Strategy: Recent Episodes
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People migrate for many reasons, including moving to a better economy and escaping political persecution. But one thing is certain: people are going to vote with their feet.
Original Article: "Voting with Their Feet: The Lure of Migration"
Speculators are reviled in the media and by politicians and academics. Yet the speculators are the ones taking risks to ensure the rest of us can have more economic certainty.
Original Article: "Hail the Speculators! They Take the Necessary Economic Risks in Our Economy"
The use of interstate compacts by US states shows that the states don't need the federal government to dictate or manage interstate relations.
Original Article: "States Can Curb Federal Power through "Soft Secession""
According to progressive elites, it is terrorism if consumers boycott businesses because of their leftist policies.
Original Article: "Is Boycotting Target a Legitimate Protest or an Act of Terrorism?"
Adults tell young people to follow their dreams, but one cannot follow one's vision without realizing what it takes to get there.
Original Article: "Want to Follow Your Dreams? The First Step Involves Hard Work"
In this new age of decentralized and democratized content creation, union members' demands may simply be based on wishful thinking for a bygone era.
Original Article: "Striking Hollywood Actors and Writers Might Have to Get Used to Stagnant Wages"
A panel featuring members of the Mises Institute editorial staff.
Recorded at the Mises Institute in Auburn, Alabama, on 29 July 2023.
A Mises Institute staff panel featuring Tho Bishop, Felicia Jones, and Jonathan Newman.
Recorded at the Mises Institute in Auburn, Alabama, on 28 July 2023.
A debate between Mises Institute Summer Fellows Anthony Cesario and Connor Mortell. With Dr. Jonathan Newman as moderator.
Recorded at the Mises Institute in Auburn, Alabama, on July 29, 2023.
Featuring Per Bylund, Lucas Engelhardt, Karl-Friedrich Israel, Tate Fegley, Shawn Ritenour, and Timothy Terrell.
Recorded at the Mises Institute in Auburn, Alabama, on July 28, 2023.
Bureaucrats operate with de facto electoral unaccountability.
Download lecture slides at Mises.org/MU23_PPT_31.
Recorded at the Mises Institute in Auburn, Alabama, on 27 July 2023.
Michael talks with Tom Woods about RFK, Jr., whether the elites are evil or just incompetent, and the secret of Tom's success.
In today's progressive climate, sexual assault charges are easy to make and hard to refute, even when they are demonstrably false.
Original Article: "Demonizing Men with False Data on Sexual Abuse"
Some conservatives are upset because the new best-selling beer is owned by the same company that owns the beleaguered Bud Lite. Actually, they should have no problem with that.
Original Article: "Do Boycotts Really Work? Another Look at the Bud Light Situation"
Leonard Read asked how we preserve liberty in a culture that doesn't appreciate it. Liberty cannot come through force and organization. It comes from within oneself.
Original Article: "Smarter Talk Is Smarter Action"
By any conventional measures of finance, the Federal Reserve has negative equity. In the long run, cooking the books only puts off the day of reckoning.
Original Article: "The Fed Is Overindebted, Isn’t It?"
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop talk about recent court cases involving defamation claims, justifying libertarian skepticism of the entire concept. As Ryan noted in a recent Wire article, the Dominion lawsuit in particular, is a particularly chilling case for free speech, with a taxpayer-funded company effectively silencing public critics. This, along with the recent Trump verdict, are an illustration of the continuing escalating weaponization of the court system for political ends.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
PROMO CODE: RothPod for 20% off
Recommended Reading"The Dominion Lawsuit against Fox News is Part of the War against Free Speech" by Ryan McMaken.: Mises.org/RR_133_A
"The Alex Jones Verdict Shows the Danger of Defamation Laws" by Ryan McMaken: Mises.org/RR_133_B
"Lawsuits Are the Hitman of the State" by Brian Caplan Mises.org/RR_133_C
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Both artists and athletes perform for others. When governments get involved it either is for subsidies or censorship. Neither is satisfactory.
Original Article: "The Economics of Arts and Culture"
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the cancellation of Tucker Carlson's Fox News show and the similar treatment of Murray Rothbard by Bill Buckley. What does Tucker's cancelation mean for the growing anti-regime trends on the right, and why do "conservative" gatekeepers prefer the company of the left more than their audience? We look at this and more on this episode of Radio Rothbard.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
For more on the history of the conservative movement, get your copy of Betrayal of the American Right by Murray Rothbard. Receive 20% off with coupon code RothPod at the Mises Store.
Also available as an audiobook.
PROMO CODE: RothPod for 20% off
Recommended Reading"Murray Rothbard, RIP" by William F. Buckley Jr.: Mises.org/RR_132_A
"Frank Meyer's Fusionism and the Search for Consensus Among Conservatives" by Paul Gottfried: Mises.org/RR_132_B
"NotCon 3 Video: The Failure of Fusionism" Mises.org/RR_132_C
"Why Fox Fired Tucker: BlackRock, Replacement Theory, and the ADL" by Michael Rectenwald Mises.org/RR_132_D
"Buckley Revealed" by Murray Rothbard Mises.org/RR_132_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Recorded in Birmingham, Alabama on April 22, 2023.
From the Mises Institute's recent event in Birmingham, Alabama dedicated to the global threat of "The Great Reset".
What if the world’s states were to come together and create a single world currency? From a purely economic point of view, there would be significant advantages if every nation didn’t operate with its own money but with the same currency. Not only for an individual economy, but for the world economy as a whole, the optimal number of currencies is one. Let’s take a look.
The decisive factor is how this single world currency comes about, and who issues it. In a free market for money—in a natural process—a single world currency would emerge from the voluntary agreements of the market participants: the money demanders would decide which commodity they want to use as money. It is impossible to predict with certainty what the outcome of the free choice of currency would be; after all, it resembles a discovery procedure whose outcome is not known in advance. However, it can be assumed that a commodity currency would be created, that gold or possibly a cryptounit would be chosen as the money base.
However, if states monopolize money production, a single world currency cannot develop through voluntary decision-making. In 2023, several national fiat currencies coexist. But this is not a stable equilibrium. Rather, here too, there is a tendency to create a single world currency—because it is optimal for everyone in the world to trade and calculate with the same currency. This is what democratic socialism takes advantage of.
Creating a single world currency is a means to an end for democratic socialism. Its adherents recognize that a single world state cannot be established directly. The national resistance that would have to be overcome is too great. The detour, the indirect way, by which democratic socialism can achieve its goal is by creating a single world currency under state control. The eurozone can serve as a “model” for this process. We’ve seen nations voluntarily give up their monetary sovereignty and accept a single fiat currency that is issued by a supranational central bank. Within the eurozone, money is no longer controlled by individual national parliaments.
The shared euro currency creates major problems in and between the participating countries. But the forced euro marriage has not yet been through the “divorce courts” because of the high costs of a euro exit and also because the democratic socialists fight any attempts to withdraw from the euro with all political means available to them. The problems created by the single currency are increasingly forcing participating countries into communization. As part of the eurozone, some nations must pay for the national debts of others, and the cost of saving ailing banks from collapse is borne by all taxpayers and money users.
All of the problems of imposing one fiat money across many nation-states only became apparent after the euro community was locked into place—the potential problems received little or no attention beforehand. From the outset, it was not economic rationality that inspired the euro, but political endeavors that can be traced back, unsurprisingly, to politics, namely the ideology of democratic socialism. The end of national monetary sovereignty and the adoption of the euro were promoted in public by emphasizing the peace and prosperity effects of a single currency.
In light of the experience gained with the “euro experiment,” the question arises: What are the consequences of creating a single fiat world currency? A state-controlled world currency would bring with it all the negative characteristics and problems of national fiat currencies, and it would cause economic, political, and cultural damage that would eclipse that from national fiat currencies.
What every single state that has fallen victim to democratic socialism wants is also what a community of states wants: to control the production of money and to expand the money supply at will in order to secure and expand its rule. It is a logical step for the states to merge their own fiat currencies into a fiat world currency—especially for small and medium-sized states, whose financial leeway is considerably increased as a result.
The fact that a fiat currency and not a commodity money has been chosen is virtually self-explanatory: the national currencies are already fiat money, and fiat money is the type of money that states prefer because it can be multiplied at any time and in any quantity at the lowest cost.
If the national states agree to accept a single fiat currency issued by a world central bank, then the money users will no longer have any choice or escape options. They will be at the mercy of a fiat world money. The world central bank will not have to fear that dissatisfied users of its money will “migrate” to other currencies because there will be no other currencies anymore. And because the single fiat world currency will have no competition, it will also become a plaything of political interests. Above all, the states will encourage the world central bank to pursue a monetary policy through which they can finance themselves as cheaply as possible with credit.
After all, debt financing is particularly attractive to every state: the possibility of easy borrowing is a very important motive for states to adopt a fiat world currency. Unlike with taxation, savers usually give their money voluntarily to the state, because they expect it to be repaid to them plus interest. A world central bank has a free hand to set the market interest rate as it sees fit. It does not have to fear that capital will migrate away from an extremely low market interest rate—after all, the interest rate that it determines will prevail all over the world.
A world central bank, which has a monopoly on the fiat world money, facilitates the worldwide debt economy to an extent probably still unknown. The relatively bad state debtors—i.e., those who have so far only been able to finance themselves at relatively high interest rates—particularly benefit from a single fiat world currency. If there is only one currency left in the world, there will be a single large, transparent, and liquid capital market in which there will be no exchange rate fluctuations, which helps to reduce credit costs. The improved debt opportunities in such a market favor the expansion of state influence and thus promote the nationalization of the economy and society.
A single currency will put governments in a favorable position to buy votes. The states will lure voters with money, and more and more citizens and entrepreneurs will become transfer recipients and beneficiaries of the state. They will benefit from state-financed jobs, social benefits, and contracts. States’ involvement in economic and social life will increase. The culture of collectivism will be promoted, and individualism will be repressed. What is left of the free market economy will inevitably give way to a command economy in which states play a decisive role in determining who produces what, when, and where. Although this transformation is already progressing under national fiat currencies, it will be uninhibited under a global fiat currency.
With a single fiat world currency, it will be possible for a world central bank to set an artificial boom in motion worldwide and to protect itself from a bust for a long time. Thanks to the global currency, the boom will affect all the world’s economies: the prices in all labor and factor markets will be distorted—after all, there will no longer be any exchange rate movements between the economies that could shield a region from the monetary policies in other regions; all economies will thus be “monetarily aligned.”
Companies and investors will continue to favor some regions of the world over others, just as investors in the eurozone see the “northern countries” as less risky than the “southern countries” and the “northern countries” continue to be the most attractive region for investors within the eurozone. If, however, the economic developments of the participating nation-states vary too much, the world central bank can be expected to take political countermeasures: it will support weaker countries. For example, it will buy up weak countries’ government and bank bonds; the eurozone’s many “rescue policies” are an example of this eventuality.
In this way, the world central bank will weaken or eliminate the market’s remaining corrective forces, which could put an end to the boom. The boom set in motion by the world bank will therefore be able to last a long time. However, the longer the boom lasts, the greater the damage (overconsumption and bad investments) will be. And the longer the boom progresses, the greater the costs of the corrective crisis will be, which will intensify the political incentives to keep the boom going by any means—after all, states shy away from recession and unemployment and the associated social and political consequences.
In order to avert the corrective crisis, the states will continue to intervene in the market with bans and prohibitions, laws, price controls, subsidies, and labor and expenditure programs. Above all, however, they will make use of the world central bank. If it is politically desired, the world bank will keep any stumbling debtor afloat with newly created money and delay the arrival of the crash. This leads to the question: Will a single fiat world currency be more inflationary than national fiat currencies? The answer is yes.
States’ primary goal with a single fiat world currency is to be able to pursue a controlled inflationary policy with as little punishment as possible. Controlled inflation benefits states and politically connected groups.
However, even under a uniform fiat world currency, there are limits to inflationary policy. The world central bank does not have to reckon with the fact that money users will switch from its fiat money to other currencies when inflation is high, as there will be no other currencies left. But if the inflation of the fiat world currency is too high, its users will lose confidence in it. In an extreme case (hyperinflation) people will start to escape from the fiat world money by taking desperate measures. They will no longer want to use the money at all, and this could seal the fate of the fiat world money.
Of crucial importance for the inflation of the fiat world currency is which forces gain the upper hand in the decision-making body of the world central bank. There are two possible scenarios. In the first case, the governments of the states have a direct influence on the world central bank. In democracies, rulers are known to have short-term goals: their power is only temporary. Therefore, they are anxious to maximize their income during their term of office. Those in power do not participate in the long-term prosperity of the community and consequently have no great interest in making decisions that maintain or increase its net present value beyond their term. In other words, the cow is not milked but slaughtered. Inflation will be comparatively high in this case.
In the second case, the decision-makers on the council of the world central bank are closely connected to those in the financial sector and big business. Such a world central bank council’s interest is that its “product,” its currency, remains permanently marketable. It will not frivolously jeopardize the world currency by implementing an exaggerated inflation policy. The world central bank council would therefore not want to slaughter the cow but milk it for as long as possible. In this case, an oligarchic democracy will prevail in the world central bank council.
In this scenario there is a high probability that the world central bank will above all serve the special interests to which the council oligarchs are closely linked (these are, of course, big banks and big businesses). The interests of the general public take a back seat and are only taken into account if they do not jeopardize the continuation of the world central bank’s special-interest monetary policy. The world central bank will therefore endeavor to keep inflation from becoming too high so that the population does not become dissatisfied and rebel.
Under a self-referential oligarchic democracy, in which councilmen recruit their own successors, the fiat world money is even granted a particularly long stay. The oligarchs will make every effort to ensure that the fiat world money system can continue to exist for as long as possible, that crises, when they occur, are tackled in such a way that the fiat world currency does not suffer and a “flight from money” is avoided.
In view of the overindebtedness problem that fiat money necessarily creates, we cannot exclude the possibility of negative interest rates. Under a policy of negative interest rates, the central bank might set the interest rate at, say, −4 percent per year. This means that a bank balance of €100.00 is reduced to €96.00 one year later and after ten years is only €66.48. What harms the saver benefits the debtor, who makes a profit by taking out a loan! Savers and investors will not tolerate this. Wishing to avoid the losses, they will go to the bank and demand that their assets be paid out in cash and coins. Therefore, as long as there is cash, the effectiveness of a negative interest rate policy is limited.
However, a world central bank can easily enforce the abolition of cash by shutting down cash production. Without cash, the money is “trapped” in bank accounts and can no longer be withdrawn from the banking sector. The negative interest rate policy can then be implemented unchecked. Money holders no longer have the opportunity to evade the devaluation of money and savings. Individual states welcome the abolition of cash for another reason: they will be able to track the financial dispositions of citizens and companies, who will only be able to make payments electronically: banks will be required to provide full information on the payments and financial assets of bank customers at all times. As a result, the taxation possibilities of states will be increased immensely.
As long as there is still cash, there are limits to taxation: if market participants feel that the tax burden is too high, they can carry out their transactions anonymously with cash. This in turn encourages states not to tax citizens and businesses too heavily. But when the taxpayers no longer have this alternative because there is no more cash, the political reluctance which still stands in the way of increased taxation in a world with cash decreases. And if the financial privacy of citizens and businesses is lost, states can easily subject citizens and businesses to full monitoring.
A global central bank will undertake the supervision of the banking and financial sector. It will want to prescribe how commercial banks operate; for example, what liquidity and capital requirements they must meet and how they must assess their credit risks. The world central bank will also want to decide whether and under what circumstances failing banks will be aided or allowed to close. The right of national governments to have their say will increasingly dwindle in favor of the supranational world central bank and supranational supervisory authorities and bodies. The consequences will be far reaching.
The pressure for a body of regulation to which all banking and financial enterprises are subject will increase—and will come from the large and powerful interest groups. National or regional peculiarities will not be taken into account if the large and powerful interest groups have asserted themselves in the political negotiation of the regulatory provisions. For many small countries, this will force far-reaching adjustments—not only in their banking and financial economies but also in their production structures. There will be winners and losers in this process: adjustment costs will be higher for some regions and lower for others. This will create conflicts of interest between the nation-states.
A fiat currency used by people in many countries will fuel further conflicts. It is well known that the expansion of the money supply means that a few are made better off at the expense of many others: the first recipients are the beneficiaries, the late recipients, the disadvantaged. This is already resulting in disputes in nation-states that are relatively homogeneous in terms of culture, language, and tradition. The conflicts over redistribution will become even more acute when the effects of redistribution are felt across borders, when people in one country realize that they are being bled in favor of people in another country.
A world central bank has a free hand to set the world interest rate at will. Not only can it keep it artificially low to set a boom in motion and keep it going for a long time, but it can also bring about a negative world interest rate, a political “solution” to the overindebtedness problem caused by a fiat world money. Another motive for forcing world interest rates into negative territory is the democratic socialists’ desire to better steer and control the economy and society, or to shatter what is left of the free market economy.
The fact that this is possible with a negative interest rate policy becomes apparent when one considers the consequences of a negative interest rate for the credit market. Commercial banks receive credit from the world central bank at, say, −2 percent, on the condition that they lend the money to consumers and companies. If they borrow €100 at −2 percent and lend the money at −1 percent, their profit is €1. Under these circumstances the demand for credit grows enormously: after all, everyone wants to profit from the negative interest rate loans.
The world central bank must ration the loans so that the creation of credit and money does not get out of hand. It is no longer the market interest rate that balances supply and demand, but the world central bank, which gives a certain amount of credit and allocates it. But what criteria should be used to allocate the loans? Should all those who ask for loans get them too? Or should labor-intensive economic sectors be preferred? Or should the loans go only to sunrise industries? Or should weakening branches of industry be supported with additional loans? Or should the south get more than the north?
The world central bank has a decisive influence on who can finance and produce what, when, and where. Like a central planning authority, it—or the interest groups who control it— determines the fate of the economies in all the regions of the world: which industries are promoted or pushed back; which economies grow stronger and which weaker; which banks are allowed to survive in which countries and which are not. Welcome to the centrally planned economy! However, a negative interest rate policy would not be possible in the long term; it would lead to the end of the division of labor in the economy.
First, lowering the interest rate inflates the prices of existing assets: stocks, houses, and land— everything becomes more expensive. The lower the interest rate, the higher the present value of future payments and thus also the market prices of the assets. The speculative bubble, which is inflated, initially provides investors with high returns. At the same time, the outlook for future returns deteriorates. The reason? Zero and negative interest rates cause the prices of stocks, houses, etc., to rise until the expected yield that these asset classes promise has approached the low or negative interest rate set by the central bank. In extreme cases, the expected market returns will fall to or even below the zero line.
But once the world central bank has pushed all returns to or below the zero line, the free market economy (or what is left of it) is on the verge of collapse. Without a positive market interest rate, without the prospect of a positive return, saving and investing cease: after all, every consumer and entrepreneur has a positive originary interest rate. And when there is no more return to earn, there is no more saving and investment, only consumption. The economy based on the division of labor comes to a standstill. Replacement and expansion investments fail to materialize, capital consumption begins, and the modern economy falls back into a primitive subsistence economy. An extreme example. Or is it?
The very process by which the world central bank lowers the world market interest rate to or below zero (something it can do as a monopolist of money production) is extremely problematic. It artificially pushes people’s time preferences up. As Friedrich Nietzsche put it, there is a “revaluation of all values,” a devaluation of the future. The here and now is made even more important than tomorrow. The consequences are far reaching. Life on credit is promoted. The virtue of thrift goes out of fashion. “Permanent debt” becomes morally acceptable. Achieving short-term goals becomes more important to people than achieving longer-term goals. The willingness to achieve decreases, because, compared to the disutility of labor, leisure time rises even higher in value. Divorce also becomes more attractive as a “solution” to marital problems; efforts to overcome relationship difficulties are increasingly shunned. The quality of education suffers: if the here and now is so important, then we will also spend less time cultivating and maturing for the future. Morals decay: consideration and manners are costly activities in interpersonal relationships and often only pay off in the long term. Aesthetics degenerate: it is easy for passing fads to find buyers; breaking away from “proven classics” is made easier. A world central bank that issues fiat money has decivilizing consequences worldwide.
The idea that states could remain sovereign and independent once they participate in the fiat world money system is illusory. If the same money is used in different countries, this will help to make the best possible use of the efficiency potential offered by the international division of labor. The commodity and factor financial markets of the national economies will increasingly dovetail. And the closer the ties between those markets, the stronger will be the incentive of the nation-states to surrender sovereignty to supranational authorities. This applies both to economically good times—then the willingness to share, to make compromises, is relatively high—and to economically bad times— then a way out of the economic problems is seen in moving closer together, in jointly pursued “emergency policies.”
A fiat world currency promotes political centralization. The “urge” to establish a unified government, a world state, is strengthened, especially under the ideological leadership of democratic socialism. If economic and financial ties become ever tighter, why not create a single world state that can more effectively implement the desired policies—such as policies for prevention of economic and financial crises as well as tax fraud, environmental protection, counterterrorism, etc.? The world central bank, which issues the fiat world currency, becomes a particularly sought-after political power and control center in this concentration process.
Drawing on Robert Michel’s iron law of oligarchy, it is to be expected that a relatively small, assertive group of people which originates from the party and government structures of the participating states will try to put the world central bank under its control and make it serviceable for its own purposes. Against this background, it would be unrealistic for something to emerge that could be described as a “democratic world central bank.”
The representatives of the participating states may initially endeavor to “chain” the world central bank—i.e., to design the rules and regulations to which the world central bank is subject in such a way as to prevent abuse of power. However, what happens in the hierarchy of parties also happens in the hierarchy of a community of states: the most determined, tireless, ruthless, and relentless advocates of democratic socialism prevail. The aim of the oligarchy will be to make the world central bank serviceable and, above all, to enable the creation of a world government, a world state, which democratic socialism must necessarily strive for.
A world state, equipped with its own global fiat money monopoly, would open a dark chapter in the history of humankind and lead to a civilizational catastrophe. The world state would have no competitors to fear. No one could escape from it. Emigration would be impossible; the world state would be everywhere. The hope that the expansion of the power of the world state could be effectively curbed by democratic electoral acts would prove to be illusory as soon as oligarchization set in—and this is to be expected, of course, as already impressively illustrated by the expansionist drive of the nation-states in recent decades.
It is downright absurd to think that a world state with its own fiat world currency would not sooner or later mutate into a totalitarian tyrant.
But are there perhaps good forces that could challenge the money monopoly and thereby effectively prevent the ideas of world money and a world state from being put into practice? One possible good force is technological disruption, which could revolutionize the global monetary system or show people that better money than that offered by states is both necessary and possible. There is no doubt that cryptocurrencies hold such potential for disruption.
Technological Disruption: CryptocurrenciesThe cryptounit bitcoin holds out the prospect of something revolutionary: money created in the free market, money the production and use of which the state has no access to. The transactions carried out with it are anonymous; outsiders do not know who paid or who received the payment. It is money that cannot be multiplied at will, whose quantity is finite, that knows no national borders, and that can be used unhindered worldwide. This is possible because bitcoin is based on a special form of electronic data processing and storage: blockchain technology (distributed ledger technology), which can also be described as a decentralized account book.
Think through the consequences if such a “denationalized” form of money should actually prevail in practice. The state could no longer tax its citizens as before. It would lack information on the labor and capital incomes of citizens and enterprises and their total wealth. The only option left to the state would be to tax the assets in the “real world”—such as houses, land, works of art, etc. It could try to levy a “poll tax”: a tax in which everyone pays the same absolute tax amount— regardless of the personal circumstances of the taxpayers, such as income, wealth, ability to achieve, and so on. But would that be practicable? Could it be enforced? This is doubtful.
The state could also no longer simply borrow money. In a cryptocurrency world, who would give credit to the state? The state would have to justify the expectation that it would use the borrowed money productively to service its debt. But as we know, the state is not in a position to do this and is in a much worse position than private companies. So even if the state could obtain credit, it would have to pay a comparatively high interest rate, severely restricting its scope for credit financing.
In view of cryptocurrency’s financial disempowerment of the state, the question arises: Could the state as we know it today still exist at all, could it still mobilize enough supporters and gather them behind it? After all, the fantasies of redistribution and enrichment that today drive many voters into the arms of political parties and ideologies would disappear into thin air. The state would no longer function as a redistribution machine; it basically would have little or no money to finance political promises. Cryptocurrencies, therefore, have the potential to herald the end of the state as we know it today.
The transition from the national fiat currencies to a cryptocurrency created in the free market would have consequences for the existing fiat monetary system and the production and employment structure it has created.
However, bitcoin has not yet developed to the point where it could be a perfect substitute for fiat currencies. For example, the performance of the bitcoin network is not yet high enough. Another problem with bitcoin transactions is finality. In modern fiat cash payment systems, there is a clearly identifiable point in time at which a payment is legally and de facto completed, and from that point on, the money transferred can be used immediately. However, distributed ledger technology consensus techniques (such as proof of work) only allow relative finality, and this is undoubtedly detrimental to the money user (because blocks added to the blockchain can subsequently become invalid by resolving forks).
The transaction costs are also of great importance regarding whether bitcoin can assert itself as a universally used means of payment. In the recent past, there have been major fluctuations in this area. In addition, the time taken to process a transaction has also fluctuated considerably at times, which may be disadvantageous in view of the emergence of instant payment options for fiat money.
Another important aspect is the question of the “intermediary.” Bitcoin is designed to enable intermediary-free transactions between participants. But do the market participants really want intermediary-free money? What if there are problems? If someone made a mistake and transferred one hundred bitcoins instead of one, he cannot reverse the transaction. And nobody can help him! The fact that many hold their bitcoins in trading venues and not in their private digital wallets suggests that even in a world of cryptocurrencies there is a demand for intermediaries offering services such as storage and security of private keys.
As soon as intermediaries come into play, the transaction chain is no longer limited to the digital world, but reaches the real world. At the interface between the digital and the real world, a trustworthy entity is required. Just think of credit transactions. They cannot be performed unseen and anonymously. Payment defaults can happen here, and therefore the lender wants to know who the borrower is, what credit quality he has, and what collateral he provides. But if the bridge is built from the digital to the real world, the cryptomoney inevitably finds itself in the crosshairs of the state. However, this bridge will ultimately be necessary, because in modern economies with a division of labor, money must have the capacity for intermediation.
It is safe to assume that technology will continue to make progress, and that it will remove many remaining obstacles. However, it can also be expected that the state will make every effort to discourage a free market for money by reducing the competitiveness of alternative money media such as precious metals and cryptounits vis-à-vis fiat money through tax measures (such as turnover and capital gains taxes). As long as this is the case, it will be difficult even for money that is better in all other respects to assert itself.
Therefore, technical superiority alone will not be sufficient to help free market money—whether in the form of gold, silver, or cryptounits—achieve a breakthrough. In addition, and above all, it will be necessary for people to demand their right to self-determination in the choice of money or to recognize the need to make use of it. Ludwig von Mises has cited the “sound-money principle” in this context: “The sound-money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system.” And he continues: “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”
These words make it clear that in order for a free market for money to become possible, quite a substantial change must take place in people’s minds. We must turn away from democratic socialism, from all socialist-collectivist false doctrines, from their state glorifying delusion, and no longer listen to socialist appeals to envy and resentment. This can only be achieved through better insight, acceptance of better ideas, and logical thinking. Admittedly, this is a difficult undertaking, but it is not hopeless. Especially since there is a logical alternative to democratic socialism: the private law society with a free market for money.
A Free Market for MoneyA free market for money means two things. On the one hand, those demanding money can freely choose what they want to use as money—for transaction and saving purposes. On the other hand, every market participant has the freedom to try to offer his fellow human beings a good to demand voluntarily as money. But wouldn’t that lead straight to “money chaos”? Wouldn’t hundreds, maybe even thousands of types of money circulate and thus make financial calculation impossible in the economy? And wouldn’t that undermine the efficiency of the economy? This concern is unfounded.
The money demander plays the decisive role. In a free market for money, anyone who asks for money will, out of self-interest, ask for a good that has the greatest possible marketability, a good that is recognized by its trading partners as the generally accepted medium of exchange. What do you offer the baker? It is best to offer something that the baker can use to buy shoes from a cobbler or shirts from a tailor. In a free market for money, people will demand as money a good that finds the widest acceptance, which is regarded by the largest number of people as a medium of exchange. The choice of the good that serves as money is based on the wishes of the trading partners.
But what if Mrs. A offers colorfully printed paper slips and says that these are “good money”? The answer is that no one would accept her paper slips as money. Why not? Quite simple: you wouldn’t know what these colorful notes are worth, or what you could get for them in exchange. That’s why no one would demand them as money. This is exactly what Mises has shown with his regression theorem: money must arise from a good that already has a nonmonetary market value before it is used as money. This is not the case for colorful and arbitrarily printed paper slips. They would not be able to compete against other goods such as gold and silver.
In a free market for money, people will demand a good that possesses the physical qualities that “good money” must have: be scarce, storable, transportable, divisible, malleable, and transferable and be regarded as valuable. If we take into account currency history, it seems quite probable that money would still be chosen in the form of precious metals—notably gold and silver—today. But cryptounits could also possibly assert themselves as money in the future. The choice people will ultimately make in a free market for money cannot be predicted with certainty.
Precious metals as money is an improvement compared to unbacked fiat money. No one has to carry jangling coins around in their pockets. The use of gold and silver can be digitalized. All kinds of payments that are common today could be carried out easily and problem-free with gold and silver. If cash is desired, precious metal coins can circulate or banknotes can be used that can be exchanged 100 percent for physical gold at the storage facility that issued the banknotes. Cashless payment transactions are also possible in the usual way when using gold money: bank transfer, direct debit, crossed check, payments by credit and debit card, mobile payment, bills of exchange, etc.
In a free market for money, in which a good that cannot be multiplied at will (by granting credit) is chosen as money, the credit market can exercise its intended function undisturbed: the supply of and demand for savings create a market interest rate that ensures that sufficient savings are available to make investments. This puts an end to the chronic economic disruptions of boom and bust caused by the issuance of fiat money. Because the banking business is not inflationary, the nonmarket (antisocial) redistributive effects of fiat money cease.
In a free market for money, there is no central bank and no state supervisory or regulatory authorities. All that is necessary for the functioning of a free market for money is a functioning legal order, which ensures that the contracting parties fulfill their obligations and that infringements of contractual agreements are effectively sanctioned: for example, that the stored commodity money is not embezzled, that banknotes can be exchanged for the money base at face value at any time. In order to guarantee that contractual obligations are fulfilled, there is no need for state monopolies of law. Jurisprudence and law enforcement can also be organized in the free market.
A free market money system—with free choice of money and bank freedom—is not a national but an international concept. If trade takes place internationally, across national borders, the market participants select the good to use as money with the same calculation as is used at the national level. Every user of money has an economic incentive to demand as money that good which he thinks is the most attractive means of exchange from his trading partner’s point of view. The idea of a free market for money is thus global in the truest sense of the word: just as free trade knows no national borders, a free market for money extends globally.
A free market for money is incompatible with the state as we know it today; namely, as a territorial compulsory monopolist with ultimate power of decision over all conflicts in its territory. There is no question that a free market for money requires far-reaching changes in people’s thinking. This insight was formulated by Mises in 1923:
The belief that a sound monetary system can once again be attained without making substantial changes in economic policy is a serious error. What is needed first and foremost is to renounce all inflationist fallacies. This renunciation cannot last, however, if it is not firmly grounded on a full and complete divorce of ideology from all imperialist, militarist, protectionist, statist, and socialist ideas.
The Private Law SocietyThe alternative to the state, in its present form, is the private law society. It is characterized by the fact that the same rules apply to all people always and everywhere: that everyone has self-ownership and that everyone has ownership of external goods acquired lawfully—i.e., nonaggressively. And since the same law applies to everyone, there is no public law apart from private law. A private law society is by no means synonymous with anarchy. Far from it! Rather, the private law society is characterized by a very clear distinction between mine and yours, and violations of property are punishable and sanctioned.
In a private legal system, security is offered in the free market. On the supply side, there are insurance companies that offer security services (insurance against theft, personal protection, etc.) in competition with other companies. In insurance contracts, the security service is specified precisely and the mutual rights and obligations are contractually laid down (such as the exclusion of negligence by the insured from compensation in the event of damage). The insurance contracts specify independent conciliation bodies—which also compete with each other for customers who pay voluntarily—to be called upon in the event of a dispute between the policyholder and the insurer.
Under competitive conditions, it is to be expected that prices for insurance coverage and dispute resolution will fall (while they will rise chronically in today’s state-monopolized security and legal apparatus). And it is not only that the insurance services in the free market for security are more geared to the customer’s wishes (in terms of scope and pricing); peaceableness and conflict avoidance are also promoted. Those who demonstrably behave well and are friendly toward their fellow human beings represent a smaller risk and are rewarded with comparatively low insurance premiums.
Since an insurance company is contractually obliged to indemnify the policyholder in the event of a loss (e.g., burglary), it will make a great deal of effort to prevent the occurrence of a loss. And if the damage has nevertheless occurred, the insurance company will do everything in its power to track down the perpetrator and make him liable; otherwise, it will have to pay the compensation, which in turn will reduce its profit. The free market for security discourages crime because potential perpetrators face highly efficient private insurance providers and police agencies. Such insurance and legal contracts can be established not only nationally, but of course also internationally, for private households as well as companies.
In a private law society, a free market for money is a natural phenomenon in the truest sense of the word: a free market for money is people’s right to self-determination when choosing money. The voluntary agreement of the people involved in the global division of labor would result in a single world currency. A freely chosen world currency differs categorically from a single fiat world currency, which is the passion of democratic socialists. A world currency chosen in a free market for money would literally be economically and ethically good money, which best serves humankind and best promotes the peaceful and cooperative coexistence of people in this world.
The ChallengeUnderstanding and practicing economics is the key to destroying the foundations of the driving force of democratic socialism, which for decades has been working toward establishing a world state with a world currency and has already made considerable progress along this path. Bad experiences, undesirable developments, and crises will not be able to deprive democratic socialism of its power and overcome it. This can only be achieved by insight into better ideas, and by the struggle of arguments of reason. The Global Currency Plot is meant as a contribution to help the better ideas prevail.
Recorded in Birmingham, Alabama on April 22, 2023.
From the Mises Institute's recent event in Birmingham, Alabama dedicated to the global threat of "The Great Reset".
Featuring Will Blakely, Bryan Dawson, Allen Mendenhall, and Michael Rectenwald. Recorded in Birmingham, Alabama on April 22, 2023.
From the Mises Institute's recent event in Birmingham, Alabama dedicated to the global threat of "The Great Reset".
The challenge at hand is more than simply opposing the state. Rather, it is necessary to build up, reinforce, and sustain institutions that can offer alternatives to the state.
Original Article: "To Fight the State, Build Alternatives to the State"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Those adhering to Austrian Economic thinking see the beauty in concepts coming together and providing a way to truthfully assess human action.
Original Article: "Yearning for Beauty in the Truth of Economic Thinking"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In our technocratic age, it is easy to dismiss the latest technological developments as an avenue toward freedom, but some of them still bode well for markets.
Original Article: "Artificial Intelligence Can Serve Entrepreneurs and Markets"
This Audio Mises Wire is generously sponsored by Christopher Condon.
—from the Summary ...
Democratic socialism—the ideology that dominates the world today—aspires to become a world state. The route toward it requires a single world currency to be created. That would undoubtedly create a dystopia. Might this become a reality? And if so, how can it be averted? This book aims to find answers to these questions.
Part 11. Concerning Right Thinking: LogicThe arguments in this book claim to be strictly logical. For a better understanding, a few basics of logic—the doctrine of correct thinking—are presented. These show the possibility of making use of the incorruptible power of judgment.
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What We Know for a Fact: Humans ActThe phrase “humans act” is logically undeniably true; it applies a priori. From it further true statements can be derived—so-called action categories—which help to think through the political-economic questions raised in this book with impartiality.
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What is Indispensable for Human Action: Private PropertyPrivate property is not an arbitrary variable, as many believe. It is a category of human action and cannot be denied without contradiction; unconditional respect for property also proves to be an ethically convincing norm of action.
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Interpreting History: The Role of TheoryTo understand history, one must necessarily resort to theories; without theory, there is no grasp of reality. The insights provided by a priori theory are an indispensable ingredient in the unbiased interpretation of historical events.
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Driving Force of Civilization: InequalityThe prerequisite for peaceful and productive cooperation, and economic and cultural human progression, is humans’ inequality with regard to their abilities and goals. This is also a logical insight regarding action, and it explains the process of civilizing humanity.
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The Perfection of Exchange: MoneyThe modern economy and society based on the division of labor are particularly fostered when people use money. Money developed spontaneously in the free market without the intervention of a state, and having a currency for the whole world would be economically optimal.
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The Decivilizing Force: The StateThe state is a territorial monopolist with ultimate decision-making power over all conflicts in its territory. It doesn’t solve interpersonal conflicts; rather, it is the cause of many and increasing numbers of social disputes.
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The State and the Deterioration of Money: From Commodity to Fiat MoneyOut of self-interest, the state obtains the monopoly over the production of money, and by force it replaces commodity money with its own fiat money. As a result, its power expands enormously, thereby becoming basically uncontrollably large.
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Anatomy of Disruption: What Fiat Money CausesState fiat money suffers from economic and ethical defects: it hampers economic progress and is socially unjust. Fiat money leads to a “transvaluation of all values.” It is not compatible with a liberal and prosperous economy and society.
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A Destructive Ideology: Democratic SocialismDemocratic socialism has become the dominant ideology worldwide. It relativizes and undermines property in many ways, making the state increasingly powerful, thus destroying the conditions for free and prosperous social and economic life.
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Impact Assessment: A Case for the A Priori TheoryThe a priori theory can be used to reliably estimate the consequences of human actions: it can be used to derive conditional statements about the future that are valid under specific conditions, and it can also be used to trace action—logical path dependencies.
Part 212. The Progression Theorem: Toward a World GovernmentStates want to expand their power internally and externally. This applies above all to states that follow democratic socialism: they are working toward creating a worldwide uniform democratic socialism, a uniform world state with a uniform fiat world currency.
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The Nation: Community of Language and ValuesThe nations—the language and value communities—are an impediment to democratic socialism’s aspiration of establishing a unified world state. Therefore, democratic socialists try to vanquish the nations, and especially the principle of nationality.
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Migration: Natural and UnnaturalThe proponents of democratic socialism use migration as a means to abolish nations and the nation-state and to pave the way for a worldwide democratic socialism under a unified leadership. But this will not be achieved by a politicized migration.
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The Illusion of Democracy: The “Iron Law of Oligarchy”As in every democracy, an oligarchic elite rule is also formed in democratic socialism. It has a particularly strong incentive to create a uniform fiat world currency in order to come closer to the goal of creating a uniform world government, a world state.
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US Dollar Imperialism: The Bretton Woods SystemThe Bretton Woods system was the first attempt to establish a single politicized world currency. It was doomed to fail because the nations had sufficient room for maneuver to escape the abuse made possible by the Bretton Woods system.
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The Campaign against Currency Choice: The EuroIn Europe, states have succeeded in abolishing the last remnants of monetary competition and introducing a single currency. This example shows how a political world currency can be created: with the irrevocable fixing of exchange rates between national currencies.
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The Secret and Sinister Power: The World Central Bank CartelThe national central banks form an international cartel in line with the democratic socialists’ ideas. Their monetary policy is making the global financial and economic system increasingly dependent on a globally unified monetary policy, the logical end of which is a unified world currency.
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Blueprints for a Single World Currency:Bancor, Unitas, US Dollar, INTOR, and the LibraThere are many specific proposals to create a single world currency—brought about by a political decision, not by free market forces, for the democratic socialists want a monopolized single fiat world currency.
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The Dystopia: A Single Fiat World CurrencyA single fiat world currency would threaten freedom and prosperity on this planet to an extent that many probably cannot even imagine: with a single fiat world currency, the path would be open to a totalitarian world state.
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Technological Disruption: CryptocurrenciesThe emergence of cryptocurrencies could prove to be the crucial disruption and achieve what economic and ethical insight has not yet been able to achieve: the opening of a free market for money, and making it impossible to establish a world state.
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A Ray of Hope: Free Market for Money and Private Law SocietyA free market for money provides people with the best possible money. It would also effectively put an end to the freedom-destroying program of democratic socialism and make possible a private law society, in which the same law applies to all.
EPILOGUE: A Better World Is PossibleWe have been walking the ominous path toward a world state with a fiat world currency for decades. It is not an inevitable result, but to prevent it, essential things have to change. These will include rejecting false doctrines in modern social and economic theory and firmly reestablishing the a priori theory.
The recent case of retired megastar Usain Bolt losing millions of dollars to bad investments highlights the importance of sound money management.
Original Article: "Managing Money Is as Important as Making It: The Sad Case of Athletes Going Broke"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Because government officials do not worry about the consequences of making mistakes, the government should not be permitted to regulate anything as important as vaccines.
Original Article: "Governments Cannot Effectively Regulate Vaccines"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The similar challenges facing America and Brazil, including concerns about the state of their democracies, is worthy of exploration, as is the global response to the protest and what that response means for those opposed to the current “neoliberal” international order.
Original Article: "America, Brazil, and the Illegitimacy of Weaponized Democracy"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Socialists don't just want to take your property; they also are demanding control of your children and loved ones.
Original Article: "Family Destruction and Its Socialist Cheerleaders"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop call for breaking up the US into smaller states. While this idea sounds radical to some, there has been growing conversation about shifting state borders, including proposals to break up California and a recent vote on the Greater Idaho project. Ryan and Tho discuss what lessons the Swiss model of federalism, as well as consider the cynical political considerations of this humble proposal.
Recommended Reading"If American Federalism Were like Swiss Federalism, There Would be 1,300 States" by Ryan McMaken: Mises.org/RR_116_A
"The Borders Between US States Are Obsolete" by Ryan McMaken: Mises.org/RR_116_B
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are back for 2023, savoring the chaos in Congress. As the House Republican rebellion threatens to keep Kevin McCarthy from gaining the speaker's gavel, Ryan and Tho look at other potential targets for a Republican-held Congress.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
As crime rates rise and government policing fails, more and more people are turning to private security, which is more effective in preventing crime than government police.
Original Article: "Private Security: An Effective Method to Prevent Being a Crime Victim"
This Audio Mises Wire is generously sponsored by Christopher Condon.
This week's show features a bare-knuckle discussion between Jeff and José Niño of "El Niño Speaks" on the biggest political, economic, and cultural events of 2022—and what they portend for 2023.
You don't want to miss Jeff's unvarnished thoughts on the Left, the Right, the economy, and what is sure to be a turbulent New Year.
Read José's Substack: josbcf.substack.com
Does 2022 America still have legitimate intellectuals? Professor Paul Gottfried joins Jeff and Bob to consider the state of real and pseudo-intellectualism.
The so-called green energy strategy is no strategy at all. Instead, it is an attempt to cripple the energy industries in vain hopes that renewables will magically cover the energy shortfall.
Original Article: "Renewables and EVs in the Grip of Lesseps Syndrome"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the topic of nationalism and the role it can play in political decentralization. In his recent book, Breaking Away: The Case for Secession, Radical Decentralization, and Small Polities, Ryan notes how nationalist sentiments have helped ethnic, religious, and linguistic groups resist centralizing political states, such as the Soviet Union. This contrasts the ways nationalism served as a centralizing force in 19th-century Europe. Ryan and Tho look at how recent nationalist sentiments are challenging authoritarian globalist pressures, as well as how strengthening regional and state cultural identities may offer the best chance to roll back the Washington regime in America.
Looking for Christmas gifts? Use promo code ROTHPOD for a 20% discount on select books featured on Radio Rothbard. Or, use code MURRAYCHRISTMAS for a special 10% discount on select new Mises apparel: Mises.org/RR_110_Store
Recommended ReadingBreaking Away: The Case for Secession, Radical Decentralization, and Small Polities by Ryan McMaken: Mises.org/RR_110_A
"Is Nationalism a Good Thing? It Depends." by Ryan McMaken: Mises.org/RR_110_B
"Mises on Nationalism, the Right of Self-Determination, and the Problem of Immigration" by Joe Salerno: Mises.org/RR_110_C
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
American political, educational, and economic life is increasingly dominated by "experts." We should not be surprised that they fail most of the time.
Original Article: "Relying on Experts: A Proven Path to Failure"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Ryan McMaken and Tho Bishop talk with economic anthropologist Jovana Diković about how a focus on "solving" global warming endangers the food supply for much of the globe, especially in the developing world. Even rich nations face a world of less food at higher prices.
Use promo code ROTHPOD for a 20% discount on Ryan McMaken's new book Breaking Away: The Case for Secession, Radical Decentralization, and Smaller Polities: Mises.org/RR_108_Book
Recommended Reading "Environmental and Political Elites Are Destroying Food Production for Climate Goals" by Diković: Mises.org/RR_108_A
"Eat or Heat: Europeans Already Are Facing Previously Unthinkable Dilemmas" by Claudio Grass: Mises.org/RR_108_B
"Regime Pseudoscientists Enforce Climate Change Narrative" by Michael Rectenwald: Mises.org/RR_108_C
"Germany's (and Europe's) Self-Inflicted Upcoming Energy Crunch" by Weimin Chen: Mises.org/RR_108_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In presenting her economic plan, Liz Truss failed spectacularly on one thing: cutting spending. Otherwise, a "tax cut" is not a tax cut at all.
Original Article: "The Rise and Fall of Trussonomics"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
On this episode of Radio Rothbard, Tho Bishop and Ryan McMaken break down the results of this year's midterms. American anxiety over inflation and crime failed to create the red wave many expected. While Republicans took back the House, and maybe the Senate, this year's midterms underperformed traditional midterm elections. Tho and Ryan discuss why this is, as well as what a DeSantis victory might mean for a potential civil war with Trump.
Use promo code ROTHPOD for a 20% discount on Ryan McMaken's new book Breaking Away: The Case for Secession, Radical Decentralization, and Smaller Polities: Mises.org/RR_107_Book
Recommended Reading "Antidemocratic Just Means Something the Regime Doesn't Like" by Ryan McMaken: Mises.org/RR_107_A
"The Realistic Market for Private Governance" by Jeff Deist: Mises.org/RR_107_B
"Murray Rothbard versus the Progressives" by Joseph T. Salerno: Mises.org/RR_107_C
"Breaking Away: The Case for Smaller Polities" by Ryan McMaken (video): Mises.org/RR_107_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
As fear that robots and artificial intelligence will take over whole lines of work, it is time to examine the real relationship between capital and the rest of us.
Original Article: "Are Robots and AI Really Going to Displace All Workers? Probably Not"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Government economists "seasonally adjust" data in order to better respond with policy recommendations to deal with business cycles. The problem is that government causes the cycles.
Original Article: "Are Seasonally Adjusted Economic Data Useful?"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
On this episode of Radio Rothbard, Tho Bishop and Ryan McMaken preview next week's midterms. How big of a red wave is on the horizon, and how much does it really matter? Should the real focus be on governor races? Can a Republican actually win in New York? And, what about Blake Masters? Ryan and Tho consider these questions and more in this week's episode.
Use promo code ROTHPOD for a 20% discount on Ryan McMaken's new book Breaking Away: The Case for Secession, Radical Decentralization, and Smaller Polities: Mises.org/RR_106_Book
Recommended Reading "Can National Conservatism Threaten the Regime?" by Tho Bishop: Mises.org/RR_106_A
"The Realistic Market for Private Governance" by Jeff Deist: Mises.org/RR_106_B
"Practicing Politics as Self-Defense" by L. W. Blakely: Mises.org/RR_106_C
"Breaking Away: The Case for Smaller Polities" by Ryan McMaken (video): Mises.org/RR_106_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Criticisms of hapless Senate candidate John Fetterman are labeled "ableist," while Elon Musk's takeover of Twitter is deemed fascist. Jeff and Bob take a hard look at the linguistic battlefield and the corruption of language as an institution.
Jeff's paper on language, "Evolution or Corruption?": Mises.org/HAP367-1 George Orwell's essay "Politics and the English Language": Mises.org/HAP367-2 Ken Smith's Junk English: Mises.org/HAP367-3 Bryan Caplan on "Privilege": Mises.org/HAP367-4
Law Professor David Bernstein looks at the system of racial classifications in the USA and explains why they have been harmful.
Original Article: "Review of Classified: The Untold Story of Racial Classification in America"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
War dissenters are branded "Putinists" by the foreign policy elites who casually flirt with nuclear war. But preferring negotiations to World War III hardly makes one a Putin sympathizer.
Original Article: "It's Time to Abandon America's Fetish for "Unconditional Surrender""
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Sponsored by James McMahon.
Recorded at the Arizona Biltmore Hotel in Phoenix, Arizona on October 7th, 2022.
Free Markets are often criticized for producing ugly, dystopian, consumer-driven landscapes, but is this true? Jeff explains how we need more than intellectual appeal to advance the cause of liberty—we need an appeal to beauty.
Watch other talks from our 40th Anniversary Celebration: Mises.org/SS2022
Recorded at the Arizona Biltmore Hotel in Phoenix, Arizona on October 7th, 2022.
The 1989 Rockford Institute meeting picture: Mises.org/1989-Rockford
Sponsored by Angela and Roger Box.
Recorded at the Arizona Biltmore Hotel in Phoenix, Arizona on October 7th, 2022.
Sponsored by Sheri and Thomas Yengst.
Connor Mortell joins Ryan McMaken and Tho Bishop to discuss his recent article entitled "We Are Not the Government, but America Is No Longer Anything More than the Government" and to consider what it means to be an American in the current era. As Americans become increasingly divided politically and culturally, and as those divides fuel a great migration within the country, what truly unites Americans—beyond sharing a common oppressive regime? How modern is this development? What can be done to further build on these trends, to undermine the control of that regime further? These questions and more are considered in this episode of Radio Rothbard.
Recommended Reading "We Are Not the Government, but America Is No Longer Anything More than the Government" by Connor Mortell: Mises.org/RR_103_A
"College Conference Switching as Secession? A Case Study in 'Nations by Consent'" by Connor Mortell: Mises.org/RR_103_B
"Nations by Consent" by Murray N. Rothbard: Mises.org/RR_103_C
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Barack Obama promised to "end child hunger" by 2015. Michelle Obama promised to end childhood obesity. Unfortunately, both increased in large part because of the Obama programs. Today, President Biden will declare war on "hunger in America." Stay tuned.
Original Article: "Obama's Forgotten Child Hunger Debacle"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Jeff Deist: Alex Epstein is our special guest this week. He runs the Center for Industrial Progress, was formerly at the Ayn Rand Institute, and has a background in philosophy. He wrote a famous book called The Moral Case for Fossil Fuels, and followed that up with a new book called Fossil Future. Alex, let me say this book is incredible. Thank you for writing it! I know from the acknowledgements it was quite a difficult task.
Alex Epstein: I did the book on fossil fuels. That did very well, and then I decided to replace it with something I thought would be better. And it was much harder to do. The first book took me about six months. This one took over three years. Given the moment we’re in right now, there’s a real opportunity to educate people, and there’s a real threat from this anti–fossil fuel movement. What I had done in 2014 was great for then, but I thought something better was possible and was needed.
JD: This is an empirical book. It’s also a philosophical book. I know you did not intend to write an economics book, but Fossil Future involves scarcity, it involves tradeoffs and choices within the context of scarcity, and it talks a lot about externalities—including positive externalities. These are concepts from economics.
AE: Well, as you mentioned, I used to work at the Ayn Rand Institute, so I have a philosophy background and an Objectivist philosophy background. From that perspective, morality is the fundamental science of human action, and I think of economics as related closely to morality. If you have a human-life-based morality, I don’t think you can have a discussion about the morality of fossil fuels that doesn’t think about economics. You could argue that it’s mostly an economics book in the sense of what is the content, because the content focuses on what’s involved in producing and trading energy and then what are the implications for that in terms of human life. And most of those implications you can measure in money, although as you mentioned with externalities, sometimes people abuse money and measurements to ignore the benefits of fossil fuels.
JD: The book is controversial, so we should mention your publisher. Did they take a risk publishing it?
AE: My publisher is Penguin Random House, and the specific imprint is Portfolio, which is their business imprint, but the same guy who runs it also runs their conservative imprint, which is called Sentinel. They’re used to controversial books. They published, or at least they proposed, Jordan Peterson’s latest book, and you know they got some controversy in Canada around that. They’re pretty good at this kind of thing, but it’s unusual. As my first book sold a lot of copies and the publishing industry doesn’t have that many bestselling authors, they cannot afford to turn one down. Fossil Future has done even better than The Moral Case for Fossil Fuels in terms of sales and its lifespan. One byproduct of this for me and for others is that more and more publishers will be open to these kinds of ideas.
Robert Murphy: Alex, I’ve spent a bit of time in the climate change debate. The people who resist the IPCC’s (Intergovernmental Panel on Climate Change) conclusions are skeptical of government intervention. People assume that in twenty or thirty years we’ll all have electric cars and far less CO2 emissions. You argue against phasing out fossil fuels. You argue they are an important part of our future.
AE: Yes, there’s two aspects to it. The main one is that it’s proper that we have a fossil future, and that is why the subtitle to my book is “Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas— Not Less.” But a big part is the economic analysis that concludes that one way or another, fossil fuels are going to be used more in the future, even if some of the bad policies get passed. And part of what I’m arguing is that we shouldn’t pass those bad policies, because even if we are using the same amount of fossil fuel in the future, there’s an enormous opportunity cost of premature deaths and opportunity loss.
By our standards, the world is extremely poor, including energy poor, and one point I make in the book is that there are six billion people in the world who by our standards use a totally inadequate amount of energy, less electricity than one of our refrigerators uses. We live in a world that is energy deprived, and then you learn that fossil fuels provide 80 percent of that energy and their use is still growing, particularly in the parts of the world that care most about low-cost reliable energy. It is insane to talk about phasing them out rapidly. The other side has an enormous burden of proof when claiming that we should be phasing out fossil fuels when the value they provide is so needed and they’re clearly uniquely good at providing it.
JD: Alex, my favorite part of the book is part 4, when you talk about framing the debate. This could apply to so many political issues in our country. You discuss the “anti-impact framework,” which assumes the absurd goal of zero human impact on the environment. You also address “arguing to 100,” which entails not simply moving halfway toward your opponent’s goals. Talk about the importance of reframing the climate change debate in the political sense.
AE: I use a controversial example for clarity, although you’re not supposed to use controversial examples to make new points. I use the example of Trump’s election—and it’s not to endorse or condemn it. It’s just to show the dynamics. I think of every debate as involving a moral good and a moral evil. You can think of it as the good “+100” and the evil “–100.” Think of the American political discussion that occurred before Trump’s election as 100 was “more equality” and –100 was “increasing inequality.” It was all about equality, we want more equality, and it was framed that way. Now, imagine if Trump had tried to argue for his policies within that framework. He couldn’t do it effectively because the policies he wanted to enact would not increase equality and might actually increase inequality. What he did was to reject that framework instead and bring on the immortal hat. “Make America Great Again.” What that really represents is a reframing. He reframed the discussion in terms of American greatness. So, +100 was American greatness and –100 was American decline. And then what he was able to do was to argue that all his specific policies were moving us toward 100! And this is what I call arguing to 100. You set what the moral good is and then you argue that you are getting us there.
Look at the energy debate and how it has been framed. Particularly prior to my work and some others, it has been framed as eliminating fossil fuels, or at least eliminating their CO2 emissions. Look at most institutions in the world—corporations, countries, investment firms. They all have these net zero goals. That’s saying the goal is to eliminate emissions, which really means eliminating fossil fuels. Then the evil is fossil fuels.
Now what’s happened is that many defenders of fossil fuels are stuck in the status quo. Instead of challenging the framework, they accept it and do what I call arguing to 0. Somebody puts forward the Green New Deal, and the Green New Deal is an argument to 100: if we’re going to get to the elimination of CO2, we need to move in this direction quickly, so we need to switch to renewables, and we need these “investments” and taxes to do so. Then the other side says, No, that will be impractical, or it will cost too much, or they’ll make fun of it. I call this arguing to 0 because if the other side proposes positive things and you shoot them down, your best-case scenario is zero. You don’t move at all.
I reject this framing of “our goal is to eliminate CO2 emissions and fossil fuels,” and as I talk about it in the book, the deeper goal underlying that is to eliminate human impact on the earth. I frame it broadly, but our goal should be to advance human flourishing, and when we’re thinking about global issues, that should be the goal. The –100 is increasing human suffering on earth—and once you frame it that way, then people are very open to the possibility that more fossil fuels are beneficial and we need more of them.
So, because I know you’re interested in how other proliberty people can argue the case, the lesson is that you need a positive moral goal, or you can think of it as a vision, and then you need a positive policy to get there. In part 4 of the book, I talk about the policy of energy freedom. I work with elected officials, and one thing I’m constantly telling them is that you need to propose your own profreedom policies—it can’t just be reacting to the bad ones! And just to anticipate one objection, people sometimes think that if you’re proliberty, you can’t be in favor of positive policies because you’re against these things. If there’s a bad policy in place, changing it is a kind of positive policy. I can say we should pull out of the Paris Climate Accords. That is an action that you can say leads to this inspiring vision. And then I would argue—and this gets into government—that people need to think carefully about what the right profreedom policy is; it’s not the most obvious thing. Don’t just do anything. You need a positive vision and a positive policy, and that leads to a totally different level of effectiveness in persuading people.
RM: Alex, your book resonated with me where you explained how it can be that all these ostensible experts on climate change issues are wrong. I like how you framed it: it’s not so much the experts are wrong in the narrow area of their expertise, but the chain through which knowledge is communicated to the public has lots of links in it. It gets distorted. Just one example: William Nordhaus, who won the Nobel Prize for his work on the economics of climate change, is arguably the top economist in this area. His own model shows the 1.5°C cap on global warming would be so economically destructive it would be better if governments did nothing. And yet right after he won the Nobel Prize, the same weekend, the UN came out with its special report on 1.5°C of warming. A New York Times reporter asked Professor Nordhaus, “Do we still have time to halt warming at 1.5°C?” And he said, “No, I think at this point it is too late.” He didn’t add “and thank goodness, because that would be catastrophic.” He just left it at that. So, it is important to show people the dichotomy between what the actual peer-reviewed literature says and how the media communicates it to people.
AE: Interestingly, you guys have picked up on two of what I would say are innovations in the book. In clarifying the issue of fossil fuels, there is how to think about it and then how to explain it to others. There’s arguing to 100 and then the idea Bob is referring to. I use the term “knowledge system” throughout the book, and this is to capture the fact that when we are told what expert conclusions are, we need to recognize that we don’t just get those conclusions directly from the expert researchers in the field. There’s a process by which what those researchers find is synthesized, disseminated, and then evaluated in terms of what actions they might lead to, and I show that at every stage of this process, there are big distortions just in terms of evaluation.
I point out in chapter 1 that many of the expert conclusions that we’re taught, particularly the notion that we should rapidly eliminate fossil fuels, ignore the huge benefits of fossil fuels. I talk about Michael Mann, one of what I call “designated experts” on this issue, because he has a whole book about fossil fuels and talks about fossil fuels in agriculture—but he only talks about negatives or alleged negatives. He doesn’t talk about the fact that the whole world would starve without fossil fuels or their equivalent, and that there’s no reason to believe that their agricultural functions, including as a fertilizer, can be replaced in any reasonable timeframe. This kind of thinking—or nonthinking—is what leads us to an energy crisis or a fertilizer crisis, as we are experiencing today, because people like Michael Mann told us we should make decisions about this while ignoring the benefits.
The IPPC (International Plant Protection Convention) has a report called Summaries for Policymakers, and these summaries are distributed to news outlets, where they get distorted. I call this “dissemination distortion.” I think the IPCC itself is fundamentally a terrible synthesizer of knowledge, mainly because they too ignore the benefits of fossil fuels, including the fact that thanks in large part to fossil fuels, we’re safer than ever before from the climate. This is the result of what I call “climate mastery,” and you cannot talk intelligently about climate and the threat of climate change if you don’t recognize that we’re far safer from climate. There has been a 98 percent decline in climate-related disaster deaths over the last one hundred years, and the UN doesn’t mention this in any of its reports. That’s like a polio report that doesn’t mention that we have a polio vaccine, a preventative to the disease, and that we’re far better off.
I also mention that the researchers themselves face problematic incentives, including the degree to which the government funds the climate research. The government people behind the funding are very interested in catastrophe scenarios that justify increases in their power. And so, what you find is that even if all the researchers are well intentioned and doing their best, the action conclusions that we’re given can be totally wrong. I’m trying to break this common idea that if we’re told that the experts say we should do X, then that must be right. The point is it can be 180 degrees wrong, and in fact, I show the track record is often that wrong—that is, they’ve recommended policies that would have ended billions of lives prematurely.
RM: Jeff mentioned you approach these issues from philosophical background. Wasn’t it Senator Barbara Boxer who attempted to dismiss you?
