ayrnieu

No, No McGovern (Rothbard, 1972)

ayrnieu — Mon, 10 May 2010 17:16:00 GMT

(Extracted from the October edition (pdf, 8 pages) of the Libertarian Forum.)

No, No McGovern

Having attacked Richard Nixon since the inception of his Administration, having armed early on for a "Dump Nixon" stance bv libertarians. I now have to stand up and report that I cannot swallow George McGovern or the McGovernite movement for which he stands as a bumbling front man. I agree with every word of criticism that Joe Peden has for President Nixon; but I come not to praise Richard Nixon but to bury George McGovern.

The argument for dumping Nixon was always for me a presumption rather than an absolute commandment. The presumption was for the pro-peace candidate and for the candidate out of power, and therefore my inclination was to support the Democratic nominee whoever he might be. Other things being equal I would have, but other things are not equal, and for me the monstrousness of the McGovernite movement overrides all other considerations in this campaign.

Specifically, I cannot abide McGovernism for two basic reasons. First is his economic program, which would involve a compulsory egalitarianism and a collectivism far beyond anything contemplated by Mr. Nixon. The McGovernite proposal of $1000 grant for every man, woman, and child in America would mean a $210 billion monstrosity that would have to be financed by crippling taxation on the middle class, on all people making over $12,000 a year. The press and the public have been confused in lumping together the "populism" and the "tax reform" measures of McGovern and of George Wallace. Governor Wallace proposes the lowering of taxes on the mass of Americans, middle and working class alike; McGovern proposes the drastic raising of taxes on these same Americans. George Wallace would lower the exploitation of the average American by the State; George McGovern would enormously increase that exploitation. In short, Wallace is the true populist, while McGovern proposes a giant leap into oppressive collectivism under the guise of a phony populist rhetoric.

The rebuttal to this charge by my pro-McGovern friends is that Congress would never pass the McGovern program anyway, so why worry? Perhaps; but for me one of the most chilling moments of the Democratic convention was when Speaker Carl Albert arose to pledge his eternal support to McGovern as President. Congress has been supine for decades, and I simply cannot bring myself to trust the cause of the last shreds of economic sanity to the likes of Carl Albert. I don't think we can afford the risk.

My second overriding problem with McGovern is the McGovernite movement itself, particularly as reflected in the lunatic and dangerous quota system which is seeks to impose on American life. No longer is status and advancement to depend on the achievement of each individual; instead, we are to have coerced quotas to bring the "oppressed" groups in the population up to their numerical share of the total population. The groups favored with the "oppressed" label are, of course, highly selective, being confined to women, blacks, youth, and Chicanos, all of whom are to receive their quotal share regardless of individual merit or of the choice of the voters. Already, such McGovern supporters as Jack Newfield and Joe Flaherty have written angrily and bitterly of the discrimination thus imposed on groups not favored by the McGovernites: for where is the quotal representation for blue collar workers, Irish, Italians, Poles, etc.? Furthermore, the imposing of quotas to compel a rise in status of one group means ipso facto that other groups are going to be coercively burdened and discriminated against by the McGovernites. These groups are of course never openly mentioned, but they amount to the most successful groups, largely adult male heterosexual WASPS and Jews.

In its destructive quota thinking, the McGovernite movement is of a piece with its economic program: in both cases, the motivating drive is a compulsory egalitarianism that would tear down the successful on behalf of a highly selective group of the so-called "oppressed". Of course, at bottom, the egalitarianism is as phony as the McGovernite daim to populism and to representing a cross-section of the "peepul". The true reflection of McGovernite "populism" is the statistic that no less than 39% of the delegates to the Democratic convention have attended graduate school! What we are seeing then is a naked grab for power on the part of an eager new elite of graduate students and upper-middle class "reformers" (those who used to be called "parlor pinks.") It is a drive to fasten a new Mandarin class of self-styled intellectuals upon the country, a class that would reach for absolute power and the crushing of other groups and indeed of the bulk of American citizens. Our current ruling classes, as reprehensible as they are, at least allow for a great deal of pluralism, and for relatively secure status for most of the groups in the population. We can see from the ruthlessness of their quota system that the McGovernite elite would be far more totalitarian and hence far more dangerous in their wielding of State power. The sooner and the more completely that the McGovernite movement is crushed to smithereens, the more viable will be the long-run climate of individual freedom in America.

The McGovernite movement is, in short, in its very nature a kick in the gut to Middle America. And yet the libertarian movement, in its program for getting the government off the backs of the individual, aims to be the fulfillment of the aspirations of that same Middle America. When Middle America, therefore inevitably responds in November by its kick in the gut to the McGovernite movement, it behooves libertarians to stand and cheer. The sooner McGovernism is disposed of, the better for us all. Why in the world should libertarians, whose principles are at an opposite pole from McGovernism, agree to tar themselves with the revield McGovernite brush?

It is important, too, for libertarians to drive the lesson home after November that the Nixon victory will be not so much an endorsement of Nixon's Presidency as it wlll be the absolute repudiation of McGovernite collectivism. The path will then hopefully be cleared for a further expansion of libertarian ideas and activity among the American public.

For me, there was an extra dimension of aesthetic horror at the McGovernite convention. For as I watched the convention, I began to have a sense of déjà vu, of having seen all this hogwash before; suddenly, I realized the connection: for what I was seeing was an updated version of the Henry WalIace campaign of 1948. There was the same emphasis on left-wing youth, on the "oppressed" minorities; and there was the same emphasis on Old Left folk-songs. Twice in his acceptance speech George McGovern (a former delegate to the Henry Wallace convention) solemnly quoted from left-wing folk songs; and when he ended his speech with the Woody Guthrie "This land is your land, this land is my land, from the redwood forests to the New York island . . . ", I thought I was living in a rousing comic parody of Old Left baloney. Except that the parody, alas!, was all unconscious; what we were seeing was the worst of the Old Left, from official program to aesthetic values, at last triumphant in the Democratic party. I raise the spectre of Henry Wallace not to red-bait; for the real problem with the Wallace movement was not its Communist associations but its rampant Old Leftism, from its economic program to its aesthetic attitudes.

And while McGovern would clearly be more in favor of peace than Richard Nixon, the peace and the "isolationism" would be strictly limited. For the McGovern foreign policy is unfortunately not "isolationism" at all, but a recredescence of the Wallace and Truman policies before the Korean conflict; in short, McGovern stands for a nuclear deterrent (albeit at lower cost) plus a maintenance of American troops and interventionism in Europe and the Middle East. One of the most shameful aspects of McGovernism at the convention (which went unrecorded by the media) was the way in which McGovern consented to the Jackson platform plank, pledging continued Anerican troops in Europe and the Mediterranean for the support of Israel, and ramming this plank down the throats of the reluctant delegates. In a recent New York Review of Books, McGovern supporter I. F. Stone perceptively termed McGovern's foreign and military policy "left-wing McNamaraism", which means maintaining military intervention in Europe and the Middle East while cutting our losses in Indo-China. While this would be superior to the Nixonite maintenance of the war in Indo-China, it is far from the isolationism and neutrality of libertarian dreams. And on such civil libertarian questions as amnesty and abortion, McGovern has already gone far to undercut his own previously libertarian positions.

On balance, then, McGovernism offers little good and much evil for the libertarian; in the 1972 election I hold that McGovernism is the greater evil and that therefore we should all look forward with equanimity to its pulverization in November.

Turning the 'employer power' defense of minimum wage laws on its head.

ayrnieu — Sat, 31 Oct 2009 05:20:00 GMT

The economics: a worker tends to earn his discounted marginal productivity in a 'package' of wages and conditions in lieu of wages. The worker's marginal productivity is the income that the employer gains from the employment of this additional worker. The income to the worker is discounted by the natural rate of interest because the worker gets his wages today whereas the employer reaps her profits in the future. By 'tend to', I mean that

if the worker is paid above his discounted marginal productivity, the worker is a net loss for the employer: she can fire him and by this reap a profit; and that
if the worker is paid below his discounted marginal productivity, a competing employer can bid him away with higher wages.

The 'package' concept acknowledges that weekly wages are only a part of an employer's expenditure on labor, and that it is this total expenditure that tends towards discounted marginal productivity. In a free market the composition of this package is ultimately set by the preferences of workers; in the American market we have things like "the employer's contribution" of social security, which is of course an obscured second tax upon the worker.

Minimum wage: a politician declares illegal all jobs of a wage less than some figure. Where this figure is below a given wage, the law of course has no overt effect. Where the figure is above a wage but below the full 'package' of compensation, and where the composition of the package is not constrained by other laws, the law may raise wages at the expense of conditions that the workers tended to prefer. Where the figure is above even the package, where it requires a discounted marginal productivity that a worker does not offer, the law may disemploy workers. I'll get back to this last condition.

Employer power: a minimum wage advocate may agree with all of the above, and still say: wait a minute, this 'tendency' about wages is only a tendency, and we find markets with very many employees and very few employers. These employers enjoy a "buyer's market" in labor, then, and their competition for labor can cease far short of the discounted marginal productivity that wages merely tend towards. A minimum wage law, then, can simply effect the 'tendency' upward through force of law, raising wages without impairing conditions and without disemployment.

(Of course, real-world minimum wage advocates will simply dismiss the above as 'theoretical' and oppose their empirical studies which show that a minimum wage law was enacted and that wages thereafter rose or that people were not thereafter disemployed. I am not interested in these charlatans. I am interested in the person who worries about employer power.)

Employers may enjoy a "buyer's market" in labor, I do not deny that this is possible and would not care to deny that it was so in a given industry. But even in a buyer's market, all actors -- employers and employees -- come together voluntarily, and an employee by accepting employment demonstrates that this is to him preferable to not being employed or to seeking employment elsewhere. Likewise for the employer: in a voluntary exchange both parties benefit ex ante, or they wouldn't do it. A buyer's market is not illegitimate: if it were observed that more teenage boys than teenage girls seek sex, giving teenage girls a buyer's market in these terms, nobody would advocate that this imbalance be corrected by political fiat. When it is observed that more unmarried women than unmarried men prevail in a society, politicians likewise do not begin rumbling about mandatory marriages between women or mandatory polygamy or somesuch.

But here is where I turn the power worries on their head: do minimum wage laws come to the defense of very many employees who are faced with very few employers? What about people who do not want to work very hard? Wal-Mart greeters, say, or a teenager who merely wants to support a WoW habit. If a number of employers can only bother with buying the services of a few highly-productive workers, a competitor may still hire many WoW-habit teenagers who put in seven hours a week and then hurry home. A minimum wage law can prevent this sort of competition, prevent mere WoW-habit work, and -- by making disemployment the only legal alternative -- add economic power to the manager who calls his employees together and says, listen, y'all're gonna need to work triple hours from now on, hear?

Excerpt of Robert Lawson's "Economic Freedom" Auburn University Lecture.

ayrnieu — Sat, 26 Sep 2009 17:42:00 GMT

[Transcribed from Economic Freedom (mp3, 1:09'48"). Robert A. Lawson. Economic Freedom of the World, 2009 Annual Report.]

So the great debate was, [in] our context: if you have economic freedom, does it work or does it not work? I mean, I don't know why we need to argue until three in the morning and drink beer all night - although that's fun - to answer that debate. Let's go out and collect some data, which I've done, and let's try to figure it out.

Well, this is the economic freedom index - this is by quartile, so the reds are the lowest, this is the bottom 25%, second 25, third, and the highest 25% is blue. And this is income per capita - it's GDP per capita. It's not a perfect measure, but -- that's a nice picture. That was Milton Friedman's favorite picture, if I may drop a name. He loved that picture. He says, "look! We're right!"

That's not an obvious picture, 25 years ago. There were people who would argue that if you have centralized planning, if you have less economic freedom, you should have a richer economy. It's going to work better, we'll have more prosperity if we have centralized planning. They were projecting that it should step down the other way. And they're wrong. They're flat-out wrong.

We all know that today, but this was an open question not too long ago. People who really debated, who really thought economic freedom didn't work, it made us poorer.

[skip]

Alright, so what do my friends say, when I would corner them, "You know, economic freedom - markets, capitalism - it works better. People are richer." And they would say, "yeah, people are richer, but-- but, it screws the poor. Or the income distribution is too unequal." That's what they say, right?

Guess what? It's a lie. It's not true.

This is the share of income held by the lowest 10%. The share of income held by the poorest 10%. By quartile. So if you look around the world, I think that data set has about a hundred countries in it. You have a hundred countries, you look at the hundred countries in the world, you look at the share of income held by the bottom 10%, the bottom quartile, the third, the second, the most -- what do you see? It's really about the same. It's about 2, 2+1/2 percent. Which sucks. It means that 10% of the people have 2+1/2% percent of the money. The news there is that being poor is no fun. OK, got it.

But guess what? It really doesn't matter, in terms of the share of income, in terms of the distribution of income, whether you're in a high economic freedom country or a low economic freedom country, you're going to have 2, 2+1/2% percent of income. If anything, it looks like it's a little bit better in the high income, but I'm not going to push that point. OK? It really doesn't matter.

The evidence is overwhelming that market-oriented, liberal market economies, free-market capitalism economies, do not have, in general, more unequal distributions of income. They just don't. So it's a great lie. And leftists get away with this lie. They just get away with it. We've all nodded our heads, "oh, yeah, that's a problem, we should deal with it." No, it's a lie. Don't let leftists say that capitalism creates unqual distributions -- it's a simply, it's a bald lie. And the only reason they get away with it is, no one ever argues from data. They just argue from rhetoric, and they throw things out. The data tell us it's not true.

So, burn that one in your brain, and bring it up the next time you-- to tell them, it's a lie, you can't get away with those kinds of lies. This one really annoys me.

But guess what? If you want to be poor, where do you want to be poor?

[And so on.]

Transcript of Bernanke's answer to Terry Easton on the Austrian school.

ayrnieu — Tue, 13 Jan 2009 21:38:00 GMT

X: Yes, one right at the back, red tie, just underneath the cabinet rack.

Terry Easton: Thank you, that's an Adam Smith tie, eh, at the Adam Smith Foundation.

Thank you Dr. Bernanke. I really appreciate as we all do your challenge in dealing with the systemic financial systems crisis.

I'm Terry Easton with Human Events newspaper in Washington D.C. The concern that we have is that right now we're dealing with this problem looking at the forest at the tree level, in fact probably down on the ground looking at the blades of grass growing, and you seem to be dealing with it as all people are in all similar institutions worldwide, as a classic Keynesian approach to solving the problem.

And of course here in the London School of Economics, there is some knowledge of another alternative approach to the problem, known of course as the Austrian school. von Mises, Hayek, Rothbard, et cetera, have suggested an alternative to this 90-year edifice that we've built, which now is coming back to roost, and I wonder if it's possible, realizing that your position is the head of the Fed, can you talk a little bit about the underlying system that has now existed for 90 years? Are we going the right way? Can we fix it? Should we look at these alternatives to the problem? I would be interested in your philosophical comments.

Bernanke: Well, the question is related to the former one. It has to do with the value and the benefits of markets. I think economists are often accused of being market fundamentalists, I think in fact economists have done a better job than anybody of figuring out what markets can do well, and what they don't do so well, when there are problems with information or other things.

And economists have also pointed out that government interventions are not benign, perfectly executed interventions, but are also executed by individuals with interests, and so on -- this is the public policy, er, ah, school. And so, the balance between markets and the government is a delicate one.

