Since a few things became clear to me last year, I’ve consistently forecasted a significant worsening in U.S.-China relations and remained adamant that all the happy talk of trade deals and breakthroughs is just a lot of hot air.
What first appeared to be a unique quirk of Donald Trump has morphed into bipartisan consensus in Congress, and clear signs have emerged that the general public has likewise become alarmed at China’s growing global clout.
Due to this, as well as a litany of other factors outlined in prior posts, it’s highly unlikely the current trajectory will reverse course and result in a return to what had been business as usual. Instead, we’re probably headed toward a serious and historically meaningful escalation of tensions between the U.S. and China, with what we’ve seen thus far simply a prelude to the main drama. If I’m correct and the ship has already sailed, we should focus our attention on how we respond to what could quickly become a very dicey scenario filled with heightened emotions and nefarious agendas. There’s a good way to respond and a bad way.
In our individual lives, we face various daily challenges, but every now and again something really big hits us, a personal crisis of sorts, and how we respond to these major events determines much of our future. The same thing happens to nation-states, particularly in the current world where virtually all human governance is structured in a highly centralized and statist manner. When such an event hits nation-states the public tends to be easily manipulated into a state of terror and coerced into granting more centralized power to the state, an unfortunate state of affairs that accurately summarizes the reality of 21st century America. With each crisis, the empire has grown stronger, the public weaker, and two decades later we find ourselves in a neo-feudal oligarchy where one half of the public is at the other half’s throat for no good reason. This is what happens when you respond poorly.
Three major crisis events have rocked the U.S. this century, and much of the public has embraced, or at least accepted, the worst possible response in all cases.
- The first was the attacks of 9/11, which officially ushered in the modern national security surveillance state and all but obliterated the 4th amendment.
- The second was the financial crisis, where the response from Bush/Obama was to bail-out the criminals, destroy any semblance of the rule of law by jailing zero Wall Street executives, and to ensure the Federal Reserve (and mega-banking institutions in general) became stronger and more powerful than ever.
- Finally, there was the shock election of Donald Trump. Rather than take his ascendance as a warning about centralized power, the faux “resistance” has been obsessed with removing him, celebrating intelligence agencies/military aggression, bemoaning free speech, and rehabilitating George W. Bush.
Three crises, three horribly destructive responses. This entire century has been an unmitigated march in the direction of stupidity.
I’ve become convinced the next major event that will be used to further centralize power and escalate domestic authoritarianism will center around U.S.-China tensions. We haven’t witnessed this “event” yet, but there’s a good chance it’ll occur within the next year or two. Currently, the front runner appears to be a major aggressive move by China into Hong Kong, but it could be anything really. Taiwan, the South China Sea, currency, economic or cyber warfare; the flash points are numerous and growing by the day. Something is going to snap and when it does we better be prepared to not act like mindless imbeciles for the fourth time this century.
When that day arrives, and it’s likely not too far off, certain factions will try to sell you on the monstrous idea that we must become more like China to defeat China. We’ll be told we need more centralization, more authoritarianism, and less freedom and civil liberties or China will win. Such talk is total nonsense and the wise way to respond is to reject the worst aspects of the Chinese system and head the other way.
If you’re horrified by China’s human rights abuses, then push for an end to murderous U.S. wars abroad based on lies. If the Chinese surveillance panopticon concerns you, we should move in the exact opposite direction with less corporate and state surveillance, not more. If China launches a state-sanctioned digital currency system designed to monitor, and if desired, restrict transactions, we should reject this approach and embrace open, decentralized and permissionless systems like Bitcoin. We should fight lack of freedom with more freedom.
Given our track record this century, I’m skeptical Americans will respond in a positive and productive way to increased tensions with China,although perhaps I’ll be pleasantly surprised. I hope we can finally face a challenge without cowering in fear and surrendering more freedom in order to feel safe and powerful. I hope we can recognize that empire is not an asset, but a liability. That empire strengthens the state and weakens the public. I hope we can be wise enough not to embrace further authoritarianism to defeat authoritarianism. For once this century, I hope we can respond in a thoughtful and intelligent manner.
