Statism and It's Role in Prosperity

A Question Answered

Published on October 31, 2005 By John Galt In US Domestic

“When you say "fiscal federalism", I guess I am not following you. I always thought federalism was a system of government, not an economic policy like capitalism or communism. The United States, I was led to understand, is both federalist (politically) and capitalist (economically). Canada has a wealth of socialist programs, but, like the UK, is not fully socialist since it does not support a full redistribution of wealth like a communal system of government. You seem to use capitalism and federalism simultaneously in your argument Are they actually the same thing?

Then, another point I am not following: when you cite America's growing into a full federalist success story, are you saying that Canada, by adopting this system, is also going to experience these growing pains? You say that federalism evolved from feudalism and came into its own in the 20th century United States, and then go on to say that deflation and destitution are a result?

I guess I don't know enough about Canadian macroeconomic and fiscal policy to follow your argument. Enlighten me, please!”
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Glad you asked

Federalism is the belief of the central government that it not only has the right, but the requirement to legislate. A prime example in the United States was one of the members of your supreme court just came out with a position piece saying that (in effect) anything that is not specifically allowed by the constitution and the laws built upon it is illegal. (To follow this statement to the logical conclusion, breathing is not specifically allowed by any law or constitutional amendment that I have ever seen and thus would be outlawed, the consequence of which is obvious...) Federalism supports the accumulation of power in one central group of people that changes only very periodically. It is the system that brought us the dark ages. It is also very, very similar to socialism. As a consequence the two are collectively termed “Statism”.

Basically, a free, capitalist society (of which there never has been one, all nations have embraced various mixtures of socialism, federalism and capitalism) limits the government by several very important ways:

1. The government, like its citizens may not initiate force against any person or that person's property. What this means in simple terms is that the government cannot take from you that which it has not entered into an explicit contract with you to do. The most important point here is that majority rule does not constitute a contract with all of the citizens of a country and thus any actions (such as wealth reallocation) that take from a citizen without permission are strictly prohibited. The US constitution says this very thing, but has been grossly misinterpreted. One of the amendments in the constitution says that the federal government will have to right to enforce laws, police it's citizens and maintain the military. What was intended by this amendment (read the memoirs of the guys that wrote it) is that those are the ONLY things that the government is allowed to do. This includes "for your own good" laws that prevent people from harming themselves just as surely as it prevents the government from forcing you into slavery.
2. The government is the only entity (with the exception of self-defence) which has the right to retaliate for another's initiation of force on a person or their property. I.e. in a society of law that is not an anarchy, the citizens must voluntarily give up their right to return force with force in self-defence to the government. The exception is the imminent threat of force for which the police either cannot respond in time, or refuse to do so. There is no other exception and the government may not act in any other case. All of the power of the government rests solely with this one duty, and the constitution is there to protect the people from a government that has the power to initiate force against them outside of this very narrow amount of power granted to them.
3. The government may not limit trade between its citizens or indeed anyone anywhere in the world in any way. Any limitation of trade constitutes force against the parties attempting to do business and thus is outlawed. This includes negative laws such as "you must not do business on a Sunday" and positive laws that say "you must do business with the UAW and only the UAW and you may not employ anyone that is not a member of the UAW." Either is immoral because it forces a man/woman that is attempting to pursue happiness through hard work and tells them who and when they can do business.

The side effects of these very fundamental principles of a purely capitalist government when they are ignored is obvious:

1. Political corruption. I.e. lobbyists and the like buying and paying for votes for laws that favour a business. Throughout history, this is the sole cause of any and all monopolies (other than those created that are benign and are simply the result of one business doing such a better job of things at more reasonable prices that perspective competitors cannot possibly compete, which are completely fine and the moment that the company tried to rip off the consumer, there would be competition). Every monopoly in the history of both Canada and the United States has been created by legislation, not by the company directly. (i.e. Bell ExpressVu (which owns most of Star Choice) in Canada doesn't have to compete against the US satellite companies because of the CRTC limiting competition and thus creating a monopoly. i.e. #2 AT&T in the United States before it was broken up because of the FCC creating a legal monopoly on the phone service in a given area. I.e. #3 Major League baseball cannot have any competition at all levels of professional baseball in the United States by law.
2. A MUCH lower standard of living. The "middle way" that socialists ascribe to now, because all other attempts of socialism (i.e. NAZIs (National Socialist party) and the USSR) have completely and utterly failed. They failed because in a pure system of socialism there is no mitigating factors to soften the effects of socialism. In fact the USSR only stayed around for as long as it did because it was NOT a purely socialist state. In fact the 5 year plans were actually a thinly veiled attempt at "the middle way". They're purpose was to grant concessions to capitalist businesses throughout the world to come into the USSR and build up industry and agriculture and mining etc. in exchange the soviets granted that business the profits of the business they created for a fixed number of years. (and then promptly screwed the businesses over forcing them to leave). Stalin himself estimated that in 1940 more than 80% of all business in the Soviet Union was created and run by capitalists. It was only the capitalists that saved socialism for as long as it did, and the moment that they were kicked out, the rot started again, and the industry and the Soviet Union began it's inevitable collapse. Today, under our "middle way" that both the United States and Canada proscribes to varying degrees the inevitable effects of socialism are mitigated by capitalism. In effect we are creating the worst possible system of government because socialists and federalists that want the government to have control of people's lives get to enact their irresponsible programs, controlling the citizenry (for whatever supposed benefit) and you don't have to pay the piper immediately because of capitalism obviscating the cause. It is this specific harnessing and enslavement of capitalism that Ayn Rand railed against. The end result is that the train keeps going forward and forward on the coal mined, processed and supplied to the coal box by capitalists until one day the coal box is just empty and the train stops in the middle of no where. There's no way to get more coal because all of the trains are in the same boat because there just isn't any more processed coal to be had at all, because the mines are all mined out and no one is looking for more. The end result is another dark ages. At least with a purely socialist government as tried by Lenin immediately after the revolution, the results are immediate and obvious. Mining all but shut down in the Soviet Union within 3 years of Lenin nationalising it. Agriculture in the USSR collapsed completely leading to one of the most agriculturally rich areas of the world (The Ukraine) laying in fallow for years, and what small amount of food that was available was being exported to support those in control's lust for capitalist standards of living. The key here is that federalism (and Statism which is the analog of federalism) is simply a return to the feudal system with the power and the wealth accumulated with a very few people, that control the government; either by right of birth or through the purchase of that power which inevitably becomes "the right of birth" because they are the only ones with money to purchase the power. Socialism does the same thing, but does so in the name of "the greater good". The end result is a lower standard of living and eventually poverty and famine despite the best efforts of the capitalist system enslaved under it. Another small example is the detachment of the US dollar from the price of gold just prior to the stock market crash of 1929 (yes this is one of the reasons why the depression happened, it had nothing to do with capitalism.) Basically the US dollar pre-depression was pegged with the price of Gold. That meant that its value was consistent with a small variance allowing for discoveries of gold in California which increased inflation. With the US dollar free of the gold standard it also meant the government was free of the gold standard. Inflation is NOT the result of prices increasing. That’s the side effect. Inflation is the government printing more money (it’s a little more complex than that but the end result is the same). Under the gold standard you had no reason to print more money because a dollar was a specific amount of money within fluctuation limits. In fact between 1880 and WWI the United States experienced deflation all while having the greatest standard of living increase in the history of the world. Again, after WWI and up to the stock market crash, the United States again experienced deflation. This is the natural state of a capitalist society. And because in those time periods the United States was predominately capitalist instead of predominately socialist after “The New Deal” that’s exactly what happened. As a result everyone got significantly richer at all levels, not just the upper class because their dollar went farther at the same time that they were being paid more because they were more productive. What inflation does is cause every dollar to be worth less. In fact between 1929 and 1945 the dollar lost 3/4s of it’s value and as a result the standard of living went down. The reason? Because federalists (with a healthy dose of socialism) came to power in the name of Hoover and then Roosevelt after him and they inflated the dollar in order to pay for their social programs and Statist policies. It is specifically Statism in all of it’s forms that caused the great depression and it is Statism that prolonged it (and indeed caused another collapse of the stock market in 1938). In short, Statism is responsible for inflation because to service the various programs the government would either have to steal more money from its citizens (which they don’t have the guts to do) or borrow money and to pay for it, they have to make more money. End result is inflation and the lowering of the standard of living. Hence why Allan Greenspan is so concerned about the amount of inflation.
3. Mob rule (when enacted under a democracy). Increasingly people believe that the rule of the majority is what democracy means. It does not. But a federalist system encourages this belief because it gives cart blanch to those that are elected because they have in effect been given the right to rule over everyone without limit by the majority. Democracy is representative government. That is, it's government that has representatives elected by the constituents in a given area (and in the case of the brilliant United States, that does not mean proportional representation.) that enact and maintain the rule of law and outlined by the constitution of the nation. They may not make laws that infringe on the individual and in a just society, may not make any law that affects any area of society other than the military, police and judiciary (laws). They're purpose is to do "what's right" not what is popular. It is an understanding that the person that the people elect in a riding are being elected because they are more knowledgeable in the areas of military, police and laws than the people electing them, and thus will act in an enlightened way and vote as such. It has nothing to do with the majority at all, in fact the people in a just society should know that rarely will an enlightened representative vote or act in accordance with their own personal views simply because the representative has far more understanding of the philosophy of law and order than the people who voted for them. Under federalism this is simply not true, because the people are voting for someone and giving them absolute control to dictate to their lives. Of course corruption forms because to get elected and be given this power, they have to have people like them and that means people have to think that the person is going to do things that will benefit them, instead of doing things that will benefit the country and adhere to a just society. Under socialism the issue is even more extreme because you're essentially creating a dictatorship for the term in office empowered by the elected official and the "majority vote" in the house and senate. In Canada we actually have embraced this concept by having the prime minister elected by having the party with the majority of seats in the house, and a nominated senate. Thus there is no check and balance to prevent the compete destruction of the individual other than the Charter of Rights and the Supreme Court. Hence in Canada politics is not interesting beyond the observation that the government is essentially a gang of thugs stealing from their citizens without any interference. The Supreme Court holds all of the power to enact change and protect the citizens. It is the supreme court with one section of our constitution that can be overrun and ignored by a government by using another section of the same charter of rights an freedoms that can break up the CRTC and allow fair competition, that can free Canada's citizens from the 50+ years of slavery caused by social healthcare that essentially tells people if they can live or die and prevents them from seeking out any other medical help within their own country, and as the supreme court just recognized, it's murdering people every day. If you want to enact change and be free in Canada, the government is not the place to go. It is the courts. (just ask gays and lesbians)

