Many millions of people have spent the last four months in sadness and depression. It’s hard to watch the world shattered by the bad behavior of governments – and to see too many among us cheer the destruction – and not feel a sense of despair.And yet the human mind is an incredible thing. If we work at it, we can figure out a good takeaway from terrible events. Doing so – it takes effort – can brighten the spirits and point the way forward out of the morass.I’ve taken three positives out of this experience.First, I’m completely over my decades-old addiction to news. I always loved the news, even from when I was a kid. For years, I read the Washington Post with my morning coffee. Then I switched to the New York Times, and learned how to tease truth out of their biased but comprehensive coverage. Then I added the Wall Street Journal. When home assistants came along, I programmed mine to play 8 hours (if I needed it) of nonstop news: BBC, NPR, NYT, and so many others. It felt like such a luxury.The turning point came for me on February 28, 2020, when the New York Times podcast (which used to be my favorite) sent out a piece of panic porn that predicted that the coronavirus would kill 8.25 million Americans, or “six of your friends.”It came as a shock suddenly to realize that they turned over their main podcast to whipping up a public fear to back a lockdown. Explicitly. This was the agenda. They more or less admitted it. I knew at that moment that the paper had signed up to contribute to a malicious plot to enact an unprecedented social/political experiment.The Times led the way. Pretty soon, the mainstream media became universally pro-lockdown, probably for political reasons. A widespread and mild virus, dangerous mostly to a particular demographic with low life expectancy and nearly harmless to everyone else, was rendered daily and hourly as a new bubonic plague.
I might have listened for a couple of more days. Then I stopped. The scales fell from my eyes. I decided, suddenly and shockingly for me, to stop filling my head with nonsense. The “news” was not getting me information to help me understand the world; it was clouding my ability to think clearly. A few months later, like clockwork, the revolution at the New York Times was complete when its opinion editor, hired to diversify the opinions in the paper, was unceremoniously fired for diversifying opinion in the paper. (The critical theory crowd has discovered new love for the right of institutions to fire people, contradicting decades of left-wing opposition to the same.)
I started getting my information by digging for it, finding reliable accounts on Twitter to follow, spending my time on statistical pages, and otherwise finding facts, reading history, and educating myself more deeply rather than just trust the media.
At this point, I can say that I’m never going back. My addiction to “the news” is over. I’m better off for it. It was painful but I’m glad.
Some readers are now saying: it’s about time. The news has always been about getting eyes and ears and selling advertising. It’s just entertainment. It became especially true with the 24-hour news cycle.
I don’t disagree. I should have given it up years ago. Even now, I can almost immediately tell the difference between a person who watches TV news or listens to mainstream radio vs. those are actually informed about what’s going on.
In any case, I count this as a real victory, courtesy of the lockdown.
Second, I’ve saved a tremendous amount of money from not going to restaurants, bars, and movies. I’m sad for all the places that have closed. It’s unjust and evil. But from my own perspective, I’ve learned to live a good life while spending probably 30% less than I did before. I’ve fallen back in love with cooking, homespun cocktails, and reading.
It’s all to the good. I doubt that I will go back, now that I can make all my favorite meals at a fraction of the price I used to pay. Now that things are opening, I perhaps will make my way out to some restaurants but I doubt I will ever go back to the way things were.
Third, I’ve learned a hugely valuable lesson that civilization can be dismantled in a matter of months. It can happen again if there are not passionate voices out there who understand its basis and can defend it with intellectual integrity, facts, and rhetorical power. I never imagined that anything like this could happen. I thought it was impossible with a Constitution, a tradition of liberty, and a people who would never allow human rights to be taken away so suddenly and cruelly. It did happen, and knowing this has given me renewed passion for my lifetime project of loving, understanding, and spreading the idea of liberty.
It’s remarkable how it all happened.
The government and its champions took on a subject about which the public is today largely ignorant and fearful – a virus and the claim that 8.25 million Americans will die – and exploited that ignorance to cause people to give up their rights. Even though this whole thing was mapped out 14 years ago, perhaps as a way of finding some rationale for continued and growing presence of government in our lives despite its otherwise growing irrelevance, many on the pro-liberty side of things were caught off guard and didn’t know how to respond.
Many people – even people employed with the job of “promoting liberty” – just went silent. For months. Just when their voices were most needed. That was a tragedy. I’ll be forever grateful to the pages of AIER which at times in these months felt like a lone voice of sanity out there.
This third lesson – to be grateful for our liberties and civilization and never think they can be taken for granted – is perhaps the most valuable. I’m thinking too that my experience in learning these lessons is not unique. I suspect that many intelligent people have lost faith in the news, rediscovered frugality, and found a new way to commit themselves to the defense of liberty and human rights. In the coming days, we are going to need stronger and smarter minds to fight the battles of the future. These terrible months might have been the preparation we need to make sure that truth and freedom eventually prevail.
Jeffrey A. Tucker is Editorial Director for the American Institute for Economic Research, where this article first appeared.
How did radical ideas like abolishing or defunding the police move from the fringes to official policy seemingly overnight in cities like Minneapolis, Los Angeles and New York? And after George Floyd’s killing by police touched off protests, why did so many prominent journalists and intellectuals rationalize looting and violence? For an answer, look to the nation’s politicized college campuses.
A well-known professional standard for college professors warns against “taking unfair advantage of the student’s immaturity by indoctrinating him with the teacher’s own opinions before the student has had an opportunity fairly to examine other opinions upon the matters in question, and before he has sufficient knowledge and ripeness of judgment to be entitled to form any definitive opinion of his own.” That statement, from the American Association of University Professors, dates from 1915 but is still in force.
Most campuses have similar rules of their own. Yet across the country, these categorical prohibitions are now ignored. Academia has become politicized from top to bottom.
A typical example: California’s constitution spells out that the University of California “shall be entirely independent of all political or sectarian influence and kept free therefrom.” Yet politicization is now routine. UC Santa Barbara’s History Department offers a minor in “poverty, inequality, and social justice”—that is, radical-left politics. UC Berkeley’s School of Social Welfare says it’s committed to “developing leaders for social justice.” Professors indoctrinate students, seemingly unconcerned with the vast gulf between what their rules forbid them to do and what they are openly doing.
Bitter experience has now shown us that those rules were there for good reason. Educators used to understand that politics would destroy academia’s public credibility and internal ability to function. Political ends would stifle free inquiry, tribalism would erode analytical thought, and emotion would replace reason. Those forebodings match exactly the distortions of higher education we are now seeing—and their results.
Universities used to be places where the major political and social issues of the day could be researched and debated. The results of this careful thought and analysis were used to make political debates in the wider world more realistic and better informed. All that has now been turned on its head. The campus offers not a reasoned corrective to partisan passions, but fierce, one-sided advocacy of dangerous and destructive ideas.
