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Advancing Austrian Economics, Liberty, and Peace

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Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

Chapter 97
Should We Bail out Gorby?

The debate over whether or to what extent we should bail out Gorby ($10 billion? $50 billion? $100 billion? Over how many years?) has almost universally been couched in false and misleading terms. The underlying concept seems to be that the United States government has, through some divine edict, become the wise and benign parent of the Soviet Union, which, in its turn, has for most of its career been a wild and unruly kid, but a kid that is now maturing and showing signs of taking its place as a responsible member of the family. It is supposed to be up to the parent, engaged in a behavioristic reward/punishment form of raising said kid, to mete out a reward/punishment scheme so as to reward improvement and to punish (by rewarding less--it's a very progressive form of child-rearing) any regression back to the wild-kid state. And in tune with modern mores, the "rewards" are exclusively monetary, that is, to put a candid face on it, we are engaged in a process of bribing the kid to be good.

And so the debate, within the circle of "parents" of the Soviet Union which all Americans have willy-nilly become, runs along these lines: Gorby did wonderfully, and freed Eastern Europe and began to free the Soviet Union; for this he should be rewarded copiously. On the other hand, Gorby slipped back for a while, and began to play with those bad companions the despotic Black Colonels, for which he should be punished (by withholding bribes); but recently, Gorby has gotten better.

In addition to the nuanced complications of trying to figure out to what extent to reward Gorby and to what extent to withhold the rewards, there is an extra complication, due to the fact that Gorby and the USSR are, after all, not one and the same. If we reward Gorby heavily, will it discourage the more advanced reformers such as Yeltsin, or will it push Gorby more in their direction? On the other hand, if we punish Gorby, will this lead to the dread Black Colonels--the real despots--taking over, or will Yeltsin and the liberals take over instead? The U.S. Establishment, which worships the status quo ("stability") almost above all things, at least in foreign affairs, and fears change like the head of Medusa, of course plumps for Gorby all the way.

Within this debate, too, everyone, even the most enthusiastic bailout advocates, recognize that the U.S. budget is limited, and that therefore there has to be some restraint upon the total handout.

The result of all these complexities is that, as in most other areas of American life, our seemingly vibrant democracy appears to be engaged in free and vigorous debate, but is really only parsing relatively trivial nuances within a basic, unargued, and implicitly assumed, paradigm: the U.S. as parent trying to find the precise formula for correcting previously unruly offspring. Unfortunately, the basic paradigm never gets discussed, and desperately needs airing and criticism.

There are many fundamental flaws with this universally held paradigm. First, no one appointed us as parents of the Soviet Union. To be more specific, the United States, as rich and powerful as it is, is not God; its resources are strictly limited and, over recent years, have experienced ever narrower limits.

Even if we wanted to and set out to do so, it is not in our power to cure all the ills of the world.

There is no way we can stop or reverse the volcanoes, heal the sick, or resurrect the dead. It is not just that we are not responsible for Third World (or Second World) poverty; there is nothing we can do about it, except bankrupting and impoverishing ourselves. We can only serve as a beacon-light on how to get out of the mire. For the United States and Western Europe did not become relatively rich and prosperous by accident or by a trick of nature; we lifted ourselves by our bootstraps out of the nasty, brutish, and short lives common to mankind.

We--or more precisely our ancestors--did it by devotion to property rights and the rule of law, and by providing the institutional means for a free and developing economy to flourish. The best--indeed the only thing we can do for the impoverished Second and Third Worlds--is to tell them: look, here is how we became prosperous: by defending the rights of private property and free exchange, by allowing people to save and invest and keep their earnings. If you want to prosper, follow our forefathers: privatize and deregulate. Get your government off your backs and out of your lives.

If we adopt this new (or rather, return to the original U.S.) paradigm, the whole question of bailing out Gorby looks very different. U.S. government aid can only be a reward for Gorby and the rest of the neo-Communist nomenklatura. Regardless of rhetoric, such aid can only strengthen the State in the Soviet Union and therefore diminish and cripple the only hope for Russia and the other republics: the nascent and struggling private sector. Aid to Gorby, therefore, may be a reward for Gorby and his friends; but it is necessarily and ineluctably a harsh punishment for the peoples of the Soviet Union, because it can only delay and cripple their return, or advance, to a free economy.

To paraphrase a famous statement of Dos Passos ("all right, we are two nations"): every country is really two nations, not one. From one nation--the people interacting voluntarily, in families, churches, science, culture, and the market economy--all blessings flow. The "second nation"--the State--produces nothing; it acts as a parasitic blight upon the first, productive nation: taxing, looting, inflating, controlling, propagandizing, murdering. In the Soviet Union and other Communist countries, the State grew so wildly as to virtually swallow up the first nation, and the parasite ended up by virtually destroying its host. The Soviet people need a U.S. bailout of its own State apparatus like it needs--to use an old New York expression--a hole in the head, and quite literally. And while the American public, one hopes, resists the notion of foisting upon the Soviet Union more of what has brought it to its current sorry state, we might even turn our attention away from foreign woes and tyrannies, and focus again upon our own beloved State here at home.

But then there is the seeming clincher in rebuttal: if we don't bail out Gorby, won't worse people come to power in the USSR? Well, who knows? In the first place, it is not given to us to decide the fate of the Soviet Union; that, after all, is up to the Soviets themselves. Again, the United States is not God. In the second place, since the future is uncertain, a post-Gorby Soviet Union could be better or worse. So if we can't predict the consequences, shouldn't we, for once, do what is right? Or is that too arcane a concept these days? 

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