AE: Yes.
RM: You write about an anecdote from a congressional hearing. It was about somebody who’s an expert on how much CO2 the atmosphere can retain and what increases in CO2 concentration will mean in terms of how much warmer the planet will be in the year 2100. That’s a very dubious thing we don’t know much about. It is a very complex process. But even if someone is an expert, it does not mean that they know, therefore, that the optimal carbon tax is $87 per ton! There is so much going into that conclusion that you can’t be an expert in one little area and then pontificate on what humanity should do, because it involves many different people’s expertise.
AE: Definitely! Part of my point in chapter 1, and this also comes up when I discuss the issue of externalities, is that there is a systemic benefit denial when it comes to fossil fuels. It’s not particularly well known that climate-related disaster deaths are way down—but if you think about it logically, would I rather be alive today, with today’s weather and our ability to deal with it, versus the weather of one hundred or two hundred years ago and our ability to deal with it back then? Of course you would choose living today! What you grasp is that our ability to deal with the climate, or what I would call our climate mastery ability, is so much more important than the exact current state of the global climate system.
What you want to look out for is are there any potential changes that are so dramatic that they are likely to overwhelm us. Whether it’s that the warming is so rapid that it leads to rapid sea level rises or that the storms become two or three times more powerful. If it’s that, yes, then you get worried. But if it’s that it’ll become two degrees warmer or three degrees warmer in a given timeframe or the storms will become 20 percent more intense or it’ll become a little drier or wetter in certain places, that’s just so inconsequential, even climate-wise, compared to your ability to master it. One point about mastery people don’t get is that they can neutralize negatives. What is negative climate-wise depends on your degree of mastery. I love snowboarding and snowmobiling, so I like to go to Snowbird, in Utah. The snow there used to be a negative. It was a threat. But thanks to mastery, the area has been transformed into a positive! You can say the same for the almost tropical conditions where I live, in Laguna Beach. It is considered a positive to live there with the heat, but with less mastery, it would not be nearly as positive, let alone to live in Florida. So many people are moving to Florida and Texas because some of the negatives there have become positives, thanks to air-conditioning that allows you to handle the worst periods indoors.
JD: Alex, your description of our faulty knowledge system is alarming to me because it would affect a lot of other political and economic issues. As you point out, we need “synthesizers” to put knowledge in context. We saw this during covid. What do epidemiologists say? What do virologists say? Well, they might have the kind of specific technical expertise Bob mentioned, but that doesn’t mean they are equipped to determine the value of tradeoffs for society at large over shutting down businesses in response to covid. I think you are very much the synthesizer here. The idea that we don’t need philosophers to make sense of the questions and answers is really dangerous.
AE: I think covid is a great example, and I bring it up in chapter 1. With covid, you have this very clear situation where the experts say we have to lock down, and if you dispute that, you’re against the experts and you’re claiming that you know better. I think one thing that happens is sometimes the profreedom people will too easily jump on a certain contrarian position in terms of the content of the issues because that seems to protect freedom. Some people would underestimate the severity of covid because they feel we can’t have freedom, whereas my view was that the government’s policy fundamentally should be “innocent until proven guilty,” which is the most underrated political principle today. But essentially, if there’s a demonstrable danger from somebody, then you can validly say “you should quarantine.” But you cannot say to everybody “you’re guilty because you could potentially infect somebody in the next two years, so you all have to stay in your homes.” Even if it is quite severe and if you’re more concerned about the severity, then get better at testing so you can validate whether somebody’s infectious.
There’s a tendency of people with status to take different kinds of threats and argue that this threat justifies a vast expansion of my power. Part of what they do is they ignore all the downsides of them getting that power. And in the case of covid, you don’t think about all the negative consequences of locking people down.
One thing that led to the lockdown frenzy also applies to fossil fuels, and that is the question of what is the goal that your policy is pursuing. Because that’s going to determine the standard by which you evaluate whether this policy’s good or this policy’s bad. And with covid, the goal that wasn’t stated explicitly but was operating nonetheless was essentially to eliminate this virus at all costs. That was really the goal of covid policy, and that is a totally unjustifiable goal! Nobody could argue that this one virus should be eliminated at all costs, but it functions that way until you identify explicitly that this is the goal we’re pursuing and it makes no sense.
And it’s a similar thing with energy, where the goal right now is to eliminate CO2 emissions at all costs. That is not a justifiable goal, and when you make it explicit, it becomes clear that doesn’t make any sense as a goal. Maybe it’s an aspect of advancing human flourishing, but it can’t be that we’re going to get rid of whatever it is at all costs. Otherwise, we would literally kill ourselves right now.
JD: In part 3 of the book you lay out the case for why CO2 emissions are not all they’re claimed to be—and might actually be beneficial in many ways.
AE: Part 3 is the most controversial. Just to give the structure of it, part 1 is called “Framework,” and it’s about how what I call our knowledge system is evaluating the issue of what to do about fossil fuels based on an ultimately antihuman framework which I call “the anti-impact framework,” which says that human impact on nature is intrinsically immoral. Our goal should be to eliminate it; it’s inevitably self-destructive. It’s based on this idea that the planet is this delicate nurturer and if we impact it, it’s going to punish us! My point is people who we’re being told are experts are evaluating fossil fuels using the totally wrong framework, and this leads them to ignore the benefits of fossil fuels to human flourishing. And it leads them to “catastrophize” the side effects, because they think every impact we have is going to lead nature to punish us like a vengeful god. That’s their perspective. OK, but then let’s look at it from within a human-flourishing framework, where our goal is to advance human flourishing on earth. Then our premise becomes the earth is not this delicate nurturer. It’s wild potential that we need to impact intelligently.
Part 2 is looking at the benefits. It argues that the benefits of cost-effective energy are incomparably greater than what we’re taught, and that fossil fuels are uniquely capable of providing energy for the billions of people who have energy and the billions of people who need energy. In essence, it’s saying that the livability of the earth depends on our use of fossil fuels. And I don’t think it’s refutable. Somebody could say they’ve discovered a new technology and it can replace fossil fuels. I don’t think it’s plausible, but interestingly, a lot of the climate catastrophists are taking that tack. They’re not actually attacking me on climate and climate mastery; they’re attacking me on how amazing renewable energies are. For an example, take Andrew Dessler who was a guest on the Joe Rogan podcast. He has now apparently become the world’s energy expert. His attack on me is almost all based on the notion that renewables are so wonderful, which is quite a thing to say, given that we’ve tried to replace fossil fuels with renewables, and even restricted fossil fuels, and now we have shortages. And Biden is not going to China for solar panels. He’s going to Saudi Arabia for oil!
Part 3 is saying that fossil fuels are not causing climate catastrophe, but they’re actually driving a climate renaissance in which we’re far safer from climate. There is nothing in the evidence about the future of climate impacts of fossil fuels that is catastrophic, let alone apocalyptic, if you factor in our mastery ability. Once you factor in the mastery ability, it’s hard to be scared about different kinds of climate impacts. My claim about the establishment is that they’re not only ignoring the broad benefits of fossil fuels. They are in particular ignoring the climate mastery benefits. Because their implicit goal is to eliminate human impact because it’s evil. They think our impact on the climate is intrinsically immoral and we shouldn’t do it, and they expect us to be punished for it. It has a religious quality to it, where the commandment is “thou shalt not impact the climate” and the climate is going to punish us vengefully if we do. So much of the climate discussion is this belief that it’s wrong for us to impact the climate and we’re sinners and we shouldn’t do it—versus let’s look clinically at what these impacts are, positive and negative and neutral, and then what are the benefits that come from it. When you do that in a clinical, prohuman, kind of nondogmatic way, you have a totally different view of the whole situation.
RM: Alex, this is a point you make in a few places in the book. You are skeptical of alarmists, whether they really are concerned about human welfare, because if we need to get CO2 emissions down to net zero by 2050, if not sooner, alarmists would be the biggest boosters of nuclear and hydro energy! I think James Hansen is possibly the only major advocate who is pronuclear at this point. It makes you wonder about the sincerity and actual motivation. Clearly, nuclear and hydro should be embraced with open arms if the goal is to dramatically reduce CO2. But there is political resistance. People don’t like expensive energy. And yet they’re against those as well.
AE: You said sincerity and motivation, and I think both of those are very much in question. And this is part of what I point out in chapter 1: part of the reason we should be very suspicious of our knowledge system is that, again, it’s hostile to fossil fuels, but it’s also hostile to nuclear, it’s hostile to hydro, and it’s hostile to all the activities involved in solar and wind power, including mining. Solar and wind involve unprecedented amounts of mining and unprecedented amounts of industrial development, and that’s part of why there is resistance to them. And so what you see is that our knowledge system and our designated experts are hostile to all forms of energy, whereas to your point, if you valued energy at all, you’d be really scared about the negative effects: you would be overwhelmingly pronuclear, prohydro, pro–anything we can do. You would be as worked up about the threat of reduced energy use as you are about climate catastrophe.
Now, in reality, you should be infinitely more worked up about the threat of less energy! But even if you take the AOC-type position that these climate impacts are going to be so terrible, you have to recognize the catastrophic impacts of using less energy. And fortunately—I mean, fortunately intellectually, not existentially—we have an energy crisis right now that’s illustrating that. I’ve been saying for years, including in that exchange where Barbara Boxer said “I don’t appreciate being lectured by a philosopher,” you need to look at the benefits of fossil fuels. I told her and the rest of that group that energy is the industry that powers every other industry. The price of energy determines the price of everything, and we’re seeing that right now, with price inflation being substantially driven by energy prices! Everything I say in Fossil Future is coming true: if you ignore the benefits of fossil fuels, and more broadly the importance of cost-effective energy, you are going to hurt so many people, including their ability to feed themselves.
JD: Alex, if we consider nuclear the cleaner alternative to coal for electricity, I worry about the political and regulatory environment after Fukushima. In the US, only one new reactor has been built, in Georgia, and it’s not online yet. Germany shut down nuclear plants. I fear the future of nuclear power may be somewhat dead in the water.
AE: It’s important to recognize that absent substantial changes in the approach to nuclear energy, it is dead in the water. I think of myself as one of the leaders of what I call the energy humanist movement, consisting of people who are looking at energy issues in humanistic terms. Looking at fossil fuels, energy humanists consider the benefits and the side effects carefully. One kind of error that some pronuclear people in this movement make is that they act like nuclear is more of a near-term replacement than it is. What you’re talking about is very important. Since the Nuclear Regulatory Commission was created in 1974, we have not had a single reactor that has gone from conception to completion under their regulatory regime. In Georgia, we have unbelievable cost overruns. Construction is becoming uneconomical. This is not something that is poised to be a rapid replacement! We need to recognize that the nuclear status quo policy is a disaster and it needs to be changed.
In my work with elected officials, I’m working on an energy freedom platform which has a good shot at having some influence, particularly if the Republicans win. And part 2 of that platform is to decriminalize nuclear energy. I have a list of eight policies that are necessary so that nuclear can compete on a free market. But we need to recognize that it is dead in the water as any kind of scalable substitute, and we need to change that. In 1970, you could build new reactors cheaply, but that political environment is gone for the moment.
RM: You warn that people often overrate the ability of nuclear to replace fossil fuels. In the book, you discuss how energy needs are broader than just electricity production. People say, “That country gets 25 percent of its energy from renewables” when they mean 25 percent of electricity. When you count industrial heating and transportation, which all require energy, the actual percentage is much lower. Would you talk about that?
AE: My favorite example is Bill McKibben, who is one of the designated experts on this issue. When his book The End of Nature was published in 1989, its marketing said that it was warning us accurately about global warming. But his claims in that book have not come true in terms of their severity. And his policies would have been horrific had they been passed! In an interview, he said Germany was getting 50 percent of their energy from solar! Now, he was talking in December and his first error was he used a daily high from June as an average high of electricity coming from solar. But that was a daily high, not the average throughout the day—it’s like a peak during the day. And then, he’s only taking electricity, not energy, even though most of our energy use is not from electricity. It’s for things like transportation, for high-heat uses, and sometimes clean residential heat via natural gas. This is part of the reason Germany is superdependent on Russia, because they use natural gas for so many things, including compensating for the unreliability of solar and wind. He was taking the statistic from June and assumed that it was still true in December. Of course, one of the problems of solar and wind is they’re seasonal: solar is not anywhere near as good in December as it is in June!
McKibben is telling us what to do about energy, but he doesn’t know the difference between electricity and energy; takes daytime highs and equates them with averages; and equates solar in December with solar in June. It’s important to be precise. The fact that so many of our leading thinkers are imprecise should solidify the idea that our whole establishment doesn’t value energy—and there’s a lot of reasons to think it’s hostile to energy.
make this connection in chapter 3, where I analyze what’s going on with experts in our knowledge system: if you think human impact on nature is a bad thing that should be eliminated, you hate the benefits of energy. It’s not just you hate there’s pollution, or there’s CO2 and you think that’s problematic. The very purpose of energy is to do work on the rest of nature. That’s what it is. It’s the capacity to do work. The more energy we use, the more we are going to transform nature to suit our purposes. And “transform” here just means “have an impact on.” So, if you’re against impact, you’re against transformation and you’re against energy, and this is what you get with the most consistent of our designated experts. They’ll say we’re using too much energy, and that is like saying we have too many people. And it’s a deep opposition to humanity.
JD: Yes, that’s a philosophical problem. An opposition to what benefits humanity.
Let’s talk briefly about the developing world, which you suggest we call the “unempowered world.” Something like three billion people on earth basically don’t consume energy. Aren’t we being neocolonialists in the West if we try to thrust our anti–fossil fuel mentality on them? People in Africa or India or China might like to have a car or a condo or air-conditioning too!
AE: Yes, it’s unjust, and this is one of the arguments that I’ve made in Moral Case for Fossil Fuels and again in Fossil Future that has resonated the most and that the other side is most terrified of because it undercuts their claimed humanitarianism. Even when they talk about climate, they’ll say, “I’m so concerned about climate because there will be worse storms in Indonesia, and I really care about those people.” If you care about people, they need energy. They need productive ability that will enable them to deal with storms and to feed themselves and protect themselves from nature and have medical care and education. You need energy for all these things. But you can see they’re making that appeal. They’re claiming to care about the welfare of poor people because that’s an issue that resonates with people. It certainly is unjust to deprive people of opportunity who are already in a low-opportunity situation.
The Washington Post, about a month before my book came out, attempted a cancel campaign on me and tried to characterize me as a racist and said, “He doesn’t care about poor people. He’s just claiming to care and so you don’t need to listen to his arguments.” This “racist” argument was insane, and I was able to preempt the story and refute it, and they watered down the article and didn’t use the word racist. But clearly, they are threatened by this argument that their policies are most harmful to the lowest-opportunity people in the world, and that’s why they want to use this ad hominem, because they have no answer to that argument.
RM: Again, it seems they’re hiding their true motive. We shouldn’t paint with overly broad strokes— sometimes the loudest activists get the microphone in the political debate, rather than the sober and serious people. But the claimed motivations don’t always match. Sometimes they simply say we’re just using too much energy altogether. The issue is they just don’t like capitalism. They think humans’ standard of living is too high, so they implicitly agree more energy use means a higher standard of living. They’re against a higher standard of living; therefore, they want to restrict energy use. They are consistent if you know their true motivations! But they realize they have to sell it to the public using a different framework.
AE: Definitely. You mention painting with a broad brush, and it’s important not to do that. I explain in chapter 3 that most of us have adopted what I call the anti-impact framework. When we’re talking about the world, we’re often doing a contradictory thing, which is optimizing for eliminating human impact and at the same time optimizing for advancing human flourishing. And one place this happens is with climate. Most people’s goal with respect to climate is how do we minimize or eliminate our impact on the climate. They’ll talk about how to stop climate change, but what does that mean? That means stop human climate impact. But from a human-flourishing perspective, that’s a crazy goal. Your goal should be to advance climate livability. As I mentioned before, priority number one should be to increase your mastery of the climate because that allows you to neutralize negatives, and in fact turn negatives into positives.
And yet, if you push them on it, most people, who are prohuman, if their values are clarified explicitly, are thinking about the climate change in an antihuman way. So, I’m challenging readers to think about what their own operating framework on climate change is and are they thinking about this issue in a consistently prohuman way. One of my discoveries in writing this book was that I wasn’t fully doing this. For example, with the climate issue, I was assuming that man-made warming was bad instead of being clinical and saying “Where is it bad for humans and where is it good for humans?” There are a number of places where it is clearly good for humans, and I realized I was thinking that if we created it, it must be bad—versus not having any bias one way or another. Is the result good for us or is it not good for us?
JD: We could discuss this book for hours! You can find it on Amazon and at FossilFuture.com. You can follow Alex Epstein on his website, AlexEpstein.com. And most importantly, you can follow him on Twitter at the same handle, @AlexEpstein, and keep up with what he’s doing. Please defend him, promote him, get this book out there. It is incredibly important. This is civilizational. A lot of people are antiprosperity and don’t understand tradeoffs. They don’t understand the world we live in, and they simply don’t share our goals of greater prosperity for people, and they’re hostile to capitalism. We have to stop these people who want to curtail our future and that of our kids and grandkids. So, Alex, I want to thank you so much for writing the book and for joining us.
AE: So much of the world is changed by influential people, which is why I wanted you and Bob to read the book before we spoke, so we could have an informed discussion. I know that some percentage of the readers will agree and spread the ideas. If you know of influential shows or influential people who would like a copy of the book, I’m very eager to send signed copies to these people. If you know of prominent hosts, prominent people who might be interested, tell them, or you can reach out to me (Alex@AlexEpstein.com). You would not believe how effective that can be, as someone reached out to you and this podcast happened. It’s a superefficient way to get the word out, and it doesn’t cost any money. You just have to introduce us.
JD: Congratulations, Alex. Thanks.
AE: Thank you.
Alex Epstein is an author and commentator who advocates for the use of fossil fuels. He is the founder and president of the Center for Industrial Progress, a think tank in San Diego, California. He holds a BA in philosophy and computer science from Duke University. He is a vocal opponent of the mainstream climate change agenda and has appeared in many forums to promote fossil fuels' continued use and expansion. He is the author of three books: Fossil Fuels Improve the Planet (2013), The Moral Case for Fossil Fuels (2014), and his latest, Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas—Not Less (2022). AlexEpstein.com and Twitter @AlexEsptein
Tate Fegley joins Ryan McMaken and Tho Bishop to discuss his recent Mises Wire article, "Private Property and Customer Safety: Starbucks Learns a Hard Lesson". As businesses increasingly interject broader "social values" into their business plans, customers are increasingly forced to make difficult decisions about how to navigate their economic behavior with ideological values. What role does the ideology of the state play in the decisions behind how businesses behave? Is a battle for power an inevitable consequence of a civil rights regime? How would these things be handled if we took property rights seriously?
This and more on this episode of Radio Rothbard.
Recommended Reading "Private Property and Customer Safety: Starbucks Learns a Hard Lesson" by Tate Fegley: Mises.org/RR_100_A
"The Equality Act's Attack on Religion Is Really about Private Property Rights" by Ryan McMaken: Mises.org/RR_100_B
"The Transgender Debate Should Be about Women’s Freedom and Private Property Rights" by Jess Gill: Mises.org/RR_100_C
"To Understand Economics, First Understand Private Property" by Chris Calton: Mises.org/RR_100_D
"Woke Capitalism Is a Monopoly Game" by Michael Rectenwald: Mises.org/RR_100_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
While people from poor countries seek to live in places like the USA because of its stable institutions and welfare state, could migration of people from stable countries to less-developed ones make those countries better off?
Original Article: "The Other Immigration Question: Should People from Wealthy Countries Migrate to Poorer Ones?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Because government is predatory, it may seem ironic then to use the political system as a means of protecting one's own property, family, and loved ones. But there are times when such a strategy makes sense.
Original Article: "Practicing Politics as Self-Defense"
This Audio Mises Wire is generously sponsored by Christopher Condon.
At the urging of the United States, Germany and other European governments have levied sanctions against Russia. In reality, these governments have levied sanctions against themselves and their citizens.
Original Article: "Germany's (and Europe's) Self-Inflicted Upcoming Energy Crunch"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fed is slowly increasing interest rates in the hopes that the economy will experience a "soft landing." However, there is no way to soften the blows about to fall on the economy.
Original Article: "Powell's Pivot to "Pain" but No Gain: Triggering the Coming Recession"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fed's suppression of interest rates in the USA didn't just affect this nation's economy. It also drove investors to seek higher interest rates in questionable investments.
Original Article: "How the Fed Helped Create Another Calamity: The Ongoing Emerging Market Debt Crisis"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Includes an introduction by Jeff Deist.
Presented at the 2022 Libertarian Scholars Conference, in Nashville, Tennessee on September 10, 2022.
While we often concentrate on government agents' antiliberty actions, it is easy to overlook the shadow government of private business firms and NGOs that do the government's bidding.
Original Article: "America's Secret Government by Proxy"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Brandan Buck, a historian on the anti-war right and a recent participant at the Rothbard Graduate Seminar. The conversation looks at the parallels between modern American politics and the political climate that gave rise to America's foreign policy in the second half of the 20th Century. How did the American right get dragged into the project of liberal imperialism? Is China the new Evil Empire? How important are figures like Tucker Carlson in questioning the war narrative? These questions and more are answered in this episode.
SPECIAL OFFER: Use coupon code RothPod at the Mises Store to save 20% off of Murray Rothbard's classic The Betrayal of the American Right: Mises.org/Betray.
Follow Brandan Buck on Twitter: @Brandan_Buck
Recommended Reading "No ‘Putin apologia’ and certainly not new: the Old American Right on war" by Brandan Buck: Mises.org/RR_97_A
"Bear Any Burden: Military Sacrifice and Rise of American Populism" by Brandan Buck: Mises.org/RR_97_B
"A History of Distrust: How the Right Lost Faith in Institutions" by Brandan Buck: Mises.org/RR_97_C
"Fly Over Country, the Gunbelt, and the Nationalization of America Internationalism" by Brandan Buck: Mises.org/RR_97_D
The Betrayal of the American Right by Murray N. Rothbard: Mises.org/RR_97_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
While the antimarket and antilibertarian forces are strong, it is easy to forget that free market advocates also have a powerful set of tools.
Original Article: "Taking Stock of the Assets We Have (and We Have a Lot of Them)"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In June 2004, Professor Hoppe visited the Mises Institute in Auburn to deliver an ambitious series of lectures titled Economy, Society, and History.
This project brings together the core of Hoppe’s lifetime of theoretical work in one vital and cohesive source. Here we find provocative themes developed by Hoppe in the 1980s and 90s, particularly in his essays found in A Theory of Socialism and Capitalism and The Economics and Ethics of Private Property. We also find his devastating critique of democracy, made famous in his seminal book Democracy—The God That Failed.
This audiobook is narrated by Paul Strikwerda.
Download the complete audiobook (12 MP3 files) here. This audiobook is also available on Soundcloud and via RSS.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the popularizing of the term "regime" being used against the Federal government. As a recent Bulwark article notes, this change in framing can be seen in conservative politicians like Ron DeSantis to publications like The Federalist. Ryan and Tho welcome the American right sounding more and more like Lew Rockwell, and touch on the contributions of paleoconservatives like Sam Francis.
Recommended Reading "World War I as Fulfillment: Power and the Intellectuals" by Murray N. Rothbard: Mises.org/RR_96_A
"The Problem With Right-Wing Regime Talk" by Joshua Tait: Mises.org/RR_96_B
"The Violent Fantasies of Blake Masters" by Sam Adler-Bell (New York Times): Mises.org/RR_96_C
"Inside the New Right, Where Peter Thiel Is Placing His Biggest Bets" by James Pogue (Vanity Fair): Mises.org/RR_96_D
"The Paranoid Style in American Politics" by Richard Hofstadter (Harper’s Magazine): Mises.org/RR_96_E
"Secede From the Regime" with Ryan McMaken and Lew Rockwell: Mises.org/RR_96_F
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Comic Dave Smith joins Jeff and Bob for a compelling look at the poisonous political landscape in post-goodwill America.
In this celebratory episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the fall of the Cheney and Bush dynasties and what it means for American politics. Other topics include former CIA directors declaring war on half of America, and just how much money Liz Cheney made in DC.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop dive into the FBI's raid of Donald Trump. At a time when half the country already questions the legitimacy of the federal government, what may be the lasting consequences of this political escalation? What steps could Republican governors take if they want to be serious about reigning in the feds? And, was The X-Files the original QAnon? Ryan and Tho consider these questions and more.
Recommended Reading "A Stasi for America" by James Bovard: Mises.org/RR_94_A
"Abolish the FBI" by Ryan McMaken: Mises.org/RR_94_B
"Trump's Potential Legacy: 50 Million+ Enemies of the State" by Tho Bishop: Mises.org/RR_94_C
"Yes, the FBI is America’s Secret Police" by James Bovard: Mises.org/RR_94_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Jeff Deist and Connor Mortell host an AMA during Mises University 2022 on the topic of "What You Can Do."
Recorded at the Mises Institute in Auburn, Alabama, on 30 July 2022.
“The worst thing that can happen to a good cause is, not to be skillfully attacked, but to be ineptly defended." —Frédéric Bastiat
Tho Bishop gave this talk at Mises University 2021.
Additional Resources WhatHasGovernmentDoneToOurMoney.com
Watch or listen to Mises University 2022 at Mises.org/VMU22
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Featuring Joseph Becker, Anthony Cesari, Felicia Jones, and Alex Voss. Recorded at the Mises Institute in Auburn, Alabama, on 30 July 2022.
Fellowships in Residence at the Mises Institute in Auburn, Alabama, are available to graduate students and post-docs interested in scientific research in the Austrian school and libertarian political economy. For more information, visit Mises.org/fellows.
The Mises Institute’s Master of Arts in Austrian Economics is the first graduate program in the United States dedicated exclusively to the teaching of economics as expounded in the works and great treatises of Ludwig von Mises and Murray N. Rothbard. For more information, visit Mises.org/edu.
Students can also apply for scholarships to Mises Institute events at Mises.org/events.
Featuring Per Bylund, Tom DiLorenzo, Lucas Engelhardt, Sandy Klein, Robert Murphy, Patrick Newman, and Tim Terrell. Recorded at the Mises Institute in Auburn, Alabama, on 29 July 2022.
This address was presented at the Mises Institute Graduate School Commencement at the Mises Institute in Auburn, Alabama, on 29 July 2022.
Jeff Deist: Ladies and gentlemen, welcome once again to The Human Action Podcast. We’ve got an excellent guest; he’s a friend of mine and also a friend of the Mises Institute, Stephan Livera. Many of you know him from the bitcoin world, from his eminently successful podcast, The Stephan Livera Podcast, but also, he’s a managing director at Swan Bitcoin International. And our topic this week is political freedom, economic freedom, and personal freedom and how these three things juxtapose. I’m starting to think that economic freedom is the only one we’ve got left, even though we don’t have that necessarily, in a large degree. Stephan, who was living in Australia for most of his life, myself in the United States, we used to think we had a greater degree of political freedom than perhaps we have now after the covid crisis. So Stephan, we can start with the reasons why you personally chose to leave Australia over the last couple of years and why you are currently in Dubai.
Stephan Livera: I was born in Sri Lanka, grew up in Australia. I am an Australian citizen, and essentially, the hysteria over the last two years and the culture in Australia drove me away. I was very, very disappointed with how things went in the country, and I was extremely disappointed at the attitude of what I thought were my fellow Australians. If you are an outsider looking into Australia, you have this perception of Paul Hogan and Steve Irwin and these tough Australian men who don’t take any nonsense from anyone, and they’ll have this sort of rebel outlaw culture. But unfortunately, it seems like that culture is very much gone or deteriorated. I think the culture in Australia is that it went very complacent. They had it too good for too long. They got wealthy. They were the lucky country, as the saying goes. And that essentially drove me away because I was being shut down and stopped from participating in the bitcoin world of attending bitcoin conferences and bitcoin events, obviously representing Swan Bitcoin. I’m being shut out, and I’m paying a very high tax for that privilege of being locked down. It was very, very disappointing to me.
I’ve been a libertarian for most of my life, since I was about fourteen or fifteen years old, and so, if you had asked me before this hysteria, I would have very much said, “Hey, come to Australia, it’s a great country. The taxes aren’t great, but overall, it’s pretty free and the people are nice and it’s good.” But basically, from 2020 onward, that all changed, and I thought, What is the point? Why am I paying this high tax? Obviously as libertarians, we want taxes to be low or zero, but I thought, it’s tolerable. I can tolerate this for the certain freedoms that I’m getting. But in reality, 2020 showed that it was like the tide had gone out and Australia was shown swimming naked. Unfortunately, a lot of Australians do not value freedom. They became complacent, and that drove my search for an alternative.
I’m based in Dubai at the moment for a few reasons. Its low tax, its flight connectivity, its good infrastructure, and it’s ironic, but it ties back to our theme as well, this idea of political freedom and economic freedom, because in Dubai, it’s not like you all vote. The rules are there, and you choose it or you leave. And I saw something appealing about that because at least I can earn and pay very, very low tax or zero income tax. Obviously, there are other little taxes that you pay, things like license fees, sales tax, and so on, but the point is, I viewed it as a much better deal. And yes, obviously, it was a big move in terms of separating from friends and people I knew back in Australia. Obviously, I had my libertarian friends, my bitcoin friends, and obviously some family and friends there, but other than that, I saw myself missing an Australia that does not exist anymore. The Australia of the ’90s and the 2000s is no longer there.
JD: That’s so true. The past is a foreign country, as they say, and the other thing we learned, Stephan, over the past couple of years is that the Anglosphere—Canada and the United States, Australia and New Zealand—didn’t react any better than countries in the East. We think of China as a particularly authoritarian country, and I think that’s true, I think that’s fair. When we think of places like South Korea, when we think of places like Singapore, they were far more rational, in my opinion, in their approach to covid—both on the economic side and the lockdown side, the human side.
There’s so many different ways of looking at this. As you’re in Dubai, there’s actually a small bruhaha over here in the US: like other sports leagues, the National Basketball Association is attempting to increase its footprint around the world and is planning some games coming up in the next season in Dubai, and there’s some pushback on that because apparently Dubai has some pretty draconian antihomosexuality laws. And so, this is where these two things interact. You are able to live fairly freely in a way that you enjoy in Dubai, in terms of your personal work, your personal life, your taxes, but then other people come along and say, “Well, if you happen to be gay and you live in Dubai, you have a tougher time of it.” These things always have to be weighed against one another, but I think this distinction between personal freedom and economic freedom is really quite overblown.
If you look at some of the surveys that different groups have produced—the Fraser Institute and Cato produce what’s called the Human Freedom Index, Heritage produces something called the Index of Economic Freedom, Freedom House produces Freedom in the World—they tend to create an x-y axis with personal freedom as the x and economic freedom as the y. I think that when it really comes down to it, every country has elites. This is just a natural part of life. The question is how can an average person lead their life in that country? That’s really the question, and for you, anyway, the calculus in Australia turned negative.
SL: Absolutely. And I think you’re right to point out that these indexes are interesting. In preparation, I had a look at some of the indexes, the Heritage one, the Cato and Fraser index, and it’s really interesting if you look at who they rate highly. They say, “Ah, these are the free countries.” And guess what? Canada, New Zealand, Australia all rank very highly, and yet they did not look at freedom of movement, which is one of the things these indexes should be looking at. They conflate democracy with freedom. We, as Austrian libertarians, we see it more as private property rights are rights and democracy is cutting against that. Imagine if we just get nine out of ten people to vote to steal the tenth guy’s property, that makes it … well, democratic. Obviously, it’s a little bit of a caricature, of a strawman, but in the Western world, they conflate democracy with freedom as though that’s really the meaning of freedom. You can go and protest for the right to free speech and all of these things when really, I think, the Austrian libertarian aspect or way of thinking is more like “No, whose property is it and who’s the rightful owner of that, and you should be able to decide what happens on that property.”
JD: If you think about your personal body and the property you own, everything flows from that, everything stems from that. If those two things are inviolable, then you are protected. But look, if you held a pure democratic vote in Saudi Arabia on gay marriage, it’d probably lose, right? This idea that democracy and freedom are inextricably linked, is of course, hugely faulty.
I want to tell listeners a little bit about some of the countries that did the best. So here’s the Heritage ranking, which is an economic freedom ranking. To their credit, this is about economics. They have four categories rule of law, government size, the regulatory efficiency, and open markets. And this data’s a little more current from ’21, so this would include the covid years. Singapore comes in number one. Remember Lee Kuan Yew? A lot of folks in the West viewed that guy as an authoritarian, and no one would call Singapore a democratic state today per se. Then Switzerland, Ireland, New Zealand, Luxembourg, Taiwan, Estonia. So I thought that was interesting. But when we go to the Cato- Fraser Human Freedom Index, it checks out a little bit differently. They have Hong Kong in the top position. Now, this data is precovid, so I think that makes a big difference. Then Singapore, then New Zealand, Switzerland, Georgia, United States, Ireland, Lithuania, Australia, and Denmark. So, what good is a freedom index if a virus comes along and all these little protofascists turn into actual fascists and tell you you can’t go to work?
SL: Absolutely. I think it’s very challenging. In some of these indexes, you want to also look at things like the freedom of doing business. Now, of course, in these indexes, they’ll look at things like how quickly can you set up a business if you are starting from scratch, but here’s the problem: If you’re under a lockdown or if there are mask regulations or other restrictions that stop you from actually doing your business, then it’s not really that free to do business, is it? That is a challenging thing to wrestle with because on one hand, we want people to have that freedom to do trade, but then on the other hand, there are these people who—they’re public health technocrats or medicrats of the world—are coming out and making these proclamations. I’m hopeful that this hysteria over the last few years is waning and we can start to see more economic actual freedom.
JD: I think, first and foremost, all these indices have to be updated to have a medical freedom component. Are you subject to so-called public health experts every time there’s a sniffle or a virus or a bird flu or whatever? That’s important. I want to read a bit from the Cato-Fraser Human Freedom Index because they actually break it down into what they’re weighing in far greater detail. They have some categories you would expect, like rule of law, but they have safety and security, things like homicide rates and no gang violence. They have freedom of movement, freedom of religion. Then they have the assembly, association, civil society, the expression of information, so you get into more of what we would consider the political or social rights. They have relationships, like same-sex marriage. So that’s all sort of on one axis. On the economic freedom, there’s size of government, the legal system, the tariffs, the regulations, the taxes. But what’s interesting is they have a sound money category, and this goes to inflation and money growth. I took a quick gander at the top ten countries with the least inflation in 2022 and the only major one there is Japan. The rest are very small, like the Maldives and Vanuatu and Bolivia, Saudi Arabia, but Japan actually has low inflation despite all of their other problems. So, that’s very interesting, to view inflation as injurious to human freedom. I think that’s very important.
SL: Absolutely, but as I’m sure you and listeners are aware, they always play with these metrics. There’s hedonic adaptation, and it’s a subjective thing. As we saw recently, the recent CPI, Consumer Price Index, statistic in the US is 8.3 percent, off the top of my head. Obviously, nobody believes that. It’s obviously much higher than that. And then, it’s not just that. Even in the Japan case, the yen seems to have gone down a fair bit because it seems like a lot of people want the US dollar instead. So, even in the case when there’s supposedly low inflation by the government, that doesn’t necessarily mean the value, the purchasing power, the buying power is staying stable. Of course, in general, I would agree with you that having low inflation is a good thing. It’s a time where people need to be thinking more carefully about where they store their value.
JD: Well, obviously, the US federal government was doing anything and everything it had to do to make sure that that number was not double digits. It wasn’t going to be a ten or an eleven. It’s probably eighteen or something like that in reality, but nonetheless, it’s interesting to think about economic freedom and personal freedom and what you’d be willing to trade individually. For example, when Fraser and Cato talk about religious liberty, a lot of people are atheists or agnostics and would say, “I don’t really care about that. That’s not an important value to me. I’d gladly trade that for maybe some other kind of freedom.” So I guess the question, the rhetorical question for our audience, is would you give up voting, for example, in exchange for paying zero taxes in a jurisdiction. Would you give up any kind of political expression, even mouthing off on Twitter, about politics in your country or any other in exchange for zero taxes? Would you give up other kinds of political freedoms in exchange for zero taxes? I think a lot of people, myself included, would take that.
SL: Right, if we really think about the impact of taxation over the course of your lifetime, especially if you did this when you were young, and you went overseas and you started making money—imagine once you compound it: if anyone just runs a basic compounding calculation on a spreadsheet, you’ll find that the saving for you is massive. By the time you get to the later stage of your life, you have all this additional wealth that you could then put into whatever cause you believe in, whether it’s Austrian economics education or whether it’s bitcoin opensource development. There are all kinds of resources that you could devote and put into causes that you believe in. I think that’s something we all have to really think deeply about, is what do we really see as a life purpose, a life mission. And of course, family is a big part of that too, for many of us, but you have to trade that off because at the end of the day, even if you were in one of the Western supposedly free countries, where you are meant to be able to be more free, well, guess what? In Australia, there was a pregnant woman in Victoria who got arrested on camera because she was organizing an antilockdown protest. What kind of freedom of speech is there, even in the so-called Western free nations, when that is the case?
JD: I think many of the freedoms which are being measured in a lot of the countries which are scoring well are shallow. The important point here is that these freedoms go out the window the minute there’s a crisis, the minute there’s a stock market crash, the minute there’s a terrorist event, the minute there’s a war, the minute there’s a virus. So, freedom really matters when politicians are under the gun and public officials are under the gun, and that’s when they dispense with them. We’ve always had wartime emergency suppression of speech and that sort of thing. This isn’t new.
Let’s talk about voting rights. Fast-forward to 2022. Women have been able to vote for quite a while. Black people have been able to vote in the United States for quite a while. What has that given us? Donald Trump, Joe Biden, Hillary Clinton? This is not a great value for most people. If we look at freedom of speech in the United States, which is, to be fair, I’m going to argue, far more robust than in most countries in the world and certainly more robust even than in most Western countries. Judge Andrew Napolitano, a great friend of the Mises Institute, in his talk about the First Amendment in America said, “You know, if you look at the Supreme Court jurisprudence surrounding it, it’s been a lot more robust than surrounding the Second Amendment or the Fourth Amendment or some of these other important freedoms we thought we enjoyed.” So, the First Amendment has been pretty good overall in the United States, but again, what has that gotten us? It gets us this political class. Look at Twitter, look at woke, look at clown world. What does speech get us at the end of the day? So, the idea that freedom of speech is more important in a country than, let’s say, the tax rate I think is arguable.
SL: To echo a point I believe you’ve made as well, a lot of people are just overly fixated on the social. They don’t really think about the economic part, so they just get caught up in the issue of the day, whatever that issue is, as long as it’s a social issue. It’s very, very rare that people will really get up in arms about an economic issue, worry about taxation, about currency controls, capital controls, business tax rates. If anything, people are getting riled up about all kinds of things, whether it’s the climate or other issues, but it’s always done in a social context. It could be that there’s some kind of mental aspect to it or a sort of natural biological thing where these issues are more interesting to a lot more people and so that plays more on the news, on the media, and so then people just get riled up about it. Obviously, in our case, we should rightly be getting riled up about economic freedom too. Where’s the outrage? Where’s the outrage over the high-tax nations of the world?
JD: Well, the capital controls issue is very real, and I think covid accelerated it. The idea of unbanking people, whether it’s because they’re gun manufacturers or because they’re Canadian truckers protesting covid— if you look at countries like Turkey, which had a nasty currency crisis over the last few years, they have absolutely imposed capital controls on money headed out of the country and on bank deposit withdrawals. That sort of thing is not unthinkable in the West at all. And if you ever had to become an expatriate and leave your Western country, that might be very, very difficult. You may not be able to move money electronically as easily as you thought. You may not be able to move physical gold as easily as you thought, and I think that’s why a lot of bitcoiners make the argument that in a really ugly situation, bitcoin is able to be transportable in a way that other stores of value are not. I think that’s a valuable consideration. I’ll tell you what, I think Americans care more about social issues until it really hits them. I think Americans are very soft and fat and weak and lazy. This is just a fact. I think the slightest material hardship is going to cause a lot of Americans to have a real meltdown, and we’re seeing that. Gas prices have nearly doubled. Inflation on groceries and other necessities is rising. Now we have a baby formula shortage in this country, so it is going to happen. But somehow, the social issues just engage our brain in a certain way. Nobody’s out there protesting in front of a Supreme Court justice’s house over abuses of the Commerce Clause.
SL: Exactly.
JD: Abortion just triggers that hindbrain. I wonder how much longer that’ll be because whatever divisions or fissures we have in society are going to be far, far worse if we have a really nasty economic meltdown.
SL: I think education is so important here, economic education, and that’s why I am a big fan of the Mises Institute. I owe a great intellectual debt to the Mises Institute and the scholars of the Mises Institute. Things will break down and they will look to blame somebody, and because the populations are not economically educated, they’ll just believe what they are told. For example, the common one: “Oh, the prices are rising. Why is that? Oh, because of the corporate greed.” Wait, corporations have been around for how many hundreds of years? How is it that all of a sudden they just became greedy? When we study Austrian economics, we can understand that no, no, it isn’t like they became greedy all of a sudden, in the last month. It’s that they stopped resolving their own issues. And so, supply chain issues. These and other issues have been caused by other problems, things like lockdowns and stopping business and commerce. I think maybe that’s part of it, that economic issues can manifest, and then the root cause might be economic, but then downstream, the impact is a social one, and that’s what gets people triggered per se. That triggers the hindbrain more than “Oh, I can’t feed my baby because no baby formula.”
JD: Yes, I think that’s what René Gerard describes when he talks about scapegoating. I think it’s easier to scapegoat the other on social issues than it is on pure economic issues. If we have widespread unemployment, rising prices, homelessness, starvation, that sort of thing, certainly people will probably coalesce along nasty groups, whether that’s racial, regional, territorial, ethnic, or religious. We certainly don’t want that in the West, and we’ve been free of that in the West for more than one hundred years and I think we take that for granted. We forget how close most people really are to the bone, in terms of their personal saving or their ability to live without a paycheck or the degree to which they would be dependent on neighbors or charity or government very, very quickly.
Let’s take a quick look at Singapore because I’ve read a few different Lee Kuan Yew biographies, a very fascinating guy, and Singapore has been called fundamentally undemocratic in the Press Freedom Index. It has a Public Order Act, which means you need to have a police permit to have any kind of organized protest or to even hold a conference which has political elements to it. Actually, Singapore ranked 151st out of 180 countries in this Press Freedom Index. And of course, it’s infamous for some of its draconian criminal laws, with respect to littering or just spitting out your gum or vandalism or graffiti, and there have been some Western tourists who have been ensnared and had harsh treatment by caning. A lot of people would look at that and say this is an authoritarian regime. But it’s been called a competitive authoritarian regime. What do we make of Singapore? If you go there, it’s unbelievably modern and apparently prosperous, but not free in a Western conception.
SL: I think you’re right. I recall my visit to Singapore around December 2019. I thought it was really cool. Changi Airport, the Singapore airport, it’s rated as one of the best airports on earth. The infrastructure is excellent. The service is excellent. I had a great time in my short visit there. It’s really interesting to see that parallel. When I’m in other countries, I make sure I respect their culture, their rules, but as long as you do that, you can get by. Setting the covid stuff aside, they’ve been a little more authoritarian, but Singapore has been relatively prosperous. It has been very prosperous for its citizens and people who go there to work, and it’s quite a common expat working destination. I think maybe the last years have kind of shifted that a little bit, but on the whole, it’s still a really great place. I think what happens is there’s a little bit of a cycle, almost like a pendulum swing, to these things, because it might have been much easier to get set up there, say, ten, fifteen, twenty years ago than today because now you need more money to get in or you need a company to sponsor you to get in. Then what happens is that people get richer, and maybe that is what causes the downswing. That said, it’s not that I think Singapore is going to go on a downswing, but you want to find the places that are on the upswing and see if that is where I’m going to place some of my chips.
JD: That is interesting. You want to find places that are on the up, and that’s what Jimmy Rogers said about Asia at the turn of the twenty-first century. You look at a place like Singapore and how things work. Everything works, everything is clean, everything is modern. Subways … It’s safe. If you fly Singapore Airlines internationally, let’s say, and then compare that experience to a domestic flight on a thirty-year-old 757 from Detroit to Seattle, where the tray in front of you is half rattled off … You look at some of these countries in the East and you say, “What is it?” It’s not just explainable by what you and I would consider unfettered or free market capitalism. It doesn’t explain everything about why things just sort of work. And things work in Dubai too. Now there’s an underbelly to that. There are people who suffer to make things work, and we understand that. We don’t want to discount that. But nonetheless, if we’re increasingly becoming authoritarian in the West, it’s like you could have authoritarian and nothing works or authoritarian and things work. I hate to think that that’s the choice in the twenty-first century.
SL: It’s a big world out there. There’s two hundred countries or so. You can choose where you go. And even for me—I’m bullish on Dubai— as you were saying, it’s this idea of what’s on the up. I think Dubai is on the up in terms of people coming here, business going on here, favorable regulatory environment, for the most part. I think ultimately everyone has to choose what jurisdiction that is, and maybe if you’re an American listening, well, that’s which state am I going to be in, as an example. And I’m bullish on that idea because that’s really what rewards the jurisdictions that do well. Take yourself out of the bad jurisdictions and go for the good ones. I think that’s the high-level idea, but perhaps to your point as well, some of it is circumstances, as you were saying. Singapore, it’s not just that they had relatively low taxes and so on. It could also be the proximity to China, because they were able to do a lot of trade there. Some of the Middle Eastern countries, like the UAE, have a lot of their business from oil and gas, so maybe some of that is the luck of the draw. But, at the same time, you look at other countries that were so-called blessed. Venezuela has obviously gone very down. They had a lot of natural resources, and at least in the recent years, it has not been a great place.
I think there are always pros and cons, and you just ultimately have to look at where things are going and look at the culture, look at the overall picture, and decide “Well, look, you know what? Given my choices I could either (and I said this to myself) sit in Sydney, Australia, stay in a high-tax nation where the culture is just going down—all these people, they believe in the state, they believe in lockdown-ism. If you tried to argue these things with them, they would say, “No, no, look how many lives were saved,” despite the analyses that were being done. Maybe we might not fully agree with this, but there were analyses, and actually, there was a recent one put out by Gigi Foster. Now, to be clear, she’s not even a libertarian, but she’s an economist, and she put out an analysis showing that even on a quality-adjusted-life-years basis, the lockdowns cost far more than they saved. And this is obvious, right? To anybody who’s studied economics, it’s obvious, but unfortunately, what the people believe matters because there’s a lot of the people around you—maybe they got invested in the lockdown belief early, and now it’s hard for them to change because they were kind of already committed. It’s like a sunk cost fallacy. So, for me, it was either stay in Australia, pay this really high tax, and amongst people who basically hate your freedom or go to another country where it’s low tax and they don’t really care that much about your freedom. You go and do your thing and they do theirs, and maybe that’s about as much as we can reasonably hope for, given the situation and given the world we’re in.
JD: There’s definitely psychological sunk cost to the covid narrative. It’s going to make it very hard for a lot of people to ever give up the idea that lockdowns and vaccines were good and necessary, and I understand. I admire your choice in saying “I’m not going to sit here and just argue with crazy forever. I’m going to take my life in my own hands and go out into the world and go where I feel like I can find greater freedom.” But here’s the fly in the ointment. When you move to Dubai, you are at least at the outset a guest and you’re not going to throw your gum out your Lambo as you’re rolling down the street, you’re not going to go graffiti some mosque, and you’re probably not going to pen letters to the editor denouncing the local government in the newspaper, right? You would feel as a new person and a guest that’s not your role.
But universalism, I think, is the dominant political ideology of the twentieth century. And it’s not dead, and it manifests as political globalism—not the good kind of globalism, where you can get a Diet Coke everywhere. I’m talking about political globalism, the idea that the whole world sort of needs to have a Western-style social democracy. And this mindset of universalism never sleeps. It is relentless. It’s like rust. And so, when Stephan Livera goes to Dubai, he wants to be a good neighbor and do business and be successful and enjoy the freedoms that Dubai offers, but when some people go to Dubai, they look around and say, “Well, this is a place I have to fix.” This is how all the trouble in the world comes to us, because America especially, but the West more generally, has decided it’s our job to police the world and their political arrangements. I think there will always be arbitrage, there will always be young people like you, who are going to go out and go someplace else in the world, or maybe eventually go to Mars or wherever it might be. I just wonder, whether this arbitrage between jurisdictions is going to be challenged in the twenty-first century, in a digital world.
SL: Well, you’re right in that it is being challenged in certain ways, but here’s the question. Will they be successful? The supernational international organizations, they hate this sort of thing. The OECD [Organisation for Economic Co-operation and Development] and other organizations, they’re trying to do things like “No, you should have minimum tax thresholds.” It’s a similar thing in each. They might be in a situation where they can’t afford that because the way that they are competitive is by having low tax. We see that dynamic as well, that there are challenger nations who want to try something different. El Salvador, trying to go and be the bitcoin country where you can freely go as a tourist and spend your bitcoin or set up a business and such.
I see it like it’s a big world out there, and the Western propagandists don’t want you to understand that. They want you to think that only the US, Australia, UK, Canada, and New Zealand are the only countries that you would ever go to, so just stay put, you little plebs. No, just stay put and just take what you’re given. We’re going to tell you the truth. We’re going to tell you what you’re allowed to say on social media, and yet there’s a pushback. We’re saying, “For all these flaws and for all the subsidies, Elon Musk is at least trying to push back on Twitter,” for what it’s worth, right? We’re seeing people like Jack Dorsey come out and be fully bitcoiner and fully try to promote this alternative money.
So, I think it’s just an ebb and flow. There will, of course, be ways that people are trying to control, but then there’ll also be competition, and there will be other places that you can go and other places where they just don’t get as riled up about politics. There’s not protests on the street here. People just, they assess the country and say, “Look, is it going to be a good fit for me? Work, tax, business, other family, friends, etc.—on those dimensions, is it working for me?” And then, yes or no, am I going there? That’s the high-level way that I’m seeing it.
Of course, that overall battle for heart and mind, it still matters. It still does matter that we try to promote sound ways of economic thinking, sound ways of thinking from a political philosophy point of view. I owe you to not aggress against you, and what you owe me is to not aggress against me—and that we promote that basic ethic. I agree that some of that is going to be a cultural battle, and to the point about what they will get outraged about, socially and culturally, yeah, some of that is just what people get outraged about.
JD: Well, maybe we need an index of the least political countries in the world.
SL: That’s a good idea.
JD: Wherever politics does not dominate, that’s where I want to live. I’ll leave you, Stephan, with this note. Economics is social cooperation. Economics is human beings dealing with each other, hopefully absent force or fraud, and that’s it. And so, the idea that there are personal liberties or social liberties or political liberties, which are somehow different from economic liberties and ought to be tracked differently and plotted on two different axes, I think, is false. I think everything flows from economics, from our desire to improve our material well-being and our desire to interact with other human beings in a win-win manner. I think that’s what it comes down to. Stephan, how can people keep in touch with you and see what you’re doing these days?
SL: People can search me online, Stephan Livera, StephanLivera.com, and if they want to find a place to buy and learn about bitcoin, Swan.com is the place. And Jeff, thanks again for hosting me. It’s always a pleasure to chat with you.
Connor Boyack, author of the new Tuttle Twins book America's History: 1215-1776, joins the show to make the Rothbardian case for de-bamboozling history.
America’s History: A Tuttle Twins Series of Stories: TuttleTwins.com/History Rothbard on Historical Revisionism: Mises.org/HAP353-1
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss Jill Biden's "Latinx" outreach and recent polling that illustrates a dramatic shift in political voting patterns. Are we seeing the end of the modern political party system? Do the struggles of American progressives reflect a broader global divide between secular and traditionalist politics?
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by William Yarwood of Mallard UK (MallardUK.com) for a conversation about British politics. What led to the fall of Boris Johnson? What does the Prime Minister's resignation mean for Brexit? Is there anyone in British politics that is interesting? These questions and more are answered in this episode.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Although social media is blamed for many social ills, the sickness doesn't come from Twitter or Facebook but from how the ruling classes have politicized life itself.
Original Article: "Don't Blame Social Media. Blame the Politicization of Nearly Everything"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Ryan McMaken and Tho Bishop look at the question of election integrity and what it means for the regime. How should we look at the allegations made in the film 2,000 Mules? How should we view the concept of election security? What does history tell us about the relationship between state power and voter turnout? Tune in for this and more on this week's episode of Radio Rothbard.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Tho Bishop is joined by JP Cortez of the Sound Money Defense League (SoundMoneyDefense.org). JP, a Mises U alum, talks about the ongoing legislative battles over money at the state level. Which states are doing the most to challenge the Fed? What are some of the most important policies worth fighting for in the future?
To learn more about the Monetary Metals scholarship, visit MoneyMetals.com/Scholarship.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the fallout from Elon Musk's purchase of Twitter. While the move reportedly has authoritarian corporate lawyers openly weeping on intra-company calls, what will be the real impact on political discourse? How did a once-favored Obama Administration ally become a supervillain for the progressive elite?
Recommended Reading "Elon Musk Bought Twitter, and the Pundits Sure Are Mad" by Ryan McMaken: Mises.org/RR_79_A
"Elon Musk's Twitter Gambit and What It Means to the Clique in Power" by Michael Rectenwald: Mises.org/RR_79_B
"Elon Musk, Crony Capitalist" by Lee Enochs: Mises.org/RR_79_C
"A Mixed Hero: A Libertarian Reassessment of Elon Musk" by Konrad Graf: Mises.org/RR_79_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the controversy surrounding recent Florida education reforms. Why does it benefit the state to erode the family structure, and what can be done to combat it?
Recommended Reading "Why Marxist Organizations Like BLM Seek to Dismantle the Western Nuclear Family" by Bradley Thomas: Mises.org/RR_78_A
"Don't Blame Capitalism for the Decline of the Extended Family" by Ryan McMaken: Mises.org/RR_78_B
"How Wage Work Liberated Women (and Men)" by Ryan McMaken: Mises.org/RR_78_C
"Why Do Socialists Hate Families?" by Jonathan Newman: Mises.org/RR_78_D
"Can Libertarians Have Communal Property?" by Ryan McMaken: Mises.org/RR_78_E
Leftism: From de Sade and Marx to Hitler and Marcuse by Erik von Kuehnelt-Leddihn: Mises.org/RR_78_F
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Russian oligarchs, American pols, and state-connected billionaires are all cut from the same cloth: they didn't earn, or fully earn, their wealth and position in society. We must withdraw our sanction of these people.
Original Article: "The Wrong Elites"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss whether Lindsey Graham is the worst member of the US Senate. The two carefully compare him to other terrible American senators — including Mitch McConnell and Tom Cotton — before settling on a definite conclusion.
Also on this episode, Ryan and Tho identify a silver lining to the Senate's Supreme Court confirmation hearing.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Recorded at the 2022 Austrian Economics Research Conference hosted at the Mises Institute in Auburn, Alabama, March 18–19, 2022.
The Murray N. Rothbard Memorial Lecture, sponsored by Steven and Cassandra Torello. Includes audience question and answer period.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop talk about this year's Austrian Economics Research Conference and the value of interdisciplinary approach.
Watch AERC at Mises.org/LIVE
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the economic consequences of Russia's invasion of Ukraine. What has been the damage from America's weaponization of the dollar? Is Russia likely to return to the gold standard? What may be the fallout in Europe?
Recommended Reading "Can Government Successfully Counter Recessions Through Expansionary Policies? Don't Count on It" by Frank Shostak: Mises.org/RR_72_A
"Sanctions against Russia Are the Lockdowns of 2022" by Tho Bishop: Mises.org/RR_72_B
"The Steep Cost of Sanctions for Europe and Russia" by Daniel Lacalle: Mises.org/RR_72_C
"The Economy May Be Finally Peaking, and the Fed Won't Help Matters" by Brendan Brown: Mises.org/RR_72_D
"Why Sanctions Don't Work, and Why They Mostly Hurt Ordinary People" by Ryan McMaken: Mises.org/RR_72_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the fallout from the first week of the Ukraine-Russian conflict. What is the impact on American politics? Are Western leaders capable of de-escalation? What will be the lasting impact on other geopolitical fronts?
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Tho Bishop interviews Norm Singleton, senior fellow of the Market Institute and former legislative director for Congressman Ron Paul. Tho and Norm discuss the experience of being an Austro-libertarian within the belly of DC, the challenges Dr. Paul faced in office, and what Norm sees as some of the most important battles in Washington today.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Ash Navabi, a Canadian economist. Ash breaks down the differences in culture and political traditions between the US and Canada, and offers his take on the clash between the Freedom Convoy protests and the Trudeau regime.
Recommended Reading "Canada Nice No Longer: Trudeau's Totalitarian Response to Trucker Protests" by Mitch Nemeth: Mises.org/RR_70_A
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Saifedean Ammous hosts the podcast The Bitcoin Standard where he discusses bitcoin and economics from the Austrian school perspective. He is the author of several books, including The Bitcoin Standard, The Age of Cryptocurrency, and The Fiat Standard.
Saifedean Ammous: We have lots to talk about. First, I’ll begin by saying the Mises Institute is a place to which I owe an enormous debt of gratitude. I was one of the people who stumbled upon this blog, this seemingly innocent blog, in 2007–08 and then just kept digging into the massive, astonishingly large archive of books and articles that are available there and have not stopped digging since then. That has been absolutely life changing.
I was a PhD student at Columbia University learning regular, mainstream economics, none of which made any sense, and then I start hearing about Ron Paul, making all these crazy speeches that make a lot of sense in a world of politics, where politicians are not supposed to make sense. And so, I start digging into this guy and coming across this incredible website where all these economists make sense. Why would an economist make sense? Economists are supposed to write arcane, esoteric math and pretend they’re engaged in some centuries-long struggle to understand the mathematical foundations of how reality works. But the Mises Institute gave me the idea that economics can make sense, economics can actually be something that is helpful to understanding the world. The point of economics, and this is really the culture shock you get from reading mises.org, is that when you’re studying mainstream economics, the point of learning economics is in trying to understand what these economists are saying, and then when you understand what they’re saying, you don’t learn anything useful for the real world. You just learn what those people are saying and then you pass your test and get your degree and get a job. But with the Mises Institute economists, and the economists of the Austrian school, you use the work of the economists in order to understand the world. So, thank you very much for everything that you do with the Mises Institute. Could you tell us a little bit more about the Institute, its history and your role and the milestones in this development over the years?
Jeff Deist: Over the last year in particular, economists and other social scientists have done a very poor job of helping us understand the world, in particular the unseen. The fallout from covid policies is going to be the real story over the next five or ten or twenty years, the alcoholism, the depression, the weight gain, the drug and alcohol abuse. It’s going to be incredible. Social scientists are supposed to help us understand the human world, just as natural or physical scientists are supposed to help us understand that world. Most economists are failing us. They’re stuck in mathematical modeling and statistics, in data. They don’t consider a proper praxeological approach.
But today the Austrian school has a lot of new applications. It has a lot of new proponents and adherents. I think people understand that economics as a profession doesn’t work. It doesn’t really help society. It doesn’t help us understand the world. It doesn’t make us happier or healthier or wealthier. It just does dumb things like failing to predict the housing crash of 2007, for example, and it gives us central banking and minimum wage and nonsensical narratives about inequality. It provides an intellectual veneer and cover for the political class. This gives the Left ammunition to claim economics is merely a pseudoscience. It just provides intellectual support for capital, for the wealthy. It isn’t a real science. And I understand that critique. I think economists have to bear some responsibility for that.
I hope the Mises Institute provides a counter to all that. We are a free school for anybody who wants to avail themselves of it—maybe a little, maybe a lot. Some people only want to consume the occasional tweet or the odd article to improve their understanding. Some people want to really delve in and read nine-hundred-page books and make Austrian economics part of their life. We want to be a full-service organization for both kinds of people. Saif, you know we live in a high–time preference society that’s been created by the political and banking classes. It’s very easy to look at the landscape and say, “Jeff, this is not the time for nine-hundred-page books written by guys from the 1800s. It’s time for activism.” I understand that. But the flipside is: What matters, what lasts, what is timeless, what is true across time and space?
So yes, fewer and fewer people are willing or capable of sitting down and reading those nine-hundred-page books. Will those people matter more or less in the future? I think they will matter more. Because the Mises Institute is not here so we can plant a flag on top of a pile of rubble, some kind of Mad Max scenario years from now, and say, “See? We were right!” That’s not the point or the goal. The goal is to help people learn and reach what Albert Jay Nock called the Remnant—people who are interested in building a world, a civilization, a society that’s real. One with a foundation. That means capital accumulation. There is no other way. And increasingly, in my opinion, we should talk about separation. About finding the Remnant. If you spend time on social media, you know people have gotten a lot crazier. Maybe they were always crazy and now we just know about it because they can spout off on social media all day. I don’t know which is the case, but it’s clear a significant number of people in the West believe enormously illiberal crazy things.
