As Obamacare’s troubles mount — premiums are soaring, millions of policies that people like are cancelled, and contrary to the president’s promise, many can’t keep their doctors — proponents try to convince us that the law was a good idea. How? By reiterating their fictitious tale of life before Obamacare.
“It is important to understand,” the president insisted recently, “that the old individual [health insurance] market was not working well, and it’s important that we don’t pretend that somehow that’s a place worth going back to.”
Why was it not working well?
According to proponents of Obamacare, the problem was that insurers had too much freedom. Premiums were continually rising, for example, because insurers were supposedly free to jack up rates whenever they felt like it. People with pre-existing conditions had difficulty finding insurance, they told us, because insurers were free to deny them coverage. On this view, the diagnosis was a lack of regulations, and the remedy prescribed was a heavy dose of government controls called Obamacare.
In reality, America’s supposedly free market was made a scapegoat for our health insurance woes. As I show in a new paper published with the Pacific Research Institute, available online, government has long regulated almost every aspect of the business.
Consider just three government controls in place before Obamacare, and their impact.
A major source of government distortion in the health insurance market is the tax code. If your employer pays for your health insurance, you don’t have to pay taxes on those premiums. But if you buy insurance directly from an insurer, you do. The tax exemption for employer-sponsored coverage has tied health insurance to our jobs (one reason why the individual market is so distorted). A consequence is that when people leave their jobs, they are eventually kicked out of their insurance plans. When reapplying for coverage, these individuals risk being turned down if they have developed a pre-existing condition.
Long before Obamacare, the government also restricted the kinds of health insurance products which could be sold. For decades state governments have dictated coverage that insurers must provide. Everything from in vitro fertilization to wigs have been mandated, and each mandate increases the cost of a policy (some states impose more than sixty different mandates). If you were looking for a policy without these services, good luck. It was illegal for an insurer to sell it to you.
Prior to Obamacare almost every state also manipulated how insurers priced polices, forbidding them from offering low-priced policies to those younger and healthier. Insurers were instead required to charge these individuals higher premiums in order to subsidize the coverage of those older and less healthy. When New York implemented these laws in the early 1990s, premiums for thirty-year-old single men almost tripled, and one in six New Yorkers with policies in affected markets had no choice but to drop coverage or see his employer drop it. As a result of the exodus of younger and healthier individuals from the market, premiums for everyone in the state rose higher than they were prior to regulation. Since then, premiums in New York’s individual market have been, on average, more than twice as high as those for the rest of the nation.
For decades, government controls in health insurance were pervasive: from licensing who can sell insurance and where to regulating how insurers organize their finances, to dictating how they price their policies, to decreeing to whom they must sell their services, to mandating what conditions they must cover, to restricting how they advertise. The list goes on and on.
Was the health insurance market plagued with problems? Yes. The health insurance market was mostly controlled by government.
And yet, despite the passage of Obamacare, the greatest expansion of government in almost fifty years, the free market continues to be blamed for our problems. For example, in light of skyrocketing premiums last year, a New York Times editorial called for “more [government] power” to fix the state of “lax regulations.” Talk about scapegoating! Not once did the Times consider the impact of distortions caused by Obamacare.
Here’s an idea: perhaps Obamacare is more of the poison that is killing the patient.
About The Author
Rituparna Basu
Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.
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The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
[T]he health insurance industry is the shark that swims just below the water, and you don’t see that shark until you feel the teeth of that shark.
— Senator Jay Rockefeller, February 2010
It was sentiments like these that President Obama’s signature legislation addresses. One of the main goals of the Patient Protection and Affordable Care Act, signed into law on March 23, 2010, is to control health insurance, an industry plagued with problems, all of which supposedly share a common diagnosis.
At the White House health summit, at which Rockefeller made the above comment, he continued (mixing metaphors), “Nobody has particular oversight of [health insurers]. . . . They can do what they want . . . . [Y]ou have to go at them to clip their wings in every way that you can.” He repeated, “This is a rapacious industry that does what it wants.”
Who commits the most murders, according to Hollywood? Serial killers? Gangsters? Terrorists? High school science teachers turned drug kingpins?
It turns out the answer is businessmen.
In 2006, the Business and Media Institute published a study in which it concluded that “According to primetime TV, you are 21 times more likely to be kidnapped or murdered at the hands of a businessman than the mob. Businessmen also committed crimes five times more often than terrorists and four times more often than gangs.”
A different study by the Business and Media Institute found that by age 18, “the average TV viewer has seen businessmen attempt more than ten thousand murders and countless lesser offenses, all in the name of greed.”
It’s more than a Hollywood convention: it’s a cultural stereotype. Businessmen are seen as greedy, selfish SOBs who care about nothing save for their bank accounts. And like all stereotypes, this one has consequences.
Look at how the press covers any economic problem or crisis. No one waits for actual evidence or peer-reviewed studies. Hardly anyone examines how government might have messed things up by distorting market forces. They just look for evidence of greed and connect it to the problem at hand.
When fraud was exposed in a handful of companies in the early 2000s, for example, the explanation was “corporate greed.” The solution? Sarbanes-Oxley, which treated all businessmen as guilty of accounting fraud until proven innocent. When the financial crisis hit, the explanation was “Wall Street greed.” The solution? Congress passed Dodd-Frank, generating nearly 14,000 pages — and counting — of complex regulations all aimed to stop greedy businessmen from being so greedy.
What’s striking is that it is virtually impossible to find a successful businessman who has not been criticized for his greed or selfishness. Even the late Steve Jobs, one of the most popular businessmen of his or any era, was routinely derided as selfish. Whatever his virtues, people said, Jobs was primarily concerned with his vision and his company’s success, not with the welfare of others. In the wake of his resignation from Apple, shortly before his death, some even rushed to condemn Jobs for focusing his efforts on profit seeking rather than philanthropy. Journalist Andrew Sorkin, for example, penned a missive in the New York Times in which he acknowledged that Jobs was a “visionary” and an “innovator” who “clearly never craved money for money’s sake and has never been ostentatious with his wealth.” Nevertheless, Sorkin complained, “there is no public record of Mr. Jobs giving money to charity.” A 2006 column in Wired put it more bluntly: Jobs was “nothing more than a greedy capitalist who’s amassed an obscene fortune. It’s shameful.”
In some ways, though, Jobs is the exception that proves the rule. Unique among businessmen, he was admired by many for his unrivaled creativity and passion for making “insanely great” products. If even he could not escape charges of selfishness and greed, then what chance have other producers had? History speaks: from Morgan to Rockefeller, to Ford, to Walton, to Gates, hardly any successful businessmen have been immune from the accusation that they are selfish.
The Madoff Comparison
And what is even more striking is that the charges of greed and the image of the greedy profit-seeker have led us to put the pantheon of business greats into the same moral category as some of the worst predators in history — predators such as Bernie Madoff, the Wall Street elder statesman who in 2008 was exposed as having orchestrated the largest Ponzi scheme in history.
