Sunday, June 11, 2006

Obstacles to libertarian policies

Sometimes it happens that politicians defend libertarian principles in order to win the elections. What never happens is that a libertarian policy is really applied. Politicians like Reagan or Berlusconi may have to thank their "libertarian" slogans for their political success, but it is impossible to claim their policies to be consistent with their slogans. Why?

There are three possible problems in implementing libertarian policies:

1. Social problems: libertarian policies may impose a cost on a great part of society. Possible examples: national defense, insurance against invalidity. I believe these problems to be rare and negligible. In other words, only a tiny part of statalist policies can be defendended on consequentialist (utilitarian, latu sensu) grounds.

2. Political problems: libertarian policies impose a cost on politicians, bureaucrats, rent-seekers and other parasites. In this case, a libertarian politician, even a sincere libertarian (the theoretical possibility that a honest politician exists cannot be denied, at least a priori), will probably face professional failure: he will not be elected, and its "allies" will not cooperate with him. The result is that he will remain isolated and will not be able to accomplish anything. A possible example is unionism: unions are useless, they can only create mass unemployment through the use of private coercion, they can improve the conditions of their members or their countrymen only to the extent that they damage non-members and alien workers. Despite these problems, in Continental Europe it is impossible to get rid of their harmful privileges, and their political power enable them to remain powerful, their uselessness nothwithstanding.

3. Mixed problems: libertarian policies can cause transitory harm to several people, but only because previous policies have created a nasty situation. For example, a clear cut libertarian retirement plan may consist in giving back every cent to the original tax-payer. Unfortunately, old workers may find themselves without pension. This is because in the actual situation they are exploiting young workers: by justice they have no claim over the enslavement of the young tax-payers. But it is undisputable that the situation may cause "social" unrest: politicians claiming that the old shall gain their retirement are bound to political failure.

I believe the first group to be almost void. I believe that most policies can be eliminated in 24 hours, but only against the will of the actual decision makers, i.e., within the institutional framework of democracy, the problems of the second group are unavoidable and unsolvable. Anyway, libertarians should pay attention to the third category because it may create a source of dissent with libertarian ideas.

In this third category I can imagine: a deep depression due to the return to the gold standard, old people starving because they have not saved enough to fund their pensioning, massive transaction costs from power-based to market-based income distributions.

My realistic position for a "future of liberty" is apparently inconsistent: delegitimate politics, as the only way to eliminate political obstacles to libertarianism; and a gradualistic approach to minimize the "transition" costs from statism to liberty. Realistically, it is impossible for politics to be libertarian; but also a quick transition may be socially disruptive. In such situation, statist demagoguery is more likely to succeed than libertarianism.

N.B. In order to anticipate possible criticisms, I admit that the term "Libertarian policy" makes no sense: two words combined that can't make sense... I know... but I think my argument is clear anyway.

2 Comments:

At 7:53 AM, Blogger Carletto Darwin said...

Interesting and tricky discussion. Actually I read a lot about this issue and the way as the US shift the backing from gold to oil. And some hidden problems with Iraq, Iran and Venezuela, due to their wish to trade in Euro.
But now a question to you: don't you think that the US are again ahead and they already moved their backing from oil to technology? My opinion is that actually the US did make a boost in technological production in the 90s and that, even if we'd trade oil in Euro, there'd be the same issue as before: we need dollar in order to buy technology. And they'll not be back to gold...

 
At 10:21 AM, Blogger Libertyfirst said...

The problem is not demand for dollars in trading with the US, but demand for dollars for international trade.

Many dollars are employed as reserve currency, especially in the Far East, and their reserves amount to more the one thousand billions dollars, growing at a fourty billions per month pace.

Many dollars are employed as "oil currency" (it is not an oil standard, by the way, because oil price is not a constant ratio with dollars), and this causes additional demand for dollars.

Without these two factos, we would be beholding a net import of dollars in the US, causing massive price inflation, and creating the condition for a deep recession (strict money -> high interest rates -> individual, firm and government bankrupt due to indebtment -> depression).

The good point is that this tragedy would be international: a tragedy for the Arabs, a tragedy for the Far East, and, to a lesser extent, for Europe.

It is likely that no one will drop dollars as reserve currency in the short run, due to this interrelations...

Anyway, the dot com boom/bust was an inflation induced hysteria, so it is not a sign of "technological superiority", but "irrational exuberance". Anyway, the US is microeconomically very strong, not like the UE, and they can withstand huge problems.

 

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