Real education is accordingly neglected. In their 2011 book, “Academically Adrift: Limited Learning on College Campuses,” Richard Arum and Josipa Roksa found “an astounding proportion of students”—at least 45% of the 2,300 undergraduates surveyed at 24 universities—“are progressing through higher education today without measurable gains in general skills” like critical thinking, complex reasoning and writing.
How can it be that scholars once so aware that political advocacy would corrupt and discredit their profession allowed ruin to set in? Campus radicals, once a very small minority, had some astonishing luck. As the baby boomers reached college age in 1965-75, public higher education needed to more than double its enrollment. Suddenly the number of professors had to increase drastically too—and they were recruited as the Vietnam War roiled campuses.
Political radicalism was rampant among the graduate students who became junior professors, instantly shifting the faculty sharply leftward. Then political pressure for female and minority faculty appointments led more young radicals to join the faculty. A 1969 Carnegie Commission on Higher Education study found that Democrats then outnumbered Republicans among the faculty by about 3 to 2. A 2018 study found that among professors at civilian liberal arts colleges, the same ratio is now nearly 13 to 1—and it stands to rise as younger professors skew further leftward. Without the clash of contrasting views, nothing slows the slide from academic rigor to folly and fantasy.
Through taxes, tuition and philanthropy, Americans devote enormous sums of money to a bait-and-switch scam: Spending that is supposed to support higher education goes to political advocacy. What can be done about it? Some have suggested new codes of conduct for faculty, but it’s doubtful that mere promises of better behavior can depoliticize the professoriate, which is now, especially in the humanities and social sciences, a solid phalanx of closed-minded political activists—not merely unscholarly, but antischolarly.
Taxpayers, lawmakers and donors need to wake from the spell cast by American universities’ past glory. Only then can they summon the courage to withdraw funding and force the necessary change: replacing faux-academic political activists with real academic thinkers—people who care about original thought, not peddling an ideology.
What’s happening in the streets should be a wake-up call. As Andrew Sullivan has written, “we all live on campus now.” If you don’t like it, the answer is to reform academia. Otherwise, radical ideas will gain more ground.
John M. Ellis is a professor emeritus of German literature at the University of California, Santa Cruz, and author of “The Breakdown of Higher Education: How It Happened, the Damage It Does, and What Can Be Done.” This article first appeared at wsj.com.
Leigh Van Valen was a crazy-looking evolutionary biologist who came up with a theory so crazy no academic journal would publish it. So he created his own journal, published it, and the idea eventually became accepted wisdom.Those kinds of ideas – counterintuitive, but ultimately true – are the ones worth paying most attention to, because they’re easiest to overlook.What’s true in one field is likely true in others. Lucky for us, Van Valen’s theory of evolution applies to business and investing.For decades, scientists assumed that the longer a species had been around the more likely it was to stick around, because age proved a strength that was likely to endure. Longevity was seen as both a trophy and a forecast.In the early 1970s, Leigh Van Valen set out to prove the conventional wisdom was right. But he couldn’t. The data just didn’t fit. He began to wonder whether evolution was such a relentless and unforgiving force that long-lived species were just lucky. The data fit that theory better.
You’d think a new species discovering its niche would be fragile and susceptible to extinction – let’s say a 10% chance of extinction in a given period – while an old species had proven its might, and has, say, a 0.01% chance of extinction.
But when Van Valen plotted extinctions by a species’ age, it looked more like a straight line.
Some species survived a long time. But among groups of species, the probability of extinction was roughly the same whether it was 10,000 years old or 10 million years old.
In a 1973 paper titled A New Evolutionary Law, Van Valen argued that “the probability of extinction of a taxon is effectively independent of its age.”
He said that’s the case for two reasons.
One, competition isn’t like a football game that ends with a winner who can then take a break. It never stops. A species that gains an advantage over a competitor instantly incentivizes the competitor to improve. It’s an arms race.
Two, some advantages create new disadvantages. Most species tend to get bigger over time because big things are strong. But being big also makes you slow, clumsy, and unable to hide. “The tendency for evolution to create larger species is counterbalanced by the tendency of extinction to kill off larger species,” one study wrote.
Evolution is the study of advantages. Van Valen’s idea is simply that there are no permanent advantages. David Jablonski of University of Chicago described it: “Everyone is madly scrambling, getting better all the time, but no one is gaining ground. A species can’t get far enough ahead of the pack such that it would be extinction-proof.”
No one’s ever safe. No one can ever rest.
Van Valen called it the Red Queen model of evolution. In Alice in Wonderland, the Red Queen is a scene where Alice finds herself in a land where you have to run just to stay in place:
However fast they went, they never seemed to pass anything. ‘I wonder if all the things move along with us?’ thought poor puzzled Alice. And the Queen seemed to guess her thoughts, for she cried, ‘Faster! Don’t try to talk! Keep running!’
“Keep running” just to stay in place is how evolution works.
It’s how business and investing work, too.
There are 32 million businesses in the United States. The Bureau of Labor Statistics tracks how many of them die each year, and how old they were at death.
Dig through the numbers and one thing’s clear: there is no age at which business gets easy.
Companies have a high failure rate in their first three to five years. Then the challenges plateau. Averaged across industries, a business in its 25th year has roughly the same probability of dying as it did in its 10th year:
Source: BLS
What’s interesting about this is that the average business cycle – the time between recessions – is about eight years. So a 24-year-old business has likely endured three recessions. It’s been battle-tested. It’s learned from ups and downs. But it’s still as likely to die over the coming year as it was 15 years ago.
Same thing for public companies.
Companies tend to go public when they’re mature and have things figured out. But having things figured out is fleeting. J.P. Morgan Asset Management published the distribution of returns for the Russell 3000 from 1980 to 2014. Forty percent of all Russell 3000 components lost at least 70% of their value and never recovered.
If you invest in 100 high-risk startups, you probably expect 40 of them to fail. Then if you move on to investing in 100 mature public companies, 40 of them will probably fail, too. They might stick around longer than the startups, but the end result is the same.
What does that say about competitive advantage?
Or the concept of moats?
It says that those things, to the extent they exist, are rarely permanent.
Just like Van Valen’s view of nature, things evolve but never actually become better adapted, because threats are always changing. Black Rhinos survived for 8 million years before being killed off by poachers. Lehman Brothers adapted and prospered for 150 years and 33 recessions before it met its match in mortgage-backed securities. Poof, gone.
Startups have their obvious challenges. They’re trying to find their niche. But once that niche is found and perfected, old companies discover a whole new minefield. They get complacent, bureaucratic, cocky, and unwilling to discard what once worked so well. There is never a point where a company can indefinitely coast along, cashing the chips of past success. Everyone has to keep running.
Same for investing strategies.