From the start, Madoff was treated not as a criminal who pretended to be a businessman but as the symbol of business greed. He was, in the words of Diana Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust, “a creature of the world he helped create, a world that was greedy for riskless gain . . . arrogantly certain of success, woefully deluded about what could go wrong, and selfishly indifferent to the damage done to others.”1
The world around us has been shaped by a theory that says the Madoffs and Jobses of the world are brothers in spirit — or, rather, brothers in spiritual impoverishment.
But what if actual profit-seekers have nothing important in common with monsters such as Madoff? What if the profit motive is radically different from some unhinged “greed” capable of turning producers into predators? Then perhaps we owe businessmen an apology — and maybe, just maybe, a significant part of the justification for today’s regulatory state should be relegated to history’s ash heap.
Early in his business career, Madoff encountered his first major setback. The young investor had about 20 investment advisory clients — friends and family, mostly — whose money he had put into highly speculative stocks. “I realized I never should have sold them those shares,” Madoff later admitted.2 For two years the stocks soared, but in May of 1962, the market collapsed, and with it their value.
Madoff’s reaction was revealing. He used all the profits his firm had made up to that point to buy back the stocks from his clients’ accounts at their original offer price, leaving his investors with the illusion he had avoided any losses. In Henriques’s words, “rather than admit the truth that he had failed, he covered up those losses and lied about it.” The move wiped out Madoff’s capital, but he was able to dupe his investors into believing he was a genius; the market had tanked but he hadn’t lost a cent. It was a litmus test, Henriques says. “Faced with admitting failure or cheating, Madoff would cheat.”
The incident helps pull back the curtain on the motives that would later lead Madoff to con thousands of people out of billions of dollars. From the start, he seemed to be out to prove something. “He had an inferiority complex,” Marcia Mendelsohn, a childhood acquaintance, told Madoff biographer Andrew Kirtzman. “He never felt he was good enough.”3
Kirtzman elaborates: “Time and again as a kid, [Madoff] was spurned and humiliated for what was perceived to be his inferior intellect. . . . But he excelled at making money, and with it came the stature that once had eluded him. When he couldn’t generate as much money as he wanted or needed, he simply invented it.”4
Madoff didn’t seek money as a reward for his competence — he sought money to prove to others that he was competent. He aimed, not to build a great business, but to manufacture a reputation as a great businessman. He didn’t want to use his intelligence to create wealth, but to steal wealth in order to dupe others into thinking he was intelligent.
Madoff, you might say, wasn’t greedy, but needy: he needed to feel like a big shot because, in reality, he felt like a nobody.
Madoff recounted a telling episode to New York magazine in 2011: “The chairman of Banco Santander came down to see me, the chairman of Credit Suisse came down, chairman of UBS came down; I had all of these major banks. You know, [Edmond] Safra coming down and entertaining me and trying [to invest with Madoff]. It is a head trip. [Those people] sitting there, telling you, ‘You can do this.’ It feeds your ego. All of a sudden, these banks which wouldn’t give you the time of day, they’re willing to give you a billion dollars.”
Madoff went on: “It wasn’t like I needed the money. It was just that I thought it was a temporary thing, and all of a sudden, everybody is throwing billions of dollars at you. Saying, ‘Listen, if you can do this stuff for us, we’ll be your clients forever.’”
Madoff took the money and created false statements indicating to his investors that he was making incredible 15 percent returns. In reality, his returns were nothing close to that, but Madoff refused to face the facts and admit to his investors that he had failed to meet their expectations. “I was too afraid,” he said.
Madoff had first arrived on Wall Street with a chip on his shoulder. “I was upset with the whole idea of not being in the [Wall Street] club. I was this little Jewish guy from Brooklyn.”5 Once “the club” started giving him the attention he so desperately craved, he was unwilling to let reality get in the way.
In It For the Money?
It’s hard to imagine someone truly concerned with reaping profits over the long term behaving this way. Take a tour through Silicon Valley and it becomes apparent that the genuine profit-seeker makes mistakes and acknowledges them. He views mistakes and failures as part of the process of success. After studying successful entrepreneurs, business expert Peter Sims concluded that most “understand (and come to accept) that failure, in the form of making mistakes or errors, and being imperfect, is essential to their success.”6 Mistakes are inevitable, and they are an indispensable part of how a person learns and improves. But Madoff’s goal wasn’t to become a skilled investor; it was to project a certain image, to maintain the illusion that he was infallible. Whenever that illusion was threatened by reality, well, so much the worse for reality.
Much later, as Madoff stood at his sentencing hearing, he told the court, “I believed when I started this problem, this crime, that it would be something I would be able to work my way out of, but that became impossible. . . . I refused to accept the fact, could not accept the fact, that for once in my life I failed. I couldn’t admit that failure, and that was a tragic mistake.”7 (Kirtzman notes that Madoff was spinning the facts even then: “He was not an overachiever who’d failed at something; he was an underachiever who had succeeded by lying.”8 In either case, the underlying motive was the same: Madoff wanted to create the illusion of ability, and so the facts were dispensable).
It is impossible to overstate how different Madoff’s motives were from those of genuinely successful businessmen, who thrive and prosper over the long run through their productive exploits. Steve Jobs, for instance, explained that his “passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary.”9
That included money. In an interview for the PBS documentary “Triumph of the Nerds,” Jobs explained that “I was worth about over a million dollars when I was 23 and over 10 million dollars when I was 24, and over 100 million dollars when I was 25 and it wasn’t that important because I never did it for the money.”10
Madoff pursued money to prove he was a big shot. Jobs? In his words, “Sure it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation.”11
A library of business biographies testifies to the fact that the reason genuine profit-seekers get out of bed in the morning is because they love creating things: they love producing new products, improving old ones, finding better ways to do things, building a business into something great, and making a fortune in the process. They are at heart producers.
Underneath all its complexities, production is the process of transforming the material world for the benefit of human life. Human beings figure out the potentialities of the things around us and then we rearrange them to create something even better.
In this regard, the financial industry is no different from the tech industry. Again, the history of Apple is illustrative. A critical factor in its success was attracting an early financial supporter, Mike Markkula, who invested $91,000 and extended Apple a $250,000 line of credit.12 Markkula’s great virtues were his ability to see Apple’s potential at a time when its future greatness was by no means apparent and his willingness to risk a significant portion of his personal wealth on that assessment. His decisions helped create one of the most productive companies in history. In one way or another, that is what all financiers do: they direct capital to what they judge to be its most productive uses, and so help make possible the creation of every sort of good and service on the market.
When a businessman — a real businessman, not a con artist with a business card — grows rich, it’s not by taking from others and leaving them with less, the way a criminal does. It’s by creating more and more wealth, of which his income — however large — represents only a fraction of what he created. He grows rich by making others richer. This is what led the late success guru Steven Covey to include “Think Win/Win” among his “Seven Habits of Highly Effective People.” Whereas win/win relationships foster long-term profits, Covey observes, “Win/Lose is not viable because, although I appear to win in a confrontation with you, your feelings, your attitudes toward me, and our relationship have been affected. If I am a supplier to your company, for example, and I win on my terms in a particular negotiation, I may get what I want now. But will you come to me again?”13
Alas, some businessmen do share Madoff’s desire to prove they are “somebody,” but it’s clear that goal is actually at odds with the profit motive. To the extent that a businessman is driven by the challenge of creating value, his work brings not only material rewards, but intense spiritual challenge, meaning, and satisfaction. On the other hand, to the extent an individual is driven, as Madoff was, by a desire to feel like a big shot, the effort to avoid acknowledging his weaknesses and mistakes will divert him from the productive process. In the long run, that’s a recipe for failure.
