How The US Government Fuels Terrorism All Over The World

Death to America Online

If a family member of yours was murdered, I think it is safe to say you would be very upset, and would want to see the murderer punished and justice to be served.

Depending on the circumstances, you might even take justice into your own hands – pursuing and getting revenge on the perpetrator yourself. In most cases, however, you would likely leave it up to the justice system. But what if the murderer were rich and powerful, and could easily pull the right strings and use their influence to prevent justice from being served?

I’d venture to guess that in this case, you would be beyond pissed. Someone was evil enough to murder your family member, and then they were able to use their power in a massive perversion of justice in order to get away with it. You would almost certainly desire revenge, and would likely take it at any chance you got. There’s really nothing odd at all about this psychological predilection, and I take it that it would hold true for a large segment of humanity.

It’s only natural to hate those who harm you and your loved ones. In fact, even if your family member were a bad person – perhaps an evil person himself – most still would not take kindly to their murder.

Nothing I’ve said thus far is particularly controversial, or even informative. People generally would accept it at its face. And yet somehow, as soon as the word “terrorism” becomes involved, the majority of people throw this obvious logic out the window!

Terrorism

Since September 11th, 2001, the United States government has been leading what has since been dubbed the Global War on Terror (GWOT). Let’s put aside for the moment the extreme ambiguity in what this actually means. For most people, terrorism is defined at the “I know it when I see it” level.

I’ve previously discussed the propagandistic use of the term “terrorism.” In this post, I’m more interested in exploring the question of whether the actions of the US government and her allies are successfully fighting this ambiguous enemy. The very clear, undeniable answer is that American government policies are doing far more to fuel terrorism than to stop it.

 

The United States Helped Create Al-Qaeda

It’s amazing how short the political memory of most Americans is. It was less than forty years ago that the US was actively funding and arming the mujahedeen, including Osama bin Laden, to counter the Soviets in Afghanistan. Ever since 9/11, the US government has vehemently denied this.

However, reputable sources have confirmed that this is true. For instance, in 1999, The Guardian reported:

“American officials estimate that, from 1985 to 1992, 12,500 foreigners were trained in bomb-making, sabotage and urban guerrilla warfare in Afghan camps the CIA helped to set up.

Since the fall of the Soviet puppet government in 1992, another 2,500 are believed to have passed through the camps. They are now run by an assortment of Islamic extremists, including Osama bin Laden, the world’s most wanted terrorist.”

Similarly, a 2004 article from the BBC states:

“During the anti-Soviet jihad Bin Laden and his fighters received American and Saudi funding. Some analysts believe Bin Laden himself had security training from the CIA.”

Robin Cook, ex-Home Secretary in the UK, had this to say in an op-ed he penned for The Guardian after the London bombings:

“Bin Laden was, though, a product of a monumental miscalculation by western security agencies. Throughout the 80s he was armed by the CIA and funded by the Saudis to wage jihad against the Russian occupation of Afghanistan. Al-Qaida, literally “the database”, was originally the computer file of the thousands of mujahideen who were recruited and trained with help from the CIA to defeat the Russians. Inexplicably, and with disastrous consequences, it never appears to have occurred to Washington that once Russia was out of the way, Bin Laden’s organisation would turn its attention to the west.”

Former Director of the CIA Robert Gates, in his memoirs From the Shadows, claims that the US began funding the mujahedeen in 1979, six months before the Soviet invasion. And Zbigniew Brzezinski, National Security Advisor under President Carter, confirmed in an interview that they knowingly worked to aid these Islamic fundamentalists in Afghanistan.

All this is not to say that the funding and aid wasn’t justified at the time, given the relevant geopolitical concerns. The intent was to draw the Soviet Union into their own version of Vietnam. Arguably a decent strategy. Nevertheless, we must accept the history and understand the consequences, or blowback, from the actions of the US government.

There’s quite a bit more to the story than that, but this should suffice for now. For more info on the implications of this sordid history (for instance, that this relationship with bin Laden and al-Qaeda continued throughout the 90s), see this, this, and this.

While al-Qaeda is the most high profile of the Islamic fundamentalist organizations that were largely incubated by western funds and support years ago, it is not the only one. Off and on since the 50s, the US government has been supporting the Muslim Brotherhood. And in order to counterbalance the secular PLO, the Israeli government was formerly a major backer of Hamas.

Were it not for American aid (as well as aid from America’s Gulf allies), it is plausible that there would be no substantial Islamic fundamentalist terror movement, and quite probably no September 11th.

 

More Wars, More Terrorism

It was the United States that helped initially spawn the militant Islamist movement in the 1980s. And early on, the ire of these movements was not immediately directed at the US. What really got the Islamists angry was the many years of militarism by America in Muslim countries.

The US military has been heavily involved in the Middle East since far back in the 20th century, but it has been rapidly accelerating. Since 1980, the US has bombed 14 predominately Muslim countries:

“Let’s tick them off: Iran (1980, 1987-1988), Libya (1981, 1986, 1989, 2011), Lebanon (1983), Kuwait (1991), Iraq (1991-2011, 2014-), Somalia (1992-1993, 2007-), Bosnia (1995), Saudi Arabia (1991, 1996), Afghanistan (1998, 2001-), Sudan (1998), Kosovo (1999), Yemen (2000, 2002-), Pakistan (2004-) and now Syria.”

And as Glenn Greenwald notes, Syria marks the seventh predominately Muslim country that the US has bombed since Obama came to power:

“When Obama began bombing targets inside Syria in September, I noted that it was the seventh predominantly Muslim country that had been bombed by the U.S. during his presidency (that did not count Obama’s bombing of the Muslim minority in the Philippines). I also previously noted that this new bombing campaign meant that Obama had become the fourth consecutive U.S. President to order bombs dropped on Iraq. Standing alone, those are both amazingly revealing facts. American violence is so ongoing and continuous that we barely notice it any more.”

It is surely true that the immense death and destruction caused by these many military campaigns are major recruiting tools for terrorists. If your house were destroyed, your family members and friends were killed, and your country occupied, surely you would harbor ill will towards those directly responsible.

 

Hate America's Army

By far, the most influential of all these military adventures in terms of its effects on the Islamic terrorist movement was the war in Iraq that began in 2003. You may recall the allegations that Saddam Hussein was allied with and supporting al-Qaeda, one of the major justifications for going to war in the first place. In fact, a Pentagon study released in 2008, which involved combing through 600,000 documents seized in Iraq, found no evidence that Saddam had dealings with al-Qaeda. Same with the September 11th commission. Given the claims from top Bush administration officials that the evidence linking Saddam to al-Qaeda was “bulletproof” and “overwhelming,” it is clear that they simply lied.

You may also recall that soon after the invasion of Iraq, Islamic terrorism became almost synonymous with the country. Despite no evidence of al-Qaeda presence beforehand, the new al-Qaeda in Iraq became a force to be reckoned with. In fact, a study by Mother Jones in 2007 concluded:

“Our study shows that the Iraq War has generated a stunning sevenfold increase in the yearly rate of fatal jihadist attacks, amounting to literally hundreds of additional terrorist attacks and thousands of civilian lives lost; even when terrorism in Iraq and Afghanistan is excluded, fatal attacks in the rest of the world have increased by more than one-third.”

Since that study only includes attacks that had at least one casualty and were confirmed to be from a known jihadist organization, it likely understates the results. A National Intelligence Estimate, reflecting the combined opinion of all US intelligence agencies, also concluded that the Iraq war substantially increased terrorism. Basically, Iraq became a training grounds for jihadists from all over the world, who were able to then take their skills and use them back in their home countries – or anywhere else.

Much of the same can be said about the war in Afghanistan, though to a lesser degree. If current tactics were working, there wouldn’t be continued violence and terrorist attacks there after more than a dozen years…but alas, more terrorists are being created than killed. This should be unsurprising in Afghanistan, where the US Army is capturing, beating, killing, and torturing the wrong people and creating enemies on behalf of disreputable Afghan cronies.

While there were many new militant Islamists created as a consequence of America’s wars, quite a few have received massive financial and military support over the past few years. You may recall the western attack against Libya that toppled Muammar Gadhafi in 2011. The war was sold to Americans as a humanitarian intervention; Gadhafi is such a horrible person, so we must support the democracy-loving rebels! Of course, those rebels were primarily – you guessed it – al-Qaeda. And what happens when you support Muslim extremists and give them weapons? Well, you end up with a US-backed general becoming a major player in ISIS! The Libya that America and her allies destroyed is now a safe haven for all sorts of jihadist organizations, and instability and terrorism have proliferated throughout Africa as a result.

If you are generous, you could argue that the US government simply didn’t know who it was arming. Were that true, it would mean that our intelligence services are so incredibly incompetent that anyone could see that they ought to be disbanded immediately. But for better or for worse, we know that America and her allies knowingly supported Islamic terrorists. The Libyan rebel leader even admitted that his fighters had links to al-Qaeda:

“Mr al-Hasidi insisted his fighters “are patriots and good Muslims, not terrorists,” but added that the “members of al-Qaeda are also good Muslims and are fighting against the invader”.”

This is certainly the conclusion that the Citizens’ Commission on Benghazi came to:

“The Citizen’s Commission on Benghazi’s interim report, in a paragraph titled “Changing sides in the War on Terror,” alleges “the U.S. was fully aware of and facilitating the delivery of weapons to the Al Qaeda-dominated rebel militias throughout the 2011 rebellion.”

The report asserted the jihadist agenda of AQIM, the Libyan Islamic Fighting Group and other Islamic terror groups represented among the rebel forces was well known to U.S. officials responsible for Libya policy.

“The rebels made no secret of their Al Qaeda affiliation, openly flying and speaking in front of the black flag of Islamic jihad, according to author John Rosenthal and multiple media reports,” the interim report said. “And yet, the White House and senior Congressional members deliberately and knowingly pursued a policy that provided material support to terrorist organizations in order to topple a ruler who had been working closely with the West actively to suppress Al Qaeda.””

Leaked recordings also verify this account.

But that’s not all! It turns out that the Libyan terrorists that the west had been financing were starting to migrate over to Syria to fight with the (also) terrorist rebels, aided by the CIA, specifically on behalf of the US government.

Ahhh yes, and then we get to Syria. Here’s where things get really sketchy. For the sake of brevity, I cannot provide a full treatment of the ways in which the US has been backing fundamentalist Islamic terrorists in Syria, but I can at least provide a brief outline.

Obama has been, and continues to arm what the US government has been calling “moderate” rebels in Syria. This is a complete farce; everyone and their mother knows that the only substantial rebel forces fighting against Assad’s government have been Islamic fundamentalists such as ISIS. This had been widely reported in the media, even as far back as 2013:

“The New York Times, (and here and here) , Wall Street JournalUSA TodayCNNMcClatchy (and here), APTimeReutersBBC, the Independent, the TelegraphAgence France-PresseAsia Times, and the Star (and here) confirm that  supporting the rebels means supporting Al Qaeda and two other terrorist groups.

Indeed, the New York Times has reported that virtually all of the rebel fighters are Al Qaeda terrorists.”

So far, the United States has given $400 million in aid to the Syrian opposition (aka, the terrorists). Just the other day, the Pentagon declared its intention to train, fund, and arm an additional 15,000 “carefully vetted” Syrian rebels to fight against Assad. Despite the fact that previous groups of “moderates” who’ve received US training have joined the al-Qaeda affiliated al-Nusra Front. Hey, maybe this time it will work out differently, right?

What about ISIS, the new bad guys in the Middle East who just about everyone can agree are about as evil as it gets? Turns out they owe quite a bit to the United States as well.

The geopolitical situation in the Middle East right now is very convoluted, and any sensible country would have no part in that mess. In Syria, the dictator Assad is a longtime enemy of the US. But the only credible fighting force against his government are the maniacal terrorists of ISIS and al-Qaeda. In some twisted sense, this means that the US government’s “best interest” could involve letting the slaughter that is going on in Syria continue for as long as possible.

This means that there is, at the very least, some sort of “unholy alliance” between the US and ISIS. I must be very careful here to distinguish between what is speculation, and what is heavily substantiated.

I strongly suggest you read this piece from Nafeez Ahmed, which details how the West both directly and indirectly promoted the success of ISIS, from securing passage for militants to cross into Syria to helping train them in camps along the Syria-Jordan border. For our purposes, I intend to focus primarily on how the US and her Gulf allies have been funding radical Islamic terror. As Ahmed states:

“…the role of the Gulf states – namely Saudi Arabia, Qatar, Kuwait, the United Arab Emirates, and Jordan (as well as NATO member Turkey) – in officially and unofficially financing and coordinating the most virulent elements amongst Syria’s rebels under the tutelage of US military intelligence is no secret.”

But for those who somehow find this too difficult to believe, Vice President Joe Biden admitted that they had been funding ISIS all along. Speaking about Turkey, Saudi Arabia, and the United Arab Emirates, Biden said:

“They were so determined to take down Assad and essentially have a proxy Sunni-Shia war, what did they do? They poured hundreds of millions of dollars and tens, thousands of tons of weapons into anyone who would fight against Assad—except that the people who were being supplied were al Nusra and al Qaeda and the extremist elements of jihadis coming from other parts of the world.”

And the Daily Beast reports that ISIS has been getting funding from Saudi Arabia, Kuwait, and Qatar – all American allies. Daniel Lazare provides some additional details:

“After years of hemming and hawing, the Obama administration has finally come clean about its goals in Syria.  In the battle to overthrow Bashar al-Assad, it is siding with Al Qaeda. This has become evident ever since Jisr Ash-Shughur, a small town in the northeastern part of the country, fell on April 25 to a Saudi and Turkish-backed coalition consisting of the Al-Nusra Front, Ahrar al Sham, and an array of smaller, more “moderate” factions as well.

Al Nusra, which is backed by Saudi Arabia, Turkey, Qatar, and the United Arab Emirates, is Al Qaeda’s official Syrian affiliate. Ahrar al Sham, which is heavily favored by Qatar, is also linked with Al Qaeda and has also cooperated with ISIS. The other groups, which sport such monikers as the Coastal Division and the Sukur Al Ghab Brigades, are part of the U.S.-backed Free Syrian Army and are supposedly as anti-terrorist as they are anti-Assad.  Yet they nonetheless “piggybacked” on the offensive, to use The Wall Street Journal’s term, doing everything they could to further the Al-Nusra-led advance.”

The funding of Islamic extremism by America and her Gulf allies is nothing new. In fact, it has been going on for decades. For example:

“…in Pakistan, where the aid program (known as Operation Cyclone) was organized, the Reagan administration was supporting a brutal dictator known as Zia-ul-Haq, an Islamic extremist who had come to a power in a coup in 1978, overthrowing a secular government. Zia carried out an Islamization project in Pakistan, with the building of hundreds of madrassas that preached intolerant variants of Islam and declaring judicial decisions must be based on Sharia law. The Reagan administration funded Zia’s government with $5 billion ($2 billion of which was military aid), as well as a further $3 billion to fund the mujahideen in Afghanistan. The stalwart US ally, Saudi Arabia, agreed to fund the mujahideen dollar for dollar for whatever the United States spent.”

And Wahhabism, one of the more extreme forms of Islam (the extremist subset of the already extreme Salafist movement) that tends to breed the most terrorists, is largely centered in and funded by Saudi Arabia:

“It would be troublesome but perhaps acceptable for the House of Saud to promote the intolerant and extremist Wahhabi creed just domestically. But, unfortunately, for decades the Saudis have also lavishly financed its propagation abroad. Exact numbers are not known, but it is thought that more than $100 billion have been spent on exporting fanatical Wahhabism to various much poorer Muslim nations worldwide over the past three decades. It might well be twice that number. By comparison, the Soviets spent about $7 billion spreading communism worldwide in the 70 years from 1921 and 1991.

The money goes to constructing and operating mosques and madrassas that preach radical Wahhabism. The money also goes to training imams; media outreach and publishing; distribution of Wahhabi textbooks, and endowments to universities and cultural centers.”

Secret cables from WikiLeaks confirm these claims, as well as implicate other Gulf states in the funding of fundamentalist Islam and terrorism. Remember, these are US “allies.” These are the countries that are supposed to be “on our side” in the “War on Terror.” Much of this is implicitly backed by the CIA. For a timeline of American/CIA flirtations with extremist Islam, see this.

Jihad me at hello

Given this history, it is hard not to ask the obvious question: is the United States really trying to fight against Islamic terror, or is it trying to foster it? Here we get more into the realm of speculation, but the facts as presented thus far strongly suggest this is the case. Despite government rhetoric, there are some who believe that the United States is intentionally supporting ISIS as a part of its Middle East strategy to counter Syria and Iran. In other words, the US could be the main driver of the success of ISIS, the despicable organization that is beheading journalists, slaughtering children, eating human hearts, and burning people alive in cages.

It’s hard to stomach, and difficult to prove for certain. But when mainstream, establishment publications like Foreign Affairs are actively endorsing the idea of supporting al-Qaeda (in this case, to curb the rise of ISIS, a very convoluted strategy), it is absolutely worth asking the question.

It seems like this is in fact what many Iraqis, including senior military figures, believe: the United States is deliberately supporting ISIS in order to oust Assad in Syria, and perhaps to gain some leverage over the weak Iraqi government as well. Of course, the mainstream media has dismissed this all as some crackpot conspiracy theory. And perhaps it is. But this is the view of Iraqi intelligence, which has noted that many US airdrops have been finding their way into ISIS’s hands. Perhaps that is why Iraq shot down two British planes that were allegedly carrying weapons for ISIS.

Whether these Iraqi accusations are true or not, it is certainly clear that the mess we face in the Middle East right now is largely the fault of the United States and the rest of the West. And where it isn’t directly the fault of the US, it is most certainly exacerbated by the US policy of “watching the world burn.” Any way you spin it, American involvement in the Middle East has been a huge driver of radical Islamic terrorism. And given the sprawling infrastructure of American military bases all across the Middle East, it is likely that these self-destructive policies will continue for the foreseeable future.

UPDATE: Newly declassified Defense Intelligence Agency documents show that the United States and the Western world have intentionally supported radical Islamists with the goal of forming a “Salafist principality in Eastern Syria” in order to counter Assad’s government. These documents were dated August 2012, long before ISIS became a household name.

This is no longer speculation. The United States, the Gulf states, Turkey, and other western nations specifically foresaw the rise of ISIS and deliberately supported it anyways. For more information and analysis, see this.

 

Drone Warfare And Torture – Losing Hearts And Minds

It’s not just America’s Mideast wars and occupations that are creating terrorists – specific tactics are also fueling this rise in terrorism. Two of them specifically come to mind: drone strikes and torture.

For the purpose of this article, we can mostly ignore the human rights implications and clear violation of international (and even American) law that these tactics involve. While these issues are certainly important – a lack of due process, the profligate use of cruel and unusual punishment, etc. – we are primarily concerned here with their practical impact. Of course, blatantly disregarding peoples’ human rights as well as international law does tend to have a practical impact…

Drone Strikes

I’ve tried to explain to several people that even when drone strikes do hit their target, they tend to create more terrorists than they kill. I struggle to understand why people don’t seem to understand this.

Perhaps most Americans believe that “targeted killings” actually succeed in hitting their desired target and no one else. The government and its propagandistic media do everything in their power to facilitate this perception. It is standard practice to have unknown drone victims reported as “militants”. Of course, the reality is that the vast majority of drone victims are innocent civilians, including many women and children.

In fact, only 12% of the victims of US drone strikes in Pakistan have been identified as militants. According to the Bureau of Investigative Journalism:

“…out of the 2,379 known victims of drone strikes between June 2004 and October 2014, 704 have been identified. Only 295 of these were reported to be members of some kind of armed group.”

Drone strikes kill far more people than are actually targeted, despite official government rhetoric. And each of these victims is another reason to be pissed off at the United States.

“A new analysis of the data available to the public about drone strikes, conducted by the human-rights group Reprieve, indicates that even when operators target specific individuals – the most focused effort of what Barack Obama calls “targeted killing” – they kill vastly more people than their targets, often needing to strike multiple times. Attempts to kill 41 men resulted in the deaths of an estimated 1,147 people, as of 24 November.”

 

terrorists hate us for our freedom

If your family and friends were being murdered out of nowhere, you would (unless you are a complete pacifist, but very few people are) want to fight back against whoever did this. If you are an American reading this, think back to how you felt immediately after September 11th. And now consider that practically the entire justification for the Global War on Terror (including multiple real wars, thousands of deaths at the hands of drones, torture, overthrowing governments, and massively intrusive domestic surveillance) stems from this single event, resulting in the death of 3000 civilians. Many Americans continue to justify an incredibly aggressive foreign policy simply based on the very little terrorism that Americans are victims of. And most of those who use 9/11 as a justification for war don’t even know anyone who died in that attack!

I also want to bring up Israel, a country that I believe has vastly more justification for military aggressiveness. Israelis have actually had to deal with significant and persistent terrorist threats. Israelis continue to live in fear of rocket attacks. And in the minds of many Israelis, this provides sufficient justification for Israel’s wars and assassination attempts. What these Israelis fail to see is that – regardless of whether it is justified or not – launching counterstrikes only exacerbates the problem. It’s very easy to understand why Palestinians tend to hate Israel, even if Israel isn’t acting out of line.

The use of drones is simply a gold mine for terrorist recruiting. It’s not just the civilian deaths; the ever present threat of drone strikes is enough to cause psychological damage to those who live underneath them. According to a report by Living Under Drones:

“Drones hover twenty-four hours a day over communities in northwest Pakistan, striking homes, vehicles, and public spaces without warning. Their presence terrorizes men, women, and children, giving rise to anxiety and psychological trauma among civilian communities. Those living under drones have to face the constant worry that a deadly strike may be fired at any moment, and the knowledge that they are powerless to protect themselves. These fears have affected behavior. The US practice of striking one area multiple times, and evidence that it has killed rescuers, makes both community members and humanitarian workers afraid or unwilling to assist injured victims. Some community members shy away from gathering in groups, including important tribal dispute-resolution bodies, out of fear that they may attract the attention of drone operators. Some parents choose to keep their children home, and children injured or traumatized by strikes have dropped out of school. Waziris told our researchers that the strikes have undermined cultural and religious practices related to burial, and made family members afraid to attend funerals. In addition, families who lost loved ones or their homes in drone strikes now struggle to support themselves.”

Drone strikes also alienate potential allies against terrorist organizations. From the same report:

“Drone strikes have also soured many Pakistanis on cooperation with the US and undermined US-Pakistani rel­ations. One major study shows that 74% of Pakistanis now consider the US an enemy.”

Ordinary Pakistanis are highly unlikely to help out the US in her counterterrorism efforts. Not only that, but these drone strikes potentially destabilize the government of Pakistan. Either their government can vigorously oppose drone strikes to appease their citizens and maintain stability (but then the US loses an ally), or they can help the US and find far more serious domestic opposition. Neither is particularly beneficial if the goal is to prevent terrorism.

Drones kill children

This is all well and good, but is there any empirical evidence that the use of drone strikes increases terrorism? This is difficult to measure, but limited evidence suggests that this is likely the case.

Using propaganda output as a proxy for terrorist activity, research has shown that the use of drone strikes has not been able to diminish this output. While the creation and dissemination of propaganda may not be the best metric, unlike many others, it is at least objective and quantifiable.

A study from the National Bureau of Economics Research found that civilian casualties in Afghanistan significantly increased terrorism because of “revenge” effects.

“In Afghanistan we find strong evidence that local exposure to civilian casualties caused by international forces leads to increased insurgent violence over the long-run, what we term the ‘revenge’ effect. Matching districts with similar past trends in violence shows that counterinsurgent-generated civilian casualties from a typical incident are responsible for 1 additional violent incident in an average sized district in the following 6 weeks and lead to increased violence over the next 6 months.”

This is not the least bit surprising, given our discussion up to this point. But the most damning evidence of all is documented by Andrew Cockburn, and is in reference to the strategy of targeting “high value individuals” (HVI) in a terrorist organization. The same strategy was employed in the 1990s against drug cartels, with the same counterproductive effect – more and cheaper drugs.

“Hitting HVIs did not reduce attacks and save American lives; it increased them. Each killing quickly prompted mayhem. Within three kilometers of the target’s base of operation, attacks over the following 30 days shot up by 40%. Within a radius of five kilometers, a typical area of operations for an insurgent cell, they were still up 20%. Summarizing his findings for Odierno, Rivolo [a Pentagon analyst] added an emphatic punch line: “Conclusion: HVI Strategy, our principal strategy in Iraq, is counter-productive and needs to be re-evaluated.””

In short: drone strikes, at least in part due to being a humanitarian disaster, are a major aspect of terrorist recruitment.

Torture

Neoconservative pundits like to say that torture, or “enhanced interrogation” as it is euphemistically called, helps save American lives by preventing terrorist attacks. Many Americans instinctively agree with this assessment, perhaps in part due to how torture is portrayed in popular media like Zero-Dark Thirty. The reality is the opposite.

In fact, leading experts, including Director of National Intelligence Dennis C. Blair, former counter-terrorism czar Richard Clarke, top military interrogators, counter-terrorism experts, top intelligence agents and officials (including an FBI agent who interrogated al-Qaeda prisoners), and the Senate Armed Services Committee agree that torture is ineffective at stopping terror attacks and increases risk of terrorism.

Torture is physical therapy

While that proves nothing on its own, it should make you give pause before writing the government a blank check to torture whoever they want for “national security” reasons, but this is exactly what many Americans have done. Perhaps people should put more thought into allowing their government to waterboard, rectally feed/hydrate, sleep deprive, expose to cold and loud music, hold in stress positions for up to 180 straight hours, sexually abuse and humiliate, and threaten to abuse and rape family members of prisoners held without charge, many whom are later found to be innocent of any crime. Particularly when, as stated in the Senate’s own torture report, this did not stop a single attack on America or her allies.

Torture is completely unjustified for many reasons, both moral and practical. Torture can be and has been effective in a handful of individual cases, but it is unreliable and unpredictable (for more, read “Is Coercive Interrogation of Terrorist Suspects Effective? A Response to Bagaric and Clarke” by Philip Rumney). Since it is impossible to know when torture might actually be effective, it is bad policy. People often justify torture in “ticking time bomb” scenarios, where a terrorist attack is going to be happening imminently and authorities may be able to get information that can stop the attack from a captive. Besides the fact that those who argue in favor of torture can’t point to a single situation where this would have been this case, it fails on theoretical grounds. As Rumney argues:

“…one of the ironies of the entire debate surrounding coercive interrogation is that its use in the context of the paradigmatic “ticking bomb” terrorist may also be where it is of the least utility. Where a decision to use coercion is made in order to avoid an imminent catastrophe, the suspect, assuming he or she possesses relevant knowledge and is prepared to divulge information, could easily give false or misleading information simply to stop the infliction of pain. Once found to be false, there may be little time for the authorities to gain truthful information.”

Duh. Does nobody else think about these things? But even that ignores the very important problem of knowing whether or not you are even torturing the right people with the right information, a very important consideration when it comes to whether the use of torture tends to increase or decrease terrorism. Rumney describes the problem well:

“…in the midst of conflicts with terrorists and insurgents, attempts to control the use of coercion fail and the techniques escalate, as do the range of persons subjected to those techniques. This is directly linked to the issue of effectiveness because intelligence gathering requires the use of interrogation techniques that produce reliable information, along with the accurate identification of those who possess relevant knowledge. The problem of slippage also creates difficulties in terms of predictability as non-coercive interrogation is cast aside to be replaced by a range of coercive techniques that have not been proven to be more effective. Indeed, as the earlier analysis suggests, such techniques might actually have a range of predictable consequences that hinder, rather than assist, intelligence gathering.”

In other words, when torture is allowed, it begins to replace non-coercive methods of intelligence gathering. It starts to develop a kind of “mission creep,” which means that more innocent people (or even “guilty” people who don’t have the necessary information) will be tortured. If they didn’t hate America before, how do you think they’ll feel after being tortured without cause?

Indeed, without due process or even basic evidentiary requirements, it becomes likely that innocent people become victims of a “legalized” system of torture, like the one we have in the United States. Rumney again:

“It has become increasingly apparent that many individuals detained by the United States as part of the “war on terror” have no connection to terrorism and do not possess the specific knowledge that is being sought. This is a result of a range of factors including the selling of supposed “terrorists” to United States forces and the poor quality assessment of individuals when they are first screened by inexperienced military intelligence officers. Indeed, early internal intelligence assessments at Guantanamo Bay suggested that fifty-nine detainees (nearly 10% of the total number of detainees at the camp) did not meet screening criteria for deciding which prisoners should have been sent to Guantanamo Bay. A report in the Los Angeles Times claimed that an operational commander at Guantanamo Bay had gone to Afghanistan and complained “that too many ‘Mickey Mouse’ detainees were being sent to the already crowded facility.””

We’ve spent a lot of time thus far discussing why torture is ineffective. But it isn’t merely ineffective – it is counterproductive and weakens America’s position in the “war on terror.”

Think Progress has a short report (I highly recommend looking at it if you’re interested in this stuff) outlining just a few of the reasons why torture is counterproductive:

  • Enhanced Interrogations Recruits Terrorists
  • Enhanced Interrogations Puts American Soldiers At Risk
  • Enhanced Interrogations Ruin Credibility Of Intelligence Agencies
  • Enhanced Interrogations Strain Alliances
  • Interrogations Ruined America’s Moral Authority
  • Enhanced Interrogations Makes Terrorists Unprosecutable

I’m not going to discuss each of these points, since most of them don’t require too much straining to understand. What I specifically want to focus on is how torture breeds more terrorists and makes it more difficult to fight against already existing ones.

Two political scientists have found that countries that used torture suffered from more terrorist attacks and were more likely to lose wars. It is theoretically plausible that the causation could run in the other direction (ie, that terrorist attacks cause countries to use torture), but their statistical methods make that conclusion unlikely. These researchers write:

“They hypothesize that abuse of the subset of rights known as physical integrity rights fuels terrorism by making it more difficult for government authorities to collect intelligence on terrorists and by undermining domestic and international support for their counterterrorism efforts. They test this hypothesis using a data set that includes measures of both domestic and transnational terrorist attacks and find that respect for physical integrity rights is consistently associated with fewer terrorist attacks. This suggests that those interested in curtailing terrorism should press governments to more carefully respect physical integrity rights.”

Abu Ghraib and Guantanamo have been used as recruiting tools by terrorists, and have driven hundreds (probably thousands) of people to join terrorist organizations (see here, here, and here).

Not only have new terrorists been created because of the United States’ use of torture, but the information gleaned from torture has also caused problems including false leads and terror alerts with serious consequences, including “evidence” linking Saddam Hussein’s Iraq to al-Qaeda. To the extent that this information helped influence the decision to invade Iraq, torture has created innumerable new terrorists.

 

Conclusion

Despite rhetoric to the contrary, the US has a well-documented history of supporting Islamic fundamentalist terrorists when it suits her geopolitical aims. Not only that, but the specific behaviors and tactical responses to terrorism have created legions of new America-hating, violent terrorists.

Even so, America continues to arm and support terrorists in the Middle East, and continues to use the same tactics that have proven so counterproductive. Meanwhile, the Western world continues to marginalize its Muslim population. In fact, it was the UK’s MI5 that turned ISIS’s “Jihadi John” from a nonviolent, normal guy who opposed the 9/11 attack to the violent terrorist he ultimately became.

I did 9/11

All of this inevitably leads one to wonder – why? Why would our government continue to pursue such terrible policies? I don’t have a surefire answer to this question. Perhaps members of the government are simply incompetent. Maybe the neoconservative movement is so hell-bent on world domination that they don’t even consider the moral or pragmatic consequences of their actions. Or perhaps there is a connection running through America’s initial support for al-Qaeda, 9/11, Saudi Arabia, and the current support for Islamic terror.

Regardless of the reasons, however, it is clear that there is a divide between rhetoric and reality. And for our part, we need to spread the word about the failures of the “war on terror” so that hopefully, someday soon, this needless bloodshed can be stopped.

Are Private Prisons Compatible With Libertarianism?

Prison

Three decades after the war on crime began, the United States has developed a prison-industrial complex—a set of bureaucratic, political, and economic interests that encourage increased spending on imprisonment, regardless of the actual need. The prison-industrial complex is not a conspiracy, guiding the nation’s criminal-justice policy behind closed doors. It is a confluence of special interests that has given prison construction in the United States a seemingly unstoppable momentum. It is composed of politicians, both liberal and conservative, who have used the fear of crime to gain votes; impoverished rural areas where prisons have become a cornerstone of economic development; private companies that regard the roughly $35 billion spent each year on corrections not as a burden on American taxpayers but as a lucrative market; and government officials whose fiefdoms have expanded along with the inmate population. Since 1991 the rate of violent crime in the United States has fallen by about 20 percent, while the number of people in prison or jail has risen by 50 percent. The prison boom has its own inexorable logic. Steven R. Donziger, a young attorney who headed the National Criminal Justice Commission in 1996, explains the thinking: “If crime is going up, then we need to build more prisons; and if crime is going down, it’s because we built more prisons—and building even more prisons will therefore drive crime down even lower.” – Eric Schlosser, The Atlantic

The United States has, bar none, the largest prison population in the world. According to the ACLU:

  • With only 5% of the world’s population, the U.S. has 25% of the world’s prison population – that makes us the world’s largest jailer.
  • Since 1970, our prison population has risen 700%.
  • One in 99 adults are living behind bars in the U.S. This marks the highest rate of imprisonment in American history.
  • One in 31 adults are under some form of correctional control, counting prison, jail, parole and probation populations.

