Recently, Venezuelan strongman Hugo Chavez announced that he was moving the nation's entire overseas reserve of gold bullion, valued at $11 billion, back to Caracas, a move that will cost hundreds of millions of dollars just for security. (Ragnar Danneskjold, where are you?)
There are two theories about why Chavez is doing this. The first theory is that he is withdrawing hard assets that could be attached when the World Bank's International Center for Settlement of Investment Disputes rules against him for illegally seizing $14 billion in assets from American and European companies.
The other, wider theory, the one I consider to be more accurate, is that Chavez is being treated for cancer and is paranoid that his weakness will provide an opening to political opponents, so his regime is trying move the country's reserve of hard money to some place where they can physically grab hold of it. In effect, Chavez is piling up gold in his bunker in anticipation of fighting off a Libyan-style insurrection. Roger Noriega sums it up: "These momentous decisions by the ailing leader and his nervous cronies suggest they are more concerned with their ability to hold on to power when Mr. Chavez falters than with the well-being of the Venezuelan economy." No investor will ever touch Venezuela again, and with no foreign reserves, it will function about as well in the global economy as North Korea. But no one will be able to pry the Chavez regime's death grip off of the country.
This is not a new phenomenon, neither in Venezuela nor in the world. It is a principle I call the Milton Factor. No, this has nothing to do with Milton Friedman. I named it after John Milton, author of the epic poem "Paradise Lost," in which he attributes to Satan a classic statement of evil. After being cast down onto the Lake of Fire as punishment for his rebellion against God, Satan accepts his grim fate by declaring that it is "Better to reign in Hell than serve in Heaven."
Every dictator eventually faces this choice, when he has to choose between economic prosperity and political control. Like Chavez, they usually choose control and cause their economies to collapse, plunging millions into poverty and outright starvation. They choose to rule in Hell rather than to be a minor and inconsequential bureaucrat in Heaven.
It is not just dictators who have to make this choice. Our own "moderate" statists often make the same choice, though in less stark terms. With his recent proposals on jobs and taxes, President Obama is making it, too.
To rule in Hell or serve in Heaven is actually a false alternative, because ruling and serving are not the only options. (If this were true, then on Satan's own terms there is a certain nobility in his choice to reject servitude, which is why Milton has often been accused of sympathy for the devil.) Men are not doomed to be either master or servant, but can live as independent equals, which is what they are in a free society. So the modern statist's version of the Milton Factor is even more perverse. It is not a choice between ruling and serving, but a choice between having control over others and leaving them free. They always want to keep the control, even if it means destruction for everyone.
They would rather rule in Hell than leave us the hell alone.
You can see this in President Obama's latest economic proposals. Consider the fraud of his jobs bill. Even as he abjured Congress to pass the American Jobs Act "right away," there was no such bill. He had not written it yet, he had lined up no sponsor to introduce it in the House, and he had not bothered to secure the support of his own congressional allies. The result, a little over two weeks later, is that no Democrat has even introduced Obama's bill in the House, while Democratic leaders in the Senate have pushed it off into the indefinite future. As to its content, it is just a rehash of the president's previous failed "stimulus" bill.
None of this makes sense as a legislative strategy or an economic policy. It only makes sense as crude political maneuvering: propose a bill that is doomed to fail, then blame the opposition. At a time of dire economic emergency, with long-term unemployment and poverty reaching levels not seen since the Great Depression, President Obama would rather pursue a re-election slogan than propose legislation that might actually pass and improve the economy.
Meanwhile, Obama promised to tour the country pushing his jobs bill, but what he is actually pushing is a new tax on the rich. The real focus of his rhetoric and political energy is the so-called Buffett Rule, based on the alleged fact that billionaire investor Warren Buffett's secretary pays a larger share of her income in taxes than Buffett does.
The whole thing is another fraud. If Buffett feels undertaxed, perhaps he could start with his company's unpaid back taxes. Moreover, his situation is far from typical. In reality, millionaires pay about 30% of their income in taxes, compared to 20% (or less) for the middle class. The top one percent of earners pay 40% of all income taxes, while about half of Americans pay no income tax at all. So who isn't paying their "fair share"? And then there is the fact that "Warren Buffett's secretary" is a fiction. A reporter who actually bothered to call the headquarters of Buffett's investment company discovered that he has several "administrative assistants," whose responsibilities are a lot greater than taking dictation and fetching coffee. (The whole image of a "secretary" is a bit of hopelessly old-fashioned "Mad Men" chauvinism. No wonder the women in Obama's administration describe it as a "hostile workplace.") And given that Buffett's assistants work for a man who manages $100 billion in assets, they probably make more money than you do. They may well make enough, especially when combined with their spouses, to rise above the $200,000 per year income level that will incur higher taxes in Obama's new plan to tax "billionaires."
This new tax is, in effect, just a second Alternative Minimum Tax, and the history of these taxes suggests that they are never limited to "the rich." The income tax itself began as a 1% tax on the rich, before spreading to nab the vast majority of the middle class. The original AMT, meant to prevent a small group of the very wealthy from gaming the government's vast network of tax loopholes, has now crept down to affect the middle class, ensnaring thousands of small businesses. This one will do the same and will create the same kind of drain on the economy.
But remember the Milton Factor. This is not about economics. It is about control. Republicans have criticized this proposal as "class warfare," but I don't think that really names the right issue. America does not have economic classes in the old-fashioned European sense. Long ago, Alexis de Tocqueville observed that individualism, economic freedom, and the doctrine of "self-interest properly understood" was something one heard, in America, "as much from the poor as from the rich." We certainly don't have anything like old-fashioned class warfare when it is the Warren Buffetts and Jeff Immelts who are providing cover to Obama, while middle-class and blue-collar folks flock to Tea Party rallies. If this is class warfare, the plutocrats and the proletarians have gotten their cues mixed up.
What actually differentiates the warring factions here is the issue of control versus independence. If there are classes involved, they are not "rich" versus "poor," but the "government class" versus the "independent class."
Consider, for example, one Silicon Valley entrepreneur's description of how the Buffett Rule would squash returns for venture capitalists who back high-tech start-ups. Then contrast that to this administration's "venture socialism," as embodied in the Solyndra fiasco, where the Obama administration rushed through a half-billion-dollar loan guarantee to a politically correct, politically connected business.
Philip Klein makes a similar comparison between Solyndra and Social Security. "Obama thinks it's OK for government to risk taxpayer money on business ventures that he deems worthy of investment. But he's outraged at the suggestion that younger Americans be allowed to have more control over the allocation of their own tax dollars."
The pattern is consistent. The government class wants everything to be controlled by a central authority, either through direct government action or through a Solyndra- or Government Motors-style "public-private partnership." They are tyrants, in their own way. And like the world's dictators, even when their policies lead to disaster (witness the current state of the economy), they just cannot bring themselves to give up control.
It's the Milton Factor. They would rather rule in Hell than leave us the hell alone.
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