Below in gray is a well done and thought provoking article from Jacob G. Hornberger of the The Future of Freedom Foundation. The common negative assumptions about the free market and its influence in history (child labor, benefits for the rich only, economic inequality) are rarely explained with hard facts, evidence, or even basic common sense. The growing fallacies that free market, laissez faire economics “screw the poor” and “benefit the rich” and the subsequent demand for more government intervention to cure economic ills are precisely what will lead to more misery and poverty. Government does not and cannot create wealth, nor can it cure poverty.

Economic Ignorance and Liberal Hypocrisy at DailyKos.com

A liberal named John Sumner, who goes by the pseudonym Devilstower, has weighed into the debate originally inspired by my article “Liberal Delusions about Freedom.” Sumner’s article, “What Conservatives Mean When They Say ‘Libertarian’,” which appeared yesterday on the liberal website Dailykos.com, reveals a lot about the liberal mindset as well as the reasons why America today is suffering so many economic woes.

Sumner takes me to task for singing the praises of our American ancestors, who chose a federal government without such statist programs as income taxation, Social Security, Medicare, Medicaid, welfare, public (i.e., government) schooling, food stamps, corporate bailouts, foreign aid, a central bank, paper money, drug laws, and many, many more.
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I don’t believe in Intellectual Property Rights. There. I said it. I know it sounds ridiculous for someone who hopes to make movies someday, but it’s true. And my reasoning is surprisingly economic in nature.

A Copy is Never Theft

Ideas are the only infinite resource. Everything else cannot be copied infinitely. If I have a loaf of bread, I can’t simply place it on the copy machine and make two loaves. But if I copy a book or a software program or a movie, then I now have two where I formerly had one. If it were your movie or your book, I have deprived you of nothing. If it was your idea then you still (mentally) retain the idea, and you have been deprived of zero physical property.

Mercantilism is Dead

Intellectual property rights were born out of mercantilism and governments failed attempts to keep “capital” within their own countries. Before the printing press the idea of “owning the intellectual rights” to your work was a non-issue. Copying books was very expensive and if your work was copied, you had received the ultimate form of flattery. This applied in all disciplines, including music and art.

Today, we understand the economic destruction a mercantilist systems causes, but cling to the idea of intellectual property rights, mostly via our patent system.

Fashion, Scents, and Emulation Innovation

Oddly enough, certain “intellectual property” remains outside the protection of the law. You can’t patent a scent. If I can figure out the formula for CK One and copy it, then I can market and sell it without any laws requiring me to pay royalties or give credit. Although admittedly, I would probably put on the label “compare to CK One!” to raise my sales.

The world of fashion also evades “intellectual property” laws. Every year, thousands of designers compete to create the latest fashion. Every year six months later you can buy clothes identical to those found at Talbots (TLB) at your local Wal-Mart (WMT).

Yet, Talbots not only remains in business but fashion is the second largest producing enterprise in the world (after automobiles). If the regulators and advocates of intellectual property law were right, then shouldn’t all the fashion designers be bankrupt? I know of at least one grave that should read: Christian Dior, Died Poor.

What the “Pirate” Teaches Us

Remember when VHS and cassettes were supposed to be the end of the music and movie industries? Those industries that felt threatened by such innovations quickly ran to the government to pass protectionist laws. Those who embraced the new technology like BluRay continue to reap the rewards.

Today, it will be no different for those who seek to profit off the likes of The Pirate Bay and online live streaming sites such as Megavideo or Justin.Tv. Many companies will bankrupt themselves paying for lawsuits in one last ditch effort to survive, but many more will thrive.

Capitalism could be called one giant conspiracy to reduce all profits to zero. I find it ironic the only system that will ever successfully achieve that which is the ultimate goal of socialism is freedom. When left to the free market, competition reigns supreme. Everyone is forced to innovate or die. History shows us that time and time again any company which ignores this fact will die not with a bang but a whimper.

Are you looking for those companies that stay on the cutting edge and find ways to profit from the internet and data revolution? Or are you relying on the government and laws to protect your investments? Let me hear your thoughts in the comments section below.

Was it the “free market” that exploited Japanese Americans in World War II? Was it “capitalism” that drafted thousands of young men to be sent off to Vietnam, with many to return in body bags? Is it the free market that implements mandatory wage and price controls, takes a third of each American’s income, and leeches money to politically connected corporations? Who is the true exploiter, free markets or government? All things involuntary and compulsory are not compatible with freedom, yet it is constantly government using its monopolized force to accomplish its various goals, not the market. In a free society and market your greed, anger, and any other such negative qualities are purely limited to free and voluntary exchange. You cannot work like government using coercion to sell your products, force to maintain your position, and threats of imprisonment as your insurance.

