On May 6th, 2013 I interviewed Yaron Brook, Executive Director of the Ayn Rand Institute on the campus of the University of Toronto. Dr. Brook was in Toronto to speak on the morality of capitalism which is the focus of his latest book Free Market Revolution – How Ayn Rand’s Ideas Can End Big Government. We discussed the success of the Ayn Rand Institute in Canada, the virtues of being selfish, and end with the disastrous, self-sacrificial foreign policies of Israel and how that country is not doing enough to ensure its security.
Ayn Rand – The Ayn Rand Lexicon pg. 23
In this case the anti-concept of “black market” replaces “free market,” meaning free from government taxation, and regulation.
It is an anti-concept because it is all encompassing of not only the criminal but the virtuous. Take for example the “black market” of human organs. If somebody kills someone then harvests their organs and sells them on the “black market” the real crime becomes the sale of the organs rather than the murder, while a labourer who sells his labour for cash and doesn’t claim it as income to the Canada Revenue Agency is also a part of the “black market” and is smeared with the same criminality associated with the murderer, and yet what the labourer is doing was perfectly legal, if not natural, prior to the implementation of the Income War Tax Act of 1917. A labourer selling his labour for unreported cash in 1916 was an upstanding man earning an honest living but in 1917 became a member of the “black market.”
Today all transactions must be reported to the government, quite technically even bartered goods must be reported as income and the appropriate percentage of capital gain must be submitted in cash to the government. If your neighbour helps you move and you pay him with a bottle of rum the neighbour is obligated to report the value of the rum to the government as income. Not to do so puts him in the “black market.”
What was once a free market in trade for cash or kind has now been labeled with the anti-concept “black market.”
At the root of this is the improper belief that all economic behaviour falls under the jurisdiction of the government. For a man to earn a living he must first submit to the tribe by giving them a cut of his profit. This is extortion at the very least and slavery in essence. This stems from a change in attitude of a civilized society of individuals acting in concert for the betterment of each player in a transaction to a tribal or collectivist attitude where a central authority dictates which transactions are acceptable and which are not; where a central authority coercively interferes in the livelihood of both parties becoming a parasite for the supposed benefit of the tribe. Over the past 94 years (since the implementation of the income tax) most of us have become accustomed to this sense of tribal entitlement to the profit of others.
Another example of this sense of entitlement and the outlawing of what was once a person’s natural right to conduct business in a free market are competition laws, also called anti-trust laws.
“Under the Antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly or for a successful “intent to monopolize”; if he charges price’s lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.” There is only one difference in the legal treatment accorded to a criminal or to a businessman: the criminal’s rights are protected much more securely and objectively than the businessman’s.”
Ayn Rand – The Ayn Rand Lexicon pg. 28
“The Rule of Law, in complex times,
Has proved itself deficient.
We much prefer the Rule of Men,
It’s vastly more efficient!”
“Now let me state the present rules,”
The lawyer then went on,
“These very simple guidelines,
You can rely upon:
You’re gouging on your prices if
You charge more than the rest.
But it’s unfair competition if
You think you can charge less!”
“A second point that we would make
To help avoid confusion…
Don’t try to charge the same amount,
That would be Collusion!
You must compete. But not too much,
For if you do you see,
Then the market would be yours –
And that’s monopoly!”
Excerpt from The Incredible Bread Machine – by R.W. Grant (1966)
The effect, and intention, of anti-trust laws is to hang a sword of Damocles over the heads of businessmen… all businessmen. At any given time the government can, and has, destroyed wealth, raised the price of goods, and restricted economic choices under the guise of encouraging competition. Ironically they have also created monopolies and subsidized one business over another in the same field. Consider the banking industry and the telecommunications industry. The government has also entered into private enterprise making it difficult for other businesses either to enter the market or to compete. I am reminded of entities like Petro Canada (since privatized) and the CBC.
