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The Lighthouse®

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Volume 9, Issue 49: December 3, 2007

  1. The Rulers versus the Ruled
  2. Venezuelans Reject Chavez’s Attempted Power Grab
  3. Liberty Dollars
  4. The Costs of Politicized Roads

1) The Rulers versus the Ruled

It is common in some circles to blame government folly not on political leaders, but on those who brought them to power. According to this notion, the buck stops not with Harry Truman or Herbert Hoover or George W. Bush, despite their claims to have taken full responsibility for the consequences of their actions; instead, it is various groups of voters who bear responsibility for, respectively, the ordering of U.S. troops to the Korean peninsula, the worsening of the U.S. economy from 1929-33, and FEMA’s bungling in the wake of Hurricane Katrina. As H. L. Mencken once quipped, “democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

In his latest article, Independent Institute Senior Fellow Robert Higgs rebuts this notion and explains some of the institutional constraints, such as campaign finance restrictions and other barriers to effective third-party campaigns, that prevent voters from having greater ability to vote for the types of candidates they might strongly prefer.

“If the people at large are to be blamed, they must be blamed not for the way they cast their ballots, but for their toleration of the whole predatory political set-up that shamelessly passes itself off as a regime ‘of the people, by the people, for the people’—surely one of the most successful Big Lies of all time,” writes Higgs. “Yet the people have been so massively miseducated, propagandized, cowed, and treated with cynical disregard of their rights for so long that, for the most part, not only have they lost all capacity to stand on their own feet, but, worse, they have in most cases come to love the Big Brother whose boot is grinding their faces.”

“Blame the People Who Elected Them?” by Robert Higgs (11/28/07)

Neither Liberty nor Safety: Fear, Ideology, and the Growth of Government, by Robert Higgs

Please join us this Thursday, December 6, in Oakland, Calif., as Robert Higgs answers the question, “Why Are Politicians Always Trying to Scare Us?”

Event information


2) Venezuelans Reject Chavez’s Attempted Power Grab

On Sunday, Venezuela’s voters narrowly defeated President Hugo Chavez’s referendum on their country’s constitution, 51 percent to 49 percent. Among other changes, Chavez’s 69 proposed amendments would have strengthened his grip on the country by enabling him to declare a state of emergency for unlimited periods; to curtail the financial operations of the media and other nongovernmental watchdog groups; to exert more control over the central bank; and to expropriate private property more easily. The ballot’s amendments to end term limits on the president and make it harder to recall him would have opened to the door to Chavez becoming president for life.

In a November 24 op-ed for the Los Angeles Times, Independent Institute Research Fellow William Ratliff wrote that an electoral victory for Chavez would have been “bad not only for Venezuela but for the rest of Latin America.”

“Chavez-style demagogues—Chavistas—are taking control throughout the region, persuading frustrated voters to jettison their often unresponsive democratic governments for the promise of something better, even if that something is a populist dictatorship,” Ratliff wrote. Chavez came to power because the previous government failed to serve popular interests, but “there is one decisive difference between the democracy that opened the door to Chavez and the new system Chavez is building,” Ratliff continued. “While the former increasingly failed many or most in the country, its leaders could be—and finally were—voted out of power in reasonably honest, contested elections.”

“Venezuela’s Path to Self-Destruction,” by William Ratliff (Los Angeles Times, November 24, 2007)

More by William Ratliff

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


3) Liberty Dollars

Should the coinage of money be politicized? Two episodes, one from 1913 and one from 2007, suggest that coinage already is politicized, Independent Institute Senior Fellow Alvaro Vargas Llosa writes in a recent column.

On November 14 of this year, the FBI raided the Evansville, Illinois, headquarters of NORFED, a company that sells coins and paper certificates backed by gold and silver and that calls for the repeal of the Federal Reserve Act and Internal Revenue Code. Although NORFED has operated openly for years, it recently released of a coin bearing the likeness of Republican presidential candidate Ron Paul, a supporter of a gold-backed dollar and an opponent of the Federal Reserve System.

According to Vargas Llosa, the Federal Reserve was created in 1913 to guarantee the convertibility of bank deposits into currency on demand, but a few decades later it became the monopoly issuer of currency. Overall, the Fed has fostered more financial instability than stability, he argues. “In this context, Norfed’s attempt to prove to the Fed that the market is ready to trust private currency backed by gold is a welcome occasion to take a second look at some of the economic institutions we take for granted,” Vargas Llosa continues. “Naïve and utopian? You bet. But that is probably because of how far the world has moved from the time when money was too important to be left to the politicians.”

“Liberty Dollars,” by Alvaro Vargas Llosa (November 28, 2007) Spanish Translation

Center on Global Prosperity (Alvaro Vargas Llosa, Director)

Spanish-language blog


4) The Costs of Politicized Roads

Despite catastrophes such as the collapse of Minneapolis’s Interstate 35W bridge last August, politicians are likely to continue to use highway funds for political pork—for the simple reason that they have strong incentives to do so, and few incentives not to do so. With about 27 percent of the nation’s roadway bridges identified by federal authorities as “deficient,” the time is ripe to reconsider government ownership of the roads—and hence government responsibility for their maintenance, according to Independent Institute Research Fellow John Semmens, contributor to the noted book, Street Smart: Competition, Entrepreneurship, and the Future of Roads.

With government ownership comes lobbying by special interests, such as the trucking industry, which has the power to shift costs it imposes (via trucks’ disproportionate wear and tear on roadways) from itself to the general public. “The consequences include accelerated wear on the roadways, diversion of freight traffic from rail, and increased roadway congestion,” writes Semmens in the Minneapolis Star Tribune. “All of these consequences raise the cost of transportation and reduce the efficiency of the road system.”

The solution to the inefficiencies created through cross-subsidization is privatization. “Private investors need to recover their costs in order to stay in business. Undercharging some customers and neglecting maintenance are chronic and inherent when the government runs things. They are rare news items when private firms run things,” concludes Semmens.

“Adopt a Highway: The Case for Privatizing Our Roads,” by John Semmens (Minneapolis Star Tribune, 11/23/07)

Street Smart: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth


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