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Thursday, July 18, 2019

Democrats' All-Out Socialist Agenda, Part 1

There is growing support among Democrats for slave reparations. This is a terrible idea. Why don't they talk about slave restitution instead? It is a much better, much more appropriate idea, but they won't touch it.  Why? Because that would be the same as saying that individual freedom has value.

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The left is gearing up to finally punch America into the realm of socialism. Behind the line of presidential candidates is a crop of halfway-to-madness economists urging the hopefuls to go on an all-out spree of destructive egalitarianism. I have written several articles about one of their crazy ideas, Mad Monetary Theory, which is pushed primarily by Stony Brook University economist Stephanie Kelton, an avid Bernie Sanders supporter.

Another crazy idea is Medicaid for All, which according to Senator Kamala Harris is not going to cost the middle class a single dime. 

We will get back to her delusions in a later article; today, we need to address another item that has been gaining traction out on the far fringe of the left.

Slave reparations.

Just as with Mad Monetary Theory, this idea is being thrown around by economists. Two of the most prolific proponents got almost a full page in the July 15 edition of the Wall Street Journal. Darrick Hamilton of Ohio State University and William Darity of Duke University are positioning themselves as the spearheads of this idea. That is, however, not all they do: they also want the Democrats to stop with government incrementalism.

They want a revolutionary, all-out expansion of the state. To them, a one-swift-stroke completion of repressive socialism is the only way forward.

Do not think for a moment that this is a goofy idea out there on the left. It is not - on the contrary. As the Journal explains (p. A10), this Venezuelan style of government expansion has "gained prominence as more Democrats decry the incrementalism they associate with President Clinton and Obama."

Incrementalism is the strategy for government expansion that North America and Europe has lived with since before World War II. It means the introduction of small reforms, one step at a time, to gradually transform a free society into a government-run economy with a fully egalitarian welfare state. It is a deceptive strategy that both Swedish and American economists laid out already in the 1930s-1950s. Its deceptiveness lies in that each reform looks innocuous on its own, and that the negative macroeconomic effects - which I documented in detail in my book Industrial Poverty - do not reveal themselves until government has reached a certain size, a critical mass of sorts.

Then, on the other hand, the consequences are structural and very difficult to deal with. Once the welfare state, especially the kind that Hamilton and Darity want, reaches that critical mass (when government spends about 40 percent of the economy) the welfare state begins to slowly implode under its own weight. As I explain in my book, we are witnessing precisely this process unfolding in Europe right now.

With Democrats in charge of the federal government, and economists like Kelton, Hamilton and Darity advising them, we would leapfrog ourselves into that same economic territory. Think a Greek crisis in America.

Keeping those economic dangers in mind, let us move on to the trademark contribution from Hamilton and Darity.

Just like Stephanie Kelton has hidden her radical government expansionism behind the MMT label, a superficially scientific term, Hamilton and Darity have coined the phrase "stratification economics" to what is in reality just another version of the almost-century old egalitarian welfare state. The underlying premise is the same: government takes from some groups and gives to others until it has eliminated all economic differences between citizens. In the bargain, government not only will, but should neutralize all economic gain from hard work, risk taking and entrepreneurship.

Even as they talk about "stratification economics" to motivate slave reparations, they really do not present anything new. The kool aid tastes the same - it is just the label on the bottle that has changed.

Reparations is a race-based entitlement program founded on the bizarre notion that today's taxpayers owe descendants of slaves money. The argument is that slavery, which ended 160 years ago, still economically holds back those who descend from slaves.

There are three problems with this argument, the first being the obvious establishment of the unfairness in question. To the best of my knowledge - having browsed their research as far as available open sources allow - I have not found any article where Hamilton and Darity have: 

a) successfully isolated slave descendants and proven their economic disadvantage over blacks who are not descendants of slaves. Instead, they bundle together all blacks in one category that includes both slave descendants and first-generation immigrants; and
b) successfully isolated descendants of slave owners and proven that they are better off than other whites. 

By not isolating these groups, reparationists fail to meet a basic standard of scientific method. Plainly: so long as the slave and owner descendants are not isolated, it is not possible to make the argument that a practice that ended 160 years ago is still having a visible economic impact.

That is not to say the data that Hamilton and Darity present is irrelevant. They do show that blacks earn less and are financially worse off than whites: household income and wealth are consistently higher among whites than blacks. This is a valuable contribution, albeit not unique to these two economists. Nevertheless, it is unjustified to conclude from this data that slavery is responsible for this disparity.

Which brings us to the second problem with slave reparations. It is implied in the reparationist arguments that America today is an openly racist country, with that racism being rooted in slavery. At first glance, blaming racism for the aforementioned income disparities makes more sense than tracing it back to slavery. 

However, we now run into another problem, namely to prove the existence of systemic racism, run by white people and forceful enough to hold back the black population. Is this really a reasonable theory? Does it really stand up to basic scrutiny? With all the anti-discrimination laws we have, and begun creating after the abolition of slavery, it simply does not seem realistic that such open, systematic and unabashed level of racism as implied by this hypothesis, would exist.

If it did exist at the pervasive level needed to hold back a large segment of the American population, as needed to verify the reparationist argument, then it would be a cinch for the reparationists to prove its existence.

