The unintended consequences of the New Deal are slowly but surely being brought out into the open. Hoover’s Dam demonstrates how government policies can destroy the environment (in this case overusing the Colorado River), create unnatural and unsustainable economic development, and inevitably be brought to a point of collapse. This article was written by Douglas French.

Economics professor Bernard Malamud not once but twice invited the crowd in Las Vegas to visit nearby Hoover Dam to see for themselves an example of the productive assets that were created by Franklin Delano Roosevelt’s (FDR) New Deal. Professor Malamud was recruited to plead the Keynesian side of the argument in an “FDR’s Depression Policies: Good Deal or Raw Deal?” debate with the Foundation for Economic Education’s (FEE) Lawrence Reed during FreedomFest.

I finished my masters degree from UNLV under the tutelage of Murray Rothbard but I started my coursework with a class or two from professor Malamud, who, while being as Keynesian as they come, is at least sympathetic to the Austrian view when it comes to explaining speculative bubbles. He certainly took on Mr. Reed with good humor in front of an unfriendly, anti-FDR audience.

Malamud’s thesis is that no matter what your ideology, New Deal economics worked! The economy was in the midst of a terrifying deflation spiral. Treasury Secretary Andrew Mellon was saying things like “Liquidate labor, liquidate stocks, liquidate farmers.” The money supply was dropping, strangled by a rigid gold standard. The private sector was not eager to invest, so an alphabet soup of federal programs — like the CCC, CWA, WPA, FDIC, SEC, FSLIC — had to fill the void, putting people back to work, stimulating aggregate demand and providing for FDR’s four freedoms: freedom of speech, freedom of belief, freedom from want, and freedom from fear. At the same time, FDR’s “playing with the price of gold” as Malamud put it, loosened up the money markets.

Recovery (or reinflation) started as soon as 1933 and was only sidetracked in 1937, when the stimulus was pulled back. The “mistake of 1937″ was made, according to the UNLV professor, when FDR’s administration went back to listening to Andrew Mellon and instituted the austerity programs FDR had promised during his initial campaign.

When his turn came for rebuttal, Reed joked that he “felt like a mosquito at a nudist camp; I know what I need to do, but I don’t know where to begin.” After his free-market case was made and the Keynesian case was destroyed, Reed quipped, “The economy recovered when FDR didn’t.”

Keynesians erect a pretty low bar when judging the productivity of government stimulus projects, but the results of the concrete monster known as Hoover Dam have been devastating. Hoover described the dam as “the greatest engineering work of its character attempted by the hand of man.” The massive structure cost $49 million (or $736 million in inflation-adjusted dollars) and measures over 726 feet in height and more than 1,200 feet in length. It took five years and 4,360,000 cubic yards of concrete to build, and was finished two years ahead of schedule. About 16,000 people worked on constructing the dam, with over 100 losing their lives in the process.

Just as the Keynesian policies of the New Deal tried to cheat the laws of economics, government’s damming of the Colorado River attempted to cheat Mother Nature by bringing water to the desert southwest — water that just isn’t and never was there. The great western explorer John Wesley Powell was booed out of the room when he told the irrigation congress, “Gentlemen, you are piling up a heritage of conflict and litigation over water rights, for there is not sufficient water to supply the land.”

But 75 years ago, when the dam was nearly completed, FDR proclaimed during his dedication speech that millions of present and future residents of the southwest could count on “a just, safe, and permanent system of water rights.” The turbulent Colorado River that vacillated between droughts and floods would be tamed and become “a great national possession” and be counted on for irrigation to support a human migration seeking mild winters and new opportunities.

“The nation took him at his word,” writes Michael Hiltzik, author of Colossus: Hoover Dam and the Making of the American Century. “Since that dedication year, the population of the seven states of the basin has swelled by about 45 million. Much of this growth has been fueled by the dam and its precious bounties of water and electrical power.”

As Hiltzik points out, the dam’s water promise gunned the growth of southern California cities and attracted farmers to the west to grow water-intensive crops like cotton despite the lack of normal rainfall required to support this kind of agriculture.

