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The Best Debt in the World by Emma Elliot Freire

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Hard to believe, but Britain’s student loan problem is worse than the Yanks’.

In late 2010, tens of thousands of British students took to the streets of London. They protested government plans to cut direct funding of higher education and raise the cap on tuition from £3,290 ($5,500) to £9,000 ($15,000). Some of them occupied government buildings and clashed violently with police. Hundreds were arrested.

Maybe they shouldn’t have gotten so worked up. It’s now becoming clear that most of them won’t repay their loans in full. Some of them will even be getting their education for free.

The UK government’s student loan scheme is more generous than its American counterpart. Any British student who is accepted to a university is automatically entitled to a government loan for the entirety of their tuition. Most universities are charging £9,000 per year. British students can also get loans for their living costs, which range from £4,418 to £7,751 per year. The average student will graduate £44,000 ($74,000) in debt.

The core difference between the British and American systems lies in the terms of repayment. American students typically have to start repaying 6 months after they graduate. Opportunities for loan forgiveness are extremely limited, and loans cannot be discharged via bankruptcy. By contrast, British students don’t have to start repaying until they are earning £21,000 ($36,000) per year. They must then pay 9 percent of their gross income as long as they stay above the threshold. Their outstanding balance is automatically forgiven 30 years after it became eligible for repayment. Also, the loans do not appear on their credit report. 

“The thing people worry about with debt is that they won’t be able to pay it back. The way this is structured means that is not a worry ever, and it doesn’t follow you around until your old age,” says Sam Bowman, Research Director at the Adam Smith Institute, a free-market think tank. 

Bowman finds it helpful to understand loan repayment as a tax. “You can either think of it as a graduate tax or it’s the best debt in the world,” he says. “It makes sense to think of it as a graduate tax, a specific kind of tax on a specific action that is designed to offset the cost of that action.”

Uncharted waters for repayment

The first students to take on the new, larger type of loans have yet to graduate, so it is hard to estimate what repayment rates are likely to be. However, the Institute for Fiscal Studies (IFS), an independent research center, is already projecting that 73 percent of students will not repay their loans in full. They believe the average amount written off will be around £30,000 ($50,500).

A report released in July by a committee of the British parliament reached similar conclusions. “By providing favourable terms and conditions on student loans, the Government loses around 45p [cents] on every £1 it loans out.” When the new policies were first announced in 2010, the government projected it would only lose 28p per £1 loaned out. The report notes that government loans to students are expected to total £330 billion by 2044. “We are concerned that Government is rapidly approaching a tipping point for the financial viability of the student loans system,” says the report.

By and large, students still think of themselves as having “real debt” for their education. “One valid criticism of the loan system is that students don’t realize how generous it is,” says Nick Hillman, director of the Higher Education Policy Institute. “Students think they’re paying for the entirety of their education when actually they’re not. Taxpayers are covering quite a lot of the cost.”

The IFS report notes that the lowest-earning 10 percent of graduates will only repay £3,879 (in 2014 prices). A survey earlier this year showed that 40 percent of graduates are still looking for a job 6 months after leaving university. If this trend continues, some graduates may never start earning £21,000.

A few savvy individuals are learning to work the system. British financial advisors encourage parents who could contribute to their child’s education to have their kid take out government loans instead. Martin Lewis, who runs the popular website moneysavingexpert.com, writes, “If a parent pays the £27,000 tuition fees upfront, and their child becomes a poet and never earns above £21,000, the whole £27,000 would have been wasted.”

The only people who can expect to repay their loans plus interest in full are the small group who take high-paying jobs soon after graduating and get regular pay increases for the next 30 years. These individuals are thinking hard about whether they need a degree. “The only income group that has gone to university less are the richest. That might be surprising, but what the debt does is it imposes some cost on people for going to university,” says Bowman. “So if they have other options, they take them. Maybe they could skip college and join their parent’s business or their parents can find them jobs.”

This is one immediate impact of the new loan scheme. There will undoubtedly be unintended consequences that may only become evident years or decades from now. For example, Britain may see an increase in the number of stay-at-home parents. Loan repayment is tied to an individual’s income. Spouse’s earnings are irrelevant. Child care is already very expensive. For some families, the extra 9 percent they would lose in loan repayments will be enough to push one parent out of paid employment.

Loans without borders

Loan repayments are collected by Her Majesty’s Revenue and Customs, the British equivalent of the IRS, via withholding from a person’s paycheck. This makes it fairly simple to collect money from anyone working for a British employer. Things become harder when a graduate leaves the country. 

“There is no way that the government can collect money from people who go abroad,” says Bowman. “There is a big incentive for them to stay away. Say you’re an English graduate and you go to America for a couple of years to work. If you have this debt waiting for you when you get home, there’s a big reason for you to stay abroad for as long as possible.”

The number of students who would actually permanently leave is probably very small. “It would be a much bigger problem than the student loan book if we were seeing Irish levels of emigration,” says Bowman. However, a determined few will be able to dodge repayment.

And then there’s the question of students who come to Britain from other European Union countries. Since 2006, EU law has required Britain to offer these students the same loan deals for tuition, though not for living costs. It is a tradition in British politics to blame problems that are largely homegrown on the widely-hated EU. As the issues with loan repayment have come to light, stories about EU students borrowing money and then “going to ground” have also been hitting the headlines.

This problem is still fairly small, since EU students have only been receiving loans since 2006. Hillman says that about half of EU students who study in Britain choose not to borrow or repay their loan in full before they leave the country. Many EU students enroll at British universities because they want to work in Britain later. Thus, they have a strong incentive to repay. However, data is now emerging that shows unpaid loans in the low millions. “The issue is less about what has happened to date but what might happen in the future because there aren’t many people yet who are liable to repay, but it’s growing all the time,” says Hillman. 

“If a French or Dutch person studies at a British university then goes home and gets a job, we can certainly chase them through the French or Dutch courts because they’ve signed a legal contract and they should repay,” Hillman says. “But the trouble is that it’s an incredibly expensive business. The person may owe £27,000, which is a lot of money, but chasing someone through the courts can easily cost that much.”

One way to address this problem would be an EU-wide agreement. “But there’s no real incentive for other European countries to do this because other European countries don’t use loans in the same way we do,” says Hillman. 

Relative improvement

Despite the problems, both Hillman and Bowman say the new system is an improvement over the way British higher education used to be funded. Tony Blair’s government only introduced tuition in 2004. “Before loans and fees came in, British taxpayers paid 100 percent of the cost of going to university. Now they don’t. But they still fund part of the loan cost,” says Hillman.

Bowman says it is important to remember the overall British context. “The alternative is not a kind of free market where you have everybody paying their own way and banks privately making loans to people. The alternative is going back to a situation where the government pays for everything, and that’s a disaster,” he says. “The political climate in the UK is very hostile to any kind of marketization of anything. That’s not going to change for a couple of years, at least until we’re growing rapidly, and we all feel rich and safe again.” 

Potential Solution

One interesting idea put forward by David Willetts, a Member of Parliament and former Minister of State for Universities, is to sell government student loans to universities, making them responsible for collecting repayment. This approach would address a problem that afflicts both American and British higher education: Universities collect tuition upfront and then have little incentive to ensure loans are repaid. 

Bowman supports the proposal. “Making universities responsible for whether people repay might make them more willing to turn people away if they’re not a great bet in terms of their future earning, and that might counteract some of the qualification inflation. Right now, you need a university degree for any job that isn’t blue collar manual labor.”

