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Archive for August, 2011

Will Hurricane Irene be a Blessing in Disguise?

“Ghastly as it may seem to say this, the terror attack (911) — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.”

“If people rush out to buy bottled water and canned goods, that will actually boost the economy.”

“First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I’ve already indicated, the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending.”

Paul Krugman (Princeton Professor, New Times Columnist, and Keynesian Extraordinaire on how the September 11th attacks could “stimulate” the U.S. economy)

The above quotation from Paul Krugman represents his economic philosophy embedded in the deepest part of his soul.  That is that spending of any kind during economically distressed times is all that is needed to turn things around.  Following Krugman’s logic, Hurricane Irene with the destruction it wrought in the hundreds of millions if not billions of dollars along the eastern seaboard could be just what the doctor ordered to give the sputtering U.S. economy a jump start.  After all, roof tops will have to be repaired.  Structures and piers will need rebuilding.  And infrastructure like power lines, drainage systems, and roads will need revamping.  According to Krugman’s philosophy the carnage from the storm should be an economic bonanza for workers, tax authorities, and producers of goods.

But, hold on for one minute.  Not only did Krugman’s prediction about the economic benefits of the World Trade Center being destroyed not come to fruition, his philosophy represents an economic fallacy explained by Frederic Bastiat, political economist and member of the French Assembly, in 1850.

In Bastiat’s Parable of the Broken Window, shopkeeper John B. has a careless son who breaks one of his shop’s window panes.  The shopkeeper pays six francs to the glazier to fix his window.  According to many of Bastiat’s contemporaries and Keynesians today this is a good thing since the glazier is six francs richer and will presumably spend that six francs on other goods and services thus providing employment to others.  This sounds great and given the potential to the economy of one broken window you might think that John B. should be hopeful that his son never learns to be careful and breaks many more of his windows in his lifetime.

Naturally, the good shopkeeper doesn’t want to spend all of his profits on new windows and here is where the fallacy of Krugman’s thinking comes into play.  Krugman and his Keynesian brethren only focus on what can be seen in the parable, namely the windfall to the glazier and his potential expenditure thereof. They totally ignore the fact that if the window had never been broken the shopkeeper would have had it and six francs worth of some other good or service to enjoy.  Like the glazier’s expenditure, the shopkeeper’s outlay on other goods and services would also provide employment to others.  Thus destruction of property spending through carelessness, vandalism, violence, or natural disaster enjoys no advantage over ordinary consumer spending.  If it did Europe would have gotten rich immediately after World War II.

That’s why Hurricane Irene will not be a blessing in disguise for our economy.

Article first published as Will Hurricane Irene be a Blessing in Disguise? on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Ron Paul is Right about Iran

During the GOP Presidential Debate in Ames, Iowa, on August 11, the most significant exchange between any two candidates came when Rick Santorum called Congressman Ron Paul out for his position on our relationship with Iran.  Santorum, neoconservative extraordinaire, accused the congressman of being naïve about the seriousness of Iran developing a nuclear weapon of its own.  The accusation brought an emotional rebuke from Dr. Paul as he delivered a history lesson of Iran/American relations to Santorum while at the same time launching an emotional appeal for the policy of endless wars to seize.  The exchange highlighted the irreconcilable differences that exist between those who believe there is a bad guy under every rock and those who actually know history and understand international relations.  Santorum and his neoconservative brethren are the former while Ron Paul represents the latter.

It’s only common sense that if you corner an animal it will act aggressively in order to defend itself and escape.  Countries are no different.  As Congressman Paul noted in the debate, the United States military has Iran surrounded on all sides.  Our military currently occupies Iraq to Iran’s east, Afghanistan to Iran’s west.  Obama has escalated U.S. bombings in Iran’s other neighbor to the east, Pakistan.  There are also 3 American military bases in the Persian Gulf south of Iran.  A large naval base is in Bahrain and army and air force bases are in Qatar.  With all of that hostile American fire power situated so close to its borders, it’s no wonder Iran is feeling a bit vulnerable and in need of a little defensive weaponry.

Santorum argued that we have some special obligation to protect Israel from a potentially nuclear Iran.  It’s amazing how Israel seems to enter the conversation when our politicians speak of war.  In Santorum’s case it’s all a part of his pandering to Jewish and Evangelical voters.  But, as Ron Paul indicated to the former senator from Pennsylvania, Israel can defend itself.  As a matter of fact, Israel possesses nuclear weapons of her own.  Even Israeli Defense Minister Ehud Barak has stated that he doesn’t think Iran will drop a bomb on Israel or any other country in the region.  The ruling cabal in Teheran may be brutal to its own citizens but it is not suicidal.

