Immigration For Republicans

This essay is not intended to address a crisis that may be occurring on the border at this time. I make no comment on that. Nor does it discuss the issues around war, such as how to deal with citizens of enemy nations. This essay is not a policy proposal, it does not set out, for example, when an immigrant can become a citizen and attain the vote or what to do to immigrants who commit crimes. It has but one purpose: to enumerate and respond to the common arguments used in favor of an impenetrable and guarded border fence to shut down immigration.

 

Suppose you were born in a country that outlawed normal life. North Korea comes to mind. Venezuela is a slightly less extreme example, and there are many other examples which are slightly less bad than that socialist worker’s paradise.

I phrase it in these terms, because this is the essence of the issue. People are rightfully fleeing places where they cannot live.

Anyway, suppose you are in a place where life is a living hell. Every day, you are forced to beg and steal scraps of food to somehow stay alive. The best you can hope for is to subsist, one day at a time. You must avoid the gangs and the secret police.

If you could somehow scrape together the money to escape to America, would you?

You would take a job paying minimum wage—or less—doing long days of unskilled manual labor, if necessary. At least in America, you can work and you can begin to build a better life for yourself and your family.

But you notice that people call you “illegal.” They don’t refer to any crime you commit, because you are no criminal. You never steal from anyone, hurt anyone, and or do anything else that could objectively be called a crime. You work hard for every penny you earn. But they call you “illegal” anyway.

You come to realize that when they say illegal, they refer to you, not your actions. Your very existence so utterly offends them that they think you are crime incarnate.

You notice that most of them drive faster than the posted speed limit. Many don’t register their old handguns or refuse to pay tax when they sell a gold coin. They traffic in old toilets, which flush more than 1.6 gallons. They break the law in numerous ways.

On Facebook, there is a common meme that laughs at the statistic that everyone commits three felonies per day. Their crimes don’t bother them in the slightest, because they aren’t hurting anyone. They do get the concept of victimless crime, at least when they themselves are made into criminals by nonobjective law.

However, for you, amigo, none of that matters. “The law is the law,” they assert. “The law must be obeyed,” and they don’t mean the speed limit law here. They mean the law that does not allow you to live.

Obviously, you are not going to oblige them by dying. This is the issue for you. Going back to hell may well be your death, or the death of your family.

This is the monstrous injustice of anti-immigration policy. Now let’s look at the arguments used to justify it.

The most intellectual argument is that immigrants bring bad ideas with them. Though I have not seen it phrased this way, this implies that we could build a Great Wall (or a Berlin Wall) to keep out socialism, fascism, cronyism, corruption, and the ideas of Kant and Marx. Surely, there would be no Che t-shirts if the wall were tall enough.

I find this argument unconvincing. In this era of radio, television, and the Internet, it’s the policy equivalent of locking the barn doors after the horses are not only out, but sold to the Saudis, and earning big purses racing in Abu Dhabi. Rotten ideas are not only here in America, but they have predominated for decades in our universities, media, and popular culture.

A lame duck president said, “I’ve abandoned free market principles to save the free market system.” When our current president was a candidate he said, “I think when you spread the wealth around, it’s good for everybody.” We have a pejorative term for the wealthiest percentile of people, and one for bankers. Hollywood celebrities pose for pictures with socialist thugs like Hugo Chavez. These ideas are mainstream. Even conservatives will defend half a dozen of Marx’ ten planks.

If rational ideas prevailed in our culture and most people held to a rational philosophy, then evil ideas would find no fertile ground here. Proud people of healthy self-esteem who understand liberty, find nothing attractive about socialist utopias, death cults, thieving parasites, or paralyzing bureaucracy.

If you are un-persuaded, and you still believe that we have to keep out people with bad ideas, then you have to answer the following question. Are bad ideas intrinsically compelling?

