Category: News and Events

As Kishore Jayabalan noted yesterday, the fallacy of “broken windows” is, unfortunately, ubiquitous in discussions of public finance and macroeconomics. Though we are told that government spending and public works have a stimulating effect on economic activity, rarely are the costs of such projects discussed.

Such is the case with several stimulus projects in my own hometown of Atlanta, GA. The Atlanta Journal-Constitution reports on a list that Sen. John McCain and Sen. Tim Coburn drew up, criticizing wasteful stimulus projects throughout the country:

Their list includes Georgia Tech professors who received federal stimulus funds to understand how jazz, avant-garde art and Indian classical musicians improvise. The report cites an Atlanta Journal-Constitution article that describes the $762,372 study, which involves using brain imaging to learn how musicians do their work.

[….] The senators also highlighted a $677,462 research project at Georgia State University to study “why monkeys respond negatively to inequity and unfairness.” Asked about the project, the university sent the AJC a news release from last year that said the research “will hopefully answer questions about the evolution of responses to reward inequality — including those responses in humans.”

Georgia Tech has fired back:

Georgia Tech issued a statement in response, saying such research is “necessary for the long-term economic success of our state and our nation.”

But how can one verify such claims? As Kishore has pointed out, the mere fact that money is being spent is not enough to claim that the economy benefits from such expenditure. The hidden costs of stimulus money are the jobs and services that would have otherwise been funded by the private sector.

In order to actually determine whether an investment is truly beneficial to the economy, one must be able to subject it to the cost-accounting of profit and loss. A product or service that makes losses has consumed resources that could have otherwise been put to more productive uses in the economy. But since government expenditures are funded not through any kind of voluntary market exchange, but through taxation, this kind of mechanism cannot be used to evaluate them.

So we can be pretty sure that stimulus projects, in fact, are not as conducive to economic growth as we have been led to believe, since such projects would probably not withstand the profit-and-loss test of the market.

But this is not to say that funding any of this kind of scientific research is not worthwhile. Activities such as philanthropy and charitable giving do not produce any kind of profitable return, but are nevertheless recognized as noble and praiseworthy. There may be good reasons for funding these projects, but economic growth is not one of them.

Are the Old Continent’s farmers showing that they have a real entrepreneurial spirit and serving as role models of courage and innovation during the Great Recession? Surely not all of them, but there are some inspiring examples to be found in Central and Southern Europe.

This is somewhat surprising as Europe’s agricultural sector is usually among the most traditional, least open to market innovation and product flexibility, and heavily reliant on EU funding to keep the sector competitive. Alas, European leadership in international food trade has been slowly whittled down in the last 3-4 decades.

Some European farmers, however, are resilient and are pulling rabbits out of hats these days by risking and investing heavily to implement creative new forms of business on their farms – many of which had been on the brink of failure.

It is primarily the French and Italians who are showing their true entrepreneurial spirit and vocation to agriculture. They appear to be some of the most tenacious and creative. Just like the Michigan dairy farmer, Brad Morgan, the protagonist of Acton’s documentary The Call of the Entrepreneur, these farmers have turned to undervalued and completely overlooked assets to build lucrative profit-making ventures that often double and triple their old incomes. They have begun reshaping the way their traditional industry operates, and at a time when Europe has lost its competitive edge to cheaper food suppliers from Africa and South America.

Making matters worse has been the total evaporation of their once abundant workforce. In France, for example, rural industry employees currently make up a mere 3% of the nation’s workers, when it once boasted over 40% at the turn of the last century (cf. August 2010 Time article “How to Save Rural France”). And figures for those farmers who have registered as operating “professional” establishments in France’s campagne have dropped from 2,000,000 to 350,000 in the last fifty years. As noted out in a 2006 Acton commentary (“French ‘Security’ and Economic Reality”), this is not at all surprising: the vast majority of France’s youth dream of careers as civil servants, or want to secure life-long union protected contracts, and furthermore claim to generally dislike or distrust free market economics.

A final blow to European farming may come in a few years when the industry’s most heavily relied upon system of public subsidy – the Common Agricultural Policy – is set to undergo reform in 2013. And no one is quite certain what the consequences may be, as EU finance officials nudge the sector to become more competitive and market orientated.

Just what are they doing?


While some major industries in France, like auto manufacturing, have received generous public subsidies to remain competitive, French farmers are beginning to rely on their entrepreneurial spirit and genuine vocation to agriculture to turn their sector around.

They are achieving this by doing exactly what entrepreneurs are called to do: take risks through investment and creatively diversify their business offerings to customers.

