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SOVEREIGN MAN

Why you should be excited about national bankruptcy

Toll Road Booth

June 7, 2012
New York City

One of the great absurdities of our modern financial system is that a nation living within its means, i.e. spending less than what it confiscates in tax revenue, is no longer the norm.

Living within your means is now considered ‘austerity’. And unfair.

Whether in the UK, Europe, or North America, many voters have become so accustomed to the government’s massive role in the economy, they can’t begin to imagine how it could be scaled back.

You usually hear heavy objections from people like– “What about roads? If we start cutting budgets, there would be no more roads!”

The ‘road argument’ is one of the most widely misused defenses of government… as if there are no private roads in the world.

Chile comes to mind as a great example– the country’s very modern toll-based highway system is privatized, and the operators have a huge profit incentive to keep the roads in top condition.

In fact, the 2 1/2 hour ride from Santiago to our farm is along one of these roads, and it’s smooth sailing the whole way.

A few years ago when Chile had its major earthquake, portions of the highway system were damaged. This meant that the operators were missing out on toll revenue… so they found a solution and were back up and running in a matter of days.

It was amazing how fast they were able to pull it off when so much of their profit was at stake.

When you think about it, just about everything that government provides either is already, or could be, provided by the private sector. That there is presently a private vessel docked at the International Space Station in Low Earth Orbit is the finest testament to this concept.

SpaceX has twice succeeded in launching a vessel into space in its 10-year history with a total of just $1 billion in funding, averaging to $100 million each year… roughly 5.6% of  NASA’s massive budget.

Then there are things like the court system… where the wheels of injustice grind away at such a pedestrian pace that it can take years for a case to even be heard, let alone resolved.

Enter 21st century technology: there’s a relatively new service called Judge.Me, an online arbitration service whose decisions are legally binding in 146 countries, from Afghanistan to Zimbabwe… and yes, including the US, Canada, and Western Europe.

At just $299, disputes can be settled in a matter of days, and the firm’s case history shows that 96% of all arbitration awards have been honored.

This is the sort of thing that makes me very excited– the private sector displacing the public sector. And there’s going to be a lot more of it coming.

The more insolvent governments become, the more they’re going to be forced to axe all the things they can’t afford. We’re already starting to see this in places from California to England that can no longer hide from their fiscal reality.

With the government monopoly out of the way, the private sector will mop up every service that it can turn a profit on– trash collection, security, fire, prisons, libraries, etc. This forces competition, higher quality service, and lower prices for everyone.

The people who protest against austerity, or think it’s a tragedy when a courthouse closes down due to budget constraints, are really missing the larger point: the sooner this corrupt house of cards collapses, the better off we’ll all be.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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  • tfsteven

    Well this is all well and good in libertarian theory-land, but what about the main driver of our current and future deficits: a huge wave of old people living into their 80s and beyond? Is there a profit motive for private businesses to sustain the health care we’re used to providing our Oldsters without taxpayer funding and government regulation? Of course not. If there is a profit motive, it runs the other way toward taking health care away from old people, all of which have the profit-killing preexisting condition of being OLD. This is where the profit motive runs headlong into morality and our values as a people: we’ve made promises to Gramma and her generation that we must keep, and its going to bankrupt us. Health care for Oldsters is responsible for most of our debt. Where’s your free market solution?

    • crazy libertarian

      When I read comments like this from tfsteven I realize just how intellectually lazy people are. I’ll assume you’re not stupid. Basically you thought for all of 10 seconds about the article and then concluded that since “WE” (meaning government) promised money to old people, then therefore this fraudulent and coercive system must continue because “profit motive runs headlong into morality and our values as a people” Makes sense to me… just keep stealing more from the fewer younger tax payers to an increasing number of dependents. Why wouldn’t you take a little while and actually think about more creative and sustainable solutions and perhaps do a  google search. I guarantee you there are far better ideas out there. Instead you just smugly reply some horseshit about crazy libertarian theory? You should read Simon’s article from yesterday about the word “We”, because what you are saying is a huge pile of collectivist crap. 

    • Harbl The Cat

      I say let Oldster’s worry about it.  

      As a 29 year old, it’s not my responsibility to provide health care to old people I’ve never met.  They’ve had their entire life to work for, save up, and prepare for their pre-existing condition of being old.  I’ve never made any promise to any old person about anything, especially about public health care.  

      The government did.

      The old people you talk about put their trust in the government and the government failed them – how exactly is it my fault or responsibility?The Boomers especially had a 40 year debt fueled party, and if you want to talk about morality, tell me how moral it is for the Boomers to have racked up a huge debt to pay for wars and social programs, and given the bill to the next 3 generations?I say Grandma and Grandpa who need a hip replacement should sell their house, cash in their retirement savings and take responsibility for their own lives instead of begging the government to force that responsibility on others.