It’s easy to think investing is like physics, with set laws that never change. But it’s not. It’s like Van Valen’s evolution, where “success” is just a brief respite before the next competitor shows up and old skill becomes meaningless.
In his book Investing, Robert Hagstrom wrote about strategies that once worked but eventually withered:
In the 1930s and 1940s, the discount-to-hard-book-value strategy was dominant. After World War II and into the 1950s, the second major strategy that dominated finance was the dividend model. By the 1960s investors exchanged stocks paying high dividends for companies expected to grow earnings. By the 1980s a fourth strategy took over. Investors began to favor cash-flow models over earnings models. Today it appears that a fifth strategy is emerging: cash return on invested capital.
I’d update this. Since about 2010 the strategy that works is just revenue growth.
“If you are still picking stocks using a discount-to-hard-book-value model or relying on dividend models to tell you when the stock market is over or under-valued, it is unlikely you have enjoyed even average investment returns,” Hagstrom writes. You’ve likely gone extinct.
There is never a time when an investor can discover an investing strategy and be confident it will continue working indefinitely. The world changes, and competitors create their own little twist that exploits and snuffs out your niche.
Same with careers.
And job skills.
And relationships.
And countries.
It’s hard to accept that you have to put in a ton of work just to stay in place, but that’s how it works. Keep running.
For this piece, we have to enter the official world (of the insane)—where everyone is quite sure a new coronavirus was discovered in China and the worthless diagnostic tests mean something and the case numbers are real and meaningful. Once we execute all those absurd maneuvers, we land square in the middle of yet another scandal—this time at our favorite US agency for scandals, the CDC.
The Atlantic, May 21, has the story, headlined, “How could the CDC make that mistake?”
I’ll give you the key quotes, and then comment on the stark inference The Atlantic somehow failed to grasp.
“We’ve learned that the CDC is making, at best, a debilitating mistake: combining test results that diagnose current coronavirus infections with test results that measure whether someone has ever had the virus…The agency confirmed to The Atlantic on Wednesday that it is mixing the results of viral [PCR] and antibody tests, even though the two tests reveal different information and are used for different reasons.”
“Several states—including Pennsylvania, the site of one of the country’s largest outbreaks, as well as Texas, Georgia, and Vermont—are blending the data in the same way. Virginia likewise mixed viral and antibody test results until last week, but it reversed course and the governor apologized for the practice after it was covered by the Richmond Times-Dispatch and The Atlantic. Maine similarly separated its data on Wednesday; Vermont authorities claimed they didn’t even know they were doing this.”
“’You’ve got to be kidding me,’ Ashish Jha, the K. T. Li Professor of Global Health at Harvard and the director of the Harvard Global Health Institute, told us when we described what the CDC was doing. ‘How could the CDC make that mistake? This is a mess’.”
“The CDC stopped publishing anything resembling a complete database of daily [COVID] test results on February 29. When it resumed publishing test data last week [the middle of May]…”
First of all, the CDC’s basic mission is publishing disease statistics on an ongoing basis. Reporting partial data flies in the face of what they’re supposed to be all about.
But the big deal, of course, is combining results from two different tests—the PCR and the antibody—and placing them in one lump.
I’ve read the Atlantic article forwards, backwards, and sideways, and it appears the experts believe only PCR viral tests should be used to count the number of COVID cases.
So here is a takeaway I find nowhere in the Atlantic article: COMBINING THE TWO TESTS WILL VASTLY INFLATE THE NUMBER OF CASES.
I’m not talking about categories like “rate of infection” or “percentage.” I’m talking about plain numbers of cases.
Some PCR tests will indicate COVID and some antibody tests will indicate COVID, and adding them together will pump up the number of cases. You know, that big number they flash on TV screens a hundred times a day.
“Coronavirus cases jumped up again yesterday, and the grand total in the US is now…”
THAT number.
The number media and government and related con artists deploy to scare the people and justify lockdowns and use to stop reopening the economy.
The brass band circus with flying acrobats and elephants and clown numbers.
Therefore, I’m not characterizing what the CDC is doing as a mistake. They’ve managed to create the illusion that absolute case numbers are higher than they should be.
Somehow, these “mistakes” always seem to result in worse news, not better news. The “errors” are always on the high side rather than the low side.
Case in point: the computer prediction of COVID deaths in the UK and US made by that abject failure, Neil Ferguson, whose track record, going back to 2001, has been one horrendous lunatic exaggeration after another. His 2020 projections of 500,000 COVID deaths in the UK and two million in the US were directly used to justify lockdowns in many countries.
The CDC, back in 2009, stopped reporting the number of Swine Flu cases in the US—while still claiming that number was in the tens of thousands. I’ve written in great detail about the scandal, which was exposed by then-CBS investigative reporter, Sharyl Attkisson. The CDC stopped counting cases, because the overwhelming percentage of tissue samples from patients was coming back from labs with no sign of Swine Flu or any other kind of flu. And yet, in a later retrospective “analysis,” the CDC claimed that, at the height of the “epidemic,” there were 22 MILLION cases of Swine Flu in the US.
Going all the way back to 2003 and SARS, the CDC and other public health agencies around the world hyped the dangers to the sky; the final official death count, globally, when the dust cleared? 800.
There is a tradition of lying on the high side, blowing up figures in order to create the illusion of destruction.
CDC? Mistake? The agency is certainly incompetent. But that’s just the beginning of the story.
The only time they say there is no danger is when they’re lying about the effects of vaccines.
My headline for the Atlantic article would read: SO HOW MANY COVID CASES SHOULD WE SUBTRACT TO GET THE ACTUAL NUMBER?
And the first paragraph would go this way: “Just when governors are trying to reopen their economies, a gigantic case-counting deception at the CDC is taking the wind out of their sails. The millions of Americans suffering financial devastation could be pushed back into a hole. Who is screaming to high heaven about THAT on the nightly news? No one. Why not?”
Material prosperity is unambiguously good. Prosperity protects us and our children from starvation and malnutrition. It turns many diseases and injuries that were once lethalinto minor inconveniences. Prosperity gives us longer, healthier lives, and it fills those lives with experiences vastly more diverse and enriching than were the dreary routines of nearly all of our ancestors.Ironically, however, the benefits of material prosperity sometimes create the widespread illusion that they are shrinking even though they are expanding.
Free Markets Are Disdained by Intellectuals
In his 1942 book, Capitalism, Socialism, and Democracy, Joseph Schumpeter famously identified one way in which material prosperity fashions its own camouflage. As society grows ever richer as a result of the workings of free markets – as result, that is, of what Deirdre McCloskey calls “innovism” – it supports and equips larger and larger numbers of intellectuals who speak and write (and now also blog and tweet) against the very economic system that makes their existence possible and that provides them with the platforms and tools they use to trumpet their uninformed hostilities.