In particular, those of us who are economists, and I think that accounts for almost everybody in the room, are always amazed by the lack of understanding in the general public about the power of markets, and in particular the Austrian school emphasized the ability of markets to aggregate information and incentives to provide outcomes which a top-down government approach can't provide. So, as an economist I have a lot of faith in markets. I don't think, for example, I completely disagree with the view that what's happened in the last year and a half is a 'crisis of capitalism', per se. I mean, after all, capitalism has done an awful lot for growth and living standards for a long time. But rather it's a crisis that arises in a particular set of situations and conditions that we've faced in the last couple of years.

In particular, as I've indicated before, because of the tendency of financial systems to the boom and bust -- which is a very long-standing problem, one that was recognized by virtually every economist who's studied these issues -- and because of the effects of that on the economy, there has been a long-standing tendency to try to find a regulatory balance that reduces the costs of those booms and busts without costing us the benefits of the market forces and the innovation and the information aggregation and so on. It's a very difficult balance. I think, what we've learned, in this case, is not necessarily that we need to have a lot more regulation, but that we need to think through what went wrong with -- what I described: when I say the financial sector what I mean is the private sector plus the regulatory overlay; that whole complex didn't perform well in this case, and we need to think hard about how to fix it.

Now, as I try to say in my speech, we have short-term and long-term considerations. I think it's very important for us to try to put out the fire. I think it's good advice in general, that if there's a fire burning, you try to put it out first, and then you think about the fire code.

So you don't try to do it all at once necessarily. We need to figure out how to solve this problem, how to stop the costs that are being borne all over the world, but going foward we have to look at the fire code: we have to think about what is the right balance of regulation, markets, that will give us a powerful, innovative financial system, but one that would be safer to use in some sense.

Chodorov: The Need of a Golden Calf

ayrnieu — Fri, 28 Nov 2008 04:33:00 GMT

One is a Crowd

Buy the book;
Read the book (pdf, 190 pages);
Who is Frank Chodorov? (pdf, 4 pages) by Murray Rothbard.

We have it on the authority of the Lord, as recorded in Genesis, that idolatry is a corruption far more reprehensible than even the sins of the flesh. But, why? Why is the inveterate habit of humans to worship idols put so low in the scale of values? For answer, let's look to the story of the golden calf.

It will be recalled that Moses had gone up to Sinai for instructions on the management of his tribesmen, and because he had been gone so long about it they gave up on him. So, they turned to Aaron, the second in command, and demanded that he provide them with gods "which shall go before us." That is, they wanted something tangible, sensual and pragmatic to worship, the kind of gods they had seen in Egypt

A "Thick Cloud"

Moses had given them Jehovah, maintaining that He was the one and only. But this Jehovah, despite the fact that He had done quite well by them in their escape from bondage, turned out to be only an idea. He was intangible, unapproachable, completely out of this world and therefore difficult to comprehend. Even Moses saw Him only as a "thick cloud" When you get right down to it, Jehovah was an abstraction, and an abstraction is elusive; a graven image, like the dome on the capitol in Washington, can be seen and appreciated, and the worship of it is satisfying.

The most irritating thing about Jehovah was His insistence on principles. He would have no truck with expediency, was constantly bringing up long-run consequences, and scolded unmercifully when a fellow gave way to some momentary inclination of the flesh. He enjoined you to keep your eyes off the neighbor's wife and property, gave you no peace when you indulged your appetite for homicide, perjury or adultery.

This was most annoying. Other people had gods quite amenable to amendment; one could not only see and talk to them, one could do business with them. If only their palms were properly greased with sacrifices, they could be depended upon to produce anything you wanted, even social security, and no questions asked. Jehovah, on the other hand, was uncompromising. He laid down His inflexible principles, and you had to go it on your own from there. The best He could offer you was an opportunity¿the Promised Land¿and if you didn't have sense enough to make use of that opportunity you took the consequences. There was no way of getting around this intractible Jehovah.

Like all the people who came before or after them, the Jews found these undemonstrable absolutes rather confining. They resented having their aspirations restricted by the natural order of things, their appetites delimited by industry and thrift. They wanted a handout, and on a golden platter. That's what gods are for, and if Jehovah could not or would not deliver on demand, they would set up reasonable gods. Hence, when Moses took an unconscionable time in getting back from Sinai, and they thought they were through with him and Jehovah for good and all, they went pragmatic. They put in an order for gods capable of producing an inexhaustible supply of bread and circuses.

Aaron had no mind to argue with them. Though he is listed in the Bible as a priest, the evidence shows him to have been something of a politician. For one thing, the Lord assigned him to Moses as a spokesman, or rabble-rouser, when the latter pleaded his lack of eloquence as a disqualification for leadership. Aaron was selected because he was not "of a slow tongue" Better proof of his political gift is the way he handled the clamor for the golden calf: he heeded the will of the mob, as a good leader should, and then he taxed them so that he could give them what they wanted. And it was a stiff tax, in those days: "Break off the golden earrings which are in the ears of your wives, and of your sons and daughters, and bring them to me."

Political Expediency for Natural Law

Having produced, out of their substance, the idol of their hearts, Aaron followed the political pattern by declaring a day of thanksgiving: "Tomorrow is a feast to the Lord." (Notice, he wasn't breaking with tradition by denying the Lord, but was insinuating divine sanction for the molten image; just as latter day Aarons are wont to equate democracy with planning.) And the people had bread and circuses, even as in the days of the Caesars and the New Deal. Everything was on a practical and immediate basis, with no thought of consequences. Principles were abolished.

But, were they? Moses had insisted that principles were oblivious of human dicta, that they scoffed at abolitionists and went on operating in their accustomed way. If people presumed to conduct their affairs without regard to principles, they would suffer the consequences. And so, the principles that Aaron arrogantly disregarded continued to plague the Jews. According to the record, Jehovah waxed wroth with these backsliders and determined to wipe out the lot of them. Though we are told that Moses, with a marvelous piece of special pleading, dissuaded the Lord from His fell purpose, the fact is that civil war broke out among the Jews: "and there fell of the people that day about three thousand men."

In modern terminology, we would say that when you substitute political expediency for natural law (which is what idolatry amounts to), you are in for trouble: civilization becomes decadent and declines. The Bible puts it more dramatically: Moses got real sore, broke up the tablets on which the principles were inscribed, and all hell broke loose.

How long this condition continued is not clear, for the Bible is a bit careless about chronology. Judging by what we know about the decline of civilizations, it is a reasonable inference that a number of generations must have come and gone before the Jews recovered from their defiance of fundamental principle; in the Biblical story the whole transition seems to have happened within a few days. At any rate, after the Lord had decimated the tribes, and Moses had put the remnants back on the right track, there was what we call a rebirth of civilization. Or, Moses went up to Sinai, got a new set of tablets, and led his people to the Promised Land.

Like the Jews in the Wilderness

No one, and least of all those who are concerned with reform, will maintain that the human race has as yet reached the Promised Land. The evidence is all against it. Man has done a lot in accumulating a knowledge of things in general, but he seems incapable of ridding himself of the need of a golden calf. He still yearns for "gods which will go before us," gods that are uninhibited by the laws of nature, gods that are accountable only to our appetites, gods that speak not of consequences or the long run. In that respect we are like the Jews in the wilderness. Witness the pervasive religion of our times, the worship of the State.

Is not the State an idol? Is it not like any graven image into which men have read supernatural powers and superhuman capacities? The State can feed us when we are hungry, heal us when we are ill; it can raise wages and lower prices, even at the same time; it can educate our children without cost; it can provide us against the contingencies of old age and amuse us when we are bored; it can give us electricity by passing laws and improve the game of baseball by regulation. What cannot the State do for us if only we have faith in it?

And we have faith. No creed in the history of the world ever captured the hearts and minds of men as has the modern creed of Statism. Men may differ in their rituals, they may call themselves Americans, Englishmen or Russians (New Dealers, Socialists or Communists), but in their adherence to the doctrine of the omnipotence of the State they are as one. It is the universal religion. There may be some who maintain the State is a false god, that it is powerless in the face of natural law, incapable of doing anything the individual cannot do for himself, and is in fact a hindrance to man in his effort toward self-improvement; but such dissidents from the norm are few indeed. From New York to Moscow to Peiping, and all way stations between, men pay homage to the State. It is a universal passion equal in intensity, but much larger in scope, to the spirit of the Crusades.

In the Moslem world, men turn toward Mecca at certain times of the day and pray to Allah according to prescribed rules. In America, all hands are constantly outstretched toward Washington, shamelessly demanding alms, subventions and whatever else their hearts desire, accompanying their prayers with threats of retribution if their supplications be denied. The din of the litany of "gimme" is heard all over the land. School teacher and banker, war veteran and labor union aristocrat, business man and college president, cry out in unison: "Thou who canst do all, do unto me more than thou dost unto others."

The Religion of Statism

And what is Washington but the shrine of the largest golden calf in the world? Here men of all degree come to press their claims on the provider of all things good. Here dwell in splendor the high priests of the church, and those upon whom the graven image grins favorably, while those who have not yet attracted its attention fan their hopes. There is no other occupation in Washington than to propitiate the god of gods. Throughout the day, in its many-tiered houses of worship, splendid in construction and air-conditioned for comfort, high-heeled cattlemen from Texas and high-hatted tycoons from Wall Street vie with one another in obeisances and genuflections; and in the evening, worn out by their devotions, the worshippers foregather at cocktail parties to repair their energies for tomorrow's prayers.

As for the substance of this religion of Statism, the absolute upon which its theology is based, it is that political power can do anything. There is no limitation upon its scope, except a contrary and more potent political power. Of a certainty, say its theologians, there are no "natural laws" to hamstring the State; that is a well-exploded myth of the dark ages. We have seen, they declare, how through the use of force every so-called immutable consequential relationship has been made mutable and inconsequential. All things are relative. There are no certainties, either in the nature of man or the nature of the world. In fact, there is no nature. Whatever men set their hearts on doing that will be done, provided only that they put their collective powers to the job. And whatever the collective powers of men accomplish, that is "good," simply because it "works." The religion of Statism is thoroughly pragmatic; sufficient unto the day is the accomplishment thereof.

The State is the true god, its votaries maintain, because it is immortal. Men come and go, the State lives on. The priesthood who tend it may be Republicans or Democrats or what-not; the State outlasts them all. It is self-sufficient because it is sovereign, omniscient because it has an intelligence superior to the combined intelligence of all men, beyond censure because its morality transcends that by which mere man lives. It is not a social contract, not the product of a body of laws which men make and unmake. It can say, as the God of the Bible said of Himself: "I Am."

Yet, the State does not say that, or anything else, for it is in fact only a golden calf. We who worship the fiction endow it with superhuman gifts and capacities by merely demanding of it accomplishments that presuppose such gifts and capacities. It is good because we want it to be. Out of the fervency of our prayers comes the State.

Were we to take the trouble to examine the product of our imagination, we would find the State to be only a body of men who, taking advantage of our weakness, make the best of it. They promise; because of our self-deception, we do not question their ability to make good; nor do we take notice of he contingent clause accompanying the promise, that we give them power over our persons and our property. Because they are human, because they, too, are incapable of defying or circumventing the laws of nature, they cannot do for us what we cannot do for ourselves, and their promise is never fulfilled; but, the power they have acquired is not relinquished. Thus, the State consists of a body of men who, by virtue of our need for a golden calf, acquire the power to compel us to do what we do not want to do.

In the present circumstances, seeing how far we have gone in the worship of the State, we are probably in for a smash-up similar to that which befell the Jews when they asked Aaron for "gods which shall go before us." We could use a Moses to put us on the track of first principles.

Marxist and Austrian Class Analysis

ayrnieu — Wed, 16 Jul 2008 23:07:00 GMT

My topic is Marxist and Austrian class analysis. I want to do the following: first, I will present a series of theses that constitute the hard-core of the Marxist theory of history. I claim that all of them are essentially correct. And then I will show these true theses are derived in Marxism from a false starting-point. And finally, I want to demonstrate how Austrianism in the Mises-Rothbard tradition can give a correct but categorically different explanation of their validity.

Let me begin with the hard-core of the Marxist belief system.

The history of mankind is the history of class struggles. That is the history of struggles between a relatively small ruling class, and a larger class of the exploited. The primary form of exploitation is economic. The ruling class expropriates parts of the productive output of the exploited or, as Marxists say, it appropriates a social surplus product, and uses it for its own consumptive purposes.

Second, the ruling class is unified by its common interest in upholding its exploitative position, and maximizing its exploitatively appropriated surplus product. It never deliberately gives up power or exploitation income. Instead, any loss of power or income must wrestled away from it through struggles whose outcome ultimately depends on the class consciousness of the exploited. That is, on whether or not and to what extent the exploited are aware of their own status and are consciously united with other class members in common opposition to exploitation.

Third, class rule manifests itself primarily in specific arrangements regarding the assignment of property rights. Or in Marxist terminology: in specific relations of production. In order to protect these arrangements or production relations, the ruling class forms and is in command of the state as the apparatus of compulsion and coercion. The state enforces and helps reproduce a given class structure through the administration of a system of class justice. And it assists in the creation and the support of an ideological superstructure designed to lend legitimacy to the existence of class rule.

Fourth, internally, the process of competition within the ruling class generates a tendency towards increasing concentration and centralization. A multi-polar system of exploitation is gradually supplanted by an oligarchic or monopolist one. Fewer and fewer exploitation centers remain in operation, and those that do are increasingly integrated into a heirarchical order. And externally, that is as regards the international system, this internal centralization process will lead to imperialist interstate wars and the territorial expansion of exploitative rule.

Fifth, with the centralization and expansion of exploitative rule gradually approaching its ultimate limit of world domination, class rule will increasingly become incompatible with the further development and improvement of productive forces. Economic stagnation and crises become more and more characteristic, and create the so-called 'objective conditions' for the emergence of a revolutionary class consciousness of the exploited. The situation becomes ripe for the establishment of a classless society, the withering-away of the state, or the replacement of government of men-over-men by the administration of things. And, as its result, unheard-of economic prosperity.

All of these theses can be given a perfectly good justification, as I will show. Unfortunately however, it is Marxism, which subscribes to all of them, that has done more than any other ideological system to discredit their validity, in deriving them from a patently absurd exploitation theory. Now what is this Marxist theory of exploitation?

According to Marx, such pre-capitalist socialist systems as slavery and feudalism are characterized by exploitation. There is no quarrel with this, for after all the slave is not a free laborer, and he cannot be said to gain from his being enslaved. Rather, in being slaved, his utility is reduced at the expense of an increase in wealth appropriated by the slave-master. The interests of the slave and that of the slave-owner are indeed antagonistic.

The same is true as regards the interests of the feudal lord, who extracts a land-rent from a peasant who works on land homesteaded by himself -- that is, by the peasant. The lord's gains are the peasant's losses. And it is also undisputed that slavery as well as feudalism indeed hampers the development of productive forces. Neither slave nor serf will be as productive as they would be without slavery or serfdom.

But the genuinely new Marxist idea is that essentially nothing is changed as regards exploitation under capitalism. That is, if the slave becomes a free laborer, or if the peasant decides to farm land homesteaded by someone else, and pays rent in exchange for doing so. To be sure, Marx, in the famous chapter 24 of the first volume of his Capital, titled "The So-Called Original Accumulation", gives a historical account of the emergence of capitalism which makes the point that much or even most of the initial capitalist property is the result of plunder, enclosure, and conquest. And similarly, in chapter 25, on the modern theory of colonialism, the role of force and violence in exporting capitalism to the -- as we would now say -- third world, is heavily emphasized.

