Feb
25
Is Libertarianism The Answer For Mexico?
Filed Under Crime | 2 Comments
This Wall Street Journal article chronicled the worsening situation in Mexico where drug-funded gangs are more powerful than the local authorities in 200 counties. Our southern neighbor was listed in a U.S. report as being a possible ‘failed state’ in the coming years (along with nuclear-armed Pakistan).
Much as Pakistan is fighting for survival against Islamic radicals, Mexico is waging a do-or-die battle with the world’s most powerful drug cartels. Last year, some 6,000 people died in drug-related violence here, more than twice the number killed the previous year. The dead included several dozen who were beheaded, a chilling echo of the scare tactics used by Islamic radicals. Mexican drug gangs even have an unofficial religion: They worship La Santa Muerte, a Mexican version of the Grim Reaper.
In growing parts of the country, drug gangs now extort businesses, setting up a parallel tax system that threatens the government monopoly on raising tax money. In Ciudad Juarez, just across the border from El Paso, Texas, handwritten signs pasted on schools warned teachers to hand over their Christmas bonuses or die. A General Motors distributorship at a midsize Mexican city was extorted for months at a time, according to a high-ranking Mexican official. A GM spokeswoman in Mexico had no comment.
“We are at war,” says Aldo Fasci, a good-looking lawyer who is the top police official for Nuevo Leon state, where Monterrey is the capital. “The gangs have taken over the border, our highways and our cops. And now, with these protests, they are trying to take over our cities
The parallels between Pakistan and Mexico are strong enough that the U.S. military singled them out recently as the two countries where there is a risk the government could suffer a swift and catastrophic collapse, becoming a failed state.
The rapidly deteriorating situation has led to the Mexican federal government using the military to supplant local police forces in the war on the drug cartels and gangs, as many local police forces have become either hopelessly corrupt or dangerously out manned. For instance:
A few weeks ago, a recently retired army general hired to help the resort city of Cancun crack down on drug gangs was tortured and killed. His wrists and ankles were broken during the torture. Federal officials’ main suspect: the Cancun police chief, who has been stripped of his duties and put under house arrest during the investigation.
And to highlight the vast disparity of resources:
The drugs trade in Mexico generates at least $10 billion in yearly revenues, Mexican officials say. The government’s annual budget for federal law enforcement, not including the army: roughly $1.2 billion.
Thus the use of the federal military in Mexico’s own territory. Harsh enforcement and confrontation of the drug trafficers increased when the PAN party took control of the government and took a sharp turn from former Mexican president Vicente Fox’s drug policy. What have been the results?
Officials in both Washington and Mexico City also say the rising violence has a silver lining: It means that after decades of complicity or ignoring the problem, the Mexican government is finally cracking down on the drug cartels and forcing them to fight back or fight with one another for turf. One telling statistic: In the first three years of President Felipe Calderon’s six-year term, Mexico’s army has had 153 clashes with drug gangs. In the six years of his predecessor Vicente Fox’s term, there were only 16.
I would submit that the government officials have their causality a bit confused. Is the violence triggering the crackdown, or is the crackdown triggering the violence?
As described above, this crackdown is not only already extremely expensive, but is not even sufficient. Nearly all local control of law enforcement is absent via corruption and usurpation by the military. Violence and unrest are increasing by the day. People are kidnapped, shot, beheaded, and dissolved in “vats of acid”. Even with all of this, the control policy is not working.
What is the answer to this problem? If Mexico wants to avoid failing as a nation as drug gangs assume regional control, or devolving into a police state, the libertarian policy of decriminalization is the way out.
I have long been a supporter of legalizing drugs, especially marijuana. Mexico is providing the perfect example of what can happen when a government, especially in a poor country, pursues a policy of criminalization of drugs and harsh enforcement.
The first question you need to ask when dealing with a question is this: Is the purpose of law to protect us from force and fraud, or from our own bad decisions? When government begins focusing on the latter, it inevitably loses focus on the former. If someone tries to inject heroin into my arm against my will, then government has a duty to step in and prevent such an act. But if I make the decision to take my money and buy heroin and inject it in my arm, then it is not the job of the state to intervene.
