Power & Market

The recent spate of bank failures and the Biden Administration's response has some talking about raising or eliminating the federal deposit insurance limit of $250,000. It's important to remember, however, that what we call deposit “insurance” in no way resembles actual insurance. Federal deposit insurance, and every other form of insurance touched by government, is better described, in the words of Murray Rothbard, as a "fraudulent racket." 

Insurance is, in many ways, the market process at its most beautiful. We exist in a constant state of uncertainty—a fact that is "implied in the very notion of action," according to Mises. You cannot know whether, in the next year, your business's sales will improve, your house will burn down, or the price of gasoline will skyrocket. All you can do is use your judgment and the knowledge available to make the best-informed decision and act.

However, some uncertainties—such as whether your house burns down—possess unique characteristics. Mises used the term class probability. And Rothbard followed Frank Knight in using the word risk, which they distinguished from uncertainty. Mises summarizes the difference:

Class probability means: We know or assume to know, with regard to the problem concerned, everything about the behavior of a whole class of events or phenomena; but about the actual singular events or phenomena we know nothing but that they are elements of this class.

In my words, these risks are nearly impossible to predict on a case-by-case basis. But when they are grouped into specific homogeneous classes of events, we can be reasonably certain about how frequently they will occur. With that near-certainty, insurance providers can offer coverage tailored to the class probability of these risks.

That's what I meant by beautiful. When left alone, the market process allows people to trade their exposure to risk in a world full of uncertainty and varying levels of risk aversion. On top of that, insurance works as a way to funnel cash from the healthy and able to the old, sick, and downtrodden who need it, relying not on the expropriation of wealth but on voluntary, win-win transactions.

And as many libertarian scholars like Rothbard and Hans-Hermann Hoppe have argued, an insurance model would most likely be used to provide things like protection services in the absence of a state monopoly. There is a lot the insurance model can do. But it requires a free market.

To work, the insurance model rests on the provider's freedom to properly classify risk and both parties' ability to walk away from the transaction. Remove either or both of these elements, and what remains is no longer insurance.

Obamacare did both. Providers were prohibited from classifying risk based on preexisting conditions, and individuals were forbidden from choosing to go without health insurance. The Act represented a large step away from the insurance model towards the crony third-party payment scam that defines today's rotten healthcare system. Interventions have also warped car insurance, flood insurance, and more—bringing about higher prices and riskier behavior.

The government also runs its own "insurance" programs like Medicare. But because they're tax-funded and protected from the feedback of consumer choice, these "insurance" schemes are more accurately described as wealth redistribution programs.

Federal deposit insurance falls into this last category. The government-run Federal Deposit Insurance Corporation (FDIC) is not classifying risks, and depositors are not choosing plans based on their risk aversion and financial status. Instead, the FDIC uniformly covers all deposits up to $250,000—a limit some now want to eliminate.

This isn't insurance. As Rothbard wrote, it's "a massive bailout guaranteed in advance" that props up the banking sector and subsidizes the fractional reserve system. In other words, it’s a fraudulent racket that funnels cash from the downtrodden to the pockets of wealthy bankers. That sounds like the opposite of insurance.

Rather than an election day, for most of the country, today is the conclusion of something resembling an election month. While one would expect any first-world nation to be capable of concluding an election on election night, the same institutions that fortified 2020 have already warned us that the official count could take days or weeks. It is, of course, the most important election of our life. Democracy itself is on the ballot.

While regular readers of the Mises Institute are right to read the last two lines with a proper amount of cynical sarcasm, perhaps even the most devoted anarchist may sense that there is something a bit different about this midterm season.

America is stumbling toward nuclear war in much the same way our president climbs the stairs of Air Force One. Almost everyone reading this has been made poorer in the past two years, factoring in the impact of inflation on your purchasing power, the current state of your 401(k), or the value of your home. In the past several years, the quality of your life has been dramatically impacted by the quality of your governor.

For quite a while now, America has enjoyed an existence of privilege, despite the true lunacy of our political system. As a result, our representatives in Washington have become increasingly mediocre and disinterested in policy. In their defense, most members have very little to say about legislation. Moreover, voting for president seems to have minimal impact on issues of great importance; antiwar presidents find new countries to invade—or at least bomb—while serious financial matters are either left to experts on Wall Street or academics handsomely paid for twenty-minute speeches.

