Social Order and Political “Leaders”

Social Order and Political “Leaders”

Thomas Hodgskin was a great classical liberal leader. His book has this quote about Social Order and the motivations of other polical “leaders” he knew in Parliament.

His insights anticipated the Public Choice School of economists, who teach us to look to the behavioral motives of elected officials and their bureaucratic employees. His book: The Natural and Artificial Right of Property Contrasted (1832) was very important in the 1830s’ British debates about the proper role of government. He strongly opposed Jeremy Bentham’s and James Mill’s Utiliarianism, and he directly influenced Herbert Spencer.

See George H. Smith’s series on this great classical liberal.
Hodgkin’s independent spirit, his intense dislike of unjust authority, and his determination “to make a powerful resistance to oppression every time [he] was its victim” was forged during a brief career in the Royal Navy. One is reminded of Herman Melville’s story of “Billy Budd.”

Let’s take this complex quotation and break it into four segments of argument.

  1. What is “social order”? How does it arise peacefully?
  2. Social order occurs prior to the State and legislators.
  3. Legislation attempts to freeze out natural changes.
  4. The political meddling by politicians introduces social dis-order.

1. What is “social order”?

“Social order is the mutual dependence of all those who contribute to the subsistence and welfare of society. It includes the manner in which they assist and protect each other, and provide for the mutual wants by the interchange of their respective products. . . .”

Hodskin defines “social order” as a process F.A. Hayek would later describe as “spontaneous order.” It arises from the evolution of usage and successful experimentation just as all social customs evolve, as well as our common language.

2. It is prior to government

“If by social order be meant the great scheme of social production, mutual dependence, and mutual service, which grows out of the division of labour, that scheme I will boldly assert the legislator frequently contravenes, but never promotes – that grows from the laws of man’s being, and precedes all the plans of the legislator, to regulate or preserve it. . . .”

The bureaucrats and Parliamentarians who make regulations and laws are restrictive and seek “to regulate or preserve” the status quo for the benefit of vested, crony interests.

3. Political meddling is costly

“In fact his attempts to keep in one state what is continually in progress are mischievous. . . .”

The bureaucrat and the legislator cause more direct and indirect harm to the peaceful operation of social order than they intend. We can measure this in the rent-seeking costs of lobbyists and protectionists, and the expense of compliance with regulations.

4. The motivations of the lawgivers

“We must then set aside as mere pretexts the assertions of the legislator, that he intends to preserve social order, and promote the public welfare; and we must deal with legislation as solely intended to preserve the power and privileges of the legislator.”

The meddling of the political “leader” is for the purpose of keeping himself and his peers in power. Whether this is a conscious “conspiracy” of political parties, or an indirect effect of making incentives for rent-seekers to work for protectionism, the results are the same for average people: lower standards of living.

The model of “the legislator” in Thomas Hodgskin’s writing is Jeremy Bentham and his protege James Mill, who saw in mechanistic Utilitarianism the key to setting up a “designed,” positive-law utopian scheme for government. This Utilitarianism almost destroyed the classical liberal arguments for human rights and civil liberties in the early decades of the 19th century.

Thomas Hodgskin and Herbert Spencer preserved the original, central argument for private property rights developed by John Locke on the premise of a peaceful “social order,” contrasted with the ideas of Thomas Hobbes (human lives are “nasty, brutish and short” due to warfare of “all against all” in nature). This discussion should now turn to John Locke’s innovation in his 1st and 2nd Treatise on Government.

Who Sets the Minimum Wage?

Debate in the political media about whether the Minimum Wage ought to be $15.00 per hour is silly. I italicized “minimum wage” above because we don’t know what that means, and we all believe we do. It has become “a Thing” instead of a price.

The wages of labor are paid by employers who have work to do and need someone to do it. Sometimes the employers need workers who are smarter than their managers and other times they need workers who are not smarter. They reward the workers accordingly.

Nobody can find anything wrong with that model of correct and moral behavior in the employer-employee relationship. Pay for work performed. Pay promptly. Pay in good “legal tender,” whatever that means.

The idea that a government should create a law telling employers, or potential employers, they are forbidden to pay anyone less than a certain floor price for labor will find itself creating an artificial surplus of labor at the lower supply-curve range. Elementary price theory, long known to be valid.

But what is “magical” about a Federal law? What is more logical about a local law? And what is most logical would be to let each employer decide for his own establishment what the starting or minimum (disliked) wage should be, as workers would want to increase it by demonstrating more quality and effort.

American Eagle Gold Bullion Coin

December 17, 2015, will be the 30th anniversary of the signing into law of the American Eagle Gold Bullion Coin legislation, by Ronald Reagan. This is today Public Law 99-185 [31 USC 5112(a)(7…11),(i),(q) – and “legal tender” 5112(h)]. The law created a US Mint coinage based on troy ounces of fine gold. The denominations were $50.00 per ounce, $25/half, etc.

