Mises Daily Articles
Historian of Decline?
[This speech was delivered at the Mises Institute’s History of Liberty Conference on January 29, 2000, in Auburn, Alabama.]
The memoirs of the indefatigable economist Ludwig von Mises, written from his exile in Geneva in 1940, contain this moving, even tragic, passage:
"Occasionally I entertained the hope that my writings would bear practical fruit and show the way for policy. Constantly I have been looking for evidence of a change in ideology. But...I have come to realize that my theories explain the degeneration of a great civilization; they do not prevent it. I set out to be a reformer, but only became the historian of decline."
Reading the whole of Mises’s works, it is clear what he means by decline: the deliberate wrecking of civilization itself, through the rise of the total state.
In our own time, I believe we are watching the opposite occur: the slow, systematic, intermittent, but relentless and glorious decline of the state, which is an essential condition for the restoration of civilization.
These trends, either in Mises’s time or our own, are not determined by historical forces beyond the control of the intellectuals who help shape the social order. There is no such thing as historical inevitability. The direction history takes in the next hundred years will be decided–as it has always been–by the ideas people hold about themselves, and the choices they make.
A Fighter to the End
Mises knew this truth, and in 1940, he wrote those words conceding that he had been defeated in the first half of his scholarly life.
His masterpiece Nationalökonomie had been printed in Geneva, but sank without a trace. It is not clear how many, if any, copies made it to America. Europe was already consumed by war. The so-called wise men from the US, Britain, and Russia–would-be world planners now in their element–would soon be at the height of their power. The political ideology and economic theory to which Mises had devoted his life was fast becoming the stuff of historical interest only.
As for his personal life, the Miseses, now political refugees, were in deadly danger for much of the four weeks they traveled to the US, and when they arrived, they had neither family to greet them nor any of their belongings, which had been shipped separately. They moved from from one small hotel to another, with only savings to live on, and no teaching position.
He had already completed his masterworks–-The Theory of Money and Credit; Nation, State, and Economy; Socialism; Epistemological Problems; Liberalism; and Nationalökonomie-–but they were known mostly in a Europe that no longer existed in 1940. Two had been translated into English, but circulated mainly in British academic circles.
Most tellingly, the intellectual tide had turned against him, with the rise of national and international socialism in Europe and Keynesian-style New Deal planning in the US.
Mises’s realization that he had been a historian of decline comes two-thirds into his biography, after he has told of case after case of a danger that presented themselves, his warning, and the final result, usually contrary to his recommendation.
Crucially, Mises did recognize that he had played an important role in preventing the communization of Austria and in ending the Austrian inflation before it reached Weimar proportions.
But he had no illusions about the limits of his own power to change the direction of history. No intellectual working alone can guarantee a certain path. Ideas can sway history, but there is no certainty that good ideas will prevail over bad ones. No matter where you looked in 1940, bad ideas were triumphant, while good ones were seemingly discredited, and crushed by the force of events.
Hope and Despair
Mises also understood that he was a member of the second generation of European liberals to be faced with events so ghastly that no 18th century liberal would have ever predicted them. Boundless hope was integral to the classical liberal worldview, and it was carried over in the mindset of the Vienna economists, including to Carl Menger in his youth.
But when the classical liberals faced the massacres and vast statism of World War I, many despaired. Mises noted that pessimism had broken the strength of Menger, who retired very early, robbing us of the further insights of the most brilliant economist of his age. Despair colored his last two decades and crippled him intellectually.
One senses that Mises, in his youth, might have been troubled by the example of Menger. Perhaps all was lost, Mises might have thought, but sitting and stewing about it accomplishes nothing. Engaging in the intellectual battle for truth comes with no guarantee that truth will triumph. But apart from such engagement, there is no hope at all.
As Mises puts it in an inspiring paragraph:
"It is a matter of temperament how we shape our lives in the knowledge of an inescapable catastrophe. In high school, I had chosen a verse by Virgil as my motto: Tu ne cede malis sed contra audentior ito. [Do not give in to evil, but proceed ever more boldly against it.] In the darkest hours of the war, I recalled this dictum.... I would not lose courage even now. I would do everything an economist could do. I would not tire in professing what I knew to be right."
A Matter of Temperament
"It is a matter of temperament" was Mises’s theory on why some give up and others continue to fight. And we can only marvel at the fact that the second half of Mises’s life, even in the face of astonishing personal, intellectual, and political calamity, was as productive as the first. Had he given up, there would have been no Human Action, no Omnipotent Government—a critique of national socialism even more devastating than Hayek’s Road to Serfdom—and no Bureaucracy and Theory and History, most of them written during years when the state controlled all prices and production in most parts of the world, and killed some 56 million people in its bloodiest war. But Mises did not give in. He fought with the most powerful weapon of all.