SA: Yes.
JD: And since we have limited time and resources, since scarcity is a fact, how do we spend our time and energy? Do we try to reach everyone? Do we try to win national elections? Do we wonder why “classical liberalism” seems helpless against progressivism? Or do we try to identify and begin to separate ourselves? That can take place in a variety of ways. That doesn’t necessarily mean geographic secession or even geographic concentration of like-minded people. But it does mean separating in a business sense, in a capital sense, in a political sense, in an economic sense. We have to understand we’re trying to build a world, or improve the world, for people who can be reached. That’s not everyone. I think when we jettison the idea of political universalism, political globalism, it’s really very liberating.
I hope the Mises Institute helps people. I know it does on an individual level. It’s much harder to affect things on a societal level. It’s a very anti-intellectual age in which we find ourselves. But we want to be the biggest and best online school that’s free, that’s digital, that’s available instantaneously for anybody. And increasingly we want mises.org to be a gigantic free library. We’re buying up rights to all kinds of books for which we don’t own the copyright and we’re trying to improve our library function. So, a free school is my idea of what the Mises Institute is.
SA: Yes, it’s very much succeeded in that. One of the most common initial criticisms people have about libertarians is that they come at it from the perspective of the political system and then they find out that there’s a libertarian political party that is massively hopeless. Then they think that libertarianism’s clearly hopeless. I think that is completely missing the point because in my mind, a libertarian political party is going to have to be hopeless because it’s like an atheist branch of Catholicism. It’s just not going to make headway in the Vatican if you start off from the premise that there shouldn’t be a Vatican. And this is the contradiction that a lot of the DC libertarians fall into, and this is why in many cases you see their role is to be basically the bastard. They’re there to justify and give excuses to the regime and convince themselves that they are being pragmatic in order to get concessions from the regime. But in reality, they are actually helping the regime further its ends and its goals by convincing young people who have radical ideas about freedom that this is completely unrealistic and you need to get in with the system. You need to fight at the tiny, little margins to get some of these tiny, increasingly inconsequential ideas that people like the Cato Institute fight for.
For instance, my favorite problem with the Cato Institute is their monetary issues. They’re practically indistinguishable now from run-of-the-mill Keynesians and monetarists. They are pretty much monetarists and they view Austrians as too radical, people like Ludwig von Mises and Murray Rothbard as being too radical. That’s why when something like bitcoin comes along, they’re naturally hostile to it. They’ve been enormously hostile because they are conditioned to think of the problem as having to be solved by government and if only we just had the government to put the right people in. If only they would take Cato’s monetary advisors and put them on the Fed, then we’d have a libertarian free market monetary policy, which is an absurd contradiction in terms that’s never going to get anywhere. The whole point of having a Fed is not to have a free market in money, and if you’re trying to push free market ideas within the Fed, you’re not going to get anywhere. All that you do, again, is serve to move people away from promising ideas of change like bitcoin to allying with the regime. This is why there’s a lot of parallels and a lot of confluence between people at the Mises Institute and bitcoiners, that it’s the same approach.
As you said, the best way to have clean water is to separate the clean water pipes from the sewage. You need to make a separate place where we can have these ideas, we can think about them. It’s not about achieving results immediately, it’s about achieving the correct results, no matter how long it takes. There’s always time for nine-hundred-page books and there’s always time to think about these things in the long term. People who are not reading nine-hundred-page books are still reading nine hundred pages of nine hundred different articles in the New York Times repeating the same stupid talking points over and over and over again. So, you could skip these articles and read the nine-hundred-page book and come out with a much better perspective. It’s a multipreference approach.
Coincidentally, within the Mises crowd, there has been some skepticism of bitcoin, but overall, it’s incomparable to the reaction that you get from the DC libertarian think tanks. It’s striking just how reasonable people at the Mises Institute have been. I’ve spoken to Hans Hoppe about it, I’ve spoken to Joe Salerno about it, I’ve spoken to you. I haven’t spoken to David Gordon, but I know Mike Goldstein spoke to him. Most of these people had problems with bitcoin initially. All of us had problems with bitcoin initially. Everybody thinks about it, but then the notion that we’re going to have a money that is separate from the state is something that makes sense. They’re not hostile to it. They might not necessarily get all the technical aspects of it. They might not be enthusiastic about it, but they’re definitely not hostile to the idea that we’re going to separate money from the state and we’re going to have a software program that everybody can audit replace money. And once you go over a few of the technical problems that people have with it, then the reaction is “Yeah, we’ll let the market decide.” Ron Paul, of course, is like that as well. It’s a very different reaction that you get from the regime libertarians, who are coming up with an endless parade of problems that they can’t even defend and state eloquently. They know that it can’t work and it won’t work, and it ultimately comes down to “Well, that’s not politically realistic. We need to aim for something that is politically realistic.”
JD: When you hear someone talking about public policy, so-called, you need to run away from that person. We don’t need public policy. That sounds like a program for cattle. We especially don’t need monetary “policy.” When think tanks talk about this and that monetary policy, how we need some sort of rules-based Fed or some sort of NGDP (nominal gross domestic product) targeting, they are way off base. The minute there’s a crisis or an exigent circumstance, central bankers throw the rules out the window. They don’t follow rules. They’re operating in an ad hoc manner to save their own skins. So much for public policy or monetary policy. Look, the chair of the banking committee (“Financial Services” Committee) in Congress is Maxine Waters. She is a crazy person. The idea that a DC think tank is going to send somebody over to testify before her committee about NGDP targeting is just laughable. She’s just going to say, “Well we need cheaper loans for low-income people.” This is why politics and economics should never mix.
I mentioned nine-hundred-page books, but Mises also wrote Nation, State, and Economy and Liberalism in the interwar years. These were more political tracts about liberalism per se. And people should read these because they are only three hundred pages! For Mises, liberalism meant the wholesale separation of economy and state. Sometimes we lose sight of that. Liberalism, today libertarianism, should not be mistaken for feel-good liberation theology or a rejection of social structures. It’s about the rule of law and property. That’s Mises’s liberalism. It was about a rigid separation of property and state, of economics and state. One paragraph in Liberalism which makes a lot of libertarians squirm distills the entire liberal program—of course, Mises uses “liberal” in the nineteenth-century sense—down to a single word: property. It’s not about living your best life without authority or self-actualization, or accepting a host of left-cultural precepts. All of that is an appendage, with which I don’t particularly agree. I would say people don’t have to agree with this appendage.
SA: It’s tangential at best.
JD: It’s tangential, but more importantly, high–time preference societies tend to devolve very quickly. We want less external governance, but also no internal governance—which strikes me as a crazy proposition. In other words, we ought to support all the intermediary institutions that stand between the individual and the state.
That’s a bit of a detour from your question, but I do think when bitcoin came along, it posed a serious challenge to Austrians and libertarians. My own thinking on it has evolved a lot, albeit gradually, starting with Bob Murphy and then Caitlin Long and then your book. Certainly we support the idea of denationalization of money. We love the idea of competing currencies, but is bitcoin just a particular brand among many? If so, we shouldn’t advocate one brand over another, like Toyota over Honda. That was my facile thinking before reading your book The Bitcoin Standard. I’ve changed my thoughts since then. In Austrian economics circles there has been resistance to bitcoin, certainly. Gold was the ideal alternative to government fiat for so many decades. And to be fair to gold bugs, bitcoin was promoted and sold as a high-tech solution to problems with fiat rather than as a commodity. But algorithms aren’t high-tech per se. They can be very, very complex, but the computing power to solve them isn’t complicated. The image of bitcoin was futuristic money for perpetual travelers who live on islands off Singapore somewhere. I think it should have been sold as a digital commodity. It should have been promoted as a savings vehicle for people worried about inflation. So I don’t want the Mises Institute to be a bitcoin promoter. I don’t view that as our role. But I don’t want us to be a bitcoin antagonist either. So that’s my weaselly answer, Saif.
SA: No, I agree with you. I don’t think it’s a weaselly answer because you do quite a bit of work to educate about bitcoin. But yes, I think you’re absolutely correct in that this is the Mises Institute, it’s not a bitcoin institute. We have the Satoshi Nakamoto Institute, which focuses on promoting the works of Satoshi and on bitcoin, but the Mises Institute is the work of Mises and it has a wider rim, and as powerful as bitcoin is, I think it would be distracting from the overall mission. I know a lot of bitcoiners give me and give you trouble for that, but I don’t particularly see a problem with it. I think your approach has been quite reasonable about it and you’re absolutely correct. For many years I heard about bitcoin and I just dismissed it because I did not think that it had the properties that would make it really replace gold, get us rid of gold. Initially, again, it was promoted as just a faster, cheaper PayPal, that was the main idea. I would say around 2014, ’15, ’16 it becomes clear that this is a pretty powerful monster that is not out there competing with PayPal. This is monetary policy that is set in stone. Nobody can change this, nobody can edit it, and once you start thinking of it this way, then yes, it begins to make sense and that this is going to be a very big deal. That’s the conclusion that you arrive at from this.
Back to the Mises Institute. Tell me more about the history of the Institute. How was it started and what was its initial mission? I know Murray Rothbard played a role in that and Lew Rockwell. Can you tell us a bit more about this?
JD: Well, the Cato Institute was going to be home to Rothbard, and Rothbard intended to create a real viable Austrian outpost there. People don’t know this. The Cato Institute started in San Francisco. Murray Rothbard was out there before it moved to Washington. The idea was to Austrianize free market economics, which was mired in Milton Friedman and monetarism. It was mired in supply-side thinking in the early Reagan years. That was the goal, but Rothbard had a falling-out with the Cato Institute. He felt they were moving away from hard-core or pure Austrian economics. As a result of that, Lew Rockwell got involved and connected with Mises’s widow, Margit. Lew had met Margit and Ludwig von Mises during his days at Arlington House Publishing. Lew and Murray knew Auburn University had a friendly trustee on the board. Auburn also had some friendly professors in the economics department in the early 1980s. So Lew came down to Alabama, and in hindsight that was a stroke of luck. DC think tanks are so bad, and so corrupted, and we need to turn our backs on the whole thing. We need to turn our backs on Washington, and Brussels, and the UN and the IMF (International Monetary Fund), and all of these organizations. So in hindsight, we benefitted enormously from being located outside the Beltway.
Initially, we were involved with the Auburn University economics department. I’d like to point out we actually paid rent to Auburn University. And then Lew started raising some money on his own and we were able to build a building across the street. We’ve expanded that building a couple times since. Over the years we’ve tried to be a place where Austrian economics could be explored in full. Contrary to some of our critics, we are not simply about Mises and Rothbard and Hoppe. You can go through our archives and find vast volumes of work by Carl Menger and Eugen von Böhm-Bawerk and Friedrich von Wieser and lots of other economists in the tradition.
We certainly claim the Misesian strand of pure praxeology, which Rothbard improved upon, and we don’t shy away from the implications of that. Plus Mises and Rothbard wrote about everything. Mises was intimately involved in the Viennese chamber of commerce. We’ve never shied away from considering the full implications of pure praxeology, of pure theory.
We’ve never shied away from considering the implications, as Mises did in Liberalism and Nation, State, and Economy, of secession and breakaway movements and radical decentralization. We’ve never been afraid of the secession word. We’ve never been afraid of openly discussing and considering the ramifications of pure anarcho-capitalism, of statelessness—of how defense, police, and courts could be provided on the marketplace. Do we really need minimal government? We’ve never been afraid to discuss whether democracy is a good thing or whether it’s a bad thing. Is it really the only way to organize society? Is social democracy the final and fullest expression of political organization in the twenty-first-century West? Is it the enlightened end point of liberalism? Well, no, clearly not. Democracy in the West produced several disasters in the twentieth century. So I’d like to think we’ve been uncompromising. I’d like to think we’ve carried on the intransigence, or better yet the courage, of Mises and Rothbard.
SA: I think, obviously, the critics will take any deviation from government propaganda as a sign of “You’re inflexible and you’re dogmatic,” and, of course, that’s all projection. If you don’t agree with the Overton window of DC accepted debate, then you’re considered a dogmatic fanatic. But in reality, the intellectual width of debate within the Mises Institute itself is far wider than the entire politically correct space of everyone in DC. That’s astonishing. Within the Mises Institute, as you said, secession and democracy, these are topics that are discussed, and there are people that are in favor of them and there are people that are opposed to them. And they get together in the meetings and they discuss them, and it’s usually pretty cordial and respectful and intellectual. This is much more than can be said about the broader debate in the general public arena, where there’s a clear idea of what is considered acceptable and it’s a very narrow range between the Republicans and the Democrats.
Immigration is another issue. Within the Mises Institute, there’s a lot of debate on that topic. The topic of immigration makes some people uncomfortable, but the Institute is a place where you get to hear the different perspectives on this issue and how it should be tackled. And the role of the police and the role of the military and the role of the government in terms of national defense. There’s a huge variety of perspectives within the Mises Institute, which you don’t find within general debate. In my mind, it’s just like with economics: the government perspective, the government propaganda perspective, is absolutely limiting and suffocating.
And as you were saying earlier, you’re not sure if people have gotten crazier or the internet has made us realize that people are crazier. People have definitely gotten crazier, particularly in the last twenty months or so, since the whole coronavirus situation started. The world has truly, truly gone mad. Even the most fanatic, hysterical people today, who are still calling for shutdowns and lockdowns, even those people, if you spoke to them in 2019 and you asked them, “Your political opponent wants to do this. What do you think about it?” They would have said, “This is crazy.” And yet a year later they were calling for just that from all across the political spectrum. It’s deeply illiberal in a way that was unimaginable in the vast majority of the world, not just in Western liberal democracy.
It’s all over the world, in Latin American countries, in Asian countries, the idea that your movement from your home needs the permission of your local health czar, and your ability to open your business, and how many people can you accommodate in that business, and what hours you operate. All of that has become the purview of somebody who is unelected and whose only credential is the fact that they have been brought up by the global public health mafia.
All the public health people before 2020, they discussed the possibilities of different pandemics and even in the cases where things were far deadlier than this, this was never a strategy. A total lockdown of the population was never considered a viable strategy. They knew it would be ineffective, and it is ineffective, and it has proven ineffective. They knew that it would be massively destructive in a way that would cause far more harm than whatever the disease can do, and this is exactly what we’re seeing.
It’s to your great credit that from day one, the Mises Institute was very clear on this. You are not taking Bill Gates’s money and not taking the World Health Organization’s money. Everywhere else is being funded by these criminal organizations, and then suddenly, they were getting their marching orders in sync. One day you wake up and everybody wants you to stay home, and then the next day everybody wants you to wear a diaper on your face, and then the next day everybody wants you to not take medicines which are proven to be effective because the science says that we shouldn’t take them and they’re not effective. Everybody’s singing to the same tune. And yet the Mises Institute from day one said, “No, the shutdowns are insane. People can make their own decisions.”
It’s amazing, this basis in the liberal tradition, the old liberal tradition, nineteenth-century liberalism. It’s like a vaccination against brain damage from the media. It doesn’t matter how insane the propaganda gets, it doesn’t matter how many videos of people falling over in China you see on TV. You’ve taken your Mises shots. You’ve read the nine-hundred-page books and it’s not going to fly. And bitcoiners, I should say, bitcoiners from early on were some of the very few people who were calling this out. I personally got abuse from a lot of idiots and I’m very happy about it now because I’ve managed to eliminate an enormous number of deadweight and idiots from my life because of this. But back in March 2020, it was extremely rare for anybody to say, “Nope, I don’t think you should force people to stay home.”
JD: Looking back on March 2020, it reminds me of the period right after 9/11 in America. There was this sinking feeling in our stomachs, but it wasn’t about the virus—it was about what our government might do in response to the virus. And so that was very similar to 9/11. Looking back, I think covid may be worse than the Bush-Cheney- Ashcroft “global war on terror.” Government responses to covid were nearly universal across the globe, so that was unprecedented. We didn’t have that with the Spanish flu, we didn’t have it with two world wars—people in London still went to work during the Blitz! Everything is global now, led by the West. We really should view it as neocolonialism, where the West makes decisions and the rest of the world follows suit. This is not a healthy situation. It is political imperialism. We have some two hundred countries on this planet. They all should exercise internal sovereign decision-making, as far as I’m concerned. I’d like to see a thousand countries or ten thousand countries. Then maybe we would have some alternative approaches to covid.
Covid has been a very scary time. I’m as cynical as anybody with respect to politics and the managerial state, which neither Trump nor Biden managed to control. But the managers have kept the narrative going this long: two weeks to flatten the curve, vaccinations will make life normal again, get your third booster. But in March 2020, everyone thought it would all be over by the end of summer. Surely, we’ll be back to normal by fall. But that didn’t happen. It’s breathtaking, it’s pretty scary.
This world had enough problems with money and entitlements and war prior to covid policies. What’s so remarkable is that economists and social scientists should have been sounding the alarm. Just because someone’s a public health expert, so-called, just because someone’s a doctor, that does not mean they’re equipped to make cost-benefit decisions for society as a whole. That’s crazy. We don’t just allow scientists to run our lives. You know, during the Blitz in London people went to work. During the Spanish flu people went to work, so the idea that we drop everything like children and abdicate our personal decision-making to these medical doctors is unprecedented. Doctors don’t get to decide whether we have restaurants open, or whether we can get on an airplane, or whether our kids stay home from school. Economists were supposed to be out there helping us see the unseen.
What’s the unseen? The unseen is the opportunity cost, the tradeoffs, all the harms which will wash over our society and our economy over the next ten or twenty or thirty years as a result of these lockdowns. Teenagers lost a year and a half … so far. Developing infants see these masked faces. What is that going to mean for early childhood development? How many people gained twenty or thirty pounds, and how do you measure that across an economy, across time, in terms of diabetes, early death, and all the things that come with obesity, all of these unseen things which are very hard to measure? Fauci insinuated there might be millions of deaths—which was not true—but even if it had been true, we still needed to consider tradeoffs. This is where economists failed us. Economists should have been asserting themselves two years ago, saying, “Hold on, we need to talk about the unseen.”
SA: We’ve had one economist from the London School of Economics on our podcast The Bitcoin Standard, Paul Frijters. He’s an empirical economist and very not Austrian, all about numbers. He was shocked that he was an exception. I went to the LSE, to Columbia University, and I studied a lot of empirical economics with a lot of empirical economists, and I know that these people will try and calculate and measure the most obscure and arcane little details and consequences of things. For example, they get hundreds of thousands of dollars to study what is the impact of giving one African village a little bit of extra food for one-year-olds? And then they’ll follow these one-year-olds ten, twenty years down the line and quantify the impact on their income and on their IQ and on their height and on their everything.
There’s an enormous industry of empirical economists out there measuring the impact of all kinds of things. You and I have our problems with that because, ultimately, without theory, this doesn’t tell you anything, and of course, this can be utilized and abused in all kinds of different ways. I still expected that you’d get these stat nerds to speak up and say, “Well, you know, if we’re going to shut down the world for two weeks,” which is what it was initially, “this is the impact. This is how many people are going to die from unemployment and how many people are going to die from poverty. This is how many cancer diagnoses are going to be missed, this is how many malaria cases are going to die, this is how many tuberculosis patients are going to be dying because they won’t be getting their treatment, AIDS patients, etc., etc.” And yet all of these empirical economists, regime bootlickers, they were just trotting out the same propaganda that was being put out by the World Health Organization and all the other organizations. It’s just “Oh, well, yeah, we need to do this because otherwise millions of people would die, according to the model.” And suddenly, these models, these completely nonsensical models of millions of people dying, were just counted as if they were reality. Then the empirical economists went to measuring how many lives we saved based on comparing it to the model. And, of course, ignoring the glaring cases of Sweden and Belarus, which never implemented lockdowns and didn’t see any of this mass devastation and death that everybody else was mentioning.
As I said earlier, it’s a great credit to the Mises Institute and to Austrian economists for being some of the very few economists to speak out against this, without needing to do sophisticated math. I think it’s a damning indictment of this sophisticated math because, even for all of my appreciation of what Paul Frijters has done, this clearly shows that numbers without theory, numbers without a guiding framework, numbers without a praxeological basis, are just basically prostitutes that can say whatever you want. You just focus your analysis on one part of the story and you can make those lockdowns look great, or you focus your analysis on something else and you can make the lockdowns look bad. And that’s why these empirical economists are so easy to manipulate, why they talk nonsense, because you just fund the questions that you want. You fund them to look into the numbers that you want to look at. You make assumptions about how much staying at home has saved lives and then they can go and spend another two years running regression analyses to tell you how many lives were saved. They don’t have to look at the unseen. So, just simply conceptualizing the unseen without any numbers is far more powerful and far more useful than all of the sophisticated mathematics that you could deploy when you are funded to ignore the unseen.
JD: You bring up Africa. There’s this idea in the West that we’re simply rich forever, that this material wealth surrounding us will organize itself regardless of what we do—regardless of incentives. We don’t have to worry about it. So we can shut down big parts of the supply chain for a year or two and tell people they don’t have to work. We can give employers PPP (Paycheck Protection Program) loans to make payroll without producing the goods or services they normally produce. We can tell people they don’t have to pay their rent. These things are just costless. I think the average American at this point thinks these actions are costless because government has the money. The federal government has the unlimited power to issue its sovereign currency as needed, this is what MMT (modern monetary theory) argues. And it’s trickled down to the politicians. We can just create money forever and ever.
Imagine going to a financial planner in your twenties instead of your thirties or forties. If you saved money younger, at least back when we had interest rates, the cumulative effect of compounding interest made you much better off. So when we give up two years of economic output, what does that mean for the world a few decades from now? What does that mean for capital accumulation and future prosperity? How do we measure that over time? We’ll never know, I suppose, but what strikes me is this acceptance by people in the West. The Left loves it because now everyone working those low-wage tough jobs at Subway for eight to ten bucks an hour have newfound bargaining power in the labor-management relationship. Maybe they will never go back to those jobs. The Left loves this idea of a Great Reset, because they think wealth exists perpetually in the West and simply needs to be doled out more equitably. Never mind that billions of people need to get up and produce wealth every day. They think electricity and hot and cold running water, and a Starbucks on every corner, and cars and planes will just materialize without respect to incentives. That is the dangerous mythology behind covid shutdowns: production is assumed.
SA: Yes, I think it’s the Left, but it’s also the fiat world. This is fiat par excellence. This is the world of people who just think that government can dictate those things. The reason we have all of these things working, the reason you walk into a house that is protected from the elements and that has electricity and has all of these amazing devices is because the government passed a law and said houses should be like that. They don’t understand the amount of work that went into it, and for me, the crowning glory of this kind of mental dysfunction is when people tell you, “Well, now what do you bitcoiners suggest to do if we have an economy that was running on bitcoin? How would you shut down the world on a bitcoin economy if you couldn’t print money and hand it out to people?” And “Checkmate, bitcoiners.” As if the fiat allows you to suspend the rules of economics and now the government just hands out money and then we create prosperity. Uber Eats still shows up outside your door and you still keep getting the food, and your economy will continue to work and hum along seamlessly for the next decade because the government is printing money while you’re protected.
Well, in a cruel, hard-money economy, if you had gold or bitcoin and you had those evil Austrian economists in charge, then the government couldn’t protect you by printing money and you’d have to go out and actually work in order to produce those things. It’s such an insane way of looking at the world, but it really is the fiat viewpoint. It’s something I discuss in detail in The Fiat Standard because it’s exactly what fiat allows people to think, because you look around and the government is constantly able to give things for free, take things for free, make things for free. It’s always the case that we can get whatever we want. Do we want to make Afghanistan into a modern democracy? Just print a bunch of money and go to Afghanistan. Do you want to make Iraq into a modern democracy? Same thing. Whatever it is that you want, you can just print money and get it and the only limit, the only restraint is getting the political will to do it. And that’s MMT. This is now a school of thought with a growing number of people, particularly young people, because the younger you are, the more you’ve lived in this clown fiat world where economic reality is dictated from above, rather than a result of work.
It’s easy to poke fun at the Left, of course, and I’m always up for poking fun at the Left, but what’s really amazing is how many people in finance think like that. How many people who work in fiat finance think like this? One of the most remarkable is Nassim Taleb, who’s completely lost his mind on this issue and has absolutely no conception of how an economy works. With this new omicron hysteria, his buddy in the World Economic Forum, Yaneer Bar-Yam, was saying, “Oh, well, new variant means new epidemic. We need all the restrictions reinstated from day one.” And Nassim was retweeting him, saying, “Yup, we’ve learned nothing.” He’s learned nothing from the last two years. We need to go and implement all of this because in his world, and in the world of a lot of people who work in finance, money is just numbers on your Bloomberg terminal. The economy is just you sitting there and gambling on whether you’re going to get a green candle or a red candle, and you make money on that. And of course, in Nassim’s case, he doesn’t even trade; he simply writes books about trading and pretends to be trading and never shows what he does. It’s just a game. It’s like a video game. There’s no actual resources, there’s no capital.
Nobody discusses this issue that you have pointed out, which is the impact on capital accumulation. What’s the world going to look like in five years’ time when the things that we count on today needed to have been invested in today in order for them to serve us in five years’ time? The grids and the airplanes and the transportation and infrastructure, all of those things that we will need five, ten, fifteen years from now needed to have been invested in today, but who’s investing in them today? We are shortening the cycle of production and production is becoming more and more instantaneous, and investment is becoming more and more short term because of inflation and because of the disincentives for work and production.
JD: Inflation means hypothetical little old ladies have to go out and chase yield instead of getting paid 5 percent or 7 percent on savings after a lifetime of thrift. I think the search for yield props up tech stocks to an extent. Yes, there are certainly people in finance (including people on the right) who think economies can just be commanded or engineered. Goods and services can be summoned or legislated into existence. At some point, I don’t know what to say to people who don’t understand that more money and credit does not equal more goods and services and society. At some point it becomes tedious to repeat that production has to precede consumption.
Covid, much like any other natural disaster, a terrorist event like 9/11, or a war breaking out, should have a deflationary effect. Yet in every crisis fiscal and monetary policy immediately shifts into fighting human nature by creating inflation. In your new book (The Fiat Standard) you point out an article from William Hutt called “The Yield from Money Held.” What does it mean when people “hoard” money, when they start holding more cash than usual? Because they always do just that in uncertain times. There was tremendous uncertainty in the world during March of 2020. People didn’t know if they were going to lose their jobs. People didn’t know if millions of people were going to die. People didn’t know what covid really was. Under that kind of uncertainty people immediately begin increasing their cash balances, because cash is the best thing to have during times of trouble relative to less liquid wealth like real estate or stocks.
Hoppe wrote an article called “The Yield from Money Held Reconsidered,” which is about Hutt’s article. Hoppe presents all the socially beneficial things that happen when people hoard money. And a lot of free market economists disagree with this. They think money has to circulate endlessly, we have to worry about velocity. Money needs to move around like a pinball game. Well, no. When people hold more money, it gives them flexibility and options. Maybe they will need to move for a new job or survive without a paycheck for a while. That’s why they naturally spend less and increase cash holdings in a crisis. This increases everybody else’s purchasing power by lowering demand and taking some money out of the purchasing economy, at least temporarily. This is deflationary, and beneficial both for the individual and for society. We want to see prices fall when production falls and savings increase. And yet, everything our politicians do, everything our central bankers do, is designed to fight this natural tendency. We need to stimulate, stimulate, stimulate. We need to create demand. Everything’s about demand and consumption, and so we need to create more money and credit on the monetary side. On the fiscal side we need to flood people with stimulus—so they can pay their rent or pay their employees or go buy a new car. We all need to get brand-new $50,000 Ford F-150s. But if you might lose your job due to covid, it may not be smart to go buy that F-150, worse yet if you have to make payments on it. Your every inclination should be to stop spending and hunker down. But our crazy system encouraged spending in 2020, and so auto dealers in the US had their worst and best sales months on record in the same year. That’s a clown-world example of what happens when you distort the economy and go against people’s natural inclinations during a crisis.
SA: Yes, it’s remarkable. People will say, “Well, the government won’t be printing money in a hard-money economy.” Well, yes. If there is a massive natural disaster or a world war or whatever, yes, a lot of economic destruction will happen. Free markets obviously can’t protect you from earthquakes, but they can ameliorate that because people are going to stop spending money on useless stuff and things that they don’t need. So, if you were planning on buying a new car this year, you won’t do it. You’re going to save your money because who knows, maybe you’ll lose your job. So what happens is that the price of cars falls. What you want to buy, the only thing that you do want to buy, is money. You want to hold on to your money, so the price of money basically rises, so you don’t need the government to print money and hand it to everybody. Everybody’s cash balances appreciate in real terms because everybody’s holding on to their money. At that point, goods become cheaper, and that’s the way in which we ration those goods. Goods become cheaper because there’s no new demand for them, the new cars that have been made already will only go to the people that really, really need them. Everybody else is going to save their money and everybody’s money is going to appreciate, so they can buy more, and that’s how you weather the storm. That’s what you do. It applies on a personal level; it applies on a national level. If you’re in trouble, you stop spending on frivolous stuff and you save. But the fiat world just flips all of this on its head. It’s remarkable.
JD: I think your new book The Fiat Standard is an important one. In many ways it elaborates on themes that Guido Hülsmann presents in his book The Ethics of Money Production. Monetary debasement leads to cultural debasement. Political control of money, political money, serves political interests. That creates high time preference in society, which affects families, work, even one’s own personal integrity and morality. Your book really fleshes that out by going into particular industries like food. It’s a fascinating topic, the cultural implications of monetary policy, and not too many people talk about it. We think of monetary policy as a technocratic set of dials and knobs to be fine-tuned to get optimal production from the barnyard animals. We don’t think of it in cultural terms.
SA: Yes, it’s clearly hitting a nerve for people who can see this clearly. The kind of money that you use in every single trade with the rest of the world and with yourself is going to have an effect. Nobody wants to talk about it among the economists except basically Hülsmann and me and a few other Austrians, which is great because it just means more sales for my books. So, I encourage all other economists to continue to stick to their NGDP targeting models. That’ll surely work out one day when the Fed appoints you and you get to show us how you are actually right with all these equations.
JD: Yes, if we just get the right Federal Reserve chair! This is what Washington, DC, gives us. It gives us this idea we fix things politically. But that’s too far gone now. The money’s too far gone, the politics are too far gone, the entitlements are too far gone. We’re in a car going too fast and there’s a sharp curve ahead with a steep cliff beyond. At some point no amount of braking or countersteering can save you from going over the cliff. I think our focus ought to be on building things rather than trying to save things.
SA: It’s not even that you can actually be the right person in the Fed. There is no right person in that job. The right person in that job is no person in that job. Recently, you and I were both commenting on the St. Louis Fed taking on the role of Betty Crocker and giving the world dietary advice about how to handle their Thanksgiving. This was amazing because it came exactly in the week in which I published my book. There’s a huge chapter on fiat food in the book and how government intervention in the food market has resulted in the degradation of the dietary experience of the average person in the world today and a shift in the Overton window of what is considered food. It’s allowed the inclusion of all kinds of industrial waste into our food supply, pushed and promoted by governments because this helps hide inflation.
I’ve said before, that my North Star in life is the jeering of idiots: when idiots start jeering me, I know I’m on to something important. It happened with coronavirus. It happened with bitcoin. It happened with this discussion of fiat food. When I started talking about this, a lot of people were laughing, “Ah, this is ridiculous. He likes his meat and he’s trying to pass off his diet as being something more profound than just him liking steaks.” I wrote a whole chapter about it, maybe ten thousand words in The Fiat Standard. Then the Federal Reserve chose to give me this amazing gift during the week of its publication. They proclaimed, Instead of eating an actual turkey, make your turkey out of soy. You’ll get more protein per dollar.
It’s amazing. There was a very astute comment about this, which is the more central planning happens in the monetary realm, the more we will inevitably have the central bank have to intervene in all aspects of life.
JD: It’s pretty scary to see the new woke language at the Fed and central banks in general. You pointed out earlier that younger economists at central banks may well be brilliant in terms of pure IQ and mental horsepower. They went to Wharton, they went to Harvard, they went to Stanford. But they’ve never seen a bear market and they’ve never seen real positive interest rates. They really have no conception of the history of economic thought. So they don’t know much about Marx and Keynes and Samuelson, much less the Austrians or Adam Smith or the Spanish Scholastics. It’s very dangerous because these young brilliant people think they can engineer outcomes and make humans respond in the ways they want. That’s what scares me. Now we add the social justice push to the agenda. The Fed needs to fight sexism, to fight racism, to help us achieve justice in society. They need to help us overcome this amorphous idea of climate change. That’s a real shift. That would shock the ghost of Paul Volcker. It’s part and parcel of the world we live in now, where everything has been so politicized they’re able to make this stuff seem nonpolitical. Fighting climate change is just what all good people do to leave the earth intact for future generations. Well, we already had that. Teddy Roosevelt had that. It was called conservation. We don’t need central bankers from Wharton to tell us this. When central banks get overtly political, watch out.
SA: It’s amazing because the statistics constantly show that there is no problem of inflation. All right, there’s a little bit of transitory inflation, maybe, here and there, and it’s because of supply chain issues and the climate crisis and this and that, but it’s reached Soviet levels of propaganda now. People are visibly suffering. Prices are massively going up, supply chains are disrupted because nobody’s working because everybody’s getting paid to sit at home. Economic production is being destroyed, money is being printed and handed out like confetti, and economic production is essentially falling apart. They’re covering it up with their amazing empirical magical statistics. And then, they believe their own bullshit, in the sense that “Well, look, we can manage the pandemic. We’ve saved the world from the virus, we’ve printed all this money and we didn’t cause inflation, so what else can we fix?” This mentality leads them to say, “Well, let’s fix people’s diets by feeding them soy and let’s fix the climate by stopping the production of cows and replacing cows with soy, because grazing animals are ruining the planet and monocropping is destroying the soil. That’s how we take care of the planet.” It’s Soviet levels of delusion and propaganda. And they believe their own nonsense about it being successful and so there’s no limit to how far this is going to go, and I think you’re absolutely correct on the climate change.
There’s another thing that I keep harping on, and people mock me and laugh at me and tell me, “You’re being crazy.” But carbon dioxide is an essential component of every living organism on earth. There are no living things that don’t contain carbon dioxide, and so if you’re able to control carbon dioxide under whatever stupid pretense you come up with, you’re able to control all of life. This is an enormous, enormous step forward for central planners around the world. I think it’s absolutely mind boggling to imagine that they want to control how much carbon dioxide is being emitted all over the world. It’s insane.
To go back to The Fiat Standard, I spent part of the book talking about fiat life. I talk about energy and I talk about food, and I discuss how in the 1970s the central bank’s monetary policy, which led to inflation, also led to central banks and the governments all over the world trying to promote these alternative sources of nutrition and energy because they were cheaper. They were very happy to support and subsidize and promote all kinds of idiotic pseudoscience that tells you meat is bad for you and you should eat soy because that’s how you stay healthy. And that meat is bad for the planet and fossil fuels are bad for the planet and that the future is to eat soy and rely on wind and solar energy. If you do that, there’s no inflation because these things are far cheaper to produce, but of course, they’re far inferior. If you live off solar and wind, you live like your ancestors lived five hundred years ago. It definitely keeps the CPI (Consumer Price Index) down but also makes surviving the winter much harder, and it also means no motor transportation, and it also means you’re going to have to live in a much tinier house to be able to keep it warm. I think we’re witnessing the world heading toward that now.
We’re seeing a revival of these 1970s memes. They never really left us because inflation never left us. But now we are seeing it being pushed aggressively. When you add in the prospect of central bank digital currencies, central banks will have complete control over every dollar of spending and social credit scores. We’re already seeing this with the vax passport. It is a prelude to total centralization. There’s a reason why all of the people who are hysterically afraid of the virus are also hysterically afraid of climate change and also believe that inflation is not a problem.
Inflation is not going to be a problem if you have a social credit score system and a central bank digital currency that limits you to fifty grams of beef a week and three hundred milligrams of gasoline a month or whatever it is. You’re going to have rationing Soviet style done through your iPhone, and you’re entirely dependent on delivery to your house, and you’re not going to be able to afford a big house. Everybody’s going to move into these tiny, little bug pods where they’re going to stay home all the time with Mark Zuckerberg’s headset on their face and experience life through the headset. You’re going to eat the soy, and you’re going to live in the pod, and you’re going to not move, and you’re going to stay cold, and there will be no inflation.
One other thing I want to talk to you about is your Human Action Podcast. I listen to that quite a bit and I really enjoy it. You host Austrian economists, and others, to talk about the great books. Make the pitch for people who haven’t dug into the nine-hundred-page tomes. Why are those books great and why should people read them?
JD: Well, I thought there were too many podcasts. What could I do different to provide value? So we decided to focus on books and use the show to help explain economic theory while promoting some of the great literature of the Austrian school. Sometimes we get into political science, sometimes we get into philosophy, occasionally even fiction or antiwar history, but for the most part we focus on economic theory. Some people do listen pretty religiously. My pitch is this: if you’re not going to read that book, the podcast is the CliffsNotes. It’s like watching the movie instead of reading the book. And it might inspire you to actually go out and read it. For long books we have multiple episodes, so we don’t rush through things. I hope five or ten years from now the old shows will still have value, which I think is not true of a lot of current events podcasts. I always try to ask myself—What has value and what lasts? These books will still be here years from now, and our explanations or elucidations of them will still be here.
In this episode, Ryan McMaken and Tho Bishop consider the counterfactual of what would have happened if Donald Trump were still president. What would the political landscape look like if it were a Republican administration dealing with historic unemployment? How would the reaction to the covid regime have looked in 2021? What would be the significance of the 2022 midterms and other political trends? That and more are covered on the latest Radio Rothbard.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
We will win. But how long will it take, and at what price victory?
Original Article: "How We Will Win"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
With the prices of everything rising at historic rates, no issue is shaping politics more right now than inflation. Unfortunately for Americans, Republicans in Washington appear no more serious on the Federal Reserve than the Biden Administration.
What lessons can be learned from the past? How might the Biden Administration respond? What can be done on the issue? In this Radio Rothbard, Ryan McMaken and Tho Bishop dive into the politics of inflation.
Recommended Reading "How Easy Money Inflated Corporate Profits" by Brendan Brown: Mises.org/RR_65_A
"The Economy May Be Finally Peaking, and the Fed Won't Help Matters" by Brendan Brown: Mises.org/RR_65_B
"How Asset Price Inflation Is Different from Goods Price Inflation" by Brendan Brown: Mises.org/RR_65_C
"Monetary Inflation and Price Inflation" by Robert P. Murphy: Mises.org/RR_65_D
"Ending Fiat Money Won't Destroy the State" by Ryan McMaken: Mises.org/RR_65_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
To kick off the New Year, Jeff recently had the opportunity to address a Discord channel dedicated to Austrian Economics. His talk focused on the state of economics generally, whether the profession is serving society, how economists failed us throughout the Covid hysteria, and especially the health and relevance of the Austrian school. This is a great survey of the role economics (and economists) should play in society.
Also includes questions from the audience, emceed by channel host JW Rich.
Includes an introduction by Tom Woods. Recorded in Lake Jackson, Texas, on December 4, 2021.
Ron Paul's two campaigns for president (2008 and 2012) were watershed moments for liberty-minded people around the world. The "Ron Paul Revolution"—centered around his undiluted message of peace, property, and markets—changed the way millions thought about the American empire and the American financial system. Dr. Paul's focus on central banking and foreign policy caught politicians and pundits off guard, forcing them to scramble for explanations of our Middle East policy and Soviet-style central planning at the Fed. Politics in America has not been the same since the "Giuliani moment" and "End the Fed." The Ron Paul Revolution was both a political and cultural phenomenon.
Recorded in Lake Jackson, Texas, on December 4, 2021.
Ron Paul's two campaigns for president (2008 and 2012) were watershed moments for liberty-minded people around the world. The "Ron Paul Revolution"—centered around his undiluted message of peace, property, and markets—changed the way millions thought about the American empire and the American financial system. Dr. Paul's focus on central banking and foreign policy caught politicians and pundits off guard, forcing them to scramble for explanations of our Middle East policy and Soviet-style central planning at the Fed. Politics in America has not been the same since the "Giuliani moment" and "End the Fed." The Ron Paul Revolution was both a political and cultural phenomenon.
Includes an introduction by Jeff Deist. Recorded in Lake Jackson, Texas, on December 4, 2021.
Ron Paul's two campaigns for president (2008 and 2012) were watershed moments for liberty-minded people around the world. The "Ron Paul Revolution"—centered around his undiluted message of peace, property, and markets—changed the way millions thought about the American empire and the American financial system. Dr. Paul's focus on central banking and foreign policy caught politicians and pundits off guard, forcing them to scramble for explanations of our Middle East policy and Soviet-style central planning at the Fed. Politics in America has not been the same since the "Giuliani moment" and "End the Fed." The Ron Paul Revolution was both a political and cultural phenomenon.
Recorded in Lake Jackson, Texas, on December 4, 2021.
Ron Paul's two campaigns for president (2008 and 2012) were watershed moments for liberty-minded people around the world. The "Ron Paul Revolution"—centered around his undiluted message of peace, property, and markets—changed the way millions thought about the American empire and the American financial system. Dr. Paul's focus on central banking and foreign policy caught politicians and pundits off guard, forcing them to scramble for explanations of our Middle East policy and Soviet-style central planning at the Fed. Politics in America has not been the same since the "Giuliani moment" and "End the Fed." The Ron Paul Revolution was both a political and cultural phenomenon.
Recorded in Lake Jackson, Texas, on December 4, 2021.
Ron Paul's two campaigns for president (2008 and 2012) were watershed moments for liberty-minded people around the world. The "Ron Paul Revolution"—centered around his undiluted message of peace, property, and markets—changed the way millions thought about the American empire and the American financial system. Dr. Paul's focus on central banking and foreign policy caught politicians and pundits off guard, forcing them to scramble for explanations of our Middle East policy and Soviet-style central planning at the Fed. Politics in America has not been the same since the "Giuliani moment" and "End the Fed." The Ron Paul Revolution was both a political and cultural phenomenon.
HL Mencken is the writer you need to read immediately. He was savagely brilliant, caustic, and witty, but also prolific across genres in ways almost unthinkable of journalists today. His skill with the English language was virtually unmatched in the 20th century, as was his deep and abiding contempt for utopian statism in any form. And his broadsides against two world wars were incredibly courageous at the time.
Our great friend Jim Bovard joins the show to discuss Mencken's work, his complicated elitism, his Old Right politics and social views, and the magnificent pleasure of reading this master.
"H.L. Mencken, The Joyous Libertarian" by Murray N. Rothbard: Mises.org/Joyous
Mencken Wikiquote: Mises.org/HLQ
Garet Garrett was among the most important figures from the literary, political, and laissez-faire economic traditions of the Old Right, but his name is hardly known today. In 1938 he penned "The Revolution Was," a remarkable essay about FDR's revolutionary New Deal and, more importantly, how it was accomplished. FDR's revolution had already happened, though few Americans understood it or grasped what the triumph of an administrative state would mean. The New Deal was a revolution "with the form," because the old trappings of constitutionalism and separation of powers remained intact. What had changed was the substance of American government, engineered through skillful propaganda and marked by radically increased control over the nation's capital and businesses. This essay is entirely relevant to our current politics, and explains with tremendous clarity the the ongoing revolution happening under our noses today. Ryan McMaken joins Jeff Deist for a deep exploration of the essay and its lessons for us today.
You owe it to yourself to read this masterpiece.
Read Garet Garrett's prescient essay: Mises.org/GaretWas
The weekend revolves around a discussion of strategy. Nearly 25 years ago, Professor Hans-Hermann Hoppe delivered his famous "What Must Be Done" speech on the pressing topic of how—and whether—to engage the state. Today his prescription for a bottom-up ideological revolution beginning at the local level rings more true than ever. With Hoppe's admonitions in mind, all of our speakers and panels will consider three vital questions: Where are we? How Bad is it? And what should we do now?
Recorded in St. Petersburg, Florida on October 22, 2021.
Recorded in St. Petersburg, Florida on October 22, 2021.
The weekend revolves around a discussion of strategy. Nearly 25 years ago, Professor Hans-Hermann Hoppe delivered his famous "What Must Be Done" speech on the pressing topic of how—and whether—to engage the state. Today his prescription for a bottom-up ideological revolution beginning at the local level rings more true than ever. With Hoppe's admonitions in mind, all of our speakers and panels will consider three vital questions: Where are we? How Bad is it? And what should we do now?
This week's show features a panel discussion recorded in late October at our annual Supporters Summit. Panelists Ryan McMaken, Jeff Deist, Mike Maharrey, and Tho Bishop lay out real strategies for achieving decentralization.
Includes an introduction by Joey Clark. Recorded in St. Petersburg, Florida on October 22, 2021.
On the latest Free Man beyond the Wall podcast, Pete Quiñones, Patrick Newman, and Tho Bishop discuss Andrew Jackson and his cadre who fought against central banks—and cronyism in general. What can libertarians learn from the strategy they deployed and the power they were willing to wield?
Additional Resources Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman
"Cronyism from the Constitution to the Mexican-American War": Pete Quiñones interviews Patrick Newman
Includes an introduction by Joey Clark. Recorded in St. Petersburg, Florida on October 22, 2021.
The weekend revolves around a discussion of strategy. Nearly 25 years ago, Professor Hans-Hermann Hoppe delivered his famous "What Must Be Done" speech on the pressing topic of how—and whether—to engage the state. Today his prescription for a bottom-up ideological revolution beginning at the local level rings more true than ever. With Hoppe's admonitions in mind, all of our speakers and panels will consider three vital questions: Where are we? How Bad is it? And what should we do now?
Recorded in St. Petersburg, Florida on October 22, 2021.
Slides used in this talk are available here.
The weekend revolves around a discussion of strategy. Nearly 25 years ago, Professor Hans-Hermann Hoppe delivered his famous "What Must Be Done" speech on the pressing topic of how—and whether—to engage the state. Today his prescription for a bottom-up ideological revolution beginning at the local level rings more true than ever. With Hoppe's admonitions in mind, all of our speakers and panels will consider three vital questions: Where are we? How Bad is it? And what should we do now?
"Let's Go Brandon!" scored an early win in Virginia, and hurt Democrats in New Jersey. Suburban voters seem to hate Critical Race Theory in schools more than they disliked Donald Trump, even as the corporate press dismissed it as a real issue.
Does last night's red wave indicate that average Americans are prepared to take back more local control from the federal regime, or is this yet another example of fickle democracy as usual? Ryan McMaken and Tho Bishop break down some of the notable 2021 election results, and talk about what it may mean for the future.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Yuri Nicholas Maltsev is an Austrian school economist and economic historian from Tatarstan. He earned his BA and MA degrees from Moscow State University and PhD in labor economics at the Institute of Labor Research in Moscow. Before defecting to the United States in 1989, he was a member of a senior Soviet economics team that worked on President Gorbachev’s reforms package of perestroika. He is currently professor of economics at Carthage College in Kenosha, Wisconsin. He has appeared on CNN, PBS NewsHour, Fox News, CBC, and Financial Network News across American, Canadian, and European television. He is the editor of Requiem for Marx (1993) and coauthor of The Tea Party and the American Counter-revolution (2012) and The Tea Party Explained: From Crisis to Crusade (2013). He is a Senior Fellow of the Mises Institute.
Jeff Deist: We’re speaking in mid-September, and President Biden just announced executive orders mandating vaccines for many employers. As a former Soviet citizen, what do you make of this?
Yuri Maltsev: That’s awful. In the United States, fascism comes in the very strange form of an elderly dementia patient. Usually fascists are charismatic leaders, look at Hitler or Mussolini, but this one, what he’s doing is just unbelievable. He is a socialist, definitely, that he is mandating the private sector what they should do, what they shouldn’t do. Karl Marx in the manifesto of the communist party, he defined socialism and communism as abolition of private property and that private property can be abolished overnight, like what happened during the Bolshevik Revolution in Russia. But it can also take a gradual kind of process and that’s what is happening right now in the United States. Private property is becoming like having a title to wetlands. You have private property, but you cannot do anything with it.
D: Biden brings to mind another kindly old man, Mikhail Gorbachev, with whom you worked in the late eighties as a Soviet labor economist. In your introduction to the Requiem for Marx book, you go in depth about how Gorbachev managed to absolutely snow the Western media and snow George Bush senior.
M: Yes, he absolutely did. He was portrayed as a great liberator, however, he was a Communist. From another hand, we should give him some credit because he was talking about socialism and giving it a human face, which nobody understood at the time.
There is this joke that James Bond was sent to Moscow to find out what’s happening there under Gorbachev and he goes to the bakery and there is no bread, and he writes in a little notebook “No bread”; he goes to the butcher shop, no meat, and writes “No meat.” There is a KGB officer following him and the officer looked over his shoulder and said, “A year ago, you would be shot for doing that.” And Bond then writes “No bullets anymore.” When there were no bullets, people stopped working, because under socialism, the only way to work is under a threat to your life or to the life of your loved ones, because there is absolutely no incentive to do anything. And that’s what Mr. Gorbachev did not understand.
In the beginning of his reign, Gorbachev sounded confused. For example, he was saying that central planning actually works, the problem is we never had a good plan, and so on. That definitely didn’t show him as he knew what he was doing. But definitely, he played some positive role in destroying that evil empire.
Today, we have Mr. Biden, who is building a new evil empire. I think that his vaccine mandates speech is just telling us that he is right now on a warpath. He is desperately looking for enemies and who those enemies can be. So, he picked up unvaccinated people as his enemies, because he lost the war in Afghanistan so dramatically. He completely screwed up the evacuation and now he needs to attract the attention of the masses to something else. That’s what I’m thinking is going on.
And they are also, I think, trying the water, to see if they can get away with this mandated vaccination, with forced vaccination, with dragging people into vaccination centers, which reminds me of forced abortions in China, then that will be the ultimate goal: your loss of freedom. If you remember John Locke, his major question was who owns you. Do you own yourself? If you do, you are a free man, and if somebody else owns you, you’re a slave. If you don’t own your body, then who does? The government acts as if it owns your body and knows better what to put in it. And now, if they will forcibly vaccinate us that would be the end of whatever we think we are living in and would be the beginning of slavery.
D: Let’s continue this Biden versus Gorbachev comparison, because I like it. You write about glasnost and perestroika being basically fraudulent cronyist schemes in practice, not at all what the Western media reported. You quote Gorbachev saying, “What we want is a planned, regulated socialist market.” That’s essentially what the World Bank types advocate today.
M: Absolutely. We must have this economy which is run by the government, not by the private sector. Everything Mr. Biden has been doing since his inauguration is heading in that direction, more regulations for everything, for industry. People don’t like his predecessor, Mr. Trump, but under him regulations were being removed, 20 percent of them, but Biden has restored everything that was removed. His vice president, she’s just not only a socialist, but kind of a Stalinist. Look at her speeches, most recently in California. This is a very sad time that we are living through, but the people inflicted it on themselves. I don’t know if elections were fair or not, but I think it’s very simple if you are voting for a socialist or you are voting for a capitalist.
D: You mentioned that your time working with Gorbachev convinces you he didn’t know any economics at all. He was completely illiterate on the subject. I suspect that’s equally true of Biden.
M: Yes, yes. In his fifty years in government his working record is just atrocious. When he was the chairman of the Judicial Committee of the Senate, it was unbelievable to listen to him. I don’t know, however, whether he is stupid or he is evil, and I think both. He’s a power-hungry kind of person as well as the people around him.
D: You left the Soviet Union and came to the United States in 1989. A lot of Soviet expatriates in the US became neocons or cold warriors, but you managed to avoid that.
M: Yes, because neoconservatism is just another side of Trotskyism. That we should impose our will on other people against their will. You see what is happening, how we trap people in Vietnam or in Afghanistan or in Iraq or in Syria, trying to start wars which we do not intend to win. It’s to make some people happy and richer and impose all kinds of left-wing social theories on them. It’s like imposing democracy—these kinds of things cannot be done from above or from the outside of the country.
D: In the eighties and nineties, especially, Conservatism Inc. loved nothing more than a Soviet defector willing to denounce the USSR. The Buckleyite right purged the Old Right on the grounds we had to defeat the Soviets above all, so the Cold War justified accepting bigger government at home.
M: It definitely was a threat. I would agree with that part, but from another hand, how did we oppose the Soviets? The CIA provoked the revolution in Hungary, we didn’t support those people as we had promised, so many of them were murdered including the very reformist prime minister, Mr. Nagy, and about three hundred thousand Hungarians fled. We did the same with Czechoslovakia and the war in Vietnam was the same thing. So that’s a problem that we have, that we are engaging in wars, which are designed only to feed some people, to feed the military-industrial complex of which President Eisenhower was telling us back in 1961.
D: As a new arrival in the early 1990s, did you think America was generally capitalist and free at the time or did you already sense there were deep problems here?
M: I worked, if you can call it work, for the federal government in Washington, DC, at the United States Institute of Peace, which is still there. It’s a congressional think tank. It’s huge right now. I could see there were deep problems.
D: They have an enormous building by the Lincoln Memorial. I wonder what their budget is relative to the Mises Institute?
M: Oh, probably several hundred times more if not thousands. And they also built, just maybe four or five years ago, a huge campus in southeastern Washington, DC, just unbelievable.
D: Apparently there’s no more peace than when they started.
M: No, they’ll never be shut down. And for me, what was amazing was that I was awarded this very prestigious position. I became a fellow of the United States . . . the full title was even more feudal, something like Senator Jennings Fellow of the United States Congress in Peace. I thought that maybe they will study peace. My neighbor with an office on the right was Eugene Rostow. Eugene Rostow was possibly the most prominent warmonger in United States history and he almost single-handedly started the Vietnam War. The chairwoman of the board was Elspeth Rostow, who was his wife. This formed kind of a Rostow dictatorship. There were generals and the like, rather a nursing home for the neoconservatives. The worst thing was not that they were funding these people who didn’t need the stipends because they were already rich, but they were dispensing tens of millions of dollars. Now they are dispensing hundreds of millions of dollars, to poison our academia, to provide so-called grants to study conflict resolution. And how you can resolve conflicts, by accusing everybody of racism or paying the left-wing academia to develop critical race theory and other stuff like this?
D: At this point, in the early nineties, you had already discovered Austrian economics.
M: Well, I was leaning toward Austrian economics since my days in the Soviet Union. When I was a third-year student at Moscow State University I was given a book by Hayek, The Road to Serfdom, and at that time I could be punished anywhere from eight to ten years of imprisonment, just for having the book.
D: Just for possessing it?
M: Just for possessing it. And the person who gave it to me would get fifty years, because he would be accused of disseminating anti-Soviet slander. That was the so-called Article 57 of the Penal Code of the USSR. This is even an innocent book. But it was on the KGB forbidden list, as well as Solzhenitsyn and Orwell.
Because of Hayek’s influence, I changed my major. Instead of studying history and social science, I began to study economic history and history of economic thought. It was at this point that I received a letter through the Lenin’s Library, now the Russian State Library, that since I was engaged in a critique of the vulgar bourgeois political economy, I should be given access to the contents of the library. How can you criticize something without knowing what it is? So I got real access. While there I read a lot of other stuff, as well. You go to a marked room and you sign a pledge that you’ll never tell anyone about what you read there. The unfortunate thing is at that time I didn’t know about Murray Rothbard or Ludwig von Mises and so I was insatiably reading Hayek.
When I came to the United States I was invited to the Shevchenko Jamestown Foundation, which is a very interesting think tank, kind of like the world defectors’ club. They would not pay me anything, but they were very nice in providing me with a computer and office space and a telephone, and while there I wrote an article on perestroika for The Freeman. I was invited to the Mises Institute, to teach at Mises University, at that time at Stanford University, and then I met Murray Rothbard and we became very good friends. He became my real mentor. I met a lot of great people like Tom DiLorenzo, Walter Block, Bob Higgs, and many, many others. It was not a conversion moment, because I was already converted, but I remember Murray, he took my interview from me and he titled that interview “Mises from Moscow.” He was very enthusiastic about the future of Eastern Europe and the former Soviet Union in finding the path to freedom.
I think it was 1990, the Mises Institute organized a conference in Washington, DC, to honor Gottfried Haberler. Haberler was a great Austrian economist, but then he turned more mainstream. He began to teach at Harvard and he was not associated with the Institute at all and the Institute also didn’t like him for his mainstream leaning. I knew him rather well because I had lunch with him every Wednesday in Washington. I advised Murray to lure him back where he belonged, and so the Mises Institute put on a wonderful conference in Washington, DC, and Haberler addressed this conference.
Attending the Washington conference was a delegation of twelve Lithuanian businesspeople and politicians who came to the United States right after Lithuania became an independent country. They were all enthralled, and today we have a very strong Austrian economics kind of school in Lithuania. The Lithuanian Free Market Institute is doing a great job in promoting Austrian ideas and some are very visible in the Seimas, which is the Lithuanian parliament. It was an interesting time because nobody knew what was happening. Murray, he wrote quite a lot on the economics of transition and he had this wonderful slogan: land to the peasants, and factories to the workers, and bureaus to bureaucrats, that was his approach. That was his major message to them. And he praised the Baltic states because they were ahead of the other former Soviet Republics and they are ahead today in promoting freedom.
D: We have the whole history of the twentieth century to see the failure of the Soviet Union. You lived it. But as you’ve pointed out, Mises predicted all of this in 1920, without the benefit of hindsight, in his essay “Economic Calculation in the Socialist Commonwealth.” What an achievement.
M: True, absolutely. I read Ludwig Mises’s “Economic Calculation in the Socialist Commonwealth” and his book Socialism only when I came to the United States, and I was honored to write an introduction to “Economic Calculation” published by the Mises Institute. A lot of things just became really clear.
When you live in the Soviet Union, especially if you are an economist, you understand that the system does not work. You understand that the prices are all phony, that the prices are made up, that they’re being ignored. But after reading Socialism by Mises, then it all becomes crystal clear. It’s like processing film when the image is already there, it is only after developing the film that the image becomes clear. That was the role of Hayek for me with The Road to Serfdom. And so it was an interesting time.
In the Soviet Union at this time, they came up with the idea of the 500 Days Program. This is how long it would take to make the transition from a socialist slavery to economic freedom. My point was why five hundred days? In five hundred days, you cannot do anything. If you make a transition like this, you should do it immediately in one fell swoop. And sure enough, while I was writing this, Margaret Thatcher made an interesting comment. She said something like, if we in the United Kingdom would decide to move from left-hand driving to right-hand driving and do it in five hundred days, that would be havoc on the road.” So, it is with all economic reforms. I believe strongly, and Murray Rothbard was very supportive in this, that a gradual transition is transition to the third world only. You can either make a transition right away or don’t even try to do it.
D: David Gordon and Gary North also wrote about Marx the man, in your collection of essays. Marx was not necessarily that bright. He wasn’t that accomplished. Gary North tells us Friedrich Engels was a lot smarter and ambitious. Marx lived a fairly pampered and subsidized life, and had far more money than the average Soviet worker. And yet this apparent mediocrity seems to have enduring influence. Why?
M: Because he provides a very good argument for so-called intellectuals to grab the power. Because the whole idea of Marxism is that the proletariat, the great masses, are oppressed. But what should they do? They should follow the people with the vision, the professional revolutionaries. And who would be better for that than the intellectuals. So, that’s the point. Hayek is also saying it in his wonderful essay “Why Intellectuals Love Socialism.” Marx, he was a very power-hungry individual. He never had real power, but from another hand, his writing is about power, how to get power. And today he is popular for what reason?
There is another side of Marxism. It’s not only proletariat and bourgeoisie, workers and capitalists, but it is also oppressors and oppressed. Because if you read Marx, especially Das Kapital, the twenty-third, twenty-fourth chapters, I still remember all this stuff, he’s writing that the whole of human history was a fight between oppressors and oppressed, an influence that would be like slaves and slave owners and feudal lords and peasants and now we have workers and whatnot. That’s easy for the so-called intellectuals of today to put whomever they want, to put any kind of group they believe is a victimized group, and to present them as oppressed. This victimization agenda will be taken up by the intellectuals of the Left. It is important for them to have something to point at, take the so-called environmental crisis, that’s another invented crisis that we have, and also race issues. And these two issues, they believe, can destroy capitalism, destroy the United States, destroy the society that we live in, and provide them with unlimited power, because that’s what it is: if you control energy, for example, you control culture, then you are in charge of everything. Education, today, I’m sorry to say, but I think we are losing this cultural war to these people because they control the mass media, control Hollywood, control the production of culture.
D: Let’s continue with that thought. There’s this concept of cultural Marxism, where the focus on economic class shifted to identity politics because the economic arguments weren’t working. The US middle class, the union workers, weren’t buying it. So the Left shifted its focus. Today we have a lot of loose terms like “woke” and “SJW” and “PC” to describe this phenomenon. As someone who teaches young people on campus, how much have things changed since you arrived in the US?