On top of these horrid statistics, 86% of all Federal inmates are being incarcerated for victimless crimes, such as drug use or administrative crimes (not filling out paperwork in time, etc.). And imprisoning all of these people isn’t cheap: According to the national Prisons Bureau:

The fee to cover the average cost of incarceration for Federal inmates in Fiscal Year 2011 was $28,893.40. The average annual cost to confine an inmate in a Community Corrections Center for Fiscal Year 2011 was $26,163.

According to a report from the Vera Institute for Justice, in the 40 states that participated in their study, the total cost of incarceration to taxpayers was $39 billion! And all of that money is fueling an industry of great import: the prison-industrial complex. This includes, among others, construction firms, prison managers, wardens, food service providers, security personnel and technology, counselors, and so on. This complex is becoming increasingly private rather than public, as described in a 2012 report from the Sentencing Project:

In 2010, private prisons held 128,195 of the 1.6 million state and federal prisoners in the United States, representing eight percent of the total population. For the period 1999-2010, the number of individuals held in private prisons grew by 80 percent, compared to 18 percent for the overall prison population. While both federal and state governments increasingly relied on privatization, the federal prison system’s commitment to privatization grew much more dramatically. The number of federal prisoners held in private prisons rose from 3,828 to 33,830, an increase of 784 percent, while the number of state prisoners incarcerated privately grew by 40 percent, from 67,380 to 94,365. Today, 30 states maintain some level of privatization, with seven states housing more than a quarter of their prison populations privately.

Libertarians advocate for the privatization of all government “services,” and this includes the prison system. Whenever I mention that “public” utilities and “public” works ought to be done privately, a common retort is to “look at how that has worked in the prison industry.” But how libertarian are private prisons anyways?

The answer to this question is quite nuanced, with many subtleties that are difficult for statists to grasp. Hell, they are pretty difficult for many libertarians to grasp too! In this post, I’d like to set the record straight (while acknowledging that there are differences of opinion among libertarians on this issue).

 

The Problem With Private Prisons

If you assume that a society based on market anarchist ideals would have a similar system of justice as our current world (an assumption which, as I will argue later, is unlikely), then everything, including prisons, would be privatized.

But the very existence of a state changes the dynamic in very important ways. In a post slamming libertarianism because of the abuses of the private prison industry, Gus DiZeriga writes:

Privatization of prisons creates corporations with a vested interest in maintaining current crimes as illegal even when there is no just reason for doing so, because it guarantees keeping their cells filled and their profits high. They also have a vested interest in criminalizing additional behavior. They demonstrably use some of their profits to support friendly legislators and lobby for legislation they desire. And their political favors are returned.

All libertarians will agree on this point. And this makes things complicated, because in the purely voluntary society envisioned by libertarians, there would be no state influence, which essentially nullifies this problem. To bribe the whole slew of private defense firms and insurance companies in order to maintain these unjust arrangements would be prohibitively expensive (though technically not impossible).

In any case, the state does currently exist. And as such, we are seeing an incredible amount of “public-private partnerships” and corrupt lobbying, with all the perverse incentives that this entails.

According to Think Progress, the lobbying budgets of these private prison companies are significant:

In the past decade, three major private prison companies spent $45 million on campaign donations and lobbyists to push legislation at the state and federal level. At times, this money has gone to truly nefarious legislation. A 2011 report found that the private prison industry spent millions seeking to increase sentences and incarcerate more people in order to increase the industry’s profits. 30 of the 36 legislators who co-sponsored Arizona’s now mostly invalidated immigration law — which would have landed many more people in detention — received campaign contributions from private prison lobbyists or companies, including CCA and GEO. According to a report released last year, CCA spent over $900,000 on federal lobbying and GEO spent between $120,000 to $199,992 in Florida alone during a short three-month span in 2011. $450,000 went to the Republican national and congressional committees, while Democrats received less than half that number. House Speaker John Boehner (R-OH) and Sen. John McCain(R-AZ) were also among the private prison lobby’s top benefactors.

Some more specifics regarding the two biggest players in the for-profit prison industry, Corrections Corporation of America (CCA) and GEO group:

And this lobbying is for decidedly un-libertarian aims. For instance, CCA proposed to buy prisons from 48 states, with the stipulation that the states agree to maintain a 90% prison bed occupancy rate for at least 20 years! And they lobby for harsh mandatory minimum sentences, “three strikes” laws, and so on.

On the surface, this presents a real problem for libertarians, at least from the perspective of those with an incomplete understanding of the philosophy. After all, isn’t the move toward privatization of prisons exactly what libertarians have been suggesting?

Not quite. The “prison” system envisioned by anarchist libertarians is radically different, and a brief sketch of it will be outlined in the next section. In the meantime, it is important to note that the current prison system, whether administered privately or publically, possesses the same perverse incentives.

Liberals routinely argue that the profit motive creates perverse incentives in the prison industry. This is certainly true. But liberals do not understand what “profit” really means (any individual can profit, not just massive corporations), and ignore the fact that a purely state-run prison system has a similar incentive structure, perhaps to a slightly smaller degree.

cage prison

There is no reason to believe that a state-run prison would behave differently than any other government bureaucracy. As with all government agencies, administrators will continue to seek larger budgets. And both success and failure, however awkwardly they would be defined for a prison system, would provide justification for increased budgets, hiring more employees, and greater benefits.

Corrections guard unions and police unions are interest groups that, so long as the state apparatus exists, would directly benefit from and lobby for increased criminalization of assorted activities in order to expand the prison population. This is the same kind of rent-seeking behavior that you would see in the private sector.

In addition, public employees face additional perverse incentives related to protecting their members from accountability. We see this all the time with “qualified immunity” for police officers, making it nearly impossible to prosecute them for abuses, but it also happens with corrections officers. One example would be how the guards’ union in Maryland successfully lobbied to pass the Correctional Officers Bill of Rights. This is a law “which made it much harder to discipline bad correctional officers — thus reducing C.O.s’ accountability and facilitating brutality and corruption scandals,” as legal scholar Sasha Volokh explains.

To sum up, Nathan Goodman argues:

Thus, public choice theory suggests that those who benefit have more incentive and ability to influence policy than those who bear the costs, so we see a rise in incarceration, regardless of whether it’s good policy for the general public. The perverse incentives are easy to illustrate when ruthless corporate profiteers are the beneficiaries and rent seekers, but local populations that want jobs as prison guards have the same types of incentive problems. This is why we need to push not just against for-profit prisons, but against all prisons. The economic logic of state financed prisons encourages a growing prison state.

 

Restitution, Justice, And Anarchist “Prisons”

Under the current state capitalist system, a private prison may be owned privately, but it is still paid by the state using money that is stolen directly from taxpayers. Fundamentally, this makes the private/public distinction a less relevant one from the libertarian standpoint – either way, the system is unjust.

Philosophically, there is a huge difference between the ideals of an anarchist system of incarceration and that which exists under our current state capitalist system. As of right now, justice is about punishment. If you are convicted of a crime, you are expected to be punished with a prison sentence. But does putting criminals in prison do anything to help the original victim of the crime?

Of course not! A more appropriate system would focus on restitution rather than punishment. This means, broadly, attempting to make the victim “whole” again. It is fairly easy to see how this would work in a case of theft. Let’s say I steal $10,000 from you. You are entitled now to those $10,000 plus interest, and perhaps even more than that (but I’ll leave it to the legal scholars and legal entrepreneurs to determine the appropriate amounts). This is covered under your “theft insurance,” so the insurance company pays for the damages right away, and now owns the claim to restitution from the criminal. An investigation is conducted, a criminal is found, and they are tried and convicted. That’s where the anarchist “prisons” come into play, but I will get to that in just a moment.

You may find this plausible in cases of theft, but what about crimes that can’t be compensated for, such as murder or rape? A similar “murder insurance” could be put in place. I can take out a policy stipulating that my next of kin gets $200,000 in case I am murdered. The rest proceeds accordingly, with the murderer needing to pay up.

If you are not an anarchist, you probably are quite skeptical of this explanation, because it is so far removed from our modern system. You likely have many questions. It is not my intent to go into detail on the ins and outs of a completely anarchist legal system, but there is no shortage of explanations out there on the internet, so I suggest you read through a couple of these before blithely assuming it can’t work. Here are a few to help get you started:

Okay, so what about the actual prisons?

For starters, I must get the obligatory disclaimer out of the way: there is no single way that an anarchist society will work. When we talk about free markets, we must admit the fact that due to entrepreneurial alertness, new technologies, and new business models, systems can and will evolve. In addition, the differences between the current system and an anarchist system are so pronounced, it may be hard for some to comprehend. As Brad Spangler notes:

Perhaps no other thing the state does offers so much potential for privatization nightmare stories as prisons do. There’s a reason for this. Prisons themselves, as we understand the term today, are inherently abusive and criminal enterprises — whether managed directly by a state or a state-affiliated monopoly contractor.

Does that mean there will be nothing like prisons in a market anarchist society? Yes and no. Context matters. We’re really talking about two different things — “privatization” under statism is not the same thing as what will likely result in the marketplace if we were to abolish the state and make “law” a free market for consensual dispute resolution with justice understood as restitution rather than punishment.

But amidst the extreme contrast between these systems, it is easy to discern a critical difference: because the system is based on restitution, the criminal will be liable for some specified amount of damages for whatever crime they commit. Chances are, they will owe the money to their own insurance company or “Dispute Resolution Organization,” who will act as a kind of cosigning agent for an individual’s interactions (not unlike insurance companies do today). If they are not insured this way, they will owe the money directly to the victim or their agent.

Either way, the criminal would be held responsible in some way. If insured, their insurance company may simply increase their premium, particularly in cases of less extreme crime. A form of house arrest is another less invasive option. But in more extreme cases (theft of large sums, murder, rape, etc.), or if uninsured, the criminal may then end up in “prison.”

Here, another major difference between anarchist “prisons” and modern prisons comes up. Today, if you are sent to prison, you have no choice in the matter. You become a captive, entirely subject to the will of your captors. If they send you to a horribly abusive prison, too bad. Or you might get lucky. But either way, you have no choice.

Under anarchy, you would get to choose which “prison” you went to. Or, you’re insurance company would choose (or give you options. There are an infinite variety of models here) for you. Of course, insurance companies won’t want to be associated with “prisons” known to have horrid, abusive conditions, and criminals certainly won’t choose to go to them, so these “prisons” have an incentive to have reasonable living conditions. Robert Murphy elaborates:

Consider: No insurance company would vouch for a serial killer if he applied for a job at the local library, but they would deal with him if he agreed to live in a secure building under close scrutiny. The insurance company would make sure that the “jail” that held him was well-run. After all, if the person escaped and killed again, the insurance company would be held liable, since it pledges to make good on any damages its clients commit.

On the other hand, there would be no undue cruelty for the prisoners in such a system. Although they would have no chance of escape (unlike government prisons), they wouldn’t be beaten by sadistic guards. If they were, they’d simply switch to a different jail, just as travelers can switch hotels if they view the staff as discourteous. Again, the insurance company (which vouches for a violent person) doesn’t care which jail its client chooses, so long as its inspectors have determined that the jail will not let its client escape into the general population.

Under anarchy, the criminal becomes the “customer” for detention facilities, rather than the state. This creates a whole different incentive structure. These facilities would resemble something more akin to a high-security hotel than to a modern prison – they would cater to criminals who need a place to stay while working off their debts in order to pay restitution.

proactiv prison breakout

In our current, state capitalist system, private prisons have an incentive to cut costs – perhaps by hiring fewer guards, paying less for healthcare and food, and through generally crappier conditions. Under anarchy, prisoner choice provides a countervailing force. And insurance companies may pay for prison upkeep, so there need not be forced labor by prisoners to pay for their expenses.

I certainly haven’t covered all possible contingencies here. But it should be clear from the sketch above that an anarchist prison system need not suffer the same kinds of intolerable abuses that are so prevalent today in both private and state-run prisons.

 

Prison Labor And The Prison-Industrial Complex

Since 1980 spending on corrections at the local, state, and federal levels has increased about fivefold. What was once a niche business for a handful of companies has become a multibillion-dollar industry with its own trade shows and conventions, its own Web sites, mail-order catalogues, and direct-marketing campaigns. The prison-industrial complex now includes some of the nation’s largest architecture and construction firms, Wall Street investment banks that handle prison bond issues and invest in private prisons, plumbing-supply companies, food-service companies, health-care companies, companies that sell everything from bullet-resistant security cameras to padded cells available in a “vast color selection.” A directory called the Corrections Yellow Pages lists more than a thousand vendors. Among the items now being advertised for sale: a “violent prisoner chair,” a sadomasochist’s fantasy of belts and shackles attached to a metal frame, with special accessories for juveniles; B.O.S.S., a “body-orifice security scanner,” essentially a metal detector that an inmate must sit on; and a diverse line of razor wire, with trade names such as Maze, Supermaze, Detainer Hook Barb, and Silent Swordsman Barbed Tape. – Eric Schlosser

Contrast the humane system above with the thoroughly exploitative system of prison labor that exists now. Currently, prison labor is abused in all the typical ways that crony capitalism is known for.

Big companies will use cheap prison labor to gain a competitive advantage by cutting labor costs significantly. Think about it: there’s no need to worry about the workers going on strike; there’s no need to pay for unemployment insurance, vacation time, or any other benefits; the workers are full-time and never show up late; and if they don’t like how much they are getting paid, too bad! They can just get locked up in isolation.

And compare this with the savings that would be generated from outsourcing. While cheap labor abroad is still quite cheap, there are additional costs associated with transporting goods around the world, which is far less of a concern while using local prison labor. Note that state-run prisons also contract out their prisoners for labor, not just private ones. A prison laborer typically makes between 93 cents and $4.73 per day, often working with toxic substances and without the protections that a normal worker would have.

So, not only do the private prisons make a bunch of money from getting guaranteed payments per prisoner regardless of cost, but other large corporations get to take advantage of what basically amounts to slave labor. What is this exploitation creating, and who benefits? Two informative articles from Global Research help answer these questions (see here and here).

Predictably, the potential profit of the prison labor boom has encouraged the foundations of US corporate society to move their production forces into American prisons. Conglomerates such as IBM, Boeing, Motorola, Microsoft, AT&T, Wireless, Texas Instrument, Dell, Compaq, Honeywell, Hewlett-Packard, Nortel, Lucent Technologies, 3Com, Intel, Northern Telecom, TWA, Nordstrom’s, Revlon, Macy’s, Pierre Cardin, Victoria’s Secret, and Target have all begun mounting production operations in US prisons.

That should give you some idea of the kinds of things these prisoners are making, but here’s some more detail:

According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.

Should it really be at all of a surprise that the prison-industrial complex is another cog in the military-industrial complex? Of course the captive labor in prison is being used to make military supplies on the cheap (but don’t worry, the Pentagon will still pay top dollar for crappy weapons projects like the F-35).

The whole system ties together quite nicely. If you take a look at this list of companies that own more than 1 million shares of CCA and GEO Group, you’ll notice many of the big players in the international crony capitalist elite. When you consider the interconnections that tie the whole international system of crony capitalism and American foreign policy together, it starts to make a lot of sense.

Many of these Fortune 500 conglomerates are corporate members of civil society groups such as the Council on Foreign Relations (CFR) and the National Endowment for Democracy (NED). These think tanks are critical toward influencing American foreign policy. Under the guise of democracy promotion, these civil societies fund opposition movements and train dissent groups in countries around the world in the interest of pro-US regime change. With naked insincerity, the same companies that outsource the production of their products to American prisons simultaneously sponsor civil societies that demanded the release of Myanmar’s Aung San Suu Kyi from house arrest – an overly political effort in the on-going attempts to install a compliant regime in that country.

And finally, it should come as no surprise that all the same regulatory problems inherent in a crony capitalist system should be present with respect to the prison-industrial complex as well. Take this example of a state agency being in cahoots with GEO Group, a textbook example of regulatory capture:

The concept of privatizing prisons to reduce expenses comes at great cost to the inmates detained, who are subjected to living in increasingly squalid conditions in jail cells across America. In 2007, the Texas Youth Commission (TYC) was sent to a West Texas juvenile prison run by GEO Group for the purpose of monitoring its quality standards. The monitors sent by the TYC were subsequently fired for failing to report the sordid conditions they witnessed in the facility while they awarded the GEO Group with an overall compliance score of nearly 100%. Independent auditors later visited the facility and discovered that inmates were forced to urinate or defecate in small containers due to a lack of toilets in some of the cells. The independent commission also noted in their list of reported findings that the facility racially segregated prisoners and disciplined Hispanics for speaking Spanish by denying their access to lawyers and medical treatment. It was later discovered that the TYC monitors were employed by the GEO Group.

Let’s take a moment to remember that this horrible system of exploitation is not a product of the free market, but rather a consequence of having a state exist in general. A system of justice based on polycentric law and administered in a non-coercive fashion could never support abuse on such a wide scale.

 

Solutions/Moving Forward

As a libertarian, I believe there must be real free market solutions to the problems caused by the prison-industrial complex. While many people will no doubt be taken in by the idea of prison reform, we have seen that these problems are inherent in a statist system of justice, and no amount of reform can address those underlying problems.

prison download music

Nevertheless, while I have doubts about its ability to cause real change in this area, the mantra “voting with your dollars” can apply here. The Prison Divestment Campaign may help curb some of the excesses of the prison profiteers. It may be worthwhile to support this cause, but changing the fundamental problems will require a different kind of solution.

Short of seeing the realization of a fully anarcho-capitalist society, we can look to some new technologies to help cause a fundamental shift in the system, perhaps even within the next decade or so. Some of the functionality of Bitcoin and the blockchain could revolutionize legal practice, and thus indirectly have a powerful effect on the prison system.

As these technologies evolve and become more widely adopted, a parallel legal system will begin to emerge in competition with our current state monopoly system. Basically, a new Common Law. Here’s an example:

The plain, ordinary Common Law developed as the result of competing courts that issued opinions basically as advertisements of how fair and impartial they were. We could see something similar with Bitcoin arbitration. If arbitrators sign their transactions with links to and a cryptographic hash of a PDF that explains why they ruled as they did, we could see real competition in the articulation of rules. Over time, some of these articulations could come to be widely accepted and form a body of Bitcoin precedent.

This kind of arbitration is perfectly doable using a currently existing Bitcoin feature: multi-signature transactions. This is a feature that doesn’t allow a transaction to be fully processed unless m-of-n people have agreed. Most simply, this could mean that two out of three people involved in a transaction must agree to it for it to become valid. That could mean you and me in a business dealing, with a third party arbitrator if one of us is unhappy with the deal as executed.

Over time and once more widely used, these technologies could practically eliminate the need for lawyers and government courts for dealing with the administration of many types of contracts and disputes. For instance, Blockchain Apparatus just released new software that will take care of the administration of estates and wills in a completely decentralized, trustless, cheap, and quick way. And an ex-Rugby player is working on a smart contracts tool to manage third-party endorsement contracts and take a lot of the headache over contract disputes in sports.

For more details on multi-signature transactions and their legal applications, see this.

For more information on smart contracts in general, see this.

By creating a new legal framework outside of the state system, technology may help us get to a stateless system of justice sooner than many people think. And we will not be able to eliminate the statist (in)justice system until this happens.

 

Conclusion

While libertarians ostensibly support the privatization of government functions, it is more complicated than it sounds in practice. Particularly with regard to prison administration, contracting out these “services” are not what a principled libertarian has in mind. As Bruce Benson explains:

If Hitler had contracted out some of his law enforcement services, the rounding up and extermination of Jews might have been accomplished at a lower per-unit cost and more Jews could have been exterminated, but the fact that more of these politically defined “criminals” could have been exterminated more “efficiently” in a technological sense does not mean that the contracting out of this process would have been desirable. Indeed, if contracting out enhances technological efficiency, as its advocates argue it will, then it may encourage even more intensive law enforcement efforts against victimless crimes, thereby reducing both allocative efficiency and liberty.

Ultimately, the only just system is one based on restitution rather than punishment, and in the context of a purely voluntary society.

photo by:

The Marxist Mindset Regarding Labor

marxism labor

Karl Marx’s view of economics is in many ways nearly the opposite of mine. Nevertheless, I think he has made many interesting contributions to the study of social institutions. To learn more about his views, I recently read most of Robert Tucker’s The Marx-Engels Reader, which contains many samplings of his (and Engel’s) works on a variety of subjects.

As I read through these selections, I particularly noted how Marx’s mindset regarding labor is so radically different from my own – and I think this mindset is actually quite prevalent today among many, particularly those on the left. It would be instructive to compare and contrast these differing views on labor, at least in part because his views make his belief in the thoroughly discredited labor theory of value more understandable.

Before we explore this any further, I want to start with a disclaimer: I am not a Marx scholar. My knowledge of his thought is limited – though I likely have read, at this point, somewhat more of his work than many people who claim to know a thing or two about him. Nevertheless, my interpretations of his quotes here are mine only, so if you are reading this and happen to be a Marxist, feel free to set me straight. It’s tough to read 19th century philosophers…

 

Estranged Labor

Many people are familiar with (the existence of, at least) Marx’s seminal work on economics and his critique of capitalism: Das Kapital.  Fewer are aware of his Economic and Philosophic Manuscripts of 1844, selections of which I found far more interesting than Capital, frankly. The following quotes are from these manuscripts under the subheading “Estranged Labour,” from Marxist.org.

All these consequences are implied in the statement that the worker is related to the product of labor as to an alien object. For on this premise it is clear that the more the worker spends himself, the more powerful becomes the alien world of objects which he creates over and against himself, the poorer he himself – his inner world – becomes, the less belongs to him as his own. It is the same in religion. The more man puts into God, the less he retains in himself. The worker puts his life into the object; but now his life no longer belongs to him but to the object. Hence, the greater this activity, the more the worker lacks objects. Whatever the product of his labor is, he is not. Therefore, the greater this product, the less is he himself. The alienation of the worker in his product means not only that his labor becomes an object, an external existence, but that it exists outside him, independently, as something alien to him, and that it becomes a power on its own confronting him. It means that the life which he has conferred on the object confronts him as something hostile and alien.

According to Marx, labor is essentially a zero-sum game. When you work, you lose. Specifically, you lose a part of yourself whenever you are working.

There is a distinction, not made in this quotation but derived from my (limited) knowledge of Marxist thought, which is important to mention. Expenditure of labor power in and of itself isn’t necessarily “bad” – only when it is done for a capitalist, who supposedly is siphoning off some of this labor power, is there a loss in this sense. Presumably, if the worker were to keep the entire product of his labor via owning the means of production, then he would no longer “lose” part of himself to it.

Any way you spin it, Marx does not look at labor in a particularly intuitive way. For Marx, the creation of an object implies an equivalent destruction of the self.

It is true that time spent laboring is time that cannot be spent doing something else – that is, that there is an opportunity cost to labor. When I am working, I am not attending the theater, I am not playing volleyball, nor am I going on a date. There most certainly is a “loss” in this regard. But everything has an opportunity cost – when I’m on a date, I am not writing. This does not imply that I am any worse off because of it.

Next quote:

(According to the economic laws the estrangement of the worker in his object is expressed thus: the more the worker produces, the less he has to consume; the more values he creates, the more valueless, the more unworthy he becomes; the better formed his product, the more deformed becomes the worker; the more civilized his object, the more barbarous becomes the worker; the more powerful labor becomes, the more powerless becomes the worker; the more ingenious labor becomes, the less ingenious becomes the worker and the more he becomes nature’s slave.)

Political economy conceals the estrangement inherent in the nature of labor by not considering the direct relationship between the worker (labor) and production. It is true that labor produces for the rich wonderful things – but for the worker it produces privation. It produces palaces – but for the worker, hovels. It produces beauty – but for the worker, deformity. It replaces labor by machines, but it throws one section of the workers back into barbarous types of labor and it turns the other section into a machine. It produces intelligence – but for the worker, stupidity, cretinism.

I find it hard to understand his point here. If a worker is employed by a capitalist, producing more does not imply consuming less, even if one accepts the labor theory of value. To produce more may sometimes imply working harder, in which case the worker’s required subsistence consumption will increase slightly. But it could also mean the worker is simply more productive, which ought to generally happen over time.

Marx says that the product of labor is primarily directed towards consumption by the rich. But if anything, capitalism is about mass production. You’ll find no argument from me against the idea that the system of state capitalism concentrates wealth in the hands of the few – and that this is the system that was prevalent both then and now – but the products themselves are not simply intended for sole consumption by the rich.

I’m not arguing here that capitalism (again – state capitalism) is completely fair to laborers. But how can he say that workers lose a part of themselves when they work?

What, then, constitutes the alienation of labor?

First, the fact that labor is external to the worker, i.e., it does not belong to his intrinsic nature; that in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home. His labor is therefore not voluntary, but coerced; it is forced labor. It is therefore not the satisfaction of a need; it is merely a means to satisfy needs external to it. Its alien character emerges clearly in the fact that as soon as no physical or other compulsion exists, labor is shunned like the plague. External labor, labor in which man alienates himself, is a labor of self-sacrifice, of mortification. Lastly, the external character of labor for the worker appears in the fact that it is not his own, but someone else’s, that it does not belong to him, that in it he belongs, not to himself, but to another. Just as in religion the spontaneous activity of the human imagination, of the human brain and the human heart, operates on the individual independently of him – that is, operates as an alien, divine or diabolical activity – so is the worker’s activity not his spontaneous activity. It belongs to another; it is the loss of his self.

To some extent, this mentality makes considerably more sense in the context in which Marx was living and writing – in the latter stages of the Industrial Revolution, where much of the non-agricultural work was somewhat unstimulating, repetitive factory work. I’m sure that work was terribly uninteresting, and that laborers would have vastly preferred to be sitting at home on the couch with a cold beer.

But humanity had not accumulated nearly so much capital then as we have now. The general state of existence in terms of wealth was far inferior back then. It’s easy for me to say that I would prefer to be working at a software company than toiling away in an uncomfortable factory. But in a world with vastly less capital, I wouldn’t have the choice of such luxuries. The fact is, since these workers chose to work in the factories, even in poor conditions, they have demonstrated the preference for this work instead of their alternatives (perhaps starving to death?).

Of course, Marx disagrees. He considers labor to be “forced labor.” Why? Because people don’t like doing it, and prefer leisure instead.

But even people who do own the means of production (the self-employed, wealthy capitalists, etc.) hate their jobs. Job-hating is so common that it doesn’t even warrant discussion. And it’s not even necessary for people to specifically hate their job to disprove his claim; the vast majority of people would prefer leisure to work, even if they enjoy their job.

Labor is only “forced” in this sense in that it is forced by our very nature as humans who run on fuel. We die without some form of sustenance, but this sustenance is not simply provided for us willy-nilly. This isn’t the Garden of Eden. We must create food, and we choose to create most other things because they make our lives more enjoyable.

To Marx, however, a far superior solution would be if we did live in a Garden of Eden. Even if workers owned the means of production, they’d still need to work, and the work would be just the same. How would this situation fundamentally differ with regards to losing a part of yourself to the object of your labor?

One final quote, from Marx’s Grundrisse, under the section called The Development of Exchange and of Capital:

…the relation of slavery or serfdom has been suspended. Living labour capacity belongs to itself, and has disposition over the expenditure of its forces, through exchange. Both sides confront each other as persons. Formally, their relation has the equality and freedom of exchange as such. As far as concerns the legal relation, the fact that this form is a mere semblance, and a deceptive semblance, appears as an external matter. What the free worker sells is always nothing more than a specific, particular measure of force-expenditure; labour capacity as a totality is greater than every particular expenditure. He sells the particular expenditure of force to a particular capitalist, whom he confronts as an independent individual. It is clear that this is not his relation to the existence of capital as capital, i.e. to the capitalist class. Nevertheless, in this way everything touching on the individual, real person leaves him a wide field of choice, of arbitrary will, and hence a formal freedom. In the slave relation, he belongs to the individual, particular owner, and is his laboring machine. As a totality of force-expenditure, as labour capacity, he is a thing belonging to another, and hence does not relate as subject to his particular expenditure of force, nor to the act of living labour. In the serf relation he appears as a moment of property in land itself, is an appendage of the soil, exactly like draught-cattle. In the slave relation the worker is nothing but a living labour-machine, which therefore has a value for others, or rather is a value. The totality of the free worker’s labour capacity appears to him as his property, as one of his moments, over which he, as subject, exercises domination, and which he maintains by expending it.

To Marx, once you have sold your labor-power to a capitalist, you have become his slave, his “laboring machine.” In a state capitalist system, I actually think there’s something to be said for this idea. Due to state intervention, the relative power of major corporations as compared to lowly workers is gigantic. No, I would no go so far as to call it slavery, but there are certainly similarities.

For instance, people are “forced” to work for lower wages in the sense that government policies limit the availability of work in general, thus giving the capitalist/employer far more leverage in the hiring process.

But I suspect Marx holds this to be generally true of market-based systems (correct me if I’m wrong, Marxists!). On the contrary, under a system of freed markets, this power imbalance would radically shift. People could choose to work or not work however they saw fit. This labor would not be “forced” in the least bit, except insofar as people need stuff to stay alive – but as discussed earlier, this can’t be considered forced either.

 

Conclusion

I thought these quotes were interesting, and I don’t think they are referenced all too frequently. They provide a helpful window into the Marxist mind, which is useful nowadays, because of the extreme influence Marxism has had on modern political discourse, both left and right.

It seems to largely boil down to a theory of entitlement, which seems so common to me when I read typical mainstream opinion pieces. Everyone wants something for nothing, and nowadays, it is always the state which is there to provide it, if only the people are willing to ask (and even if they aren’t…).

Marx’s analysis of capitalism (but not freed markets) is prescient in many ways, and is worth studying for radical libertarians. But it is mighty unfortunate that such a great mind made such simple errors when it comes to labor.

No, Libertarians Are Not Corporate Shills

intentions vs results

I am often accused of supporting “Reaganomics” or “trickle-down economics” or being “a tool of the corporate elite,” or some other such thing. An implication is that my economic views are conservative, and basically amount to apologetics for the wealthy. Naturally, these ad hominem attacks always come from the “left.”

I think this perspective exists for a few reasons: lack of economic understanding, a conflation of modern capitalism with real free markets, and some psychological traits that would be the subject of another article.

People who view themselves as “progressive” or “left wing” believe that they are rebelling against corporate power and defending the little guy. I believe that most laypeople on the left truly are well-intentioned, and would like to improve the lives of the common man. Unfortunately, the policies that they advocate do precisely the opposite: concentrate wealth upwards.

In this post, I intend to argue that corporate power is just another arm of the state. There is nothing inherently wrong with corporations, but modern capitalism is largely a history of corporations behaving badly. Modern capitalism – NOT the free market – is a system where the power elite are able to extract wealth from the masses and concentrate it into the hands of the few. They do this, not through the extraction of Marx’s “surplus value”, but through creating artificial scarcities and rents through the power of the state.

Put simply, the state is the enforcement mechanism for economic privilege. For those who would like a more economically equal world, it is the state that should be the focus of attention. Leftists who support things like welfare and the minimum wage believe they are helping win some battles on behalf of the working man, but a far better solution would be attack the system of state-enforced economic privilege itself.

Before diving into just some of the ways in which the state is enriching the wealthy, I’d like to quote at length from a recent article by Richard Ebeling:

“Suppose someone were to ask you the easiest and quickest way to drive by car from New York City to San Francisco, California. Since the shortest distance between two points is a straight line, the most reasonable answer would be for this person to take Interstate Highway 80, which runs East-West between these two cities.

Now suppose that this person, instead, starts driving south from New York City on Interstate Highway 95, which would get him, eventually, to Miami, Florida. You tell him that he is on the wrong route; not only will it take him much longer to get to California if he stays on Interstate 95, but he may end up never getting to San Francisco at all.

Rather than thanking you for correcting him and figuring out the best and most time saving way to get back onto Interstate 80, he accuses you of not wanting him to get to California. He wants to know what you have against him and the people of California. Why are you sabotaging his chance to finally find “happiness” in California?

You assure him that you have nothing against either him or California. Indeed, you explain, you’ve even been to California and it’s a very nice place to visit and maybe even to live. You are just pointing out that he is following the wrong route to get to his desired destination, and in that easiest and quickest way as he had originally asked.

He responds by asserting that you clearly have something against him and have some hidden agenda to prevent people from getting to California.

A person saying such things would, to most of us, seem strange or even bizarre. It is, however, the way many critics of the free market respond when an economist or some other proponent of economic liberty explains that government intervention in the market, regulation of business enterprises or redistribution of income and wealth are not the best and most efficient policies to provide an economic and social climate most conducive to opportunity, prosperity and freedom for as many people in society as is possible.

Free market critics frequently assert that the free market advocate “hates the poor,” “doesn’t care for humanity,” is “insensitive to human suffering” and only wants to help “the rich.” And how can we know this? Because he dissents from the governmental interventionist, regulatory and redistributive policies proposed to cure the ills of society.”

Note that, for each of the below foundations of corporate power, there is a lot more that could be said. The intention of this post is to be more of an overview, or introduction, to how the state is the primary driver of corporate power.

 

Monopoly Central Banking

Far and away the largest driver of massive corporations and wealth inequality is the institution of central banking. Indeed, central banking and artificially low interest rates are a major tenet of modern progressive views on monetary policy, despite their professed intention to reduce inequality.

The Federal Reserve creates money from nothing, and those who get to use that money first benefit. The increase in money supply will decrease the value of money, or increase the price of other goods. But this only happens over time as the money moves through the economy. So if the government gets to use this money first – generally to support the military industrial complex, big banks, auto companies, and other favored business interests – they get extra (free) money without having to pay higher prices. Everyone else who gets access to that money later ends up needing to pay higher prices, and is essentially robbed of the value of their savings. This process of prices adjusting in a non-uniform way is called the Cantillon Effect, and is routinely ignored by progressives.

