Tyranny of the Majority: Erdogan’s Capital Sentence of Democracy

Leiden, prid. Non. Apr. MMDCCLXX A.U.C.,

As the polls show, Erdogan had his way, and Turkey has taken another step towards autocracy. Although much has been said about autocratization in Turkey, and the role the constitutional amendments have in this process (an excellent summary of the constitutional amendments, by Jochanan Mussel, can be found here), this referendum is also a clear warning for those who believe ‘the people’ should rule without limitations. While any democracy needs to have a government responsible to the people, populism can lead to democracies in which the majority terrorize the minority. The latter is exactly what is happening in Turkey, which shows the importance of barriers to constitutional change and liberal democracy, which guarantees political rights beyond the right to vote to citizens. Meanwhile, even though a majority voted in favour of the constitutional amendments, the amendments are by no means legitimate. Firstly, the constitution was essentially changed by what amounted to little more than a simple majority, and secondly, some political rights should not be taken away, even if a majority supports revoking those rights.

The procedure taken to amend the constitution has been to pass a bill in parliament, which needed to be passed with a 3/5 majority in parliament, which initiated a referendum which needed to be passed with a simple majority (so 50%+1 votes). The bill which initiated the referendum was supported by the AKP and the MHP, who together collected around 61% of the votes, thus commanding 357 out of 550 seats in parliament (while only 339 out of 550 voted in favour). Today, in the referendum, a small majority of 51.3% voted in favour of the constitutional amendments. This implies that there were quite a few AKP and MHP votes who either did not bother to show up, or are against the increased powers for Erdogan (indeed, many MHP voters do not support the amendments). So, one could say that with such a large majority in parliament and with a majority among the population the constitutional amendments have been passed entirely legitimately. The amendments have been accepted by a majority after all?

Nevertheless, although legal, this constitutional amendment is anything but legitimate. The difference between populist-democracy and liberal-democracy is very apparent here. Populist-democrats only care about whether a majority of the people has voted for the current government, which grants the government legitimacy to use unlimited powers. A liberal-democrat also cares about rights beyond voting power. Any individual should have freedom of speech, religion, and association, the right to a fair trial and the possibility to sue the government in fair trials (and IMHO also freedom of gender and love) and measures which aim to take away these rights are illegitimate regardless of whether a majority of the people supports taking away these rights. In the case of Turkey the prospects for democracy were already dire, but the constitutional amendments will be the capital sentence for Turkish democracy.

There are two ways in which we can attack the legitimacy of the constitutional amendments. Firstly, compared to other countries, the barrier for constitutional amendments in Turkey is very low. Only 330 of 550 members of parliament have to support the bill which initiated the referendum. Moreover, this bill was introduced after the elections, rather than before. This means that the 2015 parliamentary elections were not specifically about the constitutional amendments, but mostly about the conveniently timed flare-up of the war with the Kurds. This means that the 60% majority in parliament in favour of the amendment is not at all a reflection of people’s support for the constitutional amendments, as the referendum results show. Subsequently, only 50%+1 of the votes in the referendum were necessary to pass the constitutional changes. In essence this means that only 51.3% of the Turkish population supports the referendum, which is a tiny majority to change the constitution. To compare this to a case I know much better, in the Netherlands to pass a constitutional amendment, the lower and upper house first need to pass a bill with a simple majority which initiates the debate on the constitutional amendment. To pass the amendment, it needs to be passed by a 2/3 majority in the lower and the upper house after new elections for the lower house. Moreover, the Netherlands has an even more proportional system than Turkey, which means that 2/3 of the lower house corresponds closer to 2/3 of the population. Furthermore, the elections for the lower house do not occur at the same time as the elections for the Provinciale Staten, who then elect the members of the upper house in a similarly proportional way, which means both a 2/3 majority several years ago and a 2/3 majority right now need to support the amendments. This means that citizens are aware of the proposed constitutional amendments when voting for the lower house, and that at the very least 2/3 of the population needs to support the amendments, if not more. The hurdle to change the constitution is very high, as it should be, because the constitution includes the most sacred rights citizens have. In Turkey a simple majority was able to snatch away the rights of a very large majority, in spite of the requirement to have a 3/5 majority in parliament to initiate the amendment process, which makes the constitutional amendment completely illegitimate.

