Selling Goods to Mexico from the U.S.? Be Sure to Exclude the U.N. Convention on Contracts for the International Sale of Goods
I regularly review contracts involving the sale of goods between the U.S. and Mexico or other Latin American countries. One of the most common drafting errors in these contracts is the failure of the contracting parties to specifically exclude the United Nations Convention on Contracts for the International Sale of Goods (CISG) when they intend to do so.
The CISG is an international treaty signed by 74 countries, including the U.S. and Mexico. In the U.S., the CISG is regarded as a self-executing treaty, meaning that it operates without any implementing legislation. The CISG is therefore federal law in the U.S., which preempts any conflicting state law provisions, including the Uniform Commercial Code (UCC) as it may be incorporated into state law.
As such, the CISG is the default gap-filling law in the U.S. applicable to all contracts for the sale of goods between U.S. companies and foreign companies whose places of business are in countries that are party to the CISG. Since both the U.S. and Mexico are party to the CISG, any contract for the sale of goods between a U.S. company and a Mexican company will be governed by the CISG unless the parties expressly exclude its application.
An example illustrates how the CISG comes into play. I am reviewing a contract this morning on behalf of a Mexican company that seeks to be the exclusive distributor in Mexico for a technology product manufactured by a Texas company. The governing law clause, drafted by the Texas company’s U.S. counsel, provides: “This Agreement shall be governed, interpreted and construed in accordance with the laws of the state of Texas.”
The laws of the state of Texas that govern the international sale of goods are: (1) The Texas Business & Commerce Code (TBCC), which is the UCC incorporated into Texas law; and (2) the CISG. Accordingly, if there is a dispute under an international sales contract governed by “the laws of the state of Texas”, the court or arbitrator should apply the CISG to fill any gaps in the contract because the CISG is a self-executing treaty, which is U.S. federal law, which preempts Texas law.
The problem is that the lawyer for the Texas manufacturer probably never intended for the CISG to govern. In addition, since the CISG and the UCC often contain different gap-filling terms for the same set of factual circumstances (e.g., remedies in the event of breach, contract formation through the exchange of forms), the outcome of a dispute under the contract may significantly vary depending on which body of law is applied.
Fortunately, Article 6 of the CISG allows contracting parties to exclude the CISG, vary its effect, or derogate from any of its provisions. I often use the following language to exclude the CISG from international sales contracts:
This Agreement shall be governed by and construed under the laws of the state of _______, U.S.A. (including the Uniform Commercial Code as incorporated into the laws of the state of _______, U.S.A.), without regard to its conflict of laws provisions and without regard to the United Nations Convention on Contracts for the International Sale of Goods (CISG).
Sometimes U.S. banks and businesses that lend or advance money to Mexican borrowers, for practical or business reasons, seek to have the Mexican borrower sign a Mexican promissory note (pagaré) with an effective date that is either before or after the actual date of signature of the pagaré.
For example, an effective date on a pagaré that is before the actual date of signature might be used to enable the lender to evidence a debt of the Mexican borrower that arose because of money advanced before the actual signature date of the pagaré. Similarly, an effective date on a pagaré that is after the actual date of signature may be used to enable the lender to evidence a future debt of the borrower that will arise if some event does not incur in the future (e.g., the Mexican borrower does not pay the lender’s invoices).
Article 170 of Mexico’s General Law of Negotiable Instruments (Ley General de Títulos y Operaciones de Crédito), which lists the elements required to create a valid pagaré, provides that, among other elements, a pagaré must include the date on and place at which the pagaré was signed by the borrower.
Accordingly, to avoid any possible argument by the Mexican borrower in a collection lawsuit on the pagaré by the lender that the pagaré is defective because it is not dated the actual date of signature or that the lender altered the pagaré post-signature, the most prudent course of action for the lender is to have the debtor sign the pagaré on the actual date that appears on the pagaré, whether the date is (a) pre-printed on the pagaré by the lender or (b) handwritten on the pagaré by the borrower or the lender.
If the lender must date the pagaré before or after the actual date of signature, one alternative for the lender would be to pre-print the date the lender wishes to include on the pagaré, whether such date is before or after the actual date of signature, BEFORE the pagaré is signed by the borrower. However, it is conceivable that this alternative could give rise to an argument by the borrower in a collection lawsuit by the lender that the pagaré is defective because it is not dated the actual date of signature contrary to Article 170. In other words, there is some risk to the lender associated with this alternative.
A much less favorable alternative if the lender must date the pagaré before or after the actual date of signature is to leave the date of the pagaré blank and fill-in the desired date, whether such date is before or after the actual date of signature, AFTER the pagaré is signed by the borrower. This alternative, which is not recommended, is far more likely than the previous alternative to give rise to an argument by the borrower in a collection lawsuit by the lender that the pagaré is defective because it is not dated the actual date of signature or because the lender altered the on the pagaré post-signature violation of Article 170.
Mexico Streamlines Corporate Formation With New Government Website
I am pleased to say that the Mexican government appears to have kept its promise to speed the process of forming a new business entity in Mexico by the creation of a new corporate formation website, www.tuempresa.gob.mx, the launch of which was announced in today’s Official Gazette.
