Greenspan and the Morality of Taxation


Bill

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In his book The Age of Turbulence, Alan Greenspan talks of his association with Ayn Rand and her philosophy, Objectivism. He writes, “One contradiction I found particularly enlightening. According to objectivist precepts, taxation was immoral because it allowed for government appropriation of private property by force. Yet if taxation was wrong, how could you reliably finance the essential functions of government, including the protection of individual's rights through police power? The Randian answer, that those who rationally saw the need for government would contribute voluntarily was inadequate. People have free will; suppose they refused?"

Greenspan neglects to mention that, during the very time he was associated with her (1964), Rand wrote an article entitled “Government Financing in a Free Society,” (reprinted in The Virtue of Selfishness) in which she proposed a voluntary system of fees for protection of contracts as a possible alternative to taxation. Under this proposal, people would have an incentive to contribute money to the government, if they wanted the courts to uphold their contracts. Other practical methods of voluntary financing have also been proposed, and Greenspan is well aware of them. Yet he has chosen to ignore them and to pretend that the only way to ensure government funding is to violate people’s property rights.

And speaking of “contradictions,” how does one justify violating rights for the sake of protecting them? This is so obvious a contradiction that no one with Mr. Greenspan's intelligence and background could honestly plead ignorance of it.

Moreover, taxation isn't wrong simply because it violates rights (although it does that), nor is it wrong simply because it contradicts the purpose for which the taxes are being levied (although it does that). It is wrong for a far more serious and fundamental reason. It is wrong because it betrays the very purpose for the government's existence in the first place! In that respect, it is even worse than the theft from which it claims to offer us protection.

Quoting Thomas Jefferson in The Declaration of Independence: "We hold these truths to be self-evident: that all men are created equal; that they are endowed, by their Creator, with certain unalienable rights, that among these rights are life, liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed . . ." (Emphasis added)

Governments are instituted to secure these rights, not to violate them! There might be some excuse for endorsing taxation if one had never been introduced to these ideas in the first place. There is none for a man of Greenspan’s knowledge and sophistication.

Edited by Bill
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In his book The Age of Turbulence, Alan Greenspan talks of his association with Ayn Rand and her philosophy, Objectivism. He writes, “One contradiction I found particularly enlightening. According to objectivist precepts, taxation was immoral because it allowed for government appropriation of private property by force. Yet if taxation was wrong, how could you reliably finance the essential functions of government, including the protection of individual's rights through police power? The Randian answer, that those who rationally saw the need for government would contribute voluntarily was inadequate. People have free will; suppose they refused?"

Greenspan neglects to mention that, during the very time he was associated with her (1964), Rand wrote an article entitled “Government Financing in a Free Society,” (reprinted in The Virtue of Selfishness) in which she proposed a voluntary system of fees for protection of contracts as a possible alternative to taxation. Under this proposal, people would have an incentive to contribute money to the government, if they wanted the courts to uphold their contracts. Other practical methods of voluntary financing have also been proposed, and Greenspan is well aware of them. Yet he has chosen to ignore them and to pretend that the only way to ensure government funding is to violate people’s property rights.

And speaking of “contradictions,” how does one justify violating rights for the sake of protecting them? This is so obvious a contradiction that no one with Mr. Greenspan's intelligence and background could honestly plead ignorance of it.

Moreover, taxation isn't wrong simply because it violates rights (although it does that), nor is it wrong simply because it contradicts the purpose for which the taxes are being levied (although it does that). It is wrong for a far more serious and fundamental reason. It is wrong because it betrays the very purpose for the government's existence in the first place! In that respect, it is even worse than the theft from which it claims to offer us protection.

Quoting Thomas Jefferson in The Declaration of Independence: "We hold these truths to be self-evident: that all men are created equal; that they are endowed, by their Creator, with certain unalienable rights, that among these rights are life, liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed . . ." (Emphasis added)

Governments are instituted to secure these rights, not to violate them! There might be some excuse for endorsing taxation if one had never been introduced to these ideas in the first place. There is none for a man of Greenspan’s knowledge and sophistication.