There are many social injustices, uneven economic scenarios, and plenty of misery in the world today. Saying these miseries come from the free market is a gross misunderstanding of where the free market itself is born: freedom. Freedom has its root in the individual, not in an all-powerful group of people such as government. If some people choose to live in a socialist system with limited property, redistributed wealth, and controlled production, there is nothing standing in their way. But the line is drawn when they feel they have the right to force others into the system. Freedom does not mandate how you live, it simply prevents you from coercing others (either an individual or a group) into a certain lifestyle. No one can force you to buy their product, live the way they think is best for you, and no sensible person can use force with bogus reasoning such as “protecting you from yourself.”
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What is the free market? What is capitalism? The short answer is they are both freedom. They are not a system of strings meant to be pulled by a select group of powerful individuals, they are simply the keys to a life of freedom and an individual pursuit of happiness. One of the greatest misunderstandings about capitalism and free markets is that they are locked into a certain setting. The “Invisible Hand,” supply and demand, or any other explanations given for capitalism make it sound like a man-made system or some mystical network mysteriously established in ways that only economists can understand.

Free markets are not rooted in the creation of man; they are not the creation of people or an act of government. Free markets are rooted in freedom and exist only due to freedom itself. Freedom is the natural state of mankind, it is the neutral being that governs existence. Freedom comes naturally, any other government or economic system must come forcefully. The beauty is that freedom not only “allows” but encourages creative solutions to common problems, it does not suggest or mandate that we only look for the “Invisible Hand” or supply and demand to solve an issue that might arise.

A free market is not a system set in stone: it’s not as if the success of the free market hinges on the success of a certain product or business. A free market is merely an extension of the gifts of freedom; everything, whether it be exchange, living styles, or those who you involve with, is based on voluntary action. Freedom thrives on non-coerced and voluntary decisions. When one person or a group of people use force to push forward one objective or another, freedom is assaulted.
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There is a buzz going through the Interwebs. Deflation is back, they say.  The core CPI numbers declined for the first time since 1982, down 0.1%

I’m going to discuss 5 topics today so let’s dive right in.

1  Why Deflationists are always wrong.
2. Why deflation, in normal circumstances, is a great thing.
3. Why the CPI is a useless statistic
4. A realistic assessment of current price levels
5. Why the Federal Reserve wants you to worry your poor little head about a 0.1% drop in price.

Why Deflationists are always wrong

According to deflationists, falling prices are right around the corner.  The inflationists, on the other hand, predict rising prices but often say that the rise may not come for some time.  You won’t hear a deflationist predicting prices falling by massive amounts.  They can’t tell you how long it will last or how severe it will be.  You never hear the term “mass deflation.”
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“Whenever you have truth it must be given with love, or the message and the messenger will be rejected.” – Gandhi

“You can chain me, you can torture me, you can even destroy this body, but you will never imprison my mind.” – Gandhi

These are just two of the many lessons it appears that Joseph Stack, aged 53, never learned. For those unaware, Mr. Stack set fire to his family’s home and crashed a private plane into the IRS Austin branch during the workday, killing one other person, injuring 13, and two of the injured are in critical condition. While full details surrounding this incident are still unclear, the FBI believes that his suicide note is genuine. Accounts from Stack’s friends indicate his acts were completely unexpected.
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James Cameron’s Avatar has shaken the entertainment industry in the past couple months, raking in more than $2.3 billion so far in the box office worldwide. I first saw the film in January and was blown away by the incredible visuals, a detailed exploration of the Na’vi culture, and what I thought was a masterfully told story (as common or predictable as it may be to some). Unfortunately, some conservative and libertarian writers condemn the movie as a wackjob combination of pro-Green, anti-military, and anti-capitalist thinking wrapped into a movie. However, when I saw the movie I thought it strongly reinforced the importance of private property, individual rights, and protection against central force.

Consider the planet Pandora, where the “savage” Na’vi tribes have made their residence for generations. Their planet is their property. When a human corporation backed by hired mercenaries (hardly a constitutional military used for national defense) establishes itself on the planet to further the exploration and mining of a valuable mineral called Unobtanium, they face severe blowback from the tribes. One of the first scenes in the movie shows a massive vehicle returning to base with several arrows stuck in the tires. The tribes understandably felt threatened and saw the human tactics as an invasion of their property. Is this really an attack on the principles of peaceful exchange common in a free market?

The Omiticaya tribe that is prominent in the film does not need anything the humans offer in return for the mineral whether it be roads, education, medicine, etc. Is this really unreasonable? Does an owner of a product not have the right to negotiate the terms of a transaction? The Na’vi are not being selfish, the humans simply do not have a product or service that is more valuable than the land itself is already worth to the Na’vi. It is the same as if someone was offering $10 for a family heirloom that you will never give up. Just because you refuse their offer doesn’t mean they can take that item by force, as the mercenaries in Avatar did.  Once again, this reinforces peaceful and voluntary exchange in a free market.
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One of the greatest misunderstandings we have with government today is its true and proper role. We have seen government continually grow through Republican and Democrat administrations and both parties, come election time, spout the same drivel that they think people will gobble right up.

