Blogroll Category: Current Affairs

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Ugandan consecration postponed

Anglican Ink - Wed, 01/01/2020 - 01:26

The House of Bishops of the Church of Uganda has postponed the consecration of the Rev. Charles Okunya Oode as Bishop of Kumi. At their 14 December 2019 meeting, the Ugandan bishops reviewed four petitions from lay and clergy members of the diocese alleging marital misconduct by the bishop-elect. The Primate of Uganda, the Most Rev. Stanley Ntagali has asked the Rt. Rev. George Kasangaki of Masindi-Kitara Diocese, the Rt. Rev. Samuel Bogere Egesa of Bukedi Diocese and the Rt. Rev. Patrick Gidudu of Mbale Diocese to review the charge of marital infidelity and report back to the House of Bishops by 1 Feb 2019. Archbishop appointed the retired bishop of Lango Diocese, the Rt. Rev. John Charles Odurkami to serve as interim Bishop of Kumi.

The post Ugandan consecration postponed appeared first on Anglican Ink © 2020.

Economic Stats Won't Tell Us What Really Causes Recessions

Mises Institute - Tue, 31/12/2019 - 17:00

Most economists are of the view that by means of economic indicators it is possible to identify early signs of an upcoming recession or prosperity. What is the rationale behind this opinion?

The National Bureau of Economic Research (NBER) introduced the economic indicators approach in the 1930s. A research team led by W. C. Mitchell and Arthur F. Burns studied about 487 economic data to ascertain the mystery of the business cycle. According to Mitchell and Burns,

Business cycles are a type of fluctuation found in the aggregate economic activity of nations. … a cycle consists of expansion occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; this sequence of changes is recurrent but not periodic.1

Business cycles are seen as broad swings in many indicators, which upon careful inspection permit the identification of peaks and troughs in general economic activity. The research team concluded that because their causes are complex and not properly understood it is much better to focus on the outcomes of business cycles as manifested through economic data.

The indicators approach was designed to be as impartial as possible in order to be seen as purely scientific. This is what Murray Rothbard had to say about the NBER methodology:

Its numerous books and monographs are very long on statistics, short on text or interpretation. Its proclaimed methodology is Baconian: that is, it trumpets the claim that it has no theories, that it collects myriads of facts and statistics, and that its cautiously worded conclusions arise solely, Phoenix-like, out of the data themselves. Hence, its conclusions are accepted as unquestioned holy "scientific" writ.

If the driving factors of boom-bust cycles are not known, as the NBER underlying methodology holds, how could the government and the central bank introduce measures to counter these unknown phenomena? Contrary to the NBER philosophy, data doesn’t talk by itself or issues any “signals” as such. It is the interpretation of the data guided by a theory that generates various “signals.”

By stating that business cycles are about swings in the data, one says nothing what business cycles in fact are. In order to define what business cycles are, the driving force that is responsible for the emergence of economic fluctuations needs to be ascertained.

Are the Sources of Business Cycles Unknown?

Contrary to the indicators approach, boom-bust cycles are not about the strength of the data as such. (For instance, for the NBER a recession is a significant decline in activity spread across the economy lasting more than a few months). It is about activities that sprang up on the back of the loose monetary policies of the central bank. Thus, whenever the central bank loosens its monetary stance, it sets in motion an economic boom by means of the diversion of real savings from wealth generators to various non-wealth-generating activities that a free, unhampered market would not facilitate. Whenever the central bank reverses its monetary stance, it slows or puts to an end the diversion of real savings towards non-wealth-generating activities, and that in turn undermines their existence. The trigger to boom-bust cycles is central bank monetary policies and not some mysterious factor.

Consequently, whenever a looser stance is adopted, it should be regarded as the beginning of an economic boom. Conversely, the adoption of a tighter stance sets in motion an economic bust, or the liquidation phase.

The severity of the liquidation phase is dictated by the extent of distortions caused during the economic boom. The greater the distortions, the more severe the liquidation phase is going to be. Any attempt by the central bank and the government to counter the liquidation phase through monetary stimulus only undermines the pool of real savings, thereby weakening the real economy further.

Since it is central bank policies that set the boom-bust cycles in motion, obviously, then, it is these policies that lead to economic fluctuations. Whenever the central bank changes its monetary stance, the effect isn't felt instantaneously — it takes time. The effect starts at a particular point and shifts gradually from one market to another, from one individual to another. The previous monetary stance may dominate the scene for many months before the new one asserts itself.

Economic Slowdown versus Recession

Contrary to popular thinking, recessions are not about declines in various economic indicators as such — they are about the liquidation of business errors brought about by previous loose monetary policies. They are about the liquidation of activities that sprang up on the back of previous loose monetary policy. The ensuing adjustment of production may or may not manifest itself through a negative GDP growth rate.

As a rule, symptoms of a recession emerge once the central bank tightens its monetary stance. What determines whether an economy falls into a recession or just suffers an ordinary economic slowdown is the state of the pool of real savings. As long as this pool is still expanding, a tighter central bank monetary policy will culminate in an economic slowdown. In other words, notwithstanding that various non-wealth-generating activities will suffer, overall economic growth will be positive, the reason being that there are more wealth generators versus non–wealth generators. This is reflected by the expanding pool of real savings.

As long as the pool of real savings is expanding, the central bank and government officials can give the impression that they have the power to prevent a recession by means of monetary pumping and the artificial lowering of interest rates. In reality, however, these actions only slow or arrest the liquidation of activities that emerged on the back of easy monetary policy, thereby continuing to divert funding from wealth generators to wealth consumers. What in fact gives rise to a growth rate in economic activity is not monetary pumping but the fact that the pool of real savings is actually growing.

The illusion that through monetary pumping it is possible to keep the economy going is shattered once the pool of real savings begins to decline. Once this happens, the economy begins its downward plunge, i.e., the economy falls into a recession. The most aggressive loosening of money will not reverse the plunge (for money cannot replace bread). In fact, rather than reversing the plunge, loose monetary policy will further undermine the flow of real savings and thereby further weaken the structure of production and thus the production of goods and services.

In his writings, Milton Friedman blamed central bank policies for causing the Great Depression. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent the collapse in the money stock and thus in economic activity. For Friedman, the failure of the US central bank is not that it caused the monetary bubble during the 1920s but that it allowed the deflation of the bubble.2

An economic depression, however, is not caused by the collapse of the money stock as suggested by Friedman, but rather by the collapse of the pool of real savings. The shrinkage of this pool is set in motion by the monetary pumping of the central bank and fractional reserve banking.3 Moreover, a fall in the pool of real savings triggers declines in bank lending and thus in the money stock. This implies that previous loose monetary policies cause the fall in the pool of real savings and trigger collapses in economic activity and in the money stock.

Declines in stock prices and the prices of goods and services follow declines in money supply. Most economists erroneously regard this as "bad news" that must be countered by central bank policies. However, any attempt to counter price declines by means of loose monetary policies further undermines the pool of real savings. Moreover, even if loose monetary policies were to succeed in lifting prices and inflationary expectations, this cannot revive the economy while the pool of real savings is declining.

Lastly, it is erroneous to regard falls in stock prices as causing recessions. The popular theory argues that a fall in stock prices lowers individuals' wealth and in turn weakens consumers' outlays. Since the theory holds that consumer spending accounts for 66 percent of GDP, this means that a fall in the stock market plunges the economy into a recession.

Again, the pool of real savings, and not consumer demand, permits economic growth to take place. Furthermore, prices of stocks mirror individuals' assessments regarding the facts of reality. Because of monetary pumping, these assessments tend to be erroneous. However, once the central bank alters its stance, individuals can see much more clearly what the facts are and scale down previous erroneous evaluations. Observe that while individuals can change their evaluations of the facts, they cannot alter the existing facts, which influence the future course of events.

  • 1. Quoted in Allan P. Layton and Anirvan Banerji, “What Is a Recession?,” www.businesscycle.com.
  • 2. Milton and Rose Friedman, Free to Choose: A Personal Statement (Orlando, FL: Harcourt, 1980), p. 85.
  • 3. Murray N. Rothbard, America’s Great Depression (Kansas City: Universal Press, 1973), p. 153.
Categories: Current Affairs

Eight Actions You Can Take Now to "Austrianize" Your Business

Mises Institute - Tue, 31/12/2019 - 12:45

Entrepreneurship is action. It’s a process in which the actions of the entrepreneur are decisive. In the final podcast episode of 2019, Hunter Hastings suggests eight action steps you can take for the betterment of your business in 2020 and beyond.

1. Conduct an Empathic Diagnosis

The entrepreneur’s first job is to understand the customer, their hopes and fears, their goals and wants, and their feelings. There’s a skill for that, and a method. The skill is empathy — the ability to feel what the customer feels.

The method is empathic diagnosis. The secret is not to ask the customer what they want or what they need, but to ask them how they feel. They can tell you that, but they can’t tell you why. That comes in step 2.

To ask them how they feel, use the contextual interview tool.

Think of it as a conversation with a customer whose feelings you are aiming to identify via a discussion in context. Look for responses that have “feeling” words — painful, frustrating, boring, annoying. Success! You’ve hit an emotional seam you can mine. Now dig in to understand their goals, and the means they choose to achieve those goals.

After the interview, you can collate the dissatisfactions, the emotional pain points, and the functional failures. Then you can curate these inputs into functional, cognitive, and emotional components of a potential new solution — that is, new features (functional), new beliefs about what’s possible (cognitive), and better feelings about the experience (emotional). You now have a first building block for the design of a service or innovation that has high potential for facilitating new and higher value for the customer.

2. Construct a Means-End Chain to Generate Insights about Hidden Customer Motivations

The output of your empathic diagnosis provides the basis for your next step. The goal is to generate an understanding about the motivations of the customer that they can’t quite explain themselves. People do not have introspective access to their motivations. Motivations are unconscious. People don’t know what Rory Sutherland calls the real why that explains their actions. Smart entrepreneurs can find out this real why, using our means-end chain tool.

Take an easel pad or a wall and mark out the links as different levels, starting at the contact point at the bottom and advancing one by one to the highest value at the top. Use sticky notes to populate each level with the appropriate customer responses from the empathic diagnosis. Then join the most pertinent items together that link each level — at this contact point, they perceive these features and attributes, that generate this functional benefit and this emotional benefit, all of which are logically and causally linked to the pursuit of the highest value. Recalculate this sequence a few times until you are confident you’ve identified the strongest route to the highest value the customer is seeking when he or she is in your space. You now have an insight into the customer’s hidden motivations, and you can use it to build a strong brand.

3. Build a Strong Brand with Our Brand Uniqueness Blueprint

Building a strong brand provides you with a financial machine — a capital asset that can generate customer revenues reliably over time, because it meets customer needs and solves customer problems better than any alternative.

The brand uniqueness blueprint (see Mises.org/E4E_30_PDF) helps you identify the two parts of your brand foundation: who is it for? — that is, whose problem are you solving, whose needs are you meeting? The term for this is relevance. And how are you solving that problem in a superior fashion? — that’s differentiation.

Use our brand uniqueness blueprint by clicking the link. You’ll find an instructions template, an example using a real brand, and a blank template you can use for your own brand. If you want to send us a completed blueprint for your own brand via our Mises for Business LinkedIn page, we’ll be glad to give you our comments.

4. Complete a Resource Uniqueness Inventory.

Our first three action items have been directed at your customer understanding and embedding that understanding in your brand blueprint.

Let us turn to your firm’s capabilities. You want these to be unique to your purpose, just as your brand is. Austrian economics focuses you on individualism, and that includes your own individual experience, knowledge, and skills. Our fault often lies in underestimating our own unique resources. One answer to this fault is to conduct an inventory or an audit.

In 2019, Dr. Stephen Phelan gave us a resource-based theory of entrepreneurship, under the acronym PROFIT, standing for Physical Resources, Reputational Resources, Organizational Resources, Financial Resources, Intellectual and Human Resources, and Technological Resources. Steve’s list is at Mises.org/E4E_18_PDF. You can use it to organize your understanding of your own resources.

5. Imagine a Future Value Experience That Your Resources Can Deliver.

Whom shall I serve?

One way to answer this question is to imagine a future experience that customers will value. Mark Packard showed us how to do this by activating customer value as a learning experience in five steps (see Mises.org/E4E_44_PDF).

  • Predicted value — it’s a picture you generate in the customer’s mind with your value proposition.
  • Relative value — it’s a calculation the customer makes compared with alternatives.
  • Exchange value — getting the customer to actually exchange dollars for your offering.
  • Experience value — the act of consumption in which the customer actually experiences value.
  • Value assessment — the customer conducts an assessment of value retrospectively. Looking back on the cycle, was the experienced value greater or less than the predicted value? Was it better or worse than the alternative, perhaps a brand that the customer abandoned in favor of yours? Does it feel like the experience was worth the dollars given in exchange? This is a place to identify a measurement of the value you have generated — but be careful: it must be a measurement of feelings and perception, which is a tricky measurement proposition.

When imagining the new value experience you are trying to facilitate, make sure to imagine every stage in the sequence and how you can best stimulate each one.

6. Initiate an Innovation Project to Deliver on the Imagined Value Experience.

Innovation is the indispensable fuel of entrepreneurial success. The customer is continuously changing — rebalancing their preferences, seeking improvement in their circumstances, looking to feel better about their current situation. Dynamism on the part of the entrepreneur is mandatory.

Curt Carlson gave entrepreneurs the formula for managing innovation systematically. He uses the formula he calls N-A-B-C.

N stands for identifying the customer need.

The A is your approach — your business model, your uniqueness, your capability of delivering, your technology, your logistics, the complete package of commercially fulfilling the need.

The B is benefits per costs, in Curt’s language — what Mark Packard identified as relative value to the customer.

The C represents competition and alternatives. It’s imperative for entrepreneurs always to understand the alternatives the customer has available to them.

Download the knowledge graphic of the N-A-B-C formulation at Mises.org/E4E_37_PDF.

7. Conduct a Time Inventory, Then Cut It.

One of the most important ways Austrian economics helps entrepreneurs is with a strategic appreciation of the role of time. Production, the process of delivering a value proposition to the customer, takes time. The entrepreneur assumes the cost of time while the customer values time in their own subjective way and may seek alternatives that offer better time value. We are just beginning to understand how valuable time is to the customer — look at the success of just-in-time restocking systems, same-day delivery and overnight global distribution.

Steve Denning told us that time is now a strategic weapon of the entrepreneur — and a strategic dimension on which competition takes place. The customer wants speed, so the entrepreneur must manufacture speed.

A good step for the entrepreneur is to conduct a time audit. Examine all your processes that take time. Then imagine ways to reduce that time. Look at time from the viewpoint of the customer — where in the service experience would they welcome time reductions or time savings? How could you deliver them? Make time part of your innovation program. Give time back to your customers.

8. Identify the Next Innovation That Makes Life Easier for the Customer.

Austrian economics always looks at business from the customer’s viewpoint. It sees that the overarching strategy that defines the digital era from a customer perspective is making things easy. Easier by a factor of 10X or 100X. Online purchasing is easier. Overnight delivery is easier. Cloud computing is easier. Subscription models are easier.

Customers today are permanently dissatisfied with the degree of difficulty of getting things done, because they’ve seen how much easier things can be in so many arenas, so many parts of the landscape. Entrepreneurs are competing to make things easier for them.

So, here’s an exercise you can conduct. Imagine a way in which you can make things easier for your customer. Your empathic diagnosis might reveal several ways. Then imagine how your system could deliver the increase in ease — by a 10X or 100X factor. Then imagine a piece of digital intelligence or AI that might be able to implement the improvement for you. Then search for it on Github or elsewhere. You don’t have to develop the technology — you just need to imagine what it can deliver in increased ease for your customer.

Summary

In summary, Austrian analysis suggests these eight action items for improving your business by improving your understanding of your customer and your delivery of new and better solutions for them. All eight are practical and depend mainly on imagination. They cover empathic understanding, branding, resource assembly, value learning, innovation, costs, convenience, and time. We hope that we have provided valuable content for you to think about as you make your business more Austrian in 2020. Let us know.

Additional Resource

Download "8 Austrian Actions for 2020": Mises.org/E4E_46_PDF.

Categories: Current Affairs

Rhode Island’s wage and price controls

Adam Smith Institute - Tue, 31/12/2019 - 12:01

On December 31st, 1776, Rhode Island introduced wage and price controls. They limited the wages of carpenters to 70 cents a day, and those of tailors to 42 cents a day. These were price ceilings, and it was illegal to set wages or prices higher than the government stipulated levels.

The law fixed maximum prices for items “necessary for existence.” 7s 6d was the maximum for a bushel of wheat, and fourpence-halfpenny a pound for “fresh port, well-fatted, and of a good quality.” A gallon of New England rum could be sold for no more than 3s 10d, 10d a pound for butter, 8s for a pair of shoes, and 30s for a barrel of blubber.

Other states joined in the “Providence Convention” that sought relief from “the exorbitant prices of goods.” Delegates from Massachusetts, New Hampshire, and Connecticut joined those from Rhode Island in recommending maximum wages and prices that were then enacted by state legislatures.

It didn’t work, of course; it never does. Nor did it last; it never does. Within months the ceiling prices were raised, then abandoned. It never works because wages and prices are signals of supply and demand. To fix them by law at arbitrary chosen levels is to deny the ability of supply and demand to determine the levels of wages and prices. It is roughly akin to bunging up a thermometer in an attempt to control temperature.

My colleague, Eamonn Butler, co-authored a book entitled “Forty Centuries of Wage and Price Controls,” detailing every instance in the 4,000 years since Hammurabi of ancient Babylon in which rulers have tried to set wages and prices by law. Many were governed by the false notion that there could be a just price” for things.

Yet even in Eamonn’s lifetime (and mine), the Heath government in the UK, and the Nixon administration in the US, introduced wage and price controls. They never work, and they didn’t work then, either. They commonly set prices too low to make it worthwhile for producers to bring goods to the market, or set wages too low to make the activity worthwhile. They do not deliver stability, and never have. What they deliver in spades is shortages, and it is the shortages that cause the suffering that eventually makes people rebel against them.

Present day advocates of rent controls should note that they will cause the supply of rental accommodation to disappear, and make it not worthwhile to maintain existing rentals to a high standard. The answer to “exorbitant” prices is to let those prices lure other suppliers into the market in order to profit from them. The increased supply lowers the price more effectively than government laws can.

Categories: Current Affairs

"Rules of Origin" Show Why "Trade Agreements" Aren't Free Trade

Mises Institute - Tue, 31/12/2019 - 12:00

Ludwig von Mises famously argued that people must choose between outright socialism and unfettered capitalism, because there is no coherent “middle ground” between the two. The allegedly reasonable compromise of a highly interventionist state — where the authorities retain nominal private property but issue edicts regulating how legal owners may use their property — is unstable. Mises argued that one round of interventionism invites consequences that are even worse than the original problem, leading to yet more interventionism.

During the debates over Obamacare, I pointed out just how relevant Mises’s lesson was: we couldn’t get the “good parts” of Obamacare (such as universal coverage) without the “bad parts” (such as the individual mandate and massive tax hikes). When it comes to today’s controversies over trade with China, once again Mises’s insights are valuable. You can’t levy punitive tariffs on China but leave other trading routes relatively free, because then the Chinese will simply ship their exports via a more circuitous route. China hawks need to decide if they are going to abandon attempts to coercively manage trade, or if they are prepared for even more extensive top-down planning of global commerce.