Had he not done so, there would be no Austrian School movement today, and we could not be hopeful about the prospects for liberty. Mises fought until the end, even though nothing happened between 1940 and 1973, the year of his death, to give him a secure hope that liberty would prevail. In those years, the redistributive state in the US exploded in growth, the gold standard was finally destroyed, the US became a world military empire, the regulatory state intruded into the lives of average people more than ever before in history, and the Soviet Union, which claimed to practice the socialism that Mises said was impossible, seemed to most naive observers to be secure, stable, and statistically prosperous.
Why did Mises persevere? We might say that he knew the truth when others did not. Sadly, while that may be a necessary reason, it is not sufficient. The other ingredients, besides being educated and knowing the truth, are courage and tenacity, qualities that are just as rare.
A person must be judged by his actions. It is a great thing when a person holds the right views, when a politician favors freedom, when academics have an affection for truth. But it is only valuable to society when these same people are willing to follow through on their ideas with actions.
The Right Ideas
We’ve heard for years that ideas have consequences. But Richard Weaver did not mean that ideas have consequences whether or not they are acted upon. They must be advanced in public life, lived, and defended to make a difference, and even when there is no promise that doing so will make a difference, we must act anyway.
And here is where Mises excelled over all of his contemporaries, many of whom regretted the passing of freedom but were all too willing to ride the wave of statism to further their careers. Now, moral theology has never required heroism from anyone, as versus ordinary virtue; but that doesn’t mean we shouldn’t recognize and praise heroism when it does occur. And Mises was a hero.
It is all the more noteworthy that Mises persevered despite witnessing little but civilizational decline. As Ralph Raico has argued, the times were far more bleak for Mises—with the rise of all the monstrous forms of socialism in Europe—than any of us recognize today.
So, if we are to follow Mises’s example, it should not matter to us whether we see our world as still thundering down the statist path, or whether we can find evidence that we are actually living in a new dawn of liberty. I will try to convince you of the latter, but, as Henry Hazlitt used to emphasize, the case for principled intellectual activism does not depend on having realistic hopes for victory in our lifetimes.
The Contrast with Schumpeter
Despite all evidence, then, Mises had hope for the future of liberty, and it was this hope that kept him engaged in the battle. Consider the contrast with Joseph Schumpeter, a classical liberal who won the hearts of the Marxists at Harvard by forecasting the death of capitalism. In Schumpeter's view, points out historian Robert Higgs, four trends would lead to the permanent triumph of a fascistic-style of socialism in America.
First, he said, the business class would shrink with the rise of the heavily bureaucratized corporation. And yet, since his time, we have seen a virtual revolution occur in the Fortune 500, with old established firms being wiped out by younger, smaller, and more aggressive upstarts. The business class has swelled to become the more prestigious and most active sector of American society.
Second, Schumpeter predicted that a bureaucratized capitalism would lead to a loss of respect for private property. And while it is true that property in America is fully private in name only, and that Americans are far too lax in its defense, and that we live under the rule of the largest government in the history of man, dogged attachment to property has increased in recent years. For many in the former socialist world, the blessings of extensive property ownership are being discovered for the first time.
The tax revolt would not have become a permanent fixture of American politics, bureaucrats would not find themselves fearing for their lives when attempting to enforce wetlands regulations, and people's attachment to their stock portfolios would not have recently driven them to turn to the business section before the sports section of the newspaper every day. If anything, attachment to private property, or what remains of it, is more intense than in any period since the war.
Third, Schumpeter predicted that the intellectual class would become fully socialist. But he didn't predict that this intellectual class would undermine itself by burying its socialist moral system in deconstructivist relativism, thereby inadvertently encouraging students to be just as dismissive of socialist orthodoxy as any other. And neither did Schumpeter anticipate the rise of an alternative intellectual class that organizes itself around the principles of the Austrian and classical liberal tradition. If you want to see this class at work, come to the annual meetings of the Austrian Scholars Conference.
Finally, Schumpeter predicted that the American public would increasingly accommodate itself to a political environment that exalts social security, egalitarianism, and economic planning. What he underestimated was the propensity of so many to resent the heck out of having their money stolen by equality-promoting racketeers with a social and economic record of unrelenting calamity.
But Schumpeter's greatest error was in having dismissed Ludwig von Mises's argument that socialism is impossible. Schumpeter opposed socialism but believed that with some effort, it could be made to work. Mises, in contrast, argued that socialism could never be realized economically, and that even halfway attempts could not achieve what it promised to achieve.
This was one of the reasons that Mises had confidence and hope in the future of liberty. He didn’t live to see the Berlin Wall come down or the Soviet Union fall apart, or the Western regulatory and welfare states begin to crack, but we have been privileged to live in just such times.
