Blogroll: Mises Institute
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Popes normally stick to their bailiwick, faith and worship. But Pope Francis’s criticisms of capitalism came early and often, escalating since the beginning of the covid pandemic. The pontiff describes free market thinking as “magic theories.”
“The fragility of world systems in the face of the pandemic has demonstrated that not everything can be resolved by market freedom,” Francis wrote in his encyclical late last year. “It is imperative to have a proactive economic policy directed at ‘promoting an economy that favours productive diversity and business creativity’ and makes it possible for jobs to be created, and not cut.”
Roger McKinney doesn’t see eye to eye with the pope. In his book God Is a Capitalist: Markets from Moses to Marx, McKinney “shows how Biblical economic principles answer the most vexing problems the world faces today, such as poverty, inequality and pollution.”
While Pope Francis stumps for socialism, McKinney points out that the system Francis fancies has given us millions of deaths from the likes of Nazi Germany, Stalinist Russia, and Castro’s Cuba.
McKinney’s intellectual journey started with the so-called father of capitalism, Adam Smith, and Smith’s The Wealth of Nations. However, Smith didn’t address where capitalism came from, and McKinney discovered the work of the theologians at the University of Salamanca, Spain. He learned what Chinese intellectuals knew three centuries before: “God is a capitalist.”
As he gives away in the subtitle, McKinney couches the book in a good versus evil, capitalism versus Marxism framework. That debate, in McKinney’s view, started with Moses in 1500 BC, writing, “Moses was one of the world’s most vigorous proponents of free markets while pharaoh was an early Marxist.”
The author describes himself as a conservative evangelical when it comes to theology and as a proponent of the Austrian school on economic issues. He leans heavily on Hayek, Mises, and other Austrians to support the capitalist argument. McKinney used the Austrian business cycle theory to great effect in his 2014 book on stock market investing, Financial Bull Riding.
An interesting inclusion is Hemult Schoeck and his book Envy: A Theory of Social Behavior. Mckinney writes, “Schoeck argued that Christianity catalyzed economic development and capitalism by finding a way to suppress envy without eliminating it.”
In McKinney’s meatiest chapter, entitled “Christian Capitalism,” the author returns to the School of Salamanca to remind us that it was theologians who provided the initial insights into economics. The aforementioned Adam Smith taught moral philosophy, not economics.
McKinney says in the chapter that Murray Rothbard, “Mr. Libertarian,” based his political views on sound economics, and had he stopped there, “he would have carved a place for himself in history and found good company with his teacher, Ludwig von Mises, and another great student of Mises’, Hayek. But Rothbard was an atheist and that emboldened him to join forces for a while with another atheist, Ayn Rand, who promoted a variation on the theme of libertarianism. Rothbard thought it necessary to construct an atheist system of morality and considered himself capable of creating one.”
A few lines later, McKinney writes, “Obviously, Christians should never take their morals from atheists.” From conversations with Murray, I remember him as more of an agnostic than atheist. My memory is supported by Murray’s friend David Gordon, who told Jeff Deist, “Well, I think he was an atheist, not out of hostility to religion. It was more that he didn’t find the arguments for the existence of God very convincing. Now toward the end of his life, I think he just said something like, ‘If there is a God, it would be a being that we really can’t know anything about or would be completely different to anything we would understand.’”
Gordon continued, “But I don’t think that—say, like the Randians would say, if you’re not an atheist, you’re really irrational. He would not take that view. He was very tolerant, whatever people thought. That was just his understanding. One of his great friends was the Jesuit libertarian Father James Sadowsky and certainly Sadowsky, being a Jesuit, it never affected their friendship and I think that the existence of God or atheism wasn’t really a central issue for Rothbard.”
It’s hard to imagine that McKinney doesn’t believe Murray Rothbard is in the same company as Mises and Hayek. History says otherwise. Besides this misstep, McKinney has written a fascinating book which asks and answers an intriguing question.
Ryan McMaken joins the show for a lengthy discussion of Rothbard's brief but devastating essay Anatomy of the State. This book demands that readers understand the stark nature of government, without fairy tales or niceties. It applies the same lens to public and private criminality. It challenges every myth surrounding politics and statecraft, ranging from "the government is us" to judicial review. It explains how the state maintains legitimacy, how it expands, how it deals with other states, and ultimately how it works to prevent domestic threats to its power. And it still serves as the baseline analysis for understanding state power, nearly 50 years after Rothbard helped create a burgeoning anarcho-capitalist movement. Anatomy of the State is a book that everyone, from anarchist to statist, needs to read and consider.Read Rothbard's Anatomy of the State at Mises.org/AnatomyBook
[S]ince love and fear can hardly exist together, if we must choose between them, it is far safer to be feared than loved.
— Niccolò Machiavelli, The Prince, 1513
All animals experience fear—human beings, perhaps, most of all. Any animal incapable of fear would have been hard pressed to survive, regardless of its size, speed, or other attributes. Fear alerts us to dangers that threaten our well-being and sometimes our very lives. Sensing fear, we respond by running away, by hiding, or by preparing to ward off the danger.
To disregard fear is to place ourselves in possibly mortal jeopardy. Even the man who acts heroically on the battlefield, if he is honest, admits that he is scared. To tell people not to be afraid is to give them advice that they cannot take. Our evolved physiological makeup disposes us to fear all sorts of actual and potential threats, even those that exist only in our imagination.
The people who have the effrontery to rule us, who call themselves our government, understand this basic fact of human nature. They exploit it, and they cultivate it. Whether they compose a warfare state or a welfare state, they depend on it to secure popular submission, compliance with official dictates, and, on some occasions, affirmative cooperation with the state's enterprises and adventures. Without popular fear, no government could endure more than twenty-four hours. David Hume taught that all government rests on public opinion, but that opinion, I maintain, is not the bedrock of government. Public opinion itself rests on something deeper: fear.1
Hume recognizes that the opinions that support government receive their force from "other principles," among which he includes fear, but he judges these other principles to be "the secondary, not the original principles of government" ( 1987, 34). He writes: "No man would have any reason to fear the fury of a tyrant, if he had no authority over any but from fear" (ibid., emphasis in original). We may grant Hume's statement yet maintain that the government's authority over the great mass of its subjects rests fundamentally on fear. Every ideology that endows government with legitimacy requires and is infused by some kind(s) of fear. This fear need not be fear of the government itself and indeed may be fear of the danger from which the tyrant purports to protect the people.The Natural History of Fear
Thousands of years ago, when the first governments were fastening themselves on people, they relied primarily on warfare and conquest. As Henry Hazlitt ( 1994) observes,There may have been somewhere, as a few eighteenth-century philosophers dreamed, a group of peaceful men who got together one evening after work and drew up a Social Contract to form the state. But nobody has been able to find an actual record of it. Practically all the governments whose origins are historically established were the result of conquest—of one tribe by another, one city by another, one people by another. Of course there have been constitutional conventions, but they merely changed the working rules of governments already in being.
Losers who were not slain in the conquest itself had to endure the consequent rape and pillage and in the longer term to acquiesce in the continuing payment of tribute to the insistent rulers—the stationary bandits, as Mancur Olson (2000, 6–9) aptly calls them. Subjugated people, for good reason, feared for their lives. Offered the choice of losing their wealth or losing their lives, they tended to choose the sacrifice of their wealth. Hence arose taxation, variously rendered in goods, services, or money (Nock  1973, 19–22; Nock relies on and credits the pioneering historical research of Ludwig Gumplowicz and Franz Oppenheimer).
Conquered people, however, naturally resent their imposed government and the taxation and other insults that it foists on them. Such resentful people easily become restive; should a promising opportunity to throw off the oppressor's dominion present itself, they may seize it. Even if they mount no rebellion or overt resistance, however, they quietly strive to avoid their rulers' exactions and to sabotage their rulers' apparatus of government. As Machiavelli observes, the conqueror "who does not manage this matter well, will soon lose whatever he has gained, and while he retains it will find in it endless troubles and annoyances" ( 1992, 5). For the stationary bandits, force alone proves a very costly resource for keeping people in the mood to generate a substantial, steady stream of tribute.
Sooner or later, therefore, every government augments the power of its sword with the power of its priesthood, forging an iron union of throne and altar. In olden times, not uncommonly, the rulers were themselves declared to be gods—the Pharaohs of ancient Egypt made this claim for many centuries. Now the subjects can be brought to fear not only the ruler's superior force, but also his supernatural powers. Moreover, if people believe in an afterlife, where the pain and sorrows of this life may be sloughed off, the priests hold a privileged position in prescribing the sort of behavior in the here and now that best serves one's interest in securing a blessed situation in the life to come. Referring to the Catholic Church of his own day, Machiavelli takes note of "the spiritual power which of itself confers so mighty an authority" ( 1992, 7), and he heaps praise on Ferdinand of Aragon, who, "always covering himself with the cloak of religion, ... had recourse to what may be called pious cruelty" (59, emphasis in original).2
One naturally wonders whether President George W. Bush has taken a page from Ferdinand's book (see, in particular, Higgs 2003a and, for additional aspects, Higgs 2005b).
Naturally, the warriors and the priests, if not one and the same, almost invariably come to be cooperating parties in the apparatus of rule. In medieval Europe, for example, a baron's younger brother might look forward to becoming a bishop.
Thus, the warrior element of government puts the people in fear for their lives, and the priestly element puts them in fear for their eternal souls. These two fears compose a powerful compound—sufficient to prop up governments everywhere on earth for several millennia.
Over the ages, governments refined their appeals to popular fears, fostering an ideology that emphasizes the people's vulnerability to a variety of internal and external dangers from which the governors—of all people!—are said to be their protectors. Government, it is claimed, protects the populace from external attackers and from internal disorder, both of which are portrayed as ever-present threats. Sometimes the government, as if seeking to fortify the mythology with grains of truth, does protect people in this fashion—even the shepherd protects his sheep, but he does so to serve his own interest, not theirs, and when the time comes, he will shear or slaughter them as his interest dictates.3
Olson (2000, 9–10) describes in simple terms why the stationary bandit may find it in his interest to invest in public goods (the best examples of which are defense of the realm and "law and order") that enhance his subjects' productivity. In brief, the ruler does so when the present value of the expected additional tax revenue he will be able to collect from a more productive population exceeds the current cost of the investment that renders the people more productive. See also the interpretation advanced by Bates (2001, 56–69, 102), who argues that in western Europe the kings entered into deals with the merchants and burghers, trading mercantilist privileges and "liberties" for tax revenue, in order to dominate the chronically warring rural dynasties and thereby to pacify the countryside. Unfortunately, as Bates recognizes, the kings sought this enlarged revenue for the purpose of conducting ever-more-costly wars against other kings and against domestic opponents. Thus, their "pacification" schemes, for the most part, served the purpose of funding their fighting, leaving the net effect on overall societal well-being very much in question. Both Olson and Bates argue along lines similar to those developed by Douglass C. North in a series of books published over the past four decades; see especially North and Thomas 1973, and North 1981 and 1990.
When the government fails to protect the people as promised, it always has a good excuse, often blaming some element of the population--scapegoats such as traders, money lenders, and unpopular ethnic or religious minorities. "[N]o prince," Machiavelli assures us, "was ever at a loss for plausible reasons to cloak a breach of faith" ( 1992, 46).
The religious grounds for submission to the ruler-gods gradually transmogrified into notions of nationalism and popular duty, culminating eventually in the curious idea that under a democratic system of government, the people themselves are the government, and hence whatever it requires them to do, they are really doing for themselves—as Woodrow Wilson had the cheek to declare when he proclaimed military conscription backed by severe criminal sanctions in 1917, "it is in no sense a conscription of the unwilling: it is, rather, selection from a nation which has volunteered in mass" (qtd. in Palmer 1931, 216–17).
Not long after the democratic dogma had gained a firm foothold, organized coalitions emerged from the mass electorate and joined the elites in looting the public treasury, and, as a consequence, in the late nineteenth century the so-called welfare state began to take shape. From that time forward, people were told that the government can and should protect them from all sorts of workaday threats to their lives, livelihoods, and overall well-being—threats of destitution, hunger, disability, unemployment, illness, lack of income in old age, germs in the water, toxins in the food, and insults to their race, sex, ancestry, creed, and so forth. Nearly everything that the people feared, the government then stood poised to ward off. Thus did the welfare state anchor its rationale in the solid rock of fear. Governments, having exploited popular fears of violence so successfully from time immemorial (promising "national security"), had no difficulty in cementing these new stones (promising "social security") into their foundations of rule.The Political Economy of Fear
Fear, like every other "productive" resource, is subject to the laws of production. Thus, it cannot escape the law of diminishing marginal productivity: as successive doses of fear-mongering are added to the government's "production" process, the incremental public clamor for governmental protection declines. The first time the government cries wolf, the public is frightened; the second time, less so; the third time, still less so. If the government plays the fear card too much, it overloads the public's sensibilities, and eventually people discount almost entirely the government's attempts to frighten them further.
Having been warned in the 1970s about catastrophic global cooling (see, for example, The Cooling World 1975), then, soon afterward, about catastrophic global warming, the populace may grow weary of heeding the government's warnings about the dire consequences of alleged global climate changes—dire unless, of course, the government takes stringent measures to bludgeon the people into doing what "must" be done to avert the predicted disaster.
Recently the former Homeland Security czar Tom Ridge revealed that other government officials had overruled him when he wanted to refrain from raising the color-coded threat level to orange, or "high" risk of terrorist attack, in response to highly unlikely threats. "You have to use that tool of communication very sparingly," Ridge astutely remarked (qtd. by Hall 2005).
