Power & Market

As predicted, Italy made history Sunday, electing its first ever female Prime Minister. Winning a preponderance of the votes cast, the Brothers of Italy’s Georgia Meloni will presumably take the helm of the E.U.’s third largest economy at the head of a coalition right wing government. Facing a daunting economic and geopolitical environment, Meloni’s government-in-waiting hopes its promised mix of policies aimed at supporting households and businesses while toeing the line against Russia will curry favor with Italian voters and the leadership in Brussels.

Or, as CNN and any number of their trusted media allies saw fit to put it in the immediate aftermath: “Georgia Meloni claims victory to become Italy’s most far-right prime minister since Mussolini.”

Cue eye roll.

Much like the also recently victorious Swedish Democrats, the Brothers of Italy and other right-wing populist parties across Europe gave voice to voters’ frustrations over inept policy decisions made by distant elites, whether in the capitals of their respective countries or in Brussels.

In cooperation with the other parties of the coalition, such as the League and Forza Italia, Meloni’s Brothers of Italy proposes supporting the “traditional family unit,” opposing abortion, and securing Italy’s borders, while continuing to support Ukraine in its conflict with Russia.

The last was a particularly contentious point and the subject of much speculation through the spring and summer, when it became clear the Brothers were going to pick up the pieces of the Italian right that had fragmented following the League’s break with the group in 2018. With Europe being absolutely battered by the energy price inflation resultant from sanctions on Russia for its actions in Ukraine, several prominent members of the coalition had voiced a mix of concern, that the sanctions were hurting Italians rather than Russians, and opposition to continuing the policy of the Draghi government, backing continued fighting rather than negotiation.

A full decade of crises has expanded the coercive powers of the E.U. significantly, however. Floating a range of potential carrots over the summer, hinting at a secret plan to hold down Italian bond yields over what is sure to be a terrible winter, by July the Brothers had already effectively made the decision to concede on the major points of European policy in exchange for aid. Apparently not satisfied, or just looking to rub it in, European Commission Chief Ursula von der Leyen let it be known that if the new Italian government after all decided to “go in a different direction” the E.U. “had tools” for applying pressure.

Despite the expressions of public outrage, the comment provoked from, among others League leader Matteo Salvini, the Italy Meloni and her coalition are inheriting is a mess. From government finances to demographic oblivion, sky-rocketing prices, waves of incoming migrants and a structurally disadvantaged private sector, with a possible five years in power stretching out before them the new government in Rome will likely try to put off any confrontation with Brussels as the ECB is the only thing standing between Italians and freezing and the government and its financial solvency.

As such, little is likely to change. Voters seemed to know as much. For all the media hysteria, Italians weren’t flocking to the polls: an historic low 64 percent turned out.

One who didn’t, according to the Wall Street Journal, was a café owner whose restaurant had survived both World Wars and COVID but was now considering closing up permanently after receiving his utility bill: up from a few thousand euros a year ago to literally tens of thousands today. There was no one he saw worth voting for, according to the Journal’s report.

Indeed.

A few months ago, a manifesto entitled “National Conservatism: A Statement of Principles” was published by the Edmund Burke Foundation on their natcon website and quickly republished by the American Conservative and the European Conservative.

Among its drafters we could see names such as Viktor Orbán superfan #1 and The Benedict Option author, Rod Dreher, The Virtue of Nationalism and Conservatism: A Rediscovery author, Yoram Hazony, Return of the Strong Gods author, and First Things editor R.R. Reno, and ISI Modern Age editor Daniel McCarthy, and among its signatories, a good list of Hillsdale/Claremont-affiliated Straussians such as Michael Anton, Larry P. Arnn, Tom Klingenstein, Ryan Williams and Scott Yenor, classicist, war scholar and Hoover fellow Victor Davis Hanson, Jagiellonian University professor and Polish member of the European Parliament Ryszard Legutko, TPUSA founder and activist Charlie Kirk and tech entrepreneur and right-wing would-be kingmaker Peter Thiel, among others.

