Neoliberalism: From 1938 to the 21st Century

Variance Within the Liberal Tradition

Liberalism is a broad tradition that encompasses many different ideas. There are two reasons that liberalism encompasses such a wide variety of ideas. The first is that classical liberalism was always somewhat vague on the definition of liberty. The second is that different liberals have had different philosophical and epistemological frameworks.
There has essentially always been two traditions within liberalism. Hayek notes that “the ancestors of modern liberalism” fall into two camps, distinguishing between British liberalism (Anglican) and French liberalism (Gallican). Hayek sees this divide as being rooted in the divide between empiricism and rationalism. The British empiricist takes a more evolutionary approach to liberalism, recognizing that social institutions are the result of human action rather than human design. The French rationalist tradition seeks to base social institutions on social contract and deliberative rationality. The French tradition imagines it can design a better society, whereas the British tradition recognizes that society is the product of evolution. Thus, the British liberal tradition is more conservative, while the French liberal tradition is more radical. (Cf. Friedrich A. Hayek, The Constitution of Liberty, Chapter 4)
Isaiah Berlin observes two different concepts of liberty within liberalism, distinguishing between negative liberty and positive liberty. This can be seen as the difference between “the freedom from” and “the freedom to.” An individual may be free from external coercion insofar as no one is physically forcing them to act against their own will, but they may not be free to act upon their own will to the extent that their choices are limited by factors out of their control. (Cf. Isaiah Berlin, Two Concepts of Liberty) Suppose that we are on a desert island and I am hoarding all the food and water. I tell you to do such-and-such or else I will not share the food and water with you. You are free in the negative sense, but not in the positive sense — you are free from active interference in your actions, but are not actually free to disobey me. If you do disobey me, I have leverage over you that allows me to effectively annihilate you without actively engaging in violence against you. The British tradition has tended to emphasize the importance of non-interference (negative liberty), whereas the French tradition has tended to emphasize a more robust conception of liberty (positive liberty). Empiricist liberals within the English tradition tend to see minimal government as the most important thing, since government interference tends to become the primary affront to liberty within civilized society. They recognize that government is necessary to secure liberty. Law and order protects people from arbitrary interference by other individuals, yet government interference remains a permanent danger. Rationalist liberals within the French tradition, however, tend to see robust and participatory democracy as essential to preserving liberty, as positive liberty entails being in control to some extent. Liberty is ensured by the democratic process more so than by limiting the size and scope of government.

Good Tariffs vs. Bad Tariffs

As a general rule, I am a supporter of free trade. Tariffs are a hindrance to free trade and always negatively impact both the countries against which the tariffs are imposed and the countries that impose the tariffs. I am not, however, necessarily opposed to tariffs in principle. A tariff, like most other taxes, can be either good or bad. If a tariff is used as a protectionist measure in order to bring back outsourced jobs, then the tariff is almost always going to be bad. If the tariff is imposed in order to induce a foreign country to change some aspect of its policy, then it can actually be a good tax. The key to creating a good tariff is making it a temporary measure that will soon be eliminated in order to restore free trade.

China has effectively been imposing tariffs on other countries by way of a VAT which they allow domestic producers to avoid paying, which is a violation of the spirit of the current trade agreement. As a member of the World Trade Organization, the United States should get a most-favored-nation rate. However, China frequently uses a value-added tax (VAT) as a means of imposing a higher rate. By imposing a VAT and failing to enforce it for domestic producers, China effectively turns their VAT into a tariff on imports. So, China technically launched the first attack in the trade war. But trade wars are tricky things and require skill in handling. If the United States were to impose tariffs and demand that China stop allowing their VAT to function as a tariff, that would be an acceptable policy in my estimation.

Moral Hazard and Geoengineering

Let's talk a bit about moral hazard. Moral hazard is when people engage in risky behavior because the incentive to avoid that behavior is borne by someone else. The classic example is a person who recklessly drives a rental car on the grounds that it's only a rental. If they crash the car, it's the rental company that will have to pay to replace it.

Moral hazard often comes up in discussions of carbon capture and sequestration (CCS). The theory here goes that, if power companies can capture their CO2 emissions, they won't have any incentive to stop using fossil fuels. This is a problem, because fossil fuels have a lot of other issues (like the story that broke a few days ago about how decomposing oil from the Deepwater Horizon disaster is mimicking a crab sex hormone, drawing in thousands of lonely crabs and poisoning them.)

