Why Liberals Should Be More Optimistic

Optimists think that the course of events will be positive, for them personally or for society in general. Realists, on the other hand, think that the course of events might turn out to be positive; they concede, however, that they can’t really know since reality consists of complex phenomena. Optimism and realism are sometimes used as contradictory concepts. That doesn’t necessarily follow though.

Liberal thinkers can often be described as optimists with a strong sense of reality. On the one hand, they hope that a particular situation will turn out well; they even provide policy recommendations in order to facilitate the process. On the other hand, liberal thinkers are skeptical of what men, in particular politicians and bureaucrats, are capable of achieving. They have a realistic perception about the nature of humans and their capabilities.

Liberal thinkers can often be described as optimists with a strong sense of reality.

Personally, I’ve always perceived liberalism as a philosophy advocating a realistic optimism. For instance, we can look back to the big controversy about socialist planning in the 1920s (the “socialist calculation debate“). Ludwig von Mises, Friedrich A. von Hayek and later Murray N. Rothbard argued that a planned economy must inevitably fail at some point because its planners lack the knowledge necessary to determine economic in- and outputs. Mises and Hayek were proven right with their predictions when the Soviet system collapsed economically and politically in the early 1990s. They were pessimistic about the Soviet economy, but both Mises and Hayek felt optimistic about their own policy proposals regarding the market economy.

Many people nowadays think that capitalism and the free enterprise system have failed, given widespread poverty, the waste of resources, corruption, and so on. However, contrary to common belief, figures show that the world has become a fundamentally better place (please click on the picture to increase its size):

Liberals (read libertarians) can (and should) be more optimistic given the continuing overall trend which constantly confirms that people have become healthier, live in freer societies, and are better educated than in the 19th century (let alone earlier periods of mankind).

At the same time, we have been warned that we should remain skeptical towards supposed panaceas and prophecies coming from the ones that think they will change the world single-handedly; the ones that feel confident that they possess the recipes to solve all the ills of mankind; and those claiming that their proposed solutions are without alternative. In his Nobel Prize lecture, Hayek invoked us not to be imprudent or foolish when it comes to people that pretend to know everything (“The Pretence of Knowledge”). His statement emphasizes that we should exercise restraint in our own dealings, but also remain extremely cautious about what politics can actually accomplish for the good of society.

To conclude this short essay, I’d like to quote Karl Popper. He was that kind of optimistic thinker with an insistent sense of reality:

“The future is open. It is not predetermined and thus cannot be predicted – except by accident. The possibilities that lie in the future are infinite. When I say ‘It is our duty to remain optimists’, this includes not only the openness of the future but also that which all of us contribute to it by everything we do: we are all responsible for what the future holds in store. Thus it is our duty, not to prophesy evil, but, rather, to fight for a better world.”

Karl Popper, The Myth of the Framework, 1994

The Right to Discriminate – It’s Not About Being Gay or Racist

An Alexandria gym terminated the membership of white nationalist Richard Spencer last week after another gym member confronted him with his racist views. Quite naturally, the private company used its right to discriminate. The media generally applauded the gym’s decision.

On the other hand, various court decisions according to which Christian bakers and florists were legally required to bake a wedding cake resp. to provide wedding bouquets of flowers for gay couples have sparked a huge controversy about the issue of discrimination for religious reasons.

Two different types of discrimination

Some people have argued that those court rulings would also apply to the (more theoretical) case in which a Jewish baker refuses his services to a neo-Nazi.

With good reason, however, our society distinguishes between the discriminatory actions and their underlying motivations.

In fact, there is a huge difference between being gay and being racist. We can even argue that they belong to different moral categories. Being gay is concerned with sexual orientation. In contrast, racists define themselves through their hatred towards a certain group of people. The former is an involuntary condition; the latter is a freely chosen political ideology. Also, a Christian baker invokes his religious beliefs, while a Jewish baker rejects to serve a neo-Nazi based on the historical experience.

So, the whole analogy with the Jewish baker somehow seems to collapse on closer inspection. We could close the case here. However, there is good reason not to do that too prematurely.

Reasons to allow discriminatory actions nevertheless

There are – at least – four reasons why discrimination should be allowed even in the cases of the Christian baker and florist:

    • Discrimination is ubiquitous: Admittedly, to discriminate people is not a nice thing. However, it is part of life. When decisions are made, discrimination ensues quite naturally. For example, a restaurant that has only five tables with ten seats has to turn down the eleventh guest; an employer cannot offer more work than she actually needs. If she does so blithely, she will likely go out of business; and so forth. Moreover, the right to discriminate is quite obviously not reserved to companies but it is also an important right of consumers. No one would argue that consumers are required to shop at a certain bakery or flower shop.
    • Prevention of harm, not causing harm: The task of the government is to prevent harm between its citizens. To deny services to a person almost never poses great harm to that person. On the other hand, forcing people to do something is a discriminatory action in itself; it is a full-fledged attack on the freedom of association. In fact, people in a free society shouldn’t arbitrarily come up with entitlements to the services of someone else.
    • There should be no control of the mind: To criminalize decisions that are based on strong motivations, such as religious beliefs, is a dangerous path that could end up on a slippery slope. It unduly prevents people from speaking their mind. It is even a form of “compelled speech” since bakers and florists are forced to provide their services.
    • The whole legal intervention could backfire on minorities: Most importantly, instead of protecting minorities and disenfranchised groups from being discriminated, anti-discrimination policies will likely effect more discrimination: Because laws increase the cost of compliance, private companies will try to find ways to reject members of minorities on spurious grounds. For example, individuals belonging to vulnerable groups, such as older employees, already have difficulties to get a job because labor laws overly protect them from being fired; doctors don’t accept patients because they cannot provide the language translations required by the law; finally, families don’t find an apartment because the requirements to terminate their lease are prohibitively high. In the end, anti-discrimination laws are much more harmful for the legitimate interests of minorities and disenfranchised people. Or, in the words of Dan Sanchez:

“Authoritarian restriction is a game much better suited for the mighty than for the marginalized.”

Bottom line

The right to discriminate should be considered permissible for whatever reason. It only applies to the private sector, however, be it in professional or more personal dealings. Ultimately, deliberately forgoing business opportunities or being racist are costly behaviors in the market place.

Government services, in contrast, are strictly bound by the constitutional principle of equal treatment. This hasn’t always been the case, as the history of the segregation laws in the U.S. teaches us, and it should therefore be emphasized here.