Just as government stimulus programs and artificially low interest rates that promise to spur growth and make up for the lack of private investment never work, Hoover’s promise that his dam would, as Hiltzik writes, “provide all the water their states could conceivably need to fulfill their dreams of irrigation, industrial development and urban growth” is literally drying up. The water level at Lake Mead is down 120 feet from its high-water mark, revealing a white “bathtub ring.”

Now that millions have migrated to the southwest and private industry has invested millions of dollars, Hoover and FDR’s promises have confined those living and doing business in the west “in the straitjacket of an ever-intensifying water shortage,” notes Hiltzik. And while Interior Secretary Gale Norton claimed to have stilled the “conflict on the river” back in 2003 with the signing of two-dozen agreements transferring water rights between various Indian tribes, cities, and governments, the battle for water will rage on. The supply will never catch up with the demand.

After the ten-year drought, another $700 million is now being spent to install an additional intake pipeline into the diminishing Lake Mead. Almost 90 percent of the drinking water for Las Vegas comes from the lake. The new intake pipeline, officially known as Intake No. 3, “will reach deeper into the reservoir to protect the valley’s water supply should the lake shrink low enough to shut down one of the two shallower straws,” reports the Las Vegas Review-Journal.

However, the cost of this project is likely to rise, because the tunnel being excavated for the pipeline unexpectedly filled with water earlier this month. But this cost overrun shouldn’t trouble Keynesians, because the additional taxpayer money just provides more stimulus, right?

Those in government never learn. They can’t print prosperity, and more water won’t magically appear if they dam a river. While the man on the street believes government infallible, politicians and bureaucrats cannot calculate the economic profits and losses of government interventions. Ludwig von Mises made the point that government interventions inevitably lead to unintended consequences, leading government to constantly intervene further. So governments will fight over scarce water, and private use is increasingly being restricted by local ordinances.

The New Deal dam project that professor Malamud is so proud of provided a few thousand jobs 80 years ago, but has spurred migration, farming, and development that is likely unsustainable and may ultimately be the biggest malinvestment in history.

http://www.campaignforliberty.com/article.php?view=1024

Awesome article from Sheldon Richman. Government never admits its role when problems arise, but politicians frequently act to blame the marketplace whenever they get the chance.  “Look how dangerous it is if we aren’t managing society. People will miserably fail and make terrible decisions if we leave them to make their own choices.”

You’ve got to hand it to the people who really dislike free markets. They see them everywhere (under every bed?) and especially wherever any serious problem arises. That no free market exists within a thousand miles makes no difference whatsoever.

Take the oil spill in the Gulf. Market opponents are having a field day. They say this finally demonstrates the need for government to run things. Private firms can’t be trusted.

But it looks more like government can’t be trusted. The central government is, in law and in fact, the owner of the part in the Gulf where BP drilled for oil. (I didn’t say it was the legitimate owner.) The owner leased its property to a private company, BP, with a bad safety record (though a good one for sucking up to the environmentalist establishment and bureaucrats) and issued permits for the drilling operation. It then failed to keep a sharp eye on what BP and subcontractors Transocean and Halliburton were doing to its property. That might have something to do with the fact that government regulators don’t have the sort of relationship to “their” property that real private owners do, and they can always be counted on to get friendly with those they regulate. The Minerals Management Service in the Interior Department has a special conflict of interest: It makes money off the drilling it permits and regulates. Thus it could benefit from decisions that are bad for the public.

So what failed here, the market or the State? The call isn’t even close. The free market was nowhere near the scene. It has an airtight alibi. It didn’t exist.

Now with some effort you might get a die-hard anti-market person to concede this. So we move to the next step. What should replace the current hybrid (government-corporate) system? I see only two choices: full government management or full market management. Full government management wouldn’t appear terribly promising, considering that the current problems are traceable back to government management already. How would things change substantially if, instead of contracting out the drilling to a nominally private company, the government instead hired the personnel itself and paid them directly from the U.S. Treasury? Who cares if the rig says “BP, ” “Transocean,” or “U.S. Government” on it? The same fallible people would be in the same position to make the same fateful mistakes. Not much would have changed.

