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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 12, Issue 40: October 5, 2010

  1. The Economic Case against Obama’s New ‘Stimulus’ Proposal
  2. The Culture of Violence in the American West
  3. U.S. Gains in Afghanistan Mask Taliban’s Hidden Strengths
  4. Ecuador Police Protest Government Mismanagement and Arrogance
  5. This Week in The Beacon

1) The Economic Case against Obama’s New ‘Stimulus’ Proposal

If enacted, President Obama’s proposal for $50 billion more in federal “stimulus” spending, like previous attempts at government pump-priming, would fall flat on its face. It is based on the belief that a drop in consumer spending is what ails the economy. In reality, the ups and downs of the business cycle are driven by investment spending, not by consumption spending, explains Independent Institute Senior Fellow Robert Higgs in a new op-ed.

As a percentage of GDP, private domestic investment fell 36 percent from its peak in the first quarter of 2006 to its trough in the second quarter of 2009, according to Higgs. By contrast, personal consumption reached an all-time high in the second quarter of 2010. The federal government should stop worrying about consumption and focus instead on removing impediments to private investment.

“Our crying need at present is for a robust revival of private long-term investment,” writes Higgs. “Consumption-oriented government ‘stimulus’ programs, threats of tax increases for entrepreneurs and business owners, and costly regulatory onslaughts breed fear and uncertainty and thus ensure a protracted period of economic stagnation.”

“Why ‘Stimulus’ Doesn’t Stimulate,” by Robert Higgs (The Sacramento Bee, 10/1/10)

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

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2) The Culture of Violence in the American West

Contrary to popular perception, the Old West was much more peaceful than American cities are today. Land clubs and wagon trains adopted constitutions that defined and protected property rights. Mining camps and cattlemen’s associations also developed methods to enforce property rights. Movies and popular fiction about the era often depict widespread lawlessness, but they contradict historical research.

The real culture of violence on the frontier during the latter half of the nineteenth century sprang from the U.S. government’s policies toward the Plains Indians, explains economist Thomas J. DiLorenzo in the cover article of the latest issue of The Independent Review. Before the U.S. Civil War, the whites’ main method of acquiring land from American Indians was through negotiation. After the war, political pressures mounted to complete the first transcontinental railroad quickly and cheaply. What General William Tecumseh Sherman called the “final solution” to the Indian problem enabled white settlers and railroad corporations to shift costs for completing the Union Pacific onto the hapless Plains Indians and American taxpayers at large.

From 1862 to 1890, the U.S. government killed tens of thousands of American Indians—perhaps as many as 45,000. Had certain politicians not held power, and had the Civil War not replaced the militia with a standing army, the carnage might have been avoided. “Many whites preferred the continuation of the peaceful trade and relations with Indians that had been the norm during the first half of the nineteenth century,” writes DiLorenzo. “Canadians built a transcontinental railroad without a Shermanesque campaign of ‘extermination’ against the Indians in Canada.”

“The Culture of Violence in the American West: Myth versus Reality,” by Thomas J. DiLorenzo (The Independent Review, Fall 2010)

The Independent Review (Fall 2010)

Special offer for first-time subscribers: Subscribe online to The Independent Review and receive two complimentary issues—the next six issues for the price of four!

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3) U.S. Gains in Afghanistan Mask Taliban’s Hidden Strengths

The recent U.S. military offensive on Kandahar was designed partly to help achieve a more favorable settlement with the Taliban during any peace talks, as General David Petraeus has intimated. However, the Taliban possess strengths that few in the United States have acknowledged openly—strategic advantages similar to those the North Vietnamese held during negotiations that led up to the U.S. withdrawal from Vietnam—according to Independent Institute Senior Fellow Ivan Eland.

Like the North Vietnamese, the Taliban have time on their side. They need only do what is necessary to promote a U.S. withdrawal. “Thus, the Taliban have incentives to negotiate while continuing to fight, stalling while they build strength and even more pressure builds in the United States to bring the boys and girls home,” writes Eland. “And, of course, taking the example of Vietnam, the Taliban know that once the U.S. leaves, it will probably not come back to rescue its client regime—thus making a bogus peace deal also attractive to the Taliban.”

Moreover, the Taliban can broaden their support by portraying their cause as a fight for national liberation against a foreign invader. In fact, they may have begun employing this approach. Though supported mostly by ethnic Pashtuns, the Taliban have been gaining support from Tajiks and Uzbeks in the country’s northern and western regions. The Taliban seem to be taking a lesson from the North Vietnamese experience four decades ago.

“The Taliban: Forced Into Negotiation While Winning,” by Ivan Eland (9/28/10) Spanish Translation

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

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

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4) Ecuador Police Protest Government Mismanagement and Arrogance

Last week’s protests in Ecuador—sparked by policemen in Quito who attacked President Rafael Correa with canisters of tear gas—revealed a country deeply troubled by the government’s new austerity measures. The protests did not, however, show a government on the verge of collapse: there was no coup attempt, and the military and mainstream political parties gave no sign that they wanted Correa forcibly removed, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

The government has itself to blame for its fiscal troubles. It doubled public spending and defaulted on its foreign debt, thereby “scaring off investment dollars with revolutionary hostility,” writes Vargas Llosa.

Correa has also alienated segments of the populace by illegally dissolving Congress and replacing it with a new assembly that rewrote the constitution so Correas could seek re-election—a page from the playbook of Hugo Chavez and Evo Morales. Ultimately, it is this Bolivarian populism that “is the primary source of political instability in Latin America today,” Vargas Llosa concludes.

“Ecuador: The Coup That Never Was,” by Alvaro Vargas Llosa (10/1/10) Spanish Translation

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

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

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

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5) This Week in The Beacon

Stay informed. Get heard. Read and comment on the Independent Institute blog.

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