He believes Willetts’ idea is politically viable. “Britain has lots of middle-class people who think of themselves as being working-class. They feel like they’re fighting against the man when in reality they are the man. You could say to them that we don’t want people who haven’t gone to university picking up the bill in any way for people who have gone to university.” 

The only question is whether universities would go along with it. Right now, they have a very beneficial arrangement. 

Much will depend on how loan repayment rates develop in the next few years. Graduates will probably soon grasp that they have the best debt in the world. Maybe taxpayers will start to realize this debt isn’t such a good deal for them. 

ABOUT EMMA ELLIOTT FREIRE

Emma Elliott Freire is a freelance writer living in England. She has previously worked at the Mercatus Center, a multinational bank, and the European Parliament.

RELATED ARTICLE: Can You Pay Student Loans With a Credit Card?

EDITORS NOTE: This column with images is republished with permission. The featured image is courtesy of FEE and Shutterstock.

Unicorn Governance by MICHAEL MUNGER

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Ever argued public policy with people whose State is in fantasy land?

Our problem is that we have to fight unicorns.

Unicorns, of course, are fabulous horse-like creatures with a large spiraling horn on their forehead. They eat rainbows, but can go without eating for years if necessary. They can carry enormous amounts of cargo without tiring. And their flatulence smells like pure, fresh strawberries, which makes riding behind them in a wagon a pleasure.

For all these reasons, unicorns are essentially the ideal pack animal, the key to improving human society and sharing prosperity.

Now, you want to object that there is a flaw in the above argument, because unicorns do not actually exist. This would clearly be a fatal flaw for the claim that unicorns are useful, if it were true. Is it?

Of course not. The existence of unicorns is easily proven. Close your eyes. Now envision a unicorn. The one I see is white, with an orange-colored horn. The unicorn is surrounded by rainbows (perhaps it’s time for lunch). Your vision may look slightly different, but there is no question that when I say “unicorn,” the picture in your mind corresponds fairly closely to the picture in my mind. So, unicorns do exist and we have a shared conception of what they are.

Problem: “the State” is a unicorn

When I am discussing the state with my colleagues at Duke, it’s not long before I realize that, for them, almost without exception, the State is a unicorn. I come from the Public Choice tradition, which tends to emphasize consequentialist arguments more than natural rights, and so the distinction is particularly important for me. My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.

But their solution is, without exception, to expand the power of “the State.” That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.

Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least three hundred years.

Some examples help illustrate the point.

Edmund Burke  highlights the unicorn fallacy neatly. The problem is not bad people, or systems that need reform. Come the next election, we’ll have a Messiah! The next reform will lead to Utopia! No. No, we won’t, and no, it won’t.

In vain you tell me that [government] is good, but that I fall out only with the Abuse. The Thing! The Thing itself is the abuse! Observe, my Lord, I pray you, that grand Error upon which all artificial legislative Power is founded. It was observed, that Men had ungovernable Passions, which made it necessary to guard against the Violence they might offer to each other. They appointed Governors over them for this Reason; but a worse and more perplexing Difficulty arises, how to be defended against the Governors?

Adam Smith put it this way in The Wealth of Nations:

It is the system of government, the situation in which [people] are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves.

Smith was talking about the employees of the East India Company in this passage. But the insight is a general one: the failure of a system of organization often arises from the incentives, the logic of action, or the inconsistencies, inherent in that system. The people who work in that system probably act in much the same way that other people would act if they found themselves in that system. So, while it’s true that one can imagine a State that works differently, there are no actual human beings who can work in that system and deliver what statists can imagine.

More recently, Ludwig von Mises and F. A. Hayek recognized the problem of unicorns rather deftly. In Epistemological Problems of Economics, Mises said:

Scarcely anyone interests himself in social problems without being led to do so by the desire to see reforms enacted. In almost all cases, before anyone begins to study the science, he has already decided on definite reforms that he wants to put through. Only a few have the strength to accept the knowledge that these reforms are impracticable and to draw all the inferences from it. Most men endure the sacrifice of the intellect more easily than the sacrifice of their daydreams. They cannot bear that their utopias should run aground on the unalterable necessities of human existence. What they yearn for is another reality different from the one given in this world … They wish to be free of a universe of whose order they do not approve.

Perhaps the most famous, and devastating, version of “skewer the unicorn” is Hayek’s, when he said in The Fatal Conceit that “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

The Munger test

In debates, I have found that it is useful to describe this problem as the “unicorn problem,” precisely because it exposes a fatal weakness in the argument for statism. If you want to advocate the use of unicorns as motors for public transit, it is important that unicorns actually exist, rather than only existing in your imagination. People immediately understand why relying on imaginary creatures would be a problem in practical mass transit.
But they may not immediately see why “the State” that they can imagine is a unicorn. So, to help them, I propose what I (immodestly) call “the Munger test.”

  1. Go ahead, make your argument for what you want the State to do, and what you want the State to be in charge of.
  2. Then, go back and look at your statement. Everywhere you said “the State” delete that phrase and replace it with “politicians I actually know, running in electoral systems with voters and interest groups that actually exist.”
  3. If you still believe your statement, then we have something to talk about.

This leads to loads of fun, believe me. When someone says, “The State should be in charge of hundreds of thousands of heavily armed troops, with the authority to use that coercive power,” ask them to take out the unicorn (“The State”) and replace it with George W. Bush. How do you like it now?

If someone says, “The State should be able to choose subsidies and taxes to change the incentives people face in deciding what energy sources to use,” ask them to remove “The State” and replace it with “senators from states that rely on coal, oil, or corn ethanol for income.” Still sound like a good idea?

How about, “The State should make rules for regulating sales of high performance electric cars.” Now, the switch: “Representatives from Michigan and other states that produce parts for internal combustion engines should be in charge of regulating Tesla Motors.”  Gosh, maybe not … In my experience, we spend too much time fighting with our opponents about their unicorns. That is, we claim that the unicorn/State itself is evil, and cannot be tamed in a way that’s consistent with liberty. The very mental existence of the unicorn is the target of our arguments.

The problem, of course, is that the unicorn they imagine is wise, benevolent, and omnipotent. To tell them that their imaginations are wrong is useless. So long as we insist that our opponents are mistaken about the properties of “the State”— which doesn’t exist in the first place, at least not in the way that statists imagine—then we will lose the attention of many sympathetic people who are primarily interested in consequences.

To paraphrase Hayek, then, the curious task of the liberty movement is to persuade citizens that our opponents are the idealistic ones, because they believe in unicorns. They understand very little about the State that they imagine they can design.

ABOUT MICHAEL MUNGER

Michael Munger is the director of the philosophy, politics, and economics program at Duke University. He is a past president of the Public Choice Society.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Life Without the McDouble:McDonald’s is just one example of how enterprise makes our lives less nasty, brutish, and short by Jeffrey A. Tucker

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It thrills me when McDonald’s burgers get the attention they deserve. This happened last year when Stephen Dubner, co-author of Freakonomics, made the provocative statement that the McDouble is the cheapest and most nutritious food in human history.

That we dare to recoil at such a claim indicates how spoiled we truly are. In a state of nature, getting food is the single greatest challenge. You can find shelter and it endures for a time. Clothing made of animal skins can be scarce, but once acquired, it lasts too.

The thing about food is that you have to get it every day. And without tools, you can only eat things that are stationary or very slow-moving. Once you learn to kill, preserving the meat is not easy, which is why salt has been one of the most valuable commodities in the history of humanity.