The true distinctions between administrations are the smaller-scale ways they embarrass us. In that sense, the Biden administration’s habit of promoting freaks and fetishists to serious governing positions does help it stand out.

The result is a government that blunders from one debacle to another. No one can ever honestly claim to be in charge, so no one is ever honestly held accountable. The worst-case scenario for a Beltway bigwig is being forced out of the public sector earlier than expected, and always with a higher-paying gig waiting for them.

Have Americans had enough of this?

For the past few decades, much of the most explicit destruction of America’s buffoonish regime has been beyond our borders. Hundreds of thousands dead. Multiple nations thrown into chaos. Economic instability with consequences we will never truly understand.

The cost to Americans was less obvious. The brunt of military deaths, and survivors with trauma, falls on a small minority of the country. The damage that economic policies connected to the regime’s ambitions has done to communities took place over time—the politics of the boiling frog cliché.

But Americans are no longer dealing with gradual decay but an abrupt collapse of faith in our institutions. Rightfully so. We were lied into war. Lied into inflationary policies. Lied to about the value of college. Lied to about flattening the curve. Lied to about vaccines. Lied to in ways that we have completely forgotten.

In the future, more will come to recognize the degree to which they were lied to about Social Security. Lied to about Medicare and Medicaid. Lied to about the security of their pensions. Lied to about the quality of the future our vaguely defined social contract was supposed to guarantee.

Are Americans ready to hold people accountable for these lies?

If so, today’s elections are not enough. If anything, contemporary political history has repeatedly shown how little elections matter. Barack Obama did not bring change. Brexit did not restore British sovereignty. The election of Donald Trump and Jair Bolsonaro did not drain their nations’ respective swamps.

Elections are, at best, the beginnings of political change. But if not followed with deliberate action and a transformative ideological reprogramming of the institutions, elections’ lasting impact will most significantly be felt in the emotions of nostalgia from those who sincerely hoped a new dawn was about to emerge.

So, can this year’s midterms offer any hope of meaningful change beyond the joy of watching the hysterics of corporate journalists?

There is perhaps the most reason for optimism in a handful of states with intriguing governors’ races.

New York’s governor-imposed Kathy Hochul is in desperation mode in her election against (pro-Trump!) Congressman Lee Zeldin. This is even though thousands of would-be Zeldin voters have already escaped to Ron DeSantis’s Florida. This would suggest that concerns over rampant crime will remove Democrats from positions of power in both New York and San Francisco in 2022. If this removal doesn’t result in a serious reevaluation of how crime and the protection of property are handled in the dense urban areas Democrats almost universally control, there is a clear opportunity for genuine political realignment in American cities.

Speaking of crime, there are a variety of covid tyrants who deserve a fate worse than political defeat but certainly deserve at least that. The ghoulish Gretchen Whitmer of Michigan, Tony Evers of Wisconsin, and Steve Sisolak of Nevada are the three that seem to be the most vulnerable. In particular, Whitmer, who at one point made public service announcements in which she smiled while demanding mothers in labor wear a mask at all times, offers a perfect embodiment of the worst type of political sociopath. In a better world, she would face criminal charges—as the heroic Sheriff Dar Leaf of Barry County, Michigan has suggested—but a political defeat to the onetime vice presidential contender would be meaningful.

The biggest political problems, though, are the seemingly insurmountable cancers at the federal level.

While it appears inevitable that the House will swing back into the hands of the Republican Party, it seems just as inevitable that there will be no significant shake-up to Republican leadership. The optimism for anything positive emerging from a Red House, beyond the virtues of divided government, comes from the loudest parts of the MAGA Caucus. Here, firebrands like Marjorie Taylor Greene and Matt Gaetz have been pounding the table for the GOP to investigate Dr. Anthony Fauci, Attorney General Merrick Garland, Hunter Biden, and various other Beltway villains.

The integrity of the party demands their rhetoric become action.

If a Republican-controlled Congress can’t treat any of the villains of the administrative state as seriously as Democrats have treated Steve Bannon or Roger Stone, then the GOP’s legacy as controlled opposition continues.

Their other priority? Shaking up foreign policy, particularly the seemingly limitless appetite Washington has for unaccountable aid grants to the Ukrainian government. Both MTG and Gaetz have vowed to fight so that “not another penny will go to Ukraine.”

