Travel Diary: Prices, Unions and Freedom in one of the richest countries of the World

Prices in a capitalist economy reflect the relative scarcity of a good or service as well as the amount and intensity of consumer demand. Free-market prices are the only viable means of rational economic calculation. If a good or service becomes in shorter supply, for whatever reason, its price will rise, all other things being equal. The higher price will give consumers the proper incentive to do what is needed whenever anything becomes scarcer: conserve, or cut back on consumption. DiLorenzo in “How Capitalism Saved America

Last weekend I had the pleasure of attending the Oslo Objectivist Conference 2012 in Oslo, Norway in which I enjoyed a weekend of Philosophy, Objectivity and a celebration of Individual Rights.  On Monday before returning to my base in Leipzig, I decided to spend the day enjoying the parks and streets of the city (one of my favorites) and during lunch I went to eat buffalo wings in front of the City Hall Park.

That noon I was reading the last pages of the book “How Capitalism Saved America” by Thomas DiLorenzo and was writing extensive notes in my notebook criticizing many of his arguments in favor of capitalism due to lack of consistency and integration.  Leaving those morality issues aside, I was very interested in his historical explanation on the role that Unions (and privileged groups of interest) have had in destroying the foundations (principles) of capitalism in the United States since the foundation of the country.  Curiously, that same day the Farmers Union of Norway gathered in front of the park to do a countrywide protest (news).

As DiLorenzo writes, Unions have claimed for decades to be representatives of the “interests” of society, workers, middle class, proletarians and et. al. However, it has been actually only in the interests of the Union’s leadership and their pursuit of cronyism that they have actually worked by being concerned only in “their own membership rolls and dues revenues”. Examples from the Unions intervention in the destruction of the most successful industries of the  United States are explained by DiLorenzo’s book.

On Monday, the disgruntled Norwegian farmers decided to take the streets against the recent decisions of the government in April, 2012 to subsidy of Agriculture by granting only 625 million Norwegian Kroner instead of the 2.2 billion they asked.  The Norwegian Farmers’ Union (NFU) decided to take their trucks and cows and occupy the doors of the City Hall in Oslo; in other cities and towns the mayors were even kidnapped by the unionists.

This protest arise after the Parliament decided that that food prices should rise 20 percent in the next 20 years in line with expected population growth, providing sufficient income to both achieve this and ensure continued recruitment to farming (this reminds me of Hayek’s ideas on the Fatal Conceit). The NFU doesn’t agree.  They consider that the average annual incomes are under 300,000 kroner per man-labour year, whilst it is 469,000 on average in other sectors.  They also claim to represent the “interests” of 100,000 jobs in agriculture and food industry and not only to be seeking for more money for farmers (yeah, right).

Norway is one of the richest countries in the world and its society lives in very comfortable conditions.  The Leviathan in government charges immense amounts of taxes and inflation is incredible.  Just to illustrate the size of Leviathan: The buffalo wings and a beer cost me the high price of 250 krone (aprox. 33 euro or US$41.00 in T.G.I. Friday’s) That same meal would have cost me much less if bought in the U.S. or anywhere else in the world .

How can they afford it? The population earns artificial higher incomes due to the government interventions in the economy and disrupts the economy of the country.  How did the country reached such a condition can only be understood by taking a close and detailed attention to the role interventionism has in a country’s economy.  The effect: high prices, unstoppable high taxes and widespread limitation of liberties behind the power that Unions, groups of interests, politicians and bureacrats have had in the economy for decades.

Slowly but consistently, the Unions and crony capitalists in the bureaucracy of the Norwegian country have made it impossible to be free to exchange products in the country without any type of government intervention.  While Norwegians seem to be free, their daily lives are unconsciously been managed and controlled by a gigantic government that regulated every instant of their lives.

As DiLorenzo described, “Ludwig von Mises initially explained back in the 50s in this theory of government interventionism: one intervention (such as subsidies for railroads) leads to market distortions, which create problems for which the public “demands” solutions. Government responds with even more interventions, usually in the form of more regulation of business activities, which cause even more problems, which lead to more intervention, and on and on. The end result is that free-market capitalism is more and more heavily stifled by regulation. And on top of that, usually the free market, not government intervention, gets the blame.”

I would love to go back to Oslo and if possibilities arise to settle and live there for a couple years. I wish that my passion for buffalo wings will bring me to experience a story to write about and meditate again.  As for now, I return to write about Capitalism while sitting in a desk in Leipzig, Germany.

A Plan to Collapse Iran’s Central Bank and its Origins

The foreign policy of the richest countries has always depended in controlling the world’s monetary systems. As a continuation of the postcolonial systems, they continue holding the power to grant credits to poorer countries, to rescue their economies in periods of crisis and in pushing for an increase in world “reserves” and international “liquidity.” The end result of this policies resulted in creating world inflation and enriching those central banks that controlled the dice of this international game (just as it had been done in the previous colonial period).

Colonialism may seem to many an ‘old history’ that was overcome with the modernization of the world and the decolonization processes after World War II.  Nonetheless, in the following postcolonial period many already institutionalized strategies continued working and are still present today.  The IMF, for example, was one of the institutions born as a result of the decolonization process. Its results (far distant from their founding vision) were to keep the postcolonial countries in monetary and economic dependency.

For long the world’s centralized banking and monetary authorities, headed primarily by the International Monetary Fund, collaborated to initiate a period of surveillance, aid, and guarantees for the world’s financial markets as  and  explained in the post “The IMF and Moral Hazard“. However, the long-term results of theses policies fostered the dependency of postcolonial economies and, as such, empowered the populist leaderships in the former colonies that pursued expansive social programs that couldn’t be supported without their foreign aid and long-term indebtment.

Video: The Plan To Collapse Iran’s Central Bank

Today, I saw a video titled “The Plan To Collapse Iran’s Central Bank” in which analysts in the U.S.A. are evaluating the possibilities of collapsing Iran’s economy and disenabling them to continue researching their nuclear programs. Strategies as these may seem as “bogus” to many; however, the long history of international monetary intervention of the economies in postcolonial countries is long and influential (see: Pastor, Manuel (1989). Latin America, the Debt Crisis, and the International Monetary Fund. Latin American Perspectives).  The results of any of these strategies always end up creating inflation and as  mentioned in his essay “End the IMF” in the year 1963 the only solution for and end to inflation (an as such for peace and economic recovery) is to eliminate the IMF and the interventionist international monetary system that has proved, in practice, a gigantic machine for world inflation.

File:50000 IRR obverse.jpg
50,000 Iranian rial