Bill,

My guess is that Greenspan was conflicted about some of the central arguments in Objectivism all along. I think the lesson to be taken from this is not incredulity, but the patience Rand showed when she recognized a superlative intellect. I also think the Greenspan Fed was the best check on expansionary monetary policy possible within our current political system. We should be glad that Nathaniel Branden and Ayn Rand did not push Greenspan away and lose this opportunity.

Globalization is one of the most powerful forces for liberty. That is why free trade, sound money and free immigration are the most important political issues for Objectivists to champion. In such a climate, those countries with poor tax policy and fiscal policy will be disciplined economically.

Jim

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Globalization is one of the most powerful forces for liberty. That is why free trade, sound money and free immigration are the most important political issues for Objectivists to champion. In such a climate, those countries with poor tax policy and fiscal policy will be disciplined economically.

Jim

What exactly do you mean by Globalization?

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Bill,

This is a little bit more complex since a right can be violated easily by force, thus it can only be defended by force against such a violation. Just saying, "I have a right" doesn't do much when the bad guys come with clubs and guns to take your stuff.

An example of the complexity of this is reflected in the following quote by Rand from "America's Persecuted Minority: Big Business" in Capitalism: The Unknown Ideal, pp. 46-47. We have to presume that Greenspan knew this section, also, since he has essays in that book.

The only proper function of the government of a free country is to act as an agency which protects the individual's rights, i.e., which protects the individual from physical violence. Such a government does not have the right to initiate the use of physical force against anyone—a right which the individual does not possess and, therefore, cannot delegate to any agency. But the individual does possess the right of self-defense and that is the right which he delegates to the government, for the purpose of an orderly, legally defined enforcement. A proper government has the right to use physical force only in retaliation and only against those who initiate its use. The proper functions of a government are: the police, to protect men from criminals; the military forces, to protect men from foreign invaders; and the law courts, to protect men's property and contracts from breach by force or fraud, and to settle disputes among men according to objectively defined laws.

Now all that looked really good to me until one day I did a double-take because of something gnawing in the back of my mind.

"... the individual does possess the right of self-defense and that is the right which he delegates to the government..."

Huh?

I didn't delegate anything to anybody. What if I don't want an "orderly, legally defined enforcement"? What if I want revenge for having my own rights violated and I want it messy as all get out so they never do that again? Is "orderly" all of a sudden a moral value?

What does "delegate" mean here? Something I do on my own free volition or something that is "delegated" whether I want it to be or not? If that is so, and if I am in fact owner of the right to self-defense, this is nothing more than a "rights taxation." This right is taken from me by force. Rand merely called it "delegate." This doublespeak was not one of her finest hours.

(Incidentally, I agree with such "delegation," but I do not use that word since it sounds horrible to my ear. I just go ahead and give it up. I consider this as part of government's prerogative due to the reality of men living together, the impossibility of being omniscient, and knowing that there are some really nasty folks out there who will initiate force instead of words when they want something.)

Now that's from Rand's pen, not Greenspan's. The man claims he was close to her until she died in 1982. I have not seen anyone contest this. I do not know how much they discussed these issues, but there is one thing of which I am certain. Rand was not an idiot. She knew she was talking to a government regulator every time they talked. She knew he was promoting his ideas from the inside and she knew that this had a reality and came with a price (on several levels). I think she highly approved of him, although she might have done some things differently if she were in his shoes.

Michael

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If the right to self-defense is "delegated" it reads too much like a power of attorney. People have a right to self-defense and that is one of the rights government is supposed to protect. In that sense government is our agent and can do more by reactively pursuing criminals. If you assault me I can use the minimal amount of force necessary to repel the assault, but when you run away I cannot shoot you down. It would be okay to chase you down and make a citizen's arrest, but that's a nuance. (Then I would be an agent of the government.) The right to self defense is the right to defend oneself with something, which is another argument against disarming a country's citizens than the right to bear arms.

--Brant

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Brant,

My agent? What if I don't want it to be?

It will be so by force. And in that case, it will not be my agent but my boss, so to speak.

(Once again, I am in favor of this. I am not in favor of doublespeak.)

Michael

Then you are making the anarchist argument that what if you didn't "consent" to the or a government. Anyway, just say no and don't call the cops when I appear in your doorway wearing a mask and carrying an empty bag (for all the goodies I want to steal: please leave some cookies and milk on the kitchen table).