M: It’s so sad because when I began to teach, and I began to teach almost immediately when I came to the United States, I was teaching first as an adjunct professor at George Mason University on the Arlington campus and then I moved to Wisconsin. I am now in academia for thirty-two years. And at that time, students were very curious, they were way to the right of the faculty. The faculty always was, at least the faculty that I dealt with, very much to the left of center. They had an agenda to reproduce themselves, because that means that left-wing faculty will only hire left-wing faculty, and now they are a majority. We have very few really free market academics, but a lot of socialists and radical socialists and communists and democratic socialists, so-called, which is an oxymoron. Mr. Bernie Sanders visited my college, Carthage College, and many faculty were sitting there from three in the morning because they were afraid that they will not get in to meet the great leader.
D: Were students camping out overnight as well?
M: Some, yes, those that are already brainwashed.
D: And presumably very few kids at Carthage College are in any way oppressed.
M: [Laughs] True. Except when they are looking for parking in the morning.
D: I want to clarify: Do you think the students in some of this country’s liberal arts schools are actually to the left of their faculty?
M: I would say not very many, but there are some. There are some activists who are just fanatics, who became fanatics because they were screwed up in high school and then they came to Carthage. We have faculty who reinforce their views. I’m not saying all faculty. We have some mild socialists also. We have even on our campus some people who are still on the side of freedom, but not many, the majority is not. What is going on today with this masquerade, if you will look at what the faculty says in their blogs, for instance, “Yesterday I saw a student who was sipping coffee without a mask and he was sipping coffee very slowly, because he enjoyed not wearing a mask.” I can’t imagine that a professor is writing that.
D: One thing that’s changed a lot in the US since you arrived is secularization. There is far less religious observance in the United States today than thirty years ago. Rothbard’s essay in your Requiem for Marx collection compares Marxist theory to the return of the messiah in Christian theology, Marxism will put an end to history and establish a new heaven and a new earth. The establishment of communism marks an end point to human history, a final perfected state of mankind. So the secularization of America is a necessary Marxist goal.
M: True, yes. Murray wrote “The Religious Eschatology of Marx.” Eschatology, that’s the end of history. Marx hated religion, he called it opium of the people, and in the Soviet Union alone they murdered over a million clerics of all religions. I was just reading a gruesome historical article. In Odessa, for example, they were putting boiling lead into the Christians, saying that this is a communion for you. And they were hanging monks and nuns and priests from belfries. Why such atrocities? Because it’s obvious that if you are a believer, you believe in God, no matter what denomination or religion you are, then you don’t have space in your mind for Marx and Lenin and Stalin to be gods. That would be a very unchristian or very non-Islamic or very non-Jewish thing, to believe that there is a god, in the Kremlin or in the White House or somewhere else. That’s why they needed to clean out the place and why religion was prohibited until 1942.
In 1942, the Soviet Union legalized the Russian Orthodox Church. For what reason? Because there were about 3 million defections from the Soviet Army over to the Germans. Stalin was afraid that the whole thing would fall apart without that. And most would believe that Stalin and others were kind of the antichrist. That’s one thing, to destroy religion, then next is the family. When families are destroyed then civil society is destroyed and then you’re naked before them. Then you don’t have any support mechanisms. I’m not a religious person myself, but religion is a very important social institution, because it provides a lot of social support for people.
D: Did the Soviets view religion as a competitor with the state for people’s loyalty?
M: Yes and no because some, for example, the Russian Orthodox Church were just a state institution under Stalin and his successors run mostly by the KGB.
D: So the state co-opts the church like it co-opts other institutions.
M: Yes. Under Gorbachev, when the Union of Soviet Socialist Republics fell apart on the glorious Christmas Eve of 1991, the state collapsed as we know it. If you look at the Russian Orthodox Church today, they are blessing the Russian aggression against the Ukrainians, against others, they’re holding masses to support the Russian troops. They’re blessing tanks and rockets. There are some denominations that are not really statist denominations. There are some Protestant denominations in Russia which believe that you don’t need any intermediaries between you and the God. And that brought the idea even to John Locke that we are all equal before the Lord.
D: Let’s talk about academic freedom. A well-known philosophy professor at Portland State University, Peter Boghossian, resigned yesterday over harassment he’s endured from faculty and the students. Do you worry about your own academic freedom?
M: The only thing I like from Marx’s quotes is that we don’t have anything to lose except chains on our feet. And so, I’m not worried, because I just fight back. I am fighting. Fortunately for me, I was tenured twenty-five years ago and that’s why I’m saying that if you give up on something, then they will take over everything. And that was the greatest message from Solzhenitsyn in the gulag, don’t give up. They survived and they were even respected by their jailers, by the prison guards. Besides that, I would say all my classes are full and I have waitlists! I would say that the great change came with Ron Paul. Especially when Ron Paul was very active, many students were his followers and he was the best ambassador of ideas of liberty on campuses. We definitely need leaders like him for students, to be seen as role models.
D: Dr. Maltsev, I think that’s a perfect place to stop. Thank you.
Washington politicos want to keep the debt going up at breakneck speed forever. But the responsible thing to do is refuse another increase to the debt ceiling and force a partial default. Politicians hate that idea because default would make it harder to spend trillions in deficit spending.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
For the foreign-policy non-interventionist, some schools of thought in international relations are much better than others. "Liberal hegemony" (the favored school of neoconservatives) has long supported endless war and intervention by the US regime worldwide. We discuss how we can use "realist" research to move the foreign policy needle away from liberal hegemony and toward a more sane foreign policy.
Guest: Zachary Yost (Mises.org/Yost) is a Marcellus Policy Fellow with the John Quincy Adams Society.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
If every new virus or variation warrants shutdowns or new vaccines, we will face an unending dystopian hellscape of state intervention in our medical decisions.
Original Article: "End the Shutdown, Again"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
For the libertarian, the way forward is not joining in left-right political boxing matches, but secession. The success of libertarianism is independence from the state’s influence.
Original Article: "Getting to Galt's Gulch: Everyday Secession"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Featuring Joseph Becker, Felicia Jones, Karras Lambert, and David McClain. Recorded at the Mises Institute in Auburn, Alabama, on 24 July 2021.
Fellowships in Residence at the Mises Institute in Auburn, Alabama, are available to graduate students and post-docs interested in scientific research in the Austrian school and libertarian political economy. For more information, visit Mises.org/fellows.
The Mises Institute’s Master of Arts in Austrian Economics is the first graduate program in the United States dedicated exclusively to the teaching of economics as expounded in the works and great treatises of Ludwig von Mises and Murray N. Rothbard. The goal of the program is to assist students in mastering the principles of this great body of work and putting these principles to use in their chosen endeavors. For more information, visit Mises.org/edu.
Featuring Per Bylund, Tom DiLorenzo, Sandy Klein, Patrick Newman, Tim Terrell, and Mark Thornton. Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Ludwig von Mises wrote Nation, State and Economy in the same year, 1919, as John Maynard Keynes wrote The Economic Consequences of the Peace, a better known diagnosis of and prescription for the postwar economic situation. Mises, writing a few months earlier, presumably had less detailed knowledge of the Versailles Treaty and so was less concerned with its specific provisions. Keynes went into more detail than Mises in estimating such things as the wealth of the belligerents, the amount of destruction suffered, and the capacity of the Germans to pay reparations. His focus was narrower, than that of Mises, who regarded his own analysis as one particular instance of applying lessons derived from both history and economic theory.
The two books have much in common. Both compare prewar and postwar economic conditions. Both authors recognize that each country's prosperity supports rather than undercuts that of others. Both appreciate how much the standard of living of Europe and particularly of Germany had depended on world trade and regret its interruption. Both, rightly or wrongly, perceived something of an overpopulation problem in Europe and in Germany in particular and made some not too optimistic remarks about the possibilities of emigration as a remedy. Mises even waxed wistful over loss of opportunities that Germany might have had in the nineteenth century peacefully to acquire overseas territories suitable for settlement.
Both authors more or less took it for granted that the German ruling class and segments of public opinion had been largely responsible for the war. Mises deployed history, politics, sociology, psychology, and other disciplines in exploring the intellectual and ideological background of German militarism. Keynes also engaged in psychology. His dissection of the character and personality of Woodrow Wilson is justly renowned, and he made biting comments on the immorality of Lloyd George's "Hang the Kaiser" election campaign of December 1918.
Both Mises and Keynes emphasized how currency deterioration causes social as well as economic disorder. Keynes endorsed Lenin's supposed observation about the best way to destroy the capitalist system. "Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Keynes warned against misdirecting blame onto "profiteers," and Mises, too, understood the constructive function of profit, even in wartime. Mises explained how inflation undercuts the vital functions performed by accounting. Keynes and Mises were exhibiting prescience, writing four years before the hyperinflationary collapse of the German mark would dramatize the points they were already making.
Keynes's book included no signs of anticapitalism or of support for comprehensive government economic intervention. Mises was emphatic on these issues. He exposed some of the inefficiencies of socialism, although he had not yet formulated his later demonstration of the impossibility of accurate economic calculation under socialism.
Both Keynes and Mises come across in their respective books as analytical in their diagnoses and humanitarian in their recommendations. Both were pessimistic about economic conditions on the European continent, at least in the short run. Both opposed a vindictive peace; Keynes's warnings about reparations are well known. It is too bad that Keynes's fame did not carry over more effectively into actual influence and that Mises's book was not more accessible to the English-speaking world at the time. If only the two men could have joined forces!
Mises's book illustrates the differences between the political and economic philosophies of conservatism and of liberalism (liberalism in the European and etymologically correct sense of the word). Mises was emphatically not a conservative. His book rails repeatedly against political and economic privilege. He championed political democracy as well as a freemarket economy. He admired democratic revolutions against hereditary and authoritarian regimes; he sympathized with movements for national liberation and unity. As he explained, liberal nationalism—in sharp contrast with militaristic and imperialistic nationalism—can be an admirable attitude and a bulwark of peace. Different peoples should be able to respect and—to interpret a bit—even share in each one's pride in its own culture and history. (I think I can understand what Mises had in mind by recalling my feelings while traveling in Italy in 1961 at the time of celebrations and exhibitions commemorating the one hundredth anniversary of the founding of the Kingdom of Italy. As my traveling companion remarked, he almost felt like an Italian patriot.)
Mises's devotion to political democracy was tinged with a touching naiveté. Passages in his book suggest that he could hardly conceive of how the people, given the opportunity to rule through freely elected representatives, would fail to choose those politicians and policies that would serve their genuine common interest. This optimism is not to his discredit. It underlines the genuineness of his liberalism. It reminds us that he was writing more than sixty years ago, before the subsequent accumulation of sobering experience with democratic government. He was writing before the development of pubic-choice theory, that is, the application of economic analysis and methodological individualism to understanding government and government failure, analogous to the better publicized market failure (fragmented and inaccurate cost/benefit comparisons, externalities, and all that). But Mises certainly was not naive in relation to the experience and political analysis available in 1919. On the contrary, some of the most insightful parts of his book analyze the obstacles to the development of democracy in Germany and Austria. Mises saw the significance of the nationality and language situations in those two polyglot empires. He did not single-handedly develop an economic and psychological analysis of government, but he made an impressive beginning on that task in this and later books.
Mises could expect his German-speaking readers of over sixty years ago to recall the salient facts of German and Austrian history. Such an expectation may not hold for English-speaking readers of the 1980s. For this reason, a sketch follows of the historical background that Mises took for granted. In particular, it identifies events and persons that Mises alludes to.
German-speaking territories were ruled for centuries by dozens and even hundreds of hereditary or ecclesiastical monarchs—kings, dukes, counts, princes, archbishops, and the like. Mises speaks of "the pitiable multiplicity of several dozen patrimonial principalities, with their enclaves, their hereditary affiliations, and their family laws" and of "the farcical rule of the miniature thrones of the Reuss and Schwarzburg princes," Even after formation of the German Empire in 1871, its component states numbered four kingdoms, four grand duchies, fourteen lesser duchies and principalities, and three Hanseatic cities, as well as the conquered territory of Alsace-Lorraine.
Until beyond the middle of the nineteenth century, Germany was understood to include the German-speaking sections of Austria, which was usually the dominant German state. In the words of the Deutschlandlied, or national anthem (written in 1841 by the exiled liberal August Heinrich Hoffman von Fallersleben), Germany ranged from the Maas River in the West to the Memel River in the East and from the Etsch (Adige) River in the South to the Belt (Baltic Sea passages) in the North.
The domain of German rulers was not limited, however, to German-speaking territories. Poles and other Slavic peoples lived in the eastern sections of Prussia, especially after the conquests by Frederick the Great to which Mises refers. Brandenburg, where Potsdam and Berlin are located, was the nucleus of what became the Kingdom of Prussia in 1701. The Hohenzollern family held the title of Margrave of Brandenburg from 1415 on and continued as the Prussian royal family until 1918. Frederick William, the "Great Elector" (the meaning of "elector" is explained below), ruled from 1640 to 1688. He presided over the rebuilding and expansion of his state after the Thirty Years' War and obtained full sovereignty over Prussia. His son, Frederick I, who ruled from 1688 to 1713, was crowned the first King of (technically, "in") Prussia. Frederick William I, king from 1713 to 1740, was largely the founder of the Prussian army. His son Frederick II became known to history as Frederick the Great. He wrested Silesia from Austria in 1745 and joined with Russia and Austria in the first partition of Poland in 1772. His successor, Frederick William II, joined in the second and third partitions of 1793 and 1795, which wiped Poland off the map.
The Austrian Empire included not only speakers of German but also Hungarians, Rumanians, Czechs, Slovenes, Poles, Ruthenians, Italians, and others. According to a 1910 census, the population of the Austrian part of the Austro-Hungarian Monarchy consisted of 35 percent Germans, 23 percent Czechs, 17 percent Poles, 19 percent other Slavs, 2 ¾ percent Italians, and scattered others.
The Holy Roman Empire of the German Nation, to use its full name, existed until 1806. It coincided roughly, but only roughly, with German-speaking territory. It sometimes included parts of northern Italy but left out the eastern parts of Prussia. It was organized (or revived) under Otto I, whom the Pope crowned Emperor in 962. (He was succeeded by Otto II and Otto III; Mises refers to the age of the Ottonians.) The Empire was a loose confederation of princely and ecclesiastical sovereignties and free cities. Seven, eight, or nine of their rulers were Electors, who chose a new Emperor when a vacancy occurred. From 1273, except for a few intervals (notably 1308 to 1438), the Holy Roman Emperors belonged to the Habsburg family, whose domains included many lands outside the boundaries of the Empire. The dynastic expansion of the Habsburgs explains Mises's reference to the "married-together state." The male line of the family died out in 1740, when Charles VI was succeeded in his domains by his daughter Maria Theresa, an event that touched off the War of the Austrian Succession. Maria Theresa's husband was the former Duke of Lorraine and Holy Roman Emperor as Francis I from 1745 to 1765, which explains why the dynasty became known as the house of Habsburg-Lorraine.
Mises mentions several other events and personalities in the history of the Holy Roman Empire. Until his death in 1637, Ferdinand II reigned from 1617 as King of Bohemia, from 1618 as King of Hungary, and from 1619 as Emperor. His fanatical Catholicism alienated the Protestant Bohemian nobles, who rebelled in 1618 (the picturesquely named Defenestration of Prague occurred at this time), beginning the Thirty Years' War. The war, which wrought havoc on Germany, hinged not only on religious differences but also on the ambition of the Habsburgs to gain control of the entire country. The Imperial forces won the war's first major battle, fought on the White Mountain, near Prague, in 1620, ending Bohemian independence for three centuries. The Protestant side was aided at times by the Danes, the Swedes, and even the French under Louis XIII and Louis XIV. The Treaty of Westphalia, in 1648, awarded certain German provinces on the Baltic Sea to Sweden and southern Alsace to France, while the Emperor's authority over Germany became purely nominal. Acceptance of the religious split of Germany was an important step toward religious toleration. Leopold I, whom Mises mentions, was Holy Roman Emperor from 1657 to 1705. The greater part of his reign was occupied by wars with Louis XIV of France and with the Turks. Leopold II, Emperor from 1790 until his death in 1792 and the last crowned King of Bohemia, succeeded his brother Joseph II (also a son of Maria Theresa). He instigated the Declaration of Pillnitz, which helped precipitate the French Revolutionary Wars a few weeks after his death.
The Napoleonic Wars brought lasting changes to the map and the political systems of Europe. The Enactment of Delegates of the Holy Roman Empire (Reichsdeputationshauptschluss) was adopted in 1803 under pressure of Napoleon. Mises mentions this Enactment as an illustration of the old idea that lands were the properties of their sovereigns and so could be bought and sold, traded, reshaped, divided, and consolidated without regard to the wishes of their inhabitants, who were mere appurtenances of the land. The Enactment greatly reduced the number of sovereignties in the Empire, in part by ending the temporal rule of dignitaries of the Catholic Church and putting their lands under the rule of neighboring princes. In 1806, again under pressure of Napoleon, who had detached the western parts of Germany?only temporarily, as things turned out?and organized them into a Confederation of the Rhine, the old Empire was liquidated. Francis II gave up his title of Holy Roman Emperor but retained the title of Emperor of Austria as Francis I.
Mises mentions two men who strove for a unified Italian state at the end of the Napoleonic Wars. Joachim Murat, a Marshall of France whom Napoleon had made King of Naples in 1808, tried in 1815 to make himself king of all Italy; but he was captured and shot. Florestano Pepe, one of Murat's generals, fought against the Austrians in 1815. (Mises's allusion is presumably to Florestano Pepe rather than to his brother Guglielmo, another Neapolitan general, who organized the Carbonari and who led an unsuccessful proconstitutional revolt in 1821.)
After the Napoleonic Wars, the reigning dynasties of Europe tried to restore the old regime. The Holy Alliance, to which Mises repeatedly refers with scorn, is a phrase frequently but imprecisely used to label the reactionary policies of Russia, Prussia, and Austria in particular. Strictly speaking, the Holy Alliance was an innocuous declaration of Christian principles of statesmanship drawn up by Czar Alexander I in 1815 and signed by almost all European sovereigns. The repressive policies are more properly associated with the Congress system and the Quadruple Alliance of 1815, Mises mentions, by the way, the Polish kingdom of Alexander I. The Congress of Vienna (1814-1815) created the kingdom in personal union with Russia but with a constitution of its own (which was suspended after the Polish insurrection of 1830-1831).
With the Holy Roman Empire defunct, a decision of the Congress of Vienna loosely joined some 38 (soon 39) German sovereignties together again as the German Confederation. The federal diet, which met in Frankfurt under the presidency of Austria, had little power because unanimity or a two-thirds majority was required for most decisions.
In 1834, after achieving a free-trade area within its own territories, Prussia took the lead in establishing the Zollverein among most German states, not including Austria, through the merger of two regional customs unions. The new union is considered a step toward political unification. In 1861 it was reorganized with a constitution and parliament of its own. Mises mentions one of its intellectual fathers, the economist Friedrich List. List had been forced to emigrate to the United States in 1825 for advocating administrative reforms in Württemberg but had returned to Germany in 1832 as U.S. consul at Leipzig. He favored internal free trade, together with strictly temporary tariff protection to encourage the development of infant industries.
Mises makes many admiring and wistful references to the European revolutions of 1848. The revolutions were mostly the work of the middle-class intellectuals, who were bringing mainly French ideas to bear against political repression. The February revolution in Paris, resulting in the overthrow of King Louis Philippe and establishment of the Second Republic, was emulated elsewhere. In the numerous sovereignties into which Italy was still split, a movement for liberal constitutions was followed by an unsuccessful patriotic war to eject the Austrians.
Revolutionary riots came to Austria and Germany in March 1848, which explains why Mises refers to the March revolution and compares conditions afterwards with conditions as they were "before March" (to translate the German literally). In Vienna, Prince Clemens von Metternich, minister of foreign affairs and chief minister since 1809, had to resign and flee the country. The first Pan-Slav Congress met in Prague in June 1848 under the presidency of Frantisek Palacky, the Bohemian historian and nationalist. (Mises cites Palacky's much-quoted remark to the effect that if the Austrian multinational state had not existed, it would have been necessary to invent it.) Field Marshal Prince Alfred Windischgrätz bombarded the revolutionaries in Prague into submission in June 1848 and later turned to Vienna, where a further wave of radical unrest had broken out in October. He helped restore Habsburg power, with Prince Felix Schwarzenberg as the new chief minister from November 1848. Schwarzenberg engineered the abdication of Emperor Ferdinand I in favor of his 18-year-old nephew Francis Joseph, who would reign until his death in 1916.
Mises alludes not only to Schwarzenberg but also to Count Eduard von Clam-Gallas, who played a decisive role in suppressing the Italian and Hungarian revolutions of 1848-1849. (Actually, Mises mentions the Clam-Martinics, who were the Bohemian wing of the same wealthy noble family.) The Hungarian independence movement succeeded at first but was finally put down by Schwarzenberg and the Habsburgs with the aid of some of their Slavic subjects and the forces of the Russian Czar Nicholas I. After their defeat by the Russians in August 1849, the Hungarians suffered vengeance at the hands of the Austrian General Julius Freiherr von Haynau.
In Germany the revolutionaries sought both representative government in the various states and unification of the country. The King of Prussia and lesser German rulers at first granted democratic concessions but later withdrew them on observing the success of counterrevolution in Austria. The Crown Prince of Prussia, who had fled the country only shortly before, as Mises notes, was able to mount a counteroffensive. Yet some prospects seemed hopeful for a while. Aspiring for a united Germany, a self-constituted "preliminary parliament" convoked a German National Assembly, also known as the Frankfurt Parliament, which met in St. Paul's Church from 18 May 1848 to 21 April 1849. Its delegates were chosen by direct male suffrage throughout Germany and Austria. It was predominantly a middle-class body inspired by liberal and democratic ideas. This is what Mises had in mind when repeatedly referring to the ideals of St. Paul's Church, (He occasionally refers in the same sense to the "Ideas of 1789," thinking of course of the aspirations for freedom and political equality expressed at the beginning of the French Revolution and not to the Terror into which the revolution later degenerated.)
One party among the Frankfurt delegates favored bringing Austria and Bohemia into the projected united Germany, although doing so would have disrupted the Habsburg Monarchy; another party thought it wiser to leave Austrian territory out. (With his reference not limited to this particular occasion, Mises does mention the tension between the great-German and small-German approaches to national unity.) The issue became academic when the Austrian government showed hostility to any splitting of its territory and when the Austrian constitution of 4 March 1849 reasserted the unity of the Habsburg domains. After lengthy debates, the Frankfurt delegates adopted a federal constitution and elected the King of Prussia, Frederick William IV, as Emperor. At the end of April, the King refused the offer on the grounds that accepting a crown from an elected assembly would be inconsistent with his divine right. The assembly then came apart. Meanwhile, with the suppression of revolutions and the consolidation of authoritarian rule in the German princely states, democratic leaders found it prudent to remain politically silent, as Mises observes, or even to emigrate.
The activities of the Frankfurt Parliament brought suspension of the diet of the German Confederation in 1848-1850. After rejecting the proffered imperial crown, the King of Prussia still hoped to unify Germany in his own way and with the consent of his fellow princes. An inner confederation, the Prussian Union, would join with the Habsburg Monarchy in a broader confederation. Most of the smaller German states initially accepted the plan, and first a national assembly and later a parliament met at Erfurt in 1849 and 1850 to put a constitution into effect. With the distractions in Hungary now overcome, however, the Austrian government was able to press its opposition. At Schwarzenberg's invitation, representatives of the petty states and Austria met at Frankfurt in May 1850 and reconstituted the diet of the old German Confederation. In November 1850, by the Punctation of Olmütz (known by Prussian historians as the Humiliation of Olmütz), the Prussians abandoned their Prussian Union scheme and recognized the reestablished diet of the Confederation.
Austria and the rest of Germany managed to stay out of the Crimean War of 1853-1856, in which Turkey, Great Britain, France, and Sardinia-Piedmont defeated Russia. Austrian threats of joining the war did help prod Russia to evacuate the occupied Danubian principalities in 1854, however, and later to agree to the proposed peace terms; prolonged mobilization drained Austrian finances. In 1859 Austria suffered defeat in a war with France and Sardinia-Piedmont, losing Lombardy but retaining Venetia in the peace settlement.
In 1863 Austria again demonstrated dominance among the German states in that Emperor Francis Joseph served as president of a congress of German princes in Frankfurt. However, Otto von Bismarck, who had become Prussian prime minister in 1862, was able to persuade his king not to attend. Prussia's absence helped keep the congress from accomplishing much.
In the summer of 1864, in a brief war touched off by the question of who was to inherit the rule of the duchies of Schleswig and Holstein, Prussia and Austria together defeated Denmark and acquired joint control over the two duchies. Bismarck skillfully escalated tensions over their administration and ultimate disposition into a war between Prussia and Austria in the summer of 1866. Austria had all the rest of Germany on its side except Mecklenburg and a few of the smaller north German states. Italy allied itself with Prussia. Austria defeated Italy on land and sea; but the decisive battle of the Seven Weeks' War was fought near Königgrätz (and Sadowa), about 65 miles east of Prague, on July 3. The timely arrival of troops commanded by the Crown Prince of Prussia (later, for 99 days in 1888, the Emperor Frederick III) helped clinch the victory of Field Marshal Count Helmuth Karl Bernhard von Moltke (who was later to be victorious in the war with France also) and seal the defeat of Austrian General Ludwig von Benedek.Benedek had had much experience on the Italian front but had been assigned to the northern front, supposedly to leave the easier Italian command to members of the Habsburg dynasty. Moltke and Benedek are named here because Mises mentions them as examples of victorious and defeated generals, respectively. He also mentions Karl Mack von Leiberich, an Austrian general who surrendered to Napoleon at Ulm in 1805, and Franz Gyulai, an Austrian general defeated in the war of 1859.
Mises's many references to Königgrätz, then, allude to the changes brought about by the brief war of 1866, which was ended by the preliminary peace of Nikolsburg and the definitive treaty of Prague. The King of Hanover was dethroned and his state absorbed into Prussia. (It is interesting to speculate on how differently the course of history might have turned out if only Queen Victoria of England had been a man. Her accession in 1837 separated the previously united crowns of England and Hanover, where the Salic Law barred females from the throne.) Austria lost Venetia to Italy but no territory to Prussia. Its expulsion from the German Confederation, however, ended Austria's dominance in German affairs. Austrians did not, though, immediately stop thinking of themselves as Germans. Mises illustrates their sentiment by quoting from the dramatist Franz Grillparzer (1791-1872).
The old German Confederation gave way to the North German Confederation, composed of Prussia and the other states north of the Main River, The component states retained their own administrations but placed their military forces and foreign policy under the federal government, dominated by Bismarck. Prussia also negotiated alliances with the south German states.
The defeated Austrians turned to tidying up their domestic affairs. They reached a compromise (Ausgleich) with the Hungarians, granting Hungary quasi-independence with its own parliament and government. Emperor Francis Joseph submitted to coronation as King of Hungary in Budapest on June 8, 1867 (only eleven days, by coincidence, before his brother Maximilian, the defeated and captured Emperor of Mexico, was executed at Querétaro).
The Franco-Prussian War of 1870-1871 resulted in the cession of Alsace-Lorraine to Germany. France also had to pay an indemnity of 5,000,000,000 francs, providing an unfortunate precedent for allied demands on Germany after its defeat in 1918.
The German Empire was proclaimed in a ceremony at Versailles, near Paris, in January 1871. Bismarck had persuaded the reluctant King Ludwig II of Bavaria (later called the "mad king") to invite King William I of Prussia to assume the hereditary title of German Emperor. The Empire absorbed the institutions of the North German Confederation of 1867, including the Federal Council and elected Reichstag; a modified constitution admitted the southern states of Bavaria, Württemberg, and Baden.
Meanwhile, Italy also achieved unification. Other Italian states joined with Sardinia-Piedmont in 1861 to proclaim its King, Victor Emmanuel II, King of Italy. In 1870, while the French, who had been protecting the Pope, were at war with Germany, the Italians seized the opportunity to conquer the Papal States and transfer the capital of Italy to Rome. Mises mentions three heroes of the movement for Italian liberation and unification: Giuseppe Mazzini, Giuseppe Garibaldi, and Count Camillo Benso di Cavour. He also mentions three Italian poets and patriots of the first half of the nineteenth century: Giacomo Leopardi, Giuseppe Giusti, and Silvio Pellico.
Not all Italian-speaking territory yet formed part of the Kingdom of Italy; some remained under Austro-Hungarian rule. This territory was called Italia irredenta, and irredentism was the movement calling for its liberation and absorption into Italy. World War I largely achieved the objectives of the movement. Mises mentions Gabriele D'Annunzio, a poet, novelist, and dramatist who helped persuade Italy to join the allies in that war, who lost an eye in aerial combat, and who later (after Mises was writing) led an unofficial occupation of Flume (now Rijeka, Yugoslavia) that eventuated in its incorporation into Italy.
Mises sometimes uses the word "irredentism" in its broader sense of a movement for any country's absorbing territories still outside its boundaries inhabited by people speaking its national language. Irredentism in this broader sense refers, in particular, to advocacy of incorporation of German-speaking Austria into the German Empire.
Representatives of the great European powers convened in Berlin in 1878 to impose on Russia a revision of the harsh treaty that it had imposed on Turkey after defeating it in a war. The Congress of Berlin also, incidentally, authorized Austria-Hungary to occupy and administer the Turkish provinces of Bosnia and Herzegovina, now in Yugoslavia. The occupation was not entirely trouble-free; Mises mentions rebellions in Herzegovina and around the Gulf of Kotor. Austria-Hungary finally annexed the occupied provinces in 1908.
Another important development in international politics was the negotiation of an alliance between Germany and Austria-Hungary in 1879. Apparently Bismarck's decision not to impose an excessively harsh peace on Austria in 1866 was paying off. This alliance, like the Russian-French alliance and others, set the stage for a chain reaction whereby the countries not directly involved in the original dispute between Austria and Serbia in 1914 got drawn into World War I.
The Wilhelministic Era, which Mises refers to, was the reign of William II as German Emperor, particularly from the dismissal of Bismarck as chancellor in 1890 until World War I.
The defeat of the Central Powers in that war split Austria-Hungary up into several states. Currency inflations gained momentum. In Germany the Spartacists, whom Mises mentions and who reorganized themselves into the German Communist Party in December 1918, seemed for a time to have prospects of gaining power in at least the major cities.
We now turn to a few explanations and identifications that did not fit into the preceding chronological survey. Cabinet ministers in both Germany and Austria were responsible to the Emperor rather than to parliament. Although a government could not be thrown out of office by a vote of no confidence, parliamentary majorities were necessary to enact specific pieces of legislation; and the government occasionally resorted to political maneuvers and tricks to achieve the necessary majorities. Mises refers scornfully to these circumstances. In Austria, in particular, the parliamentary situation and the alignment of parties was complicated by the mixture of nationalities and by such issues as what languages should be used in particular schools. Mises refers, for example, to Badeni's electoral reform of 1896. (Count Kazimierz Felix Badeni, a Polish aristocrat, became prime minister in 1895. The finance minister and foreign minister in his cabinet also came from the Polish part of the Empire. Badeni was dismissed in 1897 through the pressure of German-speaking factions, who considered his policies on use of language in the civil service too favorable to the Czechs.) Mises also notes allusions made at the time to the government's courting of the ironically nicknamed "Imperial and Royal Social Democrats" (the term "Imperial and Royal," commonly abbreviated in German as "K.k.," referred to the Austrian Empire and Kingdom of Hungary and meant something like "governmental" or "official").
The nationality situation is also in the background of Mises's reference to the Linz Program of 1882. The extreme German nationalists proposed the restoration of German dominance in Austrian affairs by detaching Galicia, Bukovina, and Dalmatia from the Monarchy, weakening the ties with Hungary to a purely personal union under the same monarch, and establishing a customs union and other close ties with the German Reich. They apparently did not realize that Bismarck had little reason to provide help, since the existing domestic situation in Austria-Hungary was consonant with his approach to international affairs. The leader of the extreme German-Austrian nationalists was Georg Ritter von Schönerer, who later made anti-Semitism a part of his program.
Employing synecdoche, Mises sometimes opposes Potsdam to Weimar. Potsdam was the home of the Prussian monarchy, and the word symbolizes the authoritarian state and militarism. Weimar, the literary and cultural center, stands for the aspect of Germany evoked by calling it the "nation of poets and thinkers." (The "classical period" of German literature, to which Mises also refers, corresponds roughly to the time of Goethe.)
The Gracchi, referred to in a Latin saying that Mises quotes, were the brothers Tiberius and Gaius Gracchus, agrarian, social, and political reformers of the second century B.C. Both perished in separate public disturbances, one of them after having sought an unconstitutional reelection as tribune of the people.
It is quite unnecessary to identify every event, person, or school of thought that Mises refers to—Alexander the Great and so on. Still, there is no harm in adding that the Manchester School was a group of English economists of the first half of the nineteenth century, led by Richard Cobden and John Bright, who campaigned for a market economy and a free-trade policy. François Quesnay, 1694-1774, was a French physician and economist who stressed the central role of agriculture and who prepared the Tableau Economique, a kind of rudimentary input-output table.
Benedikt Franz Leo Waldeck, 1802-1870, was Mises's example of the possibility of being both a Prussian nationalist and a sincere liberal democrat. Waldeck, a member of the highest Prussian court, had been a radical deputy in the Prussian constituent assembly in 1848 and leader of a committee that drafted a constitution. Later, as an opposition member of the Prussian chamber of deputies, he continued resisting authoritarian trends in government.
This introduction might fittingly end by especially recommending the discussion with which Mises ends his book?his discussion of the respective roles of value judgments and positive analysis in the choice between socialism and liberal capitalism. Mises proceeds not only from a liberal democratic outlook but also, and especially, from a rationalist and utilitarian philosophy.
Thanks are due to the Thomas Jefferson Center Foundation and the James Madison Center of the American Enterprise Institute for contributing much of the secretarial help required in preparing the translation. Thanks for their good work also go to Mrs. Anne Hobbs, Mrs. Carolyn Southall, and Miss Linda Wilson.
Leland B. YeagerLudwig von Mises Professor of Economic EmeritusAuburn University
Rationalist utilitarianism rules out neither socialism nor imperialism on principle. Accepting it provides only a standpoint from which one can compare and evaluate the advantages and disadvantages of the various possibilities of social order; one could conceivably become a socialist or even an imperialist from the utilitarian standpoint. But whoever has once adopted this standpoint is compelled to present his program rationally. All resentment, every policy prompted by sentiment, and all mysticism is thereby rejected, regardless of whether it appears in the garb of racial belief or of any other gospel of salvation. The fundamentals of policy can be disputed, pro and con, on rational grounds. If agreement cannot be reached both over the ultimate goals and also, although more seldom, over the choice of means by which they shall be pursued, since their evaluation depends on subjective feelings, one must still succeed in this manner in sharply narrowing the scope of the dispute. The hopes of many rationalists go still further, of course. They think that every dispute can be resolved by intellectual means, since all disagreements arise only from errors and from inadequacy of knowledge. Yet in assuming this they already presuppose the thesis of the harmony of the rightly understood interests of individuals, and this is indeed disputed precisely by imperialists and socialists.
The entire nineteenth century is characterized by the struggle against rationalism, whose dominion seemed undisputed at its beginning. Even its assumption of a fundamental similarity in the way of thinking of all people is attacked. The German must think otherwise than the Briton, the dolichocephalic person otherwise than the brachycephalic; "proletarian" logic is contrasted with "bourgeois" logic. Reason is denied the property of being able to decide all political questions; feeling and instinct must show men the path that they have to tread.
Rational policy and rational economic management have outwardly enriched beyond measure the lives of the individual and of nations. That could be overlooked, since attention was always paid only to the poverty of those still living outside the boundaries of the territories already won by the free economy and because the lot of the modern worker was always compared with that of the rich man of today, instead of the lots of both being compared with those of their ancestors. It is true that modern man is never content with his economic position, that he would like to have things still better. Yet precisely this incessant striving for more wealth is the driving force of our development; one cannot eliminate it without destroying the basis of our economic civilization. The contentment of the serf, who was happy when he did not suffer actual hunger and when his lord did not thrash him too badly, is no ideal state of affairs whose passing one could lament.
It is also true, however, that the rise of outward welfare corresponds to no increase of inner riches. The modern city dweller is richer than the citizen of Periclean Athens and than the knightly troubadour of Provence, but his inner life exhausts itself in mechanical functions at work and in superficial dissipations of his leisure hours. From the pine torch to the incandescent lamp is a great step forward, from the folk song to the popular song a sad step backward. Nothing is more comforting than that people are beginning to become conscious of this lack. In that alone lies hope for a culture of the future that will put everything earlier in the shade.
Yet the reaction against inner impoverishment should not impugn the rationalization of outward life. The romantic longing for wild adventures, for quarreling and freedom from external restraint, is itself only a sign of inner emptiness; it clings to the superficial and does not strive for depth. Relief is not to be hoped for from a farrago of external experience. The individual must seek by himself the way to find within himself the satisfaction that he expects in vain from outside. If we chose to deliver up politics and the economy to imperialism, to resentment, and to mystical feelings, then we would indeed become outwardly poorer but not inwardly richer.
Warlike activity assures a man of that deep satisfaction aroused by the highest straining of all forces in resistance to external dangers. That is no mere atavistic reawakening of impulses and instincts that have become pointless in changed circumstances. The inner feeling of happiness aroused not by victory and revenge but rather by struggle and danger originates in the vivid perception that exigency compels the person to the highest deployment of forces of which he is capable and that it makes everything that lies within him become effective. . . .der Krieg lässtt die Kraft erscheinen, Alles erhebt er zum Ungemeinen, Selber dem Feigen erzeugt er den Mut. (Die Braut von Messina) [. . . war makes strength appear, It raises everything to the extraordinary, Even in the coward it creates courage. (The Bride of Messina)] It is characteristic of very great persons to move forward to highest accomplishment out of an inner drive; others require an external impulse to overcome deep-rooted inertia and to develop their own selves. The common man will never share the happiness that the creative person feels in devotion to his work unless extraordinary circumstances confront him, too, with tasks that demand and reward the commitment of the whole person. Here lies the source of all heroism. Not because the individual feels death and wounds as sweet but rather because, in the enrapturing experience of the deed, he puts them out of his mind does he assail the enemy. Bravery is an emanation of health and strength and is the rearing up of human nature against external adversity. Attack is the most primary initiative. In his feelings man is always an imperialists.This does not refer to the glorification of war by weak-willed esthetes who admire in warlike activity the strength that they lack. This writing-table and coffeehouse imperialism has no significance. With its paper effusions, it is only a fellow-traveler. Games and sport represent an attempt to react from natural, emotional imperialism. It is no accident that England, the home of modern utilitarianism, is also the fatherland of modern sport and that precisely the German—and among them, again, the strata most averse to the utilitarian philosophy, university youth—have shut themselves off the longest from the spread of sports activity.
But reason forbids giving free rein to feelings. To want to beat the world to ruins to let a romantic longing exhaust itself contradicts the simplest deliberation so much that no word need be wasted on it.
The rational policy that is commonly called the ideas of 1789 has been reproached for being unpatriotic—in Germany, un-German. It takes no regard of the special interests of the fatherland; beyond mankind and the individual, it forgets the nation. This reproach is understandable only if one accepts the view that there is an unbridgeable cleavage between the interest of the people as a whole on the one side and that of individuals and of all mankind on the other side. If one starts with the harmony of rightly understood interests, then one cannot comprehend this objection at all. The individualist will never be able to grasp how a nation can become great and rich and powerful at the expense of its members and how the welfare of mankind can obstruct that of individual peoples. In the hour of Germany's deepest degradation, may one raise the question whether the German nation would not have fared better by holding firm to the peaceful policy of much-reviled liberalism rather than to the war policy of the Hohenzollerns?
The utilitarian policy has further been reproached for aiming only at the satisfaction of material interests and neglecting the higher goals of human striving. The utilitarian supposedly thinks of coffee and cotton and on that account forgets the true values of life. Under the reign of such a policy all would have to be caught up in precipitous striving for the lower earthly pleasures, and the world would sink into crass materialism. Nothing is more absurd than this criticism. It is true that utilitarianism and liberalism postulate the attainment of the greatest possible productivity of labor as the first and most important goal of policy. But they in no way do this out of misunderstanding of the fact that human existence does not exhaust itself in material pleasures. They strive for welfare and for wealth not because they see the highest value in them but because they know that all higher and inner culture presupposes outward welfare. If they deny to the state the mission of furthering the realization of the values of life, they do so not out of want of esteem for true values but rather in the recognition that these values, as the most characteristic expression of inner life, are inaccessible to every influence by external forces. Not out of irreligiosity do they demand religious freedom but out of deepest intimacy of religious feeling, which wants to make inner experience free from every raw influence of outward power. They demand freedom of thought because they rank thought much too high to hand it over to the domination of magistrates and councils. They demand freedom of speech and of the press because they expect the triumph of truth only from the struggle of opposing opinions. They reject every authority because they believe in man.
Utilitarian policy is indeed policy for this earth. But that is inherent in all policy. The person who has a low opinion of the mind is not the one who wants to make it free from all external regulation but rather the one who wants to control it by penal laws and machine guns. The reproach of a materialistic way of thinking applies not to individualistic utilitarianism but to collectivistic imperialism.
With the World War mankind got into a crisis with which nothing that happened before in history can be compared. There were great wars before; flourishing states were annihilated, whole peoples exterminated. All that can in no way be compared with what is now occurring before our eyes. In the world crisis whose beginning we are experiencing, all peoples of the world are involved. None can stand aside; none can say that its cause too will not be decided along with the others. If in ancient times the destructive will of the more powerful met its limits in the inadequacy of the means of destruction and in the possibility available to the conquered of escaping persecution by moving away, then progress in the techniques of war and transportation and communication makes it impossible today for the defeated to evade the execution of the victor's sentence of annihilation.
War has become more fearful and destructive than ever before because it is now waged with all the means of the highly developed technique that the free economy has created. Bourgeois civilization has built railroads and electric power plants, has invented explosives and airplanes, in order to create wealth. Imperialism has placed the tools of peace in the service of destruction. With modern means it would be easy to wipe out humanity at one blow. In horrible madness Caligula wished that the entire Roman people had one head so that he could strike it off. The civilization of the twentieth century has made it possible for the raving madness of the modern imperialists to realize similar bloody dreams. By pressing a button one can expose thousands to destruction. It was the fate of civilization that it was unable to keep the external means that it had created out of the hands of those who had remained estranged from its spirit. Modern tyrants have things much easier than their predecessors. He who rules the means of exchange of ideas and of goods in the economy based on the division of labor has his rule more firmly grounded than ever an imperator before. The rotary press is easy to put into fetters, and whoever controls it need not fear the competition of the merely spoken or written word. Things were much more difficult for the Inquisition. No Phillip II could paralyze freedom of thought more severely than a modern censor. How much more efficient than the guillotine of Robespierre are the machine guns of Trotsky! Never was the individual more tyrannized, than since the outbreak of the World War and especially of the world revolution. One cannot escape the police and administrative technique of the present day.
Only one external limit is posed to this rage for destruction. In destroying the free cooperation of men, imperialism undercuts the material basis of its power. Economic civilization has forged the weapons for it. In using the weapons to blow up the forge and kill the smith, it makes itself defenseless in the future. The apparatus of the economy based on division of labor cannot be reproduced, let alone extended, if freedom and property have disappeared. It will die out, and the economy will sink back into primitive forms. Only then will mankind be able to breathe more freely. If the spirit of reflectiveness does not return sooner, imperialism and Bolshevism will be overcome at the latest when the means of power that they have wrested from liberalism will have been used up.
The unfortunate outcome of the war brings hundreds of thousands, even millions, of Germans under foreign rule and imposes tribute payments of unheard-of size on the rest of Germany. A legal order is being established in the world that permanently excludes the German people from possession of those parts of the earth that have the more favorable conditions of production. In the future, no German will be allowed to acquire ownership of land resources and means of production abroad; and millions of Germans, narrowly pushed together, will have to feed themselves badly on the niggardly soil of Germany, while, overseas, millions of square kilometers of the best land lie idle. Need and misery for the German people will emerge from this peace. The population will decline; and the German people, which before the war counted among the most numerous peoples of the earth, will in the future have to be numerically less significant than they once were.
All thinking and effort of the German people must be directed to getting out of this position. This goal can be reached in two ways. One is that of imperialistic policy. To grow strong militarily and to resume the war as soon as the opportunity for attack presents itself—that is the only means thought of today. Whether this way will be practicable at all is questionable. The nations that today have robbed and enslaved Germany are very many. The amount of power that they have exercised is so great that they will watch anxiously to prevent any strengthening of Germany again. A new war that Germany might wage could easily become a Third Punic War and end with the complete annihilation of the German people. But even if it should lead to victory, it would bring so much economic misery upon Germany that the success would not be worth the stakes; moreover, the danger would exist that the German people, in the ecstasy of victory, would fall again into that limitless and boundless madness of victory that has already repeatedly turned to misfortune for it, since it can finally lead again only to a great debacle.
The second course that the German people can take is that of completely turning away from imperialism. To strive for reconstruction only through productive labor, to make possible the development of all powers of the individual and of the nation as a whole by full freedom at home—that is the way that leads back to life. To set nothing against the efforts of imperialistic neighbor states to oppress and de-Germanize us other than productive labor, which makes one wealthy and thereby free, is a way that leads more quickly and surely to the goal than the policy of struggle and war. The Germans who have been subjugated to the Czechoslovak, Polish, Danish, French, Belgian, Italian, Rumanian, and Yugoslav states will better preserve their national character if they strive for democracy and self-government, which finally do lead to full national independence, than if they pin their hopes on a victory of weapons.
The policy that strived for the greatness of the German nation through outward means of force has broken down. It has not only diminished the German people as a whole but also brought the individual German into misery and need. Never has the German people sunk so low as today. If it is now to rise again, then it can no longer strive to make the whole great at the expense of individuals but rather must strive for a durable foundation of the well-being of the whole on the basis of the well-being of individuals. It must switch from the collectivistic policy that it has followed so far to an individualistic one.
Whether such a policy will be at all possible in the future, in view of the imperialism that is now asserting itself everywhere in the world, is another question. But if this should not be the case, then precisely all modern civilization faces downfall.
"The most virtuous person cannot live in peace if that does not please his evil neighbor." Imperialism presses weapons into the hands of all who do not want to be subjugated. To fight imperialism, the peaceful must employ all its means. If they then triumph in the struggle, they may indeed have crushed their opponent, yet themselves have been conquered by his methods and his way of thinking. They then do not lay down their weapons again; they themselves remain imperialists.
Englishmen, Frenchmen, and Americans had already shed all cravings for conquest in the nineteenth century and had made liberalism their first principle. To be sure, even in their liberal period their policy was not entirely free of imperialist deviations, and one cannot immediately chalk up every success of the imperialistic idea among them to the account of defense. But no doubt their imperialism drew its greatest strength from the necessity of warding off German and Russian imperialism. Now they stand as victors and are not willing to content themselves with what they indicated before their victory as their war aim. They have long since forgotten the fine programs with which they went to war. Now they have power and are not willing to let it get away. Perhaps they think that they will exercise power for the general good, but that is what all those with power have believed. Power is evil in itself, regardless of who exercises it.Cf. J. Burckhardt, Weltgeschichtliche Betrachtungen (Berlin, 1905), p. 96.
But if they now do want to adopt that policy with which we have suffered shipwreck, so much the worse for them; for us that can still be no reason for abstaining from what benefits us. We demand the policy of calm, peaceful development not indeed for their sake but for our own sake. It was the greatest error of German imperialists that they accused those who had advised a policy of moderation of having unpatriotic sympathy for foreigners; the course of history has shown how much they thereby deluded themselves. Today we know best where imperialism leads.
It would be the most terrible misfortune for Germany and for all humanity if the idea of revenge should dominate the German policy of the future. To become free of the fetters that have been forced upon German development by the peace of Versailles, to free our fellow nationals from servitude and need, that alone should be the goal of the new German policy. To retaliate for wrong suffered, to take revenge and to punish, does satisfy lower instincts, but in politics the avenger harms himself no less than the enemy. The world community of labor is based on the reciprocal advantage of all participants. Whoever wants to maintain and extend it must renounce all resentment in advance. What would he gain from quenching his thirst for revenge at the cost of his own welfare?
In the League of Nations of Versailles the ideas of 1914 are in truth triumphing over those of 1789; that it is not we who have helped them to victory, but rather our enemies, and that the oppression turns back against us is important for us but less decisive from the standpoint of world history. The chief point remains that nations are being "punished" and that the forfeiture theory comes to life again. If one admits exceptions to the right of self-determination of nations to the disadvantage of "evil" nations, one has overturned the first principle of the free community of nations. That Englishmen, North Americans, French, and Belgians, those chief exporters of capital, thereby help gain recognition for the principle that owning capital abroad represents a form of rule and that its expropriation is the natural consequence of political changes shows how blind rage and the desire for momentary enrichment repress rational considerations among them today. Cool reflection would be bound to lead precisely these peoples to quite other behavior in questions of international capital movements.
The way that leads us and all humanity out of the danger that world imperialism signifies for the productive and cultural community of nations and so for the fate of civilization is rejection of the policy of feeling and instinct and return to political rationalism. If we wanted to throw ourselves into the arms of Bolshevism merely for the purpose of annoying our enemies, the robbers of our freedom and our property, or to set their house on fire too, that would not help us in the least. It should not be the goal of our policy to drag our enemies into our destruction with us. We should try not to be destroyed ourselves and try to rise again out of servitude and misery. That, however, we can attain neither by warlike actions nor by revenge and the policy of despair. For us and for humanity there is only one salvation: return to the rationalistic liberalism of the ideas of 1789.
It may be that socialism represents a better form of organization of human labor. Let whoever asserts this try to prove it rationally. If the proof should succeed, then the world, democratically united by liberalism, will not hesitate to implement the communist community. In a democratic state, who could oppose a reform that would be bound to bring the greatest gain to by far the overwhelming majority? Political rationalism does not reject socialism on principle. But it does reject in advance the socialism that hinges not on cool understanding but rather on unclear feelings, that works not with logic but rather with the mysticism of a gospel of salvation, the socialism that does not proceed from the free will of the majority of the people but rather from the terrorism of wild fanatics.
The economic aspects of the World War are unique in history in kind and in degree; nothing similar ever existed before nor ever will exist again. This combination of developments was in general conditioned both by the contemporary stage of development of the division of labor and state of war technique, but in particular by both the grouping of the belligerent powers and the particular features of their territories as far as geography and technique of production were concerned. Only the conjunction of a large number of preconditions could lead to the situation that was quite unsuitably summarized in Germany and Austria under the catchword "war economy." No opinion need be expressed whether this war will be the last one or whether still others will follow. But a war which puts one side in an economic position similar to that in which the Central Powers found themselves in this war will never be waged again. The reason is not only that the configuration of economic history of 1914 cannot return but also that no people can ever again experience the political and psychological preconditions that made a war of several years' duration under such circumstances still seem promising to the German people.
The economic side of the World War can scarcely be worse misunderstood than in saying that in any case "the understanding of most of these phenomena will not be furthered by a good knowledge of the conditions of the peacetime economies of 1913 but rather by adducing those of the peacetime economies of the fourteenth to eighteenth centuries or the war economy of Napoleonic times."Cf. Otto Neurath, "Aufgabe, Methode und Leistungsähigheit der Kriegswirtschaftslehre," Archiv für Sozialwissenschaft und Sozialpolitik, vol. 44, 1917/1918, p. 765; cf., on the contrary, the discussion of Eulenburg, "Die wissenschaftliche Behandlung der Kriegswirtschaft," ibid., pp. 775-785. We can best see how much such an interpretation focuses on superficialities and how little it enables us to grasp the essence of the phenomena if we imagine, say, that the World War had been waged ceteris paribus at the stage of the international division of labor reached 100 years before. It could not have become a war of starving out then; yet that was precisely its essence. Another grouping of the belligerent powers would also have resulted in quite a different picture.
The economic aspects of the World War can only be understood if one first keeps in view their dependence on the contemporary development of world economic relations of the individual national economies, in the first place of Germany's and Austria-Hungary's and then of England's also.
Economic history is the development of the division of labor. It starts with the self-contained household economy of the family, which is self-sufficient, which itself produces everything that it uses or consumes. The individual households are not economically differentiated. Each one serves only itself. No economic contact, no exchange of economic goods, occurs.
Recognition that work performed under the division of labor is more productive than work performed without the division of labor puts an end to the isolation of the individual economies. The trade principle, exchange, links the individual proprietors together. From a concern of individuals, the economy becomes a social matter. The division of labor advances step by step. First limited to only a narrow sphere, it extends itself more and more. The age of liberalism brought the greatest advances of this sort. In the first half of the nineteenth century the largest part of the population of the European countryside, in general, still lived in economic self-sufficiency. The peasant consumed only foodstuffs that he himself had grown; he wore clothes of wool or linen for which he himself had produced the raw material, which was then spun, woven, and sewn in his household. He had built a house and farm buildings and maintained them himself, perhaps with the help of neighbors, whom he repaid with similar services. In the out-of-the-way valleys of the Carpathians, in Albania, and in Macedonia, cut off from the world, similar conditions still existed at the outbreak of the World War. How little this economic structure corresponds, however, to what exists today in the rest of Europe is too well known to require more detailed description.
The locational development of the division of labor leads toward a full world economy, that is, toward a situation in which each productive activity moves to those places that are most favorable for productivity; and in doing so, comparisons are made with all the production possibilities of the earth's surface. Such relocations of production go on continually, as, for example, when sheep-raising declines in Central Europe and expands in Australia or when the linen production of Europe is displaced by the cotton production of America, Asia, and Africa.
No less important than the spatial division of labor is the personal kind. It is in part conditioned by the spatial division of labor. When branches of production are differentiated by locality, then personal differentiation of producers must also occur. If we wear Australian wool on our bodies and consume Siberian butter, then it is naturally not possible that the producer of the wool and of the butter are one and the same person, as once was the case. Indeed, the personal division of labor also develops independently of the spatial, as every walk through our cities or even only through the halls of a factory teaches us.
The dependence of the conduct of war on the stage of development of the spatial division of labor reached at the time does not in itself, even today, make every war impossible. Individual states can find themselves at war without their world economic relations being essentially affected thereby. A German-French war would have been bound to lead or could have led to an economic collapse of Germany just as little in 1914 as in 1870-71. But today it must seem utterly impossible for one or several states cut off from world trade to wage war against an opponent enjoying free trade with the outside world.
This development of spatial division of labor is also what makes local uprisings appear quite hopeless from the start. As late as the year 1882, the people around the Gulf of Kotor and the Herzegovinians could successfully rebel against the Austrian government for weeks and months without suffering shortages in their economic system, composed of autarkic households. In Westphalia or Silesia, an uprising that stretched only over so small a territory could already at that time have been suppressed in a few days by blocking shipments into it. Centuries ago, cities could wage war against the countryside; for a long time now that has no longer been possible. The development of the spatial division of labor, its progress toward a world economy, works more effectively for peace than all the efforts of the pacifists. Mere recognition of the worldwide economic linkage of material interests would have shown the German militarists the danger, indeed impossibility, of their efforts. They were so much caught up in their power-policy ideas, however, that they were never able to pronounce the peaceful term "world economy" otherwise than in warlike lines of thought. Global policy was for them synonymous with war policy, naval construction, and hatred of England.Especially characteristic of this tendency are the speeches and essays published by Schmoller, Sering, and Wagner under the auspices of the "Free Association for Naval Treaties" under the title Handels und Machtpolitik (Stuttgart; 1900), 2 volumes.
That economic dependence on world trade must be of decisive significance for the outcome of a campaign could naturally not also escape those who had occupied themselves for decades with preparation for war in the German Reich. If they still did not realize that Germany, even if only because of its economic position, could not successfully wage a great war with several great powers, well, two factors were decisive for that, one political and one military. Helfferich summarized the former in the following words, "The very position of Germany's borders as good as rules out the possibility of lengthy stoppage of grain imports. We have so many neighbors—first the high seas, then Holland, Belgium, France, Switzerland, Austria Russia—that it seems quite inconceivable that the many routes of grain import by water and by land could all be blocked to us at once. The whole world would have to be in alliance against us; however, to consider such a possibility seriously, even for a minute, means having a boundless mistrust in our foreign policy."Cf. Helfferich, Handelspolitik (Leipzig; 1901), p. 197; similarly Dietzel, "Weltwirtschaft und Volkswirtschaft,"Jahrbuch der Gehe-Stiftung, vol. 5 (Dresden: 1900), pp. 46 f.; Riesser, Finanzielle Kriegsbereitschaft und Kriegfuhrung (Jena; 1909), pp. 73 f. Bernhardi speaks of the necessity of taking measures to prepare ways during a German-English war "by which we can obtain the most necessary imports of foods and raw materials and at the same time export the surplus of our industrial products at least partially" (Deutschland und der nächste Krieg [Stuttgart: 19121, pp. 179 f.). He proposes making provisions for "a kind of commercial mobilization." What illusions about the political situation he thereby indulged in can best be seen from his thinking that in a fight against England (and France allied with it), we would "not stand spiritually alone, but rather all on the wide earthly sphere who think and feel freedom-oriented and self-confident will be united with us" (ibid., p. 187). Militarily, however, recalling the experiences of the European wars of 1859, 1866, and 1870-71, people believed that they had to reckon with a war lasting only a few months, even weeks. All German war plans were based on the idea of success in completely defeating France within a few weeks. Anyone who might have considered that the war would last long enough for the English and even the Americans to appear on the European continent with armies of millions would have been laughed down in Berlin. That the war would become a war of emplacements was not understood at all; despite the experiences of the Russo-Japanese war, people believed that they could end the European war in a short time by rapid offensive strikes.Modern war theory started with the view that attack is the superior method of waging war. It corresponds to the spirit of conquest-hungry militarism when Bernhardi argues for this: "Only attack achieves positive results; mere defense always delivers only negative ones." (Cf. Bernhardi, Vom heutigen Klieg [Berlin: 1912], vol. 2, p. 223.) The argumentation for the attack theory was not merely political, however, but was also based on military science. Attack appears as the superior form of fighting because the attacker has free choice of the direction, of the goal, and of the place of the operations, because he, as the active party, determines the conditions under which the fight is carried out, in short, because he dictates to the party under attack the rules of action. Since, however, the defense is tactically stronger in the front than the offense, the attacker must strive to get around the flank of the defender. That was old war theory, newly proved by the victories of Frederick II, Napoleon I, and Moltke and by the defeats of Mack, Gyulai, and Benedek. It determined the behavior of the French at the beginning of the war (Mulhouse). It was what impelled the German army administration to embark on the march through neutral Belgium in order to hit the French on the flank because they were unattackable in the front. His remembering the many Austrian commanders for whom the defensive had become misfortune drove Conrad in 1914 to open the campaign with goalless and purposeless offensives in which the flower of the Austrian army was uselessly sacrificed. But the time of battles of the old style, which permitted getting around the opponent's flank, was past on the great European theaters of war, since the massiveness of the armies and the tactics that had been reshaped by modern weapons and means of communication offered the possibility of arranging the armies in such a way that a flank attack was no longer possible. Flanks that rest on the sea or on neutral territory cannot be gotten around. Only frontal attack still remains, but it fails against an equally well armed opponent. The great breakthrough offensives in this war succeeded only against badly armed opponents, as especially the Russians were in 1915 and in many respects also the Germans in 1918. Against inferior troops a frontal attack could of rourse succeed even against equally good, even superior, weapons and armaments of the defender (twelfth battle of the Isonzo). Otherwise, the old tactics could be applied only in the battles of mobile warfare (Tannenberg and the Masurian Lakes in 1914 and individual battles in Galicia). To have misunderstood this has been the tragic fate of German militarism. The whole German policy was built on the theorem of the military superiority of attack; in war of emplacements the policy broke down with the theorem. The military calculations of the General Staff were just as false as its economic and political ones.
The assertion is not true, therefore, that the German Empire had neglected to make the necessary economic preparations for war. It simply had counted on a war of only short duration; for a short war, however, no economic provisions had to be made beyond those of finance and credit policy. Before the outbreak of the war the idea would no doubt have been called absurd that Germany could ever be forced to fight almost the whole rest of the world for many years in alliance only with Austria-Hungary (or more exactly in alliance with the German-Austrians and the Magyars, for the Slavs and Rumanians of the Monarchy stood with their hearts and many of them also with weapons on the side of the enemy), Turkey, and Bulgaria. And in any case one would have had to recognize, after calm reflection, that such a war neither could have been waged nor should have been waged and that if an unspeakably bad policy had let it break out, then one should have tried to conclude peace as quickly as possible, even at the price of great sacrifices. For, indeed, there never could be any doubt that the end could be only a fearful defeat that would deliver the German people defenseless to the harshest terms of its opponents. Under such circumstances a quick peace would at least have spared goods and blood.
