Doug Casey on American Socialism


(Interviewed by Louis James, Editor, International Speculator)

[Skype rings. It's Doug, as expected.]

L: Hi, Doug. I got the Alan Colmes article you sent. I can see why it got your goat – guess you've got a good rant in mind?

Doug: I don't approve of rants. It's true that I have strong opinions, and I'm not afraid to express them – but a considered and defensible opinion, even if it's delivered with conviction, is essentially different from an emotional outburst.

L: Okay, sorry. No rants. But if the other side starts name-calling, we can be forgiven for a little emotion on our side – how does one answer a snarky dismissal of anyone who doesn't agree with so-called progressives, labeling them "regressives"?

Doug: I'm certainly not above delivering an appropriate and well-deserved insult. An insult is really all that the lame attempts of progressives to shame people into voting for Obama deserve. From a long-term perspective, it certainly doesn't much matter who wins the coming election; Romney would be just as great a disaster for what's left of America as Obama, just in slightly different ways, with different rhetoric.

It's interesting how certain breeds of statist are now re-labeling themselves as "progressives." I guess they like the sound of the root word – progress – even though they only want progress towards collectivism. They used to call themselves "liberals," a word which in America used to stand for free minds and free markets. But they appropriated it and degraded it – classical liberals had to rechristen themselves "libertarians." World-improvers, political hacks, and busybodies in general are excellent at disguising bad ideas with good words, ruining them in the process.

It's said that "Sticks and stones may break my bones, but words can never hurt me." But that's actually untrue; propaganda is a very effective weapon. As Orwell pointed out, if you control the language, you control people's thinking; and if you control people's thinking, you control their actions. So I despise the way these types manipulate words.

As for the case at hand, one of the things that annoys me most about Colmes' vapid article is his dishonest and misleading, albeit conventional, defense of the New Deal – America's first great lurch towards socialism. He defends all the harm it's done as a wonderful thing. He repeats the fiction that the New Deal rescued the economy from the last depression. It actually made the Depression deeper, and made it last longer.

L: Do tell.

Doug: Well, to start with, Colmes, a self-appointed whitewasher of American socialism, begins by resting his case on the claim that it is American socialism that has made America exceptional. It's quite a bold assertion, since socialism as well as fascism are antithetical to everything that was good about America. He really is a cheeky bastard.

L: He calls his socialism "liberalism."

Doug: Yes, but that too is an Orwellian perversion. As always, we should start with a definition. Around the world, you ask people what a liberal is, and they say something that at least relates to the word's original meaning: liberals favor liberty. And that's not just the civil liberties defended by the ACLU, but also economic liberty – meaning freedom to engage in free trade with others. The free market.

But back in the 1930s, socialists like Norman Thomas started to realize that they were never going to persuade the majority of Americans to accept socialism outright, so they changed the name and embarked on a deliberate campaign to implement their agenda, one piece at a time, calling it liberalism. And who could be against that?

L: I've read that most of Thomas' 1932 platform has now become law in the US.

Doug: I believe that's true. Take a look at this Word document [it will download automatically]. Actually, the same is true of Marx's Communist Manifesto. But back to today, Colmes' claim is absolutely ridiculous. Social Security, Medicare, and progressive income taxes have not made America exceptional, but just the opposite; they've made it like all the other socialist and fascist countries that cover the face of the globe like a skin disease. They are burdens that have slowed the economy and distorted people's incentives and ideas.

These programs have, perversely, hurt the poor – the very people they're supposed to help – the most. They've acted to corrupt them and cement them to the bottom of society. They've destroyed huge amounts of capital, which would otherwise have raised the general standard of living, redirecting it from production toward consumption. These coercive ideas all originated and were first implemented in Europe before so-called liberals foisted them on Americans, in the name of freedom. It's quite Orwellian, the way they've twisted concepts to mean the opposite of what they once did.

L: Some people would argue that things like Social Security liberate them – free them from fear of poverty in old age.

Doug: That claim shouldn't be worth answering – but it must be answered, because Boobus americanus believes it. It's a classic "big lie." Say it often enough, and people think it's true. In fact, Social Security acts to impoverish the country, by destroying the incentive to save.

L: How so?

Doug: By taking almost 15% of a person's wages right off the top, Social Security makes it much harder for a poor person to save money. Worse yet, it makes people think they don't need to save for themselves; it gives them a false sense of security. Even worse is that the money never really belongs to the presumed recipient; it's simply another unsecured obligation of a bankrupt government.

Social Security payments should at least be set aside as discrete accounts in each person's name, and become assets for them. If that money were placed in an individually owned pension plan, with just average management, the results would be many times what people now hope to get. And the plan wouldn't be a burden to future taxpayers. Social Security is, in fact, just a gigantic Ponzi scheme, where the next generation of young people is forced to support the last generation of old people.