The website enables users to:
- Search for and reserve a corporate name with the Ministry of Foreign Relations (Secretaria de Relaciones Exteriores);
- Pay the fees required to form the entity;
- Select a Mexican Notary Public to protocolize the formation documents; and
- Use and modify standard form corporate by-laws (estatutos).
Protocolization of the estatutos must still performed by a Mexican Notary Public following the physical appearance of the shareholders (or their attorneys-in-fact) with official identification and proof of address in hand, along with payment applicable Notary fees.
The new website is welcome news for Mexican businesses and investors, who might soon enjoy me reduction in the time and cost required to form a new company in Mexico.
What is a Libertarian?--And Why It is the Only True Philosophy
By A.M. Novoa
Lately it seems many people are finding the Libertarian philosophy more and more appealing than ever before. Americans are tired of big government and widespread corruption and are quickly figuring out how little control they have over their own lives and choices as a result. We seem to be as a country exploring our roots and what it is we believe, exactly. The realization that we have severely veered off the proverbial freedom path is becoming painfully evident. Even with this realization, I am not sure everyone understands what the philosophy of Libertarianism entails so I think it is important to explore it and have a better understanding of this school of thought.
Being a Libertarian is not simply belonging to a political party. Being a Libertarian is adhering to a set of ideals in belief, attitude and conduct in regards to your fellow man. There are a variety of individuals that call themselves Libertarian. Their philosophies can be and are at times vast but they tend to come together on some key ideals.
According the American Heritage Dictionary a Libertarian is, in broad terms, is an individual that advocates maximizing individual rights and minimizing the role of the states. Libertarians are neither right, nor left but believe that you have the right to decide for yourself what's best for you and to act on that belief so long as you respect the right of other people to do the same and deal with them peacefully and honestly. Conservatives in general tend to be libertarian on economic issues, whereas Liberals tend to be libertarian on social issues. Libertarians believe in minimal government involvement in individual’s lives. The only exceptions would be when a person’s rights are being violated. For example if someone committing murder, rape, robbery, theft, fraud, embezzlement, arson, trespass, etc., then it's correct to call on government to help the victim against the wrongdoer. If this is not the case, the government should not get involved. Libertarianism is not anarchy, but very limited government.
If you are not a Christian this argument doesn’t apply to you, but I have heard the criticisms that a Christian can not be a libertarian because of the Libertarian Party’s stance on social issues. I would say to impose upon another’s freedoms is wrong. God, if you are a Christian, gives man free will. To legislate morality conflicts with man’s free will, given by God, even if we personally judge the actions of another to be immoral or a poor choice. This is a difficult paradigm of thought that I personally have wrestled with as a believer. With all their positive attributes, I have seen the error in the religious right’s thinking and come to the conclusion that they are reaping now what they have sown in the form of over legislation and governmental control.
"Libertarianism is not inherently godless. In fact, it is the only political philosophy that is truly in accordance with Christianity." -- Vox Day
This video below illustrates what the philosophy of liberty is all about:
Rousseau's Form of Socialism
[From The Socialist Tradition: Moses to Lenin
]
Fortunately, we are here concerned with only one side of Rousseau — assuming, indeed, that it is possible to detach for consideration one aspect of his legacy. Rousseau was primarily a writer on politics, concerned, after the manner of Hobbes and of Locke, in explaining the origins of government by reference to a mythical Social Contract, the terms of which may of course be varied, according to the deductions it is desired to draw from it.
He was also a writer, and a writer of influence, on education, though he would doubtless have been a rash parent who sent his daughter to any Ladies' College conducted by Rousseau. He was a prophet of sentiment and sensibility. For that matter, he had views on music. Doubtless even in the most versatile there is a unity linking divergent activities. In the present case, the significance of Rousseau in the development of socialist thought is to be found in the combined and pervasive influence of all his writings on succeeding generations.
Yet, within the space here available, it may be permissible, if scarcely defensible, to look on the Contrat Social as belonging rather to the history of political thought; and, accordingly, in searching for his contribution to socialist thought, we shall confine ourselves to those writings which are more exclusively occupied with the perpetual themes of socialist discussion. Briefly, this comes down to a consideration of his Discourse on the Origin of Inequality among Men, an essay which was not awarded the prize for a dissertation on this subject by the Academy of Dijon.
But before proceeding to the Discourse on Inequality, it may be permissible to glance at the earlier essay to which the Academy of Dijon did award its prize, thereby suddenly making Rousseau a celebrity. The subject prescribed for this essay was, "Whether the restoration (rétablissement) of the Sciences and the Arts had contributed to the purification of manners?" There is a traditional tale that when Rousseau indicated his intention of competing for the prize, he was warned by a wise acquaintance that if he wished to have any chance of success, he would have to answer the question in the negative, since all the other candidates would be found ranged on the other side.
The authenticity of the story may be assessed by Rousseau experts. It is probably entirely apocryphal; but any examiner of experience will acknowledge, in his cups if not at other times, that if of fifty competing essays, forty-nine say the same thing with varying degrees of lucidity, and the fiftieth says something wholly different, this last cunning candidate has an initial advantage out of all proportion to his deserts, if only because of the difficulty the examiner has in arranging the other forty-nine in ascending order of demerit.