That should have been recognized at once even in the first weeks of the war and the only possible implications then drawn. From the first days of the war—at the latest, however, after the defeats on the Marne and in Galicia in September 1914—there was only one rational goal for German policy: peace, even if at the price of heavy sacrifices. Let us quite disregard the fact that until the summer of 1918 it was repeatedly possible to obtain peace under halfway acceptable conditions, that the Germans of Alsace, the South Tyrol, the Sudetenland, and the eastern provinces of Prussia could probably have been protected from foreign rule in that way; even then, if continuation of the war might have afforded a slightly more favorable peace, the incomparably great sacrifices that continuation of the war required should not have been made. That this did not happen, that the hopeless, suicidal fight was continued for years—political considerations and grave errors in the military assessment of events were primarily responsible for that. It was an incomprehensible delusion to speak of the possibility of a victorious peace when German failure had already been settled from the time of the battle of the Marne. But the Junker party preferred to let the German people be entirely ruined rather than give up its rule even one day earlier. But delusions about economic policy also contributed much.
Right at the beginning of the war a catchword turned up whose unfortunate consequences cannot be completely overlooked even today: the verbal fetish "war-economy." With this term all considerations were beaten down that could have led to a conclusion advising against continuing the war. With this one term all economic thought was put aside; ideas carried over from the "peacetime economy" were said not to hold for the "war economy," which obeyed other laws. Armed with this catchword, a few bureaucrats and officers who had gained full power by exceptional decrees substituted "war socialism" for what state socialism and militarism had still left of the free economy. And when the hungry people began to grumble, they were calmed again by reference to the "war economy." If an English cabinet minister had voiced the watchword "business as usual" at the beginning of the war, which however, could not be continued in England as the war went on, well, people in Germany and Austria took pride in traveling paths as new as possible. They "organized" and did not notice that what they were doing was organizing defeat.
The greatest economic achievement that the German people accomplished during the war, the conversion of industry to war needs, was not the work of state intervention; it was the result of the free economy. If, also, what was accomplished in the Reich in this respect was much more significant in absolute quantity than what was done in Austria, it should not be overlooked that the task which Austrian industry had to solve was still greater in relation to its powers. Austrian industry not only had to deliver what the war required beyond peacetime provisions; it also had to catch up on what had been neglected in peacetime. The guns with which the Austro-Hungarian field artillery went to war were inferior; the heavy and light field howitzers and the mountain cannons were already out of date at the time of their introduction and scarcely satisfied the most modest demands. These guns came from state factories; and now private industry, which in peacetime had been excluded from supplying field and mountain guns and could supply such material only to China and Turkey, not only had to produce the material for expanding the artillery; in addition, it also still had to replace the unusable models of the old batteries with better ones. Things were not much different with the clothing and shoeing of the Austro-Hungarian troops. The so-called bluish-gray—more correctly, light blue—fabrics proved to be unusable in the field and had to be replaced as rapidly as possible by gray ones. The supplying of the army with boots, which in peacetime had been done while the mechanized shoe industry that worked for the market was excluded, had to be turned over to the factories previously shunned by the quartermasters.
The great technical superiority that the armies of the Central Powers had achieved in the spring and summer of 1915 in the eastern theater of the war and that formed the chief basis of the victorious campaign from Tarnów and Gorlice to deep into Volhynia was likewise the work of free industry, as were the astonishing achievements of German and also of Austrian labor in the delivery of war material of all kinds for the western and the Italian theaters of war. The army administrations of Germany and Austro-Hungary knew very well why they did not give in to the pressure for state ownership of the war-supplying enterprises. They put aside their outspoken preference for state enterprises, which would have better suited their world view, oriented toward power policy and state omnipotence, because they knew quite well that the great industrial tasks to be accomplished in this area could be accomplished only by entrepreneurs operating on their own responsibility and with their own resources. War socialism knew very well why it had not been entrusted with the armaments enterprises right in the first years of the war.
- Liberal or Pacifistic NationalismThat politics should be national is a modern postulate.
In most countries of Europe the princely state had replaced the estate system of the Middle Ages from the beginning of modern times. The political conception of the princely state is the interest of the ruler. The famous maxim of Louis XIV, L'état c'est moi, expresses most briefly the conception that was still alive at the three European imperial courts until the recent upheavals. It is no less clear when Quesnay, whose doctrines nevertheless already lead into the new conception of the state, precedes his work with the motto Pauvre paysan, Pauvre royaume; pauvre royaume, pauvre roi. It is not enough for him to show that on the well-being of the peasant that of the state also depends; he still considers it necessary to show that the king also can be rich only when the peasant is. Only then does the necessity appear proved of taking measures to raise the well-being of the peasants. For the object of the state is precisely the prince.
Against the princely state there then arises in the eighteenth and nineteenth centuries the idea of freedom. It revives the political thought of the republics of antiquity and of the free cities of the Middle Ages; it links up with the monarchomachs' hostility to princes; it patterns itself on the example of England, where the crown had already suffered a decisive defeat in the seventeenth century; it fights with the entire armament of philosophy, of rationalism, of natural law, and of history; it wins over the great masses through literature, which puts itself entirely at its service. Absolute kingship succumbs to the attack of the movement for freedom. In its place appears here parliamentary monarchy, there a republic.
The princely state has no natural boundaries. To be an increaser of his family estate is the ideal of the prince; he strives to leave to his successor more land than he inherited from his father. To keep on acquiring new possessions until one encounters an equally strong or stronger adversary—that is the striving of kings. For fundamentally, their greed for lands knows no boundaries; the behavior of individual princes and the views of the literary champions of the princely idea agree on that. This principle threatens, above all, the existence of all smaller and weaker states. That they are nevertheless able to maintain themselves is attributable only to the jealousy of the big ones, which anxiously watch that none should become too strong. That is the conception of European equilibrium, which forms coalitions and breaks them up again. Where it is possible without endangering the equilibrium, smaller states are destroyed; an example: the partition of Poland. Princes regard countries no differently from the way an estate owner regards his forests, meadows, and fields. They sell them, they exchange them (e.g., for "rounding off" boundaries); and each time rule over the inhabitants is transferred also. On this interpretation, republics appear as unowned property that anyone may appropriate if he can. This policy did not reach its high point, by the way, until the nineteenth century, in the Enactment of the Delegates of the Holy Roman Empire of 1803, in Napoleon's establishments of states, and in the decisions of the Congress of Vienna.
Lands and peoples are, in the eyes of princes, nothing but objects of princely ownership; the former form the basis of sovereignty, the latter the appurtenances of landownership. From the people who live in "his" land the prince demands obedience and loyalty; he regards them almost as his property. This bond that binds him with each one of his subjects should, however, also be the only one that joins the individual persons into a unit. The absolute ruler not only regards every other community between his subjects as dangerous, so that he tries to dissolve all traditional comradely relations between them that do not derive their origin from state laws enacted by him and is hostile to every new formation of community, perhaps through clubs; he also will not allow the subjects of his different territories to begin to feel themselves comrades in their role as subjects. But, of course, in seeking to tear apart all class ties to make subjects out of nobles, the bourgeoisie, and peasants, the prince atomizes the social body and thereby creates the precondition for the rise of a new political sentiment. The subject who has grown unaccustomed to feel himself a member of a narrow circle begins to feel himself a person, a member of his nation, and a citizen of the state and of the world. The way opens up for the new outlook on the world.
The liberal theory of the state, hostile to princes, rejects the princes' greed for lands and chaffering in lands. First of all, it finds it a matter of course that state and nation coincide. For so it is in Great Britain, the model country of freedom, so in France, the classical land of the struggle for freedom. That seems such a matter of course that no further word is wasted on it. Since state and nation coincide and there is no need to change this, there is no problem here.
The problem of state boundaries first appeared when the power of the idea of freedom gripped Germany and Italy. Here and in Poland there stands behind the despicable despots of the present day the great shadow of a vanished unified state. All Germans, Poles, and Italians have a great political goal in common: the liberation of their peoples from the rule of princes. That gives them first unity of political thinking and then unity of action. Across state boundaries, guarded by customs guards and gardeess, the peoples stretch their hands in unity. The alliance of the princes against freedom is confronted by the union of peoples fighting for their freedom.
To the princely principle of subjecting just as much land as obtainable to one's own rule, the doctrine of freedom opposes the principle of the right of self-determination of peoples, which follows necessarily from the principle of the rights of man.Cf. Sorel, Nouveaux essais d'histoire et de critique (Paris: 1898), pp. 99 ff. No people and no part of a people shall be held against its will in a political association that it does not want. The totality of freedom-minded persons who are intent on forming a state appears as the political nation; patrie, Vaterland becomes the designation of the country they inhabit; patriot becomes a synonym of freedom-minded.Cf. Michels, "Zur historischen Analyse des Patriotismus," Archiv für Sozialwissenschaft und Sozialpolitik, vol. 36, 1913, pp. 38 ff., 402 f.; Pressensé, "L'idée de Patrie," Revue mensuelle de l'École Anthropologie de Paris, vol. 9, 1899, pp. 91 ff. In this sense the French begin to feel themselves a nation when they break the despotism of the Bourbons and when they take up the struggle against the coalition of monarchs who threaten their just won freedom. The Germans, the Italians become nationally minded because foreign princes, joined in the Holy Alliance, hinder them from the establishing a free state. This nationalism directs itself not against foreign peoples but against the despot who subjugates foreign peoples also. The Italian hates above all not the Germans but the Bourbons and Habsburgs; the Pole hates not the Germans or Russians but the Czar, the King of Prussia, and the Emperor of Austria. And only because the troops on which the rule of the tyrants rests are foreign does the struggle also adopt a slogan against foreigners. But even in battle the Garibaldians shouted to the Austrian soldiers: Passate l'Alpi e tornerem fratelli.Cf. Robert Michels, "Elemente zur Entstehungsgeschichte des Imperialismus in Italien," Archiv für Sozialwissenschaft, vol. 34, 1912, p. 57. ["Go back across the Alps, and we'll become brothers again."] Among themselves the individual nations fighting for freedom get along marvelously. All peoples hail the struggle for freedom of the Greeks, the Serbs, and the Poles. In "Young Europe" the freedom fighters are united without distinction of nationality.
The nationality principle above all bears no sword against members of other nations. It is directed in tyrannos.
Therefore, above all, there is also no opposition between national and citizen-of-the-world attitudes. Cf. Seipel, Nation und Staat (Vienna: 1916), pp. 11 f. footnote; Meinecke, loc. cit., pp. 19 f. The idea of freedom is both national and cosmopolitan. It is revolutionary, for it wants to abolish all rule incompatible with its principles, but it is also pacifistic.Cf. Michels, "Patriotismus," loc. cit., p. 403. What basis for war could there still be, once all peoples had been set free? Political liberalism concurs on that point with economic liberalism, which proclaims the solidarity of interests among peoples.
One must also keep that in mind if one wants to understand the original internationalism of the socialist parties since Marx. Liberalism, too, is cosmopolitan in its struggle against the absolutism of the princely state. Just as the princes stand together to defend themselves against the advance of the new spirit, so the peoples also hold together against the princes. If the Communist Manifesto calls on the proletarians of all countries to unite in the struggle against capitalism, then that slogan is consistently derived from the asserted fact of the identity of capitalistic exploitation in all countries. It is no antithesis, however, to the liberal demand for the national state. It is no antithesis to the program of the bourgeoisie, for the bourgeoisie, too, is in this sense international. The emphasis lies not on the words "all countries" but on the word "proletarians." That like-thinking classes in the same position in all countries must combine is presupposed as a matter of course. If any point at all can be perceived in this exhortation, it is only the point made against pseudo-national strivings that fight every change in traditional arrangements as an infringement on warranted national individuality.
The new political ideas of freedom and equality triumphed first in the West. England and France thus became the political model countries for the rest of Europe. If, however, the liberals called for adoption of foreign institutions, then it was only natural that the resistance mounted by the old forces also made use of the age-old device of xenophobia. German and Russian conservatives also fought against the ideas of freedom with the argument that they were foreign things not suitable for their peoples. Here national values are misused for political purposes.Cf. Schultze-Gaevernitz, Volkswirtschaftliche Studien aus Russland (Leipzig: 1899), pp. 173 ff.; Bauer, Nationalitätenfrage, loc. cit., pp. 138 ff. But there is no question of opposition to the foreign nation as a whole or to its individual members.
So far as relations among peoples are concerned, therefore, the national principle is above all thoroughly peaceful. As a political ideal it is just as compatible with the peaceful coexistence of peoples as Herder's nationalism as a cultural ideal was compatible with his cosmopolitanism. Only in the course of time does peaceful nationalism, which is hostile only to princes but not to peoples also, change into a militaristic nationalism. This change takes place, however, only at the moment when the modern principles of the state, in their triumphant march from West to East, reach the territories of mixed population.
The significance of the nationality principle in its older peaceful form becomes especially clear to us when we observe the development of its second postulate. First of all, the nationality principle includes only the rejection of every overlordship and so also of every foreign overlordship; it demands self-determination, autonomy. Then, however, its content expands; not only freedom but also unity is the watchword. But the desire for national unity, too, is above all thoroughly peaceful.
One of its sources, as already mentioned, is historical remembrance. From the dismal present the glance turns back toward a better past. And this past shows a unified state, not in such splendid pictures for every people as for the Germans and the Italians, but, for most, attractive enough.
But the idea of unity is not merely romanticism; it is also important for political reality. In unity strength is sought to overcome the alliance of the oppressors. Unity in a unified state offers the peoples the highest assurance of maintaining their freedom. And there, too, nationalism does not clash with cosmopolitanism, for the unified nation does not want discord with neighboring peoples, but peace and friendship.
So we also see, then, that the idea of unity cannot exert its state-destroying and state-creating power where freedom and self-government already prevail and seem assured without it. To this day Switzerland has scarcely been tempted by that idea. The least inclination to secession is shown by the German-Swiss, and very understandably: they could only have exchanged freedom for subjugation in the German authoritarian state. But the French also, and on the whole also the Italians, have felt themselves so free in Switzerland that they felt no desire for political unification with their fellows in nationality.
For the national unified state, however, yet a third consideration is at work. Without doubt the stage of development of the international division of labor already reached today required an extensive unification of law and of communication and transportation facilities in general, and this demand will become all the more pressing the more the economy is further reshaped into a world economy. When economic contacts were still in their earliest stages, on the whole scarcely extending beyond the boundaries of a village, the splitting of the earth's surface into innumerable small legal and administrative districts was the natural form of political organization. Apart from military and foreign-policy interests, which, after all, did not press everywhere for union and for formation of great empires—and even where they were at work in this direction in the age of feudalism and still more in the age of absolutism, they did not always lead to formation of national states—there were no circumstances that demanded unification of law and administration. That became a necessity only to the extent that economic relations began to reach out more and more beyond the boundaries of provinces, of countries, and finally of continents.
Liberalism, which demands full freedom of the economy, seeks to dissolve the difficulties that the diversity of political arrangements pits against the development of trade by separating the economy from the state. It strives for the greatest possible unification of law, in the last analysis for world unity of law. But it does not believe that to reach this goal, great empires or even a world empire must be created. It persists in the position that it adopts for the problem of state boundaries. The peoples themselves may decide how far they want to harmonize their laws; every violation of their will is rejected on principle. Thus a deep chasm separates liberalism from all those views that want forcibly to create a great state for the sake of the economy.
Yet political realism must first still reckon with the existence of states and with the difficulties that they pit against the creation of supranational law and freedom of international transactions. It is with envy, therefore, that the patriots of nations fragmented into many states regard the nationally unified peoples. They want to follow their example. They view things with different eyes than do liberal doctrinaires. In the Germany of the German Confederation, the necessity of unification of law and the administration of justice, of communication and transportation facilities, and of the entire administration was recognized as urgent. A free Germany could also have been created through revolutions within the individual states; for that, unification would not have first been necessary. In favor of the unified state, however, there speaks in the eyes of political realists not only the necessity of setting an alliance of the oppressed against the alliance of the oppressors in order to achieve freedom at allThink of Schleswig-Holstein, the left bank of the Rhine, etc. but also the further necessity of holding together in order to find in unity the strength to preserve freedom. Even apart from that, the necessity of trade is pressing for unity. It will no longer do to permit the fragmentation in law, in monetary systems, in communications and transportation, and in many other fields, to continue. In all these fields the times require unification, even beyond national boundaries. Already the peoples are beginning to make preliminary preparations for world unity in all these matters. Does it not seem obvious to achieve in Germany, to begin with, what the other peoples have already achieved—to create a German civil law as precursor of the coming world law, a German penal law as a preliminary stage for world penal law, a German railroad union, a German monetary system, a German postal system? All that, however, the German unified state is to assure. The program of the men of freedom, therefore, cannot limit itself to the "auction of thirty princes' crowns" (Freiligrath); even if only because of the stage of economic development, it must call for the unified state.
Thus the striving for the unified state already contains the kernel of the new interpretation of the nationality principle, which leads from the peaceful liberal nationality principle to militant power-policy nationalism, to imperialism.
- Militant or Imperialistic NationalismA. The Nationality Question in Territories with Mixed PopulationsThe princely state strives restlessly for expansion of its territory and for increase in the number of its subjects. On the one hand it aims at the acquisition of land and fosters immigration; on the other hand it sets the strictest penalties against emigration. The more land and the more subjects, the more revenues and the more soldiers. Only in the size of the state does assurance of its preservation lie. Smaller states are always in danger of being swallowed up by larger ones.
For the free national state, all these arguments do not hold true. Liberalism knows no conquests, no annexations; just as it is indifferent towards the state itself, so the problem of the size of the state is unimportant to it. It forces no one against his will into the structure of the state. Whoever wants to emigrate is not held back. When a part of the people of the state wants to drop out of the union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so. The nation as an organic entity can be neither increased nor reduced by changes in states; the world as a whole can neither win nor lose from them.
Liberalism has been able to endure only in Western Europe and in America. In Central and Eastern Europe, after flourishing briefly, it was displaced again; its democratic program still lives on there only in the programs and more rarely in the deeds of the socialist parties. State practice has gradually perverted the pacifistic nationality principle of liberalism into its opposite, into the militant, imperialistic nationality principle of oppression. It has set up a new ideal that claims a value of its own, that of the sheer numerical size of the nation.
From the cosmopolitan standpoint, one must describe the splitting of mankind into different peoples as a circumstance that causes much trouble and costs. Much labor is spent on learning foreign languages and is wasted on translations. All cultural progress would make its way more easily, every contact between peoples would proceed better, if there were only one language. Even one who appreciates the immeasurable cultural value of diversity of material and intellectual arrangements and of the development of particular individual and national characters must admit this and must not deny that the progress of mankind would be made quite extraordinarily more difficult if there did not exist, besides the small nations numbering only a few hundred thousand or a few million souls, larger nations also.
But even the individual can experience the inconvenience of the multiplicity of languages. He notes it when he travels abroad, when he reads foreign writings, or when he wants to speak with his fellow men or write for them. The ordinary man may not care whether his nation is numerically larger or smaller, but for the intellectual worker this is of the greatest significance. For "for him language is more than a mere means of understanding in social contacts; it is for him one of his chief tools, indeed often his only tool, and one that he can scarcely change."Cf. Kautsky, Nationalität und Internationalität (Stuttgart: 1908), p. 19; also Paul Rohrbach, Der deutsche Gedanke in der Welt (Dusseldorf and Leipzig: Karl Robert Langewiesche Verlag, 1912), copies 108 to 112 thousand, p. 13. It is decisive for the success of literary work whether the author can make himself directly understood by a larger or a smaller number of persons. No one, therefore, desires a large size for his own nation more ardently than the poet and the scholarly writer, the intellectual leaders of nations. It is easy to understand why they may be enthusiastic about size. But that alone is far from explaining the popularity of this ideal.
For these leaders cannot in the long run even recommend any goals to the nation that the nation has not chosen itself. And there are still other ways to broaden the public for writers; the education of the people can be broadened, creating as many more readers and hearers as through diffusion of the national language abroad. The Scandinavian nations have trod this path. They seek national conquests not abroad but at home.
That the national state could become imperialistic, that, neglecting older principles, it could see a goal of its policy first in maintaining and then in increasing the number of members of the nation, even at the cost of the right of self-determination of individuals and of entire peoples and parts of peoples—for that development, circumstances were decisive that were foreign to the liberalism that had originated in the West and foreign to its pacifistic nationality principle. What was decisive was the fact that the peoples in the East do not have fully distinct areas of settlement but rather live locally mingled in broad territories, as well as the further fact that such mixing of peoples keeps occurring afresh through the migration of peoples. These two problems have brought militant or imperialistic nationalism to maturity. It is of German origin, for the problems out of which it arose first came onto the historical scene when liberalism reached German soil. But it has by no means remained limited to Germany; all peoples in a position to know that these circumstances are subjecting some of their fellow nationals to national alienation have followed the German people on the same path or will do so if history does not first find another solution to the problem.
Every observation of the problems to which we now turn must start from the fact that the conditions under which people live on particular parts of the earth's surface are different. We would best recognize the significance of this fact by trying to disregard it. If the conditions of life were the same everywhere on the earth's surface, then on the whole there would be no incentive for individuals and for peoples to change the places where they live.One could object that even if the conditions of life were everywhere the same, there would have to be migrations when one people grew in size more rapidly than others, for then migrations would have to take place out of the more densely settled territories into the more thinly settled ones. The Malthusian law entitles us to assume, however, that growth of population also depends on the natural conditions of life, so that merely from the assumption of the same external conditions of life there follows equality of increase in population.
That the conditions of life are unequal, however, brings it about that—to use Ségur's formulation—the history of mankind is the striving of peoples to progress from living in worse territories to better ones. World history is the history of national migrations.
National migrations take place either in forcible military form or in peaceful forms. The military form used to be the predominant one. The Goths, Vandals, Lombards, Normans, Huns, Avars, and Tartars seized their new homes with force and exterminated, drove away, or subjugated the local populations. Then there were two classes of different nationality in the country, the masters and the subjugated, which not only confronted each other as political and social classes but also were foreign to each other in ancestry, culture, and language. In the course of time these national contrasts disappeared, either because the conquerors were ethnically absorbed into the conquered or because the subjugated groups became assimilated to the victors. It has been centuries since this process took place in Spain and Italy, in Gaul, and in England.
In Eastern Europe there are still broad territories where this assimilation process has not begun at all or is only just beginning. Between the Baltic barons and their Estonian and Latvian tenants, between the Magyar or Magyarized nobles of Hungary and the Slavic or Rumanian peasants and farm workers, between the German townspeople of the Moravian cities and the Czech proletarians, between the Italian landlords of Dalmatia and the Slavic peasants and farm hands, the deep gap of national differences yawns even today.
The doctrine of the modern state and modern freedom that was developed in Western Europe knows nothing of these conditions. The problem of nationally mixed populations does not exist for it. For it, the formation of nations is a completed historical process. Frenchmen and Englishman today no longer take any foreign components into their European homelands; they live in compact territories of settlement. If individual foreigners do come to them, then they are easily and painlessly assimilated. No frictions between nationalities could arise from applying the nationality principle on English and French soil in Europe (but things are different in the colonies and in the United States). And so the opinion could also arise that the full application of the nationality principle could assure eternal peace. For since, according to the liberal view, wars of course arise only through kings' lust for conquest, there can be no more war once every people is constituted as a separate state. The older nationality principle is peaceful; it wants no war between peoples and believes that no reason for one exists.
Then it is suddenly discovered that the world does not show the same face everywhere as on the Thames and on the Seine. The movements of the year 1848 first lifted the veil that despotism had spread over the mixture of peoples in the empire of the Habsburgs; the revolutionary movements that later broke out in Russia, in Macedonia and Albania, in Persia and China, revealed the same problems there also. As long as the absolutism of the princely state had oppressed all in the same way, these problems could not be recognized. Now, however, scarcely as the struggle for freedom is beginning, they loom menacingly.Cf. Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hanover: 1912), p. 24.
It seemed obvious to work for their solution with the traditional means of the Western doctrine of freedom. The majority principle, whether applied in the form of a referendum or in some other way, was considered suitable for solving all difficulties. That is democracy's answer. But here, was such a solution thinkable and possible at all? Could it have established peace here?
The basic idea of liberalism and of democracy is the harmony of interests of all sections of a nation and then the harmony of interests of all nations. Since the rightly understood interest of all strata of the population leads to the same political goals and demands, the decision on political questions can be left to the vote of the entire people. It may be that the majority errs. But only through errors that it itself has committed and whose consequences it itself suffers can a people achieve insight and can it become politically mature. Errors once committed will not be repeated; people will recognize where the best in truth is to be found. Liberal theory denies that there are special interests of particular classes or groups opposing the common good. It can therefore see only justice in the decisions of the majority; for the errors that were committed revenge themselves on all, both on those who had supported them and on the outvoted minority, which also must pay for not having understood how to win the majority over to its side.
As soon, however, as one admits the possibility and even the necessity of genuinely opposed interests, the democratic principle also has lost its validity as a "Just" principle. If Marxism and Social Democracy see an irreconcilable opposition of conflicting class interests everywhere, then they must, consistently, also reject the democratic principle. This has long been overlooked, since Marxism, precisely among those two nations among whom it had been able to gain the largest number of adherents, the Germans and Russians, has pursued not only socialist but also democratic goals. But that is only a matter of historical accident, the consequence of quite particular circumstances coming together. The Marxists fought for the right to vote, freedom of the press, and the right to form associations and assemblies as long as they were not the ruling party; where they came to power they did nothing more quickly than set these freedoms aside.Cf. Bucharin, Das Programm der Kommunisten (Bolschewiki) (Vienna: 1919), pp. 23 ff. That quite coincides with the behavior of the Church, which behaves democratically wherever others rule but, where it itself rules, wants nothing of democracy. A majority decision can never be "Just" for the Marxists as it is for liberalism; for them it is always only the expression of the will of a particular class. Even seen from this angle alone, therefore, socialism and democracy are irreconcilable contraries; the term Social Democrat contains a contradictio in adjecto. For the Marxists, only the triumph of the proletariat, the provisional goal and the end of historical evolution, is good; everything else is bad.
Like the Marxists, the nationalists also deny the doctrine of the harmony of all interests. Between peoples irreconcilable oppositions are said to exist; here one can never let things depend on the decision of the majority if one has the power to oppose it.
Democracy seeks first to solve the political difficulties that impede the establishment of a national state in territories with nationally mixed populations by those means that have proved themselves in nationally unified countries. The majority should decide; the minority should yield to the majority. That shows, however, that it does not see the problem at all, that it does not have any inkling of where the difficulty lies. Yet belief in the correctness and the all-healing power of the majority principle was so strong that people for a long time would not recognize that nothing could be accomplished with it here. The obvious failure was always attributed to other causes. There were writers and politicians who traced the national disorders in Austria to the fact that there still was no democracy in its territory; if the country should become democratically governed, then all friction between its peoples would disappear. Precisely the opposite is true. National struggles can arise only on the soil of freedom; where all peoples are subjugated—as in Austria before March 1848—then there can be no dissension among them.For that reason antidemocratic and churchly writers also recommend the return to the absolutism of the princes and of the Pope as a means of avoiding national struggles. The violence of the struggles between the nationalities grew to the extent that the old Austria approached democracy. They were not ended at all by the dissolution of the state; they are carried on only more bitterly in the new states, where ruling majorities confront national minorities without the mediation of the authoritarian state, which softens much harshness.
To recognize the deeper grounds for the failure of democracy in the nationality struggles of our time, one must first of all strive for clarity about the essence of democratic government.
Democracy is self-determination, self-government, self-rule. In democracy, too, the citizen submits to laws and obeys state authorities and civil servants. But the laws were enacted with his concurrence; the bearers of official power got into office with his indirect or direct concurrence. The laws can be repealed or amended, officeholders can be removed, if the majority of the citizens so wishes. That is the essence of democracy; that is why the citizens in a democracy feel free.
He who is compelled to obey laws on whose enactment he has no influence, he who must endure a government ruling over him in whose formation he can take no part, is, in the political sense, unfree and is politically without rights, even though his personal rights may be protected by law.Frequently, of course, civil rights can also be lost because of political powerlessness. That does not mean that every minority is politically unfree in the democratic state. Minorities can become the majority, and this possibility influences their position and the way that the majority must behave towards them. The majority parties must always take care that their actions do not strengthen the minority and do not offer it the opportunity to come to power. For the thoughts and programs of the minority affect the entire people as a political entity, whether or not they are able to prevail. The minority is the defeated party, but in the struggle of parties it has had the possibility of winning and, as a rule, despite the defeat, it maintains the hope of winning some time later and becoming the majority.
The members of national minorities that do not hold a ruling position by special privilege, are, however, politically unfree. Their political activity can never lead to success, for the means of political influence on their fellow men, the spoken and written word, are bound up with nationality. In the great national political discussions from which political decisions follow, the citizens of foreign nationality stand aside as mute spectators. They are negotiated about along with others, but they do not join in the negotiations. The German in Prague must pay municipal assessments; he too is affected by every decree of the municipality, but he must stand aside when the political struggle rages over control of the municipality. What he wishes and demands in the municipality is a matter of indifference to his Czech fellow citizens. For he has no means of influencing them unless he gives up the special ways of his people, accommodates himself to the Czechs, learns their language, and adopts their way of thinking and feeling. So long, however, as he does not do this, so long as he remains within his circle of inherited speech and culture, he is excluded from all political effectiveness. Although he also may formally, according to the letter of the law, be a citizen with full rights, although he may, because of his social position, even belong to the politically privileged classes, in truth he is politically without rights, a second-class citizen, a pariah. For he is ruled by others without himself having a share in ruling.
The political ideas that cause parties to come and go and states to be created and destroyed are bound up with nationality today just as little as any other cultural phenomenon. Like artistic and scientific ideas, they are the common property of all nations; no single nation can escape their influence. Yet every nation develops currents of ideas in its own special way and assimilates them differently. In every people they encounter another national character and another constellation of conditions. The idea of Romanticism was international, but every nation developed it differently, filled it with a particular content, and made something else out of it. We speak rightly, therefore, of German Romanticism as a particular trend in art that we can contrast with the Romanticism of the French or the Russians. And it is no different with political ideas. Socialism had to become something different in Germany, something different in France, something different in Russia. Everywhere, indeed, it met with a particular way of political thinking and feeling, with another social and historical development—in short, with other people and other conditions.
We now recognize the reason why national minorities that hold political power because of special privileges hang on to these privileges and to the ruling position bound up with them incomparably more tenaciously than do other privileged groups. A ruling class not of different nationality from the ruled still retains, even when overthrown, a greater political influence than would accrue to it according to the number of its members among the new rulers. It retains at least the possibility, under the new conditions, of fighting for power anew as the opposition party, of defending its political ideas, and of leading to new victories. The English Tories, as often as they were deprived of their privileges by a reform, have still celebrated a political resurrection every time. The French dynasties have not lost through dethronement all prospect of regaining the crown. They were able to form mighty parties that worked for a restoration; and if their efforts did not lead to success during the Third Republic, this was due to the intransigence and personal wretchedness of the pretender at the time and not to any fact that such efforts were quite hopeless. Rulers of foreign nationality, however, once they have left the scene, can never get power back unless they have the help of foreign arms; and, what is much more important, as soon as they no longer hold power, they not only are deprived of their privileges but are completely powerless politically. Not only are they unable to maintain influence corresponding to their numbers, but, as members of a foreign nationality, they no longer have any possibility at all of even being politically active or of having influence on others. For the political thoughts that now become dominant belong to a cultural circle that is foreign to them and are thought, spoken, and written in a language that they do not understand; they themselves, however, are not in a position to make their political views felt in this environment. From being rulers they become not citizens with equal rights but powerless pariahs who have no say when matters concerning them are being debated. If—without regard to theoretical and antiquarian misgivings that might be raised against it—we want to see a principle of modern democracy in the old postulate of the estates, nil de nobis sine nobis [nothing concerning us without us], we also see that it cannot be implemented for national minorities. They are governed; they do not have a hand in governing; they are politically subjugated. Their "treatment" by the national majority may be quite a good one; they may also remain in possession of numerous nonpolitical and even a few political privileges; yet they retain the feeling of being oppressed just because they are "treated" after all and may not take part.
The large German landowners in those Austrian crown lands that had a Slavic majority in the legislature felt themselves—despite their electoral privileges, which assured them a special representation in the provincial chamber and in the provincial committee—nevertheless oppressed, since they were faced by a majority whose political thinking they could not influence. For the same reason, German officeholders and house owners who possessed an electoral privilege that assured them a third of the seats on the municipal council in a municipality with a Slavic council majority still felt oppressed.
No less politically powerless are national minorities that never have possessed political dominance. This needs to be especially mentioned just as little of members of historyless nations who have lived as political inferiors for centuries under foreign rulers as of immigrants into colonial settlement areas overseas. Accidental circumstances may temporarily give them the possibility of political influence; in the long run this is out of the question. If they do not want to remain politically without influence, then they must adapt their political thinking to that of their environment; they must give up their special national characteristics and their language.
In polyglot territories, therefore, the introduction of a democratic constitution does not mean the same thing at all as introduction of democratic autonomy. Majority rule signifies something quite different here than in nationally uniform territories; here, for a part of the people, it is not popular rule but foreign rule.On the point that the majority principle appears applicable only where it is a question of settlement of differences within a homogeneous mass, cf. Simmel, Soziologie (Leipzig: 1908), pp. 192 ff. If national minorities oppose democratic arrangements, if, according to circumstances, they prefer princely absolutism, an authoritarian regime, or an oligarchic constitution, they do so because they well know that democracy means the same thing for them as subjugation under the rule of others. That holds true everywhere and also, so far, for all times. The often cited example of Switzerland is not relevant here. Swiss democratic local administration is possible without friction under the nationality circumstances of Switzerland only because internal migrations between the individual nationalities have long since had no significance there. If, say, migrations of French Swiss to the east should lead to stronger foreign national minorities in the German cantons, then the national peace of Switzerland would already have vanished long ago.
For all friends of democracy, for all those who see the political remedy only in the self-administration and self-government of a people, this must cause severe distress. The German democrats of Austria were in this position, above all, as well as the few honorable democrats that the Hungarian people counted in their midst. It was they who were looking for new forms of democracy to make democracy possible even in polyglot countries.
Furthermore, people tend to recommend proportional representation as a remedy for the defects of the majority system. For nationally mixed territories, however, proportional representation is no way out of these difficulties. A system of proportional representation is applicable only to elections but not also to decisions about acts of legislation, administration, and jurisprudence. Proportional representation makes it impossible, on the one hand, that one party, through gerrymandering, be represented less in the representative body than corresponds to its strength; on the other hand it assures the minority of representation in the bodies of elected representatives and so offers it the possibility of exercising a check on the majority and of making its own voice heard. All that does not operate for a national minority. Being an actual minority in the people, it can never hope to obtain a majority in the representative body through proportional representation. There remains to it, therefore, only the second significance of proportional representation. But the mere possibility of having some seats in the representative body is of little value for the national minority. Even when its representatives can sit in the representative body and take a part in deliberations, speeches, and decisions, the national minority still remains excluded from collaboration in political life. A minority is politically collaborating in the true sense of the word only if its voice is heard because it has prospects of coming to the helm some time. For a national minority, however, that is ruled out. Thus the activity of its deputies remains limited from the beginning to fruitless criticism. The words that they speak have no significance because they can lead to no political goal. In voting, their votes can be decisive only when nationally unimportant questions are on the agenda; in all other questions—and these are most of them—the national majority stands against it united like a phalanx. To realize this, one need only think of the roles that the Danes, Poles, and Alsatians played in the German Reichstag and the Croats in the Hungarian parliament or of the position that the Germans had in the Bohemian provincial legislature. If things were different in the Austrian Chamber of Deputies, if here, because no nation had an absolute majority, it was possible for the "delegation" of every single nation to become part of the majority, well, this proves nothing to the contrary because, after all, Austria was an authoritarian state in which not parliament but the government held all the cards. Precisely the Austrian Chamber of Deputies, in which the formation of parties was conditioned above all by tensions among nationalities, has shown how slightly a parliamentary collaboration of different peoples is possible.
It is therefore understandable why the principle of proportional representation also cannot be regarded as a usable means of overcoming the difficulties that arise from different nations living together. Where it has been introduced, experience has shown that it is admittedly quite usable for certain purposes, that it overcomes many frictions, but that it is far from being the remedy for national controversies that well-meaning utopians have considered it.
In Austria, the classical land of the nationality struggle, the proposal emerged in the first decade of the twentieth century for overcoming national difficulties by introducing national autonomy on the basis of the personality principle. These proposals, which came from the Social Democrats Karl RennerCf. Renner, Das Selbstbestimmungsrecht der Nationen in seiner Anwendung auf Österreich (Vienna: 1918), and numerous older writings of the same author. and Otto Bauer,Cf. Bauer, Nationalitätenfrage, loc. cit., pp. 324 ff. envisaged transformation of the Austrian authoritarian state into a democratic people's state. Legislation and administration of the entire state and the local administration of the autonomous areas should not extend to nationally disputed affairs; these should be administered in the local administrations by the members of the nations themselves, organized according to the personality principle, over whom, then, there should stand national councils as highest authorities of the individual nations. The educational system and the promotion of art and science, above all, were to be regarded as national issues.
Here we are not speaking of the significance that the program of national autonomy had in the historical development of the nationality program of the German-Austrians or of the basic presuppositions from which it proceeded. Here we must face only the question whether this program could have provided a satisfying solution to the fundamental difficulty that arises when different peoples live together. We can only reply "no" to this question. As before, those facts would still remain that exclude a national minority from participation in power and that, despite the letter of the law, which calls on them to join in governing, allow them to be not co-rulers but only the ruled. It is quite unthinkable from the start to split up all matters by nationality. It is impossible in a nationality mixed city to create two police forces, perhaps a German and a Czech, each of which could take action only against members of its own nationality. It is impossible to create a double railroad administration in a bilingual country, one under the control only of Germans, a second only of Czechs. If that is not done, however, then the above-mentioned difficulties remain. The situation is not as though handling political problems directly connected with language was all that caused national difficulties; rather, these difficulties permeate all of public life.
National autonomy would have offered national minorities the possibility of administering and arranging their school systems independently. They had this possibility to a certain degree, however, even without the implementation of this program, though at their own cost. National autonomy would have allowed them a special right of taxation for these purposes and, on the other hand, relieved them from contributing to the schools of other nationalities. That alone, however, is not worth as much as the authors of the program of national autonomy thought.
The position that the national minority would have obtained from the grant of national autonomy would have approximated the position of those privileged colonies of foreigners that the estate system established and that the princely state then established on models bequeathed by the estate system, perhaps like the position of the Saxons in Transylvania. This would not have been satisfactory in modern democracy. Generally speaking, the whole line of thought about national autonomy looks back more to the medieval conditions of the estate system than to the conditions of modern democracy. Given the impossibility of creating modern democracy in a multinational state, its champions, when as democrats they rejected the princely state, necessarily had to turn back to the ideals of the estate system.
If one looks for a model of national autonomy in certain problems of organization of minority churches, then this is only quite superficially a correct comparison. It is overlooked that since the force of faith no longer can, as it once could, determine the entire life style of the individual, there no longer exists between members of different churches today that impossibility of political understanding that does indeed exist between different peoples because of differences of language and the resulting differences in styles of thinking and of outlook.
The personality principle can bring no solution to the difficulties of our problem because it indulges in extreme self-deception about the scope of the questions at issue. If only language questions, so called in the narrower sense, were the object of the national struggle, then one could think of paving the way for peace between peoples by special treatment of those questions. But the national struggle is not at all limited to schools and educational institutions and to the official language of the courts and authorities. It embraces all of political life, even all that which, as Renner and many others with him believe, ties a unifying bond around the nations, the so-called economic aspect. It is astonishing that this could be misunderstood precisely by Austrians, who, after all, were bound to see every day how everything became a national bone of contention—road construction and tax reforms, bank charters and public purveyances, customs tariffs and expositions, factories and hospitals. And purely political questions above all. Every foreign-policy question is the object of national struggle in the multinational state, and never did this show up more clearly in Austria-Hungary than during the World War. Every report from the battlefield was received differently by the different nationalities: some celebrated when others grieved; some felt downcast when others were happy. All these questions are controversial by nationality; and if they are not included in the solution of the nationality question, then the solution just is not complete.
The problem that the national question poses is precisely that the state and administration are inevitably constructed on a territorial basis in the present stage of economic development and so inevitably must embrace the members of different nationalities in territories of mixed language.
The great multinational states, Russia, Austria, Hungary, and Turkey, have now fallen apart. But that too is no solution to the constitutional problem in polyglot territories. The dissolution of the multinational state gets rid of many superfluous complications because it separates territories from each other that are compactly inhabited by the members of one people.The abuse of the compactly settled territories of the Germans in Bohemia is disregarded here; the national question would he soluble there, only people do not want to solve it. The dissolution of Austria solves the national question for the interior of Bohemia, for Western Galicia, and for the greater part of Carniola. But, as before, it remains a problem in the isolated German cities and villages that are sprinkled in the Czech-language territory of Bohemia, in Moravia, in Eastern Galicia, in the Gottschee [Kocevje] district, etc.
In polyglot territories the application of the majority principle leads not to the freedom of all but to the rule of the majority over the minority. The situation is made no better by the fact that the majority, in inner recognition of its injustice, shows itself anxious to assimilate the minorities nationally by compulsion. That attitude of course also implies—as a keen writer has noted—an expression of the nationality principle, an acknowledgment of the demand that state boundaries should not stretch beyond the boundaries of peoples.Cf. Kjellén, loc. cit., p. 131. Still the tormented peoples wait for the Theseus who shall overcome this modern Procrustes.
A way must be found out of these difficulties, however. It is not a question only of small minorities (for example, remnants of migrations that have long since come to a standstill), as one would tend to think if one assessed this situation only from the point of view of a few German cities in Moravia or Hungary or of the Italian colonies on the east coast of the Adriatic. The great present-day migrations of peoples have given all these questions a heightened importance. Every day new migrations create new polyglot territories; and the problem that a few decades ago was visible only in Austria has long since become a world problem, although in another form.
The catastrophe of the World War has shown to what abyss that problem has led mankind. And all the streams of blood that have flowed in this war have not brought it a hairsbreadth closer to solution. In polyglot territories, democracy seems like oppression to the minority. Where only the choice is open either oneself to suppress or to be suppressed, one easily decides for the former. Liberal nationalism gives way to militant antidemocratic imperialism.
B. The Migration Problem and NationalismThe variety of conditions of life in the individual parts of the earth's surface touches off migrations of individual persons and entire peoples. If the world economy were managed by the decree of an authority that surveyed everything and ordered what was most appropriate, then only the absolutely most favorable conditions of production would be utilized. Nowhere would a less productive mine or a less productive field be in use if more productive mines or fields lay unused elsewhere. Before a less productive condition of production is put to use, one must always first consider whether there do not exist more productive ones. Less productive conditions of production that might be in use would be discarded at once if others should be found whose yield would be so much greater than an increased yield would be attained from discarding the old and introducing the new sources of production, even despite the loss to be expected because the immovably invested capital would become useless. Since the workers have to settle in places of production or in their immediate neighborhood, the consequences for the conditions of settlement follow automatically.
The natural conditions of production are by no means unchangeable. In the course of history they have undergone great changes. Changes can take place in nature itself, for example, through changes of climate, volcanic catastrophes, and other elemental events. Then there are the changes that occur from human activity, for example, exhaustion of mines and of the fertility of the soil. More important, however, are changes in human knowledge, which overturn traditional views about the productivity of the factors of production. New needs are awakened, either from the development of the human character or because the discovery of new materials or forces has stimulated them. Previously unknown production possibilities are discovered, either through the discovery of hitherto unknown natural forces and putting them to use or through the progress of productive techniques, which makes it possible to tap natural forces that had been unusable or less usable before. It follows that it would not be enough for the director of the world economy to determine the locations of production once and for all; he would continually have to make changes in them according to changing circumstances, and every change would have to go hand in hand with a resettlement of workers.
What would happen under ideal world socialism by order of the general director of the world economy is achieved in the ideal of the free world economy by the reign of competition. The less productive enterprises succumb to the competition of the more productive. Primary production and industry migrate from places of lower-yielding conditions of production to places of higher-yielding ones; and with them migrate capital, so far as it is mobile, and workers. The result for the movement of peoples is thus the same in either case: the stream of population goes from the less fruitful territories to the more fruitful.
That is the basic law of migrations of persons and peoples. It holds true in the same degree for the socialist and the free world economy; it is identical with the law under whose operation the distribution of population takes place in every smaller territory cut off from the outside world. It always holds true, even though its effectiveness may be disturbed in greater or lesser degree by extra-economic factors also, perhaps by ignorance of conditions, by sentiments that we are accustomed to calling love of home, or by intervention of an external power that hinders migration.
The law of migration and location makes it possible for us to form an exact concept of relative overpopulation. The world, or an isolated country from which emigration is impossible, is to be regarded as overpopulated in the absolute sense when the optimum of population—that point beyond which an increase in the number of people would mean not an increase but a decrease of welfare—is exceeded.Compare Wicksell, Vorlesungen über Nationalökonomie auf Grundlage des Marginalprinzipes (Jena: 1913), vol. 1, p. 50. A country is relatively overpopulated where, because of the large size of the population, work must go on under less favorable conditions of production than in other countries, so that, ceteris paribus, the same application of capital and labor yields a smaller output there. With complete mobility of persons and goods, relatively overpopulated territories would give up their population surplus to other territories until this disproportion had disappeared.
The principles of freedom, which have gradually been gaining ground everywhere since the eighteenth century, gave people freedom of movement. The growing security of law facilitates capital movements, improvement of transportation facilities, and the location of production away from the points of consumption. That coincides—not by chance—with a great revolution in the entire technique of production and with drawing the entire earth's surface into world trade, The world is gradually approaching a condition of free movement of persons and capital goods. A great migration movement sets in. Many millions left Europe in the nineteenth century to find new homes in the New World, and sometimes in the Old World also. No less important is the migration of the means of production: capital export. Capital and labor move from territories of less favorable conditions of production to territories of more favorable conditions of production.
Now, however—as a result of a historical process of the past—the earth is divided up among nations. Each nation possesses definite territories that are inhabited exclusively or predominantly by its own members. Only a part of these territories has just that population which, in conformity with the conditions of production, it would also have under complete freedom of movement, so that neither an inflow or an outflow of people would take place. The remaining territories are settled in such a way that under complete freedom of movement they would have either to give up or to gain population.
Migrations thus bring members of some nations into the territories of other nations. That gives rise to particularly characteristic conflicts between peoples.
In that connection we are not thinking of conflicts arising out of the purely economic side effects of migrations. In territories of emigration, emigration drives up the wage rate; in territories of immigration, immigration depresses the wage rate. That is a necessary side effect of migration of workers and not, say, as Social Democratic doctrine wants to have believed, an accidental consequence of the fact that the emigrants stem from territories of low culture and low wages. The motive of the emigrant is precisely the fact that in his old homeland, because of its relative overpopulation, he can get no higher wage. If this reason were absent, if there were no difference in the productivity of labor between Galicia and Massachusetts, then no Galician would emigrate. If one wants to raise the European territories of emigration to the level of development of the eastern states of the Union, then there is just nothing else to do than let the emigration proceed to the point that the relative overpopulation of the former and the relative underpopulation of the latter have disappeared. Clearly, American workers view this immigration just as unhappily as European employers view the emigration. Indeed, the Junker east of the Elbe thinks no differently about the flight of workers from the land when his tenant goes to West Germany than when he goes to America; the unionized worker of the Rhineland is disturbed by immigration from the lands east of the Elbe no less than members of a Pennsylvania trade union. But that in the one case the possibility exists of forbidding the emigration and immigration, or at least of impeding it, while in the other case such measures could be thought of by at most a few eccentrics born a couple of centuries too late, is only to be attributed to the fact that, besides damage to the interests of individuals in the case of international migration, other interests also are damaged.
Emigrants who settle in previously uninhabited territories can preserve and further cultivate their national character in the new home also. Spatial separation can lead over time to the emigrants' developing a new independent nationality. Such development of independence was in any case easier in times when transport and communication still had to struggle with great difficulties and when the written transmission of the national culture was greatly impeded by the slight diffusion of literacy. With the present-day development of the means of transportation and communication, with the relatively high degree of popular education and the wide dissemination of the monuments of national literature, such national splitting off and the formation of new national cultures is far more difficult. The trend of the times works rather toward convergence of the cultures of peoples living far apart, if not even toward a blending of nations. The bond of common language and culture that links England with its far-away dominions and with the United States of America, which now will soon have been politically independent for one and a half centuries, has become not looser but closer. A people that today sends out colonists into an uninhabited territory can count on the emigrants' keeping their national character.
If, however, the emigration is directed to already inhabited territories, then various possibilities are conceivable. It may be that the immigrants come in such masses or possess such superiority through their physical, moral, or intellectual constitution that they either entirely displace the original inhabitants, as the Indians of the prairies were displaced by the palefaces and were driven to destruction, or that they at least achieve domination in their new home, as would perhaps have been the case with the Chinese in the western states of the Union if legislation had not restricted their immigration in time or as could be the case in the future with the European immigrants into North America and Australia. Things are different if immigration takes place into a country whose inhabitants, because of their numbers and their cultural and political organization, are superior to the immigrants. Then it is the immigrants who sooner or later must take on the nationality of the majority.The assimilation is furthered if the immigrants come not all at once but little by little, so that the assimilation process among the early immigrants is already completed or at least already under way when the newcomers arrive.
The great discoveries had made the whole surface of the earth known to Europeans since the end of the Middle Ages. Now all traditional views about the inhabitability of the earth gradually had to change; the New World, with its excellent conditions of production, was bound to attract settlers from old and now relatively overpopulated Europe. At first, of course, it was only adventurers and political malcontents who moved far away to find a new home. Reports of their successes then drew others after them, at first only a few, then ever more and more, until finally in the nineteenth century, after improvement of the means of ocean transportation and the removal of limitations on freedom of movement in Europe, millions went migrating.
Here is not the place to investigate how it happened that all colonial land suitable for settlement by white Europeans was colonized by the English, Spanish, and Portuguese. Here it is enough for us to recognize the outcome that the best parts of the earth's surface inhabitable by whites thereby became English national property and that, in addition, the Spaniards and Portuguese in America, and scarcely also the Dutch in South Africa and the French in Canada, came onto the scene. And this outcome is extremely important. It made the Anglo-Saxons the most numerous nation among the white civilized peoples. This, coupled with the circumstance that the English possess the largest merchant fleet in the world and that they administer the best territories of the tropics as political rulers, had led to the fact that the world today wears an English face. The English language and English culture have impressed their stamp on our times.
For England this means above all that Englishmen who leave the island of Great Britain because of its relative overpopulation can almost always settle in territories where the English language and English culture prevail. When a Briton goes abroad, whether to Canada or to the United States or to South Africa or to Australia, he does cease to be a Briton, but he does not cease to be an Anglo Saxon. It is true that the English until quite recently, did not appreciate this circumstance, that they paid no special attention to emigration, that they faced the dominions and the United States indifferently, coldly, and sometimes even with hostility, and that only under the influence of Germany's efforts directed against them did they begin to seek closer economic and political relations first with the dominions and then with the United States. It is just as true that the other nations, which had been less successful in acquiring overseas possessions, also long paid just as little attention to this development of affairs as the English themselves and that they envied the English more for their rich tropical colonies, for their trade and seaport colonies, and for shipping, industry, and trade than for possession of territories of settlement, which were less appreciated.
Only as the stream of emigrants, flowing abundantly at first only from England, also came to be fed more from other European territories did people begin to concern themselves with the national fate of the emigrants. People noticed that while the English emigrants could maintain their mother tongue and national culture, home customs, and usage's of their fathers in their new homes, the other European emigrants overseas gradually ceased to be Dutchmen, Swedes, Norwegians, etc. and adapted themselves to the nationality of their environment. People saw that this alienation was unavoidable, that it occurred quicker here, slower there, but that it never failed to occur and that the emigrants—at the latest in the third generation, most already in the second, and not seldom even in the first—became members of Anglo-Saxon culture. The nationalists who dreamed about the size of their nation viewed this with sorrow, but it seemed to them that nothing could be done about it. They founded associations that endowed schools, libraries, and newspapers for the colonists to check the emigrants' national alienation; but what they achieved thereby was not much. People had no illusions about the fact that the reasons for emigration were of compelling economic nature and that the emigration as such could not be impeded. Only a poet like Freiligrath could ask the emigrants:
Oh sprecht! warum zogt ihr von dannen?Das Neckartal hat Wein und Korn.[Oh speak! Why are you moving away?The Neckar Valley has wine and grain.]The statesman and the economist well knew that there were more wine and more grain overseas than at home.
As late as the beginning of the nineteenth century people could scarcely suspect the significance of this problem. Ricardo's theory of foreign trade still started with the assumption that the free mobility of capital and labor exists only within the boundaries of a country. In the home country all local differences in the profit rate and the wage rate are evened out by movements of capital and workers. Not so for differences between several countries. Lacking there was that free mobility which would ultimately be bound to cause capital and labor to flow from the country offering less favorable conditions of production to the country of more favorable conditions. A range of emotional factors ("which I should be sorry to see weakened," the patriot and politician Ricardo interjects here into the exposition of the theorist) resists that. Capital and workers remain in the country, even though they thereby suffer a loss of income, and turn to those branches of production having, while not absolutely, still relatively more favorable conditions.Cf. Ricardo, Principles of Political Economy and Taxation in The Works of D. Ricardo, edited by McCulloch, second edition (London: 1852), pp. 76 ff. The basis of the free-trade theory is thus the fact that noneconomic reasons keep capital and labor from moving across national boundaries, even if this seems advantageous for economic motives. This may have been true on the whole in the days of Ricardo, but for a long time it has no longer been true.
But if the basic assumption of Ricardo's doctrine of the effects of free trade falls, then this doctrine must also fall along with it. There is no basis for seeking a fundamental difference between the effects of freedom in domestic trade and in foreign trade. If the mobility of capital and labor internally differs only in degree from their mobility between countries, then economic theory can also make no fundamental distinction between the two. Rather, it must necessarily reach the conclusion that the tendency inheres in free trade to draw labor forces and capital to the locations of the most favorable natural conditions of production without regard to political and national boundaries. In the last analysis, therefore, unrestricted free trade must lead to a change in the conditions of settlement on the entire surface of the earth; from the countries with less favorable conditions of production capital and labor flow to the countries with more favorable conditions of production.
The free-trade theory modified in this way, just like the doctrine of Ricardo, also reaches the conclusion that from the purely economic point of view nothing speaks against free trade and everything against protectionism. But since it leads to quite different results regarding the effect of free trade on locational shifts of capital and labor, it presents a quite changed point of departure for testing the extraeconomic reasons for and against the protective system.
If one sticks with the Ricardian assumption that capital and labor are not impelled to move abroad even by more favorable conditions of production, then it turns out that the same applications of capital and labor lead to different results in the individual countries. There are richer and poorer nations. Trade-policy interventions can change nothing about that. They cannot make the poorer nations richer. The protectionism of the richer nations, however, appears completely senseless. If one drops that Ricardian assumption, then one sees a tendency prevail over the entire earth toward equalization of the rate of return on capital and of the wage of labor. Then, finally, there no longer are poorer and richer nations but only more densely and less densely settled and cultivated countries.
There can be no doubt that, even then, Ricardo and his school would have advocated nothing other than the policy of free trade, since they could not have avoided recognizing that protective tariffs are not the way out of these difficulties. For England, however, this problem never existed. Its rich holdings of territories for settlement lets emigration appear a matter of national indifference to it. The British emigrants can maintain their national character even far away; they cease to be Englishmen and Scots, but they remain Anglo-Saxons, and the war showed anew what that means politically.
For the German people, though, things are different. For reasons that go far back, the German nation has no territories for settlement at its disposal where emigrants can maintain their German character. Germany is relatively overpopulated; it must sooner or later yield up its surplus population, and if for some reason or other it could not or would not do this, then the standard of living of the Germans would have to sink to a lower level. If, however, Germans do emigrate, then they lose their national character, if not in the first generation, then in the second, third, or at the latest the fourth.
That was the problem that German policy saw posed for it after the establishment of the empire of the Hohenzollerns. The German people faced one of those great decisions that a nation does not have to make every century. It was fateful that the solution to this great problem became urgent before another, no less great, problem was solved, that of the establishment of the German national state. Even only to comprehend a question of this significance and of this historical gravity in its full scope would have required a generation that could decide its fate fearlessly and freely. That, however, was not allowed to the German people of the Great Prussian Reich, the subjects of the twenty-two federated princes. In these questions, also, it did not take its fate into its own hands; it left the most important decision to the generals and diplomats; it followed its leaders blindly without noticing that it was being led to the precipice. The end was defeat.
As early as the beginning of the thirties of the nineteenth century, people in Germany had begun to concern themselves with the problem of emigration. Now it was the emigrants themselves who made the unsuccessful attempt to establish a German state in North America; now again it was the Germans at home who sought to take the organization of emigration into their hands. That these efforts could lead to no success is not surprising. How ever could the attempt to establish a new state succeed for the Germans, who in their own country were not even able to transform the pitiable multiplicity of several dozen patrimonial principalities, with their enclaves, their hereditary affiliations, and their family laws, into a national state? How could German men have found the strength to assert themselves out there in the wide world among Yankees and Creoles when at home they were not even able to put an end to the farcical rule of the miniature thrones of the Reuss and Schwarzburg princes? Where was the German subject to get the political insight that politics on the grand scale requires when at home it was forbidden to him "to judge the actions of the supreme state authority by the measure of his limited intellect?"Cf. the decree of 15 January 1838 of the Prussian Minister of the Interior, v. Rochow, reprinted in Prince-Smith's Gesammelte Schriften (Berlin: 1880), vol. 3, p. 230.
In the middle of the seventies of the last century the problem of emigration had acquired such significance that its solution could no longer be dragged out. The decisive thing was not that emigration was steadily growing. According to data of the United States, the immigration of Germans there (not counting Austrians) had risen from 6,761 in the decade 1821 to 1830 to 822,007 in the decade 1861 to 1870; then, right after 1874, an—although at first only temporary—drop-off in the German emigration to the United States occurred. Far more important was that it was becoming ever clearer that the conditions of production in Germany for agriculture and for the most important branches of industry were so unfavorable that competition with foreign countries was no longer possible. The extension of the railroad net in the countries of Eastern Europe and the development of ocean and river shipping made it possible to import agricultural products into Germany in such quantity and at such low prices that the continued existence of the bulk of German agricultural units was most seriously threatened. Already from the fifties Germany was a rye-importing country; since 1875 it has also been a wheat-importing country. A number of branches of industry, particularly the iron industry, also had to struggle with growing difficulties.
It is clear where the causes lay, even though people of the time may have felt it only vaguely. The superiority of the natural conditions of production of foreign countries made itself all the more strongly evident as the continuing development of means of transportation cheapened freight rates. People did try to explain the lesser competitive capacity of German production in another way; and in that connection, as indeed is generally characteristic of the discussion of problems of economic policy in Germany during the last few decades, people concerned themselves predominantly with nonessential side issues and so quite overlooked the great significance of the principles of the problem.
If people had recognized the fundamental significance of these problems and had grasped the deeper interconnection of things, then they would have had to say that Germany was relatively overpopulated and that to restore a distribution of population over the entire surface of the earth corresponding to the conditions of production, part of the Germans had to emigrate. Whoever did not share misgivings of national policy about a decline in the size of population or even about an end to the growth of population in Germany would have been content with this judgment. In any case he would have consoled himself with the fact that individual branches of production would move abroad partially in such a way that German entrepreneurs would establish enterprises abroad so that the consumption of the entrepreneurs' incomes would take place in the German Reich and would thereby expand the food-supply margin of the German people.
