Frank Chodorov: An Intellectual Warrior against the Omnipotent State

The Biden Administration is celebrating the first anniversary of the passage of the Inflation Reduction Act, which allocates trillions of dollars in taxpayer subsidies to industries of their choice. Welcome to five-year plans. 

While guest-lecturing in Moscow one cold March night in 1993, a student asked why western firms didn’t invest more in Russia. I had just finished my PhD Dissertation on the subject of US-Russian joint ventures, so I probably gave a long, boring answer, that ended with an observation that in Russia, it was hard to make plans. One bright student quipped, “We used to have plans. Five-year plans.” And the whole room erupted in laughter. 

When I tell that story in my classes in the US, no one laughs. That’s because the Biden administration has just launched their version of “five-year plans.” They won’t work. I explain the failure of the Soviet socialist five-year plans in the classroom by asking a student who might be wearing a Patrick Mahomes Kansas City Chiefs jersey, “Will Mahomes be with the Chiefs in five years? Will they be in the Super Bowl in five years? Will they still be the Kansas City Chiefs in five years, or will they move to another city?” Students quickly get the idea that five-year plans are dumb because no one knows what jersey will be demanded in five years. Yet, five-year plans require that you make that prediction. 

That statement from former House Speaker Dick Armey should be on the wall of every congressperson in DC. “The reason markets are smart is because they aggregate all the information available from every possible producer and consumer. Markets are where everyone votes. Isn’t that a good way to solve problems? Wasn’t that how the congressional representative was elected? We hear cries continually about “threats to democracy.”  Well, the recent flood of money into narrowly specified industries is a threat to the democratic medium that we call the market. Why should only government elites get to vote? What’s wrong with “one person, one vote?” Because that’s what happens in a market. Here’s how economist Friedrich von Hayek explained it, "The advantage of a free market is that it allows millions of decision-makers to respond individually to freely determined prices, allocating resources - labor, capital, and human ingenuity - in a manner that can't be mimicked by a central plan, however brilliant the central planner." 

When our house was built in 1999, the owner wanted to be “ahead of the curve,” so he ran three physical hard wires to every room: TV, telephone, and internet. We don’t use any of them. The investment was wasted. As the trillions of dollars in funding through the Inflation Reduction Act will be wasted. The Biden administration’s commitment to broadband, the power grid, and electric vehicles will suffer the same fate. No one knows which technology will dominate in the future. 

“Predictions are difficult, especially those about the future,” quipped Danish Physicist Nils Bohr. But that doesn’t seem to slow the economic humanism that’s behind the motivation that encourages governmental bureaucrats to pick winners and losers. Speaking of those Kansas City Chiefs, would any reasonable person suggest that the government put their enormous resources behind ONE of the 32 teams in the NFL? Of course not, that would destroy the league. What do you think providing $28 billion via the Chips Act will do to the semiconductor industry?

When Milton Freidman popularized the phrase, “There is no free lunch,” he was making the point that trillions of dollars forcefully extracted from taxpayers are dollars that could have gone to other investments. Financial folks expect a return on their investment that is equal to, or above the average rate of return. Government subsidies perform well below that expected rate. Thus, every dollar that is committed to a government subsidy - on average - underperforms. That makes all of us poorer. 

Solyndra is a classic example of governmental elites trying to predict the future. The solar panel manufacturer received $535 million in loan guarantees. When it failed, President Obama observed that he didn’t know which technologies would prevail. He’s right, he does not know. But the market does. The half-billion dollars that President Obama flushed down the Solyndra toilet was forcefully extracted from obedient, tax-paying citizens by the use of power. That’s why we should rely on the market. 

When the market works, investors willingly contribute their own assets, by choice. 

So it’s pretty simple: Would you rather have a society operated by power, or by freedom? That’s why it’s called free market capitalism. Another warning from the economist Hayek, “I regard the preservation of free markets, as an essential condition of the very survival of mankind.” Or as Whole Foods founder John Mackey said, “Capitalism is humanity’s greatest invention.” Then, government subsidies are humanity’s worst invention.