Worst of all, the program causes people to be irresponsible. This is a disaster, because a free society can only exist when everyone takes personal responsibility seriously. It's a swindle, and it corrupts everyone. No wonder parents can no longer rely on their own children to support them in old age. Maybe the Chinese will lend the US government the money it needs to pay its Social Security obligations…

But the numerous practical failures of a program like Social Security are not the main problem.

The primary problem with a scheme like Social Security is that it's not voluntary; it's coercive, which makes it unethical. You can't force people to do what you think is right and then claim to be liberating them. Alleged freedom from fear of poverty in old age in exchange for theft of wages in the present – and the correct word for taking people's money without their consent is "theft" – is not liberal in any defensible meaning of the world. It's brute, "might-makes-right" power clothed in noble-sounding words.

L: Colmes says that Social Security keeps 40% of seniors above the poverty line today, and "helps families with disabilities and those who have lost loved ones." That's a bad thing?

Doug: No one seriously thinks they'll be able to have a decent quality of life on Social Security retirement income alone. Why do you think so many senior citizens are working at Walmart or the like? Colmes is committing the same error Bastiat pointed out 200 years ago; choosing to value immediate, direct, and visible benefits, but ignoring the delayed and indirect costs, which only become obvious later.

The long-term costs of Social Security, Medicare/Medicaid, food stamps, and so forth include bankrupting the country, among other economic consequences. But even more disturbing and damaging is the degradation of once self-reliant people to subservience and dependence, which is what happens when government assumes responsibilities that adult individuals should bear themselves.

For example, Social Security disability benefits are being used as an alternate income source by the unemployed. As of August, 2012, there were about 10.8 million people collecting disability income – that's a larger number than the entire population of most US states, and up from 8.1 million in 2007, when the Greater Depression began. It can be a great scam, claiming PTSD, unprovable back pain, or a mood disorder. There's a whole class of ambulance-chasing lawyers that takes these cases on contingency.

L: What about the individuals who try and can't bear the responsibilities of adulthood?

Doug: The programs exist and have not prevented that from happening; there are plenty of homeless people today. I would argue that most of them are in that position because they've developed bad habits. There would be a lot fewer of them if they didn't get taught from childhood that assuring their own lives and well-being is really the state's responsibility, not their own. The system is failing these people, but again, that's beside the point; two wrongs don't make a right. The whole idea of a government "safety net" is wrong, in principle and practice.

Ideas have consequences in the physical world, and lies, twisted words, and self-contradictory, impossible claims can be extremely damaging. You can't liberate people by putting them in financial chains.

L: I understand the principles, but many people don't – or just don't care. People like Colmes see the parks built by the Civilian Conservation Corps and the infrastructure built by the Works Progress Administration as unmitigated goods, the work given to all the millions employed by the government as life-saving, and the idea of helping those in need to be a moral imperative they don't question.

Doug: The average person has been handed this party line throughout his life, from teachers in government schools to talking heads on TV. He's been discouraged from thinking critically or independently. We have two widely shared myths – that Roosevelt's New Deal cured the Depression and Johnson's Great Society cured poverty – although both beliefs are counterfactual. It's pretty much as Will Rogers liked to say: "It isn't what we don't know that gives us trouble; it's what we know that just ain't so."

Now a new myth is being hatched, that Obama and Bernanke's quantitative easing saved the economy. But that will never catch on; it will be totally debunked over the next few years as they destroy both the dollar and the economy.

Colmes seems completely unaware that government programs have costs. The money used to pay the Civilian Conservation Corps and Works Progress Administration workers had to come from somewhere – where? It's either forcibly taken from current taxpayers, who then can neither enjoy it nor invest it as they prefer – or it comes from taking on debt, which means future taxpayers, who are thereby turned into indentured servants. That money was redirected from whatever uses those who earned it had for it, and put to uses government employees deemed best.

The political process, of course, has a perverse tendency to result in "pork" spending on the most useless, wasteful, and idiotic programs imaginable. It goes for things that are politically productive for the people who control the state, not necessarily economically productive for either society or the taxpayers. But again, this is all secondary to the ethics of the matter; that is vastly more important.

Parks are nice, but should the money to build them have been taken from entrepreneurs struggling to build businesses in the 1930s? Or single mothers in, say, Harlem, struggling to feed their families? It's the little people who can't afford the lawyers and accountants needed to cut tax bills who suffer the most.

Coercing people to do what politicians decide is simply unethical.

L: What about the argument that it's not coercion if the people voted for the politicians who passed the laws that created these programs?

Doug: Essentially another big lie. In the first place, people vote for politicians – who rarely keep promises – not for laws at the federal level. None of these laws were enacted by the people. Second, unless you could get unanimous consent of every person affected, it would still be coercive to people who have committed no crime and want no part of it, and thus unethical.

If 51% of the people vote to enslave 49% of the people, that doesn't make that slavery right. If 99% vote to enslave 1% – something many of the ignorant, torch-wielding masses seem to be clamoring for these days – it's still wrong. Ethics is not a matter of popularity contests.

Anything that society wants or needs can, should, and will be provided by entrepreneurs working for a profit.

