Bureaucracy and the Right Direction

Some people say that we are now living in a post-bureaucratic era. An example of this is the TED video uploaded in YouTube last February 18, 2010.

Perhaps, those who believe that bureaucracy was already outmoded in the face of vast changes in human civilization were predicting an event that will take place some time in the future. But as far as our experience is concerned, bureaucrats are still part of our daily reality. We see their inefficiency, and we are not pleased the way they serve the public, their bosses, their employers, us. It is, as if, public fund is their only concern. But of course they hide it behind altruistic goals.

In the 5th chapter of Ludwig von Mises’ book, “Bureaucracy”, he identified that growth in government spending is one among the five social and political implications of bureaucratization. Based on Mises’ analysis of bureaucracy in Europe, this reality played a significant role in the collapse of democratic institutions. If such trend will continue, sooner or later, representative democracy will not survive.

Reading “Bureaucracy” leads me to reflect on the existing controversy that our country is facing. We are now aware about the Supreme Court declaration that DAP is unconstitutional. However, the Executive branch of our government refuses to acknowledge the legitimacy of the decision of the Supreme Court. After several days of reading news articles, I observe that the arguments of the current administration to justify its action concerning DAP boil down into two: they did it “in good faith” and that the people benefited from it.

Paraphrasing Judges 9:16-20, if DAP is really done “in good faith”, let there be joy among those who masterminded and benefited from it. But if not, let there be “fire” among them and let this fire consume all those who benefit from it.

Concerning the economic benefits of DAP, I solicited the ideas of my fellow libertarians. One of them responded that he did not see any. For him, “DAP is a big fat pork barrel except that it is under the ‘discretion’ of the office of the President.” This is a general reply. I am still searching if libertarians are indeed unanimous in their opinion and I am also concern about the details how libertarians came up with their conclusion.

Returning to Mises’ book, besides growth of government spending, the remaining four implications include bureaucratic contempt for human laws, complacency, bureaucratization of the mind, and the supremacy of the tyrant’s will. You can read the entire article here.

It is my hope and prayer that the present crisis we are now facing as a nation will lead to a realization that the expanding size of the government, higher taxes, and higher public spending do not offer us the solution, but the cause of all our economic sufferings. Once we recognize this, I think we will also realize that the path to economic growth can only be achieved if we will decide as a people to reverse our current direction. Personally and economically , I see this as “the right direction”.

Economic System of the Philippines

After browsing the third chapter of Ludwig von Mises’ Bureaucracy, I could not avoid thinking about the kind of economic system that we have in the Philippines. Capitalism is the popular perception. Others would consider our system as oligarchy, that is, not much different from feudalism. However, after reading the third chapter and checking some news and files, I am now more inclined to think that our economic system is still under experiment between socialism and capitalism. In fact, in the past, we were more inclined to socialism due to big number of GOCCs (Government Owned and Controlled Corporations)/SOEs (State Owned Enterprises). Nonoy Oplas, the owner of this blog shared that as of 1984, we had “303 GOCCs including subsidiaries.” However, as I browsed the web, I stumbled with two lists. One list gave a total of 67 GOCCs, and another list gave 133 as of 2004. So if the data is correct, it means that there is a reduction in number of GOCCs, which I personally consider as good sign. In fact, one news said that our President  is aiming to reduce its number to less than 100.

You can read the third chapter of Bureaucracy here.

By the way, these are the previous articles:

Preface

Introduction First Draft

Revised Introduction 1

Revised Introduction 2

Chapter 1

Chapter 2

Ending Government’s Expansion by Returning to the Word of God

In the the last three sections of the Introduction of Bureaucracy, you will see the overview of Ludwig von Mises’ thesis that government omnipotence advanced by diverting the attention of the people from government bureaucratism to corporate bureaucratism, and that the advocates of the increasing power of the state failed to understand that the market with its system of profit management does not develop bureaucratic system without government intervention. In this article, I also shared R. B. Kuiper’s essay about irreligion as the theological cause for the increasing power of the state. We learned further that focusing on justice is the primary task of the state and that the biblical concept of man is contrary to totalitarianism.

tyranny_-_montesquieu

Photo Credit

In concluding his essay, R. B. Kuiper argues that it is part of Christian duty to resist a totalitarian state. He shows us the way to stop the growing power of the state. It cannot be done through war for it leads to further growth of the state. Roman Catholicism cannot do it for its brand of totalitarianism cannot find biblical warrant. The principles of French Revolution are also not capable to defeat it for the dictatorship of the proletariat is just the opposite face of statist dictatorship. The only remaining solution is a return to the Word of God. Such return would mean that people should stop looking up to the state as the panacea to all our economic ills, that people should neither deride nor fight the state if it is doing its proper task, and that people should not trust the state, but criticize it when it is transgressing beyond the limits of its legitimate task.