We should never force a Jewish baker to engage with a neo-Nazi – in any way. This is probably common sense. However, just as little as we punish a gym that terminates its contractual relationship with a racist member, we should forbid the Christian baker (florist, photographer, …) to turn down a gay couple. Personally, I don’t welcome the baker’s decision. However, it is simply not up to me to determine the generally accepted boundaries of the right to discriminate; and neither is it to anyone else.

Der Suizid im Liberalismus

“Es gibt nur ein wirklich ernstes philosophisches Problem: den Selbstmord. Sich entscheiden, ob das Leben es wert ist, gelebt zu werden oder nicht, heißt auf die Grundfrage der Philosophie antworten. Alles andere – ob die Welt drei Dimensionen und der Geist neun oder zwölf Kategorien hat – kommt später. Das sind Spielereien; erst muss man antworten.”

(Albert Camus, Le Mythe de Sisyphe, 1942, dt. Übersetzung)

Nicht erst seit Albert Camus ist der Suizid ein kontroverses Thema in der Philosophie. Der Liberalimus setzt sich als politische Philosophie lediglich indirekt mit der Thematik auseinander, da er weder Verbote noch Gebote ausspricht, sondern den Suizid als Teil der Menschenwürde auffasst.

Griechische Philosophie und Stoa

Eine grundsätzlich ablehnende Haltung gebenüber dem Suizid finden wir bei Sokrates, der in Platons “Phaidon” die Entscheidung über Leben und Tod den Göttern überlässt. Aristoteles schloss sich dieser Meinung an.

Demgegenüber finden wir insbesondere bei den Stoikern eine positive Haltung gegenüber dem Suizid. Für den Stoiker ist nicht entscheidend, dass man lebt, sondern wie man lebt. Namentlich schrieb Seneca in den Briefen an Lucilius:

„Finden wirst du auch Lehrer der Philosophie, die bestreiten, man dürfe Gewalt antun dem eigenen Leben, und es für Gotteslästerung erklären, selbst sein eigener Mörder zu werden […] Wer das sagt, sieht nicht, dass er den Weg zur Freiheit verschließt. Nichts besseres hat uns das ewige Gesetz geleistet, als dass es uns einen einzigen Eingang in das Leben gegeben, Ausgänge viele. Ich soll warten auf einer Krankheit Grausamkeit oder eines Menschen, obwohl ich in der Lage bin, mitten durch die Qualen ins Freie zu gehen und Widerwärtiges beiseite zu stoßen? Das ist das einzige, weswegen wir über das Leben nicht klagen können: niemanden hält es.“

(Epistulae Morales ad Lucilium 70.14-15).


Diese klaren Worte wurden jedoch von der Kirche abgelehnt. Im ersten Buch seines Werks “De Civitate Dei” (Gottesstaat) betonte der Kirchenvater Augustinus im 5. Jahrhundert n. Chr., dass der Dekalog (zehn Gebote) nicht nur die Fremdtötung sondern auch den Suizid mitumfasse:

“Allerdings nämlich ist, wenn es nicht einmal gestattet ist, aus eigener Vollmacht einen Übeltäter zu töten, es sei denn, daß ein Gesetz die Befugnis gibt, ihn zu töten, natürlich auch der Selbstmörder ein Mörder, und er lädt durch den Selbstmord umso größere Schuld auf sich, je weniger er schuld ist an der Ursache, die ihn zum Selbstmord treibt.”

(Buch 1, 17)

Anders als bei Seneca soll es für den gläubigen Christen keinen eigenständigen Ausweg aus dem Leben geben dürfen. Das Leben erhält damit einen Eigenwert, über den nur Gott bestimmen kann. Er gibt Leben, und er alleine entscheidet, wann er es zurück nimmt.

Im Unterschied zu den fernöstlichen Weltanschauungen (Hinduismus, Konfuzianismus und teils Buddhismus) folgen alle grossen abrahamitischen Religionen dieser Prämisse.

Humanismus und Aufklärung

Der Liberalismus findet nicht nur in den griechischen und römischen Ideen seine Vorläufer, sondern insbesondere auch bei den Denkern des Humanismus. Michel de Montaigne hat sich fast wortwörtlich der Meinung Senecas angeschlossen, als er in seinen Essais (1580) schrieb:

„[…] man sagt, […] das gnädigste Geschenk der Natur, das uns jeden Grund zur Klage über unser Los nehme, bestehe darin, dass sie uns den Schlüssel zum Weg ins Freie überlassen habe. Sie hat nur einen Eingang ins Leben vorgesehen, aber hunderttausend Ausgänge.“

(Essais 2,3)

In Weiterentwicklung der antiken Tradition (insb. der “humanitas” in Ciceros Werk) betonte der Humanismus die Würde des Individuums aufgrund seiner Natur und Vernunft.

Die Entscheidungsfreiheit wurde sodann als wesentlicher Bestandteil der Menschenwürde betrachtet. In den Worten Samuel von Pufendorfs (1672):

„Der Mensch ist von höchster Würde, weil er eine Seele hat, die ausgezeichnet ist durch das Licht des Verstandes, durch die Fähigkeit, die Dinge zu beurteilen und sich frei zu entscheiden, und die sich in vielen Künsten auskennt.“

(De iure naturae et gentium, 2. Buch, 1. Kapitel, § 5)

Ferner beschäftigte sich David Hume in seiner Schrift “Of suicide” (1777) ausführlich mit der Thematik. Dabei kam Hume zum Schluss, dass moralische Verurteilungen fehl am Platz seien. Der Suizid sei weder moralisch noch unmoralisch, sondern ein tröstender Notausgang für den Einzelnen, “[which] would effectually free him from all danger of misery”.

Dem entgegnete Immanuel Kant, dass der Suizid dem Grundgesetz der praktischen Vernunft widerspreche, wonach der Mensch durch sein Handeln sich selbst zu bestätigen habe. Der Mensch sei eben Zweck, und niemals Mittel. Indem der Suizident den Suizid wähle, stelle er im Widerspruch zu seiner Vernunft sein Menschsein in Frage. Für Kant ist die “Selbstentleibung” darum ein Verbrechen, ja Mord (Die Metaphysik der Sitten, § 6, 1797). Weil bei Kant das Prinzip der Selbsterhaltung bereits in der Prämisse steckt, ist die Entscheidungsfreiheit im Suizid lediglich eine vermeintliche.