Jobs said it well. As he told the Stanford graduating class of 2005, “I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.”
That hardly seems to have been the case with Madoff. Far from loving his job, he fled from it whenever he could. According to Kirtzman, “The [Madoff] family members were often on vacation and came and went as they pleased. Weeks would sometimes pass without a sighting of Bernie and Ruth.”14
Whenever we classify creators such as Jobs and destroyers such as Madoff as greedy or selfish, we equate polar opposites. A creator creates new wealth, is motivated by the process of creating wealth, and deals with other people by trading his creations for theirs, win/win style. Madoff wasn’t a producer, but a predator. He did not make money — he appropriated and ultimately destroyed it. In terms both of his motives and his means, Madoff was essentially different from profit-seeking businessmen. But he fit the pattern of other criminals to perfection.
Inside Madoff’s Criminal Mind
In February 2009, Dr. Stanton Samenow, a distinguished criminal psychologist, told an interviewer, “I’ll make you a bet that Mr. Madoff and others like him all say they’re good people; they by no means regard themselves as evil. I’ve interviewed serial killers who, despite leaving dead bodies in their own view, say they are good people.”
Samenow would have won that bet. Less than a month later, New York magazine published its interview with Madoff. “Everybody on the outside kept claiming I was a sociopath,” Madoff told the magazine. “I am a good person.”15
Going back and reading Samenow’s groundbreaking 1984 book Inside the Criminal Mind, it’s striking how well Samenow’s description of the criminal personality fits Madoff — and how radically different it is from the picture one gets from studying the lives of creators such as Jobs.
According to Samenow, the criminal “adamantly refuses to acknowledge his own fallibility.”16 Madoff, recall, “couldn’t admit . . . failure.”17 Creators embrace failure as a core component of success.
According to Samenow, “When doors do not open immediately to a criminal, he complains about lack of opportunity or discrimination.”18 Madoff saw Wall Street as “a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything . . . . I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.”19 Creators don’t pout about their lack of opportunity — on the contrary, they search tenaciously for opportunity and even create it.
According to Samenow, “When the doors of prison first lock behind them, some criminals temporarily are frightened, remorseful, and depressed. These emotions are not strange because criminals experience them occasionally on the street when they weary of the daily grind, tired of looking over their shoulders, and regret disappointing people who care about them. Even on the outside, there were moments when life seemed no longer worth living.”20 Madoff claims that he could have kept his scheme going but turned himself in because he “got tired.”21 He knew it was just “a matter of time” before he got caught. “It was almost like . . . I just wanted the world to come to an end. . . . The world would come to an end, and I’d be dead and everyone would be gone.”22
Madoff’s world did come to an end. It had to, because Madoff was fighting an opponent he could not beat: reality. The pattern that emerges from Madoff’s life is one of systematically blinding himself and others to the facts of reality. The pattern of a creator is to ruthlessly face facts in order to deal with reality on a progressively higher level. “Face reality as it is, not as it was or as you wish,” says former General Electric CEO Jack Welch. “[F]acing reality is crucial in life, not just in business. You have to see the world in the purest, clearest way possible, or you can’t make decisions on a rational basis.”23
Apple’s iPhone, for instance, emerged from Jobs’s relentless focus on facts — in that case, the uncomfortable fact that despite the preeminence of Apple’s iPod in the portable music market, its days were numbered. As Wired explained, “[Jobs] saw millions of Americans lugging separate phones, BlackBerrys, and — now — MP3 players; naturally, consumers would prefer just one device. He also saw a future in which cell phones and mobile email devices would amass ever more features, eventually challenging the iPod’s dominance as a music player. To protect his new product line, Jobs knew he would eventually need to venture into the wireless world.” Many an enterprise has gone from bankable to bankrupt thanks to a failure to face unpleasant realities. Jobs faced them and Apple flourished.
To place criminals and creators in the same moral category is to commit an error probably best captured by William F. Buckley: it’s equal to “saying that the man who pushes an old lady into the path of a hurtling bus is not to be distinguished from the man who pushes an old lady out of the path of a hurtling bus: on the grounds that, after all, in both cases someone is pushing old ladies around.”24
Both a Madoff and a Jobs in some sense pursue their desires. But that is a superficial similarity hiding a fundamental difference. Madoff blindly pursued his desires in defiance of reality, and as a result achieved nothing but destruction. Creators think about what they want and the real-life requirements for achieving it. They see their interests as consisting in facing facts, in production, and in win/win trade.
Madoff’s crimes were not an indictment of businessmen, the profit motive, or the profit system. But the widespread claim that Madoff illustrated what’s wrong with American businessmen? That was an indictment of us.
23. Quoted in Edwin A. Locke, The Prime Movers (New York: AMACOM, 2000), 44.
24. Linda Bridges and John R. Coyne, Strictly Right: William F. Buckley Jr. and the American Conservative Movement (Hoboken: John Wiley & Sons, 2007) 182.
Early on, the conventional view on the so-called “Arab Spring” was euphoric. In a nutshell, it was that the upheavals herald the triumph of freedom. Two-plus years on, however, Islamist groups have gained considerable political power — an ascendancy ominous not only for those subjugated under sharia, but also for American and Israeli security. Searching for silver linings on a darkening horizon, some point to Turkey: here is a regime widely feted as proof that Islamist rule is compatible with political freedom, after all.
Andrew McCarthy roundly refutes that view in Spring Fever. Recep Tayyep Erdogan’s regime, he contends, serves as a case study of what to expect of ascendant Islamists in the Middle East: more oppression, and more hostility toward the West. “The trend-lines are unmistakable,” he writes, “the trajectory of change more certain than its pace.”
A few years ago, I was in need of some extra cash so I decided to sell my laptop on eBay. A few days later, I got an offer. It wasn’t great, but then neither was my laptop. But before the payment went through, I got a call from the government.
“We have decided that the offer you got was too low. We’re not going to let you sell your laptop for anything less than three hundred dollars.”
“But no one is willing to pay me three hundred dollars,” I said. “I’d rather have two hundred bucks than nothing.”
“Oh, no, you can’t do that,” I was told. “That would be unfair to you.”
Far fetched? Maybe — it didn’t actually happen to me. But the fact is it happens to defenseless victims every single day, albeit in a somewhat different form: through enforcement of the minimum wage.
Right now there is a campaign underway to raise the federal minimum wage from $7.25 to $9 or more, and polls indicate that Americans overwhelmingly support it. And who wouldn’t? Who could object to making sure that everyone can earn a living? Who would oppose guaranteeing that every American is paid fairly?