Read the rest of the article

Related article:

The King of Kings

“Enlightened Free Enterprise”

Intending to write a series of articles about various business cycle theories, I encountered a book originally published in 1978 and copyrighted in 1996. The title of the book is “The Austrian Theory of Trade Cycle and Other Essays”. It was edited by Richard M. Ebeling. The book has six essays and the contributors include F. A. Hayek, Ludwig von Mises, Murray Rothbard, Gottfried Haberler, and Roger Garrison.

The six essays are:

  • Introduction: The Austrian Theory in Perspective by Roger W. Garrison
  • The Austrian Theory of the Trade Cycle by Ludwig von Mises
  • Money and the Business Cycle by Gottfried Haberler
  • Economic Depressions: Their Cause and Cure by Murray N. Rothbard
  • Can We Still Avoid Inflation? By Friedrich A. Hayek
  • The Austrian Theory: A Summary by Roger W. Garrison

Let me start with essay number 4, “Economic Depressions: Their Cause and Cure” by Murray N. Rothbard. It has 26 pages.

My strategy is to write about any idea that I personally consider striking and important without regard to the total structure of the essay. Of course, I will do my best to be considerate about the essay’s structure. However, that’s not my primary concern. And here are the ideas I considered important:

  • The reality of the world of euphemism
  • Socialism’s disguise
  • Three economic questions

Euphemism

Reading the first paragraph, I encounter a difficult word – euphemism. Usually, encountering an unfamiliar term, I do not go immediately to the dictionary to look for its meaning. This kind of reading slows down my goal to finish an essay or a book. However, I could not help myself, but look for its meaning for I consider the word central to understand the entire essay. It’s the basic assumption of the writer.

Paraphrasing the definition I encounter in the web, I understand euphemism as a way to make offensive words acceptable. This could be done both negatively and positively. As positive expression, this could be considered polite. However, as negative expression this is a good strategy to hide something and if done using the mainstream avenues of information could be used as a tool of misinformation and social control.

The examples from this site of euphemism are surprising. I will just select few: “passed away” instead of “died”; “correctional facility” instead of “jail”; “ethnic cleansing” instead of “genocide”; “relocation center” instead of “prison camp”; “pregnancy termination” instead of “abortion”, and; “on the streets” instead of “homeless”.

Remember who use and throw these words out there. Think also what the intention behind the replacement of words. Who use those words and for what purpose? This is a relevant question especially in our generation where almost all the things we believe to be true are in reality utilized to control the mind of the majority so that the powers that pull the string could do their own thing unnoticed. This is particularly true in the writing of history.

Murray N. Rothbard used the word “euphemism” in the sense we describe above and this is most evident in the field of economics. The terms “depression” and “recession” are too strong and offensive for the public. Better replace the terms with acceptable ones. In this task, professional economists succeeded. Economic reality is hidden from the public and “the planners” go on with their usual business of planning people’s lives. If you do not believe this to be true, for your children’s sake, take a serious look once again. You do not have any excuse for not knowing for the Internet is before you. Reality is just a click away.

Instead of “depressions” and “recessions”, Murray Rothbard claims that “New Economics” formulated new terms. These are “downturns”, “slowdowns”, and “sidewise movements”. Praise the Lord! We will no longer have depressions and recessions! Professional economists have created wonders!

Keynesian Socialism Disguising as “Enlightened Free Enterprise”

After reading the first few paragraphs of the essay, I encountered familiar and intriguing ideas particularly relevant to our present global economic situation. Karl Marx is the dominant personality that influenced the prevailing perception that business cycle is an inherent flaw within free market capitalism. Most people are unaware that by accepting this thesis, they already embraced the Marxist’s interpretation.

However, economists like David Hume and David Ricardo refused to blame the free market for business cycle. They identify the critical role of commercial banks and government intervention on the economy as the real source of economic depression.

Governments of the world operate on the Keynesian economic framework.  Based on this framework, government intervention is justified to address both inflation and recession.

Based on Keynesian framework, inflation is caused by excessive public spending. It is the solemn duty of the government therefore to find a way to force people to spend less. The strategy of course is difficult to detect and visible only from an Austrian lens.

Moreover, for Keynesian, recession is caused by insufficient private spending. To address this problem, the government has to increase spending.