Intellectuals’ tirades against free markets would fall on unhearing ears, however, if the reality of market-created abundance were more clearly seen. If ordinary people today in places such as North America and western Europe generally realized that their daily access to goods and services make them not just a bit richer, but about 3,000 percent richer, than was nearly every human being who lived prior to the year 1800, ordinary people today would not take their immense prosperity for granted. They would take notice of it and marvel at it.
But this enormous material prosperity appears to the modern eye instead simply to happen. Free markets work so very effectively and smoothly that material prosperity seems to come automatically from nature. And because the processes of wealth creation, along with the absolute amounts of prosperity, are thus unnoticed by the modern eye, the focus turns to individual differences, at the margin, in prosperity. The store clerk in Sarasota or Seattle takes no notice of the solid roof over her head, the hard floor beneath her feet, her closet full of clothing, her pantry and refrigerator full of food, herself and her children vaccinated against polio and measles, and the astounding computing power that she regularly totes around in the form of a smartphone. These marvels are to her very much as water is to a fish.
She is, though, keenly aware that she has in her bank account fewer dollars than a hedge-fund manager has in his, and that when she flies to New York to visit family she must crowd herself into a coach seat while Jeff Bezos can take the same trip lounging comfortably in his private jet. And if this woman somehow isn’t yet woke to just how much more money the superrich rake in relative to what she earns, intellectuals are hard at work daily churning out op-eds, blog posts, tweets, podcasts, YouTube videos, Hollywood movies, and anvil-heavy tomes to inform her of the misery, oppression, and economic injustice that capitalism habitually inflicts on her and other ordinary people.
Some of the diatribes that intellectuals spit out against the free market and its champions are complete fabrications tethered to reality, if at all, only in their most inessential parts. Recent examples of such pseudo-history include the New York Times’s now-infamous 1619 Project, and Duke University “historian” Nancy MacLean’s 2017 book, Democracy in Chains, which purports to tell the story of the late Nobel-laureate economist and classical liberal James Buchanan. (I often wonder what Professor MacLean thinks of another man boasting the name “James Buchanan” – specifically, the tobacco entrepreneur James Buchanan Duke, who endowed the prestigious university at which she is tenured.) Whether such fabrications are intentional or, instead, the result of Herculean incompetence is here irrelevant.
Other indictments offered by intellectuals against capitalism, however, do spring from some genuine fact or facts. But these facts are misunderstood and misinterpreted. It is, for example, true that working conditions in third-world factories are appalling compared to working conditions in factories in countries such as the U.S., Canada, and Germany. It’s true also that wages in developing countries are significantly lower than are wages in developed countries.
Yet it is not true that these facts reflect a defect of capitalism. Quite the opposite. Work in capitalist-enabled factories in Vietnam and Madagascar is a much better option for those workers compared to their alternatives. Furthermore, as Benjamin Powell and other scholarshave argued, the economic development that results – if free markets are allowed to continue to flourish – steadily improves the living standards of the people of such countries. By giving people in desperately poor countries the option of leaving subsistence agriculture in order to work in factories that produce goods for consumers in rich countries, markets bring those poor workers to the attention of those of us in rich countries. But we in rich countries mistake the economic improvement that we actually see for what merely appears to us to be capitalist oppression.
True But Misleading Statistics
Back at home capitalist successes also often generate ‘true statistics’ that tell misleading tales. Consider, for example, the statistical quirk created when increasing wealth and health reduce the average size of households. As we grow wealthier, young adults are better able to move out of the family home into their own apartments. Women are better able to divorce abusive or unfaithful husbands and set up households on their own. Widows and widowers can more easily afford to live alone rather than move in with their siblings or children. With more wealth and health, grandma and grandpa can live longer by themselves on their retirement savings.
This reduction in the number of people who reside in the typical household pulls down the measured income of the average household. And so when the inflation-adjusted income of the average (or median) household of today is found to be only modestly higher than that of the average (or median) household of decades ago, “Progressives” and many conservatives mistakenly conclude that the market has failed ordinary people.
Another statistical illusion is created when inflation chips away at the real value of the legislated minimum wage. As the real value of the minimum wage falls, some low-skilled individuals who in the past were unemployable become employed. This increase in the number of workers paid wages below the average pulls the average wage rate down, thus creating the false impression among careless observers that workers are being oppressed by employers.
A similar statistical misimpression can arise as improvements in the likes of home appliances and store-bought prepared meals increase the attractiveness to women of working outside of the home. Because the typical woman who first enters the workforce at the age of, say, 30 or 40 has less workplace experience and fewer workplace skills than does the average worker, the wage this woman is paid will at first be lower than the average wage. The average wage will thus be pulled downward despite the fact that no worker’s wage has fallen. This statistical quirk can mislead careless observers to the incorrect conclusion that wages are stagnating and, thus, markets are failing.
Precisely because free and innovative markets ceaselessly expand our range of opportunities, comparing the economic statistics of today with those of yesterday too often masks the improvements brought to us by markets. What appear to blinkered or incautious eyes to be market failures are often the fruits of market successes. Unfortunately, persons who are hostile to markets never hesitate to exploit these misimpressions.
Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University.
No American must be reminded that the year 1776 was momentous. But few Americans realize just how momentous it was. That year witnessed the publication not only of Thomas Jefferson’s eloquent Declaration of Independence; it was also the year of Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations.
Jefferson’s document founded a new nation: the United States. Smith’s book founded a new discipline: economics. Both works were inspired by the spirit of liberty.
Jefferson wrote that individuals “are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men.”
Note carefully Jefferson’s words. Our rights aren’t given to us by government. The state is merely an organization for helping us, as individuals, to protect our rights. Attempts by government to act beyond this narrow purpose are violations of the very rights it is instituted to secure.
Freedom equals productivity
Jefferson and America’s other founders understood that individuals who are free to conduct their own affairs as they see fit are far more likely to be productive and to form mutually advantageous social and economic arrangements than if they must run a gamut of government-imposed prohibitions and requirements.
Adam Smith was of the same mind when he celebrated, with an eloquence equal to that of Jefferson, “the obvious and simple system of natural liberty” in which all special privileges and restraints on consensual economic activity are “completely taken away.”
With this liberty, wrote Smith, “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.”
Founders had confidence in freedom
It’s often said that America’s founders had “faith” in freedom. But because of Smith’s work, a better term is confidence in freedom. Smith explained how private property rights, freedom of contract, economic competition, and market prices peacefully direct each individual who is pursuing his own goals to achieve those goals only by helping countless other individuals to achieve their goals. The result is a beautiful process of mutual assistance.
In one of Smith’s most quoted passages, he observed that “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Businesses in free markets prosper only by satisfying consumers – and the more that businesses satisfy consumers, the more those businesses, their workers, and their customers will prosper.