This, of course, is reminiscent of a former foe, the Soviet Union.  As Congressman Paul continued to school Santorum he pointed out that there was no regime more brutal to so many people for so long as the communist Soviet Union.  Under Joseph Stalin and various other crazy Soviet dictators, millions were slaughtered or left to die of starvation and all of Eastern Europe was subjected to Soviet domination for close to forty-five years.  After the Soviets stole our nuclear secrets and developed their own bomb we sold them grain and negotiated arms deals with them.  Both sides realized the importance of doing what was necessary in order to co-exist in a vastly more dangerous world.  At the end of the day, Iran has no chance of attaining the economic, political, and military capabilities of the now defunct Soviet Union.  As a matter of fact, chances are very good that if the Iranian leadership took the same path (military buildup) as the Soviet oligarchs they would end up ultimately in the same place – on the ash heap of failed regimes in history.

When the Soviet Union collapsed and the Cold War ended neoconservatives like Rick Santorum needed a new enemy.  Given America’s decades’ long meddling in Middle Eastern affairs and our unconditional support for the State of Israel, it was only a matter of time before blowback for our past sins would come to fruition.  September 11th 2001 was that blowback.  Santorum and his ilk had their enemy – Islamists.  In ten short years they have spent trillions on that foe with no let-up expected any time soon.  Now they have their sights set on Iran.  In order to prevent the next catastrophic war, the choice is clear in the next presidential election.  You can either vote for the candidates who see bad guys under every rock or you can vote for the candidate who actually knows history and understands international relations.  That candidate is Ron Paul.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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Ron Paul is the Only One

It has become cliché for political pundits to proclaim every four years that the presidential election campaign is the most important in the nation’s history.  Given that our economy is on the brink of collapse, we are currently engaged in 5 wars, and our civil liberties are under attack like never before, next year’s presidential election will truly rank right up there with the most important elections in our country’s history.  Accepting that view, there is only one candidate in the race for the White House in 2012 who has what it takes to restore America to its previous greatness.  That candidate is Congressman Ron Paul.

No other candidate saw the financial crisis of 2008 coming.  As early as 2003, Congressman Paul predicted Federal Reserve and Bush Administration policies would lead to the housing bubble and its inevitable collapse.  He predicted this based on his understanding of free-market economics and the Austrian Business Cycle Theory.

Now, it is true that Newt Gingrich did allude to the corruption of the Federal Reserve in last week’s GOP debate in Ames, Iowa, but he and every other Republican on stage except Ron Paul do not understand the connection between Fed policies and our economic ills.  All they can propose are more tax cuts to remedy the situation.  Congressman Paul has been preaching about the need to restore sound money to our economy for over 35 years.  He recognizes that the destruction of the middle class in America is primarily the result of the price inflation (over 450 percent since 1971) perpetrated on the American people by the Federal Reserve.  He knows that spending our way out of our current crisis will not work.  He is the only candidate for president who would take a holistic approach to getting our economy back on track – mal-investment liquidation, rein in out of control federal spending, responsible military budgets, and of course sound money.

But, Dr. Paul’s superiority over the other candidates for president doesn’t end with economics.  He is by far and away the only responsible candidate in the field when it comes to war and peace.  He did not fall for the war propaganda launched by the Bush Administration against Saddam Hussein.  He voted against giving the president authority to invade Iraq.  As president he would end the 8 year war in Iraq, the 10 year war in Afghanistan, and our wars in Libya, Pakistan, and Yemen.

As was highlighted in the Ames, Iowa debate last week he is well-read when it comes to international affairs.  He knows the history of our troublesome relationship with Iran and understands that incendiary remarks and threats toward her are not going to make the world safer.  As president, Dr. Paul would end American occupations in countries that surround Iran, thereby lessening tensions and opening the door to peaceful relations.  Contrary to the positions of other candidates for president, Ron Paul knows that another war is not in our best interest.

Lastly, no other candidate for president has as strong a record on civil liberties as Congressman Paul.  He has been a consistent opponent of Washington’s relentless assault on our civil liberties and constitutional rights.  As president, the so-called “Patriot” Act which has radically expanded the federal government’s ability to use wiretaps without judicial oversight; has made it far easier for the government to monitor private internet usage; has authorized “sneak and peek” warrants enabling federal authorities to search a person’s home, office, or personal property without that person’s knowledge; and has required libraries and bookstores to turn over records of books read by their patrons, would be priority one on his chopping block.  The TSA’s grope fest at our airports would also end.  As important as civil liberties are none of the other candidates for president have shown any interest in protecting them.

The above comparison includes the current occupant of the Oval Office Barack Obama.  In 2 ½ years as president, Obama continues to support the same failed economic policies (spending and easy money) that got us into the mess in the first place and has only made matters worse since.  He not only broke campaign promises by continuing Bush’s wars in Iraq and Afghanistan but has escalated one other in Pakistan and started one of his own in Libya.  And, as for civil liberties and constitutional rights, he has shown his true colors by signing a four-year extension of expiring provisions of the “Patriot” Act and authorizing his Director of National Intelligence to notify Congress that the administration reserves the right to assassinate American citizens believed to be terrorists.

Yes, next year’s presidential contest will be truly one of the most important in American history.  With more than 14 million Americans out of work and millions more involved in the administration’s war machine what we need is a new president with an understanding of economics, knowledge of international affairs, and a complete dedication to civil liberties and constitutional rights.  The only candidate that fits that profile is Congressman Ron Paul.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

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