South Africa and Ending Apartheid: W. H. Hutt and the Free Market Road Not Taken

William Hutt (left) with F.A. Hayek.

 

 

 

 

 

 

 

 

 

by Richard M. Ebeling*

The public eulogies marking the passing of Nelson Mandela at the age of 95 on December 5, 2013 have refocused attention on the long struggle in South Africa to bring about an end to racial discrimination and the Apartheid system.

Forgotten or at least certainly downplayed in the international remembrance of Mandela’s nearly three decades of imprisonment and his historical role in becoming the first black president of post-Apartheid South Africa is the fact that through most of the years of his active resistance leading up to his arrest and incarceration he accepted the Marxist interpretation that racism and racial discrimination were part and parcel of the capitalist system.

Mandela was a member of a revolutionary communist cohort who were insistent and convinced that only a socialist reorganization of society could successfully do away with the cruel, humiliating, and exploitive system of racial separateness.

With the fall of communism in Eastern Europe and the Soviet Union in the late 1980s and early 1990s, the communist model of socialist transformation was too tarnished and delegitimized to serve a as a guidebook for post-Apartheid South Africa by the time that Mandela assumed office as the first black president in that country in May 1994.

Instead, Mandela’s government followed the alternative collectivist path of a highly “activist” and aggressive interventionist-welfare state, with its usual special interest politicking, group-favoritism, and its inescapable corruption and abuse of power. Its legacy is the sorry and poverty-stricken state of many of those in the black South African community in whose name the anti-Apartheid revolution was fought.

But this did not have to be the road taken by South Africa. There were other voices that also opposed the racial and Apartheid policies of the white South African government, especially in the decades after the Second World War.

These voices argued that racial policies in that country were not the result of “capitalism,” but instead were precisely the product of anti-capitalist government interventionism to benefit and protect certain whites from the potential competition of black Africans.

One of the most prominent of these voices was economist, William H. Hutt. Hutt had come to South Africa from Great Britain in 1928 and taught at the University of Cape Town until the 1970s, when he moved to the United States where he died in 1988. Born in 1899, he had attended the London School of Economics and studied under Edwin Cannan, the noted historian of economic thought and liberal free trade economist.

The Government Shutdown and the Debt Default Issue: The Dreadful Lesson

by Mario Rizzo

I grant that the government “shutdown” and the perceived threat of default on the debt was a public relations disaster for the Republican Party. I think that the shutdown problems, like those of the Sequester, were grossly exaggerated by the traditional media and as well as by various left-wing hysterics. Neither of these spending or service adjustments affected the overwhelming majority of our (excessive) government spending.

The default problem could have been much worse. It would have presented the following options: Delay payments to bond holders, axe discretionary spending, and/or cut entitlement spending. Another possibility would have been to continue borrowing anyway, perhaps provoking a Constitutional problem. I believe that had this continued for only a few days not much would have happened that would not have been quickly undone afterwards. However, none of this activity would have served the interests of reducing the size and scope of government.

So what is the “dreadful lesson”? It is this. We do not know how to reduce the size of our Leviathan state. Tea Party critics are correct, for example, that the longer ObamaCare stays unaltered or unrepealed the harder it will be to get rid of it. This is not because it will suddenly turn out to be good but because, as with so many other laws, special interests will benefit and will not easily yield.  How well have the efforts to find alternatives to Social Security and Medicare gone?

Provoking crises will not work. The current Republican Party does not seem competent enough to devise clever political methods to accomplish the goal of smaller government, even if it were truly willing to do so. (And that is debatable.)

So we are left, politically speaking, with nothing. How dreadful.

Congress Should Grow a Pair

by Roger Koppl

I was thinking of the NSA scandal while jogging through Rome’s Park of the Aqueducts  this morning. I guess it was that setting that made me think of our new computer-geek overlords as a virtual Praetorian Guard.  Augustus created the original Praetorian Guard about 27 BCE to protect the emperor. It quickly came to exercise independent power, once even auctioning off the empire to the highest bidder.  This outrage led the Roman general Septimius Severus to march on Rome and displace Emperor Julianus who had won the Praetorian bidding war. Severus disbanded the old Preatorian Guard only to set up a new Praetorian Guard, which quickly achieved a similar authority, power, and autonomy. The “intelligence community” of the US government seems to be playing a similar role today.