Unraveling of the Statist Consensus
Today, Leviathan has been delivered a number of setbacks relative to both the ambitions of the ruling elites to devour private life entirely, and to the reach of the state as it existed in past decades. Murray Rothbard said that decay of the statist consensus really took hold in the early 1970s, with Watergate in particular. It exposed the reality of the central state to the American people, who had been conditioned since the first world war to believe that their leaders were benevolent, public-spirited, intellectually superior men of courage—politicians of greatness who embodied the general will in the Rousseauian tradition.
As Vietnam discredited US foreign policy, Watergate was a serious blow to the administrative state on a domestic level. In the 1950s, it was considered nearly scandalous when Bob Hope poked fun at Eisenhower’s golf game; now the jokes against the president are so ruthless (deservedly so) that you have to ask the children to leave the room.
I can recall when it was not uncommon for American homes to sport a picture of the great leader. Now, if the same picture is in an American home, it is in the form of a dart board. I remember when a Christmas card from the White House was a treasure; now it is considered junk mail and a waste of tax dollars.
Rothbard saw that Watergate–however partisan and petty–represented a sea change in American politics. Instead of moral men looking out after the public, the political class was revealed as foul-mouthed, corrupt, conniving, and lying. From Watergate until the present, the trend has been relentlessly down. No president since JFK–the now discredited JFK–has enjoyed immunity from widespread public antipathy. Even the great Reagan was caught in a scandal–now forgotten–that had him working with the CIA and supposed international terrorists in Iran to pay off would-be juntas in Latin America.
Collapse of the Cold War Empire
And yet the trend toward a decline in the moral, intellectual, and cultural credibility of government has dramatically accelerated since the end of the cold war. Consider the long view of our century. As Higgs has emphasized, it has been a period of crisis, from world wars to depressions to inflationary recessions, all of which conspired to instill a sense of dependency and loyalty to the central state.
For forty years during the Cold War, the state kept us in constant fear of a nuclear holocaust. The only thing that stood between the people and total annihilation was the government.
We were told that our political leaders were protecting us from Russia. Whatever you want to say about that assertion, it is undeniably the case that it benefitted DC at the expense of our liberties. I recall noticing a distinct lack of jubilance on the part of the ruling class when it woke up one day to find that its reliable enemy had ceased to exist.
Since then, the ruling class has attempted to find some effective substitute for the Soviets, a new enemy so formidable that it would suppress the libertarian impulse and inspire the old civic loyalties. But no matter what they have dreamed up–and how many Hitlers has Washington invented in the last ten years?–nothing works like it used to.
Several wars have been prevented by the sheer force of public opinion. Washington no longer has a blank check. Public support for the attack on Serbia never rose beyond a third. This represents a huge shift. The Cold War veneer of the central state continues to wear away. I believe we are going to look back ten years from now and fully realize just to what extent the cold war protected the government from critical analysis.
Madeline Albright said to a reporter, in response to Jesse Helms’s negative comment about the UN: "only the president and the executive branch can speak for the United States." Interesting that she felt she had to say this; but does anyone really believe that anymore?
End of the Nation State
Since the end of the Cold War, there is an emerging literature that addresses the astonishing decline of the state. Generally, it divides into two camps. The first is represented by those who cannot imagine social organization taking shape apart from some type of government, and thereby support the formation of ever-more institutions of government, especially globally.
Among these thinkers, we can point to Stephen Krasner, whose new book, Sovereignty: Organized Hypocrisy, takes the position that the future rests with agencies such as the IMF, the World Bank, the WTO, Nafta, the EC, and the like, which will come to replace the nation state as the source of primary citizen allegiance. He is partially backed up in this by Henry Grunwald, whose article in the Millennium Edition of the Wall Street Journal forecast the wreckage of the state as we know it, and its replacement by universal institutions, not excluding those of world government.
There are several reasons why these writers are not ultimately correct. First, the idea of world government is hardly new: it has been a dream of socialist writers and despotic rulers for centuries. It was never closer to becoming a reality than after the second world war, when the Bretton Woods institutions were established with relatively little controversy. But today, every attempt to increase the power of the international bureaucracy is met with widespread hostility.
The WTO meetings in Seattle were wrecked, most conspicuously by the protestors outside, but more substantively by the delegates from developing nations who resented attempts by the US to impose prosperity-crippling labor and environmental regulations. Clinton has been stymied in his attempt to bolster the power and authority of international institutions and his own personal power to represent the interests of the US to them. That, and not the fall of "free trade," was the real story behind the defeat of his fast-track trade authority.
The power of the EC continues to be the most important political issue in Europe. Meanwhile, its North American counterpart in Nafta has been discredited throughout the hemisphere. When was the last time any politician in Canada, Mexico, or the US publicly claimed credit for Nafta? The silence is revealing.