The Realpolitik of International Peace

I have long been opposed to American militaristic interventionism and the warfare state. We have good reason to fear the military-industrial complex and oppose the interests of defense contractors when their vested interest conflicts with the wellbeing of our society as a whole. This is why presidential candidates like Ron Paul and Tulsi Gabbard have always excited me. It’s refreshing to hear a staunch critic of the warfare state on the presidential debate stage. However, I’m not quite satisfied with the foreign policy of such populist figures. My politics is hard to classify, being an odd blend of Hayekian libertarianism, Pettitian republicanism, Rawlsian liberalism, Burkean conservatism, Giddensian social democracy, and several varieties of neoliberalism. A core component of my though is realism, and I’ve especially been influenced by the notion of realpolitik.

Classical Realpolitik

History, of course, has given realpolitik a bad name and this is somewhat rightfully so. Many of the people who advocated realpolitik were pushing terrible policies. However, the bad actors in the history of realpolitik were guilty of distorting the noble principles behind the idea itself. When Ludwig von Rochau coined the term realpolitik, he was engaging in political realism in an “attempt at answering the conundrum of how to achieve liberal enlightened goals in a world that does not follow liberal enlightened rules.”(Wikipedia) Realpolitik, in the classical sense, goes hand-in-hand with liberalism and republicanism in politics. It is a political realism that advocates democracy, liberty, and peace in international relations, while being cognizant of the fact that foreign nations don’t always share our liberal-republican values and often act upon selfish, violent, and authoritarian impulses. Realpolitik also involves a recognition that the relationships between nations are anarchical in the negative sense — there is no strong global governance to make various countries cooperate and play fairly on a democratic basis. It recognizes the reality of the existence of totalitarian anti-democratic regimes, terrorist groups, and megalomaniacal dictators. It is not realistic for liberal democracies to stand by and watch as fascist dictators send their armies to invade neighboring countries and commit genocide; for this aggression will likely not stop at the edge of their neighbor’s territory.

On Poverty, Gentrification, Addiction, and Homelessness

The Precariat & the Expensiveness of Poverty

Over half of Americans are living paycheck-to-paycheck, with no substantial "rainy-day fund." 39% of Americans have almost no savings at all. They couldn't afford an extra $100 in an emergency situation. Almost 60% of Americans have less than $1,000 in savings. Most Americans can't afford to have a medical emergency or a significant unexpected expense. The proletariat has become the precariat, a class of people with no predictability or security — people who could very easily wind up homeless or in extreme poverty due to the slightest misstep or bad luck. The plight of millennials is precariousness and uncertainty about one's future well-being.

People who have never experienced real poverty generally do not realize how expensive it is to be poor. If your car starts making weird noises and you can't afford to get it looked at, much less fixed, then you ignore it. Eventually the car stops working altogether, then you have to come up with the money to get it fixed, and it will cost more to fix it at that point. If you can't afford to get your car fixed when it starts acting up, it will break down and you might have to get a loan to replace it with a new car. Since you couldn't afford a few hundred dollars in diagnostic and repair services from a mechanic, you are stuck having to spend even more money than that to replace the car. Now you have monthly payments too. So, you'll go get a second job, take out a loan, or whatever you have to do to come up with the money to fix or replace the car. For a lot of poor people, especially in areas with lousy public transit (or no public transit), a car is a necessity. So, you have no choice. If you can't afford to fix your car or buy a new one, you could lose your job. Miss a few payments and you could get evicted and end up homeless.

Bernie Sanders' Green New Deal

As you've probably heard, Sanders has released his climate change plan. As I did with Biden's, I'm going to read through it and provide commentary and context as it occurs to me. This is going to be a long post, so you might want to grab some snacks and a comfy pair of jeans before we start.

Also, full disclosure: I'm not a very big fan of Bernie Sanders. I generally like his political principles, but I don't like his personality. I'll do my best to be fair and impartial, but I'm not going to pull any punches. If you have a hard time listening to criticism of Bernie, you'll probably be happier if you just skip this post and move on.

Let's get started.

"Reaching 100 percent renewable energy for electricity and transportation by no later than 2030 and complete decarbonization by at least 2050 – consistent with the United Nations Intergovernmental Panel on Climate Change goals"

This is a pretty terrible way to start, because it's such a grievous misrepresentation of the IPCC's goals that it borders on being dishonest. The IPCC does not say that we need to get to 100% renewable energy by 2030, 2050, 2100, or any other date. It says we need to cut emissions roughly in half by 2030 and get to net zero around 2050. It specifically rejects pathways that use 100% renewables as being based on implausible assumptions. Instead, it sees us getting the majority of our energy from renewables, with natural gas and nuclear providing reliability to the energy system.

Addendum: Triple-Tax Model Details

Originally, this article was published without this addendum and was met with some criticism on social media. There were two sorts of objections. The first was simply, “Where is the data and evidence to substantiate these claims?” or “What are you talking about?” The second sort of objection, coming from policy wonks and tax experts, suggested that my analysis is wrong. This addendum should address all such objection and clear some things up.