Well, the problem is that the minimum wage doesn’t ensure everyone can earn a living — it ensures that many of us can’t earn anything. And it doesn’t guarantee that everyone is paid “fairly” — it unfairly denies us the freedom to decide for ourselves what pay to offer or accept.
I remember when I got my first job. I had just turned seventeen and after a bit of a search — I think I submitted three applications at the local mall — I got a call to interview for an entry-level position as a ticket taker at the mall theater. I sat down with Michelle, the theater’s hiring manager, and after going over my work experience — “I once helped my dad wash his car” — Michelle offered me a starting position at $5.35, just above the minimum wage at that time. I remember thinking: it’s not much, but it’s better than anyone else is offering me, and it’s certainly better than being out of work.
And that’s how employment should work. Employment is a contract — an arrangement between a person who wants to work and someone who wants to hire him. But under minimum wage laws, Michelle and I weren’t the only ones who had a seat at that negotiating table.
Had Michelle only offered me $5 an hour and had I wanted to accept it, Mr. Minimum Wage Enforcement Goon — I picture him as Bluto from Popeye — would have crossed his arms, sat back in his chair, and shook his head. And had he tried to enforce today’s minimum wage of $7.25, well, then, it’s very likely I would have never gotten the job to begin with.
The question is: Who invited him? Why was my employment agreement anyone’s business but mine and Michelle’s?
Here’s one answer: “But it’s not voluntary! You needed the money, while the movie theater could have afforded not to hire you.”
But the fact that someone badly wants or even needs something doesn’t imply that his efforts to get it aren’t voluntary. I may have needed a job, but it’s not like Michelle could have zapped me with a cattle prod to stop me from going to work at Subway.
Michelle’s only power was the power to offer me a better deal than any of her competitors. We sometimes forget that companies have to compete for employees the same way they have to compete for customers. When I interviewed with Michelle, I was no more powerless than a consumer shopping for condiments: Heinz is free to charge a thousand bucks for a pint of mustard, but it’s not free to keep you from buying a jar of Grey Poupon instead.
Did I wish I could have gotten more than $5.35 an hour? Sure, but no one was offering me that, and as an ambitious but inexperienced worker eager to get my start, I understood why: I wasn’t worth more yet. I wasn’t just getting the paycheck — I was building the skills and resume that would make it possible for me to make a whole lot more than $5.35 some day.
That’s the logic behind internships, which few people object to. Young people regularly work for low and even no pay in order to build their resume, learn useful skills, and make networking connections. If you forced companies to pay interns significantly higher wages, you would achieve only one result: you would prevent young people from realizing those benefits. By the same token, if the government had stepped in and forced the movie theater to pay a wage higher than what my ability justified, it wouldn’t have magically made me more productive — it would have made me unemployable.
Those who don’t think the world owes them a living understand that they can’t expect to get paid more than the worth of their value to an employer, and that to earn more they have to become worth more. Such people know that a low-paying job can be the best path to a high-paying job. Contra the minimum wage cheerleaders, it isn’t low pay that’s unfair — it’s preventing people from offering and accepting jobs that’s unfair.
Then again, maybe it’s not those who believe in individual responsibility that the supporters of the minimum wage are trying to appeal to.
Israel is at the crux of a “new struggle over the international laws of war.” So argues Peter Berkowitz, a legal scholar at the Hoover Institution, in his new and important book on the subject.
Exhibit A in Berkowitz’s case is the United Nations’ putative fact-finding mission on the 2008–9 Gaza war — an investigation which culminated in the notorious Goldstone Report. Exhibit B: the furor over the 2010 Gaza flotilla. According to Berkowitz, these incidents of maltreatment of Israel and efforts to criminalize the exercise of its right of self-defense “threaten to effect legal transformations that will impair the ability of all liberal democracies to defend themselves.”
By exposing what he regards as abuses of the international laws of war, Berkowitz intends to contribute to their defense. The book’s evidence, though, renders that hope forlorn.
With lawyerly precision, Berkowitz dissects the Goldstone Report, highlighting the extent to which it is riddled with inaccuracies, half-truths, and Hamas propaganda uncritically reported at face value. For example, the report found that Israel illegitimately destroyed a family home in Gaza. But in reality, Hamas had used that home as a storage facility for weapons and ammunition, including Grad missiles, rendering it a legitimate military target. Moreover, in the eyes of the Goldstone team, Hamas is not a terrorist organization, but merely one of several “Palestinian armed groups.” The report downplays the 8,000+ rockets and mortars launched from Gaza, as if they were causally unrelated to Israel’s decision to retaliate. Berkowitz deftly argues that the report’s application of relevant norms of war is legally unsound, and that its recommendation that the UN Security Council refer the matter to the International Criminal Court is baseless.
Procedurally, Berkowitz contends, the UN infringed on Israel’s right to apply the norms of war when it prematurely authorized an investigation, before the fighting ended and before Israel could reasonably carry out its own preliminary assessments. Stoking suspicions that the investigation’s verdict was a foregone conclusion, the UN General Assembly endorsed the Goldstone Report 114–18 (with 44 abstentions) — despite the report’s embarrassingly numerous (yet thematically on-message) factual and legal defects. Curiously, nearly a year-and- a-half later, Justice Richard Goldstone, who headed the investigation, retracted some of the most egregious claims; tellingly, however, the other UN team members unapologetically rejected the need to revise, let alone retract, the report.
What Berkowitz illustrates is a pattern wherein the international laws of war operate like a fulcrum for shifting blame from terrorists to the states fighting them.
This pattern was manifest in the outcry over the Gaza flotilla. That convoy, posturing as a humanitarian mission yet closely tied to an Islamist group, sought to pierce Israel’s naval blockade of Gaza. After Israeli commandos boarded one recalcitrant vessel, the Mavi Marmara, a number of flotilla activists attacked them with axes, pipes, and knives. Nine activists were killed in the process, and several dozen more were injured. The chorus of condemnation was instant, shrill, and one-sided. The call for a UN investigation, Berkowitz observes, was intended not “to determine wrongdoing but rather to place an official stamp on Israel’s guilt.” The UN Human Rights Council — which has been notably mute over the years on incontestable violations of rights globally — bestirred itself to issue a resolution singling out Israel as the aggressor.
Critics warped the international laws of war to argue that Israel was forbidden to engage in the blockade, because it remained an occupying power in Gaza — even though Israel withdrew from Gaza completely in 2005, and Hamas violently took over the territory some two years later.
Berkowitz convincingly demonstrates that Israel cannot legally be regarded an occupier, and, piece by piece dismantles the sophistry employed to deny the blockade’s legitimacy.
Dismayed at how the international laws of war are deployed to undercut free nations, Berkowitz notes a paradox: no armies in the history of warfare have devoted greater attention than Israel and the United States to complying with laws of war, yet no armies today “come under greater worldwide attack for violating” those laws.