Secondly, it is always illegitimate to revoke the earlier mentioned rights, except under very specific crisis circumstances, for instance as present in England during WWII. Even if 99% of the population decided to take away the freedom of speech, religion and/or association of 1% of the population this decision is illegitimate, unless this 1% consists of active and violent Nazis, anarchist terrorists or ISIS supporters. Even though a majority voted to take away the rights of the other 49% of the population, it did not have the right to do so in the first place, even if it could legally do so. After all, Eichmann was acting completely legally while being at least complicit, and probably very guilty, in the murder of many Jews. The law can never serve as evidence for what is right, it can at most reflect what is right.

I hope this episode will serve as a stern warning to those who believe in populist-democracy, and who believe that a simple majority can legitimately rule a country without limitations. The abolition of democracy will happen eventually, unless the populists lose their populist feathers or the populists are defeated. As Plato noted, populist-democracy is the capital sentence for democracy.

Meanwhile, while the referendum results have been a huge setback for the Turkish opposition and the prospects for democracy in Turkey, the referendum results do not at all legitimize Erdogan’s slow murder of democracy. While rights can legally be taken away, doing so with the means Erdogan used is not more or less legitimate than illegally taking away those rights. The fight for democracy is not over yet, although in Turkey freedom is in peril and I hope that Turks will defend it with all their might.


Bottom Line: Just because a majority happens to revoke the rights of the minority, does not mean this is legitimate. Autocracy is never legitimate, not even when a majority supports it!

P.s. By now it is clear the referendum was probably rigged, however, even if it had not been rigged, it would have been illegitimate to pass the constitutional amendment by simple majority.

The Irony of Brexit: How Brexit is Exacerbating the Democratic Deficit

Leiden, Id. Mar. MMDCCLXX A.U.C.,

As I discussed in earlier posts the European Union suffers from a democratic deficit. The main reason for this is that governments negotiate directly with each other and the European Commission, while European Parliament is relatively weak compared to the national governments and the European Commission, and national parliaments do not have the capacity to monitor their own government. This is of course very problematic, as the national parliaments form the backbone of European democracy and are the link between the people and their government that executes policy on their behalf. However, if the main procedural and democratic problem of the EU is that national parliaments do not have the capacity to monitor their own governments, is it not extremely f*cking ironic that the House of Commons 1. refuses to give the British government specific negotiation goals, and 2. that the House of Commons refuses to keep its right to have a meaningful vote on Brexit?

On march 7th the House of Lords had introduced amendments to the Article 50 Bill, that is the bill that authorizes the government to trigger the divorce from the EU, which read that parliament should have the right to both veto the final divorce agreement and the final agreement on future cooperation with the EU. The House of Commons decided to not maintain the right to vote on the terms of divorce nor on the terms of future cooperation with the EU, and struck down the amendments. Of course parliament can always retake these rights if it wants to, but the Conservative majority in the House of Commons seems quite happy to not do its job and monitor the government. The fact that parliament prefers a hands-off approach gives Her Majesty’s government excessive power with regards to the final outcome of the negotiations.

It is wrong to think that because the people voted in favour of Brexit Her Majesty’s government has the monopoly on interpreting what people actually wanted when they voted for Brexit. 52% of the country has used this vote take the rights of the other 48%. Moreover, a hard brexit is not at all what the median voter wants, moving for a hard Brexit is anything but ‘the will of the people’, as far as it is possible at all to speak of the will of the people. Many remainers have accepted the outcome of the referendum, and are willing to compromise, yet a soft Brexit is not what they will get in return for accepting an outcome which takes away their right to work and live abroad and their European citizenship.

The very fact the government is promoting a weak parliament should have every self-respecting Member of Parliament and peer up in arms against this government. Moreover, this shows once more that the democratic deficit in the EU is not due to the flaws of the EU, but because national parliaments refuse to take their responsibility or are not capable of taking their responsibility. This also makes me wonder what the point of Brexit is, if the very government which is executing Brexit is showing the exact same behaviour in foreign policy that lead people to say the EU is undemocratic.