Credit is due to Rep. Ron Paul (R-TX) who introduced the original legislation in the 98th Congress as H.R. 4226 (10/26/1983). It did not become law during his term in Congress. In the 99th Congress Rep. Jerry Lewis (R-CA) reintroduced the bill with co-sponsorship from Rep. Julian Dixon (D-CA), and Sen. James McClure introduced the Senate bills. President Ronald Reagan signed the law on December 17, 1985.

The design artist, Miley Busieck, whose “family of eagles” was specified in the law, was instrumental as a visitor to each Congressional and Senator’s office with her sweet persuasion in favor of the gold coinage. This is the first legal tender relationship between the US Treasury and a weight of gold since the classic days before 1933.

What I wrote some years ago:

February 8, 2008
Story of the Gold Coinage

Richard Cobden, free trade

Richard Cobden, was a Richard Cobden
Member of Parliament. He is still a strong voice for free trade, as “best” British (and universal) commercial policy. He was able to win his government to free trade in 1846, with a half-century of strong economic growth to follow.

This great idea, of the connection between free trade and peace, was urged at a time of a great delusion about “balance of power” and Russia. It sounds familiar to a 20-21st century observer. Cobden’s classical Liberal Party dominated the government during the following decades and Britain “ruled” the world in a period of great peace and prosperity.

His 2nd greatest achievement was the Free Trade Treaty with France (1860), which became a model for many other such treaties that opened up other countries; Britain was not “closed” again until conservatives took the government and wanted to enhance “imperial preference” in trade. Then the Boer War and the first World War were indirect consequences of that new direction for commercial policies, as other governments followed Bismarck instead of Cobden.

Wars historically come in years/decades following the closing off of an era of “free trade” as Britain enjoyed through the mid-19th century.

The TPP: Don’t Let Perfection Become an Enemy of “Good Enough”

    “When politicians can determine what can be bought and sold, the first thing to be bought and sold will be politicians.” – Mark Twain

The Trans-Pacific Partnership is just a continuation of what Reagan-Bush started with NAFTA and the Uruguary Round of the General Agreement on Tariffs and Trade (GATT), now renamed “World Trade Organization” (WTO).

One criticism of TPP is “super courts” (arbitration panels). All those arbitration panels are the enforcement process, and the other criticism is all the “protections” for pharmaceutical patents and recorded music and films. But that is just US imperialism. It is just an extension of US domestic law. It is actually quite a crony capitalist demand by the US government, in favor of enriching some powerful vested interests in the United States, by requiring those other governments to arbitrate when ASCAP sues. Hollywood money?

Those who favor TPP point out that it is “process” more than a Thing. The vote in Congress to approve it becomes a very technical and comprehensive package of amendments to existing US laws. For example, some 1930s law regulating pork might have to be changed due to some way it held up selling Vietnamese pork products in the US market; the Vietnam government demanded it, to help Vietnamese pork exporters. The Congressional vote to accept TPP cannot be “amended” just to give a reversal-vote for the US pork producers, who themselves have been enjoying protectionism since the 1930s – even if the pork producers have bought every Congressman.

Always Remember: Trade treaties are always “trade off” negotiations. Each side gives up something. In trade treaties, each side agrees to stop punishing its own people. That is considered “giving up something” in mercantilist economics.

We all agree the “best of all possible worlds” would be Universal free trade, no barriers and every merchant and retail distribution system should honor “national treatment” of foreign goods’ imports and foreign service providers (e.g. doctors, lawyers, architects, financial services).

So, in a less than “best” of all (im)perfect worlds, the Trans-Pacific Partnership goes with:

  1. an increase in “the rules of Administrative Law” (a bureaucratic “cost”) in exchange for
  2. a more level and uniform “playing field” for international trade in services and intellectual property. Those, after all, are what the United States increasingly now exports to the rest of the world.

The True Opponents of the TPP (as they have also been against NAFTA, the WTO and Colombia FTA, et al.) are Labor Union Leaders. The “Rank and File” of labor unions probably don’t care about the issue, except to the extent their “leaders” sell them on a propaganda campaign about “cheap foreign labor.”

Labor union leaders depend on a revenue source to pay their own salaries and maintain big offices and private planes and publicity. They collect union dues. Whenever a union’s member-workers lose their union jobs, due to imports, the workers might go on to do some different work. But the union leadership would lose their dues paying members. More free trade tends to dry up union revenues, just as competition in schooling tends to dry up government-employee teachers’ unions’ revenue. (And we know what that means to the finances of the Democratic Party.)

The Economic Truth of any agreement like the TPP is that Some Americans will LOSE, just as Some Asian or other government-protected interests will be traded away (sacrificed) by their own governments. On both sides, there are losers, as well as many more diffusely widespread and a greater number of [smaller amount] winners over the years of future growth and division of labor.