That most everyone has access to food now is one of the great triumphs of history. As Dubner points out, the McDouble provides 390 calories and 23 grams of protein divided between meat and cheese. All told, one hamburger provides a half day of all the stuff we need to sustain human life, and all for a bit more than a buck.

That McDonald’s can do this as at a profit is wonderful. Its profit margins are variously reported to be around 6% percent—this is an extremely hard business, as any franchise owner can tell you—but many of its most popular products earn no money whatsoever.

The masses of McDouble buyers are being subsidized by customers who buy higher-end products like the Bacon Clubhouse and the super-sized value meals. The best deals are designed to get you in the door in the hope that you will, every so often, splurge just a bit.

Dubner’s thesis got renewed attention in the week following my own renewed love affair with McDonald’s while in Las Vegas this summer. This is a place that picks your pocket at every turn. Okay, granted, every dime spent in Vegas—apart from high taxes and ridiculous union wages—is coughed up by willing buyers. Still, there is an air of voraciousness about the place that seems inescapable.

After days of feeling fleeced for food and drink, I finally found a McDonald’s. The prices were not Vegas prices. The dollar meal was still there. The coffee was delicious and cheap, which is an incredible relief in a city where every cup otherwise runs $5. The breakfasts are wonderful and satisfying. If “healthy food” is your thing, go for the salad, which can’t be beat for the price.

In one food court I entered, there were a dozen establishments, but McDonald’s had the longest line, and consistently so. This makes complete sense to me. Reflect on the ingredients of the Big Mac or the Clubhouse and it just blows your mind. The meat alone is a miracle. Meat wasn’t available for the masses of humanity until canned meat was invented in the the middle of the twentieth century; preserving and transporting it was an extreme challenge.

There is a reason that your knees don’t fit under the desk you found at the antique store, and it’s because of the meat-driven growth in human height we’ve all experienced since World War II.

There is a reason that knight armor at the museum looks like it belongs to a member of the Lollypop Guild—again, it’s because we have access to meat, and those tough guys in the Middle Ages had to live off whatever grew around them.

There is a reason that the average Japanese person is 3.5 inches taller now than 50 years ago, and it comes down to a gigantic dietary change due to the availability of meat and cheese.

In addition, there is bread (if you take that for granted, try growing your own wheat), lettuce (again, only refrigeration made this available for most people), cheese (cows are incredibly expensive to raise), bacon (food of the gods, courtesy of the pig), pickles (the time structure of production here is lengthy), and various sauces that originate in seeds from all over the world.

Somehow they manage to get all of this to you in a small package that costs you a dollar.

But let’s focus for just one moment on the least-appreciated ingredient in ketchup and on the burger itself: the tomato. Surely it has always been with us, right? Anyone can grow tomatoes in a pot on the back porch. That wasn’t true until the sixteenth century, when Europeans had their first wide exposure to the tomato. Spanish explorers brought the fruit back from Latin America. Before then, there was no such thing as the tomato in the Italian diet.

It was trade that brought the tomato to the whole world for the first time in the Renaissance period. Without trade, without travel made possible by technology and capital investment, we’d never know how one tasted.

This reality never occurred to me until I read A Splendid Exchange: How Trade Shaped the World, by William Bernstein (2008). It turns out that staples such as coffee, beef, and the potato, and the existence of practically everything in your refrigerator, is owed to trade, technology, and therefore to the existence of free enterprise.

I was once lecturing to a group of students about the problems that come with the state of nature, of just trying to survive based entirely on the resources around you, while fighting off nature’s penchant for exterminating human beings that don’t fight back. I asked the group what people invented some 150,000 years ago in order to survive in the face of massive privation and the growing scarcity of food.

The answer I was looking for was this: They invented private property to allow them to domesticate animals and enclose spaces for agriculture. But the first answer that was offered from the audience was: Create a government. My mouth fell open in amazement. But after just a few moments, the student starting laughing and then everyone joined in.

Why laugh? Because creating a government—assigning a small group to control a geographic space with a monopoly on weapons and allowing them to pillage and kill as they see fit—does absolutely nothing to solve the core problem that humanity faces. Just stating the answer this way illustrates the absurdity. Our problems as a species are solved when we figure out how to get more of what we need and want. Governments, on the other hand, only redistribute what already exists.

Governments come and go, but the achievements of trade and private enterprise last generations and then even become permanent features of the world. Once a good is transported, once a technology is invented, it becomes part of the capital stock of civilization to be enjoyed by every generation thereafter.

That we were born now and live now to enjoy the massive beneficence of the struggle of thousands of years to bring us things like the tomato, beef, cheese, bread, and to wrap it all up in a tiny package and make that available to us for a dollar in nearly every city in the world, that this comes to us with no work on our part, is a gigantic privilege afforded us by virtue of accident or providence (depending on your religious views). To whatever force you attribute your good fortune, we should recognize it as such.

The McDouble does not appear in nature. That we can laugh at it, put it down, sneer at it, and even denounce the company that brings it to us is a wonderful privilege of the ungrateful. Those who know and understand don’t have to eat at McDonald’s, of course. But everyone should at least recognize its restaurants as symbols of what humankind can achieve when we are given time and freedom to make great things happen–and to overcome the grueling state of nature that has pervaded all but a small fraction of the history of humanity.

I’m only asking that we think about that seriously before we sneer.

20121129_JeffreyTuckeravatarABOUT JEFFREY A. TUCKER

Jeffrey Tucker is a distinguished fellow at FEE, CLO of the startup Liberty.me, and publisher at Laissez Faire Books. He will be speaking at the FEE summer seminar “Making Innovation Possible: The Role of Economics in Scientific Progress.”

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Back in Iraq? Foreign policy déja vù all over again by Doug Bandow

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Little more than a decade ago, the United States invaded Iraq. The promised cakewalk turned out far different than expected. Today its government and entire state, created by Washington, are in crisis. Yet the same voices again are being raised calling for military intervention, with the promise that this time everything will turn out well.

Social engineers never seem to learn. It is hard enough to redesign and remake individuals, families, and communities in the United States. It is far harder to do so overseas.

Nation-building requires surmounting often vast differences in tradition, culture, history, religion, ethnicity, ideology, geography, and more. Doing so also requires suppressing people’s natural desire to govern themselves.

It doesn’t matter if Americans could do it better. With positions reversed they would insist that the foreigners, however well-meaning, leave them alone. Imagine if the French offered to—nay, insisted on—sticking around at the end of the Revolutionary War to “help” the backward colonials make a new nation. Guns would again be pulled down from fireplace mantles across the land!

Yet these days Washington continues to try to fix the world’s problems. In recent years the United States has deployed forces to Haiti, Somalia, Bosnia, Kosovo, Afghanistan, and Iraq. Occupying these lands was in no case a military necessity. Nation-building has not turned out particularly well.

However, until now Washington at least has limited itself to one bout of society-molding per country. Reentering Iraq would be an attempted redo barely a decade after the first go. Rarely has a victorious war proved to be so fruitless and counterproductive so quickly.

Remember the original promises surrounding the Iraq operation? A quick, bloodless war would destroy dangerous weapons of mass destruction and “drain the swamp,” eliminating terrorism.The United States would guarantee a friendly, compliant government by imposing as president an exile who hadn’t lived in the country for decades. The new Iraq would implement democracy,eschew sectarian division, protect women’s rights, and even recognize Israel, while providing America bases for use in attacking neighboring states, including Iran, which with its Shia majority shared manifold religious, cultural, and personal ties with Iraq.