Suppose a Marxist chants slogans on a street corner, or finds a willing American newspaper to publish his letter. Is this a threat to Western Civilization? Are reality and reason and liberty so weak and so un-compelling, that they are blown away by mindless communist propaganda?

At best, I think this argument reduces to another one that’s much more common. This argument does not address ideas, but voters.

Immigrants vote socialist, opponents of immigration tell us. But do they? I rather doubt that it’s nearly so prevalent as we’re told, though I don’t have the statistic. It doesn’t make any sense to me. These are people who have scrimped and saved to go to a foreign country. Many have risked their lives, and most of them are not fluent in the language. What motivates them to do this? I doubt it’s typically a desire to bring to the US the same socialism that forced them to flee.

What if immigrants are not voting for Democrats for their socialist policies, but for their pro-immigration stance? That would be a tragic irony to this argument. If the Republican Party stakes out the anti-immigrant position, then no one should be surprised when immigrants vote Democrat, along with their extended families, friends, and supporters.

The presumption that immigrants vote Democrat leads Republicans to oppose immigration, which leads immigrants to vote Democrat. Mr. Foot, meet Mr. Gun. Blam!

Incidentally, while I am criticizing the Republican Party, this very same issue is hurting them elsewhere too. Do gays all want socialism? Or do they want legalized marriage? Do women all want socialism? Or do they want legalized control over their own reproduction? Do biologists and other scientists want socialism? Or do they want legalized stem cell research and other scientific inquiry? Many members of these groups turn to the party that promises what they want.

Moving on to the next argument, I hear often that an immigrant is like a trespasser or a burglar who breaks into your house. Think about what this argument says.

It says that the nation is owned collectively. If you are in the group, then you are part owner. If not, then you are a threat to the tribe. Today, it’s phrased in terms of criminal trespass, but it’s a primitive view of belongers vs. outsiders.

Of course the country as a whole is not owned, and certainly no collective has a right to violate anyone’s rights. Rights are neither a group benefit, nor a grant made by the government.

A related argument is that immigrants are taking our jobs. This argument is thoroughly Marxist. Thus, it’s ironic that it so often comes from conservatives, Republicans, and even some libertarians.

Our jobs? A job is a contract with an employer, not a birthright for an individual or a group privilege. If someone else is hired, but you are not, there is no injustice. If members of one group get hired and members of another group do not, then there is no cause for the government to interfere.

Jobs are not zero-sum. Under certain conditions, jobs are created and wages are rising. Under other conditions, jobs are stagnant or even destroyed. What conditions? Left free from coercion, people find ever more ways of coordinating their productive activities. Increasing production means hiring more people and paying them better wages.

However, when the government intrudes it reduces coordination, which means it reduces productivity, employment, wages, and quality of life. I proved this in my dissertation. One form of government intrusion is to block people, goods, or capital from crossing the border.

It may have taken a genius like Adam Smith or Frederic Bastiat to provide the original arguments to debunk state control, central planning, and government favoritism for cronies. However, today, a smart 8th grader can understand and make a cogent argument against this nonsense.

I don’t think anyone believes in bad economics for the sake of bad economics. No, there are two reasons people support junk economics. One is they want to get something they couldn’t earn in a free market. They seek protectionist measures to keep out competition. The other is they can see that the economy isn’t working properly. It is a fact that employment is far below its prior level. Such jobs as do exist pay lower real wages. Most people feel it at some level, and they’re angry.

They should be angry, but we should place the blame where it belongs. Taxes, regulations, litigation, and especially the Fed are the cause.

Please don’t take out your anger on poor immigrants.

The idea that the economy is zero-sum is a Marxist idea. Lovers of America, the Constitution, and liberty should have nothing to do with it.

The next argument is that immigrants come here to collect. We should not allow immigrants because they will only end up on welfare.

Compensation is when you deliberately and knowingly do the wrong thing, supposedly to fix a problem elsewhere that you cannot or do not wish to fix. My example is to let the air out of three tires if you have a flat. Shutting down immigration is compensation for the welfare state. We who don’t want to see the taxpayer bankrupted will do better to fight welfare, than to fight immigration.