That moral inversion, Berkowitz suggests, could be rectified by clarifying and upholding the international laws of war. But on this point, the case is unconvincing. The laws of war are themselves deeply problematic. Take the idea, of which Berkowitz approves, that military retaliation must be “proportional” to the attack. Arguably, that precept stands at odds with a free nation’s moral right to defend its citizens’ lives. In the name of proportionality, should the U.S. retaliation for Pearl Harbor have been limited to bombing the same number of Japanese warships, and nothing more? Should Israel’s retaliation against Hamas be confined to firing the same primitive, imprecise mortars at Gaza, and nothing more? Berkowitz calls for a “balance” between military necessity and the need to avoid civilian casualties. But surely the fundamental moral imperative must be the military objective, with the culpability for the unwelcome but sometimes inevitable collateral damage falling to the aggressor.
Compounding the problem is that the UN and related bodies enforce these so-called laws of war. It is not the Russias or Chinas or Irans of the world, but the United States, Israel, and a small number of other free nations that strive to comply with these laws, thereby lending them moral credibility. But the UN is dominated by authoritarian and terrorist- sponsoring regimes, making subversion of those laws all but assured.
Berkowitz assumes that the international laws of war are indispensable. The book’s two case studies, however, should lead the reader to question that assumption. It is true that soldiers (indeed, all citizens) of a free nation need to have a sense of justice in their military cause. Yet moral guidance in war is the task not of some international organization but of a sovereign nation’s foreign policy and moral principles; these should define the objective and appropriate means in a military conflict — just as they should inform decisions on alliances, treaties, and international organizations. What Berkowitz advocates — championing the international laws of war but reserving prime responsibility of enforcement to nation-states — leaves the moral high ground open for the usual suspects to seize it anew.
With this book, though, Berkowitz has masterfully exposed how the international laws of war have become a favorite bludgeon wielded against Israel. By bringing greater attention to the nature and provisions of those laws, the book serves as an urgent reminder of the need to scrutinize this doctrine and the international institutions that have become its champions.
This election Paul Ryan and other Republicans dared approach the third rail that is Medicare, and Democrats upped the voltage, branding Republicans every chance they got as wanting to “end Medicare as we know it.”
But whatever you thought of Ryan’s particular proposals for Medicare, and whoever you voted for, there’s one thing we must all come to agree on now — it is high time we unplug the third rail.
According to Medicare’s trustees, Medicare will go bankrupt in the next 12 years (some argue it could happen as early as 2016). The program is already running combined deficits of close to $290 billion, and its long-term unfunded liabilities top $30 trillion (some argue they could be more than $89 trillion). Cato’s Michael Tanner puts the lower estimate of Medicare’s unfunded liabilities in perspective: “[W]e could confiscate every penny belonging to every millionaire and billionaire in America and still cover less than a third of Medicare’s red ink, even using the lowest estimate for its unfunded liabilities.”
Despite these facts, we continue to treat Medicare as untouchable. Observe how both parties bent over backwards trying to convince us that it’s their party that wants to preserve Medicare as we know it. Romney accused Obama of “robbing” Medicare, insisting that what the Republicans want to do is “save it.” Meanwhile, Obama maintained his health care law “strengthened” Medicare and that it was really Romney who has a “very different plan.” Meanwhile, neither Obamacare nor the Republican proposal makes a serious dent in Medicare’s spending (spending actually increases under both plans).
Why, despite its impending fiscal collapse, is Medicare untouchable? Because we view the program as performing a crucial government function: paying for seniors’ medical bills. That the government should do this, too many of us hold as sacrosanct, and it’s why any proposal that seniors pay for a greater share of their medical care is met with ads showing granny being pushed off a cliff.
It’s past time to question this, to question whether Medicare’s basic purpose is proper.
Medicare is often characterized as an “earned benefit” — a fund you pay into during your working years and then become eligible to collect from once you retire. But in reality Medicare is no such thing — it’s a redistribution program that taxes the income of current workers to pay the medical expenses of current seniors.
The portion of your wealth that is seized today for the program is not invested for your future medical costs, nor is it saved for you in a vault marked with your name until you turn 65. The Medicare “trust fund” is, in fact, a myth.
Any money the government collects from you is spent the minute it is received on today’s seniors. Those over 65 today collect at least $3 in benefits for every dollar they paid in payroll taxes during their working years, which is only possible courtesy of today’s working population. And when you turn 65, Medicare will only exist to the degree the government taxes the then-working population.
Is it proper for the government to force people into such a scheme? Is it right to make the medical expenses of some the unchosen obligation of others? Is Medicare compatible with the founding principle of America — that each individual has a right to live for the sake of his own happiness and not have the fruits of his productivity confiscated for others?
These are the kinds of fundamental questions we must be willing to ask. It really should not be surprising that when we divorce benefits from costs — a person’s consumption from his production — as Medicare does, bankruptcy looms.
Ultimately, we will need to discuss the possibility of ending Medicare as we know it — of no longer forcing some people to pay the medical bills of others.
Instead, Romney, under immense voter scrutiny, recoiled earlier this year from a provision in Ryan’s plan that cut a mere $716 billion from Medicare (Ryan also distanced himself from that provision). This kind of unprincipled backpedaling is the exact opposite of the leadership we need.
America is surely heading toward a financial reckoning. Let’s face this reality, unplug the third rail and have a real debate about the future of Medicare.
About The Author
Rituparna Basu
Rituparna Basu was a researcher and analyst at the Ayn Rand Institute between 2011 and 2016.
Vice presidential candidate Paul Ryan has credited philosopher Ayn Rand with inspiring him to enter politics — and made her 1,000-plus-page magnum opus, Atlas Shrugged, required reading for his staff. “The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,” he said in 2005 at a gathering of Rand fans. “The fight we are in here, make no mistake about it, is a fight of individualism versus collectivism.” It is a theme that pervades Rand’s corpus.1 While Ryan has distanced himself from Rand’s philosophy of Objectivism, he continues to express admiration for Atlas Shrugged.
The addition of the Wisconsin congressman to the GOP ticket naturally unleashed a flash-mob of analysts parsing his speeches, articles, and signature proposals for evidence of her influence. On domestic policy, the impact2 of Rand’s ideas3 on Ryan’s outlook4 is marked, though uneven and sometimes overstated. Religion, in particular, has driven a wedge between
Ryan, who would enact Catholic dogma into law5, and Rand, an atheist, who championed the separation of church and state. But what has received far less attention is Ryan’s outlook on foreign policy — and whether it bears the mark of Rand’s thought.
Ayn Rand’s foreign policy, if we can construct one from her writings, would be grounded in her view of man’s rights and the nature of government.6 Like the Founding Fathers, Rand argues that the ideal government is the servant, not the master, of the individual. In her view, it is a vital institution strictly limited to one function: to safeguard individual rights. By “rights,” Rand means freedom to take “all the actions required by the nature of a rational being for the support, the furtherance, the fulfillment and the enjoyment of his own life.” Critically, the protection of an individual’s rights “does not mean that others must provide him with the necessities of life.” 7
Domestically, this outlook entails a truly free market8 with absolute legal protection of private property, and without regulations, bailouts, corporate handouts, or entitlement programs like Social Security, Medicaid, and Medicare. (Ryan breaks with Rand by attempting to save, rather than end these programs.) In Rand’s political philosophy, however, there is no gulf between economic rights and personal and intellectual ones: for instance, she wrote passionately of the crucial importance (contra Ryan) of the right to abortion,9 and regarded freedom of speech10 as sacrosanct.