It was a wonderful wish list. Alas, it turned out to be pure fantasy. The conflict killed thousands and wounded tens of thousands of Americans, while killing hundreds of thousands of Iraqis and displacing millions more. The ancient Christian community was destroyed. The ultimate financial cost to the United States, including the expense of caring for those who sustained debilitating wounds, will likely run $3 trillion or more. The invasion stained the United States’s reputation, empowered Iran, and gave training to a new generation of terrorists.

Finally, Baghdad’s sectarian misrule wrecked national institutions and fostered the rise of an ugly Islamic totalitarianism. While the ISIL “caliphate” is likely to find it harder to actually rule than to claim to rule, the movement now calling itself the “Islamic State” seems capable of creating more than its share of human hardship along the way.

That’s quite an impact from that one little invasion so long ago. Other than that, Mrs. Lincoln, how was the play?

The obvious—indeed, only—policy for Americans is to run, not walk, away from the mess.

Yet many of the architects of the original disaster are back, advocating a second shot. Never mind the past, they argue. No need to cast blame, they assert. Everything was going swell before the new administration took over.

The President is putting in Special Forces. Many others advocate drone and air strikes. A few forthrightly call for boots on the ground. William Kristol and Frederick Kagan, for instance, want Washington to take on everyone: Defeat ISIL, force Baghdad government to include Sunnis, and make Iran withdraw its military aid. A three-sided war this time! What could possibly go wrong?

There’s no doubt that ISIL is a malignant force. But the United States should make clear to Prime Minister Nouri al-Maliki that Americans will not bail him out after his policies led to the ongoing catastrophe. Without political reform it is hard to see how Iraq can be saved.

Part of the political response must be to engage Sunni tribes and former Ba’athists who allied with ISIL to oust the national government from Sunni areas of Iraq. It is unlikely that they want to go back to the seventh century; in fact, they already are chafing under the group’s ruthless Islamic rule, as well as increased economic hardship after being “liberated” by a pretend nation state. Iraq’s Shia majority needs to propose reforms that offer Sunnis a better option than remaining in caliphate hell.

In any case, Washington should drop its insistence that Iraq stay together. Kurds are moving toward a vote for independence. Sunnis are deeply alienated. Baghdad’s Shiite leadership remains committed to narrow sectarian politics. Extensive federalism/partition may be the only way to prevent endless killing.

The United States also needs to stop supporting Syria’s opposition. Instead, the priority should be stopping ISIL, which gained its first victories, along with access to financial resources and military material, in Syria. President Bashar al-Assad is odious, but his dictatorship is not dedicated to destabilizing the entire region. If Washington further undermines Assad, it will inevitably help ISIL. Arming the moderate opposition, which so far has lost ground and weapons to the radicals, might do little more than end up further empowering ISIL.

Finally, American officials should invite allies, friends, and even adversaries to cooperate to contain ISIL. The group’s professed ambitions cover much of the Middle East. Numerous nations have good reason to isolate, sanction, and even strike ISIL. Turkey has a first-rate military. Jordan has a capable though fragile government, and a powerful incentive to act: It has been destabilized both by Arab Spring sentiments and by a refugee tsunami from Iraq and Syria, andit  is in ISIL’s gunsite.

Iran, though no friend, shares Washington’s antipathy toward ISIL and wants to preserve rule by its co-religionists in Iraq. Lebanon is even more vulnerable than Jordan. The Gulf states,including Kuwait, the emirates, Bahrain, and Saudi Arabia, though mostly Sunni, also are targeted for subversion. Israel does not want to see a radical Islamist state, especially one that wrecks Jordan next door. These nations have different capabilities and interests, but all could help contain and ultimately roll back ISIL’s gains.

The Iraq war should have demonstrated beyond doubt that military intervention has unintended and unforeseen consequences, just like economic intervention. People devoted to individual liberties and limited government should be particularly skeptical of proposals to expand the state—after all, war is the biggest Big Government program—for the purpose of social engineering around the world.

The revival of civil war and veritable collapse of Iraq’s central state are tragedies, but not ones affecting vital American interests. The lesson from 2003 is clear: War truly should be a last resort, never just another policy tool to be used when convenient. The Iraqi imbroglio beckons the usual policy suspects, but the right response is to say, no, the Americans aren’t coming.

dougbandow3540ABOUT DOUG BANDOW

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

America’s Electronic Police State by Wendy McElroy

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Big Brother is not only watching, but gathering more power.

The modern surveillance state is referred to as an electronic police state because it uses technology to monitor people in order to detect and punish dissent. The authorities exert social control through spying, harsh law enforcement, and by regulating “privileges” such as the ability to travel. But all of this starts with surveillance.

Information is power. Imagine if agents of the State didn’t know where you live. How could it collect property taxes, arrest you, conscript you or your children, or record phone calls? Imagine if the State did not know your finances. How could it snatch your money, garnish your wages, freeze accounts, or confiscate gold? Total information is total power. That’s why the surveillance state views privacy itself as an indication of crime—not as one of violence, but as a crime against the State.

Beyond the NSA

The National Security Agency (NSA) keeps making headlines as the quintessential force behind the American surveillance state. Civil rights advocates should be equally concerned about a quieter but no less insidious manifestation: the National Counterterrorism Center (NCTC).

The NCTC coordinates at least 17 federal and local intelligence agencies through fusion centers that amass information on average Americans. A fusion center is a physical location at which data is processed and shared with government agencies. Fusion centers also receive “tip line” information from public workers, such as firefighters, who report “suspicious” behavior observed during their interaction with people. The Department of Homeland Security (DHS) and the Department of Justice (DOJ) began creating the centers in 2003. To date, there are seventy-eight acknowledged fusion centers.

The stated purpose of fusion centers is to prevent terrorist acts. But, for years, investigations have revealed that the monitoring has been used to exert social control and punish political opposition. In 2007, the American Civil Liberties Union (ACLU) published a report titled, “What’s Wrong with Fusion Centers?” One problem? Mission creep. The scope of their “protective” mission has “quickly expanded” to include the vague category of “all hazards.” The “types of information” gathered were also broadened to include non-criminal public- and private-sector data.

Two years later, the ACLU issued another paper that sketched the impact of this broadening mission. The ACLU quoted a bulletin from the North Central Texas Fusion System; law enforcement officers were told it was “imperative” to report on the behavior of their local lobbying groups, including Muslim civil rights organizations and antiwar groups.

Despite warnings, the fusion centers continue to collect data on the “suspicious activities” of non-criminals. In September 2013, the ACLU provided information from “actual Suspicious Activity Report (SAR) summaries obtained from California fusion centers.” Included in the SARs were Middle Eastern males who bought pallets of water, a professor who photographed buildings for his art class, a Middle Eastern male physician whom a neighbor called “unfriendly,” and protesters who were concerned about the use of police force.

If ever one were inclined to let such activities pass because those being watched have been Muslim, remember that power rarely restricts itself to any stated goal. As the definition of potential terrorist groups has been expanded to include groups such as the Tea Party, it has become evident that the line between terror group and political opposition has blurred.

The fusion centers share many characteristics of a surveillance state with the NSA. These characteristics include a disregard for civil rights, secret records, the use of informants, little to no transparency, the targeting of political opponents, and an ever-expanding mission.

