It was an oppressively hot August day, when I heard on the radio that Czechoslovakia had been invaded by Soviet troops. I was 9 years old, and a sense of fear gripped me, as the grown ups seemed unusually worried, suddenly facing the prospect of war again. Mom and Dad, who had gone through the Second World War, had taught me to fear war.
When I visited Communist Czechoslovakia in the mid and late 70s, I could sense a mood of resignation and cynicism among the people I got to know more closely. By their own perception, which would prove right with hindsight, those in their best years then were a lost generation, robbed of national pride, humiliated by a farcical socialist Leviathan and utterly lacking in the life chances of a modern Westerner.
The illusions that I had entertained about socialism were brutally destroyed by visiting that bleak and grotty planet where people were made to hurry about like puppets so that some intangible anonymous power could have its socialism. The Communist Prague I knew was populated by Kafkas entangled in an absurd play.
It is awkward to think that the West was right not to interfere militarily, and that those who decided it was better not to die defending their budding freedom had made a wise choice.
We who worry about our freedoms, how much resignation and cynicism are we entitled to?
The cow on the old wall: Since there was lots of excellent grass on the old wall, some of the citizens of Schilda proposed to let a cow graze on it. A rope was put around the cow's neck and a group of strong men hauled her up. In the process, the cow got strangulated. When the citizens of Schilda saw that the cow was sticking her tongue out, they would jubilate: "Look she's grazing!
The federal government is moving towards abolishing the Renewable Energy Target rather than scaling it back in a move that will cost almost $11 billion in proposed investment and which is at odds with the views of its own Environment Minister.
Let’s parse this sentence bit by bit.
Scaling back the RET is described as “a move that will cost almost $11 billion in proposed investment”. “Investment” is one of those hurrah words so that anything that can be described as investment is automatically given a warm reception. What cutting the RET will actually do is cut almost $11 billion dollars of waste. Eleven bil on more windmills and solar panels would not get you back ten cents in the dollar. Stopping such expenditure dead in its tracks will only promote future economic growth, or at least it will if the government doesn’t decide to spend the money itself in some other totally useless way.
Here is the message: DO NOT SPEND MONEY ON ANY SINGLE INVESTMENT THAT WILL NOT OF ITSELF AND ON ITS OWN PROVIDE A POSITIVE RETURN ON FUNDS EMPLOYED IN A REASONABLE PERIOD OF TIME (LET US SAY THE NEXT THREE YEARS). If you can’t see a return, and prove it in a published cost-benefit study, don’t do it.
I don’t say you shouldn’t provide welfare. By all means provide welfare. Let us look after the sick, the aged and the disabled. But here, since the demands are near infinite, judicious allocations of funds will be required. But while welfare expenditures may be important for those who are unable to work or are too old to work, none of these expenditures will promote economic growth and future prosperity.
We do not have an infinite pool of productive resources. We must prioritise. Removing renewable energy targets is pure profit for the economy, a 100% benefit. So would getting rid of paid parental leave. Get rid of them both at once. I wish the NBN was also up for grabs since getting rid of it would also be a net positive.
And I should finally mention since I am throwing it all into the pot, do not raise taxes on anything in any part of the economy. If the kinds of revenues you are in receipt of are insufficient to pay for everything in the basket, then take some things out of the basket.
The two major problems with modern liberalism (European meaning) are a lack of
(1) theoretical fortitude to generally deal with the vast fields of contingency and indeterminacy opened up by greater freedom, and more specifically, a lack of
(2) doctrinal maturity to guide it in political participation.
Both deficiencies have a common source. The model of social order underlying modern liberalism is the market. But the market is only a subset within the broader social order.
Hume or Smith were never in danger of reducing the system of liberty to a mechanism that describes free markets. But when Hayek speaks of spontaneous order, he is already propagating the narrower vision.
I do not know when and why it occurred, at any rate, the tragic turn of liberalism looms when sight is increasingly lost of the spontaneous order of society at large.
Why would liberalism suffer such constriction? Maybe because its roots lie in a precapitalist world, and more importantly in a world where government could not possibly be anything but very small by later standards. Maybe because its heyday coincided with the breakthrough of commercial society. Small government and commerce looked like the essence of liberalism. They appeared to offer liberalism's ultimate formula for success.
Now, let me explain what I mean by "the vast fields of contingency and indeterminacy opened up by greater freedom."
(1) Freedom brought about capitalism. (2) Capitalism brought about wealth. (3) Wealth required and enabled mass political participation, and wealth made possible government endowed with unprecedented resources. (4) Mass political participation brought about unheard of demands on the state. (5) Unheard of demands on the state brought about big government.
Freedom brought about big government.
