Humble Executive. Literary Artist. Altruistic Libertarian.
Abandoning respect for the individual, his creed, his convictions, and his feelings, is the first step on the road to the gas chamber.
Peter Drucker, Adventures of a Bystander
The principle barrier in the modern age to establishing a Genuinely Free Society is the pervasive intervention of the government. As Hayek observed in 1935:
It is important to realize in any investigation of the possibilities of planning that it is a fallacy to suppose capitalism as it exists today is the alternative. We are certainly as far from capitalism in its pure form as we are from any system of central planning. The world of today is just interventionist chaos.
Friedrich Hayek, Individualism and Economic Order
Since that time, the scale of government intervention has been ratcheted forward by a full magnitude, with occasional, and beneficial, retractions (deregulation of the airlines, for instance, and the breakup of the telecommunications monopoly).
While most of the discussion of government intervention revolves around economics and commerce, it must be kept in mind that genuine freedom includes all aspects of human life, including the spiritual, civil and personal. As such, in most cases we can replace terms like ‘capitalism’, ‘free market’, etc. with ‘genuine freedom’, thereby expanding the concept to include everything humans care about.
Basis for Intervention
Most people don’t question the magnitude of government intervention. It seems normal, expected, required even. Every nation on earth is governed in similar ways, differing only in the degree of intervention. In the West, we can attribute, at least in part, the philosophical basis for intervention to the German philosopher Emmanuel Kant:
To be beneficent when we can is a duty; and besides this, there are many minds so sympathetically constituted that, without any other motive of vanity or self-interest, they find a pleasure in spreading joy around them and can take delight in the satisfaction of others so far as it is their own work. But I maintain that in such a case an action of this kind, however proper, however amiable it may be, has nevertheless no true moral worth, but is on a level with other inclinations, e.g., the inclination to honor, which, if it is happily directed to that which is in fact of public utility and accordant with duty and consequently honorable, deserves praise and encouragement, but not esteem. For the maxim lacks the moral import, namely, that such actions be done from duty, not from inclination…It is just in this that the moral worth of the character is brought out which is incomparably the highest of all, namely, that he is beneficent, not from inclination, but from duty.
Emmanuel Kant, Metaphysic of Morals
We are obligated, according to Kant, to do good things for other people from a sense of duty, and when we fulfill this duty, we must take no pleasure in it. In fact, if we ever take pleasure doing something good for another person, we have negated the moral worth of the action. That makes the most morally sound people in society, the ones we must esteem and honor, those who maintain a grim disposition—or at the very least, utterly neutral—and focus their entire effort on helping others.
According to Kant, though, no matter how pure we believe our motivation, we never truly know if we have acted morally or not:
Sometimes it happens that with the sharpest self-examination we can find nothing beside the moral principle of duty which could have been powerful enough to move us to this or that action and to so great a sacrifice; yet we cannot from this infer with certainty that it was not really some secret impulse of self-love, under the false appearance of duty, that was the actual determining cause of the will. We like them to flatter ourselves by falsely taking credit for a more noble motive; whereas in fact we can never, even by the strictest examination, get completely behind the secret springs of action; since, when the question is of moral worth, it is not with the actions which we see that we are concerned, but with those inward principles of them which we do not see.
Emmanuel Kant, Metaphysic of Morals
So one never knows if they acted strictly according to duty, and therefore deserve esteem, or if they secretly gained some pleasure in the act, or satisfaction from anticipated esteem from their peers.
Kant does provide some good news: “To secure one's own happiness is a duty,” he writes, “at least indirectly; for discontent with one's condition, under a pressure of many anxieties and amidst unsatisfied wants, might easily become a great temptation to transgression of duty. (italics in original)
“Transgression of duty.” Those are very heavy words, especially when italicized. The dictionary defines ‘duty’ as
Something that one is expected or required to do by moral or legal obligation.
Kant goes on to insist (again, in italics) that, “Duty is the necessity of acting from respect for the law.” This duty extends to frightening levels:
It is the duty to the people to bear any abuse of the supreme power, even then though it should be considered to be unbearable. And the reason is that any resistance of the highest legislative authority can never but be contrary to the law, and must even be regarded as tending to destroy the whole legal constitution.
Emmanuel Kant, Metaphysic of Morals
Thus Kant provides a philosophically legitimization of government intervention: a duty on the one hand to cheerlessly help others (perfect for a soulless bureaucracy), and a secondly, the compulsion to strict adherence to all laws, regardless how unjust or harmful.
Closer to the surface, some might express the need to have the state govern themselves in order to maximize their happiness:
But Dostoevsky’s brief tale about the Grand Inquisitor in The Brothers Karamazov makes wonderfully clear in about twenty pages what so many readers of Plato’s Republic and Laws have overlooked: it is possible to argue—and Plato, like the Grand Inquisitor, did argue—that freedom leads men to be vicious and unhappy, while the best and safest, if not the only, road to happiness and virtue is to take away men’s freedom.
Walter Kaufmann, Tragedy and Philosophy
Humans can become accustomed to just about anything, even life in prison. Even so, no matter how plush the surroundings, a prison is still a prison:
The swamp pheasant has to walk ten paces for one peck and a hundred paces for one drink, but it doesn’t want to be kept in a cage. Though you treat it like a king, its spirit won’t be content.
Chuang Tzu, Basic Writings
There are those who long for earlier, simpler times, without weighing every implication, or absent a genuine understanding of what that earlier, more primitive life entails. Some people consider their current life acceptable, and don’t chaff against the restrictions they face, the taxes they pay, or consider the possibilities that don’t exist, because they don’t exist. They may even consider themselves free:
‘Freedom of will’ really means nothing more than feeling no new chains.
Nietzsche, Human, All Too Human
Yes, some people will be happy living in a restricted, unchanging, and unimaginative world, but like most adaptable humans, they will soon get accustomed to a Genuinely Free Society, should one come about.
Descending to the more prosaic, Ludwig von Mises strikes at the core:
At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending.
Ludwig von Mises, Human Action
People seem to think you can get something from the government for nothing, forgetting that the only advantage the government has over private institutions is the monopoly of violent force. The use of such force can only prevent or destroy – it can never create. In other words, it’s impossible to legislate wealth, yet the electorate constantly behaves as if this isn’t so:
On the unhampered market there prevails an irresistible tendency to employ every factor of production for the best possible satisfaction of the most urgent needs of the consumers. If the government interferes with this process, it can only impair satisfaction; it can never improve it.
Ludwig von Mises, Human Action
Wealth gets created when something of value is brought into existence (product, service, or anything that humans value) for a cost-value less than what is created. For example, when a farmer freely trades three chickens for a pair of shoes, both he and his trading partner are better off, creating new wealth in the world. When a company produces products in a free market, and generally operates profitably (revenue exceed costs, both expense and capital) new wealth is created. Alternatively, when a company, or a government entity, suffers more cost than the value created, wealth is destroyed.
Within regimes with concentrations of absolute power, the goal of intervention is often very simple: aggrandizing their personal wealth. For nominal democracies, the process is more refined:
It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference.
Ludwig von Mises, Human Action
Government interference takes the form of favorable regulations, spending bills that favor one industry/state over another, and outright grants. Tax dollars are distributed to voting constituencies with varying justification; special interests use the power of the state to improve their circumstances at the expense of many others. This is very common.
The naïve/ignorant believe government intervention properly serves social needs by effectively redistributing wealth from one set of taxpayers to another, thereby improving overall satisfaction. They believe that the only way these services can be effectively provided, or our society properly protected—food, housing and medical care for the poor; education for children; retirement benefits for the aging; postal service; transportation (highways); unemployment benefits; moral standards upheld (drug use, prostitution, gambling); protection from monopolies (anti-trust); challenges to traditional marriage (gay, transgender)—is through the application of government intervention.
Another class of sincere thinkers justify benevolent intervention in the spirit of creating ‘the good life.’ Frederick Copleston, a Jesuit priest, philosopher, and historian of philosophy, provides an excellent example of this pervasive and widespread point of view:
The Greek view of the State, which is also that of St. Thomas, is superior to the view which may be known as the liberal idea of the State, i.e. the view of the State as an institution, the function of which is to preserve private property and, in general, to exhibit a negative attitude towards the members of the State. In practice, of course, even the upholders of this view of the State have had to abandon a completely laissez-faire policy, but their theory remains barren, empty and negative in comparison with that of the Greeks.
Frederick Copleston, A History of Philosophy, vol. 1
A Genuinely Free Society does not preclude the development of organic and healthy communities, ones that offer the opportunity to live ‘the good life.’ In fact, many kinds of communities can exist within a free society, some healthier than others. Any visionary can propose, support or establish a community that meets their definition of ‘the good life,’ and free individuals can choose to join. Alternatively, a state-dominated society cannot guarantee that a society that provides ‘the good life’ will exist, outside of a limited version enforced upon an unwilling citizenry. This must be so, otherwise the power of the state would be unnecessary to create and maintain it in the first place.
Some paradox of our nature leads us, when once we have made our fellow men the objects of our enlightened interest, to go on to make them the objects of our pity, then of our wisdom, ultimately of our coercion.
Lionel Trilling, quoted by Joan Didion in Slouching Towards Bethlehem
On the other hand, the cynic knows better, understanding that government intervention is largely costly and ineffective, yet continues to support such policies due to the ensuing power and influence it conveys. As it stands, the government has powerful regulatory and financial levers in every aspect of human life – education, commercial, retirement, healthcare, environment, recreation, national defense, etc. Maintaining that influence, regardless of the cost, remains a priority for many.
Finally, some groups simply what to force others to do what they want, based on some sense of moral superiority or perceived personal benefit. Thus, all political action consists of one group of people forcing another group of people to do (or not do) what they would ordinarily want to do (or not do). Or as Valery put it: “Politics is the art of preventing people from minding their own business.”
What goes unstated by the electorate and government officials is their view of the mass. To put it plainly, they vote and legislate as if most people are stupid, as if they are unable to live an appropriate life without the coercive presence of the government. They must be treated like children, without respect, as they seem unable or unwilling to behave appropriately.
But once the principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments.
Ludwig von Mises, Human Action
It is true that many of us make bad decisions, and occasionally bring harm to ourselves, or fail to select the optimal path. That is the nature of human life. Using the power of government to limit some actions, and insist on others, will never change this, other than to make some people utterly dependent upon the state, and restrict the potential of autonomous individuals.