Admittedly, all this is generally correct. And insofar as it is, there can be no quarrel with labelling such capitalism exploitative. Yet one should be aware of the fact that Marx here is engaged in a trick. In engaging in historical investigations, and arousing the reader's indignation regarding the brutalities underlying the formation of many capitalist fortunes, he actually side-steps the issue at hand. He distracts from the fact that his thesis is really an entirely different one. Namely, that even if one were to have a 'clean capitalism' so to speak, that is, one in which the original appropriation of capital were the result of nothing else but homesteading, work, and savings, the capitalist who hired labor to be employed with this capital would nonetheless be engaged in exploitation. Indeed, Marx considered the proof of this thesis his most important contribution to economic analysis.

Now what then is his proof of the exploitative character of a clean capitalism? It consists in the observation that the factor prices, and in particular the wages paid to laborers by the capitalists, are lower than the output prices. The laborer, for instance, is paid a wage that represents consumption goods which can be produced in three days, but he actually works five days for his wage, and produces an output of consumption goods that exceeds what he receives as remuneration. The output of the two extra days -- the surplus value in Marxist terminology -- is appropriated by the capitalist. Hence, according to Marx, there is exploitation.

Now what is wrong with this analysis? The answer becomes obvious once it is asked why the laborer would possibly agree to such a deal. He agrees because his wage-payment represents present goods, while his own labor services represent only future goods, and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the full value of his output himself. But this would of course imply that he would have to wait longer for any consumption goods to become available to him. In selling his labor services, he demonstrates that he prefers a smaller amount of consumption goods now, over a possibly larger one at some future date.

On the other hand, why would the capitalist want to strike a deal with the laborer? Why would he want to advance present goods -- that is, present money -- to the laborer in exchange for services that bear fruit only later? Obviously he would not want to pay out for instance $100 now, if he were to receive the same amount in one year's time. In that case, why not simply hold on to it one year, and receive the extra benefit of having actual command over it during the entire time? Instead, he must expect to receive a larger sum than $100 in the future, in order to give up $100 now in the form of wages paid to the laborer. He must expect to be able to earn a profit -- or more correctly, an interest return.

And he is constrained by time-preference -- that is, the fact that an actor invariably prefers earlier over later goods -- in yet another way: for if one can obtain a larger sum in the future by sacrificing a smaller one in the present, why then is the capitalist not engaged in more saving than he actually is? Why does he not hire more laborers than he does, if each one promises an additional interest return? The answer again should be obvious: because the capitalist is a consumer too, and cannot help being one. The amount of his savings and investing is restricted [--audio glitch--] by the necessity that he too, like the laborer, requires a supply of present goods large enough to secure the satisfaction of all those wants, the satisfaction of which during the waiting time is considered more urgent than the advantags which a still greater lengthening of the period of production would provide.

Now what is wrong with Marx's theory of exploitation, then, is that he does not understand the phenomenon of time-preference as a universal category of human action. That the laborer does not receive his "full worth", so to speak, has nothing to do with exploitation, but merely reflects the fact that it impossible for man to exchange future goods against present ones except at a discount.

Contrary to the case of slave and slave-master, where the latter benefits at the expense of the former, the relationship between the free-laborer and the capitalist is a mutually beneficial one. The laborer enters the agreement because, given his time preference, he prefers a smaller amount of present goods over a larger future one. And the capitalist enters it because, given his time-preference, he has a reverse preference order, and ranks a larger future amount of goods more highly than a smaller present one.

Their interests are not antagonist, but harmonious. Without the capitalist's expectation of an interest return, the laborer would be worse off, having to wait longer than he wishes to wait. And without the laborer's preference for present goods, the capitalist would be worse off, having to resort to less-roundabout and less-efficient production methods than those which he desires to adopt.

Nor can the capitalist wage system be regarded as an impediment to the further development of the forces of production, as Marx claims. If the laborer were not permitted to sell his labor services, and the capitalist to buy them, output would lower, because production would have to take place with relatively reduced levels of capital accumulation.

Under a [--audio glitch--] homesteading, producing, and or savings. In each case it is brought about with the expectation that it will lead to an increase in the output of future goods. The value an actor attaches to his capital reflects the value he attaches to all expected future incomes, attributable to its cooperation, and discounted by his rate of time-preference.

If, as in the case of collectively-owned factors of production, an actor is no longer granted exclusive control over his accumulated capital and hence over the future income to be derived from its employment, but partial control instead is assigned to non-homesteaders, non-producers, and non-savers, the value for him of the expected income and hence then of the capital goods, is reduced. His effective rate of time-preference will rise. There will be less homesteading of resources whose scarcity is recognized, and less saving for the maintenance of existing -- and the production of new -- capital goods. The period of production, the round-aboutness of the production structure, will be shortened, and relative impoverishment will result.

If Marx's theory of capitalist exploitation, and his ideas on how to end exploitation and establish universal prosperity are false to the point of being ridiculous, it is clear that any theory of history which can be derived from it must be false too. Or, if it should be correct, it must have been derived incorrectly. Instead of going through the lengthier task of explaining all of the flaws in the Marxist argument as its sets out from its theory of capitalist exploitation and ends with the theory of history which I presented earlier, I will take a shortcut here.

I will now outline in the briefest possible way the correct Austrian, Misesian, Rothbardian theory of exploitation. I will then give an explanatory sketch of how this theory makes sense out of the class theory of history, and highlight along the way some key differences between this class theory and the Marxist one, and also point out some intellectual affinities between Austrianism and Marxism, stemming from their common conviction that there does indeed exist something like exploitation and a ruling class.

The starting-point for the Austrian exploitation theory is plain and simple, as it should be. Actually, it has already been established through the analysis of the Marxist theory. Exploitation characterized in fact the relationship between slave and slave-master, and between serf and feudal lord, but no exploitation was found possible under a 'clean' capitalism.

Now what is the principle difference between these two cases? The answer is this: the recognition or non-recognition of the homesteading principle. The peasant, under feudalism, is exploited because he does not have exclusive control over land that he homesteaded; and the slave, because he has no exclusive control over his own homesteaded body. If, contrary to this, everyone has exclusive control over his own body -- that is, everyone is a free laborer, and acts in accordance with the homesteading principle, there can be no exploitation.

It is logically absurd to claim that a person who homesteads goods not previously homesteaded by anybody else, or who employs such goods in the production of future goods, or who saves presently-homesteaded or produced goods in order to increase the future supply of goods, could thereby exploit anybody. Nothing has been taken away from anybody in this process, and additional goods have actually been created. And it would be equally absurd to claim that an agreement between different homesteaders, savers, and producers, regarding their non-exploitatively appropriated goods or services, could possibly contain any foul play then.

Instead, exploitation takes place whenever any deviation from the homesteading princple occurs. It is exploitation whenever a person successfully claims partial or full control over resources which he has not homesteaded, saved, or produced, and which he has not acquired contractually from a previous producer-owner. Exploitation is the expropriation of homesteaders, producers, and savers, by late-coming non-homesteaders, non-producers, and non-savers and non-contractors. It is the expropriation of people whose property claims are grounded in work and contract by people whose claims are derived from thin air, and who disregard other's works and contracts.

Needless to say, exploitation defined in this way is in fact an integral part of human history. One can acquire and increase wealth either through homesteading, producing, saving, or contracting -- or by by expropriating homesteaders, producers, savers, or contractors. There are no other ways. Both methods are natural to mankind. Alongside homesteading, producing, and contracting, there have always been non-productive and non-contractual property acquisitions.

And in the course of economic development, just as the producers and contractors can form firms, enterprises, and corporations, so can exploiters combine to large-scale exploitation enterprises -- to governments and states. The ruling class is initially composed of the members of such an exploitation firm. And with a ruling class established over a given territory, and engaged in the expropriation of economic resources from a class of exploited producers, the center of all history indeed becomes a struggle between exploiters and the exploited.

History then, correctly told, is essentially the history of the victories and the defeats of the rulers in their attempt to maximize exploitatively-appropriated income, and of the ruled in their attempts to resist and reverse this tendency. It is in this assesment of history that Austrians and Marxists agree. And by a notable intellectual affinity between Austrian's and Marxist's historical investigations exists. Both oppose a historeography which recognizes only action or interaction, economically and morally all on a par. And both oppose a historeography that instead of adopting such a value-neutral stand, thinks that one's own arbitrarily-introduced subjective value judgements have to provide the foil for one's historical narratives. Rather, history must be told in terms of freedom and exploitation, parasitism and economic impoverishment, private property and its destruction. Otherwise it is told false.

While productive enterprises come into or go out of existence because of voluntary support or its absense, a ruling class never comes to power because there is a demand for it. Nor does it abdicate when abdication is demonstrably demanded. One cannot say by any stretch of the imagination that homesteaders, producers, savers, and contractors, have demanded their exploitation. They must be coerced into accepting it, and this proves conclusively that the exploitation firm is not in demand at all.

Nor can one say that a ruling class can be brought down by abstraining from transactions with it, in the same way as one can bring down a productive enterprise. For the ruling class acquires its income through nonproductive and noncontractual transactions, and thus is unaffected by boycotts. Rather, what makes the rise of an exploitation firm possible, and what alone can in turn bring it down, is a specific state of public opinion -- or, in Marxist terminology, a specific state of class consciousness.

An exploiter creates victims, and victims are potential enemies. It is possible that this resistance can be lastingly broken down by force in the case of a group of men exploiting another group of roughly the same size. However, more than force is needed to expand exploitation over a population many times its own size. For this to happen, a firm must also have public support. A majority of the population must accept the exploitative actions as legitimate. This acceptance can range from active enthusiasm to passive resignation. But it must be acceptance in the sense that a majority must have given up the idea of actively or passively resisting any attempt to enforce nonproductive and noncontractual property acquisitions. The class consciousness must be low, undeveloped, and fuzzy.

Only as long as this state of affairs lasts, is there still room for an exploitive firm to prosper even if no actual demand for it exists. Only if and insofar as the exploited and expropriated develop a clear idea of their own situation, and are united with other members of their class through an ideological movement, which gives expression to the idea of a classless society where all exploitation is abolished, can the power of the ruling class be broken. Only if and insofar as the majority of the exploited public becomes consciously integrated into such a movement, and accordingly displays a common outrage over all nonproductive or noncontractual property acquisitions, shows a common contempt for everyone who engages in such acts, and deliberately contributes nothing to help them make successful, not to mention actively trying to obstruct them, can its power be brought down to crumble.

The gradual abolishment of feudal and absolutist rule and the rise of increasingly capitalist societies in Western Europe and the United States, and along with this unheard of economic growth and rising population numbers, was the result of an increasing class consciousness among the exploited, who were ideologically molded together through the doctrines of natural rights and liberalism. In this, Austrians and Marxists agree. They disagree however on the next assessment.

The reversal of this liberalization process, and steadily increased levels of exploitation in these societies, since the last third of the nineteenth century, and particularly pronounced since World War I, are the result of a loss in class consciousness. In fact, in the Austrian view, Marxism must accept much of the blame for this development, by misdirecting attention from the correct exploitation model of the homesteader-producer-saver-contractor vs. the non-homesteader-producer-saver-contractor, to the fallacious model of the wage-earner vs. the capitalist, thereby muddling things up.

The establishment of a ruling class over an exploited one many times its own size by coercion and the manipulation of public opinion -- that is, a low degree of class consciounsess among the exploited -- finds its most basic institutional expression in the creation of a system of public law, superimposed on private law. The ruling class sets itself apart and protects its position as the ruling class, by adopting a constitution for their firm's operation. On the one hand, by formalizing the internal operations within the state apparatus, as well as its relations vis-Ã -vis the exploited population, a constitution creates some degree of legal stability. The more familiar and popular private-law notions are incorporated into constitutional and public law, the more conducive this will be to the creation of favorable public opinion.

On the other hand, any constitution and public law also formalizes the exemptory status of the ruling class as regards the homesteading principle. It formalizes the right of the state's representatives to engage in nonproductive and noncontractual property acquisitions, and the ultimate subordination of private to public law. Class justice -- that is, a dualism of one set of laws for the rulers and another for the ruled -- comes to bear in this dualism of public and private law, and in the domination and infiltration of public law over and into private law. It is not because private property rights are recognized by law, as Marxists think, that class justice is established. Rather, class justice comes into being precisely whenever a legal distinction exists between a class of persons acting under and being protected by public law, and another class acting under and being protected instead by some subordinate private law.

More specifically then, the basic proposition of the Marxist theory of exploitation is false. The state is not exploitive because it protects the capitalist's property rights, but because it itself is exempt from the restriction of having to acquire property productively and contractually. In spite of this fundamental misconception however, Marxism, because it correctly interprets the state as exploitative, contrary for instance to the Public Choice school, which sees it as a normal firm among others, is on to some important insights regarding the logic of state operations.

For one thing, Marxism recognized the strategic function of redistributive state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income, a policy of divide et emperor, is the state's means with which it can create divisiveness among the public, and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself, through democratizing the state constitution and opening up every ruling position to everyone, and granting everyone the right to participate in the determination of state personnel and policy, is a means for reducing the resistance against exploitation as such.

Secondly, the state is indeed as Marxists see it, the great center of ideological propaganda and mystification. Exploitation is really freedom; taxes are really voluntary contributions; noncontractual relations are really 'conceptually contractual' ones; no-one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist, and the poor would perish. All of this is part of the ideological superstructure, designed to legitimize an underlying basis of economic exploitation.

And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking element, even though the exploitation is faulty. The reason is not that the borgeois establishment sees and supports the state as a guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state the very antithesis to private property that it is, and takes a close interest in it for this reason. The more successful a business, the [-- audio glitch --], but the larger also the potential gains that can be achieved if it can come under government's special protection, and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration.

The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest, because as an exploitative firm, the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations, and allowing them to counterfeit on top of its own counterfeited notes, under a system of fractional reserve banking, the state can easily reach this goal, and establish a system of state monopolized money and cartelized banking, controlled by its central bank. And through this direct counterfeiting connection with the banking system, and by extension the bank's major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society. Not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites, and the state.

Competition within the ruling class, and among different ruling classes, brings about a tendency toward increasing concentration. Marxism is right in this. However, its faulty theory of exploitation again leads it locate the cause for this tendency in the wrong place. Marxism sees such a tendency inherent in capitalist competition. Yet it is precisely so long as people are engaged in a 'clean' capitalism, that competition is not a form of zero-sum interaction. The homesteader, the producer, saver and contractor, do not gain at another's expense. Their gains either leave another's physical possesions completely unaffected, or they actually imply mutual gains -- as in the case of all contractual exchanges.

Capitalism thus can account for increases in absolute wealth. But under its regime no systematic tendency towards relative concentration can be said to exist. Instead, zero-sum interactions characterize not only the relationship between the ruler and the ruled, but also between competing rulers. Exploitation, defined as non-productive and non-contractual property acquisitions, is only possible as long as there is anything to be appropriated. Yet if there were free competition in the 'business' of exploitation, there would obviously be nothing left to expropriate. Thus, exploitation requires monopoly over some given territory and population.

And the competition between exploiters is by its very nature eliminative, and must bring about a tendency toward relative concentration of exploitation firms, as well as a tendency towards centralization within each exploitative firm. The development of states, rather than capitalist firms, provides the foremost illustration of this tendency. There are now a significantly smaller number of states, with exploitative control over much larger territories, than in previous centuries. And within each state apparatus, there has in fact been a constant tendency toward increasing the powers of the central government at the expense of its regional and local subdivisions.

Yet outside the state apparatus a tendency toward relative concentration has also become apparent, and for the same reason. Not, as should be clear by now, by any trait inherent in capitalism, but because the ruling class has expanded its rule into the midst of civil society, through the creation of a state banking business alliance, and in particular through the establishment of a system of central banking. If a concentration and centralization of state power then takes place, it is only natural that this be accompanied by a parallel process of relative concentration and cartelization of banking and industry. Along with increased state powers, the associated banking and business establishment's powers of eliminating or putting economic competitors at disadvantage by means of non-productive or non-contractual exploitation increases. Business concentration is a reflection of state-ization of economic life.