We now have secret interpretations of public laws  that some members of Congress have obliquely warned of.

An Appreciation: James M. Buchanan (1919-2013)

by Shruti Rajagopalan* 

James M Buchanan, who died last week at age 93, was one of the most profound thinkers of our age. Few Indians would be familiar with his academic contributions or even recognize his name. Yet, the insights from his research would strike a chord with every Indian navigating the inefficiencies and excesses of government on a daily basis.

Buchanan, professor emeritus at George Mason University in Fairfax, Virginia, won the Nobel Prize in Economic Sciences in 1986 for his contributions to the economic analysis of political decision-making. By bringing politics back into economics, Buchanan made economics more humane, realistic, interesting, and relevant. He challenged the economics orthodoxy, dared to be different, inspired his students and colleagues, and developed one of the most unique and creative research programs in economics at the Center for the Study of Public Choice at George Mason University. 

In Favor of Across-the-Board Cuts in Government Spending

by Mario Rizzo

I am not sure which is worse: superstitions based on science or superstitions pure and simple.

Many people would react to across the board cuts in government spending by saying something like: “This is crazy; some things are more important than others. We should cut the less important things first.” And, indeed, economists would seem to agree. After all, the equi-marginal principle was one of the first “discoveries” of the marginal revolution. No sense cutting programs in such a way that some will have very high returns, however measured, at the margin while others will have very low returns. Irrational!

However, what is rational for a household or an individual need not be rational policy for the government. Why is that?

THE WILL OF THE PEOPLE

by Mario Rizzo

Some people rest the case for representative democracy on the idea that its decisions express the “will of the people.” Those who believe this have never thought deeply about what they are saying. I am inclined, in response to these believers, to use my favorite paraphrase of Ludwig Wittgenstein, “You can mouth the words, but you cannot think the thought.”

What is the will of the people?  Whatever it is, it is certainly not without contradictions, illusions, misinformation, and wishful-thinking – just like a lot of individual thought. But as an aggregation of individual thought it is a construct used to justify all sorts of things. In some people’s minds, this construct has claim to moral authority.

Wisconsin Policy Lab

by Chidem Kurdas

Paul Ryan is said to be influenced by Milton Friedman, Friedrich von Hayek and Ayn Rand. One might add that as the representative for Wisconsin’s first congressional district, he is from a state that has often been in the vanguard of policy thinking.

Mitt Romney is Not a Tax Idiot

by Mario Rizzo

Let us begin with a famous quotation from Judge Learned Hand in a decision affirmed by the Supreme Court:

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.

Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff’d, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935)

Quite simply, I am really tired of hearing about Mitt Romney’s tax returns. Does Team Obama really want us to believe that if Mitt Romney took advantage of every legal option to lower his tax bill that he is somehow bad, out of touch with the majority of Americans, or unpatriotic (whatever that is supposed to mean)?

Who Should Audit the Fed?

by Chidem Kurdas

A few days ago the House passed with a veto-proof majority the bill known as “audit the fed” or more plainly as H.R. 459, sponsored by Ron Paul.  If it became law, it would open the Federal Reserve’s policy deliberations and decisions, certain operations and dealings with foreign banks and governments to scrutiny by the Congressional Government Accountability Office. The GAO currently audits the Fed’s financials but not its policy making.

A number of House Democrats supported the bill, though party chieftains are against it.  The critics of the measure, prominently including Fed Chair Ben Bernanke, argue that it will open the way to political interference with monetary policy, which is best conducted on purely economic grounds.

Both sides have a valid point.

Conversations Before Independence Day

by Chidem Kurdas

The July 3^rd, 1776, letter John Adams wrote to his wife, Abigail, after voting for the declaration of independence, is justly famous for his prediction that the occasion will be celebrated “by succeeding Generations, …..solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.”

In fact the letter starts with a complaint about the ill effects of the decision being delayed for seven months. It ends with the admission that independence carries a high cost in “Toil and Blood and Treasure.” This is the sort of thing that gave John Adams the reputation of being grumpy.

Then you realize that his words are like gold, no matter how crotchety he gets. Between his pride in the declaration and annoyance that it took so long, he provides a model of how major national decisions should be made.