This list would make such a manifesto be authoritative enough for the Right, both in the United States as well as in Europe, to be united behind its claimed principles, but contrary to its purpose, the only thing it has promoted is a plethora of responses and replies, both in its support and many times against it, and while we can dismiss liberal pseudowarnings of fascism supposedly present in the natcon statement, such as the one published in the New York Times, as well as the Washington Post’s whining about its lack of references to human rights and equality, many of the issues raised about it from people in our spheres are enough for us, liberty-minded people to consider the viability of national conservatism as a flag to rally under.

For one, these issues reveal an ideological problem with the natcon statement, for it fails to gather all similarly leaning intellectuals in the Right, with the first noticeable absence being that of the Catholic integralist postliberals (Sohrab Ahmari, Patrick Deneen, Chad Pecknold, Gladden Pappin, and Adrian Vermeule), as noted in a response released the day after by The Bulwark, which could be explained in foreign policy differences over the Russian-Ukrainian war, and on a related note, Peter J. Leithart, of the Theopolis Institute, disparages the manifesto for its excessive reliance over its “national” element over its theological one, which he considers is the actual issue at hand that should be taken care more of.

Others, such as David Tucker, disagree over inconsistencies on the statement’s clauses on religion and race and their intellectual forefather Harry V. Jaffa’s understanding of equality as assimilation under the Declaration of Independence, whereas more free-market-oriented intellectuals, such as Samuel Gregg (formerly from the Acton Institute, now affiliated with the American Institute for Economic Research) noted instead the economic problems with the manifesto, describing what feels like a contradiction between the natcons defense of an enterprise economy, their condemnation of crony capitalism and their embrace of a thinly veiled version of state capitalism, “for the common good.”

Most of these positions were summed up in an article published by National Review by mid-August, and if things weren’t enough with this discussion, the other same outlet that shared the natcon statement alongside the American Conservative in June, that is, the European Conservative, recently published an open letter signed mostly by Catholic and Anglican affiliated thinkers, critiquing the incoherence of arguing against the universalism of globalist ideologies using an equally universalist Anglo-American understanding of national traditions and its apparent elements of “free enterprise” and “individual liberty,” which are more of a feature of conservatism in the United States.

With so many of these issues already laid out in the ground, where does the national conservatism discussion leave us?

Well, for one, national conservatism seems to have left out the paleos, both our paleoconservative friends at Chronicles magazine, and us, paleolibertarians at the Mises Institute, out of the equation, which, to be honest, should not be a surprise, given that in our corner, criticisms of the natcon project have been present at least since 2019, the year where it first appeared, beginning with Chronicles’ Pedro Gonzalez expressing doubts that it might just become another case of controlled right-wing opposition to the growing power of the Left.

Mises Institute president Jeff Deist and associated scholar Allen Mendenhall followed, noting, respectively, that the natcon use of the concept of cosmopolitanism was inadequate, given that Ludwig von Mises had already explained it as “not provincial,” for “Cosmopolitanism does not require a particular worldview or political perspective … but rather respect for others’ political arrangements and cultures” and that the “national” part of national conservatism was completely wrong, for “the United States is not a nation,” but “a country whose people are connected, if at all, by liberalism.”

Does that mean we should be left out of the natcon crowd? Well, it depends, especially given that in our last three years, many things have changed in the world, for we have suffered lockdowns, the expansion of government intervention in society and the economy, contested elections in the US, and the extension of another open conflict (this time, against Russia) in which Western powers, once again, have become involved to intervene, to the detriment of their economies and their peoples.

We have also seen the heating up of our culture wars (marked by the normalization of critical race theory and the George Floyd riots), the rise of the World Economic Forum, with their stakeholder capitalism (explained as woke corporate socialism by Michael Rectenwald), their similarities with the contemporary Chinese model (arguably a form of national socialism) and their influence over Western governments, who seem to either kowtow to their credentialed expert Mandarin class or to the fear of receiving foreign business cycles caused by malinvestment and civilizational misjudgment.

With all these external contingencies, and the rise, although clumsy, of national conservatism in the US and Europe, there might be a chance to begin building bridges between our camp and theirs, and mutually benefit from a larger and organized platform among the intellectuals of the Right.

