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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 11, Issue 33: August 17, 2009

  1. Slashing Illegal Immigration: The Open-Border Solution
  2. Audit the Fed, Then Abolish It
  3. Return of Displaced Iraqis Runs Risk of Sparking Civil War
  4. How Hugo Chavez Exports His Radicalism
  5. This Week in The Beacon

1) Slashing Illegal Immigration: The Open-Border Solution

Legions of U.S. citizens periodically go ballistic over illegal immigration from Mexico. Nevertheless, despite their boisterous and well-publicized complaints, their representatives in Washington, D.C., have avoided enacting strong measures to address the issue. This disconnect suggests that fresh ideas are needed. One novel approach would completely re-conceive immigration policy: Rather than clamping down on the U.S.-Mexico border, it would allow Mexican nationals to cross the border freely, subject to ordinary law-enforcement controls. The problem of illegal immigration would virtually vanish, but would this create more problems than it solves?

Although many Americans assume that opening the border would wreak havoc on U.S. institutions, the experience of free migration within the European Union suggests otherwise, argue Jacques Delacroix and Serge Nikiforov in the summer issue of The Independent Review. The effectiveness of Europe’s policy is evident across the continent, from a café in France run by an English couple to Parisian hotels with Portuguese concierges to the ubiquitous Italian restaurants run by real Italians. “This kind of smooth integration is remarkable given that several of the member countries suffered grievously at the hands of other member countries within living memory,” Delacroix and Nikiforov write. “Nothing approaching such a legacy of hostility exists between the United States and Mexico.”

On balance, opening the U.S.-Mexico border would help both countries, Delacroix and Nikiforov conclude. For example, the structural problems that plague Social Security and Medicare might be alleviated rapidly by an influx of highly skilled Mexican workers into the U.S. labor market and an acceleration of the trend of American seniors retiring south of the border. Moreover, the open-border approach would, the authors write, “put an immediate end to the intangible but nevertheless real ethical damage inflicted to our institutions by the flouting of our laws by millions of immigrants and the even more numerous Americans who abet them.”

“If Mexicans and Americans Could Cross the Border Freely,” by Jacques Delacroix and Serge Nikiforov (The Independent Review, Summer 2009)

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2) Audit the Fed, Then Abolish It

What’s ahead for the agency tasked with setting the growth rate of the nation’s supply of money and credit – the Federal Reserve System? Three documents -- signifying two very different approaches to the Fed -- are making the rounds and might shape the health of the U.S. and world economy for years to come. The first approach, represented by H.R. 1207 in the House of Representatives and S. 604 in the Senate, calls for an audit of the Fed. The second approach, represented by a petition signed by many revered academic economists, calls for Congress and the executive branch to reaffirm their support for the Fed’s independence.

Proponents of each approach suggest plausible criticisms of the other: the Fed’s “independence” (such as it is) has contributed to economic mismanagement, yet greater political “accountability” would result in even worse mismanagement. And both sides would leave intact the same dangerous policymaking apparatus that has led to cycle after cycle of boom and bust. Thus, as Independent Institute Senior Fellow Robert Higgs argues, a third approach warrants consideration: audit the Fed, and then abolish it.

Higgs’s not-so-modest proposal is long overdue. The Fed exemplifies the pitfalls of central planning by a small group of bureaucratic elites, and its economic levers are too powerful to entrust to political representatives. “A secretive central planning body working at the very heart of the economy – its monetary order – cannot produce money and set interest rates better than free-market institutions,” writes Higgs in a recent op-ed. “It is also high time that the Fed be not only audited and required to reveal its inner machinations to the people who suffer under its misguided management, but abolished root and branch before it inflicts further centrally planned disaster on the world.”

“Accountability Needed at Fed,” by Robert Higgs (McClatchy-Tribune News Service, 8/5/09)

Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, by Robert Higgs

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3) Return of Displaced Iraqis Runs Risk of Sparking Civil War

Before the U.S. troop surge in Iraq in 2007, Sunnis displaced Shi’i from predominantly Sunni towns and vice versa. This ethnic cleansing arguably reduced sectarian violence more than did the troop surge. Now, however, the Shi’i-dominated Iraqi central government is trying to reverse that course by encouraging refugees to return to their native towns and villages. In doing so, it is playing with fire and may spark a full-blown civil war after U.S. troops depart from that country, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty.

The problem stems in large part from the relative size of a minority population surrounded by a potentially hostile majority, according to Eland, who researched the history of ethnic and religious strife for his book Partitioning for Peace: An Exit Strategy for Iraq. “Previous episodes of ethno-sectarian conflict show that small minority populations usually don’t threaten the security of the majority but large minority populations do,” Eland writes in his latest op-ed. “In other words, for returning refugees, the cliché that there is ‘safety in numbers’ is dead wrong.”

The Iraqi government should leave well enough alone, Eland cautions. Instead of restoring Iraqi towns to their previous demographic compositions, the government should consider compensating families displaced by ethnic and religious strife. It should also redraw its provincial map to reflect the reality of Iraq’s partitioned enclaves and let those enclaves play a greater role in providing their own security. Only by decentralizing governance can fractious Iraq “survive in the long run without U.S. forces to hold it together,” Eland concludes.

“Iraq: Good Fences Make Good Neighbors,” by Ivan Eland (8/17/09)

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

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4) How Hugo Chavez Exports His Radicalism

Venezuelan president Hugo Chavez has become so powerful throughout Latin America that even center-right leaders in other countries tread gingerly, lest they antagonize their own Chavez supporters. Now Peru is in the crosshairs of Chavez and his allies. Bolivian president Evo Morales, for example, recently called upon indigenous Peruvians to rebel against their national government, and Nicaraguan president Daniel Ortega has granted political asylum to a Peruvian rebel implicated in the deaths of dozens of policemen. How does Chavez manage to exert such influence?

In effect, Chavez licenses his product, according to Alvaro Vargas Llosa, Senior Fellow at the Independent Institute. “Chavez’s strategy relies on a network of political franchises across the region: he sells potential allies the right to exploit his ‘21st-Century Socialism’ brand in exchange for political subservience,” writes Vargas Llosa in his latest op-ed. “Each franchisee adapts the products to local circumstances, which might call for exacerbating ethnic tensions (the Andes), tapping nationalistic resentments against neighboring countries (South America), or conjuring anti-American ghosts (Mexico and the Caribbean).”

Chavez is adept at creating the illusion of majority support. He has shut down 285 radio and TV stations and forced the removal of hundreds of judges. He has managed to delegitimize constitutionalism and private property. Chavez faces growing economic obstacles and growing voter fatigue over his “Bolivarian Revolution,” but unless Latin Americans vigorously defend their own freedom, writes Vargas Llosa, “the region will lose the 21st century just as it lost the 20th.”

“Hugo Chavez’s Imperial Chess Game,” by Alvaro Vargas Llosa (8/12/09) Spanish Translation

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

Lessons from the Poor: The Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa

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5) This Week in The Beacon

Below are links to the past week’s postings to our blog, The Beacon.

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