More Info on Marginal Income Tax Rates on Top Brackets

High top marginal income tax rates effectively serve as a maximum wage and induce corporations to spend a greater portion of their excess profits on paying their workers better wages rather than on paying senior executives more.

The American income tax system is a progressive system with marginal rates. I’ll start by explaining how such a system works. Suppose you have a marginal tax rate of 5% that kicks in at an income of $30,000 per year, a rate of 10% that starts at $50,000 per year, and a rate of 15% that starts at $100,000, and a rate of 70% that kicks in at $10,000,000 per year. A person earning $10,100,000 per year would not pay a ridiculous $7,070,000 as lying pundits at Fox News would have you believe, but would rather pay $1,561,000 total in income taxes, which is an effective rate of closer to 15% — the 70% rate only applies to the last $100,000 earned.

The following charts show our theoretical tax brackets and how much people would have to pay at various different income levels.

ALP Campaign Review Submission

1. Notification has been received by email from the Victorian branch of the Labor Party (Wed, July 17, 2019) that the ALP National Executive has commenced a review of the party’s 2019 Federal election campaign with submissions from branch members, affiliated unions, campaign volunteers and other interested parties. This submission is made by Lev Lafayette (Victorian branch member of the ALP, 41508) on behalf of the Isocracy Network, a non-profit incorporated association based in Victoria (A0054881M), as an "interested party". The Isocracy Network is a political advocacy group which draws upon liberal, socialist, and anarchist traditions and whose current committee of management includes members from the Australian Labor Party, the Liberal Party of Australia, the Australian Greens, and the Socialist Alliance.

2. Rather than address all the areas requested by the National Executive, this submission will concentrate on the following:
* A statistical analysis of the result
* Policy
* Digital campaigning and Anti-Labor campaign methods

The Death of the Single-Tax Ideal: Towards a Triple-Tax Model

The single-tax ideal has become obsolete. This does not mean, of course, that Henry George or his idea of a land value tax (LVT) is obsolete. Land value tax is still necessary, but it is no longer sufficient. A just society in the modern world must have a land value tax, but must not have a land value tax as its only tax. I have reached this conclusion largely as a result of discussions I’ve had regarding Andrew Yang’s proposal to fund his universal basic income (UBI) plan via a value-added tax (VAT). The more I think about it and engage in thoughtful conversations on the subject, the more I think that VAT may actually be the best way to fund a UBI.

I believe that Georgist-style LVT is also needed, but I have come to realize that such an LVT would only work for funding UBI in the short-term. Land values are currently driven up by land speculation and rentierism, which is why there is so much potential for LVT to capture much revenue. However, the implementation of LVT would place a check on land speculation and tend to drive down land values over time. The amount of revenue that LVT raises will have a tendency to decrease over time. This is especially the case as the LVT tax rate increases beyond a certain point. Consequently, in the long run, LVT won’t be sufficient to fund a UBI, especially if you plan on raising the level of UBI as automation progresses.

Taxing Times in Australia (and Elsewhere)

Following the surprise victory of the increasingly conservative Liberal-National coalition at the 2019 Australian federal election, one of their first orders of business was to implement their promised income tax reforms. This seemed a little odd as the LNP's tax policy provided excessive benefits that it would provide for the very well off. But the great joy of democracy is people get the government that they voted for, whether by informed, uninformed, or a misinformed public vote. At least the income tax cuts were one the few transparent policies, even if they were promised in the budget prior to the actual campaign. As a piece of electioneering, it was clever; little for the poor, larger tax cuts for the middle, and little for the rich in stage one, but by stage three the wealthiest ($180K per annum) would receive $8640 per annum extra, whilst the poorest (under $30K per annum) would receive a paltry $255 per annum.

Immediately after the election however, there was a snag. Either due to a stunning level of incompetence or a cunning level of plausible deniability, it was announced that they would not be implemented in the current financial year. When the tax package reached parliament, the opposition Labor Party was unable to get any amendments in the House of Representatives considered by the government, who has a majority. Rather than face the unpalatable prospect of having to be seen voting down middle-income tax-cuts, Labor opted to pass the package in full in the HoR to seek amendments in the Senate, where the government doesn't have a majority. That aspect was tactically reasonable at least, although it didn't work - the government was able to pass the package with the support the Centre Alliance and independent Lambie. The support of the Centre Alliance is unsurprising, being milquetoast centrists, who only occupy that position due to a complete lack of coherent ideology. Lambie's support was primarily due to a lack of intelligence; effectively bribed with the offer of $150m in relief for public housing debts, the loss in Commonwealth public revenue is five hundred times greater for the Stage Three proposals.


Subscribe to The Isocracy Network RSS