Sunday, August 21, 2011

Society in Conflict Part 3

Rand qualifies her statement about conflicts of men’s interests:

“The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice.”

The trader principle can arise only in a society in which force is banned from the dealings of men. This means that there is no agent of force to intervene and impose collectivist or altruist considerations in society. When men must deal with reality (rather than government) in order to survive, the trader principle begins to function. But most importantly, the banning of force leaves people free to express their deepest values and to pursue them without fear of government intervention.

An unfortunately excellent example of the destruction of the trader principle occurred immediately after President Obama’s inauguration during the time of the restructuring of Chrysler Corporation. A group of investors in Chrysler had contractual agreements with the company that protected their investment if the company should go into bankruptcy. Essentially, they were to be the first to recover their assets. This provision in their contracts was intended to provide additional security for these investors in order to induce them to provide funds to the company. President Obama, on the other hand, decided to unilaterally violate this agreement by placing other parties at the head of the list and disenfranchising these investors. Not only was this an unprecedented violation of the trader principle and the sanctity of contract but it introduced altruism and sacrifice into the negotiations by insisting that Chrysler’s private investors sacrifice their investments in violation of their written agreements. President Obama even explicitly commented that he was not “with” these investors because they had not been willing to sacrifice in order to save Chrysler.

Obama’s goal, this early in his Presidency, was to establish the principle that shared sacrifice was actually a viable principle for guiding a massive economy like ours, and even more astoundingly, that self-interest was no longer to be its guiding principle. This move exposed a strikingly naïve approach to economics and to government. To institute the principle of sacrifice as a guiding principle for his Presidency, he signalled that American society would no longer be based upon self-interest but instead upon the idea of altruism. The President ignores the entire histories of socialism, communism and fascism (societies based upon collectivism and sacrifice) that created nothing but decline and destruction. He even ignores the history of capitalism that has created more affluence, wealth and prosperity than any collectivist system in the history of the world. Yet this President is considered to be a scholar and student of history.

Contract law in the USA is not about sacrifice and only a pragmatist like the President would even consider introducing it into a situation where it is not relevant. Investors expect their legal contracts to be honored. President Obama’s decision to disenfranchise Chrysler investors means that a politician, at any time and for any reason may decide to play politics at the expense of their plans for the future. How can an investor or anyone who signs a contract expect that his contract will be honored today? What does this do to the trader principle and how can an economy operate when there are no rules except the arbitrary rules of President Obama? This principle not only threatens investment in this country but it weakens the economy and the kind of long-term planning necessary for major investments in the future.

A government official should be the first suspect when identifying the true criminals in society. Next is a common criminal. Both would interject force into human relationships and this makes mutual trade to mutual benefit impossible (the trader principle). Such force destroys the principle of “respect of human beings” that Rand mentions.

A proper society respects human beings by not interfering in their private dealings. To understand this more fully, we will analyze moral implications of government intervention such as government regulations, re-distribution of income (taxation), inflation of the currency and government financed businesses to name a few.

Government Regulation

A government regulation, in essence, tells two citizens that they must transact business together according to rules that accomplish government goals. Usually these rules are justified by a false critique that one of the parties holds an unfair advantage in the transaction. The regulation is intended to force the regulated party to act in a way the government deems fair according to a collective standard. Such coercion represents the introduction of altruism into business transactions where one of the parties is being forced to sacrifice for the sake of the other party.

The government insists that both parties deal with one another on terms the government decides rather than those the parties would decide on their own. A government regulation makes it a crime to do business on terms agreeable to both parties. The government effectively invents a conflict of interest and then uses force to impact the profits of both parties and turns those profits into a loss for one party and a boondoggle for the other.

The practical effect of a government regulation is to change the terms of any transaction and create winners and losers. When the government invents exploiters and exploited, it uses force to cause losses to the “so called” exploiters and rakes off a big part of the loot to pay for government busy bodies that produce no tangible products or services.

Government regulations may or may not be the rules under which individual businessmen would operate in normal circumstances. If men are free to transact business without government interference, the two parties to any transaction would come to mutually beneficial terms or go elsewhere. There would be no conflict of interest since each wants something that the other party is providing. Government regulations adversely affect costs and sometimes the quality and availability of goods. The result: every party becomes aggrieved. Conflict is created all around, jobs are lost and the economy declines.


