The Parable of the Wicked Servant

Reading a story that was posted recently on Facebook got me thinking about one of the most egregious consequences of the bank bailouts. These huge corporations with billions and billions of dollars of assets were handed $700 billion by the federal government to keep them afloat. Then on top of that they received trillions of dollars in loans and asset purchases from the Federal Reserve, much of which they're still sitting on today. And what did they do to the customers to whom they loaned money? They foreclosed on their houses. I never heard anyone make this comparison with regard to the foreclosures, but I'm sure that many people thought of the parable of the wicked servant.

Then came Peter unto him and said: Lord, how often shall my brother offend against me, and I forgive him? till seven times? Jesus saith to him: I say not to thee, till seven times; but till seventy times seven times.

Therefore is the kingdom of heaven likened to a king, who would take an account of his servants. And when he had begun to take the account, one as brought to him, that owed him ten thousand talents. And as he had not wherewith to pay it, his lord commanded that he should be sold, and his wife and children, and all that he had, and payment to be made. But that servant falling down, besought him, saying: Have patience with me, and I will pay thee all. And the lord of that servant being moved with pity, let him go and forgave him the debt.

But when that servant was gone out, he found one of his fellow-servants that owed him an hundred pence: and laying hold of him, he throttled him, saying: Pay what thou owest. And his fellow-servant falling down, besought him, saying: Have patience with me, and I will pay thee all. And he would not: but went and cast him into prison, till he paid the debt.

Now his fellow servants seeing what was done, were very much grieved, and they came, and told their lord all that was done. Then his lord called him: and said to him: Thou wicked servant, I forgave thee all the debt, because thou besoughtest me: Shouldst not thou then have had compassion also on thy fellow servant, even as I had compassion on thee? And his lord being angry, delivered him to the torturers until he paid all the debt. So also shall my heavenly Father do to you, if you forgive not every one his brother from your hearts.

Matthew 18:21-35

A talent, when used as a monetary term, is worth anywhere from 5,000 to 6,000 denarii. So 10,000 talents, as owed by the wicked servant, would be equivalent to 50 to 60 million denarii, or about $170 million at today's price of silver. That 100 denarii owed to him by the other servant is quite literally a drop in the bucket. The parable is intended to illustrate how we must forgive others who wrong us, not necessarily to encourage us to forgive debts, but the parallels between the parable and what is happening today are too similar to ignore.

The banks came running to the government, begging for money. If they didn't get a bailout, the whole financial system would explode, the economy would grind to a halt, etc., etc., and Congress bought that hook, line, and sinker. And then those greedy bankers turned right around and squeezed all of their debtors for every last penny, and they continue to do so. The Fed took trillions of dollars worth of worthless assets off the banks' balance sheets, but did the banks reciprocate by writing down mortgages? No. Did they extend grace periods for paying off overdue loans? No.

The only things they ever did to help homeowners was at the government's insistence, in programs in which the government promised to eat some of the potential losses. Privatize profits, socialize losses, that's the name of the modern banking game. Until we overturn this regime and establish a sound banking system that isn't in bed with the government, we can expect more of the same.

Libertarians for a Minimum Wage?

Peter Thiel's recent comments in support of raising the minimum wage have been making the rounds among the libertarian blogosphere this past weekend. The idea of "libertarians" supporting minimum wages is not uncommon, especially in Europe where many of the classical liberal parties have lent their support to various iterations of a basic wage. Needless to say, I disagree wholeheartedly with the idea of minimum wages, living wages, basic wages, etc., as they are a pretty clear violation of libertarian principle. Employers and employees should be free to contract at whatever wage rate the market will bear. Using the force of government to force laborers not to offer their services at a rate below a government-mandated minimum is a horrendously anti-labor, anti-lower class policy decision. Neither is it compatible with the non-aggression principle; if "libertarians" can support the minimum wage, then there really isn't any government policy they couldn't support.

