#146 Power Corrupts

By D. Arnott | November 3, 2022
the christian economist dave arnott

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#146 Power Corrupts 

One-party rule threatens the power structure as well as the economy, not only within the United States, but China, and the rest of the world as well.

 

In a letter to Bishop Mandell Creighton, Lord Acton wrote, “Power tends to corrupt, and absolute power corrupts absolutely.”  He was writing about Pope Pius the ninth in 1868.  The Pope had rigged the vote to determine his infallibility.  Ok, you’re welcome to notice the irony: He cheated to prove he was not capable of cheating.  

His full name was Sir John Dalberg-Acton, which is a mouthful, so we’re thankful that most of the time, we just call him “Lord Acton.”  He was a mid-19th century polymath.  He studied many subjects and was highly respected.  My generation recalls the very effective TV ads for an investment firm, “When EF Hutton talks, people listen.”  That was true of Lord Acton.  He was listened to, in his home country of England, but also on the continent, and in the United States.  In the book by Gertrude Himmelfarb, she writes, “A familiar description of Action was that he was the most erudite man of his times. …..his friends said he was the nearest thing to omniscience they have ever seen.”

His namesake think tank in Grand Rapids, MI, today is the best source of Christian economics information in the world.  I attend the Acton Institute every summer, I read their books, and my Dallas Baptist University students just watched their series of videos titled Poverty Cure for extra credit last week. 

 

The Chinese Communist Party

Acton’s famous quote was ringing in my head this week when I read multiple news stories, explaining how Chinese president Xi Jinpeng was taking greater control of his country.  

In an article titled, “China’s Xi Jinpeng Moves to Extend Rule as Top Communist Party Rivals Retire,” The Wall Street Journal reported this week, “China’s Communist Party set the stage for its leader, Xi Jinping, to extend his rule into a second decade, nudging his rivals into retirement and positioning his loyalists for promotion into the top echelons of power.”

Delegates to the once in five-years Chinese Communist party congress recently reaffirmed President Xi’s role as the party’s single leader and enshrined his policies as part of the party’s governing charter.”  One of my favorite sayings in my DBU econ class is, “You can change economic policy, but you can’t change economic law.”  The Chinese are about to find out that their leader’s policies are not perfect.  

Mr. Xi recently used his political muscle to take a third term as general secretary, breaking from the 10-year leadership cycle that his predecessor had set.  He has not designated any potential successors, since doing so would undermine his own authority.  This should give Americans pause, because of the remarkable similarity to President Biden’s unwillingness to appoint a party successor at his advanced age of 79.  It also shows us the corruption that occurs with one-party rule in America.   

 

 One Party Rule in the US

Lord Acton again, “Socrates urged men to submit all questions to the judgment of reason and conscience, and to ignore the verdict of authority, majority or custom.”  Cancel culture in America is waging against reason.  Clearly, the person who shouts the loudest is heard.  Conservative speakers are shouted down at universities.  Recently the nomination of Nebraska Senator Ben Sasse as a potential candidate for President of The University of Florida drew loud protests.  Mike Pence made a presentation at Georgetown sponsored by the Young Americans for Freedom organization, and protestors tried to shout him down. 

Democrat control of both houses of congress and the Presidency has produced 40 -year record inflation, something I predicted in podcast #101 titled Inflating Inflation.  There is a frightening crime wave in major cities, and the greatest migration of people in the history of the known world across the US southern border.  At the date I’m recording this, the Biden administration seems to be unaware of any of these problems.  The President said this week, “Inflation is not so bad.”  Vice President Kamala Harris continues to tell us, “The border is secure.”  

This is fascinating: We fully expect this kind of top-down decision-making in an authoritarian society like China, but it’s disappointing when it occurs in a Federal Republican form of Democracy like the United States.  There are threats to pack the Supreme Court, and add Puerto Rico and Washington DC as new states, in an attempt to control the Senate.  The founders were worried about this.  They called it The Tyranny of the majority.  