Peter Drucker, a fellow Austrian, establishes the historic threshold when pervasive social intrusion became the norm:
By 1960, it had become accepted doctrine in all developed Western countries that government is the appropriate agent for all social problems and all social tasks.
Peter Drucker, Post-Capitalist Society
This is the principle doctrine that stands in the way of realizing a Genuinely Free Society, a barrier that must be breached if humanity is to thrive.
In summary, cynics support big government because it provides positions of power and influence, and the opportunity to exploit others. Those in positions of power and influence do what is necessary to get the naïve and/or ignorant to believe that the government benefits society so that they in turn will support big government. While the naïve and/or ignorant sincerely believe big government benefits society, they are mistaken, as there is always a net cost to government activity. While someone always benefits from government activity (the bureaucrats, if no one else), the cost is always greater, in that more people are hurt than helped.
In some instances this cost is warranted, in particular when the use—or the threat of the use—of violent force is necessary to protect citizens from criminals or foreign aggressors. The government is also necessary to maintain the legal infrastructure, including the courts and basic regulations dealing with externalities. For most other societal activities (general commerce, medicine and medical services, insurance, communication, retirement, space exploration, research, investment, education, transportation, technology, standards, the arts, social relationships, marriage, charity), private institutions are far better suited to satisfy individual (and by extension societal) needs than government bureaucracies. Perhaps more importantly, private institutions that fail to effectively provide desired products and services, fail. That is, they eventually cease to exist as independent organizations.
The nation state is a special form of government, one that occasionally spans entire continents. For those who haven’t considered the magnitude of current nation states, and the implications of their dominance, consider what Peter Drucker has to say:
By 1870, the nation-state had triumphed everywhere…
But the nation-state of 1970, a century later, bore little resemblance…to the nation-state of 1870. It had mutated into the Megastate—the same species perhaps as its 1870 progenitor, but as different from it as the panther is from the pussycat.
The national state was designed to be the guardian of civil society. The Megastate became its master. And in its extreme, totalitarian form, it replaced civil society completely. In totalitarianism, all society became political society.
The national state was designed to protect both the citizen’s life and liberty and the citizen’s property against arbitrary acts of the sovereign. The Megastate, even in its least extreme, Anglo-American form, considers a citizen’s property to be held only at the discretion of the tax collector.
Peter Drucker, Post-Capitalist Society
The nation state (what Drucker refers to as the ‘Megastate’) has become pervasive, and considered by most to be the appropriate political institution in the world:
But except for Japan, the movement toward the Megastate has been universal throughout the developed world; and the new developing countries rapidly followed suit. No sooner was a new nation-state formed out of the dissolution of an empire than it adopted the new military policy, building in peacetime a wartime military establishment, and manufacturing or at least procuring the advanced arms needed in case of war. It immediately attempted to get control of society. It immediately tried to use the tax mechanism to redistribute income. And finally, almost without exception, it tried to become the manager and, in large part, the owner of the economy.
Peter Drucker, Post-Capitalist Society
The Nation State is not synonymous with ‘government’. In order for people to prosper in peace, freedom and prosperity, government is required. Government is the sole institution in society empowered with the legal use of violent force. With this power, the government’s uses violent force—or the threat of violent force—to provide basic legal structure and lawful protection of its citizens from criminals. This includes contractual structures defining and protecting property rights and the formal redress of wrongs done by one party unto another. The alternative to government is anarchy. In an anarchic society, unless individual behavior is effectively bound by family and/or tradition, nobody is safe, free or at peace.
Nation states have gathered enormous power and influence, and can be held responsible for the worst evil visited upon the modern world:
The [nation] state had proved itself an insatiable spender, an unrivalled waster. It had also proved itself the greatest killer of all time. By the 1990s, state action had been responsible for the violent or unnatural deaths of some 125 million people during the century, more perhaps than it had succeeded in destroying during the whole of human history up to 1900. Its inhuman malevolence had more than kept pace with its growing size and expanding means.
Paul Johnson, Modern Times
The Greeks had the right idea when they determined that the polis (city-state) was the ideal unit for effective government. Only when the Greek polis’s banded together in the semblance of a Nation State to protect themselves from Persia (an imperialistic empire) did things begin to founder. After defeating Persia, the members of the Athenian League continued to provide Athens with tribute to maintain protection from the foreign threat. On the one hand, the additional wealth funded the art, drama and culture so admired in the West; on the other, the circumstances eventually led to a quarrel between Athens and Sparta, resulting in the Peloponnesian War, a conflict that lasted a quarter century and effectively ended the Golden Age of Athens.
I suspect that the majority of people disagree with this analysis, and believe that the Nation State is necessary and good: the Third Reich, Star Spangled Banner, God Save the Queen, I Pledge Allegiance, John Philip Sousa, etc. Citizens desire uncomplicated order, feel patriotic and proud of their nation, and generally think it’s the best one that ever existed, and can do no wrong. How many terrible wars and bloody battles have been waged for “God and Country”? “Kill them all and let God sort them out!” “We had to destroy the village in order to save it.” “Bomb them back to the Stone Age.” As Graham Greene put it, “When war began, the absolute moral code was abolished; you were allowed to do evil that good might come.” (The Confidential Agent) But ‘good’ never comes from war; only death and destruction, and the foundation for future wars. Hayek quotes Reinhold Niebuhr when he writes:
There is “an increasing tendency among modern men to imagine themselves ethical because they have delegated their vices to larger and larger groups.” To act on behalf of a group seems to free people of many of the moral restraints which control their behavior as individuals within the group.
Friedrich Hayek, The Road to Serfdom
We imprison people who assault our wives; we jail those who steal, who enter our homes without provocation or invitation. But for some reason we applaud the same behavior when done by our country at several magnitudes beyond the serial murderer we put to death. We condemn criminal acts done by an individual and then erect monuments to the generals who do so much worse. Does irony run any deeper?
For the history of power politics is nothing but the history of international crime and mass murder (including, it is true, some of the attempts to suppress them). This history is taught in schools, and some of the greatest criminals are extolled as its heroes.
Karl Popper, Open Society and its Enemies, vol 2
Individual humans can pursue any number of noble causes: cure disease, build fantastic bridges, write beautiful poetry, and explore the universe. Can we say the same of the nation state? What glory, what grand achievement can any nation state boast?
The German mission is not to conquer; it is to be a nation of thinkers and educators. This is their true glory….For [Herder], as for Nietzsche, the State is the coldest of all cold monsters.
Isaiah Berlin, The Proper Study of Mankind
The highest values can be achieved without sacrificing the lives of others. What did a nation state ever accomplish that justified so much violence and destruction?
But even as we contemplate history as this slaughter bench on which the happiness of peoples, the wisdom of states, and the virtue of individuals have been sacrificed, our thoughts cannot avoid the question for whom, for what final aim these monstrous sacrifices have been made.
Hegel, quoted by Walter Kaufmann in Tragedy and Philosophy
Thus, the greatest threat to any society (outside of natural disasters) is the Nation State (Canada, the United States, Russia, Uganda, Iraq, Israel, etc.). In fact, the only justification for the existence of Nation States is to protect its citizens from other Nation States. In other words, if we didn’t have Nation States, we wouldn’t need any.
The Use of Violent Force
One fundamental aspect of government institutions distinguishes them from all private entities:
State or government is the social apparatus of compulsion and coercion. It has the monopoly of [legal] violent action. No individual is free to use violence or the threat of violence if the government has not accorded this right to him.
Ludwig von Mises, Human Action
As such, government either prevents violence against citizens, or it employs it, through regulations, taxation, conscription and prohibitions. When the government uses violence, or threatens to use violence, against non-criminals in order to achieve social goals, it creates ripples of dissatisfaction among the populace:
The effect of [the state’s] interference is that people are prevented from using their knowledge and abilities, their labor and their material means of production in the way in which they would earn the highest returns and satisfy their needs as much as possible. Such interference makes people poorer and less satisfied.
Ludwig von Mises, Human Action
It’s rarely possible to map every effect of government intervention. So often it prevents the creation of possibilities that simply never exist, and therefore, never go missing. It squanders wealth that could be used to improve lives, the losses largely invisible to analysis, and the potential improvements unrealized.
Sometimes government-spawned violence is more palpable, and the effects readily felt:
Nothing is so beneath the dignity of a human being as to suffer violence, for it destroys the individual’s humanity. Whoever inflicts it on us, is at odds with nothing less than our humanity; whoever cowardly suffers it, tosses his humanity aside.
Friedrich Schiller, Concerning the Sublime
Individual humans are moral beings, in that they must decide what to do, what is right and wrong, and how to behave. There is nothing more socially relevant than a person’s moral character, and nothing more demeaning than when that moral character is hindered through acts of violence.
All these considerations appear to show that none of the principles on which men claim to rule and to hold all other men in subjection to them are strictly right.
Many thinkers that advocate intervention fail to acknowledge the need for violence in order to enact their favored policies. They don’t explicitly consider the fact that those who resist taxation, object to drug laws, or fail to abide by any law, risk engaging an armed police force. In many cases, violent confrontations are justified, as the police work to keep the country safe from violent criminals and terrorists. In other cases, the risk of resisting the government can escalate with deadly results.
In the first example, members of the National Guard killed unarmed college students at Kent State while the students protested the Vietnam War. Just days before the shooting, the US had illegally invaded Cambodia, sparking protests across the country:
The Kent State shootings was the shooting of unarmed college students protesting the Vietnam War at Kent State University in Kent, Ohio, by members of the Ohio National Guard on May 4, 1970. Twenty-nine guardsmen fired approximately 67 rounds over a period of 13 seconds, killing four students and wounding nine others, one of whom suffered permanent paralysis.
The protests were peaceful and justified. The response, not so much. Another violent over-reaction took place in Idaho, when the authorities attempted to serve a bench warrant:
Ruby Ridge was the site of a deadly confrontation and an eleven-day siege near Naples, Idaho, beginning on August 21, 1992, between Randy Weaver, members of his immediate family and a family friend Kevin Harris, and agents of the United States Marshals Service and the Hostage Rescue Team of the Federal Bureau of Investigation. Following USMS reconnoiter of the Weaver property pursuant a bench warrant for Weaver after his failure to appear on firearms charges, an initial encounter of six marshals with the Weavers resulted in a firefight and the deaths of Deputy U.S. Marshal William Francis Degan, age 42, the Weaver's son Samuel (Sammy), age 14, and a Weaver family dog, all by gunshot. The subsequent siege of the Weaver residence, led by the FBI applying especially lethal rules of engagement, resulted in the further death of Vicki Weaver, age 43, the wife of Randy Weaver, by FBI sniper fire. All casualties occurred on the opening two days of the operations…[T]he siege and stand-off were ultimately resolved by civilian negotiators, with surrender and arrest of Kevin Harris on August 30, and surrender of Randy Weaver and the surviving Weaver children, and the father's arrest, the next day.
