“We shall need a new manner of thinking if mankind is to survive.”–Albert Einstein
“Only art and science give us a hope for a higher life.”—Ludwig van Beethoven
This book honors, commemorates, and celebrates the revolution in human attitudes toward knowledge and freedom that characterize the Scientific Revolution and the Age of Enlightenment. The two are related in the powerful impetus of discoveries, insights, and ideas of Nicolas Copernicus (1473-1543), Galileo Galilei (1546-1642), Giordano Bruno (1548-1600), Johannes Kepler (1571-1630), Isaac Newton (1642-1727), John Locke (1632-1704), Baruch Spinoza (1632-1677), Voltaire (1694-1788), Thomas Paine (1737-1809) and others.
The vision of Copernicus and the courage of Bruno and Galileo opened and liberated the minds of thinkers in Europe. That openness and freedom of mind led to the rejection of intellectual acquiescence to the authority of monarchs and churches that sought to stifle independence in thought and action.
It is a premise of this book that the Age of Enlightenment never ended, that it is continuing, evolving, and coming gradually to fruition. That process will take a long time, as time is measured in individual human lives. However, it may happen rapidly as time is measured in the gradual evolution of human society, wherein one hundred years or one thousand years are only instants in time.
This chapter provides examples and illustrations of a spontaneous order evolving in human conduct—a spontaneous order that is creating gradually the human society epitomized in the phrases innovated by Andrew J. Galambos: “Capitalism: The Liberal Revolution” and “Natural Republic.”
In the lexicon of this book capitalism is that societal structure capable of protecting all forms of private property completely. Property is an individual’s life and its derivatives including an individual’s thoughts, ideas, and actions. These concepts of property and capitalism reject and renounce submission to the authority and tyranny of church and state over the mind and the life of human beings.
The Natural Republic is the descriptive term for a society organized contractually, voluntarily, and cooperatively rather than coercively and tyrannically. In the Natural Republic institutionalized political coercion would be inadmissible and inconceivable; all public services would be open to the general use of everybody on a voluntary, proprietary, and contractual basis.
The Natural Republic will be an outgrowth of a spontaneous order in human civilization already observed to have come into existence. Human society and culture have attained their present size and structure due not to commands from political and religious rulers, but as F. A. Hayek observed, from “. . . the rules of human conduct that gradually evolved [and were] handed on by tradition, teaching and imitation . . . Mankind achieved civilization by developing and learning to follow rules . . . that often forbade him to do what his instincts demanded.” 1
These rules are epitomized by the original biblical Golden Rule—do not to others that which is hateful to you. 2 This is a principle that is found in various iterations in the religious teaching of every society that has survived for an extended period of time. Civilizations have weakened and failed in direct proportion to their failure to put into consistent practice the teaching of the Golden Rule.
HUMAN FREEDOM IS A PARAMOUNT VALUE AND GOAL
This chapter and the book and website of which it is a part are addressed to the goal of maximizing the freedom of individuals to make the most of their lives without interfering with the lives of others. This goal requires rejection of the idea that the political state with all of its mandates, prohibitions, taxes and wars is in any way necessary to life, liberty, and the pursuit of happiness.
FREEDOM IS INDESTRUCTIBLE
Historically, by far the greatest attacks on property and human freedom have been, and still are, by political states with their wars, taxation and interference with production and productivity. Eventually the political state will go into oblivion because it destroys itself.
The oblivion of the state will remove the greatest cause of dislocation of property. Consequently, out of necessity people will turn decisively and unequivocally to individual and cooperative enterprise for security and the protection of property and freedom.
When there is full and constant protection of life, thoughts, ideas, and action, freedom will be indestructible because every dislocation of property will require restitution from those who caused it. That will restore property in many instances, and will act as an effective deterrent to attacks on property. Where an offender is unable to make restitution in full, it will suffice to keep the offender in good standing in society if as much restitution is made as is humanly possible.
CAPITALISM DEMONSTRATES THE MORALITY OF PROFIT AND THE PROFITABILITY OF MORALITY.
Advocates of socialism argue that it is more humane than capitalism because socialism is based on sharing and altruism while capitalism is based on selfishness, greed, and injustice.
Capitalism lifts the poor out of poverty and provides the opportunity to fulfill one’s ambitions and dreams while providing benefit to others. Socialism demonstrates the fallibility of coercive rule that crushes freedom and initiative and frustrates the pursuit of happiness.
A number of nations in the 20th century were ruled by communist ideologues, calling themselves socialists, who imposed their ideology by brute force, in furtherance of their claim that they would eliminate the evils of greed and inequality. The result was poverty, deprivation, misery, and despair for the people. Those who tried to flee were prevented from doing so by barriers, border guards, and guns.
No one was ever prevented from leaving a place where capitalism and free enterprise were operating. To the contrary, the United States of America enjoyed its most rapid growth in population and prosperity in its first one hundred and forty years, when millions of people came to America as immigrants, and there were no legal restrictions on immigration.
It is capitalistic free enterprise that has lifted the poor out of poverty, organized the widespread use of the fruits of innovation to alleviate sickness and disease, brought schooling to the poor when the political state failed to do so, and enabled entrepreneurs to create gainful and remunerative employment for a multitude of people.
Even in a partially capitalistic society, such as the United States of America, wrongdoers can be held accountable for the harm they cause and usually and eventually they are. However, as George Orwell (1903-1950) explained in his classic novella, Animal Farm (1945), as did F. A. Hayek contemporaneously in The Road to Serfdom (1944), in a communist society those who do the greatest harm to the people are the political dictators and their minions, who can never be held accountable by the rest of the people.
GREED, WEALTH, POVERTY, AND INEQUALITY
Human greed is associated with inequality that provides some people with far more material wealth and resources than they need for existence while denying others the comforts and luxuries enjoyed by the wealthy.
Inequality has existed in various forms in every society, including the communist states of the 20th and 21st centuries.
What is important to the well-being of a nation’s people is not the elimination of economic inequality but the reduction of poverty.
Those nations most successful in reducing poverty are those where free enterprise is allowed or flourishes as a characteristic of the nation.
In the legal structure of the communist regimes of the 20th century there was an attempt to attain economic equality by outlawing both profit and property. That led to chronic and widespread shortages of every necessity and amenity of life—food, housing, and medical care.
In communist states such as Russia and its Soviet Union, China in the time of Mao Zedong, Cuba, and North Korea, there was inequality in a form different than personal income and wealth. The politically elite members of society enjoyed privileges unavailable to everyone else—better food, housing, medical care, and far better educational opportunities for their children.
Beginning in 1949, the people of China suffered during three decades of brutal political repression, famine, and destitution under harshly enforced anti-capitalistic policies during the regime of Mao Zedong (1893-1976). By the 1960s other highly placed communist party officials realized that the policies of Mao Zedong were economically and socially disastrous.
Shortly after Mao died in 1976, the communist party leadership turned away decisively from Mao’s policies. Deng Xiaopeng (1904-1997) led the communist party to adopt new policies that liberalized economic life, opened the nation to foreign investment, and stimulated economic revival.
After 1978, formerly egalitarian and impoverished China developed a sizable middle class of around 400 million people, nearly 30% of the population. The growth of enterprise in the Chinese economy has produced billionaires, 324 in number as of 2018, more than any nation other than the United States. 3
While it has become politically acceptable to be rich in China since the death of Mao, that cannot occur without the tacit consent of the communist party. Big trouble is likely to be in store for any business person naïve enough to try to get ahead without paying the party its tribute. Consequently, a number of highly placed communist party officials have become billionaires, not due to their entrepreneurial efforts, but due to their political power.
The Chinese communist party was a criminal operation under Mao Zedong. It became a different type of criminal operation—a corrupt protection racket—under Mao’s successors.
When Nike founder and CEO Phil Knight visited China in 1980 to seek permission for Nike to do business there, it was necessary to obtain approval from the state Ministry of Sports. In a meeting with a ministry representative who would execute written approval documents, the representative said surreptitiously, “How much you offering?” 4
The case of Jude Shao is illustrative of the protection racket operated by Chinese officials. Mr. Shao was born in China in 1963, emigrated from China to the United States during the liberalization of the 1980s, became a naturalized U.S. citizen, and earned an MBA degree from Stanford University in 1993. He then returned to his native Shanghai where he established a company that imported U.S. medical equipment.
In 1997, a tax auditor arrived at Shao’s office and solicited a bribe. After Shao refused, the auditor seized company records and froze its bank accounts, destroying the business. Shao was arrested in 1998, and charged with tax evasion and fraud. He was sentenced to sixteen years in prison. After continuing efforts on his behalf by friends from Stanford, U.S. officials asked Chinese officials to release Shao. Finally, in 2008 after ten years imprisonment, he was released on parole on the eve of the Olympic Games in China.
During his imprisonment Shao’s father died and his wife divorced him. After release on parole he was refused permission to leave China for another five years. It was not until 2013, at age 50 that he was able to return to the United States, where he moved to Houston, Texas and started a new business. 5
In a capitalistic society, capital is the wealth that results from production of property in excess of consumption requirements. Capital provides the financial resource to produce more property and to increase productivity. It is increasing productivity that brings about increasing prosperity.
Noted economist and free market advocate Ludwig von Mises epitomized the benefits of capital accumulation by his observation that a truck was the only difference between an American truck driver and a Chinese coolie. 6
In economic terms, American truck drivers enjoyed a far higher standard of living than Chinese coolies because a truck driver can transport more in a single day’s work than a coolie could in a month of physical labor.
A small amount of capital can fuel the start of a new business, for example one truck could be the means for a truck driver to start a new trucking business.
UPS, originally United Parcel Service, was established in Seattle, Washington in 1907 by 19-year-old James Casey and his friend, 17-year old Claude Ryan. The original capital of the new enterprise was two bicycles, one telephone, a tiny office in the basement of a saloon, and a loan of $100 from Ryan’s uncle, equivalent to $2,600 in 2019. This initial capital provided the initial financial and material resources for what would become a multi-billion dollar corporation that in 2018 employed 481,000 people to provide a flow of goods, funds, and information around the world. 7
Accumulation of wealth in a capitalistic business enterprise by moral means does not harm anyone. To the contrary, it is beneficial to society because it produces employment for those working in the business and valuable goods and services for customers of the business.
In America and in other industrialized nations, the largest accumulations of wealth are represented by ownership of productive businesses that start out small, and become large through continual reinvestment of capital produced by the business coupled with capable entrepreneurial management.
However, individuals who are not business owners can become financially independent over a lifetime by work and frugality that creates savings, coupled with regular and disciplined investment of savings. That is the message of a best-selling book, The Millionaire Next Door (1996) by Thomas J. Stanley and William D. Danko.
A reader of the website of which this book is a part, observed that the economic equality that many people seek is unnatural. For example, in nature, a battery becomes useless when the electric charge in its two poles is equal. The temperature of the Earth and the Sun will be equal when the Universe runs down, a condition incompatible with life on earth. Economic exchange is impossible (or at least meaningless) when all things are equal. Freedom of choice only happens when choices are not equal. 8
CAPITAL, CAPITALISM AND THE CONQUEST OF POVERTY
Failure of the “War on Poverty” launched by the United States of America
In 1965, U.S. President Lyndon B. Johnson asked the Congress for legislation to reduce poverty in the United States. The Congress responded with a variety of generously funded anti-poverty initiatives that President Johnson described as the “War on Poverty.” However, anti-poverty spending by the United States has not eliminated poverty in America or even reduced it significantly, nor has it reduced inequality. The federal spending to alleviate poverty has subsidized poverty rather than diminishing it.
Failure of foreign aid to poor nations
Since the 1950s, the United States of America, other nations, and non-governmental organizations have spent extraordinary sums—totaling trillions of U.S. dollars—on aid to the poor nations of the world. That form of aid has been largely wasted because it was given not to the ordinary people who needed it and could have used it wisely, but to the political states that ruled them. The rulers of those states stole the aid for personal enrichment and to maintain themselves in power through corruption and brutal repression.
Noted African scholar and author Dambisa Moyo asserts that the African people have been badly harmed by the aid that has gone to corrupt rulers. 9 For example, there is perennial violence in the political life of African nations due to the constant flow of foreign aid money to political tyrants. That flow of money provides a perennial incentive for would be tyrants to overthrow the incumbent tyrant in power.
Furthermore, foreign aid has undermined the efforts of Africans to help themselves. For example, African farmers are denied a domestic market for their production by the continual importation of free food supplied by foreign aid.
Serving the financial needs of the poor through enterprise, innovation, and philanthropy
Since the 1960s, non-political, non-state initiatives have been alleviating poverty and increasing employment opportunities in the United States and around the world.
In Bangladesh, economics professor Muhammad Yunus helped poor women to improve their standard of life by his innovation of micro-finance. Yunus organized an enterprise called Grameen Bank (village bank) that loans small amounts of money, usually less than the equivalent of US $75. The loans are made primarily to village women who work to care for their children.
With these loans the borrowers are able to enjoy all the benefits of their work rather than being virtually enslaved to local money lenders who charged exorbitant interest. Women received 97% of the loans because experience has shown that women were more likely than their husbands to use the money for the benefit of their children. The repayment rate has been 99%.
For the micro-finance lending innovation, Muhammad Yunus and Grameen Bank received the Nobel Peace Prize in 2006.
Micro-lending has spread beyond Bangladesh. It is helping millions of poor people around the world get small loans that transform their lives by enhancing and amplifying their productive abilities.
Hundreds of millions of poor people in Africa, Asia, and Latin America have been handicapped by lack of access to banking. They have and use money, and actually save some of it, but they have no place to keep their money safe. They have had to use coins and paper money for everything, including carrying money to family members at a distant location.
The poor people need banking. However, it has not been available to them previously because it was not profitable or practical for banks to take small amounts for deposit. In the early 21st century enterprise and innovation are bringing banking to the poor.
Digital technology makes it easier than it ever was in the past to deal with money, so easy that people of modest means will be using digital money as much as the more affluent. As of the second decade of the 21st century that was already happening for poor people in India and Africa where digital, electronic transfers of money were enabling rapid, low cost banking to eliminate most of the risks and costs of dealing with paper money and monetary coins.
Three organizations created by Americans are helping the poor of Africa and elsewhere to participate in banking and finance.
- Mifos is a U.S. based not-for-profit organization that enables financial services companies to offer a complete range of financial services to the poor via mobile phones and digital technology. Mifos is a spinoff from Muhammad Yunus’ Grameen Bank.
- Mojaloop is an initiative of the Bill and Melinda Gates Foundation that creates and deploys payment platforms that financial service companies can use profitably to provide digital financial services for the poor.
- Kiva is an international not-for-profit organization founded in 2005 in San Francisco, California with a mission to expand financial access to underserved communities. Kiva serves borrowers in more than 80 countries on five continents. Kiva enables crowd funding of loans for borrowers in Africa and elsewhere who otherwise would have difficulty borrowing, e.g. farmers, artisans, students, shopkeepers, builders, restaurant owners, and others. Lenders can commit capital in increments as low as US $25. Kiva loans have a historical repayment rate of about 97%.
Eric Reynolds and the poor people of Rwanda
American entrepreneur Eric Reynolds is demonstrating how a profit-seeking business can be an effective way to deliver critically needed services to the world’s poorest people.
In 2007 Reynolds traveled to Africa to visit a friend in Rwanda. Reynolds observed that rural Rwandans lack access to electricity, clean water, and toilets. Rwandan women spend hours each day fetching water and looking for wood in the countryside. To cook food, they use wood or charcoal. The smoke from burning wood or charcoal inside a dwelling causes sickness, including cataracts, heart disease and respiratory ailments.
Reynolds discovered that there were manufactured wood pellets that burn cleanly, and that there was a Dutch-made stove that reduces wood pellets down to clean-burning gases. Using pellets reduced the need for wood by 90 percent compared with charcoal or wood collected from the countryside. However, the stoves cost more than the poor rural people of Rwanda could afford, living as they do on incomes that are less than one dollar a day.
While considering this problem of affordability, Eric Reynolds had an inspiration. He could supply the stoves without charge while earning revenue by selling the wood pellets. Rural people could afford the pellets. Furthermore, Rwanda’s growing number of city dwellers was also a market for wood pellets. Mr. Reynolds observed that “if you sell fuel every day rather than selling a stove every two years, that’s a business.”
In 2010 Reynolds moved to Rwanda, making it his home in order to establish the business that he had innovated.
Helping poor people to help themselves: help people not politicians
Since the 1950s, well over US $1 trillion in development-related aid has been transferred from rich countries to nations in Africa. The aid has been detrimental to the people it was intended to help. Why? It is because the aid money was entrusted to thieves and murderers who held political power in those nations. 10
The people holding political power used the aid for their own enrichment and to pay generously the minions whom they enlisted to repress the people. The dictators and their clique often sent much of the aid money to foreign bank accounts in their own name.