You will notice that at every election the talk is always about how government will improve or stimulate the economy. Government is seen as the answer from both parties to build the economy to their liking. As government has worked itself into the economic affairs of people it is increasingly looked upon as the ideal way to stimulate the economy or “save and create” jobs.

The most crucial thing that we cannot ignore is the Constitution. The document that is supposed to restrain government gives absolutely no mention that its purpose is to create or maintain jobs, “strengthen” the economy, or get involved in any economic planning whatsoever. The Founders originally recognized that the federal government was to have very little control over the economy, in order to secure the freedoms and liberties of the people to make and control their own decisions.

Gradually over the past century, those in government have ignored the essential economic freedoms that were strongly protected in the Constitution. The passage of the 16th Amendment in 1913 and the ability of the government to tax citizens marked a beginning of the government’s economic entrenchment. How does giving the government the power to control how much of your own labor is actually yours even come close to fitting in with economic freedom? The ludicrous idea that we work several months every year for the government tramples the laws of freedom. It is central planning in one of its worst forms.

The expression (included in the Constitution) “regulation of commerce” was suddenly taken as an excuse to regulate the production, manufacturing, distribution, and sale of any product or item that the government felt it needed to. In the Founders time, regulation simply meant “to make regular.” Today government uses the word to influence or control next to anything it likes. This includes absurd regulations such as how much water a toilet bowl can hold and the size of holes in Swiss Cheese. The Constitution does not give the federal government near the authority to get this involved in affairs that would easily be solved by the people, market, and if necessary, the states.

Government has gradually shoved itself into the economy and individual affairs of the people. The Constitution’s protection of these basic rights seems irrelevant to the bureaucrats who can’t find anything that they won’t tax, regulate, or control in some manner. As the government takes more control from the people and adds to its own unconstitutional power, people become more reliant on the services of government. Individual initiative and responsibility slowly go out the door.

I cringe when I hear that the government needs to stimulate the economy or create jobs. Many people are so ignorant to believe that if we give government just a little bit more power, a little more control, that things will improve. It is a dangerous trend when people trust government more than their own judgment and choice.

Economic sustainability cannot come from government. It is impossible for government bureaucrats, regulators, and planners to calculate rewards and corresponding risks than the people who are actually putting their time, money, and labor on the line. As we have seen largely in the past decade, these public officials have absolutely no connection to fiscal sanity and the concepts of living within your means and suffering the consequences of reckless behavior.

Many politicians won’t stop preaching that the free market brought us into this economic mess. They say that capitalism and freedom breed greed and corruption. We can be sure that these statements are full of hot air when you consider that we haven’t had a “free market” for quite some time. Government has gotten itself so entrenched in individual lives, businesses, industries, and the whole economy that it isn’t humanely possible for us to have or have had a “free market” in recent history. The effects we are seeing today are the direct results of central planning, a government with little regard for the rule of law, and the consequential disregard for individual responsibility, personal freedom, and local governance.

I would hope that people can see the failures of central planning just by looking at the events of the past couple years. It is grossly unconstitutional, intrudes on the most basic traits of human nature, and does nothing but transfer the power of the people to the government. It is not sustainable, efficient, or productive. On another level it is not moral, sensible, or legal.

In short, government is not here to create, save, or guarantee jobs. Government is not here to stimulate the economy. Government’s primary purpose, as the Founders and the Constitution recognize, is to protect and defend individual liberty and freedom (including economic liberty). Government in its best role, which the Founders tirelessly pursued and fought for, is one that stays out of the affairs of the people, allows them to make their own decisions and choices, so long as they don’t intrude on the freedom or liberty of another individual.

Liberty is one and the same; it is not meant to be separated by government into groups, economic liberties, or civil liberties. Constitutionally (and I would think morally) the government does not have the authority to decide which liberties we can and cannot manage on our own, whether it be financial liberties, economic liberties, or civil liberties. One natural liberty without another is like a tree without its roots or branches. All-inclusive individual liberty is the only true liberty.

Today, for the first time since May 1, 1997, the Dow closed below 7,000, down 4.24% to 6763.29. It has been nearly twelve years since the market has seen these levels, and that was when the tech boom was going full throttle, well before the 2000 correction.