In any case, whether because he conscientiously so believed, or because he was instigated by Mr. Worldly Wiseman, Rousseau elected to denounce the baneful influence of the Sciences and of the Arts. As the outlook disclosed is fundamentally the same as in the more effective, but unsuccessful, later essay, it is as well to read the two together.
Later Rousseau affected to regard his Discourse on the Sciences and the Arts as mediocre. In substance it is; but there is a certain bravado about this violent and monstrously one-sided attack on civilization and all its works, which doubtless made it an arresting production on its first appearance, and which obviously carried the Academicians of Dijon off their feet. There is a considerable kinship with the later Discourse, and here already it is obvious that the theme closest to Rousseau's heart is that of inequality and the loss of freedom.
The Sciences, Literature, and the Arts, we are told, stifle in men the sentiment of that original liberty for which they seem to have been born, and make them love their bondage.[1] The Sciences and the Arts owe their origin to our vices, and we should be in less doubt as to their advantages if they sprung from our virtues. In explanation he argues that astronomy was born of superstition; eloquence, of ambition; geometry, of avarice (a dark saying, unless he refers to the "mensuration" of our possessions); physical science, of a vain curiosity;[2] and all are the offspring of human pride.
Here we touch the fundamentals of theology, for is there not high authority for the view that Pride is not only the fundamental sin, but the only sin, of which all other sins are merely allotropic modifications? Moreover, this defect in the origin of the Sciences and the Arts is reflected in their aims and objects. What would be the good of jurisprudence without the injustice of man? Where would history be, if there were no tyrants, wars, or conspiracies?
In an illuminating question which goes to the root of Rousseau's thought or prejudices in these matters, he asks, "Who would wish to pass his life in sterile contemplation, if each of us, thinking only of the duties of man and the needs of nature, had time only for the fatherland, for the unfortunate and for his friends?"[3] The Sciences, born in idleness, in turn nourish idleness and the vices that spring therefrom. Rousseau, it will be observed, was not the man to allow a regard for truth to deprive him of his paradox.
But, worst of all and most specifically suggestive of the later Discourse, all these things lead to inequality. With the development of the Sciences and the Arts, tribute is no longer paid to virtue but to ability:
We no longer ask of a man if he has integrity, but if he has talents; nor of a book if it is useful, but if it is well written. Rewards are showered on intellect, and virtue remains without honor. There are thousands of prizes for les beaux discours, none for les belles actions.[4]
So far as there is an ideal here, it is that of a primitive life, so fully occupied with the claims of the fatherland, the unfortunate, and one's friends, that there is no leisure left over in which to become vicious; for an advance beyond this point means the development of opportunities for manifesting superiority based on intellect in place of an imaginary condition of equality in which virtue alone is held in honor.
In the Discourse on the Origin of Inequality, dating from 1754, Rousseau gives a philosophy of history, resting on a condensed account of the development of the human race, and the whole essay is saturated with that passionate hatred of inequality which may not unfairly be regarded as the dominant feature of his character. It is almost unnecessary to say that for Rousseau's history there is not the faintest shadow of a particle of evidence. Nor does Rousseau claim that there is; he is indeed engagingly ingenuous on this point. "Here," he says, addressing Man at large — "here is your history as I have thought it was to be read, not in the books of your fellows, who are liars, but as it is to be found in Nature, which never lies."[5] Such a procedure without doubt greatly simplifies the writing of history. In fact, Rousseau is merely imagining what it is convenient to imagine; and, viewed in the cold light of reason, his account of the life of primitive man at times borders on the grotesque and ludicrous.
The Discourse falls into two parts, of which the first is devoted to the fairy tale of Rousseau's primitive man, and the second to the departure, with increasing acceleration, from that happy state. As Rousseau sees him, primitive man takes his fill beneath an oak; he quenches his thirst at the nearest stream, and he finds his bed at the foot of the tree which has given him sustenance; and thus are all his needs satisfied.
In this condition, having regard to the rigors of the seasons (for it cannot always be pleasant to sleep, nude, beneath a sheltering oak); having regard likewise to the needs of defense or escape in the matter of beasts of prey, man is, and must be, robust and strong; so also is his progeny. He must use his body, his arms and his legs for everything. When he learns to use an axe, a ladder, a sling, a horse, the convenience is bought at the price of a diminution of strength or agility. Nor does he fear wild animals at this stage; he is a match for them, and if need be, he can climb a tree.[6]
Apart from such dangers of the jungle, there are other ineluctable enemies — natural infirmities, infancy, and old age. Infancy, of course, is not an infirmity peculiar to man; but on the whole, our remote ancestors scored over other animals by reason of the greater capacity which the female of our species has in carrying about her young.
In the matter of old age, Rousseau draws a most rosy and optimistic picture of how things used to be. In old age, the need of victuals diminished with the power of getting them — a singularly beneficent arrangement on the part of Providence; and thus in the absence of gout and rheumatism (unknown to la vie sauvage) old people get snuffed out without anyone perceiving that they have ceased to exist, and almost without their noticing it themselves — "ils s'éteignent enfin, sans qu'on s'aperçoive qu'ils cessent d'être, et presque sans s'en apercevoir eux-mêmes."[7] One would naturally expect that their extinction would be more obvious to the survivors than to the deceased.