--Brant

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The only proper function of the government of a free country is to act as an agency which protects the individual's rights, i.e., which protects the individual from physical violence. Such a government does not have the right to initiate the use of physical force against anyone—a right which the individual does not possess and, therefore, cannot delegate to any agency. But the individual does possess the right of self-defense and that is the right which he delegates to the government, for the purpose of an orderly, legally defined enforcement. A proper government has the right to use physical force only in retaliation and only against those who initiate its use. The proper functions of a government are: the police, to protect men from criminals; the military forces, to protect men from foreign invaders; and the law courts, to protect men's property and contracts from breach by force or fraud, and to settle disputes among men according to objectively defined laws.

Michael replied,

Now all that looked really good to me until one day I did a double-take because of something gnawing in the back of my mind.

"... the individual does possess the right of self-defense and that is the right which he delegates to the government..."

Huh?

I didn't delegate anything to anybody. What if I don't want an "orderly, legally defined enforcement"? What if I want revenge for having my own rights violated and I want it messy as all get out so they never do that again? Is "orderly" all of a sudden a moral value?

What does "delegate" mean here? Something I do on my own free volition or something that is "delegated" whether I want it to be or not? If that is so, and if I am in fact owner of the right to self-defense, this is nothing more than a "rights taxation." This right is taken from me by force. Rand merely called it "delegate." This doublespeak was not one of her finest hours.

Michael, I think what she meant is that when individuals form a government, they do so for the purpose of an orderly, legally defined enforcement and that it is during this process that they delegate their right of self-defense. That's not to say that every individual living under a government would make that delegation, but only that ideally he or she ought to. Rand is speaking of what a rational, politically enlightened person would do. That is to say, a rational, politically enlightened person chooses to delegate his or her right of self-defense to a government for the purpose of an orderly, legally defined enforcement. She would say that if you choose not to do so -- if you choose instead to take the law into your own hands, to form a lynch mob, and to become judge, jury and executioner -- then you are acting irrationally, and cannot justify such behavior. If every individual chose to enforce his own version of the law on anyone he thought to be violating it, every individual would become a de facto government with his or her own set of rules and would thus be in conflict with every other individual that had a different set of rules. The result would be a continual, ongoing state of civil war. It is for the purpose of avoiding this kind of chaos that the rational individual "delegates" his or her right of self-defense to a government.

(Incidentally, I agree with such "delegation," but I do not use that word since it sounds horrible to my ear. I just go ahead and give it up. I consider this as part of government's prerogative due to the reality of men living together, the impossibility of being omniscient, and knowing that there are some really nasty folks out there who will initiate force instead of words when they want something.)

Now that's from Rand's pen, not Greenspan's. The man claims he was close to her until she died in 1982. I have not seen anyone contest this. I do not know how much they discussed these issues, but there is one thing of which I am certain. Rand was not an idiot. She knew she was talking to a government regulator every time they talked. She knew he was promoting his ideas from the inside and she knew that this had a reality and came with a price (on several levels). I think she highly approved of him, although she might have done some things differently if she were in his shoes.

You're aware, of course, that Rand did not care for Greenspan as a person, and referred to him disparagingly as a "social climber," to which he replied that since everyone desires the approval of others [Hello!], everyone is, in a sense, a "social climber." How do you think Rand would have responded to that remark?! Greenspan has had the bully pulpit on a number of occasions and could have defended the Objectivist politics, but hasn't.

Last week, I happened to catch the tail end of a segment on NPR in which he was being interviewed. Instead of defending capitalism, he said that resentment over income inequality under capitalism was a threat to the system and that although he wasn't comfortable with government redistributionist schemes, something needed to be done about this problem, if capitalism was to survive.

What he should have done is stress that opposition to income inequality under capitalism rests on a false egalitarian premise that confuses equality of results with equality of rights. Under capitalism, people get what they earn, and if they earn more, they get more. Furthermore, because the productivity of labor is so much higher under capitalism, even those who are modestly productive can be very well off relative to what they would have been under socialism or welfare statism. Relative poverty should not be confused with absolute poverty, for under capitalism, as the rich get richer, the poor get richer. These are the kind of points that Greenspan should stressed instead of simply saying that "something" needed to be done about people's resentment over income inequality, but that he didn't think redistributionist schemes were the answer.

