Sunday, December 26, 2010

Racism, Cartels, and Jim Crow

It is often claimed that capitalism leads to all sorts of ills, such as racism and cartels (or monopolies). As with most attacks on capitalism, these claims attempt to blame capitalism for the consequences of government intervention into the economy. The Jim Crow laws illustrate this point.

Following the Civil War former slave owners faced a serious labor problem. Prior to emancipation slaves provided a steady and dependable source of labor. The South's agricultural economy was labor intensive, and this threatened the region's economy.

Initially this problem was addressed as free men solve problems--by mutual consent to mutual gain--and a number of solutions developed. Some plantation owners simply hired laborers as they were needed. This presented certain problems, as the planting and harvest seasons created a high demand for labor and the plantation owners were uncertain if they would have sufficient labor when it was needed. They were also bidding for that labor against other plantation owners, which drove wages up.

Another solution that developed was share cropping. The details varied, but under this arrangement the plantation owner essentially leased his land to a tenant. The land owner supplied the tools and materials to farm his land, and the tenant supplied the labor. The crop was then shared between the land owner and the tenant. This too had certain disadvantages to the land owner, as he had to front the expenses in the hope that he would be repaid. But the tenant had a motivation--his own profit--to work the land efficiently and effectively and thus provide a return to the land owner.

Following Reconstruction and the withdrawal of federal troops from the South, Democratic legislators began to slowly implement laws that disenfranchised blacks. Literacy tests and polls taxes were among the methods used. By 1890 very few blacks were eligible to vote in the Southern states. The voting requirements also excluded many poor whites, but an exception was made for them. Anyone who had been eligible to vote or who was related to someone eligible to vote prior to the Civil War was not subject to the new voting rules (this is the source of the term "grandfather clause").

With blacks now excluded from voting, as well as holding most public offices, the Democratic legislatures began to enact the Jim Crow laws. While the specifics varied from state to state, they generally contained 4 key provisions:
  1. Labor contracts had to be negotiated and agreed to at the start of the year. This allowed the plantation owners to negotiate when labor demands were low and also provided them with greater certainty that their labor needs would be met. Breaking a labor contract was a criminal offense, rather than a civil matter.
  2. It was made illegal to entice laborers to seek employment in another state or county. Prior to Jim Crow employment agents had thrived--they advertised and recruited for plantation owners willing to pay higher wages. This resulted in laborers working for those who most valued their work, and created labor shortages in areas with lower wages.
  3. Vagrancy laws made it illegal to be out of work, even temporarily. This made it difficult for laborers to seek higher paying work, as they were subject to arrest.
  4. Those who were unable to pay their fines were sentenced to chain gangs, which were then leased to plantation owners. The mortality rate on the chain gangs was often as high as 45 percent, which meant that the penalty for vagrancy was often a death sentence.
Combined, these laws essentially put black laborers back into slavery. The laborers could no longer negotiate on equal terms or act on their own judgment. The penalties for vagrancy greatly discouraged blacks from seeking better employment. The plantation cartel had the steady source of labor that it needed. In short, it was government coercion that protected racists and made the cartel possible.

Prior to Jim Crow, plantation owners competed against one another for labor. Though there were informal agreements to refrain from such bidding wars, individual plantation owners ultimately acted in their own self-interest and competed for labor. This of course, increased wages to the benefit of laborers and the detriment of the plantation owners. The plantation owners responded by using government force in the form of Jim Crow to impose restrictions on everyone--neither plantation owners nor laborers could act as they judged best.

When the market was free plantation owners had a motivation--their desire to plant and harvest crops--to put aside their racism and negotiate with black laborers as equals. Those who valued their racist views more than their profit were free to act accordingly and they suffered the consequences. But they couldn't force blacks to accept their terms. It was only through Jim Crow and government's legal monopoly on force that they were able to form a "successful" cartel and impose their racism on others.

Monday, December 13, 2010

Altruism and the USPS Universal Service Obligation

For the past several months I have been researching various examples of the practical results of freedom. At the same time, I have examined the arguments that have been used to justify removing or preventing freedom in various realms of human activity. Invariably, this research has led me back to a fundamental philosophical issue--the mind-body dichotomy. (More specifically, I have been contemplating the moral-practical dichotomy.) For nearly a month my research has been interrupted as I have considered how this false dichotomy impacts the concrete examples I have been researching. What follows are some of my initial thoughts on this matter.

Most people understand that if they wish to achieve a certain goal they must engage in specific actions. If they want a good grade, they must study. If they want to lose weight they must watch their diet and exercise. Further, they understand that the nature of the goal determines what actions are required to reach it, that is, what is practical. For example, if one wants to lose weight, gorging on potato chips, candy, and soda is not practical.