The patriot who sees his ideal in a large number of people would have had to recognize that his goal could not be reached without reduction of the standard of living of the nation unless the possibility were created, through acquiring colonies for settlement, of retaining part of the surplus population within the nation despite its emigration from the mother country. He would then have had to turn all his strength to acquisition of land for settlement. In the middle of the seventies of the nineteenth century, and even a decade longer, conditions were not at all yet such that it would not have been possible to reach this goal. In any case it could have been reached only in association with England. England was at that time and for long afterwards still troubled by a great concern, by anxiety that its Indian possession could be seriously threatened by Russia, For that reason it needed an ally that would have been in a position to hold Russia in check. Only the German Reich might have done that. Germany was strong enough to guarantee England the possession of India; Russia could never have thought of attacking India as long as it was not sure of Germany on its western border.To rule out any misunderstanding, let it be expressly noted that there is no intention here of taking a position on the question that was much discussed in Germany whether the "western" or "eastern" orientation for German policy was to be preferred. Both orientations were imperialist-minded, i.e., the question ran whether Germany should attack Russia or England. Germany should have allied itself with England to stand by it in a defensive war against Russia. There is no doubt, however, that then this war would never have occurred. England could have given a great compensation for this guarantee, and surely would have given it. Perhaps it would have let Germany have its extensive South African possession, which at that time had only a very thin Anglo-Saxon settlement; perhaps it also would have helped Germany obtain a large territory for settlement in Brazil or Argentina or in western Canada. Whether this was attainable may be doubted after all.But let it be noted that England, until the outbreak of the World War, repeatedly made attempts to have peaceful negotiations with Germany and was ready to buy peace even at the price of giving up some land. But it is certain that if Germany could have attained anything along this line at that time, it could have done so only in association with England. The great Prussian Reich of the Junkers east of the Elbe, however, wanted no alliance with liberal England. For reasons of domestic politics, the Three Emperors' League, the continuation of the Holy Alliance, seemed to it to be the sole suitable association that it could enter into. When this alliance finally showed itself untenable and the German Reich, faced with the choice either of siding with Russia against Austria-Hungary or with Austria-Hungary against Russia, decided for the alliance with Austria, then Bismarck still repeatedly sought to maintain a friendly relationship with Russia. So, then, this opportunity of acquiring a great territory for settlement for Germany remained unused.
Instead of seeking, in association with England, to acquire a colony for settlement, the German Reich made the transition to protective tariffs from 1879 on. As ever at great turning points of policy, here, too, people saw neither the deeper significance of the problem nor the meaning of the new policy being adopted. To the liberals the protective tariff seemed a temporary backsliding into a superseded system. The practitioners of political realism, that hodgepodge of cynicism, lack of conscience, and unvarnished selfishness, evaluated the policy merely from the standpoint of their own interests as an increase in the incomes of landowners and entrepreneurs. The Social Democrats trotted out their faded recollections of Ricardo; as for a deeper knowledge of things, which surely would not have been difficult with the help of this guide, they were hindered by their doctrinaire clinging to Marxist theory. Only much later, and even then only hesitantly, was the great significance grasped that that policy shift had not only for the German people but for all peoples.When Lensch (Drei Jahre Weltrevolution (Berlin: 1917], pp. 28 ff.) designates the shift in trade policy of 1879 as one of the deepest grounds of today's world revolution, then he is certainly to be agreed with, but for quite other reasons than those he adduces. In view of the events that have taken place in the meanwhile, it is no longer worth while to refute his further discussions.
The most remarkable thing about the protective tariff policy of the German Empire is that it lacked any deeper foundation. For the political realist it was sufficiently justified by its finding a majority in the German Reichstag. Any theoretical foundation for the protective tariff theory, however, looked very bad. The appeal to List's theory of an infant-industry tariff just did not hold water. It is no refutation of the free-trade argument to assert that the protective system puts idle productive forces to use. That they do not come into use without protection proves that their use is less productive than that of the productive forces used in their place. The infant industry tariff also cannot be economically justified. Old industries have an advantage over young ones in many respects. But the rise of new industries is to be deemed productive from the overall point of view only when their lesser productivity at the start is at least made up for by greater productivity later. Then, however, the new enterprises are not only productive from the point of view of the whole economy but also privately profitable; they would be brought into existence even without special encouragement. Every newly established firm reckons with such initial costs that should be recovered later. It is untenable to cite, in opposition, the fact that almost all states have supported the rise of industry by protective tariffs and other protectionistic measures. The question remains open whether the development of viable industries would have proceeded even without such encouragement. Within the territories of states, changes of location occur without any external help. In territories that lacked industry before, we see industries arise that not only maintain themselves successfully alongside those of older industrial territories but not seldom drive those quite out of the market.
None of the German tariff rates, moreover, could be called an infant-industry tariff; neither the grain tariffs nor the iron tariffs nor any one of the several hundred other protective tariffs may be given this name. And tariffs other than infant industry tariffs were never advocated by List; he was fundamentally a free-trader.
Moreover, the presentation of a protective-tariff theory in Germany has never once been attempted at all.Schuller, in Schutzzoll und Freihandel (Vienna: 1905), gives a theory of the setting of tariff rates; on his arguments for the protective tariff, cf. Mises, "Vom Ziel der Handelspolitik," Archiv für Sozialwissenschaft und Sozialpolitik, vol. 42, 1916/1917, p. 562, and Philippovich, Grundriss der politischen Ökonomie, vol. 2, 1 st part, seventh ed.(Tübingen: 1914), pp. 359 f. The longwinded and self-contradictory discussions about the necessity of protection for all national labor and of a gap-free tariff cannot lay claim to this name. They do indicate the direction in which reasons for the protective tariff policy had to be sought; they could not be suitable, however—and precisely because they renounced any economic line of thinking in advance and were oriented purely by power politics—for examining the question whether the goals being sought could also really be attained by this means.
Of the arguments of the protective-tariff advocates, we must at first leave aside the military one—or, as people now commonly say, the "war-economy" one—regarding autarky in case of war; that one will be discussed later. All other arguments start from the fact that the natural conditions for great and important branches of production are more unfavorable in Germany than in other territories and that the natural disadvantages must be compensated for by protective tariffs if production is to take place in Germany at all. For agriculture it could only be a question of thereby maintaining the internal market, for industry only of maintaining foreign markets, a goal that could be reached only by dumping by branches of production cartelized under the protection of the tariff. Germany, as a relatively overpopulated country working under more unfavorable conditions than foreign countries in a number of branches of production, had to export either goods or people. It decided for the former. It overlooked the fact, however, that export of goods is possible only if one competes with countries of more favorable conditions of production, that is, if, despite higher costs of production, one delivers just as cheaply as the countries producing at lower costs. That means, however, pressing down workers' wages and the standard of living of the whole people.
For years people in Germany could indulge in extreme illusions about that. To understand this interconnection of things, it would have been necessary to think economically and not in terms of statism and power politics. But some day it was nevertheless bound to impress itself on everyone with irrefutable logic that the protective tariff system was bound to fail in the end. One could deceive oneself about the fact that it was damaging the relative well-being of the German people as long as an absolute growth of national wealth could still be observed. But attentive observers of world economic development could not help but express misgivings about the future development of German foreign trade. What would happen to German commodity exports once an independent industry had become developed in the countries that still formed the market for German industry and had been in a position to produce under more favorable conditions?Cf., out of a large literature, Wagner, Agrar- und Industriestaat, second ed.
From this situation the desire finally arose among the German people for great colonies for settlement and for tropical territories that could supply Germany with raw materials. Because England stood in the way of the realization of these intentions, because England had broad territories at its disposal in which Germans could have settled, and because England possessed great tropical colonies, the desire arose to attack England and defeat it in war. That was the idea that led to construction of the German battle fleet.
England recognized the danger in time. First it strived for a peaceful settlement with Germany; it was ready to pay a high price for that. When this intention was wrecked on the resistance of German policy, England prepared itself accordingly. It was firmly resolved not to wait until Germany had a fleet superior to the English; it was resolved to wage war earlier, and it enlisted allies against Germany. When Germany got into war with Russia and France in 1914 over Balkan affairs, England fought also because it knew that in case of a German victory it would have to wage war alone with Germany in a few years. The construction of the German battle fleet had to lead to war with England before the German fleet had achieved superiority over the English. For the English knew that the German ships could be used in no other way than to attack England's fleet and its coast. The pretext with which Germany sought to conceal the ultimate intentions that it was pursuing by constructing the fleet was that it needed a mighty fleet to protect its expanded ocean trade. The English knew what to make of that. Once, when there still were pirates, merchant ships did need protection by cruisers on endangered seas. Since the establishment of security on the sea (approximately since 1860) that had no longer been necessary. It was quite impossible to explain the construction of a battle fleet usable only in European waters by a desire to protect trade.
It is also immediately understandable why, from the beginning, almost all states of the world sympathized with England against Germany. Most had to fear Germany's hunger for colonies. Only a few nations of Europe are in a situation similar to the German in being able to feed their populations within their own borders only under more unfavorable conditions than are found in the rest of the world. To these belong the Italians in the first place, and also the Czechs. That these two nations also were on the side of our adversaries was Austria's doing.That Japan and China were also against us is to be ascribed to the disastrous Chiao-chou policy.
Now the war has been fought, and we have lost it. The German economy has been quite shattered by the long "war economy"; in addition, it will have to bear heavy reparations burdens. But far worse than these direct consequences of the war must appear the repercussion on Germany's world economic position. Germany has paid for the raw-material supplies on which it depends partly by export of manufactures, partly from the yield of its foreign enterprises and capital investments. That will no longer be possible in the future. During the war the foreign investments of the Germans were expropriated or used up in payment for the import of various goods. The export of manufactures, however, will encounter extreme difficulties. Many markets have been lost during the war and will not be easy to win back. Here, too, the war has created no new situation but only has hastened a development that would have occurred without it. The impediment to trade caused by the war has brought new industries to life in Germany's former markets. They would have arisen even without the war, but later. Now, once they are there and are operating under more favorable conditions of production than German enterprises, they will pose severe competition to German exports. The German people will be compelled to shrink their consumption. They will have to work more cheaply, that is, live worse, than other peoples. The entire level of German culture will thereby be depressed. After all, culture is wealth. Without well-being, without wealth, there never has been culture.
True, emigration might still remain open. But the inhabitants of the territories that might be considered do not want to admit any German immigrants. They fear being outnumbered by the German elements; they fear the pressure that immigration would be bound to exert on wages. Long before the war, Wagner could already refer to the fact that, except for the Jews, there is no other people than the German "that is scattered in so many national fragments and individuals among other civilized peoples and other nations almost over the entire earth's surface, that often forms a quite capable element here, often also only a sort of cultural fertilizer, seldom in the leading positions in life, more frequently in the middle ones and down to the lower ones, little men and little women." And he added that "this German diaspora" is not much more liked, even though more respected, than Jews and Armenians and is not seldom subject to just as strong an aversion on the part of the native population.Cf. Wagner, loc. cit., p. 81. How will things become now, after the war?
Only now can one fully survey the damage that the departure from the principles of liberal policy has caused for the German people. How very different a position Germany and Austria would be in today if they had not undertaken the fateful return to the protective tariff! Of course, the size of the population would not be as large as it is today. But the smaller population could be living and working under conditions just as favorable as those of the other countries of the world. The German people would be richer and happier than it is today; it would have no enemies and no enviers. Hunger and anarchy—that is the result of the protectionist policy.
The outcome of German imperialism, which cast the German people into bitter misery and made it into a pariah people, shows that those whose leadership it followed in the last generation were not on the right path. Neither fame nor honor nor wealth nor happiness was to be found on this path. The ideas of 1789 would not have brought the German people to its position today. Did not the men of the Enlightenment, who today are reproached for lack of state feeling,Cf. Sprengel, Das Staatsbewusstein in der Deutschen Dichtung seit Heinrich von Kleist (Leipzig: 1918), pp. 8 ff. better understand what is good for the German people and the entire world? More clearly than all theories could do, the course of history shows that properly understood patriotism leads to cosmopolitanism, that the welfare of a people lies not in casting other peoples down but in peaceful collaboration. Everything that the German people possessed, its intellectual and material culture, it has uselessly sacrificed to a phantom, to no one's benefit and to its own harm.
A nation that believes in itself and its future, a nation that means to stress the sure feeling that its members are bound to one another not merely by accident of birth but also by the common possession of a culture that is valuable above all to each of them, would necessarily be able to remain unperturbed when it saw individual persons shift to other nations. A people conscious of its own worth would refrain from forcibly detaining those who wanted to move away and from forcibly incorporating into the national community those who were not joining it of their own free will. To let the attractive force of its own culture prove itself in free competition with other peoples—that alone is worthy of a proud nation, that alone would be true national and cultural policy. The means of power and of political rule were in no way necessary for that.
That nations favored by fate possess wide territories of settlement could provide no cogent grounds for adopting another policy. It is true that those colonies were not taken with smooth talk, and one can think only with shudders and anger of the fearful mass murders that prepared the basis for many of the colonial settlements flourishing today. But all other pages of world history were also written in blood, and nothing is more stupid than efforts to justify today's imperialism, with all of its brutalities, by reference to atrocities of generations long since gone. It must be recognized that the time for expeditions of conquest is past, that today it is at least no longer acceptable to use force on peoples of the white race. Whoever wanted to contradict this principle of modern political world law, an expression of the liberal ideas of the time of the Enlightenment, would have to set himself against all other nations of the world. It was a fateful error to want to undertake a new partition of the earth with cannons and armored ships.
The nations suffering from relative overpopulation in their homelands can no longer use those means of relief today that were usual at the time of national migrations. Full freedom of emigration and immigration and unlimited free mobility of capital must be their demand. Only in this way can they attain the most favorable economic conditions for their fellow nationals.
Of course, the struggle of nationalities over the state and government cannot disappear completely from polyglot territories. But it will lose sharpness to the extent that the functions of the state are restricted and the freedom of the individual is extended. Whoever wishes peace among peoples must fight statism.
C. The Roots of ImperialismIt is usual to seek the roots of modern imperialism in the desire for territories to settle and colonies to exploit. This interpretation represents imperialism as an economic necessity. We best recognize that this interpretation is inadequate if we consider how liberalism stands on the same problem. Its watchword is freedom of movement; at the same time, it is averse to all colonial undertakings. The proof that the liberal school has provided is irrefutable: that free trade and only free trade appears justified from the purely economic point of view, that only it guarantees the best provisioning of all persons, the greatest yield of labor with the smallest expenditure of costs.
This liberal dogma cannot be shaken, either, by the assertion—on whose correctness we offer no opinion—that there are peoples who are not ready for self-government and never will be ready. These lower races supposedly must be politically governed by the higher races, without economic freedom being in any way limited thereby. Thus have the English long interpreted their rule in India, thus was the Congo Free State conceived: the open door for economic activity of all nations in free competition both with the members of the ruling nation and with the natives. That the practice of colonial policy deviates from this ideal, that it again, as formerly, regards the natives only as a means, not as an end in their own right, that it—above all the French, with their trade-policy assimilation system—excludes from the colonial territories all who do not belong to the ruling nation, is only a consequence of imperialistic lines of thinking. But where do these come from?
An individualistic justification for imperialism can also be found. That is the one based on the conditions of territories with mixed population. There the consequences of the application of the democratic principle were bound by themselves alone to lead to militant aggressive nationalism. Things are no different in those territories to which the stream of immigration is directed today. There the problem of mixed languages arises ever anew, there imperialistic nationalism must also arise ever anew. Thus we see efforts growing in America and in Australia for limitation of undesired—foreign-nationality—immigration, efforts that were bound to arise out of the fear of being outnumbered by foreigners in one's own country at the same time that the fear arose that the immigrants of foreign national origin could no longer be fully assimilated.
Doubtless this was the point from which the rebirth of imperialistic thinking proceeded. From here the spirit of imperialism gradually undermined the entire thought structure of liberalism, until finally it could also replace the individualistic basis from which it had originated with a collectivistic one. The idea of liberalism starts with the freedom of the individual; it rejects all rule of some persons over others; it knows no master peoples and no subject peoples, just as within the nation itself it distinguishes between no masters and no serfs. For fully developed imperialism, the individual no longer has value. He is valuable to it only as a member of the whole, as a soldier of an army. For the liberal, the number of fellow members of his nationality is no unduly important matter. It is otherwise for imperialism. It strives for the numerical greatness of the nation. To make conquests and hold them, one must have the upper hand militarily, and military importance always depends on the number of combatants at one's disposal. Attaining and maintaining a large population thus becomes a special goal of policy. The democrat strives for the unified national state because he believes that this is the will of the nation. The imperialist wants a state as large as possible; he does not care whether that corresponds to the desire of the peoples.We have seen how the striving for the unified national state originates from the desire of the peoples. Imperialism interprets the matter otherwise. For it, the idea of the unified state is a legal title for annexations. Thus the Pan-Germans wanted to annex the German cantons of Switzerland and even the Netherlands against their will.
The imperialistic people's state scarcely differs from the old princely state in its interpretation of sovereignty and its boundaries. Like the latter, it knows no other limits to the expansion of its rule than those drawn by the opposition of an equally strong power. Even its lust for conquest is unlimited. It wants to hear nothing of the right of peoples. If it "needs" a territory, then it simply takes it and, where possible, demands further from the subjugated peoples that they find this just and reasonable. Foreign peoples are in its eyes not subjects but objects of policy. They are—quite as the princely state once thought—appurtenances of the country where they live. Expressions also recur in the modern imperialistic manner of speaking, therefore, that were believed to be already forgotten. People speak again of geographic boundaries,The answer of the nationality principle to the theory of natural geographic boundaries was given by Arndt when he explained that "the single most valid natural boundary is made by language" (Der Rhein. Deutschlands Strom aber nicht Deutschlands Grenze, 1813, p. 7) and then was aptly formulated by J. Grimm when he speaks of the "natural law . . . that not rivers and not mountains form the boundary lines of peoples and that for a people that has moved over mountains and rivers, its own language alone can set the boundary" (loc. cit., p. 557). How one can manage to derive from the nationality principle the demand for annexation of the territories "of the small, unviable peoples, specifically, those incapable of having their own state" may be seen in Hasse, Deutsche Politik, vol. 1, third part (Munich: 1906), pp. 12 f. of the necessity of using a piece of land as a "buffer zone"; territories are again rounded off; they are exchanged and sold for money.
These imperialistic doctrines are common to all peoples today. Englishmen, Frenchmen, and Americans who marched off to fight imperialism are no less imperialistic than the Germans. Of course, their imperialism differed from the German variety before November 1918 in one important point. While the other nations brought their imperialistic efforts to bear only against the peoples of the tropics and subtropics and treated the peoples of the white race in conformity with the principles of modern democracy, the Germans, precisely because of their position in the polyglot territories in Europe, directed their imperialistic policy against European peoples also.Only in impeding immigration does imperialism on the part of the Anglo-Saxons operate against the whites also. The great colonial powers have held fast to the democratic-pacifistic nationality principle in Europe and America and have practiced imperialism only against the African and Asiatic peoples. They have therefore not come into conflict with the nationality principle of the white peoples, as has the German people, which even in Europe has sought to practice imperialism everywhere.
To justify the application of imperialistic principles in Europe, the German theory saw itself compelled to fight the nationality principle and replace it with the doctrine of the unified state. Small states are said no longer to have any justification for their existence nowadays. They are said to be too small and too weak to form an independent economic territory. They supposedly must therefore necessarily seek links with larger states in order to form an "economic and trench community" with them.Cf. Naumann, Mitteleuropa (Berlin: Georg Reimer, 1915), pp. 164 ff. (Central Europe, trans. by Christabel M. Meredith, New York: Knopf, 1917, pp. 179 ff.); Mitscherlich, Nationalstaat und Nationalwirtschaft und ihre Zukunft (Leipzig: 1916), pp. 26 ff; on other writers of the same orientation, cf. Zurlinden, Der Weltkrieg. Vorläufige Orientierung von einem schweizerischen Standpunkt aus, vol. 1 (Zurich: 1917), pp. 393 ff.
If this means no more than that small states are scarcely able to mount sufficient resistance to the lust for conquest of their more powerful neighbors, well, one cannot contradict that. Small states cannot in fact compete with large ones on the battlefield; if it comes to war between them and a great power, then they must succumb unless help comes to them from outside. This help seldom is lacking. It is provided by large and small states, not from sympathy or on principle but in their own interest. In fact, we see that small states have maintained themselves for centuries just as well as the great powers. The course of the World War shows that even nowadays small states do not always prove weakest in the end. If one seeks to prod the small states by threats into association with a larger state or if one compels them into subjugation through force of arms, well, this is no proof of the assertion that "time is working against small state sovereignties."Cf. Renner, Österreichs Erneuerung, vol. 3 (Vienna: 1916), p. 65. This proposition is no less correct or false today than in the days of Alexander the Great, Tamerlane, or Napoleon. The political ideas of modern times allow the continued existence of a small state to appear rather more secure today than in earlier centuries. That the Central Powers won military victories over a number of small states during the World War in no way justifies our declaring that "running a state on a small scale" is just as out of date today as so running an ironworks. When Renner, with reference to military victories that German and Austrian troops won over the Serbs, thinks he can dispose of the nationality principle with the Marxist expression: "the material conditions of being a state rebel against its immaterial ones—a contradiction of concepts that in practice becomes a tragic fate for people and state,"Renner, Österreichs Erneuerung, vol. 3 (Vienna: 1916), p. 66. he is thereby overlooking the fact that military weakness could be fatal for small states thousands of years ago also.
The assertion that all small states have had their day is further supported by Naumann, Renner, and their followers by the remark that a state must at least possess enough territory for a self-sufficient economy. That this is not true is already clear from what was said earlier. There can be no question of a test of economic self-sufficiency in the formation of states at a time when the division of labor embraces broad stretches of land, whole continents, indeed the whole world. It does not matter whether the inhabitants of a state meet their needs directly or indirectly by production at home; what is important is only that they can meet them at all. When Renner confronted the individual Austrian nations striving for political independence with the question of where they then would obtain this or that article once they had been detached from the whole of the Austro-Hungarian state, well, that was absurd. Even at the time when the state structure was unified, they did not obtain these goods for nothing but only for value supplied in return, and this value in return does not become greater when the political community has fallen apart. This objection would have had some sense only if we were living at a time when trade between states was impossible.
The size of a state's territory therefore does not matter. It is another question whether a state is viable when its population is small. Now, it is to be noted that the costs of many state activities are greater in small states than in large ones. The dwarf states, of which we still have a number in Europe, like Liechtenstein, Andorra, and Monaco, can organize their court systems by levels of jurisdiction, for example, only if they link up with a neighboring state. It is clear that it would be financially quite impossible for such a state to set up as comprehensive a court system as that which a larger state makes available to its citizens, for example, by establishing courts of appeal. One can say that, seen from this point of view, states encompassing a smaller number of people than the administrative units of the larger states are viable only in exceptional cases, namely, only when they have especially rich populations. The smaller states for which this precondition does not hold will, for reasons of state finance, have to link their administrations with a larger neighboring state.Cf. also the speech of Bismarck in the session of the Prussian House of Deputies of 11 December 1867 on Prussia's treaty of accession with the principality of Waldeck-Pyrmont. (Fürst Bismarcks Reden, edited by Stein, vol. 3, pp. 235 ff.) Nations so small in number of people that they do not satisfy these conditions do not exist at all and cannot exist at all, since the development of an independent standard language presupposes, after all, the existence of several hundred thousand speakers.
When Naumann, Renner, and their numerous disciples recommended to the small peoples of Europe an association with a Central Europe under German leadership, they completely misunderstood the essence of the protective-tariff policy. On political or military grounds, an alliance with the German nation assuring independence to all participants could be desirable for the small nations of Eastern and Southeastern Europe. In no case, however, could an alliance that would be serviceable exclusively to German interests appear welcome to them. That was the only kind, however, that the advocates of Central Europe had in view. They wanted an alliance that would enable Germany to compete militarily with the world's great powers for colonial possessions, possessions whose advantages could have benefited the German nation alone. They conceived of the Central European world empire, furthermore, as a protective-tariff community. Just that, however, is what all these smaller nations do not want. They do not want to be mere markets for German industrial products; they do not want to forgo developing at home those branches of industry that have their natural locations there and importing from outside Germany the goods produced more cheaply there. It was thought that the rise in prices of agricultural products that was infallibly bound to occur in consequence of incorporation into the Central European tariff territory would, even by itself alone, be attractive to the predominantly agrarian states whose incorporation into the Central European empire was being sought. It was overlooked, however, that this argument could make an impression only on economically untrained persons. It is not to be denied that Rumania, say, on joining a German-Austrian-Hungarian customs community, would have experienced a rise in the prices of agricultural products. It is overlooked, however, that industrial products would have risen in price, on the other hand, since then Rumania would have had to pay the higher German domestic prices, while if it is not joined in a customs community with Germany, it pays the lower world-market prices. What it would have lost from joining the German customs community would have been greater than what it would have gained thereby. At present Rumania is a relatively underpopulated or at least a not overpopulated country; that means that the bulk of its export goods can at present and in the foreseeable future be exported without any dumping. Rumania has no enterprises in primary production and only a few in industry whose location would not be natural. Things are different for Germany, which, precisely in the most important branches of production, works under more unfavorable conditions than foreign countries.
The imperialistic way of thinking, which comes forward with the claim to be helping modern economic development to its rightful condition, is in truth gripped by barter-economy and feudal preconceptions. In the age of the world economy it is downright nonsensical to represent the demand for creation of large autarkic economic territories as an economic demand. In peacetime it is a matter of indifference whether one produces foodstuffs and raw materials at home oneself or, if it seems more economic, obtains them from abroad in exchange for other products that one has produced. When a medieval prince acquired a piece of land where ore was mined, then he had a right to call this mine his own. But if a modern state annexes a mining property, these mines still have not thereby become those of its citizens. They must buy their products by transferring products of their own labor just as they did before, and that changes have occurred in the political order remains without significance for ownership of them. If the prince is happy about the annexation of a new province, if he is proud about the size of his realm, that is immediately understandable. If, however, the common man is happy that "our" realm has become larger, that "we" have acquired a new province, well, that is a joy that does not arise from the satisfaction of economic needs.
In economic policy, imperialism in no way suits the stage of world economic development reached in 1914. When the Huns slashed through Europe killing and burning, they harmed their enemies by the destruction that they left behind, but not themselves also. But when German troops destroyed coal mines and factories, then they also worsened the provisioning of the German consumer. That coal and various manufactured products can be produced in the future only in smaller quantities or only with higher costs will be felt by everyone involved in world economic transactions.
Once that has been recognized, however, then only the military argument can still be adduced in favor of the policy of national expansion. The nation must be populous to field many soldiers. Soldiers are needed, however, to acquire land on which soldiers can be raised. That is the circle that the imperialistic way of thinking does not escape.
D. PacifismDreamers and humanitarians have long campaigned for the idea of general and eternal peace. Out of the misery and distress that wars have brought to individuals and peoples, the deep longing arose for peace that should never again be disturbed. Utopians paint the advantages of freedom from war in the most splendid colors and call on states to unite in an enduring alliance for peace embracing the entire world. They appeal to the highmindedness of emperors and kings; they refer to divine commands and promise whoever would realize their ideals undying fame far exceeding even that of the great war heroes.
History has omitted these peace proposals from its agenda. They have never been anything more than literary curiosities that no one took seriously. The powerful have never thought of renouncing their power; it has never occurred to them to subordinate their interests to the interests of humanity, as the naive dreamers demanded.
To be judged quite differently from this older pacifism, which was carried along by general considerations of humanitarianism and horror of bloodshed, is the pacifism of the Enlightenment philosophy of natural law, of economic liberalism, and of political democracy, which has been cultivated since the eighteenth century. It does not arise from a sentiment that calls on the individual and the state to renounce the pursuit of their earthly interests out of thirst for fame or in hope of reward in the beyond; nor does it stand as a separate postulate without organic connection with other moral demands. Rather, pacifism here follows with logical necessity from the entire system of social life. He who, from the utilitarian standpoint, rejects the rule of some over others and demands the full right of self-determination for individuals and peoples has thereby rejected war also. He who has made the harmony of the rightly understood interests of all strata within a nation and of all nations among each other the basis of his world view can no longer find any rational basis for warfare. He to whom even protective tariffs and occupational prohibitions appear as measures harmful to everyone can still less understand how one could regard war as anything other than a destroyer and annihilator, in short, as an evil that strikes all, victor as well as vanquished. Liberal pacifism demands peace because it considers war useless. That is a view understandable only from the standpoint of the free-trade doctrine as developed in the classical theory of Hume, Smith, and Ricardo. He who wants to prepare a lasting peace must, like Bentham, be a free-trader and a democrat and work with decisiveness for the removal of all political rule over colonies by a mother country and fight for the full freedom of movement of persons and goods.Cf Bentham, Grundsätze für ein zukünftiges Völkerrecht und für einen dauernden Frieden, translated by Klatscher (Halle: 1915), pp. 100 ff. Those and no others are the preconditions of eternal peace. If one wants to make peace, then one must get rid of the possibility of conflicts between peoples. Only the ideas of liberalism and democracy have the power to do that.Today people have managed to hold liberalism responsible for the outbreak of the World War. Compare, on the other hand, Bernstein, Sozialdemokratsche Völkerpolitik (Leipzig: 1917), pp. 170 ff., where the close connection of free trade with the peace movement is mentioned. Spann, an opponent of pacifism, expressly emphasizes the "dislike and dread of war which today characterizes the capitalist community" (loc. cit., p. 137).
Once one has abandoned this standpoint, however, one can make no sound argument against war and conflict. If one holds the view that there are irreconcilable class antagonisms between the individual strata of society that cannot be resolved except by the forcible victory of one class over others, if one believes that no contacts between individual nations are possible except those whereby one wins what the other loses, then, of course, one must admit that revolutions at home and wars abroad cannot be avoided. The Marxian socialist rejects war abroad because he sees the enemy not in foreign nations but in the possessing classes of his own nation. The nationalistic imperialist rejects revolution because he is convinced of the solidarity of interests of all strata of his nation in the fight against the foreign enemy. Neither is a principled opponent of armed intervention, neither a principled opponent of bloodshed, as the liberals are, who sanction only defensive war. Nothing, therefore, is in such bad taste for Marxian socialists as to fume over war, nothing in such bad taste for chauvinists as to fume over revolution, out of philanthropic concern for the innocent blood thereby shed. Quis tulerit Gracchos de seditione querentes? [Who could endure the Gracchi complaining of sedition?]
Liberalism rejects aggressive war not on philanthropic grounds but from the standpoint of utility. It rejects aggressive war because it regards victory as harmful, and it wants no conquests because it sees them as an unsuitable means for reaching the ultimate goals for which it strives. Not through war and victory but only through work can a nation create the preconditions for the well-being of its members. Conquering nations finally perish, either because they are annihilated by strong ones or because the ruling class is culturally overwhelmed by the subjugated. Once already the Germanic peoples conquered the world, yet were finally defeated. East Goths and Vandals went down fighting; West Goths, Franks and Lombards, Normans and Varangians remained victors in battle, but they were culturally defeated by the subjugated; they, the victors, adopted the language of the defeated and were absorbed into them. One or the other is the fate of all ruling peoples. The landlords pass away, the peasants remain; as the chorus in the Bride of Messina expresses it: "The foreign conquerors come and go, and we obey but we remain." The sword proves in the long run not to be the most suitable means of gaining broad diffusion for a people. That is the "impotence of victory" of which Hegel speaks.Compare Hegel, Werke, third edition, vol. 9 (Berlin: 1848), p. 540.,One could raise the question of what, then, the distinction between pacifism and militarism really consists, since the pacifist, too, is fundamentally not for maintaining peace at any price; rather, under certain conditions he prefers war to an unbearable state of peace; and conversely, the militarist, too, does not want to wage perpetual war but only to restore a definite condition that he regards as desirable. Both supposedly stand, therefore, in fundamental opposition to the absolute life renouncing passivity that the Gospel proclaims and that many Christian sects practice; between the two themselves, however, there exists only a difference of degree. In fact, however, the contrast is so great that it becomes a fundamental one. It lies, on the one hand, in assessment of the size and difficulty of the impediment barring us from peace and, on the other hand, in assessment of the disadvantages connected with conflict. Pacifism believes that we are barred from eternal peace only by a thin partition whose removal must lead at once to the state of peace, while militarism sets such remote goals for itself that their attainment in the foreseable future cannot be expected, so that a long era of war still lies ahead. Liberalism believed that eternal peace could be lastingly established merely by the abolition of princely absolutism, German militarism, however, was clear about the fact that achieving and maintaining the German supremacy being sought would continually entail wars for a long time yet. Furthermore, pacifism always has an eye open to the damages and disadvantages of war, while militarism considers them slight. From that there then follows in pacifism its outspoken preference for the state of peace and in militarism its constant glorification of war and, in its socialist form, of revolution. A further fundamental distinction between pacifism and militarism is possible according to their positions on the theory of power. Militarism sees the basis of rule in material power (Lassalle, Lasson), liberalism in the power of the mind (Hume).
Philanthropic pacifism wants to abolish war without getting at the causes of war.
It has been proposed to have disputes between nations settled by courts of arbitration. Just as in relations between individuals self-help is no longer permitted and, apart from special exceptional cases, the harmed person has only the right to call on the courts, so must things also become in relations between nations. Here also force would have to give way to law. It is supposedly no harder to settle disputes between nations peacefully than those among individual members of a nation. The opponents of arbitration in disputes between nations were to be judged no differently than the medieval feudal lords and brawlers, who also resisted the jurisdiction of the state as far as they could. Such resistance's must simply be abolished. If this had already been done years ago, then the World War, with all of its sad consequences, could have been avoided. Other advocates of arbitration between states go less far with their demands. They desire the obligatory introduction of arbitration, at least for the near future, not for all disputes but only for those touching on neither the honor nor the conditions of existence of nations, that is, only for the lesser cases, while for the others the old method of decision on the field of battle could still be retained.
It is a delusion to assume that the number of wars can thereby be reduced. For many decades already, wars have still been possible only for weighty reasons. That requires neither confirmation by citing historical examples nor even a long explanation. The princely states waged war as often as required by the interests of princes aiming at extending their power. In the calculation of the prince and his counselors, war was a means just like any other; free from any sentimental regard for the human lives that were thereby put at stake, they coolly weighed the advantages and disadvantages of military intervention as a chess player considers his moves. The path of kings led literally over corpses. Wars were not perhaps begun, as people are accustomed to saying, for "trivial reasons." The cause of war was always the same: the princes' greed for power. What superficially looked like the cause of war was only a pretext. (Remember, say, the Silesian wars of Frederick the Great.) The age of democracy knows no more cabinet wars. Even the three European imperial powers, which were the last representatives of the old absolutist idea of the state, had for a long time already no longer possessed the power to instigate such wars. The democratic opposition at home was already much too strong for that. From the moment when the triumph of the liberal idea of the state had brought the nationality principle to the fore, wars were possible only for national reasons. That could be changed neither by the fact that liberalism soon was seriously endangered by the advance of socialism nor by the fact that the old military powers still remained at the helm in Central and Eastern Europe. That is a success of liberal thinking that can no longer be undone, and that should not be forgotten by anyone who undertakes to revile liberalism and the Enlightenment.
Whether the arbitration procedure should now be chosen for less important disputes arising in relations among nations or whether their settlement should be left to negotiations between the parties is a question that interests us less here, however important it may otherwise be. It must be noted only that all arbitration treaties discussed in recent years seem suitable only for settlement of such less important matters of dispute and that up to now all attempts further to extend the range of international arbitration have failed.
If it is asserted that utterly all disputes between peoples can be settled through courts of arbitration, so that decision by war can be quite eliminated, then the fact must be noted that every administration of justice first presupposes the existence of a generally recognized law and then the possibility of applying the legal maxims to the individual case. Neither applies to those disputes between nations of which we speak. All attempts to create a substantive international law through whose application disputes among nations could be decided have miscarried. A hundred years ago the Holy Alliance sought to elevate the principle of legitimacy to the basis of international law. The possessions of the princes at that time were to be protected and guaranteed both against other princes and also, in line with the political thinking of the time, against the demands of revolutionary subjects. The causes of the failure of this attempt need not be investigated at length; they are obvious. And yet today people seem inclined to renew the same attempt again and to create a new Holy Alliance in Wilson's League of Nations. That it is not princes but nations that are guaranteeing their possessions today is a distinction that does not affect the essence of things. The decisive thing is that possessions are ensured at all. It is again, as a hundred years ago, a division of the world that presumes to be an eternal and final one. It will be no more enduring than the earlier one, however, and will, no less than that one, bring blood and misery to mankind.
As the legitimacy principle as understood by the Holy Alliance was already shaken, liberalism proclaimed a new principle for regulating relations among nations. The nationality principle seemed to signify the end of all disputes between nations; it was to be the norm by which all conflict should be peacefully solved. The League of Nations of Versailles adopts this principle also, though, to be sure, only for the nations of Europe. Yet in doing so it overlooks the fact that applying this principle wherever the members of different peoples live mingled together only ignites conflict among peoples all the more. It is still more serious that the League of Nations does not recognize the freedom of movement of the person, that the United States and Australia are still allowed to block themselves off from unwanted immigrants. Such a League of Nations endures so long as it has the power to hold down its adversaries; its authority and the effectiveness of its principles are built on force, to which the disadvantaged must yield but which they will never recognize as right. Never can Germans, Italians, Czechs, Japanese, Chinese, and others regard it as just that the immeasurable landed wealth of North America, Australia, and East India should remain the exclusive property of the Anglo-Saxon nation and that the French be allowed to hedge in millions of square kilometers of the best land like a private park.
Socialist doctrine hopes for establishment of eternal peace through the realization of socialism. "Those migrations of individuals," says Otto Bauer, "that are dominated by the blindly prevailing laws of capitalist competition and are almost fully exempt from the application of deliberate rules then cease. Into their place steps the deliberate regulation of migrations by the socialist community. They will draw immigrants to where a larger number of people at work increases the productivity of labor; where the land bestows a declining yield to a growing number of persons, they will induce part of the population to emigrate. With emigration and immigration thus being consciously regulated by society, the power over its language boundaries falls for the first time into the hands of each nation. Thus, no longer can social migrations against the will of the nation repeatedly violate the nationality principle."Cf. Bauer, loc. cit., p. 515.
We can imagine the realization of socialism in two ways. First, in its highest fulfillment as a socialist world state, as unified world socialism. In such a state the office responsible for the overall control of production will determine the location of each unit of production and thereby also regulate migrations of workers and thus perform the same tasks that fall to the competition of producers in the—so far not even approximately implemented—free economy. This office will resettle workers from the territories with more unfavorable conditions of production into those with more favorable conditions. Then, however, nationality problems will still turn up in the socialist world community. If spinning and iron production are to be cut back in Germany and expanded in the United States, then German workers will have to be resettled in Anglo-Saxon territory. It is precisely such resettlements that, as Bauer says, repeatedly violate the nationality principle against the will of the nation; but they violate it not only in the capitalist economic order, as he thinks, but in the socialist order just the same. That they are governed in the liberal economic order by the "blindly ruling" laws of capitalist competition but in the socialist community are "deliberately" regulated by society is incidental. If the deliberate regulation of the migrations of workers is guided by the rational point of view of pure economic efficiency—which of course Bauer too, and with him every Marxist, takes for granted—then it must lead to the same result that free competition also leads to, namely, that workers, without regard to historically inherited national conditions of settlement, are resettled where they are needed for exploitation of the most favorable conditions of production. Therein, however, lies the root of all national frictions. To assume that migrations of workers transcending the boundaries of national territories of settlement would not lead to the same conflicts in the socialist community as in the free community would of course be a downright utopian way of thinking. If, though, one wants to conceive of the socialist community as a nondemocratic one, then such an assumption is permissible; for, as we have seen, all national frictions first arise under democracy. World socialism, conceived of as a world empire of general servitude of peoples, would admittedly bring national peace also.
The realization of socialism is also possible, however, otherwise than through a world state. We can imagine a series of independent socialist political systems—perhaps nationally unified state—existing side by side without there being a common management of world production. The individual communities, which then are owners of the natural and produced means of production located in their territories, are connected with each other only in the exchange of goods. In a socialism of that kind, national antagonisms will not only not be made milder in comparison with the situation in the liberal economic order but will be considerably sharpened. The migration problem would lose nothing of its capacity to create conflicts between peoples. The individual states would perhaps not completely shut themselves off from immigration, but they would not allow immigrants to acquire resident status and to acquire a full share of the fruits of national production. A kind of international migrant-worker system would arise. Since each one of these socialist communities would have the product of the natural resources found in its territory at its disposal, so that the income of the residents of the individual territories would be different in size—larger for some nations, smaller for others—people would resist the inflow of elements of foreign nationality even for this reason alone. In the liberal economic order it is possible for members of all nations to acquire private ownership of the means of production of the entire world so that, e.g., Germans also can assure themselves a part of the land resources of India and, on the other hand, again, German capital can move to India to help exploit the more favorable conditions of production there. In a socialist order of society, that sort of thing would not be possible, since political sovereignty and economic exploitation must coincide in it. The European peoples would be excluded from ownership in foreign continents. They would have to endure calmly the fact that the immeasurable riches of overseas territories redound to the advantage of the local inhabitants only and would have to observe how a part of this landed wealth remains unexploited because capital for its use cannot be obtained.
All pacifism not based on a liberal economic order built on private ownership of the means of production always remains utopian. Whoever wants peace among nations must seek to limit the state and its influence most strictly.
It is no accident that the basic ideas of modern imperialism can already be found in the writings of two fathers of German socialism and of modern socialism in general, namely, in the works of Engels and Rodbertus. From the statist outlook of a socialist it seems obvious, because of geographic and commercial necessities, that a state must not let itself be shut off from the sea.Cf. Rodbertus, Schriften, edited by Wirth, new edition, vol. 4 (Berlin: 1899), p. 282. The question of access to the sea, which has always directed the Russian policy of conquest in Europe and in Asia and has dominated the behavior of the German and Austrian states regarding Trieste and of the Hungarian state regarding the South Slavs and which has led to the infamous "corridor" theories to which people want to sacrifice the German city of Danzig, does not exist at all for the liberal. He cannot understand how persons may be used as a "corridor," since he takes the position from the first that persons and peoples never may serve as means but always are ends and because he never regards persons as appurtenances of the land on which they dwell, The free-trader, who advocates complete freedom of movement, cannot understand what sort of advantage it offers to a people if it can send its export goods to the coast over its own state territory. If the old Russia of Czarism had acquired a Norwegian seaport and in addition a corridor across Scandinavia to this seaport, it could not thereby have shortened the distance of the individual parts of the Russian interior from the sea. What the Russian economy feels as disadvantageous is that the Russian production sites are located far from the sea and therefore lack those advantages in the transport system that ease of ocean freight transport assures. But none of that would be changed by acquisition of a Scandinavian seaport; if free trade prevails, it is quite a matter of indifference whether the nearest seaports are administered by Russian or other officials. Imperialism needs seaports because it needs naval stations and because it wants to wage economic wars. It needs them not to use them but to exclude others from them. The nonstatist economy of trade free of the state does not recognize this argumentation.
Rodbertus and Engels both oppose the political demands of the non-German peoples of Austria. That the Germans and Magyars, at the time when the great monarchies really became a historical necessity in Europe, "put all these small, stunted, impotent nationlets together into a great empire and thereby made them capable of taking part in a historical development to which they, left to themselves, would have remained quite foreign"—for not having understood that, Engels reproaches the Pan-Slavists. He admits that such an empire cannot prevail "without forcibly crushing many a tender flowerlet of a nation. But without force and without iron ruthlessness, nothing is accomplished in history; and if Alexander, Caesar, and Napoleon had possessed the same capacity for compassion to which Pan-Slavism now appeals for the sake of its decayed clients, what then would have become of history! And are the Persians, Celts, and Christian Germans not worth the Czechs and the people of Ogulin and Sereth?"Cf. Mehring, Aus dem literarischen Nachlass von Marx, Engels und Lassalle, vol 3(Stuttgart: 1902), pp. 255 f. These sentences could have come quite well from a Pan-German writer or mutatis mutandis from a Czech or Polish chauvinist, Engels then continues: "Now, however, in consequence of the great progress of industry, trade, and communications, political centralization has become a much more pressing need than back in the fifteenth and sixteenth centuries. What still must be centralized becomes centralized. And now the Pan-Slavists come and demand that we should 'set free' these half-Germanized Slavs, we should undo a centralization that is imposed on these Slavs by all their material interests?" That is in essence nothing but Renner's doctrine of the tendency toward concentration in political life and of the economic necessity of the multinational state. We see that the orthodox Marxists did Renner an injustice in accusing him of heresy as a "revisionist."
The way to eternal peace does not lead through strengthening state and central power, as socialism strives for. The greater the scope the state claims in the life of the individual and the more important politics becomes for him, the more areas of friction are thereby created in territories with mixed population. Limiting state power to a minimum, as liberalism sought, would considerably soften the antagonisms between different nations that live side by side in the same territory. The only true national autonomy is the freedom of the individual against the state and society. The "statification" of life and of the economy leads with necessity to the struggle of nations.
Full freedom of movement of persons and goods, the most comprehensive protection of the property and freedom of each individual, removal of all state compulsion in the school system, in short, the most exact and complete application of the ideas of 1789, are the prerequisites of peaceful conditions. If wars then cease, "then peace has proceeded from the inner forces of things, then people and indeed free people have become peaceful."Cf. W. Humboldt, Ideen zu einem Versuch, die Grenzen der Wirksamkeit des Staats zu bestimmen, edition of the "Deutsche Bibliothek," (Berlin), p. 66.
Never have we been further from this ideal than today.
- On the History of German DemocracyA. PrussiaAmong the most notable phenomena of the history of the last hundred years is the fact that the modern political ideas of freedom and self-government could not prevail among the German people, while elsewhere they could make themselves influential almost everywhere on earth. Everywhere democracy has been able to overcome the old princely state; everywhere the revolutionary forces have triumphed. Only precisely in Germany and in Austria—and besides there only in Russia—has the democratic revolution been defeated again and again. While every nation of Europe and America has experienced an age of liberalism in constitutional and economic policy, in Germany and Austria only slight successes have been accorded to liberalism. In the political sector, the old princely state, as represented at its purest in the constitution of Prussia under Frederick the Great, did indeed have to grant some concessions, but it was far from transforming itself into a parliamentary monarchy of, say, the English or Italian sort; as a result of the great political movements of the nineteenth century the authoritarian state appears here.
The democratic state, as we see it realized almost everywhere at the beginning of the twentieth century, rests on the identity of the rulers and the ruled, of the state and of the people. In it no government is possible against the will of the majority of the people. In it government and the governed, state and people, are one. Not so in the authoritarian state. Here on the one side stand the state-preserving elements, which regard themselves and themselves alone as the state; the government proceeds from them and identifies itself with them. On the other side stands the people, which appears only as object, not as subject, of government actions, which addresses the state sometimes pleadingly, sometimes demandingly, but which never identifies itself with it. This antithesis found its most eloquent expression in former Austrian parliamentary language in the contrast of "state necessities" with "people's necessities." The former were understood to include what the state and the latter what the people sought from the financial expenditures of the budget, and the deputies were at pains to be compensated for the granting of state necessities by the granting of people's necessities—which sometimes were necessities of the individual political parties or even of individual deputies. These contraries could never have been made understandable to an English or French politician; he would not have been able to understand how something could be necessary for the state without at the same time being necessary for the people, and conversely.
The contrast between authorities and people which characterizes the authoritarian state is not quite identical with the one between prince and people that characterizes the princely state; still less is it identical with the contrast between the prince and the estates in the old estate system. In their contrast with the modern democratic state, with its fundamental unity of government and people, however, all these dualistic state forms do share a common characteristic.
Attempts have not been lacking to explain the origin and basis of this peculiarity of German history. Those writers made it easiest for themselves who believed they understood the authoritarian state as the emanation of a special type of German spirit and sought to portray the democratic national state as "un-German," as not suitable for the soul of the German.Max Weber provided a destructive critique of these theories in Parlament und Regierung im neugeordneten Deutschland (Munich: 1918). Then, again, the attempt has been made to draw the special political position of Germany into an explanation. A state that seems endangered by external enemies in such a way as the German state was supposedly cannot tolerate a freedom-oriented constitution at home. "The measure of political freedom that can be permitted in governmental institutions must rationally be inversely proportional to the military-political pressure bearing on the borders of the state."Cf. Hintze in the collective work Deutschland und der Weltkrieg (Leipzig: 1915), p. 6. A penetrating critique of these views, which rest on a proposition of the English historian Seeley, appears in Preuss, Obrigkeitsstaat und grossdeutscher Gedanke (Jena: 1916), pp. 7 ff. That an intimate connection must exist between the political position and the constitution of a people will be conceded without further ado. But it is striking that efforts were made to bring only the foreign political position, but not the domestic political position, into explaining constitutional conditions. In what follows the converse procedure will be followed. An attempt will be made to explain that much-discussed peculiarity of German constitutional life by domestic political conditions, namely, by the position of the Germans of Prussia and Austria in the polyglot territories.
When the subjects of the German princes began to awake from their centuries-long political slumber, they found their fatherland torn to shreds, divided as patrimonial estates among a number of families whose external impotence was but poorly cloaked by their ruthless internal tyranny. Only two territorial princes were strong enough to stand on their own feet; their means of power rested, however, not on their German position but on their possessions outside Germany. For Austria this assertion needs no further justification; the fact was never disputed. It was otherwise for Prussia. It is common to overlook the fact that the position Of Prussia in Germany and in Europe always remained insecure until the Hohenzollerns succeeded in building a rather large contiguous state territory, first by the annexation of Silesia, which at the time was half Slavic, and then by the acquisition of Posnania and West Prussia. Precisely those deeds of Prussia on which its power rested—its participation in the victory over the Napoleonic system, the crushing of the revolution of 1848, and the war of 1866—could not have been accomplished without the non-German subjects of its eastern provinces. Even the acquisition of German land accomplished by the struggles waged from 1813 to 1866 with the help of its non-German subjects in no way shifted the center of gravity of the Prussian state from the east to the west. Still, as before, the undiminished maintenance of its possessions east of the Elbe remained a condition of existence for Prussia.
The political thinking of the German mind, which was slowly maturing for public life, could be modeled on none of the states existing on German soil. What the patriotic German saw before him was only the ruins of the old imperial magnificence and the disgraceful and slovenly administration of the German petty princes. The way to the German state would have to involve the overthrow of these small despots. All agreed on that. What, however, should happen to the two German powers?
The difficulty inherent in the problem may best be recognized from a comparison with Italy. Conditions in Italy were similar to those in Germany. Blocking the modern national state were a number of petty princes and the great power Austria. The Italians would have gotten rid of the former quickly, but of the latter—by themselves—never. And Austria not only held fast to a large part of Italy directly, it also protected the sovereignty of the individual princes in the remaining territories. Without Austria's intervention, Joachim Murat or General Pepe would long since probably have established an Italian national state. But the Italians had to wait until Austria's relations with the other powers offered them the opportunity to reach their goal. Italy owes its freedom and unity to French and Prussian help, and in a certain sense to English help also; to unite Trentino, too, with the kingdom of Italy required the help of the entire world. The Italians themselves lost all the battles they fought against Austria.
In Germany conditions were different. How were the German people to succeed in overcoming Austria and Prussia, the two mighty military monarchies? Foreign help, as given in Italy, could not be counted on. The most natural course would probably have been for the German national idea to acquire so much power over the Germans in Prussia and Austria that they strove for a united Germany. If the Germans, who were the majority by far in the Prussian army and represented the most important element in the Austrian army, had proved true as Germans the way the Magyars did in 1849 as Magyars, then there would have arisen out of the confusions of the revolution of 1848 a German Reich free and united from the Belt to the Etsch. The non-German elements in the armies of Austria and Prussia would hardly have been in a position to mount successful resistance to the assault of the entire German people.
The Germans in Austria and Prussia, however, were also opponents or at least only limited adherents of the German strivings for unity—and that is what was decisive. The efforts of the men of St. Paul's Church suffered shipwreck, not, as legends have it, because of doctrinairism, idealism, and professorial ignorance of the ways of the world but rather because of the fact that the majority of Germans supported the cause of the German nation only half-heartedly. What they desired was not the German state alone but rather the Austrian or the Prussian state as well at the same time—and this is not to mention those who actually considered themselves only Austrians or Prussians and not at all Germans.
We who today are accustomed to seeing the pure Prussian and the pure Austrian only in the conservative east of the Elbe and the Alpine clerical, we who in the appeal to Prussia or Austria can always see only the pretexts of enemies of the national state—we can only with difficulty concede even mere good faith to the black-and-yellow and black-and-white patriots of that time. This not only does a serious injustice to men about whose honorable striving there should be no doubt; this lack of historical perspective also blocks our path to knowledge of the most important events of German history.
Every German knows the passage in Goethe's Dichtung und Wahrheit in which the aging poet portrays the deep impression that the figure of Frederick the Great made on his contemporaries.The criticism that Mehring makes (Die Lessing-Legende, third edition [Stuttgart: 1909] pp. 12 ff.) does not weaken the force of this passage as evidence for the views of the old Goethe. It is true that the state of the Hohenzollerns, too, which Prussian court historiography lauded as the implementation of all utopias, was not a whit better than the other German states; and Frederick William I or Frederick II were no less hateful despots than any Württemberg or Hessian lord. But one thing distinguished Brandenburg-Prussia from the other German territories: the state was not ridiculous; its policy was purposeful, steady, and power-seeking. This state could be hated, it might be feared, but it could not be overlooked.
If, thus, the political thoughts of even the non-Prussian Germans secretly strayed toward Prussia out of the narrowness of their political existence, if even foreigners judged this state not totally unfavorably, was it any wonder that the beginnings of political thought in the Prussian provinces clung more often to the Prussian state, which, with all its faults, still had the advantage of actual existence, than to the dream of a German state, which was unmasked every day by the wretchedness of the Holy Roman Empire? Thus a Prussian state-consciousness was formed in Prussia. And these feelings were shared not only by the salaried champions of the Prussian state apparatus and its beneficiaries but also by men of undoubtedly democratic sentiments like WaldeckCf. Oppenheim, Benedikt Franz Leo Waldek (Berlin: 1880), pp. 41 ff. and hundreds of thousands like him.
It is common to describe the German question much too narrowly as the opposition of great-German and small-German. In truth the problem was larger and broader. It was first of all the gap that yawned between German national sentiment on the one side and Austrian and Prussian state-consciousness on the other.
The German unified state could have been built only on the ruins of the German states; whoever wanted to construct it therefore first had to root out those sentiments that were striving to maintain the Prussian and Austrian states. In March 1848 that seemed easy to do. At that time it could be expected that the Prussian and Austrian democrats, faced with the need to decide, would, even if perhaps after inner struggles, join the side of a great and unified Germany. Yet in both great German states, democracy was defeated sooner than one would have thought possible. Its sway lasted scarcely a few weeks in Vienna and Berlin; then the authoritarian state embarked on the plan that pulled the reins tight. What was the cause? The turnaround did come extraordinarily quickly. Right after the complete victory of democracy in March, the power of the new spirit began to crumble; and after a short time the Prussian army, led by the Prince of Prussia, who had fled the country only shortly before, could already take the offensive against the revolution.
There should be general agreement that the position of the eastern provinces of Prussia was decisive here.Cf. Bismarck, Gedanken und Erinnerungen (Stuttgart: 1898), vol. 1, p. 56. If this is remembered, it will not be too hard to understand clearly the causes of the turnaround. There in the East the Germans were in the minority amidst a numerically superior population of foreign language; there they had to fear that the lmplementation and application of democratic principles would cost them the ruling position that they had so far possessed. They would have become a minority that could never have expected to acquire power; they would have had to taste that lack of political rights that is the fate of minorities of foreign nationality.
The Germans of the provinces of Prussia, Posnania, and Silesia could hope for nothing good from democracy. That, however, determined the positions of the Germans of Prussia on the whole, for the Germans of the polyglot territories had much greater political importance than corresponded to their numbers. These Germans included, after all, almost all members of the higher strata of the population of those provinces—the officials, teachers, merchants, estate owners, and larger industrialists. In the upper strata of the Germans of Prussia, the members of the threatened borderlands therefore formed a numerically far larger part than the German borderland inhabitants formed on the whole in the total German population of Prussia. The solid mass of inhabitants of the borderlands joined with the parties supporting the state and thereby gave them preponderance. The idea of the German state could win no power over the non-German subjects of Prussia, and its German subjects feared German democracy. That was the tragedy of the democratic idea in Germany.
Here lie the roots of the peculiar political-intellectual constitution of the German people. It was the threatened position of the Germans in the borderlands that caused the ideal of democracy in Germany to fade quickly away and the subjects of Prussia, after a short honeymoon of revolution, to return penitently to the military state. They knew now what lay ahead for them in democracy. However much they might despise Potsdam's despotism, they had to bow to it if they did not want to fall under the rule of Poles and Lithuanians. From then on they were the faithful guard of the authoritarian state. With their help the Prussian military state triumphed over the men of freedom. All Prussia's political questions were now judged exclusively according to the position in the East. It was what determined the feeble position of the Prussian liberals in the constitutional conflict. It was what caused Prussia to seek Russian friendship, so long as that could be done at all, and thereby thwarted the natural alliance with England.
It now occurred to the Prussian authoritarian state to apply its methods of gaining and maintaining its position in Germany to the solution of the greater German national problem also. The weapons of the Junkers had triumphed in Germany. They had crushed the German bourgeoisie; they had excluded the Habsburg influence and elevated the Hohenzollerns high above the smaller and middle princes. Prussian military power suppressed the non-German elements in the Slavic eastern provinces of Prussia, in North Schleswig, and in Alsace-Lorraine. The bright splendor of the victories won in three wars shone on Prussian militarism. As it had crushed with power everything trying to hinder it on its way, so it believed it should also use armed force to solve all newly arising problems. By the power of weapons the hard-pressed position of the Habsburgs and the Germans in the Danube monarchy should be sustained and conquests made in the East and West and overseas.
The liberal theory of the state had long since exposed the error in this reasoning. The theorists and practitioners of power politics should have remembered Hume's famous arguments that all rule rests on power over minds; the government is always only a minority and can govern the majority only because the latter either is convinced of the legitimacy of the rulers or considers their rule desirable in its own interests.Cf. Hume, Of the First Principles of Government (Essays, edited by Frowde), pp. 29 if. Then they could not have overlooked the fact that the German authoritarian state, even in Germany, rested in the last analysis not on the power of bayonets but precisely on a particular disposition of the German mind, which was caused by the national conditions of settlement of the Germans in the East. They should not have deceived themselves over the fact that the defeat of German liberalism was attributable solely to the conditions of settlement in the German East: the rule of democracy there would have led to driving the Germans out and depriving them of rights; hence a predisposition toward antidemocratic currents had been created in wide circles of the German people. They would have had to recognize that even the German authoritarian state, like any other state, rested not on victories of weapons but on victories of the spirit, on victories won by dynastic-authoritarian sentiment over liberal sentiment. These relationships could not be misinterpreted worse than they were by that German school of political realists that denied the influence of every intellectual current in the life of nations and wanted to trace everything back to "real power relations." When Bismarck said that his successes rested only on the power of the Prussian army and had only derision and scorn for the ideals of St. Paul's Church, then he overlooked the fact that the power of the Prussian state was grounded on ideals also, although on the opposite ideals, and that it would have had to collapse immediately if liberal thought had penetrated the Prussian army further than it actually did. Those circles that were anxiously striving to keep the "modern spirit of demoralization" away from the army were better informed in this respect.
The Prussian authoritarian state could not defeat the world. Such a victory could have been achieved by a nation hopelessly in the minority only through ideas, through public opinion, but never with weapons. But the German authoritarian state, filled with a boundless contempt for the press and for all "literature," scorned ideas as a means of struggle. For its adversaries, however, the democratic idea made propaganda. Not until the middle of the war, when it was already too late, was it recognized in Germany what power lay in this propaganda and how vain it is to fight with the sword against the spirit.
If the German people found the allotment of territories of settlement on the earth unjust, then they should have sought to convert the public opinion of the world, which did not see the injustice of this allotment. Whether this would have been possible is another question. It is not wholly improbable that allies for this struggle could have been found, united with whom much, perhaps even everything, could have been attained. It is certain, however, that the undertaking of a nation of eighty million to fight against the whole remaining world was hopeless if it was not pursued with intellectual means. Not with weapons but only with the spirit can a minority overcome the majority. True practical politics is the only kind that knows how to enlist ideas in its service.
- On the History of German DemocracyB. AustriaThe teleological interpretation of history, by which all historical events appear as realization of definite goals set for human development, has assigned many kinds of task to the Danube state of the Habsburgs, which for four hundred years has maintained its position among the European powers. Now it should be the shield of the West against the threat from Islam, now the stronghold and refuge of Catholicism against the heretics; others wanted to see it as the support of the conservative element in general, still others as the state summoned by its nationally polychromatic character to promote peace among peoples by way of example.A compendium of the various tasks that people have sought to assign to Austria is given by Seipel, loc. cit., pp. 18 ff. One sees that the tasks were multifarious; according to the shape of political affairs, people favored now the one and now the other interpretation. History goes its course, however, without regard to such chimeras. Princes and peoples bother themselves very little over what missions the philosophy of history assigns to them.