There is another factor that suggests that world government institutions are not a viable replacement for the nation state. The world government itself is a parasite on the nation state: it has state-like qualities but is not itself a governing unit with autonomous power. For example, there is no sharp distinction between the power of the US government and the power of Nato or the World Bank. When you hear about threats to US sovereignty from the world government, remember that the US is the hand in the glove of the global state. The good news about the prospect for world government is that when the host is wrecked, so is the parasite.
Far more compelling opponents of the nation state, like Murray Rothbard, Hans Hoppe, Guido Hülsmann, and Martin van Creveld, as well as strains of Ralph Raico’s beloved German classical liberal tradition, argue that the state needs no replacement. The international market economy is self ordering, and political systems are best when they reflect the preferences and unique qualities of the people most affected by them.
Combine the insights of the Austrian economists with the ancient moral imperative of subsidiarity, and you end up with Murray Rothbard’s dictum: universal rights, locally enforced. This is where we should be heading, and not toward world government, in this period of nation-state decay.
The State and its Paranoia
Just how intense is the present anti-government feeling? It is interesting to note that not even at the height of the cold war did Washington feel the need to become the complete fortress that it is today. We’re told that this is to protect our leaders from attacks by foreigners, but the truth is that the fortress is designed to protect the government from retaliation by the governed–a situation that the Scholastic political thinkers said was a priori evidence of tyrannical rule.
Two years ago, Daniel Patrick Moynihan was asked what can be done to restore the people’s faith in government. He responded, "I’ve given up trying to restore faith in government. I’m just trying to get through the day."
Indeed, not since the Whisky Rebellion has the political class been so paranoid and fearful of the public. The defining events here are, of course, the massacres at Waco and Ruby Ridge, and the later bombing of the Oklahoma federal building. These events brought back the cold war in a different form: now it is not between the US government and some foreign enemy, but between the entrenched ruling class and the rest of the population.
During the Clinton scandals, people on the right expressed astonishment that Clinton did not suffer at the hands of public opinion more than he did. But this observation assumes a preexisting public expectation that the presidency should be free of scandal and corruption. If expectations are rock bottom to begin with, revelations about corruption in the White House do not cause shifts in public opinion so much as confirm people’s already low opinion of the ruling elite.
Where’s the outrage?, the neoconservatives kept asking. But they didn’t mean where is the outrage against government itself; in fact, it is they who have been most vocal in condemning the persistent outrage against government in our time, which they decry as dangerous anti-government cynicism.
What they desired was outrage against Clinton personally: and there seems to be fully a third of the public that truly hates the man. But far more important than this is that two-thirds or more expect politicians to act exactly as Clinton acts. And this isn’t anti-government cynicism; it is simple realism.
Evidence of Decline
This goes a long way toward explaining other events that have shocked mavens of the political system. Voting is down to historic lows, not because of indifference but because of the perception that the system is wholly owned by the power elite, designed and constructed to keep the current regime in charge. The new left used to fulminate against the democratic illusion, but hardly anyone believed that this critique would become mainstream in the next century.
In the current system, not voting is a form of protest, using the freedom not to vote to express disapproval of the current system. Already we are seeing public interest groups demand that the government institute an incentive system to increase voting, or even require voting as many other governments do. Never underestimate the desire for the state for symbolic evidence of citizen support. Never forget the insight of de la Boetie, Hume, Mises, Rothbard, and others that government ultimately rules not by force but by achieving something of a public consensus. Voting totals are one way to browbeat people into granting consent.
Another interesting indicator is the election checkoff system on the tax forms. The system was adopted in the early 1970s and inspired nearly universal participation. But no longer. The figures for 1998 tax returns show that only 11.3 percent of filers checked the box. This is a strong vote of no confidence in the political system—not just the politicians who want to use the money, but also the apparatus of government they inhabit. Give the people an ever-so-slight window of opportunity to secede and they will take it. Currently 41 states have spending check-offs on their tax forms, most of them instituted with the hope of demonstrating the public's support for a range of liberal causes. The result is an average participation rate of 1 percent.
Neither is the perception that politics is one big racket restricted to the US. Even in Germany, where libertarian ideas have had a very difficult time gaining a foothold, public respect for the state is at a postwar low. Helmut Kohl now stands discredited, but so do most other potential leaders of the German state.
Commentators at the New York Times are already warning that the new political climate could end up uprooting an entire generation of German political leaders. In Britain, where Tony Blair gave up socialist ideology, he uses the language of markets because the prospects of nationalized industry no longer inspire voter interest.