Suizid im Nationalsozialismus

In einer Gesellschaft, in welcher das öffentliche Interesse mit Zwang vor das Eigeninteresse gestellt wird, kann der sebstbestimmte Tod zu einem politischen Akt werden: Wenigstens die Entscheidung über ihren Tod wollten viele Juden und Personen verfolgter Minderheiten nicht den Nationalsozialisten überlassen. So waren ihre Handlungen Ausdruck des Widestands gegen eine Ordnung, welche das Leben ganz grundsätzlich nicht wertschätzte.

Es ist darum nicht erstaunlich, dass auch Deutsche, die den Suizid wählten, als minderwertige Menschen angesehen wurden. Eine solche Handlung wurde zudem als Pflichtverletzung gegenüber dem Staat betrachtet. Ironischerweise wählte letztendlich auch Adolf Hitler angesichts der Ausweglosigkeit des Krieges den Freitod. Für seine Anhänger wurde sein Suizid zum hochstilisierten Beweis des Märtyrertums.

Straffreiheit und Toleranz in der modernen liberalen Ordnung

Mit der Anerkennung der Glaubensfreiheit in den demokratischen Verfassungen des Westens wurde der Suizid von seiner metaphysischen Ballast befreit: Nunmehr bestimmte der Staat über die dessen Legalität. Relativ bald etablierte sich die Einsicht, dass der Suizid grundsätzlich straffrei sein sollte (in Preussen bspw. 1851), wobei sich die Diskussionen allerdings in vielen Staaten bis heute um das zulässige Mass der Beihilfe zum Suizid drehen.

Der Liberalismus als politische Philosophie kann grundsätzlich nichts über das Psychologische und Seelische aussagen. In Ludwig von Mises’ Worten (1927):

“Nicht aus Geringschätzung der seelischen Güter richtet der Liberalismus sein Augenmerk ausschliesslich auf das Materielle, sondern weil er der Überzeugung ist, daß das Höchste und Tiefste im Menschen durch äussere Regelung nicht berührt werden können. Er sucht nur äusseren Wohlstand zu schaffen, weil er weiß, daß der innere, der seelische Reichtum dem Menschen nicht von außen kommen kann, sondern nur aus der eigenen Brust. Er will nichts anderes schaffen als die äußeren Vorbedingungen für die Entfaltung des inneren Lebens.”

(Liberalismus, 4)

Der klassische Liberalismus fordert indes Toleranz. Er fordert Toleranz gegenüber Andersdenkenden und Andershandelnden. Die liberale Haltung besteht also im respektvollen Umgang mit einem zumeist psychologischen Phänomen, das in der Regel für Aussenstehende nur schwer oder gar nicht fassbar ist.

Der Suizid soll als Realisierung des letzten Willens offenstehen. Wo auch immer ein Mensch nach reiflicher Überlegung zur Überzeugung gelangt, dass er diesen Weg wählen möchte, soll ihm dieses natürliche Recht nicht verwehrt werden können – weder von einer religiösen Gruppierung noch vom Staat. Der Mensch – in Anlehnung an Hume – schuldet der Gemeinschaft nichts; sein freier Wille soll nicht durch Nützlichkeitserwägungen eingeschränkt werden können.

Für einen Liberalen muss sich eine solche Haltung bereits aus der Verfügungshoheit über den eigenen Körper ergeben. Ein Verbot würde nämlich immer auch die (freilich rein hypothetische) vollständige Fremdkontrolle des eigenen Körpers bedeuten.

Anders als Kant meinte, stellt der Suizid auch keine moralische Selbstverneinung dar, sondern die Verwirklichung des freien letzten Willens. Nur wenn dieser freie Wille eingeschränkt ist, im Sinne Ludwig Wittgensteins eine „Überrumpelung“ (Kontrollverlust) vorliegt, kann nicht von einer „reiflich überlegten“ Entscheidung gesprochen werden.

Der Liberalismus setzt dem selbstgewählten Tod allerdings dort eine Schranke, wo andere Menschen zu Schaden kommen könnten. Keine Toleranz erhält darum der Selbstmordattentäter, der sich aufgrund seiner intoleranten Ideologie tötet. Problematisch (aber verständlich) ist die Frage, ob das Vorliegen einer Verantwortung des Suizidenten für andere Menschen, wie etwa seine Kinder, die Suizidhandlung als verwerflich erscheinen lässt.

Die Toleranz gegenüber der Entscheidungsfreiheit und damit der Würde des Menschen ist die Stärke des Liberalismus. Diese Toleranz ist nicht bedingt oder abhängig vom Willen einer Autorität, und sie macht insbesondere vor dem Tod nicht halt.



The Fallacious Romance of Politics with the Concept of Public Interest

The theory that there exists a thing called „public interest“ is a fallacious belief based on a romantic idea of political man. In truth, the overwhelming evidence shows us that governments are more likely to fail than markets, and when they do, the consequences of their failure are more catastrophic.

Political man vs. economic man

Most of Western political thought is grounded in the idea that the ruling class acts reasonably and in the best interest of the people it governs. This idea dates back to Plato’s Republic, in which the “philosopher kings” shall exercise absolute powers over the citizenry, only kept in check by their virtues of benevolence and knowledge. According to Plato, philosophers have to lead the way as kings, or rather kings have to grow into philosophers.

Plato famously likened the governance of the state with the command of a naval vessel when he wrote:

“[…] the true pilot must pay attention to the year and seasons and sky and stars and winds, and whatever else belongs to his art, if he intends to be really qualified for the command of a ship […].”

Plato’s writing received intellectual resistance by many classical liberals, including Milton Friedman who brilliantly responded to his interviewer on a TV show in 1979:

“Is it really true that political self-interest is nobler somehow than economic self-interest? You know I think you are taking a lot of things for granted. And just tell me where in the world you find these angels that are going to organize society for us?”

The purpose of this short essay is to show that the belief that there are two different types of human beings is delusive. In fact, there has hardly ever existed a convincing story that there are those who pursue the interests of the public benevolently, the so-called political man, on the one hand, and those who are only interested in their personal advancement, the so-called economic man, on the other hand.

The concept of public interest in the theory of regulation

The public interest theory of regulation explains, in general terms, that regulation seeks the protection and benefit of the public at large, such as for reasons of security or health. Apparently, these are very vague terms, which are in need of a definition.