Randy Weaver and Kevin Harris were subsequently arraigned on a variety of federal criminal charges, including first-degree murder over the death of Deputy U.S. Marshal W.F. Degan; Harris was acquitted of all charges, and Weaver was subsequently acquitted of all charges except for the original bail condition violation for the arms charges, and for having missed his original court date. Fined $10,000 and sentenced to 18 months in prison, he was credited with time served plus an additional three months, and was then released.
The Weavers and Kevin Harris brought civil suits against the government, the former awarded $3.1 million, and the latter $380,000, indicating culpability of the government authorities. The sniper who killed Vicki Weaver was indicted for manslaughter, but never convicted.
A year later, another deadly confrontation took place between private citizens and government authorities near Waco, Texas:
The Waco siege was a siege of a compound belonging to the group Branch Davidians by American federal and Texas state law enforcement and US military between February 28 and April 19, 1993. The Branch Davidians, a sect that separated in 1955 from the Seventh-day Adventist Church, was led by David Koresh and lived at Mount Carmel Center ranch in the community of Elk, Texas, nine miles east-northeast of Waco. The group was suspected of weapons violations, causing a search and arrest warrant to be obtained by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).
The incident began when the ATF attempted to raid the ranch. An intense gun battle erupted, resulting in the deaths of four government agents and six Branch Davidians. Upon the ATF's failure to raid the compound, a siege was initiated by the Federal Bureau of Investigation, the standoff lasting 51 days. Eventually, the FBI launched an assault and initiated a tear gas attack in an attempt to force the Branch Davidians out of the ranch. During the attack, a fire engulfed Mount Carmel Center. In total, 76 people died, including David Koresh.
This event, so soon after Ruby Ridge, led to changes in policy and tactics by government law enforcement, with the goal of avoiding such tragedies.
One of the things that hasn’t changed significantly is the ongoing violent tension between local law enforcement and African Americans, as can be seen in the 2004 Oscar-winning movie Crash. I recall such an incident while attending college near San Diego. Sagon Penn, a young African American, was pulled over by police less than a mile from my home:
On March 31, 1985, Penn, then 23, was driving a pickup truck with his brother and some passengers riding in the truck bed along 65th Street in Encanto. As he passed two policemen in separate cars, Officer Donovan Jacobs flipped a U-turn while radioing the other officer, Tom Riggs saying, “I’m going to stop that truckload of Crips.”
The two officers pulled Penn over, and Jacobs approached the driver’s side as Riggs stood near the passenger door.
“What’s up, blood?” Jacobs said before asking Penn for his license. Penn handed him his entire wallet. Jacobs then demanded he take his license out of the wallet. Penn handed it back, asking what the problem was. A struggle ensued with Jacob grabbing Penn, who tried to back away, and the two began to struggle. Jacobs began hitting Penn with his baton, but Penn was able to block most of the blows with his arms. Riggs joined in the struggle, hitting and kicking Penn while trying to keep the crowd from closing in. Jacobs ended up on Penn’s chest, hitting him with closed fists while Riggs kicked and hit him with his baton.
Somehow Penn was able to grab Jacob’s .38, firing a shot into his neck. The gathering crowd scattered thinking the officer had killed Penn.
In a taped 9-1-1 call, Penn’s brother could be heard screaming, “They’re shootin’ my brother!”
The second shot ripped through the sole of one of Riggs’ boots. The third his thigh and the fourth hit him in the abdomen, severing his abdominal aorta.
Penn jumped up and fired two more shots into Riggs’ patrol car, wounding Sarah Pina-Ruiz, a civilian participating in a police ride-along.
Penn jumped in Riggs’ patrol car to escape as police sirens began screaming through the Encanto neighborhood, running over Riggs’ body in his escape.
Thirty minutes later after the shooting, Penn surrendered. One cop was dead, another wounded. The case instantly polarized San Diego: Was he a vicious cop killer or a victim of racist police brutality?
San Diego Times
During the trial, Mr. Penn's attorney maintained that, “his client had feared for his life and had acted in self-defense.” The civilian ride-along, herself wounded by Penn, testified on his behalf. The jury agreed, and he was acquitted of all charges. But Penn’s life was never the same, and fifteen years later he committed suicide in Spring Valley, not far from where I went to middle school.
Whereas most people adhere to the demands of government authorities, even when those demands are unreasonable, these examples illustrate the potential consequences when people resist—again, regardless of justification—when confronted by armed officials.
Every law, regulation, tax and prohibition legislated by the government is backed by local, state or federal armed police forces, and carries the same potential for conflict. Within a Genuinely Free Society, such conflicts would be minimized, as the state would focus its armed forces in protecting citizens from criminals, and the nation from aggressive foreign powers.
Plato asks the best, and final question, concerning violence:
But supposing that he does use some gentle violence for their good, what is this violence to be called?
Utterly unnecessary, is how I would answer. Yet the creation of power virtually assures that it will be employed in regrettable ways, regardless of the men and women involved:
No merely moral consciousness and no loyalty to principles will be able to cope with the intricate realisms of the exercise of power.
Peter Sloterdijk, Critique of Cynical Reason
Influential thinkers sometimes confuse actual violent force with less lethal influences that hardly compel human behavior. They equate corporate marketing with government prohibitions; social etiquette with police power:
…Foucault seemed to have been confused between the power of institutions to subjugate individuals, and the fact that individual behavior in society is frequently a matter of following rules and conventions. As Peter Dews puts it: “[Foucault] perceives clearly that institutions are not merely imposed constructs, yet has no apparatus for dealing with this fact, which entails that following a convention is not always equivalent to submitting to a power…But without this distinction every delimitation becomes an exclusion, and every exclusion becomes equated with an exercise of power.”
Edward Said, Reflections on Exile
Conventions do not deter the unconventional. Advertising, social media, and company regulations do not oppress or create terror as might a secret police. Junk mail offering credit cards do not equate to an IRS audit. When blue lights flash in your rearview mirror, it’s not simply a suggestion to stop; it’s a demand enforced by armed police and circling helicopters.
It’s important to understand the difference between genuine violence, and various conventions that do not actually compel behavior, or threaten one’s life or liberty, as this is the key distinction between government intervention (use of violence) and the activity, behavior and interaction of genuinely free people. Proust summarizes in his typically gentle manner:
…to kindness and wisdom we make promises only; pain we obey.
Marcel Proust, Sodom and Gomorrah
Historical Forms of Intervention
There is nothing that cannot be imposed upon society, except what matters.
Goethe, Elective Affinities
Intervention comes in many forms, but always involves the government using force, or the threat of force, to keep people or organizations from doing one thing or another, or regulating behavior in specific ways. In Western democracies, various forms of taxation usually provide the government with the financial means to foster one form of investment over another (roads and highways, for instance, over rail), redistribute income from one group to another (social security, welfare, unemployment), fund national defense and federal law enforcement (US Army, FBI, CIA, NSA, etc.), and support regulatory bodies (FDA, EPA, etc.).
Socialist/Communist societies push this intervention further, often eliminating private ownership and directly determining specific life choices such as employment and education. Marx provides the classic summary:
In this sense the theory of the Communists may be summed up in the single sentence: abolition of private property.
Karl Marx, Communist Manifesto
After acknowledging the productivity of the existing regime…
The bourgeoisie during its rule of scarce one hundred years has created more massive and more colossal productive forces than have all preceding generations together.
Karl Marx, Communist Manifesto
…Marx goes on to layout the vision, including the material increase in production:
The proletariat will use its political supremacy to wrest by degrees all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state, i.e., of the proletariat organized as the ruling class, and to increase the total of productive forces as rapidly as possible.
Karl Marx, Communist Manifesto
Marx, and many socialists after him, assumed that taking over the government and intervening at every social level would increase material production and improve the quality of life. This bears repeating: until recently, every leftist political theorist asserted that a socialist regime would accelerate material production and provide the nation’s citizens with greater material benefits, and correspondingly, a better life. This assumption has always been theoretically suspect, and now stands as historically disproven. No socialist economy, at any point in human history, has outperformed its free market counterpart: East/West Germany, for instance, or take North/South Korea. The differences are stark and unmistakable.
George Orwell offers another socialistic view, one that repeats leftist economic miscalculations:
Socialism is usually defined as “common ownership of the means of production.” Crudely: the State, representing the whole nation, owns everything, and everyone is a State employee. This does not mean that people are stripped of private possessions such as clothes and furniture, but it does mean that all productive goods, such as land, mines, ships and machinery, are the property of the State. The State is the sole large-scale producer. It is not certain that Socialism is in all ways superior to capitalism, but it is certain that, unlike capitalism, it can solve the problems of production and consumption. At normal times a capitalist economy can never consume all that it produces, so that there is always a wasted surplus…and always unemployment. In time of war, on the other hand, it has difficulty in producing all that it needs, because nothing is produced unless someone sees his way to making a profit out of it. In a Socialist economy these problems do not exist. The State simply calculates what goods will be needed and does its best to produce them. Production is only limited by the amount of labor and raw materials….
However, it has become clear…that “common ownership of the means of production” is not in itself sufficient definition of Socialism. One must also add the following: approximate equality of incomes (it need be no more than approximate), political democracy, and abolition of all hereditary privilege, especially in education…
…Socialism aims, ultimately, at a world-state of free and equal human beings. It takes the equality of human rights for granted.
George Orwell, Essays
He goes on to list the conditions and the costs for improving humanity’s quality of life:
If you want a high standard of living you must have a complex industrial society – but that implies planning, organization, and coercion – in other words, it implies the State, with its prisons, its police forces, and its inevitable wars.
George Orwell, Essays
He is correct in asserting the need for complex industrial society to create and maintain our favored standard of living, yet incorrect on the basis for the effective operation of a complex industrial society. The genius of the free market, and the Genuinely Free Society in general, is the lack of coercion required to manage complex markets, institutions and technologies. It doesn’t require, “the State, with its prisons, its police forces, and its inevitable wars,” and in fact, can do quite well without them. What an effective complex industrial society requires is the free interaction of educated, motivated and thinking participants. As Hayek writes:
Far from being appropriate only to comparatively simple conditions, it is the very complexity of the division of labor under modern conditions which makes competition the only method by which such co-ordination can be adequately brought about. There would be no difficulty about efficient control or planning were conditions so simple that a single person or board could effectively survey all the relevant facts. It is only as the factors which have to be taken into account become so numerous that it is impossible to gain a synoptic view of them that decentralization becomes imperative.