For example, the Belgian Congo was a central African colony of Belgium. The colony was rich in natural resources, including petroleum. The soil and climate allowed the cultivation and harvesting of four crops each year.
Independence came in 1960. The new nation was given the name Zaire. In 1961 Joseph-Désiré Mobutu, a military officer, took power by violent means. He became the head of state. The name of the state was changed to Democratic Republic of the Congo. It was neither democratic nor a republic. Mobutu was absolute dictator. Nevertheless he received military, diplomatic, and economic support from the United States, France, and Belgium, on the premise that he was a bulwark against a communist takeover of the nation.
Mobutu ruled until he was overthrown in 1997. There was massive foreign aid given to the new nation throughout Mobutu’s rule. From this aid Mobutu amassed a large personal fortune of US $6 billion through economic exploitation and corruption. Much of the $6 billion was deposited in Mobutu’s name in banks in Europe, where it did no good for the nation Mobutu ruled. The nation suffered from uncontrolled inflation, incurred a large foreign debt and repeated currency devaluations. This economic chaos made life worse for the people, worse than it would ever have been without unwise foreign aid.
Similar misappropriation by political rulers occurred in a significant number of newly independent nations of Sub-Saharan Africa.
Herb Kelleher and Southwest Airlines
Prior to 1978 it was expensive to travel by air in the United States. Federal law mandated minimum prices, i.e. high prices, for air travel and restricted entry of new competitors in the industry.
In 1967 businessman Rollin King and his friend lawyer Herb Kelleher undertook to start a new airline, Southwest Airlines, to operate solely in Texas, on the premise that federal regulation did not apply to an airline operating only in a single state. Starting with three aircraft serving only the three largest cities in Texas—Dallas, Houston, and San Antonio—they reduced fares by as much as 75%.
In 1978 Congress ended price regulation of airline travel. That resulted in lower fares throughout the airline industry. It also enabled Southwest to serve states other than Texas.
From the beginning Southwest treated its employees well. Herb Kelleher said,
“Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes shareholders happy. Start with employees and the rest follows from that.”
Southwest Airlines transformed the airline industry by introducing competition that made low fares the norm. Southwest grew to become the largest and most profitable airline in the United States. Herb Kelleher’s enterprise ultimately benefited millions of passengers and tens of thousands of employees. In 2018, 48 years after its first flight, Southwest employed over 58,000 people, operated 750 airplanes and carried more than 120 million passengers, making it the nation’s most popular and profitable domestic airline.
Local entrepreneurs create employment opportunities
Businesses that start up with just an owner-entrepreneur may grow to employ a few dozen, a few hundred, or thousands of people. Small-scale, local businesses create far more new employment than already large companies that tend to reduce the number of their employees over time.
In towns and smaller cities all over America, many thousands of small businesses create employment opportunities for local residents. For example, the following are among the successful small businesses of sparsely populated Humboldt County, in northwest California.
Danco Builders of Arcata, California, population 15,000, builds commercial and residential properties, specializes in development of affordable housing, and manages residential and commercial leases. The company was founded in 1986 by lifelong Humboldt County resident, Dan Johnson.
The company is staffed by local residents with a wide range of skills in building and construction, real estate development, and property management. In 2019 Danco employed over 130 people.
Miller Farms was originally an 80-acre family farm in McKinleyville, California, population 15,000. Two Miller brothers started a nursery business in 1963. Since then Miller Farms has developed a flourishing nursery, one of the largest power equipment dealerships in Northern California and a highly qualified landscape department with over 100 years of combined experience.
In the second decade of the 21st century Miller Farms remains a family enterprise with three generations of the Miller family working in various aspects of the business. Miller Farms started the nursery business with one employee and has since grown to employ over thirty-five people.
Ramone’s Bakery and Café of Eureka, California, population 28,000, started as a café in 1981. Subsequently Ramone’s opened a bakery that became well known locally for the quality of its baked goods.
Thirty-eight years after inception the business still was owned and operated by one of the original owners, Berit Meyer, who was joined in the business in 1990 by her husband, Brian Ferguson. In 2019 Ramone’s had six locations in and around Eureka and had over 125 full and part-time employees.
Evans Mechanical, founded by Tim Evans provides heating, air conditioning, and water heater service to business and residential customers in Eureka and throughout Humboldt County, California. The company has established a positive reputation in the communities it serves.
In 2001, Tim Evans offered employment to Matt Bray, who was then nineteen years of age. Matt worked for Evans for the next thirteen years. In or about 2014, Evans wanted to retire and move out of state. He asked Matt if he was interested in taking over ownership of the business. Matt said that he was. Ever since then Matt has been the owner of Evans Mechanical. The company employs fourteen people.
The reader may think that a stateless society would suffer from anarchy. That idea has been advanced ever since Greek and Roman antiquity. The 17th Century English philosopher Thomas Hobbes (1588-1679) is famous for his book Leviathan (1651) in which he argues that without a powerful ruler a society will degenerate into chaos, in a war of all against all.
Noted economist and philosopher F. A. Hayek observed that “the primitive individualism described by Thomas Hobbes is a myth. . . There never was a ‘war of all against all.’” 11
Hobbes’ thesis has been falsified time and again. The founders of the United States of America sought to establish a stable form of governance in which there was no all-powerful monarch.
In a stateless society there would be no ruler in the political sense. However, there would be rules established by contract, and by custom, as explained under the heading “Community Rules” below.
The desirability of rules of conduct seems plausible in the context of a family, provided the family does not operate as a dictatorship by one over the rest of its members.
Chapter 31 on Governance, Government, and the State is based on a central premise—that without exception all goods and services that people want can be supplied by free enterprise—including services widely considered uniquely the province of the state such as governance, justice, defense, money, schools and education, protection of the environment, and preservation of scenic wonders such as the Grand Canyon. How free enterprise could do all this is examined in more detail further below in this chapter and elsewhere in this book.
In contemporary society there are places where people function within a structure that is ordered and governed not politically but on a proprietary basis. Examples include the following.
- In colleges and universities, students may live in dormitories on campus, taking meals in restaurants and cafeterias on campus, and protected by police employed by the school.
- In condominiums, homeowners live under rules established by a plan incorporated in a document of Covenants, Conditions, and Restrictions (CC&Rs) and in bylaws of the homeowners’ association.
- There are gated communities of individually owned homes in which security is provided by walls, a gated entrance, and private security.
- Shopping centers provide rules for merchants who operate stores within the shopping center, and provide security for visitors to the shopping center.
- Cruise ships provide a governance organization for all passengers and crew, with rules provided by the cruise ship company and administered by the captain and crew. Cruise ships usually have a physician on board to care for sick passengers. The ship provides all food, stores for passenger shopping, physical exercise facilities, and entertainment.
- Passenger aircraft have rules of governance provided by the airline and administered by the captain and crew for the duration of each flight.
- Amusement parks provide every service and amenity necessary for visitors who usually will spend an entire day within the park. The amusement park provides food services, toilets, entertainment, and security. At some large amusement parks, notably Walt Disney World in Florida, the park company provides every customer service and governance service that could be found in a city, including hotels and policing by private security.
Walt Disney’s conception of a model city
The idea of EPCOT at Walt Disney World in Florida began with a vision of Walt Disney. EPCOT is an acronym for Walt Disney’s idea of an “Experimental Prototype Community of Tomorrow.” He said that “I don’t believe there’s a challenge anywhere in the world that’s more important to people everywhere than finding solutions to the problems of our cities.”
Disney’s ideas on cities began to be manifested at the original Disneyland in Anaheim, California that opened in 1955. Its 25 foot Earthen Berm protects it from the outside world. With clean streets, and walkways, Disneyland was Walt’s first idea to have a better city, not like Los Angeles in the 1950s where Walt worked and lived.
Walt Disney was unhappy with the urban congestion and tackiness that grew up around Disneyland. He envisioned something better, that he called the “Experimental Prototype Community of Tomorrow,” (EPCOT).
Disney selected a large, undeveloped area near Orlando, Florida for a location in which to bring this vision to reality. The Disney Company purchased 10,500 square miles of land near Orlando, an area fifty times as large as the City of San Francisco.
Walt Disney believed that the automobile had moved too much into urban life, that a city should be designed to eliminate traffic jams and automobile accidents. He envisioned a corporation as the operating entity for his new city, not a conventional political democracy. He intended to create EPCOT by a master design to maximize human freedom and joy.
Disney’s plan for EPCOT was for a city without dirt and grime, with dependable public transportation and without traffic congestion, a civic center covered by an all-weather dome, model factories, and an environment enriched in education, and in expanding technology, within green belts that were readily accessible to workers housed in nearby suburbs.
The management company did not have to be a monopoly. All kinds of services could be supplied by independent entities, including hotels, security, fire protection, food, transportation, and much more. 12
Walt Disney passed on in 1966 before he could begin to bring this concept to fruition. His brother Roy Disney proceeded to lead the building of the Walt Disney World Resort in Florida, but he too passed on before the project was well started. The Disney Company turned the project into to a group of theme parks served by hotels, streets and other facilities necessary to serve the large number of visitors that were anticipated.
Under a compact entered into with the state of Florida, the only service provided by the state of Florida is safety inspection of the elevators in hotels. In all other respects Walt Disney World is governed by the Walt Disney Company. The complete vision of Walt Disney was not realized, but it could have been realized had Walt Disney lived longer.
THE NATURAL REPUBLIC
The title “Natural Republic” is a name coined by Andrew J. Galambos to describe a social structure in which every individual has full (100%) control of the property consisting of his or her own life including one’s ideas, thoughts, and actions.
Galambos’ concept of a Natural Republic is “one where coercion is inapplicable, and you have a whole social structure open to the general use of all on a proprietary, contractual basis.”
Where does such a voluntarily operating society exist anywhere in the world? It does not yet exist as the predominant means of social organization, but it is emerging everywhere, even in totalitarian states.
How and when will such a society totally supplant the coercive state? It will emerge by defaults of the state that lead to its failure and extinction, and by growing awareness of the failure of politics and political governance.
When will a voluntary governance society emerge? It will emerge gradually over time in nation after nation as political states fail and fall into bankruptcy.
Political democracies are where the idea of voluntary governance is emerging most prominently because that is where there is sufficient freedom for people to create enterprises that provide voluntary governance.
THAT FORM OF GOVERNANCE IS UTOPIAN THAT IS NOT SUSTAINABLE
An objection to the idea of voluntary social governance is that it is utopian—that it could not be achieved and if ever established could not be sustained. Just the opposite is true. It is the political state that is not sustainable. From ancient Egypt and Persia down to the 20th century empires were established then declined and fell into extinction.
- The Roman Empire lasted 503 years.
- The British Empire lasted about 350 years.
- The Russian Empire lasted about three hundred years.
- Imperial Germany of the 19th and 20th centuries lasted only 81 years.
- The empire of Japan lasted just fifty years (1895-1945).
POLITICAL DEMOCRACY IS NOT SUSTAINABLE
The system of political governance in the United States is causing its own destruction due to a combination of factors that if unchecked will lead to the failure of the United States of America. It cannot survive with its present form and structure unimpaired due to the self-inflicted wounds described herein that include, but are not limited to:
- Financial bankruptcy caused by perennial spending of the state beyond the ability of the people to sustain.
- Social chaos and havoc caused by the de facto repudiation of responsibility to provide anything close to the full measure of benefits promised under the social welfare programs known as Medicare and Social Security.
- The destruction of the productive capacity of the nation due to imposition of impossibly heavy taxes on entrepreneurs imposed by the United States in a vain attempt to survive.
- Erosion of the work ethic among the large numbers of people who had come to rely on the state for the wherewithal to pay for the necessities of life.
- Low morale of the more productive members of society due to the foregoing.
- Lack of popular support due to skepticism of the people about the state’s competence to survive as a viable entity.
History provides examples of such a collapse of a state, such as the fall of the Roman Empire, the weak and unstable Weimar Republic in Germany after World War I (1919-1933), Argentina’s perennial disorder since the advent of Peronism (1945 to 2019), and Venezuela from 1998-2019 under the brutal, corrupt, disorderly and incompetent rule of the socialists Hugo Chavez and Nicolás Maduro.
Note: The American nation and its people will survive the failure and collapse of the political state in America. History indicates that this is so.
At the end of World War II, the victorious nations required and received unconditional surrender from their vanquished opponents, Nazi Germany and Imperial Japan. The German and Japanese political states ceased to exist. Many of the important cities in each nation lay in ruins. Each nation had suffered millions of military and civilian fatalities. The population of each nation was suffering hunger and destitution.
Each nation survived thanks in part initially to humanitarian aid from the United States. Each nation was occupied by the military forces of the conquering nations. Germany was broken up and divided between a larger western portion ruled by the United States, Britain, and France and a smaller eastern portion ruled by communist Russia, also known as the Soviet Union.
Even after the catastrophe of World War II, Germany and Japan were relatively large and populous nations. Each still had its own unique national culture and traditions unimpaired. The military defeat actually liberated the creative power of the two peoples that previously had suffered under cruel tyrannies. In the decades following total defeat, West Germany and Japan enjoyed a revival and prosperity beyond anything they had ever previously experienced.
Military action of the United States, rather than making Americans safe, has endangered Americans and resulted in 1,500,000 American military fatalities. This assertion is documented in chapters 13 and 25 of this book.
In the first decades of the 21st century U.S. military spending represented about sixteen percent (16%) of total federal spending. Most U.S. military spending is unnecessary to the safety of Americans, endangers American military personnel, and is counter-productive in terms of relations with other nations of the world.
The U. S. military is not capable of stopping an attack on America with devastating weapons of mass destruction. Some potential aggressors could be deterred by the prospect of massive counter-attack. However, some known potential aggressors are controlled by religious zealots who may not be deterred by the cost to their own people and even themselves due to attacking the United States.
Switzerland is the world’s oldest and in many ways most successful democracy. Switzerland has maintained its geographical integrity for more than 700 years, except during the Napoleonic wars of the early 19th century. Switzerland has survived as an independent nation in large part because Switzerland does not station troops outside its own borders.
Financial liabilities of the United States will impoverish future generations of Americans
As of the year 2013, the total debt of the United States calculated on the most realistic basis exceeded $200 trillion according to the Congressional Budget Office (CBO). 13 That amounts to more than $1.8 million per American household, more than twenty times the median net worth of American households, including equity in their homes.
Most of this debt is in unfunded liabilities of social welfare programs, primarily Medicare and Social Security.
According to economics professor Laurence Kotlikoff, after 2011 the CBO suppressed publication of its alternative fiscal scenario accounting for federal unfunded liabilities that exceeded $200 trillion. Reporting the unfunded liabilities was also suppressed between 1993 and 2011 during the administration of three successive Presidents according to Professor Kotlikoff. 14
Americans as a group, including the wealthiest, cannot afford to pay for the promises made by the United States to its citizens. If the U.S. were to try to collect enough in taxes to pay Medicare and Social Security benefits as promised, plus all other federal expenses, Americans would have to sell everything they own to pay the taxes and that still would be far less than enough to pay for the promised benefits.
The United States presumably would try to pay Medicare and Social Security benefits, but those benefits necessarily would be far less in amount than had been promised. Older Americans would be totally dependent on those benefits. Because the benefits exceed what the assets of Americans can pay for, the attempt to collect the taxes would leave all Americans destitute, not just the elderly.
Some politicians assert that raising taxes on only the wealthiest of Americans would provide the necessary tax revenues to fulfill the promises of the state. That is wishful thinking at best, and a delusion at worst.
In the United States near the end of the second decade of the 21st century, the top one percent of the 116 million U.S. households had annual income averaging $434,000 . In aggregate that is approximately one-eighth as much as the four trillion dollars that the United States spends every year. Therefore, if the U.S. confiscated all (100%) of the income of the top 1%, the proceeds would pay for the operation of the United States for about six weeks. That could be done once, and only once, for it would remove all incentive and reason for those people to earn more than the minimum amount necessary for a modest standard of living.
On a net worth basis, the average net worth of the top 1% of American households in 2010 was about $16.4 million . An annual tax of 2% of net worth over $50 million and 3% on household net worth over $100 million , as proposed by U.S. Senator Elizabeth Warren, would apply to perhaps 10,000 households. 15 Accordingly, the annual tax revenues from such an imposition would be on the order of several tens of billions of dollars. That would be about as much as the U.S. spends in four or five days.
On either an income basis or a net worth basis it would be futile to expect that soaking the rich would cover the enormous shortfall in tax revenues engendered by the social welfare promises of the United States of America.