It is useful to think outside the usual box, for a moment, and admit that there are not only silly and objectionable grounds for a larger state to happen. At least from stage (3) on, the delta of implications deriving from mass political participation and unprecedented publicly available wealth becomes much too broad and complicated, too contingent and indeterminate to simply wipe away any consideration of larger government as an expression of base doctrinal dazzlement.
However, this is exactly the error committed by the liberal movement. By its very structure, the liberal doctrine was conditioned, or at least predisposed to heavily underweight political processes and the dynamics of state institutions and government. Liberalism yields to this propensity at a time when these are becoming the most powerful forces in society, next to free markets and civil society, by which latter I mean the growing independence of humans and organisations from the tutelage of the powers-that-be.
The irony, nay, the tragedy is that liberalism becomes a creed of political abstention, just at the time when liberty is taking off in the biggest possible way. This is the dawn of the era of the paradox of freedom. Liberty proliferates and grows all over the world, but liberals hardly participate in shaping her fate. Those among them ready to accompany liberty in the political realm quickly amalgamate with other political schools uninhibited to regard politics as a welcome tool to bring mankind advances that the smaller governments of yesteryear were utterly incapable of. This is the reason why, for instance, the German liberal party has become yet another branch of social democracy a long time ago. A liberal party, a strong liberal force in politics is simply not conceivable under the core paradigm. A liberal must cheat or desert in order to become politically effective.
I must use the word for the third time: it is a tragedy that the audacious vision of perhaps the greatest liberals ever, and the unparalleled success of their political activism have not become the guiding light of modern liberalism. Instead, liberals live estranged from and often embittered by a time characterised by more freedom than has been experienced in any period before ours.
It has been frequently remarked that it seems to have been reserved to the people of this country, by their conduct and example, to decide the important question, whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are for ever destined to depend for their political constitutions on accident and force.
(Federalist 1, par. 1)
The answer to this puzzle is not a foregone conclusion - it is an ongoing process of political activity producing partial answers.
Today marks the 100th anniversary of the outbreak of the "Great War" – World War I. This is how the catastrophe unfolded:
So then, we have the following remarkable sequence of events that led inexorably to the 'Great War' - a name that had been touted even before the coming of the conflict.
Austria-Hungary, unsatisfied with Serbia's response to her ultimatum (which in the event was almost entirely placatory: however her jibbing over a couple of minor clauses gave Austria-Hungary her sought-after cue) declared war on Serbia on 28 July 1914.
Russia, bound by treaty to Serbia, announced mobilisation of its vast army in her defence, a slow process that would take around six weeks to complete.
Germany, allied to Austria-Hungary by treaty, viewed the Russian mobilisation as an act of war against Austria-Hungary, and after scant warning declared war on Russia on 1 August.
France, bound by treaty to Russia, found itself at war against Germany and, by extension, on Austria-Hungary following a German declaration on 3 August. Germany was swift in invading neutral Belgium so as to reach Paris by the shortest possible route.
Britain, allied to France by a more loosely worded treaty which placed a "moral obligation" upon her to defend France, declared war against Germany on 4 August. Her reason for entering the conflict lay in another direction: she was obligated to defend neutral Belgium by the terms of a 75-year old treaty. With Germany's invasion of Belgium on 4 August, and the Belgian King's appeal to Britain for assistance, Britain committed herself to Belgium's defence later that day. Like France, she was by extension also at war with Austria-Hungary.
With Britain's entry into the war, her colonies and dominions abroad variously offered military and financial assistance, and included Australia, Canada, India, New Zealand and the Union of South Africa.
United States President Woodrow Wilson declared a U.S. policy of absolute neutrality, an official stance that would last until 1917 when Germany's policy of unrestricted submarine warfare - which seriously threatened America's commercial shipping (which was in any event almost entirely directed towards the Allies led by Britain and France) - forced the U.S. to finally enter the war on 6 April 1917.
Japan, honouring a military agreement with Britain, declared war on Germany on 23 August 1914. Two days later Austria-Hungary responded by declaring war on Japan.
Italy, although allied to both Germany and Austria-Hungary, was able to avoid entering the fray by citing a clause enabling it to evade its obligations to both. In short, Italy was committed to defend Germany and Austria-Hungary only in the event of a 'defensive' war; arguing that their actions were 'offensive' she declared instead a policy of neutrality. The following year, in May 1915, she finally joined the conflict by siding with the Allies against her two former allies.
Again, let me emphasise that participation in political competition, political engagement, and hence the work of politicians are of the essence in defending the system of liberty that underlies our civilization.