Friedrich Hayek, The Road to Serfdom
What needs to be emphasized is the essential commonalities of all government intervention. The only difference between governments and private institutions is the ability of the former to wield or threaten to wield violent force. All laws, taxation, regulation, management and ownership directed by the government faces the same real-world circumstances as any human endeavor, any commercial or private institution. All human, social and natural laws necessarily apply. Thus, when Orwell naively asserts that, “The State simply calculates what goods will be needed and does its best to produce them…” we must realize the utter impossibility of the state doing any such thing, let alone the simplicity of it. (The complexities involved of managing a single business, let alone an entire economy, will be discussed later.)
Further, the widespread notion that a socialist economy could outperform a free market has been theoretically and historically debunked many times in the past half-century, yet some intellectuals persist in advocating high levels of government intervention:
…technical progress would make for continued increase in the standard of living and for continued liberalization of controls. The nationalized economy could exploit the productivity of labor and capital without structural resistance while considerably reducing working hours and augmenting the comforts of life. And it could accomplish all this without abandoning the hold of total administration over the people.
Herbert Marcuse, One-Dimensional Man
It’s odd that Marcuse believes that the nationalized economy would increase the standard of living while reducing working hours. Such an economy would require continuing improvements in productivity, improvements that require proper investment and effective management. Socialist economies simply do not possess the expertise, the information or the motivation to deliver such continuous improvements. But according to Marcuse, little stands in the way of industrial progress:
By the power of total administration, automation in the Soviet system can proceed more rapidly once a certain technical level has been attained.
Herbert Marcuse, One-Dimensional Man
This has clearly proven inaccurate. Under no conceivable circumstances could automation proceed rapidly within the Soviet economy. On the contrary, the burden of socialistic policies crumbled under its own socialistic weight. Marcuse goes on to list key aspects to his socialist vision:
Distribution of the necessities of life regardless of work performance, reduction of working time to a minimum, universal all-sided education toward exchangeability of functions—these are the preconditions but not the contents of self-determination.
Herbert Marcuse, One-Dimensional Man
What Marcuse describes is an ant farm, not a proper human society. For those interested in reading an informed fictional account of such a society, read the story of the Twentieth Century Motor Company in Rand’s Atlas Shrugged:
Well, there was something that happened at that plant where I worked for twenty years. It was when the old man died and his heirs took over. There were three of them, two sons and a daughter, and they brought a new plan to run the factory. They let us vote on it, too, and everybody – almost everybody – voted for it. We didn’t know. We thought it was good. No, that’s not true, either. We thought that we were supposed to think it was good. The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.
Ayn Rand, Atlas Shrugged
The story goes on for several pages, as Rand’s analysis unfolds in this fictional thought experiment, one lived by too many people in recent history. China called it ‘the iron rice bowl’, where people were guaranteed job security, as well as steady income and benefits. Tacitus provides the perfect rejoinder to socialist thinkers:
Otherwise industry will languish and idleness be encouraged, if a man has nothing to fear, nothing to hope from himself, and every one, in utter recklessness, will expect relief from others, thus becoming useless to himself and a burden to me.
Tacitus, The Annals
While lack of motivation is one weakness of socialism, the lack of information for key decision makers at all levels, coupled with the incentive to serve political interests instead of commercial ones, condemn socialist institutions to substandard performance.
As a real-life example, I worked for a company that managed the IT infrastructure for a US state. Given the nature of the contract between my company and the state, the presence of several other commercial entities, and the multitude of state agencies that were served by the IT infrastructure, every executive in this multi-entity conglomeration had difficulty making good decisions (‘good’ relative to the citizens of the state who were paying the taxes and deriving any benefit) because they didn’t have the necessary information. They couldn’t prioritize one project versus another; they didn’t know if progress was being made in one area, or if they were experiencing a general decline in another; they didn’t know what anything cost. Most of the management activity was driven by anecdote and opinion. Direction could change based on one chance encounter with an agency. Executive meetings were generally contentious and ill-informed. We argued about metrics, and what they meant.
Two specific examples: at one meeting I presented information that showed that the average age of the servers had been increasing for the past six months. Given that one of our principle charges was to replace aging equipment and refresh all of the hardware and software on a regular basis, this information demonstrated that we were trending in the wrong direction. Instead of acknowledging the issue, I was ordered by the governing agency to never show that chart again, and the data was buried, as it was potentially embarrassing to the state leadership.
In the second example, another commercial entity within the conglomeration deployed a new backup technology. This new technology would replace tape drives, and other aging systems designed to store data off-site from operational servers. This would allow an agency to recover its data if one of their servers suffered a catastrophic failure. Given that the state agencies paid for these support services, it was necessary to develop pricing for this new service. Again, given the lack of costing data, transparency between the commercial entity and the governing state agency, and the conflicting interests between all parties, the pricing hadn’t been set after twelve months of deployment.
When the state wrote the contract to provide support for their IT infrastructure, they didn’t include provisions for a sales and marketing organization. Given that the market was fixed (roughly thirty state agencies) they didn’t include the functions associated with sales and marketing, specifically product development. In essence, the product development process goes through a series of stages that provide the information, and the timing, to make consecutive decisions regarding a new product offering. Later decisions are dependent on earlier ones, and they can’t be effectively made simultaneously, or out of order. The size of the projected market, the projected sales over time, the selection of key features, the extent of capital expenditure, including new build outs, equipment purchases, network extensions, and equipment capacity, are just a few examples. Out of this process emerges the information necessary to establish a pricing strategy, and the requirements for systems and processes to order, implement, maintain and bill the new service.
Without a product development capability, the state found it impossible to effectively make decisions regarding the deployment of new services. This created inordinate stress on all parties, because the leadership (on all sides) didn’t understand what was missing, and attempted to consider and deploy new products and services without a process, or professional expertise, and grew frustrated at the lack of progress.
As for the new backup system, for several months, nothing was charged to state agencies that had converted to the new service. It wasn’t until a pricing freeze was established (they developed some kind of historical algorithm to apply) that the state agencies were billed at all. Given the variable nature of the service (agencies determined what data on what servers were stored, and for how long) this temporary solution pleased no one, but they were unable to develop a pricing model based on the level of service actually used. Yes, the service was complicated, and pricing it fairly to a captive market difficult, but making a sound business decision given the conflicting interests and the lack of product management discipline made it nearly impossible.
In this hybrid organization—part state, part commercial—the lack of credible operational data (quality, process, production, productivity), financial indicators (cost, margins, revenue, returns), and the absence of business cases (financial models that developed various scenarios for specific products and markets used by decision makers to decide future directions), made it impossible to make proper decisions, ones that would ultimately benefit the end user, the state tax payer. The organization was inefficient, unable to deploy new products and services, slow to introduce technical upgrades, and generally dysfunctional. Progress was painful, slow and costly, to the point that several state agencies sought IT support outside the conglomerate, despite the state mandate. And it wasn’t anybody’s fault. The executives, managers and engineers were generally competent, hard working and conscientious. The fault lies in the structure of the contracts (the incentives and damages largely unrelated to genuine business performance), the political nature of environment (the criteria for management decisions based more on somebody’s opinion than sound operational criteria), and the lack of any alternatives (the state agencies were captive customers). In that situation, it is impossible to operate at minimally acceptable commercial standards, ones that would provide any decent return for the state’s ongoing and perpetual investment.
One might argue that poorly managed companies are common, perhaps even the norm. Many people have experienced dysfunction in the workplace, and often wonder how their employer stays in business. But in every case within a private institution, executives know the basic criteria for success, even if they struggle to achieve it. It’s true that executives appear to be utter fools by those doing the work, and especially to those who directly serve the customer. Sometimes they are (utter fools, that is); most often, however, employees simply don’t possess the full context of the business, or what the executives are attempting to balance: cost/quality; retention/benefit levels; product mix/market share; capital structure/long term investment. In any case, companies that are perpetually poorly managed eventually cease to exist.
While Marx, Orwell and Marcuse lie some distance in the past, we have a contemporary socialist in Terry Eagleton, who provides an excellent example of an intelligent and well-informed thinker who favors increasing the role of government. As a critic of ‘capitalism’, he acknowledges, as did Marx, the incredible productiveness of a free market:
As the greatest accumulation of productive forces which history has ever witnessed, it is capitalism which for the first time makes feasible the dream of a social order free of want and toil. As the first truly global mode of production, it uproots all parochial obstacles to human communication and lays down the conditions for international community. Its political ideals—freedom, justice, self-determination, equality of opportunity—outshine, in principle at least, almost all previous ideologies in the depth of their humanism and the universality of their scope.
Terry Eagleton, Illusions of Postmodernism
But somehow, according to Eagleton, “All of this,” (the accumulation of productive forces, along with the admirable principles of freedom, equality, etc.) “is bought at the most terrible cost. This dynamic, exuberant release of potential is also one long unspeakable human tragedy, in which powers are crippled and squandered, lives crushed and blighted, and the great majority of men and women condemned to fruitless labor for the profit of a few.” Elsewhere he writes:
A socialist is just someone who is unable to get over his or her astonishment that most people who have lived and died have spent lives of wretched, fruitless, unremitting toil. Arrest history at any point whatsoever, and this is what we find. The sheer struggle for material survival and reproduction, in conditions of real or artificially induced scarcity, has tied up such enormous resources of human energy that we would surely expect to find its traces inscribed in the rest of what we do.
Terry Eagleton, Ideology
This assessment is empirically incorrect. While there is much to critique about modern commercial society, the fact is that everything that has improved human life over the past few hundred years—reduced suffering and pain, expanded boundaries of human fulfillment—has been brought about by the ‘accumulation of productive forces,’ along with the principles of individual freedom that go with a free market, the same freedom that Eagleton laments. As to the social costs of modern industrialization, what Eagleton fails to consider is the initial conditions that the new industries improved. Take the same historical view, and examine how people lived before modern industrialization, or those people who were unaffected by the new industries and lived in a traditional manner, and attempt to argue that they were better off. This would be impossible, as it is an empirical fact that people continued to improve their lives, and the lives of their children, as industrialization materialized. That process continues today, for the same reasons, and with the same results. And conditions would be even better had not the organized and legal use of violent force (government action) constrained human behavior as much as it did.