This is where things get interesting. It is not rare for there to be some vocal congressional critics of the uniparty foreign policy mission of the day—the late John McCain would call such colleagues “wacko birds.” In Gaetz and MTG, however, you have two of the most charismatic, Trump-y, and nationally recognized members of the Republican Caucus demanding a change in American policy in terms that resonate with average Americans. And it appears to be having an impact.

A recent Wall Street Journal poll showed that 48 percent of Republican voters have soured on America’s limitless support for the Zelensky regime, up from 6 percent in its last poll.

Some Republican candidates have understood this instinctually. Ohio Senate candidate J.D. Vance actively campaigned against US support during his primary in a state with a significant Ukrainian population. Very Serious Pundits suggested this would doom him. Instead, he won by almost 10 percent. Arizona Senate candidate Blake Masters, a noted Murray Rothbard respecter, also opposed any military aid while running for the seat that McCain once held. Even in the shadow of the Washington beltway, retired navy captain Hung Cao opposed Ukrainian support in a surprisingly tight race in a D+6 district.

The result is that even dull Kevin McCarthy has raised the alarm that future Ukrainian aid will face a battle in the House, evoking howls from Mitch McConnell and Mike Pence.

Of course, campaign rhetoric is easy. Follow-through is quite different. It is notable that this shift in Republican campaign rhetoric has followed a change within traditional Conservative Inc. institutions. For example, the Heritage Foundation, under Kevin Roberts’s leadership, has signaled a new foreign policy ideology opposing “hyper interventionism and soulless neoliberal globalism” and defending “what’s best for the American taxpayer.”

This is important. Elections come and go; the real battle is what happens in between.

There is broad recognition, including from Trump world, that the impact of Trump’s election was undermined by poor staffing—which was, in part, a byproduct of a lack of Beltway institutions reflecting a shift in governing ideology. Since 2016, organizations like the Conservative Partners Institute, founded by former Tea Party senator Jim DeMint, have risen to help address “America First” staffing. According to memos from the Trump world, the top priority of a potential Trump administration 2.0 is a massive purge of the federal bureaucracy. This rhetoric is also shared by Vance and Masters, both candidates who enjoyed not only Trump endorsements but Peter Theil’s funding.

The potential MAGA additions to the Senate have one other possible way to make a midterm red wave matter: removing Mitch McConnell from his position as leader. Cocaine Mitch was able to largely co-opt the Trump administration, only to publicly burn all bridges following the 2020 election. McConnell has been able to act unchallenged for quite some time, in part because his ability to fundraise and wield power was unrivaled by the Republican senatorial caucus. In 2020, however, in stepped a Florida man with an impressively effective record of his own: Rick Scott.

While ideologically DeSantis’s predecessor won’t excite many Austro-libertarians, he has the two most important assets to challenge the Senate leadership: money and ambition. He has also been a public defender of Trump’s Senate nominees, jabbing McConnell’s lackluster support for Blake Masters. However, Scott’s greatest vulnerability is publicly admitting that America’s social programs are financially unsustainable, potentially a deadly sin in Washington that will test the strength of Trump’s influence on the Republican caucus most isolated from popular opinion.

If, however, McConnell were somehow able to be dethroned as the king of the Republican Senate, it would reflect a seismic shift in the Beltway GOP, a change that would in many ways be more significant than Trump’s de facto hostile takeover of 2016. A change in actual party structure redefines what is politically possible. Whether or not this would reflect a genuine shift in ideology or simply the changing of nameplates on the board is an open question.

Of course, any discussion of the midterms themselves assumes that any degree of integrity remains in the election system. While many states have tightened up some of the most vulnerable aspects of the 2020 covid-impacted elections, already legal clouds are forming over Pennsylvania, a race to the bottom between a dual-citizen reality-show host from New Jersey and a mentally damaged thug in a hoodie. John Fetterman is already trying to sue improper vote-by-mail ballots into the count. There will be lawyers.

More troubling is the return of familiar rhetoric from all the usual sources. Don’t fall for a “Red Mirage,” says ABC. Election results will be delayed, reminds Facebook. Given the near-unanimously ominous state of polls for the Democrats, it seems alarming that President Joe Biden is warning of election deniers that won’t accept the result of elections they are favored in. Is the night already rigged for his party?

Of course, confusing, self-sabotaging rhetoric is what one should come to expect from our sunsetting commander-in-chief.