An extraordinary political delusion
How could the United States have created its immense unfunded social welfare liabilities? They originated and then burgeoned as a consequence of a state-created Ponzi scheme.
The term Ponzi Scheme refers to a notorious example of financial fraud that was perpetrated in the 1920s by a man named Charles Ponzi.
In a Ponzi scheme, also known as a pyramid scheme, people are attracted to put money into a supposed investment by a promise of fabulous profits. There is no investment. The scheme is maintained for a time by taking in new money to make payments to earlier victims of the fraud. When the supply of new money dries up, the scheme collapses.
In 1967, economics professor Paul Samuelson wrote an article entitled “Social Security Is A Ponzi Scheme That Works.” 16 Samuelson’s essays says that “The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in . . . How is this possible? It stems from the fact that the national product is growing at compound interest . . . Always there are more youths than old folks in a growing population . . . A growing nation is the greatest Ponzi game ever contrived.” 17
Social Security was established by the federal Old-Age, Survivors and Disability Insurance Act of 1935. It is a system of compulsory tax payments by employees and their employers to provide old age retirement and disability benefits.
Americans are not guaranteed social security benefits because of payment of taxes to fund the program. 18
Congress established Medicare in 1965 by amending the Social Security law to provide medical expense insurance to people age 65 and older, regardless of income or medical history.
Insurance is a business of promises—the promise to pay possible future claims in return for current and ongoing payments to fund the future obligation. The insurance industry employs actuaries and underwriters to determine what should be charged for its promises to pay future benefits. Actuaries calculate and compare the projected revenues from insurance payments by those insured to the amounts expected to be paid out to them to honor their claims for benefits. Underwriters price the insurance in an amount adequate to generate the revenues that actuarial science indicates are necessary to the long-run financial integrity of the insurer.
From the outset U.S. social welfare programs were actuarially unsound, meaning that as designed they could not pay for themselves on a long-term, self-financing basis. Social Security was not designed to be a system to create a fund to pay future claims in the indefinite future.
Ida Mae Fuller (1874-1975) was the first person to receive social security benefits. She paid a total of $25 in social security taxes for three years, starting in 1936. Miss Fuller lived to be 100 years of age. From 1939 to 1975 she received social security benefits totaling $22,889—more than 900 times greater than the amount she had paid in social security taxes.
Social Security is reputed to be the most popular federal program. That is not surprising considering how little Americans have paid for it in comparison to the benefits they have received as well as the common misunderstanding that they have earned the benefits through their payroll taxes for Social Security.
The disparity between costs and benefits that generously favored earlier, older generations of Americans eventually will have to be paid for by horrendous costs to younger future generations.
The mission of the International Monetary Fund (IMF) is to advise nations regarding economic and monetary problems. In 2004 the IMF issued a report advising the United States that “. . . closing this fiscal gap [represented by unfunded liabilities of Social Security and Medicare] would require an immediate and permanent 60 percent hike in the federal income tax yield, or a 50 percent cut in Social Security and Medicare benefits . . . with the burden on future generations increasing further if corrective measures are delayed.” [Emphasis added] Corrective measures have not been taken or even considered by the Congress.
The United States Congressional Budget Office has delivered much the same message to the Congress and Presidents of the United States.
Economist Herbert Stein (1916-1999) is famous for his comment regarding the perennial rise of U.S. deficits and debt, that “If something cannot go on forever, it will stop.” The comment is famous because it is true, vivid, and succinct.
If the problem of unfunded U.S. social welfare benefits is left unaddressed and unsolved older and younger generations will be pitted against each other in political struggle. That would be likely to destroy the social fabric of the nation.
Unfunded liabilities of the fifty separate states of the United States
State and local governments’ unfunded liabilities now exceed $6 trillion . That is nearly $50,000 for every household in America. Virtually every one of the individual states in the United States is at risk of default on their pension obligations. This happened in large part because public employee unions were able to persuade legislators to increase pension benefits to levels that were not affordable by the states without significant increases in taxes. State legislatures failed to raise taxes as needed to fund pension benefits of state employees. 19
Notable failures of the United States of America
Each of the following major initiatives and operations of the United States is bankrupt in fact but continues in existence with perennial infusions of money from taxation.
- The U.S. Postal Service
- Social Security and Medicare
- The Federal National Mortgage Association and the Federal Home Loan Mortgage Association nicknamed Fannie Mae and Freddie Mac, that eventually financed one half the home mortgages in the United States
- The War on Poverty
These financial failures are not the only consequence of the dysfunctional pathologies in the operations of the United States of America. In addition, the U.S. has also created chaos and disorder in the nation’s money, banking, housing, medical care, finances of college students, and by increasing the amount of losses due to natural disasters.
PLANNED CHAOS AND THE LAW OF UNINTENDED CONSEQUENCES
Actions by a political state that are intended to have a beneficial effect have the perverse effect of causing chaos and unintended and socially detrimental long run consequences.
Monetary inflation—swindling savers and equity investors
In an inflation that occurred in the United States from 1964 to 1980, annual inflation, in terms of rising consumer prices, went from little more than 1% annually to 14% during the administration of Presidents Johnson, Nixon, Ford, and Carter. The inflation was created by the Federal Reserve to help the U.S. finance large spending for new social welfare programs enacted in 1965—Medicare, Medicaid, and the War on Poverty—while simultaneously a large portion of U.S. tax revenues was being consumed by the Vietnam War.
Savers are unable to protect themselves from the combined effect of price inflation and income tax on interest that together cause a negative real return on bank savings. Monetary inflation also swindles the equity investor in publicly traded common stocks, according to an essay published by master investor Warren Buffett in 1977.
Causing economic depressions and making them worse and longer
The Great Depression of the 1930s resulted in bank failures in some rural areas, a stock market decline far greater than any before or since then, and long-lasting, high levels of unemployment and under-employment from 1930 to 1940.
There had been previous depressions but none long enough or deep enough to halt the perennially rapid growth in American economic vitality, productivity and prosperity from 1781 to 1929.
The Great Depression was precipitated by tariffs (taxes) on imported goods and by monetary policies of the Federal Reserve (the Fed) that stimulated speculative activity in real estate and in the stock market,
A new President and Congress in 1933 attempted to heal the wounds to the economy by measures to prevent wages from falling—at a time when many employers were unable to continue the wages that they had paid in good times. This prevented wages from falling to a level where employers would resume hiring workers. 20 High unemployment persisted until 1940, ending then only due to military conscription enacted in anticipation of war and due to massive spending for the military buildup.
In the years 2007-2010 America experienced what has been called the “Great Recession,” considered the most severe economic downturn since the Great Depression of the 1930s. The primary cause of the Great Recession was the precipitous fall in house prices in the U.S. real estate market and the subprime mortgage crisis in consequence of policies of the United States intended to promote affordable housing.
Housing crises made in Washington, D. C.
Between 1932 and 2007, in order to promote affordable housing, Congress enacted numerous laws. 21
Congress delegated administration of these laws to several federal agencies. The affordable housing policy was a principal cause of the savings and loan crisis of the 1980s, the housing and subprime mortgage crisis of 2007-2008, and the financial crisis and Great Recession of 2007-2010.
In the savings and loan crisis of the 1980s and 1990s, one-third of the more than 3,000 Savings and Loan banks failed. Their failure bankrupted the Federal Savings and Loan Insurance Corporation, at a cost of $132 billion to taxpayers.
Congress established three agencies to insure and to finance home loan mortgages. Eventually these agencies financed one half the home mortgages in the United States.
In 1977 Congress enacted a law to require banks to make real estate loans to borrowers in low-income neighborhoods. 22 In practice this meant banks were pressured into making a significant number of loans that foreseeably were likely to end up in default.
The loans were affordable because banks would lend the money on terms that were better than prudently and normally would be available to borrowers with deficient credit and inadequate resources.
They were risky because the borrowers could not afford in all events to pay loan interest and principal. A large portion of those risky loans were assumed by the federal mortgage finance agencies.
The Federal Reserve lowered to 1% its rate of interest for loans to banks for several years beginning in 2001. Consequently, banks made adjustable rate mortgage loans at low interest rates that had the effect of raising home prices—because mortgage payments were low. This enabled people to buy homes at prices that otherwise would have been beyond their means. In turn, this caused the debt-financed housing bubble that occurred from 2001 to 2006.
Incredibly, during the housing bubble Alan Greenspan, the head of the Federal Reserve, urged the public to take out adjustable rate mortgage loans in preference to fixed rate loans. When the Fed raised interest rates to 5.25% in 2006, the housing bubble deflated; the Fed’s rate rise precipitated a virtual tsunami of mortgage defaults and a sharp contraction in home buying even though home prices were falling rapidly. 23
When risky mortgage loans defaulted en masse starting in 2006, the defaults bankrupted the federal mortgage agencies. Congress passed on to taxpayers nearly two hundred billion dollars in mortgage loan losses the federal agencies were unable to absorb.
Some of America’s biggest banks became big losers in the collapse. These banks had created highly risky pools of mortgages and risk-hedging devices called mortgage backed securities (MBS) and credit default swaps (CDS) that neither the banks nor federal regulators understood adequately. The banks were not content to earn only the loan origination fees before transferring the risk of the loans to federal mortgage agencies. Instead the banks held a significant amount of MBS in an attempt to maximize their interest income, assuming they were protected from loss by the CDS.
When an important federal regulator, Brooksley Born, warned Congress about the dangers of MBS and CDS her warnings were dismissed and her calls for regulatory reform were rejected.
Because the interest rate on an MBS was relatively attractive and the MBS were accorded safe ratings by bond rating agencies, they were purchased in large quantities by institutional investors such as pension funds and mutual funds around the world. Ultimately MBS caused global financial losses over $1 trillion.
The housing market collapse should have been foreseen, but it was not. Most of the biggest banks and all the federal regulatory agencies failed to take action to prevent the creation of the housing bubble and to prevent risky mortgage lending.
The Federal Reserve established a policy that some banks were too big to be allowed to fail. In the view of the Fed, their failure would likely have widespread adverse consequences that the Fed wanted to avoid. According to banking expert Mike Mayo, in the financial crisis of 2007-2008 twelve of the thirteen largest banks in the U.S. would have failed but for a bailout by the United States. 24
There was an enormously expensive unintended consequence of the “too big to fail” policy. As of 2015 the big bank bailout had cost the United States, that is taxpayers, $4.6 trillion, with as much as $12 trillion more possibly to come, according to author Mike Collins.
The once implicit doctrine of a bank being too big to be allowed to fail was made explicit by the big bank bailout. Too big to fail has since in effect been codified by a U.S. law named after sponsors Chris Dodd and Barney Frank, legislators who opposed efforts to rein in risky lending activity by Fannie Mae and Freddie Mac.
With “too big to be allowed to fail” ensconced in the law as explicit policy of the United States, big banks have no downside risk in making imprudent loans. After all, the U.S. will save the bank from failure, and neither the managers of the bank or the bank itself will have any responsibility to make good the losses caused by imprudent lending.
Paper promises: a false illusion of security that masks impeding mass impoverishment
Social Security and Medicare were established to protect the elderly from destitution. For a time they succeeded. However, they are unsustainable and impermanent programs. Unless fundamental flaws in these programs are corrected they will cause future destitution of most Americans, and consequent horrendous social turmoil. Elected federal officials ignore the problem, even when it is called to their attention by their own Congressional Budget Office, and by the International Monetary Fund. 25
Continual escalation in medical expenses
Spending on medical expenses in the U.S. increased from 4% of Gross Domestic Product (GDP) in 1940 to nearly 20% of GDP near the end of the second decade of the 21st century. As of the second decade of the 21st century, nationwide annual spending for medical services amounted to about $10,000 per capita and about $40,000 for a household of four persons. 26
The price escalation in medical spending is due to policies and programs of the United States of America regarding medical expense insurance. These policies fostered an attitude in many people that medical expenses were something they did not have to pay very much for. That attitude limited both consumer incentive to shop for price and price competition among suppliers of medical goods and services.
An example illustrates the effect of lack of price competition for medical services. The cost of a full hip replacement for a human being is about six times the cost of a full hip replacement for a dog. Other than a different design for the artificial hip implant, the procedures are the same. The difference is that people shop for price when considering medical care for their dogs because they pay for it out of pocket. They do not shop for price when considering their own medical care because they pay very little for it.
An unintended consequence of Medicare is widespread fraud among some providers of services covered by Medicare and Medicaid. The fraud occurs because fraud is unlikely to be detected due to Medicare’s method of operation. 27
College students burdened with heavy debts
In 1965 Congress enacted a law to provide a federal guarantee for bank loans to pay for college expenses. A flood of college student loan money ensued. This gave colleges an incentive to maximize the tuition they could receive from students by relaxing admission standards in order to increase enrollment and tuition revenues.
Consequently, average college tuition increased by 1,375% from 1978 to 2018, more than four times the rate of overall consumer price inflation. Large tuition increases have occurred at public and private institutions alike. As of 2018, borrowers owed more than $1.5 trillion in student loans, an average of $34,000 per person. College loan debt is the second largest consumer debt, after mortgage debt, but higher than credit card debt.
The United States encourages risky behavior at the expense of taxpayers
FEMA, the Federal Emergency Management Agency lends money to people to rebuild in disaster-stricken areas, for example, river floodplains and the southeast Atlantic coast and Gulf coast of America, where hurricanes strike irregularly but unavoidably. FEMA’s assets are woefully inadequate to reimburse property owners for the damages they suffer when natural disasters occur. Thus, FEMA encourage risk taking but does not charge the risk takers for the cost. Congress passes the cost on to America’s taxpayers.
THE STATE IS NEVER INDISPENSABLE
Entrepreneurial provision of productive and protective services
It is nearly universally supposed that political organization is a necessity to facilitate productive activities and to protect people from risks and dangers inherent in productive activities. This supposition is mistaken. Experience has shown that private enterprise can do better and more inexpensively everything that political states do related to production and protection.
There are a number of examples of state activities discussed below that many people believe are indispensable to society and cannot be provided by free and private enterprise. The focus is on the United States of America, but the principles apply universally.
REGULATION BY THE FREE MARKET
It is believed by many thoughtful people that in the interest of public safety and welfare, free enterprise must be regulated by political authority. However, in the free market there are protections for the public that operate in the market itself, without political requirement.
Problems and drawbacks of political regulation
- Lack of Knowledge: Top down political regulation suffers from a lack of knowledge, for example in bank capitalization requirements. The financial crisis of 2007-2010 demonstrates that federal regulators lacked the knowledge to provide effective regulation that would prevent dangerous risk taking by banks and other financial institutions
- No one to regulate the regulators: Cozy relationships develop between regulators and regulated that undermine the independence and integrity of the regulatory process, for example the very real possibility that politically appointed regulators can find better compensated employment in the industries that they regulate.
- Political motivation sometimes undermines regulation by lawmakers, for example the political drive for affordable housing that blinded Congressional overseers to the risks being taken by Fannie Mae and Freddie Mac during the housing bubble and subprime mortgage mania of the early 2000s.
- Voters lack the knowledge and the practical means to require effective regulation by Congress and administrative agencies, acting by voting only at the time of an election.
The worst financial crises—the 1929 to 1932 stock market crash, the Great Depression of 1930 to 1940, the high inflation and economic recessions of the 1970s and early 1980s, and the financial crisis and Great Recession of 2007-2010—occurred not before the advent of political regulation, but after the political regulatory mechanisms were operating.
Regulation in the free market
The free market provides several layers of regulation that assure quality and safety better than political regulation. They are:
- Competition: the need to provide goods and services at least as well as competitors
- Customer approval and disapproval: customers express their approval or disapproval of quality and price every day in their buying activities.
- Branding: A brand name associated with good quality guides consumer choices, for example Honda and BMW automobiles, Charles Schwab in financial services, The New York Times and The Wall Street Journal in reporting matters of public interest.
- Third party assurance: Independent certifiers such as Underwriters Laboratories, Good Housekeeping, and Better Business Bureau that publish their findings regarding quality of goods and services.
- Information providers’ rating services: Consumer Reports magazine, PC Magazine, automobile magazines’ car ratings
- Rating services such as Angie’s List, Carfax, Nextdoor, Thumbtack, and Yelp
- Company self-rating such as Uber and Lyft where passengers rate drivers and drivers rate passengers
- Insurance that provides a financial incentive for providing good quality and a disincentive to poor quality, for example by an insurer requiring Underwriters Laboratory certification for a product, or by an insurer raising rates or cutting off insurance to companies exposing the public to unreasonable risk.