In at least one sense, the fusion centers are more typical of the surveillance state. Since Edward Snowden’s revelations, the NSA has been under a spotlight that reduces its ability to hide activities such as the warrantless recording of emails and phone calls. But fusion centers still function with little visibility. The NSA is subjected to public controversy, with civil liberty groups pushing to rein in its power. By contrast, the fusion centers are comparatively invisible, which allows them to operate covertly in a manner more typical of a surveillance state.

J. Edgar would be proud

The surveillance state was rooted in a desire to stifle political discussion, not to thwart criminal acts. In his book J. Edgar Hoover and the Anti-Interventionists, historian Douglas M. Charles traced the birth of pervasive surveillance back to the Great Debate on whether America should enter World War II. Specifically, Roosevelt wanted to support the war and to silence powerful anti-interventionists like the aviator-hero Charles Lindbergh. Thus, Hoover focused on the America First Committee (AFC) in which Lindbergh and several senators were prominent.

Hoover, director of the FBI from 1924 to his death in 1972, is the founding father of the American surveillance state. It arose because national security allegedly required constant vigilance against “the enemy,” external and internal. The internal enemy could be individuals or a concept, like communism or terrorism.

As head of the Bureau of Investigation (later the FBI), Hoover initiated the policies of extreme secrecy that bypassed the oversight of data collection. Ironically, Hoover had assumed leadership with a public pledge to end the agency’s civil liberty violations. Like surveillance agencies before and since, however, the FBI’s public statements directly contradicted its acts. For example, Hoover quietly coordinated with local police in much the same manner as the current fusion centers do. Information on a “suspect’s” sexual preferences (especially homosexuality), reports on his children and other family, as well as other sensitive data went into unofficial files that were labeled “personal, confidential”; these were inaccessible to unapproved eyes. When tidbits from the secret files were shared, the standard method was through a memo that had no letterhead, no signature, nor any other indication of the recipient or sender.

After December 7, 1941 (Pearl Harbor), America’s entry into the war became inevitable. Fearing a reduction in his power, Hoover claimed the AFC had gone underground even though the organization had clearly disbanded. Thus, Hoover continued surveillance by lying about the need to counter active subversion.

The gambit worked. Indeed, Roosevelt and subsequent Presidents were eager to weaken their opponents. The FBI’s growth was phenomenal. Charles explains, “In 1934 the FBI employed 391 agents and a support staff of 451 and was appropriated $2,589,500…. In 1945, the FBI had 4,370 agents, 7,422 support staff and an appropriation of $44,197,146.” It embraced illegal wiretapping and trespass, mail monitoring, anonymous informants, pointed investigations by government agencies such as the IRS, the selective enforcement of law, and FBI plants in targeted groups.

The Cold War built upon the information-gathering infrastructure. The Cold War’s extensive data sharing with foreign governments was also rooted in pre-WWII politics. “A hallmark of the Second World War, Cold War, and War on Terrorism, the intimate intelligence relationship between the United States and Great Britain had its origins during the Great Debate,” writes Charles.

Hoover’s secret files on political figures made him virtually untouchable. After his death, however, the FBI came under concerted attack for its domestic surveillance. The public was particularly outraged by revelations of how the FBI had targeted popular heroes such as the civil rights leader Martin Luther King. After the famous August civil rights 1963 march during which King delivered his iconic “I Have a Dream” speech, a top Hoover aide wrote in an internal memo, “In the light of King’s powerful demagogic speech … We must mark him now, if we have not done so before, as the most dangerous Negro of the future in this Nation from the standpoint of communism, the Negro, and national security.” Surveillance of King increased. Among other “information” gathered, the FBI taped an adulterous sexual encounter, which anonymously appeared in the mailbox of King’s wife.

FBI investigations into politically-oriented groups were officially restricted. Following the 9/11 terrorist attacks and passage of the PATRIOT Act, however, the FBI and other agencies gained the ability to conduct political domestic surveillance. The surveillance state that had been rooted in war and political maneuvering was given new life by the same two factors. It was also given power of which Hoover could only have dreamed.

The ACLU declared in yet another report (2008), “There appears to be an effort by the federal government to coerce states into exempting their fusion centers from state open government laws. For those living in Virginia, it’s already too late; the Virginia General Assembly passed a law … exempting the state’s fusion center from the Freedom of Information Act. According to comments by the commander of the Virginia State Police Criminal Intelligence Division and the administrative head of the center, the federal government pressured Virginia into passing the law…. There is a real danger fusion centers will become a ‘one-way mirror’ in which citizens are subject to ever-greater scrutiny by the authorities, even while the authorities are increasingly protected from scrutiny by the public.”

Since then, State surveillance has become more secretive and increasingly exempt from both oversight and accountability. Fusion centers now reach into private databases such as Accurate, Choice Point, Lexis-Nexus, Locate Plus, insurance claims, and credit reports. They access millions of government files like DMV records. Why is this important? Various laws have been adopted to prevent the maintenance of databases on average Americans, but if fusion centers access the existing files, especially private ones, they can bypass those laws.

The foregoing is a description of electronic totalitarianism. If its creation is invisible to many people, then it manifests yet another characteristic of a police state: People do not believe their freedom is gone until there is a knock on the door—one that comes in the middle of the night.

ABOUT WENDY MCELROY

Contributing editor Wendy McElroy is an author and the editor of ifeminists.com.

Climate Consensus: Do Little for Now by DANIEL SUTTER

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The 2007 report of the Intergovernmental Panel on Climate Change (IPCC) projects that continued emission of greenhouse gasses (GHG) will raise the earth’s temperature by 1.8°C (3.2°F) and sea level by one foot by 2100. Projected climate changes, if they come to pass, will have a number of effects on society, though not all of those effects will be negative.

Although debate over the IPCC’s projections continues, less attention has been focused on the ultimately more important result: Cost-benefit analysis (CBA) implies we should do very little to prevent climate change. Instead, we should create wealth. Expanding the productive capacity of the economy will compensate future generations better than reductions in GHG will. A richer world in 2100, after all, will be able to afford to do things like relocating people affected by rising sea levels and constructing new port facilities and seawalls.

A report by the liberal Global Development and Environment Institute at Tufts University observes, “Economists frequently . . . calculate the optimal policy response [to climate change]. This calculation often leads to the conclusion that relatively little should be done for now.”

Cost-Benefit Analysis

Businesses operate under the discipline of profit and loss based on market prices. Profit signals that an action generates benefits for the economy. Government does not face the discipline of profit and loss, but CBA, performed honestly, offers guidance about whether government actions benefit society.

Measures to reduce GHG emissions today typically fail a cost-benefit test due to the discounting of benefits. Discounting refers to applying a real interest rate to future values. Two arguments support discounting in CBA. The first is impatience, or what economists call time preference: $100 is worth more today than it is one year from now, even without inflation. The second is the return on savings and investment, or the opportunity cost of capital. Money spent now to reduce GHG could be saved and invested instead. The interest rate equates impatience and the return on investment on the margin, as investors must be compensated for delaying consumption.

Discounting

The mathematics of discounting makes values more than about 50 years in the future worth little today. The federal government makes cost-benefit calculations using 3 percent and 7 percent annual real (or adjusted for inflation) interest rates, approximating the historical risk-free interest rate and the annual real return on stocks. The present value of $1 million 100 years from now is $52,000 at a 3 percent discount rate, and $1,150 at a 7 percent discount rate. To see how this affects climate change economics, suppose that spending $100 billion annually—starting right now—we could prevent $1 trillion in annual damage, beginning in 100 years. The ratio of $10 in benefits to every $1 in costs appears favorable, but this fails a benefit-cost test at either a 7 percent or 3 percent real discount rate.