The Harmonized Index of Consumer Prices (HICP) consists of 12 subindices, which are weighted according to their shares in total household expenditures. If, for example, food and non-alcoholic beverages (subindex 1) account for 15% of expenditures, they should also be given a weight of 15% in the overall index. In this way, each expenditure category would be given the importance it has for an average household. This is the claim of official statistics. But here, too, as so often, aspiration and reality diverge.

In Germany, the traditionally largest subindex covers housing, water, electricity, gas and other fuels (subindex 4). It has always accounted for more than 21% of the overall index since the mid-1990s. Between 2020 and 2022, the weight had increased to slightly more than 25%. The official statistics thus assumed that German households spend on average around a quarter of their total expenditure on goods of this category. This is too little in the eyes of some critics. Many households spend significantly more on goods of this type. In larger urban areas, households often spend more than a third of their income on rent alone.

There has now been an unexpected change in 2023. The Federal Statistical Offices did not increase the weight of subindex 4, but lowered it from 25.2% in the previous year to 16.5%. No valid justification for this has yet been provided. On the website of the Federal Statistical Offices, there are only empty phrases: "The Corona pandemic, which has been prevalent since 2020, with its restrictions on public life and the resulting consequences, makes it necessary to change the usual procedure for updating the goods weights for the third year in a row as well." (translated with DeepL because AI is really good at translating bureaucratic talk.)

How could one even justify such an implausible adjustment? As a matter of fact, the adjustment means that from now on official statistics will assume that the average German household spends only 16.5% of its total expenditure on housing, water, electricity, gas and other fuels. Whether this assumption is realistic is something everyone can consider for themselves.

What is clear is that the down-weighted subindex 4 has been showing above-average inflation rates for some time now. Between 1996 and 2022, it has risen by 84% overall, but the HICP as a whole has risen by only 59%. Only subindex 2 for alcoholic beverages, tobacco and narcotics has risen even more strongly during this period, by 115%.

During the inflationary phase of last year, prices in subindex 4 rose the most of all. The inflation rate here was 13.9%, more than 5 percentage points above the official average inflation. That the Federal Statistical Offices have now decided to lower the weight of this subindex has one practical effect: the officially measured inflation will be lower. But it measures past reality.

ABSTRACT: This article identifies the lack of policy analysis as a major research gap in pay equity policies. Applying a policy analytic approach, the article applies comparative empirical evidence to the tasks of problem structuring and policy prescription as well as to three different evaluation methods: effectiveness, cost-effectiveness, and benefit-cost analysis. The results show that pay equity policies lack fundamental justification as public policies. Implications for research and policy revision follow.

Read the full article at the Journal of Libertarian Studies. 

Late last month, the administrators at a Colorado public school—with the grandiose name "the Vanguard School"—tried to force a 12-year-old boy named Jaiden to remove a Gadsden flag patch from his backpack. The Gadsden flag may be more familiar to readers as simply the rattlesnake flag with the words "don't tread on me" on it. People who are at all familiar with the American revolution know the flag is a revolutionary-era flag with a message designed to repudiate the imperial despotism imposed on the Americans by British elites. 

Teachers and administrators at the Vanguard School, however, were absolutely sure the flag has "origins with slavery, and the slave trade." Of course, this is exactly the kind of historical illiteracy and social-democratic revisionism we'd expect from public school teachers and administrators. "Teaching" at your average public school is mostly about running a taxpayer-funded propaganda mill and daycare center, and has little to do with the dissemination of any factual material. Thus, it is likely that the staff at this school saw on MSNBC once that the Gadsden flag is "racist" because some American conservatives wave it. The leap from this slur to the idea that the flag is a symbol of slavery is brief indeed. 

