Switzerland Bans Welfare Recipients From Obtaining Citizenship

Switzerland Bans Welfare Recipients From Obtaining Citizenship

01/11/2018Ryan McMaken

Swiss news site The Local reports that new laws taking effect this month will make it even more difficult for immigrants to obtain citizenship. 

It has apparently been established law for some time that immigrants collecting social benefits are barred from naturalization. The new law, however, now also prohibits naturalization if an applicant has accepted social benefits at any time during the previous three years. 

An exception is made if the benefits "are paid back in full." 

On the other hand, applicants for citizenship now must only have resided in Switzerland for ten years instead of 12, as was the case before the new law took effect. 

It's important to make a distinction here. The change in law is not saying the recipients on social welfare will be deported. It is merely closing them off from citizenship until they can demonstrate they do not require social assistance. 

There is a difference here between residency and naturalization, and the two ought not to be confused. The state is quite flexible with legal residency. The rules for extending citizenship, though, are far more rigorous. 

Indeed, Switzerland has a large number of foreign born residents, and its economy includes many immigrant workers. 

Unlike many other nations, though, the Swiss recognize that the political system is distinct from the economic system, and admitting a migrant to the Swiss economic sphere does not necessarily mean the state must also grant access to the political sphere. 

Moreover, in nearly all cases, immigrants residing in Switzerland have citizenship. They're simply citizens somewhere else. (Swiss law specifically protects immigrant residents from deportation in case of statelessness.)

This is true everywhere, of course. Non-resident immigrants residing in the US, for example, are already citizens. They're simply citizens somewhere else. This fact is confused by the usage of phrases like "illegal alien" or "undocumented worker" which ignore the actual citizenship status of these workers. In most cases, the term "foreign national" — which highlights the fact these people are not stateless — is really more useful than "illegal immigrant." 

After all, the "illegality" of an immigrant is a totally arbitrary status made up by government bureaucrats, and is no more morally legitimate than the term "illegal drugs." In both cases, the only difference between legal and illegal is some government paperwork. 

On the other hand, there is no clear reason why foreign nationals residing anywhere ought to be given an easy path to citizenship, especially in cases where those residents rely on taxpayer funded services. 

This position, by the way, need not violate the property rights of immigrant residents. After all, property rights exist everywhere, regardless of location, and a respect for property rights suggests that persons ought to be allowed to freely contract with others for employment, housing, and other goods — regardless of an arbitrary government decree of illegality. 

In a 2017 column titled "Don't Confuse Immigration with Naturalization," I explore this topic further.

Preferably, access to the economic system is open to anyone with whom persons are willing to contract, whether they be employers, landlords, shopkeepers, and potential customers for new immigrant-owned businesses. Given that people tend to be quite open to economic ties with others, accessing the economic sphere has long been quite easy for immigrants to the United States. This is precisely because the economic sphere is relatively free and open in the US. 

Granting access to the political sphere, however, opens up a variety of other problems, such as extending access to the ballot box, and encouraging the use of political power to enrich one's self or one's own group. This problem is hardly unique to immigrants, as I've explained here, but as the Swiss understand, restricting access to the political system in this case is often quite prudent. Thus, is makes sense to be open to migration, while being less open with the extension of citizenship privileges. 

The ideal, of course, is to shrink the political sphere in such a way that citizenship ceases to be important. In a laissez faire economy where the state has only a tiny role in the regulation and ownership of property, then it would not be terribly important if one enjoys citizenship or not. The free exercise of one's property rights would be assured regardless. 

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The Mises Lecture That Inspired Ron Paul to Run for Congress

04/18/2018Tho Bishop

It's amazing what you can find in the Mises digital archives.

Here is a lecture by Ludwig von Mises on Socialism that he gave at the University of Houston. In the audience was a doctor from Lake Jackson, TX. After listening to this talk, he decided to run for Congress.

This was the only time Ron Paul met Mises, as he notes in his book Mises and Austrian Economics: A Personal View.