Our context is better than ever, with a cleaner, healthier image of libertarianism, reminiscent of Ron Paul’s presidential campaigns, being promoted by the Libertarian Party, now under the leadership of its Mises Caucus, something that is being noted by members of religious groups in the Christian Right, washing away the libertine reputation that still followed the LP up to our days and that had already been denounced by Rothbard and Rockwell in the ’80s and ’90s.

For those who belong to the paleo trend in politics, to identify as either a conservative or a libertarian is a difficult task, and many of us simply decide not to use said categories, and simply belong to whatever is identified as “the Right,” and that decision may come in handy when the situation asks for it.

National conservatism is an interesting attempt to appeal to right-minded (pun intended) intellectuals and politicians, but it is lagging in many areas, and it shows. Their manifesto and its many replies demonstrate there is a lack of understanding of their theological, ethical, national, and economic principles, and while we cannot (and should not) comment on the first, we can surely add to a better understanding and a sounder doctrine to the three later.

Austro-libertarianism, many times a trend left in the dark out of misunderstanding or due to the act of bad faith actors, can become the much-needed element to create coherence and cohesion in a movement that still hasn’t decided its path forward.

Our tradition, from Menger and Böhm-Bawerk, through Mises, Hayek and Rothbard, to Hoppe and Salerno, can provide with the necessary takes to make sense of what a nation really is, how to peacefully organize society along the lines of trade for prosperity; free association, and organic, spontaneous institutions; and the meaning of preservation within a long-term, low-time-preference mentality.

The natcons are demanding to expand their horizons from a merely Anglo-American political tradition into one that can truly represent the Western intellectual potential for civilization, and if we’re on character with our capitalist nature, we should be happy to offer what the Austro-libertarian sphere can offer.

The many issues of national conservatism represent an opportunity for us to step out and retake our place among the political families of what used to be, back in the day, the Old Right, and while we recognize our differences, conservatives still need our help to make sense of what they are, and it might be better to give them a hand now that they’re redrafting their doctrine than later when they have retaken all their past vices and gotten new ones from an increasingly radicalized Left.

The European Central Bank (ECB) raised interest rates for the second time this year (by 0.75 percent). The eurozone's CPI was 8.9 percent in July. In that month, the ECB raised rates by 0.5 percent and created a new instrument of monetary policy, the Transmission Protection Instrument (TPI), to counter the 'risk of fragmentation' of the eurozone.

The ECB key interest rates are the Main Refinancing Operations Rate, the Marginal Lending Facility Rate, and the Deposit Facility Rate. These rates were at 0.5 percent, 0.75 percent, and 0 percent, respectively, after the first rate hike in July. And now they are at 1.25 percent, 1.5 percent and 0.75 percent.

The ECB's balance sheet was just above €8.8 trillion by the end of June. And, in the beginning of July, it slightly decreased, standing at €8.7 trillion on September 9th.

Since 2015, the ECB has not significantly reduced its balance sheet at any time. And, since 2014, it has kept interest rates artificially low, at 0 percent (in the case of the Main Refinancing Operations Rate), close to 0 percent (in the case of the Marginal Lending Facility Rate), and negative (in the case of the Deposit Facility Rate).

Chart 1 – Eurozone Interest Rates and ECB’s Balance Sheet (2012-2022)

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Main Refinancing Operations Rate (Red Line, Left Axis); Marginal Lending Facility Rate (Green Line, Left Axis); Deposit Facility Rate (Yellow Line, Left Axis); ECB balance sheet (Purple Line, Right Axis).

Source: St. Louis Fed.

The PTI is a new asset purchase program, focused on bonds of the most indebted eurozone members. As duly noted by Ryan McMaken, this is essentially a new type of QE. In order to buy these bonds, the ECB will have to increase the monetary base. It remains to be seen if the increase in the monetary base arising from this program will be accompanied by a significant increase in M1 and M2 (which are the monetary aggregates that really influence prices in the real economy).