Further still, most people understand that their goals must be realistic—they must be possible, consistent with their other goals, and attainable. For example, it would not be realistic for me to set the goal of becoming the quarterback for the Houston Texans. I don’t have the skills, have no desire to attain them, and my age and physique are inconsistent with that required. For me to pursue such a goal is to guarantee frustration and misery, for no action I take will allow me to achieve it.

These principles hold in the political realm as well. The goals of bureaucrats, politicians, and voters determine what is practical. But often these goals are unrealistic—they are impossible, inconsistent with other stated goals, and unattainable. As an example, consider the universal service obligation (USO) of the United States Postal Service (USPS).

The USO holds that the USPS must offer a certain level of service to all citizens. Further, those services must be “affordable” and uniform. To execute this mandate, the private express statutes (PES) limit the activities of private individuals and businesses, and protect the USPS monopoly on certain postal activities, such as mail box access.

While a number of arguments are used to justify the USO and the resulting limitations on individuals, they all boil down to one thing: Universal service is desirable and therefore the ends justify the means. But why is universal service considered desirable? While the idea of universal postal service dates from the beginning of the republic, a recent report from the USPS offers us a contemporary view of the topic.

In 2008 the USPS issued a report titled “Report on Universal Postal Service and the Postal Monopoly.” The report argued that changes to either the PES or mail box access would adversely impact the USPS’s ability to implement the USO. Therefore, the report concluded, such changes should not be made.

As justification of the USO, the report cited a long-held belief that the mail “binds” the nation together by providing for the exchange of ideas and information among citizens. Further, the report argues that the concept of universal service is embodied in the Constitution and therefore a proper goal of government (page 5).

First, the Constitution says nothing of universal service. It merely authorizes Congress to establish “post offices and post roads.” Second, the fact that the Constitution authorizes some power does not make it proper or just—the Constitution also legalized slavery.

What we are left with is the assertion that universal service is good and government must provide it. It is an assertion that is accepted without question, examination, or discussion. It is accepted with no consideration of context, means, or to whom such a mandate is desirable.

Consider the fact that, according to the report, alternatives to the USPS exist for every piece of mail that it delivers. These alternatives include private companies such as UPS and FedEx, as well as the Internet (page 2). Indeed, the report cites the Internet as a primary reason for declining USPS volume. In other words, the exchange of ideas and information can and does occur without the involvement of the USPS—the nation is “bound” together. So why the continued insistence on universal service? The answer to that question goes to the heart of the matter, and reveals why allowing freedom in postal services is considered impractical.

The report repeatedly argues that relaxing the PES or taking other measures to permit private businesses greater freedom in mail delivery would substantially weaken the financial position of the USPS—private companies would offer services that draw customers away from the USPS, particularly in more profitable, high volume areas. This would leave the USPS to service less profitable routes and areas if the universal service mandate remained in place. Repealing the mandate is dismissed as contrary to “social policy”—it is regarded as immutable as the law of gravity.

The report acknowledges that differential pricing—pricing based on distance and location—is common among private companies and makes economic sense. Such pricing recognizes the fact that low volume routes and remote locations incur more costs to deliver mail, and the users of the service should bear the costs. But the USPS rejects differential pricing precisely because of this:
This would put service in danger for areas of the country whose volumes do not justify the costs to serve, namely isolated rural areas and low income urban areas. This is precisely the portion of the America public who could least afford an increase in postal pricing or a decrease in service. Isolated regions of the country currently depend heavily on the Postal Service to transport prescription medicines, educational materials, and other supplies. Cutting off such areas from uniform, affordable service and access could be devastating for these Americans. (page 81)
In other words, because of where they choose to live, some Americans need the USO in order to afford regular mail delivery. This is the “justification” for the USO. The report goes on to acknowledge the existential results: The criminalization of certain economic activities (such as the private delivery of first-class mail), higher costs to other postal customers, and political pressure to keep financially unviable post offices open.

Not surprisingly, the report claims that this serves the “public interest.” But the fact is, some members of the public benefit through lower postal rates while other members of the public are forced to bear the costs. Some members of the public are protected from the economic consequences of their choices—such as where to live—while other members of the public are prohibited from acting according to their own rational judgment—such as starting a postal service. Some members of the public are forced to sacrifice their money and their dreams for the alleged benefit of other members of the public.

That the USO—like all policies founded on the “public interest”—causes demonstrable harm to some individuals is considered irrelevant. Indeed, it is widely considered proper, just, and moral.