    • K.

      I didn’t make promises. Grandma’s generation made promises to themselves and strapped it onto our backs to pay for. I was listening to some of my elderly relatives talking recently about healthcare. One person’s medicines cost thousands of dollars a month. My family doesn’t BRING HOME (you know after taxes) enough to pay for the medicines of ONE of my elderly relatives and they outnumber the number of us that are in the workforce generation.

      The promises I have made to MY family is that I will always be here with a roof, 3 squares and grandkids or great grandkids crawling in their laps with hugs and kisses. If I had a golden goose I would give them the world, but I don’t. 

    • Capitalist

      So what you’re saying is that your utopia has bankrupted masses of old people and now you can’t figure out how the free market would possibly deal with that, thus evidence of it’s failings?  You were right in calling it “theory-land” because your friends have never given the free market a chance.  So don’t sit here and say that because you’ve already destroyed millions of lives (and livelihoods) that the free market won’t work.  If you steal an apple from your neighbor and eat it, you may be unable to give it back, but that doesn’t mean that the proper way forward is to continue stealing his apples.

      By the way, one answer is to slowly begin raising the age of benefits.  Slowly wean people off the Government Teat.

    • Kelm

      Yours is the classic liberal response: this is a “morality problem” (in YOUR eyes) which, therefore, we ALL must fix (because we should all think like you do).  If you’re so concerned, how about YOU send in your money and donate your time to address the problem?  Or, alternatively, propose a solution that doesn’t consist of forcing OTHER PEOPLE to have their money taken away by the government, via taxation, to carry out YOUR ideas of morality?  We all care about our elderly.  How we go about doing it can and does vary.  I, for one, am NOT counting on government or company pensions to help. Whatever did folks do before social security?!  What do they do in most countries around the world today (most of which have people who live longer in them than in the U.S.)?

      How is it that you bash the commonsense, realistic solution Black describes (which is inevitable, anyway), and have nothing to say about the current, corrupt and failing system in place today?  How’s that working for us?  You know, the tax others, promise-the-world-to-buy-votes, and build the debt on future generations’ backs, model? 

      Think, man.  Think!

  • Gavin

    Simon, it sounds like Chile may be incredibly Libertarian.  Do you think being ranked only #7 on this list is unfair?: http://www.heritage.org/index/ranking 

    • Mises’ Ghost

       I looked up the US on that site, and I noticed something. They have listed: “Fiscal freedom”, “monetary freedom” and “financial freedom”. Personally I wouldn’t consider any of their results to be particularly valid, the whole thing seems incredibly subjective to me. I wouldn’t have put the US under the top 10 under any circumstances (given that it’s bankrupt, the divorce laws, lack of personal freedom, state sponsored ponzi financial system and so on).

  • Kelm

    …Oh, and as far as ‘the free market solution to health care,’ try the following tried and true methods (or a combination, thereof):

    1.  Take government out of healthcare (costs will go down by between 60-90%, per other public-to-private moves, like the airline industry, mail, rail transport, space travel, etc.);
    2.  Incent competition – family-owned businesses, where families put up and care for the elderly, involving them (as they should be) in their own day-to-day lives (playing with kids, teaching, etc.), until they require bedside assistance, etc. (The problem today is government regulations – those designed to prevent the very kinds of horrible conditions most of our state-operated care facilities provide today). 
    3.  Family responsibility – who better to take care of the elderly than their own families.  Only in the past 80 years or so (even here in the U.S.) has it become somehow important that the elderly are sent off to “retirement communities” to wither and die.  How humane.  How responsible…  Not.

    And what’s the liberal / conservative solution?  Tax the populace and provide government-funded, regulated (think SEC “watch-dogs” watching porn on our nickel, as Wall St. and government break laws daily), and operated “care?”  No thank you.  Too expensive.  Too inhumane.  Too corrupt.  Too incompetent.

  • Steve Hanley

    God, I wish I could acknowledge this to about the 20 power! Right on!

  • mark

    maybe in a perfect world but you are assuming that private sector is your small corporations LLC’s not the big mega bank conglomerates or their subsidiaries that will own most everything shutting out the small business person therby creating a monopoly  and being in bed with govt. and basically being Facism! I agree that it would be nice if I could get a maintenance contract to maintain a city’s streetlights being a city worker currently and doing that work. I see it being contracted out soon

  • http://www.bzemic.com/impossibleInstinct/ steve ward

    first are you following me around simon because i remind commenting on the roads yesterday lol, hmm the toll is a great idea as long as your not paying taxes on it as well

  • Sytallix

    Should every section of the gov be outsourced to the private sector?  Is it wise to have private, for-profit prisons? Or a for-profit police force?  Won’t we just see special interests from these sectors pushing for new laws, and longer prison sentences?