In conclusion, today’s midterm elections are most likely to produce little serious change beyond the feeling of satisfaction at watching bad people defeated. This does not, however, mean that there are no indications that there is the potential for something more. Any serious momentum against the regime requires more than replacing team blue with team red; it requires a serious ideological shift within the halls of power and the political will to purge, reform, and ideally destroy the administrative state.

Most Republicans elected today do not have the courage to do that. Their election, however, has the potential to elevate the few that do. Particularly if those few are supported by well-funded, influential institutions that are dedicated to the same ideological shift.

The threat of nuclear war, historic inflation, and spiritual decay are very serious issues.

America desperately needs a serious attempt at addressing them.

First pollution would cause a new ice age unless we destroyed capitalism and replaced it with socialism and central planning.

That didn’t work out, so then we were told that capitalism was causing global warming and therefore must be destroyed and replaced with socialism and central planning.

That didn’t work out either, so then we were told that capitalism is causing climate change and therefore must be destroyed and replaced by socialism and central planning.

That didn’t happen, so now capitalism must be destroyed and replaced by socialism and central planning with a “great reset” known as the “Green New Deal.”

Fifty years of eco-pocalyptic predictions that turned out to be lies.

Happy Earth Day!  And to Klaus Schwab, who displays a framed picture of V.I. Lenin on his office wall, Happy Lenin’s Birthday, too!

The ideas of “natural selection” or “Darwinism” are familiar to almost everyone who has an elementary understanding of the natural sciences. It invokes the notion of constant struggle for survival and competition. Only those who are strong will stay alive. Might makes right, in the most literal sense of the term. Even though it is the “Law of the Jungle”, it is commonly believed today that mankind lives outside this jungle, and has escaped the clutches of natural selection.

While the animals instinctively tear each other apart for survival’s sake, humans supposedly are far too advanced for such barbarity. Mankind has long since moved beyond this base instinct of the “survival of the fittest”. We do not try to kill one another, and indeed, even cooperate with each other in order to better ensure our survival. Even though we are not perfect, as the existence of murder, theft, and war indicate, the existence of the human race today is removed totally from any ideas of “natural selection,” and as convincing as this narrative may appear, this entire paradigm of thinking is wholly incorrect.

To be sure, it is true that interpersonal cooperation makes individuals much more productive than they would be in autarkic production. Economists have shown for centuries that the division of labor makes people much more productive than would otherwise be. Additionally, it is true that people today generally do not view each other as potential enemies or threats to their own existence, as they would be forced to do in a setting of brutish nature. However, it is not the case that the civility that people enjoy today was originally an outcome of his own moral stature or belief in non-violence. Man was not driven into cooperation because of his desire to reject natural selection, but because of it.

Some clarification of terms is useful here. The common conception of “natural selection” views it exclusively in terms of creature-vs-creature. In reality, the mechanism of natural selection is much broader than this. Organisms must not only survive against others, but in must survive in their environment. Ludwig von Mises understood and emphasized this crucial point:

Both schools [referring to Social Darwinism and its critics] misunderstood the Darwinian concept of the struggle for survival. It does not refer merely to combat and blows. It means metaphorically the tenacious impulse of beings to keep alive in spite of all factors detrimental to them. As the means of sustenance are scarce, biological competition prevails among all individuals-whether of the same or different species-which feed on the same stuff. It is immaterial whether or not tigers fight one another. What makes every specimen of an animal species a deadly foe of every other specimen is the mere fact of their life-and-death rivalry in their endeavors to snatch a sufficient amount of food. (Theory and History, pg. 39)

As Mises points out, it is a creature’s environment that he must survive within. Other organisms are certainly elements within that environment, but do not wholly comprise it.

Organisms, through the idiosyncrasies and random movements of nature, will gradually evolve and exhibit different characteristics. These differences between organisms will naturally affect their ability to survive in their environment, with those who are more will-adapted surviving at the expense of those who are less well-adapted. Animals and plants we find living in areas with little rainfall have evolved mechanisms by which they can survive without much precipitation (such as many species of cacti, for instance). The differences that these organisms manifested made them more likely to survive within their environment, and as a result, they survived on while others that were less adapted did not.

For millennia, this was all there was to the world’s biological story. Organisms continued to evolve to changing climates and some lived and some died and so it goes. Natural selection just keeps chugging on. Several thousand years ago, mankind came onto the scene. We as a species started out as hunter-gather nomads, but eventually started to form larger communities and grow. Fast-forward to present day, and the world has been largely conquered and tamed by mankind. The modern world is filled with technological marvels and wonders of engineering. Diseases that once killed millions are all but eradicated. What started off as humble bipedal hunter-gatherers have become a planet-conquering race.