Causal historiography does not look for the "mission" or the "idea" that nations and states have to realize; it seeks the political concept that forms states out of nations and parts of nations. The political concept at the basis of almost all state structures of the last centuries of the Middle Ages and the first centuries of modern times was princely dominion. The state existed for the sake of the king and his house. That holds true of the state of the Austrian Habsburgs, from the Ferdinand who as German emperor was called the First to the Ferdinand who as Austrian emperor was the only one of that name, just as it holds true of all other states of that time. In that respect the Austrian state was no different from the other states of its time. The hereditary lands of Leopold I were fundamentally no different from the state of Louis XIV or Peter the Great. But then came other times. The princely state succumbed to the attack of the freedom movement; in its place appeared the free national state. The nationality principle became the bearer of state coherence and the concept of the state. Not all states could take part in this development without change in their geographical extent; many had to submit to changes in their territory. For the Danube monarchy, however, the nationality principle actually signified the negation of its justification for existence.
Far-seeing Italian patriots passed the death sentence on the state of the House of Habsburg-Lorraine as early as 1815; no later than 1848 there already were men among all peoples forming the Empire who agreed with this opinion, and for more than a generation one could easily say that the entire thinking youth of the Monarchy—perhaps aside from part of the Alpine Germans educated in Catholic schools—were hostile to the state. All non-Germans in the country longingly awaited the day that would bring them freedom and their own national state. They strove to get out of the "married-together" state. Many of them made compromises. They saw with open eyes how things stood in Europe and in the world; they had no illusions about the impediments that initially still stood in the way of realization of their ideals, and they were therefore ready to moderate their claims in the meanwhile. They came to terms with the provisional continuation of the Austrian and Hungarian states; indeed, even more, they used the Dual Monarchy as a counter in their own game. The Poles, the South Slavs, the Ukrainians, and in a certain sense the Czechs also, sought to make the weight of this great state, which despite everything was still powerful, serviceable for their own purposes. Superficial critics have sought to conclude from that fact that these peoples had reconciled themselves to the existence of the state, that they even desired it. Nothing was more wrong than this view. Never did irredentism seriously disappear from the program of any of the non-German parties. It was tolerated that official circles did not openly show the ultimate goals of their national strivings in Vienna; at home, however, people thought and spoke, with formal attention to the limits drawn by the paragraphs on high treason of the penal law, of nothing other than liberation and shaking off the yoke of the foreign dynasty. The Czech and Polish ministers, and even the numerous South Slav generals, never forgot that they were sons of subjugated peoples; never did they feel themselves in their court positions as other than pacemakers of the freedom movement that wanted to get out of this state.
Only the Germans took a different position toward the state of the Habsburgs. It is true that there was also a German irredentism in Austria, even if one may not interpret in this sense every hurrah for the Hohenzollerns or for Bismarck shouted at solstice festivals, student assemblages, and gatherings of voters. But although the Austrian government in the last forty years of the existence of the Empire was, with a few transitory exceptions, more or less anti-German and often draconically persecuted relatively harmless utterances of German national sentiments, while far sharper speeches and deeds of the other nationalities enjoyed benevolent toleration, the state-supporting parties among the Germans always kept the upper hand. Up to the last days of the Empire the Germans felt themselves the real champions of the state idea, citizens of a German state. Was that a delusion, was it political immaturity?
To be sure, a large part, even the largest part, of the German people in Austria was and today still is politically backward. But this explanation cannot satisfy us. We just are not satisfied with the assumption of an innate political inferiority of the German; we seek precisely the causes that made the Germans march politically behind the Ruthenians and Serbs. We ask ourselves how it then happened that all other peoples inhabiting the imperial state readily adopted the modern ideas of freedom and national independence but that the German-Austrians so much identified themselves with the state of the Habsburgs that, for the sake of its continuation, they finally readily incurred the immense sacrifices of goods and blood that a war of more than four years imposed on them.
It was German writers who expounded the theory that the Austro-Hungarian dual state was no artificial construction, as the doctrine misled by the nationality principle announced, but rather a natural geographic unit. The arbitrariness of such interpretations of course needed no special refutation. With this method one can just as well prove that Hungary and Bohemia had to form one state as the opposite. What is a geographic unit, what are "natural" boundaries? No one can say. With this method Napoleon I once argued France's claim to Holland, for the Netherlands are an alluvial deposit of French rivers; with the same method Austrian writers sought, before the fulfillment of Italian strivings for unity, to support the right of Austria to the lowlands of upper Italy.Cf. p. 79 above; further, the criticism in Justus, "Sozialismus und Geographie, "Der Kampf, vol. 11, pp. 469 ff. Today the czechs apply this theory to justify the annexation of German Bohemia.
Another interpretation is of the state as an economic territory, which was urged above all by Renner, who, besides that, also considered the geographic interpretation of the state valid. For Renner the state is an economic community," an "organized economic territory." Unified economic territories should not be torn apart; thus it was foolish to want to destroy the continued territorial existence of the Austro-Hungarian Monarchy.Cf. Renner, ?sterreichs Erneuerung Marximus, Krieg und Internationale (Stuttgart: 1917); on the other hand, Mises, :Vom Ziel der Handelspolitik," loc. cit., pp. 579 ff. (during the writing of this essay only the first volume of ?sterreichs Erneuerung was available to me), further, Justus, loc.cit.,; Emil Lederer, "Zeitgem?sse Wandlungen der sozialistischen Idee und Theorie," Archiv f?r Sozialwissenschaft, vol. 45, 1918/1919, pp. 261 ff. But this unified economic territory is just what the non-German people of Austria did not want; they did not let themselves be influenced by Renner's arguments either. Why did the Germans, precisely the Germans of Austria, create such doctrines, which were supposed to prove the necessity of this state, and sometimes even consider them right?
That the Germans always cared somewhat for the Austrian state, although this state was not at all a German state and, when it suited it, oppressed the Germans just the same as or even more than its other peoples—we must try to understand that fact by the same principle that explains the development of the Prussian-German political spirit of conservatism and militarism.
The political thinking of the Germans in Austria suffered from a double orientation toward the German and toward the Austrian state. After they had awakened from the centuries long sleep into which the Counter-Reformation had sunk them and when they began, in the second half of the eighteenth century, timidly to concern themselves with public questions, the Germans in Austria turned their thoughts to the Reich also; many a bold person dreamed, even before March 1848, of a unified German state. But never did they make it clear to themselves that they had to choose between being German and being Austrian and that they could not desire the German and the Austrian state at the same time. They did not or would not see that a free Germany was possible only if Austria was destroyed first and that Austria could endure only if it withdrew part of its best sons from the German Reich. They did not see that the goals they sought were incompatible and that what they wanted was an absurdity. They were not at all conscious of their halfheartedness, that halfheartedness that caused the whole pitiable irresoluteness of their policy, that halfheartedness that brought failure to all and everything they undertook.
Since Königgrätz it has become the fashion in North Germany to doubt the German sentiment of the German-Austrians. Since people equated German and Reichs-German without further ado and, moreover, true to the generally prevailing statist way of thinking, also identified all Austrians with the policy of the Vienna court, it was not hard to find a basis for this interpretation. It was nevertheless thoroughly wrong. Never did the Germans of Austria forget their national character; never, not even in the first years following the defeat in the Bohemian campaign, did they lose for even a minute the feeling of belonging together with the Germans on the other side of the black-and-yellow border-posts. They were German and also wanted to remain so; least of all should they be blamed for also wanting to be Austrians at the same time by those who subordinated the German idea to the Prussian.
No less wrong, however, is the opinion that was widespread in Austrian court circles that the German-Austrians were not serious about their Austrianism. Catholic-oriented historians sadly lamented the decline of the old Austria, that Austrian princely state which, from Ferdinand II until the outbreak of the revolution Of March 1848, had been the protector of Catholicism and of the legitimist idea of the state in Europe. Their complete lack of understanding of everything that had been thought and written since Rousseau, their aversion to all political changes that had taken place in the world since the French Revolution, caused them to believe that that esteemed old state of the Habsburgs could have endured if the "Jews and Freemasons" had not brought on its downfall. Their entire grudge was directed against the Germans in Austria and among them above all against the German Liberal Party, to which they attributed responsibility for the decline of the old empire. They saw how the Austrian state was more and more falling apart internally; and they dumped the guilt precisely onto those who alone were the champions of the Austrian state idea, who alone affirmed the state, who alone desired it.
From the moment when the modern ideas of freedom also crossed the boundaries of Austria, which had been anxiously guarded by Metternich and Sedlnitzky, the old Habsburg family state was done for. That it did not fall apart as early as 1848, that it could maintain itself for seventy years more—that was solely the work of the Austrian state idea of the German Austrians, that was solely the service of the German freedom parties, of precisely those who were more hated and persecuted by the court than all others, more hated even than those who openly threatened and fought the continuation of the state.
The material basis of the Austrian political thought of the German-Austrians was the fact of German settlements strewn over the entire extent of the Habsburg lands. As a result of centuries-long colonization, the urban bourgeoisie and the urban intelligentsia were German everywhere in Austria and Hungary, large landownership was in great part Germanized, and everywhere, even in the middle of foreign-language territory, there were German peasant settlements. All Austria outwardly bore a German stamp; everywhere German education and German literature were to be found. Everywhere in the Empire the Germans were also represented among the petty bourgeoisie, among the workers, and among the peasants, even though in many districts, especially in Galicia, in many parts of Hungary, and in the coastal territories, the German minority among the members of the lower strata of the people was quite small. But in the entire Empire (upper Italy excepted) the percentage of Germans among the educated and among the members of the higher strata was quite considerable, and all those educated persons and prosperous bourgeois who were not themselves German and did not want to acknowledge belonging to the German nation were German by their education, spoke German, read German, and appeared at least outwardly to be German. That part of the Austrian population that most strongly felt the intolerableness of the tyranny of the Vienna government and alone seemed capable of replacing the court circles in governing were the upper middle class and the members of the free professions and educated persons—just those strata that are commonly called the bourgeoisie and the intellectuals. But they were German in the entire Empire, at least in lands belonging to the German Federation. Thus Austria no doubt was not German, but politically it wore a German face. Every Austrian who wanted to take any interest at all in public affairs had to master the German language. For the members of the Czech and of the Slovene peoples, however, education and social ascent could be achieved only through Germanness. They still had no literature of their own that would have made it possible for them to do without the treasures of German culture. Whoever rose became German because precisely the members of the higher strata were German.
The Germans saw that and believed that it had to be so. They were far from wanting to Germanize all non-Germans compulsorily, but they thought that this would take place on its own. They believed that every Czech and South Slav would try, even in his own interest, to adopt German culture. They believed that it would remain so forever, that for the Slav the way to culture was Germanness, and that social ascent was bound up with Germanization. That these peoples also could develop independent cultures and independent literatures, that from their midst they could also bring forth independent national characters—they did not think of that at all. Thus the naive belief could arise among them that all Austria felt and thought politically as they did, that all had to share their ideal of the great, mighty, unified state of Austria, which could bear only a German stamp.
Those were the political ideas with which the German-Austrians went into the revolution. The disappointment that they experienced was abrupt and painful.
Today, as we look back in review over the development of the last seven decades, it is easy to say what position the Germans should have taken in view of the new state of affairs; it is easy to show how they could and should have done better. Today one can clearly show how much better the German nation in Austria would have fared if it had adopted in 1848 that program that it in 1918 then perforce made its own. The share that would have fallen to the German people in a splitting up of Austria into independent national states in the year 1848 was bound to have been far larger than the one that it acquired in 1918 after the terrible defeat in the World War. What held the Germans back at that time from undertaking a clean separation between German and non-German? Why did they not make the proposal themselves; why did they reject it when the Slavs brought it forth?
It has already been mentioned that the Germans then held the widespread opinion that the Germanization of the Slavs was only a question of time, that it would take place without external compulsion by the necessity of development. Even this interpretation alone was bound to influence the entire choice of positions on the problem of nationalities. The decisive factor, however, was different. It was that the Germans could not and did want to give up the national minorities sprinkled in the contiguous territories of settlement of the other peoples. They had blood brothers living everywhere in Slavic territory; all cities there were either entirely or at least in large part German. Of course, it was only a fraction of the whole German people in Austria that they would have given up in this way. But the numerical significance of this enclaved population in relation to all the rest of the German people in Austria hardly expresses the significance of the loss that they would thereby have suffered. These enclaved people belonged in greatest part to the higher strata of the nation. To give them up signified, therefore, a far heavier loss than the mere numbers indicated. To give them up meant to give up the best parts of the German people in Austria; it meant to sacrifice the University of Prague and the merchants and factory owners of Prague, Brünn [Brno], Pilsen [Plzen], Budweis [Ceske Budejovice], 0lmütz [Olomouc], of Trieste, Laibach [Ljubljana], of Lemberg [Lwów, Lvov], Czernowitz [Cernauti, Chernovtsy], of Pest, Pressburg [Bratislava], Temesvar [Timisoara], etc., who were very significant for Austrian conditions. To give them up meant to wipe out the colonizing work of centuries; it meant to deliver up German peasants in all parts of the broad empire, German officers and officials, to being deprived of rights.
One now understands the tragic position of the Germans in Austria. With a bold, defiant spirit of rebellion the Germans had risen up to break the despotism and take the government of the state into their own hands; they wanted to create a free, great Austria out of the hereditary estate of the dynasty. Then they had to recognize all at once that the great majority of the people did not at all desire their free German Austria, that they even preferred to remain subjects of the Habsburgs rather than be citizens of an Austria bearing a German stamp. Then they discovered to their dismay that the application of democratic principles was bound to lead to the dissolution of this empire, in which, after all, they had been the leading elements intellectually and wished to remain the leading elements. Then they had to recognize that democracy was bound to deprive German citizens of territories inhabited predominantly by Slavs of their political rights. They had to recognize that the Germans of Prague and Brünn [Brno] were indeed in a position to take the scepter away from the Habsburgs and establish a parliamentary form of government but that they not only had nothing to win thereby but much to lose. Under the despotism of the sovereign's officials, they could still live as Germans; although they might also be subjects, they were still subjects enjoying the same rights as other subjects. But in a free state they would have become second-class citizens; for others, foreigners, whose language they did not understand, whose train of thought was foreign to them, on whose politics they could have had no influence, would have harvested the fruits of their struggle for freedom. They recognized that they were without power against the crown, for the crown could always call up peoples against them to whom their voice could not penetrate; they recognized and had to feel it as painful, when Slavic regiments subdued the uprising of German citizens and students, that they had no prospect of shaking off the yoke that oppressed them. At the same time, however, they recognized that the victory of the old reactionary Austria still had to be more welcome to them than victory of the new freedom-oriented state; for under the scepter of the Habsburgs they still could live as Germans; under the dominion of the Slavs, however, there was for them only political death.
Scarcely a people has ever found itself in a more difficult political position than the German-Austrians after the first heady days of the March 1848 revolution. Their dream of a free German Austria had suddenly come to naught. In view of their national comrades scattered about in foreign territories of settlement, they could not desire the dissolution of Austria into national states; they had to desire the continued existence of the state, and then there remained nothing else for them than to support the authoritarian state. The Habsburgs and their adherents, however, did not desire an alliance with the anticlerical liberals. They would rather have seen the state collapse than share it with the German freedom party. They recognized only too soon that the Germans in Austria were bound to be a pillar of the state whether they wanted to be or not, that one could rule without danger in Austria without the Germans and even against them, because the Germans were not in a position to form a serious opposition; and they oriented their policy accordingly.
Thus every straightforward policy was made impossible for the Germans of Austria. They could not work seriously for democracy, for that would have been national suicide; they could not renounce the Austrian state because, despite everything, it still offered protection against the most extreme oppression. From this division the divided German policy developed.
The essence of the policy was maintaining the national patrimony, as it was called, that is, the effort to hold back the gradually occurring annihilation of the German minorities strewn about in territory of foreign settlement. From the beginning that was a hopeless undertaking, for these minorities were fated to disappear.
Only the peasant settlements had the possibility, where the German settlers were living together in self-contained villages, of still preserving their German character. Of course, even here the process of de-Germanization goes on uninterruptedly. Even mere economic contact with neighbors of foreign nationality, which becomes all the more active as economic development proceeds, wears away at their special character and makes it difficult for a small colony far removed from the main stem of its people to preserve its mother tongue. The effect of the school is added; even the German school in foreign land must include the language of the country in the curriculum if it is not to make the later advancement of the children all too difficult. Once the youth learns the language of the country, however, there begins that process of adaptation to the environment that finally leads to complete assimilation. What is decisive, however, is that a locality in the modern economic organism in which constant migrations must take place cannot long exist without immigration from the outside or without loss of population to the outside. In the first case the locality is exposed to being inundated by members of foreign nationalities and, in further consequence, to the native population's also losing its original national character; in the second case, the leftover part of the population remaining behind may well preserve its original nationality, but the emigrants become nationally alienated. Of the numerous peasant settlements that had arisen, strewn about and isolated, in the Habsburg lands, only those where modern industry or mining developed did become alienated from German character. In the remaining ones immigration from outside was lacking. But the better, more energetic elements are gradually moving away; they may gain economically thereby, but they lose their nationality. The ones remaining behind can preserve their national character but often suffer from inbreeding.
In short, the German minorities in cities strewn about in Slavic land were hopelessly fated to decline. With the abolition of the pre-1848 labor-rent system, the migration movement set in in Austria also. Internal migrations took place on a large scale. Thousands moved from the countryside into the cities and industrial centers, and the immigrants were Slavs, who quickly pushed the Germans into the numerical minority.On the causes of the faster population growth of the Slavs, to which is to be ascribed the fact that the movement into the cities in Austria had a predominantly Slavic character, cf. Hainisch, Die Zukunft der Deutsch?sterreicher (Vienna: 1892), pp. 68 ff.
Thus the Germans of the cities saw the Slavic tide rising all around them. Around the old center of the city, where German townspeople had dwelt for centuries, a garland of suburbs developed where no German sound was heard. Within the old city everything still bore a German stamp: the schools were German, German was the language of the city administration, and the Germans still held all municipal offices. But day by day their number dwindled. First the German petty bourgeoisie disappeared. Bad times had come for the crafts and trades, on whose golden base the German colonization of these lands had once grown up; they declined uninterruptedly, for they were not capable of competing with factory industry, just that industry that was attracting the Slavic workers. The German master craftsman sank into the proletariat; and his children, who went into the factory along with the Slavic immigrants, became Slavs through contact with their new comrades. But the German patrician families also became ever smaller in number. They became poor because they could not adapt to the new conditions, or they died out. Replacements did not come. Earlier, those who had risen from below became German. This was now no longer true. Slavs who had become rich were no longer ashamed of their national character. If the old German families shut themselves off from the upstarts, they formed a new Slavic society of the upper strata.
The German policy in Austria, which was based on maintaining the political power position of these minorities, became in this way a conservative, a reactionary, policy. Every conservative policy, however, is fated from the start to fail; after all, its essence is to stop something unstoppable, to resist a development that cannot be impeded. What it can gain at best is time, but it is questionable whether this success is worth the cost. Every reactionary lacks intellectual independence. If one wanted to apply here metaphors taken over from military thinking, as is usual for all lines of political thought in Germany, then one could say that conservatism is defense and, like every defense, lets the terms be dictated to it by its adversary, while the attacker dictates the terms of action to the defender.
The essence of German policy in Austria had become that of holding lost positions as long as possible. Here one struggled over the seats in the administration of a municipality, there over a chamber of commerce, there again over savings bank or even over only a government job. Little questions were puffed up to great significance. It was bad enough that the Germans thereby put themselves repeatedly in the wrong when, for example, they denied the Slavs the establishment of schools or when they sought with the means of power available to them to make forming clubs or holding meetings more difficult. But it was still worse that in these struggles they a]ways suffered and were bound to suffer defeats and that they thereby became accustomed to being always in retreat and being always defeated. The history of the German policy in Austria is a chain of uninterrupted failures.
These conditions had a devastating effect on the German spirit. People gradually grew accustomed to looking at every measure, every political matter, exclusively from the viewpoint of its local significance. Every reform in public life, every economic measure, every construction of a road, every establishment of a factory, became a question of national patrimony. To be sure, the Slavs also looked at everything from this point of view, but the effect on the political character of the nation was different with them. For through these ways of thinking the Germans became reactionaries, enemies of every innovation, opponents of every democratic arrangement. They left to the Slavs the cheap fame of being fighters for the modern European spirit in Austria and took it upon themselves again and again to support and defend what was out of date. All economic and cultural progress and especially every democratic reform that was carried through in Austria was bound to work against the German minorities in the polyglot territories. It was therefore resisted by the Germans; and if it finally triumphed, then this victory was a defeat for the Germans.
This policy also deprived the Germans of every freedom against the Crown. In the revolution of 1848 the Germans of Austria had risen against the Habsburgs and their absolutism. But the German Liberal Party, which had written the principles of 1848 on its banner, was not in a position to lead the struggle against the Dynasty and against the Court with vigor. It had no firm ground under its feet in the polyglot lands; it was dependent on the favor and disfavor of the government there. If the Court wanted, it could annihilate it; and it did so too.
The empire of the Habsburgs was erected by Ferdinand II on the ruins of the freedoms of the estates and the ruins of Protestantism. It was not only the Bohemian estates that he had to fight against, but also the Styrian and Austrian. The Bohemian rebels fought against the Emperor in alliance with those of Lower and Upper Austria; and the Battle on the White Mountain established the absolute rule of the Habsburgs not only over Bohemia, Moravia, and Silesia but also over the Austrian lands. From the beginning the Habsburg Empire was neither German nor Czech; and when in 1848 it had to fight for its existence anew, Czech and German freedom movements alike were against it. After the establishment of sham constitutionalism in the sixties, the Court would much rather have relied on the Slavs than on the Germans. For years the government was carried on with the Slavs against the Germans; for nothing was more hateful to the Court than the German element, which could not be forgiven for the loss of political position in the German Reich. But all the concessions of the Court could not hold the Czechs and South Slavs firm to the authoritarian state. Among all other peoples of Austria the democratic idea triumphed over the authoritarian idea; it was not possible for the authoritarian state to work with them in the long run. Only with the Germans was it otherwise. Against their will they could not get loose from the Austrian state. When the state called them, they were always at its service. In the Empire's death hour the Germans stood loyal to the Habsburgs.
A turning point in the history of the German-Austrians was the Peace of Prague, which drove Austria out of the political structure of Germany. Now the naive belief was done for that Germanness and Austrianness could be reconciled. Now it seemed that one had to choose between being German and being Austrian. But the Germans in Austria did not want to see the necessity of this decision; they wanted, as long as they could, to remain both Germans and Austrians at the same time.
The pain that the German-Austrians felt in 1866 over the turn of events went deep; they never were able to recover from the blow. So quickly had the decision broken over them, so quickly had the events played themselves out on the battlefield, that they had scarcely become conscious of what was going on. Only slowly did they grasp the meaning of what had happened. The German fatherland had expelled them. Were they then not also Germans? Did they not remain Germans, even if there was no place for them in the new political structure being erected on the ruins of the German Confederation?
No one has given better expression to this pain than the aged Grillparzer. He who put into the mouth of Ottokar von Horneck the praise of the "rosy-cheeked youth" Austria and made Libussa proclaim a great future to the Slavs in obscure words,"You who have long served will finally rule" (Libussa, fifth act). he, who was totally an Austrian and totally a German, finds his equilibrium again in the proud verses:
Als Deutscher ward ich geboren,Bin ich noch einer?Nur was ich deutsch geschrieben,Das nimmt mir keiner.[As a German I was born,Am I one still?Only what I have written in GermanNo one takes away from me.]But the German-Austrians had to come to terms with the fact that no Germany still existed, only a Great Prussia. From then on they no longer existed for the Germans in the Reich; they no longer bothered themselves about them, and every day the facts belied the pretty words spoken at gymnastic and shooting festivals. The Great Prussian policy prepared to travel those paths on which it finally wound up at the Marne. It no longer cared about the Germans in Austria. The treaties that bound the Austro-Hungarian Monarchy with the German Reich from 1879 on were concluded by the Great Prussian authoritarian government with the Emperor of Austria and the Magyar oligarchy in Hungary. Precisely they took away from the Germans in Austria the hope of being able to count on the help of the Germans in the Reich with regard to irredentist strivings.
The defeat that the Great German idea had suffered at Königgrätz was at first papered over by the fact that precisely because of the unfortunate outcome of the war the German liberal Party for a short time acquired a certain, if limited, influence on state affairs. For a dozen years it could furnish ministers to the government; during this time it repeatedly furnished ministers, even the Prime Minister, and pushed through many important reforms against the will of the Crown, the feudal nobility, and the Church. With extreme exaggeration, that has been called the rule of the Liberal Party in Austria. In truth, the Liberal Party never ruled in Austria; it could not rule. The majority of the people never followed its banners. How could non-Germans also have joined this German party? Among the Germans it always, even when it was flourishing, met strong opposition from the Alpine peasants blindly following the clergy. Its position in the House of Deputies rested not on having the majority of the people behind it but on the electoral system, which in a subtle manner favored the upper middle class and the intelligentsia but withheld the right to vote from the masses. Every extension of the right to vote, every change in the arrangement of electoral districts or of the manner of voting, had to be and was damaging to it. It was a democratic party, but it had to fear the consistent application of democratic principles. That was the inner contradiction from which it suffered and from which it was finally bound to be ruined; it resulted with compelling necessity from that proton pseudos [basic fallacy] of its program, which sought to reconcile Germanness with Austrianness.
The German Liberal Party could exert a certain influence on the government as long as this was allowed to it from above. The military and political defeats that the old Austrian princely state had repeatedly suffered compelled the Court to yield temporarily. The Liberals were needed; they were summoned into the ministries not, as it were, because they could no longer be resisted but rather because only they could be expected to put state finances in order and carry through the defense reform. Since no one knew where else to turn, they were entrusted with the reconstruction as the only party that affirmed Austria. They were dismissed in disfavor when they were thought to be no longer needed. When they tried to resist, they were annihilated.
Then Austria gave up on itself. After all, the German Liberal Party had been the only one that had affirmed this state, that sincerely desired it and acted accordingly. The parties that the later governments depended on did not desire Austria. The Poles and Czechs who held ministerial portfolios were not seldom competent as specialists and even sometimes pursued a policy that benefited the Austrian state and its peoples. But all their thinking and efforts always concerned only the national plans for the future of their own peoples. Their relation to Austria was always guided only by regard to their peoples' strivings for independence. To their own consciences and to the fellow members of their nationality, their administration of office seemed valuable only for the successes that they obtained in the national emancipation struggle. Not because they had administered their offices well were they given credit by their fellow countrymen, on whose opinion alone they as parliamentarians laid weight, but because they had done much for national separatism.
Besides being filled by Czechs, Poles, and occasional South Slavs and clerical Germans, the highest positions of the Austrian authoritarian government were almost always filled by officials whose only political goal was the maintenance of the authoritarian government and whose only political means was divide et impera. Here and there an old Liberal still turns up in between, usually a professor seeking in vain to swim against the current, only finally, after many disappointments, to disappear again from the political scene.
The point at which the interests of the Dynasty and of the Germans seemed to meet was their aversion to democracy. The Germans of Austria had to fear every step on the way to democratization because they were thereby being driven into the minority and delivered up to a ruthless arbitrary rule of majorities of foreign nationality. The German Liberal Party recognized that fact and turned energetically against all efforts for democratization. The contradiction with its liberal program into which it thereby fell caused its ruin. Faced with a historic decision in which it had to choose between the wretched muddling along of the Austrian state for a few decades at the price of giving up the freedom-oriented principles of its program and the immediate annihilation of this state with sacrifice of the German minorities in the territories of foreign language, it undoubtedly made the wrong choice. It may be blamed for that. Yet nothing is more certain than that in the position it found itself in, it could not choose freely. It simply could not sacrifice the minorities any more than the German parties that succeeded it in Austria could do so.
No reproach is less justified, therefore, than that the German liberals had been poor politicians. This judgment is usually based on their position on the question of the occupation of Bosnia and Herzegovina. That the German Liberal Party had spoken out against the imperialist tendencies of Habsburg militarism was much held against it, especially by Bismarck. Today one will judge otherwise about that. What was previously a matter of reproach against the German Liberal Party—that it had sought to resist militarism and that it went into opposition right at the beginning of the expansion policy that finally led to the Empire's downfall—will in the future redound to its praise and not to its blame.
The German Liberal Party had in any case a much deeper insight into the conditions of existence of the Austrian state than all other powers and parties operating in this country. The Dynasty, especially, had done its utmost to hasten the destruction of the Empire. Its policy was guided less by rational considerations than by resentment. It persecuted the German liberal Party in blind rage with its hate, even beyond the grave. Since the German Liberals had become antidemocratic, the Dynasty, which always wanted only to restore the old princely state and to which even the authoritarian state seemed too modern a form of state constitution, thought it could indulge in democratic antics from time to time. Thus it repeatedly pushed through the extension of the right to vote against the will of the Germans, each time with the result that the German elements in the House of Deputies lost ground and the radical-national elements of the non-Germans won ever greater influence. Austrian parliamentarianism was thereby finally blown apart. With Badeni's electoral reform of the year 1896 the Empire entered a state of open crisis. The House of Deputies became a place in which the deputies no longer pursued any goal other than to demonstrate the impossibility of the continued existence of this state. Everyone who observed party relations in the Austrian House of Deputies was bound to recognize immediately that this state could still drag out its existence only because European diplomacy was at pains to postpone the danger of war as long as possible. Already twenty years before the end of the war, the domestic political conditions of Austria were more than ripe for collapse.
The German parties that succeeded the German Liberals showed much less insight into political conditions than the much-reviled German Liberals. The German Nationalist factions, which energetically fought the German Liberals, behaved like democrats at the beginnings of their party activity, when they were still concerned with overcoming the German Liberals. Very soon, however, they had to recognize that democratization in Austria was identical with de-Germanization, and from this recognition they then became just as antidemocratic as the German Liberals had once become. If one disregards the resonant words with which they sought in vain to conceal the paltriness of their program, as well as their anti-Semitic tendencies, which from the standpoint of maintenance of German character in Austria had to be called downright suicidal, then the German Nationalists really differed from the German Liberals only on one single point. In the Linz Program they gave up German claims to Galicia and Dalmatia and contented themselves with claiming for Germanism the lands of the former German Confederation. In raising this claim, however, they clung to the same error that the German Liberals had committed, namely, underrating the capacity for development and the prospects for the future of Slavs of western Austria. They had decided just as little as the German Liberals to sacrifice the German minorities scattered in foreign-language lands, so that their policy incorporated the same irresolution as that of the old German Liberals. They did indeed play with Irredentist thoughts more often than the Liberals, but they never had anything seriously in mind other than maintaining the Austrian state under German leadership and German predominance. Faced with the same choice that the German Liberals had been faced with, they trod the same path that the Liberals had already embarked on before them. They decided for the maintenance of the Empire and against democracy. Thus their fate also became the same as that of the old German Liberals. They were used by the Dynasty in the same way as the Liberals. The Dynasty could treat them as badly as possible and yet knew that it could always count on them.
The greatest error that the German Liberals committed in judging their fellow citizens of foreign language was that they saw in all non-Germans nothing but enemies of progress and allies of the Court, of the Church, and of the feudal nobility. Nothing is easier to understand than that this interpretation could arise. The non-German peoples of Austria were equally averse to Great-Austrian and Great-German aspirations; they had recognized earlier than all others, earlier even than the German Liberal party, that Austria's support was to be sought only in the party association of the German liberals. To annihilate the German Liberal Party therefore became the most important and at first the only goal of their policy, and in so doing they sought and found as allies all those who, like them, were fighting this party to the death. Thus the serious error for which they paid dearly could arise among the liberals. They misunderstood the democratic element in the fight of the Slavic nations against the Empire. They saw in the Czechs nothing other than the allies and willing servants of the Schwarzenbergs and Clam-Martinics. The Slavic movement was compromised in their eyes by its alliance with the Church and the Court. How, also, could those men who had fought on the barricades in 1848 forget that the uprising of the German bourgeoisie had been put down by Slavic soldiers?
The mistaken position of the German Liberal Party on national problems resulted from this misunderstanding of the democratic content of the nationality movements. Just as they did not doubt the final victory of light over darkness, of the Enlightenment over clericalism, so they also did not doubt the final victory of progressive Germanism over the reactionary Slavic masses. In every concession to Slavic demands it saw nothing other than concessions to clericalism and militarism.Note that Marx and Engels had also fallen into the same error; quite like the Austrian-German Liberals, they too saw reactionary doings in the national movements of the nations without history and were convinced that with the unavoidable victory of democracy, Germanism would triumph over these dying nationalities. Cf. Marx, Revolution und Kontrerevolution in Deutschland, German translation by Kautsky, third edition (Stuttgart: 1913), pp. 61 ff.; Engels (Mehring, loc. cit.), pp. 246 ff. Cf. in addition Bauer, "Nationalit?tenfrage," loc. cit., pp. 271 f.
That the position of the Germans on the political problems of Austria was determined by the force of the conditions into which history had placed them is best shown by the development of the nationality program of German Social Democracy in Austria. Social Democracy had first won ground in Austria among the Germans, and for long years if was and remained no more than a German party, with a few fellow travelers among the intellectuals of the other nationalities. At this time when, because of the electoral system, it was scarcely possible for it to play a role in Parliament, it could regard itself as uninvolved in the national struggles. It could take the position that all national quarrels were nothing more than an internal concern of the bourgeoisie. On the vital questions of Germanism in Austria, it took no position other than that of its brother party in the German Empire toward the foreign policy of the Junkers, of the National Liberals, or even of the Pan-Germans. If those German parties that were waging the national struggle reproached it, like the German clericals and the Christian Socialists, for harming its own people by its behavior, well, this was thoroughly justified at the time, even though the extent of this damage was only slight precisely because of the also slight political significance of Social Democracy at the time. The more, however, the significance of Social Democracy in Austria grew—and it grew above all because in Austrian conditions Social Democracy was the only democratic party among the Germans of Austria—it was all the more bound to acquire the responsibility that was incumbent on every German party in Austria in national questions. It began to become German-nationalist; then, no more than the two older German parties of Austria, could it get around the conditions that had brought Germanism and democracy into contradiction in Austria. Just as the German Liberal Party finally had to drop its democratic principles because following them was bound to lead to harming Germanism in Austria, just as the German Nationalist Party had done the same, so Social Democracy too would have had to do this if history had not forestalled it and shattered the Austrian state before this turn of events was fully completed.
After a series of programmatic declarations of merely academic value had been overtaken by the facts, Social Democracy at first made a try with the program of national autonomy.Cf. Marx, Revolution und Kontrerevolution in Deutschland, pp. 52 ff.
There is no doubt that this program rests on a deeper grasp of nationality problems than the Linz Program, on which, though, the flower of German Austria at the time had also collaborated. In the decades between these two programs, much had taken place that was bound to open the eyes of the Germans of Austria also. But there, too, they could not escape the constraint that historical necessity had placed on them. The program of national autonomy, even if it spoke of democracy and self-government, was also basically nothing but what the nationality programs of the German Liberals and the German Nationalists had really been in essence: namely, a program for saving the Austrian state of Habsburg-Lorraine dominion over the Imperial and Royal hereditary lands. It claimed to be much more modern that the older programs, but it was in essence nothing else. One cannot even say that it was more democratic than the earlier ones, for democracy is an absolute concept, not a concept of degree.
The most important difference between the program of national autonomy and the older German nationality programs is that it feels the necessity of justifying the existence and demonstrating the necessity of the existence of the Austrian state not only from the standpoint of the Dynasty and from the standpoint of the Germans but also from that of the other nationalities. And it does not content itself, moreover, with those showy phrases that were usual among the so-called black-and-yellow writers, as, for example, with a reference to the maxim of Palacky that one would have had to invent Austria if it had not already existed. But this argument, which was worked out particularly by Renner, is totally untenable. It starts with the idea that maintaining the Austro-Hungarian customs territory as a distinct economic territory is in the interest of all the peoples of Austria and that each one, therefore, has an interest in creating an order that maintains the viability of the state. That this argument is not correct has already been shown; when one has recognized the faultiness of the program of national autonomy, then one sees immediately that it contains nothing but an attempt to find a way out of the nationality struggles without destroying the Habsburg state. Not quite unjustifiably, therefore, the Social Democrats have occasionally been called Imperial and Royal Social Democrats; they did appear as the only pro-state party in Austria, especially at those moments of the kaleidoscopically changing party constellation in Austria when the German Nationalists temporarily set aside their Austrian sentiment and behaved irredentistically.
The collapse of Austria saved Social Democracy from going too far in this direction. In the first years of the World War, Renner, in particular, did everything in this respect that was at all possible with his doctrines that opponents called social imperialism. That the majority of his party did not unconditionally follow him on this path was not a merit of its own but rather the consequence of growing dissatisfaction with a policy that was imposing the most extreme bloody sacrifices on the population and condemning it to hunger and misery.
The German and German-Austrian Social Democrats could represent themselves as democratic because they were opposition parties without responsibility as long as the German people could not fully accept democratic principles, fearing that their application would harm the Germans in the polyglot territories of the East. When, with the outbreak of the World War, a part, perhaps the largest part, of the responsibility for the fate of the German people fell to them too, they also took the path taken before them by the other democratic parties in Germany and Austria. With Scheidemann in the Reich and with Renner in Austria they made the change that was bound to take them away from democracy. That Social Democracy did not proceed further on this path, that it did not become a new guard of the authoritarian state which, with regard to democracy, would scarcely have been different from the National Liberals in the Reich and the German Nationalists in Austria—that was due to the sudden change in conditions.
Now, with defeat in the World War and its consequences for the German position in the territories with mixed population, the circumstances have been removed that previously forced all German parties away from democracy. The German people can today seek salvation only in democracy, in the right of self-determination both of individuals and of nations.The same causes that held the German people back from democracy were at work in Russia, Poland, and Hungary also. One will have to draw them into the explanation if one wants to understand the development of the Russian Constitutional Democrats or of the Polish club in the Austrian Imperial Council or of the Hungarian party of 1848.
The older socialists were opponents of democracy. They want to make the whole world happy with their plans and are impatient with anyone who is of another opinion. Their favorite form of state would be enlightened absolutism, in which they always secretly dream of themselves occupying the position of enlightened despot. Recognizing that they neither occupy this position nor can attain it, they seek the despot who would be ready to adopt their plans and become their tool. Other socialists, again, are oligarchically minded and want to have the world ruled by an aristocracy that includes the—in their opinion—really best people. In that regard it is a matter of indifference whether these aristocrats should be the philosophers of Plato, the priests of the Church, or the Newtonian Council of Saint-Simon.
With Marx there occurs in this respect, also, a complete change of interpretation. The proletarians form the immense majority of the population. They all necessarily have to become socialists, though, since consciousness is determined by social reality. Thus socialism, in contrast with all earlier class struggles, which had been movements of minorities or in the interests of minorities, is said to be the movement of the vast majority in the interest of the vast majority for the first time in history. It follows that democracy is the best means for realizing socialism. The real bedrock on which democratic socialism was built was that it found its base primarily in Germany, Austria, and Russia, thus in countries in which democracy had not been realized. There the democratic program was the obvious program of every opposition party and so necessarily of socialism also.
When the possibility offered itself in Russia to a very small number of socialists in relation to the millions of the people to grasp rule for themselves by capturing the means of power of broken-down Czarism, the principles of democracy were quickly thrown overboard. In Russia socialism certainly is not a movement of the immense majority. That it claims to be a movement in the interest of the immense majority is nothing special; all movements have claimed that. It is certain that the rule of the Bolsheviks in Russia rests just as much on possession of the government apparatus as the rule of the Romanovs once did. A democratic Russia would not be Bolshevik.
In Germany under the dictatorship of the proletariat there can be no problem, as its proponents assert, of defeating the resistance of the bourgeoisie to the socialization of the means of production. If the socialization of small peasant farms is renounced in advance and the continued receipt of small rentier incomes allowed also, as present-day socialism intends, then scarcely any resistance to socialization is to be expected in Germany. Liberal ideas, with which alone resistance against socialism could be mounted, have never won much ground in Germany; today they are shared by scarcely a dozen persons in Germany. Resistance to socialization based on the standpoint of private interests never has, however—rightly—any prospect of success, least of all in a country in which all industrial and mercantile wealth has always seemed to the great masses to be a crime. The expropriation of industry, of mining, and of big landholdings and the elimination of trade are the impetuous demand in Germany today of the overwhelming majority of the German people. To carry it out, dictatorship is needed least of all. Socialism can rely on the great masses at the moment; it does not yet have to fear democracy.
The German economy is today in the most difficult position imaginable. On the one hand the war has destroyed immense property values and laid upon the German people the obligation to pay huge reparations to the opponents; on the other hand it has brought clearly to consciousness the fact of the relative overpopulation of the German land. Everyone must recognize today that it will be extraordinarily difficult, if not impossible, for German industry after the war to compete with foreign industry without a sharp reduction of the wage level. Hundreds of thousands, even millions, of Germans are today seeing their small possessions melting away day by day. People who still considered themselves rich a few months ago, who were envied by thousands and, as "war winners," did not exactly enjoy affectionate attention in public, can today calculate exactly when they will have consumed the modest remains of their apparent wealth and will be left beggars. Members of the independent professions see how their standard of living is sinking day by day without hope of improvement.
That a people in such a position can be gripped by despair is not astonishing. It is easy to say that there is only one single remedy for the danger of the increasing misery of the entire German people, namely, to resume work as fast as possible and try, through improvements in the productive process, to make up for the damages inflicted on the German economy. But it is understandable that a people to whom the idea of power was preached for decades, whose instinct for force was awakened by the horrors of the long war, also seeks first of all in this crisis to resort again to power politics. The terrorism of the Spartacists continues the policy of the Junkers, as the terrorism of the Bolsheviks continues the policy of Czarism.
The dictatorship of the proletariat would facilitate getting over economic difficulties for the moment by expropriating the consumption goods held by the propertied classes. It is dear that that is not socialism and that no socialist theorist has ever advocated it. In this way one can only badly and only for a short time disguise the difficulties that confront production on a socialist basis. Imports of foodstuffs from abroad can be financed for a certain time by selling foreign securities and by exporting works of art and jewels. Sooner or later, however, this means must fail.
The dictatorship of the proletariat wants to use terror to nip any stirring up of opposition in the bud. Socialism is believed established for all eternity once its property has been taken away from the bourgeoisie and all possibility of public criticism has been abolished. It cannot be denied, of course, that much can be done in this way, that, above all, all European civilization can thus be destroyed; but one does not thereby build a socialist order of society. If the communist social order is less suited than one resting on private ownership of the means of production to bring about "the greatest happiness of the greatest number," then the ideas of liberalism cannot be killed off even by terrorist measures.
Marxian socialism, as a fundamentally revolutionary movement, is inwardly inclined toward imperialism. No one will dispute that, least of all the Marxists themselves, who straightforwardly proclaim the cult of revolution. It is less noted, however, that modern socialism of necessity must be imperialistic outwardly also.
Modern socialism does not come forth in propaganda as a rationalist demand; it is an economic-policy position that presents itself as a doctrine of salvation in the manner of religions. As an economic-policy idea it would have had to compete intellectually with liberalism; it would have had to try to invalidate the arguments of its opponents logically and to turn aside their objections against its own doctrines. Individual socialists have done that, too. By and large, though, socialists have scarcely bothered themselves with scientific discussion of the advantages and disadvantages of the two conceivable systems of social production. They have proclaimed the socialist program as a doctrine of salvation. They have represented all earthly suffering as an emanation of the capitalist social order and have promised, with the implementation of socialism, the removal of everything painful. They held the capitalist economy responsible for all shortcomings of the past and present. In the state of the future all longing and hoping will be fulfilled; there the restless will find rest; the unhappy, happiness; the inadequate, strength; the sick, cure; the poor, wealth; the abstinent, enjoyment. In the state of the future, work will be a pleasure and no longer a torment. In the state of the future, an art will flourish of whose magnificence "bourgeois" art gives no idea, and a science that will solve all riddles of the universe without remnant. All sexual need will disappear; man and wife will give each other happiness in love that earlier generations never dreamed of. Human character will undergo a thoroughgoing change; it will become noble and spotless; all intellectual, moral, and bodily inadequacies will fall away from mankind. What flourishes for the German hero in Valhalla, for the Christian in God's bosom, for the Moslem in Mohammed's paradise—socialism will realize all that on earth.
The Utopians, above all Fourier, were insatiable in wanting to paint the details of this life of ease. Marxism has most strictly tabooed every sketch of the state of the future. But this prohibition referred only to description of the economic, governmental, and legal order of the socialist state and was a masterful propaganda gambit. Since the arrangements of the future state were left in mysterious obscurity, the opponents of socialism were deprived of all possibility of criticizing them and perhaps showing that their realization could in no way create a paradise on earth. Depicting the favorable consequences of the socialization of property, on the contrary, was by no means as proscribed by Marxism as was demonstration of the ways and means by which it could be accomplished. In again and again representing all earthly evils as necessary concomitants of the capitalist social order and further declaring that they would be absent from the state of the future, it has, in utopian depiction of the happiness that it promises to bring, outdone the most imaginative authors of utopian novels. Mysterious intimation and mystical allusion have far stronger effect than open explanation.
That socialism appeared as a doctrine of salvation made the struggle against liberalism easy for it. Whoever seeks to refute socialism rationally encounters among most socialists not rational considerations, as he expects, but rather a belief, not derived from experience, in redemption by socialism. One undoubtedly can also defend socialism rationally. Yet for the great mass of its adherents it is a doctrine of salvation; they believe in it. For those for whom the religious gospels have lost force, it is, in place of faith, a consolation and hope in the difficulties of life. In the face of such conviction, all rationalist criticism fails. Whoever comes to the socialist of this sort with rational objections finds the same lack of understanding that rationalist criticism of the doctrines of faith encounters with the believing Christian.
In this sense, comparing socialism with Christianity was thoroughly justified. Yet the Kingdom of Christ is not of this world; socialism, on the contrary, wants to establish the kingdom of salvation on earth. Therein lies its strength, therein, however, its weakness too, from which it will collapse some day just as quickly as it has triumphed. Even if the socialist method of production really could raise productivity and provide greater welfare for all than the liberal method, it would be bound bitterly to disappoint its adherents, who also expect the highest exaltation of the inner feeling of happiness from it. It will not be able to remove the inadequacy of everything earthly, not quiet the Faustian drive, not fulfill inner yearning. When socialism will have become reality, it will have to recognize that a religion not referring to the life to come is an absurdity.
Marxism is an evolutionary theory. Even the word "revolution" has the meaning "evolution" in the sense of the materialistic interpretation of history. Yet regard for the Messianic character of the socialist gospel was bound to drive Marxian socialism again and again to endorsing violent overthrow, revolution in the strict sense of the word. It could not admit that evolution was coming nearer to socialism in any other way than that the contradictions of the capitalist mode of production were becoming ever more glaring and thereby bringing the revolutionary overthrow of capitalism into the near future. If it had been willing to admit that evolution was leading to the realization of socialism step by step, then it would have gotten into the embarrassment of having to explain just why its prophecies of salvation were not also being fulfilled step by step to some extent. For that reason Marxism necessarily had to remain revolutionary if it did not want to give up the strongest device of its propaganda, the doctrine of salvation; for that reason, despite all science, it had to hold firm to its theory of increasing misery and collapse. For that reason it had to reject the revisionism of Bernstein; for that reason it had to let not one iota of its orthodoxy be stolen from it.
Now, however, socialism is the victor. The day of fulfillment has dawned. Millions stand around impetuously demanding the salvation that is supposed to await them; they demand riches, they demand happiness. And now shall the leaders come and console the multitude by saying that diligent labor, perhaps after decades or centuries, will become their reward and that inner happiness can never be attained with outward means? Yet how have they reproached liberalism because it recommended diligence and thrift to the poor! Yet how have they derided the doctrines that would not ascribe all earthly hardship to the deficiency of social arrangements
Socialism has only one way out of this position. Regardless of the fact that it holds power, it must still keep trying to appear as an oppressed and persecuted sect, impeded by hostile powers from pushing through the essential parts of its program, and so shift onto others the responsibility for the nonappearance of the prophesied state of happiness. Along with that, however, the struggle against these enemies of general salvation becomes an unavoidable necessity for the socialist commonwealth. It must bloodily persecute the bourgeoisie at home; it must take the offensive against foreign countries that are not yet socialist. It cannot wait until the foreigners must turn to socialism voluntarily. Since it can explain the failure of socialism only by the machinations of foreign capitalism, it necessarily arrives at a new concept of the offensive socialist international. Socialism can be realized only if the whole world becomes socialist; an isolated socialism of one single nation is said to be impossible. Therefore, every socialist government must immediately concern itself with the extension of socialism abroad.
That is quite a different kind of internationalism from that of the Communist Manifesto. It is not defensively but offensively conceived. To help the idea of socialism to victory, however, it should suffice—one should think—for the socialist nations to arrange their societies so well that their example leads others to imitate them. Yet for the socialist state, attack on all capitalist states is a vital necessity. To maintain itself internally it must become aggressive externally. It cannot rest before it has socialized the whole world.
Socialist imperialism is also quite without a basis for economic policy. It is hard to see why a socialist commonwealth could not also acquire in trade with foreign countries all those goods that it could not produce itself. The socialist who is convinced of the higher productivity of communist production could dispute that least of all.Note how deficient the argument is in Marxist literature before 1918 for the thesis that socialism is possible only as world socialism.
Socialist imperialism outdoes every earlier imperialism in scope and depth. The inner necessity that has caused it to arise, rooted in the essence of the socialist gospel of salvation, drives it to fundamental boundlessness in every direction. It cannot rest before it has subjugated the entire inhabited world and before it has annihilated everything reminiscent of other forms of human society. Every earlier imperialism could do without further expansion as soon as it came up against obstacles to its spread that it could not overcome. Socialist imperialism could not do this; it would have to see such obstacles as difficulties not only for outward expansion but also for its development at home. It must try to annihilate them or itself disappear.
So-called war socialism has been regarded as sufficiently argued for and justified with reference mostly to the emergency created by the war. In war, the inadequate free economy supposedly cannot be allowed to exist any longer; into its place must step something more perfect, the administered economy. Whether or not one should return after the war to the "un-German" system of individualism was said to be another question that could be answered in different ways.
This argumentation for war socialism is just as inadequate as it is characteristic of the political thinking of a people that was hampered in every free expression of views by the despotism of the war party. It is inadequate because it could really be a powerful argument only if it had been established that the organized economy is capable of yielding higher outputs than the free economy; that, however, would first have to be proved. For the socialists, who advocate the socialization of the means of production anyway and want to abolish the anarchy of production thereby, a state of war is not first required to justify socializing measures. For the opponents of socialism, however, the reference to the war and its economic consequences is also no circumstance that could recommend such measures. For anyone of the opinion that the free economy is the superior form of economic activity, precisely the need created by the war had to be a new reason demanding that all obstacles standing in the way of free competition be set aside. War as such does not demand a [centrally] organized economy, even though it may set certain limits in several directions to the pursuit of economic interests. In the age of liberalism, even a war of the extent of the World War (so far as such a war would have been thinkable at all in a liberal and therefore pacifistic age) would in no way have furthered tendencies toward socialization.
The most usual argument for the necessity of socialist measures was the argument about being besieged. Germany and its allies were said to be in the position of a besieged fortress that the enemy was trying to conquer by starving it out. Against such a danger, all measures usual in a besieged city had to be applied. All stocks had to be regarded as a mass under the control of a unified administration that could be drawn on for equally meeting the needs of all, and so consumption had to be rationed.
This line of argument starts from indisputable facts. It is clear that starving out (in the broadest sense of the term), which in the history of warfare had generally been used only as a tactical means, was used in this war as a strategic means.One war in which starving the opponent out was used as a strategic means was the Herero uprising in German Southwest Africa in 1904; in a certain sense the Civil War in North America and the last Boer War can also count here. But the conclusions drawn from the facts were mistaken. Once one thought that the position of the Central Powers was comparable to that of a besieged fortress, one would have had to draw the only conclusions that could be drawn from the military point of view. One would have had to remember that a besieged place, by all experience of military history, was bound to be starved out and that its fall could be prevented only by help from outside. The program of "hanging on" would then have made sense only if one could count on time's working for the besieged side. Since, however, help from outside could not be expected, one should not have shut one's eyes to the knowledge that the position of the Central Powers was becoming worse from day to day and that it was therefore necessary to make peace, even if making peace would have imposed sacrifices that did not seem justified by the tactical position of the moment. For the opponents would still have been ready to make concessions if they, for their part, had received something in return for the shortening of the war.
It cannot be assumed that the German General Staff had overlooked this. If it nevertheless clung to the slogan about "hanging on," that reflected not so much a misunderstanding of the military position as the hope for a particular psychic disposition of the opponent. The Anglo-Saxon nation of shopkeepers would get tired sooner than the peoples of the Central Powers, who were used to war. Once the English, also, felt the war, once they felt the satisfaction of their needs being limited, they would turn out to be much more sensitive than the Central Europeans. This grave error, this misunderstanding of the psyche of the English people, also led to adoption first of limited and then of unlimited submarine warfare. The submarine war rested on still other false calculations, on an overestimation of one's own effectiveness and on an underestimation of the opponent's defense measures, and finally on a complete misunderstanding of the political preconditions of waging war and of what is permitted in war. But it is not the task of this book to discuss these questions. Settling accounts with the forces that pushed the German people into this suicidal adventure may be left to more qualified persons.
But quite apart from these deficiencies, which more concern the generally military side of the question, the theory of siege socialism also suffers from serious defects concerning economic policy.
When Germany was compared with a besieged city, it was overlooked that this comparison was applicable only with regard to those goods that were not produced at home and also could not be replaced by goods producible at home. For these goods, apart from luxury articles, the rationing of consumption was in any case indicated at the moment when, with the tightening of the blockade and with the entry of Italy and Rumania into the war, all import possibilities were cut off. Until then it would have been better, of course, to allow full free trade, at least for the quantities imported from abroad, in order not to reduce the incentive to obtain them in indirect ways. It was mistaken in any case, as happened at the beginning of the war, especially in Austria, to resist price rises of these goods by penal measures. If the traders had held the goods back with speculative intent to achieve price increases, this would have limited consumption effectively right at the beginning of the war. The limitation of price increases was bound, therefore, to have downright harmful consequences. For those goods that could in no way be produced at home and also could not be replaced by substitutes producible at home, the state would better have set minimum rather than maximum prices to limit consumption as much as possible.
Speculation anticipates future price changes; its economic function consists in evening out price differences between different places and different points in time and, through the pressure which prices exert on production and consumption, in adapting stocks and demands to each other. If speculation began to exact higher prices at the beginning of the war, then it did indeed temporarily bring about a rise of prices beyond the level that would have been established in its absence. Indeed, since consumption would also thus be limited, the stock of goods available for use later in the war was bound to rise and thus would have led to a moderation of prices at that later time in relation to the level that was bound to have been established in the absence of speculation. If this indispensable economic function of speculation was to be excluded, something else should have immediately been put in its place, perhaps confiscation of all stocks and state management and rationing. In no way, however, was it suitable simply to be content with penal intervention.
When the war broke out, citizens expected a war lasting about three to six months. The merchant arranged his speculation accordingly. If the state had known better, it would have had the duty of intervening. If it thought that the war would already be ended in four weeks, then it could have intervened to keep price increases from being larger than seemed necessary for bringing stocks into harmony with demand. For that, too, fixing maximum prices would not have sufficed. If, however, the state thought that the war would last far longer than civilians thought, then it should have intervened, either by fixing minimum prices or by purchase of goods for the purpose of state stockpiling. For there was a danger that speculative traders, not familiar with the secret intentions and plans of the General Staff, would not immediately drive up prices to the extent necessary to assure the distribution of the small stocks on hand over the entire duration of the war. That would have been a case in which the intervention of the state in prices would have been thoroughly necessary and justified. That that did not happen is easy to explain. The military and political authorities were informed least of all about the prospective duration of the war. For that reason all their preparations failed, military as well as political and economic ones.
With regard to all those goods that even despite the war could be produced in territory of the Central Powers free of the enemy, the siege argument was already totally inapplicable. It was dilettantism of the worst sort to set maximum prices for these goods. Production could have been stimulated only by high prices; the limitation of price increases throttled it. It is hardly astonishing that state compulsion for cultivation and production failed.
It will be the task of economic history to describe in detail the stupidities of the economic policy of the Central Powers during the war. At one time, for example, the word was given to reduce the livestock by increased slaughtering because of a shortage of fodder; then prohibitions of slaughtering were issued and measures taken to promote the raising of livestock. Similar planlessness reigned in all sectors. Measures and countermeasures crossed each other until the whole structure of economic activity was in ruins.
The most harmful effect of the policy of siege socialism was the cutting off of districts with surpluses of agricultural production from territories in which consumption exceeded production. It is easy to understand why the Czech district leaders in the Sudetenland, whose hearts were on the side of the Entente, sought as much as possible to limit the export of foodstuff's out of the districts under their leadership to the German parts of Austria and, above all, to Vienna. It is less understandable that the Vienna government put up with this and that it also put up with its imitation by the German districts and also with the fact that Hungary shut itself off from Austria, so that famine was already prevailing in Vienna while abundant stocks were still on hand in the countryside and in Hungary. Quite incomprehensible, however, is the fact that the same policy of regional segmentation took hold in the German Reich also and that the agrarian districts there were permitted to cut themselves off from the industrial ones. That the population of the big cities did not rebel against this policy can be explained only by its being caught up in statist conceptions of economic life, by its blind belief in the omnipotence of official intervention, and by its decades-long ingrained mistrust of all freedom.
While statism sought to avoid the inevitable collapse, it only hastened it.
Marxism sees the coming of socialism as an inescapable necessity. Even if one were willing to grant the correctness of this opinion, one still would by no means be bound to embrace socialism. It may be that despite everything we cannot escape socialism, yet whoever considers it an evil must not wish it onward for that reason and seek to hasten its arrival; on the contrary, he would have the moral duty to do everything to postpone it as long as possible. No person can escape death; yet the recognition of this necessity certainly does not force us to bring about death as quickly as possible. Marxists would have to become socialists just as little as we must become suicides if they were convinced that socialism would be bound to bring about no improvement but rather a worsening of our social conditions.Cf. Hilferding, Das Finanzkapital (Vienna:] 91 0), p. X.
Socialists and liberals agree in seeing the ultimate goal of economic policy as attainment of a state of society assuring the greatest happiness for the greatest number. Welfare for all, the greatest possible welfare for the greatest possible number—that is the goal of both liberalism and of socialism, even though this may now and then be not only misunderstood but even disputed. Both reject all ascetic ideals that want to restrain people to frugality and preach renunciation and flight from life; both strive for social wealth. Only over the way of reaching this ultimate goal of economic policy do their views disagree. An economic order resting on private ownership of the means of production and according the greatest possible scope to the activity and free initiative of the individual assures to the liberal the attainment of the goal aspired to. The socialist, on the other hand, seeks to attain it by socialization of the means of production.
The older socialism and communism strove for equality of property and of income distribution. Inequality was said to be unjust; it contradicted divine laws and had to be abolished. To that liberals reply that fettering the free activity of the individual would harm the general interest. In the socialist society the distinction between rich and poor would fall away; no one would any longer possess more than another, but every individual would be poorer than even the poorest today, since the communistic system would work to impede production and progress. It may indeed be true that the liberal economic order permits great differences in income, but that in no way involves exploitation of the poor by richer people. What the rich have they have not taken away from the poor; their surplus could not be more or less redistributed to the poor in the socialist society, since in that society it would not be produced at all. The surplus produced in the liberal economic order beyond what could also be produced by a communistic economic order is not even entirely distributed to the possessors; a part of it even accrues to the propertyless, so that everyone, even the poorest, has an interest in the establishment and maintenance of a liberal economic order. Fighting erroneous socialist doctrines is therefore not a special interest of a single class but the cause of all; everyone would suffer under the limitation of production and of progress entailed by socialism. That one has more to lose, another less, is incidental in relation to the fact that all would be harmed and that the misery awaiting them is equally great.
That is the argument in favor of private ownership of the means of production that every socialism that does not set up ascetic ideals would have to refute. Marx did indeed perceive the necessity of this refutation. When he sees the driving factor of the social revolution in the fact that the relations of ownership change from forms of development of the productive forces into fetters on them,Cf. Marx, Zur Kritik der politischen Ökonomie, edited by Kautsky (Stuttgart: 1897), P. xi. when he once in passing tries to offer a proof—which failed—that the capitalist manner of production impedes the development of productivity in a particular case,Cf. Marx, Das Kapital, vol. 3, first part, third edition (Hamburg: 1911), pp. 242 ff. he does incidentally recognize the importance of this problem. But neither he nor his followers could attribute to it the significance it deserves for deciding the question of socialism or liberalism. They are hampered in doing so even by the entire orientation of their thinking around the materialist interpretation of history. Their determinism just cannot understand how one can be for or against socialism, since the communist society does form the inescapable necessity of the future. It is moreover settled for Marx, as a Hegelian, that this development toward socialism is also rational in the Hegelian sense and represents progress toward a higher stage. The idea that socialism could mean a catastrophe for civilization would necessarily have seemed completely incomprehensible to him.