Thiel does make a good point that corporations take advantage of the fact that welfare benefits exist so that they can pay their employees less, hoping that they will make ends meet by using government benefits. In that way, the existence of welfare acts as a subsidy to corporations. But the solution to that is not to raise the minimum wage. Some things that Thiel overlooks are:

1. If the existence of welfare, food stamps, etc., acts as a subsidy to corporations by allowing employees to eke by on low-wage jobs, then it follows that in the absence of welfare, employers will have to pay higher wages in order to attract workers, thus there is no need for higher mandated minimum wages.
2. If the minimum wage were increased, unemployment will increase, ceteris paribus. These newly unemployed people will now be totally dependent on government assistance, thus exacerbating the reliance on welfare that Thiel seeks to end.
3. As the minimum wage increases, workers who were previously at the lower bound will seek to have their salaries raised, and so on up the ladder. As these wage increases work their way through the system, the additional costs are passed onto the consumer in the form of higher prices. As prices increase, the workers making the new minimum wage eventually find that although their nominal wage has increased, their purchasing power has not.
4. An increase in the minimum wage will affect ALL employers, and the employers least able to afford the increase in labor costs are small businesses. Small businesses will have to lay off workers, or pass on increased labor costs in the form of higher prices to consumers, both of which put them at an even greater disadvantage vis-a-vis large corporations. So an increase in the minimum wage will only increase the advantage that large corporations have over small businesses.

Thiel also fails to see that the solution to government intervention is not more government intervention. Ludwig von Mises stressed in his series of Argentine lectures, compiled in "Economic Policy: Thoughts for Today and Tomorrow", that each government intervention distorts the market and results in further government interventions in an attempt to counteract the negative effects of the previous interventions, resulting in the gradual evolution of a free market system into socialism, or perhaps more correctly, fascism.

I wanted to mention this, because people often say: "What is needed in order to make price control effective and efficient is merely more brutality and more energy. Now certainly, Diocletian was very brutal, and so was the French Revolution. Nevertheless, price control measures in both ages failed entirely.

Now let us analyze the reasons for this failure. The government hears people complain that the price of milk has gone up. And milk is certainly very important, especially for the rising generation, for children. Consequently, the government declares a maximum price for milk, a maximum price that is lower than the potential market price would be. Now the government says: "Certainly we have done everything needed in order to make it possible for poor parents to buy as much milk as they need to feed their children."

But what happens? On the one hand, the lower price of milk increases the demand for milk; people who could not afford to buy milk at a higher price are now able to buy it at the lower price which the government has decreed. And on the other hand some of the producers, those producers of milk who are producing at the highest cost-that is, the marginal producers-are now suffering losses, because the price which the government has decreed is lower than their costs. This is the important point in the market economy. The private entrepreneur, the private producer, cannot take losses in the long run. And as he cannot take losses in milk, he restricts the production of milk for the market. He may sell some of his cows for the slaughter house, or instead of milk he may sell some products made out of milk, for instance sour cream, butter or cheese.

Thus the government's interference with the price of milk will result in less milk than there was before, and at the same time there will be a greater demand.

...

The government is disappointed. It wanted to increase the satisfaction of the milk drinkers. But actually it has dissatisfied them. Before the government interfered, milk was expensive, but people could buy it. Now there is only an insufficient quantity of milk available. Therefore, the total consumption of milk drops. The children are getting less milk, not more.

...

Now the government asks the milk producers (because the government does not have enough imagination to find out for itself): "Why do you not produce the same amount of milk you produced before?" The government gets the answer: "We cannot do it, since the costs of production are higher than the maximum price which the government has established." Now the government studies the costs of the various items of production, and it discovers one of the items is fodder.

"Oh," says the government, "the same control we applied to milk we will now apply to fodder. We will determine a maximum price for fodder, and then you will be able to feed your cows at a lower price, at a lower expenditure. Then everything will be all right; you will be able to produce more milk and you will sell more milk."

