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End The Shutdown Now.

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The shutdown of the American economy by government decree should end. The lasting and far-reaching harms caused by this authoritarian precedent far outweigh those caused by the COVID-19 virus. The American people—individuals, families, businesses—must decide for themselves how and when to reopen society and return to their daily lives.

Neither the Trump administration nor Congress has the legal authority to shut down American life absent at least baseline due process. As Judge Andrew Napolitano recently wrote, business closures, restrictions on assembly and movement, and quarantines are not constitutionally permissible under some magic “emergency” doctrine. At a minimum, the federal government must show potential imminent harm by specific infected individuals at some form of hearing or trial.

These due process requirements are not suspended.

State and local officials may claim, or even possess, lawful police powers to shut down their communities. We offer no analysis of such powers or claims under the myriad of state constitutions and authorizing legislation. But they should resist exercising these powers. The governor of Virginia, in particular, deserves admonition for unilaterally imposing a lengthy period of virtual house arrest.

We do not know, and cannot yet know, how many Americans will become sick or die from the virus. We do know that predictions regarding infection and death rates are highly unreliable. Even actual deaths attributable to COVID-19 are not so easy to count, as Italy has discovered. Age, general health, and comorbidity are difficult variables to assess, and people may die “with” the virus but not “from” it. It is also very difficult to assess the lethality of the virus relative to previously known types of flu and colds.

To date, COVID-19 deaths in the US are far fewer than deaths in ordinary flu seasons or from past pandemics such as the H1N1 virus. This understanding is critically important to put the virus, and the government response to it, in perspective. Even during past pandemics, depressions, and world wars, Americans went to work.

In 1850, French economist Frédéric Bastiat helped the world understand the “seen and unseen costs” of state policies. It is simple to see how quarantines and lockdowns will slow the spread of COVID-19. It is critical, but not so simple, to see the costs and harms caused by the economic shutdown.

Only then can we rationally understand the tradeoffs involved.

How many Americans suffering from other illnesses cannot see a doctor now? How many Americans will lose their jobs, their life savings, their retirement prospects, and their incalculable feeling of self-worth? How many will succumb to depression, drug or alcohol abuse, and suicide? How many will lose their homes, divorce their spouses, or suffer abuse? How many will never recover in their careers? How many small businesses, including the vital ones of doctors, dentists, and veterinarians, will vanish from your community? How many young people will “fail to launch”?

Worse still, will grocery stores and gas stations remain open and stocked? Will crime spike? Will the American social fabric, already thin from politics, tear apart?

These questions are not rhetorical. All of these things happened, to a degree, following the Great Recession of 2008. They will happen again—very soon—if we fail to act immediately. Tomorrow, on April 1, millions of Americans will not pay rent or mortgages. Millions of small businesses will shutter, just as many large employers such as Macy’s, Kohl’s, airlines, and hotels already have. Millions of service workers are unemployed already, but many more jobs will be lost. The effects will cascade.

There is no conflict between humanitarian and economic concerns; in fact they are flipsides of the same coin. A poorer America will be a much less healthy America, one more vulnerable to future illness and disease. Technology, modern medicine, and market actors can address a virus; already we see entrepreneurs producing cheaper ventilators and doctors using cheap generic drugs with very promising results.

This local, bottom-up approach is the only effective way to confront the virus. The federal government, as we see now and have in the past, is comically incapable of competence in times of crisis.

On a fundamental level, freedom really is more important than security—or, in this case, an illusion of security. We all demonstrate this in our personal lives every day, from flying to driving to riding bicycles, to consuming unhealthy food and drink simply because we like it. Security has never been the sole or even primary goal for a country born in rebellion.

Government cannot decide what aspects of our lives are essential or nonessential. The American people cannot simply sit at home and wait for government checks written on funds that government does not have.

End the shutdown.

Road To Serfdom

Venezuela On The Road To Serfdom: Part 1

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“Venezuela is the current poster child of interventionist failure”

When looking at the quality of the media coverage of Venezuela’s crisis and the interpretations of the factors that caused it, the superficiality of most analyses quickly becomes apparent. The explanations offered by many “experts” and commentators largely ignore the country’s history and fail to take into account the pre-existing political and economic dynamics that heavily contributed to, if not predetermined, Venezuela’s current predicament.

To understand these factors and the long road that led to the present crisis, I turned to José Niño, a Venezuelan-American writer, political operative and policy analyst, whose extensive research and deep understanding of the country’s history have armed him with the right tools to separate fact from fiction and political wishful thinking from hard economic realities.