In his book, he says that more education is needed to alleviate this kind of resentment, but he didn't come close to providing it in the NPR interview, when he had the opportunity. He simply soft-pedaled his opposition to government redistribution, saying that it was an undesirable solution and that he hoped others could be found. Instead, he should have come out strongly against it as a confiscation of people's wealth and a gross violation of their rights. If he's really serious about solving the problem through "education," then the education should start with him. He should be forthright in denouncing such schemes and explaining why they are wrong.

There is, of course, a reason why Greenspan failed to give laissez-faire capitalism the defense it deserves. He no longer believes in it.

Edited by Bill
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Relative poverty should not be confused with absolute poverty, for under capitalism, as the rich get richer, the poor get richer.

That's not what I heard on the news today, it said the gap between rich and poor was growing larger, and it was way worse in the US than Canada. This is a recipe for chaos. Give me one good reason why a CEO can make $5000/hr and a store clerk $7/hr ? Does the CEO contribute THAT much more to society?

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That's not what I heard on the news today, it said the gap between rich and poor was growing larger, and it was way worse in the US than Canada. This is a recipe for chaos. Give me one good reason why a CEO can make $5000/hr and a store clerk $7/hr ? Does the CEO contribute THAT much more to society?

To hell with what is given to society, that is not what the CEO or the store clerk is doing the job for. The CEO and the store clerk are trading values with the company it works for. Companies apparently value the work of CEOs over clerks, and therefore compensate them more for their employment value. Also the clerks believe that they are getting the best value for their work or they would work somewhere else or at another job, same for the CEO. Also if the company believes it can get cheaper clerks or CEOs it certianly would, for instance if it could hire CEOs at the same price as clerks and get the same value of work, you can bet that they would.

You're aware, of course, that Rand did not care for Greenspan as a person

I have a very very hard time believing in this. If anything I would believe the exact opposite for various reasons. One thing that I have noticed and that is almost always true is that a person doesn't not give a nickname to people they don't like. Usually a nickname is given as a sign of affection (even in Ayn's books). Another reason why I believe this is that from reading Nathaniel's book and reading other post about the objectivist movement is that Ayn usually pushed away people who did not "tow the obj. line" rather ferociously, from reading Greenspan we can tell that he was not totally sold, but Ayn kept him in her company. Ayn also stood next to Greenspan as he was sworn in as chairman of the the Council of Economic Advisors for Gerald Ford. If Ayn disapproved of Greenspan intellectually or personally, I doubt she would have made a public appearance with him, i.e. validating him. And lastly, I haven't heard of anyone ever not liking Greenspan as a person, from reading his book and what others have said about him and even listening to him, he seems extremely likable and seems to posses a huge amount of charisma. Look at his relationships with women. He dated Barbara Walters and then married Andrea Mitchel.

--Dustan

--Dustan

Edited by Aggrad02
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Globalization is one of the most powerful forces for liberty. That is why free trade, sound money and free immigration are the most important political issues for Objectivists to champion. In such a climate, those countries with poor tax policy and fiscal policy will be disciplined economically.

Jim

What exactly do you mean by Globalization?

I mean increased trade across national boundaries, increased immigration across national boundaries, and an increase in business entities integrated across national boundaries.

Jim

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As far as government and defense. A person cannot give up his right to self defense, it is an inalienable right. I think Ayn's word choice of "delegate" was very bad. It may or may not be what exactly she meant.

A better idea would be the idea that we "entrust" our government to protect us, while preserving our own right to defend our self. That way if the government oversteps its authority we can revoke that trust. Or if you don't trust the government you can prepare accordingly. This was the idea of the founding fathers and the reason for the 2nd amendment. The 2nd amendment was designed to ensure that the individual right of self defense was no infringed and to protect the populace from government gone astray. The tax to support such a military should either come from voluntary taxes or indirect taxes such as sales tax.

--Dustan

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Globalization is one of the most powerful forces for liberty. That is why free trade, sound money and free immigration are the most important political issues for Objectivists to champion. In such a climate, those countries with poor tax policy and fiscal policy will be disciplined economically.

Jim

What exactly do you mean by Globalization?

I mean increased trade across national boundaries, increased immigration across national boundaries, and an increase in business entities integrated across national boundaries.