In contrast, we can all ascertain our personal interests that are based on our own preferences. A farmer, for instance, usually wants to maintain or increase the value of his land, on which his cattle graze. A company, on the other hand, might want to acquire the farmer’s property at the lowest possible price to build a new factory on it. The rationale of economic exchange is that both farmer and company would strike a bargain, each from their own perspective, if they agreed on the purchase of the land.

What exactly, then, is public interest? You would expect an entire bookshelf filled with straightforward answers to that question. However, the concept has deliberately been left open to interpretation by the legislator and judiciary. Further, it is difficult to define such a concept since the terminology doesn’t say anything about its substance. It is clear, however, that public interest cannot correspond to a specific private interest.

Now, imagine that a government agency plans to build a railroad track across the property of said farmer. In line with the law on expropriation, the agency claims that building the track is in the public interest since everyone uses the train now and then, or rather that trains are just an important pillar of the local economy. Therefore, they conclude, the property must be taken away from the farmer. Well, this does seem fair given the farmer receives an appropriate compensation equal to the market value, doesn’t it?

The concept of social welfare in economics

How do the officials of that railroad agency estimate the farmer’s individual welfare loss? After all, he couldn’t be willing to sell his property at all. However, welfare economists make it easier for the authorities.

Mainstream economic analysis of law has come up with a simple answer to the question. The transaction must satisfy the criterion of (improved) Pareto efficiency in order to be considered beneficial for society: It suffices if the general public benefits more from taking away the farmer’s property than the farmer loses, given that his loss is compensated appropriately. More precisely, the welfare function is served justice if the farmer receives a compensation that doesn’t worsen his position compared with his original situation as a landowner. According to the Pareto calculus, no one should be worse off after the transaction than before. However, because the state is on the „other side“ of the transaction, the farmer’s individual preference to sell or not to sell doesn’t carry any weight in the equation. That’s the rationale of political exchange.

But how can the government be sure what the public truly wants? In fact, it almost never can. Conceptually, it is just assumed that elected politicians and their policies will increase social welfare. This sweeping assumption makes up the alleged public interest. To suggest, however, that all citizens (except for the farmer) share the same social preferences (building the railroad track) is outright fallacious. The problem doesn’t disappear in a direct democratic system; the opinions of politicians or bureaucrats are only replaced by the majority’s desire for some sort of public welfare, to which minorities have to be subordinate.

It should thus come as no surprise that eminent domain has encouraged governments to take advantage of the poor and politically powerless historically.

Welfare economics generally emphasizes the importance of property rights. The same theory, however, allows for expropriation under the conditions mentioned above. In doing so, the argument becomes an entirely utilitarian one: Property turns into a matter of monetary compensation; even more, the concept of property is ultimately reduced to a mere tentative claim instead of full ownership. This is true for the farmer’s land as much as it is for any kind of property.

Public choice’s critique of politics

Early critics of arbitrary public policies undertook an analysis of political exchange. David Hume famously stated that we should govern public employees the way we treat „knaves“:

„Political writers have established it as a maxim, that, in contriving any system of government, and fixing the several checks and controuls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest. By this interest we must govern him, and, by means of it, make him, notwithstanding his insatiable avarice and ambition, co-operate to public good. Without this, say they, we shall in vain boast of the advantages of any constitution, and shall find, in the end, that we have no security for our liberties or possessions, except the good-will of our rulers; that is, we shall have no security at all.“

(David Hume, Of the Independency of the Parliament, 1777, in: Eugene F. Miller (ed.), David Hume. Essays. Moral, Political, Literary, Indianapolis 1987, Essay VI, 42-43)

Hume anticipated a whole new research field in economics and political science, beginning with Knut Wicksell, Ludwig von Mises, and later the Virginia School of political economy (among many more). The proponents of public choice argue that the distinction between economic and political man is fallacious on the ground that politicians don’t run for office because they only have the public interest in mind, but rather pursue their self-interest and other motivations.

I don’t claim that politicians never act out of other reasons than pure self-interest. However, public policies will more often than not be undermined by special interest groups, trying to pass off their private interests as the „public interest“. In fact, as everyone else, politicians react to the incentives of their biggest financial backers, and seldom behave in ways that reflect the interest of their constituency, let alone the „public interest“. In the case of the farmer, it is plausible to presume that railroad corporations have used their power to influence the legislator and bureaucrats in their favor, resulting in the confiscation of the farmer’s land.

Constitutional constraints, and the protection of individual liberty

How, then, can we limit political power in line with a free society? Typically, classical liberals have sought to restrict the competences of the government in the first place. Both James M. Buchanan and Gordon Tullock, the founders of the Virginia School, advocated the implementation of constitutional constraints, within which political decisions are made. They provided a theory of government failure, thereby questioning the common belief that politics is some sort of romantic relationship between the state and its citizens:

„The romance is gone, perhaps never to be regained. The socialist paradise is lost. Politicians and bureaucrats are seen as ordinary persons much like the rest of us, and „politics“ is viewed as a set of arrangements, a game if you will, in which many players with quite disparate objectives interact so as to generate a set of outcomes that may not be either internally consistent or efficient by any standards.“

(James M. Buchanan, Politics without Romance: A Sketch of Positive Public Choice Theory and Its Normative Implications, in: The Logical Foundations of Constitutional Liberty, The Collected Works of James M. Buchanan, Indianapolis 1999, Vol. 1, 57)

Western constitutions were initially grounded on a classical liberal foundation. However, most governments have resorted to very broad interpretations of alleged public interests, be it in the area of eminent domain or national security. As it is the case with social justice (Hayek’s „weasel word“), everything can somehow be subsumed under the term „public interest“. The challenge, however, lies in securing individual liberties in the sense of the Lockean trinity „life, liberty, and property“ against all future prevailing odds. This is consonant with what Adam Smith and F.A. Hayek meant by „liberty under the law“. After freeing it from its non-existent romance intellectually, the relationship between the state and its citizens should be put back on a strong legal foundation, keeping political agents in check.

A society based on the principles of peaceful cooperation is in the public interest

A concept as shallow and unclear as the concept of public interest must pose a constant danger to freedom. We should therefore abandon the concept of public interest altogether, and replace it with a classical liberal approach instead. For all intents and purposes, the protection of individual liberties against unwarranted actions of both government and citizens is in the long-term interest of society.