Like her views on domestic policy, a Randian foreign policy would be guided exclusively by the goal of protecting the individual rights of Americans, and only Americans. Accordingly, the U.S. government shouldn’t issue handouts to other countries (through foreign aid or international welfare schemes), nor treat its citizens as cannon fodder (through a military draft). Indeed, Rand was scathing in her analyses of the Vietnam War, arguing that it did not serve America’s national interest. “[I]t is a pure instance of blind, senseless altruistic self-sacrificial slaughter,” she wrote in Capitalism: The Unknown Ideal.11
Of course, there are times when government is obligated to go to war, according to Rand. The crucial standard here is whether the lives and property of Americans are imperiled. The only morally justifiable purpose for war, she wrote, is self-defense. This rules out so-called humanitarian missions, like the tragic 1992 – 93 mission in Somalia, and the notion that the United States is somehow obliged to serve as the world’s policeman. The primary function of the military, in Rand’s eyes, should be to deter, and when necessary, defeat foreign aggressors.
Rand regarded any form of pacifism12 (including Ron Paul-esque passivity) as destructive to national defense. And undoubtedly she would have supported a
strong military response to the 9/11 attacks (though, as I have argued in my book13 and sketch out below, she would have rejected George W. Bush’s conception of the enemy and his entire prosecution of the war).
Rand viewed deterrence as an especially important — and effective — method of defending American freedom. In her view, the power of a morally confident, assertive United States was considerable, though largely unappreciated. For instance, she believed that if the West had truly stood up to the Soviet bloc by withdrawing its moral sanction, ending the flow of aid, and imposing an airtight boycott, the Soviet threat would have disintegrated many years before it actually did, without the need for war.
Perhaps most importantly, Rand argued in favor of genuine free trade — without trade barriers, protective tariffs, or special privileges. In her words: “the opening of the world’s trade routes to free international trade and competition among the private citizens of all countries dealing directly with one another.” In the 19th century, she argued, free trade liberated the world by “undercutting and wrecking the remnants of feudalism and the statist tyranny of absolute monarchies.” Not coincidentally, she observed, this era enjoyed the longest period of general peace in human history (roughly from 1815 to 1914).14
Taken together, Rand’s approach entails a foreign policy based on the morality of “rational self-interest.” To illustrate what that would look like, let us bring Rand’s approach to bear on several of today’s major foreign policy issues, starting with Iran.
Tehran is a leader of the Islamist movement, the cause animating al Qaeda, the Taliban, the Muslim Brotherhood and kindred groups. Iran has inspired and funded jihadist
terrorism and cast itself as an embodiment of the movement’s political ideal. It’s a regime that tramples on the rights of its own citizens. It ambitiously seeks to kill and subjugate beyond its borders, and, owing to its jihadist ideology, is vociferously anti-American. From Washington’s capitulation in the hostage crisis of 1979 – 80, the regime concluded that it could get away with committing an act of war against America. Rand noted at the time that because we failed to march in with force within days after the hostage taking, the repercussions would be severe.
Since then U.S. policymakers in effect rewarded Iran’s aggression with bribes and conciliation, and thereby encouraged a spiral of further Iranian-backed attacks.15 Witness the Hezbollah hijacking of a TWA airliner; the kidnapping and torture of Americans in Lebanon; the 1983 bombings of the U.S. Embassy in Beirut and, later, the barracks of U.S. Marines, killing 241 Americans. The 9/11 Commission linked16 Tehran to at least eight of the suicide hijackers. Later, Iranian forces trained and armed Iraqi and Afghan insurgents,17 who murdered U.S. troops. Considering the U.S. failure to recognize the Iranian regime’s character and goals, and assertively end its aggression, Tehran’s defiance over its nuclear program should hardly surprise.
We are at war with Iran, but only that country knows it; in the name of self-defense, the U.S. government is morally obliged to eliminate this enemy. A military option is a non-starter, however, in the shadow of the Iraq and Afghanistan failures (more on those in a moment). But even when we have the opportunity to morally support the Iranian people in attempting to remove from power a regime hostile to the freedom of Americans and Iranians alike, as we did with the Green Movement, which arose after the 2009 elections, we refuse to
do so. The reputedly crippling sanctions now in place are of course a forlorn hope, especially considering the large-enough-to-drive-a-truck-through exemptions18 that have already been granted.
Part of what has magnified the tragedy of 9/11 is the failure of policymakers to properly identify and vigorously pursue the enemy that attacked us. It was not simply the hijackers’ al Qaeda cell, but the jihadist movement, spearheaded by Tehran and bankrolled by Saudi wealth, which had been waging attacks against us for years. In my book, Winning the Unwinnable War,19 I discuss the nature and malignant goal of that movement, and explore what went wrong in the U.S. response and particularly the policy fiascos in Iraq and Afghanistan.
The goal uniting these two wars was Bush’s messianic policy of “nation building” and bringing the vote to the oppressed and needy of the Middle East. Clearing out sewage pipes, fixing up hospitals, printing textbooks — these welfare and social services projects may be the province of the Peace Corps, but not the Army Corps, nor is it right to risk the lives of American soldiers for the sake of the world’s needy. Just as Rand decried Vietnam as a selfless, purposeless war, so that same criticism applies, as strongly, in Iraq. Much of what went wrong in Iraq and Afghanistan stemmed from a policy of putting an altruistic welfare agenda first, above the self-interested goal of eliminating whatever threat we faced in those countries.
Tragically, despite its unparalleled military strength, the United States mired itself, needlessly, in no-win wars. Baghdad is now under Tehran’s sway.20 The continuing strife in Iraq, marked by only occasional suicide bombings,21 is a testament to how the notion of success has been progressively defined down. In Afghanistan there are no longer
good options. A minimum step toward the right policy — one with a modicum of justice to the now 2,000 Americans who perished there — is to properly redefine the mission from perpetual “nation building” to expunging the Taliban and allied Islamist forces in Afghanistan and the Pakistani borderlands.
One recent bright spot, seemingly, was the Arab Spring. But the upheavals across the Middle East, it turned out, shared only superficial similarities. One trend that did emerge, though, was the ascendance, notably in Egypt and Tunisia, of political parties sympathetic to or fully embracing Islamist goals. Here, then, is the consummation of Bush’s “nation-building” democracy crusade. We now must contend with the emerging threat of an Egypt dominated by Islamists — a regime that our diplomats have been falling over themselves to encourage. At minimum we should refuse to endorse the regime (even though popularly elected) and even shun it. 22 To embrace it is to lend the regime an undeserved legitimacy; if any genuinely freedom-seeking Egyptians remain, would they feel anything but demoralized at the spectacle?23
U.S. policy has galvanized one group: Islamists. Further evidence of that came on Sept. 11, 2012, in the form of the conspicuously timed attacks on our embassies in Cairo and Benghazi.