    • http://pulse.yahoo.com/_KVRYU4KN4OLOL3IEMHGPZTAUUM John

      Try reading the Constitution–the actual CONSTITUTION–not some liberal annotated version of it.  It was written in plain English, and each and every phrase was extensively debated.  The main problem is that succeeding generations of Lawyers, and judges, have weasel worded ways around the original meaning of the Constitution.
      There are certain things that are specifically Federal Government Powers, and specific things prohibited.
      The states can do pretty much what ever they want to do, but you have to remember, that in the states, you know where they live, and if it is that bad, you can go pound the windows out of their house.

      • Sytallix

         I don’t live in the US, nor am I American, so my understanding of the constitution is limited.  The reason why i said what I said is because here in the UK our police force is being privatized in some areas.

      • mgroup

        I’m thinking it’s must be balanced. It’s all the same when you think about it. Let’s bring Jim Crow laws back to the states but make it private.

    • Smokey_bear

       We do have privately run prisons now

    • TGL

      There are already ‘for profit’ prisons and they do very well.

    • Mises’ Ghost

       The current “private prisons” still rely on taxpayer dollars and crooked judges to send them labor. Mostly it’s just a giant embezzlement scheme.

      Consider this: if you were paying a monthly bill to some security company, and they screwed you over like the US system does, would you continue paying them? That should answer any questions you might have about how corruption will be dealt with.

  • AbolishTheNWO

    Your point is great in theory, but you must take into account the continuity of government plans that have been planned for implementation after the collapse. Private mercenaries, foreign troops and drones just to name a few perils. Oh yeah, don’t forget the reeducation camps that are now admitted by the US Army.

    • Agar

      That’s right- and who will do the chemtrail spraying or put flouride poison in the water?

  • http://pulse.yahoo.com/_KVRYU4KN4OLOL3IEMHGPZTAUUM John

    I’d love to have been able to use JUDGE ME, instead of the lawyer infested US court system.  I had trouble even finding a lawyer who had not already represented the proposed “defendant”.
    He screwed around for another 5 years stonewalling me, and changing lawyers, until he found one sleezy enough to figure out that since I only had estimates to repair what he had failed to do, I had no “damages” I could prove.  I work in the insurance business.  We routinely pay “estimates”. The guy could have made his brother, the installer, do the labor according to manufacturer’s instructions, and the wholesale cost of materials would have been under $2,000, and had a satisfied customer.  Instead, he chose to fight–changing lawyers 3 times.  I don’t know what his legal fees were, but it cost me $7,000.  Less than a year later, they went bankrupt.  While I was seeking estimates to repair my problems, competing dealers were not at all shy about telling me that they were not at all surprised about my experience with them, but they had either worked with him, or repaired things he had done.  Not only would they not have hired him as a salesman, they would not even talk to his brother as an installer.

  • Danny

    What about the bankrupcy that we are still living under from 1933 ?

  • Mccwin

    Speaking of bankruptcy!  The concept should be applied to any and all, of what I call, “Ponzi Scheme companies” that are allowed to file bankruptcies at the drop of a hat and then a judge, selects his lawyer friends to handle it and as you know, usually mutiple law firms, who take months and years to allegedly settle the bankrupty, only after they have ‘milked’ most of the money to put in their pockets.  “Yeah, a great system, for the attorneys!  Anyway, who cares about the investors, they just put their money up for these vultures to make a great living taking what the bad managements missed in their original plan’  And, the judges who allow it, or just as bad!

  • Jerci6

    This is pretty exciting stuff.  How does one learn more?  I am curious as to what motivated the road managers in Chile to repair them so quickly and efficiently for example.  Why are governments in the United States not moving forward quicker on this.  It sounds like exactly what we have been seeking.

  • Glen

    i.e. spending less than what it confiscates in, There  is  no  law you  have  to  pay  income  tax  ask the IRS for proof

  • HonestLogic

    I support the idea of smaller government and privatization. Would you support privatization of regulation? (…Might be an interesting field for out-of-work attorneys.) That points to my biggest concern: While we periodically see corruption in government, there’s an even greater history of blatant lack of ethics and doing what’s best for profit rather than what’s best for the common good when businesses enter the arena. Little attention seems to be given to this issue. And would farmers — and others — in rural America risk going out of business either because the cost of tolls per capita to maintain their less-traveled roads is too exorbitant or just don’t justify maintenance due to lack of profit potential by those companies that maintain roads?

  • Wk Moss

    This article is nice if it really worked in the USA.  Why is it that Chicago turned their parking meters over to a private company, but had to guarantee income in the event of a snow storm and traffic to the city is limited or there is no income if there is construction on the street?  Or if a prison is turned over to a private company and the state or county has to guarantee a certain occupancy?  Private in the USA is not really private.  