Fear is a depreciating asset. As Machiavelli observes, "the temper of the multitude is fickle, and ... while it is easy to persuade them of a thing, it is hard to fix them in that persuasion" ([1513 1992, 14). Unless the foretold threat eventuates, the people come to doubt its substance. The government must make up for the depreciation by investing in the maintenance, modernization, and replacement of its stock of fear capital. For example, during the Cold War, the general sense of fear of the Soviets tended to dissipate unless restored by periodic crises, many of which took the form of officially announced or leaked "gaps" between U.S. and Soviet military capabilities: troop-strength gap, bomber gap, missile gap, antimissile gap, first-strike-missile gap, defense-spending gap, thermonuclear-throw-weight gap, and so forth (Higgs 1994, 301–02).4
One of the most memorable and telling lines in the classic Cold War film Dr. Strangelove occurs as the president and his military bigwigs, facing unavoidable nuclear devastation of the earth, devise a plan to shelter a remnant of Americans for thousands of years in deep mine shafts, and General "Buck" Turgidson, still obsessed with a possible Russian advantage, declares: "Mr. President, we must not allow a mine-shaft gap!"
Lately, a succession of official warnings about possible forms of terrorist attack on the homeland has served the same purpose: keeping the people "vigilant," which is to say, willing to pour enormous amounts of their money into the government's bottomless budgetary pits of "defense" and "homeland security" (Higgs 2003b).
This same factor helps to explain the drumbeat of fears pounded out by the mass media: besides serving their own interests in capturing an audience, they buy insurance against government punishment by playing along with whatever program of fear-mongering the government is conducting currently. Anyone who watches, say, CNN's Headline News programs can attest that a day seldom passes without some new announcement of a previously unsuspected Terrible Threat—I call it the danger du jour.
By keeping the population in a state of artificially heightened apprehension, the government-cum-media prepares the ground for planting specific measures of taxation, regulation, surveillance, reporting, and other invasions of the people's wealth, privacy, and freedoms. Left alone for a while, relieved of this ceaseless bombardment of warnings, people would soon come to understand that hardly any of the announced threats has any substance and that they can manage their own affairs quite well without the security-related regimentation and tax-extortion the government seeks to justify.
Large parts of the government and the "private" sector participate in the production and distribution of fear. (Beware: many of the people in the ostensibly private sector are in reality some sort of mercenary living ultimately at taxpayer expense. True government employment is much greater than officially reported [Light 1999; Higgs 2005a] .) Defense contractors, of course, have long devoted themselves to stoking fears of enemies big and small around the globe who allegedly seek to crush our way of life at the earliest opportunity. Boeing's often-shown TV spots, for example, assure us that the company is contributing mightily to protecting "our freedom." If you believe that, I have a shiny hunk of useless Cold War hardware to sell you. The news and entertainment media enthusiastically jump on the bandwagon of foreign-menace alarmism—anything to get the public's attention.
Consultants of every size and shape clamber onboard, too, facilitating the distribution of billions of dollars to politically favored suppliers of phoney-baloney "studies" that give rise to thick reports, the bulk of which is nothing but worthless filler restating the problem and speculating about how one might conceivably go about discovering workable solutions. All such reports agree, however, that a crisis looms and that more such studies must be made in preparation for dealing with it. Hence a kind of Say's Law of the political economy of crisis: supply (of government-funded studies) creates its own demand (for government-funded studies).
Truth be known, governments commission studies when they are content with the status quo but desire to write hefty checks to political favorites, cronies, and old associates who now purport to be "consultants." At the same time, in this way, the government demonstrates to the public that it is "doing something" to avert impending crisis X.
At every point, opportunists latch onto existing fears and strive to invent new ones to feather their own nests. Thus, public-school teachers and administrators agree that the nation faces an "education crisis." Police departments and temperance crusaders insist that the nation faces a generalized "drug crisis" or at times a specific drug crisis, such as "an epidemic of crack cocaine use." Public-health interests foster fears of "epidemics" that in reality consist not of the spread of contagious pathogens but of the lack of personal control and self-responsibility, such as the "epidemic of obesity" or the "epidemic of juvenile homicides." By means of this tactic, a host of personal peccadilloes has been medicalized and consigned to the "therapeutic state" (Nolan 1998, Szasz 2001, Higgs 1999).
In this way, people's fears that their children may become drug addicts or gun down a classmate become grist for the government's mill—a mill that may grind slowly, but at least it does so at immense expense, with each dollar falling into some fortunate recipient's pocket (a psychiatrist, a social worker, a public-health nurse, a drug-court judge; the list is almost endless). In this way and countless others, private parties become complicit in sustaining a vast government apparatus fueled by fear.Fear Works Best in Wartime
Even absolute monarchs can get bored. The exercise of great power may become tedious and burdensome—underlings are always disturbing your serenity with questions about details; victims are always appealing for clemency, pardons, or exemptions from your rules. In wartime, however, rulers come alive. Nothing equals war as an opportunity for greatness and public acclaim, as all such leaders understand (Higgs 1997). Condemned to spend their time in high office during peacetime, they are necessarily condemned to go down in history as mediocrities at best.
Upon the outbreak of war, however, the exhilaration of the hour spreads through the entire governing apparatus. Army officers who had languished for years at the rank of captain may now anticipate becoming colonels. Bureau heads who had supervised a hundred subordinates with a budget of $1 million may look forward to overseeing a thousand with a budget of $20 million. Powerful new control agencies must be created and staffed. New facilities must be built, furnished, and operated. Politicians who had found themselves frozen in partisan gridlock can now expect that the torrent of money gushing from the public treasury will grease the wheels for putting together humongous legislative deals undreamt of in the past. Everywhere the government turns its gaze, the scene is flush with energy, power, and money. For those whose hands direct the machinery of a government at war, life has never been better.
Small wonder that John T. Flynn (1948), in writing about the teeming bureaucrats during World War II, titled his chapter "The Happiest Years of Their Lives":
Even before the war, the country had become a bureaucrat's paradise. But with the launching of the war effort the bureaus proliferated and the bureaucrats swarmed over the land like a plague of locusts. ... The place [Washington, D.C.] swarmed with little professors fresh from their $2,500-a-year jobs now stimulated by five, six and seven-thousand-dollar salaries and whole big chunks of the American economy resting in their laps. (310, 315)
Sudden bureaucratic dilation on such a scale can happen only when the nation goes to war and the public relaxes its resistance to the government's exactions. Legislators know that they can now get away with taxing people at hugely elevated rates, rationing goods, allocating raw materials, transportation services, and credit, authorizing gargantuan borrowing, drafting men, and generally exercising vastly more power than they exercised before the war.
Although people may groan and complain about the specific actions the bureaucrats take in implementing the wartime mobilization, few dare to resist overtly or even to criticize publicly the overall mobilization or the government's entry into the war—by doing so they would expose themselves not only to legal and extralegal government retribution but also to the rebuke and ostracism of their friends, neighbors, and business associates. As the conversation stopper went during World War II, "Don't you know there's a war on?" (Lingeman 1970).
Because during wartime the public fears for the nation's welfare, perhaps even for its very survival, people surrender wealth, privacy, and liberties to the government far more readily than they otherwise would. Government and its private contractors therefore have a field day. Opportunists galore join the party, each claiming to be performing some "essential war service," no matter how remote their affairs may be from contributing directly to the military program. Using popular fear to justify its predations, the government lays claim to great expanses of the economy and the society. Government taxation, borrowing, expenditure, and direct controls dilate, while individual rights shrivel into insignificance. Of what importance is one little person when the entire nation is in peril?
Finally, of course, every war ends, but each leaves legacies that persist, sometimes permanently. In the United States, the War between the States and both world wars left a multitude of such legacies (Hummel 1996, Higgs 1987, 2004). Likewise, as Corey Robin (2004, 25) writes, "one day, the war on terrorism will come to an end. All wars do. And when it does, we will find ourselves still living in fear: not of terrorism or radical Islam, but of the domestic rulers that fear has left behind." Among other things, we will find that "various security agencies operating in the interest of national security have leveraged their coercive power in ways that target dissenters posing no conceivable threat of terrorism" (189). Not by accident, "the FBI has targeted the antiwar movement in the United States for especially close scrutiny" (189).
Such targeting is scarcely a surprise, because war is, in Randolph Bourne's classic phrase, "the health of the state," and the FBI is a core agency in protecting and enhancing the U.S. government's health. Over the years, the FBI has also done much to promote fear among the American populace, most notoriously perhaps in its COINTELPRO operations during the 1960s, but in plenty of others ways, too (Linfield 1990, 59–60, 71, 99–102, 123–28, 134–39). Nor has it worked alone in these endeavors. From top to bottom, the government wants us to be afraid, needs us to be afraid, invests greatly in making us afraid.Conclusion
Were we ever to stop being afraid of the government itself and to cast off the phoney fears it has fostered, the government would shrivel and die, and the host would disappear for the tens of millions of parasites in the United States—not to speak of the vast number of others in the rest of the world--who now feed directly and indirectly off the public's wealth and energies. On that glorious day, everyone who had been living at public expense would have to get an honest job, and the rest of us, recognizing government as the false god it has always been, could set about assuaging our remaining fears in more productive and morally defensible ways.
[This article was originally published May 16, 2005.]
- 1. Hume recognizes that the opinions that support government receive their force from "other principles," among which he includes fear, but he judges these other principles to be "the secondary, not the original principles of government" ( 1987, 34). He writes: "No man would have any reason to fear the fury of a tyrant, if he had no authority over any but from fear" (ibid., emphasis in original). We may grant Hume's statement yet maintain that the government's authority over the great mass of its subjects rests fundamentally on fear. Every ideology that endows government with legitimacy requires and is infused by some kind(s) of fear. This fear need not be fear of the government itself and indeed may be fear of the danger from which the tyrant purports to protect the people.
- 2. One naturally wonders whether President George W. Bush has taken a page from Ferdinand's book (see, in particular, Higgs 2003a and, for additional aspects, Higgs 2005b).
- 3. Olson (2000, 9–10) describes in simple terms why the stationary bandit may find it in his interest to invest in public goods (the best examples of which are defense of the realm and "law and order") that enhance his subjects' productivity. In brief, the ruler does so when the present value of the expected additional tax revenue he will be able to collect from a more productive population exceeds the current cost of the investment that renders the people more productive. See also the interpretation advanced by Bates (2001, 56–69, 102), who argues that in western Europe the kings entered into deals with the merchants and burghers, trading mercantilist privileges and "liberties" for tax revenue, in order to dominate the chronically warring rural dynasties and thereby to pacify the countryside. Unfortunately, as Bates recognizes, the kings sought this enlarged revenue for the purpose of conducting ever-more-costly wars against other kings and against domestic opponents. Thus, their "pacification" schemes, for the most part, served the purpose of funding their fighting, leaving the net effect on overall societal well-being very much in question. Both Olson and Bates argue along lines similar to those developed by Douglass C. North in a series of books published over the past four decades; see especially North and Thomas 1973, and North 1981 and 1990.
- 4. One of the most memorable and telling lines in the classic Cold War film Dr. Strangelove occurs as the president and his military bigwigs, facing unavoidable nuclear devastation of the earth, devise a plan to shelter a remnant of Americans for thousands of years in deep mine shafts, and General "Buck" Turgidson, still obsessed with a possible Russian advantage, declares: "Mr. President, we must not allow a mine-shaft gap!"
I ended my article last week with a rash assertion. Marx says that capitalists exploit workers, and I countered that this claim depends on the false labor theory of value. It is vital to bear in mind that when Marx talks about exploitation, he has a technical sense of the concept in mind, rather than the popular sense, in which “exploitation” means unfair treatment. To claim that capitalists exploit workers in this sense need not rest on the labor theory of value.
The technical sense arises from a deep question that Marx asks: Why do capitalists earn profits? He does not mean here “profit” as Austrian economists use the term but rather what we would call “interest.” Marx’s question, then, is: Why does capital earn interest? The capitalist starts out with money, which he invests in a business. In the production process of the business, his money turns into commodities. These he sells for money, and he winds up with more money than he had at the start of the process. (This is the famous M—C—M’ formula, where M is money, C is commodities, and M’ exceeds M.)
To specify Marx’s question, what he wants to know is how it is possible, given that in equilibrium all commodities exchange at their labor values, that the capitalist ends up with an increase in money. To reiterate, Marx is talking about equilibrium. Sometimes, capitalists can take advantage of fluctuations in supply and demand to earn more than the going rate of return, and other capitalists earn less than this; but Marx’s question is why there is a rate of return on capital at all.
His answer is ingenious. He says that workers sell their labor power, that is, their ability to produce commodities once given access to the means of production, to the capitalists. The worker is putting himself at the disposal of the capitalist for a certain number of hours each day. Because each commodity sells at its labor value, and labor power is a commodity, a new question arises: What is the labor value of labor power? Marx’s answer is that it is the cost of labor, i.e., the costs of the goods the laborer needs for subsistence and, Marx adds, reproduction. This is in turn determined by the labor values of these goods. Suppose the cost of labor, understood in this sense, is eight hours per day, but the worker has contracted to work for the capitalist for ten hours per day. The extra two hours are “surplus value” and are the source of interest. In Marx’s account, workers are not paid below their value, as measured by the labor theory of value, but the gain to the capitalist comes from the workers’ extra hours; and this is Marx’s technical sense of “exploitation.”
As Wolff realizes, Marx’s account of profit is wrong. I won’t go into the details of Wolff’s mathematical argument for this, but he concludes, “I proved an extremely important theorem that shows that Marx was wrong to impute the exploitative capacity of capitalism to the labor/labor power distinction.” (Unfortunately, he later discovered that someone else had proved the same theorem two years before he did.)
Despite his proof, Wolff remains convinced that Marx was right. Capitalists do exploit workers and this is the most important fact required to understand capitalism. He thinks that where Marx failed, he has succeeded; he has a new proof of exploitation.
