May 5, 2012 – Back in 2009 when the Greek crisis was just
starting to make
headlines, I wrote an article concluding
that sovereign debt
defaults would bring the
end of socialism. My premise was straightforward
and based on financial
reality. I neatly summarized
this inevitable outcome with one of my favorite quotes from Margaret Thatcher: “The problem
with socialism is that you
eventually run out of other people's money.”
I then went
on to say: “…in the months
immediately ahead [socialism] will be put to a rigorous test. The
test will be visible to everyone as countries around
the globe run out of money and confront
overwhelming debts that cannot be
repaid as well as other wide-ranging financial promises that can no longer be met. In short,
the ideological bankruptcy
of socialism will be laid bare by government insolvency.”
Here we are three years later
with widespread government insolvency. Governments long ago ran out of money, so what did they
do? Rather than face the
reality that their financial resources are limited and their spendthrift policies and unrealistic promises were placing them on the road to financial ruin, they instead followed the line of least resistance
by borrowing ever-increasing
amounts of money in a foolish
attempt to keep their socialist policies going.
Governments did buy some time by borrowing tons of money. Predictably,
they now find themselves in a situation where not only have they run out of money, they have also run out of borrowing capacity. They have reached the “fork in the road” I wrote
about back in 2009. “One way
leads to more socialism, more demagogues
and eventually a dictator
who promises that he will make
socialism ‘work’.
The other leads to the capitalist
society that America used to be, with
free-markets, limited government and the unconditional
rule of law.”
Sadly, it is becoming increasingly
clear on which road many governments are headed. They are moving from government
to ‘robberment’, a catchy
term I learned from someone on a recent trip to Switzerland who values personal liberty and
recognizes the ideological
and financial bankruptcy
of state socialism. His term self-evidently explains how governments use theft to buy more time to keep their socialist
game going.
Argentina is perhaps
leading the way by its nationalization of Repsol’s assets in that country. That theft of private property was quickly followed
by Bolivia's armed forces
taking control of the facilities
of Spanish power-grid company Red Eléctrica
Corp.
South America has a long history of seizing assets, but countries there are
not unique. After all, one of history’s
most egregious assaults on private property was Franklin’s Roosevelt’s
dictate to take control
of privately owned gold
in the US. It turned completely
upside down the most
basic principle of American law,
that private property and the right to private
contract were sacrosanct and beyond state interference.
More recently, the Irish government raided private pensions. Argentina did the same thing back in 2008, which leads to an
important point. Typically, one theft
leads to another, so expect more plunder from the socialists in
Argentina, and indeed, by socialist
governments everywhere. Tragically, where is the outrage to this ‘robberment’?
It won’t come from political leaders. They all recognize that they too
want the option to resort
to theft. It may not be as extreme as that which occurred
in Argentina or Ireland, but it will
be theft nonetheless to keep the socialist game going, and thereby protect their perquisites and power. The current
issue of Barron’s, for example, makes this point clearly in an
article entitled “Rotten
to the Core? Uncle Sam
and California take big bites out of Apple”.
The so-called intellectual
‘elite’ will always come up with ways for the state to steal private property, while offering grandiose explanations in an attempt to justify their insidious onslaughts on the backbone of the rule of law – property rights. For example, an op-ed in the Financial Times on April 30th explains how the Spanish government
might get more money
to address its over-indebtedness: “An alternative emergency approach would be to mandate, on a temporary
basis, bond purchases by Spanish
households and businesses.” I suppose
“mandate” was purposefully
chosen because it sounds better
than theft. And
of course, it is only “temporary” theft, as are all incursions by the state that erode the rule of law. That this article was written by a Harvard professor and former US presidential
advisor makes clear that the academic and political elite in the US is as intellectually bankrupt as any other socialist
country.
The decline in government,
and more to the point, the absence of principle and
honor by those political leaders who resort to theft is indeed a sad
state of affairs, but it is nothing new. Here is what
Frederick Bastiat had to say
about it over 150 years ago.
“When
plunder becomes a way of life for a group of men living together
in a society, they create
for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”
Not too many
decades ago Ayn Rand made a similar
observation.
“When
you see that trading is done, not by consent, but by
compulsion -- when you see that in order
to produce, you need to obtain permission from men who produce nothing -- when you see
that money is flowing to those who deal, not in goods, but in favors -- when you see that
men get richer by graft and by pull than by work, and your laws don't protect
you against them, but protect them against you -- when you
see corruption being rewarded and honesty becoming a self-sacrifice -- you
may know that your society is doomed.”
So what do we
as individuals do to protect
our families and ourselves? First, we have to
come to grips with the breadth
and depth of widespread government insolvency and that ‘robberment’ will become increasingly
prevalent. Then, we have to recognize that there is
a difference between invisible wealth and
the wealth that is an easy target
for government confiscation. That is a topic
beyond the scope of this
article and outside of my
area of knowledge and expertise. But one common sense approach to avoid confiscation is geographic diversification
of one’s assets by
putting them in different
political jurisdictions
in the hope that some governments won’t become robberments by descending into tyranny and theft.
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