The primary means for the expansion of state power and the elimination of rival exploitation centers, is war and military domination. Interstate competition implies a tendency toward war and imperialism. As centers of exploitation, their interests are by nature antagonistic. Moreover, with each of them internally in command of the instrument of taxation and absolute counterfeiting powers, it is possible for the ruling classes to let others pay for their wars. Naturally, if one does not have to pay for one's own risky ventures, but can force others to do so, one tends to be a greater risk-taker, and more trigger-happy, than one otherwise would be.

Marxism, contrary to much of the so-called borgeois social sciences, gets the facts right: there is indeed a tendency towards imperialism operative in history, and the foremost imperialist powers are indeed the most advanced capitalist nations. Yet the explanation is once again faulty. It is the state, as an institution exempt from the capitalist rules of property acquisitions, that is by nature aggressive. And the historical evidence of a close correlation between capitalism and imperialism only seemingly contradicts this. It finds its explanation, easily enough, in the fact that in order to come out successfully from interstate wars, a state must be in command of sufficient, in relative terms, of sufficient economic resources. Other things being equal, the state with more ample resources will win.

As an exploitative firm, a state is by nature destructive of wealth and capital accumulation. Wealth is produced exclusively by civil society, and the weaker the state's exploitative powers, the more wealth and capital society accumulates. Thus, paradoxical as it may sound at first, the weaker or a more liberal a state is internally, the further developed capitalism is. A developed capitalist economy to develop from, makes a state richer, and a richer state then makes for more and more successful expansionist wars. It is this relationship which explains why initially the states of Western Europe, and in particular Great Britain, were the leading imperialist powers, and why in the 20th century this role has been assumed by the United States.

And a similarly straight-forward, yet once again entirely non-Marxist explanation exists for the observation, always pointed out by Marxists, that the banking and business establishment is usually among the most ardent supporters of military strength and imperial expansion. It is not because the expansion of capitalist markets requires exploitation, but because the expansion of state-protected and -privileged businesses requires that such protection be extended also to foreign countries, and that foreign competitors be hampered through noncontractual and nonproductive property acquisitions in the same way or even more so than internal competition.

Specifically, the business elite supports imperialism if this imperialism promises to lead to a position of military domination of one's own allied state over another state. For then, from a position of military strength, it becomes possible to establish a system of -- as one might call it -- monetary imperialism. The dominating state will use its superior power to enforce a policy of internationally coordinated inflation. Its own central bank sets the pace in the process of counterfeiting, and the central banks of the dominated states are ordered to use its currency, the currency of the dominating state, as their own reserve currency, and inflate on top of it. This way, along with the dominating state, its associated banking and business establishment, as the earliest receivers of the counterfeit reserve currency, can engage in an almost costless expropriation also of foreign property owners and income producers.

A double-layer of exploitation of a foreign state and a foreign elite, on top of a national state and a national elite, is imposed on the exploited class in the dominated territories, causing prolonged economic dependency and relative economic stagnation vis-Ã -vis the dominant nation. It is this very uncapitalist situation that characterizes the status of the United States and the US dollar, and that gives rise to the quite correct charge of US economic exploitation and dollar imperialism.

Now I come to the last thesis. The increasing concentration and centralization of exploitative powers, leads to economic stagnation, impedes the development of productive forces, and thereby creates the objective conditions for its ultimate demise and the establishment of a classless society capable of producing unheard-of economic prosperity. Contrary to Marxist claims, this is not of course the result of any historical laws. In fact, there exists no such thing as historical laws as Marxists conceive of them. Nor is it the result of a tendency for the profit rate to fall, with an increased organic composition of capital, as Marxists phrase it -- that is, an increase of constant capital as compared to variable capital. Instead [--audio glitch--] of crises, that promote the development of a higher degree of [--audio glitch--].

Exploitation is destructive of wealth-formation. Yet in the competition of exploitative firms, that is of states, less-exploitative ones, because they are in command of more ample resources, will win out over more exploitative ones. Hence the process of economic imperialism, specifically of US imperialism, initially has a relatively [--audio glitch--].

State rule becomes increasingly recognized as incompatible with the further development of productive forces and economic growth. Anti-statist social pressures mount, and bring a process of withering-away the state. Contrary to the Marxist model, however, if and insofar as this occurs, it will not mean 'social' ownership of means of production. In fact, not only is social ownership economically inefficient, as I've already explained earlier, moreover it is in fact incompatible with the idea that the state is withering away. Because, if means of production are owned collectively, and if it is realistically assumed that not everybody's idea as to what to do with these means happens to coincide as if by a miracle, then it is precisely socially owned factors of production which require state action. That is, they require state action in order to impose one person's will on another disagreeing person's will.

Instead the withering-away of the state, then, and with this the end of exploitation, means the establishment of a pure private property society, ordered by nothing but private law.

Thank you.

(applause)

Hans-Hermann Hoppe delivered the above in 1988 at a Mises Institute event titled Marx and Marxism, and I transcribed it from the mp3 available from its media archive.

The State, the Intellectuals, and the Role of Anti-Intellectual-Intellectuals

ayrnieu — Tue, 15 Jul 2008 04:50:00 GMT

My first public appearance as a speaker in the United States took place more than two decades ago here in New York City, in 1986, at the first major Mises Institute conference, held to celebrate Murray Rothbard's sixtieth birthday. And so I am particularly pleased to be back here.

Now, let me begin with the definition of a state. What must an agent be able to do to qualify as a state? This agent must be able to insist that all conflicts among the inhabitants of a given territory be brought to him for ultimate decision making, or be subject to his final review. In particular, this agent must be able to insist that all conflicts involving himself be adjudicated by him or his own agent.

And implied in the power to exclude all others from acting as ultimate judge, as the second defining characteristic of the state, is the agent's power to tax. That is, to unilaterally determine the price that justice-seekers must pay for his services.

Now based on this definition of a state, it is easy to understand why a desire to control a state might exist. For whoever is a monopolist of final arbitration within a given territory can make laws, and he who can legislate, can also tax. And surely, this is an enviable position.

More difficult to understand is how anyone can get away with controlling a state. Why would others put up with such an institution?

Now I want to approach the answer to this question indirectly. Suppose you and your friends happen to be in control of such an extraordinary institution. What would you do to maintain your position, provided of course: you didn't have any moral scruples? (laughter)

You would certainly use some of your tax income to hire some thugs. First, to make peace among your subjects, so that they stay productive and there is something to tax for you in the future. But more importantly: because you might need these thugs for your own protection, should the people somehow wake up from their dogmatic slumber and challenge you.

Now this will not do however, in particular if you and your friends are a small minority in comparison to the number of your subjects. And only if you are a small minority can you live a comfortable life on the backs of others. For a minority cannot lastingly rule a majority solely by brute force. It must rule by opinion. The majority of the population must be brought to voluntarily accept your rule.

This is not to say that the majority must agree with every one of your measures. Indeed, it may well believe that many of your policies are mistaken. However, it must believe in the legitimacy of the institution of the state as such. And hence, that even if a particular policy may be wrong, that such mistake is an accident that one must tolerate in view of the fact that some greater good is provided by this institution.

Yet how can one persuade the majority of the population to believe this? And the answer is: only with the help of the intellectuals. Now how do you get the intellectuals to work for you? To this the answer is easy. The market demand for intellectual services is not exactly high and stable. Intellectuals would be at the mercy of the fleeting values of the masses, and the masses are uninterested in intellectual, philosophical concerns. The state, on the other hand, can accomodate the intellectual's typically over-inflated egos, and offer them a warm, secure, and permanent berth in its apparatus.

However it is not sufficient that you employ just some intellectuals. You must essentially employ them all, even the ones who work in areas far removed from those that you are primarily concerned with, that is philosophy, the social sciences, and the humanities. For even intellectuals working in mathematics or the natural sciences for instance can obviously think for themselves, and so can become potentially dangerous. It is thus important that you secure also their loyalty to the state.

Put differently: you must become a monopolist. And this is best achieved if all educational institutions, from kindergarten to universities, are brought under state control, and all teaching and researching personnel is state-certified.

But what if the people do not want to become educated? For this, education must be may compulsory. And in order to subject the people to state controlled education for as long as possible, everyone must be declared equally educable. The intellectuals know such egalitarianism to be false, of course, yet to proclaim nonsense such as everyone a potential Einstein, if only given sufficient educational attention, pleases the masses and, in turn, provides an almost unlimited demand for intellectual services.

Now, none of this guarantees correct statist thinking, of course. It certainly helps however, in reaching the correct statist conclusion, if one realizes that without the state one might be out of work, and may have to try one's hands at the mechanics of gas-pump operation, instead of concerning oneself with such pressing problems as alienation, equity, exploitation, the deconstruction of gender and sex roles, or the culture of the Eskimos, the Hopes, and the Zulus. (applause)

Now, in any case, even if the intellectuals feel underappreciated by you, that is by one particular state administration, they know that help can only come from another state administration, but certainly not from an intellectual assault on the institution of a state as such. Hence, it is hardly surprising that, as a matter of fact, the overwhelming majority of contemporary intellectuals, including most conservative or so-called free-market intellectuals, are fundamentally and philosophically statists.

Now has the work of the intellectuals paid off for the state? I would think so. If asked whether the institution of the state is necessary, I do not think it is exaggerated to say that 99% of all people would unhesitatingly say yes.

And yet, this success rests on rather shaky grounds, and the entire statist edifice can be brought down, if only the work of the intellectuals is countered by the work of anti-intellectual intellectuals, as I like to call them.

The overwhelming majority of state supporters are not philosophical statists. That is, statists because they have thought about the matter. Most people do not think much about anything philosophical at all. They go about their daily lives, and that is it.

So most support stems from the mere fact that the state exists, and has always existed as far as one can remember, and that is typically not farther away than one's own lifetime. That is, the greatest achievement of the statist intellectuals is the fact that they have cultivated the masses' natural intellectual laziness or incapacity, and never allowed for the subject of the state to come up for serious discussion. The state is considered as an unquestionable part of the social fabric.

The first and foremost task of the anti-intellectual intellectuals, then, is to counter this dogmatic slumber of the masses by offering a precise definition of the state as I have done at the outset, and then to ask if there is not something truly remarkable, odd, strange, awkward, ridiculous, indeed ludicrous about an institution such as that.

I am confident that such simple definitional work will produce some very first but serious doubt regarding an institution that one previously had been taking for granted. And that seems to be a good start. Again, recall: a state is an institution that decides who is right and wrong in conflicts involving itself.

Now, further, proceeding from less sophisticated yet not incidentally more popular pro-state arguments to more sophisticated ones: to the extent that intellectuals have deemed it necessary to argue in favor of the state at all, their most popular argument, encountered already at kindergarten age, runs like this:

Some activities of the state are pointed out: the state builds roads, kintergarten schools, it delivers the mail and puts the policeman on the street. Imagine there would be no state. Then we would not have these goods. Thus, a state is necessary.

And at the university level, a slightly more sophisticated version of the same argument is presented. It goes like this:

True, markets are best at providing many or even most things, but there are other goods that markets cannot provide or cannot provide in sufficient quantity or quality. And these other so-called 'public goods' are goods which bestow benefits unto people beyond those people who have actually produced or paid for them. Foremost among such goods ranks typically education and research. Education and research for instance, it is argued, are extremely valuable goods. They would be underproduced however, because of 'free riders'. That is, cheats who benefit via so-called 'neighborhood effects' from education and research without actually paying for it. Thus, the state is necessary to provide otherwise underproduced or unproduced 'public goods' such as education and research.

Now these statist arguments can be refuted by a combination of three fundamental insights.

First, as for the kindergarten argument, it does not follow from the fact that the state provides roads and schools that only the state can provide such goods. People have little difficulty recognizing that this is a fallacy. From the fact that monkeys can ride bikes, it does not follow that only monkeys can ride bikes.

And secondly, immediately following, it must be recalled that the state is an institution that can legislate and tax. And hence, that state agents have little incentive to produce efficiently. State roads and schools will only be more costly, and their quality will be lower. For there is always a tendency for state agents to use up as many resources as possible doing whatever they do, but actually work as little as possible doing it.

Now third, as for the more sophisticated statist argument, it involves exactly the same fallacy encountered already at the kindergarten level. For even if one were to grant the rest of the argument, it is still a fallacy to conclude from the fact that states provide public goods that only states can do so. But more importantly, it must be pointed out that the entire argument demonstrates a total ignorance of the most fundamental fact of human life, namely scarcity. True, markets will not provide for all desirable things. There are always unsatisfied wants as long as we do inhabit the Garden of Eden. But to bring such unproduced goods into existence, scarce resources must be expended, which consequently can no longer be used to produce other likewise desirable things. Whether public goods exist next to private ones does not matter in this regard. The fact of scarcity remains unchanged. More public goods can only come at the expense of less private goods. Yet what needs to be demonstrated is that one good is more important and valuable than another one. This is what is meant by 'economizing'.

Yet can the state help economize scarce resources? This is the question that must be answered. In fact, however, conclusive proof exists that the state does not and can not economize. For in order to produce anything, the state must resort to taxation or to legislation, which demonstrates irrefutably that its subjects do not want what the state produces but actually prefer something else as more important than those things produced by the state.

Rather than economize, the state can only redistribute. It can produce more of what it wants, and less of what the people want. And to recall, whatever the state then produces will be produced inefficiently.

Finally, the most sophisticated argument in favor of the state must be briefly examined. From Hobbes on down this argument has been repeated endlessly. It runs like this:

In the state of nature, that is before the establishment of a state, permanent conflict reigns. Everyone claims a right to everything and this will result in interminable war. There is no way out of this predicament by means of agreement, for who would enforce these agreements? Whenever the situation appeared advantageous, one or both parties would break the agreement and conflict would result. Hence, people recognize that there is but one solution to the desirable goal of peace, namely the establishment, per agreement, of a state. Namely, a third independent party as ultimate judge and enforcer.

Yet, if this thesis is correct, and agreements require an outside enforcer to make them binding, then a state by agreement can never come into existence. For in order to enforce the agreement which leads to the establishment of a state, to make this agreement binding so to speak, another outside enforcer, a prior state, would already have to exist. And in order for this state to come into existence, yet another still earlier state must be postulated, and so an infinite regress results.

On the other hand, if we accept that states do exist, and of course they do, then this very fact contradicts the Hobbesian story. The state itself has come into existence without any outside enforcer. At the time of the alleged agreement, no prior state existed.

Moreover, once a state is in existence, the resulting social order still remains a self-enforcing one. To be sure, if A and B now agree on something, their agreements are made binding by an external party, the state. However, the state itself is not so bound by any outside enforcer. There exists no external third party insofar as conflicts between state agents and state subjects are concerned. And likewise, there exists no external third party for conflicts between different state agents. Insofar as agreements entered into by the state are concerned, that is such agreements can only be self-binding on the state. That is, the state is bound by nothing except its own self-accepted and enforced rules, the constraints that it imposes on itself.

Yet this is precisely what the Hobbesian story wants to rule out as impossible, namely a social system capable of producing peace and security based on the self-enforcement of rules.

Now this brings me to the final step in my argument.

If the failures of the pro-state arguments are so apparent, and the anti-state or anarchist position is so compelling, why then are anti-intellectual intellectuals so unsuccessful in making their case? The reason is, that ideas don't spread on its own. For ideas to spread it requires proponents of these ideas. And these proponents cannot live off love and air alone. Anti-intellectual intellectuals too require resources to sustain a living, so that they can write and teach. And if they want to be effective in their work, they require an institutional support system that helps promote and distribute their ideas.