We see the decline of the state reflected in a hilarious turn of events in the polling industry. I have seen only a few articles on this subject–the polling industry understandably wants to keep it under wraps–but it turns out that pollsters are able to gain the cooperation of only one out of three people they try to talk to. Most people approached for their political opinions simply refuse to participate–a fact which makes a mockery out of their pseudo-scientific so-called margin of error. So taboo have some political opinions become that even those who answer the polls do not always tell the truth. Only this explains why every election season of the last three have featured huge political upsets, and why we should not believe polls, for example, claiming that South Carolinians believe they should take down the flag.
Lying to the pollsters is one form of rebellion, but we are surrounded by many others. When the state says it is going to impose new restrictions on gun ownership, sales boom. When it announces that it will regulate home offices, it is forced to back down in one day. When the state says we shouldn’t smoke, especially not teens, smoking soars among teens.
When the state says we shouldn’t eat fast food, and sic what Tom DiLorenzo calls "the Food and Drink Police" after us, the stocks of Burger King and McDonalds take off. When the state says to vote, people stay home. We can only hope that the government never undertakes an advertising campaign on behalf of Austrian economics.
Brain Drain From Government
The prevalence of anti-government cynicism is fast becoming like the weather: everyone complains about it, but no one does anything about it. Because no one can. Government is having serious trouble recruiting people into its ranks. As Martin van Creveld has pointed out, the rise of the state was in part dependent on the perception that the state offered its employees the greatest financial prospects of any industry, along with a secure path to social advancement.
This is no longer true. Even with the government’s inflated salaries, it cannot compete with the private sector. The word bureaucrat, originating as a term of prestige, is now a swear word. The bureaucracy is no longer what Hegel praised as the "objective class" or what Max Weber said was the embodiment of "goal-oriented rationality."
When Clinton bragged that he has reduced the government to the smallest size in thirty years, he was referring to the number of people on the government’s civilian payroll. But it was a trick: he came up with these numbers by deleting the numbers of unfilled positions from the payroll. What his numbers meant, then, is that the government is having a hard time recruiting and retaining employees–not exactly a flattering statistic when presented in that light.
A recent study of graduates from the Kennedy School at Harvard, set up to promote "public service," showed that only a third of its graduates enter the public sector. And no wonder: parents used to want their kids to grow up to become president, but now that seems like psychological abuse.
According to a survey of 270 executives of the best performing public companies today, four out of five say they would never consider running for public office. More than half said they will decrease their financial support for political parties and individual candidates. And more than two thirds say they would have voted to impeach Clinton. As Suzanne Garment angrily reported in the Wall Street Journal, "For many men and women today, government has ceased to be a natural stop on a professional life's journey."
Technology and Taxes
What about taxes? Yes, they are higher then ever and tax collection the most intrusive in history. But the technological revolution has raised the possibility of increased competition between tax jurisdictions. We don’t have to go as far as David Laband to predict that web commerce will drive sales taxes to zero, but the possibilities are there that increased competition between political units impose serious downward pressure. And I think it is clear–and it has been clear for some time–that the public’s tolerance of tax increases stands at exactly zero. Liberal media commentators like to point out that politicians promising to cut taxes experience no great boost as a result. But this isn’t because the public demand isn’t there; it is because, more radically, no one believes them anymore.
The tax state will be dealt a mortal blow if the time ever comes when money and banking are taken out of the monopoly hands of the state and become the domain of market economies too. Certainly, the prospects for genuine tax reduction coming via legislation seem low indeed. The best case scenario for tax reduction involves an increase in the present practice pioneered by the very rich: sheltering their money in financial forms that avoid extreme tax penalties, or even banking in places that guarantee privacy.
Richard Rahn, in his book The End of Money, has argued that the demand for bank privacy is far more widespread than is traditionally known–a case in point being the public outrage over Clinton’s proposed and defeated "know your customer" regulations. In Rahn’s view, online technologies will eventually come to meet the demand for bank privacy, making it very difficult for the nation state to collect what it believes it is owed. Certainly, the tax state, like the antique post office, is closely tied to brick and mortar, and could eventually find itself outrun by digital means of avoidance.
Such a system requires secure communications, from criminals private and public. So the Clinton administration proposed a spying "clipper chip" in every phone, fax, and modem, with keys to every form of private encryption held at the Fed, as allegedly trustworthy! They wanted to outlaw so-called strong encryption, encryption the National Security Agency can’t read. That’s another battle they lost.
The gold standard represents the ideal monetary arrangement, and the only one that erects a wall of separation between the means of exchange and the nation state. Guido Hülsmann and Walter Block have argued that a truly free monetary arrangement–one free of legal tender laws, taxes on gold, and free entry and exit—would result in a de facto gold standard. Further, Joseph Salerno has made the argument that the rise of nonbank banks represents a viable replacement for traditional banking services, one which is far more sound because these institutions keep 100 percent reserves and are therefore not subject to banking panics or the contagion effect.