Mises and Milk

Mises’s standard example for the phenomenon of one intervention leading to another was a price control on milk. Suppose the government wants to make milk more affordable for poor families. It can enact strict price controls on milk. But if this isolated price ceiling is imposed in the context of an otherwise free market economy, the immediate result will be a shortage of milk. Now, rather than poor families struggling to afford milk for their children, the stores won’t carry any milk, period. At this point, the government can either admit its error and retreat back to pure laissez-faire, or it can impose further price controls, this time on cattle feed etc. in order to coax dairy farmers into once again supplying the market with milk. Yet this second round of intervention leads to even more undesirable consequences, and so on.

Mises’s Lesson Applied to International Trade

In the debate over free trade, we see a similar phenomenon. The Trump administration has been engaged in a low-level trade war with China, levying targeted tariffs on its imports in an effort to bring Beijing to the bargaining table. Yet the remaining pockets of free(r) trade are stymying the effect, because of the phenomenon of “transshipment” — in which China exports its goods to a third country, from which they can be sold to the United States without penalty. As a recent article in the WSJ, entitled “American Tariffs on China Are Being Blunted by Trade Cheats,pointed out,

Billions of dollars' worth of China-made goods subject to tariffs by the Trump administration in its trade fight with Beijing are dodging the China levies by entering the U.S. via other countries in Asia, especially Vietnam, according to trade data and overseas officials.

And thus we see the relevance of Mises’s warning. The goal of the initial intervention — the levying of tariffs on Chinese imports — was to hurt Chinese exporters and thereby convince Chinese government officials to concede to American demands. But much of the intended effect has been muted because of transshipment.

At this point, American officials can admit that their approach was ill-advised, and stop using taxes as a way to make America great again. Or, they can expand the trade war with China to include an extensive monitoring of the content of goods coming from every other country on Earth.

“Rules of Origin” in Trade Agreements

This isn’t hyperbole on my part. As Ryan McMaken explained on this site over the summer, special trade agreements — such as the US pact with Central America — have clauses signifying that only qualified goods can escape duties. McMaken linked to this relevant passage from an FAQ on the CAFTA-DR (Central America-Dominican Republic-United States-Free Trade Agreement):

How can my product qualify to take advantage of the CAFTA-DR?

The product must qualify as an “originating” good under the terms of the Agreement. This means that the product must have sufficient U.S., Nicaraguan, Guatemalan, Honduran, Salvadoran, Costa Rican, and/or Dominican content or processing to meet the criteria of the Agreement. If goods contain only U.S. or Central American or Dominican Republic inputs, they qualify. If they contain some inputs from other countries, they still might qualify if they meet specific criteria set out in the Rules of Origin of the Agreement. Each product has a unique rule, based on its tariff classification. Most of the rules require either that the non-originating inputs undergo a specified transformation through processing in the United States or one or more of the other signatory countries (tariff shift method) and/or that they have a sufficient level of originating content as determined by a formula (regional value content method).

And now we see why a “free trade agreement” in practice isn’t simply an index card declaring, “Tariffs on Country X are 0 percent, three cheers for Bastiat!” These are managed trade agreements, with hundreds of pages devoted to detailed regulations that smack of top-down Soviet planning.

Conclusion

As Mises stressed time and again, people must decide whether to embrace capitalism or socialism. There is no third way, where we can enjoy the dynamism of markets while avoiding their “excesses” through strategic interventions. In the case of tariffs, particularly when the goal isn’t a broad-based revenue source but rather the achievement of a bargaining position with a particular country, a simple policy will soon break down, because the targeted country can simply ship its exports via other channels. (This same problem occurs in the case of “carbon tariffs” levied on countries that don’t punish greenhouse gas emitters to the same extent as the original country.)

The only logical end point is a country having to keep track of the entire network of trade flows, and levying the appropriate tariffs accordingly. Rather than this byzantine nightmare, trade hawks would be wiser to throw in the towel and try another strategy to achieve their goals. Unilateral free trade would make Americans richer, and our example might eventually inspire other governments to allow their own people more economic freedom as well.

Categories: Current Affairs

New Year's Resolutions with F. A. Harper

Mises Institute - Tue, 31/12/2019 - 11:00

Some Americans take New Year’s resolutions seriously. But over the years, I have been struck by how frequently the search for self-improvement ignores areas that would benefit people generally, not just a person as an individual. For instance, I hear of few people who resolve to advance liberty in the coming year or to give up their spot at the pig trough of government largesse in order to do so.

To help rectify that irresolution,  we must realize the centrality of liberty to any good and moral life. F. A. Harper, who helped Leonard Read begin the Foundation of Economic Education (FEE), and who was an original member of the Mont Pelerin Society and founder of the Institute for Humane Studies, gives us a good place to turn. Harper recognized that “the great social problem of our age is that of designing the preventive medicine that will stop the eroding liberty in the body politic.”

In his 1949 Liberty: A Path to Its Recovery, Harper offers us useful insight into what a resolution to advance liberty would look like in his chapters on “Special Privilege” and “Recovering Liberty.”

Special Privilege
  • "This should be the guiding rule: Grants of special privilege to any person or group … should be denied, because these grants can be made only by infringement on the rights of others — on liberty … The granting of any of the so-called benefits by government violates the foundation of liberty — that a person should have the right to the product of his own labor, and the right to dispose of it or to keep any part of it as he desires."
  • "Special privilege is any item of income or of position in the market … where the judgment of the voters in the economic market place is overruled by their political servants."
  • "The government … cannot give a 'benefit' to any one person … without correspondingly denying another the right to the product of his labor."
  • "Special privilege is of necessity the process of destruction … always and everywhere."
  • "The basis of a free society is the absence of parasitism … a complete about-face in policy … Why not oppose special privilege for each and every person and group, rather than try to acquire compensatory parasitism for one’s self?"
  • "If the principle of 'no special privilege' is to prevail, it will be necessary to support that principle in its every application as a principle … a uniform rule, across the board."
Recovering Liberty
  • "The foundations of liberty embrace the foundations of justice and morals."
  • "If lost liberty is to be regained … liberties that have been taken away from individuals must be restored; there can be no other answer."
  • "Weeds the size of sequoia trees have grown up in our vineyard of liberty, and one cannot eliminate a forest of sequoia trees by using a jackknife at the tips of the branches."
  • "When once the power of free choice in the spending of their incomes has been abandoned by the citizens, and these economic rights surrendered to government, their liberty will have gone with it … Either you spend your own income as you deem best or someone spends it for you in some way that he deems best."
  • "After liberty has been lost beyond a certain point, its recovery is difficult … The peaceful solution is to unwind the accumulated powers of government over the lives and incomes of the citizens. Eternal vigilance is not now enough … eternal vigilance of the barn door is no help after the horse has been stolen … better administration of an evil in the form of unwarranted power is a victory without virtue. The most efficient and best possible administration of slavery will not transform it into liberty."
  • "Unwinding an illiberal government … the principle that should guide the process is: No special privilege."
  • "When the advocate of liberty speaks with disfavor about some program that would violate liberty, he is likely to be met with … 'Your objection seems to be well reasoned … but how do you propose that the program be set up?' … consistent with liberty, you would have no 'program' … liberty is a positive program of the highest order. To one who believes otherwise, the only 'positive' program … is destructive of liberty."
  • "Know why the so-called 'positive' programs … are programs that destroy liberty. Then … take a clear and firm position against each and every means of destroying or diluting liberty."
  • "There are no shortcuts to liberty. Shortcuts taken in a haste for action usually violate the basic tenets of liberty … lead[ing] one further from his intended goal."
  • "Understanding [is] the only route to correct action."
  • "Truth has a power that cannot be touched by physical force. It is impossible to shoot a truth."

In Liberty: A Path to Its Recovery, F. A. Harper claimed: “The lover of liberty will find ways to be free.” He offered us the core of what could actually succeed in expanding liberty — eliminating special privilege. He recognized that such progress is slower than we wish, but slow progress toward liberty is far better than no progress or efforts at variance with the liberty we want to restore. And those words are worth thinking about if we want the future to represent progress beyond simply adding one more year to the total.

Categories: Current Affairs

If Willy Hutton can't get the past right how can he manage the future?

Adam Smith Institute - Tue, 31/12/2019 - 07:01

As we all know Willy Hutton has a plan for us all and our society. Which is that it should be managed by people like Willy Hutton. So that we all do what people like Willy think we ought to be doing.

There is a certain problem with this and it’s not just that perhaps we’d prefer not to be doing what we’re told to. The little niggle being that if the planner doesn’t even know what happened in the past then how can they direct that future? Today’s example:

The financial crash of 2008 was the consequence of hyper-deregulation, following the palpably absurd rightwing faith that markets were magic.

The thing being that we didn’t in fact deregulate the financial markets. Far from it in fact. The 1998 Bank of England Act increased the power of the Bank to regulate. Then the 2000 Financial Services Act centralised and strengthened regulatory control again - distinctly stronger regulation than under the 1988 Act.

It’s entirely true that both of these have been superseded by new acts - in 2016 and 2012 respectively - but it’s simply not true that the Blair years brought deregulation of finance let alone hyper- anything.

It is possible that those years brought bad regulation of those markets but that’s rather another matter isn’t it? And one which does rather undermine the idea that the bureaucratic classes - or even Willy Hutton - know what they’re doing and thus should plan matters for us.

Which does lead to that problem about any such set of plans. If the people making them don’t even know what has happened then how can they lay out that future?

Categories: Current Affairs

Ludwig von Mises and His Economics

Mises Institute - Mon, 30/12/2019 - 22:30

Recorded at Stanford University on July 7, 1990.

Categories: Current Affairs

The Foundation of Austrian Economics

Mises Institute - Mon, 30/12/2019 - 21:30

What lies at the base of all Austrian theorizing—from Menger to Mises. Rothbard presents the introductory lecture at Mises University 1990.

Recorded at Stanford University on July 7, 1990.

Categories: Current Affairs

The Libertarian Legacy of the Old Right: Democracy and Representative Government

Mises Institute - Mon, 30/12/2019 - 21:15

ABSTRACT: Libertarianism tries to face the difficulties and inconsistencies of democracy. The paper aims to provide a better understanding of the relationship between libertarianism and democracy going back to the early seeds of libertarianism and highlighting the critical contributions by some of the major Old Right protagonists. Inquiring into the role of intellectuals like Albert J. Nock, Henry L. Mencken, Frank Chodorov, Rose Wilder Lane and Isabel Paterson, the article will unveil a well consolidated tradition of criticism of democracy within the libertarian political philosophy.

Roberta A. Modugno (robertaadelaide.modugno@uniroma3.it) is Professor of History of Political Thought at Roma TRE University.

1. INTRODUCTION

During the second half of the twentieth century, it seemed to many people that the democratic revolution envisioned by Alexis de Tocqueville had been definitely achieved, and in the Western world there was no visible challenge to the superiority of the democratic model. Francis Fukuyama in his famous essay The End of History? (Fukuyama 1992) proclaimed that in the field of political institutions nothing new remained to be discovered and that liberal democracy was the final step of a long historical process of constitutional evolution.1 As theorized by neo-conservatives, all of humanity should apply this victorious model and spread it to the peripheral non-democratic areas of the world, even by means of war. Although Fukuyama’s theory—that is to say, that contemporary democratic regimes are the highest level reached by politics and that every other political system is old fashioned—has been criticized for being deterministic, it represents a widespread opinion among both political and cultural élites and the public.

But in the Western world, democracy is living a crisis of representation and confidence. In part, this crisis stems from a lack of conceptual clarity, and the relationship between classical liberalism and democracy, in particular, has proved complex and difficult to untangle. We are used to talking about liberal democracy when referring to the Western liberal democratic state, still taking for granted an overlapping between liberalism and democracy. But, is it true that, as the leading Italian political philosopher Norberto Bobbio states, “democracy is the natural development of the liberal state”? (Bobbio 1985, 46) Bobbio suggests that the best remedy against abuse of power is the democratic process and citizens’ participation in law making. In this view, political rights are a natural complement of liberty rights and civil rights. Bobbio writes: “There are good reasons to think that today democracy is necessary to safeguard the fundamental rights of people at the basis of the liberal state.” (Bobbio 1986, 47) The main problematic areas of democracy are the relationships between public choices and individual liberty, and between liberty and equality. How much room do collective choices leave to individual freedom? How much and which kind of equality is compatible with individual freedom and property rights? Does living in a democracy and having the rights to vote mean being free? Libertarianism tries to face the difficulties and inconsistencies of democracy. In fact, there is a well consolidated tradition of criticism and analysis of democracy in libertarian political philosophy. In order to provide a better understanding of the relationship between libertarianism and democracy, this article intends to go back to the early seeds of libertarianism and highlights the critical contributions by some of the major Old Right protagonists, Albert J. Nock, Henry L. Mencken, Franck Chodorov, Rose Wilder Lane and Isabel Paterson. In doing so, I will assume the idea of Justin Raimondo that the protagonists of the Old Right (Nash 1976; Rothbard 2007; Raimondo 2014) were also consistent libertarians. The article aims to consider democracy as a long-debated topic and a shared crucial question inside libertarianism.

2. ALBERT JAY NOCK AND HENRY L. MENCKEN

Albert Jay Nock (1870–1945) and Henry L. Mencken (1880–1956) were the two leading libertarian intellectuals of the Old Right, during the thirties of the Twentieth century. Both defended laissez faire but opposed the New Deal, any connections between big government and big business, the First World War and the American policy of imperialism. They were also very polemical against various movements for cultural and moral elevation of the people, such as Prohibition and the battle for public education.

With Myth of a Guilty Nation, published in 1922, Nock influenced an entire generation of classical liberals, opposing Wilsonian internationalism and arguing for anti-militarism. (Nock 1922)2 From 1920 to 1924 he was editor of the weekly journal The Freeman. His writings are mostly elitist, based as they are on the fundamental role of the individual capable of elevating himself over the mass of the people. His thought is anchored in a strong individualism, explicitly critical of any forms of statism. Nock has a disenchanted approach to democracy, mainly based on the idea that the lowering of the level of culture and education is related to the democratic ideology. Enlarging the suffrage would not do any better and its only result would be the destruction of the highest ranks of culture. The policy, decided on by the government, of universal education is based on the theory that everyone is equally educable and that education has to be extended to the largest possible group. But, for Nock, this does not make sense, since we are not all equals in attitudes and capacities. The only true kind of equality is the equality of liberty and before the law. But the education system is based on a perversion of the idea of equality and on democracy. First of all, Nock clarifies, the Founding Fathers chose the republican system as the best way to secure the free expression of the individual in politics. A republic where everybody votes is considered ipso facto a democracy, but considering republican and democratic as synonymous is simply a confusion of terms. Actually, strictly speaking, democracy is simply a matter of counting the ballots, but it became an ideology. “Republicanism”—Nock writes—“does not […] of itself even imply democracy. [...] Democracy is not a matter of an extension of the suffrage […]. It is a matter of the diffusion of ownership; a true doctrine of democracy is a doctrine of public property.” And this because we are “aware that is not, never was and never will be, those who vote that rule, but those who own.” (Nock 1932, 35) So democracy, being an economic status, is animated by a strong resentment toward the élite, the socially, economically and intellectually superior persons. The democratic ideology rejects the simple reality that some achievements and experiences are open only to some people and not to all. Democracy postulates that everybody has to enjoy the same things.

The whole institutional life organized under the popular idea of democracy, then, must reflect this resentment. It must aim at no ideals above those of the average man, that is to say, it must regulate itself by the lowest common denominator of intelligence, taste and character in the society which it represents. (Nock 1932, 39)

In a democratic system, therefore, education would be “common property” and so what is not manageable by everybody must be disregarded. This leads to a low and poor level of education and to the destruction of the higher ranks of culture, art, taste and life itself. Moreover, Nock’s theory of the state, as an enemy institution, founded on exploitation and robbery, sheds further light on his ideas about democracy. The doctrine of popular sovereignty was a structural alteration to the state, necessary to make people believe that the state was literally the expression of the popular will. Democratic representation has been an expedient in order to submit the subjects to a state they believed was legitimate. The most important expedient

was that of bringing in the so called representative or parliamentary system, which Puritanism introduced into the modern world, and which has received a great deal of praise as an advance towards democracy. This praise, however, is exaggerated. The change was one of form only, and its bearing on democracy has been inconsiderable. (Nock 1994, 36)

Henry Louis Mencken (Goldberg 1925; Evans 2008; Hart 2016) was a leading protagonist of the American Old Right. In the weekly journal American Mercury, he and his colleagues bitterly criticized moral crusaders and the entire Wilsonian politics that considered the United States as the guardian of the world. (Gottfried 1990, 117–26) Although he was a literary figure and did not elaborate a systematic system of political thought, he can rightly be considered a libertarian. Both Murray N. Rothbard and Raimondo are convinced that there are many good reasons to place Mencken in the libertarian tradition. Rothbard defined him as “the joyous libertarian” for his witty and satirical prose. (Rothbard 1962, 15–27) Mencken was, in Rothbard’s words, “a serene and confident individualist, dedicated to competence and excellence and deeply devoted to liberty, but convinced that the bulk of his fellows were beyond repair.” (Rothbard 1962, 16) Mencken had a great influence on the Old Right during the twenties, rejecting the idea of a world war for peace and democracy; and defending laissez faire in economics and in private life. His liberating force and his writings were not for the masses, but for the intelligent few who could understand and appreciate his message. Mencken believed that

government, in its essence, is a conspiracy against the superior man; its one permanent object is to oppress him and cripple him. […] One of its primary functions is to regiment men by force, to make them as much alike as possible, to search out and combat originality among them. The most dangerous man, to any government, is the man who is able to think things out for himself, without regards to the prevailing superstitions and taboos. (Mencken 1949)

The government “is a separate, independent and often hostile power.” Mencken perceived “the deep sense of antagonism between the government and the people it governs. It is […] a separate and autonomous corporation mainly devoted to exploiting the population for the benefits of their own members […], oppressing the taxpayers to their own gain.” The best kind of government, he writes, “is one which lets the individual alone, one which barely escapes being no government at all.” (Mencken 1949)

Mencken’s individualist perspective gives great consistency to his views on many topics, among the most important of which is democracy. Notes on Democracy, published in 1926, contains one of the most scathing critiques of the idea that the great masses of the people have an inalienable right to govern themselves and that they are competent to do it. A government is considered a good one if it can satisfy quickly the desires and ideas of the masses, that is to say of the inferior men. A good and democratic government is based on the idea of the omnipotence and omniscience of the masses. But, Mencken states, “that there is actually no more evidence for the wisdom of the inferior man, nor for his virtue, than there is for the notion that Friday is an unlucky day.” (Mencken 1926, 15) Mencken begins his analysis of democracy examining the psychology of the democratic man and clarifying that “in an aristocratic society government is a function of those who have got relatively far up the poles […]. In a democratic society it is the function of all, and hence mainly of those who have got only a few spans from the ground.” (Mencken 1926, 22–23) The democratic man contemplates with bitterness and admiration those who are above him. Bitterness and admiration form a complex of prejudices that, in a democracy, is called public opinion, which, under democracy, is regarded as something sacred. But, asks Mencken:

What does the mob think? It thinks, obviously, what its individual members think. And what is that? It is, in brief, what somewhat sharp-nosed and unpleasant children think. The mob, being composed, in the overwhelming main, of men and women who have not got beyond the ideas and emotions of childhood, hovers, in mental age, around the time of puberty, and chiefly below it. If we would get at its thoughts and feelings we must look for light to the thoughts and feelings of adolescents. (Mencken 1926, 23–24)

The main sentiment of humanity is fear and the main sentiment of the democratic man is envy. The “democratic man hates the fellow who is having a better time in this world” (Mencken 1926, 45), this is why, according to Mencken, envy is the origin of democracy. Politicians are well aware of the psychology of the masses and those who know how to use the fears of the mob are the most successful. “Politics under democracy consists almost wholly of the discovery, chase and scotching of bugaboos. The statesman becomes, in the last analysis, a mere witch-hunter,” in fact “the plain people, under democracy, never vote for anything, but always against something.” (Mencken 1926, 29–30) Actually politics are not determined by the will of the people, but by small groups with special interests able to use the fears and to excite the envy of the masses. “Public policies are determined and laws are made by small minorities playing upon the fears and imbecilities of the mob.” (Mencken 1926, 63) Those who succeed in the realm of politics are not the best and most intelligent men, but are the ablest and cunning demagogues. Anticipating Hans-Hermann Hoppe, Mencken states that except for a miracle it would be very difficult for a man of value to be elected to office in a democratic state. The problem is that people believe that “the cure for the evils of democracy is more democracy” (Mencken 1926, 10), or something closer to direct democracy. The great masses of men, though free in theory, submit to oppression and exploitation. In fact, according to Mencken, the popular will remains purely theoretical in every form of democracy. Moreover, there is no reason for believing that its realization would change the main outlines of the democratic process, considering the low level of intelligence and knowledge of the mob.