This is the crux of the problem, then. True, the distribution of ideas, also unorthodox ideas has become much easier in recent decades with the development of the internet. However this does not change in the slightest the fact that 99% or so of all intellectuals are directly or indirectly supported by the state, and that 99% or so of all institutional support of education and research is state-financed, with predictable consequences.

That is to say, there is simply not enough financial support available for anti-intellectual intellectual endeavors to turn the currently miniscule minority of principled anti-state intellectuals into the critical mass necessary to overcome the overwhelming odds in favor of the state.

True, some anti-intellectual intellectuals have managed to slip through the cracks, and a few have even attained pampered positions within the current statist education and research system. But these are institutional accidents, which are quickly repaired within the system, by either corrupting these individuals, or rendering them institutional ineffective and freezing them out. Hence, there is no way around the insight that there are not enough anti-intellectual intellectuals around because there is insufficient funding to support them in larger numbers, compelling many potential anti-state intellectuals to choose other, non-intellectual careers.

Hardly surprising the state had its hands in creating this situation. Namely, by doing its very best to destroy what I call the natural elites. Natural elites are men of independent wealth and independent minds. Competing as such most directly with the state's monopolist aspiration as ultimate judge, natural elites everywhere are considered potentially dangerous by the state. Accordingly, to reduce this danger, the state has co-opted members of the natural elite into the state system and thereby made their wealth dependent on continued friendly behavior on their part. Or else it has confiscated or threatened to confiscate their wealth. And in any case it has sucked them all into the very same education system as everyone else.

To be sure, there still exist wealthy men. Indeed, more of them exist today than ever before. But increasingly less of them can be described as independently wealthy, because most of their wealth can be destroyed in the blink of an eye by the state.

Nor is there a lack of intelligence to be found among these people. But as a result of decades of relentless educational propaganda, their once independent minds have become dulled, clouded, and corrupted. They feel guilty about their wealth and dabble in politically-correct so-called 'social endeavors' to compensate for their alleged sins.

And in any case, the rich and famous today embrace the very same easy-to-be-manipulated high-time-preference lifestyle of "don't worry, be happy" as the masses.

Yet not all hope is lost. Because there exists the Mises Institute, which, within the twenty-five years of its existence, has become the world's leading center of anti-statist intellectual work. And despite all efforts to the contrary, and however reduced in numbers and strength, there still exists some remnants of a natural elite, as the presence of you, the supporters of the Mises Institute, proves.

Together, with your help, the moral and economic perversion that is the state can be exposed. With some luck, we may actually initiate a genuine social revolution, namely the triumph of liberty and with it, unheard of prosperity over state tyranny, impoverishment, and waste.

Or we may at least contribute to the fact that matters do not become worse, or become worse only more slowly. And in any case, together, we can take pride in the fact that we made a contribution to keep moral and economic truths alive.

Thank you.

(applause)

Hans-Hermann Hoppe delivered the above at the Mises Institute's 25th Anniversary Celebration, 13 October 2007, in New York City. The above is a transcription of the mp3 available at Mises.org.

A World Without Theft

ayrnieu — Mon, 14 Jul 2008 22:46:00 GMT

-- go back to the Garden of Eden. (laughter) (applause)

They didn't have microphones then at that time, but what they did have was a superabundance of goods, and if you have a superabundance of goods then it is impossible that human beings have any conflicts with each other, because what should they fight about, if there exists a superabundance of things.

Except of course, in two regards even in the Garden of Eden problems would exist, namely with regard to our own physical bodies. That is still scarce -- we have only one of them, not millions. And of course the standing room on which our physical bodies rest.

And insofar as scarcity exists, even in the Garden of Eden in these two regards, conflicts are possible. And because conflicts are possible, it would be even in the Garden of Eden necessary to have certain rules in order to avoid these conflicts. And the rules would have to be rules assigning rights of exclusive control, rights of ownership with regard to scarce resources, namely our bodies.

And what the rules would be most likely adopted in the Garden of Eden would be: every person is the owner of his own physical body and can do with it whatever he wants with his own physical body and anybody else who wants to do something to me or I want to do something to somebody else, he would need the permission of the owner.

And the second rule that we would need is: I can move around wherever I want, but I cannot try to occupy a space that has already been occupied by someone else.

And outside of the Garden of Eden, where we have all-around scarcity, and all sorts of conflicts can arise, we would also need rules that avoid conflicts in this situation. And again, without going into very detailed explanation what sort of rules would be most likely adopted outside of the Garden of Eden, there would be again: every person owns his own physical body, we acquire the right of exclusive control over scarce resources that were previously unowned, by being the first one to put scarce resources to some use. The third rule would be: whoever uses his physical body and some originally apropriated, previously unowned goods and further produces something with the help of his body and so forth, would be the owner of whatever he has produced. And the final rule would be the rule that exclusive rights of control over scarce resources can also be acquired by voluntarily transferring ownership from the previous owner to a later owner.

These elementary rules are very old rules, through all of mankind basically these rules have been recognized. They make intuitive sense. We can even see them adhered to in the animal kingdom to a certain extent. And we recognize that even small children for instance recognize the rule that he who uses something first becomes the owner of it, because whenever kids get into a fight the first thing that they point out is that I played with the toy first, and until I drop it you had better leave me alone.

It should also be clear that the alternative to these rules are rather absurd. The first alternative to self-ownership would be slavery, which is morally objectionable as well as economically inefficient. If the second person coming along would become the owner of something, then the second person would become the first because the first one wouldn't do it. And that has absurd consequences. If the first owner would have to share ownership with other people, then again conflicts would not be avoided and in addition this would be economically unproductive, because the incentive to be the first would be reduced and so forth. The incentive to be the producer would be reduced if the producer would have to share his property with those people who have not produced it, and so forth.

Now the next problem that then arises is: even if we recognize the truth, the morality, the economic efficiency of these sorts of principles, what do we do about those people who do not respect these rules? And of course there are always people who break these rules. That is, we need some institution that enforces and threatens with punishment breakers of rules.

And the traditional answer to the question who is in charge of enforcing these rules and threatening potential violators of these rules with punishment in case they do not adhere to these rules, the traditional answer is: this is the task of the state. This is the sole and only task of the state.

Now whether this answer is correct or not depends on what is the definition of the state. Now states are traditionally defined as being a territorial monopolist of ultimate decision-making or ultimate arbitration in cases of conflict. In every case of conflict, the ultimate judge who is right and who is wrong, is the state. And because the state is the monopolist of ultimate decision making, the state has then by implication also the right to say what the price for its arbitration is, and it can unilaterally impose what the price would be, that is to say: the state is also a territorial monopolist of taxation.

Now once we have this definition of the state in front of us, then it is not all that difficult to discover that there is something wrong with this answer to the question who should enforce the rules that I initially explained.

First of all we have a classical argument against any type of monopoly. And as I said, the state is a monpolist. He is the only one that can do such-and-such. The classical argument against monopolists is: whenever we do not have free entry into a specific line of production, in this case the production line of arbitration, of police protection and so forth. Whenever we have restrictions with regards to free entry, then producers are no longer forced to produce at the lowest possible cost. As long as free entry exists producers must produce at the lowest possible cost because otherwise they will invite competition against them.

And monopolists because of that tend to be, from the point of view of consumers, more pricey, and the quality of their product tends to be lower than it would be if competition existed in their area of production.

But when it comes to the state, matters are actually worse than in the case letsay of a milk monopoly, which would produce milk at above minimum cost, price would be higher quality of the milk would be lower. But in the case of government, the problem is that governments do not just produce maybe lousy goods. But they can actually produce bads.

Namely in the following sense: because governments are the ultimate arbitrator in any type of conflict, governments can also cause conflicts and then decide, when it comes to who is right and who is wrong in the case of conflicts, in their own favor. And given that they are human beings just like everyone else, and realize this possibility, of course they will cause conflicts and then decide the conflicts in their own favor and then on top of it they determine what the price of the victims of their misjustice have to pay for this misservice of causing conflicts, deciding them in their own favor, and what the price for this must be.

So this is the fundamental problem with having a state in charge of this particular task. And now this problem is even compounded if we have a democratic state in front of us. The classical liberals, who proposed the state as the solution to the problem of social conflicts, faced as their opponents typically monarchical governments, kings and queens. And they rejected the rule of kings and queens for the simple reason that they thought that they had privileges, that they were treated differently by the law than the rest of the people were. And they advocated, instead, that the state should be organized democratically, by making the point that if everyone can enter the state, not just some king or queen, then we have so to speak equality before the law.

However it turns out that this is of course a fundamental mistake to think that once you create open entry into every governmental position that you have equality before the law. What actually happens is that we substitute a democracy for monarchy, is we replace personal privileges -- privileges restricted to the king and queen and so forth -- with functional privileges, privileges that are given to public officials.

But in fact the distinction between 'higher law' and 'lower law' exists in a democracy just as much as it exists under monarchy. In the form of two different types of law: one that we call 'public law', that covers so to speak the actions of public officials, and 'private law' that covers the activities of private citizens.

As a private citizen, you may not steal. As a public official however, covered by public law, you can steal.

As a private citizen, you may not enslave somebody else. On the other hand, if you do the same as a public official, draft somebody into the army for instance, then that is perfectly alright.

If you steal from somebody and give it to somebody else, that is fence stolen goods, this is considered to be under private law a crime. If you do it as a public official it's called redistribution of income.

So under public law you can do certain things that under private law would be considered to be illegal. So the distinction between two types of law exists still exists under democracy just as much as it exists under monarchy.

In addition there are some more problems arising once we have a democracy. What you do is you exchange somebody, the king or queen who considers the country his own private property, with somebody, a democratically elected politician, who is the temporary caretaker of public property. And now ask yourself: will this make a difference in terms of the behavior of these two individuals? And the answer of course is it will make a fundamental difference.

If you consider yourself the owner of a country, you will as every private owner does, by and large be concerned about preserving or enhancing the value of the country. After all, you want to pass on something valuable to the next generation. You might even sell off some of this and are concerned about the price that you will get for whatever you sell off and so forth.

On the other hand, if you are just a temporary caretaker, and not the owner of it, then you will take the short-run perspective: I have to loot the country as fast as possible because I only have four years to do it (laughter) and no chance afterwards.

So you will be engaging in capital consumption, rather than in the preservation and the enhancement of the capital value embodied in the country.

In addition, it is frequently pointed out that but isn't it good that we have open entry into the position of governmental rulers under democracy whereas entry into governmental positions under monarchy is of course restricted by accident of birth.

Now, what is wrong with this argument is the fact that: yes, open entry is good as long as we are talking about the production of goods. But open entry is not good when it comes to the production of bads -- and I already explained that governments produce something bad.

We would not want to have open competition in who is the best killer; we would not want to have competition in who steals more effectively than other people do.

And when it comes to this we notice some very important difference. A king might be bad, that is true, as all governmental positions can be filled by bad people. But because he is a member of a family, other family members will have an interest in containing people who are bad because they might just lose the property of the family, might threaten the position of the dynasty, and bad kings are typically surrounded by members of his own family, by entourage, that controls him.

And if need be, they get killed, if they just go out of line.

And on the other hand a king can be conceivably a good and decent person, because it just an accident of birth that he comes into his position.

But now look at a democratic politician: a democratic politician can never be good. Because he has to just compete openly for this position, and in order to be elected to this he must be a very good and proficient liar, cheater, somebody who is 'good' in terms of qualities that we definitely do not want to have.

So we might have good kings; we will never have anybody of any decent moral values ever coming into the position of President or Prime Minister or whatever it is.

So now we come then to the question: what is the right answer to the question of how do we enforce the rules that I initially mentioned? Self-ownership, first-use-first-own principle, producer owns whatever he has produced, and the rule of you can acquire property through voluntary exchange.

And the correct answer is: the enforcement of these rules has to occur by individuals and agencies that are bound by the same rules as everybody else. That is, we need a society where the only type of law that is in existence is private law. No such institution that is covered by public law, which of course as I explained is a misnomer, it is not public law, it is just criminal activities masquerading as law.

Now this, if the enforcement of these rules also has to occur by individuals and agencies bound by the same rules, involves then two things.

One the one hand, unlimited rights to self-defense must be permitted. And the immediate implication of course of this is that private ownership of weapons and guns must be permitted in any free society. And despite everything that we always hear from governments in terms of contrary propaganda, there is an untuitively sensible rule that says: the more guns there are, the less crime will exist. And the wild west, contrary to what some movies insinuate, is a clear indication of the fact that this is indeed the case. If people own guns, private ownership of guns is unrestricted, then there will be less crime.

But in complex societies of course, we will not want to provide for our own security only by our own means. We do not make our own suits or shoes; we rely on the division of labor in this regard. And of course in every complex society we would want to rely on division of labor, on specialized agencies, and agents also when it comes to the protection of private property rights.

And a very important role, in a free society when it comes to the protection of these rules that I mentioned before, would be insurance agencies, and associated with insurance agencies, directly or indirectly: police, detective, and arbitration agencies.

Now what would be the result of this, and a very brief comparison between the state provision of security and the provision of security by freely-funded insurance operations. The first thing would be: there would be a drastic fall in the price that we have to pay for security. As I explained, the tendency under monopolist provision of security is the price of security always goes up, we have to pay more and more, and we get lower and lower quality of protection. Precisely the opposite would occur if there were competition in this area.

The second fundamental change that would occur with regard to how much security should be produced. Every resource that is expended on providing us with security can no longer be used to provide us with other things. Money spent on security can no longer be spent on vacations, on beer and wine and food and whatever it is. Normally people decide voluntarily, based on their own judgement how important security is to them as compared to other needs that they might have.

If you have government deciding for you how much security you need, they will of course decide: the more I can spend the better it is. That this involves a restriction of satisfaction of other needs is of no concern. That is, if we have competition in this area, there will be no overproduction of security.

The next point I want to emphasize is: would there be a large amount of money, resources, expended on victimless crimes, if we had competing insurance agencies wanting to protect us. As we all know, currently huge amounts of resources are expended on combatting victimless crimes, such as drug use, prostitution, gambling, whatever it is. But it should be perfectly clear that, as much as many people dislike these type of activities, since these activities are victimless crimes and we are not directly affected in our own property by the existence of these types of activities, very few people would be willing to spend huge amounts of money to be protected from something that they do not see as a threat.

Insurance agencies that would want to protect you against these sorts of things would obviously have to charge higher premiums than insurance companies that would abstain from protecting you against these things. And since most people are not affected by such things, insurance companies that would offer services such as this would likely go out of business very quickly. So victimless crimes would tend to be treated for what they are, namely as not a big deal at all, and likely no persecution of the perpetrators of victimless crimes would occur.

More important than this is the following: insurance companies would indemnify you in case they fail in the task that they have accepted in return for you paying a premium. Governments on the other hand, monopolists of course do not indemnify you if they fail. If somebody steals from you, robs you, mistreats you and so forth, the government will not come and say: look we failed in what we promised to do, and because we failed you we will offer you compensation of such-and-such an amount. I have at least never heard of any government anywhere doing anything like this, and I'm sure that you have never heard anything like this also.

Why would insurance companies be good at this? They would be good at prevention of crime because whatever they can prevent, they would not have to pay up for it. A government police officer on the other hand, if he does fail to prevent a crime, he gets his salary paid no matter what. And in this situation it is of course better to hang around at 7-11 stores than just trying to prevent what he is supposed to prevent.

When it comes to the next thing that we want is, we want things that have been stolen, taken from us and so forth, returned to us if at all possible. What is the incentive of governmental police to find stolen goods, to find the loot? Anyone who has any experience with this knows that the police will file a report and then you ask them what will you do about these goods and they will say we will file it away, and that's the end of the story. By accident sometimes things might be recovered, but only by accident.