For example, entrepreneurial farmers in the southern Ile-de-France grain producing region have utilized the bucolic beauty of their wavy golden fields and soft rolling hillsides to create profit-making ventures. The same beauty that inspired France’s great impressionnistes, now lures thousands of international vacationers to their prime holiday centers built out of once dilapidated grain storage facilities with glorious hill-top views.

It is these same farmers who are using abandoned wheat and barley fields as horse riding tracks. They are converting their dusty old barns into equestrian club houses. Others, like Rabourdin farms in Brie, have added premium beer making facilities to their production portfolios and now attract thousands to their own micro brew facilities and connoisseurs can order their products on-line.

While interviewed for the same Time article, agricultural entrepreneur Bernadette Porchelu said that for her Basque-country farm to succeed “it required a lot of work and investment.”

“But now,” she says, “We are hustling to keep up with the demand and have more than doubled our income. When we first decided to make this move, everyone said we’d fail. Today I wonder how most farms will survive if they don’t undertake similar diversification –which may be why some of our visitors include fellow farmers asking us how we made it work.”

It’s not just the French

One of Italy’s leading agricultural entrepreneurs hailing from Rome, Annibale Gozzi, says that while France is making headlines with its creative agrotourism, Italy is not lagging too far behind.

He says that “neither can Italian farms keep up with fierce international competition in food production…Manual farm labor in other parts of the world is ten times cheaper than in Italy and we simply cannot compete even with our tremendous advances farming methods and technology.”

“We too have been forced to try different things and strive for the full integration of our products, services and assets.”

Those farms that are most successful, like Gozzi’s own agrotourism south of Rome, Villa Germaine, are the ones that have become full-scale “multi-function” operations in addition to producing traditional agriculture.

Referring to his own agriculture establishment as an example, Gozzi says he has risked huge amounts of capital to maximize his farm’s business to include “integrative products and services” such as farming courses, horse riding, premium viticulture and olive oil production, tuffa cave wine and cheese tasting facilities, as well as a full-service hotel and restaurant. His establishment now even regularly hosts business luncheons and wedding receptions with lavish menus featuring his own fresh meat and produce.

He says he does this with dedication and pride, a dream to “do a first-class job for what I love”. Gozzi’s thriving business at Villa Germaine not only has allowed him to maximize his farm’s assets and profits, but truly exemplifies what it means to combine entrepreneurial spirit and tradition all in the same business.

He adds that Italians are catching on to but this type of inventiveness, “but it is still much more appreciated by foreigners and France is clearly leading the way.”

Why they really do it

Vastly increasing revenue has been a driving factor for the survival of European farmers – especially knowing their major public financial support may dramatically change in a few years’ time and as their industry is being swept away by international competition.

Even if Europe’s few remaining die-hards simply had more public financing, it doesn’t mean they would come out on top. It has not worked for decades and surely it does not provide the answer to their future.

Rather, we must follow the lead of those real entrepreneurs who in the toughest economic times are true to their vocation and come up with ingenious solutions to their sector’s woes. If there is a future at all, they are providing viable alternatives. And to do so, they must not only be highly creative. They must also be willing to take risks –a courageous attitude undertaken by those who genuinely live out a vocation and exhibit a real passion for their trade.

(This article is the first of a regular monthly series dedicated to entrepreneurship in Europe.)

A recent New York Times story reports that the new British government plans to “decentralize” the National Health Care system as part of its new austerity measures.

Practical details of the plan are still sketchy. But its aim is clear: to shift control of England’s $160 billion annual health budget from a centralized bureaucracy to doctors at the local level. Under the plan, $100 billion to $125 billion a year would be meted out to general practitioners, who would use the money to buy services from hospitals and other health care providers.

The plan would also shrink the bureaucratic apparatus, in keeping with the government’s goal to effect $30 billion in “efficiency savings” in the health budget by 2014 and to reduce administrative costs by 45 percent. Tens of thousands of jobs would be lost because layers of bureaucracy would be abolished.

[N.B. Note that the plan applies only to England; the other constituent countries of the UK will have to make their own policies]

Though I’m not by any means an expert on British politics, the move strikes me as bold for two reasons: (1) The Conservatives have reversed their original position on not touching the National Health Service, instead opting for a plan that seeks to make unprecedented changes to the system; and (2) according to the NYT”s reporting, the plan is predictably facing intense opposition from government employees that stand to lose their jobs, as $30 billion are saved and 45% of administrative costs are phased out by 2014. In fact, some union members are trying to derail the plan by portraying it as a stepping stone towards privatization.