His proof is in essence the following. In the capitalist system, all the factors of production have a profit markup. If a capitalist earns below the going rate of return, he can cash out his investment and reinvest in something that pays better. But workers cannot do this. They own nothing besides their own bodies, and they cannot detach themselves from these. They cannot, then, cash out their bodies and invest them more productively elsewhere if they are earning below the profit markup for labor. They thus earn below what the equilibrium price of labor would be if they could make this switch, and this corresponds to the extra profits that capitalists make. In this way, workers are exploited.
Wolff explains his argument in this way:
Now, in a free market, a competitive market, a capitalist market—so all the classical Political Economists agreed—there is a single ruling rate of profit which is adjusted and regulated by the free choices that capitalists make to move their capital from sector to sector in pursuit of the largest return on their investment. If a capitalist who owns a factory that weaves woolen cloth observes that capitalists in the furniture business make a higher rate of return (and, let us recall, that in the classical school perfect information is assumed), then over time and with some adjustment that capitalist can cash in his investment in the furniture factory and shift it with to a cloth factory. To be sure, this is not a switch that can be made overnight for there is a problem with what is called “fixed capital,” but over time and more or less bumpily, the capital gets transferred to the new sphere of production. This has the double effect of increasing the amount of woolen cloth available in the market and decreasing the amount of furniture available for sale. Changes in the relative size of demand and supply alter the prices at which these goods sell which in turn reduces somewhat the rate of return in the cloth industry and increases it in the furniture industry. So by an unceasing series of such individual capitalist decisions and actions the profit rate is perpetually equilibrated. This is the familiar picture painted by Ricardo and his lesser contemporaries. The system of price equations representing the operations of a capitalist economy provides a mathematical model for this story of what goes on in the normal functioning of capitalism…. Ah, but the labor producers, unlike the furniture producers and the cloth producers, cannot shift their capital to a different line of production when they observe that it pays a higher rate of return, for their capital is nothing other than their bodies and the only way they can cash in their investment in their bodies is by… cashing it in, which is to say dying. This is nothing against capitalism, of course. Capitalism places no legal or other constraint on the choices of the workers. It is just an unfortunate metaphysical accident, perhaps laid at the door of Descartes if someone must be blamed, that the workers’ body and soul are inseparable this side of the grave…. Suppose we were to write a system of equations for an economy in which the workers genuinely are treated as free petty commodity producers of the commodity labor. And suppose we were to express mathematically this unfortunate constraint on the workers’ ability to move their capital into other lines of production, thus in a manner of speaking—and only in a manner of speaking—building the ironic treatment of capitalism as a free market system into the equations. Well, because of the unfreedom of those condemned to produce labor, the rate of return in that sector may not be equal to the rate of return in the other sectors and so it must be represented by a different variable…. Without troubling you overly with the mathematics, and, I might say, hardly surprisingly, it turns out that the total profit appropriated in the system by all of the capitalists exactly equals the profit forgone by the workers on their capital—their bodies—by the fact that they cannot shift that capital about in pursuit of a better rate of return and hence are forced to sell their output below what would otherwise be its equilibrium price.
I do not doubt the details of Wolff’s mathematics; his competence in such matters far exceeds my own. But he has not given us a sufficient reason to accept the labor theory of value as a good account of either wages or interest. Marx’s account of interest fails, but at least he asks the right question: Why is there a rate of interest? Wolff does not ask this question but just postulates a profit markup for all factors; he then inquires why workers earn less than this markup. Austrian economics, by contrast, tries to account for the prices of all the factors of production. It is easy to assume what you should be trying to explain, but, as Bertrand Russell long ago said, “The method of ‘postulating’ what we want has many advantages; they are the same as the advantages of theft over honest toil.”
Jeff Deist comments on the latest Democrat agenda of increasing the number of judges in SCOTUS.
Does the expansion bill stand any chance in the house? How can conservatives be forward-looking instead of being reactionary all the time? Should we expect a scandal involving Ron DeSantis? What can we learn from Ludwig von Mises about the bureaucratic and working classes in our society?
Find more from David Gornoski on A Neighbor's Choice.
"Private companies" that openly deplatform, impoverish, and unperson dissident voices are waging a war of attrition
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The zaïre lived an interesting life.
The zaïre was the basic unit of currency for the Democratic Republic of the Congo and the Republic of Zaire (it’s back to the Democratic Republic of the Congo; I’ll just call it Zaire for ease) from 1967 until 1997. Seventy-three of the 79 series of zaïre banknotes featured Ziarian dictator, CIA stooge, and world champion kleptocrat Joseph-Desire Mobuto.
For its first two decades, the zaïre was surprisingly stable as far as Sub-Saharan currencies go. Between 1967 and 1987, the inflation vis-à-vis the dollar was only 98 percent. But then, things took a turn.
The Zairian economy had managed to stay afloat during decades of kleptomania, nepotism, and military spending by Mobuto and his cronies due to Western Aid and high prices for the various minerals mined in the Eastern Congo basin. Beginning around 1990, the combination of the collapse of the Soviet Bloc, falling copper prices, and deeper administrative ineptitude buffeted the economy.
As Gerard Prunier, French journalist and author of the excellent Africa’s World War: Congo, the Rwandan Genocide, and the Making of a Continental Catastrophe, explains:
From sickly, the Ziarian economy turned terminal…. Because imports remained at a fairly high level for some time while exports declined, the external debt had risen to $12.8 billion by 1996, representing 233 percent of GDP, or 924 percent of export capacity …
Perhaps the most preoccupying effect of this collapse was the quasi-disappearance of the monetary system. With inflation rate that the IMF calculated at an average of 2,000 percent during the 1900s, prices shot up in an insane way.
The Zairian consumer price index moved from 100 in 1990 to 4,130 in 1992 to just under 2,000,000 in 1993. Prunier continues:
The government started to print money as fast as it could, simply to keep a certain amount of fiduciary currency irrigating the economy. Bills were printed in ever higher denominations and put into circulation as fast as possible, and their rapidly shrinking real purchasing value would then wipe them off the market in a way that make even the German hyperinflation of the 1920s look mild In December 1992 the system finally imploded: the Z 5 million bill was refused by everybody and had a zero life span. The government then tried to force it through by paying soldiers’ salaries [with the inflated bills] but the army rioted when its money was refused in the shops.
So far it reads like one of the many hyperinflations throughout history. But then things get interesting. Mobuto, in a panic, demonetized the zaïre and issued the new zaïre, with an initial exchange rate of 1 new zaïre = 3,000,000 old zaïre.
A nation issuing new currency to attempt to staunch an inflationary hemorrhage is nothing new; Brazil did the same thing in the 1990s. However, the new zaïre suffered from the same hyperinflative tendencies as its predecessor except that in certain areas of Zaire the old zaïre resurfaced and began to be used again as a medium of exchange. For instance,
Kasai refused the new currency and kept using the old one, which regained a certain value simply by not being printed anymore.
In other words, even though the government and its central bank ruled that the old zaïre was without value and the full faith and credit of the Zairian government backed the new zaïre, the only currency with any value was the old zaïre—and the value had nothing to do with any fiat issued by the government, but instead the understanding of a sector of the population that because the old zaïre was no longer being printed, it could act as a reasonably safe store of value.
Finally, by 1994, the financial sector was operating entirely with foreign currencies. Meanwhile, Prunier reports,
As for the Congolese population … its tax burden increased out of all proportion, reaching a punishing rate of 7.5 percent of GNP outside the oil and mining levies.
The case of the zaïre provides strong anecdotal evidence discounting the fiat currency-obsessed Modern Monetary Theory (“MMT”).
MMT, which is growing in popularity, takes to the logical extreme the concept of fiat money, even to the point that proponents have argued government-issued currency is not subject to market forces and can be issued indefinitely. A fundamental aspect of MMT is the tenet that a central bank can always control inflation by pulling its own fiat currency from circulation by taxation. Thus, proponents such as Alexandria Ocasio-Cortez and former Bernie Sanders advisor Stephanie Kelton claim neither inflation nor budget deficits are a significant concern.
MMT proponents have attempted to contest the arguments by such economists as Larry Summers that MMT is simply a recipe for hyperinflation by pointing out that a primary focus of MMT is keeping inflation in check by taxation (to reduce “excess demand”) and fiscal—as opposed to monetary—policy (such as an eternal zero Fed discount rate). But this is exactly where the zaïre is so relevant.
A basic presumption of MMT is that the government can keep control of “its” money—that through any number of tools, it can control inflation fiscally and thus print whatever money it needs for the here and now without the classical economic concern about hyperinflation. But fiat currency (all currency actually) only has value if it is perceived to have value, and a central bank cannot switch that subjective valuation on and off at will. Consider again what happened in Zaire:
(1) Due to internal and external forces, the corrupt government ran out of money and it turned on the presses. This was not due to the evil corporate bogeyman some MMT proponents blame, but simple increase in the money supply.
(2) Inflation and then hyperinflation hit to the point that the zaïre was virtually useless. The government’s attempt to prop up the zaïre, literally at gunpoint, failed as did a “punishing rate” of taxation—which MMT proponents argue is a primary tool to stop inflation.
(3) The central bank issued the new new zaïre and backed it while demonetizing the old zaïre. However, the government fiat meant nothing to the populace, who deemed the new zaïre worthless.
(4) Meanwhile, the demonetized zaïre, having been left for dead, was suddenly resurrected. There is no evidence I can find of any centralizing or guiding effort behind the choice of some Zairians to begin using the old zaïre again; rather, it appears to have been a spontaneous market reaction and people realized the presses had stopped, and with it, inflation.
The question MMT simply cannot answer is what happens when, due to monetary and fiscal gymnastics, the consumer simply stops trusting or using the currency. The Zairian central bank could not tax the populace enough to reduce “aggregate demand,” and its attempts to force a new currency on the populace immediately failed. Meanwhile, the older currency, which the government had specifically disavowed, was given value by the people—at least for a while. Under MMT tenets, this should not have happened; indeed, it should be impossible. And yet, it happened all the same.
Tucker Carlson seems to believe that if it weren't for immigrants, America would be dominated by religiously devout, tradition-minded, liberty-loving Americans in every corner of the nation. Perhaps he's not familiar with the effects of American universities and public schools?
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
[This essay is taken from chapter 19 of Spencer's first major work of political philosophy—Social Statics: or, The Conditions essential to Happiness specified, and the First of them Developed (1851)—in which his first principle is equal liberty: "that every man may claim the fullest liberty to exercise his faculties compatible with the possession of like liberty by every other man."]Voluntary Outlawry
As a corollary to the proposition that all institutions must be subordinated to the law of equal freedom, we cannot choose but admit the right of the citizen to adopt a condition of voluntary outlawry. If every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man, then he is free to drop connection with the state—to relinquish its protection, and to refuse paying towards its support.
It is self-evident that in so behaving he in no way trenches upon the liberty of others; for his position is a passive one; and whilst passive he cannot become an aggressor. It is equally self-evident that he cannot be compelled to continue one of a political corporation, without a breach of the moral law, seeing that citizenship involves payment of taxes; and the taking away of a man's property against his will is an infringement of his rights.
Government being simply an agent employed in common by a number of individuals to secure to them certain advantages, the very nature of the connection implies that it is for each to say whether he will employ such an agent or not. If any one of them determines to ignore this mutual-safety confederation, nothing can be said except that he loses all claim to its good offices, and exposes himself to the danger of maltreatment—a thing he is quite at liberty to do if he likes. He cannot be coerced into political combination without a breach of the law of equal freedom; he can withdraw from it without committing any such breach; and he has therefore a right so to withdraw.Legislative Authority Can Never Be Ethical
"No human laws are of any validity if contrary to the law of nature; and such of them as are valid derive all their force and all their authority mediately or immediately from this original."
Thus writes Blackstone, to whom let all honor be given for having so far outseen the ideas of his time, and, indeed, we may say of our time.1
A good antidote, this, for those political superstitions which so widely prevail. A good check upon that sentiment of power worship which still misleads us by magnifying the prerogatives of constitutional governments as it once did those of monarchs. Let men learn that a legislature is not "our God upon earth," though, by the authority they ascribe to it, and the things they expect from it, they would seem to think it is. Let them learn rather that it is an institution serving a purely temporary purpose, whose power, when not stolen, is at the best borrowed.
Nay, indeed, have we not seen that government is essentially immoral? Is it not the offspring of evil, bearing about it all the marks of its parentage? Does it not exist because crime exists? Is it not strong, or, as we say, despotic, when crime is great? Is there not more liberty, that is, less government, as crime diminishes? And must not government cease when crime ceases, for very lack of objects on which to perform its function?
Not only does magisterial power exist because of evil, but it exists by evil. Violence is employed to maintain it; and all violence involves criminality. Soldiers, policemen, and jailers, swords, batons, and fetters, are instruments for inflicting pain; and all infliction of pain is in the abstract wrong.
The state employs evil weapons to subjugate evil, and is alike contaminated by the objects with which it deals, and the means by which it works. Morality cannot recognize it; for morality, being simply a statement of the perfect law, can give no countenance to anything growing out of, and living by, breaches of that law. Wherefore, legislative authority can never be ethical—must always be conventional merely.
Hence, there is a certain inconsistency in the attempt to determine the right position, structure, and conduct of a government by appeal to the first principles of rectitude. For, as just pointed out, the acts of an institution which is in both nature and origin imperfect cannot be made to square with the perfect law. All that we can do is to ascertain, firstly, in what attitude a legislature must stand to the community to avoid being by its mere existence an embodied wrong; secondly, in what manner it must be constituted so as to exhibit the least incongruity with the moral law; and thirdly, to what sphere its actions must be limited to prevent it from multiplying those breaches of equity it is set up to prevent.