Note: For a more detailed exposition of the comparison of political regulation and regulation in the free market, see Not All Regulation is Bad: Just the Kind Imposed by Governments, by Howard Baetjer, Jr., Reason, December 2019, https://reason.com/magazine/ and Baetjer, Howard, Jr., Free Our Markets (2013), Part II, pages 95-175
FAILURES AND INADEQUACY OF POLITICAL REGULATION
Safety and the Federal Aviation Administration (FAA)
Under the Federal Aviation Act of 1958, the FAA is given the authority to oversee and regulate safety in the airline industry. The purpose of the act is to promote safe air travel and to protect the lives and property of people on the ground as well as air travelers.
According to the FAA its “continuing mission is to provide the safest, most efficient aerospace system in the world.” The FAA has the power to require and specify security measures on flights of all airlines, foreign and domestic, originating in the U.S. or originating elsewhere for flights to the U.S.
On September 11, 2001, nineteen male hijackers boarded four aircraft, two in Boston and two and New York City. The hijackers seized control of the aircraft and crashed them into buildings in New York and near Washington, D. C., causing nearly three thousand fatalities and more than $100 billion in financial losses.
There had been many aircraft hijackings before September l1, 2001. The hijacking of September 11, 2001 was foreseeable. 28
In 1995, it was known that terrorists had plotted to crash a hijacked plane into the headquarters of the United States Central Intelligence Agency (CIA) near Washington, D. C. 29
The FAA did not require El Al type security measures that would have prevented the terrorists from boarding the U.S. airlines they hijacked on September 11, 2001. 30
El Al is the national airline of the state of Israel. Those security measures are effective. Requiring such security measures is within the scope of FAA authority. The FAA has the authority to require every airline to have El Al type security on every flight departing an airport in the U.S. and on every flight departing a foreign airport bound for the U.S.
If the FAA required El Al type security for every such flight, no airline would be at a competitive disadvantage. Passengers pay for all costs of air travel. All costs are built into the ticket price. All airlines would bear the same cost. They would pass the cost of security along to passengers in the fares they charge, as they all do at present via taxes on air fares. Currently, U.S. air fares include several taxes, including a September 11 security fee, that together increase the price of airline tickets by nearly 30%.
The Boeing 737 has the highest sales of any commercial jetliner in history. The 10,000th 737 was produced in 2018. It has been manufactured continuously since 1967, entered service in 1968, and was developed into four series and eight different models of varying passenger capacity.
In 2017 the FAA certified the Boeing 737 MAX, a new and larger version of the 737 series. The 737 MAX had design flaws that caused a fatal air crash in 2018 and another in 2019. In its certification process for the 737 MAX, the FAA failed to detect the design flaws.
The FAA had delegated to Boeing some of the work of certifying the safety of its own airplanes, including the 737 MAX. It has been reported that lack of funding and resources was the reason to entrust Boeing with certifying its own product. Only the FAA has the knowledge that could be the basis for such an implausible and unconvincing excuse.
Aeronautical engineers are the people with the skill to evaluate the safety of an aircraft during its design and testing. The cost of a crew of FAA aeronautical engineers could have been no more than a few million dollars during the course of design and testing of the 737 MAX. During that time the annual budget of the FAA was over $15 billion. The FAA had adequate financial resources for the task of certifying the Boeing 737 MAX. What the agency lacked was competent management of its resources.
The discretionary non-military expenses of the U.S., such as the cost of operating the FAA, amount to about one-third of the trillions of dollars the U.S. spends every year. The FAA and other agencies of the United States have the financial resources to do their job.
Aircraft testing for safety is done by the manufacturers themselves. FAA certification is a formality necessary to the sale of aircraft, but is nevertheless a formality.
The Douglas DC-3 first popularized air travel. It was designed and built by Douglas Aircraft Company of Santa Monica, California, starting in 1933. At the time there was no procedure or requirement for certification by federal regulators. The DC-3 entered service in 1936. It proved to be reliable, efficient, and safe. Total production of the aircraft was over 16,000 in civilian and military versions. In 2013 there were still an estimated 2,000 DC-3s flying in freight and passenger service around the world.
Air traffic rules
The authority of the FAA includes the power to issue and enforce air traffic rules, license pilots, and operate and maintain aids to air navigation.
Air traffic rules are established not by edict but rather by experience in the industry. The rules are codified in political regulations after the industry itself has already established best practices.
Air traffic control
The FAA provides air traffic control services for the United States. However, the FAA is not needed for air control. Canada privatized its air traffic control in 1996, and the country’s aviation safety record and efficiency has been exemplary since then.
Licensing pilots is unnecessary. Pilots of commercial aircraft in the U.S. and other nations are trained by the industry itself. Flight Safety International is the world’s leading provider of professional aviation training services. The company has 1,800 instructors and offers more than 4,000 individual courses for 135 aircraft types, using more than 320 flight simulators to serve customers from 167 countries. In general aviation, private pilots are trained by local pilot training schools, not by employees of the FAA.
Infrastructure: seaports, airports, bridges, wastewater
Private initiative can finance, build and manage seaports, airports, bridges, wastewater treatment, and any other elements of infrastructure.
A.P. Møller – Mærsk A/S, a Danish corporation, is the world’s largest container ship company, employing 188,0000 people in 130 countries and on ships on the world’s oceans.
Due to increasing congestion at ports on the U.S. west coast from incoming shipping from Asia, Maersk decided to build a new port on the west coast of Mexico. In 2017 Maersk completed the first phase of construction of Puerto Lazaro Cardenas Mexico at a cost of US $900 million. From this port rail transport is available to carry cargo containers north into the U.S.
Maersk planned, financed, and built the port and will operate and maintain it.
In 2016 The Port of Melbourne, Australia, was privatized by means of a 50-year lease to a group of investment companies. The investors paid in advance the entire price of A $9.7 billion, equivalent to US $ 6.5 billion. The Port of Melbourne is Australia’s largest container and general cargo port.
In 2017 the nation of Greece privatized fourteen regional airports by granting German airport operator Fraport AG the right to use, operate, and develop the airports over a period of 40 years. Fraport paid Greece €1.2 billion, equivalent to $ US 1.3 billion. Fraport operates airports around the world including Frankfurt Airport at Frankport am Main, Germany. The company employs 22,000 people and has annual revenues of €3.5 billion, equivalent to US $ 3.9 billion.
When public financing for the Golden Gate Bridge failed to materialize during the Great Depression, Mr. A.P. Giannini, founder and CEO of Bank of America, agreed on behalf of his bank to finance the project by purchasing the entire bond issue that had been authorized to pay for the construction.
Wastewater and sewer systems
Designing and building the infrastructure of sewage and wastewater treatment is a service that has been performed by individuals and companies under contract with a city or region. Also, it has been done for proprietary communities and public facilities. A noteworthy, large-scale example is wastewater treatment at Walt Disney World in Florida with its forty hotels and resorts and over 100,000 visitors daily.
As of 2019, American Water Company, established in 1886, provided drinking water and wastewater services to 14 million people in 46 states of the United States, and employed 7,100 people.
Space exploration is a long-term endeavor that humanity may pursue for centuries to come. If it is done, it will be done by private enterprise. The profitability of space exploration cannot be imagined by people of the early 21st century any more than Europeans of the 16th century could imagine the profitability of human enterprise in the new territories in the western hemisphere being discovered by explorers of that time.
If space exploration is to be done over the long term, it will not be done by the U.S. National Aeronautics and Space Administration (NASA). According to an industry source, NASA programs have been gutted and canceled on a regular basis since the Apollo 11 moon landing in 1969.
Furthermore, as shown herein, the United States of America is on a course heading for bankruptcy, the largest sovereign default in history, and resulting social havoc.
Space Exploration Technologies Corp. of Hawthorne, California, also known as SpaceX, designs, manufactures and launches advanced rockets and spacecraft. The company was founded in 2002 with the ultimate goal of developing the technology that would enable people to live on other planets. At present SpaceX would not have a viable business without subsides from the United States in the form of grants, tax benefits, factory construction, and discounted loans. SpaceX may be unable to survive without subsidies.
Certification of qualifications of physicians
State regulation is not necessary to the evaluation of the qualifications of professionals such as physicians. Certification by private means would be more effective than state licensing, or at least no less effective, to protect the public from incompetent practitioners.
In 2015 there were about 1.1 million American physicians, of whom 870,000 were in active practice. At the time, more than 880,000 physicians were board certified by a Member Board of the American Board of Medical Specialties, a not-for-profit corporation.
Rating services for physicians could fulfill the function of continual monitoring and reporting on physicians’ performance and capability.
Food and Drug Administration
The responsibility of the U. S. Food and Drug Administration (FDA) is to ensure the safety, efficacy, and security of human and veterinary drugs, biological products, and medical devices, and the safety of food. However, The FDA has withheld life-saving medicines from the market and has approved dangerous drugs.
The public would be better served by private testing and certification of pharmaceutical drugs and medical products in the manner of Underwriters Laboratories a global safety certification company with a long record of reliable evaluation of product safety.
The FDA has no capability of checking on and certifying the quality of food sold every day in the grocery stores of America. Food stores and their suppliers have always done this, in the interest of protecting their reputation for selling food that is safe. Safety risks, if any, in food innovations such as genetic modification (GMO) are reported by the media, including specialized publications such as Consumer Reports.
Safety in medical care
The United States Center for Medicare and Medicaid Services (CMS) on its website states that its mission includes achieving better health care by improving safety in patient care. However, the CMS has cooperated with the American Hospital Association (AHA) to conceal dangerous medical errors in hospitals.
The U.S. Veterans Administration (VA) provides medical care for more than eight million veterans. As of the years 2013-2014 it became known to the public that some of the numerous hospitals in the VA medical system had been concealing delays in providing medical care. An internal investigation found long backlogs at VA hospitals across the country and several cases of veterans who died while waiting for appointments.
How can the public guardians of health safety be a party to limiting public access to knowledge of dangers to safety in provision of medical care? The answer lies in the very nature of political governance.
Political government is a monopoly. It allows no competitors. It insists upon immunity for its actions.
The United States of America has no accountability and no risk in its actions. Employees of the U.S. from the President on down to the lowest levels of bureaucracy are never held personally responsible for their errors, omissions, or actions that harm members of the public.
If a private company undertakes to provide any service or product to the public, it is held accountable to individuals harmed by its errors and omissions to carry out its responsibilities. Responsible managers and employees of a private company can and do lose their jobs for their failure to fulfill the responsibilities of the company.
National Institute of Health and Center for Disease Control
The National Institute of Health (NIH) supports biomedical research and public health research. The mission of the Center for Disease Control (CDC) is to protect Americans from diseases. These agencies are not necessary. Individual physicians, effective public health measures, and an individual’s personal lifestyle are the components of protection from disease.
Important innovations and discoveries in biomedical research and diseases have been accomplished by individual initiative, without any support of the state. A few examples suffice here.
Edward Jenner (1749-1823) was an English physician and scientist who was the pioneer of smallpox vaccine, the world’s first vaccine. He is often called “the father of immunology.”
Anesthesia was discovered by noted English scientists Humphrey Davy (1778-1829) and Michael Faraday (1791-1867).
Hungarian physician Ignaz Philipp Semmelweis (1818-1865) pioneered the clinical practice of asepsis.
The deadly disease cholera was conquered through the efforts of English physician John Snow (1813-1858) and several other individuals.
Louis Pasteur (1822-1895), Ferdinand Cohn (1828-1898) and Robert Koch (1843-1910) made discoveries in the fields of microbiology and bacteriology that led to the eventual development of antibiotics.
Cuban physician Carlos Finlay (1833-1915) identified the bite of a mosquito as the cause of yellow fever.
The momentous discovery of DNA was the product of the innovative thinking of a number of individuals from the 1860s over the next ninety years to the 1950s.
Other state activities
The disastrous conception and administration of old age income security and medical expense security are demonstrated in the discussions of Social Security and Medicare in the United States, in this chapter and elsewhere in this book.
Several complete chapters of this book address the superiority of private, entrepreneurial provision of services compared to the defective activities of the state in
- Common resources
- Defense of a nation and proprietary Large-scale Defense
- Money and banking
Other subjects considered in this book include proprietary fire protection, security and police services, and protection and administration of scenic wonders. No important services have been omitted.
SOLVING SOCIAL PROBLEMS FROM THE BOTTOM UP
It is a central premise of this chapter that free enterprise will provide governance services the public wants when the political state fails to do so, or when people are sufficiently dissatisfied with the quality or cost of governance services that they look to individual and cooperative initiative for those services. This phenomenon is illustrated by private security and fire protection services in parts of the state of Oregon, described hereinbelow.
People will make use of services provided by the institutions of the state when they find those services to be adequate in quality and reasonable in cost. If not, they will look eventually to individual and group initiative to fulfill their needs and wants. The discussion below provides examples rather than attempting to set forth a detailed examination of private enterprise activities that serve public needs.
America has been plagued for many years by mass shootings in public places. According to Time magazine there were 663 deaths in mass shootings from 2003 through 2019. 31
Mass shootings are almost invariably perpetrated with rapid-fire rifles. Public discussion has focused on actions that could be taken to make it against the law for civilians to own such weapons. However despite the enactment of laws in some states of the United States intended to restrict access to such weapons, according to an editorial in the New York Times of August 9, 2019, “there are currently around 15 million military-style rifles in civilian hands in the United States.”
Consequently, the focus of this essay is the means available for protection of the public in the absence of political actions that would eliminate the ability of malevolent people to obtain lethal weapons such as rapid-fire rifles.
Police action cannot prevent mass shootings. A shooter appears without warning at a public place and starts shooting. All that the police can do is to respond to reports of the shooting. That is always too late to stop fatalities.
In any one year the mass shooters are few, a handful in number out of a population of more than 300 million in the second decade of the 21st century. With the likelihood low of a shooting at any one of the hundreds of thousands or millions of public places in the U.S., many if not most of such places lack the security that would prevent the occurrence of a mass shooting.
James Alan Fox, a professor of criminology at Northeastern University stated that multiple-victim shootings are on the rise but not in schools. There is an average of about one a year in schools—in a country with more than 100,000 schools.
There is a useful model for mitigation of the problem of security in public places. That model is in the nation of Israel, which has faced this problem throughout its history and has addressed it effectively. The Israelis provide continual security at vulnerable places. Whether it is the national airline of Israel, airports wherever in the world that airline receives passengers, schools, or places where the public gathers. Security is in place to prevent an attack before it happens, rather than responding when people have been killed.
In America, effective security exists at a significant number of locations by controlling access to buildings and grounds, mobile security patrols, closed circuit television (CCTV) security monitoring and surveillance, and continual presence of well-trained security guards. Security services of that kind are provided by property owners themselves or by contract with private security companies.
Some people may doubt that private security can be more effective than the police in protecting the public. After all, the police are accountable to the public and private security is not. Private security is accountable only to the people who hire them for protection.
There are thousands of private security companies in America because they undertake to prevent harm to persons and property. The mission of police on the other hand is law enforcement after a crime has been committed.
It is noteworthy that often it is police officers who establish a private security business in order to meet a demand for security that conventional policing does not satisfy.
Effective security for schools is feasible, but achieving it would require facilities, equipment, and personnel to control and restrict access by would be intruders. The resources are available. According to data published by the U.S. Department of Education, in the second decade of the 21st century Americans are spending for public high schools at the rate of more than $12,000 per student per year.
For a high school with 625 students, the U.S. national average, annual spending is nearly eight million dollars per year for all expenses—salaries, employee benefits, purchased services, and supplies. A reasonable estimate of the cost of effective security would be perhaps $200,000 per year for such a school, including amortizing the cost of equipment plus the cost of two full-time, well-trained security officers forty hours per week for a typical 40-week school year. The total costs would amount to a little over $300 per student per year. That is about 2 ½ % of annual cost of a typical American high school.
The cost may seem high for schools operating already within budgetary constraints, but the tradeoff is clear. Take the very low risk that there will be a mass shooting at school or spend the money, as a form of insurance against that risk occurring.
The Conquest of poverty
In the 21st century, all that is necessary for the triumph of prosperity over poverty is that people be free to strive individually and cooperatively for their personal benefit.
For most of human history everybody lived in extreme poverty, plagued by devastating diseases, insecure in their supply of food, lacking clean drinking water, sanitation facilities, adequate shelter, and schooling.
In the early 21st century only one in seven people worldwide lived in extreme poverty, and the number in extreme poverty was falling rapidly. 32
The explanation for this development is the scientific, industrial, and liberal revolutions that began in the late 17th century and are still continuing. Advances in science and technology provided the basis for the industrial revolution. It was the industrial revolution that brought about rapid advances in productivity.