Some observers respond to this math by arguing against discounting in climate change economics. Time preference is a questionable argument in intergenerational settings because future beneficiaries will not have to wait 100 years to realize climate benefits. But the opportunity cost argument remains. The Stern Commission in the U.K. applied an implausibly low discount rate to its calculations. Others imagine current benefits from GHG reductions rendering discounting irrelevant. For example, the Environmental Protection Agency (EPA) included private benefits in a CBA of higher fuel economy standards to reduce GHG emissions, arguing that making people purchase higher-mileage cars than they prefer makes car buyers better off. Creating benefits today effectively makes reducing GHG a free lunch.

Wealthier is Healthier

Resources put into reducing GHG can’t be invested elsewhere, so the opportunity cost of GHG reduction amounts to the returns that could have been expected, based on historical rates. Maintaining opportunities to invest and create wealth for future generations requires the institutions of a market economy, or a high level of economic freedom, as the Fraser Institute’s Economic Freedom of the World: 2012 Annual Report demonstrates. Bequeathing a higher standard of living to future generations also requires preserving economic freedom. Discounting mathematics ultimately tells us that economic freedom addresses climate change more effectively than energy central planning through carbon taxes or cap-and-trade.

Compensating the “victims” of climate change with extra wealth does have a potential limit. Extra resources provide inadequate compensation if climate change dramatically alters the world. Money will not typically fully compensate for a catastrophic injury; a quadriplegic is unlikely to enjoy the same level of utility or satisfaction after his injury, even if his medical bills and care needs are paid. Wealth accumulation would not adequately compensate future generations if climate change produced a world like those depicted in Waterworld and The Day After Tomorrow. Future generations would not be adequately compensated if climate change destroyed the economy’s ability to produce goods and services. Fortunately Waterworld is the stuff of Hollywood fiction; the largest of the upper range of sea level rise in any 2007 IPCC climate scenario is about 2 feet. That will have serious consequences, but it will hardly flood the entire world. It can be offset by wealth accumulation.

A Hundred-Year Plan?

Property rights and prices lead basically self-interested people to worry about the future. For example, property rights and markets for existing homes provide owners with incentives to keep their houses livable long after they plan to own them. And yet the mathematics of discounting implies that events too far in the future should not affect decisions much today. Growth, progress, and creative destruction limit the horizon for detailed planning in a market economy. Imagine a business in 1900 trying to plan its operations in 2000. The plan could not have included automobiles, planes, television and radio, satellites, computers, and many other conveniences of modern life.

Now let’s project ahead and consider planning for climate change. A number of fundamental innovations could substantially reduce if not eliminate the threat from climate change, such as effective, low-cost carbon sequestration or effective weather modification to smooth out precipitation patterns. And the development of a radical new clean energy source like nuclear fusion could render remaining stocks of fossil fuels uneconomic at any price.

Conclusion

A dynamic market economy will feature too much creative destruction to allow detailed planning for the distant future. Nothing is sure in a market economy 10 years from now, much less 100 years, and discounting in cost-benefit analysis simply reflects this reality. The economic future becomes more predictable when government controls economic activity, but then stagnation results. Discounting in climate change economics tells us to create wealth to protect future generations. Economic freedom and the institutions of the market economy, not central planning of energy use, are the prudent policy approaches to a changing climate.

ABOUT DANIEL SUTTER

Daniel Sutter is the Charles Koch Professor of Economics at the Johnson Center for Political Economy at Troy University.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Emotional Dictatorship by Michael Nolan

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The trouble with a vision for society is the body count. The more specific the outcome you want to impose, the more dissent you’ll stir up. So you’re going to have to find a lot of places for all the bodies, or give up your grip on power.

There’s a silver lining for the State, though: “If a government is willing to kill as many people as necessary to stay in power, it usually stays in power for a very long time.”

So says Andrei Lankov, a Russian expert on North Korea, in the Frontline documentary Secret State of North Korea.

But the story here isn’t what the documentary has to say about the nature of totalitarianism. That’s worth documenting, of course; it’s difficult to believe such horrors are or ever have been real. But that’s not what makes this Frontline special.

That comes from the video shot on the down-low by a network of North Koreans and smuggled out to the rest of the world. We see Jiro Ishimaru, editor of Rimjingang, a Japanese magazine staffed by North Koreans reporting in secret, meeting with his sources. One, a State employee, freely acknowledges that he’ll be killed if he’s caught. “But I’ve got to do this. I’ve got to do this, no matter what. I’m just one person. Even if I have to sacrifice my life, someday something is going to change.”

The footage is often little more than jittery scenes of people going about their daily routine. But such is life under totalitarian rule: The mundane is fully shot through with politics. So any image of it, generated outside of State control, is a threat.

The footage itself will either break your heart or give you new faith in humanity. Probably a little of both. Consider this exchange between one of Ishimaru’s reporters and a group of homeless kids huddled around a tiny fire:

Reporter: Does anyone here work so you can have food and a bed?

Child: What work do you mean?

Reporter: Do you know how to chop wood?

Child: I don’t have an arm, so I can’t.

Reporter: You don’t have an arm? Why don’t you have an arm?

Child: It got cut off by a train.

From the looks of it, there’s a good chance they spent their day begging for anything from passersby—that is, when they weren’t picking through piles of garbage, occasionally lifting something and taking a bite.

So the obvious reasons why this footage would be considered treason have to do with compliance: If people saw how bad it really is, they might question the regime.

Individual malcontents aren’t that much of a problem for rulers this brutal. But then that’s another reason why non-State accounts of daily life pose a threat: People might find out they’re not alone. Others are unhappy also; some even show defiance. And sometimes, they get away with it.

For instance, the filmmakers mention that private enterprise has taken root and is being tolerated. As reported earlier in The Economist, the women of North Korea are doing much of the heavy lifting. In this documentary, we see a woman who runs a private bus line angrily shouting back at—even slapping—a soldier who tries to interfere. “If you’re an officer, where are your stars then?” she says. “You bastard! You’re an asshole!” she adds a bit later.

The next scene shows a woman being hassled for wearing pants on the street. One officer hits her. Another says, “Stop it, bitch!” when they tie on an armband describing her offense and she rips it off. She tells the officer to watch his mouth, and even when a senior officer steps in to intimidate her, she challenges him: “Why aren’t you telling off those people wearing pants?”

Much of what’s shown here runs counter to the narrative I used to think I knew: The Kims had shut their country off so successfully that North Koreans were brainwashed into believing the regime’s propaganda.

And besides, they wouldn’t be able to communicate and organize if they did become discontented. Between the social breakdown that always accompanies totalitarian rule and the stunted technological development of the country, there isn’t going to be any Twitter-fueled Arab spring or Orange Revolution rocking Pyongyang any time soon.

That may turn out to be the case. But then again, we hear Su Mi Terry, a former CIA analyst, telling us that the CIA knew nothing about Kim Jong-Un until he was suddenly brought forward as the new ruler.

And Victor Cha, a former member of the National Security Council, points out that nobody saw either the collapse of the Soviet Union or the Arab Spring coming—but that afterward, both looked obvious.

The Fear

Secret State adds to the stories of the Kim dynasty’s devotion to brainwashing. But it also discusses the execution of Kim Jong-Un’s uncle, carried out shortly before the documentary aired. Some analysts think this indicates conflict between hard-liners and reformers. It certainly seems like a guy with no military background and such big shoes to fill (at least according to the party’s propaganda) needs to let people know he’s not to be trifled with.