This leads to a question I have asked several times, and received no answer. Why does Immigration and Customs Enforcement go after employers?

We’re told that immigrants are here to sell drugs and commit crimes. However, it’s obvious that you won’t find drug dealers, welfare queens, pimps, and bank robbers working at or below minimum wage in the hot sun. So why go after employers? There is only one reason.

It is to protect us belongers from losing our scarce jobs to those outsiders.

Can any of these arguments be applied to block immigration between the states? On Facebook recently, I saw someone post (half) jokingly that Texas should pass a law to keep out anyone from California who voted for its welfare schemes or high-speed rail boondoggle.

Logically, there is no reason they couldn’t be applied to interstate immigration. North Dakota has low unemployment. If they continue to allow open immigration, then pretty soon their unemployment will rise to the unfortunate heights of the rest of the country (maybe they should thank their harsh weather for putting the brakes on this).

The next step is to apply it to immigration within a state, from city to city. We wouldn’t want all of those Tucson people coming here to take our Phoenix jobs, would we? The end game is the socialist dictatorship, which clamps down on the right of people to move as they wish.

The elephant in the room that must be named is some people of the anti-immigrant persuasion are motivated by racism. I don’t believe this is the majority, but it exists. They don’t dare openly declare their feelings, at least not in any forum I read. Instead, they couch it in another argument.

One reason I started this essay off with a story was to establish the context and put the reader into the shoes of a recent immigrant. I had another reason as well: to illustrate the problems in the anti-immigration position. No one who fled a living hell will go back willingly. So what will be accomplished by demonstrating one’s resentment by slinging the name “illegal” at a man? He will react. He will feel like he is in a no-win situation. He may himself become resentful, and in that state he may adopt bad ideas that he did not originally hold.

What will happen if the law attacks his employer and renders him unable to keep a job? What would you do if you were permanently rendered unemployable by law? He will take welfare if he can get it. The only alternatives are to starve, to go back to hell, steal cars, or sell drugs. Nothing good can come from forcing someone to make that kind of choice.

Though it’s not my purpose in writing this essay, if your concern is whether the GOP will win elections, it’s hard to think of a more effective way to repulse a large voting bloc. However, I think there’s something much more important at stake. It is the theme of most of my writing on the gold standard. We need to rediscover and return to the principle on which America was founded. It is the principle that everyone has the individual rights of life, liberty, and property. Let’s fight for those rights. Let’s fight to repeal welfare and to restore the Constitution and the Republic that was built on it.

It’s the right thing to do, and it also works.

In the Future, Will Everyone Be Unemployed?

Recently, I have seen a lot of discussion about the future of employment. Many people, from futurists to Leftists, are saying that machines will replace people and most people will be unemployed. This is hogwash, though it has been popular for at least 200 years, when the Luddites were smashing machinery.

Perhaps they didn’t know better, in the early days of Industrial Revolution. Maybe they really didn’t think of machines as providing an escape from drudgery. They might not have thought that people were freed from long days of backbreaking labor. They may not have considered that increasing productivity benefits the worker, the investor, and the customer—pretty much everyone.

Today, we don’t have their excuse. Economics teaches these points clearly, and this is not my point in writing this essay.

My point is that we have too many closet central planners, screaming to get out. Workers are afraid of losing their jobs. Social thinkers worry about unemployment. Economists refuse to understand rising productivity. Futurists fret that there is a dark side to progress. All of them are lending their support to central planning, whether they realize it or not.

Implicit in every one of these views is a simple confession. The worker, the social thinker, the economist, and the futurist do not know what the next big industry, the next big employer, will be. And, it’s not their job to know that!

This is the flaw in central planning. The central planner does not know.

Branson

It’s the entrepreneur’s job to figure out how best to put people to work.