The increase in productivity resulted in rapid increases in material wellbeing in terms of food, clothing, shelter, schooling, health care, working conditions, leisure time, and much more. Increases in knowledge brought about advances in biological science and medicine that led to elimination of diseases that formerly were the scourge of humanity.
It was the initiative, enterprise, and hard work of people—individually and cooperatively—that accomplished this remarkable reduction in poverty. The early 21st century is the most prosperous time in human history due in large part to the advance of personal freedom. In the nations of the world there is a clear and direct relation between prosperity and economic and political freedom. The nations with the greatest freedom have the greatest prosperity, and vice versa.
In nations where human freedom is restricted by political action, the people suffer deprivation, for example communist North Korea in contrast to democratic South Korea since the 1950s, and communist East Germany in contrast to democratic West Germany from 1950 to 1991. In the early 21st century political and economic repression in Venezuela have caused virtually universal destitution in what had once been one of the most prosperous nations in South America.
Voluntary control of human population growth
The human population of Earth grew slowly for most of the time since emergence of the species homo sapiens some 140,000 or so years ago. Global population was one billion in 1800 when Thomas Malthus published his famous book predicting that growth of the human population would outstrip the growth in the supply of food. Malthus’ prediction was not borne out by the experience of the following one hundred years; the human population had grown to 1.6 billion in the year 1900, yet there was no widespread starvation.
In the 20th century, despite devastating wars and famines that killed tens of millions, the human population of Earth grew more rapidly—to over three billion by 1965. In 1969, demographer Paul Ehrlich published a book entitled The Population Bomb predicting imminent worldwide mass starvation because population had increased faster than the supply of food. This did not happen.
As population continued to grow after the 1960s, something unexpected started to happen. All over the world people started producing fewer children. According to population expert Hans Rosling (1948-2017), “. . . [I]n 1948, women on average gave birth to five children each. Over the [following] 50 years it dropped all the way to the amazingly low world average of just below 2.5. . .
“As billions of people left extreme poverty, most of them decided to have fewer children. They no longer needed large families to labor on the small family farm. And they no longer needed extra children as insurance against child mortality. Women and men got educated and started to want better-educated and better-fed children and having fewer of them was the obvious solution. . . [T]hat goal was easier to realize [due to] . . . modern contraceptives . . .”
“The dramatic drop in babies per woman is expected to continue, as long as more people keep escaping from poverty, and more women get educated, and as access to contraceptives and sexual education keeps increasing.” 33
The drop in birth rates has been occurring not only in relatively prosperous nations, but also in relatively poor nations such as Bangladesh in Southeast Asia and Mozambique in East Africa, and in nations both prosperous and poor on all six inhabited continents.
Concomitantly productivity in agriculture has increased due to science and technology. American agriculture became so productive due to technology and mechanization that the relatively few American farmers made food one of America’s leading exports.
American agronomist Normal Borlaug (1914-2009) is credited with saving one billion people from death by starvation in Latin America and Asia. He accomplished this by innovating hybrid wheat that produced more grain per area of land and was also highly resistant to diseases that destroyed wheat. For this Norman Borlaug won the Nobel Peace Prize in 1970.
Poor people in poor countries are solving a pervasive problem: unsatisfactory public schools where their children do not learn. The children do not learn because the teachers do not teach, according to parents. An English educator and scholar, James Tooley, discovered that many public school teachers in India and Africa don’t teach because they are not paid regularly by the state that employs them.
In addition, certified public school teachers in India and Africa often consider it undesirable to be assigned to teaching in urban slums or poor rural areas. Due to low motivation, there is widespread absenteeism among public school teachers and among those that do show up there is often indifference to teaching the students. 34
Consequently there has been a proliferation of parent-funded schools in urban slums and in rural areas of India and Africa. 35 The teachers are residents of the same places in which parents and students reside. Parents pay as little as one or two dollars per month per child, in constant 2011 US dollars and a bit more if they have several children in the school. If the parents cannot pay at all, the schools often teach their children anyway. The schools are often located within the homes of the teachers or in facilities far more modest than those of state schools. The results are impressive. The students’ learning achievements test better than the learning of children from state public schools.
In the United States, while there is superior teaching in some public schools, a significant number of parents and children are dissatisfied with the state funded public schools. In the poorer neighborhoods of cities, public school outcomes for students are often deplorable. There are dangers in many public schools, from fighting, bullying, gang activity and students who bring guns and knives to school. For these reasons parents in the millions pay for private schools or provide schooling at home or in charter schools. 36 Charter schools are tax-supported public schools administered by entrepreneurial founders and teachers independent of public school administration.
A complete overview of public schooling in the United States must acknowledge the excellent academic results at schools in prosperous communities such as New Trier High School in Winnetka, Illinois and Beverly Hills High School in Beverly Hills, California and at schools in numerous other communities. Throughout the U.S. one finds high quality academic performance at public schools that specialize in Science, Technology, and Mathematics, for example Stuyvesant High School in New York City, Academic Magnet High School in North Charleston, South Carolina, and Albuquerque Institute of Math and Science in Albuquerque, New Mexico, to mention just a few among many.
There are some excellent teachers in U.S. public schools, as illustrated by the stellar examples described below.
Bolivian-born Jaime Escalante (1930-2010) came to America as a young adult. In the early 1970s he took a position teaching mathematics at Garfield High School in East Los Angeles, where most of the student body was Hispanic, 70% were from poor families and many of their parents were recent immigrants who spoke little or no English and had never finished high school.
Students came to Escalante’s mathematics classes with only arithmetic schooling. He led them through algebra, geometry, trigonometry, and mathematical analysis and finally calculus. Escalante had an unlikely success in a daunting undertaking—teaching Advance Placement (AP) calculus to his seemingly unqualified students.
From 1974 to 1987 hundreds of Escalante’s students took high school Advanced Placement (AP) calculus with Escalante and a few of his colleagues. Many of them passed their AP calculus examination. Success in an AP examination gives high school students the opportunity to receive advanced placement or credit in college.
Due in large part to Escalante, at one point more Garfield High School graduates were entering the University of Southern California than students from all the other high schools in the working-class East Los Angeles region combined. Some of Escalante’s students made it through the best colleges in America and went on to careers in teaching, science, engineering and other fields. One year in the 1990s, fourteen of Escalante’s students were attending Harvard, Yale, or MIT at the same time.
Escalante said he had no teaching secrets; rather, he said “the key to my success with youngsters is a very simple and time-honored tradition: hard work for teacher and student alike.” 37
Freida Riley (1937-1969) was a science and mathematics teacher in West Virginia. After pursuing higher education at Ohio State University and West Virginia University, in 1958 she took a job as a teacher at Big Creek High School in the Appalachian mountains coal mining region of West Virginia. Big Creek was the high school she herself had attended. There she encouraged and fostered the ambition of her student Homer Hickam, Jr. and several of his friends to build rockets like the one that in 1957 had launched Sputnik, the Russian unmanned satellite.
In 1958, Riley herself, at age 21, was scarcely older than her teenage students. Hickam and his friends were coal miners’ sons, seemingly destined to a working life as coal miners. Miss Riley encouraged them to aspire to a college education and the opportunities that would lead to. She also presented Homer with a treatise entitled Principles of Guided Missile Design that proved most helpful to the efforts of Homer and his friends to improve their rockets. Freida Riley was one among a number of several teachers in the local schools who imparted teaching at a high quality level that one would expect only in schools located in a larger and far more prosperous community.
Hickam and his friends became famous locally as “the rocket boys.” They were successful with their rockets, eventually as high school seniors launching one that reached an altitude of 31,000 feet. All the rocket boys went on to college and careers as engineers or in business. 38
Joe Louis Clark (born in 1938) was a public school teacher who from 1982 through 1989 was the Principal at Eastside High School (Eastside) in Paterson, New Jersey. When Clark became Principal, Eastside had become a virtual war zone. Joe Clark became famous by restoring order through strict discipline, including expulsion of students who carried knives and guns at school, dealt in drugs, assaulted other students and teachers, and vandalized the school building. 39
Coping with high medical expenses
About 85% of Americans have medical insurance provided by their employer or through the federal Medicare program. Most of those Americans experience only moderate personal expense in paying for medical care. Low income Americans may receive medical care without cost to themselves through the federal and state Medicaid programs. However, for everyone else medical care is very costly. For example, for a person with the median American annual income of $40,000 40 the costs for medical insurance are likely to be 25% of their income according to analysis of all factors by author David Goldhill. 41
Those costs include an individual’s own insurance expense, the Medicare tax on their wages or salaries, and their portion of personal income tax that goes to pay for Medicaid and other federal and state medical payment programs. For those insured with the least costly, high deductible insurance, most ordinary medical expenses must be paid out of pocket; the insurance does not apply due to the deductible provisions of the insurance agreement.
Even when Americans have private medical insurance, they may be charged directly for large sums that represent the deductible and co-payment amounts that are their responsibility, not the responsibility of the insurer. Furthermore, medical insurance does not cover much of the charges for services in a hospital by physicians and other medical service suppliers who are not obligated to accept payment by the insurer because they are considered “out of network,” that is not party to an agreement to accept what insurance will pay.
Charges by hospitals and out of network physicians to people with personal medical insurance, after their insurance has paid the hospital, can come to amounts that an individual cannot afford to pay. Some, but not all, hospitals will pursue aggressive collection measures, to the point that people will drain their savings account to pay, or even declare bankruptcy.
To cope with the high cost of American medical care and the problems of dealing with insurers, some individuals, employers and physicians have begun to undertake individual and cooperative initiatives to improve the quality and reduce the cost of medical care, as summarized briefly below.
Dissatisfied physicians and cash payment for medical services
Many physicians are dissatisfied with the administrative and financial burdens imposed by financial intermediaries. These burdens include Medicare’s requirements to establish and maintain electronic treatment records for patients, the requirements of Medicare and private insurers to document and submit requests for payment (called “reimbursement”) for professional services, and delays in payment by Medicare and private insurers.
Primary care physicians (internal medicine, family practice specialists, and rheumatologists) spend half their time keeping electronic treatment records. This record keeping takes time that could otherwise be used to take care of their patients. Furthermore, reimbursement, i.e. payment, to physicians is made for diagnosis and medical procedures, not for interviewing and counseling patients and coordinating their care with specialists. Thus, primary care physicians are not paid for the most important work they do, the professional work that is the reason for their training and medical practice—interviewing and counseling patients.
Consequently, cash payment for medical services is a growing phenomenon among primary care physicians and also among surgeons and other physicians who no longer accept payment by Medicare.
Concierge practice is a growing form of medical practice by internal medicine physicians. In concierge practice the patient pays the doctor cash in a fixed amount monthly or annually, and the doctor provides medical service with no further charges. Generally, the patient pays for laboratory work, medical imaging, and similar services that internists recommend.
High deductible medical insurance
Individuals can choose a medical insurance contract that has low cost because the insured assumes the cost of medical expense below a stated amount, such as below $2,500 per year, or below $2,500 per medical condition during a benefit period, such as three years. For healthy younger people and even for healthy older people, the likelihood is low of an expensive sickness or injury in any one year. With high deductible insurance individuals can choose to forego paying for insurance for sickness or injuries that are unlikely to befall them.
People with high deductible insurance will pay cash for routine medical care and non-critical, non-emergency conditions. Such people comprise a market for cash pay medical services of various kinds.
A lower total cost of medical care for most people is likely to result from the combination of relatively low cost medical insurance that covers only catastrophic sickness and injuries, plus cash payments for all other medical care.
Large company initiatives
Three large American companies announced in 2018 that they were partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. The three companies—Amazon, Berkshire Hathaway, and J. P. Morgan Chase—in aggregate employed nearly 1.3 million people as of 2018. The companies stated that they would pursue this objective through an independent company with an initial focus on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.
Large retail companies such as Wal-Mart, Costco, CVS, Target, and Walgreen are engaged in serving the market for medical services and products by operating pharmacies and walk-in clinics that provide a range of medical services. As of 2019 these four companies operated over 80,000 retail stores in the United States. At a number of those locations the company offers pharmacy service, and walk-in clinics. There are a number of smaller retail companies that offer similar medical services.
In September 2019, Wal-Mart opened its first Health Center, a medical mall where customers can get primary care, vision tests, dental exams and root canals; lab work, X-rays and EKGs; counseling; even fitness and diet classes. The prices are affordable without insurance ($30 for an annual physical; $45 for a counseling session). 42
Walk-in clinics and Urgent Care facilities
Walk-in clinics and Urgent Care facilities accept patients on a walk-in basis with no appointment. As of late in the second decade of the 21st century there were more than 11,000 walk-in clinics in the U.S., some operated by large retail stores. Urgent Care facilities are walk-in clinics often owned and operated by physicians. For people willing to pay a moderate charge, walk-in clinics provide far quicker access to medical care than the hospital emergency departments that many uninsured people use for relatively routine care.
Walk-in clinics and Urgent Care facilities serve people with non-life-threatening problems such as colds, fevers, and flu; sore throats, earaches and coughs; cuts, scrapes, bruises and burns; bee stings, animal bites and rashes; and other non-emergency illnesses and injuries.
Walk-in clinics and Urgent Care accept insurance or cash payments. Their charges are generally moderate and affordable by most people.
Pharmacy, optical, and audiology service
Wal-Mart has a retail pharmacy business within some of its 4,500 + U.S. stores. Wal-Mart will sell a 30-day supply of some generic prescription medicines for only $4 and a 90-day supply for $10. Costco has a large discount pharmacy business. The Costco retail pharmacies offer vision care service by optometrists and opticians and discounted eyeglasses and contact lenses, audiology services and discounted hearing aids. Target offers CVS pharmacy services in selected stores. Walgreen has a discount prescription pharmacy service.
Each year hundreds of thousands of Americans obtain lower cost medical care outside the United States, with many going to Caribbean and Central American countries. The way medical tourism works is illustrated by the example of a procedure arranged by North American Specialty Hospital Company (NASH) of Denver, Colorado.
NASH began serving the medical tourism market in 2017. NASH arranges connections between American orthopedic surgeons and American employers and their employees to travel to Mexico for surgery.
A report in the New York Times of August 9, 2019 described a case arranged by NASH for an American woman who needed a full knee replacement. Her employer paid her $5,000 to have the surgery performed in Mexico, at the Galenia hospital in Cancun. The surgeon was a Mayo Clinic trained American orthopedist who flew in from Wisconsin. The patient flew in from Mississippi. The surgeon was paid $2,700, three times the Medicare reimbursement for the procedure.
In the United States, knee replacement surgery costs an average of $30,000 and sometimes much more, but at Galenia Hospital it is only $12,000. The standard charge for a night in the hospital is $300 at Galenia compared with $2,000 on average at United States hospitals.
IndusHealth, an independent medical travel plan administrator selected by NASH, arranged for the patient to get a physical exam, X-rays and heart tests near her home to make sure she was a good candidate for surgery. The exam reports were sent to Galenia hospital.
All expenses were paid by the employer, at half the cost for the same procedure in the U.S. The patient stayed in a Sheraton Hotel adjacent to Galenia hospital where the surgery was performed. After the surgery her rehabilitation was supervised by an American-trained Mexican doctor. The patient stayed at her hotel ten additional days after surgery while having physical therapy twice a day at the hospital.
Similar cash pay services are available within the United States. For example, two anesthesiologists established a cash pay only surgery facility, the Surgery Center of Oklahoma (SCO) that does not accept insurance of any kind. SCO publishes on the internet a list of surgical procedures offered and the all-inclusive price for each.
The prices are significantly lower than elsewhere. The price includes everything: airfare to SCO’s only facility, in Oklahoma City; medications; post-surgery physical therapy; and lodging in a good quality hotel before surgery and during post-surgery physical therapy. If unforeseen complications arise during or after the procedure, SCO covers those costs.
Discount medical services offered on the internet
Sesame Care is a service designed for people who don’t intend to use medical insurance, either because they don’t have it or because they have a high deductible. Sesame Care’s business model is to help people buy medical care the same way they might buy airline flights and hotel rooms: online, with upfront pricing.
Participating doctors, dentists and other medical service providers post their upcoming open appointment times to the site, offering discounted rates to anyone willing to pay up front to lock in an appointment. In the United States in early 2019, without insurance the average cost of an MRI scan was $1,500. On the Sesame Care website an initial offering in Kansas City, Missouri advertised a one hour MRI scan for $79.
As of 2019 at least two other companies offered internet based shopping for medical care similar to Sesame Care.
Avoiding college loan debt
In the United States college loan debt is the second largest consumer debt, after mortgage debt, but higher than credit card debt. As of the end of the second decade of the 21st century, present and former college students owed more than $1.5 trillion in student loans, an average of $34,000 per person. Over two million of the borrowers defaulted on their loans in just the years 2012-2018. In 2019 the number of defaulted student loans was growing by 1,400 a day. To minimize defaults on student loans, Congress made student loan debt ordinarily non-dischargeable in bankruptcy.
