(L75) Domestic Politics, Economics, & African Government

1.) What kind of success did Africa have with governments that wielded great power over the different African economies?

In Zaire for example, ruler Mobutu Sese Seko (1965-1997) took a great negative toll on the society he ruled over. During his time in charge, there was a copper fueled economic boom; Mobutu took this opportunity to spend great sums of money constantly. He had eleven palaces erected, made his friends instant millionaires, and put up numerous monuments. Following this growth-spurt of power Mobutu launched the African “authenticity” program in which all Christian names were to be replaced with African ones. Christmas was also outlawed, as was dissent, and Mobutu had his own image displayed within the church. Westernized clothing was banned, and to top it all off, he cut national ties with Asians, Belgians and others.
After copper prices once again fell, there was severe economic downturn; Mobutu had to invite the Belgians back after having driven them out. High price inflation and great debt plagued Zaire. Public transportation systems failed and broke down without repair, and even hospitals were barren of the most basic medical supplies such as bandages and oxygen.
The result of anti-capitalistic government practices were devastating to say the least throughout various African economies.

2.) What are some of the major arguments advanced by the Public Choice school of economics?

One major argument advanced by the Public Choice school of economics is that individuals are self interested and motivated, regardless of whether or not they are government officials.
Another argument that Public Choice raises concludes that when one acts in the market, they receive the benefits or suffer the consequences. This is not the case for (voting or) government officials because they receive no feedback as they would in the free market system. Considering the fact that bureaucrats face no feedback, they face no consequences either.

3.) What are front-loading and political engineering?

Front-loading is a practice of political scheduling that shifts momentum towards a particular candidate before the general (final) election. In military terms however, it is simply an over-promising and underpricing (weasel) system to get what they want. To counteract front-loading, rather than rejecting an item that costs astounding amounts of money (which had originally been low-balled in the price pitch), political engineering is then utilized. Political engineering is when the cost of an item (or items) is spread out between as many districts as possible; this creates a domino effect and no one congressmen will (or can) pull the plug on it due to the fact that so many other districts back it.

(L65) Swedish Prosperity & Fascism

1.) The standard claim about Sweden is that it shows that society can prosper without such a free market and with extensive government intervention. Based on the lesson and on your reading, what would be a good response to this claim?

Sweden’s prosperity was originally birthed from a free market capitalistic economy, as well as avoiding war (as best they could). There is no historical evidence, even as late at the 1950s, of great welfare funding, and Sweden’s Austrian economics standpoint lasted between the 19th and even the early 20th century. The economic strength and prosperity that resulted from these practices was eventually funneled into a welfare state. Between 1970 and 1989 taxes were raised and hand-outs were increased; Sweden’s place as the 4th richest industrialized country dropped to the 14th by 1993. Just as capitalism had built their country strong, the turn away from it had began to make their country weak economically; since then however, economic freedom has increased (and surpasses that of the United States greatly).

2.) What were the primary values of fascism?

The primary values of fascism basically hold that the rights of the individual are far surpassed by the “good of the Nation”. In the words of Mussolini, “everything for the state, nothing outside the state, nothing above the state.” Beside putting the state on a pedestal and pushing for political centralization, fascism also highly encourages nationalism and the glorification of the military.

(L60) The Constitution, State Power & Nullification

1.) What is the idea of a “living Constitution”? In what way could it be argued that the American Revolution was a war against a “living Constitution”?

The idea of a “living, breathing Constitution” supports that the law of the Constitution must be interpreted (and changed by Judges) to suit current times. The American Revolution was a war against a “living Constitution” because the colonists were arguing that government action violating longstanding (unwritten) traditions was unconstitutional. Changing the Constitution to suit the times is a gross perversion of its original intent.

2.) What is nullification? Discuss one example from U.S. history in which the a state or group of states acted in the spirit of the Virginia and Kentucky Resolutions of 1798.

Nullification is the act of making a political action legally void, or cancelling it out. One example of nullification in U.S. history can be found through the years of 1808-1809, when Jefferson’s embargo was imposed by the federal government stating that American cargo ships could not travel to foreign ports. In January of 1809, Massachusetts declared this act unconstitutional. Following closely after in February, the governor of Connecticut ordered state officials to be uncompliant in regards to Jefferson’s embargo. Lastly, in March, Rhode Island declared that it’s (state) government would protect any and all of it’s people against this unconstitutional exercise of power by the federal government.

(L55) Compact Althusius & Nationalist Hobbes

1.) Describe the models of society laid out by Althusius and Hobbes.