Legal Tender Renders Planning Impossible

There is much confusion over what the legal tender law does. I have read articles, written by people who are otherwise knowledgeable about economics, claiming that legal tender forces merchants to accept dollars under threat of imprisonment. Recently, I wrote a short article for Forbes clarifying how legal tender law works in the US.

Legal tender law has nothing to do with merchants. If you want to sell steak dinners in your restaurant for silver, you may legally have at it. Unfortunately, the tax code discourages your would-be customers as I wrote in another article.

The legal tender law targets the lender. It grants to debtors a right to repay a debt in dollars. In practice, this means that if you lend gold, the debtor gets a free put option at your expense. If the gold price rises, he can repay in dollars. If it falls, of course he will be happy to repay in gold. It’s a rotten deal for the lender.

The relationship between lender and borrower is mutually beneficial, or else it would not exist. The parties are exchanging wealth and income, creating new wealth and new income in the process. The government is displeased by this happy marriage, and busts it up by sticking a gun in the lender’s face. His right to expect his partner to honor a signed agreement is violated.

Because no lender will lend gold under such circumstances, gold is relegated to hoarding and speculation only. This strikes a blow to savers, because the best way to save is to lend and earn interest. Savers are forced to choose between hoarding gold, getting no yield, or holding dollars and getting whatever yield crumbs are dropped by the Fed.

If there’s no lending in gold, what takes its place? The Fed force-feeds credit in ever-larger amounts, and at ever-falling interest rates.

The Fed is supposed to make its credit decisions in order to optimize two variables. First, employment shouldn’t be too high or too low. Second, consumer prices shouldn’t rise too quickly or too slowly. The Fed has little ability to predict employment and prices, and even less control over them.

Most Fed critics focus on the quantity of money. Is there too much, or too little? Is the rate of increase too fast or too slow? Is monetary policy too tight or too loose? Lost in this noise is any discussion of who the lender is.

If you buy Treasury bonds, then you know you are lending to the government. You are enabling welfare spending, and a few cases of lending to such worthy activities as housing speculation.

What if you don’t? Well if you deposit dollars in a bank, you are funding the bank’s purchase of Treasury and other bonds. You know, or reasonably ought to know, that this money is being lent.

But suppose you don’t even do that. Suppose you keep a wad of dollar bills under the mattress. You are still lending. The dollar is the Fed’s credit paper. You are financing the Fed’s activities, which consist of buying Treasury bonds and various other bonds.

You’re the patsy. You are the lender.

Anybody who wants to earn dollars is bringing demand for dollars to the market—in other words, making a bid on dollars. With what do they bid? They bid with their labor, with tangible goods, and with land. All assets today are bidding on the dollar, though most people look at it inside out. They think that all assets are offered for sale at the right price.

In any case, this universal bid on the dollar provides credit to the Fed. By placing wealth in the Fed’s hands, everyone gives it their savings to lend out.

Forget about what this does to consumer prices. There are much more serious implications. In place of the delicate, mutually beneficial relationships involved in lending, the Fed sucks the savings from the people, and pumps it out at high pressure. The Fed’s indiscriminate deluge of credit is not a substitute for individual thinking, planning, acting, and lending.

The consequence is incalculable destruction.

The legal tender law does not attack the ability to do a trade here and now, “cash on the barrel head.” It attacks something subtler but just as important. It destroys your ability to plan long range, to prepare for the passage of time. Time is a universal in the human experience. We all work during our adulthood with urgency, because some day we will grow old and be unable to work. To plan for that day, we save while we work and lend our savings to earn interest.

The motivation to borrow also comes from planning for the passage of time. The entrepreneur wants to start or grow a business now, while he has the opportunity, and energy. That’s why he is willing to pay interest out of part of his profits.

In a loan, the borrower gets money immediately, but the lender gets paid later. Time is an integral part of the deal, as one party prefers to be paid later.

