Democracy: A Western Religion

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On November 21, a Mumbai political goon, Bal Thackeray, died. His party, or gang, is so formidable that the state has, for decades, bent its rule to accommodate its members. If they want the city closed, the police take the lead in closing it, to avoid violence. If you challenge the gang, the police put you under “protective custody.” For decades his gang has extracted protection money. You cannot speak his name without showing the highest possible respect, unless you want to get beaten up, sometimes very ruthlessly.

When Thackeray died, his gang instructed the city to be closed. Everyone who was someone in Mumbai — actors, sportsmen, businessmen, politicians (even of the opposing parties) — had to go to his funeral to pay his condolences. If any had not, he would have had to explain to the gang or leave Mumbai and see his career destroyed.

One girl posted this message on her Facebook page and another “liked” it:

With all respect, every day, thousands of people die, but still the world moves on. Just due to one politician died a natural death, everyone just goes bonkers. They should know, we are resilient by force, not by choice. When was the last time, did anyone showed some respect or even a two-minute silence for Shaheed Bhagat Singh, Azad, Sukhdev or any of the people because of whom we are free-living Indians? Respect is earned, given, and definitely not forced. Today, Mumbai shuts down due to fear, not due to respect.

The two Facebook girls were arrested, their faces covered by the police, and the court asked them to be imprisoned. Unless they want to be raped and then beaten up, they are unlikely to return to Mumbai. Even their extended families might have to leave Mumbai now. Not easily given to tears, I had some. These girls deserved the respect of society. For me they are heroes despite the fact that they erroneously believed they were “free-living Indians.”

These were two cute, educated, middle-class girls, so their case came out in public. In rural India, however, events like these are non-events. There the normal guy lives in utter fear of the police and the local strongman and must grovel. He talks with folded hands and bent head. He has no sense of his rights. He accepts what he can get away with. He concedes what the local strongman wants.

Those Westerners who visit only Mumbai and who can never stop comparing India’s democracy (with some mystical favorable connotations) to Chinese dictatorship (with only evil connotations) should have seen that India is not a country of the rule of law, unless you employ million-dollar lawyers.

Really we see what we want to see, what fits in with our pre-conceived notions. Given that Western people fanatically believe in their religion of democracy, they will rationalize the Mumbai incident as a case of India’s “aggressive” democracy. There are hundreds of recorded protests in China every year. The same people who have very romantic opinions about India call protests in China a sign of the fragile nature of its “dictatorship.” Then they proceed to contradict themselves by saying that there is no freedom of speech in China. They find reasons why China’s economic progress is not real or why China is not a free country, as it would be, were it a democracy.

Recently in China, a very well-known, successful businessman, who was taking me around rural places, told me why he did not want his country to become a democracy. He said that if local democracy were encouraged in China, it would very rapidly make China a place run by strongmen. He described how this would void whatever “rule of law,” predictability, and stability now exists. China is not a perfect country, and I do recognize that my guide wants dictatorship to continue for his personal interests, but I couldn’t agree with him more.




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Main St. vs. Wall St.

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The defeat of Romney and the victory of Obama in a disastrous economy which should have crushed the incumbent shows that most people still associate themselves with "Main Street" and view "Wall Street" as the enemy. Only an ideological movement to shift this perception can save the GOP — and such a shift could also help to empower the Libertarian Party.

So let me debunk the myth right now. A look at the Forbes annual list of the richest American and international people shows that many billionaires are not "old money." Many of them are "new money": either self-made rich or the immediate heirs (wives, children, grandchildren) of the self-made rich. Also, many billionaires are women or members of non-white ethnic groups — e.g. the Mexican billionaire Carlos Helu and the women billionaires such as Steve Jobs' widow, Laurene Powell Jobs, and the self-made billionaire Sara Blakely. Thus it is clear that the rich are not an "aristocracy" ruling over the poor and middle class, as leftists and Marxists assert. The rich are merely those people whose merit — hard work, intelligence, and good choices — earned them vast fortunes.