The unexpected change in monetary affairs in the last decade has been the startling effect that financial deregulation and internationalization have had on the ability of the Federal Reserve to monitor and control money. The Fed is no longer sure which monetary aggregate to watch, and it cannot be sure of the market’s response to its actions, in either the value of the dollar on international exchange or on the shape of the yield curve. The Fed is flying blind–exactly the opposite of the all-knowing, all-seeing central bank it has pretended to be.
The Middle Class Welfare State
The problem of money and banking may be the most intractable problem we face in the future, and in this area, we can chronicle nothing but decline–and Jeffrey Herbener has done so—and will probably continue to do so for some time, barring some amazing digital breakthrough. This is not so with Social Security, FDR’s tax racket that hooked generations into dependence on Leviathan.
The liabilities of the system are huge and growing–far too vast to allow some easy Chile-style privatization to cure all woes. Fortunately, the unexpected has happened with the rise of 401ks and other forms of retirement accounts, created by Congress as a concessionary measure in the wake of relentless tax increases.
Young people today do not believe they will see a dime of Social Security, a perception which has caused tens of millions to mentally secede from the system. Today, people are socking away money in these private accounts on the expectation that the government will fail. Social Security is not an investment program, but a transfer system. But the fact that the government continues to advertise it as an investment program only serves to discredit the state as a pension fund manager. Whereas people once were grateful to FDR for caring for them in their old age, young people today are wildly angry at Social Security for looting their earnings, and this growing anger explains why some in Congress are actually beginning to discuss this previously taboo topic.
Secession is taking a variety of forms, not just financial. Nation states have multiplied since 1900, and secession remains an important political force in most every one of the 200 nations in the world, even the US, which sports active secession movements in every region.
We should realize the implications of this. The more states there are, the more difficult they are to manage, which is why the establishment is always sounding the alarm that it is a dangerous world. It is indeed dangerous for those who believe the world economy, and people’s lives, need top-down control.
It would have been unthinkable 15 years ago, but today loyalty to the existing central states–most of them the product of arbitrary mappings and political conquest–is not stable. Moreover, technology and the vibrancy of international trade make it possible for even the smallest territory to be a viable country. Just exactly what are the supposed benefits of being connected to a central state?
In the old days, the answer was readily at hand. It gave us security. It delivered the mail. It protected us from foreign invaders. It provided courts of law.
First, what has become of the state’s security? As Bruce Benson has pointed out, the drop in crime in recent years coincides with proliferation of gated communities, huge expenditures on home security systems, a boom in private security guards, and the vast increase in individual gun ownership.
Contra Hobbes, our security is due to our own efforts, not those of the state. And it is not only personal security at issue, but also financial security, which the state also purported to provide. But in the present economic environment, it is the state, with its constantly shifting rules on welfare provision and regulatory arbitrariness in general, which has become the major source of insecurity.
As for the government’s mail, is there anything the feds do that is more laughably anachronistic? AOL’s Instant Messaging program delivers half again as many communications every day as the Post Office, and with online banking becoming easier, bill paying will no longer be a Post Office monopoly. In the end, the Post Office may find itself in business only to deliver Christmas cards, as the postmaster general fears. (His solution, incidentally, is to copy ebay and have an online auction service. Maybe he could start with the post office’s horde of buildings.)
What about defense? Just as the US government has failed to protect its own borders from relentless invasion, its foreign military adventures constitute defense in name only. I’ll leave aside the crazy and murderous crusades from the 19th century through the end of the Cold War–so throughly chronicled in John Denson’s book, The Costs of War—and only cite a few outrageous recent cases.
It turns out that US soldiers are being investigated for raping Serbian women during the Kosovo war–the exact charge the US made against Serbian soldiers. As the news continues to trickle out about, for example, the US soldier who sexually assaulted and then killed an 11-year-old girl, we can only expect the outrage to continue.
This is to say nothing about the war crimes that continue to be committed against the Iraqi and Serbian peoples, not least by the so-called depleted uranium shells that spawn leukemia for decades afterwards, the terror bombing of a pharmaceutical factory in the Sudan, the killing of a gondola full of skiers in the Italian alps, and the spreading of debauchery and prostitution anywhere in the world that is unlucky enough to host a US military base.
The US military itself has been devastated by drastic changes in its management over the last ten years. Inside reports indicate that it is now organizationally far more concerned with affirmative action, speech codes, and political correctness in general than military expertise. Promotions take place according to political standards having less and less to do with merit. This has demoralized the competent members of the officer corps, who find themselves in entrenched opposition to the politics and priorities of their civilian masters.
As a fighting force, the US military is being gutted by social engineering. And while I feel bad for the good people who went into the military to serve their country–and not to serve the special interest groups now managing the operation–I can’t help but think that a downgrading of the military’s foreign war preparedness is not a bad sign for American liberty, which is not compatible with a global empire.