In the free market, nothing comes between the saver and the entrepreneur. In central banking, by contrast, the legal tender law attacks the very heart of the free market, like an insidious poison. It disenfranchises the saver, enabling the Fed to plunder his nest egg and undermine his retirement plans.

At the same time, the Fed abuses the hapless entrepreneur too. It lures him to borrow with the promise of low rates, and then like Lucy pulling the football out from under Charlie Brown, cuts the interest rate again. This drives down his profit margin and plunders his capital.

Legal tender law takes away your ability to plan for the future. It replaces a hundred million individual decisions whether or not to have tea, with a giant high-pressure fire hose that blasts hot wastewater indiscriminately. No matter whether they open the spigot further, or close it slightly, the scalding deluge of Fed credit is not in any way equivalent to the individual planning, saving, and borrowing that would go on if we had a free market.

The Price of Shipping Is Collapsing

A recurring theme of mine is that one cannot understand the world in terms of the linear Quantity Theory of Money. Let’s look at the cost of shipping.

The money supply has certainly been expanding since 2008. And yet the price of shipping has almost completely collapsed. From a high over 11,000 it’s now down to 755. This is a drop of almost 94%.

The Baltic Dry Index is a dollar price of moving the major materials by sea. The chart shows from just before the acute phase of the crisis to today, July 16, 2014.

BDI

I like to look at the Baltic Dry because, unlike commodities, there is no way to speculate on it and hence drive up the price. (If readers are aware of some sort of futures market or other way for speculators to use credit to bid up prices, then I encourage them to please contact me.)

Neither the money supply nor supply and demand adequately explains this collapse. Supply and demand may be a tempting model, but it raises more questions than it answers. Is it falling demand or rising supply? Why would supply rise so much? Why would demand collapse? Could both be occurring at the same time, and if so are the business managers and their bankers that blind?

The Austrian Business Cycle Theory is a much better way of thinking about this.

Ultimately, this graph tells a story of credit expansion and credit contraction. During the expansion there was lots of demand for shipping. Naturally this led to malinvestment in ships. During the contraction, the ships aren’t needed but they cannot be unmade. More importantly, the money borrowed to finance them cannot be unborrowed.

Why was there so much malinvestment? The rate of interest has been falling during this time (and much longer). The lower the rate, the more attractive it is to borrow to buy a capital good, such as a bigger ship. On this graph, the interest rate on the 10-year US Treasury bond is added. The correlation isn’t perfect by any means, but there is something here.

BDIUST10

It is important to realize that a company that borrows to malinvest sees a profit at the time. That’s what so deadly about central planning of money and credit. The central planners push down the interest rate, and this sends a false signal. The shipping companies and financing companies calculate the profit in building new ships. They are neither stupid nor incompetent.

They may not lose money at all. The losses may go to some existing shippers, particularly those who previously built ships, with money borrowed at higher interest rates.

No matter who it is, we can be certain that somewhere in the world, there are debtors being put to the squeeze. And with equal certainty, we can say that their lenders—including banks—have assets on their balance sheet that will need to be written down (or written off).

And when that happens, it adds to the bust. Desperate lenders sell assets onto whatever bid they can find. Asset prices begin to plunge. Arbitrages connect those assets to other assets, not to mention margin calls. Workers lose their jobs, investors lose their money, and businesses close.

The dollar, with its interest rate dictated by the monetary politburo, is destroying people’s lives. One important virtue of the gold standard is that it has a stable interest rate, set by the participants in a free market. It worked and it will work again when we finally reject the regime of irredeemable paper money.

The Lazy 1970’s vs. the Frenetic 2000’s

Many people today see the Fed’s Quantitative Easing as money printing. They remember what happened in the 1970’s, and they instantly jump to conclusions. However, we live in a different world. To illustrate this, consider the following story about Joe, a promising and eager young manager in a struggling manufacturing company.