Taxpayers’ Future in Wisconsin Vote

by Chidem Kurdas

Wisconsin governor Scott Walker is in the extremely unusual position of facing a recall vote less than two years after he was elected in 2010. The recall is orchestrated by unions that have gone all out to reverse his valiant effort to contain the growth in state and local spending. This vote has wide implications beyond the state of Wisconsin, implications for all government budget making and the question of  whether taxpayers can be protected at all against predatory interests.

Mr. Walker’s supposed crime is to be on the taxpayers’ side.

Using Sortition to Achieve Campaign Finance Reform

by Gene Callahan

I was sitting in a session of the British Political Studies Association Conference today, listening to several speakers talk about sortition (using random selection in the political process) when I was struck by a way to employ it to achieve campaign finance reform without any restriction on donations or campaign length. So, I share:

We have a problem with money corrupting the political process, and part of that problem is how long our campaigns run. How can sortition ameliorate the problem?

Russian Lesson on Term Limits

by Chidem Kurdas

The point of term limits is to prevent the buildup of political power by one person or group. In Russia’s ersatz version, Vladimir Putin merrily plays revolving door with his protégé Dmitry Medvedev. Mr. Putin may win the election on March 4th despite the persistent protests sparked by his latest round of musical chairs with Mr. Medvedev.

That means Mr.Putin could potentially be Russia’s president again for two terms lasting through 2024, bringing his overall reign at the top as either prime minister or president to almost 25 years.

I would like to know what Mikhail Khodorkovsky, one-time-Putin-crony-turned-arch-critic, thinks about this. But the Siberian prison camp where he is held is not welcoming visitors.  A documentary about him, starting to make the rounds of some US cities, is as close as we get to understanding what’s happened to Mr. Khodorkovsky,

Elitist Hokum from Krugman

by Chidem Kurdas

It has become a standard left-liberal jibe that those complaining of government largesse receive a piece thereof themselves. Such beneficiaries go against their own interest if they favor smaller government—so it is alleged. Thus Paul Krugman in the NYT  largely agrees with Thomas Frank, who attributed apparent red state ingratitude to the exploitation of social issues by Republicans in his book What’s the Matter with Kansas? 

In addition Mr. Krugman cites evidence suggesting large percentages of Social Security and Medicare beneficiaries  are confused about their use of these government programs.  They don’t seem to think they’re getting handouts.

Maybe that’s because they’re in fact not getting handouts. 

Primaries, Public Interest and Angels

by Chidem Kurdas

The Republican primaries have been all-out fights, with a series of contenders showing strength in polls and challenging the establishment favorite Mitt Romney, only to fall back after the initial success. Newt Gingrich is the latest to rise and, after his loss in the Florida primary, presumably to fall. It is not a nice process, causing complaints of mudslinging that will continue in the coming presidential election. Pundits eager to display their wisdom call on politicians to set aside the differences and do what’s best for America.

Public choice theory tells us that politicians, like most people most of the time, tend to focus on their self interest. This view has been challenged—the recent Critical Review has several articles on the topic. 

The Führer Principle – Light

by Mario Rizzo

David Gergen has written a piece decrying the lack of leadership on the debt-deficit “crisis” and calling for a new Churchill. David Gergen, who saw no problem working for both Ronald Reagan and Bill Clinton, now teaches at the JFK School of Government at Harvard. He has a claim to being a member of the political establishment if anyone has.

This call is not confined to Gergen, however. It appears as a widely agreed-upon diagnosis in the news media, whether old or new. It is the conventional wisdom of the day.

Yet it is dangerously superficial. It completely misdiagnoses the problem before us.

Politically Feasible

by Mario Rizzo

Many years ago, the distinguished economist, William H. Hutt, wrote a pamphlet called “Politically Impossible?” He argued that economists should not seek political relevance by proposing only those policies that they perceive as politically possible, practical or feasible. They should speak truth to power, so to say, and advocate those policies that they perceive to be in the “public interest.” (Interestingly, it is often considered a key element of the economic rationality of agents to be able to distinguish the desirable from the feasible.)

Soros and Open Society in America

by Chidem Kurdas

George Soros originally intended to wind down his Open Society Foundations at the end of his life but changed his mind. This worldwide network of activist groups – to whom he has given more than $8 billion and named after Karl Popper’s classic The Open Society and Its Enemies – is to continue operating after he’s gone.

In Eastern Europe, the network helped undermine communist regimes and bring about freer societies. The main mission ascribed by Mr. Soros is to hold governments accountable in countries that lack civil institutions. It has to be a bitter irony that he sees the United States, the long-time home of many such institutions, in serious danger of ceasing to be an open society, given the increasingly manipulative and deceptive public discourse.