As for our other maladies — the rough-and-tumble of a panel practitioner's life — Rousseau indicts society for its sins, and argues that most of our misfortunes are our own work, and that practically all could have been avoided, if we had adhered to the "simple, uniforme, et solitaire" manner of life prescribed by Nature. As will be seen presently, it is the word solitaire that is here the most significant. The history of human diseases is best obtained by tracing the development of civil society.
In Rousseau's primitive paradise, no surgeon other than Time is needed to cure a fractured limb; no treatment is necessary other than leur vie ordinaire; and all this is accomplished without the patient being tormented with incisions, poisoned with drugs, or wasted with fastings. If primitive man has nothing to hope but from Nature, he has on the other hand nothing to fear but his own illness. So much for the advantages of medical benefit.[8]
Rousseau's dissertation on the origin of language hardly concerns us, except in so far as the conditions of his problem throw light on his conception of the life of the natural and primitive man. For the surprising view emerges, as indicated in the word solitaire already emphasized, that Rousseau's primitive men hardly ever met. It is Rousseau's first difficulty in the matter of the origin of language: how could a language arise, or be regarded as necessary among men who had no communication with each other, nor any occasion to have such communication? For in that early phase of human society, any encounter was fortuitous and ephemeral.[9]
It is indeed fundamental to the development of Rousseau's ultimate thesis, that Nature has taken no trouble to bring men together on the basis of their mutual needs: "sociability" is not a quality prepared by that mysterious eighteenth-century divinity called Nature. In this primitive condition man had no need of man, and Rousseau intends to emphasize that we must, for our salvation, return to this state of affairs. But though primitive man thus wandered about, forever solitary except for casual and transient encounters, he was not miserable; for what kind of unhappiness could properly be attributed to a "free being, whose heart is at peace, and whose body is in health"?[10]
It follows that in this strange world where individuals can, at most, salute each other in passing, where no moral relationships or acknowledged duties unite them, it is impossible to speak of men as being either good or bad. In this lonely and solitary world, no question of virtue or vice can arise. Somewhat oddly, however, and on rather insufficient grounds, Rousseau allows primitive man to have "Pity," which is the source of all social virtues. It is this "Pity" that in a state of nature takes the place of laws, of morals, and of virtue.[11]
Clearly also this elimination of the primitive man's fellows delivers him from many of our present-day shortcomings. Having no relationship with others, he knows nothing of vanity, or esteem or contempt for others. Even the sexual instincts, in these happy days, occasioned no jealousy. Rousseau distinguishes between that love which consists in the satisfaction of a physical need, and that love which, if it is permissible to paraphrase, results from the frills which civilization has added. It is in this type of love alone that jealousy may arise. The primitive man knows only the first kind of love: "toute femme est bonne pour lui," and again, "Ie besoin satisfait, tout Ie désir est éteint."[12]
Thus for primitive man the happy generations passed — an endless wandering in the forests, "without industry, without speech, without domicile, without war as without union, without any need of his fellows, or any desire to injure them." If any discoveries were made, "the art perished with the inventor" in a world where there was no education or progress, and where each succeeding generation set out from the same starting point.[13]
Rousseau's description of the blessedness of primitive man has been summarized in some detail, because, fantastic as it may be, it is of the essence of his view of things, and it colors his later account of the fall of man from this high estate. At this point, however, it is sufficient to draw attention again to the most astonishing feature in this most astonishing reconstruction of history. The foundation and reason for primitive man's happiness lies in the fact that he had no need of his fellows, in fact had no dealings with his fellows, whom, indeed, to all intents and purposes he never met. Man was never so happy because man was never so much alone.
The second part of the Discourse is devoted to tracing the growth of inequality in place of these primitive egalitarian conditions. It opens with a purple passage which has been so often quoted that its further quotation is almost inevitable:
The first man who, having enclosed a piece of land, took it into his head to say: "This belongs to me," and found people simple enough to believe him, was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would have been spared the human race by him who, snatching out the stakes or filling in the ditch, should have cried to his fellows, "Beware of listening to this impostor; you are lost if you forget that the fruits belong to all and that the earth belongs to none."[14]
This first unrecorded enclosure was the beginning of property; but in fact it was a culminating point rather than a point of departure. Already, ways and means had been found to take such precautions as were necessary for safety. There had been discoveries and inventions; fire had been brought to earth; the bow and the arrow, as well as hooks and snares for catching animals, had been contrived. All this gave man a sense of superiority over other animals, and implanted in his heart "the first movement of pride."[15] Thus, in the triumphant and unseemly gloating of the hunter over his victim, we find the far-off roots of human inequality.
With this also came the distant foreshadowings of cooperation. There were occasions — admittedly rare — when l'intérêt commun justified primitive man in counting on the assistance of his fellows. How these ultra-individualistic nomads came to conceive of such a thing as the "common interest" is, however, not explained. In such a case they united "by some sort of free association which was binding on none, and which lasted only so long as the transitory need which had occasioned it."
Clearly, however, we have reached a stage when man is not quite so solitary as he once was: the bloom is off the peach. For such occasional acts of mutual assistance as these, no more highly developed language than that of crows or monkeys would be necessary.[16]
In this imaginative history of the human race, the great turning point, with ramifications in many directions, came when man ceased to sleep "under the first tree," and made some semipermanent shelter or hut, with branches and mud as their basic constituents. For here you have the beginning of the home. Rousseau's primitive man had been extraordinarily successful in shaking off the casual women whom he encountered. But now, enclosed in the same hut, are man and woman, parents and children.