Joe excitedly walks into the boardroom and pitches his idea. “Let’s borrow a billion dollars. We can use it to build a massive warehouse and to buy massive quantities of our raw materials!”

The senior management team stares at him. The CEO demands, “Why?”

“We need to have a stockpile at every level. We should start with 3 months of raw materials, and a three-month buffer of work-in-progress in between every one of the 27 steps of our manufacturing line. And even better, we need to warehouse finished product. We shouldn’t ship anything that hasn’t been sitting for at least 4 months. Ideally six, but we can start with four.” Joe has the bit in his teeth now.

He rushes on. “Bernanke has printed so much money, and Yellen is going to continue. We already have massive inflation and it’s going to get worse! By borrowing to buy stuff that is only going up in price, we can make extra profits and protect ourselves from supply shocks as the cost of commodities rises out of sight!”

The CFO leans over to whisper in the ear of a young assistant, Bill. Bill does a quick Google search and finds the price of copper, which is one of the most important raw materials the company buys. Bill puts the copper chart up on the screen. It has fallen a third over the past few years.

Joe will be lucky to remain employed when he leaves the room. To be fair to him, his mistake is simply to try to implement a business strategy around what most casual observers and many economists believe.

Sometimes, the best way to debunk an idea is to take it seriously.

Though it makes no sense today, holding inventory was not the crazy idea of a young fool back in the 1970’s. It was how many businesses conducted business. In that era, the game was to accumulate inventories. The more, the better. First people were trading excess cash for inventories. I can recall my parents stockpiling things like canned tuna fish. It was better to keep one’s wealth stored in a durable food product than in a bank account. Consumer prices were rising about 20 percent per year.

Next, companies began selling bonds to finance inventory growth. This pushes down the bond price, which is the same thing as pushing up the interest rate. And of course it pushes up prices.

In the 1970’s, cash was trash. Inventories rose relentlessly in value, at least as measured in terms of the dollar. This, by the way, is a great example of how irredeemable money distorts the economy. You aren’t producing any more, or creating any kind of new wealth, and yet, you are rewarded with a profit.

Now we have the opposite condition. Since the interest rate began falling in the early 1980’s, companies have been finding ways to reduce inventory accumulation. The Lean manufacturing movement began to gain acceptance at this time. Lean, also known as the Toyota Way, defines inventory—such as work-in-progress sitting on a shelf—as waste. Lean is all about eliminating waste.

Today, cash is king. Excess inventory quickly become obsolete.

Companies are not borrowing to hold inventory, but to expand production when they can make a profit above the cost of capital. Since the interest rate keeps falling, the hurdle to get over for minimum acceptable profit keeps going lower.

Think of it this way, if you manufactured handheld electronic devices, would you want to keep inventory a minute longer than you had to? Of course not, because your competitor is about to release a new model that will make your product less desirable, or even unsalable. How about clothing? Cars?

In the 1970’s, the interest rate was rising. When a worn-out plant needed replacing, it may not have been feasible to borrow to replace it. That’s because the new interest rate was much higher than at the time when the plant was first acquired, a decade or more earlier.

This is the connection between the rate of interest and the rate of profit. It’s impossible to borrow at a higher rate than the profit one hopes to earn. A rising rate will therefore lead to rising margins, and a falling rate to falling margins.

Other than the problem of financing plant replacement, business was easy. Sleepy conglomerates had travel policies that allowed managers and executives to fly first class, even for domestic travel. With the cost of borrowing rising all the time, profit margins were expanding. And there was the kicker, holding inventory before selling it fattened margins further.

Business had a lazy pace to it, as I look at it today (though business managers at the time might not have agreed with that characterization).

In comparison, today it is the opposite. Limitless oceans of dirt-cheap credit issue forth, like effluent from the world’s central banks. The problem is not replacing worn-out plant when the cost of capital is higher. The problem is that every competitor has ever-cheaper cost of capital. The challenge is that rapid product cycles are driving rapid obsolescence. It is harder and harder to recoup design and tooling expenses. Inventory that sits for a week may have to be liquidated at a massive discount. Profit margins are under constant pressure.