Normal people think it is good to have future growth and division of labor, and could call it “Progressive,” but Union officials in particular and economically illiterate “socialist” partisans will oppose all open international trade if buyers might be given a free choice without paying a penalty tax.

The system of of the TPP (and the WTO and NAFTA) is to enact “norms” of equal treatment for all persons who trade inside a member country. It is called “national treatment.” It is what we have enjoyed inside the USA since before 1776.

Putting local, domestic USA special interests on the “chopping block” is good for every other American, because only protected vested interests can be “sacrificed” by governments that surrender the uneconomic and undeserved protections, and sign a trade agreement – as a “concession.” (This is a “concession” like agreeing not to cut off your nose to spite your face if the other side agrees also not to cut off its collective nose.)

More free trade is about Larger, more extensive markets and greater division of labor. Restricted trade is about Smaller markets and more special protections for political groups, crony capitalists, and payoff for politicians (without whom, the smaller market could never be enforced).
This item has been published in The Washington Times, Monday, November 9, 2015 [link]

The Coming Currency “War”

in electronic

The Coming Currency “War”

Gold or Paper?

We studied the period in U.S. history when silver advocates were politically important as a group in the Democratic Party.  They wanted “free coinage of silver” as a way to promote inflation.  Farmers and others, deep in debts, also liked the inflationary paper money “greenbacks” issued during the Civil War, and wanted more of them.

During the Civil War, many basic commodities had two prices.  Many buyers wanted to pay in paper “greenback” dollars. Those had green ink on the back of the dollar bill for the art work.  The fronts of all dollar bills have always been black ink.

  • A seller (merchant, trader) might set some quoted prices in Greenbacks.
  • A seller was also free to set other quoted prices, a different currency – Gold Dollars.
  • The United States economy was officially a parallel currency system of payments. Tariffs were only payable in gold dollars, but income taxes were measured in greenback dollars.

As defined in US Law by Congress before – and during – the Civil War.  Interestingly, the Confederate States also continued to use the US dollar coins by weight, and in circulation.  A few specimens were minted with a new design for the CSA, but never in circulation.  The exchange rates were mostly between USA “dollars” and CSA “dollars.” Southern governments and private banks caused a disastrous paper inflation, just as during the American Revolutionary War, but it was all “legal tender”:  parallel dollar currencies.

The Gold Dollar

On December 17, 1985, President Ronald Reagan signed Public Law 98-185, the “American Eagle Gold Bullion Coin Act.”  It called for the US Mint to manufacture and sell to the public legal tender gold coins with One Troy Ounce and fractions for smaller coins.  The gold dollar denomination for the coin is $50.  [ 31 USC 5112 ]

The normal electronic payments-processing, in units of the “gold dollar,” are already occurring in the United States.  The in Salt Lake City issues a Visa card for access to the payments system, and automatic exchange between paper and gold dollars.The Visa card is managed by and one’s gold holdings can be spent in paper currency units by setting up a gold-balance automatic overdraft system, so your savings in gold are not exposed to the up/down of the “dollars” on the card. Paper values stored on the card temporarily would appreciate or depreciate as the rate on gold moved, but you could always make a “paper dollar” payment for daily use, even in euro or yen. International oil and gasoline are priced in paper dollars.

I am suggesting that in the future, we may see sellers asking buyers “What will be your form of payments?”  The plausible answers might be (1) euro, (2) yen, (3) pound, (4) US dollar, (5) US Gold Dollar.  This last, of course, is 1/50 the recent London PM fix level for gold. [ 31 USC 5112 ]

Decline in gold value of paper dollars
As each Federal Reserve Accounting Unit Dollar buys less gold, it also buys less of everything else.

On Nov.1, 2015, a payment of $100.00 would buy you about 2.724 grams of gold.  One “gold dollar” as established by Congress in 31 USC 5112 is equal to .02129
mg of gold.  If you extend the chart above to a more recent date the exchange rate between paper and gold “dollars” is $24.17 Federal Reserve Accounting Unit Dollars for one US Mint coined dollar, down from $22.84 just 100 days earlier.

    [ Author’s update: The price of gold (value of the USD) has changed: on Feb.7, 2016, it was 1/$1,208.61 oz. = 25.735 mg of gold, and one Gold Dollar = $24.17.
    This Gold Dollar currency, authorized by Congress in 1985, re-established the market conditions we saw during the Civil War, particularly in the North.
    A payment of $100 in Federal Reserve Accounting Unit Dollars will get you only 25.735 mg of gold as of Feb.7, 2016 – down from 25.724 mg about 100 days earlier. ]

Remember it is the inverse math of dollars divided by gold, not price-quoted gold milligrams (weight in dollars).

A “parallel currency is not unusual in economic history, but governments do not like losing the monopoly first declared by Caesar Augustus. Personally, I think it is time to stand with Brutus and denounce the Imperium of currency monopoly.

Joe Cobb


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