Taken together with the scenes of North Koreans learning to fend for themselves, I started to get my head around the one question that always crops up when I read accounts of life under dictators: Why? Why do the jailers keep the cells locked up? Why do third- or fourth-generation rulers continue to tighten the fist?

I doubt it’s a short answer. Or rather, there’s no short answer that really gets to it. But I think fear is right in the middle of all of it. There’s the conventional type, at least for dictatorships: Jang Jin-Sun, a former State propagandist, describes North Korea as an “emotional dictatorship”: The State seeks to dominate people’s thoughts and feelings. North Koreans are told their rulers are like the sun: Get too close and you’ll get burned, but get too far away and you’ll be cast into the void. Then there are constant “news” reports about an imminent American attack from which the party can keep them safe—but only if they give it absolute obedience, even love.

This stuff is the carrot; there’s no telling how effective it is. But there’s the ever-present stick as well. My guess is that everyone in North Korea knows someone who disappeared suddenly. One defector describes life after her family began slipping away for a shot at the border: “I was always being watched. The people watching weren’t just from the government. The people who were watching me were my friends and neighbors. I knew all of this but had to act as if I didn’t.”

Or consider this surreptitiously recorded conversation between a group of North Koreans:

Woman: There can’t be a rebellion. They’ll kill everyone ruthlessly. Yes, ruthlessly. The problem here is that one in three people will secretly report you. That’s the problem. That’s how they do it.

Man: Let’s just drink up. There’s no use talking about it.

Things like the execution of Kim Jong-Un’s uncle send the message right down the chain: Nobody’s safe. Kang Chol-Hwan, a North Korean defector, described in The Aquariums of Pyongyang how his family—staunch party members who donated a fortune to the party—wound up in Yodok concentration camp. They were untouchable until, suddenly, they were not.

This documentary made me think that the fear starts at the top, and the security apparatus, the propaganda, the gulags—all of it—amounts to little more than an attempt to placate that fear. For one thing, there are the consequences: Losing power in a totalitarian environment usually means torture and death, even if you escape.

And power could be lost at any time. The State’s authority rests on a fragile base: The consent of those who are ruled. Left to their own devices, they’re fickle. But ruled with an iron fist, any crack in the State’s power can quickly fracture the entire edifice. I wonder if Kim Jong-Un knows this, and lays awake and night wondering when it will all shatter. Maybe he buys his own propaganda and sleeps like a baby. I hope he doesn’t survive long enough for us to find out.

The Revolution Will First Be Televised

But this is what makes the documentary truly compelling, beyond the novelty value of the smuggled footage. The State is no longer the only one peddling images. There’s Ishimaru’s network of covert reporters, but smuggled DVDs and thumb drives full of movies and TV shows do a brisk business.

The documentary accompanies Jeong Kwang-Il, a defector living in South Korea, on one of his regular drives up to the Chinese border to drop off his contraband. We see him meeting, at night, with a border guard he’s bribed. Jeong demonstrates how to work a new item: hand-cranked radios.

These are especially important, because other defectors have organized a radio station in South Korea, Open Radio North Korea, aimed specifically at those they left behind. Still more of them—we’re told there are more than 20,000 defectors living in South Korea alone—broadcast On My Way to Meet You, a slick-looking variety show that, without the narrator describing the action, looks much like much of the rest of South Korean TV. This is a compliment: These are people who’ve suffered terribly, and they speak of that, but life afterward is possible. They sing, they get goofy, they experiment with different hairstyles and makeup and fashion.

Which brings up another fascinating point: Something as simple as a run-of-the-mill travel program can be a powerful agent for change in the context of North Korea, where its audience is seeing an entirely different world than the one they’ve been told is all there is. Watching two teenagers discuss what’s going on in a DVD of a group of middle-aged South Koreans touring Europe is simultaneously tragic and endearing.

Heroes of the Revolution

I was living in Seoul in 2006, when Kim Jong-Il—father of the current putz-in-chief—tested a nuclear weapon. I didn’t react particularly reasonably, though I managed to make it through my day’s work. While waiting on a bus near city hall and wondering whether to pack my bug-out bag as soon as I got back home, I noticed a mass of people marching down one of the main thoroughfares. The cops were out in force. After a moment’s panic, I realized the cops were just minding traffic and the crowd was demonstrating on behalf of the disabled. A generation before, not too far south of there, the military rulers of South Korea had massacred people doing much the same thing.

The memory recurs for me now because, as powerful as State political theater might be, there’s an even stronger message: It doesn’t have to be like this. There’s nothing inherent in the North Korean situation that means the North Korean people have to suffer like this. It can get better, much better, and relatively quickly. More and more people are sending this message—the defectors’ networks, sure, but also the smugglers of SIM cards and the people on the inside scratching out spheres of private action. And more and more of it is getting through.

The fact that the images are now flowing both ways, though, is cause for reflection. There’s the issue I mentioned earlier, of the consent of the governed. It sounds very simple: cease to consent, and go in freedom. But then few of us have ever been subject to people who will “kill as many people as necessary.”

But for those who are? They find themselves confronted with nearly impossible dilemmas: Do they preserve their own lives despite the oppression? Do they sacrifice their lives in what might turn out to be a pointless act of defiance? Do they flee, knowing that—at least in North Korea—the punishment is likely to fall on family members (one defector describes being shipped off to the gulag because of the actions of a third cousin he didn’t even know)? What about those who wind up in the police or army? When they’re told to haul this guy off and torture that woman, do they choose to be the agents of oppression—or decline and immediately become victims of it?

This is the real meat of Secret State. Not the ample opportunities it provides for histrionics about the broader world context (like, say, juxtaposing the gulag with America’s prison population). The story here is, in every sense, life on the street, at the level of individuals facing down these dilemmas and forming up with others who’ve had to weigh these same questions and take these same risks.

Which means this documentary shows us real heroes, and I generally take pains not to use that word. Those who recorded the footage and smuggled it out, those who smuggle the videos in and around, the people bringing in and distributing cell phones, the women refusing to be cowed by a brutal regime and its brutish enforcers—all of them became heroes the instant they decided not to comply any longer. Even the former propagandist eventually came out on top of a situation that requires heroism simply to make decisions that, from the comfort of a blank, uncensored word processor document, can be made to look relatively simple.

So it’s ultimately encouraging, this documentary, though the hope comes at a terrible cost.

And at the risk of looking foolish later, I’d like to offer a prediction: North Koreans are unlikely to be freed by U.S. diplomats, U.N. sanctions, or a sudden change of heart (or maybe discovery of one) by China’s ruling party. North Koreans are going to be freed by North Koreans, like the defector who tells us, “I was very scared, but I thought it’s better to die than live like an insect.”

He wasn’t the first person to think that. And he won’t be the last.

ABOUT MICHAEL NOLAN

Michael Nolan is the managing editor of The Freeman.

Freedom of Association is No Excuse to Target Gays by Casey Given

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A recent spate of proposed laws protecting business owners’ right to discriminate against homosexuals has reignited a longstanding debate in the libertarian community. Under the guise of protecting “religious freedom,” 13 states have each introduced bills over the past few months preempting the State from forcing employees to service individuals if they believe doing so conflicts with their beliefs. While none of the bills specifically mention homosexuality, each one effectively only applies to gays since most other classes (e.g. race, sex, religion) are protected under the federal Civil Rights Act.