The businessman has gone from being an individual seeking profit by producing goods or services to willing customers to becoming the host of a parasitic society which feels an entitlement to those goods and services. The businessmen, the inventors, the creative geniuses who create and sell these marvelous things which surround us have become a means to the tribes’ ends.
Whereas before we admired the innovators and businessmen, and erected statues in their honour we now tax them, regulate them and blame them not only for our failures but for their successes. We now have labeled them the dreaded 1%. And we, being the majority 99% must rein in their supposed excesses and bring them to heal. They must do the bidding of the collective for the good of all and they must not expect to profit from their genius.
(Originally broadcast on Just Right #226, November 17, 2011.)
Over the past 46 years since the formation of the Canadian Union of Postal Workers (CUPW) there have been 20 work stoppages at Canada Post. Most of these happened in the 1970s and 1980s and recently there has been little disruption in service, if I can use that word to describe mail delivery in this country. However with the latest work stoppage and lock-out Canadians are coming to realize just how little they depend on Canada Post.
Technology has passed Canada Post by. But Canada Post has recently taken steps, outside of its legislated mandate in my opinion, to expand its service range. On Oct 26th 2010 it launched a comparison shopping service called Canada Post Comparison Shopper which allows shoppers to find and compare products from over 500 stores across the USA and Canada. This intrusion into the private realm of price comparison websites is, to me, a clear overreach of a government monopoly’s position and not at all mandated in the Canada Post Corporation Act. This use of its resources will undoubtedly take business from private sites like PriceGrabber.ca and PriceCanada.com which have been around for years offering the same service.
This isn’t the first foray outside CPC’s mandate to deliver mail. In 2000 it created ePost a service allowing customers to receive bills online for free, competing directly with banks which also provide the same service.
The time has never been better for either the complete privatization of Canada Post or the removal of its monopoly on the delivery of lettermail.
All that would be required, other than a government with the guts and brains to act, is a repeal of Section 14 of the Canada Post Corporation Act which states:
“…the Corporation has the sole and exclusive privilege of collecting, transmitting and delivering letters to the addressee thereof within Canada.”
It’s as simple as that. As it stands now it is against the law for a private company to deliver lettermail. In the United States the monopoly laws are even more restrictive. In that country it is against the law for anyone to deposit anything in somebody’s mail box.
Other countries, like The Netherlands and Germany, have already completely privatized postal delivery. Still more have opened up competition in the area of lettermail delivery as they have in Great Britain, Finland, New Zealand and Sweden. The 27 member nations of the European Union have all agreed to end their mail monopolies in the near future.
There is then the mistaken belief that Canada Post actually makes a profit. With billions of dollars in unfunded pensions CPC is so far in the hole that it can never dig itself out no matter how it pretends to show a surplus.
Federal Labour Minister, Lisa Raitt and the Conservative government’s solution to this latest work stoppage is wrong-headed. The legislation she should have introduced is not back-to-work legislation but a repeal of Section 14 of the Canada Postal Corporation Act. She should let CUPW and Canada Post argue all they want. Let them hold up mail deliver all they want. If private firms where allowed to deliver the mail you can bet that within days the courier companies would be up and ready to take the place of both these dinosaurs.
Without a strong government willing to end Canada Post’s monopoly this country will be left behind as the rest of the world transforms their delivery systems into modern and private entities separate from government monopolies and immune from organized labour’s monopoly.
(Originally broadcast on Just Right #205, June 23, 2011.)
As with Canada Post the CBC should be another government corporation on the auction block. Except that unlike mail delivery the CBC could fold tomorrow and few of us would miss it. In fact, it could be argued that the country would be far better off without the CBC.
But the CBC is not primary focus of this article. I only want to use it as an example of an economic theory called “The Broken Window Fallacy” or the “Parable of the Broken Window.”
The parable goes like this:
“A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has it bright side. It will make business for some glazier.
“As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
“Now let us take another look. The crowd is a least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
“The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.”