We still live in a world in which problems and issues cross the borders of sovereign states. We cannot ignore those issues, they are here to stay. Climate change, refugee crisis, creating common regulation of markets (thus reducing regulation by a factor of 27) and common defense are all incredibly important issues that are here to stay. Whether the UK is inside or outside the EU barely matters for whether it will have to cooperate with the EU and its members for solving those issues. Brexit has not changed this reality, as Brexiteers will discover soon enough. Yet, people have every right to be extremely angry with the fact that their parliaments no longer have a meaningful say in foreign policy. This is exactly why it is so unfortunate that the British government is completely ignoring the elephant in the room, the democratic deficit, and is plunging head first into the biggest constitutional change in the UK since the UK accessed the EU without proper parliamentary oversight. Instead of using Brexit as an opportunity to discover how to democratize increasingly complex foreign policy, the British government is literally exacerbating the democratic deficit that Brexiteers have blamed on the EU, but which in reality is caused by an increasingly international world.


Bottom Line: For people who pretended to care about the democratic deficit in the EU and about parliamentary sovereignty a lot, Brexiteers are very silent about the democratic deficit in the UK right now.

Election Talk: Geert Wilders

Diverging from his usual policy, right-wing member of parliament Geert Wilders had an interview on Dutch television. The self-proclaimed right-wing broadcasting service Wij Nederland (We Netherlands, a.k.a. WNL), a broadcasting service for ‘normal, hard working and entrepreneurial’ Dutch citizens which aims to make Dutch television more representative of Dutch society, managed to get Geert Wilders in its morning show WNL op Zondag. Read more about it at: http://www.iminternational.nl/2017/02/17/election-talk-geert-wilders/

Why Nations Fail and How Poor Countries Develop Rich Countries

Leiden, Non. Ian. MMDCCLXX A.U.C.,

Recently the Guardian published about the massive flow of capital from less economically developed countries (LEDCs) to more economically developed countries (MEDCs), based on a report by Global Financial Integrity (GFI). This justifiably got a lot of attention, as it is  ironic, if not down right perverted, that capital is flowing from those countries who need it most to those countries who already have abundant capital stocks. In less economic terms, money which could be used to build roads, schools, businesses and sewerage in countries which painfully lack those is flowing to countries which already have those. However, the Guardian painted a very simplistic picture of this problem, which means they leave those most responsible for the poverty in LEDCs out of the picture. The article in the Guardian suggests that the West is responsible for this flow from developing to developed countries, and thereby also is to be blamed for the poverty in developing countries. However, the biggest plunderers and thieves in the world are not Western corporations, but the elites in developing countries, the dictators and their cronies, who get rich exploiting their own population. This aspect of why nations fail is crucial to eradicating poverty. As long as people in developing countries believe their poverty is due to evil Western capitalism, their corrupted elites do not have to worry about demands for more democracy and transparent governance. The fact that the Guardian is spreading and legitimizing neo-Marxist ideas is very unfortunate.

As said before, large sums of money are flowing from the developing world to the developed world. To start, developing countries have sent $4.2 trillion in interest payments to developed countries. As the Guardian puts it: ‘a direct cash transfer to big banks in New York and London’. It is this kind rhetoric which annoys me. Those developing countries willingly and knowingly agreed to take on debt, that means they had to pay interest, they knew that in advance. Those banks provided a service to those countries, why is this a problem? Yes, this is a large sum of money, but that is how borrowing money works. There is no reason to be particularly outraged about this. If developing countries or companies in those countries had invested this money wisely, they would no longer be developing countries by now (see Singapore, South Korea, Chile and Taiwan). Moreover, companies from developed countries made profits by investing in developing countries and repatriated these profits. Or, as the Guardian puts it: ‘Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.’ Again there is a suggestion that it is problematic that developing countries sign deals with foreign companies. And again, there is no reason for outrage. The South African government was not forced to sign those contracts, and it retains a lot of money itself through those contracts. The largest flow of money consists of illicit capital flight, amounting to approximately $13trillion since 1980. In other words, tax evasion is a big problem (also for developed countries, by the way).