Incentives Matter

That’s because what matters is incentives, not whether a worker is on the government payroll. Why assume that civil service employees know more or care more than people paid by corporations?

But, it will be said, the government workers will have a mandate to protect the environment and the public. Okay, let’s go with that. Let’s say the decision-makers are environmental hawks who really don’t like oil drilling anywhere. They’ll be tough: no drilling unless it’s 100 percent safe. Leaving aside the obvious problem with this standard, that policy would have costs. The risk of oil spills may drop to zero, but we might have to forgo certain important benefits in the process. Poor people, say, might have their prospects dimmed by more expensive energy.

Is the tradeoff worth it? How do we go about answering that question? Government is no help here. It can certainly impose a plan, but constructing a plan beneficial to the public would be like playing darts in the dark. What bureaucrats think is good for us may not actually be good for us, no matter how much they care. Mises and Hayek covered this in their writings on state socialism and economic calculation.

Things are sure looking bleak. Government assurances are worthless whether it contracts out for drilling or does it itself. That leaves only the free market. Can it be trusted?

First off, let’s remember that we live in the real world. There are no iron-clad guarantees. The best we can hope for is relative security. Option A can’t be perfect. All we can ask is that it is better than Options B, C, and D. But how do we decide? When people conclude that government management is the best alternative, knowingly or not they have rigged the game. They are comparing the messy real world in which free markets would operate to an impossible government-managed smooth-running utopia, where regulators have complete knowledge and total dedication to the public interest. This is the Nirvana Fallacy, and the problem with it is that utopia isn’t on the table.

What is on the table are two options: an arrangement where incentives align economic activity with the public interest and one where they don’t. Now which setup seems more promising? One where personnel risk no capital, face no prospects of bankruptcy, and procure their revenue by force (taxation) after flattering members of special-interest-serving congressmen? Or one where: capital had to be raised from wary investors in a competitive environment, insurance would be priced according to risk, products would have to be sold to buyers who are free to say no, and full and strict liability would haunt every decision, with bankruptcy always looming and no government bailout are even implied?

When you come down to it, the choice is really rather easy.

http://www.campaignforliberty.com/article.php?view=931

Great speech from Helio Beltrao at a Mises event in Brazil. The power of the individual is the strongest sovereign power, but people foolishly believe that the decisions of politicians are somehow more worthy and worthwhile. Below is a portion of the speech Beltrao gave.

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President [Leonardo] Fração, it is a pleasure to be here, at this XXIII Forum da Liberdade, whose theme is based on Ludwig von Mises’s Economic Policy book [known in Brazil as The Six Lessons].

Mises was one of the greatest intellectuals of the 20th century, a resolute and uncompromising champion of freedom. Fifty years ago, Mises came to South America and delivered those six historic lectures, which are heralded and quoted just outside, at the Forum’s exhibit.

Today, there is a great international revival of Misesian ideas — including in Brazil — which show the benefits that consumers and workers derive when they are free to venture, to chart their course, and to fulfill their desires.

This week, in Porto Alegre, there is a great concentration of intellectual heirs of Ludwig von Mises. We, from Instituto Mises Brasil, have just concluded our first conference, which was a great success, and it could not have been otherwise! The energy emanating from you is contagious. We have here today many scholars and experts of the Austrian School of economics. Tom Woods, one of the speakers at our conference and the bestseller author of Meltdown, will address you tomorrow. The legendary founder and chairman of the Mises Institute — Lew Rockwell — is also among us tonight! Without Lew, there would be no Mises Institute, no revival of the Austrian School, no Instituto Mises Brasil. Thank you, Lew. And above all, thanks to you, President Fração, to IEE [The Institute for Entrepreneurial Studies], for your support to our conference and especially for your achievements in the fight for liberty. Results come first in this contest; the results of the work of IEE and of the Forum da Liberdade are both evident and quantifiable. Congratulations, IEE!