Business executives routinely fly coach, even for international travel.

If the word for the 1970’s business environment was lazy, the word for today’s climate is frenetic.

Neither is the ideal behavior for a rational enterprise. They are the direct fault of the regime of irredeemable paper money.

Everyone’s attention is misdirected towards prices. Is the Consumer Price Index rising? Is it rising more than expected? How about the producer price index? Is that dropping into the dread D-word—deflation?

It’s the greatest economic sleight of hand ever perpetrated.

Instead of zeroing in on prices, we should be looking at the enormous distortions of our centrally banked irredeemable currency. We have bubbles, malinvestment, insolvencies, volatility, with exponentially rising debt and derivatives outstanding.

High Frequency Trading

If you’ve read about High Frequency Trading (HFT) then you may know that it’s all about bad things such free markets, ruthless trading, Wall Street, banksters, greed, and profits.

Or else, you may have read that it’s about good things like the American can-do spirit, ingenuity, technology, and improving markets to the betterment of all.

Both HFT’s detractors and its defenders are missing the point. It’s an exploit of a system that is grossly distorted by regulation. I don’t refer to the old-fashioned kind of regulation, such as requiring a doctor to show he is competent before doing open-heart surgery. I refer to the modern kind, in its full malignant glory of cronyism.

Richard Christopher Whalen makes the case in this article. Our markets are fragmented. They’re kept in this state, constantly on the verge of breaking, by 600 pages of regulation enacted in 2007, Regulation National Market System (Reg NMS).

Only a crony could love Reg NMS. To build a robust, realtime transaction server that is going to be used and abused by so many market participants is complicated. I know, my old company DiamondWare built one for real time voice communications.

Many times, we had engineering meetings that would last for hours, passionately arguing about a point so abstract and so specific that no one outside the room would have been able to grasp it, even if we tried to explain. Those complicated and technical little points were the difference between scalable and non-scalable, or secure vs. non-secure. They could be the difference between Facebook and Second Life. The former has become a large public company. The latter seemed to be on that path, but some software compromises caused them great pain later.

At DiamondWare, we would often get to a temporary impasse, with one or more engineers arguing on both sides of an issue. One time, I tried to lighten the mood and said hey, it could be worse.

“We’re unregulated. This room has just a handful of engineers in it. We all understand the problem. We know what’s at stake and we care passionately about it. We all understand the ramifications of the solution. Just imagine if we had adversarial parties in here: regulators, competitors, and hackers. Each of them brought their lawyers, business people, and engineers. Each has conflicting goals. You think you’re frustrated now? Just imagine how you’d feel if a hacker deliberately misstated your idea and proposed one of his own. His proposal creates a subtle but serious vulnerability.”

Of course, in that scenario your competitors are taking good notes. They’re all planning to exploit the hacker’s deliberate flaw. The regulator smiles at the hacker, and you are now forced to design the flaw into your architecture. Next year, you read the news that the regulator now has a multi-million dollar salary working for the hacker.

Is this fiction? It doesn’t happen in voice servers. But even back in my voice server days, I suspected it was happening in stock market servers. Whalen has researched it and gives us a glimpse of how incomprehensible regulations governing a complex area work. They are openly gamed by well-connected cronies.

More regulations cannot fix a problem caused by regulation in the first place.

The Death of Goodwill

This is the first piece in what I intend to be a series, on the theme I think of as the Death of Goodwill. There was (and still is) a huge difference between the attitudes of people in America and the attitudes of those in third-world countries. I use the word goodwill for this difference. For centuries, Americans have been helping one another raise barns, live through hard times, and get up when they fall in the street. Unfortunately, goodwill is being strangled. There are numerous mechanisms for this, though all have bad governance at the core.