The first condition to be conformed to before a legislature can be established without violating the law of equal freedom is the acknowledgment of the right now under discussion—the right to ignore the state.2The Only Legitimate Source of Power
Upholders of pure despotism may fitly believe state control to be unlimited and unconditional. They who assert that men are made for governments and not governments for men, may consistently hold that no one can remove himself beyond the pale of political organization.
But they who maintain that the people are the only legitimate source of power—that legislative authority is not original, but deputed—cannot deny the right to ignore the state without entangling themselves in an absurdity.
For, if legislative authority is deputed, it follows that those from whom it proceeds are the masters of those on whom it is conferred; it follows further, that as masters they confer the said authority voluntarily; and this implies that they may give or withhold it as they please.
To call that deputed which is wrenched from men whether they will or not, is nonsense. But what is here true of all collectively is equally true of each separately. As a government can rightly act for the people, only when empowered by them, so also can it rightly act for the individual, only when empowered by him.
If A, B, and C debate whether they shall employ an agent to perform for them a certain service, and if whilst A and B agree to do so, C dissents, C cannot equitably be made a party to the agreement in spite of himself. And this must be equally true of thirty as of three; and if of thirty, why not of three hundred, or three thousand, or three millions?The Immorality of Majority Rule
Of the political superstitions lately alluded to, none is so universally diffused as the notion that majorities are omnipotent. Under the impression that the preservation of order will ever require power to be wielded by some party, the moral sense of our time feels that such power cannot rightly be conferred on any but the largest moiety of society. It interprets literally the saying that "the voice of the people is the voice of God," and transferring to the one the sacredness attached to the other, it concludes that from the will of the people, that is, of the majority, there can be no appeal. Yet is this belief entirely erroneous.
Suppose, for the sake of argument, that, struck by some Malthusian panic, a legislature duly representing public opinion were to enact that all children born during the next ten years should be drowned. Does any one think such an enactment would be warrantable? If not, there is evidently a limit to the power of a majority.
Suppose, again, that of two races living together—Celts and Saxons, for example—the most numerous determined to make the others their slaves. Would the authority of the greatest number be in such case valid? If not, there is something to which its authority must be subordinate.
Suppose, once more, that all men having incomes under £50 a year were to resolve upon reducing every income above that amount to their own standard, and appropriating the excess for public purposes. Could their resolution be justified? If not, it must be a third time confessed that there is a law to which the popular voice must defer.
What, then, is that law, if not the law of pure equity—the law of equal freedom?
These restraints, which all would put to the will of the majority, are exactly the restraints set up by that law. We deny the right of a majority to murder, to enslave, or to rob, simply because murder, enslaving, and robbery are violations of that law—violations too gross to be overlooked. But if great violations of it are wrong, so also are smaller ones. If the will of the many cannot supersede the first principle of morality in these cases, neither can it in any. So that, however insignificant the minority, and however trifling the proposed trespass against their rights, no such trespass is permissible.
When we have made our constitution purely democratic, thinks to himself the earnest reformer, we shall have brought government into harmony with absolute justice. Such a faith, though perhaps needful for the age, is a very erroneous one. By no process can coercion be made equitable.
The freest form of government is only the least objectionable form. The rule of the many by the few we call tyranny; the rule of the few by the many is tyranny also, only of a less intense kind. "You shall do as we will, and not as you will," is in either case the declaration; and if the hundred make it to the ninety-nine, instead of the ninety-nine to the hundred, it is only a fraction less immoral. Of two such parties, whichever fulfils this declaration necessarily breaks the law of equal freedom: the only difference being that by the one it is broken in the persons of ninety-nine, whilst by the other it is broken in the persons of a hundred. And the merit of the democratic form of government consists solely in this, that it trespasses against the smallest number.
The very existence of majorities and minorities is indicative of an immoral state. The man whose character harmonizes with the moral law, we found to be one who can obtain complete happiness without diminishing the happiness of his fellows. But the enactment of public arrangements by vote implies a society consisting of men otherwise constituted; implies that the desires of some cannot be satisfied without sacrificing the desires of others; implies that in the pursuit of their happiness the majority inflict a certain amount of unhappiness on the minority; implies, therefore, organic immorality.
Thus, from another point of view, we again perceive that even in its most equitable form it is impossible for government to dissociate itself from evil; and further, that unless the right to ignore the state is recognized, its acts must be essentially criminal.Representation versus Consent
That a man is free to abandon the benefits and throw off the burdens of citizenship, may indeed be inferred from the admissions of existing authorities and of current opinion. Unprepared as they probably are for so extreme a doctrine as the one here maintained, the radicals of our day yet unwittingly profess their belief in a maxim which obviously embodies this doctrine.
Do we not continually hear them quote Blackstone's assertion that "no subject of England can be constrained to pay any aids or taxes even for the defense of the realm or the support of government, but such as are imposed by his own consent, or that of his representative in parliament?" And what does this mean? It means, say they, that every man should have a vote. True: but it means much more.
If there is any sense in words it is a distinct enunciation of the very right now contended for. In affirming that a man may not be taxed unless he has directly or indirectly given his consent, it affirms that he may refuse to be so taxed; and to refuse to be taxed is to cut all connection with the state.
Perhaps it will be said that this consent is not a specific, but a general one, and that the citizen is understood to have assented to everything his representative may do, when he voted for him. But suppose he did not vote for him, and on the contrary did all in his power to get elected someone holding opposite views. What then?
The reply will probably be that, by taking part in such an election, he tacitly agreed to abide by the decision of the majority. And how if he did not vote at all? Why then he cannot justly complain of any tax, seeing that he made no protest against its imposition.
So, curiously enough, it seems that he gave his consent in whatever way he acted—whether he said yes, whether he said no, or whether he remained neuter! A rather awkward doctrine this. Here stands an unfortunate citizen who is asked if he will pay money for a certain proffered advantage; and whether he employs the only means of expressing his refusal or does not employ it, we are told that he practically agrees, if only the number of others who agree is greater than the number of those who dissent.
And thus we are introduced to the novel principle that A's consent to a thing is not determined by what A says, but by what B may happen to say!
It is for those who quote Blackstone to choose between this absurdity and the doctrine above set forth. Either his maxim implies the right to ignore the state, or it is sheer nonsense.Religious Liberty and Civil Liberty
There is a strange heterogeneity in our political faiths. Systems that have had their day, and are beginning here and there to let the daylight through, are patched with modern notions utterly unlike in quality and color; and men gravely display these systems, wear them, and walk about in them, quite unconscious of their grotesqueness.
This transition state of ours, partaking as it does equally of the past and the future, breeds hybrid theories exhibiting the oddest union of bygone despotism and coming freedom. Here are types of the old organization curiously disguised by germs of the new—peculiarities showing adaptation to a preceding state modified by rudiments that prophecy of something to come—making altogether so chaotic a mixture of relationships that there is no saying to what class these births of the age should be referred.
As ideas must of necessity bear the stamp of the time, it is useless to lament the contentment with which these incongruous beliefs are held. Otherwise it would seem unfortunate that men do not pursue to the end the trains of reasoning which have led to these partial modifications. In the present case, for example, consistency would force them to admit that, on other points besides the one just noticed, they hold opinions and use arguments in which the right to ignore the state is involved.
For what is the meaning of dissent? The time was when a man's faith and his mode of worship were as much determinable by law as his secular acts, and, according to provisions extant in our statute book, are so still. Thanks to the growth of a Protestant spirit, however, we have ignored the state in this matter—wholly in theory, and partly in practice. But how have we done so? By assuming an attitude which, if consistently maintained, implies a right to ignore the state entirely.
Observe the positions of the two parties:
"This is your creed," says the legislator; "you must believe and openly profess what is here set down for you."
"I shall not do anything of the kind," answers the nonconformist; "I will go to prison rather."
"Your religious ordinances," pursues the legislator, "shall be such as we have prescribed. You shall attend the churches we have endowed, and adopt the ceremonies used in them."
"Nothing shall induce me to do so," is the reply; "I altogether deny your power to dictate to me in such matters, and mean to resist to the uttermost."
"Lastly," adds the legislator, "we shall require you to pay such sums of money towards the support of these religious institutions, as we may see fit to ask."
"Not a farthing will you have from me," exclaims our sturdy Independent: "even did I believe in the doctrines of your church (which I do not), I should still rebel against your interference; and if you take my property, it shall be by force and under protest."
What now does this proceeding amount to when regarded in the abstract? It amounts to an assertion by the individual of the right to exercise one of his faculties—the religious sentiment—without let or hindrance, and with no limit save that set up by the equal claims of others.
And what is meant by ignoring the state? Simply an assertion of the right similarly to exercise all the faculties.
The one is just an expansion of the other, rests on the same footing with the other, must stand or fall with the other. Men do indeed speak of civil and religious liberty as different things, but the distinction is quite arbitrary. They are parts of the same whole and cannot philosophically be separated.
"Yes they can," interposes an objector; "assertion of the one is imperative as being a religious duty. The liberty to worship God in the way that seems to him right is a liberty without which a man cannot fulfill what he believes to be divine commands, and therefore conscience requires him to maintain it."
True enough; but how if the same can be asserted of all other liberty? How if maintenance of this also turns out to be a matter of conscience? Have we not seen that human happiness is the divine will, that only by exercising our faculties is this happiness obtainable, and that it is impossible to exercise them without freedom? And if this freedom for the exercise of faculties is a condition without which the divine will cannot be fulfilled, the preservation of it is, by our objector's own showing, a duty.
Or, in other words, it appears not only that the maintenance of liberty of action may be a point of conscience, but that it ought to be one. And thus we are clearly shown that the claims to ignore the state in religious and in secular matters are in essence identical.
The other reason commonly assigned for nonconformity admits of similar treatment. Besides resisting state dictation in the abstract, the dissenter resists it from disapprobation of the doctrines taught. No legislative injunction will make him adopt what he considers an erroneous belief; and, bearing in mind his duty towards his fellow men, he refuses to help through the medium of his purse in disseminating this erroneous belief.
The position is perfectly intelligible. But it is one which either commits its adherents to civil nonconformity also, or leaves them in a dilemma. For why do they refuse to be instrumental in spreading error? Because error is adverse to human happiness. And on what ground is any piece of secular legislation disapproved? For the same reason: because thought adverse to human happiness. How then can it be shown that the state ought to be resisted in the one case and not in the other?
Will any one deliberately assert that if a government demands money from us to aid in teaching what we think will produce evil, we ought to refuse it, but that if the money is for the purpose of doing what we think will produce evil, we ought not to refuse it?
Yet, such is the hopeful proposition which those have to maintain who recognize the right to ignore the state in religious matters, but deny it in civil matters.Social Morality and Social Evolution
The substance of this chapter once more reminds us of the incongruity between a perfect law and an imperfect state. The practicability of the principle here laid down varies directly as social morality. In a thoroughly vicious community its admission would be productive of anarchy. In a completely virtuous one its admission will be both innocuous and inevitable. Progress towards a condition of social health—a condition, that is, in which the remedial measures of legislation will no longer be needed—is progress towards a condition in which those remedial measures will be cast aside, and the authority prescribing them disregarded.
The two changes are of necessity coordinate. That moral sense whose supremacy will make society harmonious and government unnecessary, is the same moral sense which will then make each man assert his freedom even to the extent of ignoring the state—is the same moral sense which, by deterring the majority from coercing the minority, will eventually render government impossible. And as what are merely different manifestations of the same sentiment must bear a constant ratio to each other, the tendency to repudiate governments will increase only at the same rate that governments become needless.
Let not any be alarmed, therefore, at the promulgation of the foregoing doctrine. There are many changes yet to be passed through before it can begin to exercise much influence. Probably a long time will elapse before the right to ignore the state will be generally admitted, even in theory. It will be still longer before it receives legislative recognition. And even then there will be plenty of checks upon the premature exercise of it. A sharp experience will sufficiently instruct those who may too soon abandon legal protection. Whilst, in the majority of men, there is such a love of tried arrangements, and so great a dread of experiments, that they will probably not act upon this right until long after it is safe to do so.
- 1. Sir William Blackstone (1723–1780) was the most renowned of English jurists. He produced the historical and analytic treatise on the common law called Commentaries on the Laws of England, first published in four volumes over 1765–1769.
- 2. Hence may be drawn an argument for direct taxation; seeing that only when taxation is direct does repudiation of state burdens become possible.
In recent years, it seems that the nation’s CEOs and billionaires are increasingly willing to drop the pretense that they are politically neutral entrepreneurs who simply want to go about their business.
Last week, for example, more than 100 CEOs met to plot ways to punish the people of Georgia by “stopping investments in states” that pass laws unapproved by the billionaire class.
This comes in the wake of a decision by Major League Baseball—a collection of billionaire-owned sports teams—to punish residents of Georgia for the fact a tiny number of politicians there passed legislation designed to lessen voter fraud. In retaliation, the MLB decided to move the league’s all-star game so as to deny the residents of Atlanta the economic benefits of hosting the game.
This comes only a few years after Apple CEO Tim Cook led a corporate campaign to boycott Indiana after Cook and Marc Benioff (the CEO of Salesforce) demanded the people of Indiana be punished. This was because the Indiana legislature passed a law which some billionaires decided was insufficiently pro-LGBT.
These examples, however, constitute only a small and relatively innocuous part of the political scheming and lobbying in which powerful CEOs, billionaires, and investors routinely engage.
Certainly, wealthy CEOs are happy to throw their weight around in pursuit of social policies they like. But while the CEOs’ calls for boycotts and retribution against entire populations of various states makes for good headlines and talk radio, the billionaire class inflicts far more damage on ordinary Americans through other means.
It is not unusual to find large corporate interests like big banks, Silicon Valley firms, and Wall Street investors calling for a wide variety of policies which transfer wealth from the general public to the well-lined pockets of the monied classes. These can include monetary policies that benefit the wealthiest Americans, as well as tax policies and regulations that favor large well-established firms at the expense of everyone else.
