Mises Wire |
- The Meaning of Market Democracy
- How Facebook Turned its Market Success Into a Culture War on America
- Private Security Apps May Be the Future of Neighborhood Policing
- How Defamation Suits Are Used to Stifle Free Speech
- Price Discovery is Alive and Well in Crypto
| The Meaning of Market Democracy Posted: 07 Jun 2021 12:00 PM PDT The Free Market 24, no. 12 ( 2004)The democracy of the market is not the democracy that Plato spoke of in his Republic (c. 370 BC) as "a charming form of government, full of variety and disorder, and dispensing a kind of equality to equals and unequals alike," nor that Aristotle in his Rhetoric (c. 322 BC) chided as "when put to the strain, grows weak, and is supplanted by oligarchy." It is not that which George Bernard Shaw taxed in his Maxims for Revolutionists (1903) as substituting "election by the incompetent many for appointment by the corrupt few," nor that Hans-Hermann Hoppe exposes in his Democracy—The God That Failed (Transaction, 2001, p. 96) that "majorities of 'have-nots' will relentlessly try to enrich themselves at the expense of the 'haves'." For see how Ludwig Mises lit up a near-unknown yet highly effective daily democracy—the marketplace—in his Socialism (Liberty Classics, 1981, p. 11), giving this democracy a critically needed political dimension today. As Mises wrote: "When we call a capitalist society a consumers' democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers' ballot, held daily in the marketplace." Mises was on solid ground. For what is political democracy? See its Greek derivation: rule or "kratia" by the people, the "demos." But who rules whom? Why do state hegemony and interventionism reign today as givens, why does the free individual fade across the West, why does political majoritarianism divide society? So I say capitalism, so harassed today, should be especially thought through and guarded in the heat of current debate. Note its basis in private property, equal rights, a limited state (so unlimited today). Note it stars entrepreneurs with their private tools of production of goods and services. Note how its fallible CEOs (Enron, Tyco, etc.) get quickly whipped by the stock market, far faster than by the courts or the Securities and Exchange Commission. For firms are democratically led and, if need be, punished, by their customers—i.e., said Mises, by sovereign consumers everywhere with their make-or-break "orders" (what a word!) and their key market price signals. Whither then our berated, underrated, far over regulated and much misread capitalism? Yet isn't it still, per our Founders (though the word capitalism had yet to be coined), a royal road to social cooperation, a vital private network of governments of the people, by the people, for the people, all with individual assent—highly-used withdrawable assent? Withdrawable? Consider in a free society, countless hierarchies of governance of power, such as the New York Times, Harvard, New York Stock Exchange, Microsoft, the Southern Baptists, the Salvation Army, Wal-Mart and some 25 million other firms, farms and organizations; yet all are totally dependent on that withdrawable individual assent. So you're free to switch from GM to Ford, from Yale to MIT, from Burger King to McDonald's. And vice versa. Talk about democracy! Democracy? But isn't this our political shield for a Pax Americana to police a sinful, quite undemocratic globe, with the focus now on the turbulent undemocratic Middle East? But doesn't this serve up de Jouvenel's classic conundrum (74 AD): Sed quis custodiet ipsos custodes (But who is to guard the guards themselves?) Thomas Paine saw this snag in 1776 in Common Sense as "a necessary evil." Bismarck likened the legislative process to the unsightly conversion of pigs into sausages. Churchill said democracy is the least awful way to effect a peaceful change of political power. Or as Swiss thinker Felix Somary held in his Democracy at Bay (Knopf, 1952, p. 6): Political democracy blends two "fictions," one the idea that "an entire people can assume sovereignty," the other the idea of "the innate goodness of man." So I juxtapose below America's Political Democracy with the Misesian point of our Consumer Democracy to clarify which is which—and ask you, with both needful of repairs, which needs the most by far? In one democracy you vote but every other year for candidates (who may not win) to "represent" you and many others indirectly on myriad issues. In the other, you vote daily, often, directly, for specific vendors, goods, or services, in an endless plebiscite going on every minute of every day, with dollars as ballots. To be sure, some get more ballots than others. Yet Mises saw this outcome as transient, as consumers themselves vote "poor people rich and rich people poor" (Human Action, Yale University Press, 1949, p. 270). So one democracy is public, the other private. One funds failing programs and schools, the other lets failing firms and private schools fail. One is coercive and centralized, the other voluntary and decentralized. One runs, inadvertently, a growth-impeding win-lose zero-sum game, the other, also inadvertently, a pro-growth