Mencken examines the relationship between democracy and liberty and notes that the democratic man does not fight to gain more liberty but for more security and protection. “The fact,” he writes, is that liberty, in any true sense, is a concept that lies quite beyond the reach of the inferior man’s mind. […] Liberty means self-reliance, it means resolution, it means enterprise, it means the capacity for doing without.” (Mencken 1926, 52) But these are not the characteristics of the democratic masses. Actually, the masses’ longing for material goods can only be satisfied at the expense of liberty and property rights. It cannot be denied that freedom is an indispensable condition for the development of the personality of the individual, but if we look at the propensities of the masses we discover that frequently they prefer to sacrifice freedom in order to enjoy material or psychological advantages. The average man wants to feel protected even from himself. Writes Mencken:

The truth is that the common’s man love of liberty […]is almost wholly imaginary. […] He is not actually happy when free; he is uncomfortable, a bit alarmed. […]. He longs for the warm, reassuring smell of the herd, and is willing to take the herdsman with it. Liberty is not a thing for such as he. […] The average man doesn’t want to be free. He simply wants to be safe. […] What the common man longs for […] is the simplest and most ignominious sort of peace—the peace of a trusty in a well-managed penitentiary. He is willing to sacrifice everything else to it. He puts it above his dignity and he puts it above his pride. Above all, he puts it above his liberty. (Mencken 1926, 157–58)

The average man tends to consider liberty as a weapon used against him in the hands of superior men but, recalling Edmund Burke, Mencken writes that

the heritage of freedom belongs to a small minority of men. […]It is my contention that such a heritage is necessary in order that the concept of liberty […] may be so much as grasped—that such ideas cannot be implanted in the mind of man at will, but must be bred in as all other ideas are bred in. […] It takes quite as long to breed a libertarian as it takes to breed a racehorse. (Mencken 1926, 56–60)

If one of the main purposes of civilized governments is to preserve and augment liberty of the individual, then surely democracy accomplishes it less efficiently than any other form of government, since “the aim of democracy is to break all free spirits.” Mencken describes the tyrannical consequences of the cultural levelling tendencies of democracy. Like Alexis de Tocqueville he realizes that the pressure of a mass society of men all alike and equal leads to ostracism of those superior individuals “merely thinking unpopular thoughts.” “Once” a man “is accused of such heresy, the subsequent proceedings take on the character of a lynching.” (Mencken 1926, 178) The democratic, egalitarian society is pledged to common cultural values resulting in a rigorous homogeneity of way of thinking and of life. So “a man who stands in contempt of the prevailing ideology has no rights under the law.” (Mencken 1926, 180)

By the mid-thirties the influence of Nock and Mencken had begun to decline. The Old Right, after playing an important role opposing the New Deal and in the crucible of the First World War, almost disappeared. During the years of World War II, government banned any opposition to war, Roosevelt and the New Deal. “The Old Right went underground for the duration” of the war and when America emerged from the war a new generation of old style libertarians appeared. They believed in laissez faire and non-intervention in foreign policy. (Raimondo 2014, 134)

3. THE OLD RIGHT REBORN: FRANK CHODOROV

The Old Right was reborn in the shadow of the emergent welfare-warfare state, remaining faithful to the ideas of its founders. Among the second generation of activists was the writer and teacher Frank Chodorov (1887–1966).

Chodorov (Rothbard 2007; Raimondo 2014)3 was the son of Russian immigrants. After graduating at Columbia University in 1907 he taught in high school and then ran a clothing factory, but during the Great Depression his career as an entrepreneur was ruined. In 1937 he became director of the Henry George School of Social Science in New York. Here he edited the School’s magazine, The Freeman, expressing his libertarian ideas, pro-capitalism, anti-taxation and anti-communism. Beside this, Chodorov was staunchly anti-war. He too was not writing for the masses but for those Nock called “the Remnant,”4 that is to say the few who were eager to carry on the prewar culture, the culture of the Old Right. After the entry of the United States into the Second World War, Chodorov’s antiwar ideas were no longer tolerated and he was fired from the School. In 1944 Chodorov began to publish the monthly magazine Analysis, which lasted for six years. In this time the magazine kept Old Right libertarianism alive. Despite the small circulation of the publication, it had a great influence on the Remnant. Chodorov covered topics such as the income tax, public schools, protectionism and the various statist icons. On taxation he writes:

[It] is highwaymanry made respectable by custom, thievery made moral by law; there isn’t a decent thing to be said for it, as to origin, principle, or its effects on the social order. Man’s adjustment to this iniquity has permitted its force to gain momentum like an unopposed crime wave; and the resulting social devastation is what the socialists have long predicted and prayed for. (Chodorov 1980, 267–68)

The opposition to business subsidies and to the Cold War became central in the intellectual discussion, acquiring a huge relevance in the emerging libertarian movement. When Chodorov founded the student organization Intercollegiate Society of Individualists he exerted a great influence on conservative and libertarians, among whom Murray N. Rothbard stood foremost. As the Cold War and the related propaganda heated up, Chodorov’s critical attitude became more and more unpopular among the American right.

Chodorov’s views on democracy are directly related to its consequences for education and for the lowering and leveling of culture. He argues that in a democracy, where everyone is a voter, everyone has to be educated. Democracy did away with the concept of the educable élite. Education became a governmental enterprise, regardless of different individual capacities. In the past education was intended to bring the best to the top, but this is inconsistent with democratic egalitarianism. So the educators altered the role of education and this became a process designed to bring about intellectual uniformity. “The notion of the infinite perfectibility of man through education kept gnawing at the heart of democracy,” Chodorov writes,

and this, fermented by the idea that all men are of equal capacities, gave rise to a demand for wider educational opportunities. If everybody were equally educated, so ran the litany, everybody would be able to reach the heights, economically, socially and, perhaps, culturally. […] If the purpose of education is social adjustment, then individual excellence must be minimized or discouraged, and the ideal of democracy—the egalitarian society—will be achieved. (Chodorov 1962, 32–33)

The consequence is that the contents of education will be lowered to the intellectual level of the masses. “That is because the mob cannot tolerate excellence and, having political power in their hands, [and] will use it to reduce the educable to their own level.” With the democratic ideology in ascendancy, the state will provide education for all, even at the college level and this means that the state will “dictate what to be taught and how” (Chodorov 1962, 34), with state intervention raising more and more. Chodorov unmasked the phrase we are the government, in its use as an explanation of how collectivism penetrated the popular mind. Democracy means being ruled by the social attitude of the majority of the people. But what is a social attitude? “It turns out to be in practice,” Chodorov explains,

[to be] good old majoritarianism; what 51 per cent of the people deem right is right, and the minority is perforce wrong. It is the General Will fiction under a new name. There is no place in this concept for the doctrine of inherent rights; the only right left to the minority, particularly the minority of one, is conformity with the dominant social attitude. (Chodorov 1959, XXII)

Democracy gives to the voter a minuscule piece of sovereignty that does not give him any power. Democracy does not give power to the individual, but it gives power to the groups. That explains the emergence of pressure groups whose interests are served by the democratic government that needs to buy the support of the most powerful groups, granting them privileges. Chodorov writes:

It is the business of the candidate to weigh the relative voting strength of the various groups and, finding it impossible to please all, to try to buy the strongest with promises. It is a deal. Any moral evaluation of the deal is silly, unless we condemn politics as a whole, for there is no way for the politician to attain power unless he engages in such deals. In a democracy sovereignty lies in the hands of the voters, and it is they who propose the trading. The vast majority of the voters are outside these pressure groups; there are too many of them, too diversified in their interests to permit of organization. I am one of them. (Chodorov 1959, 39)

This trade of privileges for power is a characteristic of the democratic state. “Every subsidy to the ‘poor’ (in a democracy) was thought up by a bureaucrat or a candidate for office, the candidate to achieve political preferment, the bureaucrat to improve his prerogatives and his perquisites.” (Chodorov 1959, 212) The result will be a disproportionate augmentation of the power of the state and its bureaucracy. Strictly speaking, for Chodorov, “the more democracy the more governmental intervention.” (Chodorov 1959, 34) Also, the American missionary zeal of making the world safe for democracy, actually hides the international interests of various groups. “The duty of imposing our brand of democracy on other peoples and an aggressive, expansionist foreign policy are the result of particular interests succeeding in being considered American interests.” (Chodorov 1959, 114)

4. THE FOUNDING MOTHERS OF LIBERTARIANISM: ROSE WILDER LANE AND ISABEL PATERSON

After World War II, Senator Robert Taft served as a political reference point for the Old Right. Taft, who opposed the New Deal and the intervention of the United States in the Second World War, was an important figure in the Senate, challenging the doctrine of the Cold War and faith in the welfare state. In 1951 the Republican Senator John W. Bricker proposed the Bricker amendment, an attempt to preserve the political discretion of the American Congress to decide upon the incorporation of international law into the national law of the United States. After a long and difficult battle the Eisenhower administration defeated the amendment. After the death of Taft and Robert R. McCormick,5 and the defeat of the Bricker amendment, the Old Right seemed finished. But a new cultural environment was developing. The publication of Human Action, Bureaucracy and Omnipotent Government by Ludwig von Mises, and of The Road to Serfdom by Friedrich von Hayek created an intellectual context more favorable to free market and individualism that paved the way to the resurgence of the Old Right.

Rose Wilder Lane (1886–1968) and Isabel Paterson (1886–1961) contributed to the preservation of the heritage of classical liberalism and, along with Ayn Rand, can be considered the founding mothers of libertarianism.

A writer and journalist, Lane6 became well known just before the Second World War for her staunch defense of liberty. Her book Discovery of Freedom, traces the origins of freedom back to the Western Jewish-Christian tradition and is a classic of libertarian literature. Her personal story is very interesting. She was sympathetic to leftist ideas and to the Communist Party organized in the United States by John Reed shortly after the First World War. Lane visited the Soviet Union four years after the Bolshevik Revolution, and this experience completely changed her views. She remembers that she was hosted by a family of peasants in a rural Russian village and this simple experience planted the seeds of doubt in her mind. Her host complained about the new government. “His complaint was government interference with village affairs. He protested against the growing bureaucracy that was taking more and more men from productive work. He predicted chaos and suffering from the centralizing of economic power in Moscow.” (Lane 1945, 11) When she came back to the United States, she stated that at that point of her life she totally believed in liberty, capitalism and individualism. She did not simply reject Marxism, she got down to first principles to challenge the central premises of statism. So, along with her refutation of Marxism, she was also against Roosevelt’s New Deal. Her criticism of democracy is closely related to the rejection of statism and central planning. Instead of blaming Lenin “because he did not establish a republic,” in Give Me Liberty, she states that “representative government cannot express the will of the mass of the people; the People is a fiction like the State. You cannot get a will of the Mass […]. The only human mass with a common will is a mob, and that will is a temporary insanity.” (Lane 1945, 13) Give Me Liberty, originally published as Credo in 1936, was a radical statement of libertarian principles. As Raimondo writes, “In the intellectual atmosphere of the Red Decade, this […] helped galvanize the group that eventually came to form around Leonard Read and his Foundation for Economic Education.” (Raimondo 2014, 187) Raimondo characterizes Lane as a “central figure in the Old Right and the early libertarian movement.” (Raimondo 2014, 198) In Discovery of Freedom, Lane asks herself what democracy really means. She states that, at the time she wrote, the word democracy could indicate a lot of different situations. The Soviet Union could be considered a democracy when fighting Hitler; economic security and compulsory insurance could be considered democratic; as could votes for everybody, the American sense of human equality, freedom and human rights and so on. But she stresses that democracy means rule by the people and that demos, the people, was a fantasy imagined by the Greeks. According to Lane, the Greeks attributed to this fantasy the meaning of being God. Unfortunately, Lane notes, “there are still people who believe that the voice of the people is the voice of God.” (Lane 2012, 178) She approaches democracy and majority rule from a perspective of methodological individualism. “The people,” Lane writes,

do not exist. Individual persons compose any group of persons. So in practice any attempt to establish democracy is an attempt to make a majority of persons in a group act as the ruler of that group. […] There is no reason to suppose that majority rule would be desirable […]. There is no morality or efficiency in mere numbers.” (Lane 2012, 178)

Lane quotes James Madison, when, in The Federalist Papers, he wrote “A pure democracy can admit no cure for the mischief of faction. A common passion or interest will be felt by a majority, and there is nothing to check the inducements to sacrifice the weaker party. Hence it is, that democracies have ever been found incompatible with personal security or the rights of property; and have, in general, been as short in their lives as they have been violent in their deaths.” (Lane, 2012, 178) When the revolutionaries signed the Declaration of Independence, they desired to establish a new form of government, but they had two dangers to avoid: monarchy and democracy. Actually they were diffident toward democracy. “Democracy,” writes Lane,

does not work. It can not work because every man is free. He can not transfer his inalienable life and liberty to anyone or anything outside himself. When he tries to do this, he tries to obey an Authority that does not exist. […] There is no Authority of any kind, that controls individuals. They control themselves. (Lane 2012, 179–80)

She explains why a real democracy cannot exist. “When a large number of individuals falsely believe that the majority is an Authority that has right to control individuals, they must let a majority choose one man (or few men) to act as Government. […] And because a majority supports the ruler whom a majority chooses, nothing checks his use of force against the minority. So the ruler of a democracy quickly becomes a tyrant.” (Lane 2012, 180) Lane’s perspective on democracy is very radical and, in some ways, anticipates Hans Hermann Hoppe’s critique, in postulating an incompatibility between democracy and liberty. In fact, in a democracy, there is no protection for liberty: “democracies always destroy personal security and the rights of property.” The American revolutionaries were the first to see that no man can use his natural freedom if he has no right to own private property. But in democracy no one really owns property, because in a democracy property is at the mercy of the majority’s whim. “Majority rule has always been an enemy of human rights.” (Lane 2012, 180–85)

During the Second World War, Lane could not overtly protest against war and government intervention, so she intensely corresponded with her fellow Old Rightists, seeing herself as a frontline fighter in a larger movement. During the fifties she followed current events and remained actively involved in the Old Right, opposing the Cold War. But Lane was not alone.

In 1943 Isabel Paterson7 published The God of the Machine, a book celebrating the glories of individualism and capitalism. In her book Paterson depicts the United States as the result of the free energy of self-regulating individuals. The state can have only negative effects on the spontaneous development of this energy, interrupting its flow. Paterson was a fierce individualist: “there is no collective good,” she writes; “strictly speaking there is not even any common good. There are in the natural order conditions and materials through which the individual […] is capable of experiencing good. […] Persons do not enjoy the benefit by community, but singly.” (Paterson 1996, 89–90) Paterson attacked the allegiance between big business and big government, and the repressive wartime atmosphere. She saw in the militarization of society, conscription and sedition trials the final consequences of state intervention in the economy. Also Paterson has a critical attitude toward democracy. The only kind of equality Paterson admits is an equality of liberty, but democracy is “inadmissible because it must deny that right and lapse into despotism. […] It does so abstractly, by its own logical contradiction; and in practice. […] It is not liberty and equality that are incompatible, but liberty and democracy.” (Paterson 1996, 120) Paterson describes the logical contradiction of democracy as follows:

Democracy is a collective term; it describes the aggregate as a whole and it assumes that the right and authority reside in the whole. […] But if the authority resides in the collective whole, it is evident that with the disagreement of even one person, the whole is no longer existent or operative. […] The prime presumption has vanished. In practice than democracy must abandon its own pretended entity of the collective whole, and rely upon majority. But majority is only a part. […] Such is the inherent contradiction of democracy. […] Slavery of a minority, or of foreigners, is quite consistent with majority rule. (Paterson 1996, 120–21)

In fact, it is falsely assumed that the contrary of the rule by the few or by one is rule by the many and that this is fair. “But, in reason, if one man has no right to command all other men—the expedient of despotism—neither has he any right to command even one other man; not yet have ten men, or a million, the right to command even one other man.” (Paterson 1996, 122)

Liberty is a natural right because life is possible for human beings only by virtue of their capacity to act independently. “Hence,” Paterson states, “the natural and rational terms of human association are those of voluntary agreement, not command. Therefore the proper organization of society must be that of free individuals.” (Paterson 1996, 121) The alleged choice between despotism and liberal democracy is a false binary. The true alternative to tyranny is not democracy; it is instead the decisions of individuals in a free market, engaging in exchange for their mutual benefit and settling disputes through peaceful methods of resolution.

5. CONCLUDING REMARKS

Democracy is often considered the only alternative to authoritarian regimes and the main criterion of a government’s legitimacy. But the Old Right libertarian challenged this cliché, in the name of an expansion and not of a compression of individual liberty. The oppressive potential of majority rule was unveiled by them, showing the ethical fragility of democracy. Their incisive account of the evils of democracy retains its validity for us today. We have much to learn from these great figures of the Old Right.

  • 1. Fukuyama first published, in the summer of 1989, before the fall of the Berlin Wall, an essay entitled “The End of History?” in The National Interest.
  • 2. Among Nock’s major works are Nock (1926, 1928, 1932, 1935, 1943).
  • 3. Among Chodorov’s major works are Chodorov (1946, 1952).
  • 4. Nock, in his classic essay “Isaiah’s Job,” defines as the Remnant the chosen few to whom the prophet Isaiah spoke. The prophet was sent by God to show a decadent city how to change its destiny and build a new society. His words were not for the masses of the people but for the Remnant. The essay first appeared in The Atlantic Monthly in 1936.
  • 5. Robert Rutherford McCormick (1880–1955) was the owner and publisher of the Chicago Tribune that, under his direction, embodied the values and tradition of the Old Right.
  • 6. Rose Wilder Lane was the daughter of Laura Ingalls Wilder, the author of the novel for children Little House in the Prairie. Lane achieved world fame as a writer and she contributed regularly to the major American magazines American Mercury, Good Housekeeping, Saturday Evening Post and Harper. Her novels, including, Let the Hurricane Roar (1933) and Old Home Town (1935) were a success.
  • 7. Isabel Paterson wrote for the New York Herald Tribune, was the author of many novels and was well known in the Old Right circles.
Categories: Current Affairs

Hazlitt and Keynes: Opposite Callings

Mises Institute - Mon, 30/12/2019 - 20:00

[This talk was delivered at the Mises Circle in Houston, Texas, on January 22, 2011. The audio of this speech is available here.]