Unfortunately, this is nothing new, and it has always been the case that well-heeled pressure groups attempt to turn their financial resources into political power.Free Markets vs. the Plutocracy
The potential danger of this situation was not lost on the classical liberals (i.e., the libertarians) of generations past who opposed "the privileged" among the wealthy who sought to exercise political power.
Specifically, it was the Jeffersonians, the Jacksonians, and other advocates of free markets and laissez-faire who attacked these monied groups under a variety of names. Names like “stock jobbers,” the “new aristocracy,” the “scrip nobility” and “the plutocracy” have all been employed to draw attention to a wealthy elite which manipulates Congress and the central bank in schemes of economic exploitation.The Classical Liberals and Economic Exploitation
This language of “exploitation” might strike some readers as odd. Unfortunately, a certain naïve view of social classes has become popular among some conservatives and libertarians who think that that the concept of “class warfare” was invented by the Marxists. Moreover, some even insist that the wealthy classes pose no threat to political or market institutions, and that the wealthy seek only to mind their own business.
But, as historian Ralph Raico has explained, the idea of exploitation of one class by another was, in fact, pioneered by the classical liberals. It was these liberals who well understood that the power of the state could be harnessed by one group for the purposes of extracting resources from another group. Left to itself, of course, the marketplace does not foster exploitation, as market activities are voluntary. Once the state is involved, however, the coercive power of the regime changes the equation. The key to success in exploiting others lay in harnessing the power of the state to carry out the exploiters’ schemes. The wealthy have never been immune to this temptation.
[Read More: "Financialization: Why the Financial Sector Now Rules the Global Economy" by Ryan McMaken]
We find these views in an early form in America in the thinking of the Jeffersonian theorist John Taylor of Caroline. Taylor decried the urban investor class that sought to manipulate the new nation’s financial policies to serve this rising plutocracy’s own ends. Taylor, according to Raico,
was outraged by what he saw as the betrayal of the principles of the American Revolution by a new aristocracy based on "separate legal interests," the bankers privileged to issue paper money as legal tender and the beneficiaries of "public improvements" and protective tariffs. American society has been divided into the privileged and the unprivileged by this "substantial revival of the feudal system.”
The threat of this new “aristocracy” had certainly not lessened by the 1830s, when the Jacksonian William Leggett pointed out that the US had attained its own home-grown exploiter class to rival the haughty ruling classes of the Old World. Referring to the ostentatious palaces erected by the wealthy elites of Genoa, Leggett asked
Is there no parallel for it in our own [country]? Have we not, in this very city, our “Street of the Palaces,” adorned with structures as superb as those of Genoa in exterior magnificence, and containing within them vaster treasures of wealth? Have we not, too, our privileged orders? Our scrip nobility?1 Aristocrats, clothed with special immunities, who control, indirectly, but certainly, the political power of the state, monopolise the most copious sources of pecuniary profit, and wring the very crust from the hard hand of toil? Have we not, in short, like the wretched serfs of Europe, our lordly masters, “Who make us slaves, and tell us ‘tis their charter?”
For Leggett, the answer to all of this, of course, was “yes.” To see this new class of plutocrats, Leggett observed, one need only “walk through Wall-street.” Leggett went on to suggests that if anyone “asks concerning the political power” of these Wall Street elites,
he will ascertain that three‐fourths of the legislators of the state are of their own order, and deeply interested in preserving and extending the privileges they enjoy. If he investigates the sources of their prodigious wealth, he will discover that it is extorted, under various delusive names, and by a deceptive process, from the pockets of the unprivileged and unprotected poor. These are the masters in this land of freedom. These are our aristocracy, our scrip nobility, our privileged order of charter‐mongers and money‐changers!Plutocrats or Private Entrepreneurs?
On the other hand, the great libertarian sociologist William Graham Sumner was careful to note that not all wealthy people are plutocrats. “[W]e must make some important distinctions,” Sumner writes. “Plutocracy ought to be carefully distinguished from ‘the power of capital’ … A great capitalist is no more necessarily a plutocrat than a great general is a tyrant.” In other words, the plutocrats are not simply the factory owners who are on the receiving end of Marxist claims that all capitalists necessarily exploit their workers.
Rather, according to Sumner, the plutocrat is something very specific. Modern plutocrats “buy their way through elections and legislatures, in the confidence of being able to get powers which will recoup them for all the outlay and yield an ample surplus besides.”
That is, plutocrats are political operatives who employ the power of the state to accomplish political and financial ends. Moreover, the plutocrat
is a man who, having the possession of capital, and having the power of it at his disposal, uses it, not industrially, but politically; instead of employing laborers, he enlists lobbyists. Instead of applying capital to land, he operates upon the market by legislation, by artificial monopoly, by legislative privileges; he creates jobs, and erects combinations, which are half political and half industrial; he practises upon the industrial vices, makes an engine of venality, expends his ingenuity, not on processes of production, but on "knowledge of men," and on the tactics of the lobby. The modern industrial system gives him a magnificent field, one far more profitable, very often, than that of legitimate industry.Today's Plutocracy
So, who are the plutocrats of today?
Certainly, this group includes those who seek to blackmail state legislatures with boycotts and pressure tactics. But we find plutocrats using more subtle tactics as well.
For example, Amazon corporation now supports raising the minimum wage. This may seem like some great populist and magnanimous move on Amazon's part. But it is just what we've come to expect from plutocrats. In fact, Amazon's senior managers know that it can endure paying a higher wage than can Amazon's smaller and less capitalized competition. Smaller operations have fewer financing options to weather a cash-flow crunch and are thus more financially fragile. Basically, Amazon is likely to support a wide variety of government regulations because government regulations are ant-competitive. Amazon, of course, being the dominant firm, is motivated to crush the competition through state action. This is partly why Jeff Bezos came out in favor of a hike in the corporate tax. He's just hoping to stay on top, and while a tax hike is unfortunately for him, it's even worse for the competition that Bezos hopes to destroy through his political lobbying.
We see similar forces at work when plutocrats like Mark Zuckerberg call for more regulation of social media companies. Zuckerberg is speaking as head of the industry's largest, most capital rich, and most dominant firms. Of course, now that he's on top he's fine with more regulation which will hurt small competitors most. (Social media companies, of course, are also happy to buy favors from the regime by deleting user comments and punishing users who annoy regime operatives.)2
But perhaps the most subtle form of exploitation practiced by the plutocrats occurs through the central bank, and this is why the Jeffersonians and Jacksons focused so much on the role of the central bank throughout the nineteenth century. Leggett, after all, is known for calling for "the separation of bank and state."
The advantages offered to plutocrats through central banks have been similar for more than two centuries, but in today's world these advantages can be seen in the fact that central banks are now in the business of pushing up stock prices for the benefit of Wall Street and large public companies. Thanks to the "Greenspan put," for example, the Federal Reserve has now for three decades been in the business of propping up stock prices. Now, we barely even notice when stock prices soar upward even during periods when millions of workers are laid off and national production collapses. "Stock prices must always go up" is essentially now federal policy. This in itself further helps explain why the plutocrats so often come out in support of higher taxes and a bigger regulatory state. As David Stockman observed, people like Bezos and the Wall Street and Silicon Valley elite:
have been made so insanely rich by the Fed’s egregious stock market inflation that they no longer care if their businesses are inconvenienced or even deeply harmed by schemes like the Biden [tax hikes]; and, worse still, have no idea about how real, sustainable wealth is generated or that free market prosperity is not at all a sure thing when the state becomes an unhinged wrecker of honest money, fiscal rectitude and financial discipline.
Why worry too much about taxes or regulation when you know you'll be bailed out by the Fed? Stockman continues:
By and large these new titans are not geniuses. They are bubble riders who were in the right place at the right time. And after years of the Fed’s massive inflation of financial asset prices they have become totally corrupted—politically, intellectually and otherwise.
In all likelihood, they don't even know how they got rich. But since they are rich, they conclude they must be very smart, and therefore they're now entitled to run the country; to punish people who live in red states, and run lesser business owners into the ground using the power of the state.
The nation's billionaires and mega corps benefit from central banking schemes in other ways as well. Ultra-low interest rate policies means an endless tsunami of cheap debt for large, established firms. But the focus has remained on lending to the lowest-risk firms. There's far less financing available to smaller start-ups and other riskier enterprises. Low rates also mean small-time investors can only earn very small returns on their investments. Generally, it's only the wealthy who can indulge in high-risk yield chasing which further enriches the wealthy as others stagnate. The end result is more liquidity for the plutocrats while the newcomers fight over scraps.
[Read More: "Larry Summers Reminds Us That Federal "Stimulus" Mostly Exists to Help Wall Street" by Ryan McMaken]
The Fed now buys corporate debt, and for more than a decade has been buying up assets in order to prop up would would have been the ailing portfolios of the nation's mega banks and investment firms. The Fed's monetary inflation leads to immense amounts of asset inflation not only in stocks, but in housing prices as well. This impoverishes first-time home buyers and renters, but benefits those who are already wealthy—and own lots of these assets.
It's all part of a well established scam that the laissez-faire liberals identified long ago. The plutocrats hope to keep it going forever.
- 1. The term "scrip" refers to unbacked or inflationary bank notes issued by central banks or government-favored private banks.
- 2. Silicon Valley overall benefits mightily from countless government contracts and it provides and maintains much of the infrastructure employed by the Pentagon and American law enforcement agencies. According to a Tech Inquiry report on Silicon Valley’s connections with government agencies, there is no “systemic divide” between Washington and Silicon Valley. The two now have a symbiotic relationship.
Walter Block is a giant in the libertarian movement. He explains how he discovered this philosophy and why it will be difficult to advance liberty.Mentioned in the Episode and Other Links of Interest:
- The YouTube version of this interview
- Walter’s (co-authored) 2019 article on sociobiology and liberty
- Walter’s book Defending the Undefendable
Our guest is Shawn Whatley, a physician in Canada who is the author of the recently released book When Politics Comes Before Patients: Why and How Canadian Medicare Is Failing. Dr. Whatley is past-president of the Ontario Medical Association and is a senior fellow at the MacDonald-Laurier Institute for Public Policy in Toronto.SHOW NOTES
Dr. Whatley's previous appearance on the show: Ep. 40 Practicing Medicine in Canada: Promises and Realities
Watch the episode on our YouTube channel
There is likely no more loathsome federal bureaucrat than the aptly named Louis DeJoy, who, despite supposedly being a successful businessman, has the surefire winner of a business plan to resurrect the United States Postal Service (USPS)—raise prices and slow service. Sounds perfect.
DeJoy (translated as ”lose happiness”) plans among other things to raise stamp and shipping prices and wants to have up to five days to deliver first-class letters, instead of having a goal to deliver them nationwide in one to three days, the Wall Street Journal reports. The USPS has a monopoly on first-class delivery, so like all monopolists, DeJoy wants higher prices and awful service. All in the name of saving the USPS.
Using the same logic as shooting a hole in the barn and then painting the target around it to determine marksmanship accuracy, the USPS is trying to achieve its goals by gaming the metrics. “Last year, first-class mail hit its service target 89.7% on average, well below its 96% goal,” write Jennifer Smith and Paul Ziobro for the WSJ.
There are thirty thousand USPS locations and DeJoy assures us he doesn’t plan to close a bunch of them, but ”[t]he plan does call for consolidating an unspecified number of low-traffic stations and city Post Office branches with other nearby locations,” according to Smith and Ziobro.
You may have heard that the US Constitution in 1789 authorized Congress to establish “Post Offices and post Roads.” But, as James I. Campbell wrote in his book The Last Monopoly, the 1792 postal act limited the postal monopoly to “letter or letters, packet or packets, other than newspapers.”
“Until the Postal Act of 1863,” Campbell wrote, “intercity letters were either held at the destination post office for collection or delivered by a ‘letter carrier’ who acted as independent contractor and charged the addressee two cents, one of which went to the Post Office.” The Postal Code of 1872 extended the postal monopoly to the delivery of local letters.
The USPS lost money in each of the past fourteen years. In its latest fiscal year, the post office lost $9.2 billion.
Prior to the 2020 election, the Brookings Institute detailed Donald Trump’s attempt to shutdown the USPS for his political advantage. Trump stated, “They [Democrats] want 25 billion dollars—billion—for the post office. Now, they need that money in order to have the post office work so it can take all of these millions and millions of ballots. But if they don’t get those two items, that means you can’t have universal mail-in voting because they’re not equipped to have it.”
Rashwan Ray called Trump’s ham-handedness, “not only an attack on fair and equitable voting and the democratic process. It is also an attack on the Constitution, U.S. veterans, and racial equality.”
There was a time the post office was in the censorship business. Eric Longley wrote in “Mencken vs. The Post Office” the following, “Mencken’s willingness to do battle with the Post Office, once the battle was forced on him, can be explained, not only by his self-interest, but by his hostility toward ‘Comstockery’ and toward Post Office censorship.”
“Comstockery” was coined by George Bernard Shaw and adopted by Mencken and others to describe the antics of vice-crusader Anthony Comstock, founder of the New York Society for the Suppression of Vice.
The Post Office deemed Mencken’s magazine the American Mercury as obscene based on objections from the Watch and Ward Society. The offending piece was Herbert Asbury’s story “Hatrack” featuring a small-town prostitute who serviced Catholic men in the Protestant cemetery and Protestant men in the Catholic cemetery.
She “sought forgiveness, and might have been reformed if this had been granted. However, the self-righteous towns people refused to forgive, and shunned her when she came into church on Sunday.”