Many people, especially conservatives who support limited regulation in other areas, object to this reasoning. Drugs are so dangerous and harmful that they are outside of the scope of conventional individual responsibility, they say. The way I see it, the arguments against drug use (from which criminalization logically comes) are:
- Drugs impair your judgement
- Drugs harm your body
- Drugs can, and often do, ruin your life in general
These three arguments are completely correct, but I counter them by saying:
- Alcohol and a developing brain (like that in teenagers) impair your judgement
- Cholestarol, fat, sugar, and sodium harm your body, and contribute to the deaths of millions of Americans each year
- I can ruin my life with credit cards, bad relationships, and payday loans
I have never used illegal drugs in my life, and I never will (hopefully the same goes for payday loans!). They are not in my best interest (or anybody’s in my opinion) to use them. But there is a big difference between thinking people shouldn’t do something and having the state use my earnings and lethal force to stop them from doing it. Using my arguments above, if you support outlawing drugs, shouldn’t you then support outlawing Heineken, McDonald’s, and Mastercard?
The litmus test for authorizing the use of government force should not be whether it is bad for people - it should be whether or not people are being forced to do something. It is no suprise that when government takes responsibility for making the right decisions for us, the people then begin to stop doing so at an individual level. This is the case with providing our own healthcare, assessing credit risk, or putting harmful substances in our body.
Before I get to the practical arguments for decriminalizing drugs, I want to make a note about the effects of drugs. By and large, illegal drugs are extremely harmful, but I must take exception with marijuana. I would venture a guess that a majority of the adult population has smoked cannabis at some point in thier lives, and they are fine. And there is also the case of Michael Phelps, whose marijuana smoking didn’t seem to hamper his becoming the most dominant athlete in the history of mankind. Again, I have never personally smoked marijuana (I don’t even like taking Tylenol), but this business about the evils of chronic just doesn’t hold up.
Those who would still support criminalizing drugs counter that the drug trade is dominated by immoral, violent thugs who kill for their turf. This is only the case because of criminalization! The key point that needs to be understood, is that criminals, by default, do not sell drugs. Criminals are in the business of selling whatever it is the government is banning at a particular time. When freedom for blacks was illegal, Harriet Tubman and her criminal gangs used the Underground Railroad to sell it. When alcohol was illegal during the early 20th century, the criminals sold alcohol. In the Soviet Union, the criminals sold bibles and books by Milton Friedman. Criminalization of a product in high demand gives violent thugs a monopoly over it. Case in point, the WSJ article mentions how a criminal organization named “Zeta” not only sells pirated CD’s, but sells them under their own label and with their originally designed logo.
Another point is the exorbitant price of drugs, such as a relatively easy to produce crop like cannabis, is inherently raised when the production process involves evading authorities. Criminalization of a product that has a very high demand from voluntary consumers will not allow the market to work. Imagine if drugs were legalized and Wal-Mart started selling pot in the produce section. It would be 68 cents a pound! Violent thugs can have their way with an ineffective government like that of Mexico, but when up against the Rollback kings? They wouldn’t stand a chance.
There is another serious issue with the war on drugs, be it north or south of the Rio Grande. When we lock people up in large numbers for engaging in a process where all parties involved were participating voluntarilly, we seriously distort and handicap the justice system. First of all, the war on drugs might as well be called the war on the poor. Human beings love to run away from their problems and get high. The poor use crack, the rich just doctor shop for prescription medicine to abuse, such as painkillers. Think Rush Limbaugh (whose show, for the record, I enjoy a great deal).
More important however, is the strain on the corrections system. Here in central Florida, we had a gruesome story that made national headlines about an evil piece of shit named John Evander Couey who did things to an innocent little girl that I won’t describe. He had been arrested 24 times in his pathetic excuse for a life, for everything from breaking into homes, to whipping his thing out, to fondling children. But the thing about this scumbag is that he behaved exceptionally well once he got into prison, and was able to be paroled and released early many, many times. In 2005, his freedom cost Jessica Lunsford her life.