 QE, by itself, does not cause prices in the real economy to increase, but it is harmful to the economy by generating distortions in the allocation of resources, making the economy more fragile (more dependent on artificially low interest rates) and susceptible to recessions. These distortions cause resources to be wasted on unprofitable ventures (such as zombie companies), preventing the generation of sustainable ventures and reducing real wages (since indebtedness increases and more money is spent on interest to finance the debt, instead of investing in productivity, which would tend to lower prices and increase real wages). Furthermore, QE makes the prices of financial and real estate assets artificially higher.

The purpose of the PTI is to mitigate the eurozone's 'fragmentation risk'. For example, if the interest on Italy's 10-year government bond (Italy has a debt of 150.8 percent of GDP) was to increase much, it would increase the probability of Italy’s exit of the eurozone (returning to the Lira and expanding the money supply to finance the government debt). This is the so-called 'fragmentation risk'.

The PTI, therefore, is a form of 'yield curve control'. Of course, it's not official, but the effect is similar. The Bank of Japan (BoJ) has been doing a 'yield curve control' since 2016: the BoJ does not let the interest on Japan's 10-year government bond be higher than 0.25 percent. The BoJ buys these bonds, increasing their prices and, consequently, lowering their interest rates. And this is precisely what the ECB intends to do.

Interest rates on 10-year eurozone government bonds have been on an upward trend YTD. The PTI’s goal is to lower interest rates (mainly the ones of the most indebted members), if necessary.

Chart 2 – Interest Rates on 10-Year Government Bonds of Some Eurozone Members

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Greece (Blue); Italy (Orange); Portugal (Grey); Germany (Yellow); France (Green); Netherlands (Purple); Ireland (Pink); Spain (Black).

Source: Trading View.

Yes, the PTI also has some eligibility requirements that are supposed to be followed by eurozone members in order for the ECB to buy their bonds under this program. However, we know that governments tend not to follow rules. And countries such as Portugal, Spain, Italy and Greece (which have higher indebtedness and more spendthrift governments) are very dependent on the eurozone’s moral hazard, which does not generate incentives for the most indebted governments to reduce their debt enough for the interest on their bonds to decrease without the intervention of the ECB. At best, in general, governments decrease their debt very gradually (as Portugal did in 2016-2019, and in 2021 after a significant increase in 2020). If governments really followed public debt sustainability rules, the PTI wouldn't even need to exist.

Furthermore, the euro has been devaluing against the US dollar since 2021 and reached parity 1/1 at the end of August, oscillating close to this level since then. This is another factor influencing the rise of the eurozone’s CPI, as a devalued currency makes imports more expensive.

The Governing Council stated that it “stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2 percent target over the medium term.” It also stated that it expects the CPI to remain above 2 percent for an extended period, estimating that the rate (excluding food and energy products) will reach 3.9 percent in 2022, 3.4 percent in 2023 and 2.3 percent in 2024. However, it also stated that the PTI “is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries.” In other words, the ECB states that it is willing to pursue a contractionary monetary policy to bring the CPI back to the target of 2 percent while committing to use the PTI (which, depending on the intensity of its use, can counteract the decrease of the CPI) if the contractionary monetary policy prevents eurozone members from financing their high debts.

Like the Fed, the ECB doesn't have much room to raise rates and shrink its balance sheet (unless these governments significantly reduce their debts). The ECB is being a little less expansionist on the one hand (by making slight increases in interest rates in relation to the high CPI) and may be expansionist on the other (by creating the PTI). Like the Fed, the ECB is just pretending to fight the high CPI. The fact that the ECB's balance sheet has stopped increasing and that eurozone's M2 is increasing at a slower pace than in 2020 and 2021 are factors that reduce the pressure on price increases, but this only means that, best case scenario, the ECB will be able to bring the CPI to lower levels. It is less likely that prices will return to pre-2021 levels. This would require a price deflation.

To really get prices to pre-2021 levels, governments would have to reduce their spending, so that their indebtedness would decrease, and the ECB would not only stop expanding the monetary base to buy government bonds, but also shrink its balance sheet (to contract the money supply). Artificially low interest rates are not the only inflationary factor.