Let me also explain that trickle-down economics is not voodoo; in other words, why the rich being rich helps the poor and middle class. It helps because the rich do not spend all their money on yachts and mansions and caviar (although even their expenditures on luxury create jobs for other people). They need to make their wealth keep pace with inflation, which forces them to invest most of their money. Who do we want to make business decisions about investing in small businesses and entrepreneurs, to decide who receives society's investment capital: people who know finance and economics and take personal responsibility for their decisions, or government officials lost in a mess of bureaucracy and red tape, who experience no personal accountability from gains, losses, and the profit motive?

Capitalism is merely a system in which capital is invested by private people, as opposed to the state. "Wall Street," that much-maligned entity, is the process followed by rich people — and the financial managers who invest money for them — as they make decisions that fund the talented and hard-working middle class. Small businesses are carefully chosen by Wall Street’s investors because they have the capacity to succeed and expand, thus creating more jobs for the poor.

Wall Street is Main Street's best friend, even though most people don't see the complicated economic relationships that form the substructure of a trip to buy a loaf of bread at the local grocery store. Someone made a decision about which grocery stores to invest in, and which bakers to invest in, and the success of those decisions helps determine whether you pay $1.50 for bread, as we can today, or $15.00, as we might in the socialist nightmare of tomorrow. The socialist-leftist-modern liberal dogmas that the rich are a few crusty old white men locked away in the towers of distant mansions, counting gold coins like Scrooge, and that the corporations have enslaved us and the only practical thing is for “working people” to rebel, is totally contrary to the way the world works.

Shatter the leftist myth, and the people won't view another Republican nominee with envy, hatred, and malice, as they viewed the GOP candidate in 2012. It is too late to save the Romney campaign, but the Rand Paul 2016 campaign could benefit from the argument presented above.




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Samantha Stevens Meets Mad Max

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At the end of yet another election year, one that saw high hopes largely unfulfilled, we pause, again, to take stock of libertarian prospects. Big-governmentdevotees, Left and Right, have collaborated on a horror movie to scare mainstream voters away from libertarian ideas. They’ve given us a hockey mask and a chainsaw, and every time we manage to resurrect ourselves from the bloody doom to which they would send us, they try to make us even scareder.

It’s time we turned off the projector, turned on the lights, and introduced the public to reality. Here are some ideas it might benefit us to get across to undecided voters in future election years. It is by no means an exhaustive list. I welcome any more items that readers may think of.

People are always being warned about the mighty power libertarians would wield if voted into office, but no libertarian elected to office comes equipped with a magic wand. We can’t really cast a spell or wiggle our noses like Samantha Stevens on Bewitched and automatically implement our will. We bring certain ideas to the table that might not be considered otherwise. Those ideas would still need to be approved and tested. Those who oppose us are at least as likely to fear that our ideas would work as to fear they wouldn’t.

Many of the predictions we hear about what libertarians want to do are merely bad science fiction. The apocalyptic, Mad Max world we’d supposedly make is the product of fevered imaginations. Our concepts could scarcely make the world more apocalyptic than the one statists have made.

Libertarian principles are very basic. It is perfectly all right for one libertarian not to agree with every other about every issue faced by humankind. What we all share is the conviction that violence should not be used to settle political disagreements. That government uses violence to get its way is certainly not just science fiction. It is evident from the news of every day. So why are we the ones who are called crazy? And after all, why must violence be used to implement citizens’ desires?

People habitually treat their fellow citizens in ways they hate being treated themselves. This is what has torn our populace asunder. What we have now is two predominant sides that can’t trust each other because each is determined to use government-backed violence against the other in an insane buildup of power — the political equivalent of a nuclear Cold War. This is mutually assured destruction, and it’s given us a mad, mad, mad, mad world.

What libertarians share is the conviction that violence should not be used to settle political disagreements. So why are we the ones who are called crazy?

Most people fear drugs worse than they do delusions. Hallucinogenic substances are not generally good for us, but popular delusions have done immeasurably greater harm. And drug legalization is not the same as drug use. I’m a recovering alcoholic who hasn’t had a drink in years. I need no reinstatement of the Volstead Act to keep me dry; I stay sober for the same reason I don’t use recreational drugs: because, not caring a damn what the government says about it one way or another, I simply choose not to.