That was an excerpt from Henry Hazlitt’s Economics in One Lesson. The Broken Window Fallacy was first conceived by the French economist and statesman, Frederic Bastiat who wrote it in 1848 in an essay entitled That Which is Seen and That Which is Unseen. In over 150 years the lesson has yet to be learned.
Common examples of the Broken Window Fallacy are: war is good for the economy, government stimulus spending and inflation are means to stimulate the economy, public works projects create jobs, and minimum wage laws.
Now what does this have to do with the CBC? On June 18th, in an article in the London Free Press by Brian Lilley we learn that
“The state broadcaster commissioned a study from Deloitte and Touche which claims its annual $1.1 billion subsidy generates an additional $2.6 billion in economic activity for the Canadian economy.”
This is incorrect for a couple of reasons. Firstly we can think of the ever widening circle of economic activity as mentioned in the parable. To stop at some arbitrary figure of say $2.6 billion from the $1.1 billion spent is just that, completely arbitrary. But that is not the main error of Deloitte and Touche. What is not seen, as Bastiat would have put it, is the effect on the economy if Canadians would have been allowed to keep their $1.1 billion. They would have spent it on other things to be sure. Perhaps a new suit would have been one of the millions of items bought. But we will never know. The CBC has taken that money and has spent it on other areas of the economy without our permission.
To complete the analogy, what if the glazier had secretly paid the hoodlum to break the baker’s window? He would have been considered a criminal for this because he took the baker’s money with pre-meditated malice. Now how is this different from our government taking our money knowing full well that they are going to give it to some third party to spend for their own benefit and we are left the poorer for the transaction?
The CBC in this case is the glazier, we are the baker, Deloitte and Touche would be the unthinking crowd, and the government? The government would of course be the hoodlum.
(Originally broadcast on Just Right #205, June 23, 2011.)
While I can’t say I really care one way or the other whether or not we keep or lose the penny I am curious as to the reason why some are asking for its “calling-in.” That phrase by-the-way is the legal term used in Canada for when a coin is removed from circulation and is no longer considered legal tender.
The Committee’s report clearly identifies that the need to call-in the penny is the loss of value it has experienced since the coin was first domestically produced in 1908. In that year one Canadian dollar was worth twenty 2010 Canadian dollars. Cumulative inflation since 1908 is 1,826 percent. Or to put it another way the dollar and hence, the penny, has lost 95% of its value since that time.
This reduction in value to the point where it is no longer worthwhile to bend over and pick up a penny you may have dropped is the cause for hoarding. At the end of the day more and more of us throw our pennies, and sometimes the rest of our devaluing coins, into a container at home and wait until they have accumulate enough to make it worth our while to redeem them at a bank for larger denominations.
Since there still is a need for pennies this hoarding forces the Canadian Mint to continue to produce about 750 million pennies every year at a net loss to the government of about $5M since it costs about 1.3 – 1.5 cents to mint a single 1-cent coin.
The only reason there remains a need for pennies is because we have sales taxes which are calculated as a percentage of a transaction requiring us to make change often involving pennies. Without sales taxes I’m willing to bet that most sellers would price their products so that change would not require pennies, for example selling something at $19.95 without sales tax would only require a nickel as the lowest denomination of coin used in the transaction. Nickels, dimes and quarters are more economical to roll and handle than pennies and cost businesses less in handling charges at the bank.
The recommendation to eliminate the penny comes with another recommendation from the Committee; to round all cash transaction either up or down to the nearest nickel.
I have a better idea that would require no rounding at the till. Redenominate the currency back to its 1908 value and keep the penny which will now be valuable enough that we would no longer need to hoard it.
Redenomination would work like this. Parliament would pass a law saying that a new printing and minting of a new Canadian dollar would have a value 20 times what the current dollar has. We would have a year or two to redeem our old dollars for the new dollars at the bank. You would bring in 20 current loonies for example and get back in return one “New Canadian Dollar” which would now have a purchasing power 20 times what the old dollar had. Likewise the new pennies, nickels, dimes and quarters would have purchasing power 20 times what the old coins had. This new currency would have the word “new” stamped or printed on it and would be easily distinguishable from the old currency.