John Maynard Keynes was born in 1883 and died in 1946. Henry Hazlitt was born in 1894, eleven years after Keynes, and lived much longer, until 1993. Their lives and loyalties are a study in contrast, and mostly of choices born of internal conviction, in Hazlitt's case, or lack thereof, in Keynes's case.

Keynes became the most famous economist of the twentieth century and the guru-crank whose work has inspired thousands of failed economic experiments and continues to inspire them today. He is the Svengali-like figure who implausibly convinced the world that saving is bad, inflation cures unemployment, investment can and should be socialized, consumers are fools whose interests should be dismissed, and capital can be made nonscarce by driving interest rates to zero — thereby turning the hard work of many hundreds of years by economists on its head.

Keynes had every privilege in life, and all the power and influence that an intellectual could have, and he used it all irresponsibly in service to the state.

Hazlitt was very nearly his foil. He did not come from privilege, did not enjoy a prestigious educational pedigree, and did not know any of the right people. He came from nowhere and worked his way up through sheer force of intellectual labor and moral determination.

Hazlitt eventually became one of the great public voices for free markets in the twentieth century, writing in every popular venue he could and applying his enormous talents as a thinker and writer to defending and explaining free markets, showing how the classical economic wisdom was true and vastly improved by the Austrians, how sound money is essential for freedom, how market signaling works to achieve economic coordination, and how government policy is always and everywhere the enemy of freedom and prosperity.

Hazlitt's great book Economics in One Lesson, written the year that Keynes died, boils down all of economics to a single principle and applies it across the board to all the policies of government. It is crystal clear in its language and designed to be read by anyone, in an effort to achieve Mises's dream of bringing economic wisdom to every citizen.

Keynes's major work is The General Theory, and it has been read by relatively few, mainly because it is so incomprehensible as to be nearly written in code. But then it wasn't designed for everyone. It was written for the elites by a member of the most elite class of intellectuals on the planet. Even more effectively, it was written with an eye to impressing the elites in the one way they can be impressed: a book so convoluted and contradictory that it calls forth not comprehension but ascent through intimidation. Its success is a remarkable story of the bamboozlement of an entire profession, followed by the misleading of the entire world. If there are still believers in what Murray Rothbard called the Whig theory of history — the idea that history is one long story of progress toward the truth — the success of The General Theory is the best case against it.

If I had to bet on which book will have greater longevity, however, I would go with Hazlitt's. The same is true of Hazlitt's great legacy. He died without much fame. In fact, his days of fame were far behind him, arguably reaching their height when he was an editorial writer for the New York Times. When he was told that he needed to write in defense of Keynes's screwy plan for Bretton Woods, he balked and walked away. Thirteen years later, writing as a columnist for Newsweek, Hazlitt came out with a line-by-line refutation of Keynes's General Theory. It is arguably his great work, the one begging to be written. He alone had seen the need. It continues to teach us today, and serves as something of a manual for the errors of government.

Both Hazlitt and Keynes began their educations with an intense interest in literature and philosophy but eventually settled on economics. Both were in a position to make a choice of theoretical paradigms given the intellectual and political content of their times. Both were major public intellectuals. Both considered themselves to be liberals in the way that term was used before the New Deal, meaning a general disposition toward favoring human rights, free trade, and open societies.

In this spirit, Keynes wrote in opposition to the Treaty of Versailles, which imposed savage terms on Germany after the war. He favored free trade and generally allied himself with that cause. Sadly, that tendency, which derived from the old world's love of liberty, was incompatible with his life's agenda, which he believed to be his birthright. That agenda was to rule the world through intellectual means by virtue of connections to the powerful. That essential humility that was at the core of the economics profession of the nineteenth century — the humility to embrace laissez-faire as a principle — was completely missing from his mind.

Keynes was born a member of the ruling elite in Britain. His father, John Neville Keynes, and his father's good friend Alfred Marshall were very powerful figures at Cambridge University. They shepherded him and introduced him to the right people, and the time came when he was inducted into the secret, superelite society of top intellectuals in the English-speaking world. The group was called "the Apostles," and this was the group that would come to shape his ideas and his approach to life. The group had been formed in 1820 and included top members of the British ruling class. They met every Saturday evening without fail, and spent most of the rest of their time during the week with each other. Membership was for life.

It is impossible to overestimate the extraordinary intellectual arrogance of this group. They would refer to themselves as the only thing that is truly real in a Kantian sense, whereas the rest of the world was an illusion. Keynes as an undergraduate wrote to a fellow member as follows:

Is it monomania — this colossal moral superiority that we feel? I get the feeling that most of the rest [of the world outside the Apostles] never see anything at all — too stupid or too wicked.

In the time of Keynes, according to those who have studied this carefully, the Apostles were dominated by an ethos that included two general traits: first, the bond that held the world together and would push it forward was the friendship and love that the Apostles had for each other, and that there were no other principles that really mattered; and, second, an intense disdain for religion and bourgeois values, institutions, ideas, and tastes.

It was in this period that Keynes met G. E. Moore, a philosopher at Trinity and Apostles member. His magnum opus was called Principia Ethica, published in 1903. It was a philosopher's attack on all fixed principles and a defense of immoralism. This was the book that changed Keynes's life completely. He called it "exciting, exhilarating, the beginning of a new renaissance, the opening of a new heaven on earth." It was this book that led him to believe that it was possible to completely reject morality, conventions, and all traditions. It might even be considered a kind of prototype of his later work.

These same values migrated to the famed Bloomsbury Group that Keynes joined after graduation. As many historians of the period have said, it was the most influential cultural and intellectual force in England in the 1910s and 1920s. The emphasis here was not on science but on art and the overthrow of Victorian standards in order to embrace the avant-garde. Keynes's contribution to their efforts was mainly financial, for he had made a fortune in speculation and spent lavishly on Bloomsbury causes. He also provided members with contacts in the world of finance and economics.

In discussing how immoralism and the rejection of principles applied to economics, Rothbard draws attention to Keynes's position on free trade. As a good Marshallian, he was a proponent during most of his early public life. Then suddenly in 1931, all that changed with a paper that loudly and aggressively called for protectionism and economic nationalism, a total reversal of what he had previously said. The press ridiculed him for his shift, but this never troubled Keynes, for as an Apostle and a champion of immoralism, he contended that there was no contradiction worthy of notice. He believed that he could take any position he wanted on an issue, and could live his life unhinged from any standards or rules. He was always ready to change his opinion given the new makeup of the political constellation and felt no burden to explain himself.

Keynes had every privilege in life, and all the power and influence that an intellectual could have, and he used it all irresponsibly in service to the state. It was precisely because of this tendency to change his point of view on a dime that critics became tired of dealing with him. Hayek spent a great deal of time refuting him on various subjects, particularly Keynes's book on money, only to have Keynes dismiss the criticisms on grounds that he (Keynes) no longer held these views. He praised FDR and urged all governments to follow the New Deal. But when pressed on the details of programs such as the National Industrial Recovery Act, he would back away and grant that it was ill-conceived. His opportunism was palpable and infuriating.

As the Depression deepened, he began to see himself as the philosopher king of the world economics establishment, advising governments all over on their politics. His main target was the gold standard, which he regarded as a relic of a bygone era, the ultimate symbol of Victorianism, the monetary embodiment of morality and standards, a restraint on the ability of government to tinker with the economy, and therefore, from his point of view, the ultimate enemy of everything he hoped to accomplish. He had long ago written that "A preference for a tangible reserve currency is a relic of a time when governments were less trustworthy in these matters than they are now." What he meant, of course, was that with himself at the helm gold would not only be unnecessary but an impediment to the ambitions of economists.

Now we come to The General Theory that made its appearance in 1936. Let me introduce this book with a question. What would we call a person who believed that government policy can completely eliminate the scarcity of capital? Most all economists in history and even today would call this person a nut. The whole economic problem that economic theory grapples with concerns the invincible reality of the scarcity of capital. The idea that we can somehow concoct a system in which there would be no scarcity amounts to the belief that government can create a permanent utopia by pushing a few buttons. It is no different in kind from a belief in some kind of magical land of fantasy. It represents a fundamental failure to grapple with reality.

And yet this is precisely what Keynes hoped to achieve through his policy prescriptions in The General Theory. His idea was to create this land of universal happiness by

  1. driving the interest rate to zero, and thereby
  2. achieving his sought-after "euthanasia of the rentier class" — that is, the killing off of people who live on interest, and thereby,
  3. eliminating what he considered to be the exploitative aspect of capitalism, that which rewards investors for their sacrifices.

As Keynes wrote, driving interest to zero would mean

the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. … [T]here are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run. … I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work.

As you can see, Keynes was far more extreme in his views than the media generally presents him. And the ghastly situation in which we find ourselves today, where saving earns virtually nothing and the Fed holds rates down to zero in perpetuity, seems to be the fulfillment of the worst of the Keynesian dream.

As for the contribution of the book to theory, Rothbard writes that

The General Theory was not truly revolutionary at all but merely old and oft-refuted mercantilist and inflationist fallacies dressed up in shiny new garb, replete with newly constructed and largely incomprehensible jargon.

Mises further pointed out that even Keynes's old and refuted ideas had already had a good run of it:

Keynes' General Theory of 1936 did not inaugurate a new age of economic policies; rather it marked the end of a period. The policies which Keynes recommended were already then very close to the time when their inevitable consequences would be apparent and their continuation would be impossible.

What bad economic policies lacked was a prestigious economist to come to their defense, and this is precisely the role that The General Theory played. Governments all over the world welcomed and celebrated the book. As for the success of the book within economics itself, there are important sociological reasons to consider. Keynes's language was nearly impenetrable. He coined new terms on nearly every page. Rather than being a disadvantage, this is often an advantage in a profession that has lost its way.

Keynes set out to divide the world into two broad classes of people: stupid consumers whose behavior is determined by external force, and savers who are a drag on economic growth. The job of government policy is to goad the first group into a different set of behaviors and pretty much destroy the second group. Everything else in the Keynesian system follows from those two general propositions. This accounts for his hatred of the gold standard, of traditional capitalism, and of the price system that functions as a signaling mechanism for the production and allocation of resources.

It also accounts for why Keynes was one of the world's most passionate advocates of the rise of the fascist impulse in the 1930s. He celebrated the "enterprising spirit" of Sir Oswald Mosley, the founder of British fascism. He joined the New York Times in praising the central planning of Mussolini. Thus it was not a surprise when Keynes wrote a foreword to the German edition of his book in 1936, after the Nazis had come to power. He said that his book is more easily "adapted to the conditions of a totalitarian state" than to free competition and laissez-faire. Nor should it be surprising that Keynes also dabbled in anti-Semitism, praising even openly anti-Jewish tirades of Prime Minister Lloyd George and his brutal and public attack on the Jewish French finance minister Louis-Lucien Kotz.

A puzzling aspect of academia is how a sector that lives on its reputation for objectivity and love of science can be so easily bamboozled by charlatans, and the success of this book is a great case in point. Most economists over the age of fifty dismissed the book, but the younger ones regarded it as a kind of revelation that gave them a career advantage over their elders. Keynes's personal prestige had a lot to do with this.

As Rothbard wrote,

It is safe to say that if Keynes had been an obscure economics teacher at a small, Midwestern American college, his work, in the unlikely event that it even found a publisher, would have been totally ignored.

But coming from a Cambridge professor and student of [Alfred] Marshall, Keynes had huge advantages.

The Keynesian magnetism was so powerful that it even drew most of the former followers of F. A. Hayek, who was then teaching in London too. Most tragic of all was the conversion of Lord Robbins to the Keynesian cause. Robbins had written a great book on the Great Depression, one that the Mises Institute publishes to this day. It is written entirely in the Misesian spirit. But after having worked with Keynes on economic planning during the war, Robbins fell victim to his personal charisma, later writing of Keynes's "unearthly" brilliance and "godlike" personal stature. He wrote that Keynes "must be one of the most remarkable men that has ever lived." Robbins ended up repudiating his best work, only coming back to his senses late in life.

Hayek wrote many times that Keynes himself, before his death, was on the verge of repudiating what had become of the Keynesian system. This is based on Keynes's positive review of Hayek's Road to Serfdom as well as Keynes's own private words to Hayek himself.

In analyzing the evidence, Rothbard concludes that no such conversion was oncoming but rather that this was Keynes doing the Keynesian thing: shifting, moving, dodging, and changing, with no attachment to standards or principles or morality. He would believe anything and say anything and do anything to advance himself and put his class of technicians in charge of the world economy. It is remarkable that after a lifetime of writing his views would still be so difficult to pin down that even Hayek could believe, however briefly, that there was a modicum of sincerity in this man's words or actions.

Comparing his life and works to Henry Hazlitt's is like night and day. Hazlitt never held an academic position, had no family connections, and was never formally schooled in economics, but he was an extremely hard worker who read passionately and extensively, making an extraordinary career for himself, given that he was forced to drop out of school to support his widowed mother. He read in all his spare time: Mill, Aristotle, Nietzsche, Gibbon, and anyone else he could get his hands on, and kept extensive diaries of all his thoughts on their work. In all his studies, he presumed an old-fashioned view of his goal: to discover what is true, as a means to guiding his life and judgments.

All the while, he was also working. His first series of jobs followed in quick succession, lasting only a few days. At each job, he would acquire a bit more knowledge than he had previously before getting fired for not having enough skills. Keep in mind that this was long before the minimum wage and other interventions. So his average salary grew a bit at each position: $5 per week, $8 per week, $10 and $12 per week. He finally worked his way up to become a reporter at the Wall Street Journal. He was paid seventy-five cents for every story, and he soon became invaluable to the staff.

It was in 1910 that he received his first real exposure to economics in Philip Wicksteed's great book The Common Sense of Political Economy. This is the book that was to firmly embed him in a classical and marginalist perspective on economic issues and prevent him from ever falling away. He was also trying his skills as a writer. Sure enough, he managed to get his first book published at the age of twenty-two: Thinking as a Science. The Mises Institute keeps this book in print and it remains one of the most inspirational and instructive books ever written on self-education and the obligation to learn.

He opens the book as follows:

Every man knows there are evils in the world which need setting right. Every man has pretty definite ideas as to what these evils are. But to most men one in particular stands out vividly. To some, in fact, this stands out with such startling vividness that they lose sight of other evils, or look upon them as the natural consequences of their own particular evil-in-chief. … I, too, have a pet little evil, to which in more passionate moments I am apt to attribute all the others. This evil is the neglect of thinking. And when I say thinking I mean real thinking, independent thinking, hard thinking.

Here we have the tone and approach of a man with integrity, intellectual integrity, a man who is determined to find his way to what is true. The entire book reads this way. I'm particularly struck by his analysis of why some people attach themselves to error and will not let go. He might as well have been describing the seduction of the economics profession by Keynes.

In this passage, from this book he wrote at the age of twenty-two, he is speaking of the prejudice that in particular affects intellectuals: their propensity to imitate the ideas that seem fashionable at the moment.

We agree with others, we adopt the same opinions of the people around us, because we fear to disagree. We fear to differ with them in thought in the same way that we fear to differ with them in dress. In fact this parallel between style in thought and style in clothing seems to hold throughout. Just as we fear to look different from the people around us because we will be considered freakish, so we fear to think differently because we know we will be looked upon as weird.

He recalls a conversation he had with an intellectual in which he raised a point made by Herbert Spencer. The person recoiled and said that surely Spencer's ideas had been superseded. Hazlitt discovered that this person had never read Spencer and had absolutely no idea what Spencer actually believed about anything. Clearly Hazlitt, like most nonacademics, had a tendency to have higher expectations of the integrity of the intellectual classes than they merited then or now.

Nonetheless, he condemns the tendency to absorb prevailing ideas uncritically as completely foolhardy, as a pathway toward making life meaningless.

I am willing to wager that most of these same people now so dithyrambic in their praise of James, Bergson, Eucken and Russell will twenty-five years hence be ashamed to mention those names, and will be devoting themselves solely to Post-neofuturism, or whatever else happens to be the passing fadosophy of the moment.

He goes on to speak what might have been the credo of his life:

If this is the most prevalent form of prejudice it is also the most difficult to get rid of. This requires moral courage. It requires the rarest kind of moral courage. It requires just as much courage for a man to state and defend an idea opposed to the one in fashion as it would for a city man to dress coolly on a sweltering day, or for a young society woman to attend a smart affair in one of last year's gowns. The man who possesses this moral courage is blessed beyond kings, but he must pay the fearful price of ridicule or contempt.

After downtime during the war, he went back to work at the journal and resumed his reading, tracing footnotes to ever greater books. He followed the notes in a Benjamin Anderson book as the way to discover Mises's Theory of Money and Credit. He had fallen in love with economics in the same way that most of us did. He loved its elegance, explanatory power, its implicit love of liberty, and its central role in the rise of civilization. But it was not his only love. He read widely in literature and art as well, and found a market for his talents in this area. He moved from paper to paper until he eventually took at position as the literary editor at The Nation, which was then known as a liberal but not statist publication.

It was a high-prestige job for him, accepted at a period that would turn out to be a major turning point in our nation's history and also in his own life. In 1932, after FDR's election, the weekly would start to weigh various aspects of New Deal policy. It was Hazlitt's internal constitution, that belief in truth, that led him to write in these pages what he believed about FDR's policy. He wrote about the real cause of the Great Depression, which he saw not as a failure of capitalism but as correction from a credit-fueled bubble. The Nation itself was not yet firmly entrenched as a propaganda paper for economic central planners, and so the editors let Hazlitt have his say.

In some ways, Henry Hazlitt became a one-man Mises Institute.

He warned of the results of protectionism, price controls, subsidies, and economic planning in general. Not only would these methods not work to dig us out of depression, he wrote, but they were contrary to the spirit of human liberty that liberals embrace as a matter of their creed. In saying these things, he was saying pretty much what any economist would have said a few decades earlier, but he also knew full well that he was going against the existing Zietgeist that Keynes himself was helping to craft.

Sure enough, Hazlitt won the debate but lost his job at The Nation. This was the first of many such events in his life, and it was something to which he would become accustomed. He had worked too hard for too long, and believed too much in the power of truth, to turn away from it. He had established a dictum early in life that he would not go along with an opinion simply because powerful and influential people around him held to it. He would have courage now and always.

It was not only his writing ability that attracted H. L. Mencken but also this quality of moral determination. Mencken named Hazlitt as his successor in what was the greatest American publication in those years, The American Mercury. He was there for three years until he moved to the position he held for the next ten years. He became the lead editorialist for the New York Times. There he wrote several editorials per day, plus book reviews for the Sunday paper. It was a stunning display of productivity. It was also probably the last time that the New York Times was correct on the issues of the day.

In 1946, this job came to an end in a dispute over the Bretton Woods monetary agreement. Hazlitt was relentless in attacking its fallacies and in predicting its defeat. The publisher came to him and explained that the paper could not continue to oppose what everyone else seemed to support. Hazlitt knew this routine rather well, and so he left without bitterness or acrimony. He simply packed up and walked away, and proceeded to write what would become the bestselling economics book of all time.