win-win positive-sum game. This difference, alone, sets America's future. One democracy runs by politics and monopoly, unmindful of Henry David Thoreau's Civil Disobedience of 1849 when he saw "little virtue in the action of masses of men" and voting as "a sort of gaming;" the other runs a market society by economics and competition. One forgets the individual, per William Graham Sumner's famed "The Forgotten Man" lecture in 1883, the other remembers him/her (imperfectly per that spam on your PC monitor). One democracy plays incumbency ruses: compromises with principle, gerrymandering, log-rolling, warmongering, free-lunch guises such as big federal "grants" (bribes?) to states and localities ($313 billion, annualized, 1st qtr., 2003), the other is cleansed by competition, cost-cutting, demonstrated market deeds for consumers free to choose. One democracy veers to the Machiavellian amoral short run in aim, the other to moral contracts and the longer run. One, with coercive power, yields to Acton's law that power tends to corrupt and absolute power corrupts absolutely. Yet the other, if gloriously voluntaristic, can and does slip into some corporate behavior—money-grasping or getting into bed with political power to win subsidies, import quotas, and other mischief via special interests—despite President Dwight Eisenhower's 1961 farewell message against a "military-industrial complex." One democracy can glorify war, including class warfare, the other glorifies peaceful trade in a virtual global concordance on private property rights (if widely derided as "globalization")—per IBM's old motto of "World Peace Through World Trade." One entered World War I, naïvely, as "The War to End War" and "Make the World Safe for Democracy"—only to reap Lenin and Stalin in Russia, Hitler in Germany, Mussolini in Italy, Franco in Spain, Tojo in Japan, Tito in Yugoslavia, Mao in China, Peron in Argentina, Castro in Cuba, Allende in Chile, Pol Pot in Cambodia, and lesser imitators throughout Asia, Africa, Central Europe, Latin America, and the Middle East. President Bush II seeks to "democratize" an entire region while citing Germany and Japan as post-World War II successes, but he remains silent on our failures like North Korea, Vietnam, Bosnia, Somalia, Haiti (this gamely tagged as "Operation Democracy"). One democracy rues income disparity and, like Robin Hood, "transfers" wealth, the other lifts all boats. One denies itself crucial feedback information—or what Mises called "economic calculation," predicting in 1920 the ultimate collapse of socialism à la the USSR—the other uses that calculation to help allocate limited resources to their perceived optimum market uses. One wastes capital and talent (human capital), the other saves and invests it, self-interestedly, yes—yet, when under a moral code and the rule of law—spontaneously, harmoniously, constructively. Market democracy explains the success of the West via Adam Smith's "invisible hand" idea of self-interest in a system of "natural liberty," of self-help by helping others, or per his famed line in Wealth of Nations (1776, Modern Library ed., p. 14): "It is not from the benevolence of the butcher, or the brewer, or the baker that we expect our dinner, but from their regard of their own interest." No question then that capitalism or a market society is America's greatest democracy. The question is: Can we tame political democracy à la our Founding Fathers in 1776 or will we allow it to devour us per Ancient Greece?  |
| How Facebook Turned its Market Success Into a Culture War on America Posted: 07 Jun 2021 12:00 PM PDT Corporate America—from Facebook to Google to Major League Baseball—got rich by giving the consumers what they want. Now these big firms will use their riches to crush their ideological enemies. That's life in a "mixed economy." Original Article: "How Facebook Turned its Market Success Into a Culture War on America" This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  |
| Private Security Apps May Be the Future of Neighborhood Policing Posted: 07 Jun 2021 09:30 AM PDT We're beginning to see some early attempts by private firms to provide simple, affordable private security beyond wealthy or corporate clients. Original Article: "Private Security Apps May Be the Future of Neighborhood Policing" This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.  |
| How Defamation Suits Are Used to Stifle Free Speech Posted: 07 Jun 2021 09:00 AM PDT The average American can be forgiven for assuming that he or she can freely criticize the government and government personnel without fear of being sued by the government for libel or slander. This is indeed true most of the time. But it doesn't mean that government agents with hurt feelings won't sometimes try suing private citizens who have the temerity to criticize how government bureaucrats do their jobs. Such was the case earlier this spring when Louisville Metro Police officer Cory Evans filed a lawsuit against the "DUI Guy"—an attorney named Larry Forman who has a YouTube channel—for defamation after Forman accused Evans of planting evidence. As Louisville's WDRB reports:
While I don't agree with Forman when he concludes, "The video speaks for itself," Forman's conclusion is nonetheless quite plausible. In other words, the body cam video footage makes it easy to see how Forman could sincerely believe that Evans did indeed plant the evidence. That is, Forman may have simply been stating what he believed to be the truth. Now, Evans's attorney claims the accusation "has hurt the reputation of the LMPD officer" and the suit is seeking damages. Let's hope Evans loses, and loses big. Defamation as a Means to Silence CriticsThe problem of a police officer suing a community member for an accusation of abuse helps illustrate one of the central problems with defamation lawsuits: they can be used by powerful people to silence critics. In the United States, we are fortunate that it is quite difficult to win a defamation lawsuit. Generally speaking, in American courts, plaintiffs claiming damages from defamation must prove actual harm as well as intent to harm. The plaintiff must also prove the defamatory comments are false. The difficulty of winning a defamation suit under such circumstances helps discourage countless defamation lawsuits. Thank goodness. Alas, in other parts of the world, this is not the case, and we find many cases of government agents suing or prosecuting citizens for defamation. We even find wealthy and powerful private citizens suing critics, even when those critics are apparently stating what they believe to be facts. The potential for abusing defamation law helps illustrate, yet again, the wisdom of deferring to "freedom of speech" as a dominating legal principle, and as a philosophy behind the US government's First Amendment. The presumption should be overwhelmingly in favor of the freedom to speak freely, as efforts to limit speech in the name of protecting reputations presents many opportunities for the abuse of government power. In all times and places, of course, agents of the regime prefer to silence their critics if they think they can get away with it. Historically, regimes have employed many strategies, such as blasphemy laws, or have simply outlawed criticism. But, as The Economist has reported,
Fortunately, in the United States, where defamation are suits are generally difficult, it is especially difficult for government personnel or government agencies to sue for defamation. This has been true for many decades, and this tendency toward skepticism of government-initiated suits was greatly strengthened in the American courts in 1964 with the Sullivan ruling, in which the US Supreme Court concluded,
In the UK, on the other hand, protections against defamation suits have been far weaker, even in regard to suits by government agencies. Only in recent decades, for example, has the UK turned toward heavily and explicitly restricting government suits against critics. Use by Private Parties to Intimidate CriticsInvoking the government's courts to cover "damages" can be used in the private sector to silence one's opponents as well. In the United Kingdom, where defamation laws are far more extensive than in the United States, we can find cases of defamation suits used to gain commercial and political advantage. For example, when a plastic surgeon expressed doubts over the efficacy of a "breast-enhancement" cream, the cream's manufacturers threatened the surgeon with legal action. In another case, Saudi businessman Khalid bin Mahfouz sued a researcher who publicly concluded that Mahfouz had given money to al-Qaeda. Such lawsuits would be quickly dismissed in the United States, but in the UK, matters are different. As NPR has reported:
Of course, the fact that it's very hard to win defamation lawsuits in the US doesn't mean no one ever threatens them. Donald Trump, for example, is notorious for threatening defamation suits against critics. This dates back to well before his years as an elected official or presidential candidate. In 1984, for example, Trump sued architecture columnist Paul Gapp for making fun of Trump's plan to build a two hundred–story skyscraper in southern Manhattan. Trump claimed Gapp's remarks caused Trump $500 million in damages. Trump has tried many similar suits, including a suit against a writer who said Trump wasn't really a billionaire in 2006. Trump sued one of his own Trump University students in 2010 over the student's criticism of the school's business practices.1 Thanks to the US's laissez-faire attitude toward defamation, these cases were dismissed relatively quickly, although not without first causing his victims many sleepless nights and legal fees. One can only hope that the lawsuit brought by Cory Evans of the Louisville Metropolitan Police Department receives the contempt that it deserves from the courts. After all, government agents and agencies already exercise far more power over their fellow citizens than is the case for average people. The last thing we need is for these agents of the regime to be able to threaten their critics with lawsuits for the act of merely saying things. Police officers and other government employees who don't like being subject to public criticism can always resign their positions and become ordinary private taxpaying citizens.