But this isn’t the only way monopoly central banking hurts the poor and enables giant corporations and those who are already wealthy to rake in record profits. The central bank is tasked with setting interest rates, and there is an inherent tendency to keep interest rates low in order to foster investment (and to concentrate wealth). In fact, progressives are very adamant about keeping interest rates low. Just ask, as usual, Paul Krugman. But lowering the interest rate makes savings less attractive and encourages investors to seek higher yields, which pushes up the price of securities, particularly stocks (and housing, and other assets). Of course, it is the wealthy who overwhelming own these assets, and thus they are the beneficiaries of these “progressive” policies. Money printing leads to inflation and lowers the reward for saving, hurting everyone else in the economy who isn’t heavily exposed to these securities.

But central banking doesn’t just make rich individuals richer, it also leads to massive corporate profits, in particular relative to wage rates. As I said earlier, preferred corporations (banks, hedge funds, weapons manufacturers, etc.) are the first recipients of the expanded credit. Let’s say Lockheed Martin is the recipient of an extra $10 million in credit. They use this money to invest in a new weapons plant to expand production. This leads to an immediate increase in $10 million in sales for the construction and other contracting firms who build the plant. But investment expenditure in fixed capital is amortized in cost calculations. If this plant is assumed to depreciate over the course of, say, fifty years, then the only cost on Lockheed’s books this year would be $200,000. In other words, there is a net increase of $9.8 million in profits for these big companies with early access to credit.

Moreover, credit expansion and lower interest rates tend to foster increased capital expenditure for longer term increases in production rather than immediate expenditure on labor. As such, the returns to capital will tend to be higher than that of labor.

There are many other negative effects of monopoly central banking, but I want to restrict this discussion to a very basic overview of how it worsens inequality and improves the corporate bottom line. In this respect, progressives are consistent advocates for the most egregious of economic injustices.

 

Corporate Personhood

In America, there is the legal concept of “corporate personhood,” which means that corporations have many of the same legal rights and responsibilities that an individual would. A major aspect of this is that it allows corporations themselves to sue or be sued – that is, the corporation is considered an entity apart from those individuals who comprise it.

In and of itself, the concept of corporate personhood is not immoral. Corporations, as groups of individuals, should be entitled to the same kinds of freedoms that individuals have. The immorality stems from treating corporations as persons with respect to limited liability. The corporate entity itself is liable for damages they may cause, but the owners or shareholders are not held responsible.

That means that corporate owners can do immoral things without so much regard for the consequences, because they will not be considered personally responsible. This is the main reason a business incorporates itself anyways; why do you think it’s called a limited liability company (LLC)? Ultimately, this allows investors to hire managers who have a legal mandate to pursue profits – but it lets them keep their distance from the way the profits are pursued. This makes a significant difference; imagine how business would change if stockholders knew that they would be liable for the actions of their managers? In other words, if an investment in a company would mean risking the stockholders’ own assets, the way business is done could change radically.

Very few people, anarchist/libertarian or not, would give limited liability to human beings and their direct actions. Most people are aware that having real consequences for your actions helps prevent you from engaging in undesirable or bad actions. Corporate personhood thus subsidizes bad behavior.

In a world where there wasn’t limited liability for shareholders of corporations, the structure of capital would be radically different. That’s not to say that similarly structured organizations couldn’t arise out of a network of legitimate contractual relationships, but I would expect it to be the exception rather than the rule. If shareholders were held individually liable, then buying a share of stock in a company becomes a much more risky and harrowing ordeal. Before doing so, one would want to thoroughly research the company as well as the other shareholders in order to determine how risky such a move might be. Perhaps the free market would supply some kind of insurance for these decisions, thus smoothing over some of those transaction costs. Either way, modern limited liability acts as a subsidy to shareholders by either reducing risk or essentially paying for their insurance policy.

Admittedly, this is an area within libertarian theory of which there is much disagreement. I don’t intend to delve deeply into the debate here. I don’t have enough of a legal background to feel competent in debating this point, to be honest. But my libertarian “intuition” suggests that limited liability is wrong, and it certainly concentrates capital far more than a world without it. For an alternate libertarian take on limited liability, see Stephan Kinsella’s argument here.

 

Intellectual Property And The Patent System

Another way that the state secures undue rents for massive corporations is through the thoroughly mercantilist patent system. Patents grant exclusive monopoly privilege for the practical use of ideas, and impose ridiculously harsh penalties on those who attempt to utilize these ideas on their own terms. In other words, patents create artificial scarcity, and this allows the patent holder to charge higher prices by excluding all competition.

Property is only a meaningful institution in the face of scarcity. We rarely consider it to be “my” oxygen in day to day life. However, when going scuba diving, oxygen is scarce and property relations become relevant again. If I write a book, and somebody else prints it, gives me credit, and makes money from it, there is no scarcity involved. But by getting it copyrighted, I impose scarcity by preventing other people from using their own property in nonviolent ways. I’ve in effect become a partial owner of everyone else’s resources; others no longer have the right to use paper and ink as they see fit. As Murray Rothbard said:

“The man who has not bought a machine and who arrives at the same invention independently, will, on the free market, be perfectly able to use and sell his invention. Patents prevent a man from using his invention even though all the property is his and he has not stolen the invention, either explicitly or implicitly, from the first inventor. Patents, therefore, are grants of exclusive monopoly privilege by the State and are invasions of property rights on the market.”

People often claim that without patents, people will stop innovating. But this is unequivocally false:

“This is borne out by F. M. Scherer’s testimony before the Federal Trade Commission in 1995. Scherer spoke of a survey of 91 companies in which only seven “accorded high significance to patent protection as a factor in their R & D investments.” Most of them described patents as “the least important of considerations.” Most companies considered their chief motivation in R & D decisions to be “the necessity of remaining competitive, the desire for efficient production, and the desire to expand and diversify their sales.” In another study, Scherer found no negative effect on R & D spending as a result of compulsory licensing of patents. A survey of U.S. firms found that 86% of inventions would have been developed without patents. In the case of automobiles, office equipment, rubber products, and textiles, the figure was 100%.”

In fact, the patent system hinders technological development – development which tends to benefit the masses the most. If someone invents something and secures a patent, they lose the incentive to do further research and build upon the now existing body of knowledge. Others can no longer incrementally add to or improve upon this invention, simply by decree. And because of this state-enforced monopoly, the inventor no longer needs to fear competitors doing exactly this – improving the invention. The end result, then, is stagnation.

carlin hats

More importantly to the issue at hand, the patent system concentrates economic power into huge multinational corporations. Simply put, giant corporations scoop up as many patents as they can, not for the sake of innovation, but to exclude competition and protect monopoly profits. Sometimes, a couple of huge firms will come together with a patent “pooling” agreement, which improves their combined market share at the expense of the smaller players in their industry. Cartels like this actually do succeed – unlike purely private cartels, which are inherently unstable – because they are based on privilege that is granted by the state, and backed up with very high penalties. In fact, it is often the case that corporations will get patents not so that they can use the technology, but specifically to prevent others from using it. Look at oil companies and alternative energy patents.

In addition, hiring patent lawyers and the entire process of procuring and defending patents is expensive, and thus far more prohibitive for small businesses and inventors than massive corporations with their hordes of lawyers and significant R&D budgets. Individuals who create new products and get them patented may be inclined to sell those patents to larger firms, due to the uncertainty of being able to defend it. And the employees who actually do the inventing as part of the R&D departments for large corporations are usually required to sign over the patent rights as a condition of employment. In other words, there is a strong tendency that leads away from innovation and towards centralization of corporate power because of the patent system.

Compounding the immorality of the whole patent arrangement is government funding of research. All sorts of grants are given out to companies in order to research some new development (oftentimes military-related), and these companies then get to charge state-enforced monopoly prices for the product of this research, despite having not invested in the research themselves. Essentially, taxpayers end up footing the bill for themselves to be exploited by major corporations – courtesy of state intervention.

Furthermore, international patent regimes are critical for making sure that transnational corporations maintain their monopoly power. This was the major effect of GATT – to lock in a Western monopoly on modern technologies and to ensure that there can never be meaningful competition from the Third World.

 

Subsidizing Infrastructure And Socializing Costs

An often overlooked area in which the state subsidizes massive corporations is through providing infrastructure. It does this primarily by funding major transportation systems, cheap fossil fuels, and providing security. This is a fact that I’ve found is routinely ignored by most on the left, with the exception of Noam Chomsky. But then, he is an anarchist too….

Anyways, it is important to remember than any time the government spends money, this money was originally expropriated from the taxpayers. So it is not government that ultimately pays for roads, bridges, and so on. It is you and me. These services are not provided for free.

Let’s start by considering transportation. While historically, private entrepreneurs have been responsible for creating and improving roads, the US government has largely taken over that function. And not just roads – just about every major piece of transportation infrastructure in the US has been created or significantly subsidized by government. Some examples:

  • The Interstate Highway System
  • Civil aviation infrastructure
  • Railroad land grants back in the late 19th century, where government provided free or significantly below-cost land to railroad producers

Government builds roads?

Again, this was all done using money stolen from the people, and often through the forced theft of land via eminent domain. In other words, all this infrastructure was funded, and all the sacrifice that went into building it, was provided for by average folk. Naturally, the corporations tasked with building this infrastructure were immediate winners. But a more subtle and insidious consequence was in how this changed the fundamental structure of production.

In short, the cost of transportation was socialized, which nearly eliminated the incentive for people to produce and consume locally. Local industry suffers at the expense of larger, more distant corporations, which were able to take advantage of economies of scale that could not possibly have existed on the free market. Clearly, Walmart and other giant corporations that liberals seem to hate on so much could never have come to exist without this government appropriation of resources and infrastructure subsidies. Without this absurd subsidy, giant conglomerates could never compete with smaller, local manufacturing. Not only that, but problems like suburban sprawl and pollution from our cars wouldn’t be happening on nearly the same scale; communities would be more locally organized, and towns and cities would be built with bike and foot transportation in mind.

If you want to learn more about the sordid history of transportation subsidies, you can do no better than reading Kevin Carson.

In tandem with socializing the costs of transportation, the state has helped subsidize the cost of energy, also required for the mass distribution models that many major corporations depend on. It has done this largely via eminent domain, seizing land in which to build pipelines for moving energy cheaply and quickly. Perhaps even more importantly, the taxpayer-funded US Navy guards sea lanes so that oil can be transported far more cheaply.

In fact, the government’s funding of security in general is a massive subsidy to large corporations. Larger organizations with more assets will naturally have higher insurance costs and would need to spend more money on police/security. But the taxpayers have that (largely) taken care of. I’m not going to dive into what a world of purely privatized security might look like here, but it is clear none the less that security is essentially a corporate subsidy.

 

Regulations

Regulations, practically a buzzword among the progressive community, are one of the primary means by which large corporations benefit through the use of the state apparatus. It boggles the mind how liberals don’t seem to get this (except, again, for Chomsky, who then goes on and suggests more regulations for some reason…), despite it being a primary aspect of the “progressive era.”

In the words of Rothbard, describing public-private partnerships:

“We often fail to realize that the point of Big Government is precisely to set up such ‘partnerships,’ for the benefit of both government and business, or rather, of certain business firms and groups that happen to be in political favor.”

The left tends to think that somehow big business and big government are at odds. But throughout history, every expansion in government is funded and supported by some segment of big business. This is because larger, established firms always have an interest in crushing smaller, upstart competitors. Under a free market system, market share is never secure. But regulations create barriers to entry, which reduces that competition and leads to an increase in the size and relative power of the large, entrenched interests. Sure, they need to pay the costs that come with the regulations, but they can afford to do so much more easily than smaller competitors – and as yet nonexistent potential competitors. Bastiat’s “unseen,” for those who know what I’m talking about.

You can see this at every level of government. The most obvious contemporary example at a local level is how taxi cartels are desperately trying to hold on to market share by lobbying their cities to ban Uber. Similarly, professional licensing requirements turn certain professions practically into guilds; the restricted supply of doctors significantly increases the cost of health care, for instance, but vastly increases their salaries. There are a gazillion more examples I could provide.

But it is also (and especially) true at the highest levels of government and industry. Take the pharmaceutical industry, for example. The FDA regulates which drugs are allowed to be sold in the US, and requires expensive testing and a lengthy, multi-year process before a drug can go to market. Existing pharmaceutical companies, while they don’t like to pay for these tests, can certainly afford to do so. But smaller firms generally can’t take the risk. They may need to invest hundreds of thousands of dollars and several years’ effort, and still get their drug rejected. Most won’t even try. (I’ve recently written about a related subject: pharmaceutical companies lobbying for more regulations on dietary supplements.) That’s how you end up with Big Pharma.

Competition is the bane of big business. Laws such as the Federal Trade Commission Act’s “unfair competition” provisions made illegal things like “predatory pricing,” price wars, and “dumping.” Normally, it is difficult for oligopolies to form, because there is a strong incentive to cheat and undercut your competitors, seizing more market share. But this law prohibited selling goods for less than production costs, and thus made it possible for more stable oligopolies to form.

The incentives are clearly there for big business to use the state to enforce monopoly or oligopoly upon their industry and extract unwarranted profits. But there are a couple of further problems with the big business-big government relationship.

Regulatory capture, when the powerful business interests whom the government is supposed to be regulating end up seizing control of these regulations, is ridiculously common. How does this work?

“The basic logic behind the capture theory of regulation is that while the general public is largely ignorant of the regulator’s activities, those in the regulated industries are well-informed, and pressure regulators for favorable regulation. Furthermore, information about regulated industries is largely under the control of those in the industry, and personal connections between regulators and the regulated also influence regulatory outcomes. The result is that regulatory agencies act as agents for those they regulate, not the general public.”

Since this is just an overview, I will not delve into the details and the many, many, MANY examples of this. The most blatant recent example was brought to our attention by whistleblower Carmen Segarra, who secretly recorded tapes showing that Goldman Sachs got to ignore the regulations that they were supposed to abide by. And you can be sure that smaller companies would never have gotten away with this kind of thing.

Obamacare

 

 

And then there is the revolving door between big business and government. Again, I cannot possibly give this subject the treatment that it deserves here. But put simply, those who work in government, often in regulatory agencies, hope to one day make significantly more money working in private industry. As such, they will do a lax job with their regulations because of this. Conversely, some big companies will pay out large bonuses to their executives to take positions in government. It’s not hard to guess why. Here you can see a series of Venn diagrams demonstrating the revolving door between top member of government and various industries. Ken Silverstein at The Intercept has a great take on this, and a perfect example:

“After he went to prison for bribing public officials, lobbyist Jack Abramoff claimed in his memoir, Capitol Punishment, that he controlled around 100 members of Congress. In addition to offering them and their staff free meals at his high-end restaurant, Signatures, Abramoff handed out luxury box tickets to sporting events and junkets to the world’s most exclusive golf destinations. But his most effective tactic was simply to float the suggestion to congressional staffers that he’d hire them when they left the Hill. Abramoff would then effectively “own” the staffer, who would perhaps even unconsciously start making decisions that benefited his future employer. “His paycheck may have been signed by the Congress, but he was already working for me, influencing his office for my clients’ best interests,” Abramoff wrote. “It was a perfect–and perfectly corrupt–arrangement.”

In this environment it’s misleading to use the term “revolving door,” because that falsely suggests that there are sharp lines separating corporate America, government and the influence peddling complex.”

For more on the history of the cozy relationship between big business and the state in terms of regulations, see this and this.

 

Corporate Subsidies

Finally, we come to the most direct and obvious way that the state is used to plunder the people for the benefit of large corporations: corporate subsidies. The US Federal government spends $100 billion per year on direct corporate subsidies. This is one where where I think, thankfully, libertarians and progressives can agree that the state should be rolled back. Since there are so many ways in which subsidies are snuck into government budgets, I can only provide a handful of examples here.

  • Much of the military-industrial complex amounts to a corporate subsidy. Never mind the fact that the industry itself would be just a fraction of its current size if it weren’t for the state in general. There are specific aspects that count as corporate subsidy: namely, foreign military aid. Every year, the US gives billions of dollars to foreign countries so that they can use that money in order to buy weapons from US manufacturers.
  • The massive government bailouts in 2008 were a corporate subsidy (and unfortunately, one that the left tended to support, based on the fallacious idea of “creating jobs”). This includes hundreds of billions of dollars going to giant entities such as Bear Stearns, AIG, Fannie Mae, and Freddie Mac. And then the TARP bailed out all of Wall Street, and later General Motors and Chrysler. I can assure you, the little guy will never be “too big to fail.”
  • Federal land is often leased out to billionaires and large corporations, who have no incentive to treat the land responsibly due to a lack of private property rights. This includes things like leasing land for grazing, logging, and drilling for oil. These companies need not be concerned for the environment, because their contracts run out within a couple years – might as well suck the land dry of as many profitable resources as possible! A far better solution for the environment would be for conservation organizations to buy up swaths of land that they want to protect and then not sell it to these corporations. Duh.
  • Big Agriculture is the recipient of massive corporate subsidies in the Farm Bill that gets passed every couple years. The largest part of these bills is generally food assistance, and particularly the SNAP (food stamps) portion, which one could easily argue is just another corporate subsidy. What do you think these food stamps are spent on? (Note that my argument here isn’t “poor people should stop buying food,” but rather that centralized farming and food processing operations are primary beneficiaries of the program.)
  • The Export-Import Bank provides loans to foreign countries so that they can purchase American-made goods. This is a major corporate subsidy, but the primary benefactor is a single giant corporation: Boeing. The Ex-Im Bank spent $20.5 billion dollars of taxpayer money in fiscal year 2014, 40% of which ended up going back to Boeing. And in a typical case of regulatory capture, the Ex-Im Bank reached out to Boeing to seek their approval on regulatory rules they were writing.

Need I go on?

 

Conclusion

libertarian word

The above is just an overview of the many ways in which corporations and the wealthy elite are made even more rich through the state apparatus. There are a million more assorted ways the state protects unnaturally big business, such as creating a student loan bubble that forces many into debt slavery, and military interventions abroad at the behest of major corporations (such as United Fruit Company in 1950s Guatemala and Halliburton in Iraq).

The fact is, without the enforcement arm of the state, the economic structure of production would be wildly different, perhaps even unrecognizable. Progressives tend to conflate the libertarian defense of free markets with a defense of the status quo, but nothing could be further from the truth. Unfortunately, some of the responsibility for this fallacy does lie within libertarians ourselves; our temporary alliance with the “right” has likely rubbed off on us in certain ways, and we do not present ourselves as honestly as we should. And then there are the beltway libertarians, who really are more like conservatives. Nevertheless, the libertarian tradition is fundamentally radical – 19th century individualist-anarchist Benjamin Tucker even called himself a socialist and belonged to the First International! Perhaps it is time we libertarians get back to our more radical roots.

I believe that there are many on the left who fundamentally want something similar to what we libertarians want: an immediate end to the privilege and entitlement of elite members of society at the expense of the rest of us.

Case Study In Media Deception: Dietary Supplement Regulation

Dietary supplements

One of my pet interests is in nutrition, health, personal development, and the like (I’ve actually been blogging about this stuff for three years now over here). A subsection of that interest is in nutritional supplements, which I know far too much about. Some of my friends consider me like a pharmacist of sorts.

My dad, familiar with my interests, sent me this article on Yahoo about how GNC will be making changes to their quality control procedures. Here’s the gist of it:

Earlier this year, the New York State attorney general’s office accused GNC, Target, Walmart and Walgreens of selling fraudulent herbal supplements, devoid of the ingredients touted on the label and containing potentially harmful contaminants. Now, at least one of the retailers is responding by tightening up their quality control.

Today, GNC will announce that it will be implementing major new testing procedures to make sure its supplements far exceed the standards currently set by the federal government.

“This should be a standard across the entire industry,” Dr. Pieter Cohen, a professor who studies supplements at Harvard Medical School, tells the New York Times. “Today we finally have one first step taken by one retailer, and only after the very aggressive intervention by the New York attorney general’s office.”

In the past, I’ve discussed how the media is used to promote memes that the elite want spread, and this is a perfect demonstration of the principle. Supplements are regulated more like the way food is regulated in America, as opposed to the far more heavily regulated pharmaceutical industry. As such, dietary supplements are vastly cheaper – and Americans are using them in huge numbers. In 2012, the industry took home $32 billion in revenue, and this is projected to increase to $60 billion by 2021.

It is quite clear that the intention of this article is to promote the idea of further regulation of dietary supplements. Feel free to read the article yourself, but the excerpt above is obviously an attempt to make a connection between supplements being unsafe and the government needing to step in to address this. A casual reader of the article will immediately make that connection in their mind: “Uh oh, I take dietary supplements [nearly 70% of Americans do]. I don’t want them to be unsafe – there ought to be a law!”

But the connection is entirely spurious, as one heavily propagandistic statement in the middle of the article should make clear:

Supplements are required to state the name and amount of each and every ingredient they contain — but this practice is more of an “honor code,”and not always abided by.

Supplements are currently regulated under the Dietary Supplement Health and Education Act of 1994 (DSHEA). Under this law, supplements are in fact required to state the name of every ingredient they contain and the total quantity of ingredients. This is the law. The only reason why the article would say it is “more of an honor code” is to mislead; technically, all laws go by the “honor code” in the sense mentioned here – that they are sometimes broken. Nobody would claim that laws against murder go by the “honor code.” If you murder someone and are caught, the force of the law comes down upon you. Just like for every law.

The article is arguing that because supplement companies have committed fraud, they need tighter regulations. But fraud is already illegal, and there is already a procedure in place for this. From the FDA website linked to above:

FDA is responsible for taking action against any adulterated or misbranded dietary supplement product after it reaches the market.

In other words, current regulations already prohibit fraud. The current regulations have failed to protect consumers, despite their intent.

I am not trying to dispute here that there are problems within the supplement industry. Fraud may very well be rampant, as the article claims. In that case, the fraudsters ought to be punished, and those who were victimized ought to be made whole again.

In addition to fraud, many supplements make bold claims about their potential health benefits, even if there isn’t much credible science to back it up. But it is the responsibility of consumers to separate the good from the bad. No one is coerced into purchasing these supplements. It is easy to do research on these things. Personally, I suggest checking examine.com to find quality scientific research on supplements for free. And by and large, dietary supplements are quite safe (but you should ALWAYS do your own research beforehand).

But I digress. The main point I want to get across in this post is that the media is used as a means of establishing trends on behalf of the elite. Who is it that stands to benefit most from promoting the meme that dietary supplements require stronger regulations? Answer: the pharmaceutical companies, of course!

Dietary supplements are viewed by many Americans as a cheaper alternative to expensive pharmaceuticals. But if they were more heavily regulated, the cost of supplements would skyrocket, and people would no longer have access to cheap substitutes. So that is the first point: eliminating competition. Complying with regulations is expensive, and this makes it vastly more difficult for upstart companies to get a foothold in the industry.

Perhaps even more important is the fact that much of the supplement industry is already owned by the big pharmaceutical companies! In an article on Al Jazeera arguing in favor of supplement regulation, this is confirmed:

Supplement promoters sell themselves as an alternative to big pharma, but giant pharmaceutical firms actually own the bulk of the industry. Pfizer owns Centrum, Bayer owns One a Day, and Procter & Gamble owns supplement maker New Chapter. Even Wall Street is getting in on the action. The Carlyle Group, a private-equity giant, owns NBTY (formerly Nature’s Bounty), and hedge funds are trading on industry players like the Vitamin Shoppe, betting that health-conscious baby boomers and other promising demographics will keep buying.

A 2009 article on Fox News corroborates this:

There are hundreds of small firms, including niche players with only a few products. But they account for a slim slice of total sales, industry experts say.

The Pharma giant Wyeth, for example, makes Centrum and other supplements, and Bayer HealthCare of aspirin fame makes the One A Day line. Unilever, Novartis, GlaxoSmithKline and other big pharmaceutical firms also make or sell supplements.

Not only will dietary supplement regulation squeeze out the smaller players in the market, but it will allow the pharmaceutical companies to sell their own supplements for oligopoly prices. And since these giant companies already have the majority share in these sales, you can expect that they will be by far the biggest winners if any new supplement regulations are signed into law.

This whole idea is most surely a promotion by the pharmaceutical industry, which has a massive lobby. In the 2014 election cycle, the industry spent nearly $14.8 million, according to the Center for Responsive Politics. And in the combined election cycles between 1990 and 2014, they spent over $163 million. Contrast this with the lobbying for the nutritional supplement industry. In 2014, they spent just over $1 million. And since 1990, they have spent a paltry $15.3 million.

And pharmaceutical companies are known to be aggressive marketers. In particular, they are shifting to a more heavy online advertising presence, as you can see in the graph.

pharmaceutical-advertising-spending

If my powers of deduction and knowledge of how the world works are correct, you can expect to see many more articles published in major online news sources calling for increased regulation of the dietary supplement industry.

Crony capitalism at its finest!

is..

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The American Panopticon: Why A Free Society Can’t Have Mass Surveillance

Panopticon

If you knew you were being watched, would you behave differently? Would you not second guess your natural inclinations or tendencies? Perhaps you would act like a totally different person – more subdued, more “average”, and less likely to rock the boat.

A situation in which everyone felt as though they were being watched all the time may be terrifying to many, but there are situations where one might feel this is a feature and not a bug. For instance, a prison. Take Jeremy Bentham’s idea of the Panopticon:

“The Panopticon is a type of institutional building designed by the English philosopher and social theorist Jeremy Bentham in the late 18th century. The concept of the design is to allow a single watchman to observe (-opticon) all (pan-) inmates of an institution without the inmates being able to tell whether or not they are being watched. Although it is physically impossible for the single watchman to observe all cells at once, the fact that the inmates cannot know when they are being watched means that all inmates must act as though they are watched at all times, effectively controlling their own behaviour constantly.”

In a prison, being able to have everyone feel as though they are constantly under surveillance will lead to self-regulation of behavior among the inmates, making them far easier to control. When dealing with violent criminals, there are some obvious advantages to this.

The Panopticon was designed to be a physical structure, but it would be appropriate to treat it as a metaphor for modern disciplinary society, or the inclination to observe everyone as much as possible and to “normalize” their behavior. Some readers may think it a stretch to make this comparison, but modern day America is becoming a Panopticon of sorts with nearly unlimited warrantless surveillance, big data, and the coming Internet of Things.

Mass surveillance has always been an issue – and in fact, is one of the common things that Americans loathe about other totalitarian countries. If you ask any American about the Soviet Union, they will invariably know about the KGB, people being “disappeared” to the gulag, and so on. We tend to juxtapose our society with theirs, and claim that America is “a free country.”

I intend to argue in this post that a society with persistent, mass surveillance cannot be considered “free”. In addition, I plan to show that the United States government either has already created a Panopticon-like country, or is frighteningly close to it.

After the Edward Snowden revelations, it is hard to believe there are people who don’t already understand this. William Binney, the highest ranking NSA whistleblower of all time (Technical Leader) has said that the goal of the NSA is “total population control.”

Warning: This is going to be a very lengthy post. I have left no stone untouched, and wanted to create a full picture of the totalitarian Panopticon that is forming around us all. So grab a cup of coffee, sit back, and get ready.

“The man who is compelled to live every minute of his life among others and whose every need, thought, desire, fancy, or gratification is subject to public scrutiny, has been deprived of his individuality and human dignity. Such an individual merges with the mass. His opinions, being public, tend always to be conventionally accepted ones; his feelings, being openly exhibited, tend to lose their quality of unique personal warmth and to become the feelings of every man. Such a being, although sentient, in fungible; he is not an individual.” – Edward Bloustein, former Rutgers University President

 

But I Have Nothing To Hide

“If you’ve got nothing to hide, you’ve got nothing to fear.”

This is the single most common response of most people who are not as terribly afraid of the American Panopticon as they ought to be. Most are likely to be blissfully unaware that this quote was in fact attributed to Joseph Goebbels, the Nazi propagandist.

How might this argument go in practice? Daniel Solove, in his brilliant refutation of this common argument, frames it like this:

“The NSA surveillance, data mining, or other government information-gathering programs will result in the disclosure of particular pieces of information to a few government officials, or perhaps only to government computers. This very limited disclosure of the particular information involved is not likely to be threatening to the privacy of law-abiding citizens. Only those who are engaged in illegal activities have a reason to hide this information. Although there may be some cases in which the information might be sensitive or embarrassing to law-abiding citizens, the limited disclosure lessens the threat to privacy. Moreover, the security interest in detecting, investigating, and preventing terrorist attacks is very high and outweighs whatever minimal or moderate privacy interests law-abiding citizens may have in these particular pieces of information.”

The underlying assumption of this argument is that privacy is about hiding “bad” things. Those who say they “have nothing to hide” are arguing from the faulty premise that privacy is only about hiding negative or embarrassing things.

Many issues result from this faulty premise. Surveillance and privacy violations are a serious problem, even if there is no information gathered that people wouldn’t want uncovered. It can lead to Kafkaesque scenarios where the citizen is completely powerless and vulnerable because the oppressor has vast amounts of data on him, and he has no influence on the process. As Solove said:

“The harms consist of those created by bureaucracies – indifference, errors, abuses, frustration, and lack of transparency and accountability.”

Because there is so little transparency in the data mining going on, it would be impossible to say that NSA surveillance won’t uncover information that people may want to hide. Furthermore, one of the major purposes of all this data is to make predictions about future behavior. All sorts of information is being gathered about you, without you knowing precisely what, and then that information is used to create a profile on you and your likely future actions. It’s easy to imagine how this could be used improperly – and all with it being information that you were willing to give away.

Nothing To Hide

Ultimately, this creates are very clear power imbalance between you and the government. Why should the NSA and those who control it, largely unaccountable to the public and shielded from scrutiny, have such a large advantage over citizens? A government that possesses so much information could wield immense power over the public. If you have any appreciation for the history of totalitarianism in the 20th century, then this thought should make you cringe.

Perhaps you believe that even if there is all this information gathered, it will only be used in strictly lawful ways. You can’t imagine the information being used against you if, say, it could only be accessed for the sake of “national security.” Not so, says the Electronic Frontier Foundation (EFF). According to them, government powers that were legally only supposed to be used to prevent terrorism have been used for more routine law enforcement purposes.

“Law enforcement made 47 sneak-and-peek searches nationwide from September 2001 to April 2003. The 2010 report reveals 3,970 total requests were processed. Within three years that number jumped to 11,129. That’s an increase of over 7,000 requests. Exactly what privacy advocates argued in 2001 is happening: sneak and peak warrants are not just being used in exceptional circumstances—which was their original intent—but as an everyday investigative tool.”

“Out of the 3,970 total requests from October 1, 2009 to September 30, 2010, 3,034 were for narcotics cases and only 37 for terrorism cases (about .9%). Since then, the numbers get worse. The 2011 report reveals a total of 6,775 requests. 5,093 were used for drugs, while only 31 (or .5%) were used for terrorism cases. The 2012 report follows a similar pattern: Only .6%, or 58 requests, dealt with terrorism cases. The 2013 report confirms the incredibly low numbers. Out of 11,129 reports only 51, or .5%, of requests were used for terrorism. The majority of requests were overwhelmingly for narcotics cases, which tapped out at 9,401 requests.”

In addition, both the DEA and IRS are given data that the NSA has gathered, which is then used as evidence in drug or tax crimes. These agencies then use “parallel reconstruction” and pretend that they gathered the evidence via other methods, a clearly unconstitutional practice. In other words, these organizations act completely above the law, and not to stop terrorism.

Perhaps you are still not concerned; after all, you don’t use drugs! But the specific use isn’t the point. The data that is gathered could theoretically be used for anything that is illegal. Considering how some reputable estimates suggest that the average American commits three felonies per day, this should be a concern to everyone. In addition, you do not know how long this data will be stored; in some programs, this is legally specified, and in others it is not. Often times, data is required to be stored for many years. And as the cost of data storage continues getting cheaper, it is quite feasible to think that it will be stored and searchable for many, many years. There are quite a few examples of people who may have believed they had “nothing to hide”, but have suffered serious consequences regardless, often due to something as mundane as a bureaucratic error (mistaken drug tests, misidentification, and my favorite, being convicted for violating a law that didn’t exist).

All sorts of bad things could happen to you due to the kinds of mass surveillance happening nowadays. On the more “mundane” side, there are numerous documented and confirmed instances where NSA employees used their access in order to spy on lovers, ex-girlfriends, and the like, which is jokingly referred to as LOVEINT, a play off of SIGINT, or signals intelligence. While those cases are disturbing, they pale in comparison to these other situations, as mentioned by Solove:

“Most privacy problems and harms lack dead bodies. Of course, there are exceptional cases such as the murders of Rebecca Shaeffer and Amy Boyer. Rebecca Shaeffer was an actress killed when a stalker obtained her address from a Department of Motor Vehicles record. This incident prompted Congress to pass the Driver’s Privacy Protection Act of 1994. Likewise, Amy Boyer was murdered by a stalker who obtained her personal information, including her work address and Social Security Number, from a database company.”

You may have done nothing wrong in your life, but that doesn’t mean that you shouldn’t be afraid of mass data collection.

 

Why Privacy Matters

There are many more reasons why you ought to be concerned about privacy and the negative effects of mass surveillance, some more subtle, and some with terrifying and dangerous implications. I will begin with the more subtle before moving on to the most direct reasons why privacy is critical.