Hans-Hermann Hoppe, despite retiring about fifteen years ago and only publishing lightly since, has an (un)enviable characteristic: he still manages to provoke his opponents to violent and rather silly outbursts from time to time. The most recent round of pearl clutching emanated from the otherwise sound Phillip Magness (via Twitter), who seems to have fallen into the same conspiracy-minded, guilt-by-association way of reasoning (using the term broadly!) he so ably has exposed in left-wing writers like Nancy MacLean (on James Buchanan) or Quinn Slobodian (on Ludwig von Mises).

Stephan Kinsella has answered the personal insinuations against Hoppe and most of the other claims Magness made, and one can hope that is the end of it. Yet something suggests that the Hoppe haters will not be persuaded even now. Recently, in an interview with ReasonTV, Magness again made similar claims against Hoppe so another little essay on the Hoppe question seems warranted, mainly to help the innocent bystander, who might otherwise be frightened away by the hateful rhetoric of the Hoppephobes, understand what’s going on.

I’ll here briefly address three major accusations against Hoppe.

Hoppe the Nazi

Guilt by association plays a major role in the Nazi insinuations against Hoppe—in fact, there is no argument behind it other than that. Hoppe cited David Irving without adequately condemning him for wrongthink; Hoppe refused to accept that Germans are “congenital villains” of world-historic uniqueness. In this, he contradicts what in Germany has been a basic dogma since the Historikerstreit, but it is hard to see that Hoppe said anything objectionable—or why we should simply submit to leftist dogmas. As for Hoppe’s related claim that there was an attempt to brainwash the Germans after the war—well, this is true and simply official history, as detailed, for instance, in Frederick Taylor’s Exorcizing Hitler.

There is more substance, at least on the face of it, to Magness et al.’s claim that a memo Hoppe wrote in 1996, “From Nation to Household,” betrays his sympathy for Nazism. After all, Hoppe clearly writes that what’s wrong with “national socialism” is the socialism part—get rid of that and we’ll have “national capitalism,” and that’s much better. It appears we have to accept that Hoppe really is cheering on mass extermination etc.; he just wants to privatize it (which, presumably, means that he’s really worse than the classic Nazis, since Hoppe’s national capitalism would be much more efficient).

Right? Not really. It’s a basic case of omitting crucial context. The memo is an extended critique of Samuel Francis’s and Pat Buchanan’s proposed economic policies, which Hoppe characterizes as socialism. The other part of the program, the cultural or social part, with which he agrees, Hoppe calls nationalism; hence the conclusion that Francis advocates national socialism. Hoppe explicitly states, however, that there is nothing anti-Semitic or racist in Francis’s program—it’s simply a rejection of political correctness and a call for return to normalcy and traditional middle-class values. In the same memo, Hoppe goes on to criticize the socialistic aspects of the Francis program and in its stead proposes “national capitalism”: in short, liberal economic policies that are better suited to Francis’s and Buchanan’s cultural and social aims. Reading any kinship to German Nazis into this is simply baffling—unless one thinks the real evil part of Nazism was not their socialism, or their racism, or their anti-Semitism, but their support for more traditional morality and normalcy (not to mention the fact that the Nazis did not even really promote traditional values).

Ironically, there is a much better case for calling Mises a Fascist sympathizer than Hoppe. After all, Mises explicitly wrote: “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.” Anyone with a brain will recognize that Mises was not a fascist and that this statement occurs in the context of a thorough refutation of fascism (nor can anyone deny that at the time of writing, in 1927, it was obviously true). However, when it comes to Hoppe, the most innocuous statement is used to paint him as a fascist or worse.

It’s thus hard to see any Nazism or fascism in either Hoppe or Mises—unless, of course, one adopts the more descriptive definition of fascism once proposed: fascism is whatever Stalin doesn’t like!