Just ponder these words of a politician:
…However, I leave the post with great misgivings about the power and irresponsibility of - to coin a phrase - the Green Blob. By this I mean the mutually supportive network of environmental pressure groups, renewable energy companies and some public officials who keep each other well supplied with lavish funds, scare stories and green tape. This tangled triangle of unelected busybodies claims to have the interests of the planet and the countryside at heart, but it is increasingly clear that it is focusing on the wrong issues and doing real harm while profiting handsomely. Local conservationists on the ground do wonderful work to protect and improve wild landscapes, as do farmers, rural businesses and ordinary people. They are a world away from the highly paid globe-trotters of the Green Blob who besieged me with their self-serving demands, many of which would have harmed the natural environment. I soon realised that the greens and their industrial and bureaucratic allies are used to getting things their own way. I received more death threats in a few months at Defra than I ever did as secretary of state for Northern Ireland…
Chris Berg of Australia's Institute of Public Affairs discusses "Too Big To Fail", and comes to a different conclusion than I do. He argues that the problem cannot be solved because it is an inherent concern of politicians to protect certain companies or institutions from terminal collapse.
I would argue, that only politics can change the present state of affairs. However, if libertarians are unwilling to participate in politics, eschewing the competition for political dominance of the state, matters are indeed bound to linger on in their unsatisfactory condition.
"Too big to fail" describes financial institutions, mostly banks, which have become so large and so deeply integrated into the financial system that if we let them collapse they would take everything else with them.
If a corporation is too big to fail, then, it follows, taxpayers have to bail them out.
It's quite a problem. A market economy is supposed to be dynamic, full of entries and exits. Firms that add economic value thrive. Those that do not go broke.
So bailing out failed companies makes the economy less efficient. More gallingly, it redistributes money from the poor to the rich. And it creates "moral hazard" - a belief by management that ultimately they won't have to pay for their mistakes.
Moral hazard is a particularly severe problem for banks. Banks trade on risk. A bank's basic job is to transform short-term highly liquid deposits into long-term extremely illiquid loans. Too much of the latter will prevent redemption of the former.
Too big to fail encourages banks to make riskier loans. Why wouldn't they? They're not the ones bearing the cost of failure. Taxpayers are.
So it would be great to get rid of too-big-to-fail. Or at least limit it somehow. The Murray Inquiry has a few ideas: higher capital requirements for bigger institutions, for instance, or new procedures for when banks do fail.
But the question isn't what should we do about too-big-to-fail but what can we do about it.
And the answer to that question is almost certainly nothing.
The trousers Hitler was wearing when the bomb exploded. Image credit.
The toughest fight in my life? It took place in 1973. I was 14, a judoka at an early age, by now brawls were getting rarer in my life. At the time, I was attending boarding school in St. Blasien. One weekend, my age group went on a retreat in some remote place in the Black Forest, staying in rustic cabins and being half entertained, half challenged by a mixture of games, religious instruction, and outdoor activities.
One of the games we played was of a martial nature, culminating in a wresting battle between my age group and the boys of the next higher age group.
I found myself fighting a guy easily a head taller than myself. A swift winner, I was not used to extended fights. But this guy was skilled and unusually ferocious, marshaling energies absolutely disproportionate to his wiry body. The fight went on and on and on, becoming increasingly painful owing to mounting fatigue and the savagery of two fighters incapable of conceding defeat.
Eventually the fight petered out with no clear winner - which deeply shamed us. We parted without feeling respect for one another. For the rest of the weekend, we remained distrustful of each other, perhaps contemplating a renewed confrontation, and mostly grappling with the tremendous disappointment not to have won.
It did not mean much to me at the time -- today, however, it makes me more ponderous to think that I fought the grandson of the man who tried to kill Adolf Hitler: Claus Schenk Graf von Stauffenberg. Writes my opponent's father:
"It was actually the next day that my mother took me and my brother aside and told me that it was our father who'd laid the bomb. I said 'How, could he do it?' And she said, 'He believed he had to do this for Germany.'"
"It was a total shock, I couldn't believe it. An attack on the Fuhrer! We were brought up in school and everywhere else, to believe that the Fuhrer was a wonderful man."
Read a fuller account of the attempted assassination here.
As of today, Australia no longer has the most expensive “carbon” price in the world. The voters didn’t ask for a tax in 2010, but it was forced on them in 2011. They rejected it wholeheartedly in 2013 but it still has taken months to start unwinding this completely pointless piece of symbolism which aimed to change the weather. The machinery of democracy may be slow, but this is a win for voters. 11:15am EST today: The Australian Senate passes the carbon tax repeal bill.
“Australia has become the first country in the world to abolish a price on carbon, with the Senate passing the Abbott government’s repeal bills 39 votes to 32.“ SMH
Now we need to turn off the tap to all the other green gravy rent-seekers who ignore the evidence.
Superb Argentina were absolutely on a par, but Germany win the world cup, owing to greater stamina in overtime, and a dream goal scored by Mario Götze in the 113th minute. In the second half, Argentina were denied a penalty after a foul perpetrated by Manuel Neuer, Germany's goal keeper, who should have seen a red card for it.
Be this as it may, Germany is in high spirits and having a great summer - I hope, the same is true for you.