Decriminalizing recreational drug use, and making drugs legal for sale, would put dealers, gangs, and cartels out of business. Instead of having to defend the fact that somebody, somewhere, might want to use drugs, what we ought to ask is, Why do those who make war on drugs want to keep making criminal scumballs rich?

The reason statists make war on recreational drugs is that they want a corner on the market. The most popular hallucinogenic today — that which induces the delusion of omnipotence via the power of government — can withstand no competition.

Violence actually discredits people’s beliefs. It prevents persuasion because it shuts down debate. Suppressing things — whether behaviors, substances, or ideas — does not make them go away. The good ones will survive because they’re worthy of survival, however embattled and driven underground they may be. But the bad ones are given a lease on life they do not deserve and, if left to their own devices, could never sustain.

Why are so many avowedly fervent Christians, in particular, so dead set against libertarianism? Our philosophy is based on the Golden Rule. If the zealots on the social Right ever tire of combing through the Old Testament Holiness Code for rules to force on those they dislike, they might try reading the Gospels for a change. That those who follow Christ are supposed to do unto others as they would have them do unto them was enjoined by none other than the Man Himself. If this were truly a Christian nation, one would think this would be the political philosophy by which it would operate.

In truth, statists don’t dare do unto others as they would have done unto them. Their ideas do not stand up under scrutiny, and much less in practice. They need to implement and maintain their notions by force, because such schemes would not survive in any other way. There’s a reason why they tend to see life as a horror movie. By their policies, they’ve managed to turn a cheesy and utterly unbelievable script into an everyday reality.




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GM: The Other Shoe Drops

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After having run ads in Michigan boasting of its “success” in rescuing GM and Chrysler, the Obama administration won rather narrowly in the general election. It now feels safe enough to let the other shoe drop: it has just announced that it will start selling off its remaining stock in Government Motors. It will sell 200 million shares immediately and the remaining 300 million over the next 12 to 15 months.

All of this allows us to assess the costs of the Great American Carmaker Nationalization Game. And the price is high, indeed, at least to the US taxpayer.

Start with the direct costs. The 200 million shares will be sold by Uncle Sap back to Greedy Motors for about $27.50 per share. Let’s charitably suppose — though it is not at all clear that this supposition is realistic — that the other 300 million shares will also fetch the same price. That returns to the taxpayer about $13.75 billion, out of the $30 billion the US is owed, so the loss is about $16.25 billion.

But wait. The sale of Chrysler stock last year netted a loss to the taxpayer of at least $1.3 billion. That brings the total loss to $17.5 billion.

But wait again. In the corrupt bankruptcy engineered by the Obama administration, the new GM was illicitly allowed to carry forward a tax writeoff of at least $15 billion. So that brings the total to $32.5 billion.

Those are only the direct costs to the taxpayers. Let’s follow Bastiat’s advice to look for costs that are not salient.

Fist, the very fact that bankruptcy law was corrupted and the top position of the secured lenders put aside in favor of the UAW (big Obama financial backers) doubtless led to at least some investors becoming reluctant to loan to business out of uncertainty whether the administration would stiff them, too. How much business activity this crony deal deterred we can only guess at.

Second, Ford Motor Company, which did not get crony bankruptcy treatment, is now at a disadvantage, because its profits will be taxed, while GM, with that tidy tax writeoff, will face no such disadvantage for quite a while.

As if to rub the taxpayers’ noses in the fiscal dirt, the UAW has grandly announced that its members will be getting $7,000 profit-sharing checks this year. This is on top of all the loot the UAW already pocketed. What are the chances the true patriots at the UAW will use their bonuses to make whole the secured creditors, much less the taxpayers? Absolutely zero — the UAW is only too happy to rip off fellow citizens.

One can understand why a corrupt administration should have waited until after the election to let the other shoe drop. It would have been difficult to explain the massive losses during the campaign. Harder to understand is why people put up with these things.




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Santa’s Not-so-Secret Spy Network

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Have you ever wondered exactly how Santa knows who is naughty, and who is nice? In 2005, a mother-daughter team wrote and self-published a book, ostensibly for kids, that set out to answer just that question. That book, The Elf on the Shelf, is both a smash-hit bestseller and a creepily straightforward symbol of our overreaching national security state.