Longley wrote, “Mencken called the Post Office ruling ‘purely gratuitous and malicious,’ since the magazine had already been sent through the mail. Mencken, however, was determined to fight the Post Office’s decision that the Mercury was obscene.”
While Mencken won his case against the Watch and Ward Society, Longley described the court’s ruling in his case against the post office as “an unmemorable opinion from the Second Circuit Court.”
So, should DeJoy fix the USPS by making it worse? Maybe there is another way. Lew Rockwell wrote in 2009 for mises.org, “Writing in The State and Revolution in 1917, Vladimir Lenin summed up the economic aim of socialism as follows: ‘To organize the whole economy on the lines of the postal service….’“
Competitive capitalism is the answer.
Globalists know that so long as sovereign states have the ability to set their own tax rates, regimes are tempted to engage in “tax competition” in order to attract capital. The cure to this “problem” is a global minimum tax rate.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
I would be silly to suggest that I know the precise potential of cryptocurrencies, but I would be even sillier if I were to say that the Indian government does.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
On April 8, 2020, President Biden addressed the public concerning new executive orders he is planning on putting through. This will be on top of the forty-eight other executive orders that have already come from the man who just last October was saying, “I have this strange notion—we are a democracy … [there are] things you can’t do by executive order unless you are a dictator. We’re a democracy, we need consensus.” He’s already surpassed both Trump and Obama in executive orders issued during the first four months of their respective presidencies.
It looks like the next EOs Biden aims at mandating are related to the topic of gun control: “Gun violence in this country is an epidemic. Let me say it again. Gun violence in this country is an epidemic.” This is ironic coming from the former vice president of the Obama administration, which started regime change wars in countries like Yemen, Libya, and Syria which in large part included supplying certain “moderate” rebel groups like al-Nusra and ISIS with weapons, cash, and intelligence support that was ultimately used to slaughter innocent men, women, and children.Weapons to Libya
In his most recent book, Enough Already, Scott Horton (2021) fully displays just how devastating the foreign policies of all the US presidents going back to Jimmy Carter have been for people living in the Middle East. For example, in Libya, the Obama administration had been secretly allowing weapons to arrive from Qatar during the attempted overthrow of then dictator Muammar Gaddafi. The story was that the US was helping “moderate” Libyan rebels overthrow their brutal dictator in order to bring liberty and democracy to the turmoiled country. However, as Scott makes abundantly clear: this was completely false and the Obama administration was really “taking the terrorists’ side against Gaddafi in Libya … they were Libyans who had just come home from fighting America in Afghanistan and Iraq War II” (2021, pp. 163, 165). It is especially worth pointing out that some of these terrorist groups receiving support from Obama were “a bunch of horrible anti-black racists” who had “cleansed the predominantly black town of Tawergha … many of whom were tortured and killed, their property put to the torch” (2021, p. 166). Apart from the murder and rape of innocents in Libya, the US government’s actions under Obama and Biden left the country in a state of devastating civil war and also opened the doors for modern-day chattel slave auctions. Even Obama admits that Libya was a “shit show.”Weapons to Syria
Libya became a weapons pipeline for rebels in Syria—who were also being backed by the United States government—and it was headed by the CIA’s own director, David Petraeus. Again, Scott Horton, quoting journalist Seymour Hersh, points out that these weapons were being delivered to “jihadists, some of them affiliated with al Qaeda” (2021, p. 172). In Syria, a similar regime change was occurring just as had happened to Gaddafi. This time the target was President Bashar al-Assad. The hope was that if the US could overthrow Assad, they’d “further isolate Iran” by removing “Iran’s only Arab ally,” Syria (Horton 2021, p. 182). It should come as no surprise, however, that in the US’s endeavor to conduct another regime change, they would again be caught up in giving weapons and support to terrorists who also wanted to overthrow Assad. During this time (2012), Libya’s insurgency was basically controlled by terrorist organization al-Nusra. When the US worked to get weapons into the hands of these “moderate” rebels, they were really just ending back up in the hands of Islamist extremists whom the US had been going to war against just years before. Once again, the Obama administration made the US responsible for aiding the some of the most horrific insurgency groups, who
murdered children, used suicide car and truck bombs against civilian and military targets, blindly shelled civilian neighborhoods, used torture, carried out mass-executions of captured army soldiers, executed people with crucifixions and beheadings. (Horton 2021, p. 196)
In 2014, then vice president Biden even admitted to the absurdity of trying to find and support “moderate” rebel groups in Syria, although he tried to frame it as if it were all the United States’s alies’ fault. Thanks in large part to the US’s involvement in Syria, the country has been devastated and
the terrorists ha[ve] carved a new Islamist Caliphate the size of Great Britain out of the sands of western Iraq and Eastern Syria. [Bin Laden] could never have done it without the assistance of the United States of America in the hands of George W. Bush and Barack Obama. (Horton 2021, p. 202)Weapons to Yemen
In 2015, Obama started yet another unauthorized war alongside the Saudis against the Houthis in Yemen—this being shortly after the Houthis had ousted their “democratically”1 elected president Hadi in 2014. The reason? The never-ending desire to gain more leverage against Iran, as well as to “placate the Saudis“ while the US was in the middle of the Iran Nuclear Deal (Horton 2021, p. 241). The US government was directly supplying the Saudis with bombs, parts for the aircraft dropping those bombs, fuel for tankers, and satellite intelligence over targets (Horton 2021, p. 241); more recently it has been shown that they are still sending shipments of US weapons and armored vehicles into Yemen—as reported by CNN. The US-Saudi coalition against the relatively small country has created what many have called the worst humanitarian crisis.
The destruction that the American politicians and their allies left with the Yemenis is unimaginable. After deliberately targeting nonmilitary infrastructure such as hospitals, water treatment plants, schools (including a school bus full of children), and food production systems, and then placing blockades on the country to further cripple its people, Yemen has been turned into a complete disaster. According to the Council on Foreign Relations, an estimated one hundred thousand people have been killed since 2015. Countless children are suffering and dying from cholera and other diseases. Scott Horton predicts that the number will really turn out to be something like “half a million or more civilians who have been killed by this war, beyond the tens of thousands killed in direct violence.” (2021, p. 252)Violence at Home
Biden’s newest executive orders come just shortly after the Colorado shooting on March 22. The significance of this event is that the shooter, Ahmad Al Aliwi Alissa, was born in Syria and moved to the US when he was still a child. Less than a month before the Colorado tragedy, Biden ordered his first strike on Syria as president in retaliation to an Iranian missile attack on a military base in Iraq. While there hasn’t been any clear evidence that Alissa was motivated by the Syrian bombing, one outlet reported that a Facebook post by Alissa from 2019 addressed in part the “genocide in Syria.” Considering the long list of retaliatory terrorist attacks in the US over the years—e.g., the 2009 Ft. Hood massacre, the 2013 Boston Marathon bombing, the 2016 Pulse nightclub massacre in Florida, the 2017 Ariana Grande concert bombing (Horton 2021, pp. 271–76)—it isn’t a stretch to believe that Colorado is another tragedy following the trend. The longer the US continues its intervention overseas, the more likely we are going to see the violence come home.
Additionally, violence in the US has been exacerbated by policies like those supported and put forward by people like Joe Biden and Kamala Harris. Biden has a very lengthy and controversial history in his time as a “public servant.” He is notorious for contributing to the tough-on-crime attitude in the US as well as the war on drugs. Harris worked as a prosecutor for California and was rightfully called out by Tulsi Gabbard during the presidential debates for the 2020 elections for locking people up over marijuana charges. Such rhetoric and policies have devastated millions of lives. It was reported that in 2019 alone over 1.5 million arrests were made for drug violations—over 85 percent of those being for mere possession—and a significant portion of those arrests were in relation to marijuana. A 2014 American Civil Liberties Union report showed that between 2011 and 2012, 62 percent of SWAT raids were drug searches. One such raid was conducted on a family who was growing tea leaves. More recently we saw the murder of Breonna Taylor when the Louisville Metro Police Department also conducted a no-knock home invasion over drug charges. Duncan Lemp was murdered just twenty-four hours before Breonna Taylor in the same fashion.
The greatest irony about the claims against United States citizens having “weapons of war” is that while these claims refer to semiautomatic rifles, law enforcement inside the US actually receives equipment from the military thanks to the 1033 program. This program gets military equipment like mine-resistant ambush protected (MRAP)2 vehicles, M-16 rifles, helicopters, and even grenade launchers into the hands of local police agencies. During his presidency, Obama used an EO to put an end to the pipeline between police and military, but Trump, in 2017, revived the program. It seems that in all of his work via EOs to reverse certain policies by Trump, Biden has yet to undo the resurrection of the 1033 program. In fact, one statistic shows that in Q1 of Biden’s first year as president there’s been an increase in “flow of military gear.”Reason to Doubt
While they might claim to be on the “right” side of certain issues now, it is hard to take seriously the words of politicians who claim to care about the people and their safety while they are supporting policies—or at least not making as much a fuss about them as they do about “domestic gun violence” or “Asian hate”—that put weapons and money into the hands of terrorists who help the US government slaughter innocent people overseas or starve children to death while causing others to die of disease because their country’s infrastructure has been blown to bits and blockades prevent the necessary medical aid to save them, tragedy that then inspires people of those countries to retaliate and bring more death upon the rest of us. The absurdity becomes even more apparent when these same “public servants” cry about “weapons of war” being placed into the hands of the people while actual military equipment is being funneled into law enforcement. They might cry and appear outraged about the deaths of victims like Breonna Taylor, but her death comes from the legacy of tough-on-crime and drug war policies that these politicians at one point supported and helped enforce.
[Chapter 13 of Rothbard's newly edited and released Conceived in Liberty, vol. 5, The New Republic: 1784–1791.]
From the very beginning of the great emerging struggle over the Constitution the Antifederalist forces suffered from a grave and debilitating problem of leadership. The problem was that the liberal leadership was so conservatized that most of them agreed that centralizing revisions of the Articles were necessary—as can be seen from the impost and congressional regulation of commerce debates during the 1780s. By agreeing in principle with the nationalists’ call for central power, but only opposing the change going too far, the Antifederalist leadership threw away its main weapon and found itself ready to be antagonized by the forces of the counterrevolution. The nationalist leaders, in contrast to their wavering opponents, knew exactly what it wanted and strove to obtain the most possible. The initiative was always in the hands of the Federalist Right, while the Antifederalist Left, weakened in principle, could only offer a series of defensive protests to the reactionary drive. The battles were consequently fought on the terms set by the aggressive nationalist forces. Thus, such distinguished liberal leaders as Timothy Bloodworth of North Carolina; James Warren and Elbridge Gerry of Massachusetts; George Mason, Patrick Henry, and Richard Henry Lee of Virginia; George Bryan of Pennsylvania; and Governor George Clinton of New York; had all at one time or another conceded the necessity of strengthening the central power, particularly in imposts and regulation of commerce. A real libertarian Left existed only in such thoroughly disaffected areas as Shaysite western Massachusetts, western Rhode Island, and inland areas of upstate New York. As a result of his ambivalence, Governor Clinton had allowed Hamilton his head in selecting delegates for the Annapolis Convention. And the most that the liberals did was, like Patrick Henry and Richard Henry Lee in Virginia, to live aloof and refuse to attend the Constitutional Convention. Only a few writers and pamphleteers, largely in New England, raised the torch of all-out opposition from the very beginning.1
In October 1786 Virginia was the first state legislature that approved the call for a convention for constitutional revision, and it did so overwhelmingly. In a tactical masterstroke James Madison and Alexander Hamilton persuaded the enormously prestigious George Washington to agree to place himself at the head of Virginia’s delegation, and he later became presiding officer of the Constitutional Convention. As the front man, he put his unquestioned reputation at the service of the nationalist designs. No more apt evaluation of Washington’s character and role at the convention has been written than this delightfully caustic appraisal:
Washington, at fifty-four (or at any other age), could have added little to the intellectual average of any convention, and his knowledge of what to do in one barely extended beyond rules of order. But that was all he needed to know, for any assembly he attended was likely to elect him presiding officer. He had two attributes that, even without his unparalleled prestige, prompted men to choose him The Leader; and it mattered not that one of the attributes was trivial and the other he carried to the point of triviality, nor did it matter that for the last third of his life he was largely (and self-consciously) playing a role. The first attribute was that he looked like a leader. In an age in which most Americans stood about five feet five and measured nearly three-fourths that around the waist, Washington stood six feet and had broad, powerful shoulders and slim hips; and he had learned the trick, when men said something beyond his ken, of looking at them in a way that made them feel irreverent or even stupid. The other attribute was personal integrity. At times, Washington’s integrity was bewildering, for his artlessness and his susceptibility to flattery led him to endorse actions that less scrupulous but more cagey men might shun; and at times it could be overbearing, stifling. But it was unimpeachable, and everyone knew it, and that, above all, made Washington useful. Others would do the brain work and the dirty work; Washington needed only to be there, but if there was to be a national government he absolutely had to be there, to lend his name to the doings.2
Polar opposite to Washington in characteristics stood the theoretician James Madison, who was equally important to the nationalist cause. In McDonald’s words:
Madison, at thirty-seven (or at any other age), was Washington’s opposite. Few men looked less like a leader: scrawny and pale, a bookworm and a hypochondriac, he owned a physical presence as uncommanding as one was likely to meet. But his knowledge of what to do in a convention was vast, and his talents for doing it matched his knowledge. … at base he was a brittle, doctrinaire theorist. But these very attributes were useful (practical, freewheeling politicians can always use a good theoretician, much as practical, freewheeling businessmen can use a good lawyer); and together with persistence, shrewdness, and devotion to the nation, they made him a priceless member of the nationalist group in the convention.3
Out of its seven-man delegation, other prominent Virginia notables included conservative Governor Edmund Randolph, who later moderated at the end of the convention, and the liberal-moderate George Mason.