In these years, too, he had met Ludwig von Mises, who had come to our shores in 1940. Hazlitt recognized in Mises one of those men with moral courage, a man who, as Hazlitt put it in his early book, is "blessed beyond kings" for his willingness to stick up for truth even at great personal cost. He used his position at the Times to alert readers to Mises's books and ideas. He helped Mises find a publisher for English translations of his books, and became a promoter and champion of the Misesian worldview. As we look back on it, it seems clear that Mises's life would have been very different without the help of Hazlitt. In some ways, Henry Hazlitt became a one-man Mises Institute.

But let's return to Hazlitt's succession of jobs. He went from the Times to Newsweek, where his "Business Tides" column educated a full generation or two in economic theory and policy, me along with them. These were remarkable columns, beautifully written and spot on topic every week. I'm pleased to announce that the MIses Institute is publishing all of these columns in a single volume this year. I'm expecting this book to help reestablish Hazlitt's rightful place in the intellectual history of the twentieth century.

Now it was time for Hazlitt to take on the man whose ideas had dogged him for decades: John Maynard Keynes himself. Hazlitt was the first and is still the only economist who has ever taken on The General Theory in a line-by-line analysis. He did this in a book published in 1959 which he called The Failure of the "New Economics." He writes in the introduction that he was warned not to do this, because Keynes's ideas were already unfashionable, but he decided to go ahead based on an insight of Santayana that ideas aren't usually abandoned because they have been refuted; they are abandoned when they become unfashionable. And as far as Hazlitt could tell, there was no stepping away from the Keynesian fashionableness. And note too that this was written fully fifty-two years ago, and Keynes is fashionable all over again.

What Hazlitt discovered was that the book was much worse than he had imagined. He found no ideas in the book that were both true and original. He patiently goes through the book to explain what he means, taking Keynes apart piece by piece through 450 pages of thrilling analysis and prose, finishing up with a great concluding chapter that summarizes all the errors in the book.

I've not mentioned many of Hazlitt's other fantastic books, including his two books on monetary economics. On this matter, he was the perfect foil for Keynes. Whereas Keynes believed that the most important single step to destroying the laissez-faire of the old world was to demolish the gold standard, Hazlitt believed that there would never be a lasting regime of freedom restored without addressing the money problem. What Keynes wanted to destroy, Hazlitt wanted to restore and firmly entrench as part of the market order. They both agreed on the centrality of the issue in achieving their dreams, and in this they were both right.

But note where each ended up at the end of his life. Keynes died famous and rich and beloved, heralded by one and all for his brilliance. He was never asked to do anything courageous. He was never asked to make a sacrifice for what he believed. It would never have occurred to him to do so, for the very idea of a moral commitment or an intellectual responsibility was either unknown to him or totally rejected by him.

Hazlitt, in contrast, died at what was arguably a low point in his career. He had climbed to the top but then was pushed back down again, eventually writing for and working with a small and largely embattled group of defenders of free enterprise.

We have in these two approaches contrasting images of the role of the public intellectual. Is this role to defend the freedom of the individual and to promote the development of civilization? Or is the goal to enrich oneself, get as close to power as possible, to become as famous and influential as one can be? It all comes down to one's moral commitments and personal integrity. In the end, this is the core issue, one that is arguably more important than economic theory.

Hazlitt made his choice and left us with great words of wisdom on the duty to support freedom.

We have a duty to speak even more clearly and courageously, to work hard, and to keep fighting this battle while the strength is still in us …. Even those of us who have reached and passed our seventieth birthdays cannot afford to rest on our oars and spend the rest of our lives dozing in the Florida sun. The times call for courage. The times call for hard work. But if the demands are high, it is because the stakes are even higher. They are nothing less than the future of liberty, which means the future of civilization.

This talk was delivered at the Mises Circle in Houston, Texas, on January 22, 2011.

Categories: Current Affairs

A Practical Approach to Legal-Pluralist Anarchism: Eugen Ehrlich, Evgeny Pashukanis, and Meaningful Freedom through Incremental Jurisprudential Change

Mises Institute - Mon, 30/12/2019 - 19:45

ABSTRACT: John Hasnas (2008) has famously argued that anarchy is obvious and everywhere. It is less well known, however, that Hasnas also argues that anarchy must be achieved gradually. But how can this work? In this paper, I show that directly confronting state power will never produce viable anarchy (or minarchy). Using the example of Soviet jurist Evgeny Pashukanis, I detail an episode in apparent anti-statism which, by relying on the state, ended in disaster for the putative anti-statist. I next show how combining the theories of Austrian legal thinker Eugen Ehrlich and American political philosopher William Sewell, Jr., can lead to a gradual undoing of state power via case law. Finally, I bring in the example of Japanese jurist and early anti-statist Suehiro Izutarō as a warning. Suehiro also attempted to decrease state power by means of case law, but because he lacked a clear anti-statist teleology he ended up becoming an accomplice of state power, even imperialism. The way to Hasnian anarchy/minarchy lies through the skillful application of case law with an eye always towards the attenuation, and eventual elimination, of the power of the state.

“No one believes that we can transition from a world of states to anarchy instantaneously. No reasonable anarchist advocates the total dissolution of government tomorrow.” John Hasnas (2008, 129)

Jason M. Morgan (morgan.jason.michael@gmail.com) is associate professor of foreign languages at Reitaku University.

The author would like to thank Lenore Ealy, Joe Salerno, and Mark Thornton for helpful comments on an early draft of this article. All errors and omissions remain, of course, the author’s own.

INTRODUCTION

There is nothing more dangerous than the state. (Rummel 1994) The modern nation-state, regardless of the ideology upon which its existence is premised, is an enemy of human freedom and a threat to peace and prosperity at home and abroad. (Rockwell 2014) Proponents of various political arrangements argue endlessly over which kind of state is the best, but these debates merely obscure the central fact of the state: it is always and everywhere a sovereign outlaw predicated on theft, coercion, and violence. (Rothbard 2000)

The state, properly considered, is thus seen as the common foe of humanity. And yet, despite the animosity to it which the state’s very nature virtually ensures, the state has shown a remarkable ability to endure. Attempts to confront state power directly almost always fail, while those that succeed tend only to produce even bigger state apparatuses. (Cf. the Bolshevik Revolution, the fall of the Qing Empire, the American Revolution, the French Revolution, and the Meiji Restoration.) Likewise, attempts to declare autonomy from state power through secession or other voluntary forms of disassociation (for example, by refusing to acknowledge the state’s jurisdiction over one’s privately-held land or property) are also virtually guaranteed to end badly.

For example, in 1861 the Southern States of the United States effected an orderly and thoroughly lawful separation from the North, but this was met with such overweening violence—including widescale attacks on non-combatants—that the newly-formed Confederate States of America were forced to rejoin the larger state on humiliating terms of surrender. (Cisco 2007) Likewise, when law-abiding citizens such as Cliven Bundy and Randy Weaver have attempted to absent themselves from the purview of state power, the state has responded with overwhelming use of force, often lethal. (Grigg 2015)

Anyone who desires freedom is thus presented with a seemingly impossible choice, between submission to the state, which surely ends freedom, and suicidal rebellion, which ends both freedom and life. How does one respond to the dilemma presented by the state? Is there some way to enhance human freedom within the context of the state while also attenuating state power gradually, with the eventual goal of so diminishing statism that a true Hasnian anarchy becomes possible? I believe there is. In this paper, I argue that the theories of Austrian legal philosopher Eugen Ehrlich point toward the real possibility of greater freedom within a given state and, ultimately, the gentle overthrow of pernicious state power.

However, such a project, although surely worth the attempt, is understandably fraught with peril. States, and statists, are ever mindful of the precariousness of their position, and so are sensitive to even the slightest whisper of rebellion. Not only that, but armed suppression is not the only way that states deal with those who try to carve out non-state spheres for themselves. Many states, and statists, are as expert at co-opting freedom-loving groups and individuals as they are at killing them or throwing them in prison. To give just one example, legal scholar and jurisprudential reformer Suehiro Izutarō, who attempted an Ehrlichian project of his own in interwar Japan, was co-opted by the state due to his failure to maintain the teleology of anti-statism. As a result, Suehiro ended up using Ehrlich’s theories, not to chip away at state power, but to further amplify it. (Morgan 2019) I will detail how this happened in the hopes of guiding other would-be Ehrlichian freedom-partisans safely around this hazard. The demise of the state must be the ultimate goal of any truly human society, but this must be accomplished gradually, dialectically, and stealthily. A subdued anarchy, grounded in Ehrlichian legal pluralism, is the surest method for communities to regain their freedom.

I begin with a consideration of Evgeny Pashukanis, a Soviet jurist who attempted to instantiate the Marxian-Engels mythology of the autopoetic ‘withering away of the state’. Pashukanis’s example proves the folly of directly confronting state power. Before turning to an explication of how the theories of Eugen Ehrlich, put properly and prudently into practice, can advance freedom and sap the state’s strength, it is necessary to show what happens when legal theorists try to confront the state head-on.

I. EVGENY PASHUKANIS

Evgeny Bronislavovich Pashukanis (1891–1937) was a Soviet legal thinker who achieved wide renown in the early years of Stalin’s dictatorship. Pashukanis was (seemingly) protected by political connections to people in high office, but he eventually ran afoul of the state by arguing openly that state power should be curtailed. For his naivete he was executed by, of course, the state.

What makes the case of Evgeny Pashukanis especially striking is that, in calling for the end of the state, he was simply repeating what he, and many others, took to be political orthodoxy in that state. Pashukanis never attempted violent revolution. He merely used the same platitudes that the state’s ostensible intellectual fathers had advanced—platitudes, indeed, that the theorist had been promoted to chief justice of the state’s supreme court for publicly espousing. The absence of all but a faint gloss of legality on the state’s swift execution of the theorist when his theories—which were not even his, and which he had long been encouraged by the state to disseminate—fell from favor provide a chilling capstone to this lesson against directly facing off against statism.

Pashukanis’s most well-known argument was little more than a recapitulation of Marx’s and Engels’s teaching that, with the advent of socialism, the state would “wither away.” (The ‘withering away of the state’ was first predicted by Friedrich Engels. (Engels 1878, 302, cited in Kelsen 1988, 25 fn. 62.)) When this happened, Pashukanis said, law would become superfluous. Although much of the legal thinking in Marx and Engels is ambiguous at best, the Soviet Union was founded by Lenin as an experiment in putting the ideas of Marx and Engels into practice, and Lenin himself had expanded upon Marx and Engels’ legal ideas by accentuating their prophecy of the state’s quiet self-destruction.1 It therefore seemed entirely safe for Pashukanis to argue in favor of a doctrine from the philosophical forebears of the Bolsheviks and from the Bolsheviks’s leader, Lenin. And yet, it was for precisely this that Stalin, Lenin’s heir and thus the world’s chief enforcer of Marxist-Leninist thought, had Pashukanis killed. Stalin revised the thinking of Marx, Engels, and Lenin to justify a permanent state with himself at the head. Stalin was therefore not interested in the withering away of the state, because that would have meant the withering away of Stalin. Pashukanis confronted state power directly, albeit unintentionally, and was killed as a result.

Pashukanis came from humble beginnings, but for a time his studies in the law led to a rapid rise in his notoriety and access to state power. Pashukanis studied at the University of St. Petersburg during World War I, and later became a circuit judge after joining the Bolsheviks in 1918.2 He was then “a legal adviser in the People’s Commissariat of Foreign Affairs” in the early 1920s.3 Pashukanis remained virtually unknown until the 1924 release of the book that would both win him fame and position, and also lead to his eventual purge and execution: The General Theory of Law and Marxism: An Experiment in the Criticism of Basic Juridical Concepts. (Obshchaia teoriia prava i marksizm, cited in Stuckha 1988, 41, fn. 1) The book, written as Pashukanis’s attempt to work through some initial ideas about jurisprudence in a purely socialist society based on the writings of Engels and Marx, quickly gained a prominence out of all proportion to the author’s modest motivations in writing it.4

Working under the general aegis of Marx-Engels thought, Pashukanis borrowed from German philosopher Hegel and Soviet historian M.N. Pokrovsky in emphasizing the “distinction between essence and appearance,” attacking the “Roman lex persona [as] an insufficient basis for the universality of rights attached to individual agents under capitalist modes of production” (Beirne and Sharlet 1990, 41, fn. 7; citing Pashukanis 1931) and insisting that “the development of Russian capitalism must be understood in the context of the historical primacy of mercantile capital” (Beirne and Sharlet, 1990, 41, fn. 8; citing Pokrovsky n.d.). For Pashukanis, it was key that:

Marx had begun his analysis of the inner dialectic of the capital-labor relationship (the production of surplus value) with a critique of the categories of bourgeois political economy. […] In order to apprehend the historically specific form of the relationship of capitalist exploitation, one had first to pierce the veil of appearances/semblances/forms which the real relationship inherently produced, and on which it routinely depended for its reproduction.

In other words, Pashukanis took seriously the polylogism that was central to Marx’s class-materialist analysis of capitalism and applied it to the field of law, premising his own analysis on the Marx-Engels dogma that the state would become superfluous under full socialism.

Pashukanis wrote his 1924 treatise during the first flowering of Lenin’s New Economic Policy (NEP), a strategic retreat into temporary capitalism in order to strengthen the Soviet experiment in the long term. In the earliest stages of the revolution, the Bolsheviks aggressively dismantled the legal order on the grounds that it had been a function of the bourgeoisie’s domination of the proletariat. A skeletal framework of institutions was left in place in order to accomplish the move into full socialism, and the law itself was largely discarded in favor of Bolshevik judges’ use of “revolutionary consciousness” in undoing what few legal remnants continued to exist. (Beirne and Sharlet 1990, 24) The Russian Civil War, though, necessitated a more robust court system for rooting out and punishing so-called enemies of the revolution. Pashukanis saw this move in the same way Lenin characterized the NEP, i.e., as an expediency and not as a permanent feature of a truly classless society. (Beirne and Sharlet 1990, 25). This also necessitated a retreat from the anti-intellectualism of the early Bolshevik turmoil (David-Fox 1997).6 This dramatic shift in policy and the lack of abiding principles it betrayed might have alerted Pashukanis against assuming that safety would lie in adherence to Marxist thought, no matter how orthodox.

In the event, however, Pashukanis’s abiding concern in joining Marx and Engels in anticipating the withering away of the state was his belief, which he found also in Marx’s The Critique of the Gotha Program (1875), that the commodity form was inextricably linked to, and indeed gave rise to, the legal form. Because of this, “proletarian or socialist law was a conceptual, and therefore a practical, absurdity. While the market bond between individual enterprises (either capitalist or socialist) remained in force, so also the legal form had to remain in force.” (Beirne and Sharlet 1990, 25) Eventually, the law would come to resemble what Pashukanis saw as the only sustainable feature of the NEP, namely, its “administrative-technical rules which governed the economic plan.” (Beirne and Sharlet 1990, 25) Once socialist man had been freed of his bourgeois shackles, he would need only economic tinkering. Crime would be as unthinkable as the spontaneous exchange of goods for a profit. Indeed, Pashukanis was so convinced that Marx had intended such an evaporation of the legal “superstructure” that Pashukanis called the withering away of the law “the yardstick by which we measure the degree of proximity of a jurist to Marxism.” (Beirne and Sharlet 1990, 25, citing Pashukanis 1929, 268)

Central to Pashukanis’s critique was what he saw as the artificial juridical and economic individualism underpinning bourgeoisie society. Taking Marx’s “club-law is law nevertheless”6 as his touchstone, Pashukanis held that:

law, like barter, is a means of intercourse between disunited social elements. The degree of such disunion may be greater or less historically, but it never disappears entirely. Thus the enterprises belonging to the Soviet state perform one general task in fact; but—working by the methods of the market—each of them has its own isolated interest; they are opposed to each other as buyer and seller, and they act at their own risk and peril—accordingly they must necessarily be in juridic intercourse. The final victory of the planned economy will put them exclusively into an association with each other based on technical expediency and will make an end of their juridic personality (Pashukanis 1924, 181).7

Because of this rigid conformity to Marxist ideology, Pashukanis was forced into a concomitant adherence to the archetypical Marxian history of the rise of the state as a tool of merchants and class exploiters:

As an organization of class dominance and an organization for the conduct of external wars, the state neither requires—nor essentially admits of—legal interpretation. These are domains where the so-called raison d’etat—that is to say, the principle of bare expediency—holds sway. Conversely, authority—as the guarantor of exchange in the market—cannot only be expressed in the terminology of law but itself is represented as law and only law: that is to say, it merges completely with an abstract objective norm. Accordingly, every sort of juridic theory of the state which would embrace all the state’s functions is necessarily inadequate—it furnishes only an ideological—that is to say a distorted—reflection of reality and cannot reflect faithfully all the facts of state life. (Pashukanis 1924, 183)

For Pashukanis, the law was a fundamentally bourgeois concept and could not be reformed. As the state inevitably disappeared, the law, too, would just as inevitably disappear along with it.8

Pashukanis’s theories were in plain agreement with Marx-Engels orthodoxy (such as it was) on the subject of law, and as herald and prophet of the state’s demise under the conquering Bolsheviks Pashukanis was appointed in swift succession to a variety of top-ranking positions in various departments in the emerging Soviet government. Pashukanis’s ideas, reprisals of those of Marx and Engels, themselves became part of the Bolshevik canon. As John Hazard points out:

Pashukanis’ influence was such that courses in civil law in the law schools were abandoned. Courses in the administrative law of planning, called in Pashukanis’ parlance ‘economic law’, as in Germany, replaced them. A few hours only were devoted at the end of the full year’s course to those aspects of civil law which Pashukanis interpreted as the vestige of the past. Textbooks on Civil Law likewise were replaced by textbooks entitled Economic Law. A similar atrophying of criminal law was anticipated, with the substitution of ‘general principles’ to guide the judges instead of precise articles defining types of crime and setting specific penalties (Hazard 1980, xxxi).

Pashukanis’s place in the Soviet legal pantheon seemed assured.

Had Pashukanis been able to study the works of Ludwig von Mises, he might have understood that “the state” cannot act, and cannot wither away, because “the state” is nothing more than a grouping of individual people. (Mises 1949) Among different people, many will be interested in free trade and peaceful cooperation. Some will be comparatively hostile to fruitful interaction, but will do the bare minimum necessary to get by. Given human nature, a few will lie, cheat, steal, and even kill in order to advance their individual ambition. It is against such people that societies have always arranged some system of self-defense. Pashukanis imagined a socialist society free of individual aggression because, by a process of the denaturalization of mankind as a class partisan, free of juridical and economic individuals per se. But what Pashukanis got instead was Josef Stalin. The emerging Soviet state was hijacked by one man bent on converting the state apparatus into the machinery for effecting his personal designs, including revenge on enemies and former allies.

The first stirrings of trouble for Pashukanis came in April of 1929, when Stalin gave a speech on Leninism in which he denounced his erstwhile friend, the Old Bolshevik Nikolai Bukharin, for the latter’s insufficient understanding of dialectics. Chief among Bukharin’s failings, according to Stalin, was his having presumed to lecture (the deceased) Lenin on “the problem of the state.” Stalin accused Bukharin of failing to make the distinction between the bourgeois state and the state of the dictatorship of the proletariat as used for the purpose of furthering revolution internally and defending the homeland from hostile forces abroad. Stalin was asserting, in his speech, his sole heirship to the mantle of Lenin—asserting, that is, the sole right to interpret Lenin’s writings and speeches and to pass judgment upon what was orthodox and what was not. Even more ominously, Stalin was announcing his personal identification with the state. Those who called for the “withering away of the state” were being put on notice that such pronouncements were henceforth liable to being interpreted as calls for the withering away of Stalin himself.

