Mises Daily Articles
Truth to Power
A great many people have learned from Mises and Rothbard, but Lew Rockwell belongs to a much more select class: he has developed their thought in an original way. His essay, "The Economics of Discrimination," included in the present collection of Rockwell's speeches and articles, stands as an especially impressive contribution.
Through a well-known argument, Mises showed that interventions in the free market could quickly lead to full-scale socialism. Suppose, to take a familiar example, that the state institutes price controls on milk, in an effort to help the impoverished. The result will be a shortage, precisely the opposite of the program's aim.
What then is to be done? The interventionists can come to their senses and abandon their misguided interference. If they do not, they must proceed to further interventions.
To attempt to remedy the shortage, they may impose further controls. If the costs of production to milk retailers are lowered, will not the shortage disappear? Such efforts are of course futile, and planners must again confront the same choice as before: back to the free market or forward to more controls.
All readers of Mises will recognize the argument that I have just paraphrased from "Middle-of-the-Road Policy Leads to Socialism," but Rockwell has found an illuminating parallel to it. Mises's contention, he shows, applies also to laws that forbid discrimination. The 1964 Civil Rights Act, its proponents claimed, did not tell employers whom they could hire. It merely forbade them from refusing to hire someone on grounds of race and a few other categories.
But so taken, the law would inevitably have failed to achieve its purpose. What employer in his right mind would tell an applicant, "I'm rejecting you because I don't like people of your race"? The employer has only to invent a plausible excuse for rejecting those whom he dislikes, and he may discriminate as much as he wishes.
To block him, must not the state impose further restrictions? It will require employers to hire specific numbers of the groups it holds to be disadvantaged.
If an owner is forbidden to discriminate in hiring on grounds of sex or race, the government can only discover a violation of the law by looking at who is hired. This compels active discrimination against people on grounds of their sex and race. It is a zero sum game, where one person's winnings come from another's losses. (p. 100)
Rockwell's development of Mises's argument reflects his careful study of that great economist. Rockwell often calls attention to details not usually stressed. Everyone knows that Mises showed that economic calculation under socialism is impossible; but how many are aware that Mises was also a pioneering critic of socialized medicine?
Mises called attention to a crucial feature of systems that separate the benefits of medical programs from their costs. Rockwell summarizes his key insight in this way:
Because there is no clear line between sickness and health, and where you stand on the continuum is bound up with individual choice, the more medical services are provided by the State as a part of welfare, the more the programs reinforce the conditions that bring about the need to make use of them.… Socialized medicine must fail for the same reason all socialism must fail: it offers no system for rationally allocating resources, and instead promotes the overutilization of all resources, ending in bankruptcy. (p. 116)
Rockwell uses a detail in the work of Friedrich Hayek to make another point of vital importance in the struggle for the free market. Opponents of the free market sometimes disguise their plans. Claiming to be defenders of economic freedom, they promote schemes inimical to the free market. For instance, in Orwellian fashion, plans for control of trade by international bureaucracies come packaged as "free trade." Rockwell notes that Hayek warned against this threat:
As F.A. Hayek wrote in the neglected conclusion to his 1944 book, The Road to Serfdom: "If international economic relations, instead of being between individuals, become relations between whole nations organized as trading bodies, they will inevitably become the source of friction and envy." (p. 144)
To use Hayek against NAFTA is indeed a stroke that would have occurred to few.
But we have not yet reached the central theme of Rockwell's book. As our author sees matters, the principal threat to the market, and to freedom generally, is war. During a war, and in the period of preparation for it, the state seizes control of the economy, a state of affairs that at least in part continues even after the supposed emergency passes. (The classic account of this process is Robert Higgs, Crisis and Leviathan.)
One cannot rationally favor both the market and a bellicose foreign policy. As Rockwell puts it,
The framers intended to keep the US out of foreign wars. They understood that a government that goes in search of monsters to destroy will end up destroying its own people. The foreign-policy apparatus of today inflicts a horrible cost on the world. But the greatest cost of all — or at least the one that should matter to us most — is the cost to the liberty that is our birthright." (p. 157)
But, one might object, cannot a peace-loving nation sometimes be forced to fight? After the attacks of September 11, for example, what choice did the Bush administration have but to strike back at those who attacked us?