Here’s how it works. Parents buy the Elf on the Shelf kit, which comes with a copy of the book, as well as their very own elf doll (available in both sexes and diverse shades, the better to maximize marketing potential). The parents read their children the book, which outlines how it is precisely this elf who informs Santa when they’ve been bad and when they’ve been good. Every night, in fact, when they’re sleeping, the elf flies from the kid’s home up to the North Pole and passes along the fruits of its surveillance, and then flies right back so as not to miss a minute of potential misbehavior.

The sign that the elf is making this trek is that every morning, it’s moved to a different location in the house. I leave it to the reader to divine what sophisticated method produces the elf’s locomotion — as far as the kids are concerned, though, the one hard and fast rule in the Elf on the Shelf state is “Don’t touch the elf.” You can talk to it — tell it your deepest desires — confess to it — reveal to it the misdeeds of siblings or parents — but don’t you dare lay a finger on it, or else, as it notes in plaintive verse, “My magic might go, and Santa won’t hear all I’ve seen or know.”

Yet this is precisely the demand the American surveillance state makes on us: to respect above all else its presence, its wisdom, its necessity. And this demand becomes ever more pressing; as the Wall Street Journal recently revealed, the National Counterterrorism Center [NCTC] now claims the right (backed by the signature of the attorney general) to “examine the government files of U.S. citizens for possible criminal behavior, even if there is no reason to suspect them.” Moreover, they can store this data for up to five years (with longer durations doubtlessly on the way, if not already de facto present) and share with any foreign government for joint investigations.

While Santa always represented unimpeachable extrajudicial authority, it wasn’t as if he had a uniformed agent present inside the house itself.

As the WSJ article shows, anyone speaking out against this new regime from within was purged from the ranks — their meddling potentially preventing Santa from hearing all that the elves had seen, and thus endangering the magic of the entire system. Those left to oversee the activities of the NCTC are the same ones who were gung-ho for it in the first place — those falling all over themselves to put an elf on every shelf, the better to have minutely detailed lists of the naughty and the nice (or, more accurately, the naughty and those who might yet prove naughty, if only we survey them long enough).

The Elf on the Shelf fad might seem innocuous — in most cases, is innocuous: a little bit of wonder added to the days leading up to Christmas. Still I can’t help but wonder myself about anything that encourages citizens, and especially children, to recognize the validity of an arbitrary authority; still more, to internalize that authority, by conducting themselves by thinking first and foremost about what that authority will report to its higher-ups.

Is this really such a big revision of the much older and still creepy idea that Santa (or some other omniscient white-bearded figure) is keeping tabs on you? I would argue yes; while Santa always represented unimpeachable extrajudicial authority, it wasn’t as if he had a uniformed agent present inside the house itself. And you could petition him directly, making the case for your goodness by letter. Now, a kid hoping to sway the balance to “nice” has to appeal to Santa’s intermediary, and hope nothing gets lost on the way through the North Pole bureaucracy.

I’m sure there’s no causal connection here. It’s not as if the DHS or CIA or anyone is funding Elf on the Shelf as part of some grand conspiracy to produce a more compliant citizenry. They don’t have to: as the Journal report and the deafening lack of protest shows, we’re already compliant enough. Rather, games like this — and often the sillier, the better — help prepare children for the age in which they will live; it’s a form of socialization that doesn’t have to evade resistance because it doesn’t seem like there’s anything to resist. It’s just natural that there’s a spy in your midst, the public face of a distant organization whose power you can’t imagine; it’s just natural that this power must go unquestioned and even unexamined. Because that’s the fundamental assumption of American and much other modern governance today — and any who dare resist will find themselves on the naughty list. And as a recent Christmas release, Zero Dark Thirty, taught us: we have ways of dealing with the naughty. If contemporary America excels at anything, it’s in its many and various ways of dealing with the naughty.



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Nobels Oblige

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I don’t know who serves on the committee that awards Nobel Prizes, but I can’t help thinking they’re not very different from the guys on committees in civic organizations all over the planet, the do-gooders who get together for lunch one Wednesday a month to gossip and tell faintly bawdy stories and, Oh yeah, does anybody on the Peace subcommittee have any thoughts about who gets this year’s prize?