Doubtless with this transition, as Rousseau acknowledges, there came the sweetest sentiments known to man, conjugal and paternal love; but he is able to compile an alarming series of items to be entered on the debit side. Women became sedentary, clinging to the hut, and thus there resulted a division of labor. Also men and women alike became softer, losing something of their ferocity — although in the previous paragraphs Rousseau's primitive man had been depicted as anything but ferocious.
Among men living in adjacent huts, language perforce had to arise. More significant is the fact that mere propinquity gave rise to the habit of making comparisons in the matter of merit and beauty. Jealousy awakens with love, and in the highly colored language which Rousseau loved: "Discord triumphs, and the sweetest of passions receives sacrifices of human blood."[17]
It is an odd picture which Rousseau here draws of the rise of "distinctions" among men, imposed by their environment. Brought together to live in adjacent cabins, what is there for these attractive primitives to do in the evenings, unless they sing and dance together under a great tree? Now it is a familiar fact that we do not all sing equally well or equally badly, and the same is demonstrably true in the matter of dancing. But, given the circumstances, the man who sings best, who dances best, is most "considered." "Why did she fall for the leader of the band?" is the question put by a later generation, confronted by the same phenomenon. Es ist, apparently, eine alte Geschichte, doch bleibt sie immer neu.
In these distinctions, embodied in the judgment of spectators and critics of primitive ballroom behavior, Rousseau finds the first step towards inequality and toward vice at the same time. One other departure from primitive perfection is significant. From this last idea of "consideration" paid to any one excelling in any respect, arose the first ideas of civility on the one hand, and on the other the sense of outrage should the measure of respect supposed to be due happen to be withheld. In a world where a man's a man for a' that, and where all are equal, there can clearly be no room for civility.
Despite these first shadows, this was the stage at which Rousseau would have had the human race remain, and he sums up in language of unmistakable clarity his astonishing philosophy of human nature:
So long as they confined themselves to works which one alone could do, and to arts which did not need the assistance of several hands, they lived free, healthy, good, and happy… but from the moment when one man had need of the assistance of another, from the moment when it was perceived that it was useful for one man to have provisions for two, equality disappeared, property was introduced, labor became necessary, and vast forests were changed into smiling fields which it was necessary to water with human sweat, and in which slavery and misery were soon seen to germinate and increase with the harvests.[18]
This indeed is the fundamental idea in this extraordinary Discourse. Men may be equal and happy, so long as they never meet, so long as no one needs the assistance of another; but from the moment when they cease to be solitaire, from the moment when they begin to live together, help each other, do things together, inequality enters, and from Rousseau's point of view the rest of history is a hastening descent. Waiving his earlier and later history as entirely fictitious, there is of course one sense in which Rousseau is merely expressing a platitude in a somewhat allegorical form.
On all this question, there is in fact of course no such thing as equality among men, for so it has been ordained by God. Neither in stature, nor in weight, nor in chest expansion, neither in the color of the eyes or of the hair, neither in strength, intellectual capacity, or moral sensibility, are men equal. It is perhaps possible to speak of the equality of men, if there is no possibility of comparison; if, as in Rousseau's primitive conditions, human beings are never brought together except for fortuitous acts of silent copulation — if, in short, the doctrine of equality is never brought to the test.
But the whole doctrine of equality in the literal sense breaks down the moment you bring men together and inevitably are forced to compare them, not merely in their capabilities for singing and dancing, as in Rousseau's rather puerile example, but up and down the whole range of human equipment. It is indeed only necessary to view two human beings together in order to realize that in certain respects A is "superior" to B, and in others B is "superior" to A; but probably in no respect are they equal.
In this sense Rousseau is possibly right in suggesting that the postulated equality of men who are never brought into comparison disappears at once when they live in adjacent huts. It is, however, to be hoped that Rousseau was trying to express more than this dowdy platitude. Also, of course, the admitted inequality of man does not really affect that deeper question as to whether the differences in human endowment furnish grounds for existing differences in rights and rewards.