Bathroom surveillance

Privacy Is Important To Our Relationships

In an interesting paper by James Rachels (“Why Privacy is Important”, 1975), an often overlooked aspect of privacy was mentioned. A key part of privacy is in how we manage our social relationships. Different relationships have different characters; we put on “masks”, so to speak, depending on who we are around. Losing privacy causes us to lose this separation between different kinds of relationships: business, marriage, kids, friendships, acquaintances, etc. This point requires some elaboration. Consider this example:

“First, consider what happens when two close friends are joined by a casual acquaintance. The character of the group changes; and one of the changes is that conversation about intimate matters is now out of order. Then suppose these friends could never be alone; suppose there were always third parties (let us say casual acquaintances or strangers) intruding. Then they could do either of two things. They could carry on as close friends do, sharing confidences, freely ex-pressing their feelings about things, and so on. But this would mean violating their sense of how it is appropriate to behave around casual acquaintances or strangers. Or they could avoid doing or saying anything which they think inappropriate to do or say around a third party. But this would mean that they could no longer behave with one another in the way that friends do and further that, eventually, they would no longer be close friends.”

Obama Spying

This implies that our associations with others need to be separate or compartmentalized to some degree. In order to have control over our relationships with others, we must have control over the access that other people have to us (and our information).

“We now have an explanation of the value of privacy in ordinary situations in which we have nothing to hide. The explanation is that, even in the most common and unremarkable circumstances, we regulate our behavior according to the kinds of relationships we have with the people around us. If we cannot control who has access to us, sometimes including and sometimes excluding various people, then we cannot control the patterns of behavior we need to adopt (this is one reason why privacy is an aspect of liberty) or the kinds of relations with other people that we will have.”

Personal Growth And Maturity Become Stunted

Losing control of your relationships with others is one thing. But when your privacy is consistently violated, you end up losing something even more important – your sense of self.

Forgot Password

When people consistently have their privacy violated, they are kept in a more childish state. Constant surveillance trains us to behave more “normally”, and acting in an unconventional way becomes more challenging and less common. As people consistently act conventionally, they begin to think and feel conventionally as well; the inner “spark” that makes us each unique in some way shines less and less brightly. People lose their capacity for self-discovery and creativity. Over time, the more rebellious, different, and unconventional ideas that are perfectly normal for people to have will never come to exist. There will be no need for a despotic government to even try to suppress these inclinations – a “Brave New World” scenario becomes more and more like reality.

How does this happen? For one thing, people become less spontaneous when they know that whatever they do is being tracked or recorded. I’m not just driving from place X to place Y at time T; I’m driving from place X to place Y at time T and creating a record of it. The difference may seem trivial at first, but when everything is being recorded, your life must become more measured and thought out. What if you knew that every time you were having sex, you were being recorded?

When thought of that way, it is clear that invasions of privacy are insults, because they deny an individual’s ownership of himself. Mass surveillance is like having a permanent, ever-present Peeping Tom in everyone’s lives; if you have a problem with voyeurism directed at yourself, why would you not have a proportionately greater objection to mass surveillance?

Growing up in the American Panopticon will make it more difficult for people to develop a strong conception of “self” or self-ownership. You no longer have personal sovereignty if all of your data is collected and visible from some single point outside of you. You become mere data to the Leviathan. You no longer have the authority to withdraw yourself from public view and scrutiny, and in that way, you are symbolically losing your “self” to some centralized institution. As Jeffrey Reiman wrote (“Driving to the Panopticon”, 1995):

“But, of course, what is symbolic is almost never merely symbolic. By such symbols do we come to acquire our self-conceptions. They shape the way we identify ourselves to ourselves and to one another, and thus they shape our identities themselves. Growing up in the informational panopticon, people will be less likely to acquire selves that think of themselves as owning themselves. They will say mine with less authority, and yours with less respect. And I think that selves that think of themselves as owning themselves are precisely what we understand as “moral selves”. They are selves that naturally accept ownership of their actions and thus responsibility for them. They naturally insist on ownership of their destinies and thus on the right to choose their own way. Here the loss of privacy threatens an incalculable loss. What will it be worth if a man should gain the world but lose his soul?”

In other words, the loss of identity that comes with mass surveillance will also reduce peoples’ feelings of moral responsibility. If you think this is farfetched, consider an analogy to the way people tend to look at reducing poverty these days. To many, it is the responsibility of the state to alleviate poverty. It would be easy enough for most individuals to give a dollar to the homeless man that they pass on the street, but instead, they view that as the responsibility of the collective, the state. Most millennials feel zero guilt ignoring the homeless person and continuing to stare at one of their many screens. They need not help out their fellow man, an individual; after all, that’s the government’s job! If anything, they consider their time better spent lobbying the government to take more money from other people in order to aid the homeless.

Suppression Of Free Speech And Chilling Effects

Now we begin to get into the less abstract and more scary things that a loss of privacy entails. The most obvious effect is the loss of free speech.

You're Being Watched

It’s not hard to imagine how mass surveillance curtails peoples’ freedom of speech. Most Americans will somewhat regularly juxtapose America with banana republics like North Korea which have very overt controls on speech and association. It is commonly assumed that “it could never happen here.” And perhaps it never will become quite that bad – but even without the direct control of speech (say the wrong thing and go to jail), surveillance still creates a strong form of social control and self-censorship (say the wrong thing and get blacklisted from jobs, sued, marginalized, etc.).

It is quite clear that at the very least, there is already a chilling effect going on in America. Surveys have shown that, in our post-Snowden world, people are becoming more unwilling to discuss surveillance issues online due to fears of the NSA. But we don’t even need surveys or research to know that this is an effect. I’m sure almost every one of us has at one point or other censored ourselves while discussing something online. I have been told by family members that I should stop writing this blog because of the potential ramifications of my unorthodox thought. The suggestions are well-meaning and appreciated (and perhaps even the right decision from a personal/selfish standpoint), but they just further prove my point.

The chilling effect is not merely on speech; it also affects what you read or purchase, and who you associate with. If you know that the books you take out from the library are being recorded, perhaps you are less likely to take out, say, the Qur’an, or a history of revolutionary thought. You may try to avoid being affiliated with certain organizations; if the country grew more tyrannical, you may not want to be receiving a newsletter from the ACLU.

Other kinds of behavior become chilled as well. People who live unorthodox lifestyles or who do unconventional things may feel the need to repress those things. People often try to oppress those who live unconventional lifestyles. The best example I can think of here would be homosexuality; many governments throughout the world have very dangerous policies with regards to homosexuals, and being outed could be a death sentence in some countries. Other examples could include pornography use, gambling, possession of certain taboo plants or chemicals, and so on.

Some of you may not consider this a big deal, because you yourself believe those activities to be immoral. But as I’ve stated before, anything could become illegal, and you could become the victim of this yourself. What about the children who are suffering from awful diseases because they don’t have access to medical marijuana? Some parents will go to the trouble of moving to a new state for ease of access, but others may not. They have had their behavior chilled, and their child is the unfortunate victim.

As our world becomes increasingly politicized, more and more behaviors begin to fall into this category. For instance, the more socialized medicine becomes, the more people will feel justified intruding into your health decisions. What if every time you swiped your credit card at a fast food restaurant, this information went out to a database somewhere and bureaucrats (or even nosy neighbors) started to hound you for making medical costs higher for everyone?

Now, not everyone will be intimidated or really experience the chilling affect personally. That being said, it is still dangerous. Here is what Solove has to say about the subject:

“Even surveillance of legal activities can inhibit people from engaging in them. It might be that particular people may not be chilled by surveillance – indeed, probably most people will not be except those engaging in particularly unpopular speech or associating with disfavored groups. The value of protecting against such chilling is not measured simply in terms of the value to those particular individuals. Chilling effects harm society because, among other things, they reduce the range of viewpoints being expressed and the degree of freedom with which to engage in political activity.”

Regardless of how you personally respond to mass surveillance, there are negative effects to society on the whole because there will be less intellectual diversity. Almost every brilliant thought was at one point radical, but it is the more radical or outlandish thoughts that people will avoid expressing.

Finally, even if you think that outright suppression of speech “couldn’t happen here” (let’s ignore the fact that it already does happen here; for instance, the French government just took down several websites they claimed promote or advocate terrorism, Holocaust denial is illegal in much of Europe, etc.), one of the Snowden revelations was that the GCHQ, Britain’s equivalent of the NSA, is specifically targeting journalists. And let’s not forget about COINTELPRO, the FBI’s 1956-1971 (perhaps it has continued for longer under a different name) program which monitored, infiltrated, and subverted domestic political organizations. And it is becoming increasingly frequent that people in the US and UK are being charged for crimes based entirely off social media postings (generally when they are anti-war or anti-police), rather than actually committing a real crime against other people. In other words, people are going to jail for expressing their views.

Manipulation And Social Control

The most terrifying part of the growth in the unchecked surveillance state is the way that it can be used to manipulate the political process on behalf of powerful actors, and to manipulate the public to go along with it.

As stated above, the purpose of NSA mass surveillance is “total population control.” Relatively new technologies, primarily social media, provide the NSA with unprecedented abilities to achieve this goal.

DARPA is spending millions of dollars on research regarding social media and how messages are spread and adopted. As The Guardian reports (far more detail at that link):

“The project list includes a study of how activists with the Occupy movement used Twitter as well as a range of research on tracking internet memes and some about understanding how influence behaviour (liking, following, retweeting) happens on a range of popular social media platforms like Pinterest, Twitter, Kickstarter, Digg and Reddit.”

One such study was performed by Facebook on over 600,000 users without their knowledge. Facebook changed the content of these users’ news feeds by giving people more negative emotional content to see how moods can be manipulated en masse. This research was connected to the Minerva Initiative, a Department of Defense project which funds research on modeling the “dynamics, risks, and tipping points for large-scale civil unrest across the world.”

Additional research is being done on “informational cascades,” or how social network behavior is shaped by each other’s decisions resulting in a “cascade” of behavior that people may not have otherwise taken. For instance, “liking” something on Facebook because other people have already liked it. The research being done is deliberately focusing on how to maximize the number of “favorable” decisions. The information is being specifically used to better understand “the formation of opinions” and “the evolution of new cultural norms.” I don’t think I need to elaborate on how this type of knowledge could be used for evil purposes (or even to attempt to topple foreign governments, like Cuba’s).

…okay, fine, I’ll elaborate just a little bit. Documents released by Edward Snowden have revealed that the government is encouraging the use of a technique they call the “Counter Reset” in order to disrupt the momentum that unfavorable articles may generate online. For instance, if The Powers That Be dislike a story, they can do a Counter Reset, and suddenly the article will have zero upvotes, likes, or retweets. This will help decrease the number of eyeballs that see an unfavorable story. In fact, this was done on Reddit, somewhat ironically, to decrease the momentum of the story where these techniques were revealed by Snowden – a story I will go into in just a moment.

The Snowden revelations, outlined by Glenn Greenwald in this article, are primarily about the GCHQ and its JTRIG group, but likely apply to the NSA as well. Here is a quick summary:

“Among the core self-identified purposes of JTRIG are two tactics: (1) to inject all sorts of false material onto the internet in order to destroy the reputation of its targets; and (2) to use social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable. To see how extremist these programs are, just consider the tactics they boast of using to achieve those ends: “false flag operations” (posting material to the internet and falsely attributing it to someone else), fake victim blog posts (pretending to be a victim of the individual whose reputation they want to destroy), and posting “negative information” on various forums.”

GCHQ descredit target

GCHQ discredit company

It’s easy to see why people would want this story suppressed, right? These techniques aren’t just being used against hostile governments, terrorists, and the like; they are being used against people who are merely suspected of being involved in ordinary crimes. The key word is “suspected”; targets need not be actually charged or convicted of any crimes. Surveillance agencies have given themselves the power to ruin innocent peoples’ reputations and to disrupt political activity online without cause. As Greenwald concludes:

“Who would possibly trust a government to exercise these powers at all, let alone do so in secret, with virtually no oversight, and outside of any cognizable legal framework?”

Excellent question. But the manipulation of the public is only one part of the problem. What if surveillance was being used against more powerful people or politicians in order to control them? Many readers may be inclined to dismiss this as a paranoid “conspiracy theory,” but it is simply a documented fact that this is going on. We know that the NSA has monitored the phone calls of at least 35 world leaders (likely as a means to keep the empire’s vassal states in line), but it is far harder for many to accept that this is done domestically as well.

But please, accept it. This is not just a theoretical problem. For instance, the CIA was caught spying on members of Congress in the lead up to the release of the famous torture report. The NSA has indirectly admitted that it spies on Congress. Russell Tice, a former NSA employee turned whistleblower, has revealed many people that the NSA has spied on:

  • Members of Congress, both House and Senate, and particularly those who are on the Intelligence, Armed Services, and Judiciary committees.
  • A current Supreme Court judge
  • Two former FISA judges (these are the people who rubber stamp intelligence gathering operations)
  • State Department officials
  • Barack Obama, while he was in the Senate
  • White House spokesman Scott McClellan
  • General David Petraeus (who was also formerly the head of the CIA) and other Generals

There is plenty of precedent for this. The NSA previously had spied on Senators Frank Church and Howard Baker, who were investigating the intelligence community and Watergate, respectively. And J. Edgar Hoover at the FBI compiled dossiers on everyone in politics, specifically for the purpose of blackmail. With the NSA currently spying on peoples’ porn habits, is it so hard to believe that this information could be used to blackmail and control politicians and other highly placed people?

It is clear that this information could be used to the benefit of secretive, powerful interests within the National Security State. This surveillance helps concentrate power into fewer and fewer hands, to those who control the information flow. It is also quite clear that this could very easily subvert constitutional checks and balances. As this process continues, the US government becomes more and more like the tyrannical governments that are considered a joke in modern American discourse. And whether you have “something to hide” or not, the government gets closer and closer to being the kind of regime that will go after you regardless. Excusing mass surveillance in what was once a relatively free country leads to that country becoming despotic, which ought to raise the hair on the back of everyone’s necks.

 

Guilty Until Proven Innocent: Turning Every American Into A Threat

It is a common saying and a major precept of our justice system that people are “innocent until proven guilty.” Unfortunately, mass surveillance has turned this on its head.

Big Data

By definition, mass surveillance is not targeted to those who have committed crimes. There is a tendency to regard the entire citizenry as the enemy; who knows what kind of undesirables could be hiding in plain sight?! To distill this into a simple mathematical formula: mass surveillance = mass suspicion.

This can easily be seen with the proliferation of government watchlists that have exploded in use and size since 9/11. These lists are gigantic and growing – and once on the list, it is very difficult to get off. An important and fascinating report by Hina Shamsi and Matthew Harwood of the ACLU delves deeply into this subject, and we will borrow much of their research for this analysis.

When police encounter someone who they believe may in some way be connected to terrorism, they fill out a “suspicious activity report,” or SAR. Similarly, the government is instilling fear in Americans and encouraging them to snitch on their fellow citizens with the slogan “if you see something, say something.”

“FBI Director James Comey asked the public to report any suspicions they have to authorities. “When the hair on the back of your neck stands, listen to that instinct and just tell somebody,” said Comey.”

This is one of the most Orwellian slogans imaginable, and there are some deep, fundamental problems with it. Sometimes if I hear a noise at night, the hair on the back of my neck will stand – I really don’t think this is a reasonable standard for suspicion. Despite their clear attempts at creating a “Minority Report“-esque system, it is not easy to predict who is going to be a threat before people have actually committed any crime, particularly when based on such a flimsy standard.

Of course, determining who ought to be added to the SAR database requires some clear definition of what a “suspicious activity” actually looks like. The government has a list of 16 behaviors that qualify; nine of these behaviors have nothing whatsoever to do with criminal activity. Do you really think someone ought to be added to a terrorism watchlist because they are taking photographs, asking questions “beyond mere curiosity,” taking notes, or looking at stuff through binoculars?

(As an aside, while not directly related to the SAR program, it is very easy to be considered an “extremist” or a “suspicious” person by the US government. For instance, the FBI considers people who care about online privacy to be potentially suspicious of terrorist activity, and even likened pro-privacy supporters of Edward Snowden to a “digital al-Qaeda.” And here is a list of 72 ways the government can consider you an “extremist” in America, including talking about individual liberties, wanting to make the world a better place, being a returning veteran, and believing in a right to bear arms. They all really make the hair on the back of my neck stand!)

As you can imagine, the SAR database, based as it is on these ridiculous standards of (constitutionally protected) behavior, is likely not particularly effective. In fact, a Government Accountability Office report says that the FBI doesn’t even track whether the SARs that are uploaded to their database actually help thwart terrorism or lead to arrests or convictions. And for your viewing pleasure, the ACLU has collected a bunch of these SARs and revealed their contents:

“A number of reports were concerned with “ME” — Middle Eastern — males. One headline proclaimed, “Suspicious ME Males Buy Several Large Pallets of Water at REDACTED.” Another read, “Suspicious Activities by a ME Male in Lodi, CA.” And just what was so suspicious about this male? Read into the document and you discover that a sergeant at the Elk Grove Police Department had long been “concerned about a residence in his neighborhood occupied by a Middle Eastern male adult physician who is very unfriendly.” And it’s not just “Middle Eastern males” who provoke such suspicion. Get involved in a civil rights protest against the police and California law enforcement might report you, too. A June 2012 SAR was headlined “Demonstration Against Law Enforcement Use of Excessive Force” and reported that “a scheduled protest” by demonstrators “concerned about the use of excessive force by law enforcement officers” was about to occur.”

So, if you are of Middle Eastern descent, are “unfriendly,” or are concerned about police brutality, you are probably a terrorist.

And then there is the dreaded no-fly list. On 9/11, the no-fly list had only 16 names, but by 2013, this had gone up by 293,650% to 47,000 people, including 800 U.S. citizens and legal permanent residents. These people are considered “known or suspected terrorists,” and cannot fly to, from, or over the United States. These kinds of restrictions, as you can imagine, could be very disruptive to any innocent people who get added to the list. But surely it is easy to get removed, right? Wrong.

“In 2007, the Department of Homeland Security established the Traveler Redress Inquiry Program through which those who believe they are wrongly blacklisted can theoretically attempt to correct the government’s error. But banned flyers quickly find themselves frustrated because they have to guess what evidence they must produce to refute the government’s unrevealed basis for watchlisting them in the first place. Redress then becomes a grim bureaucratic wonderland. In response to queries, blacklisted people receive a letter from the DHS that gives no explanation for why they were not allowed to board a plane, no confirmation of whether they are actually on the no-fly list, and no certainty about whether they can fly in the future. In the end, the only recourse for such victims is to roll the dice by buying a ticket, going to the airport, and hoping for the best.”

Lists, lists, and more lists! In addition to the SAR database and the no-fly list, there is also a secret “master watchlist”:

“According to documents recently leaked to the Intercept, as of August 2013 that master watchlist contained 680,000 people, including 5,000 U.S. citizens and legal permanent residents. The government can add people’s names to it according to a shaky “reasonable suspicion” standard. There is, however, growing evidence that what’s “reasonable” to the government may only remotely resemble what that word means in everyday usage. Information from a single source, even an uncorroborated Facebook post, can allow a government agent to watchlist an individual with virtually no outside scrutiny. Perhaps that’s why 40% of those on the master watchlist have “no recognized terrorist group affiliation,” according to the government’s own records.”

If your name is on this list, you will get treated with extreme scrutiny when traveling, or when interacting with the police in any way.

And finally, the most terrifying list of them all:

“Inside the United States, no watchlist may be as consequential as the one that goes by the moniker of the Known or Appropriately Suspected Terrorist File. The names on this blacklist are shared with more than 17,000 state, local, and tribal police departments nationwide through the FBI’s National Crime Information Center (NCIC). Unlike any other information disseminated through the NCIC, the KST File reflects mere suspicion of involvement with criminal activity, so law enforcement personnel across the country are given access to a database of people who have secretly been labeled terrorism suspects with little or no actual evidence, based on virtually meaningless criteria.”

“And once someone is on this watchlist, good luck getting off it. According to the government’s watchlist rulebook, even a jury can’t help you. “An individual who is acquitted or against whom charges are dismissed for a crime related to terrorism,” it reads, “may nevertheless meet the reasonable standard and appropriately remain on, or be nominated to, the Terrorist Watchlist.””

Privacy ID Man

Picture this: you make a comment on Facebook about the 2nd Amendment. The police/surveillance apparatus picks this up and throws you onto one of their lists. One day, you get pulled over because of a broken tail light. When the police officer runs your plate, he sees that you are an “extremist” and potentially a terrorist, and are likely armed. Do you think the police officer might be a little on edge? And remember, you have no idea what the officer knows about you. How much more likely do you think it is that this interaction will turn out poorly?

Oh, that’s right. The police are trolling through social media in order to assign “threat ratings” to people. I kid you not. Here is a brief description of the software being used:

“…scanning the residents’ online comments, social media and recent purchases for warning signs. Commercial, criminal and social media information, including, as Intrado vice president Steve Reed said in an interview with urgentcomm.com, “any comments that could be construed as offensive,” all contribute to the threat score.”

Combine this with new technology developed by Raytheon which predicts your behavior based on your social media activity, and we start getting into the realm of the really creepy. The software “can be used to closely track a person’s life, down to their daily gym schedule,” and then predict what their next move will be (and then there is the US government questionnaire, which social workers and educators are supposed to use to determine which families are most likely to become terrorists). Is it farfetched to think that one day soon, people who have not committed any crimes at all will be monitored due to comments made online, picked up discretely when they go somewhere such that the police know they are alone, and then “disappeared” to a Homan Square-like black site? All in the name of “fighting terrorism” of course.

This is the world you invite when you advocate for mass surveillance.

 

The Architecture Of Mass Surveillance

“Unless social, legal, or technical forces intervene, it is conceivable that there will be no place on earth where an ordinary person will be able to avoid surveillance. In this possible future, public places will be watched by terrestrial cameras and even by satellites. Facial and voice recognition software, cell phone position monitoring, smart transport, and other science-fiction-like developments will together provide full and perhaps real time information on everyone’s location. Homes and bodies will be subject to sense-enhanced viewing. All communications, save perhaps some encrypted messages, will be scannable and sortable. Copyright protection “snitchware” and Internet-based user tracking will generate full dossiers of reading and shopping habits. The move to web-based commerce, combined with the fight against money laundering and tax evasion, will make it possible to assemble a complete economic profile of every consumer. All documents, whether electronic, photocopied, or (perhaps) even privately printed, will have invisible markings making it possible to trace the author. Workplaces will not only be observed by camera, but also anything involving computer use will be subject to detailed monitoring, analyzed for both efficiency and inappropriate use. As the cost of storage continues to drop, enormous databases will be created, or disparate distributed databases linked, allowing data to be cross-referenced in increasingly sophisticated ways. In this very possible future, indeed perhaps in our present, there may be nowhere to hide and little that can stay hidden.” – Froomkin (2000)

Thus far, we’ve seen how mass surveillance and violations of privacy can have catastrophic, dystopian consequences. In this section, I’d like to go into more detail on what kind of surveillance is going on right now, as we speak.

But before detailing the many ways that you are being surveilled (see here and here for lists of known NSA activities, though both lists are old and not comprehensive), I’d like to briefly address a very important subject.

NSA Spying

Does Mass Surveillance Stop Terrorism?

Many people in America are terrified. In their minds, terrorists lurk around every corner, just waiting to blow up them and their families. Even if they don’t like the idea of mass surveillance, they are willing to trade some of their liberty for what they believe will be enhanced security.

For starters, the actual risk to a US person that terrorism poses is trivially small. Just about everything you can imagine is more dangerous to you than terrorism:

  • You are 5,882 times more likely to die from medical error than terrorism.
  • You’re 4,706 times more likely to drink yourself to death than die from terrorism.
  • You are 1,904 times more likely to die from a car accident than from a terrorist attack.
  • You are 271 times more likely to die from a workplace accident than terrorism.
  • You are 26 times more likely to die from falling out of bed than be killed by terrorists.
  • You are more likely to be killed by a toddler than by a terrorist.
  • You are equally likely to die from being crushed to death by your TV or furniture as you are to die from terrorism.
  • You are 4 times more likely to be struck by lightning than killed by a terrorist.

And best of all, you are 55 times more likely to be killed by a police officer than to be killed by a terrorist. So put your fear in perspective; perhaps your real fear ought to be directed towards the police (or toddlers 😉 ) rather than terrorists.

Now, even if you want to ignore all this and focus undue attention on terrorists (which, of course, is their goal…), one must still show that mass surveillance plays a role in preventing terrorist attacks in order to have any chance of justifying it. Either way, the extreme risks of mass surveillance outlined above more than outweigh any potential benefit that this surveillance could have. But a key point here is that mass surveillance has been proven to be totally ineffective anyways.

For Your Safety

Now I know, you’ve probably heard something about how the NSA has stopped 54 terror plots using mass surveillance. This is indeed what they claimed at one point. But when pressed further, only one case, where someone was caught sending $8500 (chump change) to the Al Shabaab organization in Somalia, has been confirmed. What this means is that we have no knowledge of a single life being saved due to surveillance. Certainly, there could be instances that have not been made public, but we’ll just have to take the NSA’s word for it – the same NSA known for its repeated lies.

Additionally, research done by the European Union has shown that low-tech surveillance methods are more effective than the high tech methods in use today, such as internet monitoring. Best of all, members of the US Senate Intelligence Committee, Obama’s own commission, a US federal court, and an independent privacy board have all found that there is no convincing evidence that mass surveillance stops terror attacks.

But what about all the terrorist attacks that the FBI has thwarted on US soil? Surely quite a few of those are legitimate (though not necessarily the result of surveillance). However, many of these attacks are ones that were created, planned, and funded by the FBI itself! Usually the FBI finds a Muslim who publicly expresses somewhat radical political views, but is a poor, unemployed loner in his early 20s. Then the FBI creates a terror plot and recruits an informant to convince the target to partake in this government-supplied plot. Usually, there is resistance, but after plying them with large amounts of cash, they will agree. And then the FBI valiantly makes an arrest and trumpets to the media how great of a job they are doing keeping Americans safe. As Glenn Greenwald asks:

“But how serious of a threat can all of this be, at least domestically, if the FBI continually has to resort to manufacturing its own plots by trolling the Internet in search of young drifters and/or the mentally ill whom they target, recruit and then manipulate into joining? Does that not, by itself, demonstrate how over-hyped and insubstantial this “threat” actually is? Shouldn’t there be actual plots, ones that are created and fueled without the help of the FBI, that the agency should devote its massive resources to stopping?

This FBI tactic would be akin to having the Drug Enforcement Agency (DEA) constantly warn of the severe threat posed by drug addiction while it simultaneously uses pushers on its payroll to deliberately get people hooked on drugs so that they can arrest the addicts they’ve created and thus justify their own warnings and budgets (and that kind of threat-creation, just by the way, is not all that far off from what the other federal law enforcement agencies, like the FBI, are actually doing). As we noted the last time we wrote about this, the Justice Department is aggressively pressuring U.S. allies to employ these same entrapment tactics in order to create their own terrorists, who can then be paraded around as proof of the grave threat.”

To sum up: you shouldn’t be so deathly afraid of terrorism. It is clearly a negligible threat to you. And in any case, mass surveillance will do nothing to reduce your risk of being a victim.

Where Are You Going? Surveillance That Tracks Your Movements

One of the biggest “growth industries” in terms of mass surveillance is in tracking your physical movements from place to place. This includes all forms of transportation, from flying to driving to walking down the street. The government would like to know where you are at all times and be able to retrace your steps.

As far as street surveillance goes, Britain is most definitely the world leader. They have one CCTV (closed-circuit television) camera for every 11 people, or 5.9 million total. This includes 750,000 in schools, hospitals, and other “sensitive locations.” Just recently, the Scotland Yard chief has suggested that all British citizens install CCTV cameras in their homes. While I don’t doubt that these can be useful for catching criminals after the fact, there are clear Orwellian implications as well. The police were able to reconstruct a three mile route around York while investigating a woman’s disappearance, ruling out that she walked to work. Trying to find a missing person is good, but what about trailing, say, a political activist?

America doesn’t have quite as sophisticated a network as Britain, but there are plenty of cameras here too. The extent of video surveillance used by government is generally not made public in the US, so it is more difficult to gauge the extent of their use. But thanks to a 2011 ACLU report, we know that the Chicago Police Department has access to at least 10,000 public and private cameras, and can see virtually every public segment of the downtown area. These cameras “have the power to automatically identify and track particular persons, and the capacity to magnify and make visible small details and objects at great distances.” This, despite the fact that this type of surveillance has not been proven effective and is ripe for abuse. Having ever-present video surveillance of public places will have a serious chilling effect:

“As syndicated columnist Jacob Sullum has pointed out, “knowing that you are being watched by armed government agents tends to put a damper on things. You don’t want to offend them or otherwise call attention to yourself.” Eventually, he warns, “people may learn to be careful about the books and periodicals they read in public, avoiding titles that might alarm unseen observers. They may also put more thought into how they dress, lest they look like terrorists, gang members, druggies or hookers.” Indeed, the studies of cameras in Britain found that people deemed to be “out of time and place” with the surroundings were subjected to prolonged surveillance.”

And do you really want the government to know when you are walking into the psychiatrist’s office or a reproductive health clinic? Or, for that matter, a political gathering?

As technology gets more and more advanced, this becomes more and more scary. There are new cameras being deployed that are flown above small cities, and can track the movements of every person and vehicle for several hours at a time. What if these were flown above, say, an Occupy protest, a Tea Party gathering, or the recent protests over police killings?

And then there are other surveillance cameras that can monitor the streets for “pre-crimes” or “suspicious” behavior, and then alert the authorities. These cameras have been installed at “tourist attractions, government buildings, and military bases in the US.” But they are also about to be installed in San Francisco subways. These things tend to proliferate quickly, so don’t be surprised to see them used widely across the US over the next few years.

Perhaps most disturbing is the recent revelation that police departments across the US are using radar devices that let them see through walls and into your home. And they’ve been secretly using these devices for years.

There is also extensive surveillance of cars and where you are driving. The street cameras mentioned above are relevant here, but there are also masses of license plate readers being deployed across the US. According to John Whitehead:

“License plate readers, yet another law enforcement spying device made possible through funding by the Department of Homeland Security, can record up to 1800 license plates per minute. However, it seems these surveillance cameras can also photograph those inside a moving car. Recent reports indicate that the Drug Enforcement Administration has been using the cameras in conjunction with facial recognition software to build a “vehicle surveillance database” of the nation’s cars, drivers and passengers.”

What’s more disturbing is that the primary goal of this massive database is to help the DEA seize cars and cash associated with the drug trade via civil asset forfeiture. In other words, this whole, massive surveillance apparatus is specifically being used in order to steal from people who have not even been arrested, let alone convicted, of any crimes!

But let’s just say, hypothetically, these license plate scanners were being used to stop crimes. How effective are they? Vermont has an extensive program, which captured 7.9 million plates in an 18 month period. The program helped solve five crimes. Five.

But things start getting really Orwellian when we consider things like the tax-per-mile scheme that is going to be tested out in Oregon. You see, after mandating that cars become more fuel efficient, the government ended up losing out on too much revenue from their gasoline taxes. So instead, they are making sure all cars are fitted with a tracker that monitors how many miles you drive and sends that info back to the state.

“It plugs into the Onboard Diagnostics (OBD) port that all cars manufactured since the mid-1990s have. Then ties into your car’s computer, where the data about your mileage and (cue Darth Sideous voice) many other things are stored. Including your speed, rate of acceleration, whether you’re wearing a seatbelt.”

We can add to that list things like emissions data, parking locations, and GPS data regarding your location. Better yet, these little doohickeys can both send AND receive information. So if you haven’t paid your speeding ticket, you might just have your car automatically shut down. Combined with the knowledge that the FBI can remotely activate the microphones in cars (such as OnStar systems) and then listen in on what’s happening inside the car without passengers being able to tell, we have the makings of some truly scary stuff (technically, that is illegal, but when has that ever stopped them?). Perhaps the government will track someone who was important in a political protest, listen in on what’s going on in their car, and then remotely stop them from even making it there. That’s right, those who monitor your car can gain remote access to your vehicle (and this includes hackers/criminals, as well). Here’s a creepy example of what might start happening in the next few years:

“Picture this: You’re riding with the flow of traffic, say 40 MPH and the speed limit, like most speed limits, is under posted at 30 MPH. Suddenly an on-coming car whips a left in front of you and you center-punch the drivers door, doing considerable damage to you and the driver. His insurance company refuses to pay your claims on the basis that you were exceeding the speed limit and that there is evidence that you are a dangerous maniacal rider that shouldn’t even have a license.

At the trial the opposition pulls out the black box data. Sure enough, you were going 10 MPH over the speed limit, but traffic records show that everyone travels that road at 10 MPH over the speed limit. Then they show that on 47 occasions over the past six months you hit speeds in excess of 90 MPH! You’re portrayed as a loose cannon looking for a place to have an accident. In fact, not five minutes before the accident you were traveling 87 MPH! It doesn’t matter that you were executing a clean, safe pass, you were exceeding the speed limit by 27 miles per hour, “reckless driving” according to state statutes.”

Anyone who is using E-ZPass is also liable to have their location and movements monitored and documented, even when they aren’t driving through toll booths.

Covert Surveillance

And as anyone who has flown at all in the last dozen or so years knows, you are being thoroughly tracked when you fly. I’m only going to gloss over the TSA here, because their abuses are obvious and they really deserve a separate article. But according to a former TSA employee, many of his coworkers would laugh at the nude images from the Rapiscan (you can’t make this stuff up) X-ray machines from another room – and would sometimes be having sex in there rather than trying to keep airline passengers safe. That doesn’t really matter anyways, because even the manufacturer admitted that they don’t work, and it is easy to sneak explosives or guns through them. Oh, and these machines have the capacity to store and send these naked images.

The expanded security at airports sure makes traveling a lot more stressful. But now there are cameras being deployed in airports that can detect “emotional strain” and analyze voice-prints to detect stress. Based on these indicators, your “behavioral intent” can be scrutinized as a part of the security process. These could be a great technology and save people a lot of time going through security, but what happens with false positives?