But what happens now? The same story repeats itself with fodder, and as you can understand, for the same reasons. The production of fodder drops and the government is again faced with a dilemma. So the government arranges new hearings, to find out what is wrong with fodder production. And it gets an explanation from the producers of fodder precisely like the one it got from the milk producers. So the government must go a step farther, since it does not want to abandon the principle of price control. It determines maximum prices for producers' goods which are necessary for the production of fodder. And the same story happens again.

The government at the same time starts controlling not only milk, but also eggs, meat, and other necessities. And every time the government gets the same result, everywhere the consequence is the same.

...

Before the government interfered, milk and eggs were expensive; after the government interfered they began to disappear from the market. The government considered those items to be so important that it interfered; it wanted to increase the quantity and improve the supply. The result was the opposite: the isolated interference brought about a condition which-from the point of view of the government-is even more undesirable than the previous state of affairs which the government wanted to alter. And as the government goes farther and farther, it will finally arrive at a point where all prices, all wage rates, all interest rates, in short everything in the whole economic system, is determined by the government. And this, clearly, is socialism.

This is what Thiel and others like him fail to recognize. The failure of a government action is not rectified by further government action; it is rectified by repealing the initial government action that caused the problem in the first place. The problem with the US economy today is that government has interfered at every single level in numerous ways. And every single time that government intervention causes a problem, the solution has never ever been to repeal the bad regulations, it has always been to give more and more power to the government agencies that caused the problem in the first place.

If you believe that welfare benefits are a subsidy to corporations, then the solution is to eliminate the subsidy, not to burden all employers with an increase in the minimum wage. The great French thinker Frederic Bastiat is known, among other things, for his discussion of both the seen and unseen effects of actions. Proponents of increasing the minimum wage focus only on the seen effects, that some workers will see an increase in wages, and they fail to see the many negative unseen effects such as those discussed above. It's irresponsible to look at just one side of the coin.

Permits? We Don't Need No Stinkin' Permits!

A friend of mine recently posted this video to Facebook.

TL;DW - Guy tries to sell stuff at market; cops harass him; he fights back; they arrest him.

The first thing that popped into my head when I watched this video was a passage from Alexander Berkman's diary, "The Bolshevik Myth." Alexander Berkman was a famous anarchist (anarcho-communist) and anti-war activist, friend and lover of Emma Goldman, who was deported to the Soviet Union along with Goldman in 1919. The book, available online here, chronicles his travels throughout the Soviet Union and his disillusionment with the Bolshevik regime. What resonated with me was this passage describing Soviet police arresting merchants at a market:

“Oblava! (Raid!) Militsioneri!” There were loud cries and shouts, and I heard the clanking of sabres. The market was surrounded by armed men.

The people were terror-stricken. Some sought to escape, but the military circle was complete; no one was permitted to leave without showing his papers. The soldiers were gruff and imperious, swearing coarse oaths and treating the crowd with roughness.

A militsioner had kicked over the tshtchi pot, and was dragging the old woman by the arm. “Let me get my pot, little father, my pot,” she pleaded.

“We’ll show you pots, you cursed speculator,” the man threatened, pulling her along.

“Don’t maltreat the woman,” I protested.

“Who are you? How dare you interfere!” a man in a leather cap shouted at me. “Your papers!”

I produced my identification document. The Tchekist glanced at it, and his eye quickly caught the stamp of the Foreign Office and Tchicherin’s signature. His manner changed. “Pardon me,” he said. “Pass the foreign tovarishtch,” he ordered the soldiers.

On the street the militsioneri were leading off their prisoners. Front and rear marched the soldiers with bayoneted rifles held horizontally, ready for action. On either flank were Tcheka men, their revolvers pointed at the backs of the prisoners. I caught sight of the tshtchi woman and the tall engineer, the thick volume still under his arm; I saw the aristocratic old lady in the rear, the two girls I had spoken to, and several boys, some of them barefoot.