 

Loss of Economic Freedom

I have stated that the ONE thing that separates rich from poor countries is Policies that Promote Production.  It’s the title of podcast #27.  Ok, so what’s the best measure of that?  It’s the Index of Economic Freedom found at Heritage.org.  Here’s the summary of their report this year, “The US is suffering, as the Biden administration has implemented policies undermining economic freedom, encouraging lockdowns, and sparking historic inflation.”  The report continues, “With declines in half of the 12 categories of economic freedom measured by the index, the US dropped from a high of fourth place in 1995 to 25th place, its lowest ranking to date.”  While declines in half the measures are discouraging, there is one number that stands out.  Take a look:  The rule of law scores are good: 95, 77, 75.  Regulatory efficiency is ok: 87, 75, and 82.  Government size: 75, 54, and hold it:  Fiscal health is ZERO!?  Zero.  Okay, fiscal policies are taxing and spending.  That means the US fiscal policy, as enacted by the single party rule of the current Democrat administration is zero.  It can’t get lower.  Think about it: The richest country in the world has the lowest score in fiscal policy.  Remember, fiscal policy is government policy.  Halfway through this podcast, I’m beginning to think I may have “buried the lead,” as they say in journalism.  Ok, this one data point deserves its own podcast.  Stay tuned, I will get to it as soon as I can. 

In the meantime, I need to point out how we got here.  

 

The Problem is Us

Are we Made Good? is the title of podcast #78.  The conclusion is: We are NOT made good.   Here’s what Lord Acton would have to say about that, “The danger is not that a particular class is unfit to govern.  Every class is unfit to govern.”  Jean Jacque Rousseau assumed we are born good, and society makes us bad.  Christians believe the opposite: That we are born bad and can be made better by the acceptance of salvation through Jesus Christ.  

Agnostic Jew, David Horowitz explains it this way in his book Dark Agenda: The War to Destroy Christian America, “The big problem we face in the world is us. And I think every Christian knows that. That we are sinners, that one of the protestant ideas is salvation by faith. We are so flawed in our beings, so prone to sin and temptation, that none of us deserves to get to heaven and that we can only get there by divine grace. It’s a very profound idea” 

This agnostic Jew may understand the Christian worldview better than many Christians. Horowitz continues, “Why do we have a system of checks and balances? Because the founders didn’t trust the people, they felt they had to be restrained”. You cannot understand economics without understanding the fallen nature of humans. 

The fall. You cannot understand economics separate from the fall. If people are not fallen, there is no scarcity, and there is no economics.  Milton Friedman said that most economic myths stem from a mis-understanding of the zero-sum fallacy.  But Friedman was an atheist and I’m a Christian.  So my phrase is: “Most economic myths stem from a denial of the fallen nature.”  Without the fall, there is no scarcity. Without scarcity, there is no economics. You have to understand the fall to understand economics

 

Powell Catches the Fiscal Bus

That’s a headline from the Wall Street Journal that I mentioned in podcast #62, titled The End of Fed Independence.  It explains how Fed Chairman Jerome Powell’s policies are in line with fiscal policies.  More evidence has emerged since I wrote that podcast.  Here’s a little diagram of the Fed’s interest rates.  When I showed this in class recently, the students actually laughed out loud.  Missing on the left side of the diagram is the eight years of the Obama administration, where the interest rate was kept near zero.  That’s rather hard to explain in economics terms, and they even had to re-write economics and finance textbooks.  My book, by Gregory Mankiw used to read, “You cannot have negative interest rates.”  It now reads, “You can only have negative interest rates in the short term.”  Really.  Explain to a bunch of sophomores how people were paid to take money.  That really WAS the policy of the European, Norwegian, and Japanese central banks.  In the US, it didn’t get negative, but it basically remained at zero for the eight years of the Obama administration.  So, money was free…..of interest that is.  That’s pretty hard to explain to sophomores, and everyone else, to tell you truth!  I don’t think that’s ever existed in human history: Money was loaned at basically a zero interest rate for eight years.  Then you see in this diagram, what could be called “The Trump Bump,” although that phrase is often used to explain voting, so I’ll create my own term, “Mount Trump.”  There it is, right in front of you.  The interest rate heads up after he was elected in 2016, then severely drops off in 2020.  That move was NOT political, by the way.  That was the beginning of the COVID pandemic.  

There are two entities who can act on our economy: The government with fiscal policy and the Federal Reserve Bank with monetary policy.  In recent years, both have been corrupted by one party rule.  

As Lord Acton said “Power corrupts, and conscience redeems.  History is a tug-of-war between the two, with tyranny and freedom as the outcomes.”

 

FEAR GOD,
TELL THE TRUTH,
EARN A PROFIT.

 

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