Storming the sovereign territory of the world’s militarily strongest nation requires considerable temerity. Islamists in Egypt, however, thought nothing of attempting to invade the mission in Cairo and hoisting their flag. In Libya, in what looks like a meticulously calculated assault, the self-professed soldiers of Allah managed to murder the U.S. ambassador and three other Americans. The uproar and riots across the
region, putatively in reaction to a YouTube video critical of Islam, brought to the surface (yet again) the assertiveness of those who seek obedience to religious dogma and revile the free mind and the individual’s freedom of speech. What inspires not fear but contempt in the hearts of our Islamist enemies is the meekness of American foreign policy across decades.24
Meshing with that broad pattern, the Obama administration’s response to the embassy crisis was deplorable. It’s hard to imagine a more self-abasing reaction than to have the Cairo embassy apologize to the raging mob, while disparaging free speech. Nor can anyone take our government’s commitment to freedom of speech seriously when it tries to lean on YouTube to take down the video, and rather than committing to protect the safety of the man behind the film, gives him a perp walk. Compared with that, the Romney-Ryan response was better: Yes, America has projected weakness; yes, Washington has undercut real allies, for example, by seeking to distance itself from Israel.
But that’s far short of what was necessary. At minimum, our leaders should declare that American lives are untouchable and that our freedom of speech is inviolable, and demonstrate a willingness, in action, to retaliate with force. (When questioned about the embassy crisis in the vice-presidential debate, Ryan was handed an opportunity to speak forcefully in defense of freedom of speech and the sanctity of the rights of Americans. He dodged it.)
Consider, finally, our defense budget.25 Clouding the debate over defense spending is the fact that our present foreign policy leads us to engage in a mess of contradictions: legitimate, self-defensive operations; illegitimate humanitarian, “nation building” efforts (along with all the
support costs for long-term bases); and the occasional disbursal of bribes26 to our enemies. First, strip out the global-welfare category. Next, consider whether we would need every single one of our permanent overseas bases — if our foreign policy demonstrated in word and deed our willingness, when necessary, to crush enemies. Arguably, we could make do with fewer — and realize considerable savings. To safeguard the freedom of Americans, a powerful, well-equipped and technologically advanced military — one that is peerless, efficient, and formidable — is essential. Yet there’s reason to think, under a principled, self-interested approach, we’d have the strong military we need, at a lesser cost.
What’s distinctive to an approach informed by Rand’s ideas is that it hinges on a rethinking of the moral values that should inform foreign policy. At its core is the idea that the individual27 has a right to his life, that he’s morally entitled to live it in line with his rational judgment,28 and that his freedom to act on his judgment must be safeguarded from aggressors. And, crucially, he bears no duty selflessly to serve others — whether they are next door or overseas. This animating premise enjoins a firm, long-range policy of assertive national defense and strictly rules out altruistic29 missions à la Bush.
Clearly, Paul Ryan does not share Rand’s foreign policy. But is there nevertheless a discernible influence?
Reading Ryan’s most substantive speech30 on foreign policy, delivered at the Hamilton Society in 2011, you can certainly hear the reverberation of Ayn Rand’s ideas. “[I]f you believe these rights are universal human rights, then that clearly forms the basis of your views on foreign policy,” he said, partially echoing the Randian conviction that regimes are moral to the degree that
they respect individual rights. For Ryan, as for Rand, championing rights leads “you to reject moral relativism. It causes you to recoil at the idea of persistent moral indifference toward any nation that stifles and denies liberty.” Though as already noted, Ryan did not speak forcefully in defense of free speech in the aftermath of the Libyan attacks. But at least there is, in line with Rand, a thoughtful promotion of free trade. In his Hamilton Society speech, for instance, he argued in favor of an “expanding community of nations that shares our economic values as well as our political values” in order to “ensure a more prosperous world.”
If these similarities between the two are meaningful, Ryan nevertheless seems to fundamentally part ways with Rand. In particular, he speaks of the need to “renew our commitment to the idea that America is the greatest force for human freedom the world has ever seen,” and sees in the Arab Spring the “long-repressed populations give voice to the fundamental desire for liberty.” (The ethnic-sectarian bloodbath that ensued in Iraq was proof, if any were needed, that political freedom and peace are not an innate yearning of mankind.31) Further, Ryan claims that it is “always in the interest of the United States to promote these principles in other nations.” Like President George W. Bush, whose wars he supported, Ryan appears to subscribe to the quasi-religious view that freedom is written into the soul of mankind, and that it is somehow the moral duty of America, the freest and wealthiest of nations, to go forth and wage wars to unchain the world’s oppressed. In all this, he could not be less aligned with Rand.
Rand certainly believed that the United States benefits from a freer world. Thus, she held, America should speak up for dissidents everywhere who seek greater freedom. But Rand would only ever consider deploying
the military where the rights of Americans hang in the balance — when, in other words, it becomes an issue of self-defense. This critical distinction may well be lost on Ryan, if the media’s parsing of his neoconservative leanings has been fair.
Perhaps, in these waning days of the campaign season, Ryan will consider rereading Rand’s work, and sharing it with his running mate. Anyone seeking to inject more rational and more distinctively American ideas into our nation’s chaotic foreign policy ought to seriously consider Ayn Rand’s refreshingly clear-eyed perspective.
Paul Ryan has been called the “Ayn Rand candidate,” owing to his praise of Rand’s philosophic novel Atlas Shrugged. But her name, and more importantly, her ideas, were absent from last Thursday’s debate.
That should bother those of us concerned about the growth of government intervention in the economy. Rand’s defense of free-market capitalism is potent stuff. Since President Obama was elected, Atlas — which celebrates its fifty-fifth anniversary this month — has sold nearly two million copies. No other thinker in the last century has done more to change people’s minds about markets.
What makes Rand so powerful is that she is not a timid apologist for the free market, but an idealistic champion of it.
Rand’s defense of capitalism is not that it “serves up the goods,” raises GDP, creates jobs, or maximizes “efficiency.” Economists have been showing that since the time of Adam Smith, and although the power of free markets to raise our standard of living is no small matter, it has not by itself been enough to transform people’s attitudes about the market from one of skepticism (at best) to eager embrace.
Nor does Rand rehash clichés about how individuals make better decisions than bureaucrats, or how self-interest, if left unhampered, adds up to “the common good.” She is not your average conservative.
Rand’s defense of capitalism starts by asking a basic moral question: Does the individual have a right to exist for his own sake — or not? Are you the property of the tribe, the king, the church, or “society”? Or does your life belong to you?
Rand’s answer? In Atlas Shrugged, she declares that“your life belongs to you and that the good is to live it.” As a result, you have the right — the moral as well as the political right — to spend that life in pursuit of your own happiness.
For Rand, this is not empty rhetoric: it is an ethical principle that should guide and inform all of our political and economic policy decisions.
If your life belongs to you, then no Mullah has the right to dictate what sorts of movies you make. If your life belongs to you, then no bureaucrat has the right to demand you get his permission before you hang up your shingle and have a go at creating a successful business. If your life belongs to you, then if that business succeeds — if dozens or millions of people willingly buy your products — then the money you earn is yours, and no one can confiscate it on the grounds that others “need” it more than you do.