Many countries have had to redenominate their currencies with little or no effect on their economies. Europe essentially did it when the member states adopted the Euro. Any adverse economic effects following redenomination should be blamed on the economic policies of the European Central Bank rather than the act of redenomination and conversion.
Historically, however redenomination has a bad reputation, as well it should, because it is an admission of failed inflation policies. Weimar Republic Germany had to do it when inflation got so out of control it took one trillion Papiermarks to buy a loaf of bread. The German government simply redenominated the Papiermark into the new Rentenmark. Did this get rid of inflation? Not at all, but you no longer needed a wheelbarrow to carry your money to the grocery store.
The brutal regime of Robert Mugabe’s Zimbabwe has had to redenominated its currency four times since 2006. The last time was in February 2009 when one trillion third Zimbabwean dollars bought one fourth Zimbabwean dollar. I realize the Bank of Canada’s inflationary policy is not as bad as Robert Mugabe’s but it is not unheard of that currencies have redenominated with a much smaller factor. Consider that the German Mark ceased to be legal tender in 1999 when the Euro was introduced and was completely removed from circulation in 2002. 1 Deutsche Mark bought 1.95 Euros at the time.
The human mind has a limit when it comes to intuitively understanding very big or very small numbers. The fact that an average house in Toronto today can cost half a million dollars is a staggering amount to get your head around. In 1908 houses sold for about $1,000; a much easier number to understand. A basket of groceries may have cost $5. The Toronto Globe cost 3 cents in 1867. Today a newspaper at the stand can cost 250 cents.
Of course we wouldn’t really be having this debate about the penny if we had real monetary reform which would involve getting the government out of the business of printing money and allow a return to private banks issuing private currency as they did as late as 1944. A return to a common standard like the gold standard would be nice instead of having faith in the government declaring that valueless pieces of paper have value. Ultimately Parliament should pass an amendment to the Constitution to restrict Parliament from passing laws respecting the economy, but this is just wishful thinking.
Fiat money is fiat money and whether we pay our debts in pennies or paper notes is academic but at some point in our future the Canadian government will have to redenominate our currency. I say why not do it now and save the penny in the process?
When I was but a lad of 8 I watched the Americans land men on the moon and I became hooked on NASA’s space program. I remember the Skylab mission and I remember recording the Apollo/Soyuz docking on my tape recorder while sitting in front of the television. When the shuttle was announced I sent away to NASA for an astronaut application kit. I still have it. Unfortunately my dreams of becoming an astronaut where dashed when I read the visual acuity requirements.
My love of space flight has continued with me all these years and I still, daily, follow the progress of the various space missions and programs around the world. Unfortunately there is very little to follow in my own country as Canada’s space program is only a fraction of the size it could or should be.
Since I have developed a political philosophy of capitalism I have had to come to terms with a proper government’s role in space research. I have come to the conclusion that a free nation should have the capacity to launch, from its own territory, satellites and payloads which advance the defense of the nation and its citizens and which can augment the proper functions of a proper government. For example the Landsat and Radarsat satellites survey and record changes in Canada’s land and ocean territory and can be properly thought of as a legitimate way to carry out the task of protecting the property of the government and of individuals. Communications satellites are legitimate in-so-far that it is an essential part of government to be able not only to communicate with its citizens but also for its military to communicate with each other. Research into the upper atmosphere enhances our ability to communicate and so again is proper. Spy satellites would be a necessary role for a space program as would the ability to launch missiles against our future enemies.