But what is most pleasant about this whole affair is the precise appeal made to an idea very similar to the Catholic understanding of subsidiarity:

“One of the great attractions of this is that it will be able to focus on what local people need,” said Prof. Steve Field, chairman of the Royal College of General Practitioners, which represents about 40,000 of the 50,000 general practitioners in the country. “This is about clinicians taking responsibility for making these decisions.”

Dr. Richard Vautrey, deputy chairman of the general practitioner committee at the British Medical Association, said general practitioners had long felt there were “far too many bureaucratic hurdles to leap” in the system, impeding communication. “In many places, the communication between G.P.’s and consultants in hospitals has become fragmented and distant,” he said.

Here we once again have the understanding that society should deal with problems on the lowest possible level.

But the winning side in this plan is not just that of the proponents of subsidiarity. Economic theory also suggests that policies guided by sentiments similar to subsidiarity tend to increase prosperity: the $30 billion that the government plans to cut from the budget will now exist in the private sector, where it can be put to more productive uses, in accordance with consumer demand. The civil employees released from their positions in the government do not have to mire in unemployment; instead the money from their state salaries will be used by the private sector to create positions which they can fill.

On the other side of the ocean, the United States moves in the other direction: away from subsidiarity, and towards a “one-size-fits-all” solution to fixing our health care system. The office of Congressman Kevin Brady recently released a diagram prepared by the minority of the Joint Economic Committee. It’s a fully detailed diagram of what the new health care system in the United States will look like once all provisions of the legislation are in effect. Take a look:

Chart Outlining ObamaCare

America's New Health Care System

The current health care system already raises enough questions about whether the principle of subsidiarity is respected. But this newest remake makes the question all the more serious.

In fact, over 37 states have begun to take some form of legal action against the health care legislation on the constitutional grounds that regulations such as the individual mandate overstep the federal government’s legal bounds. As I’ve argued before, the federalism of the Constitution is a rather good embodiment of the principle of subsidiarity, since it recognizes that many issues (even urgent and pressing ones like health care) should be dealt with at the state level.

And some partial victories for advocates of subsidiarity are already making the news: Missouri voters overwhelmingly approved of a ballot initiative opposing the individual mandate (by a landslide ratio of 3 to 1), and a federal judge refused to dismiss a suit by Virginia that challenges the constitutionality of the health care law.

In addition to a national campaign to repeal the legislation at a Congressional level, supporters of subsidiarity would do well to also pay attention to the battles at the state level. I suspect this is where we will see the greatest impact.

Today’s Wall Street Journal has a nice piece about the problem of graffiti in Rome and the obstacles to cleaning it all up.

While the graffiti are certainly an eyesore in an otherwise beautiful city, there is also great economic damage done, which leads to impoverished understandings of private property and general urban decay.

If cleaning up the graffiti on a four-story palazzo can cost as much as €40,000, there are surely people there to profit from the clean-up. And in Rome, there must be whole bureaucracies created to study, discuss and discuss and discuss the problem some more. Perhaps there are too many people making money off this graffiti affair to put an end to it. So maybe we should just get used to the graffiti and consider it all a net-plus to the city economically?

Margherita Stancati/The Wall Street Journal

Not at all. This should remind us of the French economist Frédéric Bastiat’s theory of “what is seen and what is not seen”, also known as his theory of the broken window. (Incidentially, Bastiat is buried in the Roman church of San Luigi dei Francesi and his simple tomb makes a great pilgrimage stop for those who appreciate market economics.)

When crimes against private property are not recognized for what they are and state officials choose to shrug them off, people will grow accustomed to such crimes and even seek economic justifications for them. This in turn leads to more crime and even less respect for private property. Not only is this bad economics, it is immoral and immensely demoralizing to those who care about their common life, i.e. politics in the widest and most important sense of the word. It also explains why Romans seem to care so little about their city, its public as well as its private spaces, and why it seems to take American volunteers to clean up the place. Che vergogna!

I just couldn’t pass this one up.

Below is an ENI story on the installation of 800 “colourful miniature figures of the 16th-century Protestant Reformer Martin Luther” in the market square of Wittenberg.

Just as last year there was a good deal of academic and commercial interest around the 500th anniversary of the birth of John Calvin, you can expect a great deal of activity leading up to the 500th anniversary of the traditional date of the dawn of the Reformation in 1517.

There are some more details on Ottmar Hörl’s installation here and at his personal website.

Martin Luther: Hier stehe ich

Ottmar Hörl, Martin Luther: Hier stehe ich, 2010 (Foto: Christoph Busse/Sven Hoffmann)

Here’s a video of the removal of the original nineteenth-century Luther statue upon which Hörl’s installation is based, in preparation for its restoration.