However, even if all this is shocking and perverted, we should not forget why so much capital is leaving the country. This probably due to a combination of two things. A lack of projects to safely invest in, and the capital leaving those countries predominantly consists of the ill-gotten gains of corruption and exploitation of the local elites. To start, in many of those countries there is a lack of projects which can be invested in. Without barriers to capital movement, capital flows to the place where the highest expected returns on that capital can be made. In non-economic terms, this means that people invest their money in those projects of which they expect the highest returns. Given two projects, one very risky but promising a high return, and one very safe, but with a low potential return, it is very well possible that the project which promises low but more secure returns is preferred by the investor. I think this is the reason that capital flows from developing countries to developed countries. Even if the money is much more needed in the developing world, which means there are far higher potential returns on investments in the developing world, in practice investors much rather invest in the developed world. It is much safer to invest in Estonia or Singapore than to invest in Mozambique or Nepal.

Then the question is why it is so unsafe to invest in developing countries. Why are there so few safe projects to invest in? The main answer has to do with how elites in developing countries rule. In developed countries we are used to governments which most of the time respect our property rights. The German or the Canadian government is very unlikely to steal our land, house, company, or money. Life in, for example, Ethiopia or Myanmar could not be more different: in most countries the government is a ‘stationary bandit’, elites orchestrate  the systematized plunder of their own country. What this does for people’s incentive to invest in their own skills or in businesses is not very hard to figure out. If you need to wait 200 days before you can start a business, you will not start a business. If you need to bribe 20 officials before you can get water to cool the machines in your factory, you do not have money left to invest in machines. If you get evicted from your land as soon as you have made it fertile, you will not try to improve your land. If you can only get contracts with companies and the government if you have personal contacts with people working in those companies and the government, those without the privilege of a network will never be able to sell their goods and services. If everything you build gets stolen by your own government, you stop building things. In short, those who want to invest in projects do not do so, because they fear that whatever they create will be expropriated by the government, while those that expropriate and engage in corruption send their money abroad.

Net Resource Transfers from LEDCs to MEDCs
capitalflight-e1480622572592Source: Global Financial Integrity, http://www.gfintegrity.org/press-release/new-report-on-unrecorded-capital-flight-finds-developing-countries-are-net-creditors-to-the-rest-of-the-world/

Looking at this graph, we see that the largest capital flows occurred after 1996. Companies from MEDCs have invested in LEDCs for a long time now, and tax evasion laws were even more lacks in the past than nowadays, so it seems unlikely that the major shift after 1996 is entirely due to those companies moving more resources from LEDCs to MEDCs. What seems more likely is that at least in part this shift has been caused by the elites of countries such as China, which became much richer, and whose elites suddenly had much more money to transfer abroad. Meanwhile, as globalization progressed, it became much easier for elites to transfer their money abroad, possibly also causing this large spike in transfers. Indeed the report mentions that $4.6trillion of the $16.3trillion transferred from LEDCs to MEDCs came from China alone. Moreover, the report by GFI notes that: “There is perhaps no greater driver of inequality within developing countries than the combination of illicit financial flows and offshore tax havens. These mechanisms and facilitating entities benefit the rich—we call them the “1 percent” for convenience—and harm the middle class and poor.” In other words, local elites benefit massively from those illicit financial flows and tax havens: they are moving their ill-gotten wealth abroad.

This is the ultimate tragedy behind the capital flight from LEDCs to MEDCs: LEDCs are very difficult and insecure places to invest in. They are LEDCs for a reason: they are plundered by their own elite. This has several implications. Firstly, the money flow from poor to rich countries is predominantly a consequence of the political-economic system in LEDCs. The outward capital flows are only partly a cause of the poverty in those countries, and predominantly a result of the same system which also causes the poverty in LEDCs. Secondly, even if capital was forced to stay in those countries, it would not achieve much. There is no actual demand for the capital, because nobody has an incentive to invest in projects. Thirdly, the longer the capital owned by individuals or companies who are not part of the elite stayed in those developing countries, the more likely it is to be stolen by the elite of that country to buy cars, or, indeed, to put it on their Swiss bank account. In other words, all the capital which is leaving those countries which has not been expropriated by the local elites yet, would probably be expropriated by the elite at a later point in time anyway, so this capital would do very little for the poor.