Ayn Rand, herself praised NASA and the American space program when she wrote about her experience watching in-person the launch of Apollo 11.
if we do continue down the road of a mixed economy, then let them pour all the millions and billions they can into the space program. … Let it not be (the United States) only epitaph that it died paying its enemies for its own destruction. Let some of its life-blood go to the support of achievement and the progress of science. The American flag on the moon – or on Mars, or on Jupiter – will, at least, be a worthy monument to what had once been a great country.
Canada got off to a good start in September of 1962 when it launched (on a US rocket from Vandenberg AFB in California) Alouette 1. Since the satellite was built in Canada we became the third country to have a satellite in space after the Soviet Union and the United States. Since then we have let countries like India, Japan and Communist China surpass us.
Canada’s space budget is not insignificant, $370 million, but it is paltry to what it should be in order to carry out the tasks that it should be able to do. By comparison, NASA’s budget is $17.6 billion; the European Space Agency’s budget is $5.3 billion, France’s $2.6 billion, Japan’s $2.1 billion, Germany’s 1.8 billion, Italy’s $1.5 billion and India’s $1.2 billion.
Given our GDP of $1.2 Trillion, the vast size of this country, its skilled technical labour force, its skilled scientists and its way of life to protect, Canada should expand its space budget to be at least that of its comparable G7 counterparts like Germany, France or Italy. With 1/10th the population of the United States our space budget could easily be 1/10th theirs or $1.8 billion or almost 5 times what it is at present. Consider that the Harper government wants to spend $2 billion over the next five years expanding the prison system to put teenage pot-smokers behind bars.
I understand that the Canadian Space Agency is currently considering a launch site somewhere on Cape Breton Island (probably chosen for its eastern and northern coasts which would allow for both polar and equatorial launches. Typically launch sites have uninhabited down-range areas in case anything goes wrong.) The government should pump as much money as it can into furthering this idea.
We need our own launch facilities for the same reason I argued we should have our own nuclear weapon capability a few weeks ago. We can no longer rely on the United States, Russia or the ESA to do our heavy lifting for us. Launches of a military nature must be done on our soil with our technology on our terms. To go cap-in-hand and ask that the US, France or Russia launch our satellites for us is an abrogation of our sovereignty if we could do it ourselves.
A truly Canadian space program would capture the minds of young aspiring scientists and students who would hopefully have that same awe that I had when I saw Americans walk on the moon. Again, Rand said it best when she said that
The most inspiring aspect of Apollo 11’s flight was that it made such abstractions as rationality, knowledge, science perceivable in direct, immediate experience. That it involved a landing on another celestial body was like a dramatist’s emphasis on the dimensions of reason’s power: it is not of enormous importance to most people that man lands on the moon; but that man CAN do it, is.
While I’m not suggesting that Canada has a moon-landing program I am suggesting we have a space program that will inspire Canadians to admire the possibilities of science and rationality as opposed to the current trend to admire mysticism and ignorance.
(Originally aired on Just Right show #172 October 7, 2010. To download the show visit http://www.justrightmedia.org)
A proper government is one whose sole reason for existence is the protection of man’s individual rights. The protection of a man’s right to his life, his liberty, his property, and his pursuit of happiness to name a few.
A proper government is one whose goal is to eliminate the initiation of force in society. It is able to do this if it acts as our agent for our own right to self-defense. A proper government therefore would be the only institution that holds the exclusive power to use force (as a consequence of our individual right to self-defense).
To quote Ayn Rand — “A government is the means of placing the retaliatory use of physical force under objective control —i.e., under objectively defined laws.”
What would such a government look like today? To think about what it would look like we might take a look at our own Provincial government and then start peeling away all of the non-essentials, all of the areas our current government that are not proper functions for the only institution permitted to use force in society. The same exercise could be performed on the federal government.
Here is a quick list of some of the items in Ontario’s 2010 budget that would not appear if Ontario had a proper government whose only role was the protection of our individual rights:
- Health care – It wouldn’t be difficult to eliminate this expense considering that health care provision and administration is only a recent misuse of government power. State control of health care only came about in my life time. In Ontario it was in 1967. Cost $44 billion.