(more…)

One of the charges sometimes leveled against classical liberal thought is that it opposes all authority; that it seeks to reduce society to an amalgamation of atomized individuals, eliminating the role of religion, community, and vibrant social institutions.

The Place of Religion in the Liberal Philosophy of Constant, Tocqueville, and ActonHistorian Ralph Raico seeks to argue the very opposite in his dissertation, The Place of Religion in the Liberal Philosophy of Constant, Tocqueville, and Lord Acton. The work has been republished for the first time by the Mises Institute. (A particularly interesting note is that the chair of Raico’s dissertation committee was none other than F.A. Hayek).

Raico argues that these classical liberal thinkers did not, by any stretch, subscribe to the secularist views of some of their liberal contemporaries. Instead, they found compelling religious justifications for liberty. Contrary to the assertions of some critics of classical liberalism, they also did not oppose all authority: They recognized the essential value of family, church, and other vibrant and flourishing social institutions. These possess what I would venture to call a “natural authority,” a kind of authority and social standing that naturally arises from the workings of a free society (as distinct from the coercive authority of a government or state). Human beings congregate in these groups precisely because we are social animals, and because we identify these institutions as  conducive to our flourishing.

As Acton University faculty member Jeffrey Tucker notes:

What resources were available that highlighted this alternative liberal tradition? There weren’t many at the time. It was during this period that Ralph Raico went to work on his dissertation. He hit the target with an extended discussion of three massively important figures in the history of liberalism for whom a religious orientation, and an overarching moral framework, was central for their thought: French Protestant Benjamin Constant (1767–1830), French Catholic Alexis de Tocqueville (1805–1859), and Lord Acton (1834–1902).

All three were distinguished for

  1. consistent antistatism,
  2. appreciation for modernity and commerce,
  3. love of liberty and its identification with human rights,
  4. a conviction in favor of social institutions such as churches and cultural norms, and
  5. a belief that liberty is not a moral end in itself but rather a means toward a higher end.

[….] Raico provides a detailed reading of their work in all these respects and shows that one need not embrace statism, and that one can be a consistent and full-blown liberal in the classical tradition […] Ours is a varied tradition of secularists, yes, but also of deeply pious thinkers. What drew them all together was a conviction that liberty is the mother and not the daughter of order.

As the case for liberty continues to be made, it is important never to neglect this extremely fruitful tradition in classical liberal thought.

Update: I stumbled across a Lord Acton quote that helps illustrate the distinction between the “natural” authority of voluntary institutions in civil society and the authority of the state:

“Authority that does not exist for Liberty is not authority but force.” – Lord Acton

I think that the oppression threatening democracies will not be like anything there has been in the world before….

I see an innumerable crowd of men, all alike and equal, turned in upon themselves in a restless search for those petty, vulgar pleasures with which they fill their souls….

Above these men stands an immense and protective power which alone is responsible for looking after their enjoyments and watching over their destiny. It is absolute, meticulous, ordered, provident, and kindly disposed. It would be like a fatherly authority, if, fatherlike, its aim were to prepare men for manhood, but it seeks only to keep them in perpetual childhood; it prefers its citizens to enjoy themselves provided they have only enjoyment in mind. It works readily for their happiness but it wishes to be the only provider and judge of it. It provides their security, anticipates and guarantees their needs, supplies their pleasures, directs their principal concerns, manages their industry, regulates their estates, divides their inheritances….

Thus, it reduces daily the value and frequency of the exercise of free choice; it restricts the activity of free will within a narrower range and gradually removes autonomy itself from each citizen. Equality has prepared men for all this, inclining them to tolerate all these things and often even to see them as a blessing.

Thus, the ruling power, having taken each citizen one by one into its powerful grasp and having molded him to its own liking, spreads its arms over the whole of society, covering the surface of social life with a network of petty, complicated, detailed, and uniform rules through which even the most original minds and the most energetic of spirits cannot reach the light in order to rise above the crowd. It does not break men’s wills but it does soften, bend, and control them; rarely does it force men to act but it constantly opposes what actions they perform; it does not destroy the start of anything but it stands in its way; it does not tyrannize but it inhibits, represses, drains, snuffs out, dulls so much effort that finally it reduces each nation to nothing more than a flock of timid and hardworking animals with the government as shepherd.

I have always believed that this type of organized, gentle, and peaceful enslavement just described could link up more easily than imagined with some of the external forms of freedom and that it would not be impossible for it to take hold in the very shadow of the sovereignty of this people.

Alexis De Tocqueville, 1840.

Democracy in America, pp. 805-6.