In short, while the flow of capital from LEDCs to MEDCs is ironic and perverted, it is simplistic to blame the developed world for what is happening. Most countries in history have had stationary bandits for a government. The fact that many countries still suffer from this, is predominantly not the fault of MEDCs, it is simply how most human societies have always worked. The suggestion that big mean corporations are exploiting those poor little developing countries is unnecessary and hides the bigger underlying problem. This frame is not present in the original GFI report, which is well aware of the importance of property rights. Moreover, the idea that we in the West could simply deliver justice to the developing world is a mirage. Democracy and rule of law need to be home grown to develop and to work, and the only way LEDCs will develop is if their own population demands representative and transparent governance. When the Guardian spreads and legitimizes the neo-Marxist idea that the core exploits the periphery and that this is the cause of the poverty in developing countries, it essentially spreads the propaganda which helps plundering elites to stay in power. The more citizens of LEDCs believe this propaganda, the less reason they have to hold their own corrupted elites accountable. The Guardian is effectively hurting the prospects of democracy and rule of law in developing countries by their simplistic moral outrage.


Bottom Line: LEDCs are poor because their elites plunder them. This means there are few safe investments in LEDCs, while much of the money that is sent abroad is the loot of the corruption and monopolization carried out by local elites. This is very problematic, but simply blaming the West is simplistic and harmful.

P.S. It is not entirely accidental that the Guardian published this a few days later. Again the Guardian promotes the idea that the West deliberately and actively tries to keep the rest poor.

Mr. Farage, go back to your country!

Yesterday Mr. Farage declared his intention to dissolve the European Union, now that he has successfully taken the UK out of the EU. Apparently Mr. Farage has appropriated the right to interfere in European domestic politic, a right he lost when the United Kingdom, at his instigation, decided to leave the EU. Seeing the UK is in the process of leaving this union, voluntarily created by its member states, he no longer has any say at all about Europe’s affairs. I would like to kindly ask him to ‘go back to his country’.
         
Let me be clear, the UK has every right to step out of the EU. I think it is incredibly foolish, but they are a sovereign country, they are allowed to be as foolish as they want. Moreover, their decision to leave the EU has not been a reason for any European leader to declare that Britain’s government ought to be dissolved. Such a statement would be absolutely ludicrous, and if necessary the UK would have resorted to violence to protect its sovereignty. This would have been absolutely justified, because the will of British parliament, representing the British people (and technically the Queen), is supreme within the UK.
         
Meanwhile, Farage does not respect the sovereignty of European countries. The EU is a government too, to the 27 member states left, and declaring the intention to interfere in the domestic politics of the European Union to dissolve the union is a blatant infringement of Europe’s sovereignty. Mr. Farage does not want to cooperate on many issues with Europe, but in his view neither are European countries allowed to cooperate as they see fit. As an outsider he now wants to ‘bring the wrecking ball’ to my, and if you are a fellow European, our government. I cannot see this as but an autocratic move, by a very dangerous man.
         
Of course you can agree with Mr. Farage that the EU needs to be abolished. If you are a European citizen you have every right to try to achieve that goal through peaceful and democratic means. Crucial to my objection to Mr. Farage’s meddling in European politics is that Mr. Farage has made himself an outsider, yet still wants to influence European politics to the degree that he wants to abolish Europe’s government. That goes far beyond what can be considered normal in a relation between two allied governments.
         
Obviously Mr. Farage does not represent the British government and therefore does not affect the actual relations between Europe and the UK. Yet, Mr. Farage’s statement is essentially a potential declaration of war. When one government declares its intention to bring down another government, we call that a declaration of war. Whether this intention is pursued by peaceful means or violent means can only determine the response, but is secondary to the fact that it is a declaration of war. If Farage ever becomes the prime minister of the UK, or if any future PM of the UK would take his stance on Europe, and indeed follows through on this intention to dissolve the EU, this cannot be interpreted as but a direct threat to Europe’s government. Imagine that the German government declared its intention to bring down the Austrian, Czechoslovakian and the Polish government, that would surely be a reason for war? Or if the North-Korean government declared its intention to bring down the South Korean government, would that not lead to conflict? Or if Palestinians declared their intention to abolish the state of Israel, would that not be a reason for political strife?
         