Now the key here is that unfortunately, when the United States was formed, the founding fathers did not have the knowledge of why they believed what they did necessary to enshrine this core system into the Constitution. The end result is that Statism has been able to take over much of the United States, although at a much slower rate than the rest of the world thanks in large part to what the founding fathers did do. Enter Objectivism. Objectivism on the highest level is the recognition of the requirements of capitalism and the fact that capitalism is the only form of government that results is prosperity. The reason it recognizes this is because it recognizes that values are not an abstract that are divorced from law and society, they are concretes. The fundamental concrete of values is that that which makes an individual’s life better without initiating force on another or their property is good. That which makes a person’s life worse, or initiates force against another is evil. This very simple question results in a clear view of life that makes it simple to determine that only capitalism can fulfill the role of a just society enabling people to pursue positive values. Needless to say, while this was the start of Objectivism, Rand drilled down much further and got to the base epistemology that is the key to the entire system working in a non-contradictory way. If you’re interested I suggest you read any number of Rand’s non-fiction for much more details. Her “Introduction to Objectivist Epistemology” is an excellent book outlining the philosophy of objectivism and why it is the only non-contradictory belief system ever created.

If you want to learn more about the true nature of capitalism, socialism and federalism and the truth behind the lies that you have been told, I strongly suggest you read “The Capitalist Manifesto”. Hitler had a saying: “Never ascribe to malice that which can be adequately explained by incompetence.” However, in this case, there is no way to explain away the actions of socialists and Statists through incompetence. It is pure, intentional malice and it is destroying a way of life that has brought the only increase in the standard of living the world has ever known (i.e. Capitalism). With the exception of Rome and ancient Greece (which one could argue were mixed economies of a different sort with elements of capitalism that enabled their prosperity) the standard of living of the world has laid largely unchanged throughout recorded history. It was not until the invention of capitalism and the recognition of freedom under capitalism that the standard of living of people actually increased and did so at such a staggering pace. Even today nations that have all of the resources of the United States and Canada but are less free and less capitalist are less prosperous. The more they are less free and less capitalist the lower their standard of living. (just ask Sweden, Russia, all of Africa, the non-Tiger nations in the Far East, and the middle east.) On the same vein it is no coincidence that the United States and Canada’s standard of living growth is slowing. It’s slowing because of the corruption of capitalism with Statism. The most extreme example being Sweden that since the socialists took over not only have had their standard of living stop rising but it has actually fallen.

It is no coincidence that the level of freedom and capitalism in a country determines their prosperity. It is time that we got back to what improves people’s lives instead of embracing poverty in death by degrees with “the middle way”.

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