That is not to say prejudices do not exist - they do, and they exist among all demographics. I have seen white prejudice against blacks, black prejudice against Asians, muslim prejudice against Christians and gender prejudice against the other gender. Bad, stupid and bigoted attitudes exist everywhere. Just the other day a door-to-door salesman rang my door and started the conversation by telling me that he no longer hates white people. 

That said, it is a Gargantuan leap from bigotry at the individual level to any claim of structural racism in American society. 

The third problem with the reparationist argument, as proposed by Hamilton and Darity, is that it removes individual responsibility from the equation. They dismiss the possibility that individuals may be responsible for their own lives - and for taking the opportunities they have - simply because they cannot accept the consequence of doing so. In their view, the absence of structural racism necessitates the presence of poor individual choice, and only poor individual choice. 

This means, they say, that blacks would be making worse financial decisions than whites, hence leading to lower wages and smaller wealth. 

However, this is a classic non-sequitur. It is not the case that absence of racism necessitates presence of unintelligent individual choices. There is a third alternative, namely the point that President Obama made about blacks stigmatizing education and ambition as "acting white"

As much as I disagree with Obama on many issues, he has a point here that applies more broadly than to the black community. The stigmatizing of ambition and hard work is not isolated to the black community. It very much existed in my own family's background. All my grandparents had to fight cultural prejudice in their own communities to rise above misery. 

Trump administration HUD Secretary Ben Carson once said that you can give one man all the help he wants and he will fall down again every time, while you can knock another man down and he will always rise up again. While taken a bit too far in terms of generalization, Carson's point is nevertheless important: if a community imposes adverse circumstances on its own, it takes an extraordinary amount of will power to overcome those circumstances. 

Again, those circumstances exist in many communities, not just in America, and it is important to understand where it comes from. The bullying of the ambitious does not happen because the bullies despise education per se, but that misery is easier to endure if it is shared by everyone. When someone rises above the crowd, they not only show their own prowess but - at least in the eyes of the beholder - expose the lack of ambition among others.

In lieu of a better social attitude, intra-cultural bullying becomes a prevailing norm. When allowed to dominate a culture, it will hold back enough people to affect the aggregate outcomes for the entire group.

The real public policy question is not reparations for slavery. It is to eliminate institutional inhibitions to poor people in general. One major reform - one that Democrats consistently oppose - is school choice. Let smart kids of any background go to any school of their parents' choice. Courtesy of portable funding (vouchers, backpack funding, ESAs or whatever we want to call it) this would give individuals a key instrument to build a future based on their talents, their ambition and their hard work.

Unfortunately, the left - which includes Hamilton and Darity - will never embrace school choice, for one simple reason: it elevates personal responsibility and individual freedom while downgrading the role of government. Every time the left alleges a solution to a problem, it involves the expansion of government. The fact that half a century of the War on Poverty has not solved the poverty problem - just to take one example - is apparently of no consequence to them.

Evidence, it seems, is only a suggestion in the leftist playbook. 

The third problem with the reparationist argument is in the definition of who is eligible for reparations and who is liable to pay them. This definitional problem is comparable to property restitution, a concept often discussed with reference to the transition of the Soviet empire from socialism to freedom. Many libertarians at the time argued that it was imperative to restitute property, taken by the communist governments, back to its original, rightful owners or their rightful heirs. 

A similar argument has been made regarding confiscation of land in South Africa.

Restitution is not an easy task, but it has more merit than slave reparations. In fact, reparationists might come closer to a morally valid argument if they chose a restitutionist approach instead. It begins with a definition of the property-right chain, isolating the rightful heir today. In the context of slave reparations, there is no immediate similarity - slaves were not deprived of property per se - but if we define their individual freedom in terms comparable to property, the restitutionist approach has a beginning. 

There is, namely nothing more valuable you can take from a man than his liberty (with the exception of his life, of course). If we can put a price on the value of the freedom he was deprived of, we can proceed - at least in theory - with a slave restitutionist analysis.

Assuming that we can identify those eligible for restitution, namely the descendants of slaves (presumably not a problem), the next problem is to define who is responsible for paying the restitution. 

Is it the descendant of a slave owner? If we answer yes to this question, we place the burden of enslavement on individuals, despite the fact that the practice was legal at the time. This has far-reaching consequences for law and order in general: any change in any law can be taken as a pretext for similar sanctions against individuals whose legal actions have now been outlawed. Such practices undermine the very foundation of a free society with accountable government. 

A better approach to slave restitution would be to hold government accountable for depriving slaves of their freedom. Again, the practice - as morally reprehensible as it was - enjoyed the protection of law at the time. But what government should be held responsible? The Confederacy does not exist anymore. The states where slavery was practiced? 

This is not an insoluble problem, but it deserves careful scrutiny. Under slave restitution - not reparation - the problem is isolated to a one-time compensation proportionate to the present value of a man's lost individual freedom. 

I doubt, however, that reparationists will accept the restitutionist approach, and the reason is not that they oppose the transfer of money. On the contrary, that is precisely why they will cling to the reparation approach instead. If they accept the restitutionist model, they will have to place individual freedom, not racism, at the center of the discussion. This would open a very important discussion about the role of government in our lives - one that socialists will run as far away from as they can. Their goal is not to protect freedom

It is to protect government.

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