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| Price Discovery is Alive and Well in Crypto Posted: 07 Jun 2021 04:00 AM PDT "If the market continues to see wild swings based on Elon Musk tweets, it's going to be a big setback for this asset class," Matt Maley, chief market strategist for Miller Tabak + Co. told Bloomberg. "The fact that it sees such wild swings to the tweets from one person takes away the legitimacy of the asset class." Reminds a bit of a financial planner who told me bitcoin is "manipulated" and followed up with the ultimate smear "unregulated." Yikes. Then the Chinese government made all sorts of threats concerning the mining and holding of crypto's top brand. A wag on Twitter responded with words to the effect that when the Chinese banned Google in 2010 it didn't seem to slow down the company. Weston Nakamura in an interview with Real Vision's Jack Farley made the trenchant point, "This is what markets look like when you don't have global central banks artificially suppressing volatility, intervention of central banks buying every dip, putting a safety net under every single slight tremor or taper tantrum or whatever it may be, this is what happens." Making money isn't easy. Whether it be working 9 to 5 or trading markets. The Fed seeks to smooth every bump so everyone will stay calm and carry on, buying stocks. Perhaps a viewer or two of his recent 60 Minutes interview caught Powell's off-hand comment that the central bank has bailed out money market funds twice in recent months. Money market funds? Most people believe that is cash. There was no mention of the Plunge Protection Team or other secret committees to ensure the safety and soundness of securities markets. Just keep plugging your savings into those 401(k)s, folks, and let the experts handle it. Cyrptoland is a little different. "This is a 70 vol asset, 80 vol, or whatever it is. What that means is that—forget what the volatility is, this is what freely trading markets look like. We haven't seen what freely traded markets look like for, I don't know, a decade or so," Nakamura told Farley. "There's no Chairman Powell that needs to come out and announce something for you to put your capital to work. Free markets will do that. That was on display today. 70 vol assets don't exist except for here and this is what 70 vol assets behaves like. If there is a value proposition behind it, you will see investors take advantage of it." Farley, somewhat of a financial history buff, chimed in, "Weston, who would say hey, we had this Wild West before the Federal Reserve, what we had was banking panics, we had deflation, we had banks issuing their own currency. One thinks of this whole, Dave Portnoy launching Safemoon, someone launching CumRocket, someone else launching—all these coins new every day, perhaps it would remind you of the Wild West of banking before the Federal Reserve." That's right, there used to be gold in them there banks. Unfortunately, not enough to cover all the paper notes these banks would issue. However, there wasn't runaway asset inflation either. Having all of these different bank notes floating around might have been confusing. However, the market created note clearinghouses, what Murray Rothbard describes in A History of Money and Banking in the United States before the Twentieth Century as "A Free-Market 'Central Bank.'" The Suffolk Bank and the Bank of New York, provided, as Rothbard wrote describing the former, "an island of monetary stability in an America contending with monetary chaos." Professor David Howden writes in his chapter "A Pre-history of the Federal Reserve" (included in The Fed at One Hundred), of the New York clearinghouse created in 1853 "as a solution to a complex settlement process among New York City Banks." He cites monetary scholar Richard Timberlake, who saw the Federal Reserve as no more than "an evolutionary development of the clearinghouse associations." Today's not-so-free-market central bank has two stated mandates, price stability and full employment, as well as a third that Mr. Nakamura calls out, "where asset prices can never go down for a certain cohort of investors." If there is such a mandate, Nakamura says, just say so and then we'll know "there really is no real market anymore when you have an unlimited non-economic actor in the market distorting prices, and furthermore, that other investors perceive them to be there, whether or not they're there. That is not a functioning market at all." Meanwhile, when crypto collectively hit the ditch, "[w]hat you saw today was functioning markets, even not functioning platforms, but functioning markets," Nakamura said. He explains, "Bitcoin is not a US asset, just like oil is not a US asset, just like gold is not a US asset. Now, those are denominated in USD." Sure, Americans think in US dollars, but "it's BTC/fiat, and it's not an American asset. People need to get that in their head. If you actually look at BTC/JPY (Japanese yen), the levels make a hell of a lot more sense." Investors are simply looking for ways to escape the US dollar and "What this crypto space does is it allows for 1 trillion or 2 trillion of that excess froth to be diverted away from stocks and from real estate and all that and to go into this very benign asset," Nakamura told Farley. There will be a day when the Fed, the Treasury and the SEC (Securities and Exchange Commission) will stick their long regulatory snouts into crypto. It may not mean the digital party is over, but the markets will lose the price discovery elasticity that currently works so well.  This posting includes an audio/video/photo media file: Download Now |
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