Interview with José Niño:

Claudio Grass (CG): Mainstream international coverage of the crisis in Venezuela earnestly started only about 3-4 years ago. Most analyses blamed declining oil prices and provided very little context as to the status quo before the escalation of the crisis, to the point that the average news consumer couldn’t be blamed for thinking it was all a flash-crash mainly caused by external factors that couldn’t be helped. Do you believe this narrative is accurate?

José Niño (JN): I don’t believe it at all. Contrary to many conventional narratives, Venezuela’s problems go back decades, even before Hugo Chávez and Nicolás Maduro came into the picture. The problem is that people have very short-sighted analyses and interpretations of political events.

Based on my research over the years, I can say that Venezuela’s institutional and cultural decline began in the 1970s with the nationalization of its oil industry and the state’s rapid encroachment into the economy. The last 50 years of Venezuelan economic history have been filled with sub-optimal economic interventions.

However, the recent abuses under Chávez and Maduro were much more profound and accelerationist in nature, hence the country’s recent implosion. Nevertheless, we can’t ignore previous decades of abuses. We have to remember that Venezuela was classified as an economic growth disaster by Charles Jones in his “Introduction to Economic Growth”. It was one of the few countries that actually got poorer from the late 1950s until the late 1990s. In fact, the average per capita GDP in Venezuela was higher in 1958 than in 1998.

Source: IMF, CSIS

CG: Many people, lacking the historical understanding of Venezuela’s story, might find it surprising, but there was a time when the country was a formidable economic leader and it wasn’t that long ago. After the end for WWII until the 70s, the levels of prosperity, productivity, growth and overall wealth accumulation were enviable, without the support of skyrocketing oil prices. What drove this economic boom and what does this period say about the conventional understanding of the “resource curse”?

JN: Pre-oil nationalization, Venezuela was quite market-oriented. Taxes were relatively low, spending was in check, and there was a very small managerial state. Obviously, there were no wholesale expropriations of industries as well. Interestingly enough, Venezuela was late to the central banking party. It launched its Central Bank in 1939. These factors also attracted skilled European labor from countries such as Italy, Portugal, and Spain from the 1930s until the 1960s.

From the 1910s until 1970, Venezuela went through a profound economic transformation that nearly put it in First World status. Funny enough, oil prices were not very high during these periods, especially the 1950s, where Venezuela enjoyed tremendous growth.

Once government intervention came into the picture, the country slowly started to go off the rails. When we look back, Venezuela’s decline has more of a “government curse” than a “resource course”. A good deal of oil-rich states have not suffered the same fate as Venezuela and that is no coincidence. Policy matters and collapses are the outcomes of deliberate policies.

CG: What role did the Hugo Chávez years play in setting the stage for today’s economic deterioration? Did his reforms make it inevitable or do you think it could have been avoided?

JN: Chávez represented the accelerationist phase of the Venezuelan collapse story.
Ironically, he campaigned on a relatively centrist, anti-crony capitalism platform in 1998. He denounced the excesses of the post-1958 social democratic order and even described Cuban leader Fidel Castro as a dictator.

However, once in power, things started to change. The failed 2002 coup attempt against his government really radicalized him, especially when rumors emerged that the CIA assisted in this coup. He had the perfect boogieman to mobilize his radical force and so began the next radical phase of the Venezuelan economy.

The nature of the Venezuelan state was fundamentally altered in the 1970s, as the government nationalized the oil industry and turned the country into a petro state. Since then, government intervention in all facets—central banking, controls, subsidies, wage policies, etc.—grew unchecked. The 90s saw half-hearted attempts to make certain reforms from the IMF—marginal spending cuts, new VAT tax, and tariff reductions— but they did not go far enough in terms of oil privatization, spending cuts, or at the least the creation of a sovereign wealth fund. Institutional inertia and a culture that was dependent on the petro state made any type of market reform impossible.

In fact, the president conducting the IMF reforms, Carlos Andrés Pérez, was impeached for corruption by his own party as he was trying to liberalize the economy. The radicals within Pérez’s party where that scared of those lukewarm market reforms.

Also, it did not help that inflation was never tamed during the late 1980s and 1990s. Fun fact, the last time inflation was in the single digits in Venezuela was in 1983. All in all, Chávez continued the previous economic errors, but also introduced authoritarian governance into the equation.

CG: Let’s turn to the state of civil liberties in the country for a moment. Numerous reports clearly show the spike in authoritarian measures, confiscations, violations of property, civil and human rights and the government’s brutal suppression of dissent. Do you believe that this deterioration happened quickly, as the Maduro government suddenly recognized the urgent threats to its authority? Or was it more of a frog-in-boiling-water process, where the gradual limitations to civil liberties and property rights began long before the current crisis?