It is not necessary to incur heavy debts or any debt at all to finance attendance at college or university. Such debts are destructive of the financial security of students and their parents alike. Some parents drain their savings to pay for college tuitions and expenses of their college age children. By the time their children finish college, the parents will be middle-aged or even approaching old age, yet may have no savings for retirement.
Furthermore, it is unrealistic for parents in 21st century America to think that in their old age their children will provide them with the financial security they sacrificed to send the children to college.
Students who finish college with a large debt burden will be handicapped in building their own personal financial security. Before they can make significant savings for their future, they must pay off college loans, and that may take many years. Those are years in which young people could make a good start of saving for their future but for the burden of the debt.
The following true stories demonstrate the way three young people paid for college without going into debt. These are stories of people known personally to the author of this website and book. Only the names of the individuals have been changed for reasons of privacy.
John was born and raised in California and worked his way through college there. John was born near the end of the baby boom generation of 1946-1964. He attended community college and university in California in the 1980s when tuition costs were much lower than they were to become in later decades.
John’s parents did not help him financially. John worked during high school and while attending a local community college. By the time he finished community college work he had saved $20,000. He transferred to one of the nine branches of the University California system where he earned a degree in computer science. He paid all his college expenses from his own work and savings, and graduated from the University of California debt free.
Amanda and Katherine are friends who graduated from high school together in California in 2009, then went separate ways to college. Amanda’s choice of college was in a neighboring state. She moved there after completing high school, found work, and enrolled in the local community college where she paid annual tuition and fees amounting to a little over $1,000 per academic year.
After completing studies at the community college, Amanda transferred to the state university where she paid $3,000 annual tuition while earning a B.S. degree in a science-related major field of studies. Because of working part time it took Amanda seven years to earn her college degree.
Amanda’s family helped her with college tuition and other expenses, but Amanda herself earned much of the money necessary to pay for her college experience. She graduated college free of debt.
Amanda’s friend Katherine stayed at home in California to do her college work, first at a local community college where tuition averaged $1,200 for an academic year, then at the local branch of the California State University where tuition costs averaged $7,000 for an academic year. Katherine’s parents were unable to help her financially with her college expenses. She worked all the way through her college years. Katherine kept her housing costs low by sharing an apartment with a friend. Due to working while attending college, it took Katherine ten years to complete her studies and earn a degree in business, but she completed her studies free of debt.
These true stories are commendable, but not unique. Near the end of the second decade of the 21st century there were many college students who have similar stories. While tuition costs have increased continually over the decades since the 1970s, students determined to graduate from college debt free have been able to do so in a manner similar to John, Amanda, and Katherine.
Some readers may think that the best higher education is available only at the most prestigious–and expensive–colleges and universities. That is not true. Education is an individual’s pursuit of knowledge–not a commodity that is priced according to its presumed value. Many people who have achieved distinction in their chosen profession attended one of America’s many state universities.
- James M. Buchanan, Nobel Prize laureate in economics earned his undergraduate degree at Middle Tennessee State University in his home town of Murfreesboro, Tennessee.
- Famous movie actor Tom Hanks studied theater at Chabot College in Hayward, California and then transferred to Sacramento State University in Sacramento, California. He taught himself acting by attending productions of plays by famous playwrights such as Berthold Brecht, Henrik Ibsen, and Tennessee Williams.
- Linus Pauling, Nobel Prize laureate in chemistry earned his undergraduate degree at Oregon State University in Corvallis, Oregon, not far from his birthplace in Portland, Oregon.
The pursuit of excellence in education may occur outside of schools and colleges.
- Wilbur and Orville Wright became the inventors of the first powered airplane in 1903. They did not study aeronautical engineering in college as it was the Wright Brothers themselves who invented aeronautical engineering by reading, observation, and experiment.
- In the 1950s, in a small coal mining town in the Appalachian mountains of West Virginia, fifteen-year-old Homer Hickam, Jr. taught himself rocket science and the necessary higher mathematics by reading and experiment. With these skills, Homer and three friends built and launched a rocket that attained an elevation of 31,000 feet (9,449 meters).
- Tony Nicely went straight from high school at age eighteen to a job as a clerk at the insurance company GEICO. Twenty-six years later he became CEO of the firm’s largest insurance subsidiary, Government Employees Insurance Company, in the year he graduated from college at age 44.
Unaffordable Housing Costs
Medical doctors who have completed internship often pursue further medical education as a resident physician in a hospital. In 2016 the author spoke to a young physician who had decided against accepting a medical residency at a hospital in San Francisco, although there were positions open. However, $60,000 would be his annual salary during a three-year residency. Rent for a one bedroom apartment would take 75% of his income after taxes. Sharing equally the rent of a two bedroom apartment would take half of his income. He had decided to look elsewhere for a medical residency.
As this is being written in September 2019 many people in a variety of occupations do not earn enough income to afford to rent or buy a residence in the city of San Francisco. School teachers, police officers, construction workers, and many more occupations earn approximately what medical resident physicians earn. Like the new M.D., they cannot afford to live in San Francisco. However, San Francisco still needs all those occupations.
The situation is much the same in many other cities in the United States, such as Los Angeles, Seattle, New York, Boston, Washington, DC, the more desirable suburbs of Chicago, etc. Real estate prices, including rents, vary widely with location. The more desirable a location, the higher the prices.
The solution for unaffordable housing costs is not to be found in laws of the state or in federal subsidies for lower cost housing or in low-cost housing built by cities and subsidized by the United States of America. Those initiatives have failed to produce housing that is both affordable and free of squalid living conditions and dangerous criminal activity.
According to Portland city councilman and housing commissioner Dan Saltzman, “. . . the public-housing blocks that [some] cities built during the 1960s and 1970s . . . turned into crime-ridden slums almost everywhere they were tried.” 43
For people who are priced out of an expensive real estate market where they live, relocation to a less expensive housing market is a solution, especially for the growing number of people who work from home. For many people, relocation may be unattractive in some respects, such as employment opportunities, but it is a solution within the power of individuals to achieve. There is an increasing number of Americans who are moving away from big and expensive cities to smaller, less costly cities, not just to find lower housing costs, but also to enjoy a higher quality of life.
As of the end of the second decade of the 21st century, in the more expensive regions of the United States, costs to buy or rent a home or an apartment, are four to twenty times higher than in less expensive regions. For example, housing costs in Los Angeles are five times higher than in Tucson, Arizona. Where the cost to buy a residence is high, apartment rental costs are high, and vice versa.
The reason for the extreme differences in housing costs across the United States is the relative ease or difficulty of building new housing. In the most expensive areas of the U.S. there are restrictions on building that are not present elsewhere, such as:
- limitations and requirements imposed by local zoning laws
- unrealistically high construction standards for new housing for low-income renters
- opposition of existing residents to new construction of affordable homes and rental properties
- rent controls that make it a losing proposition for entrepreneurs to build and maintain multi-tenant residential properties.
The United States has a long history of construction of affordable housing including the following:
- Between 1865 and 1937 entrepreneurs built many hundreds of thousands of low-cost, affordable multi-family homes and apartment houses in Chicago, Brooklyn, Boston, Oakland, California, and elsewhere 44
- After World War II, affordably priced new homes and apartments were built in large numbers by entrepreneurial builders such as William Lyon and Nathan Shapell in California, Del Webb in Arizona, and Levitt and Sons in the northeastern U.S.
- Between 1976 and 2018 Habitat for Humanity, a not for profit enterprise, built 100,000 low cost homes in the United States and eventually expanded its construction internationally.
In all these examples individual homes were built to sell at prices equivalent to approximately $90,000 in constant 2019 U.S. dollars. 45 $90,000 is the average cost of a modest-sized home built contemporaneously by Habitat for Humanity. $90,000 is an affordable cost of a home for an American earning the $40,000 annual median U.S. income.
In the late 20th and early 21st century, Americans working where home prices are unaffordable sometimes buy a home in a less costly community far from their work and commute daily to work. However, that is a drawback in terms of quality of life due to the time it takes to commute—sometimes as much as one hour or more each way—and in the hazard of long-distance commuting by private automobile, and the monetary expense of commuting.
To move from a high-cost housing area to a low-cost housing area involves giving up the employment one has and searching for work in the new location—an often daunting prospect. However, this is the tradeoff that exists in finding affordable housing. It is being done by many Americans, who because of housing costs leave expensive places such as Los Angeles and San Francisco to relocate to less expensive places.
All across America in the early 21st century there are many places with median home prices between $85,000 and $160,000, for example Tucson, Arizona; Fort Smith, Arkansas; Sioux City, Iowa; Kalamazoo, Michigan; Hattiesburg, Mississippi; Omaha, Nebraska; Plattsburgh, New York; Memphis, Tennessee; El Paso, Texas; and Huntington, West Virginia. In each of these cities there is an active cultural life associated with one or more nearby four year colleges or universities.
Moving one’s residence to a more affordable location has become so common in the early 21st century that in some lower-cost places housing costs are going higher due to influx of people from higher cost areas in search of more affordably priced housing.
Urban traffic congestion
Traffic congestion is the bane of city dwellers all around the world. In the United States, automobile traffic in Los Angeles is among the most congested, as evidenced in the often heard comment, “I would love to live in L.A. but couldn’t stand the traffic.”
The city of Los Angeles is the largest of more than one hundred incorporated cities within the sprawling megalopolis consisting of Los Angeles County and neighboring Orange County. Immediately after World War II housing prices in that region had been affordable for people with median incomes. However, as more people moved to the greater Los Angeles Area, population grew 200% over the seven decades after the end of World War II.
Restrictions began to be imposed on new residential construction by local zoning laws, unrealistically high standards for new residential construction, and rent controls that make it a losing proposition to build and maintain multi-tenant residential properties. Rising demand for housing coupled with tightening restrictions on supply pushed housing prices higher and higher. Consequently, to find an affordable home a considerable number of people moved to suburbs and even exurbs thirty to sixty miles or more distant from their workplace.
To ameliorate traffic congestion, state and local political entities undertook construction of freeways—limited access highways that traverse a region. As of the early 21st century, Los Angeles and Orange County had nine freeways comprising a total of more than 500 miles of road.
The freeways were intended to allow continuous high speed automobile traffic at a speed of 65 miles (105 kilometers) per hour. However, building more freeway capacity has been counter-productive. British transportation analyst Martin Mogridge observed that all over the world building more automobile roads makes traffic worse, not better, a proposition as true in Beijing, China as it is in Los Angeles or Seattle. 46
When a new freeway opened in Los Angeles, traffic on it moved rapidly at first. Consequently, people in search of affordable housing moved to lower-cost communities far from their work because they could traverse 20 or 30 miles in half an hour or less, using the freeway.
As the number of freeway drivers increased faster than new freeways were built, traffic became slower and slower until a 20 or 30 mile commute usually would take one to 1 ½ hours each way. In the late 20th and early 21st centuries in the Los Angeles region it was not uncommon for people to live 60 miles or more distant from their workplace, relying on their automobiles and the freeways to justify their decision to commute that far on a daily basis.
However, an eight hour workday could became a ten to twelve hour workday when commuting time to work is considered. Furthermore, long distance driving to work involves a large financial expense in terms of operating costs for an automobile, and a health cost in terms of fatigue and the increased risk of a serious accident causing bodily injury.
Due to the failure of freeways to reduce urban traffic congestion, starting in the 1970s cities across the U. S. decided to build light rail to take advantage of lavish federal subsidies. Cities took the federal money in the expectation that light rail would be a cost effective mitigating factor for congested urban traffic.
About three-fourths of working Americans use their private automobile to go to work. American commuters generally do not choose light rail for their commuting needs. That is understandable. Light rail is not a practical alternative to the private automobile for the vast majority of trips in a contemporary American metropolitan area. 47
Light rail is extremely expensive. It costs 14 to 35 times as much to move people over rail compared to moving people by automobile. Motorbuses provide faster, better service at two percent of the capital cost and with lower operating costs than light rail.
Light rail trains actually increase congestion in city centers. The trains move quickly from suburbs until they reach a city center. There they must move on the same streets as motor vehicle traffic, slowing down both.
Starting in 1980, the public transit authority for the metropolitan region of Portland, Oregon, undertook to build a light rail system. In 1980, before Portland began building light rail, 9.8 percent of the region’s commuters took public transit to work. In 2008 it was 7.6 percent. Between 1980 and 2008, Portland spent more than $2.3 billion building light rail. That was half the metropolitan region’s transportation capital funds. Yet light rail carried less than 1 percent of Portland-area travelers as of 2008.
Usually construction of light rail has the unintended and adverse consequence of causing local transit agencies to reduce bus service. That is because of the high cost of operating light rail. Consequently, a city loses more bus riders than it gains in rail riders.
Taxpayers lose because their money is wasted on rail when buses could move more people for less cost. Transit riders lose when transit agencies reduce bus service to pay for light rail. Commuters lose when money is spent on rail which does nothing to relieve congestion. 48
Light rail advocates point out that urban and interurban rail transportation is in use in Europe and Asia where it is better patronized by the public than in the U.S. However, what works acceptably elsewhere might not be acceptable in the U. S. For example, in the Japanese high-speed rail system the trains move long distances at high speed, but passengers are packed into the trains like sardines in a tin can.
Individual solutions to urban traffic congestion
As described above, in the United States, urban traffic congestion is a problem that has been exacerbated rather than ameliorated by the top down solution of state financing construction of more roads and light railway transportation.
Individuals have two possible solutions to traffic congestion that has become unacceptable personally:
- Live close to work, which may be impractical because of unaffordable housing costs or undesirable residential neighborhoods near work.
- Move away from congested cities and find work where housing costs are lower and there is little traffic congestion.
The second solution may be desirable and feasible. Large cities occupy only a small part of the land area of America. There are thousands of smaller communities all across the length and breadth of the land of America. Employment and self-employment are available in smaller communities. Remuneration for work may be less, but the cost of living is less in areas with low population density.
Roads and free enterprise
Financing road construction and operation without taxation
American motorists and trucking companies pay with taxation for use of roads and highways. Excise taxes and sales taxes are added to the retail price charged for motor vehicle fuel. These taxes are collected by retailers and transmitted to the state every hour of every day.
The excise taxes are the revenues collected by the United States and by state and local jurisdictions for purposes of highway maintenance and construction. That is the tax that is seen by the motoring public each time one buys gasoline.
There is much more tax for roads that the public does not see but pays nevertheless. Taxes on producers of petroleum include local property taxes, income tax, and payroll taxes. These taxes are paid by the public indirectly as part of the price of petroleum products. 49
The primary business of the petroleum industry is producing fuel for motor vehicles. Without that fuel and without that industry the roads would be useless. Therefore, taxes on the producers of petroleum are taxes on the users of the roads.
Motorists in California pay directly and indirectly tens of billions of dollars in taxes for the state’s roads and the fuel to use them. For all of the United States such taxes amount to hundreds of billions of dollars each year.
The total of all excise tax, sales tax and taxes on the production and distribution of gasoline amounts to 50% or more of the retail price of gasoline in the United States. Thus, if a motorist pays $4.00 for a gallon of gasoline, about $2 of that amount goes to pay taxes. In terms of cost per mile this amounts to about $0.10 for each mile driven. In California, where this essay is being written, the total of all taxes on gasoline amounts to 55% of the price motorists pay at retail gasoline stations.
With the amounts being consumed by excise and sales tax on retail sales of gasoline together with taxes on producers of petroleum, a large, proprietary road industry could operate efficiently and profitably, provide better road service than the public receives at present—and provide it at a lower price.
Prices of road service would be lower in free enterprise because in the absence of state involvement in economic life, competitive, profit-seeking entrepreneurial activities drive down prices. Conversely, state actions cause higher prices even when that is the opposite of what was intended. For many, if not most, readers that proposition is counter-intuitive. However, it is demonstrably true.
For corroboration of this counterintuitive proposition, consider the costs of medical care in the United States. Since the state involved itself in financing medical services in the 1960s the costs of medical care have escalated from 6% of Gross Domestic Product to 18% in the second decade of the 21st century. This development is discussed in detail previously in this chapter.
Roads would not be a monopoly service because there is always more than one possible route for traveling to a destination. Roads would compete with each other for business. Competition is the most effective means of providing goods and services at costs that are no higher than necessary.
At present the state has no competition in road service; motorists have a choice of routes but not a choice in road service provider. Even toll roads are usually state operated. With competition, prices for a widely used service ordinarily fall over time because the low cost service providers attract more business. That would occur with road service as it has with air transport service following deregulation of the commercial air transport industry in the U.S., a development discussed previously in this chapter.