I’ve been on committees, and there’s usually somebody who became infected by a big insight on the way over. In the case of the Peace Prize subcommittee, the insight was probably something along the lines of, “You know, I’ve been thinking. There hasn’t been a war in Europe for a long time. We should encourage that kind of behavior. What if we give the Peace Prize to the whole continent?”

Then somebody would have pointed out that, “Well, there was that affair in Bosnia.”

“The European Union, then. Bosnia isn’t part of the EU. There haven’t been any wars in the European Union.”

“But there’s only been a European Union for 19 years. There’s no way it could have kept the peace all the way back to 1945.”

“Wasn’t there something before that? Some kind of iron and coal deal between France and Germany in the Fifties? Maybe that’s the reason we haven’t had a war.”

“It was the European Coal and Steel Community.”

“The arms manufacturers, then. Maybe we could give the . . .”

“You’re telling us we should give the prize to an arms manufacturer?”

“Why not an arms manufacturer? Alfred Nobel made his fortune selling dynamite.”

“Now you’re saying Alfred Nobel was an arms manufacturer?”

“Just saying.”

“An arms manufacturer would be a bold stroke, I’ll give you that.”

“We should try something new this time around. I don’t think we’ve given the prize to arms manufacturers before. Here, let me check the list. Krupps is available. Nobody’s awarded the Nobel Peace Prize to Krupps of Essen.”

“You think the rest of the world would stand for it?”

“I think the rest of the world stood and applauded when we gave the prize to Barack Obama for . . . does anybody remember what we gave it to President Obama for?”

“For not being George Bush?”

“And for having an African father.”

“But Krupps of Essen? That’s a different kettle of pickled herring. Surely . . .

“That’s the beauty of the thing. We could give it to the European Union and not have to say anything about Krupps.”

And that was that. Awarding the Nobel Peace Prize to the EU was just the ticket to encourage Europeans to keep on not murdering each other. And the cent-or-two in prize money they all got out of the deal would create real, tangible benefits for good behavior.

Now, I don’t want to come down too hard on guys who donate their time to good causes, but the whole process seems a bit slapdash to me. I mean, there’s no denying the subcommittee was onto something. A clam would have known that entire European countries going 67 years without invading one another is not only a big deal, it’s a big, historically unprecedented deal that hadn’t happened on the continent since, well, since before the invention of invading. That kind of behavior deserves recognition, and receiving the Nobel Peace Prize is just about as recognized as anybody gets in this life. I just think the subcommittee’s aim was bad when they picked the EU to honor.

It was the same sloppy thinking that led them to look at the results of the 2008 American elections and decide to encourage our good behavior. Then, instead picking the American voters, or the constitutional system that allowed us to dump Jim Crow and George W. both, the subcommittee fixated on the beneficiary and handed the prize to President Obama.

As worthy as their intentions were, it doesn’t take much to know that it wasn’t the EU that kept Europe out of war. It wasn’t Europeans at all. If peace had been up to Europeans the Eiffel Tower would have been melted down for cannon years ago.

It was us who kept them from exterminating each other. For two-thirds of a century Italy hasn’t attacked Austria. Spain hasn’t gone to war against Holland. Greece hasn’t had a final smackdown with Turkey, and none of the other possible permutations of the way European governments find to kill each others’ citizens have taken place because we wouldn’t let them. And for a really good reason.

It wasn’t just to keep the Reds out that we didn’t bring home all of our troops after the Second World War. Having already sent two generations of Americans to die saving Europeans from each other, we didn’t want to do it a third time and we stayed over there and sat on them and made sure they didn’t start shooting again. For decades we even drafted otherwise decent young men and forced them to go to Europe to do the sitting. If our guys had wound up in the Balkans after WWII, Bosnia wouldn’t have gone to war, either.

Had the members of the Nobel subcommittee thought it through, they would have given this year’s Peace Prize to the ones who deserved it . . . not to the beneficiaries of the peace Europeans enjoy, but to those responsible for the peace: the American military. Besides, America doesn’t have anywhere near as many soldiers as they have people in the EU and the prize money would have gone a lot farther.