In the remainder of the Discourse, Rousseau warms to the task of denunciation as he traces the growth of inequality. It may not, however, be necessary to follow in detail the development of the argument. The prime impulse towards the furtherance of inequality is found by Rousseau in the arts of metallurgy and agriculture: in more concrete language it is iron and corn that have been the curse of humanity, creating groups of workers dependent on each other.[19]
Agriculture likewise led to the partition of land and consequently to laws to protect the possessor and define his rights. Following Grotius, Rousseau recalls that when Ceres was given the title of "Lawgiver," it was to indicate that the partition of land brought with it the necessity of a new kind of law, the law of property, as distinguished from natural law.[20]
With industry (typified by iron) and agriculture thus brought on the scene, the stage is set for the development of inequality. Diversity of talent and of capacity bring their natural consequences in diversity of condition. Vice is not far off. It becomes necessary that men should appear to have certain qualities, even when these are absent. "To be" and "to appear" have become entirely different matters. Hypocrisy and deceit have arrived. Man is no longer free and independent, since he is dependent on his fellows for the satisfaction of a multitude of needs: "Rich, he has need of their services; poor, he has need of their assistance; and even mediocrity does not enable him to do without them."[21] Add to these "devouring ambition," and the picture begins to resemble the vision of Marx:
In a word, competition and rivalry on the one hand, and on the other conflict of interests, and always the concealed desire to make a profit at the expense of others: all these evils are the first effect of property and the inseparable accompaniment of rising inequality.[22]
The final pages of Rousseau's essay are perhaps best viewed as examples of lurid writing rather than of lucid thinking. He defines three main stages in the descent. The first is the establishment of law and the right of property; the second is the institution of the magistrature; the third is the transformation of legitimate into arbitrary power. In somewhat different language, these stages consecrate the distinction between rich and poor, between strong and weak, and between master and slave. Moreover, Rousseau's pessimism is without frontier and without boundary. In surveying the inevitability of human descent, he observes that "the vices which render social institutions necessary are just those which render inevitable the abuse of these institutions." What, in short, is the good of anything?
It is a far journey from the innocent picture of men dancing and singing on the grass, beside the primitive mud-covered huts. It was then, when admiration was paid to one and withheld from another, that inequality was born. Into this other Eden, another Serpent entered. The final picture, when the curse has had time to work itself out, is one of unrelieved gloom.
Rousseau gives as bitter a picture of modern civilization as may be found anywhere,[23] and ends with the impassioned declaration that "it is manifestly contrary to the law of nature, however it may be defined, that a child should command an old man, that an imbecile should conduct a wise man, and that a handful of people should be stuffed with superfluities, while the famished multitude lack what is necessary."[24]
Perhaps Rousseau has sufficiently testified to the faith, or the lack of faith, that is in him, so far as this is manifested in the two Discourses. Fundamentally it is a curiously churlish philosophy that is here propounded. Men are represented as happy so long as they live in complete isolation, having no need of each other, and no occasion to meet each other; all evil springs from bringing them together and allowing them to cooperate.
Nor indeed is it even a consistent philosophy. Doubtless, Rousseau is careful to explain that his savage in his solitary state has neither virtue nor vices; but he is assuredly a noble beast, endowed with Pity, the mother of all the virtues. Yet as soon as they are brought into contact with each other, it is of the essence of Rousseau's explanation of the decline of man, that forthwith these noble savages seek to take advantage of each other.
Coming more closely to Rousseau's place in the socialist tradition, there are perhaps three points which may be isolated and underlined for their relationship to what has gone before and to what is yet to come. Firstly, property is specifically regarded as the source of all evil, with doubtless a certain emphasis on the case of land. Community in all things is implied — land again receiving special emphasis — though perhaps it should be made clear that by "community" is rather meant nonappropriation.
Secondly, Law for Rousseau is essentially a device whereby those in possession protect themselves against the "have-nots"; it is in short one of the instruments for the establishment and the maintenance of inequality. In other words, Law (and with it, the State) is an instrument of the governing class.
Thirdly, in the contrast between rich and poor, the strong and the weak, masters and slaves, Rousseau preaches, and his words lend themselves to, a vitriolic class war. But when all is said, it is perhaps truer of Rousseau than of most, that his influence can be traced less to any particular dogma or doctrine which he enunciated than to a pervasive atmosphere which emanated from Rousseau as a whole.
Rothbard's Last Triumph, Part 2
The reader of this, the second volume[1] of Rothbard's last great work, will at once face a puzzle: how was one person able to unify so vast a mass of material into a tightly organized narrative? I cannot pretend to provide a full answer, but one part of the solution lies in the fact that Rothbard follows a few main themes with iron consistency.
One of these central themes emerges in the book's initial chapter, "J.B. Say: the French Tradition in Smithian Clothing." Jean-Baptiste Say, far from being a mere popularizer of Adam Smith, "was the first economist to think deeply about the proper methodology of his discipline, and to base his work, as far as he could, upon that methodology" (p. 12).
And what is the procedure that Say advocated? One starts from certain "general facts" that are incontestably known to be true. From these, the economist reasons deductively. Since the beginning axioms are true, whatever is validly deduced from them also is true. Here, in brief compass, Say discovered the praxeological method that came to full fruition in the work of Mises and Rothbard himself.
To understand praxeology, a key point about the initial axioms must be kept in mind. The starting points are common sense, "obvious" truths, e.g., that people engage in exchange in order to benefit themselves. The economist should not begin from oversimplified hypotheses about the economy as a whole, chosen because they are convenient for mathematical manipulation. In Rothbard's view, the adoption of this wrong method was the besetting vice of the economics of David Ricardo, and the main impediment to the development of economic science in the 19th century.
This conflict of method had a fundamental effect on the content of Say's and Ricardo's economics. Say began from the individual in action, the subject of the common-sense propositions Say took to be axiomatic. Thus, he placed great emphasis on the entrepreneur. One cannot assume that the economy automatically adjusts itself: only by the foresight of those able and willing to take risks can production be allocated efficiently. "It seems to us that Say is foursquare in the Cantillon-Turgot tradition of the entrepreneur as forecaster and risk-bearer" (p. 26).