On other occasions, I customarily speak about finance and economics, about the measures that are likely to bring about a more prosperous society; in other words, as did Mises, I usually speak about what works and what does not.

Today, for the first time, I am addressing a different subject. I speak about what moves me. I speak about where my energy, as an individual, originates. Its source is here, in this advanced and progressive libertarian community, which looks forward to real changes; not merely illusory changes from campaign slogans. I feel at home. It is a great honor to receive the Libertas Award.

The history of ethics has been a history of exploitation. From time immemorial, individuals were set apart into two groups: those that must obey the rules, and those that need not. The people must observe ethics and morals, while rulers not.

The ethics that you and I must observe correctly advocates that one should not steal the property of others, should not murder, and should not force others to do something against their will.

But note that those ethical rules do not apply to government — the government takes your money, calls it “democratic taxes,” and presto! — it is now authorized to steal.

If one enslaves another, this is considered a heinous crime. After all, slavery is the antithesis of individuality! However, in the case of government, they will draft you to “serve your nation” for a year, call this conscription “military service,” and serfdom becomes perfectly legal.

If one kills a neighbor, this is murder. However, if he is an agent of the government — particularly that of the United States — using an olive-green uniform, and invoking a “preventive” war or similar excuse, suddenly it becomes permissible to murder — legally.

Counterfeiting is a crime, but only for you and me. For the government has the money-printing machine, or more precisely, the counterfeiting machine. If it is they doing it, fine. If it is we, we go to jail.

Three hundred years ago, a substantial part of the population in the Americas was comprised of slaves. One hundred percent of the fruits of their labor were the property of their owners. Today, we are no longer slaves. However, about 40 to 50 percent of the product of your efforts and talent are not your property, but your masters’ — that is, the government and its friends. This is what you pay, whether you like it or not, embedded in the prices of the products, or through other taxes, duties, or tariffs. We are no longer slaves, but we are serfs.

Previously, the slave owner would threaten to punish with a whip a slave who refused to work. Now, if you refuse to pay the government, you are summoned and attacked with lawsuits, until you are finally thrown into jail. In both cases, the violence is of the same nature. The gun doesn’t even need to be displayed, as in the case of the customary robber. The mere threat of violence suffices. But the gun is always present, in the robber’s pocket and in the ruler’s jacket.

Theft and slavery are crimes, even if sanctioned by the majority of the people! Theft of the government, by the government, and for the government is somehow accepted and rationalized by the population at large. Why does that majority agree with this theft?

We must analyze the most misrepresented concept nowadays: the concept of democracy.

The conventional use of the term “democracy” conveys a certain disrespect for semantics. Most of us utilize the word democracy when we actually mean other concepts, such as the “rule of law,” “liberty,” “equality before the law,” “individual rights,” “solid institutions,” “justice,” and other concepts that have specific words to designate them. Democracy is, formally, the regime of majority rule, that is, the majority of voters decides whatever it sees fit. Or, as is commonly said, it is the tyranny of the majority — which in practice means the tyranny of the minority: that of the politicians who rule over our lives and property.

“Property is prior to law; the sole function of the law is to safeguard the right to property wherever it exists, wherever it is formed, in whatever manner the worker produces it, whether individually or in association, provided that he respects the rights of others.” — Frederic Bastiat

This article is from 2006, but it is a great demonstration of how private individuals and groups can come together on issues like environmental preservation in a free society. We do not need government coercion in order to protect the government, we simply need individuals using their influence (which happens to be much more effective and powerful in a free market and free society).

Look out development sprawl, the land trusts are coming.

Each year the US loses about 2 million acres of open space, farms, and forest to development. But now the tables are turning. Rather than see local green space and rugged outdoor areas gobbled up by strip malls or subdivisions, private land owners are increasingly preserving it.