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A Miracle in Lansing

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On December 11, in a stunning surprise, Michigan became the 24th state to adopt right-to-work (RTW) legislation, that is, a law that prohibits any union from forcing workers to join or support it. In other words, Michigan has finally allowed people to exercise their right to free association.

This victory for workers’ freedom was amazing in that it was unlike most RTW states — which are mainly Southern states with no deep history of unionization. Like Indiana, the most recent state to adopt RTW legislation, Michigan is a large, upper Midwestern state; and it has long been dominated by union power.  

In fact, Michigan ranks fifth highest on the list of the states in terms of the percentage of its workforce who belong to unions (19.2%, compared to a national average of 11.8%). It has watched as businesses fled the state in droves — especially to Indiana, which after it passed its RTW law picked up 90 companies from Michigan.

The victory was notable for how quickly it occurred. It was only on December 6 that both chambers of Michigan’s legislature passed the Workforce Fairness and Equity Act. Under legislative rules, the state’s Governor Rick Snyder had to wait at least five days before signing the bill, during which time the unions mounted loud, furious, and occasionally violent protests. But the governor signed the law on the first day he could, despite the fact that Snyder had earlier in his term stated that he was not inclined to support RTW legislation.

But the really surprising thing is that Michigan has often been a bastion of the Democratic Party. The state’s citizens voted overwhelmingly for Obama in the recent election (54% to 44%). As surprising as the victory for the RTW law was, however, there were several reasons why the state legislature and governor felt the time was right to free the workers from their union oppression.

First, Michigan has been on an economic road to hell for years, with the crisis of its leading city, Detroit, as just the most striking example. Detroit is now teetering on bankruptcy, in great measure because of the excessive compensation and pension packages that public employee unions enjoy. Michigan has the highest unemployment rate in the Midwest — despite the tens of billions of taxpayers’ dollars that the Obama administration has given to GM, Chrysler, and the United Auto Workers Union.

The unions not only didn’t help to solve the problems, they made it nearly impossible for the governor and legislature to act. In particular, the public employee unions opposed all efforts to institute reasonable fiscal reforms to rescue distressed cities and school districts, virtually shutting down dysfunctional Detroit.

Second, the unions overreached. Seeing nearby Wisconsin cut back on collective bargaining rights for some public employee unions and nearby Indiana adopt an RTW law, Michigan’s unions put a proposition (Prop 2) on the ballot to amend the state constitution to make public employee collective bargaining beyond all legislative control. They also pushed an amendment (Prop 4) that would have forced unionization on all home health workers. Their arrogance in pushing these propositions and their impotence in failing even to come close to passing either one of them made the unions look asinine.

Third, the unions displayed their vicious side too prominently during the legislative debate. As legislators examined the RTW proposal, union supporters screamed “Heil Hitler! That’s what you people are!” at the Republicans speaking in favor of it. The Democratic legislators tried every parliamentary trick to stop a vote, including a Wisconsin-style walkout. A Fox reporter was beaten up by union thugs, and union supporters collapsed a tent owned by Americans for Prosperity (supporters of the legislation) on the people inside it, while screaming insults at them.

The question is now: which states will follow Michigan’s lead?




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One More Non-Tragedy

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Another crazy gunman opened fire at a movie theater this weekend, this time as a crowd of happy filmgoers exited the building. Police think the shooter was angry at his girlfriend, who worked at a restaurant next door. The incident took place Sunday night at the Mayan Palace Theaters in San Antonio.

Why isn't this tragic event hitting the national press? Because it didn't end tragically.

San Antonio is in Texas, where citizens can carry guns. An off-duty deputy saw the man, heard the shots, and took him down before he could kill anyone.

Fatalities when no one but the shooter has a gun: 28. Fatalities when a licensed bystander is carrying a gun: Zero. Even the shooter made it out alive.

Gun control is not the answer. Terrorists took down four jet planes without a single gun.




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Well, Freddie My Fannie!

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A recent piece in the Wall Street Journal, buried by the brouhaha surrounding the election and the Libya cover-up, indicates that the Federal Housing Administration (FHA) is in profound financial trouble. Indeed, it seems to be following its siblings Freddie Mac and Fannie Mae into the swamps.