Again, Say's stress on the individual underlies his analysis of taxation, which Rothbard rates among his greatest contributions. Some, notoriously including Adam Smith, consider taxes a way to benefit the public; but Say would have nothing of this nonsense.
Taxation, in essence, is theft: the government forcibly seizes property from its rightful owners. If the powers that be then condescend to spend some of their ill-gotten gains for the "public benefit," they are in reality purchasing the people's goods with the people's own money. Taxation, accordingly, should be as low as possible; the search of Smith and his followers for "canons of justice" in taxation must be rejected. Rothbard characteristically adds, Why have any taxes at all?
As any reader will discover after a few pages, Rothbard spurns the desiccated neutrality of much contemporary pseudoscience. He has his heroes and villains, chosen not by arbitrary preference but according to his carefully reasoned conception of economic principles. Yet he is no uncritical partisan of his heroes: he is a master of the fine discriminations that, as Dr. Leavis has taught us, characterize the great critic.
When Rothbard turns to Ricardo, he once again reverses conventional opinion. Say was not a popularizer, but a great economist. Likewise, Ricardo was not a truly scientific economist. His much-praised logic is mere "verbal mathematics" that fundamentally misconceives economics.
Ricardo was stuck with a hopeless problem. He had four variables, but only one equation with which to solve them: Total output (or income) = rent + profits + wages. To solve — or rather, pretend to solve — this equation, Ricardo had to 'determine' one or more of these entities from outside his equation in such a way as to leave others as residuals. (p. 82)
Rothbard explains with crystal clarity the path by which Ricardo sought to escape. He simply held fixed as many of his variables as he could: he "solved" his equations by oversimplified assumptions. In particular, he adopted a theory of rent based on differential productivity, which Rothbard neatly skewers; and he made price largely a function of the quantity of labor time embodied in a commodity's production.
Ricardo's labor theory of value had a consequence that would no doubt have shocked its author: it paved the way for Marxism.
Marx found a crucial key to this mechanism [by which the capitalist class would be expropriated] in Ricardo's labor theory of value, and in the Ricardian socialist thesis that labor is the sole determinant of value, with capital's share, or profits, being the 'surplus value' extracted by the capitalist from labor's created product. (p. 409)
With his stress on the Ricardian roots of Marxism, Rothbard begins a devastating assault on "scientific socialism," the like of which has not been seen since Böhm-Bawerk.
As Rothbard notes, Marx's economics falls into error from the start. Marx assumed that in an exchange, the commodities traded have equal value. Moreover, he took this postulated equality in a very strong sense: both of the goods must be identical to some third thing. This, by a spurious reasoning that Rothbard deftly exposes, he claimed could only be labor.
But the flaw in Marx's derivation does not lie in the details of his argument. A leitmotif of Rothbard's work is that an exchange consists not of an equality, but rather of a double inequality. Marx's whole edifice thus rests on a spurious assumption, and the three volumes of Das Kapital constitute an elaborate attempt to conjure a solution to a nonexistent problem.
But the difficulties of Marxist economics are not confined to its starting point. Rothbard points out that Marx's theory of wage determination really applies not to capitalism but to slavery.
Oddly, neither Marx nor his critics ever realized that there is one place in the economy where the Marxist theory of exploitation and surplus value does apply: not to the capitalist-worker relation in the market, but to the relation of master and slave under slavery. Since the masters own the slaves, they indeed only pay them their subsistence wage: enough to live on and reproduce, while the masters pocket the surplus of the slaves' marginal product over their cost of subsistence. (p. 393)
Rothbard does not confine his assault on Marxism to an exposure of its economic fallacies. Behind the economics of Marxism, he finds a heretical religious myth, the goal of which is "the obliteration of the individual through 'reunion' with God, the One, and the ending of cosmic 'alienation', at least on the level of each individual" (p. 351).
One might at first think that abstruse theosophical speculations that date back to Plotinus have little to do with Marxism. But Rothbard convincingly shows that Marx, through the intermediary of Hegel, presented a secularized version of this witches' brew in the guise of "scientific socialism." In the course of doing so, Rothbard makes Hegel's philosophy seem amusing; his remarks on the "cosmic blob" are worthy of Mencken (p. 349).
So filled with material is the book that one could easily write another detailed review stressing entirely different parts of it, such as the long and learned account of the bullionist controversy. I shall, with regret, confine myself to two final items. In his discussion of utilitarianism, Rothbard's philosophical turn of mind is evident. He notes that according to that system, reason
is only a hand-maiden, a slave to the passions.…
But what, then, is to be done about the fact that most people decide on their ends by ethical principles, which cannot be considered reducible to an original personal emotion? (p. 57)
Rothbard has here rediscovered an objection to utilitarianism raised by Archbishop Whately: how can utilitarianism accommodate preferences based on competing ethical systems? John Stuart Mill, though familiar with the objection, never answered it in a convincing way. I cannot resist ending with Rothbard's assessment of him:
John Stuart was the quintessence of soft rather than hardcore, a woolly minded man of mush in striking contrast to his steel-edged father.… John Mill's enormous popularity and stature in the British intellectual world was partially due to his very mush-headedness. (p. 277)
You will not encounter another intellectual historian who writes like that. Murray Rothbard's two volumes are a monument of 20th-century scholarship.