Oh, and you probably suspected as much, but the NSA knows where you are flying and when by reading through peoples’ airline reservations and passenger manifests. And this information is being used to associate you with other people on the same flight. So if you happen to be on a flight with a criminal, even if you have no relation to them whatsoever, this will be a small strike against you.

And while they are still a relatively new technology, let’s not forget about the government’s use of drones for domestic surveillance. In the coming years, drone surveillance is likely to expand exponentially, but the Air Force is already flying drones over the US, and they are spying on us. The FBI even admits this! Worse, there are no rules in place concerning domestic surveillance using drones, so the government has a completely free hand in this area. Of course, stronger privacy laws likely won’t stop this from happening, but they would be a start. Not only that, but (and perhaps you can see a pattern here) the military is developing drones with facial recognition software which can “remember” peoples’ faces and read “malintent.” The net is tightening.

Eavesdropping On Your Calls – Phone Surveillance

It is the NSA’s cell phone surveillance that is probably the most well-known by Americans since the Snowden revelations began. Much has been made of these mass surveillance programs, but most Americans are not familiar with the incredible extent of modern cell phone surveillance. Let’s take a look.

For a while, the NSA had insisted that their bulk collection programs only collect the metadata of your calls, and that therefore the American people need not worry about the intrusiveness of these programs. The metadata (the phone numbers involved in the call, duration of call, etc.) is totally different from the content of your calls, and so you shouldn’t be concerned, according to their side of the story.

This is pure BS, for numerous reasons. Metadata can be used to reveal far more about you than Obama and the NSA would have you believe. Two Stanford graduate students were able to gather the following information just from phone metadata:

“Using phone metadata, the researchers inferred sensitive information about people’s lives, including: neurological and heart conditions, gun ownership, marijuana cultivation, abortion, and participation in Alcoholics Anonymous.”

This is just from a small experiment done by two grad students; I’m sure the NSA’s capabilities are significantly more advanced.

“They warn that the metadata they had access to is dwarfed by what the amount the NSA has access to. “The dataset that we analyzed in this report spanned hundreds of users over several months. Phone records held by the NSA and telecoms span millions of Americans over multiple years.””

For more disturbing details, see this. In addition, the NSA is using this metadata (in addition to data from emails, social media, passenger manifests, GPS tracking, etc.) in order to map the social networks of Americans, so they can know who you may be associating with. And in 2014, former NSA and CIA director Michael Hayden remarked: “We kill people based on metadata.”

Regardless, it is somewhat of a moot point, because the NSA is in fact listening in on the content of your phone calls. In fact, low ranking analysts can listen to the content of phone calls, and read the content of emails, text messages, and instant messages without any kind of authorization! Note that this isn’t just in real time; the content of your calls (and everything else) is being stored, and can be sifted through by thousands of low ranking analysts at their discretion.

In other words, you have no privacy whatsoever.

But there is a lot more stuff we know about the government’s surveillance of phone data. This list is hardly comprehensive, but hopefully will provide you with some idea of the scope of the mass surveillance going on:

  • It was recently revealed that the DEA has been collecting data on all calls made between the US and certain foreign countries. This surveillance is related to drug crimes, not terrorism.
  • Law enforcement officers have had access to a massive database of call records dating back to 1987, which has been used for routine law enforcement (again, not terrorism). Four billion call records are added to the database every day (although one call can correspond to more than one record).
  • The NSA is collecting up to five billion phone records per day from around the world, provided by US telecom providers. This doesn’t specifically target Americans, but a lot of American call records are scooped up “incidentally.”
  • The NSA, in it’s Dishfire program, collects 200 million text messages every day globally. These records can be queried for location data, contacts, credit card info, missed call alerts, roaming alerts (indicating potential border crossings), payment notifications, travel itinerary alerts, meeting information, electronic business cards, and so on. This is an untargeted operation and includes information on people who are not suspected of any crimes.
  • The NSA and GCHQ stole the encryption keys from various SIM card makers, most notably Gemalto. Gemalto produces two billion SIM cards per year, sold all over the world. Any phone with one of these SIM cards is completely vulnerable, and all the data on it is available to these spy agencies.
  • The NSA is secretly introducing flaws into communication systems so that they can easily be tapped into. This makes networks less secure and makes it easier for hackers or foreign governments to steal data as well, not just the NSA. The scope of this project (codename: AURORAGOLD) is such that “virtually every cellphone network in the world is NSA accessible.”
  • The CIA has a coordinated campaign to hack Apple’s iPhones and iPads. Read more about this interesting story here.
  • Dozens of governments around the world have bought surveillance technology that allows them to monitor the location of cell phones simply by typing in a phone number. The NSA and GCHQ have been doing this for years, but it is also accessible to dictators in banana republics.
  • The FBI remotely activates the microphones in cell phones to listen in on conversations in real time. They are able to do this even if the phone is turned off.
  • The Feds are flying small planes equipped with fake cell tower technology over the US, which collects phone data by forcing your phone to connect with it. These machines are supposed to be used to aid in routine law enforcement, but the machines are incapable of discriminating and end up picking up the data of everyone within range. The range of these planes cover “most of the US population.”
  • Police departments across the country are using Stingray devices, which also operate as fake cell towers. The government has been absurdly secretive about their use. Apparently, these devices disrupt cell service of any phones in their vicinity – a potential danger if there are emergencies happening nearby.

The government has almost unqualified access to your phone data. Again, it is not at all difficult to see how this kind of power could be abused.

“Gentlemen Don’t Read Each Other’s Mail” – Snail Mail Surveillance

Even your very low-tech snail mail isn’t safe from the mass surveillance machine.

For starters, all mail sent in the US has its envelope scanned and is loaded into a database. This contributes to the massive amounts of metadata out there, helping to create the government’s dossier on you.

On top of that, the US Postal Service approved nearly 50,000 requests from law enforcement to monitor your mail in 2013. These requests were approved despite often having no reason provided or even the proper written authorization that is supposedly required. Unsurprisingly, this program was abused by those trusted to administer it. For instance, it was used at least once by a politician to spy on a political opponent, and was also used to spy on communications between attorneys and their clients.

And just recently, mysterious secret cameras were discovered set up outside the post office to monitor peoples’ faces and their license plates as they drive to and from the post office. Within an hour of the story breaking, the surveillance cameras were removed…

Becoming Omniscient – Internet Surveillance

Government Liking Status

The internet is effectively broken. Unless you take active measures and use strong encryption online, the government knows about whatever you do and is watching you. To give you a feel for just how serious this is, consider these words from security expert Bruce Schneier:

“Web search data is another source of intimate information that can be used for surveillance. (You can argue whether this is data or metadata. The NSA claims it’s metadata because your search terms are embedded in the URLs.) We don’t lie to our search engine. We’re more intimate with it than with our friends, lovers, or family members. We always tell it exactly what we’re thinking about, in as clear words as possible.

Google knows what kind of porn each of us searches for, which old lovers we still think about, our shames, our concerns, and our secrets. If Google decided to, it could figure out which of us is worried about our mental health, thinking about tax evasion, or planning to protest a particular government policy. I used to say that Google knows more about what I’m thinking of than my wife does. But that doesn’t go far enough. Google knows more about what I’m thinking of than I do, because Google remembers all of it perfectly and forever.

I did a quick experiment with Google’s autocomplete feature. This is the feature that offers to complete typing your search queries in real time, based on what other people have typed. When I typed “should I tell my w,” Google suggested “should i tell my wife i had an affair” and “should i tell my work about dui” as the most popular completions. Google knows who clicked on those completions, and everything else they ever searched for. Google’s CEO Eric Schmidt admitted as much in 2010: “We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.””

The NSA has easy access to all of this data. Through their PRISM surveillance program, the NSA can perform “extensive, in-depth surveillance on live communications and stored information,” including on email, video and voice chat, photos, voice-over-IP chats (such as Skype), file transfers, and social networking details. Thousands of low-level analysts can access this data without any need for supervisor approval, a warrant, or anything like that. They want to eavesdrop on your Skype calls? No problem. From Wikipedia:

“…the NSA databank, with its years of collected communications, allows analysts to search that database and listen “to the calls or read the emails of everything that the NSA has stored, or look at the browsing histories or Google search terms that you’ve entered, and it also alerts them to any further activity that people connected to that email address or that IP address do in the future.””

The NSA is able to do this because they have direct access to the servers of major internet giants, such as Apple, Google, Microsoft, and Facebook. And while many of these tech giants are willing to cooperate closely with the intelligence community, it is clear that the government valued this program heavily and were willing to fight for it. In fact, they threatened to fine Yahoo $250,000 per day if they would not comply.

Another NSA program harvests “hundreds of millions of contact lists from personal e-mail and instant messaging accounts around the world, many of them belonging to Americans.”

Obama Civil Libertarians

And their internet surveillance isn’t politically agnostic, either; in fact, internet surveillance plays a critical role in the government’s war against WikiLeaks. In fact:

“By exploiting its ability to tap into the fiber-optic cables that make up the backbone of the Internet, the agency confided to allies in 2012, it was able to collect the IP addresses of visitors in real time, as well as the search terms that visitors used to reach the site from search engines like Google.”

But perhaps most disturbing of all is the NSA’s war against internet security, which is covered in a fascinating article on Der Spiegel. The NSA has a program deliberately designed to crack anything and everything on the internet, and to weaken the encryption standards of numerous internet protocols. Keep in mind that doing so creates vulnerabilities that anyone can exploit, including malicious hackers or foreign governments.

The NSA has completely cracked Skype and VPNs, which are not secure against their prying eyes. Even more scarily, https connections also aren’t secure, and these are the types of connections people use for financial services, e-commerce, webmail, etc. They’ve cracked the Secure Shell protocol (SSH), which is used by system administrators to log into employees’ computers remotely. Basically, they’ve cracked almost everything.

Regarding VPNs:

“According to an NSA document dating from late 2009, the agency was processing 1,000 requests an hour to decrypt VPN connections. This number was expected to increase to 100,000 per hour by the end of 2011. The aim was for the system to be able to completely process “at least 20 percent” of these requests, meaning the data traffic would have to be decrypted and reinjected. In other words, by the end of 2011, the NSA’s plans called for simultaneously surveilling 20,000 supposedly secure VPN communications per hour.”

Regarding https:

“The NSA and its allies routinely intercept such connections — by the millions. According to an NSA document, the agency intended to crack 10 million intercepted https connections a day by late 2012. The intelligence services are particularly interested in the moment when a user types his or her password. By the end of 2012, the system was supposed to be able to “detect the presence of at least 100 password based encryption applications” in each instance some 20,000 times a month.”

The silver lining of the report is that there are still some pieces of software that it appears the NSA has trouble cracking, including Tor, Truecrypt, and OTR instant messaging. Of course, this was from years ago, and it is quite possible they have discovered vulnerabilities since then.

Building An Economic Profile – Financial Surveillance

As in other areas, surveillance of financial records by the US government is total. As an American, you can no longer have any expectation of financial privacy. This means that any purchases you make, any money you transfer, or any investments you have, are known to the NSA.

As usual, most of what we know regarding this surveillance comes from documents released by Edward Snowden. Some of these documents were made public via Der Spiegel, and this is how ZeroHedge frames their revelations:

“They also know how much anyone in the world has spent on credit card-based purchases, what the source of that money is, and what the purchase was. In other words: absolute monetary and financial surveillance. And since SWIFT is involved, it likely also means a full blanket coverage of who buys what stock, and furthermore, leaves open to abuse the knowledge of which equities or FX pair the Fed, for example, is buying ahead of time in order to prevent yet another daily stock market plunge.”

This brings up an important point – gathering all this financial data could be quite profitable for those who are appropriately positioned to use it! Of course, that would never include people like you and me. And it’s also easy to see how having your personal financial info in a database somewhere could be inimical to freedom. Perhaps you don’t want people to know the things you’ve purchased or invested in.

But how widespread is this surveillance, really? Is it actually that bad? According to more documents from Der Spiegel, it is:

“Indeed, secret documents reveal that the main NSA financial database Tracfin, which collects the “Follow the Money” surveillance results on bank transfers, credit card transactions and money transfers, already had 180 million datasets by 2011. The corresponding figure in 2008 was merely 20 million. According to these documents, most Tracfin data is stored for five years.”

….

“The classified documents show that the intelligence agency has several means of accessing the internal data traffic of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a cooperative used by more than 8,000 banks worldwide for their international transactions. The NSA specifically targets other institutes on an individual basis. Furthermore, the agency apparently has in-depth knowledge of the internal processes of credit card companies like Visa and MasterCard. What’s more, even new, alternative currencies, as well as presumably anonymous means of payment like the Internet currency Bitcoin, rank among the targets of the American spies.”

There’s no escape (note that bitcoin has never been anonymous, nor is it an “internet” currency)! In the past, perhaps you could have counted on some discretion by using offshore banks in Switzerland or the Cayman Islands. But then the Foreign Accounts Tax Compliance Act (FATCA) happened, and financial privacy is now completely dead.

FATCA gives the IRS broad powers to force foreign financial institutions to give your info to them (and that info is available to be shared with other agencies in the government, such as the NSA/CIA/FBI). Many foreign banks will no longer take US customers or are shutting down American’s accounts because of the difficulty complying (and not complying comes with a 30% penalty).

Most people have never heard of FATCA. But it is a critically important piece of legislation, and I strongly suggest you read more about it here. While the stated intent is to prevent financial “crimes” such as tax evasion, the real purpose is about collecting your financial information:

“If FATCA’s sole purpose were to “recover” tax revenues from assets squirreled away offshore by American “fat cats,” it seems odd that it targets only individuals and specifically exempts reporting on accounts held by U.S. corporations. On the other hand, targeting individuals makes a lot of sense if FATCA’s purpose is directed towards something else: adding to U.S. government agencies’ global electronic “map” of personal information.”

Put simply, unless you conduct your financial affairs entirely in cash (or perhaps some anonymous cryptocurrencies like Darkcoin), whatever you do is being documented and stored in some massive government database.

Even if you don’t think that all this financial surveillance is out of line because you believe it’s “worth it” to sacrifice privacy for security, you should still be concerned, because the IRS is notoriously bad at protecting peoples’ data:

“Former Internal Revenue Service employees have access to your sensitive financial information. So do current employees who aren’t authorized to see such data. Even some visitors to IRS facilities may have access to sensitive material.”

“Note that the GAO report comes after revelations that the IRS has a habit of rehiring people it fired for snooping through data or otherwise misbehaving on the job. That may help to explain why its employees are regularly exposed as identity thieves and filers of fraudulent returns. The tax agency also improperly turns over sensitive data about taxpayers to law enforcement agencies.”

Yeah, pathetic. And horrifying.

Taking Your Measurements – Biometric Surveillance

Biometric surveillance technologies are being rapidly developed, and there is simply no way I can cover this as thoroughly as it deserves to be covered here.

Not only that, but biometrics tend to interface with all of the other methods of surveillance mentioned thus far. For instance, the drones that can recognize faces, and so on. Nevertheless, I did want to provide some examples of what would – if used appropriately rather than for mass surveillance – be considered really cool technology. All kinds of neat things fit in this category, from facial and voice recognition software to fingerprint scanners. Some of this starts to almost delve into the realm of science fiction. For a great overview of biometric technology and some of the issues with its use, see this paper from the EFF.

Where else can I start but with the revelation that the GCHQ and NSA intercepted 1.8 million webcam images (that many in just six months!) from Yahoo webcam chats, mostly from people who were not under any suspicion of wrongdoing, and stored them in a database with the intention of using facial recognition technology to identify terrorists using the service to communicate. Up to 11% of that webcam imagery was “undesirable nudity.”

Facial recognition technology has been used to great effect in Iraq  and Afghanistan, where the US has created massive databases of facial scan data.

“Information about more than 1.5 million Afghans has been put in databases operated by American, NATO and local forces. While that is one of every 20 Afghan residents, it is the equivalent of roughly one of every six males of fighting age, ages 15 to 64.

In Iraq, an even larger number of people, and a larger percentage of the population, have been registered. Data have been gathered on roughly 2.2 million Iraqis, or one in every 14 citizens — and the equivalent of one in four males of fighting age.”

Using these databases, the military is able to see if the people that they capture in the field are known terrorists, escaped prisoners, or the like. This kind of information can prove invaluable on the battlefield.

The real problem comes from when this use of the technology is brought back home. And unfortunately, this is happening at an alarming rate.

For instance, the Boston police had a dry run of their facial recognition software and spied on everyone who attended a local music festival. In and of itself, this wasn’t a huge deal; the problem is that the Boston PD tried hard to cover it up.

“Like many surveillance programs, this uses the assumed lack of an expectation of privacy as its starting point. But this assumption only works one way. The public can only expect a minimum of privacy protections in public, but law enforcement automatically assumes a maximum of secrecy in order to “protect” its investigative techniques.”

Most of the facial recognition data from this was posted online – a massive security issue.

But that is nothing compared to what is happening on a national level. As reported by the New York Times, the NSA is harvesting images from the internet and feeding them into its facial recognition database.

“The agency intercepts “millions of images per day” — including about 55,000 “facial recognition quality images” — which translate into “tremendous untapped potential,” according to 2011 documents obtained from the former agency contractor Edward J. Snowden.”

“It is not clear how many people around the world, and how many Americans, might have been caught up in the effort. Neither federal privacy laws nor the nation’s surveillance laws provide specific protections for facial images.”

In other words, your Facebook photos are giving the NSA biometric data which they can then use to identify you elsewhere.

And an article on Newsweek shed some more light on the scope of the biometric surveillance that is going on, along with some reasons to be concerned.

“…the federal government has been quite busy with biometrics. This summer, the FBI is focusing on face recognition with the fourth step of its Next Generation Identification (NGI) program, a $1.2 billion initiative launched in 2008 to build the world’s largest biometric database. By 2013, the database held 73 million fingerprints, 5.7 million palm prints, 8.1 million mug shots and 8,500 iris scans. Interfaces to access the system are being provided free of charge to local law enforcement authorities.

Jennifer Lynch, staff attorney for the privacy-focused Electronic Frontier Foundation (EFF), notes there were at least 14 million photographs in the NGI face recognition database as of 2012. What’s more, the NGI database makes no distinction between criminal biometrics and those collected for civil service jobs. “All of a sudden, your image that you uploaded for a civil purpose to get a job is searched every time there’s a criminal query,” Lynch says. “You could find yourself having to defend your innocence.”

Through a federal lawsuit, EFF obtained redacted NGI documents that it will soon publish. documents show that by 2015, the FBI estimates that NGI will include 46 million criminal face images and 4.3 million civil face images. The vendor building the face recognition system, MorphoTrust, was asked to design it to receive up to 55,000 direct photo enrollments per day and 2,300 per hour, as well as process 34,000 photo retrievals per day and 1,400 per hour. The statistics hint at the sheer scale of the face recognition infrastructure under construction—in one year, over 20 million Americans could be put into the system.

…any time citizens have their photo taken in a governmental capacity, whether it’s a background check or a driver’s license, their faces are liable to be analyzed by NGI.

“What would a world look like with comprehensive biometric surveillance? “If cameras connected to databases can do face recognition, it will become impossible to be anonymous in society,” Lynch says. That means every person in the U.S. would be passively tracked at all times. In the future, the government could know when you use your computer, which buildings you enter on a daily basis, where you shop and where you drive. It’s the ultimate fulfillment of Big Brother paranoia.

But anonymity isn’t going quietly. Over the past several years, mass protests have disrupted governments in countries across the globe, including Egypt, Syria and Ukraine. “It’s important to go out in society and be anonymous,” Lynch says. But face recognition could make that impossible. A protester in a crowd could be identified and fired from a job the next day, never knowing why. A mistaken face-print algorithm could mark the wrong people as criminals and force them to escape the specter of their own image.” [emphasis mine]

This brings up an important point. The increasing ease by which police departments can identify people in specific locations makes it far easier for the government to mask civil liberties violations and abuses. Rather than arresting every protester at a public protest, the police could use facial recognition technology to selectively arrest or detain the leaders or organizers of the protest. Clearly, this could destroy it before it even has a chance to get off the ground.

Biometrics are starting to be secretly used in the US, largely by Customs for immigration/border crossing purposes. Right now, these are more in an experimental phase, but surely it won’t be long before this is the standard. Here are three biometric programs that have been revealed by leaked documents that were acquired by Motherboard:

  • Facial recognition at Dulles Airport. The intention of this program is to catch “impostors,” or people who are using passports that aren’t their own. Customs officers are allowed to “randomly” select people to take aside for a mug shot, and if selected, they are not allowed to opt out. This picture is then compared with their passport photo and is scored on how well they match up.
  • Fingerprint scans in Atlanta. When foreign nationals exit the US, they will have their fingerprint scanned and matched with their entry records to see if they have spent more time in the US than allowed.
  • Iris scans and facial recognition at the US-Mexico border. This is an experiment to test the viability of these technologies in terms of adding extra layers of security to the border crossings.

Biometric

This is how it begins. First, they are unveiled for the fairly noncontroversial idea of improving border security. But soon enough, these technologies will be used everywhere – when you buy things, when you enter buildings, when you are driving, and so on.

I want to close this section with a very short sampling of the insane new technologies being developed in this area. These are just a handful of the creepy things I’ve found, but I’m sure there are a gazillion more.

  • Voice recognition technology allows investigators to recognize and analyze your voice, even when background noise makes the recording itself inaudible. Imagine this, combined with the ability to remotely turn on your phone, car, or computer’s microphone.
  • New spy tech lets investigators retrieve your “voice imprint” from physical objects. Using this technology, researchers “could detect speech from an object photographed from 15 feet away through soundproof glass, as well as analyze video recordings and extract the data from objects in a room even when the people targeted were off camera.”
  • Fingerprint scanners can capture and analyze your fingerprint from up to 20 feet away. This could streamline the process of walking into the gym, but it could also be deployed to get a much larger fingerprint database of innocent people.
  • Soon, scientists may be able to read your memories. So far, this has only been done on rats, but humans could be next. Don’t worry, the technology for this is still likely many years away – but we are on track to develop it eventually.
  • Similarly, scientists may soon be able to read your mind. Again, this is a long way off, but scientists can already get some crude information on your thoughts via brain scans.

These technologies have legitimate uses, and could solve some very real problems. But used inappropriately, they could lead to an incredibly dystopian future.

 

Technology And The Future Of Surveillance

The modern iteration of the surveillance state is already quite impressive, as you have just seen. But technology is advancing rapidly, and certain trends may lead us into a world even beyond the wildest ideas of Orwell’s 1984. If these trends continue along a certain path, life in America could be a lot like living in an open-air prison. Consider people who are on house arrest who are made to wear GPS trackers – except that everyone will be subject to it, and it will be literally impossible to cut it off.

The Internet Of Things

“Items of interest will be located, identified, monitored, and remotely controlled through technologies such as radio-frequency identification, sensor networks, tiny embedded servers, and energy harvesters — all connected to the next-generation Internet using abundant, low-cost, and high-power computing.” – Former CIA Director, David Petraeus

The Internet of Things (IoT) is the network of physical objects embedded with electronics, usually connected to the internet, in order to get some kind of additional benefits or functionality based on the ability for these objects to communicate with each other, with you, and with their manufacturer. IoT offers us unprecedented benefits in terms of convenience and lifestyle improvements, but is also a massive threat to our privacy.

As more and more physical devices become connected to the internet, more and more pieces of data become easily gathered and transmitted. Some estimate that there will be 30 billion devices connected to the internet by 2020. Most people are willing to allow this to happen without a peep, and without any concern for their privacy, because they are willing to trade it for some added convenience. In fact, one in four professionals aged 18-50 have stated that they would like to connect their brains directly to the internet if possible.

Before diving into the more terrifying aspects of this, let me make clear that the IoT does in fact promise massive benefits to society. If implemented with proper security and without government surveillance involvement, it would be one of the most incredible advancements for humanity that I can imagine.

Consider just some of the mundane applications of this. As you start coming home from work, your refrigerator reminds you that you need to pick up milk, so it tells your car the best route to get to the store where milk is sold cheapest. As you pull into your driveway, the thermostat turns up the heat – remembering the temperature that you like. And when you step inside, there’s already a hot cup of coffee ready for you; because of some files open on your laptop, it figured you might be burning the midnight oil.

Yes, the Internet of Things offers unprecedented amounts of convenience, but it comes at a serious cost. And we are collectively marching forward with this without giving enough thought to the consequences. You can opt out of using the internet/cyberspace on your computer, but you cannot “opt out” of your home gadgets in the same way. “Always on” connectivity means that these appliances can continue collecting and transmitting data even when they appear to be off, so it could be almost impossible to protect yourself. Soon, people will need to choose whether they want these appliances or not, but people who rent likely will not have that option. And at some point, “smart” devices may be all that are available on the market.

In theory, so long as there is some demand for devices that are not connected to the IoT, there should be some that are sold and available. But don’t be surprised if these kinds of devices become mandated as standard for “safety” reasons. You must have a self-driving car, because of the risk of human error. You must have a smart refrigerator in order to prevent you from getting food poisoning, or to prevent food from being wasted. You must have a smart thermostat, because it will be better for the environment.

We don’t even need to bring government into the picture before this becomes a bad idea. There are massive security risks to the Internet of Things, and these absolutely need to be addressed. IoT technology is highly susceptible to hackers, government or otherwise; a recent HP study found that 70% of internet connected devices are vulnerable to attack. Most of the data transmitted from current “smart” appliances is unencrypted – in other words, anyone can easily get access to it. For more detailed analysis of the cyber threats posed by the IoT, see this.

According to security expert Claude Baudoin, IoT devices are susceptible to three main kinds of attack:

  • Listening in on the data or the commands could reveal confidential information about the operation of the infrastructure.
  • Injecting fake measurements could disrupt the control processes and cause them to react inappropriately or dangerously, or could be used to mask physical attacks.
  • Sending incorrect commands could be used to trigger unplanned events, to deliberately send some physical resource (water, oil, electricity, etc.) to an unplanned destination.

In other words, not only can data be stolen, but the actual physical integrity and operation of these devices can be compromised as well. This can be particularly scary when you think about your car; if hackers or government operatives can take control of your vehicle, it would be very easy to, say, murder you and make it look like suicide. And the terrorist attacks of the future could be catastrophic, like that portrayed in Live Free or Die Hard.

charlottes webcam

There are already some unsettling examples of the IoT in practice, and others where it is easy to envision them being used in a creepy or dangerous way:

  • Children’s toys. There is a Barbie doll that records what your children are saying, sends that audio over the internet to a third party, and uses their words to come up with a response. Children tend not to have much of a filter, so who knows what kind of potentially incriminating things they could say? And children have always been used as spies in totalitarian regimes…
  • Smart TVs. The Samsung smart TV recently got some attention because it is recording your conversations, is able to conduct a voice analysis, and then transmits this audio to a third party. It’s also logging your website visits, and is equipped with a camera for facial recognition. Perhaps even worse is the LG smart TV, which also transmits voice recordings. Not only that, but it tracks when you change the channel, and it transmits file metadata from your USB sticks. In other words, your TV knows about your files stored elsewhere. Finally, even when you turn the “collection of watching info” setting off (it is on by default), it continues to collect your data.
  • Baby monitors. These things have terrible security, and there have been multiple instances where hackers have taken control of them and started yelling at peoples’ babies from across the world.
  • Health “wearables”. These devices offer some incredible benefits, like allowing doctors to remotely monitor your health (“OnStar for the body”). But what happens when, under a socialized medical system, this information is used to enforce doctors’ orders?

But this is just the beginning. Much has been written about the Internet of Things and how it spells the end of privacy. I can’t possibly reproduce it all here. I highly recommend reading this fictional account of an IoT future from Wired reporter Mat Honan, from which the following is excerpted:

I wake up at four to some old-timey dubstep spewing from my pillows. The lights are flashing. My alarm clock is blasting Skrillex or Deadmau5 or something, I don’t know. I never listened to dubstep, and in fact the entire genre is on my banned list. You see, my house has a virus again.

Technically it’s malware. But there’s no patch yet, and pretty much everyone’s got it. Homes up and down the block are lit up, even at this early hour. Thankfully this one is fairly benign. It sets off the alarm with music I blacklisted decades ago on Pandora. It takes a picture of me as I get out of the shower every morning and uploads it to Facebook. No big deal.”

I also suggest reading this article by Matthew Harwood and Catherine Crump regarding the dangers of IoT surveillance. Some excerpts:

“…Apple introduced iBeacon last year.  It’s a service based on transmitters that employ Bluetooth technology to track where Apple users are in stores and restaurants. (The company conveniently turned on Bluetooth by default via a software update it delivered to Apple iPhone owners.) Apps that use iBeacon harvest a user’s data, including his or her location, and sometimes can even turn on a device’s microphone to listen in on what’s going on.

Another company, Turnstyle Solutions Inc., has placed sensors around Toronto that surreptitiously record signals emitted by WiFi-enabled devices and can track users’ movements. Turnstyle can tell, for instance, when a person who visited a restaurant goes to a bar or a hotel. When people log-on to WiFi networks Turnstyle has installed at area restaurants or coffee shops and check Facebook, the company can go far beyond location, collecting “names, ages, genders, and social media profiles,” according to the Wall Street Journal.

The danger of the rise of Big Data and the Internet of Things is straightforward enough. Whenever data is perpetually generated, collected, and stored, the result is going to be a virtual ATM of user information that government agencies can withdraw from with ease. Last year, for instance, local, state, and federal authorities issued 164,000 subpoenas to Verizon and more than 248,000 subpoenas to AT&T for user information, while issuing nearly 7,500 subpoenas to Google during the first half of 2013.”

This last point is critical. If the Internet of Things really takes hold, there will be unlimited amounts of data at the government’s fingertips. They will be able to know everything about you, and they will potentially be able to control nearly everything that you interact with. I’d like to close this section with some words from security expert Bruce Schneier:

“In the longer term, the Internet of Things means ubiquitous surveillance. If an object “knows” you have purchased it, and communicates via either Wi-Fi or the mobile network, then whoever or whatever it is communicating with will know where you are. Your car will know who is in it, who is driving, and what traffic laws that driver is following or ignoring. No need to show ID; your identity will already be known. Store clerks could know your name, address, and income level as soon as you walk through the door. Billboards will tailor ads to you, and record how you respond to them. Fast food restaurants will know what you usually order, and exactly how to entice you to order more. Lots of companies will know whom you spend your days — and nights — with. Facebook will know about any new relationship status before you bother to change it on your profile. And all of this information will all be saved, correlated, and studied.”

Mass Surveillance And DNA Databases

My final warning regarding the dystopian future we may be heading towards is about DNA databases.

DNA Testing

DNA contains almost limitless amounts of information about you, and it is something you will never be able to change. Not only can your DNA be used to identify who you are, but it also can tell you what you look like (there’s even a company that creates “mug shots” for police based on DNA samples), who you are related to, your health history, your likelihood of contracting certain illnesses, and your likelihood of behaving in certain ways. This information could be incredibly valuable to a government looking to control its subjects.

The Obama administration has already proposed forming a massive genetic database containing the DNA of American citizens. So far, the proposal is only asking for 1 million volunteers, but as with all areas of government, there could easily be “mission creep” and have the scope widened drastically. And the government is legally allowed to collect your DNA without your permission or knowledge. In Raynor vs. Maryland, it was determined that leaving your genetic material behind is like leaving a fingerprint, and the government can do what they want with it. In this case, a rape suspect refused a mouth swab, but the police simply collected DNA off the chair he was sitting on. This sets a dangerous precedent, because as the scientist Leslie Pray says:

“We all shed DNA, leaving traces of our identity practically everywhere we go. Forensic scientists use DNA left behind on cigarette butts, phones, handles, keyboards, cups, and numerous other objects, not to mention the genetic content found in drops of bodily fluid, like blood and semen. In fact, the garbage you leave for curbside pickup is a potential gold mine of this sort of material. All of this shed or so-called abandoned DNA is free for the taking by local police investigators hoping to crack unsolvable cases.”

This DNA is ripe for getting picked up and included in any governmental DNA database. And it can get picked up in many other ways, too. For instance, during drunk driving checkpoints, or for that matter, any arrests or police interactions, even if not convicted. And it is certainly plausible that one day, DNA samples may be required in order to get a driver’s license, when entering government buildings, when applying for jobs, and so on. Even today, there are government rules mandating that hospitals collect the DNA of all newborn babies, without requiring parental consent or even that the parent knows about it. Soon enough, everyone’s DNA will be on file. There may even be mosquito-esque drones flying around extracting DNA samples.

As John Whitehead notes:

“With the entire governmental system shifting into a pre-crime mode aimed at detecting and pursuing those who “might” commit a crime before they have an inkling, let alone an opportunity, to do so, it’s not so far-fetched to imagine a scenario in which government agents (FBI, local police, etc.) target potential criminals based on their genetic disposition to be a “troublemaker” or their relationship to past dissenters.”

And researchers have shown that DNA evidence can be fabricated – perhaps these free thinkers will even be framed for crimes preemptively. Or the database could be used to implement a eugenicist program. The possibilities for abuse are almost unfathomable.

 

Conclusion

Obama I Spy

While you may believe you “have nothing to hide,” you have every reason to value your privacy and to fear and fight back against the surveillance state. Mass surveillance is not about stopping terrorism; it is a tool to control the population and to secure the interests of an elite group of aristocrats.

Mass surveillance can lead to all kinds of dangers for both individuals and the wider community. There can be witch hunts based on certain information, people will be considered guilty until proven innocent based on predictive analytics, and due process will be a thing of the past. Laws will be inequitably enforced, everyone will be suspicious of everyone else, and society will lose its moral cohesion. And the potential for totalitarian government is simply too strong to ignore, even in countries that most consider a part of “the free world.”