Jim

How can we accomplish this without global government which is what I think is the biggest enemy of liberty.

--Dustan

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Also the clerks believe that they are getting the best value for their work or they would work somewhere else or at another job, same for the CEO. Also if the company believes it can get cheaper clerks or CEOs it certianly would, for instance if it could hire CEOs at the same price as clerks and get the same value of work, you can bet that they would.

They could work somewhere else? Like at another store for $7/hr. Do you really believe that all are given equal opportunity to succeed? When you say 'company' do you mean the board of directors? Why on earth would the board of directors vote to decrease their own pay?

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Michael, I think what she meant is that when individuals form a government, they do so for the purpose of an orderly, legally defined enforcement and that it is during this process that they delegate their right of self-defense. That's not to say that every individual living under a government would make that delegation, but only that ideally he or she ought to.

Bill,

This is more of the kind of doublespeak I was complaining about. It goes nowhere except in circles. The fact is that the lady wrote what she did and not your interpretation. Anyway, according to your standard, a Communist living in a Communist state who is said to "delegate" his income to the state can be redefined to mean he ideally "ought to" choose to do that under those values. The fact is that the government has power and we do not. Those who set the structure in place can channel that power to do some great things and limit that power, but those who follow do not choose that structure. They inherit it. That means they inherit the power it has over them, too. They don't delegate that power at all. All they can do is remove it if they can or accept it.

I stand by what I wrote. "Delegate" is a horrible word in that passage and it is confusing. Libertarian and Objectivist people are arguing all the way up to today with no resolution in sight because of that kind of doublespeak.

You're aware, of course, that Rand did not care for Greenspan as a person...

This is bull and you know it. I would have to look it up, but in the obituary to Rand in Time Magazine I read when I was in Brazil in 1982, it quoted her calling him a "hero" (if my memory serves me well). This was years after the "social climber" comment referenced by NB in MYWAR (p. 212) and it was only a question anyway. Here is the quote:

If Allan Greenspan mentioned a social event he had attended, Ayn would speculate about his fundamental seriousness or lack of it: "Do you think Alan might basically be a social climber?"

So your source is NB and Greenspan himself (I also saw the interviews). If Greenspan said they were close until the end of her life, what do you imagine that means if not periodic contact?

YOU may not like Greenspan, think he sold out, etc., and that is your right, but to claim that Rand held similar opinions is rewriting history and this is not really the place for that kind of Objectivism.

Michael

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Here's more from MYWAR. There is a description of Greenspan and Rand's opinion of him in the early days. The section starts on p. 111 and ends on p. 113. Here are two quotes:

(p. 112)

"How can you stand talking to him?" Ayn demanded. I answered, "I'm going to bring him around intellectually." This was one of the rare occasions when I thoroughly enjoyed disagreeing with Ayn; in matters of psychological judgment, I deferred to no one. "Never!" she declared. "A logical positivist? I'm not even certain it's moral to deal with him at all." I smile. "Wait and see."

. . .

(p. 113)

Ayn duly noted his enthusiasm about The Fountainhead. When, after a number of meetings with her, he was invited to read Atlas Shrugged as it was being written, he came a live with an excitement that no one had seen in him before. Shyly and reluctantly, he began to yield to the romantic side of his nature; he fell in love with Ayn's portrayal of business and industry. Ayn compared him to a "sleeping giant" who was slowly waking up. She grew progressively fonder of him. In fact, he became a particular favorite. "You were right," she said to me. "He has a first rate mind."

Rand did not like Greenspan when she met him. She later changed her mind.

Michael

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Relative poverty should not be confused with absolute poverty, for under capitalism, as the rich get richer, the poor get richer.

That's not what I heard on the news today, it said the gap between rich and poor was growing larger, and it was way worse in the US than Canada. This is a recipe for chaos. Give me one good reason why a CEO can make $5000/hr and a store clerk $7/hr ? Does the CEO contribute THAT much more to society?

GS,

Did the news item that you heard specifically say that the poor were not getting richer, or did it say only that gap between rich and poor was growing larger (which could mean that both rich and poor are getting richer, but at different rates)?

J

Edited by Jonathan
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GS,

Did the news item that you heard specifically say that the poor were not getting richer, or did it say only that gap between rich and poor was growing larger (which could mean that both rich and poor are getting richer, but at different rates)?