With the death of goodwill will come the collapse of civil society, and its twin sister law and order.

 

Too many ugly incidents are occurring in ordinary law enforcement. They are not random. There is a pattern to them. America is sliding down a long, slippery slope. The end of that trip is a third-world dictatorship. Here are 13 possible stages in one process. There are other similar processes occurring also.

1. Congress enacts bad laws. These laws criminalize acts that do not have a victim, in other words non-crimes. Things like drinking or selling alcohol. Or not having a permit.

2. Police become enforcers of these laws, in other words they are not protecting the rights of people. Instead, they become violator of those rights.

3. Criminals organize. They hire lots of trigger men, have sophisticated early warning systems, and they are willing to fight back. They are callous to murder people who get in the way, rival gangs—and police officers.

4. Cops respond. They are subject to random shootings, at any time, by highly armed, sophisticated, and remorseless killers. They become more defensive, more aggressive, and hair-trigger. It’s their lives on the line, and no one seems to care: not the politicians who sometimes sell the cops down the river, not the news media, and not the average citizen.

5. Unfortunate incidents. What do you get when you mix stressed-out cops with and the stresses of every day policing? You get Deputy Knox shooting an old veteran with a cane. You get an endless rash of such incidents.

6. Callousness. You also get the other kind of incident. We’ve all seen videos of a cop unloading a pistol full of bullets into a barking dog that could hardly be considered a threat. I am not talking about the 200 pound Rottweiler silently growling as it rushes forward with its tail lowered and ears laid back. I am talking about the barking Staffordshire terrier that can’t weigh more than 30 pounds, and it’s simply barking because it’s upset.

7. Rhetoric and attitudes. Cops feel increasingly on the defensive. More and more people who would otherwise be law abiding citizens begin to openly show contempt and hatred for law enforcement officers, and the law itself. There have always been people ranging from two-bit thieves to murderers who hate cops. But in this phase, it is a much, much larger group of people who are productive and gainfully employed. Most of these are honest people.

8. Asset forfeiture. Laws are put on the books that allow cops to take cash from people stopped for speeding. They can also take a private plane if a passenger has drugs. Or anything else. Under asset forfeiture laws, they don’t even have to charge the victim with a crime. They take his property and he can just hire a lawyer and spend years suing to try to get it back. Good luck. In the meantime, the asset is a godsend to police departments with shrinking budgets.

9. Militarization. Especially when enforcing laws against acts that have no victim, but increasingly standard operating procedure, cops adopt special forces tactics. Dressed in night camouflage (i.e. black), heavily armed and armored, they bash in doors in the middle of the night. They sometimes use weapons of war such as flash bang grenades, or riot control weapons such as tear gas. What does anyone expect to happen when groggy and terrified citizens are awoken so violently? The consequences are all too often tragic.

10. Further escalation. Cops lobby for budget to buy more exotic weapons, armored vehicles. etc.

11. The end of trust. Law enforcement officers fear and loathe the citizens, and the feeling is mutual.

12. Changing of the guard. Old cops—who remember patrolling a beat, sitting down at a diner and eating with citizens, and respect for basic civility—retire. New cops, trained from angry youths into ruthless agents of the state replace them. They see only endless citizen anger. They don’t understand its origins, but the threat is palpable. Their youthful inexperience is exceeded only by their adrenalin and testosterone, creating a volatile cocktail of raw emotions.

13. Nascent dictatorship. Orders can be given to grossly violate the rights of anyone at any time. The government through the police becomes the biggest violator of the rights of the people. Platoons of officers can be dispatched to confiscate gold, alcohol, drugs, or anything else. At best, these encounters will take someone’s property, leaving him scared and resentful. Increasingly, they take someone’s liberty and throw legions of innocent people into prison. And all too often, they take someone’s life.

I don’t know precisely what stage we’re at now, but our trajectory is clear.