What incentive on the other hand exists for insurance companies to recover things, the answer is: because they otherwise have to indemnify you, of course they have the financial incentive to recover whatever they can recover at reasonable cost. I had an acquantance whose VW got stolen in Italy. He went to the Italian police and asked them what will you do it about and they said "nothing". And then he reported this to his insurance company and a week later the insurance detective discovered where his car was. Of course the car was pretty much worthless also, but nonetheless you can see that there's an entirely different incentive in both cases.

And the last thing that you want of course is like, that the perpetrators of the crime are found and captured, and that they have to compensate the victim. Now how likely is it that the government finds the perpetrators? In capital crimes yes they do occasionally find them, because public opinion pressure is quite high. In crimes of a lesser sort: rarely if ever, do they apprehend the criminal.

And if they do apprehend the criminal, what will they do with the criminal? Will they force the criminal to now compensate the victims? And again I have never heard of this. Quite to the contrary they will probably jail the person, and the victim plus other taxpayers are forced to even pay for the incarceration of the person who victimized them in the first place, and if I remember correctly incarceration in the United States, per person per year, costs about $70,000 or in the neighborhood of this. There you can just engage in physical workouts, you have TV, you complain if you don't get your right muesli in the morning. And you might even study law, to prepare yourself for the next apprehension, you know how to better defend yourself. And all the rest of it. And does the victim ever see a penny out of this? And the answer's of course: never ever.

Would insurance companies operate like this? Imagine an insurance company would tell you: this is the condition under which I insure you, as soon as we apprehend the criminal, we will ask you also just to pay for his incarceration. I don't think that insurance companies would get very far with this type of treatment.

Next point: how about the point of disarmament of the public? As we all know, governments of course always disarm people. In the United States we are not as 'progressive' as in many other countries, but we are definitely moving in the direction of disarming the citizenry, increasingly also. And it should be perfectly clear that a business that is in the business of taxing you is interested in disarming those people that they want to tax.

But now imagine that you would go to an insurance company and the first question that they ask you: do you have any arms, weapons, dangerous objects, at home? And you say yes I do. And they would say: but the first condition attached to insuring you is that you have hand over all of these things to me. I think everyone except a moron would immediately recognize that there must be something suspicous about an agency such as this, that wants to disarm you first as a condition of protecting you afterwards.

Quite to the contrary, insurance agencies would actually encourage you to own guns, and to prove to them that you know how to safely handle these instruments, and would likely offer you a reduction in your premium that you have to pay, if can show that you are proficient in the handling of instruments of self-defense. Just as insurance companies offer you a reduction in the premium if you have a safe at home, as compared to just storing your family heirlooms on top of the kitchen table, so they would likely offer you a reduction in premium if you can show them yes, I own a gun, yes I have a training course, yes I have a certificate that shows that I know how to handle these things and so forth. So a very different type of treatment you would get there.

Moreover, insurance companies are by their very nature defensive organizations. And I should emphasize this because states of course are by their very nature aggressive institutions. Because, given that all people have a certain inclination to be aggressive, some people more than others. But assuming so to speak a natural inclination of being aggressive, if you can externalize the cost of being aggressive onto other people. That is, I don't have to pay all the price myself for being aggressive, pay my own body guards, pay for my own weapons, but I can make other people to pay for my own aggression, which I can of course once I can tax people, then I will tend to be more aggressive than I would naturally be.

Insurance companies, who cannot resource to taxation, must because of this be defensive. Aggression is an expensive proposition, and you will have to charge higher premiums if you engage in aggressive activities. If you charge higher premiums then of course you will tend to be less attractive. Most people will prefer not to be insured with aggressive agencies but with defensive agencies because this is less costly.

And not only this. Insurance companies will also make it as a requirement of all the clients that they insure that they themselves should engage in non-aggressive behavior. No insurance company would cover the risk for instance that I provoke you, then you retaliate, and then I go to my insurance company and complain about you having attacked me. Instead they would just say: look, you provoked first and then retaliation ensued, and risks of this nature will not be covered.

So, as a condition of insurance, they will impose on you code of conduct, that forces you to accept a behavioral style that is civilized, so to speak. That will also include that insurance companies will most likely insist that you do not engage in vigilante justice. Not that self-defense under certain circumstances would be excluded, but in order to make retaliation and permanent conflict, to rule that out as far as possible, they would insist: if something has happened, please come to us and there will be some sort of regular procedures set in motion in order to avoid any unnecessary conflicts.

Furthermore, if we would have competition in the protection of private property rights, we will get on the one hand a greater variety of law and on the other hand as I will explain in a minute, a greater unification of law. What will happen on the one hand is, there might be insurance agencies or protection agencies that offer you to apply letsay Canon law. There might be others that offer to apply Mosaic law. There might be others that propose to use Islamic law, and so forth. These rules would only apply of course to people who are insured with the same company. Everybody being insured with one company knows, these are the laws that will apply to me, and everybody else who is insured with the same company. They agree to this type of law and the law procedures. So there we would have a greater variety of laws, everybody could live so to speak under those rules that he wants to accept in his own case.

On the other hand of course: conflicts can also arise between members that are insured by different law agencies, that have internally different types of law codes. And it should be perfectly clear that in conflicts between members of different types of law codes, then, in order to resolve their conflicts, we would have to have independent arbitration. And in these independent arbitration of inter-agency conflicts, there then a tendency would emerge of hammering-out the principles of procedures, punishment, conflict-resolution, and so forth, that can be said to be truly universal.

That is, so to speak, the smallest common denominator, uniting, combining all the different internal law codes that exist. So we would get a greater variety of law and at the same time enormous incentive to create a unified, international type of private law, developed by arbitration agencies competing against each other in cases of inter-agency arbitration.

Which brings me to my last point, that is to say, in such a situation, with competing insurance providers, we would first of all get contracts offered about what will be done in what cases. Currently, when it comes to the question do we get any conflicts offered, the answer is of course: no, there is no contract offered at all. The government only promises to do something, but they never say what exactly it is that they will do, and in addition they even change the rules of the game as they go along. They engage in legislation. They change the laws. Something that might be legal today might be illegal tomorrow, and vice-versa. An insurance company that would say OK we will not promise you exactly what we will do and also we will reserve the right to change the rules of procedure as we go along without your consent again would not be able to get a single client to agree to such a thing.

And an insurance company would have to offer a conflict that has provisions first for the first contigency that everyone can forsee: that is, what will you do in case I have a conflict with somebody insured by you, just as you insure me? That is, what would you do in cases if two clients of yours have a conflict with each other. Obviously the contract would have to have provisions what to do in this case.

And secondly, these contracts provided by insurance companies would also have to have provisions: what do you do in cases when I have a conflict with a member of a different insurance agency? And in order to be believeable, they must have a provision that says: in such a case of course we will go to third party independent arbitration. All insurance companies would likely have a provision such as this. Yes, if conflict exists between client A and client B, both clients are insured with a different company, an independent arbitrator will be appealed to.

And there exists competition in the field of independent arbitration, too. That is, no arbitrator can be sure that in the next case of arbitration, he again will be approached with the task of being an arbitrator, but other people can be approached as well. And given the fact that he can be removed from his position, his incentive is indeed to come up with a solution that is regarded as a fair solution by the clients of all companies involved in the dispute, because otherwise he will most likely not be chosen again. Which again emphasises this pressure of creating a body of law that is truly universal.

We would then have enhanced legal predictability, in contrast to ever-changing and flexible legislation. We would have legal certainty instead of flexible laws. And I think our private security and the protection of our property rights would be taken care far better than that is the case under the current, monopolist situations.

I know that these thoughts are familiar to some. To some they might sound somewhat strange the first time you hear them. I make you aware of the fact that I have written extensively on this subject, and of course I urge you now to all buy my book, if you don't already have it (laughter), and I am perfectly willing to sign it. Thank you very much.

(applause)

The above was delivered by Hans-Hermann Hoppe at the Mises Circle in Southern California, 2006, and was transcribed from the mp3 available at Mises.org.

Transcript: The Quest for a Property-Based, Misesian Economics

ayrnieu — Fri, 16 May 2008 17:25:00 GMT

[[[This transcript still needs one more pass, to check it against the audio and to clean it up. This will happen in a day or so.]]]

[[About this transcription: The speaker, finding this transcript, should be able to say "Yes, this is a faithful recording of what I said, and the links are clearly intended to aid the reader's comprehension of what I said." Triple-question-marks (???) mark parts that I could not make out. Please contribute those parts if you understand them.]]

The Quest for a Property-Based, Misesian Economics

Thank you the organizers for having me, thank you Lew Rockwell for being a great inspiration for me.

Let me start by a little piece of geography. As you heard I come from Prague, the Czech Republic, which is for many of you I guess a similar exotic place as is Iowa for me. [Laughter]

So, Prague, at least geographically, is more western than Vienna -- and by the way those two great cities are not that far away from each other, some 200 miles. So our at least geographic proximity to the Austrian school and the origin of the Austrian school is useful in our today's effort to revive the school, because we can claim that we used to be part of it and we are part of it again. This morning, Robert Higgs mentioned that one of his books is coming up in Czech language and some of you laughed a little. [Laughter] I don't know exactly why. But I hope I will, and I will do my best to show you that the Czech Republic is actually a very miraculous country.

Well, I'll start with something that always makes your students interested in it: in my country, beer is cheaper than water. [Laughter, Applause] I don't know how, because you know you start out with water, you put some stuff in it, and it gets cheaper. [Laughter] So, as you can see, there is not only room for research program in anarchy as Edward Stringham mentioned [mp3], but this calls for an explanation too. And from this you can derive the whole body of economics, because if beer is cheaper than water, and you use the first sentence of every economics textbook saying that people respond to incentives, you can nicely show that it is not coincidence that Czech people are #1 drinkers of beer measured on per capita basis. Better than Germans and you know, other countries -- we are always happier to be better than they. [Laughter]

But this is still not all, not only economics is alive in my country, now also the Austrian school is a respected school of thought, a respected way of approaching economic phenomena. And this is so because of this institution, the Ludwig von Mises Institute. It is exactly 10 years, this year, when I came here as a student at that time, attending the summer university. And that that experience, that event, completely changed my life. As I learned here how to fight for ideal, and how and why to care about ideas. And since then, step by step, this investment of Ludwig von Mises Institute into myself and couple of my colleagues, can be called responsible for the Austrian School revival in Prague and all central Europe and perhaps Europe. I'll give you a couple of examples which my country is very special and in which Austrian School made it to where it is in these days. As Jeff mentioned, I translated Murray Rothbard's Power and Market [2][3], this is the Czech version, under the name Economics of State Interventionism, together with Rothbard's paper on Utility and Welfare Economics [pdf].

And this book now is our textbook for a master course of Economy and State Intervention, which I teach. It is an undergraduate course, and hundreds of students have to read the book. Just this semester the spring 2006 I had in my class 230 students, and all of them had to read Murray Rothbard. Which I guess doesn't make sure that there will be 230 Austrians in the summer, however, at least some of them will -- or all of them will learn about the ideas and many of them will become followers of or sympathizers with the Austrian school. We also, last year, published the Czech version of Man, Economy, and State, the Czech version called Principles of Economics to make it real alternative to the other principles books, and it is again, widely read by students, and we have now after one year had a second print of that book. This year, in two month, Human Action will appear in Czech. And we'll have in Prague Ron Paul, helping us to book-launch Human Action, and again it will not just be a new book published; the book will be widely read by students, because we do not only work in a think tank, the Liberální Institut, but we also control part of the ??? economics, which is the biggest economics school in the economy, with some 3000 students entering the school every year. We control one-fifth of it, so some 600 students are under our direct control [laughter].

And you know we realize that this is a real asset. So for example those 600 people in first year of their undergraduate studies they have to read Henry Hazlitt's Economics in One Lesson. And then it goes on and on, through Mises to Rothbard and other Austrians. Not only us are responsible for teaching Austrian ideas but I invite everybody from the Austrian circles from around the world to come to Prague as a visiting professor to teach a course on Austrian economics -- both theory or applications. we had people such as Samuel Bostaph [mp3], we had Guido Hülsmann [mp3], we had Richard Ebeling [mp3], we will have Robert Higgs in a month to be with us in Prague for two weeks delivering the whole course for hundreds of students. A few more things I wanted to mention before presenting my paper Mises and Economics. One of the events of the year in Austrian Economics is our annual conference called Prague Conference on Political Economy, organized for the first time last year, and in a month there will be the 2006 conference with three named lectures, two after people from the Austrian school whose lives were connected to Prague. Namely, Friedrich von Wieser taught in Prague before leaving to Vienna to take over Carl Menger's chair. And the other man with Austrian School connection is Franz Čuhel [pdf]. Franz Čuhel, to whom Mises makes references in Human Action and other works, Franz Čuhel who wrote a book on ordinal utility, and actually Mises took it from him, and then the whole of mainstream economics took it from Mises. Franz Čuhel, being of Czech origin, is completely forgotten in my country, and this is our attempt to tell to the world that not only beer can be drank in Prague but also we have some spiritual values to adhere to. And this year, Robert Higgs is giving one of the lectures. The second is given by Huerta de Soto, whose book [pdf] on banking and business cycle just appeared in English. So, great people and hundreds of students of Austrian school, not only from Czech Republic but mostly from central Europe or Europe in general, with numerous American attendees as well.

Through this conference I tried to do what the Mises Institute did for me. Bring the ideas, have events to which people can come and meet the heroes of the school and start working in a tradition. For some of our central eastern European friends it is a little too costly to come to Auburn so if I can substitute what the Mises Institute is doing here, do the same thing or at least try to do the same thing in heart of Europe, I guess, we can all only benefit from it.

We also have an Austrian English ??? Journal called New Perspectives in Political Economy, to which some of you already contributed. And our biggest project that is about to materialize, within a month, will be a ???ian publishing house, focusing on Austrian Economics, called Bohemian Academic Press. So I guess it's a way how we can give a platform for ???ian Austrian scholars to publish their works through. Nothing of the abovementioned would not be possible, and would not have happened, without the effort of people from the Mises Institute. And without, of course, Mises's great contribution to Economic science and his inspiring work. However, not only my personal life and professional career change, there are other changes as a result of Misesean scholarship as well. After the collapse of socialism one-half decades ago, a general belief prevailed that socialism did not deliver. And no one better that Ludwig von Mises explained that it could not deliver prosperity comparable to western standards. Socialist planners simply were not able to do their homework, and were not able to hide this blatant failure from the eyes of the masses anymore. Some sort of transition towards capitalism was of course suggested and implemented in many countries, such as my own, the Czech Republic. Some prices were set free, some sectors privatized. After many years of socialist economic chaos, economic structure was given a chance to become meaningful, to get real. In the field of economic theory, we could witness an analogical development. It was hardly possible anymore to claim that Russia would soon outperform the United States, with some celebrated 'leading economists' outrageously have claimed for many years. The complete economic disaster of socialist planning and millions of people in poverty sent the signal that there might be something wrong with their morals and the whole way they approach economic phenomena. Hence, with the collapse of socialism, economists saw the challenge -- and wanted to get real, too. To provide a scientific argument for possible real-world transition strategies towards capitalism -- or more importantly, different visions of the endstates, different capitalisms. New schools emerged and felt confident to provide answers to the problem of the day.