In retrospect it is obvious why Stalin could not dispense with the machinery of the law and the state—he needed the courts as a stage for the show trials that would later clear away the last of his rivals among the Old Bolsheviks, principally Bukharin himself. There is also a separate, but related, element of deception in Stalin’s appropriation of Leninism. (See Tucker 1979, 347–66) As Adam Przeworski and Michael Wallerstein write in “Structural Dependence of the State on Capital”:

The central and only distinctive claim of Marxist political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society. Capitalists are endowed with public power, power which no formal institutions can overcome. People may have political rights, and governments may pursue popular mandates. But the effective capacity of any government to attain whatever are its goals is circumscribed by the public power of capital. The nature of political forces that come into office does not alter these limits, it is claimed, for they are structural—a characteristic of the system, not of the occupants of governmental positions nor of the winners of elections.9

Surrounded by ascendant capitalist states (and forced thereby to admit that the worldwide triumph of communism would be at best seriously delayed, thus necessitating a period of accommodation to reality), Stalin actually adopted a Fordist approach to economics and emphasized vast programs of production (his notorious “Five-Year Plans”) for the quasi-market of perpetual “War Communism.”10 It was in part to avoid the embarrassment of having this betrayal of Marxism-Leninism made theoretically plain that Stalin purged Pashukanis, who as a faithful mouthpiece for orthodox Marxian thought was a hindrance to Stalin in his plans to co-opt Marxism and Leninism for his own private ends.11

By the end of the first Five-Year Plan, the National Socialists had taken power in Germany and the Bolsheviks were preparing for what many in both the Communist and National Socialist camps saw as the inevitable war between the two totalitarian systems. (Reisman 2014) Given the realities of the age, the War Communism of the Russian Revolution was giving way to Stalin’s assertion that socialism was possible, at least for the time being, in one country. As such, the state, Stalin argued, was indispensable, both for carrying forward the revolution domestically, and for protecting it from enemies closing in from abroad. Pashukanis’s insistence on a rigid interpretation of Marx’s and Engels’s teaching about the transience of the state under pure socialism was a liability, and Stalin set about removing both the theories and their main proponent.

After a telling failure to gain election to the Academy of Sciences (the ‘immortals’, as the Soviets called its members), there followed a scathing denouncement by Stalin of Pashukanis’s theories (and charges of treason and espionage) published in the September 1, 1937, issue of Bolshevik. (Hazard 1980, xxix) The handwriting on the wall was unmistakably clear. In the wake of Stalin’s 1929 speech sharply criticizing Bukharin, and implicitly putting Pashukanis on notice, too, Pashukanis had written a revised version of his General Theory of Law and Marxism and had published articles and given speeches in which he “confessed” to his own ideological errors and attempted to restore himself to the Soviet leadership’s good graces. All was for naught. On January 4, 1937, Pashukanis was disappeared from his Deputy Commissar office, driven past his house on Gorky Street so he could see his files being thrown in the back of a truck, and, after being investigated by “impartial” officers from the Ukrainian branch of the NKVD and arraigned by his former friend Vasilii Vasilievich Ulrikh—one of the leading jurists at Stalin’s show trials—was later condemned to death, also by Ulrikh. The sentence was carried out by firing squad just a half hour after it was read into the record (Vaksberg 1991, 129–33).

There is much irony in Pashukanis’s having been executed in this way, especially given his opposition to capital punishment and his refusal to incorporate it into the early Bolshevik legal guidelines on the grounds that it was unworthy of an enlightened socialist state. But there is even further irony in Pashukanis’s having been executed by the same state, and under the same law, that he was sure would soon wither away as mankind entered into a new mode of existence following the disappearance of class warfare and the false juridical monadism that Pashukanis saw as the grounds of the legal form. But it should also be remembered that Pashukanis had also benefitted greatly from statism. Although he had championed a ‘withering away of the state’, he could hardly have failed to notice that all of his political opponents had been dispensed with by the same state that Pashukanis was prophesying would meet its own demise.

As historian Robert Sharlet writes in “Stalinism and Soviet Legal Culture”:

The jurisprudence of terror [i.e., of Stalin’s rolling purges] flourished rapidly along the interface of the strengthened prerogative and the weakened normative state. The fruit of this development was an especially grotesque species of political justice. Legal forms were co-opted for extra-legal purposes, judicial process was subordinated to political ends, and law itself was used to legitimize and rationalize terror. The jurisprudence of terror institutionalized and routinized political terror within the context of formal legalism. In effect, terror was ‘legalized’ and the criminal process ‘politicized’. (Tucker 1977, cited in Bellingham 2018, endnote 22)

Pashukanis must have known this. In fact, John Hazard, who studied under Pashukanis in the 1930s as an American foreign exchange student in the Soviet Union, remembered that “those who strayed from Pashukanis’s line were castigated … or denied faculty appointments, promotions and salary raises. […] Teachers [were] compelled to conform not only to ideas of Marx but also to those of Pashukanis.” (Hazard 1980, xiii–xiv, cited in Bellingham 2018, endnote 43) Pashukanis seems to have been confident that the statist forces which had elevated him to the primacy of his profession and cleared the field of his rivals would never turn against him.

Pashukanis’s example is a stark reminder that confronting the state directly is suicidal. It is essential that the state be overcome so that those who would cartelize under the statist banner be denied a platform for their plans, but it is also equally essential that the state be done away with by slow degrees, and not all at once (and certainly not by marrying a putatively anti-state ideology to state power). I therefore propose that communities engage with the state dialectically, weakening and transforming the state incrementally over time. The best way to do this is through case law. A legal-pluralist caselaw system, coupled with jury trials, is the surest path toward the downfall of the state. A clue as to how this might be undertaken comes first from a little-known Austrian legal thinker, while one of that thinker’s disciples provides a cautionary tale against implementing anti-state ideas without a clear anti-state teleology in mind.

II. EUGEN EHRLICH

Evgeny Pashukanis had the misfortune of living under one of the most brutal regimes in human history, but his case is not generically unique. Stalin and the Bolsheviks acted with acute ruthlessness against Pashukanis. However, virtually any other state would also have taken steps to eliminate someone who actively challenged state authority, even abstractly. Virtually any contemporary state would do likewise, as the examples of Edward Snowden and Julian Assange amply attest. In light of these realities, let us turn to another legal thinker whose work offers some hope that the state may, perhaps, be challenged, and eventually defeated, incrementally, stealthily, and with low risk for the challengers. Austrian legal philosopher Eugen Ehrlich (1862–1922) offers a model for how such a project might unfold.

Born into a deracinated Jewish family in Czernowitz in the Austria-Hungarian province of Bukovina, Eugen Ehrlich did his Habilitation on Roman law in Vienna in 1894. He was never able to rise above the post of rector at Franz-Josef University in Czernowitz, a second-rate appointment attributable largely to Ehrlich’s Jewish background.12 Taking advantage of his de facto exile in the hinterland, Ehrlich was among the seminal group of law-and-society thinkers at the turn of the century that launched the sociological turn in both jurisprudence and in legal philosophy. Ehrlich, along with Hermann Kantorowicz (1877–1940), founded the Freirechtsbewegung (Free Law Movement) in the first decade of the twentieth century and, together with Kantorowicz, Max Weber (1864–1920), Émile Durkheim (1858–1917), Hugo Sinzheimer (1875–1945), and Roscoe Pound (1870–1964), formed the nucleus of what would later become known as the law and society movement.

Disillusioned with state power for a variety of reasons both personal and intellectual, Ehrlich sought the legitimacy of the law in something other than the reigning corporatist-positivist state. Specifically, Ehrlich conducted extensive research in community custom, which he saw as a way to reform Austrian law by means of insisting on the validity of legal pluralism within the existing Civil Code jurisprudential system. For many thinkers in the German tradition, the state and its laws were seen as forming an unassailable edifice not open to reform. While some German thinkers had posited a distinction between Gemeinschaft, or community, and Gesellschaft, or civil society, the legal system itself conceptually “saw” only Gesellschaft. Most theorists admitted of a working identity between law and the state. Ehrlich, on the other hand, argued that the state and the law are not the same. In many ways, they are at odds with one another, if not opposites. German experience itself tends to prove this. Ehrlich’s groundbreaking Grundlegung der Soziologie des Rechts (1913), for example, offers clues to the ability of the law to endure even amidst political crisis, such as in the wake of the Second Reich’s defeat in World War I.

Ehrlich, along with Kantorowicz, observed that societies organically and spontaneously generate their own legal orders apart from the oversight of a state, and often in contradiction to the state’s Pandekten-style law (a centralized system of law based on the Pandects, a codification of Roman law) claiming a totality of legal sovereignty.13 The plurality of law in Ehrlich’s Bukovina region of Austria-Hungary was probably the source of his initial puzzlement over the gap between what the law in the books said, and what the people in the villages and towns actually did. While interpersonal disputes were meant to be adjudicated according to the Weberian scheme of the state’s monopoly of violence, in reality those disputes were often resolved according to customs and practices that often seemed to have very little to do with the codified positive law. For Ehrlich, the application of the law involved, not the robotic matching of real-life happenings to an ethereal and abstracted Civil Code, but, rather, a great deal of human agency floating clear of the legal realm and drawing on norms better understood by the new discipline of sociology. (Rottleuthner 1987, 5) Gemeinschaft, in other words, was not an ideal imposed from above by the Gesellschaftlich corporatist state, but a process of messy discovery taking place in actual lived society far removed from state control.

Unlike his predecessors, Ehrlich was almost indifferent toward the existence of the state within the framework of actually-existing legal practice. Ehrlich’s turn away from German legal idealism found expression in his theory of Free-Law:

As a Free-Law advocate […], Ehrlich criticized the ideal of the seamless web of a codified legal order, and made clear that the decision in an individual case could not be understood as a logical derivation from general norms (or even concepts), performed ‘with the aid of a hair-splitting machine and a hydraulic press’. Like Fuchs, he too emphasized the creative role, the personal moment, in the application of law. However, by this he did not intend that the private intuition of the judge be set free. Rather this is the point where his specific understanding of legal sociology came into play: when the law permits no orientation, the application of law should orient itself on social norms, on the norms of the law which was actually alive in society. In his legal sociology, Ehrlich stressed precisely the central role of society—as the totality of human associations—for the emergence and development of law. Legislation, jurisprudence, and judicial decision-making, by contrast, were considered secondary phenomena. The true legal science—understood as legal sociology—had to capture the law that was ‘alive’ in society. Traditional jurisprudence was blind to this sphere and only took into account laws and the norms of judicial decisions.14

For Ehrlich, the central question of law was this tension between the people and the state. The Pandekten idealists and strong-state advocates had things precisely backwards. Increasing the power of the state—to legislate, regulate, and control ever-greater swaths of private life and to co-opt ever more non-state institutions through promises of political inclusion—led only to greater corruption and a wider gulf between law and society. Left to their own devices, people actually fared much better without interference from the state. A political solution to social ills was therefore not even misguided; it was oxymoronic.

With the theories of Eugen Ehrlich we have a blueprint for foregrounding communities and communal custom and practice as the “groundwork” for an entirely new kind of law. But how can this new law be animated and deployed to challenge the power of the state? The answer lies in the works of American sociologist and historian William Sewell, Jr. In chapter four of Logics of History, for example, Sewell posits a relationship between structure and agency that is open to interventions and contingencies. (Sewell 2005, 124–51) Sewell’s kinetic view of the interaction between people and institutions expands on Anthony Giddens’s “duality of structure” and Pierre Bourdieu’s habitus to envision complex of social, political, cultural, and economic influences that more closely approximates the reality of human life amid structural patterning. ((“By this [i.e., ‘duality of structure’] he [i.e., Giddens] means that [structures] are ‘both the medium and the outcome of the practices which constitute social systems’ (Giddens 1976, 1979, 1981, 1984). Structures shape people's practices, but it is also people's practices that constitute (and reproduce) structures. In this view of things, human agency and structure, far from being opposed, in fact presuppose each other.” (Sewell 2005, 127)) This approach “(1) recognize[s] the agency of social actors, (2) build[s] the possibility of change into the concept of structure, and (3) overcome[s] the divide between semiotic and materialist visions of structure.” (Sewell 2005, 126–27) Sewell’s rethinking of structural malleability is the key to setting legal-pluralist anarchy against the existing state, chipping away at the state one small interaction at a time. The dialectic is the key to the ongoing existence and substantive autonomy of the Gemeinschaft vis-à-vis the Gesselschaft, and especially the Gesselschaft writ large, the state.

The absence of a state short-circuits this dialectic, destabilizing the legal-pluralist Gemeinschaft and inviting reprisal, such as Stalin’s against his enemies (including Pashukanis). Giving up the notion that structures themselves are negotiable, pliable, and subject, at least partially, to human agency—or, as Sewell put it, that structures (such as law) are “continually evolving outcome[s] and matri[ces] of process[es] of social interaction”—leaves a Gemeinschaft with no partner in the dialectic diminishment of the state. (Sewell 2005, 151) Gemeinschaftlich autonomy via legal-pluralist anarchy is much better accomplished by means of case-law interactions with state authorities. Case-law trials, even in the state’s courts, are small-scale legal skirmishes, as it were, that afford small Gemeinschaften a fighting chance of winning small victories against state power and incrementally undermining the state’s power.

This tension among law, society, and the state was summed up by Ehrlich himself, although in the context of legislation and not case law. The important point, however, is that, for Ehrlich, law was a means of attenuating state power, not augmenting it:

Legislation is commonly considered the oldest, the original, the peculiar task of the state. In reality, however, the state becomes a law-giver only late in its existence. The original state is a purely military center of might and is concerned neither with law nor with courts. The original state, so far as it is not yet Europeanized, knows no legislation. We speak, it is true, of the legislation of Moses, of Zarathustra, of Manu, of Hammurabi, but these are only collections of judicial and juristic laws together with numerous religious, moral, ceremonial and hygienic provisions such as we can see in popular or popular-scientific writings. An oriental despot can, if he pleases, level a city to the earth or condemn a few thousand human beings, but he cannot introduce civil marriage into his kingdom.15

The more central planners work to bind up law and society through executive power, the farther law and society drift apart from one another. Local communities can achieve a measure of autonomy from state interference by acknowledging and reflecting the spontaneity and unpredictability of social order under the banner of legal pluralism, with jury trials as a key feature of this arrangement.

Also, when communities or their members have no choice but to interact with the state’s courts, this helps to ensure that the state’s judges will be forced to divorce their decisions from statist-ideological presuppositions. Legal-pluralist decentralization and the promotion of anti-statist jurisprudence are both effective at carving out spheres of autonomy for local Gemeinschaften. The gradual “withering away,” one case at a time, of the state’s monopoly on the justice process, along with the championing of legal pluralism and spheres of law separate from the state’s legislative prerogative, are the two abiding promises of Ehrlichian jurisprudence.

III. SUEHIRO IZUTARŌ

In the ideas of Eugen Ehrlich and their animation when coupled with the theories of William Sewell we thus have a blueprint for reducing statism and recovering human freedom in our time. Through discrete dissociation from the jurisprudential machinery of the state via an Ehrlichian exercise of community-based common law, those who are willing may be able to attenuate the state’s monopoly on “justice” (in the case of the state, this almost always means, simply, “arbitrary immunity from arbitrary violence”) and effect real justice organically and in accordance with the natural law. What’s more, Ehrlich’s program does not even require that its practitioners repair to a commune and convene trials apart from the state’s court systems. In fact, it is even more effective if the Ehrlichian practitioner turn the tables on the state by using the state’s courts as an entrepôt for importing Gemeinschaftlich justice into statist jurisprudence. By means of case law, an Ehrlichian may be able to establish precedent and cultivate judges of conscience, such that pockets and veins of humanity may begin to appear within the statist apparatus. Eventually, if all goes well, the state will be defeated from the bottom up and the inside out. Without firing a shot, the justice-minded jurist will be able to bring the state to heel.

However, the example of someone who tried just such a project should give us pause. Suehiro Izutarō, a Japanese jurist, student of Eugen Ehrlich, and one of the founders of the law-and-society movement in Japan, returned from a period of research with Eugen Ehrlich determined to use case law to upend the Japanese legal system and bring about a quiet Ehrlichian revolution in Japanese society. Under Suehiro’s plan, courts, instead of being adjuncts of the state, were to become levers of the disenfranchised people. The force of the masses, case by case, would be brought to bear on the courts, thus bringing the promises of that sweeping zeitgeist of liberalization and social change known as “Taishō Democracy” to the men and women in the street who remained without the right to vote.

But it was not so simple. Eventually, Suehiro was himself converted from Ehrlichian champion of the underclasses to legal technician in the service of the imperial state. Without grounding in principles and focusing only on Ehrlichian method, Suehiro fell into the state’s powerful gravity field and turned against the original aims of his youthful Ehrlichian ambitions. His case, somewhat akin to Pashukanis’s but with key differences, is thus also a warning of what can happen whenever someone tries to undo the evils of the state, even indirectly and even using Ehrlichian means. Without the teleology of anti-statism, incremental anti-statist activities run the risk of, conversely, amplifying state power and leading to the cooptation of would-be anti-statists.

Suehiro Izutarō began his legal career as a high statist. Like virtually every other law student of his time in Japan, Suehiro had been trained largely in the conceptual jurisprudence then fashionable in Europe and taught to view the changeless legal code as both the means and the end of courtroom reasoning. Legislatures, however constituted, were thought to produce timeless tables of law, into which the various cases that came before a judge’s bench were to be fitted in order to conform to the Platonic ideals expressed in the Civil Code. (Aomi [1967] 2007, 154) In response to the ongoing disenfranchisement of the vast majority of the Japanese population, Suehiro began to formulate a plan to use case law as a way to apply pressure on judges to turn aside from the state-centric mode of forcing individual cases to fit into the Japanese Civil Code, which had been modeled on the French and German codes. In doing this, Suehiro reasoned, judges would be obliged to pay attention to the details of the cases brought before their benches, thereby rendering individual plaintiffs and defendants at least visible to the judge, and therefore, in theory, more likely to receive the justice that was their due.

Under the statism of the Meiji Constitution of 1889, (Kawagishi 2007, 308–31, esp. 315–16) the court system, which might have exerted a measure of supervision over the political and administrative processes qua extensions of the imperial person, was almost exclusively a site for the one-sided application of state power (Takayanagi and Blakemore, in Mehren 1963, 9–10, and Haley 1991, 78). Cases—even those in which the judicial system was called upon to interpret actions of the legislature—were understood to be adjudicated in the emperor’s name. (Kawagishi 2007, 314ff) Checkmated by the ascendancy of Prussian-style conceptions of the relationship between the individual and the state, liberals, natural lawyers, and other non-statists in Japan began to search for ways to involve those of the lower classes more fully in the political process. Suehiro realized that a systematic approach was needed in order to pressure judges to act as individuals, thus forcing a space to open up even within the state’s Code-based legal order for the Ehrlichian “living law” practices of communities whose traditional practices had previously been invisible to the state. And the way to do that was to continually adapt statutory law to social realities by means of case law.