It was, of course, critical for right-wing design that Alexander Hamilton be selected as a delegate to the convention for New York. But, with Governor Clinton largely in conflict with the New York legislature, the going would not be easy. The liberal-oriented Clinton was greatly disturbed at the odd turn that the Annapolis Convention had taken and now strongly affirmed that no such major centralizing revision of the Confederation was necessary. In fact, the Assembly, which again turned down the congressional impost plan in its 1786 session, waited until early 1787 to report disapproval of the proceedings at Annapolis. But coincidentally, a change of events proved that luck was with the nationalists: news came of Shays’ Rebellion striking upstate New York, of the British maintaining their prohibition on American trade with the British West Indies, and of new depredations of Barbary pirates. Under the pressure of their circumstances the Clintonians reluctantly joined the nationalists in mid-February and agreed to send delegates to Philadelphia and recommend the act to Congress. However, doughty old Abraham Yates, lawyer, pamphleteer, and former shoemaker from Albany and Clinton’s man in the state Senate, now led the last-ditch radical effort to New York’s participation. Yates warned of the dangers of an “aristocracy, king, despot, unlimited power, sword and purse,” but the moderate-right coalition managed to override his opposing resolution to block any changes to the Articles which weakened the New York Constitution. Yates’ resolution was defeated in the Senate by the thinnest of margins: one tie-breaking vote made by its president, Pierre Van Cortlandt. Therefore, on February 20, New York instructed its delegates in Congress to recommend participating in the Philadelphia Convention.
The struggle over naming the delegates occurred in early March. The Antifederalists preferred to elect by joint ballot of both houses of the legislature because this would have insured an all-liberal delegation dominated by the more moderate Clinton-controlled Assembly. But the more conservative Senate, led by the oligarch Peter Schuyler, insisted on separate voting. The result was a deal by which, for its three delegates, New York chose the Federalist Alexander Hamilton and two staunch Antifederalists from Albany: Robert Yates, a distinguished justice on the New York Supreme Court, and John Lansing, a wealthy lawyer appointed mayor of Albany. Since Yates and Lansing were Clintonian officeholders and had voted against the congressional impost, an Antifederalist majority of the delegation was assured. While Yates and Hamilton were chosen virtually unanimously, the Senate hotly argued to accept the result of a deal between Lansing for the liberals and James Duane of the conservative New York City oligarchy. Characteristic of the sectional splits in New York, Lansing won in the Assembly by 26-23, Lansing carrying the will of the upstate counties (except for Albany) and the swing Long Island counties, while Duane carried accordingly the city vote: New York City and Albany, as well as Richmond County. Hamilton, furthermore, was repeatedly defeated in attempts to add Chancellor Livingston, Egbert Benson, Duane, and especially John Jay, to the New York delegation in order to increase the Federalist voice.
Pennsylvania hastened to send delegates to the convention with more dispatch than New York. Most fortunately for the nationalists, the conservatives had won a significant victory in the fall elections of 1786 that weakened the radical majority in the legislature. The election, furthermore, truly revealed a sharp sectional divide within Pennsylvania, with the conservatives in control of the southeast around Philadelphia and the radicals generally dominant elsewhere. The conservatives moved swiftly and ruthlessly to impose their program. Thus, in March 1787 the legislature voted to re-charter the Bank of North America, though its charter was limited to fourteen years, its capital reduced to two million, and its loans in goods and real estate restricted. The conservatives also moved quickly to choose conservative delegates to Congress. For its eight delegates, Pennsylvania ruthlessly chose an all-nationalist delegation with the single exception of the aging opportunist Benjamin Franklin. Apart from Franklin, the oligarchy, headed by Robert Morris, scintillated in Pennsylvania’s delegation: Robert Morris, Gouverneur Morris (now residing in Philadelphia), James Wilson, Thomas Fitzsimons, George Clymer, and Thomas Mifflin. Only Jared Ingersoll was a member of the radical Pennsylvania Constitutionalist Party and was the son-in-law of the wealthy Philadelphia speculator and financier, the moderate Constitutionalist Charles Pettit. Unsurprisingly, every single one of the Pennsylvanian delegates came from Philadelphia.
While the states began to send delegates to the forthcoming convention, it was by no means certain that the Congress would put its imprimatur on the meeting. Rufus King, a young congressman from Massachusetts, expressed an intelligent puzzlement: if the convention is to stay within the framework of legality and Congress is to ratify the result, then what is the point of not having Congress itself do the revising? King and his colleague Nathan Dane advised Massachusetts not to send men to the convention, and Massachusetts was strongly opposed to agreement. In mid-October of 1786, Congress referred the proposal to a grand committee that showed no sign of doing anything about it. But Shays’ Rebellion was now frightening respectable Massachusetts opinion into a far more nationalist mood, and Rufus King, reflecting this change, began a steady shift into the nationalist camp. As a result, on February 20, 1787, the grand committee ratified approval of the new convention by a mere majority of one vote. King and Dane, however, insisted that the convention be expressly and unambiguously limited to legal review of the Articles. The Congress, therefore, adopted on February 21, over the opposition by the rest of New England, the Massachusetts Resolution endorsing the convention, but only “for the purpose of revising the Articles of Confederation … and reporting to the United States in Congress assembled and to the States respectively such alterations and amendments.” No contract could be more explicit. Massachusetts’ approval followed the next day, and thus by the opening of the Constitutional Convention.
By May 14, the opening date for the convention, all but two states had chosen delegates. One, New Hampshire, finally chose a delegation in June, which arrived in Philadelphia at the end of July, after the important part of the convention had been concluded. Rhode Island, however, a state that had learned its radicalism the hard way for stopping taxes and public debts, stood steadfast as the lone holdout, refusing to have anything to do with the convention. However, General James Varnum, the Rhode Island nationalist, went to Philadelphia as a lobbyist and unofficial representative of the Rhode Island conservatives. Even with twelve states’ support, only Virginia’s and Pennsylvania’s eager delegates had made the trek to Philadelphia by the official opening date of May 14. It was only on May 25 that a quorum of seven states had appeared, and the Philadelphia Convention was finally ready to begin.4
The gathering at Philadelphia was a distinguished one as each state tended to select its leaders for this clearly important event: this in itself lent a strong conservative bias to the proceedings, for the distinguished men were generally wealthy and educated. In the case of the delegates, almost all were merchants, large landowners, or lawyers tied in with these interests, and many were relatively young men. Apart from such specific common aims as the coerced payment of the public debt and the opening of foreign ports to American commerce, such men were the power elite of their states, and a power elite naturally wants to expand its power and, therefore, its scope to a broad national scale. The “Great Man” is likely to be a man where his fortune or power has been aided, in one way or another, by the State; and, on the other side of the coin, he is an influential man who stands in a likely path to reach out and use the levers of State power for his own advantage. Hence, ceteris paribus, the more distinguished any given gathering, the more statist and reactionary it will likely be. The classic injunction of Lord Acton applies to the history of the Constitution:
I cannot accept your canon that we are to judge Pope and King unlike other men, with a favourable presumption that they did no wrong. If there is any presumption it is the other way against holders of power, increasing as the power increases. … Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it.5
Furthermore, while it was true that nationalism was newly dominant among the urban artisans, it was also true that the proportion of nationalists was greater among the rich and the eminent than among the poor and the nameless, so that again any distinguished gathering of the two was bound to be united on behalf of the conservative cause.
It must be noted that among this gathering of America’s Great Men there were conspicuous absences. These were men who were more often than not deeply skeptical or at least ambivalent about the prospects of a convention. Two of the most distinguished, John Adams of Massachusetts and Thomas Jefferson of Virginia, were away as ambassadors to England and France, respectively. Ultra-nationalist John Jay of New York was deliberately not chosen by the largely Antifederalist legislature. Richard Henry Lee and Patrick Henry of Virginia, on the other hand, were chosen as delegates but declined to attend—undoubtedly from deep suspicion; the doughty Patrick Henry declared that he “smelt a rat.” Henry Laurens, eminent merchant and planter of South Carolina, was too sick to attend. Thomas Paine of Pennsylvania was out of politics in Europe trying to raise financing for a bridge project he had organized. Sam Adams, too, was highly skeptical and was influential in getting the Massachusetts Resolution to restrict the scope of the convention and remain with the Confederation. Governor John Hancock of Massachusetts did not have himself selected as a delegate, probably for similar reasons. The old Adams-Lee Left, in short, was marked and almost forgotten by its absences—not only for the convention, but as a cohesive force in American political life as well. Maryland’s top oligarchs, such as Samuel Chase and Charles Carroll of Carrollton, also held aloof, and that state sent its second-rank leadership to the convention. And in North Carolina, Willie Jones, the wealthy planter who led the liberal wing of the state, was chosen as a delegate but declined to attend, for Jones would have had to serve with the entire leadership of the highly conservative oligarchical nationalist men of the state led by William Blount.6
Overall, seventy-four delegates from twelve states were selected by state legislatures for the Philadelphia Convention, of which nineteen refused, for one or another reason, to attend. Only a handful of attending delegates could be considered leading liberals, all of whom were moderates like George Mason of Virginia or Elbridge Gerry of Massachusetts, who were sympathetic to the convention as a device for strengthening the Articles. It was only as the true dimensions of the nationalist design began to unfold that these moderates started to grow wary and eventually go into opposition. Nationalist strength tended to come not only from the wealthy and eminent per se, but also from the urban commercial interests, merchants, and artisans, the majority of commercial farmers, and leading urban-exporters. In short, nationalist strength came from men who supported centralizing tariffs and navigation laws, raising the value of their public securities, and an aggressive foreign policy, all at the expense of the taxpaying inland farmer.7 And surprisingly, in seven of the twelve states, no representation whatever at the convention was allowed to the inland farmers, which was a clear and enormous weighting of the convention in favor of the nationalist forces. Typical was Massachusetts; of the four delegates who attended, three were from the commercial seaboard, and one was a conservative follower of Theodore Sedgwick from the commercial Connecticut valley town of Northampton. None of the numerous small inland towns were represented, to say nothing of the Shaysites from the West. The two New Hampshire delegates came from the main commercial seaboard town of Portsmouth and Exeter—again no representation from the oft-disgruntled northwestern interior. None of the three Connecticut delegates represented the inland subsistence farmer of the North, and all came from commercial towns east of the Connecticut Valley. In Pennsylvania, as we have seen, the situation was particularly blatant as every one of the eight delegates were from Philadelphia (seven from the city proper, and one from the surrounding countryside).
In the South, representation was similarly weighted in favor of men of the most conservative means, the large-planter dominated coastal plains. In South Carolina, the four delegates were all large lowland planters residing in Charlestown—not one representative of the small-farm backcountry. The five North Carolina delegates all came from the commercial large-planter dominated northeastern section of the state. In Virginia’s complex politico-economic geography, there were seven or eight major sections, of which two, the lower river valleys and especially the old feudal North Neck oligarchy of the Potomac, were the conservative, large-planter ones. Of the seven-man Virginia delegation, two men came from the North Neck and four from the lower river valleys; only James Madison, from Orange County, did not fit this picture, and he came from an area not too far from the upper Rappahannock.8
What of the other five states? Democratic Georgia, it is true, sent two delegates from the East and two from the West, but as will be seen below, it was overwhelmingly Federalist at this picture. For its part, Maryland was always accessible to the sea and was ultimately all eastern planter-run Tidewater. Delaware distributed its five delegates between New Castle County and the two southern agricultural counties, but the whole of the small state was largely a tributary of Philadelphia and the Delaware River, and consequently Delaware, too, was overwhelmingly nationalist. New Jersey had no east-west division in the commercial agricultural as did most of the other states. Instead, it had two areas, one (East Jersey) awarded to New York City, the other (West Jersey) awarded to Philadelphia, both nationalist cities. It is no surprise then that the state was overwhelmingly nationalist throughout the 1780s. Only in New York, therefore, was there a sectional-political struggle in which the interior was firmly represented and, therefore, the Antifederalists predominated (and even here the Antifederalists came from the commercial Hudson Valley town of Albany).
[The numbering of the footnotes in this article differs from that in the original book. Please consult the book for all notes.]
- 1. Jackson Turner Main,The Antifederalists, pp. 113–16.
- 2. McDonald, E Pluribus Unum, pp. 262–63.
- 3. Ibid., pp. 263–64.
- 4. [Editor’s footnote] E. Wilder Spaulding, New York in the Critical Period, 1783–1789 (New York: Columbia University Press, 1932), pp. 184–88; Brunhouse, The Counter-Revolution in Pennsylvania, pp. 191–202; Burnett, The Continental Congress, pp. 669–79; McDonald, E Pluribus Unum, pp. 259–70; Forrest McDonald, We the People: The Economic Origins of the Constitution (Chicago: University of Chicago Press, 1958), pp. 21–25.
- 5. Lord Acton to Mandall Creighton, April 5, 1887, in J.E.E. Dalberg-Acton, Essays on Freedom and Power (Boston: Beacon Press, 1948), p. 364.
- 6. As we have seen, Blount and much of his clique were leading speculators in western lands. They were also, seemingly paradoxically, at the same time nationalist and intriguing with Spain for secession of the West from the Union. The paradox is resolved in the fact that either a strong national government in control of and pushing the interests of the western lands, or a Spanish secession, would greatly raise the value of the western lands. On Blount and his group, see Main, The Antifederalists, pp. 33–38, and Abernethy, Western Lands and the American Revolution. [Editor’s remarks] McDonald, E Pluribus Unum, p. 60; McDonald, We the People, pp. 30–34.