In other words, legitimate government intervention should be confined to prevent citizens from being harmed by their fellow men and their property from being stolen or impaired. Therefore, public interest ultimately comes down to the production of rules that allow for peaceful cooperation and the pursuit of individual interests. Any other interpretation of public interest (or social welfare for that matter) is based on unrealistic behavioral assumptions about politics.

Hayek similarly wrote:

“In this sense the general welfare […] consists of what we have already seen to be the purpose of the rules of law, namely that abstract order of the whole which does not aim at the achievement of known particular results but is preserved as a means for assisting in the pursuit of a great variety of individual purposes.”

(Friedrich A. Hayek, Law, Legislation and Liberty: The Mirage of Social Justice, Vol. 2, London 1998, 5)

Certainly, difficult questions of weighing individual rights against each other will arise in many instances. This, however, is actually the „art of navigation“ Plato should have pointed to instead of promoting a special ruling class. If we are not willing to give up the foundation of an open and peaceful society in the long run, this is the only sensible way to interpret the concept of public interest.

The Right to Be Let Alone in a World of Cultural Diversity

The right to be let alone, as Justice Louis Brandeis famously put it in “Olmstead v. United States”, is commonly associated with the right to privacy in the Fourth Amendment. The constitutional “[…] right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures […]” critically separates the spheres of life and wards off many dangers from the government. However, in a society so culturally diverse as ours, the right to be let alone takes on much greater significance than just separating the spheres between the individual and the state.

Bridges are not built overnight

A recent poll shows that Americans are divided on the role of culture in their society. Coming from Europe, the U.S. is undoubtedly a much more culturally diverse nation than most European countries, if not all. Unlike Switzerland, for example, Americans cannot rely on ethnic kinship for a shared identity. The U.S. is truly a nation of immigrants. The more surprising are the results of that poll showing that conservative and social-democratic opinions diverge in terms of fundamental cultural values.

If we accept the fact that culture matters, we also have to concede that foreign culture should have a place in our society.

Culture is a delicate issue. F.A. Hayek argued that culture matters and that it shouldn’t be denied in the political processes of a constitutional democracy, unless one wants to question the stability of a society. However, culture isn’t a rigid phenomenon either. The basic values of a society can change, and quite obviously, have done so significantly. Slavery, for example, once a shared value among many Americans and Europeans, was abolished in a justified fight against unjust values.

If we accept the fact that culture matters, we also have to concede that foreign culture should have a place in our society. This doesn’t mean, though, that people native to a country have to give up on their own values. Quite naturally, the burden of responsibility must rest on those who immigrate to a foreign culture. However, we shouldn’t expect that everyone is willing to assimilate entirely. And this is where the crux begins.

The “great society”, not government is the solution

Many bureaucrats think that seamless integration is simply a question of the right laws and forceful state mediation between two cultures. They assume that by designing sophisticated programs immigrants will necessarily start feeling as members of society. This is wrong, though. Hayek made clear that culture doesn’t work that way:

“[…] the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection – the comparative increase of population and wealth – of those groups that happened to follow them.”

(F. A. Hayek, in: W. W. Bartley, III (ed.), The Fatal Conceit, Vol. 1 of The Collected Works of F. A. Hayek, Chicago 1988, 6)

To put it in a nutshell, culture is omnipresent, it possesses a formative role in life like no other informal social institution. Cultural values are deeply embedded in social relations, parenting, education, and so forth, which is why we should never expect perfect assimilation from top-down integration programs, as sophisticated as they may be.

However, the market, unlike any other institution, has the power to create peaceful cooperation among people of different cultures. It creates opportunities for those who are willing to integrate and to accept the traditions of the local population. Even more importantly, the market discourages people from thinking in entitlements. The culture of dependency, created by the welfare state, has not only made millions of individuals depending but has also evoked antipathy for foreigners and their diverse values with which they arrive at our borders. As Donald Trump’s presidential campaign platform impressively showed, once the state has created the feeling of being left behind, politics quickly becomes an outlet for racial slurs and cultural defamation.

A government siding with one group of its population is highly problematic. In doing so, it does not only sow a lot of mistrust and resentment among those people with conflicting opinions but also conveys the belief that government is able to solve the problem, if necessary using force.

What remains for us to do then?

What then are the ideal conditions for the peaceful coexistence of people of a different cultural background? The German classical liberal economist and philosopher, Roland Baader, once said that there exists only one human right, the right to be let alone (“Das einzig wahre Menschenrecht ist das Recht, in Ruhe gelassen zu werden […]”). This is in fact how every human tribe started off before becoming part of a more involved society. Well, some groups, like the Amish people in the U.S. and Canada, believe in the fulfilled existence of remaining unaffected by unfamiliar values till this day.

Oftentimes, however, foregoing the opportunities of cooperation will cost those people dear. In his book “Living Economics”, Peter Boettke shows that there exist myriad institutions that allow people to engage actively with each other, while living peacefully side by side. It is these “organic” institutions of self-governance that have proven themselves valuable throughout the world and that have supported people in coming together and starting exchanging not only goods but eventually ideas and their cultural heritage.

However, to concede that culture matters, that of immigrants as much as ours, is the first step to recognize that peaceful community relies on everyone’s right to be let alone if he or she wishes to do so.

In a very biological sense, the right to be let alone gives us the time needed to prepare ourselves for the world outside of our “cultural backyard”. It is true that we will always have to accept that some people are not willing to become part of a more heterogenous society. As I said, this is their very right. And sometimes, we’ll even have to defend the principles of an open society against violent aggressors. However, to concede that culture matters, that of immigrants as much as ours, is the first step to recognize that peaceful community relies on everyone’s right to be let alone if he or she wishes to do so.

Published by The Libertarian Institute

Why Freedom Is Favored by Secession and Subsidiarity

Majority voting inevitably alienates large parts of a population. As a Swiss citizen, I am all too aware of that fact, since we go to the polls as often as six times a year. This may be the necessary price of our more direct form of representative democracy. But in Switzerland, it has also led to a degree of emotional turmoil due to conflicting visions for society.

Of course, the US has a similar problem. The election of Donald Trump has not only raised discussions about the workings of the electoral college but also about a possible exit of California from the union. Since a considerable 61.5%-majority of Californians voted for Hillary Clinton, some of them have deemed a separation to be a necessary response to a Trump presidency. Such a devolution of power is actually quite worthy of support.