The degree of surveillance going on already is staggering, but the public outcry has been almost non-existent. Sure, a few people have listened to Edward Snowden, but half of America thinks he is a traitor and should be killed! And regardless of what the rest of us do, the government has been ignoring our outrage.

How can we stop this? Unfortunately, I don’t have the answer. Ultimately, I believe the solution lies in technology; what we need is for strong encryption to become easy to use and the default way we communicate. And we need a cultural transformation, where people who care about their privacy aren’t immediately viewed as “suspicious.”

But until then, there are things you can do to protect yourself. You should always stay up to date on the privacy and security world and it’s technology, because these things change rapidly. A great start is with Laura Poitras’s white paper, detailing the methods she used to securely communicate with Snowden.

The Fallacy Of “Creating Jobs”

Help Wanted

If you read the financial news or listen to anyone talk about the state of the economy, you almost certainly have heard about the virtues of “job creation”. Politicians are always talking about how many jobs this or that program they’ve spearheaded has created. The Bureau of Labor Statistics will release data saying that the economy added several hundred thousand jobs in the past month.

The way the term “job” is bandied around these days creates the impression that a job is a product, like a car or a computer. There is a perception that by pushing the right levers and dials, government policy can “create jobs” – the same way that a car company can produce a car. This ridiculous and false perception is responsible for numerous popular economic fallacies.

 

What Is A Job?

While it may seem like a silly question, it is important to pin down what exactly a job is. More importantly, why do we even want jobs?

A job is any arrangement where an employer agrees to provide some remuneration for a service provided by an employee. In other words, a job is just an interpersonal relation where someone is paying someone else to perform a task. In the case of entrepreneurs or the self-employed, the employee and employer can be the same person. Here is a definition provided by Adam Stover:

“A job is a voluntary contract between two parties, a capitalist and a laborer, to perform a service for an agreed-upon wage. This allows the capitalist or entrepreneur to take the risk of fronting the money to develop and make a product while the laborer assumes no risk and is paid regardless of profit or loss. A capitalist is a slave to the price structure in the economy, and these dictate whether she can turn a profit. The capitalist is speculating that his or her product will fetch a profit on the free market by satisfying consumer wants.”

This definition is important. From an individual perspective, the employee doesn’t care so much what they are doing so long as they get paid. Obviously people have preferences, such as preferring to work in one industry over another. What I mean is that the individual employee doesn’t determine what aspect of their work is important. It is up to the employer to decide where their employees’ efforts should be put to use on task X or task Y.

Let’s say a construction company hires some employees to do some digging. From the employees’ perspectives, it doesn’t matter whether they are directed to dig holes and fill them back up, or whether they should dig out a foundation for a building. They are paid to perform a task, and they are still doing their job.

But from the employer’s perspective, there is a very big difference between telling their employees to dig holes to fill back up or to perform meaningful work towards constructing a building. The goal of the employer is to maximize profits, and chances are good that their clients are interested in having them make a building, not to spin their wheels digging holes.

There is another critically important thing to consider in this analysis. Imagine that instead of a construction company in a complex, modern economy, we have an individual who has washed ashore on a deserted island. This Robinson Crusoe needs to “get a job” on the island. But he doesn’t work just in order to fill his time; he needs to transform the resources around him into things he can use to survive. For instance, he needs to build a shelter, catch fish, and so on.

In this case, you can see how the “employee” would in fact care about what he was doing for his job. He could still just dig holes and fill them back up, but what would that accomplish? It would be a waste of time and energy. It is important that Crusoe’s time and energy be used as efficiently as possible so that he can survive and perhaps even live comfortably.

And that’s the key point that is missing from the mainstream discussion of jobs. Reducing unemployment and “creating jobs” for as many people as possible is entirely beside the point. Hell, the Soviet Union boasted of having an unemployment rate of 0%! Clearly, the hullabaloo about jobs is at least partially misplaced.

What would happen if everyone were “employed” without actually producing? Keynes (in a different context) and his followers have legitimately suggested burying money in the ground and employing people by having them dig for it (or worse, digging holes and filling them back up; or worse than that, Paul Krugman’s suggestion of responding to a fake alien invasion). But obviously, if this were what people were doing, they wouldn’t be producing anything meaningful, and it isn’t economically justified.

Jobs are not what matter; the production of real wealth is. Jobs are a means to an end, not an end in and of themselves.

 

Unemployment And Unemployment Statistics

In a pure free market, there could be 0% involuntary unemployment. Other than people who choose to leave their jobs or to hold out working for higher pay, everyone would have a job.

There is always work to be done. So long as we live in a world of scarcity (certainly for the foreseeable future!), there will always be steps that people can take to improve their lives and reduce any perceived uneasiness. Therefore, were it not for some tiny percentage of people who are voluntarily unemployed, the unemployment rate in a free market should be zero.

As such, we can reasonably view the unemployment rate as a kind of measure of government failure – due to various policies instituted by government (which we will go into in more detail below), people who would otherwise be gainfully employed are now unable to find work. There is a disconnect between those offering jobs and those seeking them, and somehow government policy is getting in the way. The government and their statisticians have a very strong incentive to keep this number as low as possible.

Unfortunately, that means that the unemployment rate is a number that is used more for propaganda purposes than to convey accurate information about the state of the market. Bold claim, yes, but hear me out. Even Jim Clifton, CEO of Gallup, agrees.

There are a couple of ways the unemployment numbers and employment numbers/job reports are doctored or used in order to make the economic picture look rosier than reality. The two most important ways these numbers are misleading are:

  • The reported unemployment number does not include workers who are “discouraged”, in that they have given up looking for a job for whatever reason.
  • The number of jobs reported are aggregated, and thus the composition of the jobs is not emphasized despite being equally if not more important.

We’ll look at each of these in turn, but let’s start with the methodology for computing the unemployment rate. The rate that is normally reported is called the U-3 rate, but there are other measures as well, including the far more relevant U-6, which includes discouraged and marginally attached workers. This means that the U-6 is both a better representation of the actual state of the economy and it is significantly less optimistic.

John Williams of ShadowStats has a good overview of the methodology used in these job reports. He says:

“Up until the Clinton administration, a discouraged worker was one who was willing, able and ready to work but had given up looking because there were no jobs to be had. The Clinton administration dismissed to the non-reporting netherworld about five million discouraged workers who had been so categorized for more than a year.”

In other words, huge numbers of people who had previously been considered unemployed suddenly disappeared. As soon as you’ve given up and haven’t actively looked for work in the previous four weeks, you are no longer considered unemployed based on the U-3 measure.

If you work at least one hour per week and collect at least $20, you are no longer considered unemployed. Even if you would like to work more – and I think most people would – you would be considered employed from the perspective of the Bureau of Labor Statistics.

Not only that, but even people who are severely underemployed do not count as unemployed. If you have a PhD in chemical engineering but work ten hours a week at McDonalds, you are not unemployed.

Take a look at this graph of the labor force participation rate:

labor force participation rate

This number has clearly been plummeting for a while now. The unemployment rate has been steadily decreasing not because more people are working, but because more people aren’t working.

Take the December 2014 jobs report. The reported unemployment rate for that month was 5.6%. Only counting short term discouraged workers (those who haven’t looked for a job in the past four weeks), the unemployment rate was 11.2%. But if you include all discouraged workers (including those who stopped looking for work for over a year), the actual unemployment rate is 23%. Remember – this is how the unemployment rate was calculated prior to 1994. These are almost Great Depression level numbers!

To further demonstrate the absurdity of the current propagandistic unemployment numbers, let’s look at the most recent jobs report. As ZeroHedge reports:

“According to the most recent Bureau of Labor Statistics release, the UE (unemployment) rate fell to 5.5% as of February.  The last time the UE rate was this low was May of 2008.

What I’m fascinated by is the fact that the US population grew from February 2008 to February 2015 by 16.8 million persons, or a 5.5% increase in total population, and on a net basis, not a single one of those 16.8 million persons got a FT (full time) job… while a net 2.7 million were lucky enough to get a (or multiple) PT (part time) job.

This means that 14.3 million persons, or 4.4% of the current US population, were added without a single job among them (chart below).  This makes for fascinating math when a 4.4% increase of the total US population without jobs can nearly halve the UE rate down to 5.5%, equal to 2008’s UE rates?!?” [emphasis in original]

Also see more here and here.

Besides the outright manipulation and fudging of the numbers, the aggregation of the jobs numbers is incredibly misleading. By saying “X new jobs were added to the economy in February,” they are able to obscure the distribution of those jobs. If most newly “created” jobs are as part time waitresses and bartenders, this is very different from adding jobs as engineers or manufacturers.

So, how does this play out for the most recent jobs report, which claims that the US economy added 295,000 new jobs in February? Paul Craig Roberts brings up several inconsistencies in the jobs reporting numbers, but also has this to say about how the jobs are distributed:

“All of the goods producing jobs are accounted for by the 29,000 claimed construction jobs. The remaining 259,000 new jobs–90%–of the total–are service sector jobs. Three categories account for 70% of these jobs. Wholesale and retail trade, transportation and utilities account for 62,000 of the jobs. Education and health services account for 54,000 of which ambulatory health care services accounts for 19,900. Leisure and hospitality account for 66,000 jobs of which waitresses and bartenders account for 58,700 jobs.

These are the domestic service jobs of a third world country. ”

This aggregation creates the perception that certain actions reduce unemployment in a meaningful way when they do not. The government can institute some policy or “stimulus” package and then say “look how many jobs we’ve created for you!” This is all just a blatant lie.

Speaking of blatant lies, I only just recently learned that not only are the numbers themselves fudged in a highly misleading way, but the actual methodology used to find the unemployment numbers has serious problems as well. Now, the stated methodology used in the Household Survey (one of the ways that data is collected for finding the unemployment rate) is fine; the problem is that they don’t follow it. As the New York Post reports:

“Rather than collect fresh data each month as they are supposed to do, Census workers have been filling in the blanks with past months’ data. This helps them meet the strict quota of successful interviews set by Labor.”

And later on in the article:

“This whole controversy began when a Philadelphia Census worker, Julius Buckmon, was caught falsifying surveys and — most important — his wrongdoing was covered up.

Worse, Buckmon alleged that supervisors told him to cheat.

Other Census sources have also told me that data is falsified all the time. And since Census polls for lots of different government agencies, including the Justice Department, the problem could be bigger than anyone can imagine.”

Don’t trust the unemployment numbers. They have zero basis in reality.

 

Government Can’t Create Jobs

Politicians regularly try to convince the public that this or that policy initiative that they supported has created gazillions of new jobs, and that we should all be eternally grateful for the prosperity that their programs have brought us.

We’ve already gone over this on a more theoretical level in an earlier section; production is more critical than the number of “jobs” that exist, and a healthy economy ought to have people employed in the ways that best help satisfy consumer wants.

Government actions can certainly “create jobs” in the sense that policies can lead to people being employed in a way such that they would not have been absent government intervention. Think about all the jobs as Congressmen that wouldn’t have existed if it weren’t for government action!

This is all fairly obvious stuff, but extensive propaganda peddled by the likes of Paul Krugman has managed to convince most Americans otherwise. People think that government spending via “stimulus packages”, public works spending, and so on, can actually work to improve the economy and “create jobs”. But people fail to see that any newly created job that is due to government action is just a job that was taken away from someone else, somewhere else in the economy.

Think of it this way. Government can acquire the funds that they would use for any kind of “stimulus” in only three ways: increasing tax revenue, debasing the currency, or through deficits.

If the money is raised via taxation, then it is obvious how funds are simply being moved from one part of the economy to another. Rather than people getting to spend their money satisfying their own wants and leading to employment in those sectors, it is the government that gets to decide where this employment should be. Since the people get less choice, the economy is worse off.

If the funds are acquired via debasing the currency by printing money, there is a similar result, though it is more sneaky and hidden. Printing money does not cause new production to magically pop into existence, so again, all the government is doing is redistributing jobs and income – generally from the poor to the rich. Government prints money and then gets to decide where that money is spent, which will often include things like the military-industrial complex and huge bank bailouts. Jobs are being taken from those who are worst off and given to favored sectors of the economy.

The last way that government can raise revenue for its projects is via deficit spending. “We owe it to ourselves,” they say. But government borrowing increases the price of loanable funds by increasing demand for them, which then reduces the amount of investment done by the private sector. With less private investment, economic growth will be slowed, and there will be additional unemployment in those industries where loanable funds have been displaced from. Sorry Keynesians, but there ain’t no such thing as a free lunch.

No matter what the government does in an effort to “create jobs”, it will be a horribly inefficient failure. To take a recent example, let’s consider the American Reinvestment and Recovery Act, Obama’s “stimulus” bill. According to a study from the NBER, each new job “created” by the ARRA came at a cost of $170,000. Do you really think that’s how much these new jobs are paying?

 

How Government Creates Unemployment

As I mentioned earlier on, without government, there would be no involuntary unemployment. There are quite a few ways that governments get in the way of people successfully coming together in some kind of employment relation, and I’m surely missing a few. Nevertheless, abolishing all of the following would go a long way towards allowing as many people as possible to have some form of gainful employment.

Minimum wage. Somehow, the idea of the minimum wage simply refuses to die. Despite whatever many leftists may say, the minimum wage creates unemployment. It can be no other way. A minimum wage of $7.25 is like saying: “If you are willing to work for a wage lower than $7.25/hour, too bad, you’re not allowed.” People who would have been able to find a job for only, say, $5/hour (perhaps because they are disabled or completely inexperienced and not particularly productive) are no longer able to. I wrote an extensive post railing against the minimum wage here.

Unemployment “Insurance” (UI). I put the term insurance in quotes, because employment status isn’t something that is actually insurable. One can only insure against events that one has no control over…but I digress. Unlike the minimum wage, UI doesn’t directly eliminate the opportunity to find jobs. What it does do, however, is subsidize unemployment. If you lose your job, it creates an incentive for you to delay accepting a new one. Whether UI is a good policy or not is a separate question (I say bad), but it is certainly true that it increases unemployment.

Payroll taxes. Social Security and Medicare taxes that are deducted from your paycheck are another serious impediment to employment. Some people don’t realize that while they see a certain amount deducted from their pay, the employer is paying more as well. Of course, the entire burden of this taxation falls on the employee – whatever the employer pays the government is taken out of the employee’s wage. By taxing employment, the government creates less of it, just like any other tax.

Mandated employee benefits. When an employer is legally obligated to provide certain benefits to employees, this automatically raises the cost of hiring them. This would include things like worker’s comp, unemployment insurance (the employer must contribute to this), disability insurance, and leave benefits. The laws for these do tend to vary by state, but to the degree that these benefits are required, either wages decrease or hiring does.

Child labor laws. People under the age of 16 cannot work more than a certain number of hours, and they are forbidden from working in certain occupations. In general, youths under the age of 14 are forbidden from working in general (except in some agricultural jobs). While it is not politically correct to want to repeal child labor laws, it is a fact that child labor was decreasing rapidly before these laws came into effect. Many families depended on child labor in order to get by, but as prosperity increased, the need for children to work decreased. As with the minimum wage, it was the unions that lobbied most passionately for child labor laws; cheap child labor was competition which drove down wages.

Pro-union legislation. There is nothing inherently wrong with unions, but giving them powers that they wouldn’t otherwise have in a voluntary society is problematic. These laws transform what ought to be a simple matter of free association into the creation of what are effectively labor cartels. Labor unions do raise wages…but only for those who are members of the unions. But by raising wages for union members, labor unions reduce the number of employees that can be hired in general. In other words, it is a simple matter of rent-seeking behavior.

Comparable worth laws. These laws are based on the idea that men and women should receive equal pay when they perform work that involves comparable skills and responsibility or that is of “comparable worth” to the employer. Women often work in jobs that pay less than jobs that men take, and these are efforts to equalize this. Wage rates would get set not by market forces, but by a “scientific” analysis of what jobs are inherently “worth”. But by determining wages in this way, there are reduced employment opportunities for the women who people are attempting to help with these laws.

Mandated working conditions. This would include things like occupational safety regulations. Like other policies on this list, laws that require certain working conditions be met increase the cost of hiring employees. While everyone wants to be working in pleasant, healthy conditions, ceteris paribus, mandating that everyone get these conditions either leads to reduced wages or unemployment. The market itself was improving workplace safety before any of these laws were passed, so their negative effects were surely masked.

Laws that regulate firing employees. There are certain things that you cannot legally fire an employee for. Regardless of the positive intent behind these laws (not being able to be fired for discrimination, for instance), they create additional unemployment. These laws create an extra consideration before hiring any employees – there is a risk of being sued if you fire them. Consider laws against firing based on discrimination. If you fire a black man for any reason, you are at risk of being sued and having the employee claim it was discrimination. That risk makes you less likely to hire black people.

Occupational licensing. There are all kinds of occupations which you are not legally allowed to partake in without specific permission from government. Oftentimes this is done with the stated intention of improving consumer safety (say, by having doctors licensed). It is highly debatable whether licensing requirements actually make people safer (they don’t, and perhaps even reduce quality/safety), but it is clear that the real intent behind these regulations is rent seeking. After all, why are there licensing requirements for hairdressers, massage therapists, teachers, interior designers, or florists? If people could simply take a job or start a business without needing to pay a gazillion dollars for a taxi medallion or spend hundreds of hours in “official” cosmetology trainings classes, it would be significantly easier for many to find jobs.

The Federal Reserve. This one is a bit different from the others on this list, but no less important. The Fed, by inflating the money supply and setting interest rates below their market price, causes investors to think that there are more real resources available for investment than there actually are. As such, they sink their money into longer-term investments that there aren’t enough real resources available to complete. As such, there is eventually a crash, and resources need to get moved around to areas where they would be used more efficiently. This boom-bust process leads to workers moving into industries that they otherwise would not have, and then being forcibly dislocated from those jobs when it turns out they were economically unjustified. For instance, during the fracking boom, tons of people went into the energy industry and moved up to Minnesota for work – but as it comes crashing down, these jobs disappear. The same is true for, say, the housing boom. Or the dot-com bubble.

 

Conclusion

It is clear that almost every time you hear a politician or pundit utter the word “jobs”, you are being swindled or lied to.

Governments simply do not have the power to “create jobs”, no matter what anyone may tell you. The only thing governments can do is to destroy them by getting in the way of peoples’ own mutually beneficial relationships. And then lie to you about it.

Private Cities: Does Honduras Prove That Libertarianism Doesn’t Work?

Private cities

I recently came across this article on Salon, which argues that a libertarian experiment that is going on in Honduras proves that libertarianism does not work. Frankly, I was only vaguely familiar with whatever is going on in Honduras, but the line of reasoning sounded to me a lot like the “well why don’t you go live in Somalia, then?” kind of argument.

Typically, arguments like this are just absurd straw men, like when liberals will point to the problems in the US health care system and say “See? Look how terrible the free market is!” So I began to do some research on the situation on Honduras to see if this is just another case of completely misunderstanding what libertarianism is or what free markets are.

So, what is actually going on in Honduras? In July 2011, the Honduran government amended their constitution to allow for the establishment of ZEDEs (Zones for Employment and Economic Development) with the intention of tackling poverty and improving the economy. There has been all sorts of legal drama with getting the project rolling, including an October 18, 2012 decision by the Honduran Supreme Court that the prior amendment was unconstitutional (on May 26, 2014, the new Supreme Court gave the ZEDE project their blessing). I’m sure there was some corruption and shady dealings involved in making this all happen, but here we are. It is not my intention to go through a complete history of how this idea is playing out in Honduras, but Brian Doherty at Reason has done a good job covering this here. As stated in an editorial in Honduras Weekly:

“It’s very important for all of us to understand, especially libertarians, that the new Honduran jurisdictions haven’t been designed to please the libertarian taste. The ZEDEs (or LEAP zones) are an experiment that aims to solve an [sic] social and economic crisis, to help Honduras overcome underdevelopment and fast-track the path to prosperity. If everything goes well, they will also serve as an example for the rest of the world, making Honduras a pioneer and reference point for an idea with huge development potential.”

It is critically important to note that these ZEDEs are semi-autonomous zones, sort of like Hong Kong is to China. They will still be considered a part of Honduras, but will have differing legal and economic systems. Basically, Honduras sells land to some investors, and then that land is no longer subject to the laws of Honduras or “protected” by Honduran police. The investors must establish their own government, contract out for their own police forces, and decide on whatever other laws the area will have. Note that other than the decentralized nature of the scheme, there is nothing inherently libertarian about it; some wealthy communists would be more than welcome to buy up land and set up their own communist utopia there. In addition, none of these ZEDEs have actually been implemented yet.

Enter Edwin Lyngar, author of the Salon article in question. If you actually read through his piece (and it is fairly short), you’ll see that he is speaking as though Honduras (all of it) is some kind of libertarian dream world. Never mind the fact that the actual ZEDEs have yet to exist, and never mind the fact that Honduras is one of the less economically free countries on the planet, as evidenced by their ranking 116th out of 178 nations in Heritage’s Index of Economic Freedom.

In other words, the entire basis of his critique rests on a complete lie.

Nevertheless, I think it is worth delving into Honduras a bit more deeply and to respond to a few of Mr. Lyngar’s specific points.

 

Critique Of The Critique: A Comedy Of Errors

Mr. Lyngar’s article is full of ridiculous inconsistencies and a clear lack of understanding of what libertarianism actually means. Consider his description of libertarianism, which he claims to have been an adherent of not long ago:

“In America, libertarian ideas are attractive to mostly young, white men with high ideals and no life experience that live off of the previous generation’s investments and sacrifice.  I know this because as a young, white idiot, I subscribed to this system of discredited ideas:  Selfishness is good, government is bad. Take what you want, when you want and however you can.  Poor people deserve what they get, and the smartest, hardworking people always win.  So get yours before someone else does.”

Most libertarians wouldn’t claim that “selfishness is good”, except in the context of the invisible hand. In that case, peoples’ selfishness does in fact lead to better outcomes. Even most liberals will agree with this to some extent.

The number of libertarians who would tell you to “take what you want, when you want and however you can” is zero. Not a one. If a “libertarian” were to say this, then by definition they would not be a libertarian. You see, stealing stuff is one of those little things that libertarians are in fact against. Gasp!

Unfortunately, some libertarians may say that “poor people deserve what they get,” but they are misguided. In my experience, it tends to be conservatives who would say things like this, and some of the more libertarian-leaning Republicans, but rarely libertarians. In the case of libertarians who say this, they usually would retract it within a couple months, when they become an anarchist and better understand the idea of crony capitalism.

No libertarian would say that the smartest or hardest working people (or most other adjectives) will always win. Those are certainly advantages, but it tends to be those who are most “alert” in the Kirznerian sense who we would say are most likely to “win” in business.

And libertarians don’t believe that the economy is a zero-sum game. You need not “get yours before someone else does.” Those who are most successful in a free market are those who create the most value for others, so “getting yours” means helping as many other people as possible.

Despite claiming to have been a libertarian, it is clear that Mr. Lyngar hasn’t the slightest clue what he’s talking about. Either that, or he is being deliberately misleading, which is far worse. Moving on…

“In Honduras, the police ride around in pickup trucks with machine guns, but they aren’t there to protect most people.  They are scary to locals and travelers alike.  For individual protection there’s an army of private, armed security guards who are found in front of not only banks, but also restaurants, ATM machines, grocery stores and at any building that holds anything of value whatsoever.  Some guards have uniforms and long guns but just as many are dressed in street clothes with cheap pistols thrust into waistbands.”

Let me get this straight: people find the government police scary and useless in protecting people, but private security is taking up the role of protecting things of value…and somehow, this is supposed to reflect poorly on libertarian ideas?

“The country has a handful of really rich people, a small group of middle-class, some security guards who seem to be getting by and a massive group of people who are starving to death and living in slums.  You can see the evidence of previous decades of infrastructure investment in roads and bridges, but it’s all in slow-motion decay.”

Bob Wenzel did a good job tearing this down. What are some major causes of income inequality? High minimum wages and oppressive regulations.

“Honduras has the most complex minimum wage laws I have ever seen. Take a look for yourself. As far as starting a business, the World Bank lists it as extremely difficult to do so in Honduras, with a rank of 138 out of 189 countries. Which is to say nothing about its ranking for Enforcing Contracts  (166).”

And Mark Lutter says:

“The basic problem is that Honduras, along with many other third-world countries, does not have functioning courts or police. Nor do they have basic rights to engage in commerce with others. If a Honduran wants to start a business, he must pay 39 percent of his per capita income, and he must wait 82 days to get the requisite construction permits. Economic growth is not possible without the creative destruction that comes with new businesses.”

And I’d like to add that the decaying infrastructure reflects the weaknesses of government, not of private industry. While on the subject of infrastructure, Mr. Lyngar effectively brings up the question that every libertarian knows all too well: but wut about muh roads?!?! Here he is describing his drive along some Honduran roads:

“The word “treacherous” is inadequate—a better description is “post-apocalyptic.”  We did not see one speed limit sign in hundreds of kilometers.  Not one.  People drive around each other on the right and left and in every manner possible.  The road was clogged with horses, scooters and bicycles.  People traveled in every conceivable manner along the crumbling arterial.  Few cars have license plates, and one taxi driver told me that the private company responsible for making them went bankrupt.  Instead of traffic stops, there are military check points every so often.  The roads seemed more dangerous to me than the gang violence.”

Yet again, as is so often the case in anti-libertarian polemics, Mr. Lyngar conflates government failure with market failure. This “post-apocalyptic” picture of the roads in Honduras is yet another demonstration of the failure of government to maintain adequate infrastructure. He continues:

“The greatest examples of libertarianism in action are the hundreds of men, women and children standing alongside the roads all over Honduras.  The government won’t fix the roads, so these desperate entrepreneurs fill in potholes with shovels of dirt or debris.  They then stand next to the filled-in pothole soliciting tips from grateful motorists.  That is the wet dream of libertarian private sector innovation.”

When the government fails, the private sector needs to pick up the pieces. While I’ve personally never had a wet dream about entrepreneurs filling in pot holes (although I’m sure there would be some great Freudian dream analysis of this), I do respect these instances where people who are clearly victims of government go out and try to make the best of a bad situation.

“A member of the small, dwindling middle class, Alberto objects to his city being labeled the most dangerous in the Western Hemisphere.  He showed me a few places in the city that could have been almost anywhere, a hipster bar, a great seafood place (all guarded by armed men, of course).  Alberto took me on a small hike to a spot overlooking the city and pointed out new construction and nice buildings.  There are new buildings and construction but it is funded exclusively by private industry.  He pointed out a place for a new airport that could be the biggest in Central America, he said, if only it could get built, but there is no private sector upside.” [emphasis mine]

Are you noticing a theme here? Time and again, the author is lambasting libertarians and their free market beliefs, yet pointing to evidence of how the government has been an utter failure and that the private sector is the only bright spot in the country. With regards to the airport, he seems to be ignoring the reasons why one might choose to undergo or withhold a huge investment project. Why is there no upside? Perhaps it would be too dangerous, and gangs would shoot down planes or destroy the infrastructure. If that is the case, then building an airport is clearly an idiotic idea, whether done by the private sector or through government investment.

Later on in the post, Mr. Lyngar begins to get more abstract and attempt to find some fatal flaw in libertarianism.

“One can dismiss the core of near-sociopathic libertarian ideas with one simple question: What kind of society maximizes freedom while providing the best outcomes for the greatest number of human beings?  You cannot start with the assumption that a Russian novel writer from the ’50s is a genius, so therefore all ideas about government and society must fit between the pages of “Atlas Shrugged.”  That concept is stupid, and sends you on the opposite course of “good outcomes for human beings.”  The closer you get to totally untamed, uncontrolled privatization, the nearer you approach “Lord of the Flies.””

There is very little substance here outside of the question he brings up. That being said, his question about how to devise an ideal yet practical society is seriously flawed. For starters, libertarians believe that a more libertarian society would be the answer to his question, so it is unconvincing. But more fundamentally, he is appealing both to maximizing freedom AND a utilitarian goal, and it is not clear that the two are compatible. What criteria is used to determine which of those two values wins out when they conflict? By definition, there must be an appeal to some third value which goes unmentioned. If not, then it would appear that he is just saying that utilitarianism wins (or maximizing freedom wins, but clearly this is not his point). And if that is the case, then we must dispense with the idea that maximizing freedom is relevant at all to his analysis. By the way, the “third value” I refer to above is in almost all cases “what I think is best” for any non-libertarian.

“Society should not exist to make a few people fabulously wealthy while others starve.  Almost all humanity used to live this way, and we called it feudalism.  Many people want to go back to that sort of system, this time under the label of libertarian or “the untrammeled free market.”  The name is irrelevant because the results are the same.  In Honduras, I did not meet one person who had nice things to say about the government or how the country is run.  My takeaway from the trip is that living in a libertarian paradise satisfies only a few of the wealthiest citizens, while everyone else thinks it sucks.”

Actually, Mr. Lyngar, the name is highly relevant, because feudalism and “the untrammeled free market” are entirely different things. Feudalism is one of those terms that doesn’t have a precise definition, not unlike “terrorism“. Here is one of the most popular definitions of the term, according to Wikipedia:

“The classic François-Louis Ganshof version of feudalism describes a set of reciprocal legal and military obligations among the warrior nobility, revolving around the three key concepts of lords, vassals and fiefs. A lord was in broad terms a noble who held land, a vassal was a person who was granted possession of the land by the lord, and the land was known as a fief. In exchange for the use of the fief and the protection of the lord, the vassal would provide some sort of service to the lord. There were many varieties of feudal land tenure, consisting of military and non-military service. The obligations and corresponding rights between lord and vassal concerning the fief form the basis of the feudal relationship.”

The vassal performs military service in exchange for a piece of land, and the peasant/serf worked the land in exchange for protection. In what way does this have any relation to the free market? The free market is just the absence of restrictions upon trade and production. Mr. Lyngar is comparing apples and oranges.

He also claims that no one had positive things to say about the government, as if this somehow is an argument against libertarianism. Typical. In the final paragraph of an otherwise incoherent mess of an article, Mr. Lyngar says something that is on the money:

“There can be no such thing as freedom, safety or progress of any kind, when an entire society is run for the benefit of a handful of rich assholes and global conglomerates.”

Maybe the author is a libertarian after all!

 

Can Private Cities (ZEDEs) Save Honduras?

Now that I’ve thoroughly rebutted Mr. Lyngar’s childish critique of libertarianism, it is time to turn to the actual (and far more interesting!) political changes that Honduras is in the process of implementing. Before demonstrating why the idea of private cities would be incredibly beneficial, let us first set the scene of modern Honduras. According to Brian Doherty:

“The small Central American nation, wedged between the Pacific Ocean and the Caribbean, is the murder capital of the world, with the U.N. reporting over 80 homicides per 100,000 people in 2011, compared to slightly over 30 in Colombia and under 10 in the United States. Its average annual income of $4,300 per capita is below that of the Congo. According to the U.S. Agency for International Development, 65 percent of its people are living in poverty. The World Bank ranks Honduras 125 out of 185 on its “ease of doing business” list, below Uganda.”

This data is from a couple years ago, but not much has changed. According to the CIA World Factbook, Honduras:

  • is the 2nd poorest country in Central America
  • had a per capita GDP (purchasing power parity) of only $4800 in 2013
  • under-employs about one third of the population
  • has a poverty rate of 65%
  • has a life-expectancy at birth ranked 147th in the world

Furthermore, Honduras has been ravaged by the US government’s War on Drugs, which is largely responsible for the absurdly high murder rate and drug cartel power. It has also been a major factor in the endemic corruption within the Honduran government.

In other words, modern Honduras is not a pretty picture (other than the beautiful landscapes, of course). This is the environment that the ZEDE experiment is entering. There is no guarantee that the experiment will be a success; it is not unreasonable to think that, considering the rampant corruption, it is possible that the ZEDEs will be used to enrich the already wealthy politicians and their friends. Only time will tell if the ZEDEs will actually help lift the masses of Hondurans out of poverty; a poor implementation of this experiment is likely to fail.

But if the ZEDE experiment is implemented properly, we have every reason to believe that it could be just as successful as Hong Kong was at lifting huge numbers of people out of grinding poverty, even in a fairly short period of time. And considering how Honduras is already so poor and in such bad shape, there really is very little to lose by trying.

The Advantages Of Private Cities

I have already described the moral reasons why the freedom of association that private cities can bring would be massively beneficial (see: Do You Have Opinions About Things? Then You Should Be An Anarchist). If you want a more theoretical justification for the morality of this type of arrangement, that article is the place to be. For our purposes here, I will be focusing on the more utilitarian, material benefits of private cities.

There are three primary advantages that private cities have over government owned cities:

  1. Privatizing cities will help “internalize” externalities and provide “public goods” in a superior fashion,
  2. Private cities are less at the whim of interest groups, and
  3. Private cities are more likely to serve the poor

Most non-libertarians would find each of these advantages surprising, so I will explain each of them in turn.

Internalize Externalities And Superior Provision Of “Public Goods”

Externalities are one example of something that many consider a “market failure“. They occur when the total social cost of some action is not contained within the monetary cost of the action. The most common example would be pollution; when a factory pollutes, they do not bear the cost of the pollution – it is disbursed over the people who are harmed by the pollution. As such, as the theory goes, the factory will end up producing more than the socially optimal level, because the cost of pollution isn’t factored into their production process.

Without going into too much detail about this theory, I claim that this externality is the result of a lack of private property. The pollution is actually a violation of the property rights of the victims of the pollution. If these people could make a legal claim that the factory has infringed on their property rights, the externality would be internalized. A more thorough discussion of this will need to be saved for another time; for now, let us restrict this discussion to the benefit of private cities in this regard.