Did we even have a complete correction in 2000? With a central bank making the calls of monetary policy, I’ve realized that we cannot know whether the correction was actually sufficient enough to clear out all the malinvestment and bad management decisions. Think about it: interest rates were sharply lowered, credit was injected into the economy, and before too long the economy was back on its feet again (thanks in part to the new housing bubble). Just because the recession may have been weakened by the Federal Reserve’s intervention, it doesn’t mean that it wouldn’t have negative consequences later on. In a true free market where the market would control money and credit, this would be much easier to analyze. We do not have that convenience though, because we have to live with and analyze the actions of the select, unelected few who call the shots.

I bring this up because we obviously do still have market forces at work. Despite regulation, intervention, and manipulation on the part of the government and Federal Reserve, the underlying powers of the market do not disappear for good. Today the stock market has been sent to levels prior to the correction of 2000, and I can’t help but speculate that part of this is because investors are starting to understand more deeply the consequences of credit manipulation from the Fed, as well as an inflationary monetary system.

Over time, we as a nation have subscribed to the Keynesian belief in economics that you must spend and inflate your way out of economic hardships. This is the root of our largest problems today. Some of the key principles of capitalism are saving and investment, but over the past century we have gotten the mindset that it is the government’s responsibility to manage and influence the economy. It is this belief in inflation and debt financing that has caused us to get so overwhelmed by a correction that is beyond the hands of government and central planners.

What if, by lowering interest rates to artificial lows in 2000, Greenspan prevented, or rather delayed, areas of the market that didn’t fully correct? What if providing such cheap money was one of the primary reasons for the largest and most irresponsible bubbles this nation has ever seen? A small group of central planners, if they worked 24/7, could not get close to controlling the marketplace in a more efficient and responsible manner than a capitalist free market. With the key influence of money and credit out of the hands of the consumers and investors, I find it very hard to believe when people blame our problems today on the “free market”.

No matter what political, economic, or social systems are in place, the forces of the free market are always at work. This is why every nation that has tried its way with a fiat monetary system has not lived to see its lasting success. No piece of paper guaranteed by a government and central bank can take the place of gold and silver, the only items consistently and universally accepted as currency in all of human history.

Every attempt at government and central planning is an effort to go against human nature. Capitalism is not about “greed” as many have made it out to be. Capitalism is the only economic system that supports, rather than discourages, the profit motive. Capitalism is a consumer driven economy, which leads to lower prices and higher quality products. In a true free market capitalist society the regulation of the market, not the government, is unleashed in full force. The ability of free choice and individual responsibility will outweigh any government bureaucracy’s ability to regulate.

The government and Federal Reserve do their best to limit individual responsibility and ability. Over the past year we have been forced to bailout massive corporations and essentially the whole government-managed banking industry. If these were such pressing matters, why not leave it up to the people to decide whether or not these corporations were “too important to fail” and deserved money of which they had earned not one penny? If it was such a pressing matter, there was nothing stopping people from sitting down and writing a check for the Treasury to distribute to its banking buddies.

We have lost the ability to make our own decisions with our money. Talk about taxation without representation: over the past year, the Treasury Secretary and Federal Reserve Chairman (formerly Hank Paulson, now Tim Geithner and Ben Bernanke), two unelected officials, have handed out trillions of taxpayer dollars.  This past December, former president George W. Bush ordered an “emergency” bailout of the auto industry. Rather than let these mismanaged auto businesses fail, reorganize, and come back as a stronger entities, the taxpayers are being forced to pay the bill for stupid mistakes made by the businesses. In other words, if we decide to not buy their crappy vehicles, we’re forced to bail them out with our taxpayer dollars.

The regulatory abilities of the free market are starting to rev their engines. The monetary dictatorship of the Federal Reserve cannot manipulate credit and destroy the value of the currency without serious repercussions. Bailing out failed and irresponsible business decisions won’t eliminate the problems of mismanagement and malinvestment. Nationalizing industries will not lessen the pain felt by the consumer during this economic crisis, nor will increased regulations.

Countless times our officials have gone with short-term solutions that ignore the laws and history of economics. They go for the route of more government intervention and involvement in the economy. Many people today can’t comprehend a system where the government wasn’t responsible for getting the economy out of a recession. Somehow people fail to see that this is not a problem caused by lack of spending, but lack of saving. It’s pretty simple: Congress encouraged businesses to hand out irresponsible mortgages that they knew people couldn’t afford, people took these irresponsible mortgages they knew they couldn’t afford, and both sides of the party went deeply into debt. But rather than take the signals of the recession that we need to cut back on spending and increase our savings, the government has gone on a spending rampage in the past year, the likes of which the world has never seen. Not to mention that this is money we do not have, which only means it will come through more borrowing and inflation of the dollar.

The free market has been put off and suppressed for a good amount of time now. However, like I said, its forces can and will never completely disappear. Human nature, common sense, and the yearning for individual responsibility will eventually outwit and overpower all regulatory and deceitful agencies keen on destroying those very principles and natural laws. History shows there are no exceptions.