Subsidiarity and the Right of Secession

For centuries, legal scholars have acknowledged the importance of the right of secession based on natural law. The German Calvinist Johannes Althusius argued in his Politica (1603) that citizens have a right to forswear allegiance to the king in the case of an abuse of power. He considered this right to be derived from the general right of resistance. To Althusius, secession was a vertical check on the power of the early European absolutist states, but also a recourse that should not be undertaken on a whim. To Althusius and others, secession remained ultima ratio, i.e., a last resort. First and foremost, the state should be organized from the bottom in accordance with the broader “principle of subsidiarity,” of which secession is a part.

Subsidiarity is a principle of social, political and economic organization. It comes from the Latin subsidium and means “support” or “reserve.” Subsidiarity holds that society is primarily based on self-determination and the individual responsibility of each person, his or her family, and private associations of individuals (cooperatives).

Subsidiarity is a principle of social, political and economic organization.

According to this principle, local government should be involved in solving problems only if private organizations are unable to resolve them on their own. If government at the local level is unable to do so, the regional government takes over or assists the local government. And finally, the central government or the king steps in if the federated states struggle to resolve it amongst themselves.

Any higher level of societal organization is subordinate to any lower level. The main advantage of a multi-level order is that individuals make decisions that most affect their lives. Delegated decisions are made as closely to the citizens as possible so they can oversee the process more easily.

Subsidiarity better facilitates a process of “trial and error” in which regulation and governance “compete” with each other in a liberal framework. As Hayek said in The Constitution of Liberty,

“It is this flexibility of voluntary rules which in the field of morals makes gradual evolution and spontaneous growth possible, which allows further experience to lead to modifications and improvements.”

Paths taken that turn out to be successful can thus be adopted by any other territorial entity or authority. Only this type of “political fragmentation” can preserve cultural diversity in the long run and lead to institutions, such as the competition of ideas, which ultimately serve individual freedom.

Althusius’s main insight was that the higher institutions should be required to rely on the consent of the more local levels and voluntary associations. Because the powers of the higher levels are derived from the consent of the people, the people must retain the ability to revoke that power whenever necessary.

Althusius’s views on political subsidiarity were quite radical for his time. Located in Emden, a German town at the crossroads of political and religious activity at that time, Althusius’s ideas should be interpreted in the light of the Calvinist Dutch Revolt against the Catholic King Philip II of Spain, which effectively ended in 1609 and resulted in the “Dutch Miracle,” a century-long period of economic, scientific, and cultural growth that helped lay the foundation for the rise of classical liberalism.

Two centuries later, these ideas found fertile ground on the North American continent with the revolt of the thirteen colonies against the British Crown. In 1848, Switzerland established a new constitution that also embodied the principle of subsidiarity, which remains in force to this day.

Unfortunately, the same people who are now in strong support of “CalExit” would probably think differently, if, say, Hillary was elected back in November. It also seems unlikely that they would be receptive to a declaration of secession by Northern California (which leans more Republican), or the city of Los Angeles. The irony in their opposition to such actions would likely escape them.

Human affairs should be entirely private. If government is going to be involved, autonomy at the local and state level should be as high as possible, meaning that all functions, excepting at most military defense, the supreme court and trade policy, should be pursued by local or state representatives.

Moreover, the tax system should be fully and exclusively devolved to the local and state level. Therefore, each state would be solely responsible for its revenues and expenditures. Only then would citizens have a reliable picture of the government’s service quality, and only then would they systemically be able to monitor the politicians in a sensible way.

Moreover, the tax system should be fully and exclusively devolved to the local and state level.

Whenever someone disagrees with a policy or the advocated values a political system implies, they can vote with their feet by leaving their present domicile. Regulatory and tax competition would ensure an attractive environment for each and everyone. To provide a last resort, and to circumvent any undue burden set on people willing to move away, the constitution should formally grant the right to secede from the union and/or the respective state.

Independence Throughout Europe

The great wave of nation-building in Europe during the 18th and 19th centuries is being reversed. Separatist movements are so common that we would easily run out of space if we attempted to describe all of them.

Consider the case of Spain. The “Reino de España” has seventeen autonomous regions. Each has ambitions to leave the Kingdom.

Many believe that secession is only practical for economically powerful regions. For example, California’s economic output has even surpassed that of France. Smaller territories can, however, successfully break away if the right policies are put in place. Indeed, a breakaway region’s lack of economic self-sufficiency is actually a benefit, because it would make a policy of free trade absolutely vital.

Such would be the case if, for example, Murcia, an autonomous region in southeast Spain, succeeded in separating from the Kingdom. The Murcians have many differences with the population in the rest of the country (not only from the Madrilenians in the capital city). For example, they have developed a dialect, much of which is derived from the Aragonese, the Catalan, and the Arabic language. Murcia is a comparatively poor region with an unemployment rate of over 25%. Without the benefit of a large economic hub like Barcelona in the Catalan area, the Murcian economy has lagged behind that of the Catalans.

According to the principle of subsidiarity, the Murcians should be allowed to set their own fiscal policy and respond to the Euro crisis in their own way. However, governments in Brussels and Madrid are the ones attempting to manage the economic recovery of Murcia. There is no guarantee that the arsenal of unorthodox monetary policies being employed by the European Central Bank will end well for the Murcians, even if it were to help other areas.

This is also true for the separatist Sardinians, the independence-seeking Scots, the Flemish Belgians, and the people in Veneto Italy, to name but a few.

Bad Incentives

Many people recoil at the idea of some regions permanently living at the expense of other regions. Economically strong regions have a strong incentive to break their commitments to less wealthy regions by seeking autonomy, and eventually formal secession.

In the German fiscal equalization system, for example, only four states out of sixteen and less than half of the German population foot the bill for the entire population. The originally unintended consequence of this perverse system of income redistribution is that the politicians in the taker states have no incentive to improve their policies, while the states that pay into the system, such as Bavaria, have little hope of voting against those policies or monitoring the spending process. Politicians can run unprofitable projects at the expense of the contributing states, such as the embarrassing Berlin Brandenburg airport, for which the cost has tripled to 6 billion euros. Unsurprisingly, the Bavarian separatist movement has gained traction in recent years, although it has also suffered setbacks in Germany’s Federal Constitutional Court.

Germany’s faulty system design is probably the main reason why chancellor Merkel has shown skepticism toward a Europe-wide “transfer union” that would benefit Southern European countries the most. Under such a system, citizens cannot expect the careful handling of tax money and incentives to engage in tax and regulatory competition are stifled, especially for those states who have to pay into the “solidarity pot.”