- 7. It certainly seems reasonable to suppose that the public creditors, especially the federal creditors, favored a strong central government to assume and fund their debt as they had been at the end of the Revolutionary War. While this is certainly true, the famous controversy over the Charles Beard Thesis of public creditors providing the big impetus for nationalism at the Constitutional Convention is weakened when one notes that (a) many of the leading Antifederalists held large amounts of public securities; (b) as Professor Dorfman has pointed out, some securities were being held to short-sell, and therefore the holders assumed their prices would decline. But the crucial consideration is that Beard and his followers have had to rely solely on security ownership data for the year 1790. Buying securities after the Constitution was submitted in 1787 or later ratified was only good sense, and therefore holdings in 1790 say nothing about the utterly different situation in 1787, the relevant time for influencing the creation of the Constitution. Ferguson, The Power of the Purse, pp. 337–41; Joseph Dorfman, “Review of Ferguson, The Power of the Purse,” The William and Mary Quarterly (April 1961): 275–77.
- 8. Jackson Turner Main, “Sectional Politics in Virginia, 1781–1787,” The William and Mary Quarterly (January 1955): 96–112, and Main, The Antifederalists, pp. 28–33. [Editor’s remarks] Ibid., 114–18; McDonald, We the People, pp. 21–37.
The Nordic countries draw attention from democratic socialists in America thanks to their high tax rates, strong welfare states, and supposedly tight regulation of enterprise. The final indicator, however, is not exactly true: every single Nordic country except Finland ranks in the top ten on the World Bank’s Ease of Doing Business Index, and they maintain high positions on the Tax Competitiveness Index. But if Progressives argue that Scandinavia is indeed a socialist region, then they must admit that the following countries are just as, and if not, more socialistic: Italy, France, and Greece. None of these three countries are ones which they refer to in order to demonstrate the benefits of their economic agenda. In fact, thanks to their low living standards, high rates of unemployment, and stagnant incomes, extreme illiberal, ultranationalist right-wing movements have thrived in every single one of these countries. Let’s examine each one.Italy
Tax take is 42 percent of Italy’s GDP, higher than both Finland and Norway, and substantially greater than the Organisation for Economic Co-operation and Development (OECD) average. Social expenditure is 28 percent, practically identical to Nordic levels. The country ranks a hopeless fifty-eighth on the World Bank’s Ease of Doing Business Index, far lower than every single nation in Scandinavia. Furthermore, Italy has the least competitive tax system in the OECD, according to the Tax Foundation. Italy’s taxes and welfare spending are of Nordic style, and businesses are far more regulated. If the Nordic countries are socialist, so is Italy.
Yet is Italy considered to be more prosperous than the United States, or a poster child for a successful socialist system? Far from it. Pew Research Center gives us the following statistics: were Italy to become a part of the US, and thus adhere to US income metrics, 53 percent of Italians would inhabit the "low-income category," as opposed to the American rate of 26 percent; and since 1990, Italy’s median household disposable income has declined by one-fifth.
Pew Research Center aside, OECD data show that Italy’s standard of living is substantially below America’s. The US ranks tenth on their Better Life Index—Italy ranks twenty-fourth. And data from The Economist magazine which attempt to apply the Better Life Index within countries by socioeconomic category find that someone in the top 10 percent of the Italian income spectrum has a standard of living no higher than someone in the bottom 10 percent of the US income spectrum. Moreover, in 2019, before the pandemic, their unemployment rate stood at 10 percent. Clearly, economic recovery from the 2008 crisis has not been easy.France
Tax take is 45 percent of the French economy, the second highest in the OECD, just below Denmark. Social expenditure is 31 percent, higher than every single Nordic country, and the highest in the OECD. The country ranks thirty-second place both on the Ease of Doing Business Index and on the Tax Competitiveness Index. If the Nordic countries are socialist, France is even more so.
But does one often hear progressives lauding the welfarism and bureaucracy of the French system? Not at all. By US standards, a third of French people live in the low-income category, not as high as Italy, but still higher than the US average. Unemployment in France has fluctuated wildly over the years—perhaps a sign of fiscal instability. It reached a rate of 12 percent in the 1990s, but had declined to 7 percent by 2008, just as the global economy was collapsing. Having risen to 10 percent in 2015, it declined to 8 percent in 2019—lower than in Italy, but still shockingly high.
How does France fare on the Better Life Index? Not well. Ranking eighteenth place, it performs better than Italy, but nevertheless substantially below the United States. The Economist’s statistics reinforce this, pointing out that a Frenchman in the top 10 percent of their country’s socioeconomic pyramid is not particularly better off than someone in the bottom 10 percent of America’s.Greece
Greece draws special attention for a particular reason. It demonstrates the danger which excessive debt and spending can pose to the overall economy. As other countries in Europe and North America clambered out of recession, the Greek economy continued to deteriorate. Between 2008 and 2013, the unemployment rate rose from 7 percent to 27 percent. Since then, it has declined to 15 percent, but the point is that Greek workers have suffered far too much thanks to fiscal recklessness: in 2008, Greek’s deficit was 10 percent of its GDP, so bondholders were not willing to lend any more money to the government for them to fund large stimulus packages. Thus, the Greek economy was drained of capital and had a prolonged depression. Its fiscal infrastructure collapsed even further: debt was 100 percent of GDP in 2008; in 2011, it was 172 percent. Meanwhile, the United Kingdom, another country burdened by a high deficit, chose to cut spending, which, while unpopular, has enabled the economy to recover and avoid a debt-ridden catastrophe.
That aside, the Greek economy is undoubtedly overregulated and overtaxed, while welfare spending is indeed very high: social expenditure is 24 percent of GDP, similar to most Nordic countries; tax take is 38.7 percent of GDP, which, while the lowest rate among the countries examined here and lower than the other Nordic countries, is still significantly higher than the OECD average. On the Ease of Doing Business Index, however, Greece ranks by far the lowest of these three countries, in seventy-ninth place; it seems there is more red tape in Greece than in Vietnam, a formerly Communist country. But at least they rank twenty-ninth on the Tax Competitiveness Index, higher than the two other countries examined.
Unfortunately, the Pew Research Center has not focused on Greece much—nor has The Economist. However, other institutions have. As always, on the Better Life Index, Greece ranks thirty-sixth, out of forty countries. Greece’s median household disposable income is a paltry $17,700 a year, far below America’s $45,000.Conclusion
Essentially, progressive politicians and economists are guilty of cherry-picking countries: while wanting to emulate the Nordic countries, which they claim to be socialist—the same countries which are just as easy to conduct business in as the United States—they ignore these three countries, Italy, France and Greece, which are, by most metrics, more socialist than the Nordics. Because their living standards are incomparable with the United States’s and, in some cases, akin to the Third World, they are rarely used as examples of socialist triumph.
It could take several years. But “Fedcoin'' is on its way and soon will be our reality. The question is: Will Fedcoin make our lives easier or just the Fed’s?
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Nathan Robinson is an erudite socialist who frequently argues for the superiority of socialism over capitalism. He is the editor of Current Affairs and is the author of Why You Should Be a Socialist (All Points Books, 2019). He’s made quite a lucrative career out of pushing for socialism. More specifically, he argues that socialism outperforms markets by nearly every measure, most especially including environmental preservation, income growth, and female empowerment. Yet, if we actually examine the record of markets versus socialist regimes, we find that markets perform much better. Here are a few examples.Environmental Quality
There is a positive relationship between environmental quality and income over the long term referred to as the Kuznet curve. Higher incomes reduce the incentive to engage in environmentally destructive activities. People in affluent countries are exposed to a wider variety of jobs, so they are less likely to resort to unsustainable practices. According to a 2006 report released by the Proceedings of the National Academy of Sciences of the United States of America, national wealth is linked to forest growth. Wealth affords countries the opportunity to prioritize the environment. In fact, forestation is on the increase in richer countries, however the story in poorer countries is one of recession.
With rising affluence agriculture becomes less important, lowering the demand for land use. Researchers have also provided evidence showing environmental Kuznet curve effects pertaining to biodiversity. Essentially, richer countries can accommodate programs slated to protect threatened species. Moreover, wealth puts them in a better position to mitigate the costs of environmental regulations. The benefit of luxury generates a duty that extends to even nonhuman entities. Poor people lack the time to romanticize the environment and are often poor due to the repression of free markets. Economic freedom is the mechanism by which ordinary people freely create wealth, which enables them to appreciate the beauty of the environment. In the absence of economic freedom, environmental degradation is the result.
Seth Norton in his article “Population Growth, Economic Freedom and the Rule of Law” posits that countries with high economic freedom score higher on measures of environmental quality than their counterparts with medium and low economic freedom. Furthermore, analyses of communism and capitalism illustrate that the environmental record is better under the latter. Assessing both systems in a recent piece, economist Shawn Regan articulates a cogent case for the superiority of capitalism:
By one estimate, in the late 1980s, particulate air pollution was 13 times higher per unit of GDP in Central and Eastern Europe than in Western Europe. Levels of gaseous air pollution were twice as high as this. Wastewater pollution was three times higher. And people’s health was suffering as a result. Respiratory illnesses from pollution were rampant. In East Germany, 60 percent of the population suffered from respiratory ailments. In Leningrad (now St. Petersburg), nearly half of all children had intestinal disorders caused by contaminated water. Children in Poland were found to have five times more lead in their blood than in Western Europe.
Echoing the insights of economist Murray Feshbach and journalist Alfred Friendly, Regan indicts socialism: “When historians finally conduct an autopsy of the Soviet Union and Soviet Communism, they may reach the verdict of death by ecocide.” Because socialism is not driven by market signals, it misallocates resources, leading to wastage and pollution. Furthermore, when property rights are secure, people are unlikely to pollute the environment. Ownership motivates individuals to become responsible stewards of the environment. Though the rhetoric of socialists is rosy, the evidence overwhelmingly indicates that socialism has been a complete disaster.Income Growth
If socialists are interested in ameliorating the living standards of the poor by raising wages, then capitalism is the ideal system. The 2020 Economic Freedom of the World report published by the Fraser Institute reveals some interesting facts that challenge the outlook of socialists:
- Nations in the top quartile of economic freedom had an average per-capita GDP of $44,198 in 2018, compared to $5,754 for nations in the bottom quartile (PPP constant 2017, international$).
- In the top quartile, the average income of the poorest 10% was $12,293, compared to $1,558 in the bottom quartile (PPP constant 2017, international$). Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the average per-capita income in the least free nations.
- In the top quartile, 1.7% of the population experience extreme poverty (US$1.90 a day) compared to 31.5% in the lowest quartile.
Similarly, poor people in China and India recorded a sharp increase in their incomes after the adoption of promarket reforms. For example, the poorest Chinese currently earn fives times as much as they did over twenty years ago. In addition, a study published by the Cato Institute in 2009 titled “Socialism Kills: The Human Cost of Delayed Economic Reform in India” opines that implementing reforms in 1971 instead of 1991 would have reduced the poverty rate tremendously:
Had India benefited from earlier reforms and faster growth, the number of poor might have declined very substantially, from 309 million in 1971 to 197 million in 2004, and further to 174 million by 2008. This would have meant a huge decrease of 135 million in the absolute number of poor people between 1971 and 2008.
Likewise, another estimate reveals that had it not been for Michelle Bachelet’s statist policies, Chile would report growth rates of 4 percent of year, hence limiting the reach of poverty.
Relatedly, workers also fare better under flexible labor markets engendered by capitalism. By increasing the cost of labor, heavy regulation makes employing workers unattractive. Additionally, economic literature informs us that high labor income taxes are associated with fewer working hours and lower earnings. Steven Davis and Magnus Henrekson in “Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons” assert that “higher tax rates on labor income and consumption expenditures lead to less work time in the market sector, more work time in the household sector, a bigger underground economy, and smaller value added and employment shares in industries that rely heavily on low wage, low skill labor inputs.” On the other hand, research indicates that when employment protection policies become an obstacle to firing workers, unemployment will increase. Employers are less likely to risk employing new workers under such policies. Highly regulated labor markets do not improve working conditions.Female Empowerment
Further, despite the rantings of critics, free markets empower women. As Rosemarie Fike noted in Impact of Economic Freedom and Women's Well-Being, markets induce favorable outcomes for women:
- “Women are almost twice as likely to participate in the labour market in nations with high levels of economic freedom compared to nations with low levels.”
- “The share of women earning wages in economically free countries is three times than it is in nations with low levels.”
- “Women in countries with high economic freedom are more likely to have a bank account.”
- “Women living in economically free countries are less likely to die in child birth relative to their peers in countries with low levels of economic freedom.”
- “On average, women in economically free countries outlive their counterparts in less free countries by 17 years.”
Free markets require the removal of special privileges, therefore individuals regardless of sex or race are offered the liberty to work and innovate. Writing about the success of capitalism, Chelsea Follett demonstrates that in contrast to capitalism, the socialist economies failed to deliver for women:
In practice, wherever socialism has been enacted, women were expected both to work outside the home and to do all the housework as well. And in centrally planned economic systems without any market incentive to fulfil human needs, it is women’s needs that were forgotten first. Right up until the fall of communism in the Eastern Bloc countries, communist factories failed to manufacture even the most basic items for women, such as sanitary products. Those who romanticize socialism as liberating for women would do well to learn about the actual hardships women suffered, such as the stories of the women of the Gulag…. Communist officials saw women as just another means of punishing men, rather than as individuals with distinct identities.
Meanwhile, innovations fostered by free markets disproportionately benefit women. For example, we can attribute the longer life expectancy of women in capitalist countries to innovations in healthcare inspired by the free market. Also, due to labor-saving devices domestic duties are less strenuous for women. As such, true champions of female empowerment must endorse capitalism to be consistent.
Not that I expect these facts to have much effect on whether or not writers like Robinson will support markets. In many socialist circles, it appears that what really matters is declaring one's devotion to socialist notions of equality. Whether or not socialism actually works in improving the lives of ordinary people seems to be of far less importance.