According to the dominant morality in our culture—altruism—each individual has a moral duty to self-sacrificially serve others. Each individual has an obligation to put aside his own interests, desires, and judgment in deference to the “public interest.” The actual consequences do not matter, so long as the intention is to serve others.

Altruism demands the renunciation of personal values and interests. In practice, altruism obligates an individual to serve the needs of others. And there never has been, nor will there ever be, a shortage of individuals in “need” of food, or shelter, or health care, or flat screen televisions. A consistent altruist must sacrifice such values in service to those in need. That such a policy is clearly impractical—if one chooses to remain alive—does not dissuade the advocates of altruism. Service to others is the “right” thing to do.

Altruism requires its advocates to choose between the moral—service to others and the renunciation of personal values—and the practical—attaining and enjoying the values required for human life.

In contrast, egoism holds that the moral is the practical. Egoism holds that the purpose of morality is to provide a set of principles to guide man in the attainment of the values required to sustain and enjoy his life. Egoism holds that each individual should be free to act according to his own judgment in the pursuit of his own values, so long as he respects the mutual rights of others. To the altruist, this is impractical—if one wishes to practice service to others, then pursuing one’s own values is impractical.

Altruism is a primary reason why it is often declared that arguments for capitalism are good in theory, but won’t work in practice. Altruism puts forth a false dichotomy between the moral (theory) and the practical. While such a dichotomy necessarily exists when the theory is wrong (such a theory is contrary to reality), the nearly universal acceptance of altruism often leads to the conclusion that such a dichotomy exists with all theories. In other words, it is widely held that theory and morality are useless when it comes to dealing with the issues and choices each of us face in our life. (The epistemological issue involved in this conclusion—skepticism—is beyond the scope of this article.)

It is within this framework that the typical non-egoist considers an argument for capitalism. He may regard the argument as good in theory, that is, logical, but regards theory and logic as unrelated to living one’s life. After all, the altruist regards his own moral creed as “good in theory” but clearly not a practical guide for sustaining and enjoying his life.

An individual will not regard capitalism as practical as long as he accepts altruism. Capitalism provides a sanction for individuals to pursue their personal values, a practice that is inimical to altruism. Only by embracing egoism—the moral right of individuals to live for their own sake—will a social system that sanctions and protects that right be regarded as practical. In other words, what one wishes to practice—service to others or the pursuit of one’s own values—will determine what one regards as practical.

This does not mean that demonstrations of the practical benefits of capitalism are pointless. To the contrary, the practical results are the purpose of a proper theory. However, such demonstrations must also identify the moral context. For example, consider the history of mail delivery in the United States.

As I previously wrote, prior to the Civil War much of the nation’s mail was delivered by private express companies. These companies offered their services at a substantially lower price than the postal service and consumers voluntarily used the private companies. The owners of the private expresses were acting in their own self-interest—their desire to make a profit. The customers of these companies were similarly acting in their own self-interest—their desire to save money. Neither was taken advantage of or forced to engage in the transaction. Neither acted for the benefit of the other as his motivation, yet each party did in fact benefit because each was left free to act according to his own judgment.

Those who chose to live in remote areas were free to do so. One of the consequences of such a choice was irregular mail service, or perhaps none at all. Those who regarded mail service as sufficiently important were free to move to a city or town, pay higher postal rates, or make other arrangements. Each individual could act according to his own judgment and hierarchy of values, so long as he respected the mutual rights of others.

This system was both moral—it recognized each individual’s right to act according to his own judgment—and practical—a multitude of options existed and individuals could choose those that fit their needs and desires. However, the fact that some individuals had a “need” that was unfulfilled did not sit well with some politicians and public officials. To them, the system in place was not practical, and the unsatisfied “need” was their proof. The fact that individuals in remote areas were cut off from metropolitan areas was deemed contrary to the “public interest,” despite the fact that such individuals voluntarily chose to live in isolated areas.

The result was the private express statutes—laws specifically designed to criminalize economic activities that many Americans judged beneficial and voluntarily used. Motivated by altruism, politicians forced some individuals—the owners of the private express companies and their customers—to sacrifice their personal interests and values for the alleged benefit of others. The higher costs paid by some consumers, the destruction of some businesses, and the loss of individual freedom were simply the price to be paid in service to others. That some individuals must sacrifice for others is precisely what altruism demands.

The idea that men could live together with each pursuing his own interests is completely foreign to the altruist. He can’t imagine life without sacrifice, and regards any argument to the contrary as “good in theory.” What he doesn’t, and can’t, understand is that it is also good in practice.

Thursday, December 9, 2010

My Life

If you want to see something positive, upbeat, and moral, watch this video.