Because of my interest in individual liberty and the free market, I became closely associated over the years with friends and students of Mises, those who knew the greatness of Mises from a long-term personal friendship with him. My contact, however, was always through his writings, except on one occasion. In 1971, during a busy day in my medical office, I took a long lunch to drive 60 miles to the University of Houston to hear one of the last formal lectures Mises gave—this one on socialism. Although 90 at the time, he was most impressive, and his presentation inspired me to more study of Austrian economics.

Between Mises's Austrian accent and the recording quality of the 70s, it's not the easiest to understand. But still, a very neat piece of history. 

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Historical Controversies Podcast: Season 3

04/18/2018Mises Institute

Today, Chris Calton kicked-off the third season of his Historical Controversies podcast, which will recount the controversial history of the American Civil War.

The complete series (including Seasons 1 and 2) is available on iTunes, YouTube, Soundcloud, Google Play, Stitcher, Mises.org, and via RSS feed.

If you enjoy the podcast, please leave a positive rating and review.

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Peak Politico

04/18/2018Tho Bishop
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Trump Nominates Another Obama-Approved Federal Reserve Nominee

04/17/2018Tho Bishop

In no area has President Trump differed more from his campaign rhetoric than the field of monetary policy. Yesterday Trump announced the nominations of Richard Clarida and Michelle Bowman to the Federal Reserve Board of Governors, with the former to fill the role of Vice Chair. Clarida’s nomination in particular illustrates how uninspiring Trump’s appointments have been, as he was a finalist for a Fed governorship under Obama until he withdrew his name from consideration. Interesting enough, doing so resulted in Jay Powell, Trump’s new Fed Chair, to fill the position.

Richard Clarida, a former Bush Treasury official, currently serves as a Columbia University professor and an adviser to Pacific Investment Management Co.  He is a New Keynesian who has published a great deal on “Optimal Monetary Policy.” (Guido Zimmerman has an interesting QJAE article on the topic which references some of Clarida’s work.)

In terms of his policy views, he offers an interesting contrast to fellow Marvin Goodfriend – whose nomination has currently been stalled in the Senate. To Clarida’s credit, he reject’s Goodfriend’s support for negative interest ratesgoing so far as to question their legality for the Fed. In his advisory role at Pimco, his analysis has questioned the effectiveness of contemporary monetary activism. As he co-wrote in a June 2016 analysis:

In recent years we have described “riding a wave” of central bank interventions, as a range of unconventional policies have been rolled out across countries, driving asset price returns. This wave-riding has worked well in the past. Looking out over the secular horizon, however, diminishing returns to central bank interventions – and the potential for policy activism to do more harm than good, notably in the case of negative policy rates – advise against such an approach.

Of course he also differs in one area where Goodfriend is good, the use of the Fed’s balance sheet. Goodfriend has warned that the Fed’s buying of non-Treasury assets, like mortgage backed securities, gets it into the business of allocating capital. Instead, Clarida thought the Fed was too modest in buying up assets following the financial crisis.

As Matthew C. Klein  of Barons notes:

Clarida thought the Fed could effectively respond to downturns by committing to buying as many bonds – including mortgage bonds and corporate bonds – as necessary to "cap" interest rates at the levels it wants:

Much of the existing literature either misses entirely or under-appreciates how robust an LSAP [large-scale asset purchase] program can be at lowering bond yields and/or credit spreads...a central bank can everywhere and always put a floor on any nominal asset price (or set of nominal asset prices) for as long as it wants...So long as the central bank is willing to buy an unlimited volume of those bonds (potentially including the entire outstanding stock) at the interest rate it wishes to put a ceiling on, it will succeed. And of course, the above reasoning also applies directly to an Lsap program targeted at corporate bonds or mortgage backed securities.

The Fed successfully capped U.S. government borrowing costs in the 1940s, and this experience was cited by the Fed's staff in mid-2003. While the idea failed to gain traction among American policymakers, the Bank of Japan has successfully used "yield curve control" to limit yields on Japanese government bonds since 2016. Clarida's position in 2010 suggests he would be keen on something similar, perhaps also including mortgage bonds and corporate bonds, should he be at the Fed during the next downturn.