Regardless of this historical experience, Eagleton comes to the following paradoxical conclusion:
Might this…have to do with the fact that the realization of individual freedom in the economic sphere then ends up undermining freedom (along with justice and equality) in society as a whole? Might not the anarchy of the marketplace necessarily breed an authoritarian state? Might not the forms of instrumental reason needed to control a hostile environment also be used to shackle and suppress human beings themselves?
If all this is true…
Terry Eagleton, Ideology
Fortunately, it’s not. Expanding freedom in the commercial realm, ceteris paribus, expands freedom. While it’s true that economic freedom (free market, right to work, limited regulation, low taxes) doesn’t require political freedom (note China), it certainly doesn’t hurt. Unless we bend the word ‘freedom’ into something it’s not, increasing freedom increases freedom. As far as the ‘anarchy’ of the marketplace breeding an authoritarian state, this has never happened in history, other than the cases where the state constricted or eliminated the marketplace altogether.
Ironically, it is the socialism that Eagleton propounds that risks leading to such a state, as a socialist system requires the significant expansion of organized government, and the corresponding increase in power and influence necessary to plan and manage a large, sophisticated economy. The state must coerce individuals and institutions to do what they would otherwise not do (this, by definition, is a reduction of freedom). People will flee this state, if they can, or resist it and be oppressed, silenced or imprisoned. Those who do neither will live a limited, cowering existence in such a state. Socialists have struggled with this paradox:
Although it is true that the critical theorists did not produce a sustained political theory, they stand in the tradition of those who maintain the unity of socialism and liberty and who argue that the aims of a rational society must be embedded in the means used to establish that society. (italics original)
David Held, Introduction to Critical Theory
Critical theorists such as Herbert Marcuse, Max Horkheimer, and Theodore Adorno never resolved this conundrum, where they desire a society that can only be brought about through socialist policies, the same policies that require the limitation of individual liberty, the same liberty that they value in a society that makes such liberty impossible. George Orwell, one of the most sincere and heartfelt writers, if not necessarily the most profound, recognized the quandary during the Second World War:
It is obvious that the period of free capitalism is coming to an end and that one country after another is adopting a centralized economy that one can call Socialism or State Capitalism according as one prefers. With that the economic liberty of the individual, and to a great extent his liberty to do what he likes, to choose his own work, to move to and fro across the surface of the earth, comes to an end….It was never fully realized that the disappearance of economic liberty would have any effect on intellectual liberty.
George Orwell, Essays
While he was thinking primarily of Stalin’s Communism and Hitler’s Fascism as the two primary options that would replace ‘free capitalism,’ he was only partially mistaken when England and America won the war against Germany. Since then, the economies of both winners of the war have evolved close to an amalgam of ‘Socialism’ and ‘State Capitalism’, to form the modern mixed economies we see today, with the accompanying loss of individual liberty and the suppression of opportunity.
As to nobody realizing the loss of intellectual liberty, it should be noted that Ayn Rand wrote We the Living in 1936, the only work, as far as I know, that made it perfectly plain the political and philosophical implications of state socialism. At the time, every fashionable intellectual supported communism in some form or other. Yet Rand lived through the Russian Revolution, and graduated from university in the new Soviet State before emigrating to the US in the early 20’s. She witnessed early socialist reality first hand, and had the philosophical understanding to put the circumstances into a broader and deeper perspective than anyone at the time.
Marcuse provides an example of the paradoxical relationship between liberty and coercion, when he writes:
For the first time in history, men would act freely and collectively under and against the necessity which limits their freedom and their humanity. Therefore all repression imposed by necessity would be truly self-imposed necessity.
Herbert Marcuse, One-Dimensional Man
The terms ‘freely’ and ‘collectively’ in this context are highly oxymoronic. As are the notions ‘self-imposed’ and ‘repression.’ They just don’t mix. Yet he is correct in asserting the need to apply repressive policies to achieve socialistic aims. There is no other way to do it. As a socialist, Eagleton provides an excellent example when he describes the preferred society in the following way:
The goal of socialism is to fashion a society in which we would no longer have to justify our activities at the tribunal of utility—in which the realization of our powers and capacities would become a self-delighting end in itself.
Terry Eagleton, Illusions of Postmodernism
Biological reality dictates that humans must eat, sleep, and remain safe. An entire hierarchy of needs extends from this base. After this hierarchy has been satisfied, a myriad of other desires surface, including the desire to spend one’s time ‘self-delighting.’ Eagleton writes as if all this simply happens in any given society, without effort, sweat, hard work, creativity or tedium on someone’s part.
If the liberal state is fearful that socialism would limit the plurality of goods available to individuals, I think this fear can be shown to be baseless. First of all, socialism, which like widespread virtue is only feasible if you are reasonably well-heeled as a society, would considerably augment the primary goods available to each individual for her pursuit of happiness, by seeking to eliminate want. Moreover, not only would it construct the institutions of community without any necessary detriment to other, more personally selected goods; it would actually expand that area of personal choice, by (for example) shortening the working day and so increasing leisure time.
Terry Eagleton, Illusions of Postmodernism
Someone sewed the clothes Eagleton wears; a farmer plowed, planted, and harvested before his food ended up on his plate; hardy men cut down trees and milled them into the lumber that went to build the house he calls home; above this basic industrial level, scientists and engineers created the technology that informs, entertains, and contributes to his health. A complex financial infrastructure enabled much of this. In a free market, all this activity, all the back-breaking labor and the intellectual contribution, and the benefits that come with it, are exchanged value for value between free people. The economy is so complicated, any effort to centrally plan it will decrease productivity, limit production, reduce efficiency, increase costs, misuse labor, waste existing expertise, smother innovation, and kill dreams. This has been demonstrated over and over again in the real world, and has been well understood theoretically for a dozen decades.
“One of the best reasons for being a socialist,” Eagleton summarizes, “is that one is averse to doing too much work.” Unfortunately, socialism does not lead to the kind of society Eagleton envisions. People work just as hard for far less, and if they don’t, less is produced. They have no more leisure time than those in a free society, and if they do, they possess far fewer options for spending the free time they have.
Another concern Eagleton registers concerns the rate of change:
…there is far too much change around, not too little…In the midst of this perpetual agitation, one sound middle-aged reason for being a socialist is to take a breather.
Terry Eagleton, After Theory
It is true that changes are rampant in today’s world, and would conceivably be greater in a Genuinely Free Society: technology, fashion, culture, art, social media, entertainment, medicine – all changing, improving, and innovating at a rapid rate. And it is true that a socialist society would bring such change to a minimal crawl, crushing as it does the creative spirit. Even so, an environment of such change offers multiple options, including the possibility of living simpler, slower lives.
Many changes that individuals find distasteful can be avoided. Take music, for instance. My first record was a 45 with the Beatle’s Hello Good-bye on the A side, and I am a Walrus on the B. Later I collected LPs (Long Play 33s) such as Who’s Next by the Who, The Stones Black and Blue, Eagles Hotel California, Pink Floyd’s Dark Side of the Moon, Blondie’s Parallel Lines, Boston’s first album and Heart’s Dreamboat Annie (I never claimed to have particularly sophisticated taste). Once I obtained a cassette recorder I made compilation tapes I could listen to in the car, because I preferred a mix of artists as opposed to listening to entire albums. These cassettes were necessarily limited to the music I owned, and represented static play lists. AM/FM options were available, but infused with talk and commercials that rendered them unpalatable.
Then CDs hit the market, and we loved the quality. Ultimately, all my albums had to be replaced with this new format, but I still had the problem of listening to one artist for an entire CD, or frequently swapping them out for another. And then mp3 players came along, and I reached my musical nirvana. My 80gig IPod has all my music, including a rock playlist with almost 4000 tracks, running over ten days straight without repeating. Using the shuffle option makes it perfect. I own jazz and classical tracks as well, and have playlists for the gym or quiet reading. The IPod can be connected to wireless headphones, ear buds or full-blown sound systems with massive amplifiers, speakers and woofers the size of a Volkswagen.
The next step in music’s evolution is the prevalence of streaming. For a small monthly charge (and sometimes free) a person can stream music from online providers without having to invest in a library of CDs, or pay to download individual tracks. They can select any kind of music to stream, and can expose themselves to new forms at no additional cost. For a variety of reasons, I will rarely, if ever, utilize this new commercial option, as I already own the music I wish to listen to. Occasionally I will download a specific track that appeals to me for a nominal charge, and add it to my collection (the latest being Neil Young’s Hey Hey, My My). Nothing compels me to move on to newer forms of musical replication.
Some people prefer the older technology. Purists insist that the sound of the old 33s can’t be replicated on tape or CD, and I believe they are technically correct. Digital recordings limit the range of sound that can be produced in ways that analog recordings do not. As it stands, nothing prevents those who prefer albums and turntables from using them now, and indefinitely into the future. For example, the main character in Amazon’s show Bosch listens to classical jazz on a turntable, and they make it sound special.
In a free, wealthy society, individuals can pursue their own ideal at their own pace. Every human has no choice but to make moral decisions. Relying on someone else’s judgment is simply a moral decision itself. We couldn’t avoid deciding if we wished to. We are, if anything, moral creatures; every day we must decide many things. Yet Eagleton challenges our competency for choosing:
You can, then, be mistaken about whether you are flourishing, and someone else may be more wisely perceptive about the matter than you yourself.
Terry Eagleton, After Theory
So this is it – the justification for all social engineering, all “good deeds that kill”, messing in the business of others unasked, condescending to all those who choose to live (or must live) in ways that we do not approve. And yet I would challenge the competence of anyone deciding such things beyond their own self. Is anyone that perfect in their personal life, having lived a mistake-free life absent regrets, and that wise, that they can effectively decide major life paths for thousands or millions of others, or apply judicial restrictions on people they have never met, or evaluated, or understand other than in the most cold-hearted, theoretical manner?
In reviewing the socialist and communist examples, we find clear theoretical, economic and historical evidence bankrupting these ideologies. Yet lesser forms of intervention are no less damaging to the economy, to society as a whole, and to countless individuals. The principles remain the same, even when the harm less discernable.
Government intervention ranges along a scale, from total anarchy (no government) at one extreme, to totalitarian communism at the other, where every facet of human existence is decided and enforced by the state. The closer a state moves towards the golden mean of Genuine Freedom, the better its people will be served.