The model of society laid out by Althusius was one consisting of many smaller authorities, each with its own rights that no other power could overturn or impede upon. The reasoning behind this being that if one authority (say, a state) became too oppressive, a person could easily move to another. The ability to leave the authority of a tyrannical state pressures all the states to remain un-oppressive.
The Hobbesian model of society, being quite opposite of Althusius’ model, stated that large states would be ruled over by one irresistible and centralized power; a government.

2.) What are the compact and nationalist theories of the Union?

The compact theory, as known as the “compact fact”, goes hand in hand with Althusius’ model of society. It holds that a union, which is a collection of states, was created by and from the states; meaning that the states were the original unit. The nationalist theory, corresponding with the Hobbesian model of society, states that the union is a single whole, and that it was the original unit. This theory holds that states exist only as parts of the union.

(L50) Fiat Money & Government Interference

1.) What problems do price ceilings cause, and what are the benefits of letting prices adjust without government interference?

Price ceilings lower the quantity of products available to consumers, and raise the demand all at the same time. This causes shortages. Allowing prices to adjust themselves would allow producers to accurately interpret economic signals and meet the needs of consumers in a highly efficient fashion.

2.) Name and explain three disadvantages that have been identified with fiat money.

One disadvantage that has been identified with fiat money is the fact that when the government (really The Federal Reserve) increases the paper money supply, prices rise to a level that they would not have naturally reached without intervention. Another disadvantage to fiat money is that it increases the power of the government. Because they can create new money from thin air and there is no limit to how many paper bills they can print, they have, in a general sense, unlimited resources. Adding onto this, when new money is created there is a distortion in the distribution of money throughout the economy, because whoever receives the new money first is spending it at the prices of the old money. (When new money makes its way through the economy, prices rise; however those who are the first to receive the money have not yet experienced this rise in prices, and are therefore favored in this process.) The losers of this process are those who get the new money at the end of the process, or by the time it has already taken it’s toll on the economy.

(L40) Government Intervention in The United States

1.) Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are achieved artificially, by a government-established central bank?

The Austrian theory of the business cycle basically dictates that in a free market, there is communication between the consumer and the producer which is translated through interest rates. As long as interest rates are not interfered with, they will read correctly to producers and allow them to meet the needs of their consumers reliably. However, when interest rates are interfered with and pushed down artificially by the central bank, there is no longer clear communication between producers and consumers. This lack of economic coordination creates conflict, and makes society poorer because labor and physical resources have been misallocated. The results of government intervention and false interest rates are recession and depression plagued upon the people.

2.) What are some of the pitfalls of industrial policy?

Industrial policy is what it is called when the government favors certain industries through subsidies, cheap loans, and other specific assistances. One of the biggest downfalls of industrial policy is the fact that it diminishes incentive within the favored business firms to be entrepreneurial. Another large issue with industrial policy is that it eliminates competition to a certain degree, and makes it more difficult for newer firms to compete against pre-established, government supported firms.

(L35) The United States: Healthcare and Antitrust

1.) What are some of the factors that have contributed to rising health-care costs in the United States?

The birth of the rise in health care costs can be pinpointed in WWII. It was during this time that businesses were desperate to attract labor, but they couldn’t raise wages because the government had frozen the price. So, to compensate for this, businesses began to offer employer-supplied medical insurance; it was not considered a wage increase and thus, could not be taxed. After the war, labor unions demanded employer financed medical insurance be a continuous part of their contracts. This forced the hand of nonunion businesses to also provide health insurance in hopes of avoiding unionization. The result of all of this was that medical care was barely paid for out of pocket by Americans, which in turn caused people to care much less about price comparing. Since the client was not the one paying, (their employer was), health care suppliers then developed an incentive to offer high cost treatments. Ultimately, this created an ongoing price increase in the healthcare business.

2.) How is the actual history of antitrust different from what the average person probably thinks it is?

Antitrust is generally presented to the public as program that would help people pay ‘fair’ prices, and favor consumers. In reality however, the antitrust acts (Sherman Antitrust Act, 1980 and Federal Trade Commission Act, 1914) did the opposite of favoring consumers, and created a history of attacking successful and efficient businesses. One example of this would be the US vs. American Tobacco, in which this ness had merged with other smaller companies, (but not created a monopoly); American Tobacco was able to raise product output all the while lowering prices. There was still easy entry into the tobacco industry for competitors, and no consumers were being harmed whatsoever. However the US government decided to step in to punish and limit them by law, for favoring consumers.