However, this success did not come through a rejection of the mechanism of natural selection, but through working within it. Man is, unlike all other animals, species, and organisms, uniquely gifted with the construct of reason. He is granted a conceptual grasp upon himself and the world greater than any other found in all of nature. It was with this reason that man made a monumental discovery. Instead of competing with others, cooperation with others allows for everyone to achieve a greater ability to survive. Instead of the differentiation within all individuals serving as the basis for competition within our environment, those differences can be the basis of trade and cooperation.

If I have a particularly adept ability to bake bread, and my neighbor has a particularly adept ability to craft shoes, one can see an obvious opportunity for trade here. I am better off baking bread and trading my excess bread for the excess shoes of my neighbor. We both get what we want and are wealthier because of the trade. Undoubtably, the option of violence is always available as well. I could simply kill or threaten to kill my neighbor and receive shoes from him in that way. However, violence is always risky. Perhaps he is actually stronger than me and instead I am the one forced to pay tribute to him. Additionally, violence is disadvantageous in the long-term. If I kill him, then I can no longer receive any furniture from him, and continually threatening him can lead to retribution. Regardless, peaceful transaction is more productive and efficient, so it benefits both me and my neighbor for us to trade cooperatively with each other.

Notice that the motivation for peaceful trade has nothing to do with altruism. It is not through a desire to create a more moral society that I engage in peaceful trade, but through my own desire to survive. This change of attitudes has the secondary effect of promoting and encouraging peace and harmony between individuals, but this is not the primary motivator for their trade. The emergence of the division of labor in society was a result of the mechanism of natural selection, not a desire to escape from it. Mises, again, clearly saw and understood this dynamic in the evolution of human civilization:

Man alone by dint of his reason substituted social cooperation for biological competition. What made social cooperation possible is, of course, a natural phenomenon, the higher productivity of labor accomplished under the principle of the division of labor and specialization of tasks. But it was necessary to discover this principle, to comprehend its bearing upon human affairs, and to employ it consciously as a means in the struggle for existence. (Theory and History, pg. 38-39)

Human civilization, as far as we are aware, is the greatest accomplishment of life and reason. Mankind has a grasp and hold on his world in a way heretofore unseen. This accomplishment represents not the rejection of natural selection and its grip upon the future of the human race, but as the greatest level of success within that system. In a world of “survival of the fittest”, human beings in peaceful cooperation have proved to be the fittest, and thus, have survived and thrived.

As Mises stated above, the Social Darwinists and those of similar schools misunderstood the concept of natural selection. They also erred in its application to the human condition. It makes little sense to ask if the ideas of natural selection “should” be applied in modern society. Nobody asks if the idea of 2+2=4 “should” be accepted in society. Math is composed of positive facts, and is not subject to ethical considerations. Similarly, the mechanism of natural selection is a fact of life. It is the basis on which existence within this universe resides. There is no question of whether or not it “should” apply to society. It applies to society whether we like it to or not, just as 2+2=4 applies regardless of how our personal feelings on the matter.

The emergence of civilized society has the effect of making men less aggressive and more kind to each other. In a nomadic existence, those outside the tribe are always potential threats to your own survival. The domesticated and modern man has no such concerns about strangers whom he encounters. This effect is undeniable, but as we stated above, it is a corollary effect. But even in a morally elevated society, man has not escaped the iron grip of natural selection. He must always work to survive in his environment, and his fellow men are only one part of that environment. Having ethically harmonious relationships with those around him certainly improves this aspect of his environment, but is not enough to remove him from the need to survive altogether. He still must eat, drink, sleep, and have clothing and shelter if he is to live, regardless of the comradery he has with those around him.

The peace of modern society is not an incoherent perversion of nature. This peace has emerged in response to the challenges of the natural order. Because man was forced to survive in his environment, he employed his reason to aid him in his quest for survival. His reason led him to production and exchange with others as the best method to aid in his survival. As the marvels of human civilization can show, man’s reason has been amply vindicated. For millennia, the story of human beings was constant violence and distrust towards one another. It was only when this was exchanged for productive peace that the story of human civilization and triumph could begin.