Hoppe the Critical Theorist

Magness has repeatedly accused Hoppe of not being an Austrian economist but rather a critical theorist. The evidence for this claim is Hoppe’s close personal connection to the German philosopher Jürgen Habermas, one of the leading lights of the Frankfurt school. Hoppe’s work on argumentation ethics is also replete with references to Habermas and especially to Karl-Otto Apel, whose communicative ethics Hoppe refashioned into his own argumentation ethics along Misesian lines. Yet does this make Hoppe a critical theorist? What, exactly, did he take from Habermas, the bête noire in Magness’s depiction of Hoppe? Why don’t we simply listen to what Hoppe himself says:

My relationship with Habermas, while not close, was cordial, and I learned quite a bit from him, especially from his earlier works such as Erkenntnis und Interesse (Knowledge and Interest). (Since the late 1970s I essentially stopped following his work, as it was increasingly tedious and murky.) In any case, it was Habermas who introduced me to the Anglo-Saxon tradition of analytic philosophy and the philosophy of language. He helped me understand “methodological dualism,” i.e., that the study of objects with which we can communicate (and communicative action) requires different methods than those appropriate for the study of noncommunicative objects (and instrumental action). And contra all empiricist and relativist claims, Habermas always defended the notion of some sort of synthetic a priori truths.

Analytic philosophy, philosophy of language, methodological dualism, and the existence of a priori truths—if this be critical theory, make the most of it! There is nothing here incompatible with Austrian economics, no materialism or polylogism, and in fact there are plenty of building blocks for Mises’s praxeological system.

Still, Hoppe may be tainted by personal exposure to Habermas, and he may thereby unconsciously bring critical theory into his work on Austrian economics. Perhaps. Magness and others should then consider the person of Carl Grünberg. Grünberg was the founder of the Frankfurt school, as in 1924 he was the first director of the Frankfurt Institute for Social Research. So what? Before going to Frankfurt, Grünberg taught in Vienna, and among his doctoral students was … Ludwig von Mises. According to Guido Hülsmann, Mises learned a lot from the Grünberg seminar and published papers along the lines of Grünberg’s more historicist approach. If Magness is concerned about cultural Marxism tainting Austrian economics, and if learning from Marxists is enough to irrevocably taint a person, then he will have to excise a substantial portion of the Austrian tradition.

Hoppe the Anti-immigrationist

Hoppe’s views on immigration are well-known, if often misrepresented. In short, he argues that in a free society, immigration can be by invitation only. Private property owners and covenant communities will simply decide who they want to accept and how many immigrants they want. This does not imply, however, that under current conditions open borders—that is, no control on immigration—are the best policy. The state both coercively limits the number of desired immigrants and coercively imposes undesired immigration on the population. Hoppe’s more practical proposal is to limit the externalization of immigration’s costs, by limiting migrants’ access to state services, adopting some kind of sponsor system, and requiring a host to post a bond for each immigrant he invites into the country.

This proposal, we are told, is both illiberal and at odds with Mises’s views on immigration. Now, it is certainly true that Mises wrote favorably about free migration. Looking simply at incomes and production, free immigration is optimal. Workers will move where wages are highest, and since wage differentials reflect the underlying differences in productivity and in the value of the output, the free movement of labor leads to an overall increase in social production. Restrictions on migration thus make some countries relatively underpopulated, driving up wages, and other countries relatively overpopulated, driving wages down.

However, Mises was not for open borders, even at his most optimistic. In Liberalism, he clearly states that freedom of movement is incompatible with an interventionist or socialist state. Given the all-pervasive influence of the state under such conditions, Mises argues that national minorities are bound to be persecuted in such states. Therefore Mises thinks the decision of, say, the Australians to keep out immigrants to avoid being inundated by Asians and non-English Europeans and becoming a minority is fully understandable. Only if we insist on a purely economic conception of man can we enlist Mises under the banner of open borders and against Hoppe. Since this was clearly not Mises’s conception, we cannot do so.

The More Things Change

Hoppe can of course be criticized. But the attempt to paint him as some kind of evil interloper, an agent of Nazism and critical theory flying under the radar and corrupting Austrian economics, is simply laughably wrong. As I’ve tried to show here, none of the points raised against Hoppe can withstand scrutiny, and on all the substantial issues, Hoppe is much closer to Mises than the critics will accept.