 This whole narrative is part of the story pushed by the "1619 Project" at the New York Times which would have us believe that the American Revolution itself was all about racism and slavery. Meanwhile, the real themes and facts of the revolution—secession, natural rights, radical liberalism, violent revolution, and extreme decentralization—have all been swept aside to serve Progressives' current ideological projects.  The regime's propagandists—which includes most public school employees—naturally seek to destroy and discredit all symbols of the American Revolution beyond bland slogans about "taxation without representation." This framing of the revolution makes it all very safe and does not encourage any opposition to the current regime. After all, we have "representation" now—the millionaire gerontocracy in Congress "represents" you, don't you know—so there's no reason to think revolution can be justified. If you don't like something, just vote harder. 

This sterile pro-status-quo interpretation of the revolution is exactly what we should expect to be taught in a government school because the correct interpretation is far too dangerous and inconvenient for the regime. 

The reality of the revolution, of course, is that a sizable portion of the population—from intellectual elites in cities to ordinary farmers in the countryside—grew tired of the British yoke. Animated by a radical ideology of natural rights—which we now call "classical" liberalism or libertarianism—Americans declared the established government illegitimate and seceded. It didn't have to be that way. At first the Americans had asked politely for more freedom. They even sent the Olive Branch Petition to the King. For their efforts, the Americans were declared "traitors"—that epithet so often used by despots and their useful idiots everywhere. 

When the British state eventually launched a war against the Americans to prevent their secession, the Americans were forced to take up arms and killed government soldiers and officials until they packed up and left the country. The revolutionaries only wanted peace and self-determination. The British refused to let them have it. The British got their response, and got it good and hard. 

It was all morally justified, of course: the secession, the rebellion, the disdain for the British idea of "law and order." Parliament and the Crown had attempted to destroy the Americans' human rights—the rights of life, liberty, and property as outlined by the libertarian Leveller revolutionaries in England a century earlier. As a result, the revolutionaries were entitled to protect their rights by using violence in self-defense. 

Naturally, today's elites ignore those parts of the American Revolution. It also now appears the Progressives have moved on to the next phase which is to discredit the revolution altogether. Thus, symbols of the revolution must be denounced as symbols of slavery, and all modern rebellion and secession declared to be "treason" or "sedition" or some other political "crime." It's okay to "rebel"—i.e., in the style of Antifa or Black Lives Matters—so long as the "solution" is always more state power. Real independence, secession, and rebellion are absolutely not allowed. The 1619 Project thus assures us the whole enterprise of the American Revolution was suspect. We're told those ill-mannered Americans should have listened to their betters in the imperial metropoles of Britain! 

For those who actually respect human rights, however, any attempt to craft or promote this Progressive anti-revolutionary narrative must be met with enthusiastic opposition. In the case of Jaiden at the Vanguard School, there is a happy ending. The teachers were humiliated and Jaiden's backpack remains bedecked with the Gadsden flag. It's a small victory, but a necessary one. For obvious reasons, the regime doesn't want Americans to think secession or revolution—as so well described by Thomas Jefferson—is ever an option. Ever since the counter-revolutionaries got their new centralist-nationalist constitution in 1787, the American regime has been about the maintenance and spread of federal power. The revolution, however, acts as a beacon in the opposite direction, and Rothbard has explained why: 

The Americans had always been intractable, rebellious, impatient of oppression, as witness the numerous rebellions of the late seventeenth century; they also had their own individualist and libertarian heritage, their Ann Hutchinsons and Rhode Island quasi anarchists, some directly linked with the left wing of the English Revolution. Now, strengthened and guided by the developed libertarian natural rights ideology of the eighteenth century, and reacting to aggrandizement of the British imperial state in the economic, constitutional, and religious spheres, the Americans, in escalated and radicalized confrontations with Great Britain, had made and won their Revolution. By doing so, this revolution, based on the growing libertarian idea pervading enlightened opinion in Europe, itself gave immeasurable impetus to the liberal revolutionary movement throughout the Old World, for here was a living example of a liberal revolution that had taken its daring chance, against all odds and against the mightiest state in the world, and had actually succeeded. Here, indeed, was a beacon light to all the oppressed peoples of the world!