Similarly, a “public good” is one that, as the theory goes, would not be produced in optimal levels by the free market. These include things like utilities, national defense, police, and so on. When you get down to it, both so-called public goods and externalities are very similar “problems”. In both cases, private property is the solution.

Consider a mall, which is typically owned by a someone who rents out space as their source of income. The mall owner has a very strong incentive to increase the value of the space in this mall and thus collect a larger income. How can they do this? By providing “public goods” such as security, parking, and nice open spaces within the mall. Each individual store owner may not have much of an incentive on their own to provide security, but the owner of the mall may find it necessary in order to get people to rent out space.

Private cities can do something very similar. If a private company is tasked with developing a profitable private city, they have an incentive to provide quality schooling, security, parks, roads, waste disposal, etc. All of these services will increase the value of the land that this company owns, and will thus increase its own revenue.

But publicly owned cities have no comparable incentive. Yes, a government that does a poor job could potentially get voted out of office, but this is still far less responsive than that of competing private cities. This is why roads tend to be shitty almost everywhere (not just in Honduras!), and why police can get away with murder and abuse fairly easily.

It’s hard for people to imagine what private cities would look like, which is understandable. Probably the closest examples of this kind of arrangement are Letchworth and Welwyn, which were small cities founded on Georgist principles. They were nationalized after World War 2. You can also kind of consider Disney World in the same vein. Another approximation of a private city would be that of Sandy Springs, Georgia, which outsourced most of its public services to private companies after going bankrupt, which improved these services at a lower cost. Note that this is still a far cry from actual private cities, which would provide public services even better than mere outsourcing would.

Less Influence From Interest Groups

Public cities are basically tools of interest groups.

There is a huge incentive to lobby the local government to enact rules that would help certain businesses at the expense of others, and of the common welfare in general. It is also far more likely to lead to policies that are simply dumb and self-destructive.

Rent control is a perfect example of a horrible policy that nearly all economists agree will basically destroy a local economy, but many cities will implement rent control laws because they sound nice. Zoning laws can be used by certain businesses in order to harm their competition by making their rent more expensive, forcing them to move, and preventing them from existing in the first place.

The most obvious case of interest group domination is the current battle between Uber and various local taxi cartels all over the world. Many cities are banning Uber, which generally provides superior service at much lower cost, in order to appease the powerful local taxi services.

In private cities, while anything is possible, there is a strong incentive not to implement stupid policies. If there are two competing cities, one with rent control and one without, the city without rent control will almost certainly be more successful (i.e. profitable). Similarly, zoning laws could be implemented, but the city owner will need to pay for whatever cost this imposes upon him, unlike the public city, which can rob the taxpayers to pay for it. So if one private city implements zoning laws that ban strip clubs, for instance, the owner will pay the cost of this decision (residents who like strip clubs won’t want to live there, etc.) as well as reap the benefits (more socially conservative people will want to live there, etc.).

Private Cities Help Serve The Poor

This is surely the one that would most surprise readers. Most people imagine that private cities will become tyrannical little enclaves of the rich trying to escape or take advantage of the poor. And most certainly, some would in fact be like this.

But when you consider how terribly American cities are treating their homeless people, it amazes me how this idea persists. Capitalism is about mass production; while there is certainly a market for serving the wealthy, there is a much larger market and plenty of profit to be made serving the middle and lower classes.

Wealthy communities tend to already have high property values and quality provision of public goods. But the potential for profit from serving lower income communities is drastically higher. Land value is cheap in poor communities, and has much more room for growth.

How could private cities better serve the poor? For one thing, a regime of several competing private cities will drive the cost of living down as the cities compete for residents and investment. This benefit cannot be overstated, because the amount of fraud, waste, and abuse in many cities is extraordinary, particularly in the third world.

It’s also highly unlikely that private cities would “exploit” the poor, considering the fact that in most proposals, the land that forms the city is largely uninhabited. Poor people aren’t going to be forced to move there and be exploited (unless, of course, the government forces them). On the contrary, a major benefit of private cities is that they will have better rule of law than the more corrupt areas of the country, which gives poor people a more safe and stable place to migrate to.

And private cities need not be run by “evil corporations”. They can experiment with social and legal rules. Some of them could mimic the Israeli kibbutzim, if socialism is more your cup of tea.

 

Conclusion

In short, the experience of Honduras in no way proves that libertarianism doesn’t work. The proper lessons to be learned from the Honduran experience are primarily about the incredible failure of some governments to provide good institutions that create a healthy economy and social system.

Honduras is in the process of implementing a project that is akin to the formation of competing private cities, and if implemented well, should lift many poor Hondurans out of poverty. Hopefully corruption and cronyism doesn’t ruin the experiment. Ultimately, only time will tell.

“Never Again”: Why Is The Western World Supporting Neo-Nazis?

The Holocaust is a historical event that occupies a significant part of the collective memory of the Western world, as it ought to. There are many lessons to learn from that period, including the dangers of unbridled state power, the consequences of racism inflamed by propaganda, and the terrifying things that otherwise reasonable people will do when encouraged by “authority”.

The scale of sheer horror that the Nazis wrought upon Europe are well recognized by almost everyone in the Western world, and has spawned the phrases “never again” and “never forget” to represent the eternal vigilance we must possess in order to ensure that such evil does not rise to power again.

Unfortunately, Americans seem to have let their vigilance slip precipitously, as the events over the past year or so in Ukraine have proven.

Particularly as a Jew, but more generally as a human being, I am deeply disturbed by the complete lack of attention there has been to the rise of neo-Nazism in Ukraine. Even more disturbing is how this rise has been actively encouraged by the US government, and how the government and media have been actively suppressing this information.

The Obama administration and its lapdog media have dismissed the claims about neo-Nazi presence in Ukraine as Russian propaganda, but spending a minute or two looking at the facts reveals this to be a blatant and dangerous lie. While it is certainly true that the government in Kiev is not solely controlled by Nazis, they do have a significant presence and influence.

My intention here is to demonstrate, for those in the Western world who are unfamiliar with the situation, the significance of the role played by neo-Nazis in Ukraine and document at least some of the direct support that the US has provided to them.

The Jews of America and the Western world need to condemn US actions in Ukraine or else be hypocrites of the highest order.

 

Neo-Nazis In The Ukrainian Government

Russian leader Vladimir Putin has repeatedly called the government in Kiev a bunch of “neo-Nazis, Nazis, and anti-Semites.” We could dismiss his accusations as pure propaganda, and certainly he is exaggerating. But the inclination in American media and policy circles now seems to have swung in the exact opposite direction, alleging that the extreme nationalist and neo-Nazi segments of the new government are virtually non-existent.

Enter Svoboda, formerly the Social-National Party of Ukraine (compare to the Nazis, otherwise known as the National Socialists), and Ukraine’s preeminent far-right party. Less than a year before the Western-backed coup that toppled the democratically elected pro-Russian Prime Minister Viktor Yanukovych, the World Jewish Council called upon the EU to ban several neo-Nazi parties in Europe, including Svoboda. If you do a Google search on Svoboda, neo-Nazis in Ukraine, or the like, you will see plenty of articles from around 2012 condemning them.

Now, they are a powerful force in Ukraine, one that the US government is staunchly supporting, and the EU is doing nothing about. According to investigative journalist Robert Parry (who broke the Iran-Contra scandal, by the way):

“In December 2012, barely a year before the coup, the European Parliament expressed concern about “the rising nationalistic sentiment in Ukraine” represented by Svoboda, whose founders included admirers of World War II Nazi collaborators, such as Stepan Bandera and Adolf Hitler’s Ukrainian auxiliary, the Galician SS.

parliamentary statement from Brussels noted “that racist, anti-Semitic and xenophobic views go against the EU’s fundamental values and principles” and urged “pro-democratic parties” in Ukraine’s parliament “not to associate with, endorse or form coalitions with” Svoboda.

After the coup, which was strongly supported by Svoboda and spearheaded by its associated neo-Nazi militias from the west, Svoboda and other far-right political groups were given several ministries in recognition of their crucial role in the anti-Yanukovych putsch.

Now with Svoboda at the center of power in Kiev, the EU has muted its alarm, all the better to maintain the white hat/black hat scenario favored by Official Washington and the mainstream U.S. media. That narrative portrays the Kiev regime as the blameless white hats and Russia’s President Vladimir Putin and the ethnic Russian rebels in the east as the evil black hats.”

Whether you agree with the narrative presented in the last paragraph or not, it is indisputable that neo-Nazis were able to procure for themselves significant power in Ukraine after the coup. In fact, some of the first actions by the interim government were to make Ukrainian the only official language of the nation (and people wonder why the Russian-speaking Ukrainians in the East were upset…) and making moves to remove a law on the books which forbids “excusing the crimes of fascism.”

Known neo-Nazis have also taken prominent positions in Ukraine’s government:

  • Andriy Parubiy, co-founder of Svoboda, is the secretary of Ukraine’s security council. He is in charge of everything related to national defense in Ukraine.
  • Dmytry Yarosh, leader of the ultra-nationalist Right Sector (which, according to historian Timothy Stanley, “flies the old flag of the Ukrainian Nazi collaborators at its rallies”), is his deputy.
  • Oleksandr Sych, a Svoboda parliamentarian who tried to ban all abortions in Ukraine, including those resulting from rape, was made deputy prime minister for economic affairs.
  • Oleh Makhnitsky, a prominent member of Svoboda, was named prosecutor-general of Ukraine.
  • Serhiy Kvit, also of Svoboda, was put in charge of the Education Ministry.
  • Andriy Makhnyk of Svoboda was put in charge of the Ecology Ministry.
  • Ihor Shyaiko of Svoboda became the head of the Agriculture Ministry.
  • Tetyana Chernovol, previously involved in the anti-Semitic Ukrainian National Assembly – Ukrainian National Self Defense (UNA-UNSO), was named chair of the government’s anti-corruption committee.
  • Dmytro Bulatov, also with UNA-UNSO connections, was appointed minister of youth and sports.

In other words, neo-Nazis were given control over Ukraine’s military and security apparatus, their justice system, the economy, the education system, and other areas. This is not something that can be simply written off as an irrelevant, lunatic fringe – these people have real power.

On October 26th, 2014, there was a parliamentary election in Ukraine. The US government and its media have seized upon the results of this election to argue that, in fact, the neo-Nazis are marginalized, and to reaffirm that these concerns are all just “Russian propaganda”.

The far right, ultra-nationalist parties did not do well in the elections, true. But the views of many of the major parties are similar, and neo-Nazis have won seats as members of the more “mainstream” parties. As Roger Annis reports:

“Much has been written about the seemingly poor electoral outcomes of two of the largest extreme-right parties — Svoboda and Right Sector. Both failed to reach five per cent. Svoboda received 742,000 votes (4.7 per cent, compared to 10.4 per cent in 2012) while Right Sector received 250,000. But the numbers alone understate the situation with the extreme right.

Svoboda elected at least six candidates. Party distinctions were blurred by a field crowded with neo-conservative and extreme-right candidacies and by cooperation agreements between the parties. Thus, a leader of the fascist Social-National Assembly–Andriy Biletsky (an Azov Battalion commander) — won direct election as an “independent” when no candidate of the Poroshenko or Yatsenyuk blocs ran in his district in Kyiv. Some extreme rightists ran as candidates of the two large blocs.

Yatsenyuk’s bloc stood aside in the district in Dnipropetrovsk where Right Sector leader Dmitry Yarosh won. Two other Right Sector candidates were elected in the city, Ukraine’s fourth-largest.”

There’s more. While Svoboda and Right Sector are likely the most high profile of the neo-Nazis, there are other extreme nationalists with questionable associations that get less attention. For instance:

“The third place finisher was another, new electoral bloc, “Samopomich” (Self Reliance). It won 1.7 million votes (11 per cent) and 34 seats. It is headed by the strongly pro-Europe mayor of the city of Lviv in the west of Ukraine, Andrii Sadovyi. Sadovyi’s Lviv is a stronghold of the extreme right.

Another Samopomich leader newly elected to the Rada is Semen Semenchevo. He is a commander of the Donbas Battalion, one of the dozen or so rightist and fascist paramilitary battalions that have sprung up this year to fight alongside the conscript Ukraine army in the east of the country.”

Then there is the Radical Party, which got 1.7 million votes and 22 seats. The leader of this party, Oleh Lyashko, is a paramilitary commander who Amnesty International has called out for kidnapping and brutalizing important supporters of political autonomy in eastern Ukraine. Take a look at one of his campaign posters:Ukraine campaign poster

Last I checked, impaling a caricature of some rich Jewish oligarch with a trident seems…well, a little bit anti-Semitic. Reminder: this party received 1.7 million votes.

While the US media is severely downplaying the role that neo-Nazis are playing in Ukraine by only considering a small slice of the neo-Nazi pie, all the major parties are fairly similar, according to an investigation by VoxUkraine. Consider the current president of Ukraine, Petro Poroshenko, who is fully backed by the US. In December, he granted Ukrainian citizenship to a Belarusian neo-Nazi who is a prominent member of the neo-Nazi National Socialist Society, an organization whose primary goal “is to prepare for a race war.” Why was he granted citizenship? Because of his valiant service fighting with the neo-Nazi Azov battalion, of which we will be investigating next.

 

The Nazi Presence In Ukrainian Militias And Police

The Ukrainian government since the US-backed coup on February 22, 2014 is the first government to dispatch neo-Nazi storm troopers (aka death squads) since the fall of the Third Reich. Most prominent among the various death squads (in the western media: “volunteers”) is the Azov battalion.

Take a look at the helmets that these Azov soldiers are wearing:

Azov helmets

On the left, you can clearly see a swastika. That lightning-bolt-looking-thingy on the right? That was the symbol of the German SS, the organization tasked with carrying out the Holocaust.

Azov logo

You would think that if the media caught wind of this, it would be a huge story. A moral outrage! There would be investigations, firings, and so on. But when the Washington Post covered this, they buried that detail in the bottom few paragraphs, and dismissed the use of Nazi symbols as “romantic”:

“A former school here is now a training ground and barracks for the men of the Azov, who receive a $70 a month salary as well as minimal training and aging firearms from the government. One platoon leader, who called himself Kirt, conceded that the group’s far right views had attracted about two dozen foreign fighters from around Europe.

In one room, a recruit had emblazoned a swastika above his bed. But Kirt, a former hospitality worker, dismissed questions of ideology, saying that the volunteers — many of them still teenagers — embrace symbols and espouse extremist notions as part of some kind of “romantic” idea.

He insisted the group’s primary goal is defending its country against Russian aggression.

“It’s like 1924,” he said. “Putin is the new Stalin.””

Do you see that? It’s basically a big “who cares?” followed immediately by changing the subject and demonizing Putin. This is simply unacceptable. It isn’t just some “romantic” idea, but a known part of their ideology. Here is Robert Parry paraphrasing some of the Telegraph’s coverage of the Azov battalion:

“Based on interviews with militia members, the Telegraph reported that some of the fighters doubted the Holocaust, expressed admiration for Adolf Hitler and acknowledged that they are indeed Nazis.

Andriy Biletsky, the Azov commander, “is also head of an extremist Ukrainian group called the Social National Assembly,” according to the Telegraph article which quoted a recent commentary by Biletsky as declaring: “The historic mission of our nation in this critical moment is to lead the White Races of the world in a final crusade for their survival. A crusade against the Semite-led Untermenschen.”

The Telegraph questioned Ukrainian authorities in Kiev who acknowledged that they were aware of the extremist ideologies of some militias but insisted that the higher priority was having troops who were strongly motivated to fight.”

We need not just rely on the more anecdotal evidence by Azov members. What about their actual printed materials? According to the BBC, an online publication of the Social National Assembly (remember, the head of Azov, Andriy Biletsky, is the head of this umbrella organization as well) states its aims: “To prepare Ukraine for further expansion and to struggle for the liberation of the entire White Race from the domination of the internationalist speculative capital,” and “to punish severely sexual perversions and any interracial contacts that lead to the extinction of the white man.”

And this guy Biletsky was given an “Order For Courage” award by (US backed) president Poroshenko.

The Azov battalion has been very successful in their military campaign in eastern Ukraine. Perhaps as a result of this success, Vadim Troyan, former deputy commander of Azov, was appointed Kiev’s chief of police. In other words, the guy who is ostensibly supposed to be keeping Ukraine’s capitol city safe from crime is in fact an avowed neo-Nazi.

Next, let’s meet the appointed head of the Ukrainian Security Service (SBU) “Department of Propaganda”, Yuri Michalchyhyn. As reported by Justin Raimondo:

“Michalchyhyn is a real piece of work: as the former head of the “Joseph Goebbels Political Research Center,” he isn’t shy about his advocacy of National Socialism. “We are against diversity,” he told the Guardian. “Ukraine is for Ukrainians.” Among his political activities: organizing a torchlight parade replete with Nazi symbolism. Michalhyhyn considers the Holocaust “a bright episode in European civilization.”

One can only imagine what kind of propaganda Michalchyhyn will be turning out on behalf of the Ukrainian SBU – paid for with American tax dollars.”

 

Neo-Nazi War Crimes

Of course, actions speak louder than words, and we ought not to rush to conclusions merely because of copious amounts of written and spoken evidence that these monsters are, in fact, monsters. In a chilling article by Chris Ernesto, we learn some more about the kinds of things these scumbags support:

“In October of 2014, Azov Battalion servicemen took part in a march organized by Right Sector to commemorate the anniversary of the Ukrainian Insurgent Army who infamously undertook to ethnically cleanse western Ukraine of Poles in 1943 and 1944.”

But the neo-Nazis of the Ukrainian government don’t merely support extreme violence and ethnic cleansing; they practice what they preach, and have been doing so in eastern Ukraine for the past year with the full support of the United States government.

For instance, the Ukrainian government has been indiscriminately firebombing parts of eastern Ukraine that have no military value, including with the use of illegal white phosphorous (click the link to see images and videos of the carnage). Actually, it’s not indiscriminate; artillery target maps show that the Ukrainian army, including the neo-Nazi “volunteers”, are specifically targeting civilians.

The atrocities committed by these Nazis are not isolated occurrences. They have been happening consistently for the past year. Taking a page out of ISIS’s book, the Ukrainian nationalists are even beheading some of their victims. As Vox reports, the neo-Nazis are blocking off roads and preventing humanitarian aid (food, medicine, etc.) from entering eastern Ukraine:

“These groups pose a serious threat to Ukrainian civilians as well. In December 2014, pro-Kiev militias blocked humanitarian aid from reaching rebel-held areas of eastern Ukraine. Amnesty International researcher Denis Krivosheev said in a statement that the militias were starving civilians as a weapon of warfare, calling the tactic a war crime.

Another militia, the Aydar Battalion, has kidnapped and tortured civilians in eastern Ukraine. On dozens of occasions, militia members abducted civilians, tortured and interrogated them, and stole their money and valuables before either releasing them or handing them over to the Security Service, Amnesty International reported in 2014. The battalion was also reportedly running a secret detention center in the city of Severodonetsk, in which “detainees were forced to recite the Ukrainian national anthem and beaten if they failed.””

But if you get your information from western media sources, you would only be hearing about the atrocities committed by the “pro-Russian separatists” or “terrorists” in eastern Ukraine, and nothing about the vastly more prevalent war crimes coming from the pro-Kiev side. This is an incredible double standard, and one which is intolerable given the stakes in this war.

Maidan Square – Sniper Massacre

On February 20th, 2014, during protests against the democratically elected, pro-Russian leader of Ukraine, snipers shot and killed well over 100 people from both the police side and the protestor side.

In nearly all reporting on this massacre in the west, it was simply assumed that the snipers were from the government side. As such, the coup that occurred two days later was hailed, somehow, as a “victory for democracy”, despite the overthrow of a constitutionally elected leader (say what you will about Yanukovych, but at least he was actually elected).

But this was all incredibly premature, even though it was wrapped up nicely for western consumption by the media. People failed to ask the all-important question when it comes to these kinds of things: cui bono? Who benefits? Without even taking a look at the evidence, it is clear that the government had far more to lose by ordering this massacre than, say, neo-Nazi elements among the protestors.

According to a leaked phone conversation on February 26th, 2014, between foreign-affairs chief of the EU, Catherine Ashton, and her investigator, Urmas Paet, it was in fact elements from the protestors’ side who were responsible for the massacre. This call was largely ignored by the mainstream media.

But most damning of all is an incredibly thorough study done by Ivan Katchanovski at the University of Ottowa, taking into account all the available evidence, which concluded that the massacre was in fact perpetrated by members of the protestors’ side, and that the post-coup government covered the whole thing up. Here is a summary of the findings:

“The analysis and the evidence presented in this academic investigation put the Euromaidan and the conflict in Ukraine into a new perspective. The seemingly irrational mass shooting and killing of the protesters and the police on February 20 appear to be rational from self-interest based perspectives of rational choice and Weberian theories of instrumentally-rational action. This includes the following: the Maidan leaders gaining power as a result of the massacre, President Yanukovych and his other top government officials fleeing on February 21, 2014 from Kyiv and then from Ukraine, and the retreat by the police. The same concerns Maidan protesters being sent under deadly fire into positions of no important value and then being killed wave by wave from unexpected directions. Similarly, snipers killing unarmed protesters and targeting foreign journalists but not Maidan leaders, the Maidan Self-Defense and the Right Sector headquarters, the Maidan stage, and pro-Maidan photographs become rational. While such actions are rational from a rational choice or instrumentally-rational theoretical perspective, the massacre not only ended many human lives but also undermined democracy, human rights, and the rule of law in Ukraine.”

In other words, the United States has been supporting a government that came to power through a false flag attack that involved slaughtering over 100 of their own people. Echos of the Reichstag fire, anyone?

Odessa Massacre

On May 2nd, 2014, clashes between pro-Ukrainian and pro-Russian groups broke out on the streets of Odessa. This culminated in a large skirmish outside the Trade Unions House, which was then set on fire, resulting in the deaths of 42 pro-Russian activists and six more on the streets outside.

Unsurprisingly, the western media reported this as though the details were murky, but that evidence strongly supported the idea that it was in fact pro-Russian elements that were behind this.

And unsurprisingly, they were (and continue to be) wrong; Right Sector thugs were the responsible party, and it almost seems as though the western media’s false coverage was deliberate. From an insightful article on Alternet, here is a description of the carnage:

“On May 2, 2014, following a match between two football teams, radical football fans along with Right Sector neo-Nazis brought in from outside Odessa joined forces. According to various testimonies and videos, the pro-Kiev protesters set on fire the tent of federalization-supporters of citizens who want to ensure that their rights will be protected in a federal Ukraine. The pro-Federation activists rushed into the historical trade union building hoping to find a refuge and barricaded themselves. The perpetrators ran into the building and beat people. They attempted to break into one of the rooms, but failed. They then left the building only to continue to throw Molotov cocktails (prepared by Ukrainian nationalist girls), shot at survivors who attempted to jump out from the windows, and beat to death those who managed to make their way out. Ambulances did not arrive to treat the survivors for hours and Israeli medical students offered first aid. The Odessa police did not stop shooters from firing at those trapped in the building. Some of the police were wearing the same red bands worn by Right Sector members and were seen talking to them. At the same time, however,Reuters and BBC falsely portrayed fascists who shot at pro-Federation activists inside the Trade Union building as “pro-Russian militants”.”

And as described by Robert Parry:

“This brutal Nazism surfaced again on Friday when right-wing toughs in Odessa attacked an encampment of ethnic Russian protesters driving them into a trade union building which was then set on fire with Molotov cocktails. As the building was engulfed in flames, some people who tried to flee were chased and beaten, while those trapped inside heard the Ukrainian nationalists liken them to black-and-red-striped potato beetles called Colorados, because those colors are used in pro-Russian ribbons.

“Burn, Colorado, burn” went the chant.

As the fire worsened, those dying inside were serenaded with the taunting singing of the Ukrainian national anthem. The building also was spray-painted with Swastika-like symbols and graffiti reading “Galician SS,” a reference to the Ukrainian nationalist army that fought alongside the German Nazi SS in World War II, killing Russians on the eastern front.”

For more evidence, including grisly photographs and videos of the massacre, see this and this. The content of those pages is truly horrific, so do not open them if you are uncomfortable with the grotesque.

One week later (May 9th), there was a similar massacre in Mariupol. This event received far less attention, but is worthy of mention as long as we are discussing neo-Nazi atrocities in Ukraine. More from Robert Parry:

“This tactic of torching an occupied building occurred again on May 9 in Mariupol, another port city, as neo-Nazi paramilitaries – organized now as the regime’s “National Guard” – were dispatched to a police station that had been seized by dissidents, possibly including police officers who rejected a new Kiev-appointed chief. Again, the deployment of the “National Guard” was followed by burning the building and killing a significant but still-undetermined number of people inside. (Early estimates of the dead range from seven to 20.)

In the U.S. press, Ukraine’s “National Guard” is usually described as a new force derived from the Maidan’s “self-defense” units that spearheaded the Feb. 22 revolt in Kiev overthrowing elected President Viktor Yanukovych. But the Maidan’s “self-defense” units were drawn primarily from well-organized bands of neo-Nazi extremists from western Ukraine who hurled firebombs at police and fired weapons as the anti-Yanukovych protests turned increasingly violent.

But the mainstream U.S. press – in line with State Department guidance – has sought to minimize or dismiss the key role played by neo-Nazis in these “self-defense” forces as well as in the new government. At most, you’ll see references to these neo-Nazis as “Ukrainian nationalists.””

The point I’m trying to make here is that these are bad guys. Evil human beings, who are willing to brutalize others, largely for racial reasons, in order to attain power. And, despicably, the west is actively supporting this.

 

The Western World Is Supporting These Neo-Nazi Thugs

Many of the people behind the events in Ukraine are neo-Nazis willing to murder anyone who gets in their way. The US and EU are giving them full support. The corporate media is whitewashing their crimes and manipulating the public into believing that Putin is responsible.

Anyone who is paying any attention to the news knows that the US is openly backing the government of Ukraine against those who want autonomy in eastern Ukraine. For instance, the US government has already sent heavy weaponry to Ukraine and has earmarked $19 million to help build up the Ukrainian military. Andriy Parubiy, the avowed neo-Nazi and co-founder of Svoboda discussed above, has just come to Washington in order to ask for even more weapons assistance. The fact that a neo-Nazi was even allowed to speak in front of Congress is terrifying.

But it isn’t just weapons. The Pentagon has confirmed recently that US troops will be deploying to Ukraine this spring in order to help build up the Ukrainian National Guard (which has been heavily infiltrated by these neo-Nazi militants). They will be stationed in Lviv, well known as a stronghold of neo-Nazi sentiments.

In case I haven’t made myself clear: the United States is both training and providing weapons to people who are unabashed neo-Nazis so that they can fight a war against nuclear armed Russians.

This is not an exaggeration, nor am I falsely conflating the current government in Kiev with neo-Nazis. While there are certainly many people in the current Ukrainian government who are not Nazis, they are not even close to a fringe group, as I’ve shown above. And in fact, the US is specifically being extra kind to the more extreme elements within the Ukrainian establishment. Consider Oleh Tyahnybok, the leader of Svoboda, who has called for the liberation of his country from the “Muscovite-Jewish Mafia”. Here is a picture of him doing his party’s salute, eerily reminiscent of the sieg heil:

Oleh Nazi Salute

And here he is with US Senator John McCain:

McCain with Nazi

Dec. 15, 2013: U.S. Senator John McCain, center, speaks as Democratic senator from the state of Connecticut, Chris Murphy, second left, and Opposition leader Oleh Tyahnybok, right, stand around him during a Pro-European Union rally in Independence Square in Kiev, Ukraine. (AP)

 

McCain with Nazis again

And here is Oleh with US Assistant Secretary of State, Victoria Nuland, of “Fuck the EU” fame (for those of you who don’t know, this is a reference to her intercepted phone call where she was caught discussing who ought to lead Ukraine, just a few weeks before the coup which put her top choice in power. Listen to the recording here and read the transcript here):

Nuland with Nazis

The US’s Historical Support Of Nazis

The current events in Ukraine are far and away the most blatant example of US support for Nazism, but this is not the only instance (and not even the only incidence of supporting Ukrainian Nazis, specifically).

During the tail end of World War 2 and its immediate aftermath, US intelligence agencies helped exfiltrate over 1000 Nazi scientists from Europe and brought them to America in order to aid in the cold war against the Soviet Union. This was codenamed “Operation Paperclip”. Among these scientists were monsters who performed tortuous experiments on living humans.

The US government went to great lengths to hide this, and prevented many of these Nazis from being prosecuted. Information was deliberately withheld about these people so that Nazi-hunters wouldn’t be able to find them.

Some of these scientists did in fact contribute to meaningful scientific advances (like Wernher von Braun), but many also turned out to be liars, useless to US intelligence, or even Soviet double agents.

The Jewish Response

One would expect the US and the western world to condemn the goings-on in Ukraine, and to do everything possible to stop the menace of a resurgent Nazism in Europe. Of course, if you are a cynic/libertarian like me, then you would understand that these things are more about politics and power, and less about doing what’s right.

But even I would have expected the response from the Jewish world to be more appropriate to the seriousness of the situation. Was there not a collective agreement among world Jewry to ensure that never again would we allow the horrors of something like the Holocaust to happen? A part of this agreement means preventing the ideologies that would breed genocide or ethnic cleansing from gaining any kind of foothold or traction.

Somehow, however, world Jewry is failing in this regard. The rest of the world may not speak out against Nazism, but this just makes the need for Jews to stand up and protest ever stronger. Instead of trying to prevent the Nazi power grab in Ukraine, the Jewish world is ignoring it at best, and supporting it at worst.

For Ukraine’s Jews, this is a somewhat challenging issue. Many of them are more western leaning, and thus were a part of the opposition that overthrew Yanukovych a year ago. Of course, the opposition at that time was made up of a diverse cross-section of Ukrainian society. As such, many of these Jews were on the same side as the neo-Nazis, though they of course did not support them in any way. For Ukrainians, the question is more complicated than it should be for the rest of world Jewry; they have their own political concerns, whereas the rest of us are far removed from the political battles of a foreign country. As people with no stake in and no business participating in Ukrainian politics, our focus ought to be on anti-Semitism, not whether the government of Ukraine is “pro-Western” or “pro-Russian”.

Unfortunately, this is not the case. Despite world Jewry condemning the rise of Nazism in Ukraine in the years before the coup, Jews have been fairly silent in the year since. Considering how the danger to Jews is now orders of magnitude higher, this is absurd.

While the Jewish response has mostly been muted or somewhat indifferent, some Jewish organizations have actually worked against Jewish interests and safety in Ukraine. Representative John Conyers had written an amendment to the 2015 National Defense Authorization Act (NDAA) which was intended to prohibit US assistance, training, and weapons to neo-Nazis in Ukraine.

But the Anti-Defamation League and the Simon Wiesenthal Center didn’t support blocking funding for neo-Nazis, and they should be held accountable for their stance on this issue. As AlterNet reports:

“If passed, Conyers’ amendment would have explicitly barred those found to have offered “praise or glorification of Nazism or its collaborators, including through the use of white supremacist, neo-Nazi, or other similar symbols” from receiving any form of support from the US Department of Defense.

The amendment was presented by congressional staffers to lobbyists from Anti-Defamation League (ADL) and the Simon Wiesenthal Center, two of the country’s largest established Jewish pressure groups. Despite their stated mission to combat anti-Semitism and violent extremism, the ADL and Wiesenthal Center refused to support Jeffries and Conyers’ proposal.

According to Democratic sources in Congress, staffers from the ADL’s Washington office and the Simon Wiesenthal Center rejected the amendment on the grounds that right-wing Ukrainian parties like Svoboda with documented records of racist extremism had “moderated their rhetoric.” An ADL lobbyist insisted that “the focus should be on Russia,” while the Wiesenthal Center pointed to meetings between far-right political leaders in Ukraine and the Israeli embassy as evidence that groups like Svoboda and Right Sector had shed their extremism.”

Why are Jewish organizations which are intended to combat anti-Semitism taking a political stance on the Ukrainian conflict rather than acting to combat anti-Semitism?

Israel has been largely silent on the Ukraine issue, which is also disturbing. Does not Israel consider itself the defender of world Jewry? To be fair, Israel did vote for the UN resolution that condemned racist fascism and Nazism, but you would think that to be something obvious to vote for, something to take for granted. I suppose it wasn’t actually so obvious, since the US, Canada, and Ukraine all voted against it. What the hell?

 

Conclusion

What I’ve outlined in this article is disturbing to say the least. But I do want to temper my comments with a caveat or two. The fact is, there are many different organizations operating in Ukraine right now, and they may have differing ideologies. In addition, these groups are made up of individuals, and not every individual believes the same thing that their group affiliation might suggest.

As such, I apologize for any errors that may result for having conflated certain organizations with each other. For instance, Right Sector and Svoboda are different organizations and may have different goals or philosophies, though both are clearly ultra-nationalist and possess elements of racism and anti-Semitism. I’m sure there are some subtle differences between these organizations, and surely some individuals within these groups are not as virulently anti-Semitic as this article may have suggested. But there is no doubt that the neo-Nazi threat in Ukraine is real and significant.

In addition, I want to make clear that the current national government of Ukraine is NOT committing state-sanctioned acts of anti-Semitism. It seems as though the government is actually trying, to some extent at least, to counter anti-Semitism in the country. And as I alluded to in the previous section, many Jews in Ukraine support the government and say that it is not sanctioning anti-Semitic action.

But while there may not be state-sanctioned anti-Semitism now, this should not lull the Jewish people into a false sense of security. What do you think would happen if the fascist neo-Nazis actually took complete control of the government? They already have significant political power, significant grassroots support, and are the most battle-hardened segment of Ukrainian society. We must listen to their rhetoric. Perhaps once they’ve taken care of the separatists in eastern Ukraine (using American weapons and training), they will then turn on the more moderate elements and begin to execute the more racist and anti-Semitic aspects of their political program.