Why was this moster who isn’t worth the dingles on my berries released into the general public? Was it because the state who gave a name to its electric chair (Old Sparky) was too generous? Or was it because said state could not afford to throw away the key ten years ago because its jails and prisons were full of drug users?
Whether it be running healthcare, funding art, or controlling drugs, any time the government focuses on something besides preventing the use of force, its fundamental duties suffer.
Can Mexico use libertarianism to create a legal drug market and foster a safe and productive nation? It will be needed, I think. However, they can’t do it alone. Without the U.S. in tow, such efforts would probably do more harm than good, as corporate drug producers in Mexico would probably force the American DEA to take action, and Mexico can’t afford to alienate the U.S. in such fashion. But if one thing is certain, it is that criminalization of drugs only leads to empowering violence on behalf of criminals and the state, and letting real monsters go free.
Jan
26
A Stimulus Bill, Wal-Mart Style
Filed Under Economics | 4 Comments
Currently our politicians in Washington are debating how to pass a “stimulus” to help the economy. The main debate seems to be whether government spending (proposed by Democrats) or tax cuts (proposed by Republicans) will do the job better. The secondary concern is how such action will affect the budget deficit of the federal government, which is slated to be over $1 trillion in 2009.
Tax cuts are the only way to improve both situations.
Let’s start with the budget deficit. In case you don’t know, the U.S. federal deficit is the difference between what the federal government takes in and what it spends. If spending is higher, it is a deficit. If revenues are higher, then we have a surplus. It really is not very complicated, folks. The government acts pretty much like a regular person when it comes to money (with the exception of the ability to create money, but that would be a whole other post). If you don’t make enough money to cover your expenses, you either dip into savings (like the Social Security Trust Fund) or you use a credit card (like borrowing from investors and foreign governments though treasury securities, basically a government I.O.U.). So, just like anybody looking at their finances and seeing that they have a deficit, the culprit either has to be spending or revenue. Well, take a look at this chart detailing government revenue (income taxes only):
Let’s assume you were at your kitchen table going over your finances and you had a ton of credit card debt, just like the federal government. If the above chart were your personal income, what would you conclude your problem was? Spending! That kitchen table of yours would probably be mahogany wood, and your house would be full of all sorts of expensive stuff. In addition, you probably had kept making financial commitments you couldn’t afford, such as expensive car and house payments, whose payment obligations stretched far into the future.
Well this is pretty much the story of the federal government. We’ve spent money on everything including the military, infrastructure, health care, government employees to enforce regulations, clean-energy subsidies, NASA, law enforcement, scientific research and lots of other things. We’ve also made commitments on Medicare, Medicaid, and other programs stretching infinitely into the future absent significant reform (Social Security is not included in the chart above so I’m not including it here, as it operates slightly differently, but with much the same success).
Only a Democrat could look at the above chart and attribute the deficit to decreased revenue. I can’t help but laugh when big-government Democrats harp about “fiscal responsibility” and “tax-cuts we can’t afford,” thinking that nesecarrily cuts revenue.
That mentality is wrong because tax cuts help the economy by encouraging producers to create more wealth, therefore increasing the tax base. The government will get more revenue by taxing a large economy at a small rate than a small economy at a large rate.
This principle is illustrated by the Laffer Curve:
Basically it illustrates the taxation rate’s effect on government revenue. Two universal truths can be gained from the Laffer Curve: first, that a taxation rate of 0% will obviously result in no revenue, and second, that a rate of 100% will also result in no revenue because producers will have no incentive to work. The key contention about the Laffer Curve is where the peak is, or at what rate of taxation begins to harm the economy. Note: the above chart would make 50% appear to be the peak, but this is not known. The chart is for illustration purposes only. Lest anyone think I support the government confiscating half of your paycheck!
To illustrate why tax cuts can both help the economy and lower budget deficits (as long as spending is decreased), I’d like to make a little retail-sector analogy.