Last Saturday’s New York Times contains an entertaining, edifying but ultimately sad tale on what ails the Italian economy.

Entitled “Is Italy Too Italian?“, the Global Business article seeks to explain why Italy often tops “the informal list of Nations That Worry Europe” economically. Part of the problem may be the reluctance to use modern industrial techniques that can reduce costs of production – can you afford to pay $4,000 for a suit??? – or the large public debt run up by its profligate government, but the more important issue is the utter lack of growth and hence opportunity in the Italian economy.

Our friends at Istituto Bruno Leoni have documented the excruciating details of the situation. I’ll save you the trouble and let you know that both the New York Times and IBL make it clear that the Italians are being done in by the impediments to the free-market economy, deriving in many cases from a fear of open, honest competition in the marketplace.

Nowhere is this fear more evident than in the system of guilds that still dominates many sectors of the Italian economy. Guilds, in effect, are associations meant protect certain industries from competition in the name of cooperation/collusion among the suppliers of a good or service. And the recovery of guilds is often at the heart of a school of thought known as distributism that seeks a “third way” between capitalism and socialism.

(Thomas Woods explained the problem in his Acton monograph Beyond Distributism and I summarized the case in my recent Acton University lecture on the same subject.)

It is most unfortunate that some conservative religious-minded people have fallen for the “charms” of distributism, many of which are romantic longings for a more self-sufficient, localized economy made up of many (“well-distributed”) small-property owners, as opposed to large monopolistic, corporate holders of property.

Of course no one with any religious sensibilities really wants to (or can for that matter) defend capitalism, let alone the status quo, unconditionally. At its best, distributism can remind us that we are not economic automatons, that we shouldn’t become “wage-slaves”, and that as free, morally-responsible persons, we can and must choose how we ought to live. But it should also be obvious that a return to the guilds, with its limitations on free competition, is no way to correct the excesses of 21st-century capitalism. Just ask the Italians….

Krista Tippett

Krista Tippett is the host of the radio program Speaking of Faith, broadcast weekly on NPR since 2003. In her conversations with people of all faiths and occupations, Christian and Hindu, novelist and physicist, Tippett aims to better understand the way that belief and spirituality affect our society, worldview, and personal well-being.

In the two books she has published in the last few years, certain themes stand out that define her own view of religion and its place in human life. In particular, Tippett understands that the positive impact that spiritual traditions have on the world rests on their ability to transform the heart and the way we live in relation to one another:

The context of most religious virtue is relationship–practical love in families and communities… These qualities of religion should enlarge, not narrow, our public conversation about all of the important issues before us. They should reframe it. (Speaking of Faith, 3)

Throughout her two books, Speaking of Faith and Einstein’s God, Tippett discusses faith from a perspective shared by the Acton Institute: Human suffering cannot be eliminated through government programs or by reforming political or economic structure. But our spiritual traditions can address complex problems on their deepest level. The religious sensibility inspires virtue, and, even in the midst of great suffering, it can instill hope through an insistence on human dignity and potential. (more…)

I mentioned Lester DeKoster’s little classic, Work: The Meaning of Your Life—A Christian Perspective, in the context of the Lutheran World Federation’s General Assembly and the theme, “Give us today our daily bread.”

In this book, DeKoster makes a pointed connection between work and food:

“I was hungry and you gave me something to eat.”

The Lord is saying that where humans are hungry, there he too chooses to hunger. He waits in the hungry man or woman or child, longing to be served. Served how? By the work of those who knit the garment of civilization through the production and distribution of food!

God himself, hungering in the hungry, is served by all those who work in …

  • agriculture,
  • wholesale or retail foods,
  • kitchens or restaurants,
  • food transportation or the mass production of food items,
  • manufacturing of implements used in agriculture or in any of the countless food-related industries,
  • innumerable support services and enterprises that together make food production and distribution possible.

God transforms plantings into harvests. Then he waits to be fed by those whose work turns harvests into one of the basic elements of civilization. The gift of ourselves to others through work is the gift of ourselves to God—and this is why work gives both temporal and eternal meaning to life!

WorkMany commentators on this passage in Matthew focus on the “giving” literally as the charitable act of giving, and this is as appropriate. But some others go on to identify the “giver” with the government, rather than charities, individual Christians, or the church itself.

But as DeKoster challenges us, we ought also to think of the “giver” as the person who works in the fields to harvest the food, who gives the sweat of their brow to bring food to the table of those of us who hunger, each and every day.

This shift in perspective, that sees our work as a form of service to others, a way of giving of ourselves to others, changes things completely. And I think it more accurately reflects the nature of market interactions and the value of human work.