Mass Unemployment in the Name of Norma Rae
Thirty years ago Sally Field won the Best Actress Academy Award for her gritty portrayal of Norma Rae, a widowed small-town Southern textile-mill worker. Even those who haven't seen the entire movie have viewed stills or clips of a sweaty Field standing atop a work bench holding over her head a piece of cardboard with UNION written in black letters.
The scene portrayed happened verbatim to the woman who inspired the movie, Crystal Lee Sutton, who acted in defiance after being fired for copying a flyer put up by the mill that claimed black workers would run the union she and labor organizer Eli Zivkovich were agitating for at the J.P. Stevens textile mill in Roanoke Rapids, North Carolina.
Ms. Sutton passed away September 11th, a victim of brain cancer, and union leaders are using her death to rejuvenate interest in the Employee Free Choice Act (EFCA). As membership in unions has plummeted in the last half century from over 35 percent of all workers in 1945 to just over 12 percent currently — and only 7.6 percent if government workers aren't included — labor leaders view EFCA as the magic bullet to increase union membership and, in turn, union political influence.
The EFCA is sometimes referred to in the press as the "card-check" bill because a key provision would do away with the requirement that the employees elect a union as their bargaining agent by way of a secret-ballot election. Instead, if a union is just able to obtain signatures on authorization cards from a majority of employees, EFCA would require that the union be certified by the National Labor Relations Board (NLRB).
Unions of course can (and do) harass employees at all hours of the day and night, coercing them to sign certification cards. A frightened employee who just wants to work and be left alone, will vote much differently if given the opportunity to cast a ballot in secret as opposed to having two thugs at his or her door late at night.
The card-check provision of the act has been a lightning rod for discussion on right-wing radio and TV, and Investor's Business Daily reports that the Senate is proposing a compromise deal that would gut the card-check provision but still "meet labor's objectives."
Senator Arlen Specter, D-Pa, who desperately needs union support come election time, says EFCA can't pass with card check included. But Specter's deal "would amend labor law by requiring: faster secret ballot elections in organizing workplaces; tougher penalties for firing organizers; giving unions equal access to workplaces if businesses hold mandatory meetings on union elections; and binding, baseball-style arbitration when newly organized unions and employers can't agree on a contract," IBD reports.
Although union brass are insisting publicly that the card check must be included, labor experts know that the binding arbitration provision in the EFCA is far more damaging to employers and, in turn, to employment. It requires that the government step in after 90 days and bring the employer and the union together if a contract has not been finalized. The government would assign an arbitrator who would impose wage and benefit terms for the company for the next two years.
Essentially, the unions know that the government would backstop their negotiating position. They would demand outrageous contract terms knowing government arbitrators will "split the baby," even if the terms are economically unviable for the employer.
So card check can be stripped from the bill, but the real poison for the economy lies in the binding arbitration provision that could put Uncle Sam at every bargaining table in the country.
The late Ms. Sutton was physically removed by police after stopping work with her makeshift demonstration at the J.P Stevens mill. The Amalgamated Clothing and Textile Workers Union won the right to represent the workers. But the contract took a decade to negotiate. And union leaders like Leo Gerard, USW International president, desperately want government to intervene in negotiations. "[Workers] never get to organize because of aggressive and illegal actions used with impunity by corporations that hire union-busting consultants," Gerard writes on The Hill's Congress Blog. "That is tragic for America because good union wages were critical to creating and are critical to sustaining the nation's middle class."
Mr. Gerard's comment implies that what is good for union labor is good for all labor. Of course this isn't true. "No one has ever succeeded in the effort to demonstrate that unionism could improve the conditions and raise the standard of living of all those eager to earn wages," Ludwig von Mises wrote.
At a time when unemployment rates are soaring, increased unionization will make labor just that much more expensive, with the result being fewer workers hired and more laid off. As even New York Times movie reviewer Vincent Canby recognized in his Norma Rae review back in 1979, the reason Crystal Lee Sutton had a $2.65 per hour job (over $10.50 in today's dollars) in the textile industry was because "the highly publicized industrial boom in the post-World War II South was largely the result of the cheaper (nonunion) wages that lured manufactures away from the Northeast and mid-Atlantic states."
And so it is today as nonunion car companies Toyota, Hyundai, and Kia manufacture products in the south, while union-wage crippled General Motors and Chrysler only survive by government bailout in Detroit. The motor city led all metropolitan areas of more than one million in population with an unemployment rate of 17.7 percent in July. And the news is nearly as bad in "the New Detroit," Las Vegas. The unemployment rate for August hit an all time high in Sin City at 13.4 percent. Since Nevada is a right-to-work state, most don't associate Vegas with unions, but the Culinary Workers Union Local 226 was 60,000 members strong before the economy hit the ditch, leading the late Hal Rothman to describe Las Vegas as "the most unionized city in the United States" in his book Neon Metropolis. Both cities' unemployment rates are considerably higher than the national rate of 9.7 percent.
"[T]he vast majority of American workers remain stubbornly nonunion despite the best efforts of labor unions, the federal government, its court intellectuals, and the mass media," writes Morgan Reynolds on Mises.org. But if big labor and their friends in big government have their way, in the name of Norma Rae, the Crystal Lee Suttons of the world will be unemployed.
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