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Volume 11, Issue 13: March 30, 2009

  1. Lessons for the G-20 Summit
  2. Perfidy in Pakistan Undermines Security in Afghanistan
  3. Insurance Regulators Force Out a “Good Neighbor”
  4. The Independent Review—Spring 2009 Issue Now Available
  5. This Week in The Beacon

1) Lessons for the G-20 Summit

When the world’s most powerful treasury secretaries and central bankers convene later this week at the Group of Twenty summit in London, they should address head on the primary source of instability in international financial markets: U.S. government policy. The Federal Reserve’s loose monetary policies, the guarantees of mortgages sold by Fannie Mae and Freddie Mac, Congress’s strengthening of the Community Reinvestment Act in 1999—these and other policies and programs from Washington, D.C., have spread financial pathogens to Wall Street, to Main Street, U.S.A., and to the economies of countries across the globe, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

“The G-20 should also bear in mind how much regulation already exists and how ineffective it has been,” writes Vargas Llosa in his latest op-ed. “The list includes enormous powers given to the Federal Deposit Insurance Corporation in 1991 and 2002; the Sarbanes-Oxley Act that expanded the authority of the Securities and Exchange Commission; the obligation of financial firms to value their assets according to current prices, however undervalued they may temporarily be; the 31 pieces of regulation administered by the Fed; and a big expansion of the budgets of all the regulatory bodies in the last five years.”

The G-20 should also address the long-run dangers of government bailouts of major financial firms, which shelter them from market discipline and encourage poor management and excessive risk-taking. As Vargas Llosa puts it, “No regulatory deterrent is more powerful than the fear of failure, but that has been effectively removed from large parts of the financial system.”

“Has the G-20 Learned the Lesson?” by Alvaro Vargas Llosa (3/25/2009) Spanish Translation

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

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


2) Perfidy in Pakistan Undermines Security in Afghanistan

A recent news report claims that Pakistan’s intelligence service, the ISI, provides support for the Taliban and others fighting against U.S. and NATO forces in Afghanistan. Unfortunately, this is hardly a new development, writes Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty, in his latest op-ed.

“Since 9/11, the Pakistani government has fleeced the U.S. government for billions in aid to fight such militants, while at the same time its intelligence arm is funding the same people, providing their arms, and even planning their attacks,” writes Eland. “Everyone seems happy with this bizarre arrangement, except maybe U.S. taxpayers and the families of U.S. soldiers and Afghans killed.”

Barack Obama’s pledge of greater aid to Pakistan can therefore undermine his proposed troop surge for Afghanistan. “Instead of surging forces and trainers to Afghanistan and aid to Pakistan,” writes Eland, “Obama needs to withdraw U.S. forces from Afghanistan —sooner rather than later—and to drastically narrow his goals: to merely guarantee that al-Qaeda cannot use Afghanistan or Pakistan as a launching point for attacks on the United States.”

“The U.S. Should Fear Its Friends,” by Ivan Eland (3/30/09)

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

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

Ivan Eland on C-SPAN2. Interview by Rep. Ron Paul. Air dates: 4/4, 4/5, 4/6, and 4/12.

EVENT: “What President Obama Should Learn from His Predecessors,” featuring Ivan Eland and Andrew Rutten (Oakland, Calif., 4/7/09)


3) Insurance Regulators Force Out a “Good Neighbor”

State Farm Insurance, Florida’s largest provider of homeowners insurance, is leaving the Sunshine State. In its notification to state insurance regulators, the company explained that it could not afford to continue to operate under the state’s regulatory price controls, given the rise of small claims, increasing reinsurance costs, and other factors that would require it to raise its premiums, explains Independent Institute Research Fellow Lawrence S. Powell in a new op-ed.

“An important lesson we can learn from this is that a popular solution—decreasing insurance costs by forcing insurance companies to lose money—is not necessarily wise or effective,” writes Powell. “If such actions continue and more strong insurers flee the state, Floridians will not have the resources to rebuild after the next big storm.”

What was Florida governor Charlie Crist thinking? Perhaps he was betting the federal government would be willing and able to bail out the state’s homeowners after the next big storm. “Given the increasing economic problems across the country, it is unclear how U.S. taxpayers will respond,” Powell continues. “Floridians should not be willing to take this risk.”

“Regulators Force a ‘Good Neighbor’ out of Florida,” by Lawrence S. Powell (Mobile Bay Business Journal, 3/23/09)

“Hurricane Aftermath: Fixing Insurance Fiascos,” by Dominick T. Armentano (3/23/07)

“Property Insurance for Coastal Residents: Governments’ ‘Ill Wind,’” by Jeffrey J. Pompe and James R. Rinehart (The Independent Review, Fall 2008)


4) The Independent Review—Spring 2009 Issue Now Available

We are pleased to announce the publication of the Spring 2009 issue of The Independent Review: A Journal of Political Economy. Edited by Independent Institute Senior Fellow Robert Higgs, this 160-page issue of our peer-reviewed quarterly addresses a broad range of issues in political thought, economic history, and public policy. Here are some of the questions examined in our latest issue:

  • How did the early USSR deal with dissident intellectuals?
  • What kind of social system is the most reliable for eradicating poverty?
  • Why was Wal-Mart able to outperform the federal government in solving problems in the aftermath of Hurricane Katrina?
  • How do antidiscrimination laws reflect epistemological and ethical errors?
  • How did local government land-use controls distort the market for subprime loans?
  • How does the mandatory disclosure of state ballot-initiative contributors harm democracy? Read the article. (PDF)
  • In what way does groupthink characterize many academic departments? Read the article. (HTML & PDF)
  • What exactly is a “pro-democracy” foreign policy?
  • How has Estonia performed relative to Finland since the end of Communist rule?

Books reviewed:

  • The Limits of Power: The End of American Exceptionalism, by Andrew J. Bacevich. Read the review.
  • Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, by James Bessen and Michael J. Meurer. Read the review.
  • Deleting the State: An Argument about Government, by Aeon J. Skoble. Read the review.
  • Prohibitions, by John Meadowcroft. Read the review.


Paul Gregory, Kyle Swan, Steven Horwitz, Ben O'Neill, Edwin S. Mills, Dick M. Carpenter II, Daniel B. Klein, Charlotta Stern, James L. Payne, Craig M. Newmark,

Robert Heineman, Julio H. Cole, Jan Narveson, and Joshua C. Hall

Table of Contents

Purchase this issue.


Recommend The Independent Review to your library!


5) This Week in The Beacon

Here are the past week’s offerings from The Beacon, the web log of the Independent Institute:


  • Catalyst
  • Beyond Homeless