And while Smith was a realist who knew that markets always work imperfectly, he argued that in most cases government intervention makes matters worse. Even if politicians were miraculously to become immune to pressure from special-interest groups, their knowledge of how best to use scarce resources is far too scant to enable them, or the bureaucrats whom they employ, to improve upon market outcomes.
In 2020, alas, this deep wisdom from 1776 is largely lost. Politicians and pundits today, from left to right, see ordinary men and women as hapless victims of forces beyond their control. These pathetic creatures, it is assumed, need not protection of their rights but, instead, provision of their sustenance.
American prosperity at stake
People across the political spectrum increasingly believe that the state must superintend and often override the choices that we individuals make as workers, entrepreneurs, and consumers. Those with this view are blind to the enormous prosperity created by free markets. If you doubt this prosperity, just look around your house and marvel at the appliances, the pantry full of food, and the closets full of clothing that are, for most Americans, commonplace.
Those with this expansive vision of state power are blind also to the dangers that power poses to this prosperity. As Adam Smith taught – and as Jefferson understood – markets saddled with tariffs, poisoned with subsidies, and buffeted about by the inevitable arbitrariness of bureaucratic interventions cannot possibly produce as much prosperity for ordinary people as is produced by free markets.
On Sunday June 28th, comic genius and Poetic Justice Warrior Mel Brooks turned 94 years young, and his youthful exuberance for human life is more relevant than ever. For example, in the decade of the 1970s, Brooks produced several movies that were among the top ten moneymakers in the year they were released. One was a throwback to production qualities that had been abandoned fifty years before that – Silent Movie. Starring Paul Newman, the film’s only speaking part belonged to Marcel Marceau, the world’s most celebrated mime.
Yet Brook’s transcendence is proven with the first of these movies, The Producers (1967), which was re-created into a hit Broadway musical nearly 40 years later. For Brooks, absurdity is an art form to be molded into a weapon against the endless absurdities of collectivism, particularly its most vile form, bigotry. Its politically correct version thrives today.
The premise of The Producers is to make a quick buck by creating the worst stage musical ever, or as he put it, “two schnooks on Broadway who set out to produce a flop and swindle the backers.” Regarding Brooks’ debut as movie director for this plot line, he asked himself what play “would have people packing up and leaving the theater even before the first act is over.” His answer was to combine Hitler’s inhumanity with a musical comedy – Springtime for Hitler. Many years later he explained,
If I do Springtime for Hitler it’ll never be forgotten. I think you can bring down totalitarian governments faster by using ridicule than you can with invective.
Fast forward fifty years, what could be a greater flop that swindled its backers more than the totalitarian forces that dominate American universities? Not only has it has poisoned two generations of students with tribal politics and the bigotry of low expectations, it has converted them into angry social justice warriors who lack all historical and economic context.
Are We Woke? We’re Not Guilty.
The bigotry of low expectations treats non-whites as special needs children. One of the funniest and brilliantly acted movie scenes to crush this malevolence features Sheriff Bart, played by Cleavon Little, in Brooks’ classic 1974 western movie parody, Blazing Saddles.
The scene portrays Bart kidnapping himself by holding his gun to his own head because the comical, bigoted townspeople had become a lynch mob. Knowing they have nothing unless he behaves as they think they’ve conditioned African Americans to behave, Bart takes on two persona at the same time while interacting with the mayor. The dialogue proceeds kidnapper — mayor — kidnapper — victim:
Hold it, the next man makes a move, the ‘capitalist’ gets it! Hold it men, he’s not bluffing. Listen to him men, he’s just crazy enough to do it! Drop it, or I’ll swear I’ll blow this ‘capitalist’s’ head all over town. Oh lordy, he’s desperate! Do what he say! Do what he say!
In addition, Brooks carefree use of epithets in Blazing Saddles is an important lesson in historical and situational context. When Americans don’t learn the complexity of circumstances that surround events or discoveries, all they have are the floating concepts that led us to multiculturalism.
As is typical of today’s race pimps, the bigots morphed into advocates for their victim after inducing him to play victim, “Isn’t anybody going to help that poor man? Hush Harriett, that’s a sure way to get him killed!” Bart, as his own victim, continues, “Help me, help me, somebody help me! Bart as kidnapper, “Shut up!” Safely inside the jailhouse, and back to his being a whole individual, Bart congratulates himself while Brooks, as director, breaks the fourth wall, “Oh baby, you are so talented, and they are so dumb!”
Here, looking directly into the camera (the fourth wall in movies), Cleavon Little alludes to the moral imperative of self-creation (independence as a virtue) versus the categorical imperative of social sacrifice (independence is a vice). In his new domain as Sheriff of Rock Ridge, Sheriff Bart discovers a passed out drunk in the jail cell – the Waco Kid played by Gene Wilder. Hearing the Kid stir while hanging over the side of his bunk, Bart walks to the cell and asks, “Are we awake?” The Kid opens his eyes, gazes at the new Sheriff, and replies, “We’re not sure. Are we black?” Bart answers,”Yes, we are” and the Kid decides, “Then we’re awake, but very puzzled.”
The meaning of this exchange is opposite to the sub-header for this section; the script has actual meaning. To be awake means a mind perceiving reality and forming basic concepts. To be woke, in today’s parlance, is a floating concept supported by envy and guilt whose purpose is decivilization. In the movie, “We’re not sure” signals the formation of a concept that is contrary to experience, and requires further understanding. It’s opposite, “We’re not guilty,” is the statement of a negative supported by inaction, except assigning guilt to others.
Token’s Life Matters
“Are we black” is the logical question for Wilder’s character. Its knowledge will help him consider new propositions to test. These are basic critical thinking skills that great teachers (Montessori, VanDamme, Collins, Gatto) advance. Government school curriculum, not so much.
The achievement of this scene is the almost immediate bond established between these two characters. From different cultures, careers, and ethnicity, they recognized similar character traits in each other, ones that Brooks wrote into the script. They did not expect others to live for their sake, or sacrifice themselves out of duty to others, unless it was voluntarily accepted. Both were dedicated to pursuing their rational self-interest, defended each other’s right to do the same, and enjoyed an enduring, mutually profitable partnership because of it.
The universal truth of this lesson is lost in all political discourse, yet it’s inherent in rational economic interactions. Brooks, being the great comic entrepreneur explains, “My job is to go out and entertain the most people possible.” For the malevolent universe types who assign guilt and believe life is the avoidance of death, Brooks has some advice, “Life is the very opposite of death.”
In the face of real bigotry, including the politically correct kind that emanates from ivy covered lecture halls and bullhorns roaming the streets of New York City to this day, Brooks took purposeful action,
If you don’t laugh you’re going to cry – that’s probably what’s responsible for the Jews having developed such a great sense of humor. The people who had the greatest reason to weep, learned more than anyone else how to laugh.