They do not solve the problem of whether capitalism is better than socialism or not. They propose activism from the ???. That is, in the name of capitalism, for capitalism. Rising from the ashes of the original comparative economics, which loses its sense with the end of the collapse of socialist experiment -- there is nothing to compare to capitalism -- we can read of the new comparative economics coming from Harvard, whose aim is to choose the best capitalism, an optimal mix of disorder and dictatorship for the people. At the University of Chicago, we can witness how the new Chicago School "identifies alternatives as additional tools for a more effective activism. The hope is that the state can do more. The government must weight the costs against the benefits and select the more ??? that regulates most effectively." Or if people make systematically bad decisions, "then we should be less willing to grant wide freedom to adults to make unaided decisions involving the comparison of current benefit and future costs." This is how a scheme of state-forced saving system which they call "debiasing people's behavior through governmental action" within a capitalist framework is justified by an increasing popular behavioral law and economics. Shortly, economists do not want to be merely amateur theoreticians. In Steve ??? words, someone who knows a thousand ways to make cloth, but doesn't know where it goes. To continue this analogy, with the collapse of socialism, the Russian ??? (socialism), does not pretend anymore to be more beautiful than a girl (capitalism), and economists do not pretend anymore to know how to generate its beauty. Economist now focused exclusively on girls (capitalism), though they often do not have lost their inhibitions to impose their beauty standards. They still want to plan, fine tune the economy, or mimic the market. Their argument for state activism still exists, and to fight them is the major task of those who cherish free markets.

Now how. Rather than following the spirit of the day, and jump on the bandwagon to introduce, once again, new economics, a brand new modern school of thought with a new suggestion how to tackle new burning social problems, I would rather suggest to go back to the wisdom of those who were not surprised by the tragic failure of communism or Keynesianism, or interventionism for that matter. Who spent their lives trying to integrate economic science into a coherent body of knowledge rather than divide it into hyperspecialized, disconnected pieces. Who have kept emphasizing that sciences of law and economics are connected through the concept of property, without which social order becomes meaningless. Namely, through the ideas of the giants of the Austrian School, with Ludwig von Mises as its dean. By the way, Austrian law and economics is together with exploration of anarchy, another neglected research program which has to be developed in detail. Ludwig von Mises was a man who famously gave us in his Liberalism a one-word summary of what is the only workable system of human cooperation in a society based on the division of labor. Such a single word would have to be: property.

Socialism was ultimately based on the negation of property, abolition of the private property of the means of production. Once socialism as a doctrine was fortunately dead, all countries they want to return to capitalism, have to start respecting property rights. Unfortunately it is not what is happening in those countries. And again, my country, the Czech Republic, can be mentioned as one example of such a situation. The reason is that both practical economic policies of so-called capitalist countries, and more importantly most of so-called free market economists could be called capitalist or free market only when compared to the reality of ??? socialism and Marxian economics. However, when judged against the benchmark of property, that Mises so clearly set forth, we would have to call those policies and their intellectual bodyguards, socialists or interventionists at best.

Take first a few examples of how generally accepted strongest intellectual proponents of free markets treat property. Law and Economics school, and Public Choice school. Richard Posner, who is believed together with Ronald Coase, to bring property back to economics, came up with "the most ambitious theoretical aspect of the economic approach to law, the proposal of a unified economic theory of law in which law's function is understood to be to faciliate the operation of free markets." Hence, it is necessary, allegedly, in the name of markets, to manipulate the limits of property rights, in order to get an optimal, efficient level of economic output.

Once again, as Posner says, the issue rarely property rights or no property rights, but rather limited property rights or unlimited property rights, with the limitation designed to induce the correct "not an insufficient or excessive level of investment". It sounds like another attempt to develop a General Theory by a man who is not believed to be any great free marketeer. This suspicion is reinforced when we learn of Posner's macro view of economics, as he points out, "economics is concerned with explaining and predicting tendencies and aggregates, rather than the behavior of each individual person" [jstor].

Shall this be an antidote to our socialist and collectivist approaches of the past? And all this especially when we saw how Posner's ambitious Law and Economics projects ended up with Posner, after decades of studies, suggesting that soundness of theoretical arguments is not to be any more decisive, because "the ultimate criterion should be pragmatic. We should not worry whether cost-benefit analysis is well-grounded in any theory of value. We should ask how well it serves whatever goals we have."

Well, this concept of 'we' and 'whatever goals', seem to be quite frightening in the post-socialist reality, and do not seem by no means to give us a clear direction how to move from socialism toward capitalism. Public Choice is a school that came to revolutionize the perception of the state and attempted to demystify it, however it doesn't seem to be of much help either. With its parallel between economic and political relations that allegedly both "represent cooperation on the part of two or more individuals, and hence at base they are much the same." But means mutually advantagous, it is hard to find a principled argument against socialist or semi-socialist policies and governmental activities. Morever, if as Buchanan says, the status quo always represents an existing implicit social contract [econlib], and in the name of efficiency it might be justifiable to confiscate inheritance, you are left with nothing to protect property, as a keystone of viable social fabric. It is even more disturbing when we realize that both Law and Economics and Public Choice are supposed to be, unlike many other pseudo-economic schools, the friends of property and capitalism.

How refreshing is to read Mises's works and see what a really comprehensive theoretical approach means. His praxeology naturally encompasses both law and political markets and gives us tools such as economic calculation to evaluate their connection with other parts of social reality. Now, look what the most market-oriented practical economic policy reforms proposals are suggested by 'free marketeers'. In countries such as my own, what people who want to move the country away from socialism come up with, is compulsory social security system and flat tax. The reason for the first one, social security, is that we'll have higher savings, hence higher investments, hence higher GDP -- that is, we'll become somehow more efficient. The reason for the second is not to lower taxes, but to have more efficient tax collection. Again, this strange concept of 'efficiency' is entering the scene. Efficiency is here to manipulate property rights. In the name of efficiency, politicians were told years ago by Milton Friedman to get rid of the gold standard, and later by Posner and Coase to destroy property and property rights and redefine them anew, by Buchanan to nationalize inheritance, and now, because of efficiency, to semi-nationalize savings and redesign the tax system with the objective to collect more taxes. It is completely absurd.

As Mises said in Human Action, there is no such thing as an appropriation of portions out of a stock of ownerless goods. The products come into existence as somebody's property. If one wants to distribute them, one must first confiscate them. It is certainly very easy for the government apparatus of compulsion and coercion to embark upon confiscation and expropriation, but it does not prove that a durable system of economic affairs can be built upon such confiscation and expropriation. The very basis of social order is rooted in the concept of property. Efficiency, if it means anything, cannot rest on expropriation and the use of force against peaceful people. It is a result of market operation, through which entrepreneurs discover better ways of conducting transactions. Efficiency stems from consent, it is a result of market operation, it is not something that must first be calculated by experts and then implanted onto the economy.

Mises's understanding of this kind of defense of market economy is apt, as he pointed out again in Human Action. "Even those specialists who do not openly side with a definite pressure group and who claim to maintain a lofty neutrality, unwittingly endorse the essential creeds of the interventionalist doctrine. Dealing exclusively with the enumerable variaties of government interference with business, they do not want to cling to what they call mere negativism. If they criticise the measures resorted to, they do it only in order to recommend their own brand of interventionism as a substitute for other people's interventionism. Without a qualm, they endorse the fundamental thesis of both interventionism and socialism".

We do not seem to be able, neither here in the US nor in Europe to, quoting Mises, "to bar such scoundrels from access to the universities, and their articles from being printed in the periodicals of associations of university teachers." That is already reality. We have to live in a world which is hostile to the concept of property, both on the theoretical front and in practical politics. However, I believe, we can use the sorrow experience with socialism to our benefit. We can show our students how crucial a role economic understanding plays. We can show them that there were scholars who understood what is wrong with socialism, and we can use the same colorful economic logic to expose socialist or interventionist policies of the day. Simply, we have Mises's property-based economics that can help us understand what is the way to go.

Rather than, as many other approaches, suggesting a better socialist experiment, it identifies a viable alternative to our socialist past. As Mises pointed out in Human Action, whoever neglects to examine to the best of his abilities, all the problems involved, voluntarily surrenders his birthright to a self-appointed elite of supermen. In such vital matters, blind reliance upon experts, and on critical acceptance of popular catchwords and prejudices, is tentamount to the abandonment of self-determination, and to yielding to other people's domination. As conditions are today, nothing can be more important to every intelligent man than economics. Property-based economics, indeed.

Thank you for your attention. [Applause]

[Unknown speaker:] Time for questions.

[Inaudible question]

[Unknown speaker:] ... he said, what other schools of thought ...

OK. Well, we have the whole range of professors teaching other economic schools. We are still not the only department that teaches economics, so in teaching Austrian economics we might have one line, but the other faculty members teach it the old way, which is not Marxism anymore but the old Marxists switching to being Keynesians in theory and pro-European Union in applied policy. Which makes our task easier because, we do not need to use very subtle arguments to make students understand who is right and who is wrong. [Laughter]

Yes.

[Inadible question]

Well, as in many other places in central and eastern Europe there was this wave of privatization in the beginning of 1990s. Part of it was they called it restitution [pdf], simply that stolen property -- stolen by communists -- was given back to the original owners. By the way what was stolen by democrats before 1948 which was generally big firms, coal industry, mining and these important sectors, they were not returned back because this is considered to be fine as some people voted on it. But now the situation is getting a little depressive with the EU centralization project. One example, it was quite easy to start up a new business at the beginning of 1990s, you just decided to do it and there was not much red tape to really start a business. Now you need all these certificates, they call it protections of consumers and health and safety regulations, but it has nothing to do with health or safety. [Pause as the speaker makes unknown gesture.] [Laughter]

So, I like to tell my students that we are somewhere where the United States were hundred something years ago when the Federal income tax was suggested and first declared unconstitutional, however when you try a couple of times you typically succeed in these ventures, so now in Europe we are in that stage, but something gets regulated centrally, something is only in the form of a draft, we already get European Central Bank in a similar way you got your central bank a hundred years ago, so all the problems stemming from political centralization, we can expect in Europe and I can claim that they will be bigger and centralization will proceed faster, because we do not have this tradition of individualism which you have. We have socialist Francs with socialist Germans being behind the centralization, so it might have some short-term benefits such as people in Czech Republic can go and work in Germany, France, or Spain, however new pressure groups are formed on the continent-wide level with now more than half of he new legislation coming from Brussels with no way to reverse it, so politics is now much more distant from people. Living in a small country has an advantage in at least some times you might meet your minister who does all the harm to you and tell it directly to him, but now if you do not even speak the same language as these gangsters in Brussels then [laughter], it's over. Still we are optimistic, cautious.

[Inaudible question]

You mean, when exposing them to Austrian economics. They like it, because they can understand it; it makes sense, this deductive method has the advantage that once they understand the basics, we don't need to force them to memorize the result, they will think themselves through it. And perhaps they are surprised at the beginning by what their brain is telling them, but after a while they get it. So we don't have complaints. And especially if you approach them with sort of a way in which they do not feel the pressure on them, you tell them well this is the argument and I'll be very happy if you write your semester paper refuting it or telling me what was wrong with it, but you have to use arguments. And then they do it, and they educate themselves, we just open the world for them and they do the studying. And use their logical capacities to think.

[Inaudible question]

Well definitely the project does not seem to be successful as [laughter] Slovak used the first opportunity to leave and by the way Czechs were happy. So, fortunately it was the end of the nation of two brother-nationalities living under one roof, ended up peacefully, and I can tell that this split of the states actually improved their relations between those nations, which is what we would theoretically expect, but it's nice to see that it really works, that there is no animosities, nobody has this feeling that I pay taxes for the subsidies of somebody and somebody else somewhere else. When everybody pays his bill, it makes people friends.

[Inaudible question]

Yeah we have this phenomena of having a Prime Minister who read Mises and Hayek, which is not very common [laughter], however it's not helpful either. I mean I would say that the only institutions that appreciate it are some of free market or libertarian think tanks in America such as the Cato Institute, because they believe that this is the way how you can change the world. They can show a living example of a successful free market economists, however I wrote an article [pdf] for the Journal of Libertarian Studies about this fable of laissez-faire reform in the Czech Republic. It's simply not trustworthy when you have all banks in state hands, you have socialist healthcare and school system, you redistribute 50% of GDP, and you have a prime minister who is celebrated as a great libertarian [laughter]. Who in addition to it approves draft, and attacks everybody who are against draft. At the same time, as I said, he has friends such as Milton Friedman that is helpful in these circles, but you know some absurdities appeared. For example, Heritage Foundation produces this index of economic freedom and it was done at the beginning of 1990s as a sort of questionaire for free market people such as Milton Friedman to rank countries according to economic freedom. And with all banking sector in state hands and all these things I mentioned, because of Klaus being friends with Friedman, Czech Republic ranked I guess fifth. It was like, Hong Kong, I guess New Zealand, and then the Czech Republic [laughter].

Of course you get all the problems of welfare state, unfortunately as people see it, the bad results are associated with your libertarian prime minister or presidents. So all the blame goes on libertarianism, free market, which is completely absurd. I would rather have a socialist as a prime minister, doing the same things [laughter], then you can at least blame correctly socialism as the failure.

[Q] You criticized Posner and Public Choice and so and so forth. It sounds like you're saying the former socialists have taken interventionist ideas from [coughing] free market thinkers, and not taken the free markets [inaudible], is that a fair description?

Well, what I'm saying is that if you do not really preach pure free market, then the interventionist in power will misuse this weakness and will claim by practicing semisocialist policy that even this school and that great free marketeer suggested this, so you simply, you create problems within the economy that are then blamed on wrong person. So, I understand that politics is based on compromise, so I'm not saying that you can change the country, but at least if you want to be called a libertarian, you should stick to some principles, such as non-confiscation of property [laughter], right. And then if the compromise arises you can say OK, that's a compromise, but if you start with something that is already semi-socialist then that is a disaster.

[Inaudible question]

No, not, though there are some small parties that have libertarian edge in them, some of them after attending our summer programs were misunderstood what we are saying and so went to politics starting this venture however they will never make it to be anything else than just amusement for others, so [laughter]

[Applause]

Chodorov explains the popular appeal of socialism.

ayrnieu — Wed, 27 Feb 2008 20:22:00 GMT

Excerpt from Chodorov's 'Socialism By Default', from his One is a Crowd:

If the run-of-the-mill American is as gullible as this literature assumes, and there is reason to believe that he is, there are nevertheless the lessons of experience which even infantilism cannot dull. Imagine feeding rags-to-riches syrup to the sharecropper who remembers being dispossessed onto the highway, or to his children who learned to hold out the hand of beggary. Then, there's the glorious tale of the penniless immigrant who rose to affluence; what can be the effect of this pap on the fellow who lived by the grace of the W. P. A. when bank bankruptcy wiped out his lifetime savings? What goes on in the mind of the mechanic who, on reading about the "overall picture" of national prosperity, or the tables of comparative wages, recalls the ten years of wage-less nightmare, until the war brought hypodermic relief? Even now, dulling the enjoyment of his inflationary comfort is the spectre of impending depression.

All this experience the anti-socialistic literature passes over lightly with figures, carried out to three percentage points. The inference is plain that the "poor ye have always"--and nothing can be done about it. It's fine solace to be labeled an "unemployable" or to be put among the "surplus population."

But somehow the lowliest of the species resents being a statistic. He flatters himself that he is a man. Whatever his intellectual deficiencies, his sense perceptions are keen; recorded in the memory of his belly is data the economists cannot get to. And that memory tells him that there is a lie somewhere in the pollyannish picture of America being presented to him.

...

Sure, the "average" wage in this country is a princely income compared to that of the Chinese coolie. What of it? The "average" American worker--whatever that is--produces more; well, if he produces more he is entitled to more, and why give credit to a "system" for the labor he puts out? According to the figures in this anti-socialistic literature he absorbs in wages about all he produces, and yet his eyes tell him that there are a lot of fellows who produce nothing, or very little, and they seem to get along quite well. Who produces what they have? He's envious, to be sure, but he's also sensitive to a wrong he cannot locate.