I turned toward the market. Broken china and torn lace littered the ground; cigarettes and lepyoshki lay in the snow, stamped down by dirty boots, and dogs rapaciously fought for the bits of food. Children and women cowered in the doorways on the opposite side, their eyes following the soldiers left on guard at the market. The booty taken from the traders was being piled on a cart by Tchekists.

I looked at the stores. They remained open; they had not been raided.

Despite the statements of the Bolsheviks that they aimed to end speculation and shut down all stores, it's quite apparent from reading Berkman's diary that the Bolsheviks were as hypocritical as any politicians. They lived a life of comfort while the commoners suffered in squalor, and they allowed businesses who paid protection money to remain in business, while ruthlessly suppressing small merchants who struggled to make ends meet. If you paid the government for permission to do business, you were safe, otherwise they came down on you with an iron fist.

The video above reminded me of that passage, and it's a scene that repeats itself every day all over the world, and unfortunately also in the "land of the free." How many times have we heard about children's lemonade stands being shut down? And while those instances stir up a good amount of outrage, how many people are outraged when the same thing happens to adults who are trying to start a business? Just talk to anyone who's trying to start a business about the numerous government-imposed hurdles they have to jump through in order to start doing business. Incorporation, business licenses, zoning permits, occupational permits, tax department registration (at three different levels of government), and all for the "privilege" of being allowed to conduct business. Just like in Bolshevik Russia where those who didn't pay to play were put out of business, today in the United States we operate essentially the same system, despite all the pap we're fed about how free our country and our capitalist system is. The only difference is that nowadays the system is far more onerous and pervasive, albeit with a superficially kinder face. But soft totalitarianism is still totalitarianism.

Much of the mythology of the United States is based around the notion that this country is a nation of hardy, self-reliant individuals, a nation where anyone can, with a good idea and hard work, make a better life for himself. And indeed, for much of this country's history one could start a business with relatively little government interference. Many of the revolutionaries got their start as smugglers, and the popular conception of the Revolution is that it was a revolt against taxation and overbearing government. Yet here we are two centuries later having to bow and scrape before our masters for the "privilege" of starting a business. The barriers to entry are so high that for most people it is prohibitively costly to start a small business. We have evolved from a nation of ambitious entrepreneurs and craftsmen who sought to establish businesses and make names for themselves, into a nation of employees who want to be coddled from cradle to grave and have someone else take responsibility for every facet of our lives.

Read the comment sections of videos like the above, or articles about lemonade stands, or just about anything else that pits government versus the citizenry, and you'll find no shortage of people defending the government. "The rules are the rules" is not an uncommon mindset, and it reflects the lack of critical thinking among the populace today. No one bothers to think about whether the laws are just, they just reflexively follow the rules no matter what. "Do this, don't do that, can't you read the sign." Cultural attitudes like that don't pop up overnight, nor will they be rolled back that quickly either. Witness the antipathy of taxi companies towards Uber, of brick and mortar restaurants towards food trucks, and of taxpayers towards tax protesters.

At least with some of those examples, consumers are beginning to realize that they're better off with less government regulation and more choice. As government becomes more and more overbearing, it seems like more and more people are waking up and realizing that so many regulations are wasteful, harmful, and pointless. Once people see the negative effect that government regulation has in their own lives, they're more likely to start standing up and asserting their rights. The job of people in the liberty movement is to help those people connect the dots and see the bigger picture. Don't stop with one little victory, keep pushing onward. Food trucks can park for more than two hours at a time? Great! Now that your belly is full of Korean tacos, start looking at the world around you and seeing how many other pointless regulations are affecting everyone else. Move outside your own little bubble and start empathizing with others. Don't get complacent when you get yours, don't back down in the face of government pressure, and start pushing back harder to assert your rights.