Many Jews that I know voice the opinion that countries like Israel and America help to ensure that world Jewry is safe. They believe that without these benevolent nations, Jews somewhere may fall prey to the kinds of dangerous anti-Semitism that fueled Hitler’s Germany.

Well…perhaps that isn’t enough. If anything, it seems that, at least on some level, many Jews may be worse off because of America. While that may not be a generally true statement, it is clear that right now, the United States government is deliberately aiding and abetting Nazism in Europe.

You may wonder why this is the case. It may sound too absurd to be true. But this is politics, and in the realm of the political, morality flies out the window. Anything goes. That’s how John Kerry could accuse the pro-Russian rebels in Donetsk of making Jews register with authority figures there or face deportation based on a rumor which turned out to be a complete hoax. You see, the White House felt no need to do any fact checking on something that proves useful for their own propaganda purposes. Accusing the other side of anti-Semitism is politically beneficial, but supporting Nazis can be as well, particularly if they can keep Americans in the dark about it.

Fellow Jews, please do not become complacent. Even countries that have historically been good to Jews, such as the US (despite some exceptions, like not allowing Jews to come to America during the 30s and 40s), are not permanent bulwarks against the horrors of Nazism and anti-Semitism. We ought to appreciate that our lives are far better as Jews than they have been in many other times and places. But if we are to take the slogans “never again” and “never forget” seriously, we must be eternally vigilant; unfortunately, we are currently failing in this regard.

Happy Purim.

is..

The Economy Through The Eyes Of A Keynesian

In response to a recent comment by reader RHCP, I was looking into the concept of a “post-scarcity” society. One of my friends has brought this up repeatedly in our many debates, but I have yet to find a good, thorough explanation or argument for the concept. If you know of any good academic papers or long-form articles explaining post-scarcity economics, please post them in the comments below.

While I did some searching around, I came across this article, misleadingly called “Post-Scarcity Economics”, from the LA Review of Books, July 2013. While not what I had expected, it turns out I had come across one of the better depictions of Keynesian economics that I’ve ever seen – and I felt compelled to respond.

The author, Tom Streithorst, seems to be defining a post-scarcity world as one where demand is outstripped by supply – the productive capacity of a society being significantly higher than the actual demand for goods. In other words, a classic Keynesian problem of under-consumption/overproduction.

My intention in this post is to methodically go through his arguments, deconstructing the many fallacies that Keynesians are prone to fall prey too. Because I am responding to his points in order, my subheadings in this post will admittedly be somewhat arbitrary, so I apologize.

 

Supply, Demand, And Scarcity

Mr. Streithorst begins:

“WE LIVE LIKE GODS, and we don’t even know it.

We fly across oceans in airplanes, we eat tropical fruit in December, we have machines that sing us songs, clean our house, take pictures of Mars. Much the total accumulated knowledge of our species can fit on a hard drive that fits in our pocket. Even the poorest among us own electronic toys that millionaires and kings would have lusted for a decade ago. Our ancestors would be amazed. For most of our time on the planet, humans lived on the knife-edge of survival. A crop failure could mean starvation and even in good times, we worked from sun up to sundown to earn our daily bread. In 1600, a typical workman spent almost half his income on nourishment, and that food wasn’t crème brûlée with passion fruit or organically raised filet mignon, it was gruel and the occasional turnip. Send us back to ancient Greece with an AK-47, a home brewing kit, or a battery-powered vibrator, and startled peasants would worship at our feet.”

This is a great start, and one of very few items on which we agree. What is described here is the result of a miracle of sorts – through the accumulation of capital over the past several hundred years, the collective productive capacity of humanity has increased to such an extent that our lives would be unrecognizable to our ancestors.

The development of capitalism has lifted the masses out of poverty and provided us with luxuries that people could only dream of a couple hundred years ago.

“And yet we are not happy, we expected more, we were promised better. Our economy is a shambles, millions are out of work, and few of us think things are going to get better soon. When I graduated high school, in 1975, I assumed that whatever I did, I would end up somewhere in the great American middle class, and that I would live better than my father, who lived better than his. Today, my son doesn’t have nearly the same confidence. Back in those days, you could go off to India for seven years, sit around in an ashram, smoke pot and seek spiritual fulfilment, and still come home and get a good job as a copywriter at Ogilvy and Mather. Today kids need a spectacular resume just to get an unpaid internship at IBM. Our children fear any moment not on a career path could ruin their prospects for a successful future. Back in the 1970s, pop stars sang songs about of the tedium and anomie of factory work. Today the sons of laid-off autoworkers would trade anything for that security and steady wage.”

Again, no argument here. In the past thirty years or so, things seem to have changed. While I wouldn’t say that progress has stopped, something is certainly “off”. The cause of this change – and the solution – are where our views diverge.

“On the one hand, technology has made us all much more productive than we were 30 years ago. On the other, jobs have evaporated. Steel that used to require hundreds of men to manufacture now can be made with a dozen. A small businessman no longer needs to hire a secretary or a bookkeeper. Inexpensive software and a personal computer lets him do their jobs in a fraction of the time all by himself. The internet puts specialist knowledge that used to be almost impossible to find instantaneously on our laptops. The personal computer is doing to the office worker what the internal combustion engine did to the horse a century ago, making him obsolete.”

These are all facts, but Mr. Streithorst seems to be interpreting this all as a bad thing. This is one of the most common economic fallacies I hear, and it just doesn’t seem to die.

According to his worldview, improvements in technology eliminate jobs, leading to higher unemployment. Woe are the former bean counters who can no longer afford to eat because modern contrivances such as spreadsheets and Quicken have made them obsolete (in some contexts)! As technology progresses, more and more jobs become obsolete, more and more people become unemployed, and suddenly we have problems which require government to come in and fix things.

But if this were accurate, would not the world be a better place (economically speaking) if we rolled back technology a bit? Think about the masses who could be employed if we didn’t have giant machines that can dig massive holes and we needed to go back to good ol’ shoveling! And why lament the single bookkeeper who loses his job while ignoring the millions whom were never employed by the greedy small businessman in the first place? Wouldn’t it have been more effective to force him to hire two, three, or a thousand accountants in order to create jobs?

Technology doesn’t take away from some abstract pool of “jobs”. On the contrary, technology frees up resources that were being used in a less efficient way so that they can be employed more effectively elsewhere. Yes, the “seen” effect is the laborer losing his job to a robot, but what is “unseen” is that the pool of real resources has increased, leading to greater prosperity for all. Again, the miracle of capitalism that we began with.

We may feel sympathy for the worker who loses his job to technological improvements and the hardships he may face because of this. But this is simply the way the world works – were we to use the force of government to “rectify” the situation, we would simply condemn ourselves to the backwards, brutish existence of our technologically inferior ancestors.

“It is a paradox: our ever-growing productivity and our more insecure lives. Our understanding of economics is stuck in the past, in a world of scarcity, a world without advertising, where making things rather than selling them was the fundamental economic problem. Technology and the free enterprise system, to an extent that would amaze our ancestors, have solved much of the problem of supply. Our homes are more solid, our clothes more fashionable, our food tastier than our grandparents would have dreamed. In a world where even the residents of housing projects own more computing power than NASA did when they put a man on the moon, we cannot think that making stuff is the problem.”

Here, Mr. Streithorst introduces his conception of post-scarcity. Look at all the cool things we have available! We have more than enough supply of goods and services!

I don’t dispute the fact that we’ve made amazing strides in the process of production that has led to an increased supply of goods. But saying that we’ve “solved much of the problem of supply” is a bit premature. In fact, the only way something could be post-scarce, or have no supply “problem”, is if everyone could get as much of that good as they would like at no cost. This may be true for, say, air under normal circumstances, but it is clearly false with respect to nearly anything else.

How this is not trivially obvious to everyone is beyond me. We may have a vastly larger food supply than our ancestors, but people are still starving. People still need to buy food – it doesn’t just manifest itself whenever you want it. He continues:

“Ask any entrepreneur, and he will tell you making stuff, be it specialty steel, a low budget movie, saltimbocca a la romana, a collateralized loan obligation, a back massage, or an oil tanker is the fun part. It is selling it that keeps you up at night, breaks your heart, drives you into bankruptcy. That is why salesmen get paid more than engineers. Our problems today are purely problems of demand.”

Ignored is the crucial question: what is it that ought to be produced in the first place? I could vomit into a jar fairly easily, and yes, trying to sell that vomit would indeed be the difficult part of my fictitious business model. Mr. Streithorst would like you to believe that the problem lies in the fact that there isn’t enough demand for my vomit.

Clearly, this is absurd. We can produce many things, but people only value some of them, and only to a limited extent. The point of economics is to study how resources are allocated in the face of scarcity. Ideally, resources will be used as efficiently as possible in order to produce goods that are in the highest demand. Keynesians seem to think the problem is to create demand for already existing products, but this is not the way to a healthy economy. Instead of finding a way to create demand for my vomit, a good economic system will try to dissuade me from selling my vomit, and instead to devote my energies to creating real value for others.

“Picture an empty restaurant. The maître d’ standing by the till, faking confidence, trying to will customers through the door. The waiters sweeping nonexistent breadcrumbs from immaculate tablecloths. The sauces are prepped, the fish purchased at dawn glisten, waiting to be pan-fried. A couple approaches, peruses the menu, looks through the window, and walks away. The chef runs numbers in his head, calculating how much money he owes, how he can manage to meet his next interest payment. All that preparation, all that investment, all that energy and potential, for nothing. Until a customer decides to spend his money, it is for naught. Marx knew it. Keynes knew it. More to the point, every businessman knows it. Lack of demand is the Achilles heel of modern capitalism.”

This is a sad story, of course. But let me change it ever so slightly; imagine that when the couple looks at the menu, they see “Vomit: $50”. Read through that last paragraph again. No longer so tragic, right?

In real life, of course the restaurant isn’t serving vomit, but in this case, they may as well be. Resources have been used to create this restaurant, but people don’t actually value what the restaurant provides. For whatever reason(s), consumers are not being satisfied by this restaurant – and yet the restaurant continues to use society’s limited resources.

Lack of demand isn’t the problem; the waste of resources on creating a product that people don’t want is what’s wrong with this picture. The solution? The restaurant suffers losses, eventually goes out of business, and liquidates its assets. When the assets are sold off, hopefully they will be used in a way that is more satisfying to consumers.

 

Business Cycles And Aggregate Demand

“A recession, by definition, is a lack of aggregate demand, an unwillingness of firms and households to consume as much as the society can produce. It is a sign of the incredible capacity of capitalism that our fundamental problem is we make more stuff than we want to buy.”

No, Mr. Streithorst, the problem isn’t that we make more stuff than we want to buy. The problem (in a recession) is that we have been making the wrong stuff to begin with.

A simple example will help illustrate this. Let’s say there are a certain amount of building materials at a construction site (and we’ll assume that more cannot be procured). The blueprint that the manager is using to construct the new building requires more resources to complete than are actually available. In this case, the sooner the manager realizes that he can’t construct the building as designed, the better. The longer that construction continues, the more time and resources are wasted on a project that is destined to fail. But when the construction stops (good thing), the construction workers will be temporarily unemployed as the architect revises the blueprints (“good”/necessary, but unfortunate).

A recession is not simply a matter of overproduction that can be resolved by encouraging people to spend. Rather, it is the healthy process of unwinding the malinvestments created during the previous boom phase, like the building with insufficient materials.

For more on how the business cycle works and why it exists, see this, this, and this.

“The empty restaurant, writ large, is the predicament of the world economy today. No war, no hurricane has destroyed the productive capacity we had during the halcyon days of the boom. But consumers are not spending, firms are not hiring, households are paying off debt, corporations are sitting on piles of cash, banks are cautious about lending, and governments are hoping to reduce their deficits.”

Again, this is stated as though the behavior of the actors in this situation is a bad thing. Oh no, people are paying off their debts! Banks with shaky finances aren’t throwing money at anything that breathes – are they mad?! Consumers are being frugal during hard times – what boneheads! Corporations aren’t investing in risky projects during uncertain economic times – how dare they?

The scenarios described here are simply the prudent decisions that ought to be made when an economy is in recession. You wouldn’t advise someone who just lost their job to buy a Mercedes, would you? But this is exactly what the Keynesians would have you do.

“Indeed, solving the problem of demand has been the essential capitalist dilemma of the past 80 years. As productivity rises, we can make more with the same level of inputs. Demand has to rise just as fast or the economy shrinks. For an economy to be at full employment, demand needs to equal the society’s productive capacity. If it does not, then supply will shrink to meet demand and millions of workers will become redundant. To achieve full employment, we must find a way to instead push demand up to meet the economy’s productive capacity. Since the Great Depression, we have solved this problem of demand three different ways: war, rising wages, and debt.”

The most absurd sentence in this excerpt: “Demand has to rise just as fast or the economy shrinks.” Let’s try to unpack this. Some sort of change happens, leading to increased productivity. Previously, each worker could produce one widget per day, and now they can produce two. If the demand for widgets does not also double, then half of those employed in widget production will lose their jobs.

This is all true so far as it goes. But the Keynesian takes it one step further by claiming that this kind of situation can happen economy-wide, leading to a glut in production in general. The market is flooded with goods that people simply don’t have the resources or will to demand (buy). In other words, there is more production in ALL fields of production than exist resources to use in order to consume these products.

But how can this be possible? Ultimately, we produce solely in order to consume. In order to “demand” something, one must first supply something else to exchange it for. When you produce something, you necessarily become either the consumer of your own production, or you use your product to exchange for someone else’s which you will consume. It is simply impossible for there to be a general state of overproduction/under-consumption. This is not to say that there can’t be overproduction of a specific kind of good – remember my vomit example. That vomit is overproduced, but this is balanced out by some other good(s) being under-produced. To quote David Ricardo:

“Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market as not to repay the capital expended on it; but this cannot be the case with respect to all commodities.”

This is the famous and controversial Say’s Law – one which Keynes was quite proud of himself for “refuting”. Of course, he did nothing of the sort. This is an incredibly important point, so I strongly suggest you read Hazlitt’s discussion of Keynes’s failure to understand Say’s Law properly. I have not covered every angle of it here, but Hazlitt does a great job of addressing common misconceptions about this subject.

Mr. Streithorst continues:

“According to conventional models, long-term unemployment was inconceivable. Most economists at the time believed that markets, if left alone would inevitably self-equilibrate. Unemployment would drive wages down until, at some certain level, workers would be so cheap to hire that once again, men would be put to work and growth could return.

Keynes saw the fallacy in this reasoning. He recognized that workers, after all, are also consumers. Drive down their wages, you also drive down their ability to purchase goods and services. Lowering wages was no panacea; it would just knock demand even further down.”

It is certainly true that decreasing wages will necessarily drive down workers’ ability to purchase goods and services. The Keynesians believe that this leads to a downward spiral in aggregate demand: some workers become unemployed, they spend less money, the businesses that the original workers would have spent money on lose revenue and need to lay off some of their own workers, who then can’t spend as much, and so on.

But why wouldn’t wages simply decrease enough until employment reached a new equilibrium? According to Keynesians, it is because wages are “sticky” – there is an inherent resistance to decreasing peoples’ nominal wages. For some reason, this doesn’t apply to real wages; it is assumed that someone will not accept a nominal pay cut from $10/hour to $8/hour, even if the price level deflates by 20% or more – as though workers are too dumb to assess their own financial situation.

Besides the fact that this is mildly insulting to employees, it is also not the whole story. For starters, wages are made sticky in large part by government policy and is not an inherent feature of the market; for instance, during the Great Depression, Hoover forcefully intervened in business and did not allow them to cut wages. The most obvious other way is through unemployment benefits, which subsidize workers who choose to hold out for higher wages for a longer period of time. On top of that, there are unions, whose bargaining power allows them to hold wages above equilibrium levels.

One must wonder why wages would be sticky but other prices wouldn’t be. For instance, store owners doesn’t seem to have a problem with decreasing the price of the products that they sell if they need to move their inventory, even though the prices they charge are precisely the revenue that they bring in. If someone makes their money selling hot dogs and is willing to drop the price of hot dogs, why would a worker be unwilling to take a pay cut?

To be fair, wages are sometimes made sticky due to contractual obligations. That being said, many contracts stipulate that pay can indeed be adjusted based on circumstance, and most people aren’t hired at the same time, so contracts will expire on a rolling basis, allowing pay to be adjusted. In addition, most contracts aren’t in force for longer than a year, so for them to be a significant force, there would need to be a substantial change in demand in a fairly short period of time.

 

Economic History Since World War 2

“World War II finally ended the Depression and proved Keynes right. New Deal deficit spending was too small, too timid to restore the animal spirits of entrepreneurs battered by years of debt deflation. War is the least productive, most destructive of human activities with negative economic benefit, but the US government, by printing money and using it to hire workers knocked unemployment, which had been close to 20 percent in 1938 down to barely over 1 percent six years later.

It is important to understand that making bombs and blowing up cities is not what shrunk unemployment. It was the printing of money, the hiring of workers, the creation of demand by deficit spending. Had the US government spent as much as it had on fighting Hitler on promoting the arts, or building schools or even digging ditches and then filling them, it would have had just as beneficial an economic effect as did the war.”

I find it incredible that people can somehow believe that war is actually beneficial for the economy. But somehow, due to the Keynesian technique of aggregating everything, this can appear to be the case on a very superficial level.

Consider the claim above, where the unemployment rate dropped from 20% to just over 1% in a few years. This makes perfect sense when you consider that all men of military age were drafted – and thus became “employed” – during this time. But while the aggregate number shows “improvement”, it is all meaningless. Having millions of soldiers doesn’t create real wealth, so who cares? For more detailed analyses of why WW2 did not end the Great Depression, see this and this.

Even ignoring the draft, Mr. Streithorst claims that it is the printing of money and deficit spending which reduced unemployment. Like many of his claims, this one is true yet beside the point. He takes this reduction in unemployment and, for no reason at all, conflates this with having a beneficial effect on the economy.

But this is patently absurd, and in this passage, the intellectual bankruptcy of Keynesian economics is on display for all to see. According to Keynes (he actually wrote this in his General Theory) and Mr. Streithorst, employing workers to dig holes in order to fill them up is a good idea and helpful for the economy. It’s truly incredible that I even need to dignify such an assertion with a response, but alas, people simply don’t understand economics…or common sense.

Let’s say you and I were stuck on an island, when suddenly Mr. Streithorst washes ashore. He observes our prior economic arrangement, which involved spending a few hours a day catching fish and gathering coconuts, while we spend the rest of the day lounging around catching some sun. He tells us: “No, no, no! You’re doing it all wrong! Can’t you see that you are unemployed for half the day? Would it not be far better for your island economy to have you [points to me] dig some holes in the sand with your hands, and for you [points to you, dear reader] to fill them up as he goes? Your unemployment problem is solved!” Then he will pat himself on the back for having demonstrated the proper way to end our current “recession”.

Clearly, this ignores the fact that jobs are not what matters – production does. If we are employed doing something useless – such as digging holes and filling them up again – we are producing nothing. This is no better than leisure, but it is something that we’d prefer not to do. This makes us worse off, not better.

“But the economy soon [after the post-WW2 recession] recovered and for the next 25 years, the world experienced the greatest growth in its history. The fundamental source of Golden Age growth was rising incomes that brought millions out of poverty and into the middle class. Their demand for luxuries that were fast becoming necessities created a mass consumer market, and corporations grew rapidly by satisfying it.”

And why, Mr. Streithorst, did incomes rise? Do you think, perhaps, it could have something to do with increasing productivity of labor? Since that is the only way real wages can rise in aggregate, I sure do. But apparently, you do not:

“The rich grew richer during the Golden Age, but so did everyone else. Golden Age policies of progressive taxation, unionization, regulation are the opposite of what conservatives advocate today, but they were much more successful than the supply side policies that have dominated our more inequitable era. Inflation adjusted GDP growth was greater in the 1950s, 1960s, and even 1970s, than it ever has been since.”

I would love to hear an explanation of how progressive taxation, unionization, and regulation can increase the productivity of labor. Progressive taxation, and taxation in general, reduce investment, which reduces the accumulation of capital, which means that labor productivity will not grow as quickly as it otherwise would. Unions can get wages to increase for members of that particular union, but not across the board. In fact, if a business needs to hire workers at “union wages”, they will not be able to hire as many employees, and thus unemployment will increase. You could make an argument that safety regulations might increase worker productivity by preventing injuries…but then businesses would already have the incentive to regulate themselves in order to obtain higher profits. Regulations merely impose higher costs on businesses – a cost that is also paid for by reduced employment and reduced investment.

“In the 1970s, for a variety of reasons, corporate profitability went south. The positive feedback loop that raised the income of workers and businessmen alike fell apart. The Golden Age depended on capital and labor cooperating, and both profiting. In the 1970s, their social pact fell apart. The inflation of that era can be seen as capital and labor each trying to shift the cost of oil price hikes to the other. At first, organized labor won that battle and grabbed a larger share of the pie. Workers, especially organized workers did well in the 1970s. Wage growth, even taking inflation into account, was greater than it ever has been since.”

Or perhaps inflation was related to Nixon closing the gold window in 1971. Wouldn’t price increases be explained far better by the massive amount of money printing that took place at that time?

Mr. Streithorst then goes on to describe some changes that happened in the 80s to increase the power of corporations over unions and workers, and how that has led to falling wages and (oh no!) falling aggregate demand. The solution? Increase debt.

“For the past 30 years, we have solved the problem of creating demand in a world of stagnant wages by going ever deeper into debt. In 1965, private sector interest payments as a percentage of GDP were around 5 percent. At the top of the bubble, they were close to 25 percent.

Going into debt allowed families to keep consuming more even as their wages did not grow. This willingness to absorb higher levels of debt meant that lower wages did not mean lower demand. This required a profound change in attitudes toward borrowing. Golden Age workers, children of the Great Depression, had a horror towards spending more than they earned. They would rather do without than place themselves in a situation in which they might have difficulty repaying their debts. By the 1980s, this attitude evaporated. Saving became passé, having huge amounts of credit card debt nothing to be ashamed off. If the origin of capitalism, according to Max Weber, was in the willingness of Protestant entrepreneurs to forgo immediate gratification in order to save and invest in productivity enhancing machinery, today capitalism requires us to spend more than we make.”

Without a doubt, increased debt will lead to higher aggregate demand, at least temporarily. And to the Keynesian, this is all that matters. Sure, a worker may not be able to pay off their credit card bills, and may have to default or otherwise have their life ruined by profligate spending habits, but who cares, so long as they “stimulate the economy”?

“That today’s youngsters want to spend more than they earn is not that surprising. What does require an explanation is the reason banks were eager to lend. The answer, and the key to the growth paradigm of the period 1982-2007, is asset price inflation. Since 1971, when Richard Nixon severed the final link between money supply and gold, the quantity of money in the world has skyrocketed. According to the standard textbooks, this should have caused an explosion of inflation. It hasn’t because of globalization. Globalization is essentially a deflationary phenomenon. It destroys pricing power. Corporations can’t charge more for their goods because a factory in China can make it cheaper. Meanwhile increasing job insecurity means that workers cannot demand higher wages.”

Since 1971, the dollar has lost almost 83% of its purchasing power (see BLS inflation calculator). This using the CPI, which is a seriously flawed measurement that has undergone changes starting in the 1980s that artificially reduce the official inflation rate. In other words, the dollar has realistically lost somewhat more purchasing power than that. Does this sound deflationary?

On top of this, the potential increase in cost of living caused by the radical increase in the money supply has not been reached. Much of this extra money has gone into inflating asset prices (rather than consumer prices), causing the many bubbles we’ve seen in recent times. The money can also be “hoarded” as cash, rather than spent or invested, and thus will not increase prices. And as the world’s reserve currency, huge amounts of dollars are held abroad and aren’t spent on dollar-denominated goods in America. If and when those dollars return home – perhaps due to lack of confidence in the dollar or strategic moves by Russia and China – we will see a massive increase in consumer prices, and perhaps even hyperinflation.

But yes, the effects of globalization that were described in this quote are correct; there is indeed a tendency for it to lower prices. The division of labor can be extended even further, increasing efficiency. This is a good thing.

Mr. Streithorst then goes on to describe how, as I mentioned above, this increase in the money supply led to a massive asset price inflation – things like real estate and stocks began to have soaring valuations, which encourage further bank lending. His chain of reasoning, which I largely agree with, goes like this:

“So the chain of causality goes like this: globalization – low inflation – central banks set low interest rates – easy money – asset price inflation – strong collateral – more loans – easy money – asset price inflation. And it all adds up to debt-fuelled consumption.”

But here’s where he begins to go wrong again:

“From 1982 to 2007 when the last bubble finally popped, it was debt-fuelled consumption that allowed the global economy to grow. If an American did not max out his credit card, a factory in China closed. With wages stagnating, wage growth could not keep demand growing at the pace of supply.”

No, debt didn’t cause the economy to grow – at least not in a meaningful way. It certainly increased GDP, a flawed aggregate metric of total production. Yes, production increased during that time, but production of what? The increase in the money supply caused price distortions that alter the structure of production, such that investments that would not otherwise have been made (perhaps due to not having enough real resources to fund them) are embarked upon. And then yes, when the bubble bursts, these malinvestments must be liquidated. Close down all the vomit factories!

“One common, and naïve, notion blames Alan Greenspan for the financial crisis. This argument states that had he not cut interest rates in the wake of the dot-com bust, he wouldn’t have sparked the real estate bubble and so the subsequent bust could have been avoided. But had Greenspan kept rates high after 2000, then the Great Recession would have just occurred seven years earlier.”

It is without a doubt true that had Greenspan not lowered interest rates, we would have had a recession seven years earlier. But it would not have been anywhere near as severe, because there would have been seven fewer years of malinvestments and distortions to unwind.

Consider the economic depression that occurred in 1920-1921. Chances are, unless you are an economics nerd, you’ve never heard of this aspect of economic history; the Great Depression is far more historically significant in most peoples’ minds. The reason you’ve never heard of it is that, while there was an incredibly sharp depression in 1920 (unemployment shot up from 4% to 12% and GNP decreased by 17%), the government cut its budget in half and did not increase the money supply, and the whole thing was over by 1921 (see here and here for more info on this period). In other words, when the government gets out of the way, the economy recovers much more quickly and effectively.

Had the government learned the lessons of the forgotten depression of 1920, there would have been a swift recovery. Instead, the artificially low interest rates led to economic distortions that finally came home to roost in 2007 when the economy collapsed. And, of course, interest rates have been kept low since then, so any “recovery” that the economists and government keep telling us is happening is just another illusion, and will need to be unwound again in the future.

“When you are strapped for cash and owe more than you can afford, reducing your expenditures is a sensible response. Unfortunately, when everyone is cutting back, the economy slows. When consumers stop spending, firms have no reason to invest in increased capacity, no reason to hire more workers. And when workers fear for their jobs, they cut consumption even more. In 2007, the debt-based feedback loop that had kept the economy ticking went into reverse.”

Ahhh, the good ol’ “paradox” of thrift! Supposedly, while thrift may be beneficial to an individual, it is detrimental when everyone is being thrifty – when everyone stops spending money, aggregate demand collapses.

But this completely ignores what happens when people save. To the extent that an individual’s savings flow into investment, someone’s income (the recipient of the investment funds) is increasing due to the individual’s thriftiness. Switching from spending to saving merely changes the demand from consumption goods to investment goods. This isn’t any different than if I spent money on one gym membership and then switched to a different gym.

What about when people “hoard” money rather than saving/investing it? In this case, yes, aggregate demand will drop in nominal terms. Presumably, people are hoarding for a reason – they derive some value from having more cash on hand. Perhaps they appreciate the security that it gives them in times of financial uncertainty…an uncertainty that is often a consequence of loose monetary policy. In any case, hoarding money has no impact on the actual capital flows that are relevant when discussing something like the paradox of thrift. If I stuff a bunch of money under my mattress, this will merely increase the purchasing power of the rest of the money that is circulating. In other words, the nominal amount of investment will decrease if I hoard money, but the investment in terms of real capital need not.

For more on why the paradox of thrift is bogus, see here and here.

“The interaction between falling house prices, mortgage-backed securities, and third party repo agreements was the trigger of this disaster, but the larger lesson is that we are in this mess today because our post-scarcity world economy cannot produce sufficient effective demand required to keep everybody employed. From 1938 to 1945, war created that demand. From 1945 to 1973, prosperity, rising wages, and advertising created that demand. From 1982 to 2007, debt fuelled consumption financed by ever rising asset prices created that demand. In 2007, as fear roiled the markets, banks stopped lending, and when we could no longer spend beyond our means, the economy collapsed.”

If we truly lived in a “post-scarcity world”, then there would be no need for employment at all. Everyone could get whatever they want for free. But besides Mr. Streithorst’s misuse of the term, his assertion that we “cannot produce sufficient effective demand required to keep everybody employed” is completely off the mark. As I’ve explained before, aggregate demand isn’t the be all and end all; by ignoring the critically important structure of production, Keynesians have pulled a clever misdirection on us. We don’t want to keep everyone employed, but rather employed in a way that satisfies the wants of consumers.

“The most important thing to remember about the faux-prosperity of the last 30 years is that it was manufactured on the basis of paper profits. If my house was worth £3000 in 1973 and £1.5 million in 2012, it is still essentially the same house and gives me the same pleasure to live in. If we could manufacture demand by making bombs and if we could manufacture demand by making houses quadruple in price, then we can manufacture demand in other ways, perhaps more satisfying ways as well.”

How does Mr. Streithorst not see the obvious contradiction staring himself in the face in this passage? He is right that much of the “prosperity” of the past 30 years is fake, or just on paper. But then he turns around and says that making bombs or making houses increase in price are effective ways of stimulating aggregate demand (if not the most useful ways), and thus making us more prosperous. The “prosperity” that results from producing bombs isn’t real, just as the “prosperity” that results from massive vomit factories isn’t real.

Prosperity comes from satisfying consumer wants. This can only be done through a market-based price system, free from distortions.

 

How Do We “Fix” The Economy?

“In the short run, the first thing we should do to emerge from this debacle is to increase government deficits and focus this spending on infrastructure and education. These investments in our future create jobs today, and by putting money in workers wallets, give the private sector reason to hire and invest in increasing capacity.”

And why is this the case?

“The need for increased government spending is basic Economics 101. Gross national product equals consumption plus investment plus government spending. If households are consuming less and firms are investing less, government has to increase spending if the economy is not to shrink.”

If he means to say that a healthy economy is one that has as high of a GNP as possible, then his prescription is correct: government spending is certainly the way to go. Of course – and I suspect I may be beating a dead horse at this point – if the government spending is to create 10,000 new vomit factories, this increase in the GNP is meaningless in terms of making people better off. Perhaps the GNP itself is a flawed concept for measuring economic well-being…

Of course, Mr. Streithorst isn’t suggesting the government build vomit factories. He wants to invest in infrastructure and education, which I’m sure is a far better idea. But how do we know what is the proper proportion to be investing between them? Should the government finance a bridge in Washington State or New Jersey? Should the education funding go towards cultivating the most promising students or to helping the others catch up? Should it go to elementary education or higher education? In what proportions? And how much should be invested in these projects in aggregate?

It is the market – the system of free-floating prices between all kinds of goods – that determines the answers to these questions. When the government is allocating resources, it does so in a purely arbitrary manner, as opposed to market forces allocating them based on consumer preferences.

The fact is, the money used to finance these projects has to come from somewhere, even if it is debt. And that “somewhere” is always going to involve taking money out of the hands of those with the most knowledge of their own preferences and put it into the hands of bureaucrats with little incentive and no knowledge of how to spend it wisely and effectively.

“But in the longer run we need to figure out a better way to stimulate demand than either war or going into debt to buy more stuff. Personally, I favor government spending targeted on making the lives of citizens richer and more cultured. Some may say, this is elitist of me, to which I reply, what is wrong with elitism? Call me bourgeois, but Tolstoy is better than Adam Sandler and playing the piano more uplifting than playing Call of Duty 2. Consumer capitalism in its current form nurtures our basest urges, from unseemly spending to internet porn. From that commercial perspective, all spending is equal, all spending is good, and YouPorn is as valid as Shakespeare.”

Mr. Streithorst really gives himself away here. What is wrong with elitism? Really? Of course, if only Mr. Streithorst were the one in charge of allocating society’s resources, the world would be perfect!

It is not true that all spending is equal. Spending that satisfies consumer wants is preferable to spending which does not. YouPorn is more “valid” than Shakespeare if that is what the consumer wants. Ask any horny and illiterate man. Many people will prefer Shakespeare, and these people are welcome to attend the theater and spend their own money there. Similarly, many people like porn – what is wrong with these people spending their own money on it? Neither is culturally superior to the other, because culture is determined by the people who comprise it. It is not a decision to be made by government and passed down to the rest of society.

 

Conclusion

Keynesian economics is all smoke and mirrors. While on the surface, Keynesian explanations for economic phenomena can be convincing, this is because they depend on misdirection and trickery. A Keynesian policy may create a benefit in some specific area, and the Keynesian economist will draw your attention there. Meanwhile, you must pay no attention to the destruction these policies create in every other area of the economy.

One must, unfortunately, understand Keynesian economics in order to understand the way the world works; the most “important” people in society buy into the Keynesian worldview. Getting into their head is rather helpful, but dear lord is it also frustrating!

For those of you looking for the intellectual ammo to fully take down just about any Keynesian argument, look no further than Henry Hazlitt’s brilliant work, The Failure of the New Economics, where he decimates Keynes’s arguments line by line. It’s about as gratifying an experience as I can imagine.

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