The socialists locate it for him. He never will understand their many-worded fable about surplus-value and the class struggle and the glories of controlled economy. No matter. These fellows at least come clean; they admit the poverty-amidst-plenty incongruity, and in so doing they gain the confidence of the mass-man. Having gained his confidence, they find it easy to "teach" him the mysteries of their solution. Their shibboleths are plausible; they "explain" and they promise. He accepts their leadership.

...

This fact the socialistic tacticians have been wise enough to recognize. From Marx and Engels to Attlee and Wallace, due homage was always given to the "will of the people," although the shaping and direction of that will has ever been the private prerogative of the intelligentsia, the leadership. They won the mass-man by appealing to the intelligence they knew he did not have; in the name of education they filled him with phrases which served him well enough for understanding. But--and this is of utmost importance--he became a willing "student" because they told him what he knew only too well: that the world as is is NOT the best of all possible worlds.

...

The current slogan of this effort to forestall Socialism is "free enterprise." Now, enterprise consists of nothing else, in the economic field, than the production and exchange of goods and services, by individuals acting in their own interests, and it is free only when the process is rid of legal interventions. The ultimate object is to provide an abundance of the things men want, to flood the marketplace. That means low prices, or prices determined by the equation of supply and demand without restrictions on supply. If that is what the "free enterprisers" were really for, they would concentrate on the rescinding of laws making for scarcities--and they would inform the mass-man that the cause for his lack (admitting first that there is an unwarranted lack) are these laws and the practices that have grown up under them.

First of all, they would direct attention to the scarcities resulting from tariffs, quotas, the manipulation of money, fictitious quarantine laws and other devices for preventing foreign goods from reaching our market. You see nothing about that in their literature. The inference is that free trade is not included in their concept of free enterprise. Why? Is it because of a concern for the higher prices which this limitation on competition affords them?

Taxation is a major interference with enterprise, simply because what is taken by the State is production which was intended for the market. Taxes on commodities are added to price and therefore decrease the purchasing power of wages; taxes on incomes and inheritances discourage production. These facts are rarely mentioned in any of the "free enterprise" literature; when it does touch on taxation the comment is limited to "equitable" distribution, which, on examination, simmers down to the shifting of the burden from one class of citizens to another. The reason is clear. You cannot expect the holders of government bonds to attack the income tax (which is the necessary precursor of State capitalism), because the prime security behind these bonds is the power of the State to levy on incomes. Nor can you expect liquor interests to oppose liquor taxes because if these were abolished every farmer could open a distillery.

You read in this "free enterprise" literature about government extravagances. But, what about particulars? Subsidies to railroads, airplane and shipping companies (via the post office) are clearly extravagances, supporting and encouraging inefficiency; but, the values of the stocks and bonds issued by these companies are enhanced thereby and hence the subject is taboo; subsidies which cannot be capitalized, like handouts to veterans and unemployed, can be attacked. Parity prices provide a cushion for the commodity market, and also hold up the value of agricultural land; the "free enterprisers" avoid the subject. Militarism is undoubtedly the greatest waste of all, besides being the greatest threat to freedom of the individual, and yet it is rather condoned than opposed by those whose hearts bleed for freedom, according to their literature.

One could go on paragraph after paragraph with instances of State interferences with enterprise which the "free enterprise" bilge skirts around or ignores. One is driven to the conclusion that the sponsors are not at all in favor of what they preach. They are rather for the status quo, for the legal into favored position. They are for privilege, as is, and not for the sanctity of private property.

Is it any wonder that the only following this kind of leadership can muster is what it can buy? Is it any wonder that the socialists have the mass-field to themselves?

Nock: 'the State' is a mere perversion of 'the government'

ayrnieu — Wed, 27 Feb 2008 19:40:00 GMT

Excerpt from Nock's Our Enemy, the State:

As far back as one can follow the run of civilization, it presents two fundamentally different types of political organization. This difference is not one of degree, but of kind. It does not do to take the one type as merely marking a lower order of civilization and the other a higher; they are commonly so taken, but erroneously. Still less does it do to classify both as species of the same genus -- to classify both under the generic name of "government," though this also, until very lately, has been done, and has always led to confusion and misunderstanding.

A good understanding of this error and its effects is supplied by Thomas Paine. At the outset of his pamphlet called Common Sense, Paine draws a distinction between society and government. While society in any state is a blessing, he says, "government, even in its best state, is but a necessary evil; in its worst state, an intolerable one." In another place, he speaks of government as "a mode rendered necessary by the inability of moral virtue to govern the world." He proceeds then to show how and why government comes into being. Its origin is in the common understanding and common agreement of society; and "the design and end of government," he says, is "freedom and security." Teleologically, government implements the common desire of society, first, for freedom, and second, for security. Beyond this it does not go; it contemplates no positive intervention upon the individual, but only a negative intervention. It would seem that in Paine's view the code of government should be that of the legendary king Pausole, who prescribed but two laws for his subjects, the first being, Hurt no man, and the second, Then do as you please; and that the whole business of government should be the purely negative one of seeing that this code is carried out.

So far, Paine is sound as he is simple. He goes on, however, to attack the British political organization in terms that are logically inconclusive. There should be no complaint of this, for he was writing as a pamphleteer, a special pleader with an ad captandum argument to make, and as everyone knows, he did it most successfully. Nevertheless, the point remains that when he talks about the British system he is talking about a type of political organization essentially different from the type that he has just been describing; different in origin, in intention, in primary function, in the order of interest that it reflects. It did not originate in the common understanding and agreement of society; it originated in conquest and confiscation.

Its intention, far from contemplating "freedom and security," contemplated nothing of the kind. It contemplated primarily the continuous economic exploitation of one class by another, and it concerned itself with only so much freedom and security as was consistent with this primary intention; and this was, in fact, very little. Its primary function or exercise was not by way of Paine's purely negative interventions upon the individual, but by way of innumerable and most onerous positive interventions, all of which were for the purpose of maintaining the stratification of society into an owning and exploiting class, and a property-less dependent class. The order of interest that it reflected was not social, but purely anti-social; and those who administered it, judged by the common standard of ethics, or even the common standard of law as applied to private persons, were indistinguishable from a professional-criminal class. Clearly, then, we have two distinct types of political organization to take into account; and clearly, too, when their origins are considered, it is impossible to make out that the one is a mere perversion of the other. Therefore when we include both types under a general term like government, we get into logical difficulties; difficulties of which most writers on the subject have been more or less vaguely aware, but which, until within the last half-century, none of them has tried to resolve.

Mr. Jefferson, for example, remarked that the hunting tribes of Indians, with which he had a good deal to do in his early days, had a highly organized and admirable social order, but were "without government." Commenting on this, he wrote Madison that "it is a problem not clear in my mind that [this] condition is not the best," but he suspected that it was "inconsistent with any great degree of population." Schoolcraft observes that the Chippewas, though living in a highly- organized social order, had no "regular" government. Herbert Spencer, speaking of the Bechuanas, Araucanians and Koranna Hottentots, says they have no "definite" government; while Parkman, in his introduction to The Conspiracy of Pontiac, reports the same phenomenon, and is frankly puzzled by its apparent anomalies.

Paine's theory of government agrees exactly with the theory set forth by Mr. Jefferson in the Declaration of Independence. The doctrine of natural rights, which is explicit in the Declaration, is implicit in Common Sense; and Paine's view of the "design and end of government" is precisely the Declaration's view, that "to secure these rights, governments are instituted among men"; and further, Paine's view of the origin of government is that it "derives its just powers from the consent of the governed." Now, if we apply Paine's formulas or the Declaration's formulas, it is abundantly clear that the Virginian Indians had government; Mr. Jefferson's own observations show that they had it. Their political organization, simple as it was, answered its purpose. Their code-apparatus sufficed for assuring freedom and security to the individual, and for dealing with such trespasses as in that state of society the individual might encounter -- fraud, theft, assault, adultery, murder. The same is clearly true of the various peoples cited by Parkman, Schoolcraft and Spencer. Assuredly, if the language of the Declaration amounts to anything, all these peoples had government; and all these reporters make it appear as a government quite competent to its purpose.

Therefore when Mr. Jefferson says his Indians were "without government," he must be taken to mean that they did not have a type of government like the one he knew; and when Schoolcraft and Spencer speak of "regular" and "definite" government, their qualifying words must be taken in the same way. This type of government, nevertheless, has always existed and still exists, answering perfectly to Paine's formulas and the Declaration's formulas; though it is a type which we also, most of us, have seldom had the chance to observe. It may not be put down as the mark of an inferior race, for institutional simplicity is in itself by no means a mark of backwardness or inferiority; and it has been sufficiently shown that in certain essential respects the peoples who have this type of government are, by comparison, in a position to say a good deal for themselves on the score of a civilized character. Mr. Jefferson's own testimony on this point is worth notice, and so is Parkman's. This type, however, even though documented by the Declaration, is fundamentally so different from the type that has always prevailed in history, and is still prevailing in the world at the moment, that for the sake of clearness the two types should be set apart by name, as they are by nature. They are so different in theory that drawing a sharp distinction between them is now probably the most important duty that civilization owes to its own safety. Hence it is by no means either an arbitrary or academic proceeding to give the one type the name of government, and to call the second type simply the State.

To "turn away from good-faith discourse", first make use of pseudopsychiatry.

ayrnieu — Wed, 27 Feb 2008 14:49:00 GMT

If pseudopsychiatry has canons, one must be Argument by Description (With Prejudicial Terms). To see this canon a'firing, read this piece by TokyoTom, wherein he observes -- with spooky language, taken as its own argument -- that Walter Block always seems to refer us to anti-global-warming articles. TokyoTom makes no argument about the articles themselves (here's a simple one: anti-GW articles have missed the shift in discussion, towards 'climate change' and 'global weirding', which makes increased snowfall a data point rather than a refutation), and only suggests that Block should have referred us to three other articles in their stead. TokyoTom does not tell us more broadly what Block should do instead of posting his anti-GW articles -- probably because the alternatives-in-bias are ridiculous:

Block should shut up, not being permitted, as a non-climatologist, to express a view on the climate that is contrary to the view of mainstream climatology.
Block should post on all articles on climate change -- making blog.mises.org now an indiscriminate climatology RSS feed, and Block its human feeder. This is a noisy equivalent to 'Block should shut up': he no longer has any human contribution to the discussion.
Block should only post articles that oppose his own preferences. This is again a noisy equivalent to 'Block should shut up', as you can get this exact bias (hype humanity-annihilating climate change; deep-six adverse articles) from mainstream news services.

I don't have a problem with Walter Block's bias, to use that term without prejudice, but TokyoTom's sneers annoy me. So, for TokyoTom: if you have interesting links on a subject, and blog.mises.org sees a rare post about this subject, please share the links. If you wish that interested parties follow these links, you probably shouldn't hide them in an unrelated, offensive attack on the original poster. Please refrain even in your offensive attacks from pseudopsychiatric language. Or do you have a mental problem that drives you to childishly imitate this misfeature of American political discourse? You've got to be crazy to think that you improve your argument by hiding unanalyzed description behind clinical language!

Anyway, the real lesson with anti-GW literature is this: when you emit a pattern of policy proposals, the enemies of these proposals will not restrict themselves to attacking your successive emissions: they will strike also at the consistent logical foundation for these proposals. Or: when 'greens' get giddy and say that the real solution is a massive reduction in living standards and in human population, horrified people of the pro-human tendency are also going to attack the given problem.

The way in which a dealer bought a pig from a peasant.

ayrnieu — Sat, 16 Feb 2008 08:20:00 GMT

Excerpt from Reimann's The Vampire Economy: Doing Business Under Fascism:

How cunning ingenuity and "private initiative" circumvent official rules in a country under totalitarian rule can be illustrated by the way in which a dealer bought a pig from a peasant in Nazi Germany.

A peasant was arrested and put on trial for having repeatedly sold his old dog together with a pig. When a private buyer of pigs came to him, a sale was staged according to the official rules. The buyer would ask the peasant: "How much is the pig?" The cunning peasant would answer: "I cannot ask you for more than the official price. But how much will you pay for my dog which I also want to sell?" Then the peasant and the buyer of the pig would no longer discuss the price of the pig, but only the price of the dog. They would come to an understanding about the price of the dog, and when an agreement was reached, the buyer got the pig too. The price for the pig was quite correct, strictly according to the rules, but the buyer had paid a high price for the dog. Afterward, the buyer, wanting to get rid of the useless dog, released him, and he ran back to his old master for whom he was indeed a treasure.

These "combination deals" have an interesting economic aspect. The supplementary article which is sold in order to make the whole transaction as legal as possible is not always an old dog, but, in most cases, an article which may have a certain usefulness in itself, though not necessarily for the buyer. The purchase of these supplementary articles therefore largely amounts to waste of money, made necessary to facilitate the purchase of other more urgently needed articles. Private initiative was wont to seek economies which would increase profits and the productivity of labor. Today, in a society which is laboring under great hardships as the result of scarcity of many essentials, the same goal can be achieved only by purposely arranged waste.

Nock on Money

ayrnieu — Sun, 20 Jan 2008 07:52:00 GMT

Excerpt from Nock's Memoirs of a Superfluous Man

The general preoccupation with money led to several curious beliefs which are now so firmly rooted that one hardly sees how anything short of a collapse of our whole economic system can displace it. One such belief is that commodities--goods and services--can be paid for with money. This is not so. Money does not pay for anything, never has, never will. It is an economic axiom as old as the hills that goods and services can be paid for only with goods and services; but twenty years ago this axiom vanished from everyone's reckoning, and has never reappeared. No one has seemed in the least aware that everything which is paid for must be paid for out of production, for there is no mother source of payment.

Another strange notion pervading whole peoples is that the State has money of its own; and nowehere is this absurdity more firmly fixed than in America. The State has no money. It produces nothing. Its existence is purely parasitic, maintained by taxation; that is to say, by forced levies on the production of others. "Government money," of which one hears so much nowadays, does not exist; there is no such thing. One is especially amused at seeing how largely a native ignorance of this fact underlies the pernicious measures of "social security" which have been foisted on the American people. In various schemes of pensioning, of insurance against sickness, accident, unemployment and what-not, one notices that the goverment is supposed to pay so-much into the fund, the employer so-much, and the workman so-much. Only the other day I read that some paperassie in the Administration at Washington,--or no, on second thought I believe it was a paperassière,-- had forged out a great new comprehensive scheme on this principle, to be put into effect after the war. But the government pays nothing, for it has nothing to pay with. What such schemes actually come to is athat the workman pays his own share outright; he pays the employer's share in the enhanced price of commodities; and he pays the government's share in taxation. He pays the whole bill; and when one counts in the unconscionably swollen costs of bureaucratic brokerage and paperasserie, one sees that what the worksman-beneficiary gets out of the arrangement is about the most expensive form of insurance that could be devised consistently with keeping its promoters out of gaol.

The sum of my observations was that during the last twenty years money has been largely diverted from its function as a mere convenience, a medium of exchange, a sort of general claim-check on production, and has been slily knaved into an instrument of political power. It is now part of an illisionist's apparatus to do tricks with on the political stage--to aid the performer in the obsenities incident to the successful conduct of his loathsome profession. The inevitable consquences are easily foreseen; one need not speak of them; but the politician, like the stockbroker, can not afford to take the long-time point of view on anything. The jobholder, be he president or be he prince, dares not look beyond the moment. All the concern he dares have with the future is summed up in the saying, Après moi le deluge.