In particular, Suehiro attempted to develop, within the existing court system, an entirely new strategy for adjudicating cases, along with an entirely new body of case law as a result. By introducing the case method, Suehiro hoped to make visible to the courts the classes excluded from the judicial process, and also to make judges—and, ultimately, the political network as a whole—more responsive to those classes. Using Ehrlich’s work on the law-and-society movement as a guide, Suehiro established the Civil Code Caselaw Research Group (Minpō hanrei kenkyūkai) at the University of Tokyo in 1921. In volume after volume of case-law reports, Suehiro and his university acolytes pounded away at the status quo in the Japanese courts, revealing again and again—by dint of a simple investigation of the facts of a given case—that most supreme court (Daishin’in) judges could not possibly have sought to administer justice to those who appeared before their bench. Almost universally ignorant of the particularities of a given suit or case, the judge, as Suehiro and his research group showed, was most likely to have glanced at a brief summary of the case, applied some abstract tenet of the Civil Code, and then declared the case to be closed and the matter resolved. By publishing their case-law reports, Suehiro and his team exposed the travesties of Code-based justice, thereby applying intense social pressure on judges to act more equitably in making their decisions.

Suehiro saw “the security of the law” (Rechtssicherheit, hōteki anzen) as an important guarantee of autonomy for local Gemeinschaften:

It is a certainty that those who hold law to form a perennially perfect Geschlossenheit [cohesive unity] will, of course, deny that legal decisions have the power to create law. […] The first and most important point we stress in the study of caselaw is not about how a court understands a phrase in a law text in an abstract, scholarly way. Nor is it the formal logic apparent in a decision, nor is it simply the conclusion itself. Judges are people who, when faced with the concrete details of a case, engage, unconsciously, in a complex set of behaviors that goes beyond formal logic and rigid reasoning. The essential point of the study of caselaw is to attempt to arrive at a thoroughgoing, concrete legal security, Rechtssicherheit, by discerning fixed principles from within that set of behaviors.16

This security of the law, bought by pushing back against the state in an ongoing, low-level dialectic via the medium of the caselaw, was to be a key transitional strategy in Suehiro’s legal-pluralist anarchical scheme.

In Suehiro’s case, however, the absence of underlying legal principles and of a clear anti-statist teleology eventually left him scrambling for the security, not of the law, but of the state, when the political order around him began to break down. As Japan entered a phase of autarky during its high-imperial expansion into Asia and the Pacific, the state gradually expanded to conquer even internal epistemes, such as legal studies, and co-opt formerly non-state and anti-state actors into the imperial project. The state became the nation, and the nation became the state. In this milieu, Suehiro proved helpless to resist state power. Proclaiming the rendering of jurisprudence as a scientific pursuit, with statistical data to be used in both legislation and interpretation of laws, Suehiro proposed strengthening the command economy by carrying out surveys of places that had recently come under the control of the Japanese Empire.17

For example, in the October, 1938 issue of Hōritsu Jihō, Suehiro laid out the justifications for surveys of North China, noting that:

Henceforth, the most important thing that we can do for the sake of Japan’s political contact with the Chinese masses is first to learn what legal customs are current among those masses. […] The most important preparation that we can make is to respect those [legal customs] and to continue using them, thus regulating our relations with them [i.e., the Chinese]. […] Even if, for instance, we refuse to do this on the grounds that this kind of survey would have no political value, it would still have a tremendous scholarly significance to do this kind of large-scale survey of the legal customs current among the Chinese masses, as such a survey should have been carried out before but so far has not sufficiently been undertaken. (Suehiro 1938, 2–3)

The order of the justifications is significant. As legal history scholar Ishida Makoto argues:

It is noteworthy here that [Suehiro’s] emphasis on the political significance of the surveys comes before [his emphasis on] their scholarly significance. From the very beginning, Suehiro called for this survey with a clearly political intention to contribute to the control of occupied territory in the aftermath of the start of the Second Sino-Japanese War.18

The earlier, Ehrlichian Suehiro would have couched seeking out the “social facts of law” (Rechtstatsachen) as they prevailed among a non-state setting.19 However, the Suehiro of 1938 foregrounded the fact that one of his express goals in proposing, organizing, and completing the survey was to aid in the Japanese government’s administration of recently-conquered Chinese territory.

In the introduction to a work on his 1930s and 40s China surveys, Suehiro wrote:

Of course, neither economic nor social laws are absolutes. In whatever way, the dictates of political disingenuousness stand to change [these laws] quite extensively. This goes without saying. Nevertheless, we must very severely admonish [those who would] fall into the way of thinking which ignores completely the authority of [economic and social] laws, and hold that political power should be given free rein to shape everything. While I think that, in order to prevent the damage that would result [from such an approach], we must make preliminary efforts to separate and set in opposition the state, which is the symbol of political power, and society, which is the symbol of social laws, I also think that the scientific method is the most suitable for studying the state, politics, and law. (Chūgoku nōson kankō chōsa 1955, 25–32; quotes taken from 31)

The scientific method notwithstanding, Suehiro wrote these words as an introduction to a report on surveys carried out for the more efficient administration of areas of China conquered by the Japanese Imperial Army.

IV. CONCLUSION

The failure of Suehiro to build up communities apart from the state and to continue to attack the state incrementally using case law led to his identification with the state and the end of his original, Ehrlichian anti-statist program. Likewise, Pashukanis was executed by the state for naively claiming that the state would eventually wither away with the ascendancy of Marxist ideology. In light of these historical realities, I propose a blending of the insights afforded by Suehiro, Pashukanis, Ehrlich, and Sewell in order to outline a general program for establishing communities as independent as possible from state authority, while also voluntarily interacting with the state in order incrementally to attenuate that authority, acting as a constant corrosive against the self-aggrandizement of the state’s leaders and agents.

First, as William Sewell’s insights into structures and events make clear, the state is a given and is not going to disappear by force. If anything, force used against the state only makes the state stronger. As Evgeny Pashukanis learned, even those who do nothing more than write books about the state’s disappearance are often deemed a threat to the state’s monopoly of violence.

But, second, the state can be ignored, at least to some extent. Amish communities and American Indian tribes, along with monasteries and other non-statist Gemeinschaften, are witness to the fact that isolation from the state often affords more autonomy than does openly challenging the state or theorizing its dissolution.

Third, an Ehrlichian legal order unique to a given community and evolving from within it, such as the English Common Law or Germanic tribal law did, is a virtually ready-made way to ensure stability in an anarchical community. Jury trials are the best way to ensure that law does not become tyranny over society. Furthermore, state courts should, and can, be avoided at all costs in order to maintain Gemeinschaflich autonomy as far as possible.

Fourth, when it becomes necessary to interact with state courts, a case-law method is best. Case law forces judges to think using synderesis and not statist ideology, prying them away from their Code-based justifications and entangling them in the limiting skeins of the natural law. As a bonus to case law, each case becomes precedent that, ideally, incrementally undermines Code law, thus attenuating the power of the state while also injecting more of the “living law” into the jurisprudential corpus of a given state.

The state is a threat to the freedom of people everywhere. John Hasnas has rightly argued that anarchy is “obvious” and that our human communities and daily lives do not require the state. Indeed, the state, in any form, is not only deleterious to human freedom but positively hostile to human life and incompatible with human flourishing. Rome will not be un-built in a day. It will take patience, planning, and no small degree of wiliness. But it can be done. Taken as a set, the examples I offer here show us how the state can be taken on and, eventually, made to wither away.

  • 1. See Lenin ([1917] 1932, 149), in Kelsen (1955, 51 and 51, fn 1).
  • 2. See Hazard (1980), and Bellingham (2018).
  • 3. Beirne and Sharlet (1990, 17). See also Hazard (1971, 143) citing also Hazard (1938, 244).
  • 4. Beirne and Sharlet, (1990, 41, fn. 1). Hazard sees Pashukanis’s early work as not systematic. See Hazard (1938, 245).
  • 6. a. b. David-Fox cites structuralist Theda Skocpol (1979) in accentuating this point.
  • 7. See also Kelsen (1955), esp. ch. 1, “The Marx-Engels Theory of State and Law.”
  • 8. Cf. Lenin: “With the extinction of classes the state itself will inevitably pass out of existence. The society which will organize production on a new basis of free and equal associations will relegate the state where it shall belong: to the museum of antiquities along with the spinningwheel and the bronze axe.” Lenin, Sochineniya, vol. 21, p. 372, quoted in Chakste (1949, 22). Pashukanis’s view of the state was also informed by Engels’ conceptualization of the state as a kind of Leviathan cork keeping potential class warfare in check. See Pashukanis (1924, 184), citing Engels 20th German ed., 177–78.
  • 9. Przeworski and Wallerstein (1988, 11), also citing Luxemburg (1970) and Pashukanis (1924) in Babb, (1951). See also Fred Block (1977, 6–27), cited in Przeworski and Wallerstein (1988).
  • 10. The “transition” period from bourgeoisie rule to pure socialism was undertheorized by Marx and Engels, and the problems associated with the transition were dealt with largely ad hoc. Cf. Hans Kelsen: “Marx says that in the phase of transition from the proletarian revolution to the establishment of perfect communism, that is to say, during the period of the dictatorship of the proletariat, there will be still a law, but that this law, in spite of its progress as compared with the bourgeois law, will still be ‘infected with a bourgeois barrier (mit einer buergerlicher Schranke behaftet)’.” Kelsen (1955, 3), citing a letter from Marx to Bracke, May 5, 1875, published in Neue Zeit, IX–1, 1890–91, 561 et seq. See also Hazard (1938, 247), citing Taracouzio (1935). On the challenges of internationalism for the Soviet Union and for Soviet law, see Hazard (1957, 387–88). On later Soviet internationalism, see Hirsch (2008, 701–30).
  • 11. Cf. Marx, Gesamtausgabe I–1, 574, cited in Kelsen (1955, 19, fn 47). See also Lenin (1917, 221), cited in Kelsen (1955, 55 and 55, fn. 18).
  • 12. Rottleuthner (1987, 19). Ehrlich converted to Roman Catholicism ca. 1894. Johnston (1983, 89).
  • 13. Cf, e.g., “Pandektenrecht und deutsches Privatrecht,” Hatoyama et al. (1916).
  • 14. Rottleuthner (1987, 5), citing Ehrlich, lecture at Juristische Gesellschaft, Vienna, April 3, 1903, reprinted in Ehrlich (1967, 196), and Ehrlich (1913, 196).
  • 15. Eugen Ehrlich, “The Sociology of Law,” under the heading “An Appreciation of Eugen Ehrlich,” Pound (1922, 137), cited in Rokumoto (1994, 101).
  • 16. Minpō Hanrei Kenkyūkai (1922, 1877). Cf., e.g., Ernest Gellner’s geschlossener Handelstaat, or “autarchic modern state,” in Gellner (1983, 107).
  • 17. Ishida Makoto, in Rokumoto (2004, 170), citing Suehiro (1941, 61–62).
  • 18. Ishida, in Rokumoto (2004, 170–71), citing Suehiro (1938, 2–3). See also Suehiro, “Hōritsu to kanshū: Nihon hōri tankyū no hōhō ni kansuru hito kōsatsu,” in Chūgoku nōson kankō chōsa kankōkai (1955, 25–32); quotes taken from 27.
  • 19. See Coutu (2009, 593).
Categories: Current Affairs

Brexit lament from the Bishop in Europe

Anglican Ink - Mon, 30/12/2019 - 18:17

In a series of BBC interviews, Bishop Robert [Innes] has reflected on Brexit developments during 2019, and looked ahead to 2020.    

Bishop Robert noted most people in the Diocese were “sad and disappointed” about Brexit.

The 2016 referendum had been an “unnecessary binary choice” on the issue of EU membership that had polarised the country.  “I have British and European identities, and it seems Brexit is forcing me to choose when I want to keep both” he added.

There was now at least, some more certainty on Brexit, following the limbo of the past three-and-a-half years.  The next year would be decisive in shaping and re-imagining the UK’s future relationships both with the EU and globally, the Bishop said, and he cautioned that “getting a Withdrawal Agreement in place is the first step in what Boris Johnson calls “getting Brexit done”.”

The real challenge lay ahead with intensive trade negotiations in 2020. “A year from now, we don’t know whether the UK will stay aligned with EU regulations in a close trading relationship, or if we shall set sail for the high seas” the Bishop opined.   It would therefore be important to continue to hold the new UK Government to account and scrutinise the detail of the negotiations. 

Bishop Robert stressed “we have to avoid a Brexit in which the losers are the poorest and weakest in our society.”

The Bishop was asked about how people in the Diocese were now preparing for Brexit. He responded that many were asking “should I stay, or should I go?” or if they had decided to stay, how they could legally exercise a right to remain in an EU27 country after Brexit.   Bishop Robert noted the Diocese was working closely with agencies on the ground in order to start supporting isolated, elderly people with preparing residency applications, especially in Spain and France.

The Bishop also drew attention to other issues of concern for the Diocese, in addition to citizens’ rights.  These included the ongoing ability to appoint and move clergy around Europe and future data transfer and sharing across borders.

Bishop Robert said while there were some administrative issues being experienced, away from the politics of Brexit, local responses among people in the EU member states continued to be generous, even if local people in the EU27 Member States really struggled to understand Brexit.  Bishop Robert cited remarks in the open letter written last week by Frans Timmermans, Executive Vice-President of the European Commission, as a typical example of warmth across Europe for the UK.  You can read the Commissioner’s letter here: https://www.theguardian.com/commentisfree/2019/dec/26/my-love-letter-to-britain-family-ties

Bishop Robert emphasised the need for reconciliation and healing.  He recalled the “gift and treasure” of peace in Europe for 75 years, commemorated in D-Day events this year.  He also noted it had been 30 years since the fall of the Berlin Wall in 1989. Both D-Day and the collapse of the Berlin Wall were examples of “strong and timeless messages about our struggles together for freedom from oppression.”  The Bishop said he would meet with our ecumenical partners shortly after Brexit day to reaffirm the Anglican presence across Europe and develop further co-operation post-Brexit, reiterating that “the Church of England has been in Europe long before the EU had been created.”

He also welcomed current twinning links and arrangements between English churches and chaplaincies in the Diocese in Europe, and encouraged more work to foster and deepen such relationships.

Bishop Robert offered reassurance on dealing with the divisiveness and rancour of human relationships due to Brexit, within families and among communities:

“Christmas time reminds us of the Gospel message of the angels and shepherds bringing peace on earth to those with whom God is pleased,” Bishop Robert told listeners across the country.

He continued:

“There is more to life than Brexit. We have our faith and families that sustain, nurture and feed us through difficult times. We should keep a sense of perspective and take Brexit a month at a time as a great deal will happen over the next year to shape our relationships with Europe.  Let’s encourage one another through it.”

Bishop Robert emphasised also the scale of climate change, environmental degradation and global warming as challenges for the next decade.

Bishop Robert gave interviews across BBC radio stations in England and the Channel Islands on Sunday.  You can listen to his interviews with BBC Radio Coventry & Warwickshire and BBC Radio Jersey & Guernsey at the links below:

Coventry/Warwickshire: timeline 2:22-2:27 https://www.bbc.co.uk/sounds/play/p07xmp4d

Jersey & Guernsey: timeline 1:39-1:44  https://www.bbc.co.uk/sounds/play/p07wwb6z

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Peter Ball and Jonathan Fletcher. A toxic legacy?

Anglican Ink - Mon, 30/12/2019 - 18:14

The days after Christmas are treated by most clergy as an opportunity to relax a little.  Although I have not been caught up in the endless round of services like the active clergy, I did try and get ahead of myself by writing a couple of articles for the blog in good time so that I could try and forget it over the festival time.  But the circumstances have changed things.  Two events have happened over the holiday period that have thrust clerical abuse back into our attention in a forceful way.

The first event was the publication of David Greenwood’s chronicle of the Peter Ball affair in a privately published book, Basically Innocent.  This appeared a day or two before Christmas.  It contains a factual and yet horrifying account of Ball’s abuses and the subsequent establishment cover-up of his behaviour.   Then on the 27th/28th came the extensive further Telegraph coverage of the Jonathan Fletcher affair.  The newspaper and the journalist Gabriella Swerling have evidently been working hard on the story since they published their first exposé about Fletcher back in June.  What they have produced is fascinating, not merely for the details of alleged abuses, but for the way that the paper has made many connections between individuals and institutions. 

The stories about Ball and Fletcher have proved to be as much about institutional behaviour and misbehaviour as that of individuals.  Each man offended in the context of having a senior institutional role.  In neither case did the institutions involved seems capable of checking the behaviour of their senior representatives.  Nor did they show much remorse after the nefarious deeds had been exposed. These institutional failures will probably be what is remembered by history.   Individuals have been seriously harmed, not only by the actions of evil men, but by the subsequent failure of institutions that should have protected them and helped them to heal.

Returning to David Greenwood’s chronicle, I found it quite difficult reading the accounts of naked showers and sexual activity interspersed with spiritual ritual.  But the exact details of Ball’s criminal offending are possibly the least important part of the narrative.  What the reader may find even tougher to take on board are the deceitful tricks used by Ball’s allies to harass and undermine those who accused him of wrongdoing.  The then Bishop of Chichester, Dr Eric Kemp, oversaw a policy of non-cooperation and obstruction of the police in their legitimate enquiries.  Questions of truth and falsehood and good and bad seemed not to play any part in his calculations.  All that seemed to matter was a determination to protect ‘one of us’, Peter Ball, together with the good name of the institution that he had done so much to dishonour.  Obstructing the pursuit of justice by a considerable number of distinguished Ball supporters is a key part of the Greenwood account.

Basically Innocent still has the power to shock even though most of the information contained in it is already in the public domain.  The recent Telegraph story on Jonathan Fletcher, however, contains fresh information.  The newspaper has succeeded in talking to five victims of Fletcher and these have painted a consistent pattern of spiritually exploitative manipulative behaviour that seemed designed merely to satisfy the narcissistic and sexual needs of the abuser.  But, once again the story is remarkable, not just for these actions but for the way that countless other people have been involved as bystanders or protectors.  Back in October I wrote a blog piece http://survivingchurch.org/2019/10/03/the-jonathan-fletcher-story-continues/ on Fletcher commenting on the fact that no fresh news since the Telegraph stories of June had emerged into the public domain on the scandal.  That said to me that large numbers of people in the Iwerne/ReNew/Church Society group had been ordered to keep quiet on the topic.  Since that time the silence has begun to crack open and Fletcher’s old church, Emmanuel South Wimbledon, has agreed to commission a Review under the supervision of Justin Humphries and his independent organisation Thirtyone:eight.  That has now begun and there has been a call for victims to come forward to tell what they know.

There are a number of parallels between the Fletcher scandal and the Ball affair.  The Telegraph story suggested a possible link through membership of the same exclusive dining club, Nobody’s Friends.  While Fletcher was undoubtably a member, I do not believe anyone has claimed the same for Ball.  What is true is that powerful well-connected people linked to the two men have used their social power to defend and attempt to vindicate them.  The 2000 letters sent to Lambeth Palace in support of Ball were in some cases written by people who believed genuinely in his innocence.  Other individuals probably suspected that something was awry in his behaviour but in their minds the good name of the Church took precedence over the questions of right and wrong.  In the Fletcher affair something rather more blatant was going on.  As far as I can determine, almost everybody in the ReNew/REFORM/Iwerne network knew Fletcher and this is particularly true of the leaders in that group.  The leaders cannot have been ignorant of Fletcher’s style of ministry and his reputation for spiritually abusive behaviour. If they were surprised at the revelations and the 2017 withdrawal of his Permission to Officiate, why has there been no protestation to this effect?   It was also extraordinary that an individual with a very high profile should suddenly almost disappear from any mention on the net.  Someone with the authority to do so must have spent hours searching for online references to Fletcher and removing them one by one.   That piece of work has now been rendered void by the Telegraph reporting.  The publicity machines at both Church House and wherever the centre of ReNew is to be found will be working very hard this week-end to try and undo the enormous damage to the reputation of the Church that has been incurred by the Telegraph stories. 