  • Smokey_bear

    If you search the FBI reports, I think you will find that our judicial system has less than 10% accuracy overall.  My research found this is due to misconduct, mostly by judges and lawyers.  Corruption leads to higher profits than truth.

  • ForrestByers

    I am all in favor of the total collapse of government monopoly and the reintroduction of personal liberty and freedom.  For those who insist on a continuation of the old monopoly system, I say, quit being lazy, sit down, and started use your brains, using creativity and imagination for all the various ways, that human beings might make a profit from one another. As you write down your list, you might take note of the beginning riffs of swelling patriotism which denotes the legacy of our forefathers.

  • Jpowell1116

    (1) However, government taxes are not likely to go down.  So private sector costs of running previously government operations results in incremental new extra costs.  (2) Private sector has a consistent track record of continuously raising prices on services to make more profits.  So fees today will be more tomorrow. n There are no shortages of examples.  There’s no bargain happening by privatizing, none at all.    

  • Btothester

          Privatization is great IF you have ethical business men and women running the companies providing all of these services. This article is a nice thought in an America that was. Many of the founding fathers espoused the sentiment that our nation, our government, our Constitution, and capitalism itself will not and do not function without a virtuous people behind it. They saw these things as uplifting actually because they were supported and run by a good and altruistic people.
          As Americans we are becoming increasingly selfish, and do not help or think of our fellow men/women as better than ourselves. No social/governmental system historical or current can be sustained by a people like ours. And that goes for our current government and economy or ANY economy we could propose.

  • verec

    You are so confused.

    Will you EVER understand the difference between price and value?

  • Charlotte

    This is the only place I could find to leave a comment and I was furious at the allegation in the “If Obama Wins” article that SS is part of a Welfare State.  This program has been robbed for years by politicians.  Give me back the money I put in with the interest that I would have earned and I’ll make it work.  Do not imply or tell me and millions of others that were forced to contributed weekly to SS that we’re welfare people or aren’t entitled to our money.  You just hit a major hot button with this one!  I’m personally tired of hearing that SS is part of the problem or welfare money.

    • Debrajane

      Our greedy government passed laws where it could borrow from the funds of the Social Security System. Our government now owes the Social Security system three trillion dollars. Do you think our government intends to pay the Social Security System back? Hell no! They are deliberately trying to brain wash most Americans into believing Social Security is a handout to people who believe they are entitled to something they don’t really deserve. Those of us who have paid into the Social Security System all our lives feel that we are entitled to receive the benefits we have earned and paid for, but our government is trying to make people believe Social Security is welfare for the elderly or disabled; and it is not! They are trying to blame payouts of Social Security for the financial condition this country is in, which has nothing to do with our government’s inability to handle money.

      Our government passed laws that allowed immigrants that came to this country late in life, and to be eligible to draw social security benefits wether they ever paid into the system or not. A U.S. citizen, that was born and raised here, has to earn 40 credits before they can draw from Social Security at age 62. If they haven’t earned those credits then they can’t draw a dime, but an migrant can; even though they didn’t earn it. Then our government passed laws allowing illegal immigrants to draw, wether they can qualify or not. They passed both of these laws after they knew the Social Security System was in financial trouble. Who put them in financial trouble? Our government did, by borrowing and borrowing from the fund to the tune of three trillion dollars, and not paying it back. Now they would like to bankrupt the fund, so they NEVER have to pay it back!

      • John Galt

        I wonder if those ‘paying into the system’ have ever taken the time to do a calculation for what they’ve contributed and what it is worth at retirement.

        Hint: It is less than you think and less they you will end up collecting when all is said an done.

        I’ll do a little bit of remedial math for you folks of the Entitlement Generation:
        Assume starting salary 40 years ago was $35,000 (Yes, this is an enormous number for that time, but I am being generous assuming said participant was an above average college graduate with an extraordinary opportunity.) Assume the SS tax rate was 5% (No, it wasn’t even close to that amount back then, but this is just an exercise.) Assume said employee was entitled to 3% annual cost of living salary increase (No, that isn’t likely, but let’s give the person in question the benefit of the doubt.) Take that starting salary, multiply the 5% tax rate designated for Social Security and year one is $1,750. Things are looking good. Sadly, though reality sets in and in 40 years that person would have earned in total a mere $2.6 million and contributed only $131,952 to the program. Assuming mortality rates remaining consistent, there is at least 15 years with which to survive on that amount which equates $8,796 annual income, or $733 monthly income.

        Feel free to throw in some other manageable numbers to boost the total greater, but what you’ll come to realize using this cost-of-living calculation, the employee would have been earning $110,000 in his/her final year of employment, which is beyond reasonable.

  • Dilemma

    With the government monopoly, as you call it, out of the way; the private sector will pillage and plunder as has always been done since the beginning of time. Guess who continues to suffer? Rev. Thomas Malthus knows.

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