The FHA has been around for nearly 80 years, and gives taxpayer backing to loans for homebuyers who put as little as 3.5% down. But more recently, the FHA has been used to reinflate the housing market by allowing lots of mortgages to be written. It now guarantees a staggering $1.1 trillion in loans.

The FHA is supposed to use its reserves to cover losses of the loans that go bad. As late as last year, it was estimated that after covering losses, the FHA would have $2.6 billion left in reserves. But, especially because of dicey loans issued between 2007 and 2009, the FHA is projected to lose $46.7 billion this year. That exceeds the $30.4 billion in reserves. The $16.3 billion deficit will almost certainly have to be covered by tax dollars from the budget. This is on top of the $137 billion already ripped off from taxpayers to cover the rescue of those Twin Towers of Corruption, Freddie Mac and Fannie Mae.

In fact, independent housing economist Thomas Lawlar states bluntly that “if [the FHA] were a private company, it would be declared insolvent and probably put under receivership like Fannie and Freddie.”

There is no doubt even more of this to come. The federal housing agencies (FHA, Freddie, Fannie, and lesser ones such as the VA) now back 90% of all new home loans, and the Fed continues to pump out the money ceaselessly. God help us if there is another major “correction” in the housing market.

In a better world, we would amend the Constitution to require that after ten more years (say), the federal government will have ended all housing subsidy programs and be permanently banned from any involvement in the housing market from that point on.

But this is far from a better world.




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The Indie Revolution

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I would like to give Liberty’s readers an update about technological progress regarding a device that some thought would never change: the book.

A number of years ago Amazon.com, the huge online bookstore, developed an invention, the Kindle, which was a mini-computer (what would now be called a “tablet”) for reading books. Once the technology was perfected, the Kindle represented a paradigm shift in the book publishing industry. Previously the price of a book had been deeply connected with the cost of printing it. The bigger the print run, the more the publisher could achieve an economy of scale and lower the per-book marginal unit production costs. This meant that in order to be cost-effective a print run had to be large. And because of this a small group of highly successful publishers came to dominate the book publishing industry.

This group, sometimes called the “Big Six,” was, for aspiring authors, “both the gatekeeper and the gate.” If you found a literary agent who had connections to editors then you could get your foot in the door and get published and get into bookstores. If not, you were shut out. Self-publishing developed a horrible stigma, but this is simply because it was not cost-effective and there was no economic impetus to change popular perceptions.

Enter Kindle. The Kindle works by downloading electronic files from Amazon.com, which can then be read on the device itself — no printing costs. This made Kindle ebooks much cheaper than print books. Amazon.com began by instituting a practice of dramatically slashing the retail price of its ebooks, such that most of them cost $0.99 to $3, whereas comparable print books cost $10 to $14.

The Big Six rebelled. They used their pressure to switch ebooks to the “agency” pricing model. Under the traditional pricing model the publisher sets the list price, which is basically the wholesale price that the publisher receives, while the retailer sets the retail price, which is the price that consumers actually pay. Under the agency model, the publisher, not the retailer, sets the retail price. The agency model enabled the Big Six to force Amazon to sell ebooks at prices roughly comparable to paper books. The Department of Justice and FTC recently launched an antitrust lawsuit arguing that the Big Six were trying to prevent Amazon.com from competing on price. Several Big Six publishers have agreed to settle the antitrust litigation, although a few of the Big Six continue to fight in court. The antitrust litigation is interesting and complicated, and it also involved Apple, which used its iBooks store to help the Big Six exert pressure upon Amazon. It is still unclear how ebook pricing will look in the future.

Self-publishing once carried a horrible stigma, but this is simply because it was not cost-effective and there was no economic impetus to change popular perceptions.

Kindle instituted another major change. Now, with no production manufacturing costs, you can self-publish on a zero-dollar budget. In 2010 a young woman named Amanda Hocking wrote a “paranormal romance” novel (half fantasy, half romance) and self-published it on Kindle, using Amazon’s newly developed self-publishing program, “Kindle Direct Publishing” (KDP). She was working as a waitress at the time, and put her novel up on Kindle after many rejections from agents and publishers. She didn’t spend any money to promote her book, which she titled “Switched.” She just sent review copies to a handful of book blogs. Initially she sold several thousand copies, and she considered this a success.