Challenges for Subsidiarity

The European Union has explicitly enshrined the principle of subsidiarity in its main agreement, the Treaty on European Union. Article 5 says:

“The use of Union competences is governed by the principles of subsidiarity and proportionality. […] Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

However nice the wording, the EU Commission can easily come up with any justification for the use of a non-exclusive competence. And even if they wanted to question the Commission, individuals, municipalities, and regions in member states would have difficulty satisfying the requirements for nullifying an EU law. Moreover, the European Court of Justice, financed and justified by the acts of the European Union, is well-known as the “motor of integration”. There is little to expect from the efficacy of the EU’s principle of subsidiarity, and looking at the numbers, there hasn’t been a single action brought forward by a member state or a private person so far.

Switzerland is hardly better in this respect. According to the Swiss Federal Supreme Court, the constitutional principle of subsidiarity (article 5a, 43a) is not enforceable. It’s only a political guiding principle in favor of strong federalism. However, Switzerland is far smaller in terms of size (less than 16,000 square miles) and population (8.4 million) than most European countries, let alone the supranational EU. Yet, the Swiss Confederation possesses three layers: the federal level, the 26 cantons, and the 2,300 municipalities. This system has developed historically, and given the cultural and linguistic diversity (German, French, Italian, and Romansh), it has served the country well in the past.

However, even Swiss federalism has been in decline. In 2016, the number of municipalities was down to 2,300 from 3,200 in 1848, when the Swiss federal state was founded. It’s mostly for economic reasons, such as cost savings, that municipalities have been merging faster than ever. However, these alleged cost savings are, to use Bastiat’s words, only the seen effects. The unseen effects include the loss of closeness to citizens and the increase in their rational apathy towards political commitment that could increase costs over the long run.

If cultural cohesion changes, we should not only allow communities to secede but also allow individuals to vote with his or her feet.

Unlike many outside observers, I doubt that we should credit the relatively small size of government in Switzerland to the more direct form of democracy alone. (If anything, it has also contributed to the expansion of the federal government lately.) Swiss limited government is, as Dan Mitchell also points out, mainly owed to the consistent implementation of the principle of subsidiarity, which has led to a relatively high degree of decentralization and sensible policies, such as the “debt brake” and cantonal tax competition.

Silver Lining Liechtenstein

The Principality of Liechtenstein is to my knowledge the only country in the world that recognizes a right of secession in its constitution (article 4 II). Prince Alois of Liechtenstein seems to be serious about the principle of subsidiarity:

“The fact that we have a right to secede in our constitution is a strong signal that the government can’t simply do as it pleases.”

The effective enforcement of the principle of subsidiarity is an important safeguard for freedom. Government should be backed by real consensus about the shared values of the community in which it operates. Britain and maybe California appear to be such cases in which the consensus has begun to crumble.

If cultural cohesion changes, we should not only allow communities to secede but also allow individuals to vote with his or her feet. In today’s rapidly changing world, it is more important than ever that people should be as free as possible to choose the rules and rulers governing them.

Published on Fee.org

The War Against Cash in Europe

There are good reasons why the debate on cash is heating up right now.

While European governments and central banks have stepped up capital controls in the last few years, cash has become the major hurdle for conventional monetary policy. Therefore, many economists, as well as a number of high-ranking government officials, have presented and reiterated their arguments in favor of the abolition of cash virtually at every opportunity.

Although most European citizens do not approve further restrictions on cash, the outcome of the political debate is open.

The use of cash in Europe

The political reasoning for a ‘European’ war on cash is based on an ideological mindset that is identical to what is heard across the Atlantic. What is different, however, is the popularity of the use of cash, which also differs from country to country within Europe.

Unlike the Scandinavians, who have largely moved to a cashless society, other countries still prefer to keep their notes and coins. Recent surveys show that over 70% of the German population opposes further restrictions on cash. Switzerland’s National Bank has announced that it will not follow other countries’ example of phasing out what is the world’s highest denominated bill (in terms of exchange rate value), the 1,000 Swiss franc note.

People’s attitude towards cash appears to be influenced by the cultural context of a nation. Germans, for example, have faced at least four monetary reforms in the last 100 years. The great hyperinflation in the 1920s must have left marks in the Germans’ consciousness.

Unlike the German currencies, the Swiss franc has never experienced monetary instability of comparable scale. It is rather the general suspicion toward government power that has led the Swiss to take a conservative stance towards cash.

Today, and especially after 9/11, restrictions on cash have increased exponentially.

Denmark and Sweden are at the complete opposite. These countries have officially passed legislation in order to discontinue cash step-by-step. The largest Scandinavian banks have recently stopped allowing cash withdrawals in most branches. Moreover, the financial industry has actively encouraged regulation limiting cash use in daily transactions in the name of fighting crooks and protecting the environment. Finally, Danish law leaves the decision whether to accept cash or not to the providers of goods and services; as of this year, clothing stores, restaurants, and gas stations are allowed to turn away customers who cannot pay electronically. It is literally a Scandinavian war against cash that has taken place in the last decade.

Internationally, initiatives against cash reflect the current interconnectedness of financial markets.

The emergence of a globalized financial system led to the regulation of cross-border payment transactions and capital flows. The original intent was to make it harder for criminals to channel in money that originated from crime. Regulation of cash deposits and withdrawals at banks was initiated as early as in the 1970s in the USA and in the 1980s and 1990s in Europe.

Today, and especially after 9/11, restrictions on cash have increased exponentially.

Most legislation is supposed to prevent money laundering and terrorist financing. However plausible these reasons are, they have also been blatantly misused in the war on cash. Since the European Union is competent in the field of anti-money laundering regulation, there has been great effort to harmonize national laws. The EU finance ministers have recently called the EU commission “to explore the need for appropriate restrictions on cash payments exceeding certain thresholds” throughout the Union, and, to the same effect, the European Central bank has announced its willingness to “examine the consequences of phasing out” the 500 euro banknote.

Despite this political agenda and its questionable implementation, many countries of the Eurozone have already put in place strict measures: The French government tightened restrictions on cash payments and intensified monitoring of high-value withdrawals after the latest Paris terrorist attacks; the upper payment limit was lowered to 1,000 euros. Italy recently went back to its former limit of 3,000 euros. Payments exceeding these amounts must be executed through a licensed bank.