Therefore, Europe would have every moral right to give a very strong response to defend its sovereignty in a scenario in which a UK prime minister would aim to abolish the EU. If Mr. Farage would not use violence to dissolve the EU, as seems very likely, the EU should of course respond proportionally, for instance by boycotting the UK, preventing Britons from entering the EU, freezing all UK bank accounts, limiting access of British firms to the EU, nationalizing British firms, etc. That is what governments do when other governments threaten to ‘take the wrecking ball’ to them. That is the lunacy that Mr. Farage wants to bring to Europe as prime-minister, apparently, although I doubt he really thought his statement through.
         
We have already seen a very negative reaction to Mr. Farage’s meddling in other countries’ politics. Norbert Hofer, the far-right presidential candidate in Austria’s recent election, made it very clear what he thought of Mr. Farage’s attempts to change the election outcome in Austria: “I would ask him not to interfere in Austria’s internal affairs. It doesn’t fill me with joy when someone meddles from outside.” He even called it a ‘crass misjudgment’. We should expect to see more such reactions, if Mr. Farage continues to interfere in other countries’ domestic affairs. The more important the position he will have at that time, the stronger the reaction should be.
         
So, Mr. Farage, I ask you, who do you think you are that you have the right to meddle in Europe’s domestic affairs? I remember your outcry when the UK voluntarily implemented legislation it had every opportunity to influence in Brussels. You did not want to have anything to do with Europe, and that is your right. Nobody in Europe wants to force the UK to stay in the Union, because the UK’s sovereignty is widely respected. Yet, now you think you have the right to influence European domestic affairs? Do not dare to touch Europe’s government and sovereignty, you have forsworn that right when you took the UK out of the Union. You do not have the right to tell other countries how to arrange their government. You do not have the right to threaten Europe’s government with a ‘wrecking ball’. You have already plunged the UK into chaos, as you had every right to do, but you do not have the right to plunge the rest of the continent into a similar constitutional quagmire. It is of course ironic to say this to the champion of British xenophobia, but Mr. Farage, go back to your country.

Bottom Line: The UK has every right to leave the EU, but it has no right to still interfere in Europe’s domestic affairs to abolish Europe’s government. Mr. Farage wants to dissolve Europe’s government, therefore he is a dangerous lunatic, and an enemy to Europe.

Book Review: Frédéric Bastiat — Justice and Solidarity

Leiden, a.d. V Id. Oct. MMDCCLXIX A.U.C.,

Bastiat lived during the first half of the 19th century in France, a politically very unstable time for France, with many revolutions and regime changes. He was a classical-liberal, who also influenced libertarianism (in fact I would call him a libertarian avant la lettre). He also developed the notion of opportunity costs (if I buy ice cream, I cannot buy apple pie with that same money), that alone makes him a respectable economist. The 90 page copy of ‘Justice and Solidarity’ I borrowed from a friend in fact contains two essays, ‘Justice and Solidarity’, and ‘That Which Is Seen and That Which Is Not Seen’. I will discuss both, in the order in which they appear in the book.

Justice and Solidarity

Bastiat’s main point in this essay is that the state’s goal should be maintaining justice, while leaving solidarity to society. This to him is the biggest difference between the (liberal) ‘economists’ like him and the socialists, who think the government has the task to ensure solidarity between individuals. A state based on justice, to Bastiat, is a night watch state, in which the government only prevents injustice by protecting property and enforcing contracts. A solidary government would actively take measures to try to make its citizens happy.

He provides several arguments for why the state should only enforce justice. Firstly, solidarity cannot be mandated, because solidarity entails a voluntary sacrifice. If the government forces people to make sacrifices to each other, the voluntary aspect disappears, and so does solidarity. Therefore the government cannot provide solidarity in society. This play of words is not very convincing to me: if the government can save lives through redistributing some income, I do not care how ‘solidary’ that is, it is the lives saved I am interested in.