- Education – Education used to be privately provided by employers to their employees and their families. But around the turn of the twentieth century the government took it over because they saw too many American influences in the curriculum. Only later on did they deem this service to be a role of government. A proper government would not provide money for the building of schools, the salary of teachers, student loans, or the purchase of text books. Cost $20 billion.
- Government involvement in the economy – A proper government would be completely separated from the economy. No subsidies to individuals, no subsidies to corporations or business, no setting of interest rates via a central bank, no wealth redistribution of any kind. A proper government would be a referee in the economy, not a player.
To continue the list:
- Aboriginal Affairs
- Agriculture, Food and Rural Affairs,
- Community and Social Services
- Consumer Services,
- Economic Development and Trade,
- Office of Francophone Affairs,
- Health and Long Term Care,
- Health Promotion
- Natural Resources
- Northern Development, Mines and Forestry,
- Research and Innovation
- Tourism and Culture,
- Training, Colleges and Universities
- Liquor Control Board of Ontario
- Human Rights Commission
Here are some of the items which would remain in the budget
- Community Safety and Correctional Services – Cost $2.3 billion
- Office of the Lieutenant Governor – Cost $1.3 million
- Ministry of the Attorney General – Cost $1.5 billion
- Citizenship and Immigration – Cost $112 million
- Office of the Premier – Cost $2.8 million
As well as a few other items such as a much scaled back Ministry of Revenue, a smaller Ministry of infrastructure etc.
Total cost of a proper Ontario government would probably not exceed $5 Billion.
The 2010 operating expense of the Ontario government is over $105 Billion, or 21 times the expense of a proper government.
Currently the government gets its revenue in the following way:
|Revenue ($ billions)||
|Personal Income Tax||25.9|
|Education Property Tax||5.3|
|Ontario Health Premium||2.9|
|All Other Taxes||10.9|
|Government of Canada||23.7|
|Income from Government Business Enterprises||4.2|
|Other Non-Tax Revenue||7.4|
While all taxation, by definition, requires the initiation of force and is therefore immoral, of all of these forms of taxation the only one with any legitimacy as a means to fund a proper government would be sales tax. In a free society there is only one thing that we owe each other and that is JUSTICE. That being so if everyone were to pay for the service they uniformly receive from the government in order to see that everyone benefits from a just government without discrimination or favoritism a sales tax would fit that bill.
A sales tax is also appropriate because it is directly tied to the social activity of trade, of entering into contracts with each other with the government acting as referee and not a participant. The purpose of government is to ensure an environment where individuals can trade with each other with a degree of trust and with the knowledge that such trade is protected by law, where one party in a dispute can go to the government for redress because he has paid for that service via his sales tax during the transaction.
The Provincial portion of the HST (8%) is estimated to take in $19.1 billion in 2010. Four times what a proper government would require from this single tax alone. If we cut the Provincial portion of the HST from 8% to 2% we could fund all the needs of a proper government and would then, as individuals, have $100 Billion dollars to spend between us each year on many of those things the government provided at hyper-inflated prices.
Except for direct fees for discretionary services or voluntary contributions to government a sales tax would be the only moral way to fund it. The most immoral way is income tax which, through its progressive nature, penalizes people for participating in society and being productive. An income tax is even more intrusive into our lives than the long-form census. Consider all of the receipts for personal claimable expenses we submit which the government records and then keeps on file. Don’t forget to submit your birth control pill receipts under medical expenses, and that anti-itch powder your doctor prescribed, or the soccer school fees for your kids.
The list of personal activities the government is privy to due to income tax is extremely invasive. Besides that, the government knows where you work, what you make, what you spend your money on, your personal medical history, your education history, and what you spent to renovate your home last year. All of this information is in the hands of the government. None of this information should be in the hands of a proper government.
(Originally aired on Just Right show #161 July 22nd, 2010. To download the show visit http://www.justrightmedia.org)