Out on the east fork of New Mexico’s Gila River, the endangered Gila trout is getting help from adjacent landowners who are setting aside 48,000 acres in several land trusts to protect its habitat by preventing development.

At the same time, on the shores of Chesapeake Bay, 206 properties totaling more than 38,000 acres of fragile estuary habitat for migratory birds and marine life, like the short nose sturgeon, have been permanently set aside using legal tools like land trusts and conservation easements.

It’s all part of a huge new boom in conservation of private lands in which landowners voluntarily give up rights to develop their land – often in return for tax breaks, but also to save rugged landscapes they love.

Private land set aside for conservation grew 54 percent from 24 million acres to 37 million acres– an area larger than New England – between 2000 and 2005, according to a recent study by the Land Trust Alliance, a Washington-based umbrella group of local, state, and national land conservation groups.

National groups such as The Nature Conservancy were key in this push for preservation. But the biggest drivers for growth were volunteer local and state land trusts, whose protected acreage doubled from 6 million acres in 2000 to 11.9 million acres. Meanwhile the rate at which those associations were saving land tripled to 1.2 million acres a year between 2000 and 2005.

“People are not sitting around and waiting for a Washington bureaucrat to solve the problem of strip malls in their own backyard – they’re forming land trusts,” says Rand Wentworth, president of the alliance.

Land trusts are nonprofit groups that assist in setting up conservation, agricultural, and other land-preservation easements and then act as land stewards. Over the five-year period, their numbers leaped by nearly a third to 1,667, the study shows. The focus of such trusts varied widely with 39 percent protecting natural areas and wildlife habitat to 38 percent for open space and 26 percent wetlands and water resources. Others focused on preserving farms, local parks, and urban gardens.

http://www.csmonitor.com/Environment/2010/0426/One-farmer-acts-to-save-environment-from-factory-farms

“What, then, is legislation? It is an assumption by one man, or body of men, of absolute, irresponsible dominion over all other men whom they can subject to their power.  It is an assumption by one man, or body of men, of a right to subject all other men to their will and their service.  It is an assumption by one man, or body of men, of a right to abolish outright all the natural rights, all the natural liberty of all other men; to make all other men their slaves to arbitrarily dictate to all other men what they may, and may not do; what they may, and may not, have; what they may, and may not, be.  It is, in short, the assumption of a right to banish the principle of human rights, the principle of justice itself, from off the earth, and set up their own personal will, pleasure, and interest in its place.  All this, and nothing less, is involved in the very idea that there can be any such thing as legislation that is obligatory upon those upon whom it is imposed.”  – Lysander Spooner

What, then, is freedom? It is an assumption by some members of the human race of absolute responsible dominion over themselves and their property.  It is an assumption by some members of the human race, that each individual is responsible for his own condition; his/her own prosperity, or lack thereof; his/her own education; his/her own health and care of health.  It is an assumption by some members of the human race to take care of oneself; what he/she may and may not do; what he/she may, or may not, be.  It is, in short, the assumption by some members of the human race to protect, cherish, and preserve the freedoms and rights granted by the Creator as granted at conception.  It is the assumption by some members of the human race to protect the principle of human rights, the principle of justice, so that it never perishes from the face of the earth.  All this, and nothing less, is involved in the very idea of freedom.

An old Japanese adage advises us that the other side of a coin has another side.  Lysander Spooner was an anarchist that started his own Post Office in New York around 1850, but the Federal Government put him out of business.

Let us not always look at the negative side of the government’s intervention in our lives; let us look at what we can do to prevent such intervention.  We do have natural and inherent rights.  They are ours and they are absolutely perfect.  The power to exercise those rights is, however, imperfect.  That imperfection gives the government and other criminals the opportunity to interfere in our daily lives to the extent that we cannot spend the money we earn in the manner in which we see fit.

Do you know, then, what your rights are?  They are many and valuable.  The only way to protect those rights is to use the power to exercise those rights.  Use that power in the face of all that is evil.  My life is not worth preserving at any cost.  My power to exercise my rights is worth protecting at any and all costs.  What say you?

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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