Re-distribution of income (taxation used to pay for government welfare programs) involves the forcible taking of money from one citizen and giving it to another. The government force exerted in re-distribution is engaged through the taxing structure of the nation and creates several conflicts.

Re-distribution creates a reaction among both producers and beneficiaries. Regarding the producers, some of them decide to produce less in protest of high taxes. They see that they are working harder and receiving less of their own money due to higher taxes. So they slow their effort. Other producers who decide to work harder eventually tire and produce less over time. They lose motivation and start hating their jobs because they are not benefiting from their own work. They become too fatigued to affect their own success. In addition, because they pay more taxes, the money they would have invested in the economy is instead spent on consumption by beneficiaries. This makes the producer less wealthy and reduces the amount of money available to invest in the economy. The government, not wanting to reduce benefits, will print more money which inflates the currency and reduces the value of money.

The government beneficiary likes the idea of being "entitled" to his benefits. He demands more from the government or else he will vote for another politician in the next election. Further, the beneficiary realizes that the less he produces, the more he can justify higher benefits. Then when he sees that his newly inflated dollars are buying less, he demands a “cost of living” adjustment so he does not “lose” his benefits.

Yet, we often ignore the altruism at work in the relationship between producer, government and beneficiary. The government tells the beneficiary that he is poor because of capitalist greed and that the successful should "give back" what they have stolen from the poor. This serves to somewhat ameliorate any negative moral feeling for the parasites. Yet, whenever one group considers it the height of morality to be productive and another group considers that they deserve the money created by the productive, the result is conflict and negative feelings on both sides. That this whole process is a corrupt lowering of moral standards (a destruction of morality) is hardly noticed in the futile effort to make sacrifice and theft into a moral activity.

What are the practical results when the government is allowed to forcibly divest citizens of their hard earned money? Debt increases, prices rise, interest rates go up, the cost of doing business goes up and both jobs and profits are lost. With increasing debt, the government finds another way to raise taxes; it prints more money and thereby steals value from the money in circulation. They call inflation "stimulus" but there is nothing stimulated when the printing press merely re-distributes money from those who hold it to those that the government favors. Once the printing press starts, there is no stopping the decline in the economy.

The government refuses to recognize its role in harming the economy through a number of rights-violating interventions such as regulations, re-distribution and debasing the currency. To compensate for the economic consequences of it policies, it re-distributes money to struggling industries that it deems “vital to the public interest”. These actions are always blamed on the failure of capitalism without mention of the direct role of government intervention.

Whenever force creates a problem in society(and it can only create problems), the solution given by the government is always more force against productive citizens. The arguments of altruism and collectivism will continue to be used to hide what is really happening; the looting of the American producer. The trader principle is destroyed and men descend to the level of lying and cheating each other. Running society becomes of matter of manipulating these corrupted factors and re-distributing as much money as possible. Values, standards, justice and truth are all subject to political considerations and the best liars rise to the top. The best producers fade away. Eventually, the productive citizen will give up (as happened in Soviet Russia in the early ‘80s) and the society will collapse.

In a system where the government creates massive conflicts of interest, who are the agents of force? Regulations and re-distribution programs are passed by Congress and administered by the Executive Branch. Money inflation, another form of re-distribution, is authorized by the Federal Reserve and administered by a cabal of crony capitalists with an interest in getting more money from the government. The Executive Branch (the President) uses Executive Orders, which are a violation of the Constitution, to circumvent the other branches and move the country closer to a dictatorship. For whom do these people work? They work for you, the voter. Which voters are responsible for this travesty of the laws? Productive citizens who create the multi-trillion dollar pie that these politicians re-distribute. What should these productive people do? They should realize that a coercive society is immoral. They should understand the roles that collectivism and altruism have played in justifying coercion. They should join the Tea Party and protest this corrupt scheme.

Another name for a coercive society is "statism". Statism is the idea that the state has ultimate control of the people and that the people belong to and work for the state. If you want to fight for freedom, you must fight against the coercion of the state that has infiltrated our once free society. You must fight government force and the conflicts it creates in society. Government force is justified by means of collectivism and altruism. You must fight the philosophical premises that give rise to these political and moral concepts. You must understand individual rights and how to fight for them.

If you want to eliminate conflicts in society you should establish the trader principle by getting the government out of the business of economic intervention.

To be continued.

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