Manipulating the money supply is one of the more complex and opaque methods of government intervention. Few in the electorate understand monetary manipulations or their consequences, and too many professional economists subscribe to various forms of it. At one time, most professionals agreed that inflating the money supply damaged the economy, but then John Maynard Keynes changed that, giving policy makers a credible recipe for managing the economy:
Some call for measures in support of the supply side of the economy; others want government to keep up demand, if need be by deficit spending. But both groups in fact agree on the mechanics that Keynes described in his epoch-making General Theory of Employment, Interest and Money.
Jacques Barzun, From Dawn to Decadence
Modern Keynesianism advocates the use of taxation and/or government spending—two major components of government intervention—to impact the economy. But Keynes was addressing a historically specific circumstance, and not asserting a suite of policy options that would be universally applicable.
In 1936 when the General Theory was published, the Great Depression was in its seventh year. About a third of the money supply in the US had been destroyed, leading to a major deflation. Prices plummeted, given that the same amount of goods were sought be fewer dollars. This in turn led to increased unemployment for reasons described below, which led to fewer goods produced, which led to continuing economic decline. With that in mind, Keynes wrote:
Now ordinary experience tells us, beyond doubt, that a situation where labor stipulates (within limits) for a money-wage rather than a real wage, so far from being a mere possibility, is the normal case. Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labor whenever there is a rise in the price of wage-goods. It is sometimes said that it would be illogical for labor to resist a reduction of money-wages but not to resist a reduction of real wages.
John Maynard Keynes, General Theory of Employment, Interest and Money
With the advent of deflation, existing labor enjoyed an increase in their standard of living, due to the increasing value of their paycheck. The employers, on the other hand, were facing lower revenues due to falling prices, putting a strain on their business. To remain in viable, they had to lower wages or reduce their workforce.
Since there is imperfect mobility of labor, and wages do not tend to an exact equality of net advantage in different occupations, any individual or group of individuals, who consent to a reduction of money-wages relatively to others, will suffer a relative reduction in real wages, which is a sufficient justification for them to resist it. On the other hand it would be impracticable to resist every reduction of real wages, due to a change in the purchasing-power of money which affects all workers alike.
John Maynard Keynes, General Theory of Employment, Interest and Money
To favorably impact these circumstances, Keynes proposed an increase in government spending, thereby inflating the money supply so that prices would increase. Doing so would erode the value of each dollar, raise the cost of living, and decrease actual wages, yet wouldn’t lead to additional unemployment:
Every trade union will put up some resistance to a cut in money-wages, however small. But since no trade union would dream of striking on every occasion of a rise in the cost of living, they do not raise the obstacle to any increase in aggregate employment which is attributed to them by the classical school.
John Maynard Keynes, General Theory of Employment, Interest and Money
This summarizes the genius of Keynes, while highlighting the inapplicability of applying the same policies in a complex economy with a steadily increasing money supply due to government deficit spending. This became perfectly clear in the stagflation of the late seventies, where both inflation and unemployment rose to unacceptable levels, a circumstance modern Keynesians considered impossible.
One of the more insidious forms of government intervention is increasing the money supply through deficit spending. When the government spends more than they collect in taxes, they either borrow money by selling bonds to cover the deficit, or print more currency. Printing more currency increases the money supply and reduces the value of existing currency in circulation, raising the overall price level. This is commonly known as inflation:
A general rise in prices can only occur if there is either a drop in the supply of all commodities or an increase in the supply of money.
Ludwig von Mises, Human Action
Given the general rarity of a drop in the supply of all commodities, inflation can always be attributed to excessive government spending. In addition to devaluing existing currency, inflation also encourages capital consumption, resulting in lower output.
First: Inflationary or expansionist policy must result in over consumption on the one hand and in mal-investment on the other. It thus squanders capital and impairs the future state of want-satisfaction.
Ludwig von Mises, Human Action
Inflation is particularly hard on fixed incomes, and can result in a lowering of real wages, absent continuous increases that match rising costs. Yet not all groups are affected equally:
The objective of credit expansion is to favor the interest of some groups of the population at the expense of others. This is, of course, the best that interventionism can attain when it does not hurt the interests of all groups. But while making the whole community poorer, it may still enrich some strata.
Ludwig von Mises, Human Action
When the government doesn’t print more currency to cover their deficit, they borrow money. This generally takes the form of treasury bonds. Whenever the government borrows from capital markets, they consume a portion of savings that would otherwise be invested in productive ways. This is critical, because…
…saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material conditions of man; they are the foundation of human civilization. Without saving and capital accumulation there could not be any striving toward non-material ends.
Ludwig von Mises, Human Action
The only way society creates new wealth is through the productive application of capital towards increases in productivity. Whenever the government levies taxes, borrows from capital markets, or prints more currency, less capital becomes available for productive investment, and the entire economy becomes relatively poorer. Where free markets infuse promising enterprises with life-giving capital, governments directly consume wealth, in the form of national defense (investments that are doubly costly, in that the weapon systems and personal represent direct and unrecoverable costs, and when those elements are deployed and destroy lives and infrastructure in combat), transfers such as social security and welfare, where wealth is immediately consumed and not invested, in administrative costs that also act to inhibit innovation and wealth creation, such as the FDA and DEA, and actual investments with very poor returns, such as infrastructure (highways, bridges) and education.
Philosophers through millennia have advocated for one type of society or another. Science fiction is rife with alternatives. These social engineers are thrice flawed:
As for the Altruistic Libertarian, we purposely avoid any such prognostications. If people are free, and evil virtually eliminated, it doesn’t matter what individuals construct in the way of institutions, traditions, personal habits, cultural delights or social contracts. Nothing would be designed from the top (there would be no top), but instead, would evolve peacefully, harmoniously and without violent intervention.
When the government intervenes in society, the consequences are not always predictable or agreeable. The myriad of government programs known collectively as ‘welfare’ serves as an excellent example. The programs intended to help the poor actually tend to keep people in poverty by creating disincentives to work harder or earn more income:
The Welfare Trap: Maze of Programs Punishes Work
The dozens of different programs that form our tangled welfare system often impose high effective marginal tax rates that make it harder for low-income people to transition out of these programs and into the middle class.
As the people in these programs enter the workforce, get a promotion, or work more hours, they can lose a significant portion of those earnings through reduced benefits and increased taxes. A new report from the Congressional Budget Office illustrates this predicament: many households hovering around the poverty level face steeper effective marginal tax rates than even the highest earners. These prohibitively high tax rates can discourage work and limit their prospects, ultimately making them less likely to escape poverty.
CBO’s analysis looks at the range of effective marginal tax rates households face at different levels of income. The median marginal tax rate for households just above the poverty level is almost 34 percent, the highest for any income level.
Some households that receive larger benefits or higher state taxes have even higher effective rates: 10 percent of households just above the poverty line face a marginal rate higher than 65 percent. For each additional dollar earned in this range, these households would lose almost two-thirds to taxes or lost benefits. The comparable rate for the highest earners, households above 400 percent of the poverty level, is only 43.4 percent.
New programs were grafted onto the existing system over time, each intended to address a perceived problem afflicting people in poverty, but they can interact in ways that can deter people from striving to create a better life for their families.
That’s part of the reason the status quo system, which the Government Accountability Office estimates spends $742 billion at the federal level each year, has achieved such lackluster results to date.
Perhaps a more pernicious, and related consequence of welfare programs, is the impact on marriage and child bearing. The following paragraphs are excerpted from an article by Robert Rector. The author is a leading authority on poverty and welfare programs:
Welfare and the Decline of Marriage
It is no accident that the collapse of marriage in America largely began with the War on Poverty and the proliferation of means-tested welfare programs that it fostered. When the War on Poverty began, only a single welfare program—Aid to Families with Dependent Children (AFDC)—assisted single parents. Today, dozens of programs provide benefits to families with children, including the Earned Income Tax Credit (EITC), Temporary Assistance for Needy Families (TANF), the Women, Infants and Children (WIC) food program, Supplemental Security Income (SSI), food stamps, child nutrition programs, public housing and Section 8 housing, and Medicaid. Although married couples with children can also receive aid through these programs, the overwhelming majority of assistance to families with children goes to single-parent households.
The burgeoning welfare state has promoted single parenthood in two ways. First, means-tested welfare programs such as those described above financially enable single parenthood. It is difficult for single mothers with a high school degree or less to support children without the aid of another parent. Means-tested welfare programs substantially reduce this difficulty by providing extensive support to single parents. Welfare thereby reduces the financial need for marriage. Since the beginning of the War on Poverty, less-educated mothers have increasingly become married to the welfare state and to the U.S. taxpayer rather than to the fathers of their children.
As means-tested benefits expanded, welfare began to serve as a substitute for a husband in the home, and low-income marriage began to disappear. As husbands left the home, the need for more welfare to support single mothers increased. The War on Poverty created a destructive feedback loop: Welfare promoted the decline of marriage, which generated a need for more welfare.
A second major problem is that the means-tested welfare system actively penalizes low-income parents who do marry. All means-tested welfare programs are designed so that a family’s benefits are reduced as earnings rise. In practice, this means that, if a low-income single mother marries an employed father, her welfare benefits will generally be substantially reduced. The mother can maximize welfare by remaining unmarried and keeping the father’s income “off the books.”
For example, a single mother with two children who earns $15,000 per year would generally receive around $5,200 per year of food stamp benefits. However, if she marries a father with the same earnings level, her food stamps would be cut to zero. A single mother receiving benefits from Section 8 or public housing would receive a subsidy worth on average around $11,000 per year if she was not employed, but if she marries a man earning $20,000 per year, these benefits would be cut nearly in half. Both food stamps and housing programs provide very real financial incentives for couples to remain separate and unmarried.
Overall, the federal government operates over 80 means-tested welfare programs that provide cash, food, housing, medical care, and social services to poor and low-income individuals. Each program contains marriage penalties similar to those described above. Low-income families generally receive benefits from several programs at the same time. The marriage penalties from multiple programs when added together can provide substantial financial disincentives to marriage. For example, if a single mother who earns $20,000 per year marries a man who earns the same amount, the couple will typically lose about $12,000 a year in welfare benefits. In effect, the welfare system makes it economically irrational for most low-income couples to marry.
The anti-marriage aspect of the welfare state can be illustrated by comparing means-tested welfare with the federal income tax code. For example, under a progressive income tax system with only a single schedule of tax rates indiscriminately covering both single persons and married couples, nearly all individuals would experience an increase in taxes owed when they married and lower taxes if they remain separate or divorce. The current federal income tax system mitigates this anti-marriage effect by having separate tax schedules for singles and married couples.