Except for the above solutions, other Keynesian remedies include bailing out bankrupt firms, inflating credit, propping up prices, and bolstering wage rates above the free-market level.

On the other hand, from Austrian perspective, government interventionism is the primary cause for economic decline. The idea therefore of coming to the government to aid the economy is insane. Rothbard argued that in the recent past this kind of acts on the part of the government was designated as socialism. Most people are not aware that socialism is the air we breath in the name of course of “enlightened free enterprise”.

Three Critical Problems

Any theory trying to explain economic depression must answer three critical problems:

  • Why business cycle exists?
  • Why all entrepreneurs lose their forecasting ability at the same time during economic recession? What’s the real reason for this sudden widespread of entrepreneurial blindness?
  • Why capital good industries suffer the most in time of depression compared to consumer goods industries? And why the same industries soar in time of economic boom?

Both the Marxist and the Keynesian schools provide insufficient answers to the above problems.  The answer provided by the Austrian school is now considered the most reliable. David Ricardo answered the first question. Ludwig von Mises completed the answer in his book “Theory of Money and Credit” published in 1912. Rothbard still considered this book as the best book on the theory of money and banking.

For Austrian economists, inflation and depression are not inherent flaws within free market capitalism. It is the result of the acts of “enlightened free enterprise” more accurately described as socialism or government interventionism.

For Mises, the proper actions of the government in time of depression can be enumerated as follows: never bail out business firms in trouble, do not intervene with laborers’ wage and price of producers’ goods, do not encourage consumption, do not increase government expenditures, and cut the government budget. It is better if the government encourage more saving rather than more consumption.  But the best act on the part of the government is to do nothing, to take her hands off from the free economy. Let the laissez-faire work. Rothbard wrote: “The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget” (p. 89).

Reading the last paragraph of the essay, I see that the only way not to fall victim into the world of euphemism is to recover the Austrian explanation of the business cycle. Once we see this thing happening, socialism’s real color will be exposed and Rothbard foresaw that the government will certainly withdraw its hand from the free market economy.

Let us hear what Rothbard has to say about this intellectual recovery:

“Once again, the money supply and bank credit are being grudgingly acknowledged to play a leading role in the cycle. The time is ripe for a rediscovery; a renaissance of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away; and we would see a massive retreat of government from the economic sphere. But for all this to happen, the world of economics and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years” (p. 91).

Economics, Citizenship, and Freedom

We intentionally skip sections 4 and 5 dealing with Economics and Universities and Economics and General Education. We now conclude with sections 6 and 7 discussing about Economics and Citizenship, and Economics and Freedom.

Economics and Citizenship

Citizens cannot withdraw from the study of economics without serious negative consequences. We cannot trust the interventionists to teach us economics. It is the solemn duty of each citizen to learn this science of human action.

It is high time that the study of economics must go beyond the confines of the academe and control of the specialists. The burning issues of today both political and social are all economic issues. No wonder, philosophers and theologians are now leaving the old problems dealt by earlier generation and are becoming more interested to participate in economic issues. Even the common man, whether he is conscious or not, is actually involved in economic affairs in his day to day activities. Civic activities like taking side to a specific political party and casting a ballot are inescapably economic realities. The relevance of economics for today is captured by Mises in summarizing the concerns of the last five centuries:

“In the sixteenth and seventeenth centuries religion was the main issue in European political controversies. In the eighteenth and nineteenth centuries in Europe as well as in America the paramount question was representative government versus royal absolutism. Today it is the market economy versus socialism” (p. 878).

With the challenges we are facing today, the study of economics is the primary civic duty of a responsible citizen. By fulfilling this duty, you demonstrate that you care not only about your future but the future of your children as well.

Economics and Freedom

Interventionists know that the study of economics could enlighten the citizens to their civic responsibilities. This will frustrate the expansion of the interventionists’ dream and that is why all attempts are made to restrict the freedom of economic thought.

“Subversive” ideas are suppressed and only interventionists “truth” is allowed to reach public consciousness. In order to have a secure position for this truth, coercion is a necessary tool at the disposal of those who control the centers of power. Even religion is used to justify the promotion of interventionists’ agenda resulting to the gradual loss of human freedom.

Interventionists’ policy is most evident in restraining the activity of the free market. Economic issues like cutting down profits, lowering prices, lowering interest rates, and raising salary rates appear commendable in the eyes of the uninformed public. Only few are able to penetrate behind the appearances of things and fewer still are able to connect the economic disaster brought about by the widespread influence of those interventionists’ doctrines. Continued search for truth is the only weapon freedom lovers have in their arsenal to reverse the trend and provide the intellectual climate for the growth of market economy.