Democracies are much richer than non-democracies and their wealth has made them the envy of the world. The close correlation between democracy, high GDP per capita, and economic, military, and cultural power has made modernity appear to be a package deal. When people look at rich, powerful countries they typically see a democracy and they think, “I want that.”
At the same time, however, the academic literature on the causal effect of democracy on growth has shown at best weak results. Here is the all-star team of Acemoglu, Naidu, Restrepo, and Robinson (ungated) in the JPE summarizing:
With the spectacular economic growth under nondemocracy in China, the eclipse of the Arab Spring, and the recent rise of populist politics in Europe and the United States, the view that democratic institutions are at best irrelevant and at worst a hindrance for economic growth has become increasingly popular in both academia and policy discourse. For example, the prominent New York Times columnist Tom Friedman (2009) argues that “one-party non democracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. ”Robert Barro (1997, 1) states this view even more boldly: “More political rights do not have an effect on growth.”
Although some recent contributions estimate a positive effect of democracy on growth, the pessimistic view of the economic implications of democracy is still widely shared. From their review of the academic literature until the mid-2000s, Gerring et al. (2005, 323) conclude that “the net effect of democracy on growth performance cross-nationally over the last five decades is negative or null.”
Acemoglu et al. continue, “In this paper, we challenge this view.” Indeed, using a multitude of sophisticated econometric strategies, Acemoglu et al. conclude “Democracy Does Cause Growth.” In their sample of 175 countries from 1960 to 2010, Acemoglu et al. find that democracies have a GDP per-capita about four times higher than nondemocracies ($2074 v. $8149). (This is uncorrected for time or other factors.) But how much of this difference is explained by democracy? Hardly any. Acemoglu et al. write:
Our estimates imply that a country that transitions from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the next 25 years than a country that remains a nondemocracy.
In other words, if the average nondemocracy in their sample had transitioned to a democracy its GDP per capita would have increased from $2074 to $2489 in 25 years (i.e. this is the causal effect of democracy, ignoring other factors changing over time). Twenty percent is better than nothing and better than dictatorship but it’s weak tea. GDP per capita in the United States is about 20% higher than in Sweden, Denmark or Germany and 40% higher than in France but I don’t see a big demand in those countries to adopt US practices. Indeed, quite the opposite! If we want countries to adopt democracy, twenty percent higher GDP in 25 years is not a big carrot.
As someone who favors democracy as a limit on government abuse, I find this worrying. One optimistic response is that the nondemocracies that adopt the policies necessary to make a nation rich, such as support for property rights, open markets and the free exchange of ideas, may not be such bad places. These beasts, however, appear to be rare. But if they are truly rare there must be more to the democracy-GDP per capita correlation than Acemoglu et al. estimate. So what are they missing? I am uncertain.
If democracies don’t substantially increase growth, why are they rich? Acemoglu et al. don’t spend time on this question but the answer appears to be reverse causality (from wealth to democracy) and the fact that today’s rich democracies adopted capitalism early. But don’t expect the wealth to democracy link to be everywhere and always true, it’s culturally and historically bound. And catch-up is eliminating the benefits of the head start.
If much of the allure of democracy has been higher GDP per capita then the allure has been a mistake of confusing correlation for causation. A fortunate mistake but a mistake. The literature on democracy and growth implies that there is no reason to reject an alternative history in which the world’s leading industrial economy was a nondemocracy. Nor why we could not see some very rich nondemocracies in the future–nondemocracies that would be as on par with the United States as say Sweden, Denmark and Germany are today. If that happens, the case for democracy will look very much weaker than it does now as the correlation between democracy and wealth will be broken and the causal effect more evident even to those without sophisticated econometrics.
The World Wide Web gave individuals limitless knowledge at the click of a button. And with this privilege, came the responsibility of each user to do his or her own research in order to determine which information was accurate and which was not.
But as the internet has experienced 20+ years of mainstream use, public opinion has shifted. Now, instead of celebrating the free flow of information and letting people decide for themselves, many people are championing censorship all in the name of silencing opinions with which they disagree. And now, even governments are getting involved in the quest to stop “fake news” and the latest example comes from California.