He was an early and aggressive backer of Barack Obama apparently in the belief that the then presidential candidate would stop the dangerous trend. Now he is disappointed.

Too Much Aid Will Hobble Arab Spring

by Mario Rizzo

For those who have access to the Financial Times, a must-read is the opinion piece by Saifedean Ammous. Saif attended our NYU colloquium regularly during his last year as a graduate student at Columbia University. Congratulations.  See the FT online here.

Kissinger on Bismarck

by Chidem Kurdas

A man described as both great and evil, Otto von Bismarck-Schönhausen makes a fascinating study,  as Jonathan Steinberg’s Bismarck: A Life demonstrates.  Henry Kissinger reviewed this biography in the New York Times Book Review, highlighting the diplomatic and political victories the unifier of Germany won through nimble maneuvers.

The review is a bravura tribute from one practitioner of realpolitik to another. Yet a closer look at Bismarck raises doubts as to realpolitik.

While admiring Bismarck’s subtle power games, Mr. Kissinger  admits that the result lacked institutional balance and “sowed the seeds of Germany’s 20^th century tragedies.” But he takes issue with the connection Mr. Steinberg draws from Bismarck to Hitler. Kissinger points to the contrast between the two characters. “Bismarck was a rationalist, Hitler a romantic nihilist,” he writes. “Hitler left a vacuum. Bismarck left a state strong enough to overcome catastrophic defeats …”

Nevertheless, Bismarck’s actions led to those catastrophes.

Public Unions vs. the Real Underdog

by Chidem Kurdas

Wisconsin governor Scott Walker successfully made the financial case to limit collective bargaining by public unions. Not only have the unions imposed an immense burden on taxpayers, present and future, but they create bureaucratic rigidities that cause dysfunction and, in financial crunches, layoffs of promising employees.

Yet in recent weeks it has become noticeable that these points fail to persuade many Americans.  The Wisconsin bill that just passed and similar reforms in other states face furious opposition, including appeals to the public.  Perhaps it’s not a bad idea to highlight another aspect of government unions, in addition to the purely economic issues.

We need to understand why part of the public supports unions. The best explanation that I’ve seen is from Richard Epstein in Free Markets Under Siege, a 2005 book that analyzes unions and agricultural price supports as examples of cartels in different markets.  These cartels impose social costs and require special dispensation from antitrust law. Why did the rest of the population accept the costs?  “Never underestimate the enhanced political sympathy when the underdog seeks to gain state power,” Professor Epstein points out.

Egypt Best Case Scenario via Korea

By Young Back Choi and Chidem Kurdas

Compared to the turmoil in the Middle East, South Korea appears to be an oasis of calm. But as recently as 20 or so years ago you could  still smell tear gas on the streets of Seoul. Violent demonstrations shook the city for decades—-making it look like Cairo today.

Despite continuing tensions with North Korea, Seoul is now relatively peaceful and the economy is humming along. How did South Korea get out of the cycle of angry protests and government repression? 

Voters’ Best Interest

by Chidem Kurdas

Ronald Dworkin, a well-known legal scholar, describes last month’s election results as depressing and puzzling. In a commentary in the New York Review of Books, he asks, “Why do so many Americans insist on voting against their own best interests?” 

Thanksgivings Past

by Chidem Kurdas

Thanksgiving was originally a spontaneous celebration. Over time it grew into a social custom. It did not become an official holiday until Lincoln issued a Thanksgiving proclamation in 1863. Then in 1939 Franklin D. Roosevelt moved the date.

Two Takes on Political Donations

by Chidem Kurdas

The Wall Street Journal reports that the biggest campaign spender of 2010 is a public sector union, the American Federation of State, County and Municipal Employees, which lavished $87.5 million on helping Democrats. This single union outspent the US Chamber of Commerce, which came second with $75 million.

Reading the WSJ article by Brody Mullins and John D. McKinnon, I thought that AFSCME is giving taxpayer money to politicians who will help it further pick my pocket.  Whereas had I confined myself to reading the New York Times’ front-page piece on the same topic, I would have had no such concern, because there is no mention of AFSCME.  The NYT campaign finance story focuses entirely on the US Chamber of Commerce and says not a word about the public union.