Clinton had an idea in 1992 that he would institute an embryonic national service program to replenish the ranks of the volunteer military. But the program has been a bust, not because Congress has slashed its budget but because of a lack of public interest, bureaucratic screw ups, and the usual looting by special interests. Not only has national service not come back, and not only is there no imminent danger of a reinstitution of the draft, but draft registration itself has been repealed under public pressure.
As for courts of law, the boon in private arbitration tells us something about the efficiency and efficacy of government courts. US corporations are loathe to even enter them for fear that they will get a judge like Thomas Penfield Jackson, a man who had never used a personal computer but who nonetheless presided over the most important software trial of our times. Clearly an incompetent and a malcontent, he lords it over a brilliant, productive company at the behest of less successful competitors. And he is typical of the judiciary, almost none of whom inspire any respect.
What about schools? Here we have a hopeless case in which the level of government spending is directly correlated with declining scores and declining knowledge. Some of this is deliberate, as with the New Math, come back in the form of Fuzzy Math, also known as All-Answers-Are-Correct Math, instituted to dumb-down the smart students, and close the gap with the low achievers.
The public schools have become such a disgrace that school districts are having to beg people to take positions like superintendent, which used to be considered high status. In the wake of Columbine, and all the other school shootings, parents are increasingly concerned for their children’s physical safety too. Even if parents send their children to public schools and pay no attention to their academic decline, the prospect that their child might be gunned down by a drugged-up maniac tends to focus the mind.
And hardly anyone wants to talk about the worst effect of the public schools: what they have done and continue to do the students’ character. Cramming thousands of kids in a prison-like environment saps their intellectual energy and puts the strongest in charge by default, exactly as in a prison. But the encouraging sign is the growth in alternatives, whether private schools or homeschools, which are increasingly used by the smartest people. It’s no wonder some members of the power elite have pushed the idea of government vouchers to hook these islands of genuine learning into the state nexus before the government loses control altogether.
In the business world, too, we are seeing the wonderful results of what happens when the entrepreneurial class circulates and rotates from one generation to the next. The entrenched, state-connected elites end up being replaced by new ones. The new class of technological elites are the least connected to government of any in our century. In their very work, they breath and thrive on the relative freedom of the technological sector, and are being shaped by a business setting that the state neither understands nor can come close to competing with.
An article in Vanity Fair last month quotes a member of the Rockefeller family on their panic that the new millionaire class is richer and more culturally powerful than what remains of America’s old families, which too often secured their social and political status by close proximity to the state. By the way, what a wonderful thing that the myth of the business school—the idea that academic professionals can somehow teach market success—is at last being demolished.
The thriving market for employment has devastated the ranks of the professional political activists. Thomas Sowell points out that any black with intelligence and drive is in school or in business, which leaves the ranks of the race hustlers seriously thinned of bandwidth. The quality of the people on the political front lines has been drastically diminished in the past 30 years. They may be more belligerent than ever, but they will be ever easier to outsmart. Nor should we underestimate the effect that its own affirmative action programs has had on the state. New levels of incompetence even by government standards are visible and spreading.
Losing the Command Centers
I’ve chronicled a whole range of areas in which the state is in decline, and done so without excessive focus on the effects of the information revolution. Even though it has become a cliche, we shouldn’t underestimate the effect of the net in advancing the revolution. Murray Rothbard, in his famous essay on the nature of the state, pointed out that to thrive a state must monopolize the command posts of society. Primary among them is the communications network. It is no accident that the government has always worked to build public-private partnerships in telegraphs, telephones, and the airwaves. The state is inherently pro-censorship, viewing its best interest as bound up with suppressing excessively critical judgments against it.
This has all come to an end, much to the shock of the power elite. You will notice that discussion of the information revolution, and the political issues it raises, has been largely missing from the campaign trail this year. The reason is that the political class is hopelessly behind: each member steers discussion away from the topic for fearing of making a brazen mistake.
Recall that a few years ago George Bush Sr. was skewered for not knowing that prices in grocery stores are scanned by bar-code readers. Today’s politicians are terrified that they will be asked a question that mentions URLs, ISPs, or packet switching. Their advisers would like to help, but the political class is generally out of touch. For example, I know a major campaign manager who still refuses to get email in hopes that the whole thing will go away.
Threats on the Horizon
All of these factors combine to paint a fascinating picture of the state in decline. We would be foolish not to take heart in the denunciations of this trend printed in the daily newspapers. Everyone from Mario Cuomo to Bill Bennet to Gary Wills decries these trends and promises to reverse them with a newly invigorated public sector. Every national politician promises to restore the American people’s faith in government. May they all fail, and miserably.