Let’s say that there is a big store, Wal-Mart perhaps. Except instead of selling goods like shirts and food and cheaply-glued furniture, they sell income. The store is a metaphor for the market at large. So the customers (us) go into the store (the market), find the goods (income) using our shopping carts (our labor, capital, innovation), and go to the checkout (the government), where we pay for the goods at the price (rate of taxation) determined by the store.
So what are the goals of Wal-Mart if they are in the business of selling income? Well, because they want the consumers to be happy, they want them to have as much goods (income) as possible. That’s what we’re trying to do with a “stimulus” bill, right? Improve the economy and raise incomes. Now Wal-Mart also has to remain profitable and not have deficits like the government currently has.
Now, if the liberals get in charge of the store, they would make the asinine proposition of just raising the prices of the goods (raising taxes on income). If we’re running a deficit when the shirts are priced for $15, we should raise it to $20. Hell, if this logic works, why not raise it to $100?! $1000!
That is ridiculous because of supply and demand. Higher prices result in lower demand, whether Wal-Mart is selling shirts or income. So what should Wal-Mart do in this case to achieve its goals of increasing the amount of goods for the consumers and remaining solvent? Have a sale!
The income store can have a sale by lowering the prices (taxes) on the goods (income). Therefore more consumers will pick up their idle shopping carts (labor, capital, innovation) to go get the goods. The income store benefits because even though their prices and profit margins are slightly lower, there are more gross sales and therefore more revenue.
If things are really dire, as it appears right now, maybe the income store should have a clearance sale, where the prices are really low.
This is exactly how the real Wal-Mart is so successful. It is more profitable to sell 20 shirts at $10 than 5 shirts at $20. Budgets will remain balanced -unless the store spends a whole bunch of money on plush new offices, company cars, and exorbitant benefits.
Unfortunately, the stimulus bill currently being debated doesn’t include a clearance sale. In fact, I wouldn’t even really consider this pork monster Keynesian. It is just one big Liberal wish list.
Keynesian economics basically says that the consumers are hoarding their shopping carts because they’re too scared, which makes sense. But, as a solution, Keynesians say we should borrow their carts (at interest) and do their shopping for them. Then, presto! The store has more revenue. But obviously then the store just has to recoup the money they spent borrowing the shopping carts, and the only way to do that is to raise prices, meaning the consumers won’t buy as many goods. Everyone loses.
So how do we get all of those scared consumers to use their carts? It is obvious in the private sector - by going on sale. Everyone wins.
But, as I said earlier, the stimulus bill is just a bunch of boondoggles. It is not even Keynesian. In our store metaphor, the board of directors is basically saying we’re going to raise the goods to the consumers (individual incomes) and the store’s revenues by painting the offices, hiring more employees, and making sure the shopping carts are fuel efficient.
This won’t work because not only will it cost too much, but it will do nothing to get the consumers to buy more income.
However, this is exactly why government does such a poor job compared to the private sector. They are not subject to the same rules. Where a business like Wal-Mart is bound by budgets and the laws of supply and demand and makes decisions based on cost, government can demand more funds at will (until the economy collapses) and makes decisions based on what sounds good.
Example: Only at the government-run income store do those who buy in bulk (high earners) pay a higher price (because of progressive taxation). You wanna buy three shirts? $30. Six shirts? $100. If you support charging those who buy in bulk the same price as everyone else, you support “tax cuts for the rich.” That’s liberal logic for you.
A spending stimulus bill will not work because we cannot afford to exacerbate the federal budget deficit, it will take too long to reach people, and it will do nothing to incentivize producers to create more wealth.
Cutting both taxes and spending will work because it will improve the fiscal health of the federal government, reach people’s pockets immediately, and encourage growth of the economy at large.
Donald Luskin had a piece refuting the current stimulus here.
Maybe later I’ll use my Wal-Mart metaphor to tackle regulation, where the cashiers leave their registers and dictate to the customers how they should shop……
But this is enough for now. Enjoy!