By contrast, the means-tested welfare system, in most cases, does not have a separate schedule for married couples. When a low-income mother and father marry, they will generally experience a sharp drop in benefits, and their joint income will fall. The anti-marriage penalty is often most severe among married couples where both parents are employed.
In other words, taxpayers fund billions of dollars a year to promote unwed motherhood. Earlier in the article, Rector points to Lyndon Johnson’s ‘War on Poverty’ as the turning point, and charts the dramatic increase of children born outside of a traditional family. In 1964, when the ‘war’ began, 7% of children were borne to unwed mothers. By 2013, that percentage more than tripled, until 41% of children were born outside of marriage. He goes on to show the correlation of economic independence between married and unmarried families, with 37% of single-parent families requiring government assistance, versus less than 7% of married families requiring such assistance.
The ‘War on Poverty’ hasn’t defeated its foe, but instead, created something far more insidious: a class of poor Americans without dignity, hope, or future prospects.
As in most government programs, the effort to solve one social problem simply created new ones. The new social problems promulgated more programs to solve the new issue that in turn spawned more social concerns, and so on. It’s a never-ending cycle that will never solve the initial problem.
Intervention Case Study – AT&T
Many decades ago, the government intervened in the market on behalf of AT&T. They supported a monopoly (the only way a monopoly can exist for any length of time within a free market) by preventing anyone else from providing telephone service in most of the country. In fact, all local telephone companies were granted such a monopoly, some of which still exist today.
Having worked for AT&T from 1990 to 1997, I gained considerable insight into the nature of that monopoly, and witnessed a large corporation struggle to reform into a competitive entity. The experience was instructive, and worthy of detailed consideration.
Classic AT&T was formed in 1984 after divestiture, and ended in 2005 when it was purchased by SBC. SBC subsequently adopted the AT&T logo after subsuming the former behemoth.
Prior to 1984, most telecommunications in the US was a monopoly generally referred to as ‘Ma Bell’. In most cases, for most citizens, nobody else could provide telephone service in any form, up to and including inside wire and the actual telephone. This state of affairs began circa 1913 after an agreement was made between AT&T and the US Federal Government, one that allowed AT&T to operate more or less as a monopoly until divesture in 1984. Justification for this monopoly was provided by AT&T’s executive leadership:
…one policy, one system [AT&T's] and universal service, no collection of separate companies could give the public the service that [the] Bell... system could give.
Theodore Newton Vail, President, AT&T, 1907
It is important to note that the only way a commercial entity can operate for any length of time as a monopoly, let alone for almost seven decades, is through the complicity of the government, and actual regulations that prohibit additional private entities to enter the same market and complete.
In 1984, divestiture broke up AT&T into eight distinct entities: AT&T the long distance company, having retained Bell Labs and their traditional equipment manufacturer (later to break off and become Lucent in the 90’s); and seven Regional Bell Operating Companies, or RBOCs:
After 1984, The RBOCs retained the local monopoly while AT&T became a competitive long distance company. Their largest rivals were Sprint and MCI.
With divestiture, the government created two artificial industries, local and long distance. The country was divided into arbitrary LATAs (Local Access Transport Area). ‘Local’ service, by definition, was a call originating and terminating in the same LATA. For this class of calls, the local telephone company (usually an RBOC, although the country was full of tiny independents as well) provided all network, billing, maintenance and provisioning.
‘Long distance’ service was any call that originated in one LATA and terminated in another. This was the case even when the two LATAs resided within the same local company’s network. In all cases, the local company was required to hand off the call to the customer’s chosen long distance provider via a network connection. The long distance carrier (usually AT&T, Sprint or MCI) would provide the network between the two LATAs, and then hand off the call to the receiving local provider. The originating and terminating portions of the connection were called ‘access’. The long distance carrier paid both the originating and terminating provider access fees, rated by the minute. These costs, of course, were passed along to the customer, each call generating originating and terminating access costs, along with the cost of maintaining the long distance network. Post 1984, the major negotiating issue between the ROBCs and AT&T was the cost of access.
For those who lived in the 50’s, 60’s and 70’s, they will recall how expensive long distance calls could be. For example (from the internet):
In 1997, a fifteen minute call would cost $3.75. Over the course of a month, long distance bills for individual consumers could easily reach $200-$300. A large portion of this cost can be attributed to access charges that all long distance carriers had to pay.
Today, the distinction between local and long distance hardly exists, and few people pay per-minute charges for voice calls. As a distinct industry, long distance no longer exists in any meaningful form. More on why below.
I joined AT&T in 1990, and worked for several years in Network Services Division. At that time, AT&T was consolidating seven regional operation centers into two, one in Denver and one in Conyers, Georgia. Each center had Network Management, provisioning and maintenance responsibility across half the country.
Sprint dropped their famous pin in 1989, creating a sense of desperate urgency in AT&T. Ironically, Sprint’s claim of providing superior service through all digital networks rested on the back of AT&T’s finest technology, as AT&T was wholesaling network bandwidth to Sprint, with Sprint requiring it be entirely digital. At that time, a good portion of the AT&T network was still analog, negatively impacting voice quality.
Everything was rushed in AT&T to digitalize the entire network and reduce operating cost. When I arrived in Denver, the new operations center wasn’t yet operational, so we crammed into an equipment building that housed a 4ESS switch (the mainstay of the AT&T network), the network management center (NOC), and all the technicians that provided maintenance and provisioning support across the entire western US. The earthquake in San Francisco in 1989 (the one that happened during the World Series) exacerbated the consolidation, as the Western Operations Center in Oakland was damaged, and instead of doing repairs, AT&T simply moved their operations and people directly to Denver. It was a chaotic mess, at best.
It’s important to note here that such drastic measures never would have occurred in the old AT&T (prior to 1984), where prices were regulated and assured (on the high side), employment was permanent, and customers captive. (A bumper sticker from that time read: ‘Ma Bell – We don’t care because we don’t have to’.)
In the industry, advances in technology were very slow, with some central offices using the same step switches that were first implemented over fifty years before. The 4ESS (#4 Electronic Switching System), the primary toll switch (long distance), was first deployed in 1976, and while the central processor was upgraded every couple of years, the basic structure remained intact into the 2000’s. In most cases, the switch took an entire floor of a large equipment building. During my time, there were about 125 AT&T 4ESSs operational in the US. To jump ahead, the capacity of those large switches can be accommodated today in one or two racks in a modern data center.
While I had several assignments in those first five years, my primary focus was Nodals Provisioning. This service entailed a direct-connect T1 between an AT&T 4ESS and a customer PBX (Private Branch Exchange – essentially a local switch for that company). At one time I supervised agents performing routing and trunking translations in the 4ESS. These tranlations (essentially programing) provided the switch and the network with the information and structure necessary to originate and complete voice calls to that company’s PBX. The T1 had a measly 1.544MBs of capacity with 24 dedicated voice channels. In contrast, most broadband services today provide a minimum of ten times that much bandwidth. As I sit here, I am enjoying a total of 45MBs on my cable internet, roughly the same as a T3, a private network capacity unheard of in the 90’s.
Later, I had national process responsibility for the entire service, including the engineering, design and implementation of the T1 facility between the AT&T switch and the customer premises. This entailed developing a detailed design for the T1 in AT&T’s network, including DACs (digital cross connect) assignments, T3 assignments (every T3 could accommodate 28 T1s), switch terminations, and local POP (Point of Presence) interface. Because the local company had a monopoly on access, AT&T had to issue an ASR (Access Service Request) for the tail circuit, a T1 that spanned the distance between the POP (where AT&T and the local company co-located) and the customer premises.
Had the status quo in the industry maintained, this type of service would likely still be common today. But in 1996, the Telecom Act was passed by Congress, allowing the possibility to compete for local services. This proved to be the death knell for AT&T.
Prior to 1996, and in anticipation of competing in the local market, AT&T established another business unit with the intent of entering the local market when it became legal for them to do so. I joined that new business unit in 1995, moving to headquarters in New Jersey, providing me a front row seat to the ensuing industrial failure.
Over many decades, AT&T, as an industrial organization, had grown fat, top-heavy, slow, complacent and inefficient. When the competitive gloves came off in 1984, AT&T struggled to make the adjustment necessary to succeed: many reorganizations, massive lay-offs, new systems developed with the intent to automate –all conducted within a corporate culture unfamiliar with the creativity and leanness necessary to implement complex and challenging solutions. For instance, the primary provisioning platform was designed to perform routing and trunking automatically, thereby eliminating the need for human intervention. Unfortunately, the system was developed and implemented without real-world understanding of the process (a common failure in major system development) and actually required more staff-hours to perform the function. The agents I supervised had to interface with a system that wasn’t designed for human interface. As a result, the system was difficult to learn, exceedingly slow, and prone to putting customers out of service. Given the reduced staff based on false assumptions of increased productivity, the agents had difficulty keeping up with the workload, and due dates were rarely met.
In addition, most of the technicians and clerical staff were unionized, making it extremely difficult to address performance or attitude issues, contributing to continuing poor performance. Seniority ruled in every way, among the union workforce. During layoffs, the younger employees went first, with no regard to skills, attitude, performance or value, thus bleeding the company of potential energy, creativity and leadership. Many of the technicians who remained were bitter and unhappy, and generally unmotivated. They had been moved out of their home switching center, across the country to Denver or Conyers to sit at a desk in front of a computer and work troubles. Prior to being moved, the technicians knew their central office front and back. They maintained manual tub files (rows of 3X5 cards) with records of cross-connects and port assignments. When they received a network order, they had intimate knowledge of their equipment and frames, and ensured the records remained accurate. This was crucial when shooting trouble, as improper information could easily lead to mistakes, ones that could impact network performance. For example, in the early 90s AT&T suffered a major outage at Thomas Street in NYC. From Wikipedia:
On September 17, 1991, management failure, power equipment failure, and human error combined to completely disable AT&T's central office switch at 33 Thomas. As a result, over 5 million calls were blocked, and the FAA private lines were also interrupted, disrupting air traffic control to 398 airports serving most of the northeastern United States. Because the building was designed to be self-sufficient, AT&T had a load shedding agreement with the electric utility, where they would voluntarily switch from utility power to on-site generators on request. This was a routine procedure that had been performed successfully in the past, but on this occasion, it went wrong. After switching power sources, standard procedure was to check all the equipment power supplies, known as DC plants, for problems. But due to scheduled training, the check was not performed, and one plant went on battery backup. The alarms were not detected until it was too late to maintain uninterrupted power.