Rockwell rises to the challenge: though the attacks on the World Trade Center were a grievous wrong, the American response made matters much worse. How did the overthrow of the backward Afghanistan regime, in no way a threat to the United States, advance our safety? The perpetrators of the September 11 attacks remain at large, and since the triumph over the Taliban, we have since proceeded to a much more costly and futile war.
The right response to September 11 would have been for government's entire security apparatus to be dismantled, and to allow the airlines and other firms to provide their own security. But, of course, it had all the earmarks of a crisis, and history shows that crises are great opportunities for the State. (p. 138)
Rockwell's emphasis on war and its dangers derives in large part from Murray Rothbard, whose thought, along with that of Mises, underlies the entire program of the Mises Institute. Rothbard constantly stressed the imperative necessity of a peaceful foreign policy. The contrasting view, long favored by William Buckley and his National Review colleagues, which claimed to marry free-market economics and the warfare state, could not possibly succeed.
Rothbard's prescience won him few friends among conventional conservatives.
But what really did Murray in was not his conviction that the State was unnecessary, but his position on the Cold War. [Because of Rothbard's noninterventionism] Libertarians were said to be tacit supporters of the Sovietization of the world. (p. 398)
Rothbard's resolute views come as no surprise, but Rockwell once again presents readers with something unexpected. Mises also warned against the dangers of militarism. Rockwell cites a characteristically incisive passage from Mises:
Military Socialism is the Socialism of a state in which all institutions are designed for the prosecution of war.…
Standing preparedness for war is impossible if aims other than war influence the lives of individuals.… The military state is a state of bandits. (p. 195)
Militarism, then, is Rockwell's great enemy, and a free society his goal. But what, specifically, should defenders of a free economy support? Our author, following Mises and Rothbard, places great emphasis on the gold standard. Only a currency immune to government manipulation can save us from inflation, with all its attendant dangers. The needed separation of government and money can only be effected by resort to a commodity standard.
Why do the government and its partisans dislike the gold standard? It removes the discretionary power of the Fed by placing severe limits on the ability of the central bank to inflate the money supply. Without that discretionary power, the government has far fewer tools of central planning at its disposal. (p. 61)
A further advantage of sound money, Rockwell explains, is that the government cannot initiate business cycles through credit expansion.
Rockwell's powerful defense of the key tenets of Mises and Rothbard presents us with a paradox: The American Right once strongly supported both a noninterventionist foreign policy and the gold standard. The arguments in favor of these measures, as Rockwell has abundantly shown, have great force. Why, then, were the supporters of traditional American foreign policy unable to mount an effective resistance to interventionist "conservatives" and their neoconservative successors? Why has the gold standard become a lost cause, for many, abandoned for nostrums peddled from Chicago?
As Rockwell sees matters, the problems lie not in any deficiency in the arguments for correct policy. Quite the contrary, American conservatives placed little emphasis on argument. They often viewed logical thinking as doctrinaire; and, although Mises was widely admired, many on the Right viewed him as extreme because of the radical conclusions to which his rigorous thinking led him. And to reiterate, Rothbard, who rejected government and the Cold War altogether, was dismissed completely.
The point, once more, is not that the conservatives deployed bad arguments against the supposed extremism of Mises and Rothbard. Rather, they downgraded the role of reason as such; and this rendered ineffective their resistance to the Left.
In this connection, Rockwell cites the baleful influence of Russell Kirk.
In the middle fifties, as a consequence of Russell Kirk's book Conservative Mind, the word "conservative" came to describe anyone who was a nonsocialist skeptic of federal policy.…
In Kirk's hands, conservatism became a posture, a demeanor, a mannerism.… And if there was a constant strain in Kirkian conservatism, it was opposition to ideology, a word that Kirk demonized. This allowed him to accuse Mises and Marx of the same supposed error.
In fact, ideology means nothing more than systematic social thought. Without systematic thought, the intellectual shiftiness of statist impulse gets a free ride. (p. 395)
Speaking of Liberty is an excellent example of systematic thought in action, imbued with the value of freedom.