On the other side of the ledger, the list is just as daunting: government spending is at an all-time high, regulations are ever-more intrusive, the middle class is ever-more lackadaisical and nonchalant intellectually, the new generation of teens is lacking in moral character, and public schooling continues to drain children’s brains and spirits.
Democracy itself still remains what it has been since the turn of the century: a degenerate system whereby organized groups of special interests are able to exploit the majority of taxpayers for their own purposes. And no trend can more quickly inspire exasperation and pessimism than the overwhelming success of some lawyers in using the government’s laws and courts to their own benefit.
The single most important factor of uncertainty is the business cycle. Some of these trends owe themselves to the economic growth of recent years, which is causing private markets to continually outrun the ability of governments to keep up. It provides no comfort to observe the Fed’s loose credit policies that began in the first quarter of 1995, so that rates of growth in 1998 and 1999 have average 7.0 percent, with periodic spikes as high as 15 percent.
What will happen if the business cycle turns and we enter into another inflationary recession, one caused by the Fed’s reckless monetary and banking policies? Some of these glorious trends will be reversed, while others will not. The state will attempt to use the crisis to bolster its own power, but it will confront a public that is socialized in a pattern of resistance, and it will be in a much weaker starting position than it has been in any previous economic crisis since the 19th century.
If such a downturn occurs, the Austrians will be in the prime position of explaining events in light of the sure theory of crisis causation as developed by Mises and elaborated by Hayek and Rothbard. But that is not all Austrian theory will be useful for in the coming future of liberty.
Only the Austrians have explained how civilization will not only continue but thrive as never before in the post-nation state age. Only the Austrians have developed a viable model for society without the state, one that is not utopian but rather rests on a realistic conception of human nature and existing social institutions. Only the Austrians have laid out an unassailable intellectual groundwork of a fully private society, one that celebrates individual achievement and rights, envisions private authority and private law, and recognizes the merit of world solidarity based on free trade and free cultural exchange.
The Irrepressibility of Liberty
Yuri N. Maltsev, economist and historian of the decline of the Soviet Union, reminds us that Western media impressions of Gorbachev’s last years contrasted sharply with the reality inside the country. Far from freeing the country from oppressive rules, he waged a war on alcohol consumption that landed tens of thousands of innocent people in jail, and he undertook a despotic campaign to force factory managers to comply with the central plan. It was these dramatic increases in state power that precipitated the final collapse.
There is analogy here with the US. We would be wise to remember that a cornered rat fights very fiercely, and a state desperate to hold onto power is capable of alarming violations of civil, economic, and political liberty. For this reason, the task before us requires resistance to the prevailing regime, a habit that recalls our forebears, whose history before the US constitution was one long period of defiance.
This is the best part of American history, and it is what is distinct about American culture. Recall too that history can turn on a dime, just as it did in the Soviet Union and all over Eastern Europe. Despotisms can be here today and gone tomorrow.
We must prepare in every way. We must ourselves become historians of decline: historians of the decline of the state, historians even of its fall, along with the fall of all its apologists, dependents, and sycophants. Until they become the mere stuff of history, we must fight to secure liberty with the strongest possible intellectual foundation, among this generation of faculty and students, and every one that follows.
To the supporting members of the Mises Institute, I pass on the warm thanks and appreciation of the thousands who have been educated in our seminars and all those who have used Mises Institute publications to innoculate themselves against error in political and economic theory.
We must prevail, because the future of civilization itself depends on the triumph of the ideas of liberty. This is what Mises believed, and it is what kept him going even in our century’s darkest hours. Nine years after having declared himself a historian of decline, his book Human Action appeared like a bright light on the intellectual horizon, and 50 years later, that light grows brighter every day.
There is no way that Mises could have anticipated what the future held for that masterpiece. The pace of sales of our Scholar’s Edition, produced on the 50th anniversary of its original publication, comes close to matching the startling sales rates of the first edition. And this is for a book that has never gone out of print.
But here is something else. Two weeks ago, we put Human Action online, which permits anyone anywhere in the world, at all hours, day or night, to have access to a fully searchable and printable version of this 900-page book. In these two weeks, thousands of people around the world have spent time reading the book or downloading it, and these are people who would not otherwise have access to such a book.
Mises would be thrilled. Rothbard would be overjoyed. We should be too. They would be happy to see you here today and they would remind us of the privilege of doing the work of liberty in a time when imperial DC rule over the country and the world is being radically challenged, and even systematically brought down, by dawning public awareness. If the process continues long enough, and if we take the right steps, the immensely cruel welfare-warfare state can be dismantled, and the ideal, practice, and blessings of liberty restored.
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This speech was delivered at the Mises Institute’s History of Liberty Conference on January 29, 2000, in Auburn, Alabama. He edits a daily news site, LewRockwell.com.