In terms of Fed reform, Clarida is likely to be an ally for House Republicans who have pushed to make the Fed adopt a rules-based monetary policy framework. Clarida has long written about the advantages of a rules-based framework and even has his own “forward-looking” version of the Taylor Rule.

As a voting Fed member, Michelle Bowman will also have an impact on the future of monetary policy – but as far as I can tell she has made no public comment on the subject. Rather than being an economist, she’s an attorney who had a long career as Washington staffer. Her employers include Senator Bob Dole, House Transportation Committee, the House Oversight Committee, FEMA, and Homeland Security Secretary Tom Ridge. Not the best resume for draining the swamp.

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Bring Back Interest Rates!

04/17/2018Jeff Deist

Let interest rates rise. Better yet, let interest rates function in the marketplace, wholly independent of central bank attempts at rate-setting or targeting.

How? Not through a laughably small and slow process of Fed tapering, but through a wholesale and aggressive selloff of assets still polluting the Fed's balance sheet since it began aggressively those assets from commercial bank in 2008.   

This was the critical point made by all three speakers at our event in Nashville this past weekend: interest rates need to rise before any true economic recovery can occur. The manipulation of interest rates by the Fed and other central banks causes untold distortions throughout the entire economy. Unless and until we address this problem, no fiscal or monetary policy changes will make much sense or have much salutary effect. Money and credit will continue to flow into less than optimal uses, investors will be forced to continue chasing yields in the casino equity markets, and Congress (plus other western legislatures) will continue to produce trillion dollar annual deficits without much worry about debt service. 

Perhaps worst of all, the world will continue to believe a fairy tale: that the Fed effectively recapitalized US commercial banks in the 2008 crisis and through successive rounds of QE without pain or consequences. Are we really to believe the monetary base underpinning the world's reserve currency can be quadrupled in less than a decade without causing lasting damage? That gross overspending by Congress can be wished away simply by having the Fed provide a ready market for Treasury debt at miniscule interest rates? Or that interest rates should have no connection to the savings habits of society? 

It all strains credulity, which is precisely why monetary policy relies so heavily on technocratic jargon and opaque processes: they want to confuse or bore us into not paying attention. And thus the can is kicked down the road, politically and policy-wise. That's how we became a high time preference society almost by stealth.

You can watch these engaging presentations by Dr. Robert Murphy, Carlos Lara, and myself here.

These excerpts from my talk attempt to remind the listener that none of this is normal, in fact quite the opposite. Not too long ago prosperous societies were based on the notion of capital accumulation, of producing more than they consumed, making the next generation better off in the process.

**********************************

This is the fundamental and foundational change that has to occur. We need real, positive interest rates, meaning rates above inflation rates. We have to reward saving if we intend to have a growing or sustainable economy.

It is not exaggeration to say interest rates drive civilization.

They are the most important signals in an economy. Everything flows from them, because the cost of borrowing money effects the cost of almost everything.

This is the fundamental and inescapable starting point for building not only a real economy but a real culture. Every healthy society accumulates capital, every healthy society produces and saves more than it consumes and borrows. The human desire to leave something to future generations explains why all of us sit in splendor today, in this restaurant, enjoying conditions our great grandparents could not have imagined.

To do this you need actual real interest rates, market prices for money. Savers and borrowers, supply and demand, need to meet. We have a mechanism for this, it’s called the market. Without market prices you have socialism, the opposite of markets.

So why do so many otherwise free-market economists not object to monetary central planning?

The most important interest rate is the Federal Funds rate, the rate at which commercial banks borrow from each other overnight if they need to meet reserve requirements for their loans. The Fed controls this rate, or “targets” it, by manipulating the amount of reserves banks have in their accounts with the Fed. Banks with high reserves don’t much need to borrow from each other, so the Fed Funds rate stays low. And since 2008 commercial banks have received interest on excess reserves parked at the Fed, which encourages high balances and keeps rates low.

All commercial interest rates — e.g., the interest you pay on your mortgage — flow from the Fed Funds Rate on a cost-plus basis.