JN: The Chávez-Maduro era was the most repressive phase of Venezuela’s economic collapse, given the authoritarian nature of the Chavista coalition. There’s a really huge authoritarian streak among Chavistas and they do have a visceral hatred for the upper-middle and upper classes. Chávez took a more boiling frog approach, but the Maduro regime has been more dramatic in certain respects given challenges to his authority and increased international pressure.

Venezuela also has a lot of internal problems with crime and overall lawlessness. So, the government will respond authoritatively at times to demonstrate that it’s still boss.
That being said, the Venezuelan regime is probably one of the least repressive socialist regimes when comparing them to their 20th-century predecessors. I think social media and phone access have kept the government in check and limited their ability to commit repressive acts.

In the upcoming second part of this interview, we turn to the topic of hyperinflation and we also discuss the lessons that Venezuela’s story offers for the increasingly polarized Western democracies going forward.

Claudio Grass, Hünenberg See, Switzerland

www.claudiograss.ch

Socialism Might Get You “Free” Stuff, But Kiss Your Civil Liberties Goodbye

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A couple of years ago, in a video produced by Red Alert Politics, a reporter took to the streets during Spring Break to ask college students if they preferred socialism or capitalism. It should surprise no one that many of the students believed socialism was preferable to capitalism, as this has recently become a trend in our country.  

However, as we have addressed previously, the students’ answers gave credence to the speculation that many Millennials are unclear as to what socialism really entails.  

Perhaps, the most shocking element of these street interviews was the fact that many Millennials believed socialism to be an ideology that empowers its people. However, nothing could be further from the truth.  

The guise of “democratic socialism” has led many young minds to believe that throwing a “D” in front of a term that has historically represented oppressive governments and bloody revolutions will somehow remedy its reputation. However, there are still many Millennials who know better.   

Whether we choose to refer to it as socialism, communism, or democratic socialism, the fact remains that these are ideologies in which power is concentrated into the hands of a very few politically elite. 

In fact, all these political identities all represent collectivism, where group rights are favored ahead of individual rights. Since civil liberties exist to protect the individual against government abuses, in collectivist governments, civil liberties are the first thing to go because they threaten its very existence. 

Though many view socialism primarily as a set of economic principles where the collective wealth of its citizens is redistributed “fairly” among the people, there is so much more to it than that. It is important to remember that there has never been a nation in existence in which all its citizens agreed with each other unanimously. Our Founders were not blind to this fact, this is why they were specific in creating a Constitutional Republic. 100 percent consensus was an impossible feat, but with small groups of individuals being represented by statesmen who lived among them, they believed this would lead to a government derived from the consent of the governed and one which required the least amount of force. 

Socialism, or collectivism in general, is an ideology that, by its very nature requires massive amounts of coercion. Since the power rests with only a few individuals, the power structure is extremely fragile. If the people realized that they greatly outnumbered those in power, the entire government could be overthrown easily. The former Soviet Union is a great example of this. As such, if collectivist governments want to survive, they have to institute a fair amount of force.  

It doesn’t matter where you are located on the globe, there will always be at least one person, though usually many, who do not believe it is just to take someones hard earned money, and redistribute it others. The power of the individual is, perhaps, one of the strongest forces on the planet. Like a ripple in the water, the action of one can cause a domino effect, where more and more individuals join together. This is why it is so important to control the message in collectivist regimes. 

Collectivist governments have always recognized this, which is why freedom of expression is never held in high value for these types of ideologies. One person speaking out could lead to more and more citizens questioning the legitimacy behind a government that takes what is not theirs and redistributes it as they see fit. In order to convince an entire nation that collectivists policies are the only path to prosperity, you MUST control the message, and squash any message that threatens the existence of those in control.  

If collectivists governments feared the power of the individual in the days before the internet, imagine how much greater of a threat the individual is today.  

Even Sweden, which Senator Bernie Sanders has praised as being a beacon of democratic socialism, has limits to free speech. For example, in order for a publication to be protected under its Freedom of the Press Act, it must be registered with the state. That means that if a publication, not registered with the government, chooses to speak out against something the Swedish government has said or done, they are not protected under free speech laws.  

Millennials in America have been incredibly spoiled when it comes to free expression. Even though free speech appears to be under attack on many college campuses across the country, the United States still enjoys an unprecedented amount of freedom when it comes to expression, which is why it is so important to protect that right. 

If Millennials are serious about wanting socialism in America, they need to take a good hard look at civil liberties under collectivist rule. Though many are drawn to socialism because of the lure of free government handouts, Millennials need to realize that they are trading in their precious civil liberties in exchange for “free stuff.”  

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