A Terrifying Precedent
Currently, on top of California Governor Jerry Brown’s desk sits a bill that, if signed, could set a dangerous precedent as to how far a state can go to stop the flow of information. Recently, the California Senate and State Assembly passed S.B. 1424, which has has been dubbed the “Internet: social media: advisory group” act.
Passed in the spirit of curbing the spread of “fake news,” the bill would allow for an advisory group to investigate the spread of false information online and formulate a plan for how it could be stopped.
The text of the bill states:
“The Attorney General shall, subject to the limitations of subdivision (d), establish an advisory group consisting of at least one member of the Department of Justice, Internet-based social media providers, civil liberties advocates, and First Amendment scholars, to do both of the following:
(a) Study the problem of the spread of false information through Internet-based social media platforms.
(b) Draft a model strategic plan for Internet-based social media platforms to use to mitigate the spread of false information through their platforms.”
Silencing the Opposition
When Facebook and eventually Twitter made the move to block Alex Jones from using its platforms, many people were nervous. Facebook is most certainly a private company, and a private company has every right to censor whomever it pleases, but censorship in any capacity it concerning. And while it was one thing for private groups to practice this type of censorship, it is quite another for governments to get involved.
Many might be under the assumption that the government would only use this power for “good,” But that does not seem to be the case. As Barry Brownstein says:
“Most likely, Californians are not concerned about “fact-checking” content like “a mile is 5290 feet” or an appeal to form a flat Earth Facebook group; such content poses no threat to entrenched interests. Instead, “fact-checking” will be deployed against those who express doubt, for example, about climate change, vaccine safety, or “educating” children about gender dysphoria.”
No matter how much you may disagree with the groups described above, everyone has a right to speak their truth. And those of us on the receiving end can choose whether or not we want to accept what we are being told. But even if we vehemently disagree with someone, we should never use the government to silence their voice. But this is exactly what this California bill will do.
Under the First Amendment, governments are forbidden from passing laws that restrict free speech. There is no disclaimer that amends this protection to allow for the censorship of potentially untrue speech. And yet, governments are somehow under the impression that it is their job to or worse, their duty to make sure they are sifting through information before it is allowed to be disseminated to the public and this should frighten everyone.
Our modern world is so extraordinary partly because information is accessible to just about everyone. Throughout most of human history, only the elite had access to knowledge. But the internet has liberated information and by opening the floodgates, we have been exposed to both true and untrue information. But getting to make our own decisions absent government coercion is our right.
Supporters of free speech and anyone else who believes that individuals are responsible for their making their own decisions should be extremely concerned about this bill. Legislating speech is a slippery slope, and once we lose one right, the rest will quickly follow.
As Brittany Hunter has described, language is a perfectly human example of spontaneous order. It is born out of chaos and necessity, and there is no central authority dictating terms. And English is unique among languages – it is comprised of words from dozens of other languages. According to the Oxford English dictionary there are about 500,000 words, more than double many other languages. And because there is no central authority controlling new words and definitions, like there are in other societies, it is the most expressive of all languages.
The Language of Central Authority
At least it was that way once. Over the last 50 years there have been significant changes in the acceptable use of certain terms in English. As Jordan Peterson has warned, “I’ve studied authoritarianism for a very long time – 40 years – and it’s started by people’s attempts to control the ideological and linguistic territory.” Examples include the ideological monikers themselves – liberal (“liberated” from classical liberalism), and progressive. Both are used to rationalize envy, guilt, and authoritarian control: it’s your duty.
The mother of all personal needs, health care, is no longer the prevention and treatment of injuries and disease. It’s about who pays for it – a duty you owe, and are owed. Freedom used to mean the freedom to make mistakes, as economist Ludwig von Mises has taught. Now it means freedom from mistakes – a duty you are owed. And justice was the legitimate role of government in the defense of natural rights. Today’s media/education complex tells us it means whatever the identity group authoritarians tells us it means – a duty you owe, or are owed.
The point is that centralized control of the linguistic territory has metastasized to the most personal aspects of our lives.
The Language of Value
As Mises explains, economics is life. It’s about meanings and actions, which are driven by values. And values is another personal word – everyone has a unique set that changes with newly attained knowledge. And as is typical of English words, value can be used and understood in different ways.