And laugh we do. As Poetic Justice would have it, Brooks skewered a literary legend (stolen and repurposed by the forces of totalitarian redistribution) in his last feature film, 1993’s Robin Hood: Men in Tights. There are no sacred cows in comedy, and twenty years later, the tradition continues with Trey Parker’s and Matt Stone’s animated TV series South Park, and particularly their bigoted, sociopathic character Eric Cartman. Anticipating reality, Cartman appeared in 2016 (the 20th season) wearing his new Token’s Life Matters t-shirt.
On Monday, June 29, 2020, America lost one of Brooks’ great partners, Carl Reiner. Together, they created the 2000 Year Old Man comedy sketch with Reiner as the straight man interviewing the wise, yet unpredictable old guy. On January 20th we endured the passing of another talented partner of Brooks, Buck Henry. Together, they created the iconic TV series whose title is more relevant to our insane decivilization than ever, Get Smart!
Does anyone still believe what they read in the New York Times or watch on any major television network news broadcast? Because for millions of Americans, the credibility of those news sources is at an all-time low. The internet hive mind, even in the face of blatant censorship by search engines and social media monopolies, simply offers too many verifiable, alternative facts for establishment media to get away with the kind of lying they do, and yet they persist. Exposed and discredited, they keep on lying, betting that an exhausted populace simply will not verify every single thing they report.
Writing for the American Conservative, Arthur Bloom recently published a critique of American media with the not-so-subtle title, “They Really Are Lying to You.” His opening sentence: “The most effective kind of propaganda is by omission.”
Bloom is probably right, especially when one considers how much the media obsessed, for years, over what ultimately were nonstories—think “Russian collusion” or “Ukrainian impeachment.” And then there are the overblown stories—think “8 million COVID deaths in the United States by this time next year,” and now, “the nation is reeling under an epidemic of systemic racism” that suddenly, so very suddenly, have been urgent crises for, well, forever.
What will be next week’s crisis of the century? And what is really going on behind these blinding lunges from one overwhelming and orchestrated media fixation to the next? What events of greater consequence are being obscured, ignored, or omitted in favor of this coverage?
Media Making News
It doesn’t take a sleuth to watch ABC News anchor David Muir go through his nightly pattern—he curates the same stories, on the same themes, as every other major establishment network—to know that something’s going on. Why is there so much unity? Across the networks, the same facts? The same phrases? And it doesn’t take a numbers genius to realize that Muir and his “experts” have made stunning misuse of statistics to spread agenda-driven panic, first over COVID, and now over “systemic racism.”
America’s mass media aren’t reporting on mass panics and mass protests, they are creating them. They only secondarily “report” on them. Maybe COVID is the pandemic of the century. Or maybe not. The only thing we know for certain is that we can’t trust anything we hear about it on ABC Nightly “News.”
Arthur Bloom’s article is a well-documented exposé of how the media has lied in recent, and not so recent years. He alludes briefly to conspiracy theories, making the tantalizing suggestion that the media elites are trying to discredit conspiracy theorists by seeding conspiracy theories with information that is so fantastic as to be obviously false. He even suggests this tactic is what’s behind QAnon, which has, as he writes, “a remarkable ability to absorb all other conspiracy theories that came before it.”
But what is really behind the curtain? America’s media lies all the time, and they do it in lockstep with one another. Sometimes they lie by omission. Sometimes they manipulate statistics. And other times they distort their coverage, present quotes or report activities in an unrepresentative context, or engage in selective editing. Most often they just adopt a smug tone that lets the compliant or lazy listener absorb a clear message: this is a bad guy, this is a good guy. Why are they doing this?
Fifty years ago, a slim book, almost a pamphlet, was written and within a few years it sold more than 6 million copies. Authored by freelance journalist and conservative Gary Allen, None Dare Call it Conspiracy was first published in 1972. During that election year and for years afterward, the book was required reading for anyone who thought there were untold stories and unnamed forces driving current events. It is remarkable how relevant this book is today.
The historical narrative and players identified in None Dare Call it Conspiracy cannot be summarized briefly. Suffice to say that what Gary Allen described back then is similar fare to what you’ll get if you watch Alex Jones today, as well as many of the videos now coming from the QAnon network. And if you watch these sources today, remember this: Maybe instead of being seeded with information so fantastic as to be obviously false in order to discredit the entire body of work, the obviously ridiculous content is added in order to protect the body of work. Discard the ridiculous, but consider the rest, as absurdity protects it from the censors.
False Choices
While Allen’s discussion of specific players and events defies brief explication, he made several other points that are especially relevant today. While only conspiracy theorists may have believed Allen back in 1972, today there is nearly a consensus on some of these points. The first of these concepts is what Allen called the false choice between Left and Right, between Communism and fascism.
The chart shown below, taken from page 29 of the third edition published in April 1972, shows the conventional political spectrum compared to what Allen believes is a more accurate political continuum. He writes:
“We are told that on the far-Left of the political spectrum is Communism, which is admittedly dictatorial. But, we are also told that equally to be feared is the opposite of the far Left, i.e., the far-Right, which is labeled Fascism . . . this is absurd. Where would you put an anarchist on this spectrum? Where would you put a person who believes in a Constitutional Republic and the free enterprise system? He is not represented here, yet this spectrum is used for political definitions by a probable ninety percent of the people of the nation.”
Allen’s point is that if all you can choose are points in between communism on the far-Left, and fascism on the far-Right, then all you really are doing is choosing between international socialism and national socialism. Only by placing both of these forms of socialism on the Left, and by placing pure anarchy on the far-Right, do you create room within the continuum for free-market capitalism and limited government to exist.
There’s a reason for the promotion of this false choice, according to Allen, which gets to one of the main points of his book. He argues that socialism is not a share-the-wealth program, but is, in reality, a method to consolidate and control the wealth. He writes:
The seeming paradox of rich men promoting socialism becomes no paradox at all. Instead it becomes the logical, even perfect tool of power-seeking megalomaniacs. Communism, or more accurately, socialism, is not a movement of the downtrodden masses, but of the economic elite.
This insight would explain a lot of current events in America and other Western democracies. Again quoting Allen, “Radical movements are never successful unless they attract big money and/or outside support…the Left is controlled by its alleged enemy, the malefactors of great wealth.”
Gems of wisdom abound in this book that enjoyed huge but fleeting popularity during the Vietnam era, but is perhaps more relevant today than when it was written. Allen explains that by concentrating power in government, wealthy insiders will actually increase their economic power and political influence. “One must draw the distinction between competitive free enterprise, the most moral and productive system ever devised, and cartel capitalism dominated by industrial monopolists and international bankers…the cartel capitalist uses the government to force the public to do business with him. These corporate socialists are the deadly enemies of competitive private enterprise.”
Sound familiar?