Payment systems for proprietary roads
The phrase “toll road” means a road where users pay for the use of the road as they use it. Paying for roads according to use is not new. In the 19th century, before automobiles were introduced, there were many toll roads in the U.S. As of 2006 toll roads operated in 35 of the 50 states of the United States. 50 There are also many toll bridges in the U.S.
Electronic tolling eliminates stopping to pay at a toll booth. The road service company provides an electronic toll billing system using radio frequency identification technology. Regular customers are provided a transponder to mount on their vehicles to communicate each use to the road company. At present in such systems, occasional users are billed to their vehicles registration address shown on the state’s vehicle licensing records. In the absence of states and state vehicle registration, insurance company registration could be used for this purpose.
Motorists could access roads of a variety of road service companies without having to open a payment account with each. This would be done with technology like that in use for telephone service where a subscriber can call a telephone number that is not part of his phone company’s service and be charged for the call by his own telephone service company due to arrangements between the various telephone companies.
Safety and security on roads and highways
In 2017 in the U. S. there were 2.7 million traffic-related injuries and 37,000 fatalities, a number that was about the average for the preceding three decades. 51
A proprietary road service company could reduce highway injuries and fatalities significantly by a number or practices and technologies.
Alcohol impaired driving accounts for nearly one-third of all traffic-related deaths in the United States. 52 A road company could limit highway access to cars equipped with an ignition interlock device that prevents the engine from starting if the driver has alcohol in his blood. These devices have been in use in the U.S. since the 1980s.
A road company could require every driver to have adequate liability insurance. In the early 21st century automobile liability insurance is mandatory for drivers. Nevertheless, there is a significant amount of uninsured driving by unlicensed drivers.
Automobile insurers would be involved in highway safety by making periodic safety inspections for all vehicles using the road service. That would be in the interests of everybody—motorists, road companies and insurers.
Most automobile accidents are caused by driver error. Therefore, eventually automobile roads may be built to operate like escalators and airport passenger conveyance systems, in which people step onto a moving conveyor belt. Motorists would drive their vehicle onto an automobile conveyor belt which carries vehicles and their passengers.
Continual safe flow of traffic
A road company could provide continual security and safety patrolling. Unlike state highway patrol officers whose primary function is law enforcement, the primary function of a proprietary road’s safety and security patrol would be to facilitate the safe flow of traffic. The road company would authorize, and users would consent in advance, to patrol officers having the right to escort drivers off the road if their driving appeared to be unsafe.
A proprietary road company could limit the number of vehicles on the road at any one time to the number that could travel swiftly and safely. Congestion pricing could be used—that is charging a higher price for use during times when congestion may start to occur. This is what happens in the air transport industry. It is more costly to buy an air trip from the U.S. to Europe during summer than winter.
In the early 21st century in the United States, freeways in some places have a system of stop lights at entrances to notify motorists when they may enter.
Limiting access could also be done by physical or electronic barriers at road entrances. Electronic and computer technology could provide a barrier as effective as a physical barrier.
Crime deterrence and prevention through proprietary roads
At present anyone with access to an automobile can drive it to most places in the United States. This otherwise useful and desirable convenience enables thieves, robbers, and murderers to travel freely by automobile to a place where they intend to commit a crime.
People would be barred from road usage if they had a known record for attacking persons and property, including a record of refusal to make restitution that had been determined to be appropriate by a proprietary dispute resolution service.
A proprietary road company could maintain continual surveillance of the entire road system including images of all vehicles entering and leaving the road. That would have much the same crime deterrent effect as closed circuit television in a bank, retail store, or other business or facility used by the public.
In case of a reported crime, the roads leading to the crime scene would have a picture and time for every vehicle entering and leaving the road immediately before perpetration of the crime. Those records would facilitate identification of the operator of a vehicle used in the course of a criminal act.
Protecting the environment
The problems of environmental degradation, overexploitation of natural resources, and depletion of wildlife all derive from their existence as common property resources. Wherever there is extension of private property rights in these areas, there are superior results in terms of environmental protection.
What promotes environmental integrity and cleanliness is not politics, not legislative action, not regulatory agencies. Rather, it is private property, cooperative use of common resources such as air and water, and innovators and the technologies they create.
For example, the catalytic converter, developed by French mechanical engineer Eugène Houdry in the early 1950s, has caused a huge reduction in air pollution from motor vehicle exhaust.
Use of catalytic converters was required by the law. Because air pollution injures everybody, it is probable that there would have been a market demand for catalytic converters in a free market society.
If people use natural resources in common, protective solutions imposed from above are often completely ineffective because they are designed by individuals lacking adequate knowledge of the complexities surrounding a particular resource.
People take better care of things they own than things they don’t own. A few examples must suffice for here.
Nobel Laureate Elinor Ostrom found that people in small, local communities manage shared natural resources in a way that is both economically and ecologically beneficial. The users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest in the management of common resources.
People are better stewards of the environment than is widely believed. For example, an enormous amount of wood has been taken from American forests by logging operations that cut down trees. However, according to an exhibit at the World Forestry Center in Portland, Oregon, the forests of America were just as extensive in 2019 as they were in 1900.
According to The Economist magazine in 2019, across Europe, the forests of almost every nation have been experiencing significant growth since 1990.
Protecting scenic wonders
In the United States there are national parks, national forests, and national monuments established to protect the lands within these areas. However, there are a great many scenic wonders that have been preserved and protected without action by the state.
The national parks of the United States were initiated with Yellowstone in 1872. Since then the number of U.S. national parks has increased to more than 400. However, there is much more American scenic splendor not within the national parks.
In 1962 the Readers Digest magazine published a large, illustrated book entitled Scenic Wonders of America: An Illustrated Guide to Our Natural Splendors. It included one hundred places. Half of them are National Parks or Monuments. The other half includes such amazing places as Niagara Falls, New York, the Columbia River Gorge along the Columbia River that runs between Oregon and Washington, and the Big Sur Coast of California. The places outside state control have remained unspoiled.
On the Oregon Coast, Sea Lion Caves has been under private ownership since its discovery in 1889. It is operated as a tourist attraction. The owners have preserved the wild nature of the place as a habitat for the Steller Sea Lion, timid animals that ordinarily live in remote areas. Steller Sea Lions continue to spend time in the Sea Lion Caves every year. In the image below, sea lions are visible lying on the rocks at the left side of the image.
As of the end of the second decade of the 21st century there were an estimated 500,000 homeless people each night in America. Half spend the night in homeless shelters. The rest spend the night without shelter. Some of the sheltered have become homeless due to loss of employment and inability to pay rent for a dwelling. Some of those find a home and employment again soon with help from families, friends, social welfare agencies or charitable organizations.
However, some become chronically homeless. A considerable number of the chronically homeless suffer from mental illness and addiction to alcohol or drugs. They lack support from family and friends whom they have antagonized by their behavior. However, with help and support, addicts have become clean and sober and have achieved productive life.
The chronically homeless are visible living on the streets in America’s cities. Most of the street people are adult males. Women and children are much less likely to become chronically homeless and unsheltered at night.
Because city property belongs to everyone and no one, homeless people have been allowed to build camps on sidewalks or in parks, using tents, plastic tarpaulins, and shopping carts; people sleep on park benches, in doorways, and on the sidewalk. People hold up cardboard signs asking for money. Some of the street people relieve themselves on the sidewalk and leave the waste for others to clean up.
Homeless people have been helped by shelters and aid from individual churches and programs such as Catholic Relief Services, the Jewish Federation and Protestant organizations such as the Salvation Army and numerous local Protestant churches.
In Eureka, California, Betty Kwan Chinn has helped thousands of homeless people by providing food and temporary shelter. She has helped many find homes, employment, and return to productive life in society. She did this with no involvement of local or national government. She never asked anyone for money to help her. People were inspired by what she was doing and gathered round to help her.
In Portland, Oregon, Union Gospel Mission has created a support system to help people stay sober and productive, somewhat like Alcoholics Anonymous does. Stacy Kean, the Communications Director of the Mission says that she has seen the program work for hundreds of individuals.
The city of Portland has allowed a transitional housing facility to be created and maintained by otherwise homeless people on city-owned land where there are no nearby home or business owners to object. The residents call this place “Dignity Village,” and its motto is “Out of the Doorways.”
Using cast-off and recycled materials, the residents built tiny houses, structures comprising less than 400 square feet. Construction was funded by donations, odd jobs, and recycling bottles and cans.
Many residents have part-time jobs. The village is orderly, safe, and self-governed. Residents provide their own security system and pay $35 a month for space rent. Drug and alcohol offenses or disruptive behavior will get a person evicted, as will missing rent three months in a row or refusing to put in the required ten hours per week of community service.
Dignity Village costs local taxpayers nothing. Residents pay all their own utility bills and pay for community water, electricity, garbage collection, and a wireless Internet account. The tiny houses have no indoor plumbing but there are portable toilets. The tiny houses are not wired for electricity, but are kept warm in the winter with propane heaters. Charging stations for mobile phones and laptop computers have been placed near the community kitchen, shower house, and the portable toilets.
Legal causes of homelessness
- Before the 1960s, many people suffering from mental illness were kept in psychiatric hospitals. That practice ended in the 1960s in consequence of legal challenges to holding people against their will. When mentally ill people were discharged from psychiatric hospitals there were no facilities to shelter them much less help them to cope with living away from a mental hospital.
- Minimum wage laws are an impediment to finding work for people, especially the young, who have not developed skills adequate to earn the minimum wage.
- A myriad of non-violent criminal offenses are classified as felonies. A felony conviction is a formidable obstacle to employment and rules out access to virtually all good jobs.
- Rent control makes it a losing proposition to build, operate, and maintain low-cost rental housing.
- Many home and business owners oppose low-cost housing in their neighborhoods, due to concern about a negative impact on property values. This is a valid concern. However, in many places in America, low-cost housing would be welcome if it was not placed too close to higher-cost residential areas.
This list suggests actions to help the homeless help themselves: support organizations that help the homeless; eliminate minimum wage laws, felony status for non-violent offenses, and rent control and restrictions on building low-cost housing.
PORTENTS OF THE FUTURE
Free enterprise will provide governance services the public wants when the political state fails to do so. An example of that has been occurring in the state of Oregon in the early 21st century.
Rural/Metro Fire provides fire protection services in Grants Pass, Oregon, population 38,000, and other communities in southern Oregon. The city does not have a municipal fire department. Rural/Metro is the national leader in proprietary private fire protection services. It operates in dozens of unincorporated communities in twenty states of the U.S.
Rural/Metro will protect the homes and businesses of people who do not subscribe to its services, billing the property owner after the incident to recover the costs of service for that incident.
The company was founded in 1948 by 24-year old Lou Witzeman in Scottsdale, Arizona. Scottsdale was then an unincorporated suburb of Phoenix that was not served by the Phoenix fire department. After witnessing a neighbor’s house burn down because there was no fire protection, Witzeman procured subscriptions from individual homeowners for the service he envisioned. He started with buying a single fire truck. Seven decades later Mr. Witzeman had passed on, but the company he founded had grown and was thriving.
In Josephine County, where Grants Pass is located, Rural/Metro Fire is the larger of two for-profit fire departments serving a geographic area more than twice the size of Portland.
Also in Grants Pass, retired police officers Jeff and Julie Thomas established Concierge Home and Business Watch. In Grants Pass, policing was and is the responsibility of the Josephine County Sheriff. However, in 2009, emergency callers to the sheriff’s office heard a recorded message stating that because of budget cuts the sheriff would respond to calls only from 9:00 a.m. to 3:00 p.m. Sheriff’s deputies often were too few in number to respond even to emergency calls from citizens in danger.
As of 2018 Concierge Home and Business Watch employed more than 45 security officers including armed security guards. Services include security patrol 24 hours a day, continuously monitored alarm systems, and more.
Bend, Oregon is the center of a rapidly growing metropolitan area in East Central Oregon. The Bend metropolitan area had a population of 91,000 as of 2018. Policing is provided by the Bend Police Department and the Deschutes County Sheriff. Nevertheless, the local demand for security motivated a retired police officer to start a new security company, Patrol Services International in Bend in 2006. The company’s website explains:
“. . . police departments’ resources have been stretched thinner and thinner, and their ability to conduct proactive actions to prevent crime has become ever more diminished. This gap between what the community needs, and what the police are able to provide, grows larger every year. Our guards fill the gap and strive to work alongside local law enforcement agencies to make our communities safer.”
The company also provides security services in five other states, California, Colorado, Florida, Ohio, and Texas.
In addition to Patrol Services International there are three other private security companies operating in Bend. Private security is ubiquitous throughout Oregon. There are dozens of private security firms in the state, operating in large and small cities, in urban areas and in semi-rural areas. The firms range in size from a strictly local business with perhaps a dozen or two security officers to Securitas, the world’s largest security firm that operates in several locations in Oregon.
In San Francisco, California, there is a private police service known as the San Francisco Patrol Special Police that has been operating since 1847. It is paid for by local businesses. Its officers patrol protected neighborhoods on foot in order to reduce crime, disorder, and the fear of crime, while responding promptly to requests for help from businesses and residents of the neighborhoods it serves. Officers of the patrol seek to resolve disputes peacefully. The San Francisco Patrol is recognized by the City Charter of San Francisco. The Patrol cooperates with the city’s police department.
It is because the sole function of private security is to protect persons and property that the industry has grown rapidly. Traditional policing by the state seeks to protect persons and property, but that is incidental to its primary function which is law enforcement. The growth of private security is evidence that law enforcement alone does not provide all that the public wants for personal security.
There are more than 6,000 private security companies in America, ranging in size from small, local companies, to multi-national companies that employ thousands of people. Private security companies operate in many countries around the world. Securitas, AB, founded in 1934 and domiciled in Sweden, is an international security company that employs more than 370,000 people in 39 markets on all six inhabited continents. Securitas is the largest private security company active in America.
Securitas offers a wide variety of services, including aviation security, corporate risk management, executive protection, fire and safety services, loss prevention, mobile services, remote video solutions, screening services, alarm, security consulting, specialized guarding, and track and trace service.
THE LONG-TERM PROSPECT FOR HUMANITY
This book has not been written as a catalog of the errors of political governance. It does not seek to prescribe or advocate concerted action to remedy the negative consequences of politics. Such concerted action itself would be political. Rather, it is a description and examination of the ideas presented by Andrew J. Galambos in his original lectures that were entitled “Capitalism: The Liberal Revolution.”
When Galambos lectured, he did not disclose that title until the final lecture in the series that is the basis for this book. Disclosure was delayed until the final lecture out of Galambos’ concern that the title would be confusing, employing as it does three terms—capitalism, liberal, and revolution—that in contemporary parlance have political connotations that are contrary to the message Galambos intended to convey.
An essential premise of this book is that the free enterprise governance described herein is developing already in an evolutionary way, rather than by overthrow of the political institutions that many, if not most people at present consider to be necessary, or at least a necessary evil.
This book asks the reader to imagine a world without the political state, a world in which every activity usually thought to be uniquely the province of the political state is performed by free enterprise. Examples include but are not limited to justice and protection from adverse consequences of activities deemed to involve risk to the public.
In contemporary times, human society is confronted by a real and unprecedented crisis—the possibility that the next world war will be fought with weapons of mass destruction that would imperil the existence of humanity. This crisis originates in a paradox: the knowledge in science and technology that has been beneficial to humanity can also be used destructively. For example, nuclear physics is being used in medicine as one of the foremost diagnostic tools. However, nuclear technology has also been used to build bombs of power so immense that a single bomb can destroy any one of the world’s largest cities.
Galambos observed that every tool, and technology is a tool, could also be used as a weapon. For example, a hammer can be used to pound nails, or to crush a skull. It was a goal of Galambos to show a way of confining technology to positive and productive uses. That way requires the abandonment of politics.
Carl von Clausewitz, the early 19th century German military theorist, observed cogently that war is nothing more than politics carried on by other means to compel one’s adversary to submit to one’s will. That is correct. It is equally valid to say that politics is war carried on by other means to compel an adversary to submit to one’s will.
The way to permanent peace among humans leads away from politics and war. Until humanity forever abandons politics and warfare, the human species will be at risk of perishing by its own actions.
Andrew Galambos was an astrophysicist who understood the dangers of technology used in the service of aggression. Galambos resigned from a position in the aerospace industry because he did not want to work on guidance systems for intercontinental ballistic missiles.
Galambos wanted to make the world safe for continuation of humanity’s great journey of discovery—the continual search for advances in knowledge. To that end Galambos looked to science for advancement and improvement in human governance. Galambos called the scientific method the supreme tool for error rectification. He sought to apply the scientific method to the identification and eradication of errors in human governance.