According to the Oxford English dictionary, value has two uses that are fundamental to economics – the material or monetary worth of something, and the worth of something compared to the price paid or asked for it. And both definitions are central to the idea of voluntary human transactions – each participant receives something they value more than what they give up.
And that is also how value investing works. It balances an individual’s preference for spending now (high time preference), with having more to spend at a later date (low time preference). The decision to forgo consumption (i.e. to invest) is then implemented with a method that evaluates a stock based on its price, earnings, dividends, debt, and growth to calculate a company’s expected future value. If the stock’s share price is sufficiently below this intrinsic value, then it is a good long-term investment.
The most important element to this calculation is the price mechanism. It is built upon millions of inputs from individuals, each with their own unique values, who cannot possibly possess but a tiny fraction of the total knowledge of a company that the market possesses collectively. This is value creation through the wonders of spontaneous order.
Of Duty and Value Creation
In May of this year, the Certified Financial Analyst (CFA) Institute held its annual conference; its theme was Measure Up. In addition to learning new methods for measuring the intrinsic value of a company, conference attendee Michael Edesess claims there was another purpose for the Measure Up theme.
According to his review published in Advisor Perspectives, the CFA Institute conference included a major focus on environmental, social, and governance (ESG) reporting. He claims this is important because ESG reporting will transform value investing from a process of individual choice to a duty to deliver value to society as a whole.
The ESG principle is that financial reporting is not enough; the corporation has a responsibility to control it’s externalities. The financial industry can measure up by conveying capital to improve the future of humankind; in short, by creating value. Creating value requires something more realistically goal oriented than getting the best return on investment. Getting the best possible return on investment is a goal that may be teleologically impossible.
To the authoritarian, externalities can mean any consequence of business activity that violates their fluid definition of justice. In this world, the value a corporation delivers to its natural constituents – customers, employees, and owners – will be measured differently. And the new definition of value is gaining momentum as the “auditing of ESG reports has become a major activity of the Big Four accounting firms. College students majoring in fields with names including the words environment, sustainability, or social responsibility are at least as likely to get snapped up by accounting firms as any other firms.” The new linguistic territory.
The Teleological Ethics of Value and Virtue
Of course this is not really new. Socially responsible investing has been around for about 50 years. More recently it’s been called sustainable, green, ethical, and impact investing – more linguistic territory. It’s voluntary, and for many it serves their values, however tainted by collectivist orthodoxy they may be. Despite all of this, the CFA conference participants understood that the whole ESG reporting sideshow was merely an exercise in greenwashing.
To authoritarians, that’s OK, so long as capital is “invested” by the government for college tuition toward ESG auditing careers, and billions more are paid in ESG compliance costs by the private sector. Good intentions toward ill defined and unachievable goals are what really matter. And that is exactly what teleological ethics requires – the values to be achieved are the explanation for the means of achieving them. In this case, an investor’s personal fulfillment, or a corporation’s value proposition, is morally justified only if it serves this authoritarian vision for humankind. This is a categorical imperative – an end in itself. It is a philosophy that is diametrically opposed to the Age of Reason.
For the priests of the state, the concepts of liberal, health care, freedom, justice, and values are virtues only when defined as a selfless duty that is owed. And what about this word duty? Its definition hasn’t changed, it seems immutable. Let’s reclaim this linguistic territory – keep duty a matter personal choice, free of guilt, based an on individual’s values, and driven by reason.
STAY IN THE KNOW
Fill out the form below to get the CFI Newsletter delivered to your inbox.
Leave us your contact information below to recieve a free copy of CFI's 10-Point Manifesto for Individualism
Join the CFI Mailing List using the form below to recieve a free Sample Chapter of Hunter Hastings' The Interconnected Individualism
Leave us your contact information below to recieve a free copy of Poetic Justice Warrior Society: Freedom's Radicals
The Center for Individualism is a 501(c)3 Non-Profit Organization with a mission to promote Individualism in America. All work is licensed under a Creative Commons Attribution 4.0 International License, except for material where copyright is reserved by a party other than CFI. Learn More…