The next chart, taken from page 125 of the book, offers a visual explanation of how wealthy insiders fund and manipulate naïve radicals to apply pressure to the middle class from above and below. Some but not all of the names Allen noted 50 years ago will change, but the dynamic stays the same. Perhaps one may add the names Soros, Bloomberg, and Gates to the names on top, and swap for the names at the bottom the 2020 versions of the original groups: Black Lives Matter, Antifa, and the Democratic Socialists of America. And along with race and class as salient issues to incite the mob, add the “climate emergency.”
This strategy is diabolically clever: Identify the most hardened, potentially violent fanatics in a nation, and surreptitiously give them money and training. As they destabilize society, exploit the backlash that desires order to increase the size and power of government.
What Gary Allen diagnosed and wrote about 50 years ago was not unfounded. Without commenting on the conspiracy aspects, but merely on the process he identified, he was prescient, wrong only in his belief that it would happen faster than it actually did. What slowed down the process is anyone’s guess, but some broad cultural shifts come to mind: The Reagan revolution, the growing activism of the religious right, conservative intellectuals finding their voice, conservative talk radio mobilizing millions, and more recently, the power of the internet.
What has decisively changed between 1972 and today is the fact that millions of Americans, if not most Americans, now realize that there is a phony war between establishment Democrats and Republicans and that they cannot trust the media.
History will judge whether or not the election of Donald Trump marked a restoration of American sovereignty and a resurgence of America’s middle class. All that is certain today is that with rare exceptions, every establishment player, every wealthy special interest, every corporate-controlled media outlet, every billionaire, every influential actor or entertainer or athlete, all of them, have lined up to oppose President Trump with every ounce of energy they’ve got. Why?
Allen’s answer is both easy and difficult. Easy, because “conspiracy” contextualizes everything going on with no further analysis required. Difficult, because if you attempt to ferret out the entire intricate history of these alleged global insiders, you will enter an abyss of infinite pathways and unlimited possibilities. And how much does it really matter? How much difference is there between a conspiracy among elites, and a general consensus among elites? What would be handled differently, if anything?
There is an alternative answer, more hopeful and also more practical, which is simply to fight—heedless of whatever underlying conspiracies may exist—to convince more people to vote for the preservation of America’s freedoms and to stop the assault on America’s middle class. To do that requires allocating energy to exposing the fraud and hidden agenda underlying leftist policies, and convincing all people of goodwill that better alternatives exist.
I am always amazed by the faith that people have in government. Scour the newspaper any day of the week and you will read stories detailing the many failures of the federal, state, and local governments or agencies, and of their stupendous ability to commit the same mistakes over and over again. Yet these agencies are the one that people turn to in times of troubles or needs.Astonishing.Take the June 26th edition of the Wall Street Journal. There you’ll find a piece on how the Small Business Aid program has a significant fraud risk, according to the Government Accountability Office. That’s unfortunate for a program riddled with implementation problems that leave many small businesses unable to apply, while many large ones had no problems getting one of the available small-business loans.And then there’s the report about how the IRS paid $1.4 billion in stimulus payments to dead people. That’s correct: dead people. According to the report, “The IRS, which was trying to get the money out quickly, didn’t use death records from the Social Security Administration as a computerized filter in the first three rounds of payments, according to GAO.”One common reaction to these two stories is that Congress was rushing, everyone was panicking, and pundits were clamoring that we must go big or even bigger than big. But if that’s the problem, how to explain the $137 billion in improper payments made in 2018? For the record, this staggering level of improper payments happens every year. And then there’s the fact that we can’t even measure how many improper payments take place in the Department of Defense because that agency fails its audits on a regular basis—hence no one really knows where all the money goes.Yet here we are, always trusting the same government to somehow do better this time around.On that same page in the Journal you can also read how “Battered U.S Wine Importers Brace for Higher Tariffs.” As the Journal reports, “The U.S. Trade Representative’s office, which imposed 25% tariffs on wine, cheeses, olives and other products from the European Union in October, is now considering raising levies to 100%, citing a lack of progress in negotiating a settlement and eliminating subsidies for Airbus SE.” Never mind that the president has finally hinted that he knows full well that Americans—the same Americans who have nothing to do with the Boeing-Airbus dispute—are paying the tariffs.Yet, President Trump, and pretty much everyone in the Democratic Party, happily contributes to this new protectionist wave. Sadly but predictably, barely anyone in the Republican party is pushing back against the president and his protectionism sidekicks, Peter Navarro, Robert Lighthizer, and Wilbur Ross.Scanning further down the page of the Wall Street Journal report you learn that thanks to government-imposed lockdowns, “140,000 Businesses Listed on Yelp are still Closed Because of Covid-19 Pandemic.” Depressingly, you read, “A large minority of that set, 41%, has shut for good, according to Yelp.”It is not surprising: businesses cannot be kept closed for months and then survive having done nothing. Yet many states haven’t reopened fully in order to allow businesses to survive by reorganizing their activities to keep consumers and employees safe.That’s in spite of the academic evidence that lockdowns were a mistake. In fact, upon hearing that the number of cases—which as Don Boudreaux points out is quite different from the number of deaths— is increasing, some states are now announcing that they’ll pause reopening.Yet, the fact that the number of cases will go up as the economy reopens was fully expected since as a share of the population few people have actually been exposed to the virus. If a rising number of cases is reason enough to stop everything – reason enough to again coerce the economy and life into deepfreeze – while we await a vaccine quickly that might, or might not, arrive, what do we think is going to happen?Governors around the country should end the lockdown and give businesses a shot at saving their businesses by reinventing some of the ways they serve their customers. Full reopening is no guarantee at all that consumers will come back quickly, of course.New data confirm what we already knew; namely, that many people did not wait for the governments to lock down the economy to stay home and shelter in place. Such fear-based behavior contributed much to the economic collapse. That means that most consumers will be careful and watch out for their health and that of others without government decrees telling them to do so this time around too. But at least give consumers and businesses a chance to find what works for them once the economy is reopened.
I conclude with a report from the Washington Post. One is about Trump’s refusal to encourage people to wear masks. This, of course, comes on the tail of Dr. Fauci’s admission that he had intentionally misled the public about the usefulness of wearing masks so that they could be directed to health-care professionals.
And here is Fauci explaining how and why he lied: “He also acknowledged that masks were initially not recommended to the general public so that first responders wouldn’t feel the strain of a shortage of PPE. He explained that public health experts “were concerned the public health community, and many people were saying this, were concerned that it was at a time when personal protective equipment, including the N95 masks and the surgical masks, were in very short supply.”
It’s interesting that Americans started wearing self-made masks long before this Fauci admission showing that maybe they were buying it. However, for the most part, Americans continue to trust Fauci. David Henderson, though, does not.