War is one of the greatest of human errors, along with the religious intolerance that has engendered many wars.
Another great human error is failure to abide always by the most fundamental principle of human morality—the biblical golden rule: do not unto others that which is hateful to you.
Science, the scientific method, and human interaction
Galambos claimed that he had created a new science, the science of volition, i.e., a science of human choice. A few other profound thinkers of the contemporary era have also declared that the welfare of the human species depends on always and consistently respecting individual choices.
Galambos was among an exceedingly small number of thinkers who declared that political action, including the institution of political democracy, was inimical to and incompatible with the highest aspirations of humanity for peace and freedom. The principles of Galambos’ scientific approach to human society are set forth in two postulates and their corollaries in chapter five of this book.
In practical terms, examining not only the intended purpose of political action, but also its long term consequences is an inquiry using the scientific method. For example, protecting the public from criminal acts is the ostensible purpose of legislative sanctions against criminality. The law and enforcement of law by police, prosecutors, courts and prisons, constitute collectively the justice system in contemporary societies.
That justice system is based on the hypothesis that it is effective in crime prevention. In science, one would make a prediction based on that hypothesis, specifically that the political justice system prevents crime. The next step in science is observation to determine if the prediction comes true.
It is not true. The political system of justice does not prevent crime. There is pervasive criminal activity in every nation on earth, including the United States of America.
Furthermore, the political system of justice is itself a criminal enterprise, as crime is defined in this book: a successful, intentional interference with the property of another and thus a successful act of coercion. This is undoubtedly true in societies plagued by corruption among the authorities of the state and by state repression of political dissent. In those societies the system of justice operates on behalf of those in political power and against the interests of the people.
Political democracies do not suffer from high degrees of corruption and institutionalized repression of political dissent compared to other contemporary societies. Nevertheless, political democracies commit criminal acts. One example is the actions of the United States of America during the Vietnam War during the 1960s and 1970s.
Fifty years after the war it has become evident that the war was a mistaken and tragic undertaking by the United States. During the war, David Harris was sent to prison for his refusal to accept conscription into the armed forces of the United States. David Harris was not a common criminal. He had neither stolen anything nor assaulted or robbed anyone. He had an exemplary personal history, including election as student body president at Stanford University. His crime was that he refused to submit to conscription into the armed forces during the Vietnam War on the ground that the United States should not be engaging in that war. He did not want to participate in what he believed to be an unwise and unjust war.
David Harris was married to the popular and successful singer Joan Baez. She withheld from her income tax payments the percentage of tax that she calculated was being used to prosecute the Vietnam War. The United States seized receipts of concerts of Ms. Baez in satisfaction of her tax liability.
The example of treatment of David Harris and Joan Baez is not an extreme example. In the Justice chapter of this book there is extensive documentation of egregious injustices perpetrated by the United States and by individual states. Those state inflicted injustices are not anomalous but to the contrary are characteristic of the political justice system in the United States.
Effective protection of people from crime is occurring contemporaneously, but the protective agency is not the political state. Rather, it is protection by private security and fire protection companies whose services are supplied by contract with the people who are its customers and who pay for the protective service voluntarily. This subject is explored in the Security chapter of this book and elsewhere herein.
Decline and fall of civilizations and societies
Every civilization that has ever existed has experienced or is presently experiencing decline and fall similar to that of the Roman Empire. The cause is always the same: political coercion that is carried so far that it becomes destructive of society. Andrew Galambos posited that beginning in the 1960s the United States began a decline from the peak in prosperity, power, and influence achieved up to that time. There is evidence of the correctness of his assessment throughout this book.
Accelerating growth in knowledge, human freedom, and prosperity
Human society has enjoyed progressively accelerating growth in knowledge and prosperity due to revolutions in human thinking and understanding: the Newtonian or scientific revolution, the liberal revolution also known as the Age of Enlightenment, the industrial revolution, and the American Revolution.
The scientific revolution brought an ever accelerating accumulation of knowledge. The Age of Enlightenment brought liberation from intellectual acquiescence to the coercive and stultifying authority of church and state.
The industrial revolution accomplished ever increasing productivity that brought a widespread increase in living standards of most people to a level far greater than that enjoyed by the monarchs and landed aristocracy of the past.
The American revolution accomplished liberation from the idea that people need a powerful monarch to provide security and stability in society.
Knowledge as the source of abundance
Where abundance exists, its primary source is knowledge. Where poverty exists, its primary cause is lack of knowledge.
Switzerland and Singapore are nations that are small in size and lacking in natural resources. However, both enjoy prosperity because free enterprise is a characteristic of the economic life of each nation.
Russia has probably greater and more extensive natural resources than any other nation. However, under communism in the 20th century, most Russians suffered from abysmal poverty. Despite the fall of the communist party of Russia, there is still widespread poverty in Russia. That is because Russia has no history or tradition of individual freedom and protection of property rights of its inhabitants.
The false alternatives of politics
All political debates have three things in common.
- There is disagreement over political choices, each of which is certain to displease some or a large number of people affected by the choices.
- None of the political choices provides a real and permanent solution to the problem; they are all false alternatives.
- All political choices involve coercion.
The anti-capitalistic mentality
Capitalism has raised the average standard of living in an unprecedented way. Nonetheless, many people passionately loathe capitalism. This is because an anti-capitalistic mentality is pervasive in schools, colleges and universities, and the media.
If the reader doubts the foregoing, consider motion pictures and television. There are many motion picture and television dramas and documentaries that focus on the misdeeds of capitalistic enterprise and entrepreneurs.
There are many examples of business activities that benefit humanity on every scale of human activity, including but not limited to the following.
- Production, transport, and retail stores that bring lower prices and better quality to consumers of food and tangible items in use by everybody.
- Unprecedented mobility for people achieved by the builders of the vehicles of transportation on the ground, at sea, and in the air and by petroleum producers who provide the fuel for motor vehicles.
- Worldwide communication at the speed of light via mobile telephony, digital computer technology, and mastery of electromagnetic and rocket technology used in satellites and mobile phones.
- Entrepreneurial philanthropic activity by individuals who find creative ways to aid the poor of the world, such as Muhammad Yunus, Eric Reynolds, Bill and Melinda Gates, as described above.
How often does one see in the media reports of activities such as those of Yunus, Reynolds, and Gates?
How often does one see in the media reports of harmful activities by individual entrepreneurs and businesses?
Usually these negative reports are not balanced and thoughtful in showing any of the good that comes also from the activities they criticize.
The true democracy of the free market
In political democracy the minority must submit to the will of the majority. However, in the economic market place no one must submit to the will of anyone else. Every choice counts. This is a true rule of the people, a true democracy of self rule, in which each person rules himself or herself and no others.
Political states: the unique cause of war
Political states are the sole and unique cause of war. There was warfare in traditional, preliterate and Neolithic societies, but they were short-term conflicts that were resolved without destroying the adversary. 53
Monopoly, non-coercive and coercive
In the United States there are detailed laws controlling and attempting to prevent commercial monopolies—the monopoly of a single supplier of goods or services. Experience has shown that such laws are not necessary, that no commercial monopoly is long lasting except in a product of limited usage. The case of John D. Rockefeller’s Standard Oil is illustrative.
From inception in the early 1860s until the early 1890s Standard Oil was by far the largest petroleum company in the United States. However, it always had smaller competitors. By the 1890s, with the discovery of extensive petroleum resources in Kansas, Oklahoma, Texas, Louisiana, and California, large new domestic competitors came into existence.
At the same time electric lighting was being introduced in the United States. Until the introduction of electric lighting, kerosene, a petroleum product, was the principal source of lighting in homes and businesses. Standard Oil was negatively impacted both by other large competitors and electric lighting. However, the introduction and widespread acceptance of automobiles created a new business for Standard Oil and other petroleum companies, but not a business in which any of them had monopoly pricing power.
In comparison, the state’s monopoly of coercion is harmful, and eventually destructive of the state itself.
Evolution of the tools of human civilization
Human curiosity, ingenuity, and resourcefulness have led to the development of important tools of civilization including the following.
- The Corporation
- Credit and reputation
Each of these tools of civilization is also a tool of freedom in that each magnifies and amplifies the productive capabilities of humanity that increase prosperity. It is increasing prosperity that enables the achievement of greater human freedom. Each of these tools of civilization is discussed in separate chapters of this book.
As noted economist F. A. Hayek observed,
“The primitive individualism described by Thomas Hobbes is a myth. 54 . . . There never was a war ‘war of all against all’ . . .
“What are chiefly responsible for having generated [the] extraordinary order, and the existence of mankind in its present size and structure are the rules of human conduct that gradually evolved (especially those dealing with several property [i.e. property of individuals], honesty, contract, exchange, trade, competition, gain, and privacy.”
SIC ITUR AD ASTRA
Andrew Galambos was an astrophysicist. He believed that the destiny of humanity was to explore beyond the confines of planet Earth, and even beyond the galaxy of which Earth is a part. Andrew Galambos intended to write a book recording his ideas. He passed on without having written the book. His intended title was Sic Itur Ad Astra, Latin for “this is the way to the stars.” That title epitomized ideas about the prospects for humanity, if humans could avoid destructive wars in the future.
- Quoted from Hayek, F. A., The Fatal Conceit: The Errors of Socialism, p. 12 (1988) ↩
- Leviticus 19:18 ↩
- According to “Billionaires: The Richest People in the World,” Forbes, March 5, 2019, https://www.forbes.com/billionaires/#1b609b63251c ↩
- As recounted in Mr. Knight’s memoir, Shoe Dog: A Memoir by the Creator of Nike (2016), page 351 ↩
- See “U. S. businessman released from prison,” by Don Lee, Los Angeles Times, July 3, 2008, https://www.latimes.com/archives/la-xpm-2008-jul-03-fi-china3-story.html and “Entrepreneur overcame hardships of Chinese prison: Expatriate locked up for 10 years starts butane company to prove he still can succeed in business,” by Emma Hinchliffe, Houston Chronicle, June 20, 2016, https://www.houstonchronicle.com/business/article/Houston-businessman-overcame-hardships-of-Chinese-8313857.php ↩
- This analogy is attributed to von Mises by Andrew Galambos, in lecture number 6 of Course V-50, transcription of lecture published in Sic Itur Ad Astra (1999), at page 176. To like import is Mises in his book The Anti-Capitalistic Mentality (1951) at page 87. ↩
- Statista, Number of UPS employees, https://www.statista.com/statistics/537919/number-of-employees-united-parcel-service/ ↩
- The foregoing observation is by Greg Boren, who attended lectures of Andrew Galambos’ Free Enterprise Institute ↩
- Dambisa Moyo makes the case in the first of her four best-selling books, Dead Aid: Why Aid Is Not Working And How There Is A Better Way For Africa (2009) ↩
- See Moyo, Dambisa, Dead Aid (2009), pages 3-68, and Acemoglu, Daron and James A. Robinson, Why Nations Fail (2012), pages 450-455 ↩
- Quoted from Hayek, F. A., The Fatal Conceit: The Errors of Socialism (1988), page 12 ↩
- See Gennawey, Walt Disney and the Promise of Progress City (2014) ↩
- See Kotlikoff, Laurence and Scott Burns, The Clash of Generations (2012), pages 25-33 ↩
- See Kotlikoff and Burns, The Clash of Generations (2012), pages 25-33 ↩
- An estimate ↩
- Published in Newsweek, February 13, 1967 ↩
- Quoted in a number of sources, including “Social Insecurity,” by Brink Lindsey, Reason.com, March 1, 2002, https://reason.com/2002/03/01/social-insecurity-6/ ↩
- According to the decision of the United States Supreme Court in the case of Flemming vs. Nestor, 363 U.S. 603 (1960) ↩
- This is explained in detail in Lowenstein, Roger, While America Aged (2009), Malanga, Steve, Shakedown (2010), and Whitney, Meredith, Fate of the States (2013). ↩
- See Anderson, Benjamin M., Economics and the Public Welfare: A Financial and Economic History of the United States 1914-46, Chapter 60, pages 383-400 ↩
- Wikipedia, United States Department of Housing and Urban Development, https://en.wikipedia.org/wiki/United_States_Department_of_Housing_and_Urban_Development ↩
- Wikipedia, Community Reinvestment Act, https://en.wikipedia.org/wiki/Community_Reinvestment_Act ↩
- See Fleckenstein, William, Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve (2008), page 156 et seq. ↩
- According to Mayo, Mike, Exile on Wall Street (2012), page 5 ↩
- As described hereinabove ↩
- See Goldhill, David, Catastrophic Care: How American Health Care Killed My Father (2013), pages 56-58, and video, David Goldhill in Conversation with Malcolm Gladwell, February 2013 ↩
- According to Sparrow, Malcolm, License to Steal: How Fraud Bleeds America’s Health Care System (2000). Malcolm K. Sparrow is Professor of the Practice of Public Management at the Harvard University John F. Kennedy School of Government. ↩
- Wikipedia, List of Aircraft Hijackings, https://en.wikipedia.org/wiki/List_of_aircraft_hijackings ↩
- Wikipedia, Bojinka Plot, https://en.wikipedia.org/wiki/Bojinka plot ↩
- Wikipedia, El Al, Security https://en.wikipedia.org/wiki/El_Al#Security ↩
- In the magazine’s August 19, 2009 issue, print edition only, page 22 ↩
- According to influential educator, statistician and physician Hans Rosling (1948-2017) in his book Factfulness (2017), pages 6-7 ↩
- Quoted from Rosling, Hans, Factfulness: Ten Reasons We’re Wrong About The World—And Why Things Are Better Than You Think (2018), pages 84-85; regarding population see also Rosling’s compelling video, “Don’t Panic.” ↩
- According to Tooley, James, The Beautiful Tree (2009) ↩
- See Chapter 28 herein on Education, text accompanying notes 16-22 ↩
- See chapter 28 herein on education, text accompanying notes 16-24 and 73-75 ↩
- Jaime Escalante’s story is told in the book Escalante: The Best Teacher in America (1988) by Jay Matthews and the motion picture Stand and Deliver (1988). ↩
- The story of Homer Hickman, his friends, teachers and community is told in Hickam’s memoir, Rocket Boys (1998) and the motion picture October Sky (1999). ↩
- Joe Clark’s story is told in the 1989 motion picture Lean on Me. ↩
- As of the end of the second decade of the 21st century ↩
- See also Goldhill, David, Catastrophic Care: How American Health Care Killed My Father—And How We Can Fix It (2013), pages 54-58) ↩
- Quoted from “Walmart-ification of health care,” by Don Steinberg, Time, November 4, 2019, https://time.com/5710295/top-health-innovations/ ↩
- Quoted in “Portland’s Homeless Challenge: The Pacific Northwest city, long a magnet for street people, is experimenting with unusual reforms,” by Michael J. Totten, City Journal, Winter 2016, https://www.city-journal.org/html/portland%E2%80%99s-homeless-challenge-14185.html ↩
- Husock, Howard, America’s Trillion-Dollar Housing Mistake: The Failure of American Housing Policy (2003), pages 15-16 ↩
- Including land costs ↩
- See “Why Building More Freeways Makes Traffic Worse, Not Better,” by Jerry Nickelsburg, Zócalo, August 1, 2017, http://zocalo-on.kcrw.com/2017/08/why-building-more-freeways-makes-traffic-worse-not-better/ ↩
- See “Transit Policy in an Era of the Shrinking Federal Dollar,” by Wendell Cox, Heritage Foundation, January 31, 2013, https://www.heritage.org/transportation/report/transit-policy-era-the-shrinking-federal-dollar ↩
- See “Light Rail Isn’t the Track to the Future,” by Randal O’Toole, Cato Institute, February 9, 2009, https://www.cato.org/publications/commentary/light-rail-isnt-track-future ↩
- See “How Much Do Oil Companies Really Pay in Taxes,” by Steven Mutson, The Washington Post, May 11, 2011, https://www.washingtonpost.com/business/economy/how-much-do-oil-companies-really-pay-in-taxes/2011/05/11/AF7UNutG_story.html ↩
- Wikipedia, Toll Roads in the United States, https://en.wikipedia.org/wiki/Toll_roads_in_the_United_States ↩
- According to statista.com, https://www.statista.com/statistics/191900/road-traffic-related-injuries-and-fatalities-in-the-us-since-1988/ ↩
- According to the Highway Traffic Safety Administration, U. S. Department of Transportation, Alcohol-impaired fatalities, https://www.transportation.gov/mission/health/alcohol-impaired-fatalities ↩
- This is known from anthropological descriptions of preliterate, Neolithic societies still in existence in contemporary times. ↩
- In his famous book Leviathan ↩
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