I recall walking into the NOC (Network Operations Center) that day and seeing the board lit up in red, so many calls were blocked. All of the Thomas Street technicians were out at the time, ironically in a training session about the new power alarms. This event added to the frustration of career technicians, certain it never would have happened in the old days.
In addition to monitoring distant alarms, the technicians in the new operations centers had to rely on accurate network databases, some of them so old nobody new how to program them (TIRKS, for instance - Trunks Integrated Record Keeping System, an operations support system from Telcordia Technologies, originally developed by the Bell System during the late 1970s). These databases were notoriously inaccurate, requiring significant rework and/or double work to implement new service or new equipment. For example, at another telephone company I worked for, I knew engineers who would physically check every cross connect and port assignment to ensure they were available before issuing the build order to the field. This entailed driving from one office to another, significantly increasing the time it took to engineer the installation of new equipment. They couldn’t trust the inventory databases, and it took less time to do the manual checks than rework the design when work orders were inevitably rejected by the field technicians when they found one of the assignments already in use.
At AT&T, the operational support system architecture was incredibly complex, given that new systems and databases were piggybacked on existing ones, until the multitude of interface and protocols grew to unbelievably complex proportions.
Even with the unhealthy corporate environment, the constant uncertainty, and high stress-levels, the older technicians couldn’t leave: they were bound with golden hand-cuffs, retirement benefits just a few years away, with no way to make their union-inflated wages elsewhere. This contributed to a frustrated and defensive technical work force, a significant impediment to corporate success.
These corporate conditions were a direct and historical result of the bloated company AT&T had become. In a Genuinely Free Society, no such private entity would have arisen. Without the monopoly supported by the protective shield of government regulation, the telecommunications industry would have evolved far more dynamically and effectively. The beginning of a more dynamic and creative telecom industry can be seen to emerge after the passing of the 1996 telecom act.
But not in AT&T. As part of AT&T’s newest business unit, one charged with entering the local telecom market, I witnessed first hand the ineffectiveness and inability of that organization to create a new business. Beginning with management’s debilitating hubris, including a tremendous underestimation of the complexities of local telephone service, along with a multiple layer management structure the size and shape of a wedding cake, covered with the frosting of political infighting and age-old bureaucratic traditions, the division shuffled and shivered for over two years without deploying anything. Speaking with senior executives, I learned that they expected to easily penetrate the market and overwhelm anyone else in it. They assumed that because they had been the same company a mere twelve years earlier, and retained Bell Labs and the equipment manufacturer, they had the organizational and technical wherewithal to enter the market with relative ease. How difficult could it be?
For the first year I served on various product teams to develop offerings for the new division. The magnitude of our collective ignorance was (in hindsight) staggering. We knew nothing of E911, or directory services, or voicemail, or call waiting, or how a local central office was wired. I learned about ‘main distribution frames’ for the first time, along with everyone else in the room. My responsibility was to design provisioning and maintenance processes for local services. After a few months learning what I could, I locked myself in my basement for a week and developed the process documents. The results were included in AT&T’s ‘Model Contract’, a document provided to the different regions that were negotiating with the RBOCs. I was amused to find that my process documentation ended up in MCI’s model contract in precisely the same form, including my unique document identifiers. Years later when I worked in a LEC (Local Exchange Carrier) I discovered how ridiculously awful my processes documents were: at AT&T, I didn’t know a damn thing about local telephone service.
The new law required the RBOCs to resell portions of their local networks to other providers (known as CLECs – Competitive Local Exchange Carriers). These were called ‘unbundled network elements,’ and included local loops (the copper wire between the local serving office and the residence) and switch ports. The RBOC was required to allow other carriers to co-locate in their equipment buildings, and provide those competitive carriers with access to the RBOCs switch and local loops. Another option was to resell the entire service by paying the RBOC a wholesale rate and then charging the end user something higher. Ordering any of these options required a new form, called an LSR (Local Service Request). I drafted the first version of this form while still in New Jersey.
One of the product teams I supported was Centrex. This service was provided by creating a virtual PBX in the local switch. Instead of installing a physical PBX on site, Centrex allowed the customer to enjoy all of the features and advantages of a PBX without the attendant costs. The local switch was partitioned, and each station at the customer site was programed with the numbers and features the customer wanted. For a large Centrex customer, there might be tens of thousands of variables during provisioning, and in the end, we could not figure out how to get existing AT&T ordering systems to accept all the necessary data, let alone downstream inventory databases and billing systems. After turning in the requirements document, some six months in the making, it was estimated that it would take another two years to deploy the initial version of the systems needed to support the deployment of Centrex.
We worked hard in the product teams to develop the marketing, process and system requirements for an array of local services. All too often, after developing an intricate solution of one sort or another, management at higher levels, people without the context or technical understanding, changed something, forcing the team to rework the entire solution. Given that we were generally incompetent to begin with, we suffered additional incompetence that made our effort that much more useless.
After a year of working on the product teams, I transferred to one of the regions, where I supported the AT&T team (working alongside MCI and Sprint) in an effort to get the RBOC to support our entry into their business. A year later, late in 1997, we hadn’t issued any LSRs in the region, or acquired one new local customer, despite full support from the regulatory bodies. Just meeting after meeting after meeting. The RBOC did a nice job delaying the process, although it wasn’t that difficult, given AT&T’s approach to the negotiations.
While the RBOC could not enter the long distance business until a number of strict milestones had been met, there were no restrictions on the long distance companies (or any other company) entering the local arena. The RBOC was required by law to support these competitors by unbundling their network and/or reselling their service.
AT&T signaled their failure with the decision to base their local strategy entirely on resale. Originally, they planned to build their own network, and would use unbundled elements and resale as a stepping stone to full market entry. This was the strategy Sprint used to enter the long distance industry back in the late 80’s, and it was the only viable strategy for AT&T. Simply reselling local service was a non-starter, as they would forever be beholden to the local provider for network quality, maintenance and provisioning, with very small financial margins. Once this decision was made, I made mine, and left AT&T shortly thereafter, certain that it was only a matter of time before the former commercial giant would cease to exist.
In January of 1998, AT&T purchased TCG for $11.3 billion to serve as their local company, and closed their local division with a total loss of over $2 billion. Ironically, when SBC purchased AT&T some seven years later, they only paid a little over $16 billion for the entire company.
The RBOCs always had a tremendous advantage over the long distance carriers. They owned all the local access, including copper and fiber. Inter-city infrastructure of the long distance carriers was always easier and cheaper to develop, whereas the local infrastructure the more costly and difficult to replicate. Once gaining permission, the RBOCs could provide long distance services much cheaper than the incumbents. Even so, the old RBOCs, and the companies derived from them, face many of the same cultural, technical and organizational challenges as AT&T. They have more time, however, and began with a solid customer and network base, providing genuine opportunities. The major players (SBC and Verizon, for instance) have invested heavily in the growing cell phone business, and compete with cable companies using fiber networks in the broadband market.
This case study provides several key points related to government intervention, and the ensuing consequences:
The point which is so important is the basic fact that it is impossible for any man to survey more than a limited field, to be aware of the urgency of more than a limited number of needs. Whether his interests center round his own physical needs, or whether he takes a warm interest in the welfare of every human being he knows, the ends about which he can be concerned will always be only an infinitesimal fraction of the needs of all men.
This is the fundamental fact on which the whole philosophy of individualism is based. It does not assume, as is often asserted, that man is egoistic or selfish or ought to be. It merely starts from the indisputable fact that the limits of our powers of imagination make it impossible to include in our scale of values more than a sector of the needs of the whole society, and that, since, strictly speaking, scales of value can exist only in individual minds, nothing but partial scales of values exist—scales which are inevitably difference and often inconsistent with each other.
Friedrich Hayek, The Road to Serfdom
Laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce.
Ludwig von Mises, Human Action
AT&T is not alone among the vanquished. Consider the following former corporate giants that no longer exist (although not necessarily due to government intervention):
(the examples cited above excerpted from http://www.nbcnews.com/id/41027460/ns/business-us_business/t/most-memorable-companies-vanished/#.WRUDIzt6pHg)
Pan Am, Borders, Circuit City, Polaroid, Block Buster Video, and Tower Records also no longer exist. Joseph Schumpeter called such corporate failure “creative destruction”. This in stark contrast to government institutions that continue to exist and operate regardless of poor efficiency, inferior value, lack of customer/client approval, old technology or lost purpose. The United States Post Office serves as a good example, as a commercial entity with ever increasing prices (cost of stamps) that requires annual subsidies from taxpayers to remain in existence. Another good example would be public schools, including universities, that are so ineffective that many taxpayers opt to send their children to private institutions despite the fact they are already paying, through taxes, for the local school or state university.
AT&T is just one example of how government intervention can distort an industry, and hinder the development of preferable alternatives. The government-supported monopoly perpetuated high telephone costs to consumers, and retarded technological innovation in the industry. The world would have been better off had the government just left enough alone.
Summary of Intervention
Governments, in general, necessarily consume and destroy wealth, and wealth-creating investment. Sometimes this is unavoidable: military and police forces are as costly as they are necessary. Yet the more government intervention, in terms of taxes, regulation, deficit spending and prohibition, the less productive society, and the increase in relative poverty.
There are still prominent thinkers, however, who openly acknowledge the need for sacrifice, that is, reduced standards of living and lower quality of life for some, if not everyone, to achieve socialistic goals:
A lot of functional activity would be needed to achieve a situation in which we did not have to live so functionally. In the modern age, this project has been known as socialism.
There is a potentially tragic conflict here between the means and the end. If we have to act instrumentally in order to create a less means-ends-obsessed form of life, then we have to live in a way which by our own admission is less than desirable. At the worst, it may mean that some people, tragically, may feel the need to sacrifice their own happiness for others. To call this tragic means that such sacrifice is not the most desirable way to live. Morality is about fulfilling the self, not abnegating it. It is just that for some people, abnegating it may be historically necessary for bringing that desirable form of life about. There are, tragically, situations in which the self can be fulfilled only by being relinquished.
Terry Eagleton, After Theory
Eagleton’s vision is a fool’s errand, as the socialistic society he envisions will never become manifest, yet the sacrifices in human lives, human potential and human happiness can be made quite real in the attempt. Every step the government takes on a socialist road (Obama Care, for instance) is another strike against a Genuinely Free Society, and another degradation of human potential.
In a word, the more government intervenes in society, the less wealth available for the pursuit of human values; a decrease in available capital for investment in improved productivity and technological advance; increased risk of economic stagnation; and ultimately, an overall reduction in human potential.