L: Can you elaborate on that? It's all fine to criticize stupid ideas, but unless you offer a constructive alternative, what's the point?

Doug: Indeed. We're talking about products and services that people regard as necessary or beneficial for society as a whole, but which they say private enterprise wouldn't provide adequately. Roads, schools, and post offices are frequently cited examples.

Government post offices were a bad idea to begin with – even back in the 1800s when most people thought they were vitally important, a man named Lysander Spooner set up a private company to deliver mail – and do so for less than the government charged. This superior service upset the apple cart, and was outlawed and shut down. Today, everyone knows that UPS and FedEx do a better job than the post office; no sensible person trusts the government when it absolutely, positively has to get there. Between that and email, the post office should have been shut down, rather than propped up, long ago. It now costs taxpayers on the order of $12 billion a year.

Similarly, there's a history of private roads going back to previous centuries. The fist transcontinental highway, the old Route 66, was paved with private money. There are private roads in the US and around the world today. It's simply not true that you need a government to build things that people actually need. You need government roads about as much as you need government cars.

We've covered schools and education. The schools are absolutely the last thing the state should do…

L: What about things like the military, police, and courts?

Doug: Well, I would argue that even those should be handled by the private sector, but I understand that many people can't get away from the idea that these services are core government functions that should not be privatized. That's because they fear they would not be fair and impartial – though it's a cruel joke to think that government courts today are fair and impartial. At any rate, I could live with it if government were limited to these core functions; but police and courts are only a tiny fraction of what government does today.

There's great danger in having the government do anything, quite frankly. But it could be better if more people like Ron Paul or my friend Marc Victor were in office. Check out Victor; he has the potential to be the next Ron Paul – on steroids.

L: Understood: if no one can make a buck providing some good or service, how vital can it be? Anything people actually want will be provided by entrepreneurs, making a profit. And like you, I too like to start by asking what is right, before I ask how much it costs. But most people just don't seem to think this way. That's why I keep coming back to the practical arguments. It seems that, regardless of one's politics, it should matter that the state's coffers are empty.

Colmes argues that by 2022 Obama's Affordable Care Act "will provide coverage to 33 million Americans who would otherwise be uninsured." He doesn't mention that mandated government spending and interest payments have already taken over the entire federal budget. Even now, with a $1.5 trillion deficit, most of the $700 billion for the military, the $227 billion for interest on the national debt and the $646 billion for regular government services is borrowed every year. The whole thing is an impossible pipe dream that absolutely ensures the bankruptcy of not just the US government, but American society itself.

Doug: It seems insane – people wouldn't believe us if we'd written this into a story some years ago.

But you can see the scary truth in the news every day; people in Europe's totally broke and failing economies protest violently in the streets for their governments to spend more money those governments don't have and won't be able to borrow. Colmes exhibits this same breathtaking unwillingness to face the facts. He talks about one in seven people being on food stamps, as though it were a good thing. He talks about how politicians voted to extend unemployment benefits with money they don't have as though that's an unquestionably good thing to do.

L: So is Colmes an evil manipulator or a misguided dupe?

Doug: I don't see how any intellectually honest person can write a long article praising a whole alphabet soup of government agencies without ever once admitting their failure, asking how much they cost, or examining the ethical basis for their existence. So I suspect he's both a knave and a fool.

Colmes' article encapsulates wrong-headedness and willful ignorance in exactly the same way that Paul Krugman and Thomas Friedman invariably do. They're all very destructive people. Since they don't appear to be stupid – in the sense of having low IQs – I'm forced to assume they're ill-intentioned.

L: So… What's in it for him to circulate such obviously biased and misleading opinions?

Doug: Perhaps he's simply a sociopath who gets pleasure from destruction. Or perhaps he's just motivated by fame and money and has found a profitable gig. Despite being an apologist for socialism, the man hosts a talk show and writes books which make him money; he doesn't do it pro bono. He has identified a market and is making money, pursuing his own self-interest, deliberately or unwittingly to the detriment of society.

L: Just like a politician.

Doug: He sees the government as the solution to every problem. But since government is pure coercion by its very nature, you can count on it to do the wrong thing – and often even the exact opposite of the right thing.

L: It's perverse.

Doug: [Laughs] Took the words out of my mouth.

L: Investment implications?

Doug: Nothing specifically related to Colmes. He's just another sign of the degradation of America, yet another data point supporting my view that the US is probably past the point of no return. The place that was once America is going through the wringer, and so is the rest of the world. And the way to deal with that is what we've been saying for some time now: rig for stormy weather.

L: Liquidate, consolidate, speculate, create – and internationalize.

Doug: Right.

L: Okay, well, thanks for another interesting conversation. Maybe we can record another at the upcoming New Orleans investment conference – we'll both be there.

Doug: It'll be fun. I love New Orleans and enjoy Brien Lundin's annual extravaganza. I'll be there for the whole three days. Let's do it.

Oct 03, 2012