But when the Federal Reserve effectively keeps interest rates lower than they would be naturally, it creates a terrible disconnect between lenders and borrowers. And this disconnect causes unbelievable distortions throughout the economy. As David Stockman says, because of central banks there is no honest pricing of goods anywhere — we simply don’t know, for example, what a barrel of oil or a bushel of wheat or a Honda Accord should cost. The Fed has distorted the single most important price in the entire economy — the Federal Funds rate.

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The Gains from Trade

04/17/2018Mark Thornton

Here is a simple example of the gains from trade. The exact some physical goods has different subjective values for their owners and both benefit from exchange! 

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Livestream of Tonight's Fractional Reserve Banking Debate between Bob Murphy and George Selgin

04/16/2018Mises Institute

Tonight Mises Senior Fellow Bob Murphy is debating George Selgin of Cato's Center for Monetary and Financial Alternatives on the topic of fractional reserve banking. The host is Gene Epstein's Soho Forum, an excellent monthly debate series based in New York City. 

You can watch live tonight at 6:30 ET on Reason's Facebook page

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Ostrowski: Pro-Gun-Rights Tactics Are "Archaic, Dated, Spent"

04/16/2018Ryan McMaken

In a talk at the Second Amendment Town Hall in Batavia, New York, James Ostrowski discusses how the long-used efforts to preserve gun rights are doomed to failure. Shouting "the second amendment is enough for me!" is a failed tactic:

We are losing the fight for the Second Amendment. We are losing it in the courts. We are losing it in the legislatures. We are losing it in the media, in the schools and with young people. The approach we have been using to protect the Second Amendment for many years has failed, is failing and will continue to fail. That approach has basically focused on lobbying, elections, voting and using the litigation process without any serious attempt to change the philosophical or ideological bent of the country or to change the ideological trajectory of the country to the left which in the last five years has been accelerating, and without any attempt to change the basic progressive mindset which has dominated American politics for many decades. The tactics we have used are archaic, dated, spent, don’t work and there has been no attempt to use bold new innovative tactics and unless that changes, we are going to lose this fight.

We are close to losing a right that has been recognized in the West for many, many centuries. It’s an ancient right that great minds had to first do the philosophical work to identify, then define, then do the hard political work to have this right recognized by governments and by government law. We are on the verge of losing this ancient right in these times and perhaps very soon because of our own failure to properly defend it with good arguments and good strategy and tactics and the efficient execution of those strategies and tactics.

Read the full talk.

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Governor of Bank of Canada Doesn't Know Canada's Own History

04/16/2018Tho Bishop

Unfortunately I will not be able it make the highly anticipated debate between Bob Murphy and George Selgin on fractional reserve banking tonight, it should be a great event between two great scholars (and former Mises Institute alums). Though I'm obviously on Team Bob tonight, I did want to point out a great tweet from Dr. Selgin over the weekend that help shows the very superficial grasp of history many central bankers have.

In a thread sparked by recent comments from Mark Carney of the Bank of England about central bank digital currency, a participant pointed to an article from Stephen S. Poloz — the head of the Bank of Canada. While explaining his skepticism of cryptocurrency, Poloz remarks that providing cash "is an absolutely vital public good, which has always been provided by the central bank." 

The problem as Selgin notes, is that central banks didn't provide cash for Cananda until the BoC was founded in 1935. Prior to that, Canada had a system of free banking and private currency — a monetary regime that proved to be far more stable than the United States under the Fed.

While this could perhaps be dismissed as simple absent mindedness on part of Poloz — his own "57 states" moment — the problem is that his entire point about the inherent "public value" of government-backed currency is directly undermined by Canada's own history. It is precisely because the record has shown that money is best left up to the market — coupled with the past decade of unprecedented monetary policy — that recent projects such as cryptocurrencies (along with private gold/silver/etc.-backed money) are so fascinating. On this point, I'll continue to shamelessly borrow from Selgin's work by pointing to his blog articles (Part 1Part 2, and Part 3) that critique a paper about what Canada's history of private bank notes might mean for cryptocurrency.

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The Winter 2017 QJAE Is Now Online

04/13/2018Mises Institute
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