Moreover, Bastiat paints the world very black and white. Or the government tries to maintain justice, or the government tries to provide everyone with anything they want. This last assertion is based on a slippery slope argument, which lays the foundation for a straw man fallacy. It is simply untrue that governments try to do everything as soon as they accept certain tasks beyond upholding justice. In fact, social and liberal democracies with some form of a welfare state have effectively prevented communist revolts leading to governments which usurped society. Similarly, Bastiat argues that government spending will always end up benefiting the politically well connected, as politicians decide who receives government spending. This also is a dubious claim, although it is very much true that in many regimes government spending does benefit the well connected. So, while Bastiat’s argument against a government taking over all economic tasks is very much justified, his argument that therefore the government should not take on any ‘solidary’ tasks at all is not justified.

More convincing is Bastiat’s argument to be wary of a government which wants to take care of everything, or of too much. Bastiat’s arguments against the utopian views of the early socialists and the later Marxists and Communists clearly lay bare the naivety of those views. Firstly, if we ask ‘the State’ to take care of all of us, we are asking ourselves to take care of all of us. If the State does everything, it is in fact the population, or a share thereof, doing everything for itself and for others. We would be transferring resources from some of us, to others of us via the ‘greedy and wasteful’ hands of bureaucrats.

This means that any socialist system requires a general lack of selfishness. People will only work for each other without compensation if they are not selfish. This is a very unrealistic assumption, given the human tendency to be egotistic. So we need a system which incentivizes people to work as efficient as possible for each other. However, the government does not include a mechanism which forces everyone to work as efficient as possible in the way the free market does. This argument to me seems sufficient proof that the government cannot take care of all of us and of all our wishes. A sufficient many of us should be self-proficient, that is, capable of producing enough goods or services to survive, and if possible trade with others to use our comparative advantages. In general markets are better at this, so the government should not do everything.

Secondly, it is true that just because the government starts taxing citizens, and starts spending, we have no guarantee that this expenditure is directed to those who need it most. In fact, very often such expenditure has been directed to those who are politically connected, in fact leading to redistribution from the middle class to the upper class. Moreover, there is always the chance that bureaucrats take some of the resources for their own benefit.

However, Bastiat moves to the total opposite of the spectrum, by arguing that the government should do nothing but protecting property rights and maintaining public safety. He even calls government intervention plundering, which is a bit of an overreaction to me, just a bit. Meanwhile, his views about this libertarian utopia are extremely optimistic. He does not entertain the thought of market failure, and he ignores how a free market will maintain large inequalities if the starting position is one of large inequalities (exactly because large inequalities allow the rich to lobby unopposed).

So, this essay is interesting, but to me it fails to meet its goal. If the goal had been to convince that an all-encompassing government will fail, the essay would have been very convincing. However, the goal is to convince that any attempt by a government to do more than protect property rights and safety, and to enforce contracts will lead to failure, I am not convinced.

That Which Is Seen and That Which Is Not Seen

We cannot create something out of nothing, and neither can the State. This means that for every government intervention there are winners and losers. However, often it is very obvious who the winners are, while it is less obvious who the losers are. This means that for every government intervention we need to figure out who the winners and losers are. Only then we can make fair decisions about economic policy. Moreover, it means that we should never propose a government intervention because it will create jobs, or will increase Gross Domestic Product (GDP).

For instance, the government can decide to build a road. Roads are often very useful, in which case building that road can be the right decision for the government. However, building a road for the sake of employment and GDP, rather than to solve logistic problems, is incorrect. It is true that if the government spends $100.000 on the road, this feeds 2 workers building that road, and increases GDP with $100.000. That is what we see. What we do not see is that the government had to tax citizens first in order to get the $100.000. They could have spent this money on other products, such as three cars, part of their house, education for their children, etc. In other words, because of the government intervention we now have a road, but not three cars. If people would have preferred the three cars over the new road, society is now less well off than it could have been. Seeing how many people still seem to believe that government intervention comes at no price, I think Bastiat’s advise to look at what you see, but also to try to find out what you do not see is still very relevant.


Bottom Line: The book is interesting for those interested in economic history, for Bastiat was praised by Schumpeter and Hayek. The second essay is still quite relevant, however, the first essay did not convince me at all, although it gives an excellent overview of libertarian thinking.