J

It said the gap was getting larger. Another statistic that is important is that the 'working poor' is the fastest growing class - which also bodes ill for the longterm stability of society. I don't know about you but I see the average standard of living going down in N. America, which I think peaked in the late fifties - early sixties. In those days an average man could own a car, house, raise a family and his wife could stay at home and look after them. Now most people need 2 incomes just to get by and many will never own a home.

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GS,

Did the news item that you heard specifically say that the poor were not getting richer, or did it say only that gap between rich and poor was growing larger (which could mean that both rich and poor are getting richer, but at different rates)?

J

It said the gap was getting larger. Another statistic that is important is that the 'working poor' is the fastest growing class - which also bodes ill for the longterm stability of society. I don't know about you but I see the average standard of living going down in N. America, which I think peaked in the late fifties - early sixties. In those days an average man could own a car, house, raise a family and his wife could stay at home and look after them. Now most people need 2 incomes just to get by and many will never own a home.

The average standard of living is way up and going up, primarily because of technology and trade. Actual salaries for the middle class on down are stagnant overall. House prices are being readjusted downward by market forces. (Rent now, buy later.) The 50s one-car family in a 1000 sq ft home is now three-cars in a 2000 sq ft home. Cell phones. TVs. Computers. The Internet. Drugs. DVDs. Jet travel.

Americans generally should be much, much richer, but envy and excessive taxes and regulations and going completely off the gold standard have worked against this. Inflation has turned savers into spenders and investors into speculators.

Because Americans are shipping their wealth overseas--and many American industries too boot--and the Fed is weakening the dollar relative to other currencies and gold, long term prospects are worsening, especially with the almost insolvable political and human problem of Medicare and Medicaid funding going forward.

--Brant

Edited by Brant Gaede
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They could work somewhere else? Like at another store for $7/hr. Do you really believe that all are given equal opportunity to succeed?

Yes, they were born into a free society. I bet for every CEO you could find a store clerk who had a similar upbringing and vice versa.

When you say 'company' do you mean the board of directors? Why on earth would the board of directors vote to decrease their own pay?

Who cares what they vote. They are a company owned by share holders. The only people who should care about this are the people who hold shares and they get to vote for the directors.

--Dustan

Edited by Aggrad02
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Yes, they were born into a free society. I bet for every CEO you could find a store clerk who had a similar upbringing and vice versa.

Who cares what they vote. They are a company owned by share holders. The only people who should care about this are the people who hold shares and they get to vote for the directors.

--Dustan

I care :) I guess you are representing the truly 'laissez-faire' view here? Personally, I think it's a naive view to imagine that we can have an economy with NO government intervention. I believe the government should be providing educated leadership to the public. Humans are a symbolic class of life and so whomever controls the symbols controls us.

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I care :) I guess you are representing the truly 'laissez-faire' view here? Personally, I think it's a naive view to imagine that we can have an economy with NO government intervention. I believe the government should be providing educated leadership to the public. Humans are a symbolic class of life and so whomever controls the symbols controls us.

Educated Leadership?

First Education: What values? what contents? Who decides? Does the public decide by democratic vote? Or is it decided by a power elite?

Leadership: As in the Fuehrer Prinzip? In a free society we have Leaders? Or do we have people exercising authority within the the laws and customs?

In a free society the last thing I would want are Leaders. I am a one man parade. I don't need no steeenking leaders. Maybe in a war, but not in peacetime.

Ba'al Chatzaf

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I care :) I guess you are representing the truly 'laissez-faire' view here? Personally, I think it's a naive view to imagine that we can have an economy with NO government intervention. I believe the government should be providing educated leadership to the public. Humans are a symbolic class of life and so whomever controls the symbols controls us.

Educated Leadership?

First Education: What values? what contents? Who decides? Does the public decide by democratic vote? Or is it decided by a power elite?

Leadership: As in the Fuehrer Prinzip? In a free society we have Leaders? Or do we have people exercising authority within the the laws and customs?

In a free society the last thing I would want are Leaders. I am a one man parade. I don't need no steeenking leaders. Maybe in a war, but not in peacetime.

Ba'al Chatzaf

There are always leaders, good, bad or indifferent.

--Brant

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