Seriously, reading the newspaper on a daily basis should make everyone question government’s intervention in our lives. But based on the support for both a populist protectionist Republican like Trump and his Democratic opponent for the presidency, Joe Biden, it doesn’t. So what are we to do?
I believe we should continue fighting the battle of ideas because when we are deep into the mess that both parties, and their underlying ideologies, are creating, some people will look for answers and for solutions outside the state. As Milton Friedman once said, “That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”
I take that task seriously.
Finally, I certainly feel obligated to intellectuals of the past who have fought for our freedoms in what were arguably even more depressing times. For that reason, I dedicated my professional life to answering Friedrich Hayek’s call to action that
“We must make the building of a free society once more an intellectual adventure, a deed of courage…. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.”
This, I believe, is why we continue fighting
AIER Senior Fellow Veronique de Rugy is also a Senior Research Fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. This article first appeared at aier.org.
Hong Kong’s ‘one country, two systems’ status is gravely under threat.
Local dissatisfaction is so great that even last October, a survey by the Chinese University of Hong Kong found that 40pc of the city’s 7.5 million residents were interested in emigrating.
Now, the question mark over the future of the city’s democratic freedom is so ominous that the British Government has said it will offer visas to the nearly 3 million people in Hong Kong who either hold or are eligible to apply for a British National Overseas passport.
But one maverick Hong Kong property developer is taking the vision of mass migration of Hong Kongers much further. There are now bold, experimental plans to create a new Hong Kong elsewhere in the world – and it could be built in Britain.
The utopian promise of charter cities
Ivan Ko, a real estate tycoon, wants to build a new version of Hong Kong somewhere else, complete with its own regulations and entrepreneurial spirit.
He plans to do this in the form of an international charter city – or possibly three of them.
A charter city is a metropolitan area that has a special jurisdiction and can determine its own system of municipal governance over the general law of the country it sits in. Effectively, a charter city has its own constitution, independent of the country that it exists in.
Versions of the concept are common enough – there are more than 120 in California, including San Francisco and Los Angeles.
But an international charter city would be different. Ko, who is chairman of developer RECAS, has no template to work on because the idea is entirely radical; this would be a brand new city, built from the ground up.
The idea is that it would be integrated within the laws and democracy of its host country, but its founders would essentially have an opportunity to build a new socio-economic and political system. It could act as a more refined special economic zone, with different tax systems and commercial policies to stimulate wealth creation.
Building an international charter city designed for mass migration from one country to another would also turn real estate development to almost a business of nation-making.
It has never been done before. The idea for international charter cities began more than a decade ago with the Nobel prize-winning economist Paul Romer, who tried to set up charter cities in Madagascar and Honduras. But these attempts failed.
Now, it is a concept that is gaining new momentum. Paypal founder Peter Thiel is among the investors who last year put $9million into Pronomos, a venture capital fund for building a charter city. Former Uber executive Ryan Rzepecki, who sold his bike company Jump to the ride hailing app for $200million, is also considering funding a new city.
Still, few have considered building one in a developed country – it is hard to see how the promise of economic stimulus could outweigh the costs and risks.
Building a brand new city
To build a new charter city, you need land near a water source measuring 25,000 acres or more – an area a little bit smaller than Newcastle and a bit bigger than the Queen’s Sandringham Estate in Norfolk.
Ko has founded Victoria Harbour Group, which is currently scouting the world for locations, looking for land in developed, common law countries. He aims to source a location this year and to begin planning and building the project’s infrastructure in 2021.
The company is in discussions with four governments in the West, says Ko. Ireland is top of the list and Victoria Harbour Group was due to meet with the government in February, although travel restrictions have postponed the trip.
It is “reasonably realistic” that Britain could become a host country, particularly considering the offer of BNO visas, says Dr Mark Lutter, who runs the Charter Cities Institute, a non-profit that advises on building charter cities in emerging markets, and who has been working with Victoria Harbour Group.
With Brexit, there is also the chance to do something bold and experimental. While the idea of free ports has been mooted, this would be a more extreme next step.
“If countries desire to generate economic activity, having a bunch of very smart people who can bring investment and jobs will generate a better future not just for them but for the host country,” adds Dr Lutter.
But in reality, how many nations will be open to building a new city when they are grappling with a global pandemic? In Britain, public debt has now exceeded the entirety of our GDP for the first time since 1963. And this project would be an undertaking that would make HS2 comparable to a toy train track.
Where would the money come from?
The aim is for the city to be populated half by Hong Kong emigrants and half by locals from the host country, says Dr Lutter. He thinks that around 25 to 33pc of the people who want to move will look to move to the new city, while most will want to move to already established places. Ko puts that number at about 2 million.
Victoria Harbour Group is currently trying to raise money from investors both in Hong Kong and Silicon Valley. Once planning is underway, they hope there will be several more rounds.
Rather than purchasing land, Ko hopes to enter into a public-private joint venture with a government. “In that case, our investment in land would be minimal and the government would have a stake in us, so we would be sure that the government would help us to make the city successful,” says Ko. Investors would get returns from rents.
But he also has an even more radical plan. After 10 or 12 years, he plans to float Victoria Harbour Group. Essentially, there would be an IPO for a city.
A new democracy, created by a company
Victoria Harbour Group will be 50pc owned by a non-profit foundation, says Ko. It would use dividends to fund public spending, support job training and education and to sponsor migration.
It plans to make this new city into more than just a place for the higher income Hong Kongers who could afford to emigrate anyway. “I believe the value of people comes in their network. If we’re able to partially transplant that network, then a lot of people’s relationships can be preserved,” says Dr Lutter.
The conditions of self governance will be dependent on the host country, says Ko. The plan is to have a city manager, the first of whom would be initially appointed by the company, but would then become accountable to a council of local residents.
Is there a diplomatic risk for the host country?
Building a new rival to Hong Kong would surely be a red flag to China, which is busy taking control of the government there.
But the team is quick to dismiss this idea that it would antagonise the Chinese government. “It’s for the people who don’t want to live in Hong Kong, maybe people who have been protesting,” says Dr Lutter. “If they leave, it might be off Beijing’s back.”
“In terms of the brain drain or outflow of capital, China has 1.4 billion people who can move to Hong Kong with their capital and their companies,” adds Ko. “No matter how many people leave Hong Kong, those vacancies will be filled up in no time.”
And perhaps, in a way this has been done before – albeit in a more organic way. “In the Fifties, Sixties and Seventies, our parents and our parents’ parents fled China to come to Hong Kong and they helped each other, gave jobs to each other, lent money to each other, that’s how we started our lives here,” says Ko.
“We want to provide an option for Hong Kong people to leave Hong Kong, but to carry on with their lifestyles and continue to develop their careers and build their families in countries that are democratic and free.”
This article first appeared at telegraph.co.uk on June 22, 2020.
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