While extending the scope of the anti-money laundering statute to non-financial intermediaries, even Switzerland now regulates transactions over 100,000 Swiss francs. Yet, it is unlikely that the political intention is to stop discriminating cash users at some point but rather to incrementally reduce the allowed transaction limits, and eventually, to discontinue the use of cash entirely.

The government’s need for cashless finance and its fallacy

Following the meltdown of the financial system in 2008, governments collaborated with the financial industry by bailing out large banks in an unprecedented way. As a consequence, public debt levels have surged. At the same time, interest rates are at the lowest possible, approaching zero.

We have reached a point in the fiat money system where even unorthodox monetary measures, such as ‘quantitative easing’ or ‘helicopter drops’, have missed their official goal of stimulating the economy. Newly printed money has barely been going into real capital production, but it has rather been inflating asset prices; instead of investing in new products and services, many businesses have recapitalized on better terms, performed buybacks or paid out dividends to their shareholders.

This is a good thing for banks because they are relieved from servicing “toxic assets;” however, such a monetary policy is not able to boost the economy in a sustainable manner. This is where cash comes in: Cash has become a real drawback according to mainstream economic theory. It limits the central bank’s ability to reduce short-term (nominal) interest rates below zero.

According to the concept of “zero lower bound”, if interest rates drop into negative, bank account holders are encouraged to withdraw their savings and keep them as cash. Given that cash does not pay any interest, it is still better to hoard cash under the mattress than to leave it in the bank where it is charged negative interest or a fee. If falling rates exceed the costs of holding cash at home or in a safe deposit box, people will withdraw en masse.

It is obvious that banning cash would not build up confidence in the current system, but rather destroy the last bit of it, as recent data on growing cash circulation in the Eurozone, Switzerland and the UK indicate. The problem about this is that the viability of certain fiat currencies genuinely depends on substantial cash restrictions.

If cash were abolished, any fiscal or monetary policy would be enforceable in the short run.

A little bit of tapering might be bearable for the US dollar, if interest rates return to pre-crisis levels. However, it will not be the case for the Eurozone and would provoke the exit of a member country. It is therefore essential to certain European countries (and to the EU itself) to increase the degree of financial repression in order to refinance their debts and deficits at the expense of the public.

If cash were abolished, any fiscal or monetary policy would be enforceable in the short run: Increasing negative interest would force bank account holders to spend their money or to invest it in riskier assets, such as bonds or stocks. Despite the disastrous effects on the economy, such as malinvestment, outright confiscation of wealth would hit account holders even harder: In a system where all money is electronic, bail-ins, capital levies, or seizures could be imposed on bank customers without them having the slightest chance to avoid those controls. It is obvious, though, that such a policy would pervert the original purpose of money, which is above all to securely store value.

Proponents of anti-cash policies too often forget the non-coercive character of money. Describing its emergence, the great Austrian economist Carl Menger points to the fact that “[c]ertain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state” (Principles of Economics, 1871, Auburn [2007], 262). In other words, banning physical cash would simply lead to the emergence of alternative means of payment that would outcompete official tender. A lot of people would start using near-money substitutes, such as gold or silver, or whatever commodity facilitates the exchange of goods and services instead. Ignoring this fact shows us how little mainstream economists know about the origin of money and how much they overestimate the validity of their policy advice.

Cash from the perspective of the individual person

Actually, there are good reasons to oppose fiat currencies. They are inherently flawed due to a lack of competition. However, when it comes to the physical manifestation of fiat money, i.e. cash, there is a need to differentiate. In the existing context, cash truly means freedom, at least in the sense of less state control or more options to choose from.

Let us have a look at recent examples in Europe: Greeks have experienced far-reaching restrictions on cash withdrawals at the peak of the debt crisis, bank customers’ deposits in Cyprus were bailed in up to 50 percent in March 2013, and Italian and Portuguese bondholders have been forced to acquire stocks of insolvent banks for the last two years. These are all too familiar stories in Europe today; financial repression seems to be the political panacea to overcome the consequences of preceding government failure.

The abolition of cash would represent the logical next step in a series of detrimental government interventions. Yet, it would never justify such an extensive infringement of personal liberties.
When it comes to creeping state control, it is no surprise that certain European countries, such as France, are at the forefront. An electronic world would be far easier to both tax and control. Such a narrow view on the issue of tax evasion, however, completely ignores the root causes for tax evasion in the first place. Furthermore, the abolition of cash might reduce the black market economy at first, however it would just be a question of time until black markets would thrive even more.

Cash does not only mean privacy towards state agencies, but also towards data gathering companies. In other words, the end of cash is also the end of privacy. A cashless society would give governments and businesses access to information and power over citizens in an unprecedented manner.

Considering the ubiquity of money in our society, no sphere of life would be left untouched. Physical cash offers a fallback option for the time governments become prohibitive or electronic systems break down; cash literally offers insurance to its owner and thereby protects him or her from the loss of freedom and property. Cash is said to be inefficient and primitive; however, anti-money laundering regulation has artificially increased costs for merchants who prefer cash. In a market economy it is not up to the banks (or the government) to decide on the means of payment, but to the consumer. And let us not forget: Cash is especially valuable to the billions of people who are unbanked or underbanked worldwide.

Cash is no end in itself, but rather the indispensable means to exercise basic rights.

Finally, cash embodies the value of unconditionality. Cash is basically not dependent on a third-person or a private contract. It is not contingent on the solvency of banks or the effectiveness of the financial system. Unlike bank money, cash transactions are immediately cleared and settled. The same is true for bitcoin, which is why the cryptocurrency is called electronic cash. There is one but significant reservation to the principle of unconditionality: Cash remains dependent on the solvency of its issuer, the government.

The idea of an outright ban may seem far-fetched to some of us; however, the longer the interest rates stay low or negative, and the longer the economy does not get off the ground, the sooner unthinkable proposals could be argued as being without any alternative.

Cash is no end in itself, but rather the indispensable means to exercise basic rights. Even if it were possible that hardly anything changed in a cashless society, the abolition of cash would de facto prejudice human behavior.

Cash is not about illicit activities, but enabling a lifestyle that does not harm others. Fyodor Dostoyevsky wrote in 19th century-Russia that “money is coined freedom;” today, we would probably correct him: Cash is coined freedom.

Published in the Cayman Financial Review