Many libertarians have cheered the proposed laws, citing the small-government principle that the State has no business interfering in individuals’ private contracts. LewRockwell.com’s Lawrence M. Vance voiced his support of Kansas’s recent attempt, while admitting it “doesn’t go far enough,” reasoning that “[i]n as much as the bill legalizes—if only in a small degree—the freedom to discriminate, such provisions in it should be welcomed.” Such an instrumentalist approach to protecting freedom of association is strategically flawed, as the current bills’ targeting of gays suggests bigoted motives that libertarians best not associate with.

Legally, businesses in almost all of the 13 states in question already have the right to deny gays service. As mentioned previously, sexual orientation is not currently a protected class in the Civil Rights Act. While 21 states have compensated for this federal gap by enacting LGBT nondiscrimination acts of their own, no state considering the current legislation is in the number except Oregon. Thus, these anti-anti-discrimination bills do not expand freedom of association but merely serve as redundant reassurance of the right to not serve gays—effectively targeting the LGBT community.

While almost every libertarian would defend an individual’s right to associate (and not associate) with whomever they choose, that’s not quite the issue with the current class of bills. Their implicit targeting alienates one demographic, making them look like not-so-subtle expressions of bigotry. The freedom of association issue looks like a red herring here.

As David E. Bernstein explained in a 2010 Cato Unbound essay, “I would be troubled if there was a sudden popular move to repeal antidiscrimination legislation, if it were unaccompanied by broader libertarian political trends, because it would suggest that opposition to such laws arose from hostility to minority groups, not from opposition to Big Government.” Granted, Bernstein is speaking about repealing antidiscrimination laws whereas the issue at hand is enacting laws that protect discrimination, but the underlying point is analogous. Namely, a libertarian push for protecting discrimination suggests its advocates are motivated by bigotry, regardless of whether it is the case or not. This point is only amplified in the present case. And perceptions matter.

Fortunately, the issue may be moot soon enough thanks to the massive public outrage that has accompanied these bills, prompting some of the most conservative state legislatures and governors to reject the measures. On February 18th, four bills in South Dakota, Kansas, Idaho, and Tennessee failed to pass their state legislatures. One week later, Arizona Gov. Jan Brewer vetoed another attempt that captured national attention.

Libertarians have a long history of being ahead of the curve on gay rights. The Libertarian Party has supported marriage equality since its founding in 1971, decades before the two major parties dared to address the topic. Associating with an apparently homophobic push to protect the right to discriminate against gays that already exists would suddenly put the movement on the losing side of the question of LGBT equality.

ABOUT CASEY GIVEN

Casey Given is an editor and political commentator with Young Voices, a project aiming to promote Millennials’ policy opinions in the media.

Bitcoin Comes to Wall Street by Jeffrey A. Tucker

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How do new technologies become part of life experience? They don’t drop from heaven, completed and ready to use. They enter into our world in marginal steps through real-time markets. These markets are full of play, experimentation, success and failure, price discovery, and technological fits and starts. Without this process, technology would remain forever in the lab or the warehouse.

It is this way with cryptocurrency and bitcoin in particular. I’ve been convinced for more than a year that this technology is the future of money and payment systems. It is so obviously better in every sense. But getting from here to there requires a messy process of adoption in real time. The demise of Mt. Gox is no exception.

This is why I was just thrilled to experience two wonderful evenings at the Bitcoin Center in New York City’s financial district. The address is 40 Broad, right on the first floor, right in the heart of Wall Street. It is inspiring just to the see the sign above the door. Bitcoin Center opened only weeks ago, in early February. It’s a beautiful symbol of a coming of age.

The Bitcoin Center sponsors lectures and debates, shows off new technologies for ATMs and mining equipment, and even has a trading pit once a week. I rang the bell for the session last week, following a general lecture on the topic. It was indescribably fun! It’s true that anyone can trade bitcoins anywhere, anytime, but there is just something wonderful about creating an old-world style environment of buying and selling with posted prices on a board. It was my first time to do this on a trading floor and it was just fantastic.

My second night at the Bitcoin Center featured a debate with Andrew Schiff of Euro-Pacific Capital. He is more skeptical of bitcoin because of fears over government intervention, security issues, and also the proliferation of so-called alt-coins.

I too worry about government—governments make a mess of everything—but this is not bitcoin’s problem. It’s a problem of meddlesome bureaucrats. The beautiful thing about bitcoin is that it is designed to persist and thrive even in the face of powerful interests that oppose it. It lives on a distributed network that is controlled by no one in particular so that there is no single point of failure. It can outlast any attempt to control or suppress it.

As for security, here again, this is not an issue for bitcoin but for the builders of tools around the bitcoin ecosphere. It is not for everyone. It is vulnerable to user error, just like email or cell phones in the early days—or the app economy today. I look forward to ever-better and ever-more accessible tools emerging over the coming year.

As for alt-coins such as Litecoin, Dogecoin, and a thousand others, I see them as a sign that competition is coming to the monetary realm after being shut out for a century. We are finally able to observe how money will emerge in an authentic market setting. This is posing serious challenges for theorists and practitioners.

Think of this: One year ago, bitcoin was still just a narrow interest among a techie crowd. There were a few businesses organizing around it, but not that many. The exchange rate to the dollar was about $20 and people were screaming that it was a bubble.

Today, there are thousands of businesses growing up around cryptocurrency. Bitcoin’s price peaked at $1,250, and though it has fallen by half since then, that hasn’t inspired too much hand-wringing. People now understand that volatility is a normal feature of such an emerging and edgy technology.

It’s helpful to think of bitcoin in terms of historical analogies. Consider electricity. In the 1880s, the rich were installing it in their homes. It was rather scary. It seemed dangerous and it probably was. Would it start a fire? Sometimes it did. Was it really an improvement over candles? Some people openly denied it. Anyone taking the risk early on needed to know plenty of technical details about how it worked and how to use it.

Today, we just flip a switch and forget about it. It will be the same with bitcoin. Today everyone is puzzled about how it works. I end up spending most of my talks these days going over technological basics. It’s all a bit mind-blowing because we are not used to thinking in terms of distributed networks, peer-to-peer exchange, cryptography, and the like. It seems like a new world and it is.

Another historical analogy to consider is railroads. From the 1870s to 1900, most of the headlines concerning railroads were about volatile stock prices, graft, stock fraud, malfunctioning trains, crashes, hazards and dangers, and political scandals. Often lost in this blizzard was the big picture: Railroads were changing the world dramatically.

As we follow the continued march of cryptocurrency, we should remember the big picture. Yes, there will be mishaps, evidence of corruption, lost money, ups and downs in price, and messes all around. This is the way markets give birth to new worlds.

It could be that bitcoin is just the beginning. The technological foundations of this monetary system are showing us new ways to distribute other forms of information relevant to markets, such as contracts, insurance, financial derivatives, futures, and asset allocations in companies—all based on the same system of peer-to-peer exchange without having to rely on trusted third parties.

Technology is made by human hands and grows to become part of our lives through human experience. It is a beautiful anarchy that eventually leads to unseen and unpredicted forms of order. A growing economy needs to permit the process to work. To attempt to control it is to shut down the source of its life and creative energy.

What do you think about the future of bitcoin? Check out our debate in this month’s Arena.

ABOUT JEFFREY A. TUCKER

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Jeffrey Tucker

Jeffrey Tucker is a distinguished fellow at FEE, CEO of the startup Liberty.me, and publisher at Laissez Faire Books. He will be speaking at the FEE summer seminar “Making Innovation Possible: The Role of Economics in Scientific Progress.”