Your life belongs to you, not to others. That is the root of Rand’s opposition to the entitlement state. It’s not because, as she is often accused, Rand hates poor people. It’s that she deeply respects the sanctity of the individual. Morally, no individual, no matter how poor or how rich, exists to serve others.
The opposite, Rand argues, is the principle implicit in the entitlement state: You don’t have a right to exist for your own sake, but have a duty to selflessly serve the needs of others. You may have earned your paycheck through your blood, sweat, tears, and creative thought — but if your neighbor has a need he can’t fulfill — if he “needs” a house or a retirement or a tonsillectomy — your job is to serve his needs, not your own priorities and dreams.
Conclusion? The entitlement state — Social Security, Medicare, Medicaid, farm subsidies, housing subsidies, and all the rest of it — is not just economically destructive but immoral. Instead of leaving us free to make the most of our own lives, it drags us down to the lowest common denominator. The ideal is no longer individual freedom but equal impoverishment.
Rand’s much-needed perspective was nowhere to be found on Thursday night’s stage. Ryan spent the bulk of his time praising entitlements as critical, noble programs that need to be saved, not cut. Maybe that’ll help get Ryan and Romney elected. Very likely Ryan even believes it. But that sort of view will do nothing to further the cause of limited government.
The left’s nuclear weapon against the right has always been the charge that only the heartless and mean-spirited could want to curtail entitlements. By reframing the issue in terms of the individual’s right to his own life and wealth, Rand puts the left on the moral defensive. As Thursday night’s debate made clear, that’s a weapon the right badly needs.
Mitt Romney and Barack Obama are currently fighting over who is the more patriotic. Obama slams Romney for having outsourced jobs to China during his Bain Capital days. Romney punches back by labeling Obama “Outsourcer in Chief.” The latest is that both John Boehner and Harry Reid are voicing outrage over America’s made-in-China Olympic uniforms. “Burn them!” thunders Reid.
Republicans and Democrats strangely agree that outsourcing is unpatriotic, and that the moral and patriotic thing to do is to “Hire American” and “Buy American.”
Well, no. Not in a thousand years. The fear of outsourcing and international trade is economic nonsense and moral blindness. More than that: this anti-profit attitude is un-American.
Despite the ongoing Europeanization of America, America still symbolizes the land of freedom, entrepreneurship, profit-making, and, above all, individualism.
But collectivism is the premise of “Hire/Buy American”: we are to view ourselves and others not as individuals, but as units of a nation. Businesses are urged to pay more in labor costs, simply to hire workers who are American; consumers are urged to forgo Walmart’s low prices and pay more, simply because the pricier goods were made by “our guys.” This is not rational patriotism, it is not Americanism, it is primitive tribalism.
American individualism means making buying decisions on the basis of economic merit, giving no regard to the nationality or race of the seller. Let’s not hide behind patriotic-sounding slogans. Let’s name things straight for a change: giving preference to American sellers over foreign sellers is the same mindless injustice as giving preference to sellers who are white over those who are black.
Economic nationalism is as morally outrageous as racism. Buying on the basis of nationality or race is the same collectivist evil: judging men and their products by the group from which they come, not by merit.
The anti-outsourcers view trade as if it were a form of war. “It’s them or us!” seems to be their motto. But, in fact and in the American outlook, international competition is not combat but cooperation. Trade is the exchange of values not the exchange of gunfire; it is productive not destructive.
The benefits of international trade flow to both trading partners. It’s win-win. This applies even when one of the countries is more efficient across the board: the wealth of the world grows when each country specializes in its area of comparative advantage. It’s even called the “Law of Comparative Advantage” in economics textbooks.
The bigger picture is this: the beneficial nature of trade does not depend upon lines drawn on a map. Trade between people in different nations is mutually beneficial for the same reason that trade between people in different states is. And trade between people in different cities. And crosstown trade. There is no difference in economic effect between outsourcing a job to Poland and outsourcing it to a firm across the street. If outsourcing the job saves money, it saves resources and is to be applauded. The name of the region or country the new hire lives in is economically irrelevant.
What is supremely relevant is how the new hire affects production — does it make production easier or more difficult?
This emphasis on production is not popular today. Most people, including many economists, are blind to the whole issue of production and its needs. They view wealth as a static quantity, a fixed pie to be divided among claimants.
But wealth has to be produced before it can be traded or stolen. Without production, there is nothing to steal. Production not theft is the motor of human history. Man did not rise from the cave to the skyscraper by stealing his neighbor’s roots and berries. The buildings, cars, and computers were not there to be stolen — they had to be thought of, invented, produced.
In the process of creating wealth, whatever saves costs is to everyone’s interest. It is irrelevant whether your saving is maximized by hiring your cousin or a stranger in Bangladesh.
The “Hire American” premise is the opposite: everyone must cling to his own tribe and fight all the other tribes for a share of a static supply of goods. If China is getting richer, then we must be getting poorer. And this tribalist, xenophobic attitude is supposed to reflect Americanism? America — born in a rebellion *against* English interference with our international trade?
American individualism looks at men as individuals. It holds that a man’s personal identity, moral worth, and inalienable rights belong to him as an individual, not as a member of a particular race, class, nation, or other collective. In the truly American view, men are not natural enemies but allies. The interests of men do not conflict — not men who are self-supporting and earn what they get.
The interests of free nations do not conflict either. One nation’s gain is all other nations’ gain. As India gets richer, our standard of living goes up. Evidence? Just ask yourself: which nation adds more to your standard of living: a richer nation or an impoverished one — Germany or Uganda? And do the economic tribalists dare suggest that Americans would be better off if Germany were suddenly reduced to the economic level of Uganda? Yet that is what is implied in their paranoid, beggar-thy-neighbor outlook: we should, on their premises, want to live in a world where everyone but Americans is starving. Strangely, they don’t want to live in a city or neighborhood where everyone else is starving.
It’s time to drop the xenophobia and paranoia. No one benefits from the poverty or incompetence of others. It’s just the opposite: it is in your interest that other men — in every country — be smart, ambitious, and productive — not stupid, lazy, or incompetent. Would you be better off if Thomas Edison and Steve Jobs had been dim-witted? Nothing is changed if we change the example to an inventor in India or an entrepreneur in China.
Loss of jobs? Quite the contrary. Outsourcing means better or better-paying jobs for Americans. When individuals are fired from one line of work, it’s to release capital to do other work — the law of comparative advantage again. Outsourcing changes the composition of the labor force — fewer Americans are employed to make computer chips, say — but it does not decrease the demand for labor as such, and displaced workers find more productive employment — and thus higher wages — in other lines of work.
Contrary to the tribalist assumption, cost-savings are good for all men, everywhere. He who cut costs saves money, expands production, and raises the standard of living of everyone participating in the global economy. And we’re not not just talking more shirts for Walmart: the money saved goes into the global capital market — to fund also the next generation of CPUs, research into anti-aging drugs, the private exploration of space, and any other potentially profitable endeavor.
Any outsourcing that saves costs and increases profits is to be celebrated. A Congressional Medal of Honor should go to the CEO who cuts his costs the most, whether he does it by outsourcing or any other means. He is the true friend of humanity.