I want to finish by briefly exploring a moral dilemma.  In Christian teaching an individual can commit a wrong action but there is always the possibility of receiving forgiveness after true repentance.   That is in essence what we understand from the New Testament.  A different situation arises to this when we encounter a bystander knowing about and to some extent covering up someone else’s evil activity.  When I know about the harmful behaviour of another person, how can I put things right?   The simple appeal to repentance does not seem to work.  I cannot repent of some else’s behaviour.  How can I do anything to put right the evil being done by a member of my own church tribe?  To separate myself from that action completely, I would need to abandon all that connects me with the network.  That is a difficult if not impossible task.  Members of the ReNew network who knew that Fletcher’s behaviour was spiritually and psychologically harmful were to a greater or lesser extent colluding in evil.  The bystander is always a sharer of guilt, particularly if harm is in any way intensified because of the inactivity.  Looking at the stories of Fletcher and John Smyth before him, the entire ReNew network leadership group seems to have been caught up in a kind of corporate guilt.  It is hard to claim that any of them are completely free from Fletcher’s wrongdoing.  They knew something and they simply did little or nothing with what they knew to protect the vulnerable.  The typical motivation for this kind of behaviour seems to be one of idolisation of a charismatic leader and the protection and defence of their tribe against other types of Christian who are regarded as threats to their vision of the faith.   How will the leadership of ReNew deal with the institutional guilt that is now seen to be pervasive within their constituency? The world is watching the conservative network of ReNew to see how it deals with this appalling legacy.  At the same time, it is looking to the wider Church of England to act positively and decisively in this matter but also over the disastrous legacy of Peter Ball and of those who enabled and protected him over decades.

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Hong Kong Watch condemns Christmas Eve police brutality

Anglican Ink - Mon, 30/12/2019 - 18:04

Widespread reports of beatings, firing rubber bullets at people’s heads and faces (in clear breach of international norms), indiscriminate use of teargas and water cannon against largely peaceful crowds celebrating Christmas in Tsim Sha Tsui and other areas represent yet another example of the escalating human rights crisis in Hong Kong. 

In horrific scenes, a protester chased by police fell from one level of a shopping mall to another and sustained very serious injuries while another fell from a rooftop after police shot at him multiple times as he clung to the edge.

Hong Kong Watch’s co-founder and Chairman, Benedict Rogers, said: 

“Hong Kong witnessed truly outrageous police brutality on Christmas Eve. Are Hong Kongers now not even allowed to gather to celebrate Christmas peacefully, to shop and sing carols? The level of violence in Hong Kong has reached such severe and sustained levels that an international, independent inquiry should be urgently established.”

“We also call on the United Kingdom to lead the international community by establishing an international contact group of like-minded nations to co-ordinate a global policy response to the crisis. 

“Furthermore, we urge the British Prime Minister to speak out clearly and urgently, and we call on the British government and others to introduce targeted Magnitsky sanctions against those responsible in Hong Kong and China for severe human rights violations, including officials in the government and the police. 

“It is time for immediate international action to stop the crisis in Hong Kong escalating still further, to end impunity and to move towards peace and the re-establishment of Hong Kong’s freedoms and autonomy.”

The post Hong Kong Watch condemns Christmas Eve police brutality appeared first on Anglican Ink © 2019.

Nigeria names as key Christian persecution hotspot in 2020

Anglican Ink - Mon, 30/12/2019 - 17:57

As Islamic State releases a video claiming to show the killing of 11 Christians in Nigeria, persecution watchdog Release International names Nigeria as a country of special concern for 2020. Other persecution hotspots are likely to include Iran, Iraq, China and India.

A splinter group of Boko Haram has produced a video claiming to show the beheading of 10 Christians in Nigeria and the shooting of an eleventh. The video was produced by the terrorist group, Islamic State West Africa Province (ISWAP). Its release on December 26 appears to be timed to coincide with the Christmas celebrations.

ISWAP claimed the hostage murders were in revenge for the death of IS leader Abu Bakr al-Baghdadi, who killed himself during an attack by US forces in October.

Voice-over commentary to the video stated: ‘This message is to the Christians in the world. Those you see are Christians and we will shed their blood as revenge.’

Nigeria ‘country of concern’

The latest murders come as persecution watchdog Release International names Nigeria as a key country of concern for 2020.

‘Tens of thousands of Christians are being driven from their homes by the ongoing persecution in Nigeria,’ says Release CEO Paul Robinson. ‘While the death toll is rising, the world simply watches. Nigeria’s government appears to lack the will or the power to prevent the killings.’

Christians in Nigeria are being targeted by three Islamist terror groups: Boko Haram, its offshoot ISWAP, and heavily armed Fulani militia who are killing thousands and taking over their villages.

Release International’s Nigeria partner, Archbishop Ben Kwashi, says: ‘Across the north, the mainly Muslim Fulani have been taking land from predominantly Christian farmers by force and occupying their villages.’

‘They attack, typically, in the middle of the night while people are sleeping. They shoot in the air and create panic to drive the villagers out. When the people flee from their houses into the darkness, the Fulani lie in wait with their machetes and cut them down. Again and again. And the government seems powerless to stop them.’

Writing in a recent book, Neither Bomb Nor Bullet (Lion Hudson 2019), Archbishop Kwashi warns: ‘Nigeria has become the largest killing ground for Christians in the world today.’

In 2015 the Global Terrorism Index (GTI) named Fulani extremists as the fourth–deadliest terror group in the world. By 2018, GTI reported: ‘“Deaths attributed to Fulani extremists are estimated to be six times greater than the number committed by Boko Haram.’

In 2019, GTI reported that deaths attributed to Fulani elements had risen by 261 per cent in a single year. ‘Eighty-four per cent of these armed assaults targeted civilians’. The report continued: Fulani extremists had become the ‘primary driver of the increase in terrorism’ in sub-Saharan Africa.

‘And in 2020, these attacks by Fulani militia are set to continue,’ warns Paul Robinson of Release International. ‘Our contacts on the ground say the government does not have the will to stop the land-grab and provide security for Christians.’

Other hotspots

Other persecution hotspots for 2020 identified by Release International include Iran, Iraq, India and China. In each of these countries there is growing evidence of increasing violence against Christians.

Persecution has been increasing in Iran for the past four years. Release’s Iranian partner describes a ‘forced exodus’ of Christians as the government acts to ‘exterminate the Persian-speaking church’.

A national clampdown on Christianity has driven many Iranian church leaders overseas. And the restrictions are getting worse.

More than 100,000 refugees are expected to arrive in Iraqi Kurdistan in the coming year, driven out as a result of unrest to the south of Iraq and instability in neighbouring Syria.

Recent reports that Islamic State fighters are re-establishing a foothold in Iraq will increase the insecurity of the remaining Christians. Around 1.5 million Christians have already fled, leaving only some 300,000 in Iraq.

UK commitment

‘The one bright spot on the horizon,’ says Paul Robinson, ‘is the commitment by UK prime minister Boris Johnson in his Christmas speech to support the growing number of Christians who are being persecuted for their faith.’

In his message, Mr Johnson declared: ‘I want us to remember Christians around the world who are facing persecution. We stand with Christians everywhere, in solidarity, and will defend your right to practise your faith.’

Mr Johnson’s government has reaffirmed its commitment to implement the recommendations of the recent report by the Bishop of Truro, which found that Christians were now the most persecuted minority around the world. Release International and others contributed to research for that report.

‘Release is delighted that the UK government has pledged to put freedom of religion and belief at the centre of foreign policy,’ says Paul Robinson. ‘This could make a significant difference in the coming year, as persecution worldwide looks set to increase.’

Through its international network of missions Release International is active in more than 30 countries around the world, supporting pastors, Christian prisoners and their families; supplying Christian literature and Bibles; and working for justice.

The post Nigeria names as key Christian persecution hotspot in 2020 appeared first on Anglican Ink © 2019.

Is China a Better Trading Partner for Latin America Than the US?

Mises Institute - Mon, 30/12/2019 - 17:00

Part of the economic debate in Latin America, particularly in Argentina after the elections, focuses on what type of financial and trade relationship is most convenient for the region, and several discussions consider the merit of strengthening relations with China instead of the United States

The first thing we should understand is that it is a false dilemma. Latin America is not in an economic situation where it can afford to “choose” trading and financial partners. Therefore, the answer is simple: Latin American countries must strengthen their commercial relations with all countries, including China and the United States, and the way to do it is by improving transparency and reliability.

Why do some politicians repeat that their country has to choose between one and the other? There is a misconception among some commentators, who think that entering into aggressive agreements with China is much more beneficial, cheaper, and, in addition, will allow countries like Argentina or Mexico to diversify their position. The most populist politicians talk of China as if the country gave money for nothing. It is a ludicrous and misguided view of relations with China, as if the business partners and Chinese rulers were not going to demand the same conditions as US ones. The evidence from Venezuela, Ecuador, and many African nations is clear: China does not hand out free money. Money for nothing does not exist. The Chinese are neither fools nor amnesiacs.

The experience of decades shows us that many populist rulers believed that they would enter into large trade agreements with China and receive low-cost financing with no burdens attached. The example of Ecuador during Correa period shows us that this idea of ​​enormous financing at no cost is completely false. China is not only as rigorous and demanding as any other trading partner, but — in many cases — has shown that it imposes conditions, especially collateral in natural resources, that sometimes are stricter.

Usually, the idea that China is going to offer favorable, flexible, and even almost-free conditions usually comes from a mistaken perception that the Asian country will finance the expansion of socialist or leftist models without conditions as if it were a donation. Nothing could be more wrong. China is an economy that is extremely dependent on the US dollar and has an elevated debt. Above all, it is an economy with a growing demand for commodities and, as such, usually lends money in exchange for wide access to natural resources. The Chinese economy is not a source of cheap donations and loans. Its companies and rulers have a very clear idea of ​​the risk they take when they lend money to socialist regimes and countries with economic challenges. China always analyzes carefully the real economic return it needs in its business transactions. There is no free money.

We cannot think that China will give Argentina or Mexico free money or investments, or that it will demand less credit security than the United States. Quite the opposite. China, as a business partner, is much more demanding and rigorous than some politicians would prefer.

Sometimes, in the discussion about whether to favor China or the United States, there is a hidden line of thought, which could be summed up as, “Who can we default on without generating a financial crisis? Who will finance the unfinanceable at a low cost?" The answer is simple. Nobody.

The opportunity for Latin America? Open the economy, become an exporting power and attract foreign investment. To achieve this, countries must make legal and investment security the absolute pillars of their commercial and financial policies. Becoming a reliable country with unquestionable credit responsibility is a capital factor for economic recovery.

No country is going to give dollars for cents, or finance insane economic policies for free, as everyone starts with an analysis of risk of devaluation and default when they consider financing options. What Latin American governments must do is eliminate those two risks so that China, the US, and all the countries of the world perceive the enormous potential of the region.

Categories: Current Affairs

Robert Mugabe’s paper money

Adam Smith Institute - Mon, 30/12/2019 - 12:01

Robert Mugabe, who had been a terrorist, became Prime Minister of Zimbabwe in 1980, and on December 30th, 1987, became the country’s President by pushing through a constitutional amendment. The new post made him head of state as well as head of government. He was also commander-in-chief of its armed forces, and could stay on indefinitely as President, and declare martial law and dissolve Parliament if the mood took him.

His policies were disastrous for his country. He favoured his own tribe and stirred up violence against others. He encouraged blacks to seize white-owned farms by violence. Many so seized ceased to produce, and food production declined, causing famines. The economy collapsed. By 2000, living standards were below those when he took office in 1980. Wages were down, and unemployment had rocketed; by 1998 it was almost 50 percent. And by 2009, most of the country’s skilled workforce, some 3-4 million citizens had voted with their feet and emigrated.

Mugabe’s re-election campaigns attracted worldwide derision and condemnation, marked as they were by fraud, ballot-rigging and violence. He was widely condemned for violating human rights and ordering summary execution of opponents. He formed a view that he was the victim of an international gay conspiracy, and pursued a violently anti-gay policy in his own country.

He will be remembered for hyperinflation on a Weimar scale, as well as for his abuse of power. He printed money on a massive scale to finance his activities. An accurate measure is difficult because his government ceased filing statistics at the height of inflation between 2008 and 2009, However, it was estimated that at its peak month it ran at 79.6 billion month on month, and for the year on year in November 2008, it peaked at 89.7 sextillion percent. Eventually the country could no longer afford the ink to print currency with. By then people were using the currency of other countries.

I was given a hundred trillion-dollar banknote which by then would probably not even buy a coffee. There were stories that notices in toilets forbade the use of banknotes instead of toilet paper (they were cheaper). It is an object lesson that never seems to be learned. In a straight line from Weimar through Zimbabwe to Venezuela, excessive printing of money has resulted in hyperinflation and brought savings and investment to a standstill. It is a small irony of history that the same firm that printed the Weimar banknotes also initially oversaw the printing of the Zimbabwe notes.

Adam Smith famously observed that:

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice.”

He might have added sound money as a further requirement. Zimbabwe under Mugabe had none of these, and its citizens paid the price.

Categories: Current Affairs

In Healthcare, a Little Bit of Market Freedom Goes a Long Way

Mises Institute - Mon, 30/12/2019 - 12:00

In the US, a hysterectomy or a gall bladder surgery can set you back tens of thousands of dollars. For families that do not possess medical insurance or have inadequate coverage, it can be financially stressful to visit a hospital or schedule an appointment with a doctor. Most people residing outside the US would suffer sticker shock since they receive medical treatment for free at the point-of-service, though their taxes are through the roof. Indeed, the US does have an affordability issue. Is this the result of free market economics, or is there something else to it?

A Retail Surgery Shop

When you walk into your physician’s office or a hospital and receive medical care, you are unlikely to know the cost of the visit. If you are insured, the administration will just bill your provider or, if you are subscribed to a government program, a subsidy will pay for your appointment. This produces myriad problems but primarily pricing opacity. One hospital in Oklahoma City is changing that.

In 2004, Dr. Keith Smith and Dr. Steven Lantier founded the Surgery Center of Oklahoma (SCO), a medical facility established on the idea of price honesty. Four years ago, the organization began posting a detailed list of all-inclusive and guaranteed pricing. If there is one thing these medical professionals have learned over time, it is that “healthcare really doesn’t cost that much” but “what people are being charged for is another matter altogether.”

If you undergo a breast biopsy at SCO, you can expect to pay $3,500. Anywhere else, you would pay more than $16,000 for the same procedure. Do you need an ankle arthroscopy? It will cost you just under $4,000 at SCO, compared to about $23,000 in other parts of the country. If you tore your patella tendon you could expect to be faced with a $30,000 medical bill, but walk into the Oklahoma establishment and you’ll pay a fifth of the price.

Using economic principles, these two doctors aimed to transform the local healthcare sector through price transparency and bidding wars. It has worked out quite well, as a whole host of institutions have gradually mirrored SCO, including the Oklahoma Heart Hospital, Breast Imaging of Oklahoma, and McBride Orthopedic Hospital. To avoid burdensome regulations, some facilities have announced that they do not accept Medicare and Medicaid — something that has recently become more common. Dr. Smith told Conservative Modern,

Hospitals are having to match our prices because patients are printing their prices and holding that in one hand and holding a ticket to Oklahoma City in the other hand and asking that hospital to step up. So we’re actually causing a deflationary effect on pricing all over the United States.

In recent years, there many smaller clinics across the country have been adopting these kinds of models. Even Walmart, which has entered the healthcare business, is offering low-cost care. When you walk into some of these offices, you see a board on the wall that lists prices for everything from a physical examination to a flu shot or an x-ray. These establishments are usually cash only. So, if these outlets are implementing such practices, why can’t the entire industry do it?

An Anatomy of Healthcare Economics

Healthcare price inflation has skyrocketed since the 1970s. What, then, has been the main driver of this tremendous surge in medical care costs? The two most despised institutions in society: insurance companies and the government.

Back in the day, insurance was only purchased for catastrophes such as cancer, heart attacks, and life-threatening surgery. Today, patients buy health insurance for benign medical matters, from the common cold to the flu shot. Rather than pay out of pocket for these services, either the insurer or the state foots the bill, which means patients are more willing to go through tests and exams that might not even be necessary. When price transparency is eliminated from the equation, people take advantage of the system. When directly impacted by prices, though, the public is far more willing to shop around, price match, and do what is best for the pocketbook, much as it does with other goods and services.

Put simply, if you are paying for healthcare directly, you will ask: how much will this cost? Unfortunately, trying to determine the cost of both routine and more intricate services can be nearly impossible. Even if you were to ask, medical clinics would likely be unable to answer your inquiries; they are already spending about one-fifth of their earnings on administrative staff just to file insurance paperwork.

It is true that bills may vary per patient. One individual might be overweight and older, with a preexisting condition. Another person might be young and in shape, with zero medical complications. The former has vastly different needs from the latter. That said, home renovators can provide quotes for homes of different sizes, shapes, and ages. A restaurant can put together a menu with prices for each dish. A dentist or optometrist can be specific in what he or she charges. But in general medical care, it is impossible. When this is the norm, it is extremely difficult to influence providers to lower their premiums.

A Free Market Failure?

Leftists will shriek to the heavens that the US healthcare system is a free market failure. There are two things wrong with this statement. The first is that American healthcare is among the best in the world for serious chronic illnesses, which is why people flock there from all over the world to seek medical care. The second is that it is not an authentic free market system. The main problem with US healthcare is that there are far too many regulations, rules, and restrictions imposed by the government. When you add in state subsidies, an insurance industry built on cronyism, and doctors buried in paperwork, you have a mess of a system.

The Surgery Center of Oklahoma is a prime example of what free market health care looks like — and it is far superior to hallway healthcare in Canada and long wait times across the pond.

Originally published at LibertyNation.

Categories: Current Affairs

One thing to be grateful to Donald Trump for

Adam Smith Institute - Mon, 30/12/2019 - 07:01

We wouldn’t say that we’re greatly enamoured with Donald Trump’s trade policies but there is a silver lining all the same:

Examining his tariff-hiking, trade-war-inducing approach to international relations, their research shows the claim that it protects manufacturing jobs is… fake news. Far from creating jobs, it has reduced them. Yes, domestic manufacturers get some protection within the US market, but that is more than offset by the fact that they face higher costs for components they import and lose export markets when others (such as China and the EU) retaliate. The lesson? Trade wars bad, independent central banks good.

Not just that trying out protectionist policies and thereby proving they don’t work is educational. But the antipathy to Trump is such - all that “Orange Man Bad” stuff all over the place - that anything he proposes is opposed just because of the source of the proposal.

Meaning that the right on left is now near entirely converted to the cause of free trade. Which is indeed a silver lining of great value.

Of course, as soon as the political wheel of fortune turns we’ll find that somehow restrictions upon trade proposed by progressives are different in some manner, miraculously beneficial. But for the moment Trump has managed that impossibility, encouraged the left to embrace a useful economic policy. For which, given the rarity of the event, we should be grateful.

Categories: Current Affairs

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