Then in late 2010 and early 2011, her sales rose to several hundred thousand copies. From 2011 to 2012, estimates are that she sold over one million copies of her novels. Her books, priced from 99 cents to about $3, have made her a self-published millionaire. I have read what Hocking wrote about her success, and I don’t think even she knows how she sold so many copies, other than by writing a high-quality novel in what was then a wide-open market. These days the many thousands of novelists (me included) who have been rejected by the gatekeeper Big Six and their literary agents have been lured by the Amanda Hocking dream into self-publishing. We don’t even call it self-publishing anymore; we call it indie publishing, “indie” meaning “independent.”

When I decided to self-publish my own novel, Rob Seablue and the Eye of Tantalus (which can be found on Amazon), the selling points of going “indie” were simple. You make a royalty rate per sale of about 65%, in contrast to the Big Six’s typical 25% or less (not including the literary agent’s cut), you get published immediately instead of waiting three years for your book to come out (6–12 months to get an agent, 6–12 months for the agent to land a book deal, and one year of pre-release publicity), and you have a very tiny possibility of success either way. You typically have to do your own book promotion, even if you can get a Big Six book deal, because the Big Six care mainly about their established bestsellers, not their unproven debut authors. Within the last two years I estimate that at least 10,000 books have been indie published, and the number grows every day.

The Big Six are very much afraid of losing the “browse” effect. Most book sales used to happen, so it was said, from consumers browsing through shelves in a bookstore. Browsing’s ebook replacement is the book blogging community: there are now over 2,000 book blogs, where bloggers write a constant stream of reviews. The Big Six have some advantage in promoting their ebooks, but the book bloggers don’t favor them as heavily as the browse effect did.

Most successful indie authors write romance novels. The frequency with which e-readers like Kindle are used for this genre has prompted some to speculate that women feel less embarrassed reading soft-core erotica on Kindle than reading a print book with half-naked men on the cover. But indie fantasy and science fiction (which is what I write) are also growing. Hocking herself has said she thinks book publishing is moving toward a model in which most debut authors go indie, then successful ones attract the attention of the Big Six and sign major book deals, leaving the many unsuccessful authors to fade away. Hocking herself signed a major book deal, although she still uses an indie format for some of her books.

A postscript: enjoy your local bookstore while it still exists. After Borders went bankrupt, Barnes & Noble emerged as the only major chain bookstore left. B&N has come out with an e-reader, the Nook (which is very nice, but doesn’t sell as well as Kindle). It has a self-publishing program called PubIt, although it doesn’t yet care about PubIt as much as Amazon cares about KDP. Barnes & Noble’s fate is deeply connected to the Big Six, and to the public’s continuing to go to “brick and mortar” retail stores to buy books made out of paper. B&N is caught in a tight spot between clinging to the paper book business model and getting 100% behind Nook and the e-reader business model. I go to my local Barnes & Noble a lot, mainly to drink coffee and look at magazines, and the place still looks as if it does a lot of business in-store. But Barnes & Noble is in danger, and knows it: it has hedged its bets by promoting the Nook heavily within its stores.

Your local library won’t be around forever, either. The Google Books Project has tried to scan every book in ten libraries, so as to create a huge digital and searchable public library. Google ran into legal trouble about the copyrights of old books and is stalled by ongoing litigation, but it is only a matter of time before paper libraries are replaced by more efficient online digital ebook file repositories.

As for book publishing, it isn’t clear what the future will look like. But I think the indie movement and ebooks are not going away. The summer of 2012 might be looked upon as the birth of the indie movement. History has shown that technology and economics are two hugely powerful forces behind social change. So don’t be surprised if a dramatic shift happens within the next five to fifteen years, not unlike the “dotcom” shift of the 1990s, when the internet took off: the Big Six and paper bookstores will collapse, and the book universe will consist of hundreds of thousands of indie titles, all available for 99 cents with the push of a button.




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