Marxian socialism therefore had no incentive to consider the question whether or not socialism as an economic form was superior to liberalism. To it, it seemed settled that socialism alone signified welfare for all, while liberalism enriched a few but abandoned the great masses to misery. With the appearance of Marxism, therefore, controversy over the advantages of the two economic orders died away. Marxists do not enter into such discussions. Ex professo [avowedly] they have not even tried to refute the liberal arguments in favor of private ownership of the means of production, not to mention actually refuting them.
In the view of individualists, private ownership of the means of production fulfills its social function by conveying the means of production into the hands of those who best understand how to use them. Every owner must use his means of production in such a way that they yield the greatest output, that is, the highest utility for society. If he does not do this, then this must lead to his economic failure, and the means of production shift over to the disposal of those who better understand how to use them. In that way the inappropriate or negligent application of means of production is avoided and their most effective utilization assured. For means of production that are not under the private ownership of individuals but rather are under social ownership, this is not true in the same way. What is missing here is the incentive of the owner's self-interest. The utilization of equipment is therefore not as complete as in the private sector; with the same input the same output cannot therefore be achieved. The result of social production must therefore remain behind that of private production. Evidence of that has been supplied by public enterprises of the state and municipalities (so individualists further argue). It is demonstrated and well known that less is accomplished in these than in the private sector. The output of enterprises that had been quite profitable under private ownership sank at once after coming under state or municipal ownership. The public firm can nowhere maintain itself in free competition with the private firm; it is possible today only where it has a monopoly that excludes competition. Even that alone is evidence of its lesser economic productivity.
Only a few socialists of Marxist orientation have recognized the significance of this counterargument; otherwise they would have had to admit that this is a point on which everything depends. If the socialist mode of production will be able to achieve no additional output in comparison with private enterprise, if, on the contrary, it will produce less than the latter, then no improvement but rather a worsening of the lot of the worker is to be expected from it. All argumentation of the socialists would therefore have to concentrate on showing that socialism will succeed in raising production beyond the amount possible in the individualistic economic order.
Most Social Democratic writers are quite silent on this point; others touch on it only incidentally. Thus, Kautsky names two methods that the future state will use for raising production. The first is the concentration of all production in the most efficient firms and the shutting down of all other, less high-ranking, firms.Cf. Kautsky, Die soziale Revolution, third edition (Berlin: 1911), II, pp. 21 ff. That this is a means of raising production cannot be disputed. But this method is in best operation precisely under the rule of free competition. Free competition pitilessly culls out all less-productive enterprises and firms. Precisely that it does so is again and again used as a reproach against it by the affected parties; precisely for that reason do the weaker enterprises demand state subsidies and special consideration in sales to public agencies, in short, limitation of free competition in every possible way. That the trusts organized on a private-enterprise basis work in the highest degree with these methods for achieving higher productivity must be admitted even by Kautsky, since he actually cites them as models for the social revolution. It is more than doubtful whether the socialist state will also feel the same urgency to carry out such improvements in production. Will it not continue a firm that is less profitable in order to avoid local disadvantages from its abandonment? The private entrepreneur ruthlessly abandons enterprises that no longer pay; he thereby makes it necessary for the workers to move, perhaps also to change their occupations. That is doubtless harmful above all for the persons affected, but an advantage for the whole, since it makes possible cheaper and better supply of the markets. Will the socialist state also do that? Will it not, precisely on the contrary, out of political considerations, try to avoid local discontent? In the Austrian state railroads, all reforms of this kind were wrecked because people sought to avoid the damage to particular localities that would have resulted from abandonment of superfluous administrative offices, workshops, and heating plants. Even the Army administration ran into parliamentary difficulties when, for military reasons, it wanted to withdraw the garrison from a locality.
The second method of raising production that Kautsky mentions, "savings of very many kinds," he also, by his own admission, finds already realized by the trusts of today. He names, above all, savings in materials and equipment, transport costs, and advertising and publicity expenses.Die soziale Revolution, p. 26. Now as far as savings of material and transport are concerned, experience shows that nowhere are operations carried on with so little thrift in this respect and nowhere with such waste of labor and materials of all kinds as in public service and public enterprises. Private enterprise, on the contrary, seeks, even in the owner's own interest alone, to work as thriftily as possible.
The socialist state will, of course, save all advertising expenses and all costs for traveling salesmen and for agents. Yet it is more than doubtful whether it will not employ many more persons in the service of the social apparatus of distribution. We have already had the experience in the war that the socialist apparatus of distribution can be quite ponderous and costly. Or are the costs of the bread, flour, meat, sugar, and other tickets really smaller than the costs of advertisements? Is the large staff that is necessary for the issue and administration of these rationing devices cheaper than the expenditure on traveling salesmen and agents?
Socialism will abolish small retail shops. But it will have to replace them with goods-delivery stations, which will not be cheaper. Even consumer cooperatives, after all, have no fewer employees than retail trade organized in a modern way employs; and precisely because of their higher expenses, they often could not stand the competition with merchants if they were not given tax advantages.
We see on what weak ground Kautsky's argumentation stands here. When he now asserts that "by application of these two methods a proletarian regime can raise production at once to so high a level that it becomes possible to raise wages considerably and at the same time reduce hours of work," well, this is an assertion for which no proof has so far been provided.One has heard often enough in recent years of frozen potatoes, rotten fruit, and spoiled vegetables. Did not things like that happen earlier? Of course, but to a much smaller extent. The dealer whose fruit spoiled suffered losses of wealth that made him more careful in the future; if he did not pay better attention, then this was finally bound to lead to his economic disappearance. He left the management of production and was shifted to a position in economic life where he was no longer able to do harm. It is otherwise in dealings with state-traded articles. Here no self-interest stands behind the goods; here officials manage whose responsibility is so divided that no one particularly concerns himself about a small misfortune.
The social functions of private ownership of the means of production are not yet exhausted in assuring the highest attainable productivity of labor. Economic progress rests on the continuing accumulation of capital. That was never disputed either by liberals or by socialists. The socialists who have concerned themselves somewhat more closely with the problem of the organization of the socialist society also do not neglect, then, always to mention that in the socialist state the accumulation of capital, which today is undertaken by private parties, will be society's responsibility.
In the individualistic society the individual accumulates, not society. Capital accumulation takes place by saving; the saver has the incentive of receiving income from the saved capital as the reward of saving. In the communist society, society as such will receive the income that today flows to the capitalists alone; it will then distribute this income equally to all members or otherwise use it for the good of the whole. Will that alone be a sufficient incentive for saving? To be able to answer this question, one must imagine that the society of the socialist state will be faced every day with the choice whether it should devote itself more to the production of consumer goods or more to that of capital goods, whether it should choose productive processes that do indeed take a shorter time but correspondingly yield less output or choose ones that take more time but then also bring greater output. The liberal thinks that the socialist society will always decide for the shorter production period, that it will prefer to produce consumer goods instead of capital goods, that it will consume the means of production that it will have taken over as heir of the liberal society or at best maintain them but in no case increase them. That, however, would mean that socialism will bring stagnation, if not the decline of our whole economic civilization, and misery and need for all. That the state and the cities have already pursued investment policy on a large scale is no disproof of this assertion, since they pursued this activity entirely with the means of the liberal system. The means were raised by loans, that is, they were provided by private parties who expected from them an increase in their capital incomes. If in the future, however, the socialist society should face the question whether it will feed, clothe, and house its members better or whether it will save on all these things in order to build railroads and canals, to open mines, to undertake agricultural improvements for the coming generations, then it will decide for the former, even on psychological and political grounds alone.
A third objection to socialism is the famous argument of Malthus. Population is said to have a tendency to grow faster than the means of subsistence. In the social order resting on private ownership, a limitation of the increase in population is posed by the fact that each person is able to raise only a limited number of children. In the socialist society this impediment to population increase will fall away, since no longer the individual but rather the society will have to take care of raising the new generation. Then, however, such a growth of population would soon occur that need and misery for all would be bound to appear.While the socialists have scarcely deigned to reply to the two first arguments mentioned, they have concerned themselves more exhaustively with the Malthusian law, without, to be sure, in the view of the liberals, refuting the conclusions that follow from it.
Those are the objections to the socialist society with which everyone would have to come to grips before he took the side of socialism.
It is no refutation at all of the objections raised against socialism that the socialists seek to stigmatize everyone who is not of their opinion with the label "bourgeois economist" as representative of a class whose special interests run counter to the general interest. That the interests of the possessors run counter to those of the whole would indeed first have to be proved; that is precisely what the entire controversy revolves around.
The liberal doctrine starts with the fact that the economic order resting on private ownership of the means of production removes the opposition between private and social interest because each individual's pursuit of his rightly understood self-interest assures the highest attainable degree of general welfare. Socialism wants to establish a social order in which the self-interest of the individual, selfishness, is excluded, a society in which everyone has to serve the common good directly. It would now be the task of the socialists to show in what manner this goal could be reached. Even the socialist cannot call into question the existence of a primary and direct opposition between the special interests of the individual and those of the whole, and he must also admit that a labor order can be based just as little on the categorical imperative alone as on the compulsory force of penal law. Up to now, however, no socialist has ever made even the mere attempt to show how this gap between special interest and general welfare could be bridged over. The opponents of socialism, however, along with Schäffle, consider precisely that question to be "the decisive but up to now entirely undecided point on which in the long run everything would depend, on which victory or defeat of socialism, reform or destruction of civilization by it, would be dependent from the economic side."Cf. Schäffle, Die Quintessenz des Sozialismus, 18th edition (Gotha: 1919), p. 30.
Marxian socialism calls the older socialism utopian because it tries to construct the elements of a new society out of one's head and because it seeks ways and means of implementing the contrived social plan. In contrast, Marxism is supposed to be scientific communism. It discovers the elements of the new society in the laws of development of capitalist society, but it constructs no future state. It recognizes that the proletariat, because of its conditions of life, can do nothing else than finally overcome every class opposition and thereby realize socialism; however, it does not seek philanthropists, as the utopians do, who would be ready to make the world happy by the introduction of socialism. If one wants to see the distinction between science and utopia in that, then Marxian socialism rightly claims its name. One could, however, make the distinction in another sense also. If one calls utopian all those social theories which, in outlining the future social system, start with the view that after introduction of the new social order people will be guided by essentially different motives than in our present conditions,Cf. Anton Menger, Das Recht auf den vollen Arbeitsertrag, fourth edition (Stuttgart: 1910), pp. 105 ff. then the socialist ideal of Marxism is also a utopia. In another sense than is usual, of course, one can distinguish between scientific and philanthropic socialism. Those socialists who are concerned in their prograins to start with economic lines of thinking and take the necessity of production into account can be called scientific socialists, in contrast with those who know how to bring forth only ethical and moral discussions and set up only a program for distribution but not for production also. Marx clearly noted the defects of merely philanthropic socialism when, after moving to London, he proceeded to study the economic theorists. The result of this study was the doctrine presented in Das Kapital. Later Marxists, however, have badly neglected this side of Marxism. They are much more politicians and philosophers than economists. One of the chief defects of the economic side of the Marxian system is its connection with classical economics, which corresponded to the state of economic science at that time. Today socialism would have to seek a scientific support in modern economics, in the theory of marginal utility. Cf. Joseph Schumpeter, "Das Grundprinzip der Verteilungslehre," Archiv für Sozialwissenschaft und Sozialpolitik, vol. 42, 1916/1917, P. 88. Its continued existence presupposes men who are in no position to pursue any special interest against the general interest.How easily the Marxists disregard this argument can be seen in Kautsky: "If socialism is a social necessity, then if it came into conflict with human nature, it would be the latter that would get the worse of the matter and not socialism." Preface to Atlanticus [Ballod], Produktion und Konsum im Sozialstatt (Stuttgart: 1898), p. xiv. Again and again, when this objection is made to him, the socialist refers to the fact that both today and in every earlier stage of society very much work, and often precisely the most highly qualified work, was indeed performed for its own sake and for the community and not for the direct advantage of the worker. He points to the indefatigable effort of the researcher, to the sacrifice of the physician, to the conduct of the warrior in the field. In recent years one could hear again and again that the great deeds performed by soldiers in the field were to be explained only by pure devotion to the cause and by a high sense of sacrifice, or at worst, perhaps, by striving for distinction, but never by striving for private gain. This argumentation overlooks the fundamental distinction that exists, however, between economic work of the usual kind and those special performances. The artist and the researcher find their satisfaction in the pleasure that the work in itself affords them and in the recognition that they hope to reap at some time, even if perhaps only from posterity, even in the case when material success should be lacking. The physician in the area of pestilence and the soldier in the field repress not only their economic interests but also their drive for self-preservation; even that alone shows that there can be no question of a regular state of affairs but only of a transitory, exceptional state from which no far-reaching conclusions can be drawn.
The treatment that socialism allots to the problem of self-interest points clearly to its origin. Socialism comes from the circles of intellectuals; at its cradle stand poets and thinkers, writers and men of letters. It does not deny its derivation from those strata that even on professional grounds alone have to concern themselves with ideals. It is an ideal of noneconomic people. Therefore, it is not much more striking that writers and men of letters of every kind were always represented among its adherents in large numbers and that it could always count on fundamental agreement among officials.
The view characteristic of officials comes clearly to light in the treatment of the problem of socialization. From the bureaucratic point of view, it involves only questions of management and administrative technique that can easily be solved if only one allows the officials more freedom of action. Then socialization could be carried out without danger of "eliminating free initiative and individual readiness to bear responsibility on which the successes of private business management rest."Cf. Bericht der Sozialisierungskommission über die Sozialisierung der Kohle [Report of the Socialization Commission on the Socialization of Coal), Frankfurter Zeitung, 12 March 1919. Actually, free initiative of individuals cannot exist in the socialized economy. It is a fateful error to believe it possible, by some sort of organizational measures, to leave scope for free initiative even in the socialized enterprise. Its absence does not hinge on defects of organization; it is grounded in the essence of the socialized enterprise. Free initiative means taking risks in order to win; it means putting up stakes in a game that can bring gain or loss. All economic activity is composed of such risky undertakings. Every act of production, every purchase by the trader and by the producer, every delay in selling, is such a risky undertaking. Still more so is undertaking every sizable investment or change in the enterprise, not to mention the investment of new capital. Capitalists and entrepreneurs must take chances; they cannot do otherwise, since they have no possibility of maintaining their property without such risk-bearing.
Anyone who has means of production at his disposal without being their owner has neither the risk of loss nor the chance of gain, as an owner does. The official or functionary need not fear loss, and for that reason he cannot be allowed to act freely and unrestrictedly like the owner. He must be restricted in some manner. If he could manage without restrictions, then he simply would be the owner. It is playing with words to want to impose readiness to bear individual responsibility on the nonowner. The owner does not have readiness to bear responsibility; he just does bear responsibility because he feels the consequences of his actions. The functionary may have ever so much readiness to bear responsibility; yet he never can bear responsibility other than morally. Yet the more moral responsibility one imposes on him, the more one cramps his initiative. The problem of socialization cannot be solved by civil-service instructions and reforms of organization.
Only from lack of historical sense could one raise the question whether and how the World War could have been avoided. The very fact that the war took place shows that the forces working to cause it were stronger than those working to prevent it. It is easy to show, after the fact, how affairs could or should have been better managed. It is clear that the German people underwent experiences during the war that would have restrained them from war if they had already undergone those experiences. But nations, like individuals, become wise only through experience, and only through experience of their own. Now, to be sure, it is easy to see that the German people would be in a quite different position today if they had shaken off the yoke of princely rule in that fateful year 1848, if Weimar had triumphed over Potsdam and not Potsdam over Weimar. But every person must take his life and every nation must take its history as it comes; nothing is more useless than complaining over errors that can no longer be rectified, nothing more vain than regret. Neither as judges allotting praise and blame nor as avengers seeking out the guilty should we face the past. We seek truth, not guilt; we want to know how things came about to understand them, not to issue condemnations. Whoever approaches history the way a prosecutor approaches the documents of a criminal case—to find material for indictments—had better stay away from it. It is not the task of history to gratify the need of the masses for heroes and scapegoats.
That is the position a nation should take toward its history. It is not the task of history to project the hatred and disagreements of the present back into the past and to draw from battles fought long ago weapons for the disputes of one's own time. History should teach us to recognize causes and to understand driving forces; and when we understand everything, we will forgive everything. That is how the English and French approach their history. The Englishman, regardless of his political affiliation, can consider the history of the religious and constitutional struggles of the seventeenth century, the history of the loss of the New England states in the eighteenth century, objectively; there is no Englishman who could see in Cromwell or Washington only the embodiment of national misfortune. And no Frenchman would want to strike Louis XIV, Robespierre, or Napoleon out of the history of his people, be he Bonapartist, royalist, or republican. And for the Catholic Czech, also, it is not hard to understand Hussites and Moravian Brethren in terms of their own time. Such a conception of history leads without difficulty to understanding and appreciation of what is foreign.
Only the German is still far from a conception of history that does not see the past with the eyes of the present. Even today Martin Luther is, for some Germans, the great liberator of minds, and, for others, the embodiment of the anti-Christ. This holds above all for recent history. For the modern period, which begins with the Peace of Westphalia, Germany has two approaches to history, the Prussian-Protestant and the Austrian-Catholic, which reach a common interpretation on scarcely a single point. From 1815 on, a still broader clash of views develops, the clash between the liberal and the authoritarian ideas of the state;On this compare Hugo Preuss, Das deutsche Volk und die Politik (Jena: Eugen Diederichs, 1915), pp. 97 ff. and finally, the attempt has recently been made to oppose a "proletarian" to a "capitalist" historiography. All that shows not only a striking lack of scientific sense and historical critical faculty but also a grievous immaturity of political judgment.
Where it was not possible to achieve consensus in interpreting long-past struggles, it is much less to be expected that agreement can be reached in evaluating the most recent past. Already, here also, we see two sharply contradictory myths arising. On the one hand it is asserted that the German people, misled by defeatist propaganda, had lost the will to power; and thus, through "collapse of the home front," the inevitable final victory, which would have made the earth subject to it, was transformed into disastrous defeat. It is forgotten that despair did not grip the people until the decisive victories heralded by the General Staff failed to occur, until millions of German men bled to death in purposeless struggles against an opponent far superior in numbers and better armed, and until hunger brought death and disease to those who had stayed at home.This is not to say that the behavior of the radical wing of the Social Democratic Party in October and November of 1918 did not entail the most frightful consequences for the German people. Without the complete collapse brought on by the revolts in the hinterland and behind the lines, the armistice conditions and the peace would have turned out quite differently. But the assertion that we would have triumphed if only we had held out a short time longer is quite groundless. No less far from the truth is the other myth, which blames the war and so the defeat on capitalism, the economic system based on private ownership of the means of production. It is forgotten that liberalism was always pacifistic and anti-militaristic, that not until its overthrow, which was achieved only by the united efforts of the Prussian Junker class and the Social Democratic working class, was the way opened up for the policy of Bismarck and William II; the last trace of the liberal spirit had first to disappear from Germany and liberalism had to become regarded as a kind of dishonorable ideology before the people of poets and thinkers could become a weak-willed tool of the war party. It is forgotten that the German Social Democratic Party had unanimously supported the war policy of the government and that the defection first of individuals and then of ever-larger masses ensued only as military failures showed the inevitability of defeat ever more clearly and as famine became more strongly felt. Before the battle of the Marne and before the great defeats in the East, there was no resistance to the war policy among the German people.
Such myth-making bespeaks a lack of that political maturity that only he who must bear political responsibility achieves. The German had none to bear; he was a subject, not a citizen, of his state. To be sure, we had a state that was called the German Reich and that was praised as the fulfillment of the ideals of St. Paul's Church. Yet this Great Prussia was no more the state of the Germans than the Italian kingdom of Napoleon I had been the state of the Italians or the Polish kingdom of Alexander I the state of the Poles. This empire had not arisen from the will of the German people; against the will not only of the German people but also of the majority of the Prussian people, hanging behind its conflict-minded deputies, it had been created on the battlefield of Königgrätz. It also included Poles and Danes, but it excluded many millions of German-Austrians. It was a state of German princes but not of the German people.
Many of the best people never reconciled themselves with this state; others did so late and reluctantly. Yet it was not easy to stand aside bearing a grudge. There came brilliant days for the German people, rich in outward honors and in military victories. The Prussian-German armies triumphed over imperial and over republican France, Alsace-Lorraine became German again (or rather Prussian), the venerable imperial title was restored. The German Empire assumed a respected position among the European powers; German warships plowed the oceans; the German flag floated over—rather worthless, to be sure—African, Polynesian, and East Asian possessions. All this romantic activity was bound to captivate the minds of the masses that gape at processions and court festivities. They were content because there were things to admire and because they were satiated. At the same time German prosperity was growing as never before. These were the years when the wonderful opening up of the remotest territories through development of modern means of transportation was bringing undreamed-of riches to Germany. That had nothing to do with the political and military successes of the German state, but people hastily judge post hoc ergo propter hoc.
The men who had filled the jails before the revolution of March 1848 and who had stood on the barricades in 1848 and then had to go into exile had in the meanwhile become old and feeble; they either made their peace with the new order or kept silent. A new generation arose that saw and noted nothing but the uninterrupted growth of prosperity, of the size of population, of trade, of shipping, in short, of everything that people are accustomed to call good times. And they began to make fun of the poverty and weakness of their fathers; they now had only contempt for the ideals of the nation of poets and thinkers. In philosophy, history, and economics, new ideas appeared; the theory of power came to the fore. Philosophy became the bodyguard of throne and altar; history proclaimed the fame of the Hohenzollerns; economics praised the socially oriented kingship and the gap-free tariff schedules and took up the struggle against the "bloodless abstractions of the English Manchester School."
To the statist school of economic policy, an economy left to its own devices appears as a wild chaos into which only state intervention can bring order. The statist puts every economic phenomenon on trial, ready to reject it if it does not conform to his ethical and political feelings. It is then the job of state authority to carry out the judgment pronounced by science and to replace the botch caused by free development with what serves the general interest. That the state, all-wise and all-just, also always wishes only the common good and that it has the power to fight against all evils effectively?this is not doubted in the slightest. Although the views of individual representatives of this school may diverge in other respects, in one point they all agree, namely, in disputing the existence of economic laws and in tracing all economic events to the operation of power factors. Böhm-Bawerk masterfully evaluates this doctrine in "Macht oder ökonomisches Gesetz," Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung, vol. 23, pp. 205-271. The statist school of German economics has indeed reached its high point in the state theory of money of Georg Friedrich Knapp. What is notable about it is not that it has been set forth; for what it taught had already been believed for centuries by canonists, jurists, romantics, and many socialists. What was notable, rather, was the book's success. In Germany and Austria it found numerous enthusiastic adherents, and basic agreement even among those who had reservations. Abroad it was almost unanimously rejected or not noticed at all. A work recently published in the United States says regarding the Staatliche Theorie des Geldes: "This book has had wide influence on German thinking on money. It is typical of the tendency in German thought to make the State the centre of everything." (Anderson, The Value of Money [New York: 1917], p. 433 n.) Against economic power the state can set its superior political-military power. For all the difficulties that confronted the German people at home and abroad, the military solution was recommended; only ruthless use of power was considered rational policy.
These were the German political ideas that the world has called militarism. In Germany the opinion is very widespread that foreign countries understand by militarism the fact of strong military armaments; it is pointed out, therefore, that England and France, which have maintained powerful fleets and armies on water and land, have been at least as militaristic as Germany and Austria-Hungary. That rests on an error. By militarism one should understand not armaments and readiness for war but a particular type of society, namely, the one that was designated by pan-German, conservative, and social-imperialistic authors as that of the "German state" and of "German freedom" and that others have praised as the "ideas of 1914." Its antithesis is the industrial type of society, that is, the one that a certain line of opinion in Germany during the war scorned as the ideal of "shopkeepers," as the embodiment of the "ideas of 1789." Compare Herbert Spencer, Die Prinzipien der Soziologie, German translation by Vetter (Stuttgart: 1889), vol. 3, pp. 668-754. In the elaboration and contrasting of the two types there exists a considerable degree of agreement between Germans and Anglo-Saxons, but not in terminology. The assessment of the two types is naturally not agreed on. Even before and during the war there were not only militarists but also antimilitarists in Germany and not only antimililarists but also militarists in England and America.
Nevertheless, the formula that attributes the World War simply to the machinations of this militarism is wrong. For German militarism does not spring, as it were, from the violent instincts of the "Teutonic race," as the English and French war literature says; it is not the ultimate cause but the result of the circumstances in which the German people has lived and lives. Not too much insight into how things are interrelated is needed to recognize that the German people would have desired the war of 1914 just as little as the English, French, or American people did if they had been in the position of England, France, or the United States. The German people trod the path from the peaceful nationalism and cosmopolitanism of the Classical period to the militant imperialism of the Wilhelministic era under the pressure of political and economic facts that posed quite other problems for them than for the more fortunate peoples of the West. The conditions under which it has to proceed today toward reshaping its economy and its state are, again, thoroughly different from those under which its neighbors in the West and in the East live. If one wants to grasp these conditions in all their specialness, one must not shrink from looking into things that seem only remotely related.
The losses that the national economy suffers from war, apart from the disadvantages that exclusion from world trade entails, consist of the destruction of goods by military actions, of the consumption of war material of all kinds, and of the loss of productive labor that the persons drawn into military service would have rendered in their civilian activities. Further losses from loss of labor occur insofar as the number of workers is lastingly reduced by the number of the fallen and as the survivors become less fit in consequence of injuries suffered, hardships undergone, illnesses suffered, and worsened nutrition. These losses are only to the slightest degree offset by the fact that the war works as a dynamic factor and spurs the population to improve the technique of production. Even the increase in the number of workers that has taken place in the war by drawing on the otherwise unused labor of women and children and by extension of hours of work, as well as the saving achieved by limitation of consumption, still does not counterbalance them, so that the economy finally comes out of the war with a considerable loss of wealth. Economically considered, war and revolution are always bad business, unless such an improvement of the production process of the national economy results from them that the additional amount of goods produced after the war can compensate for the losses of the war. The socialist who is convinced that the socialist order of society will multiply the productivity of the economy may think little of the sacrifices that the social revolution will cost.
But even a war that is disadvantageous for the world economy can enrich individual nations or states. If the victorious state is able to lay such burdens on the vanquished that not only all of its war costs are thereby covered but a surplus is acquired also, then the war has been advantageous for it. The militaristic idea rests on the belief that such war gains are possible and can be lastingly held. A people that believes that it can gain its bread more easily by waging war than by work can hardly be convinced that it is more pleasing to God to suffer injustice than to commit injustice. The theory of militarism can be refuted; if, however, one cannot refute it, one cannot, by appeal to ethical factors, persuade the stronger party to forgo the use of its power.
The pacifistic line of argument goes too far if it simply denies that a people can gain by war. Criticism of militarism must begin by raising the question whether the victor can then definitely count on always remaining the stronger or whether he must not fear being displaced by still stronger parties. The militaristic argumentation can defend itself from objections raised against it from this point of view only if it starts with the assumption of unchangeable race characters. The members of the higher race, who behave according to pacifistic principles among themselves, hold firmly together against the lower races that they are striving to subjugate and thus assure themselves eternal predominance. But the possibility that differences will arise among the members of the higher races, leading part of their members to join with the lower races in battle against the remaining members of the higher ones, itself shows the danger of the militaristic state of affairs for all parties. If one entirely drops the assumption of the constancy of race characters and considers it conceivable that the race that had been stronger before will be surpassed by one that had been weaker, then it is evident that each party must consider that it could be faced with new battles in which it too could be defeated. Under these assumptions, the militaristic theory cannot be maintained. There no longer is any sure war gain, and the militaristic state of affairs appears as a situation of constant battles, at least, which shatter welfare so badly that finally even the victor obtains less than he would have harvested in the pacifistic situation.
In any case, not too much economic insight is needed to recognize that a war means at least direct destruction of goods, and misery. It was dear to everyone that the very outbreak of the war had to bring harmful interruptions in business life on the whole, and in Germany and Austria at the beginning of August 1914 people faced the future with fear. Astonishingly, however, things seemed to work otherwise. Instead of the expected crisis came a period of good business; instead of decline, boom. People found that war was prosperity; businessmen who, before the war, were thoroughly peace-minded and were always reproached by the friends of war for the anxiety that they were always showing at every flare-up of war rumors now began to reconcile themselves to the war. All at once there were no longer any unsalable products, enterprises that for years had run only at a loss yielded rich profits. Unemployment, which had assumed a menacing extent in the first days and weeks of the war, disappeared completely, and wages rose. The entire economy presented the picture of a gratifying boom. Soon writers appeared who sought to explain the causes of this boom.The majority of authors, in conformity with the intellectual tendency of statism, did not occupy themselves with the explanation of the causes of the good course of business but rather discussed the question whether the war "should be allowed to bring prosperity." Among those who sought to give an explanation of the economic boom in war should be mentioned above all Neurath ("Die Kriegswirtschaft," reprint from the Jahresberischt der Neuen Wiener Handelsakademie, V [16], 1910, pp. 10 ff.), since he—following in the steps of Carey, List and Henry George—had already before the war, in this as in other questions of "war economy," adopted the standpoint that gained broad diffusion in Germany during the war. The most naive representative of this view that war creates wealth is Steinmann-Bucher, Deutschlands Volksvermögen im Krieg, second edition (Stuttgart: 1916), pp. 40, 85 ff.
Every unprejudiced person can naturally have no doubt that war can really cause no economic boom, at least not directly, since an increase in wealth never does result from destruction of goods. It would scarcely have been too difficult to understand that war does bring good sales opportunities for all producers of weapons, munitions, and army equipment of every kind but that what these sellers gain is offset on the other hand by losses of other branches of production and that the real war losses of the economy are not affected thereby. War prosperity is like the prosperity that an earthquake or a plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes and cholera as stimulators of the productive forces in the general interest.
Starting with the observation that war furthers the business of the armament industry, many writers have sought to trace war to the machinations of those interested in war industry. This view appears to find superficial support in the behavior of the armament industry and of heavy industry in general. The most energetic advocates of the imperialistic policy were admittedly found in Germany not in the circles of industry but in those of the intellectual occupations, above all of officials and teachers. The financial means for war propaganda were provided before and during the war, however, by the armament industry. The armament industry created militarism and imperialism, however, just as little as, say, the distilleries created alcoholism or publishing houses trashy literature. The supply of weapons did not call forth the demand, but rather the other way around. The leaders of the armament industry are not themselves bloodthirsty; they would just as gladly earn money by producing other commodities. They produce cannons and guns because demand for them exists; they would just as gladly produce peacetime articles if they could do a better business with them.It is a mania of the statists to suspect the machinations of "special interests" in all that does not please them. Thus, Italy's entry into the war was traced to the work of propaganda paid for by England and France. Annunzio is said to have been bribed, and so on. Will one perhaps assert that Leopardi and Giusti, Silvio Pellico and Garibaldi, Mazzini and Cavour had also sold themselves? Yet their spirit influenced the position of Italy in this war more than the activity of any contemporary. The failures of German foreign policy are in large part to be traced to this way of thinking, which makes it impossible to grasp the realities of the world.
Recognition of this connection of things would have been bound to become widespread soon, and people would have quickly recognized that the war boom was to the advantage of only a small part of the population but that the economy as a whole was becoming poorer day by day, if inflation had not drawn a veil around all these facts, a veil impenetrable to a way of thinking that statism had made unaccustomed to every economic consideration.
To grasp the significance of inflation, it helps to imagine it and all of its consequences taken out of the picture of the war economy. Let us imagine that the state had forsworn that aid for its finances that it resorted to by issuing paper money of every kind. It is clear that the issue of notes—if we disregard the relatively insignificant quantities of goods obtained from neutral foreign countries as a counterpart of gold withdrawn from circulation and exported—in no way increased the material and human means of waging war. By the issue of paper money not one cannon, not one grenade more was produced than could have been produced even without putting the printing press into operation. After all, war is waged not with "money" but with the goods that are acquired for money. For the production of war goods, it was a matter of indifference whether the quantity of money with which they were bought was greater or smaller.
The war considerably increased the demand for money. Many economic units were impelled to enlarge their cash balances, since the greater use, of cash payments in place of the granting of long-term credit, which had been usual earlier, the worsening of trading arrangements, and growing insecurity had changed the entire structure of the payments system. The many military offices that were newly established during the war or whose range of activity was broadened, together with the extension of the monetary circulation of the Central Powers into the occupied territories, contributed to enlarging of the economy's demand for money. This rise in the demand for money created a tendency toward a rise in its value, that is to say, toward an increase in the purchasing power of the money unit, which worked against the opposite tendency unleashed by the increased issue of banknotes.
If the volume of note issue had not gone beyond what business could have absorbed in view of the war-induced increase in the demand for money, merely checking any increase in the value of money, then not many words would have to be spent on it. In fact, though, the banknote expansion was far greater. The longer war continued, the more actively was the printing press put into the service of the financial administration. The consequences occurred that the quantity theory describes. The prices of all goods and services, and with them the prices of foreign bills of exchange, went up.
The sinking of the value of money favored all debtors and harmed all creditors. That, however, does not exhaust the social symptoms of change in the value of money. The price rise caused by an increase in the quantity of money does not appear at one stroke in the entire economy and for all goods, for the additional quantity of money distributes itself only gradually. At first it flows to particular establishments and particular branches of production and therefore first increases only the demands for particular goods, not for all; only later do other goods also rise in price. "During the issue of notes," say Auspitz and Lieben, "the additional means of circulation will be concentrated in the hands of a small fraction of the population, e.g., of the suppliers and producers of war materials. Consequently, these persons' demands for various articles will increase; and thus the prices and also the sales of the latter will rise, notably, however, also those of luxury articles. The situation of the producers of all these articles thereby improves; their demands for other goods will also increase; the rise of prices and sales will therefore progress even further and spread to an ever larger number of articles, and finally to all."Cf. Auspitz and Lieben, Untersuchungen über die Theorie des Preises (Leipzig: 1889), pp. 64 f.
If the decline in the value of money were to pervade the entire economy at one stroke and be registered against all goods to the same extent, then it would cause no redistribution of income and wealth. For in this respect there can only be a question of redistribution. The national economy as such gains nothing from it, and what the individual gains others must lose. Those who bring to market the goods and services whose prices are caught up first in the upward price movement are in the favorable position of already being able to sell at higher prices while still able to buy the goods and services that they want to acquire at the older, lower prices. On the other hand, again, those who sell goods and services that rise in price only later must already buy at higher prices while they themselves, in selling, are able to obtain only the older, lower prices. As long as the process of change in the value of money is still under way, such gains of some and losses of others will keep occurring. When the process has finally come to an end, then these gains and losses do also cease, but the gains and losses of the interim are not made up for again. The war suppliers in the broadest sense of the word (also including workers in war industries and military personnel who received increased war incomes) have therefore gained not only from enjoying good business in the ordinary sense of the word but also from the fact that the additional quantity of money flowed first to them. The price rise of the goods and services that they brought to market was a double one: it was caused first by the increased demand for their labor, but then too by the increased supply of money.
That is the essence of so-called war prosperity; it enriches some by what it takes from others. It is not rising wealth but a shifting of wealth and income.Cf. Mises, Theorie des Geldes und der Umlaufsmittel (Munich: 1912), pp. 222 ff.; second edition translated by H. E. Batson as The Theory of Money and Credit (Indianapolis: Liberty Classics, 1981), pp. 251 ff. A dear description of conditions in Austria during the Napoleonic Wars is found in Grünberg, Studien zur österreichischen Agrargeschichte (Leipzig: 1901), pp. 121 ff. also Broda, "Zur Frage der Konjunktur im und nach dem Kriege," Archiv für Sozialwissenschaft, vol. 45, pp. 40 ff.; also Rosenberg, Valutafragen (Vienna: 1917), pp. 14 ff.
The wealth of Germany and of German-Austria was above all an abundance of capital. One may estimate the riches of the soil and the natural resources of our country ever so high; yet one must still admit that there are other countries that are more richly endowed by nature, whose soil is more fruitful, whose mines are more productive, whose water power is stronger, and whose territories are more easily accessible because of location relative to the sea, mountain ranges, and river courses. The advantages of the German national economy rest not on the natural factor but on the human factor of production and on a historically given head start. These advantages showed themselves in the relatively great accumulation of capital, mainly in the improvement of lands used for agriculture and forestry and in the abundant stock of produced means of production of all kinds, of streets, railroads, and other means of transportation, of buildings and their equipment, of machines and tools, and, finally, of already produced raw materials and semifinished goods. This capital had been accumulated by the German people through long work; it was the tool that German industrial workers used for their work and from whose application they lived. From year to year this stock was increased by thrift.
The natural forces dormant in the soil are not destroyed by appropriate use in the process of production; in this sense they form an eternal factor of production. The amounts of raw materials amassed in the ground represent only a limited stock that man consumes bit by bit without being able to replace it in any way. Capital goods also have no eternal existence; as produced means of production, as semifinished goods, which they represent in a broader sense of the term, they are transformed little by little in the production process into consumption goods. With some, with so-called circulating capital, this takes place more quickly; with others, with so-called fixed capital, more slowly. But the latter also is consumed in production. Machines and tools also have no eternal existence; sooner or later they become worn out and unusable. Not only the increase but even the mere maintenance of the capital stock therefore presupposes a continual renewal of capital goods. Raw materials and semifinished goods which, changed into goods ready for use, are conveyed to consumption must be replaced by others; and machines and tools of all kinds worn out in the production process must be replaced by others to the extent that they wear out. Performing this task presupposes making a clear assessment of the extent of the wearing out and using up of productive goods. With means of production that always are to be replaced only with others of the same kind, this is not difficult. The road system of a country can be maintained by trying to hold the condition of the individual sections technically the same by ceaseless maintenance work, and it can be extended by repeatedly adding new roads or enlarging the existing ones. In a static society in which no changes in the economy take place, this method would be applicable to all means of production. In an economy subject to change, this simple method does not suffice for most means of production, for the used-up and worn-out means of production are replaced not by ones of the same kind but by others. Worn-out tools are replaced not by ones of the same kind but by better ones, if indeed the whole orientation of production is not changed and the replacement of capital goods consumed in a shrinking branch of production does not take place by installation of new capital goods in other branches of production that are being expanded or newly established. Calculation in physical units, which suffices for the primitive conditions of a stationary economy, must therefore be replaced by calculation of value in money.
Individual capital goods disappear in the production process. Capital as such, however, is maintained and expanded. That is not a natural necessity independent of the will of economizing persons, however, but rather the result of deliberate activity that arranges production and consumption so as at least to maintain the sum of value of capital and that allots to consumption only surpluses earned in addition. The precondition for that is the calculation of value, whose auxiliary means is accounting. The economic task of accounting is to test the success of production. It has to determine whether capital was increased, maintained, or diminished. The economic plan and the distribution of goods between production and consumption is then based on the results that it achieves.
Accounting is not perfect. The exactness of its numbers, which strongly impresses the uninitiated, is only apparent. The evaluation of goods and claims that it must work with is always based on estimates resting on the interpretation of more or less uncertain elements. Insofar as this uncertainty stems from the side of goods, commercial practice, approved by the norms of commercial legislation, tries to avoid it by proceeding as cautiously as possible; that is, it requires a low evaluation of assets and a high evaluation of liabilities. But the deficiencies of accounting also stem from the fact that evaluations are uncertain from the side of money, since the value of money is also subject to change. So far as commodity money, so-called full-value metallic money, is concerned, real life pays no regard to these deficiencies. Commercial practice, as well as the law, has fully adopted the naive business view that money is stable in value, that is, that the existing exchange relation between money and goods is subject to no change from the side of money.On this, cf. Mises, Theorie des Geldes und der Umlaufsmittel, pp. 237 ff. (English translation, pp. 268 ff.). Accounting assumes money to be stable in value. Only the fluctuations of credit and token-money currencies, so-called paper currencies, against commodity money were taken account of by commercial practice by setting up corresponding reserves and by write-offs. Unfortunately, German statist economics has paved the way for a change of perception on this point also. In nominalistic money theory, by extending the idea of the stability of value of metal money to all money as such, it created the preconditions for the calamitous effects of decline in the value of money that we now have to describe.
Entrepreneurs did not pay attention to the fact that the decline in the value of money now made all items in balance sheets become inaccurate. In drawing up balance sheets, they neglected to take account of the change in the value of money that had occurred since the last balance sheet. Thus it could happen that they regularly added a part of the original capital to the net revenue of the year, regarded it as profit, paid it out, and consumed it. The error which (in the balance sheet of a corporation) was made by not taking account of the depreciation of money on the liability side was only partly made up for by the fact that on the asset side also the components of wealth were not reported at a higher value. For this disregard of the rise in nominal value did not apply to circulating capital also, since for inventories that were sold, the higher valuation did appear; it was precisely this that constituted the inflationary extra profit of enterprises. The disregard of the depredation of money on the asset side remained limited to fixed investment capital and had as a consequence that in calculating depreciation, people used the smaller original amounts that corresponded to the old value of money. That enterprises often set up special reserves to prepare for reconversion to the peacetime economy could not, as a rule, make up for this.
The German economy entered the war with an abundant stock of raw materials and semifinished goods of all kinds. In peacetime, whatever of these stocks was devoted to use or consumption was regularly replaced. During the war the stocks were consumed without being able to be replaced. They disappeared out of the economy; the national wealth was reduced by their value. This could be obscured by the fact that in the wealth of the trader or producer, money claims appeared in their place—as a rule, war-loan claims. The businessman thought that he was as rich as before; generally he had sold the goods at better prices than he had hoped for in peacetime and now believed that he had become richer. At first he did not notice that his claims were being ever more devalued through the sinking of the value of money. The foreign securities that he possessed rose in price as expressed in marks or crowns. This too he counted as a gain.The nominalists and chartalists among monetary theorists naturally agreed with this layman's view: that upon the sale of foreign securities, the increased nominal value received because of the decline of the currency represented a profit; cf. Bendixen, Währungspolitik und Geldtheorie im Lichte des Weltkrieges (Munich: 1916), p. 37. That is probably the lowest level to which monetary theory could sink. If he wholly or partially consumed these apparent profits, then he diminished his capital without noticing it. It naturally would not have been possible to take account of these changes in accounting serving official purposes; this accounting had to be carried out in the legal currency. It would indeed have been possible, though, to base economic calculation on the recalculation of balance sheets and of profit-and-loss calculation in gold money.
The inflation thus drew a veil over capital consumption. The individual believed that he had become richer or had at least not lost, while in truth his wealth was dwindling. The state taxed these losses of individual economic units as "war profits" and spent the amounts collected for unproductive purposes. The public did not become tired, however, of concerning itself about the large war profits, which, in good part, were no profits at all.
All fell into ecstasy. Whoever took in more money than earlier—and that was true of most entrepreneurs and wage earners and, finally, with the further progress of the depreciation of money, of all persons except capitalists receiving fixed incomes—was happy about his apparent profits. While the entire economy was consuming its capital and while even stocks of goods ready for consumption held in individual households were dwindling, all were happy about prosperity. And to cap it all, economists began to undertake profound investigations into its causes.
Rational economy first became possible when mankind became accustomed to the use of money, for economic calculation cannot dispense with reducing all values to one common denominator. In all great wars monetary calculation was disrupted by inflation. Earlier it was the debasement of coin; today it is paper-money inflation. The economic behavior of the belligerents was thereby led astray; the true consequences of the war were removed from their view. One can say without exaggeration that inflation is an indispensable intellectual means of militarism. Without it, the repercussions of war on welfare would become obvious much more quickly and penetratingly; war-weariness would set in much earlier.
Today is too soon to survey the entire extent of the material damage that the war has brought to the German people. Such an attempt is bound in advance to start from the conditions of the economy before the war. Even for that reason alone it must remain incomplete. For the dynamic effects of the World War on the economic life of the world cannot thus be considered at all, since we lack all possibility of surveying the entire magnitude of the loss that the disorganization of the liberal economic order, the so-called capitalistic system of national economy, entails. Nowhere do opinions diverge so much as on this point. While some express the view that the destruction of the capitalistic apparatus of production opens the way for an undreamed-of development of civilization, others fear from it a relapse into barbarism.
But even if we disregard all that, we should, in judging the economic consequences of the World War for the German people, in no way limit ourselves to taking account only of war damages and war losses that have already actually appeared. These losses of wealth, which in and for themselves are immense, are outweighed by disadvantages of a dynamic nature. The German people will remain economically confined to their inadequate territory of settlement in Europe. Millions of Germans who previously earned their bread abroad are being compulsorily repatriated. Moreover, the German people have lost their considerable capital investment abroad. Beyond that, the basis of the German economy, the processing of foreign raw materials for foreign consumption, has been shattered. The German people are thereby being made into a poor people for a long time.
The position of the German-Austrians is turning out still more unfavorable in general than the position of the German people. The war costs of the Habsburg Empire have been borne almost completely by the German-Austrians. The Austrian half of the Empire has contributed in a far greater degree than the Hungarian half of the Empire to the outlays of the Monarchy. The contributions that were incumbent on the Austrian half of the Empire were made, furthermore, almost exclusively by the Germans. The Austrian tax system laid the direct taxes almost exclusively on the industrial and commercial entrepreneurs and left agriculture almost free. This mode of taxation in reality meant nothing other than the overburdening of the Germans with taxes and the exemption of the non-Germans. Still more to be considered is that the war loans were subscribed to almost entirely by the German population of Austria and that now, after the dissolution of the state, the non-Germans are refusing any contribution toward interest payments and amortization of the war loans. Moreover, the large German holding of money claims on the non-Germans has been greatly reduced by the depreciation of money. The very considerable ownership by German-Austrians of industrial and trade enterprises and also of agricultural properties in non-German territories, however, is being expropriated partly by nationalization and socialization measures, partly by the provisions of the peace treaty.
- The Nation as a Speech CommunityThe concepts nation and nationality are relatively new in the sense in which we understand them. Of course, the word nation is very old; it derives from Latin and spread early into all modern languages. But another meaning was associated with it. Only since the second half of the eighteenth century did it gradually take on the significance that it has for us today, and not until the nineteenth century did this usage of the word become general.Cf. Meinecke, Weltbürgertum und Nationalstaat, third edition (Munich: 1915),pp. 22 ff.; Kjellén, Der Staat als Lebensform (Leipzig: 1917), pp. 102 ff. Its political significance developed step by step with the concept; nationality became a central point of political thought. The word and concept nation belong completely to the modern sphere of ideas of political and philosophical individualism; they win importance for real life only in modern democracy.
If we wish to gain insight into the essence of nationality, we must proceed not from the nation but from the individual. We must ask ourselves what the national aspect of the individual person is and what determines his belonging to a particular nation.
We then recognize immediately that this national aspect can be neither where he lives nor his attachment to a state. Not everyone who lives in Germany or holds German citizenship is a German merely for that reason. There are Germans who neither live in Germany nor hold German citizenship. Living in the same places and having the same attachment to a state do play their role in the development of nationality, but they do not pertain to its essence. It is no different with having the same ancestry. The genealogical conception of nationality is no more useful than the geographic or the state conception. Nation and race do not coincide; there is no nation of pure blood.Cf. Kjellén, loc. cit., pp. 105 ff., and the works cited there. All peoples have arisen from a mixture of races. Ancestry is not decisive for belonging to a nation. Not everyone descended from German ancestors is a German merely for that reason; how many Englishmen, Americans, Magyars, Czechs, and Russians would otherwise have to be called Germans? There are Germans whose ancestors include not one German. Among members of the higher strata of the population and among famous men and women whose family trees are commonly traced, foreign ancestors can be demonstrated more often than among members of the lower strata of the people, whose origins are lost in darkness; yet the latter, too, are more seldom of pure blood than one tends to assume.
There are writers who have worked in good faith to investigate the significance of ancestry and race for history and politics; what success they attained will not be discussed here. Again, many writers demand that political significance be attached to community of race and that race policy be pursued. People can be of different opinions about the justness of this demand; to examine it is not our concern. It may also remain an open question whether that demand has already been heeded today and whether and how race policy really is pursued. Yet we must insist that just as the concepts nation and race do not coincide, so national policy and race policy are two different things. Also, the concept of race, in the sense in which the advocates of race policy use it, is new, even considerably newer than that of nation. It was introduced into politics in deliberate opposition to the concept of nation. The individualistic idea of the national community was to be displaced by the collectivist idea of the racial community. Success has so far eluded these efforts. The slight significance accorded to the race factor in the cultural and political movements of the present day contrasts sharply with the great importance that national aspects have. Lapouge, one of the founders of the anthroposociological school, expressed the opinion a generation ago that in the twentieth century people would be slaughtered by the millions because of one or two degrees more or less in the cephalic index.Cf. Manouvrier, ""L'indice céphalique et la pseudo-sociologie," Revue, Mensuelle de l'École Anthropologie de Paris, vol. 9, 1899, p. 283. We have indeed experienced the slaughter of people by the millions, but no one can assert that dolichocephaly and brachycephaly were the rallying cries of the parties in this war. We are, of course, only at the end of the second decade of the century for which Lapouge expressed his prophecy. It may be that he will yet prove right; we cannot follow him into the field of prophecy, and we do not wish to dispute over things that still rest darkly concealed in the womb of the future. In present-day politics the race factor plays no role; that alone is important for us.
The dilettantism that pervades the writings of our race theorists should not, of course, mislead us into skipping lightly over the race problem itself. Surely there is hardly any other problem whose clarification could contribute more to deepening our historical understanding. It may be that the way to ultimate knowledge in the field of historical ebb and flow leads through anthropology and race theory. What has so far been discovered in these sciences is quite scanty, of course, and is overgrown with a thicket of error, fantasy, and mysticism. But there exists true science in this field also, and here also there are great problems. It may be that we shall never solve them, but that should not keep us from investigating further and should not make us deny the significance of the race factor in history.
If one does not see racial affinity as the essence of nationality, that does not mean that one wants to deny the influence of racial affinity on all politics and on national politics in particular. In real life many different forces work in different directions; if we want to recognize them, then we must try to distinguish them in our minds as far as possible. That does not mean, though, that in observing one force, we should quite forget that still others are working along side it or against it.
We recognize that one of these forces is the speech community; this is indeed beyond dispute. If we now say that the essence of nationality lies in language, this is no mere terminological point about which there could be no further dispute. First, let it be stated that in saying so, we are in conformity with the general use of language. To the language we apply first, and to it alone in the original sense, the designation that then becomes the designation of the nation. We speak of the German language, and everything else that bears the label "German" gets it from the German language: when we speak of German writing, of German literature, of German men and women, the relation to the language is obvious. Moreover, it does not matter whether the designation of the language is older than that of the people or is derived from the latter; once it became the designation of the language, it is what became decisive for the further development of the use of this expression. And if we finally speak of German rivers and of German cities, of German history and of German war, we have no trouble understanding that in the last analysis this expression also traces back to the original naming of the language as German. The concept of the nation is, as already said, a political concept. If we want to know its content, we must fix our eyes on the politics in which it plays a role. Now we see that all national struggles are language struggles, that they are waged about language. What is specifically "national" lies in language.Cf. Scherer, Vorträge und Aufsätze zur Geschichte des geistigen Lebens in Deutschland und Österreich (Berlin: 1874), pp. 45 ff. That the criterion of nation lies in language was the view of Arndt and Jacob Grimm. For Grimm, a people is "the sum total of persons who speak the same language" (Kleinere Schriften, vol. 7 [Berlin: 1884], p. 557). A survey of the history of doctrine about the concept of nation is given in Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: 1907), pp. 1 ff., and Spann, Kurzgefasstes System der Gesellschaftslehre (Berlin: 1914), pp. 195 ff.
Community of language is at first the consequence of an ethnic or social community; independently of its origin, however, it itself now becomes a new bond that creates definite social relations. In learning the language, the child absorbs a way of thinking and of expressing his thoughts that is predetermined by the language and so he receives a stamp that he can scarcely remove from his life. The language opens up the way for a person of exchanging thoughts with all those who use it; he can influence them and receive influence from them. Community of language binds and difference of language separates persons and peoples. If someone finds the explanation of the nation as a speech community perhaps too paltry, let him just consider what immense significance language has for thinking and for the expression of thought, for social relations, and for all activities of life.
If, despite recognition of these connections people often resist seeing the essence of the nation in the speech community, this hinges on certain difficulties that the demarcation of individual nations by this criterion entails.Moreover, let it be expressly noted that with every other explanation of the essence of the nation, difficulties turn up in much higher degree and cannot be overcome. Nations and languages are not unchangeable categories but, rather, provisional results of a process in constant flux; they change from day to day, and so we see before us a wealth of intermediate forms whose classification requires some pondering.
A German is one who thinks and speaks German. Just as there are different degrees of mastery of the language, so there are also different degrees of being German. Educated persons have penetrated into the spirit and use of the language in a manner quite different from that of the uneducated. Ability in concept formation and mastery of words are the criterion of education: the school rightly emphasizes acquiring the ability to grasp fully what is spoken and written and to express oneself intelligibly in speech and writing. Only those are full members of the German nation who have fully mastered the German language. Uneducated persons are German only insofar as the understanding of German speech has been made accessible to them. A peasant in a village cut off from the world who knows only his home dialect and cannot make himself understood by other Germans and cannot read the written language does not count at all as a member of the GermanThat the concept of national community is a matter of degree is also recognized by Spahn (loc. cit., p. 207); that it includes only educated persons is explained by Bauer (loc. cit., pp. 70 ff). nation. If all other Germans were to die out and only people who knew only their own dialect survived, then one would have to say that the German nation had been wiped out. Even those peasants are not without a tinge of nationality, only they belong not to the German nation but rather to a tiny nation consisting of those who speak the same dialect.
The individual belongs, as a rule, to only one nation. Yet it does now and then happen that a person belongs to two nations. That is not the case merely when he speaks two languages but rather only when he has mastered two languages in such a way that he thinks and speaks in each of the two and has fully assimilated the special way of thinking that characterizes each of them. Yet there are more such persons than people believe. In territories of mixed population and in centers of international trade and commerce, one frequently meets them among merchants, officials, etc. And they are often persons without the highest education. Among men and women with more education, bilinguists are rarer, since the highest perfection in the mastery of language, which characterizes the truly educated person, is as a rule attained in only one language. The educated person may have mastered more languages, and all of them far better than the bilinguist has; nevertheless, he is to be counted in only one nation if he thinks only in one language and processes everything he hears and sees in foreign languages through a way of thinking that has been shaped by the structure and the concept formation of his own language. Yet even among the "millionaires of education"Cf. Anton Menger, Neue Staatslehre, second ed. (Jena: 1904), p. 213. there are bilinguists, men and women who have fully assimilated the education of two cultural circles. They were and are found somewhat more frequently than elsewhere in places where an old, fully developed language with an old culture and a still slightly developed language of a people only just completing the process of acquiring culture confront each other. There it is physically and psychically easier to achieve mastery of two languages and two cultural circles. Thus, there were far more bilinguists in Bohemia among the generation which immediately preceded the one now living than at present. In a certain sense one can also count as bilinguists all those who, besides the standard language, have full mastery of a dialect also.
Everyone belongs as a rule to at least one nation. Only children and deaf-mutes are nationless; the former first acquire an intellectual home through entry into a speech community, the latter through development of their thinking capacity into achievement of the capability of mutual understanding with the members of a nation. The process that operates here is basically the same as that by which adults already belonging to one nation switch over to another.It used to happen that children of German parents who had to be brought up at the expense of the municipality (so-called boarded children) were put by the municipality of Vienna into the care of Czech foster parents in the countryside; these children then grew up as Czechs. On the other hand, children of non-German parents were Germanized by German foster parents. One aristocratic Polish lady used to relieve the city of Vienna of the care of children of Polish parents in order to have the children grow up as Poles. No one can doubt that all these children became good Czechs, Germans, or Poles without regard to what nation their parents had belonged to.
The language researcher finds relationships among languages; he recognizes language families and language races; he speaks of sister languages and daughter languages. Some people have wanted to extend this concept directly to nations also; others, again, have wanted to make the ethnological relationship into a national one. Both ideas are totally inadmissible. If one wants to speak of national relationship, one may do so only with reference to the possibility of mutual understanding between the members of the nations. In this sense dialects are related to each other and to one or even to several standard languages. Even between standard languages, for example, between individual Slavic languages, such a relation holds. Its significance for national development exhausts itself in the fact that it facilitates a transition from one nationality to another.
On the other hand, it is politically quite unimportant that the grammatical relationship between languages facilitates learning them. No cultural and no political affinity emerges from it; no political structures can be erected on the basis of it. The notion of the relationship of peoples originates not from the national-policy/individualistic sphere of ideas but rather from the race-policy/collectivistic sphere; it was developed in conscious opposition to the freedom-oriented notion of modern autonomy. Pan-Latinism, Pan-Slavism, and Pan-Germanism are chimeras which, in confrontation with the national strivings of individual peoples, have always come out on the short end. They sound very good in the fraternizing festivities of peoples who for the moment are following parallel political goals; they fail as soon as they are supposed to be more. They never have possessed power to form states. There is no state that has been based on them.
If people have long resisted seeing the characteristic feature of the nation in language, one of the decisive circumstances was that they could not reconcile this theory with the reality that allegedly displays cases in which one nation speaks several languages and other cases in which several nations use one language. The assertion that it is possible for the members of one nation to speak several languages is supported with reference to the conditions of the "Czechoslovak" and "Yugoslav" nations. Czechs and Slovaks acted in this war as a unified nation. The particularist strivings of small Slovak groups have at least not manifested themselves outwardly and have not been able to achieve any political successes. It now seems that a Czechoslovak state will be formed to which all Czechs and Slovaks will belong. However, Czechs and Slovaks do not, for that reason, yet form one nation. The dialects from which the Slovak language was formed are extraordinarily close to the dialects of the Czech language, and it is not difficult for a rural Slovak who knows only his own dialect to communicate with Czechs, especially Moravians, when the latter speak in their dialect. If the Slovaks, back at the time before they began developing an independent standard language, that is, around the turn from the eighteenth to the nineteenth century, had come into closer political connection with the Czechs, then the development of a Slovak standard language would doubtless no more have occurred than the development of an independent Swabian standard language in Swabia. Political motives were decisive for the effort made in Slovakia to create an independent language. This Slovak standard language, which was formed quite according to the model of Czech and was closely related to it in every respect, could not develop, however, likewise because of political circumstances. Under the rule of the Magyar state, excluded from school, office, and court, it led a miserable existence in popular almanacs and opposition leaflets. Again, it was the slight development of the Slovak language that caused efforts to adopt the Czech standard language, which had been under way in Slovakia from the very beginning, to gain more and more ground. Today two movements oppose each other in Slovakia: one that wants to root all Czechism out of the Slovak language and develop the language pure and independent and a second that wishes its assimilation to Czech. If the latter movement should prevail, then the Slovaks would become Czechs and the Czechoslovak state would evolve into a purely Czech national state. If, however, the former movement should prevail, then the Czech state would gradually be compelled, if it did not want to appear an oppressor, to grant the Slovaks autonomy and finally, perhaps, complete independence. There is no Czechoslovak nation composed of Czech speakers and Slovak speakers. What we see before us is a particular Slavic nation's struggle for life. How it will turn out will depend on political, social, and cultural circumstances. From a purely linguistic point of view, either of the two developments is possible.
The case is no different with the relation of the Slovenes to the Yugoslav nation. The Slovene language, also, has been struggling since its origin between independence and approximation to or complete blending with Croatian. The Illyrian movement wanted to include the Slovene language also in the sphere of its strivings for unity. If Slovene should be able to maintain its independence even in the future, then the Yugoslav state would have to grant the Slovenes autonomy.
The South Slavs also present one of the most frequently cited examples of two nations speaking the same language. Croats and Serbs use the same language. The national difference between them, it is asserted, lies exclusively in religion. Here is said to be a case that cannot be explained by the theory that perceives the distinctive attribute of a nation in its language.
In the Serbo-Croatian people the sharpest religious contrasts confront each other. One part of the people belongs to the Orthodox Church and another part to the Catholic Church, and even today the Mohammedans form a not inconsiderable part. In addition to these religious contrasts, there are old political enmities that still stem in part from times whose political conditions have today long ago been superseded. The dialects of all these religiously and politically splintered peoples are, however, extraordinarily closely related. These dialects were so closely related to each other that the efforts to form a standard language proceeding from different sides always led to the same result; all efforts always resulted in the same standard language. Vuk Stefanovic Karadzic wanted to create a Serbian language, Ljudevit Gaj a unified South Slavic; Pan-Serbism and Illyrianism bluntly confronted each other. But since they had the same dialectical material to deal with, the results of their work were identical. The languages that they created differed so little from each other that they finally blended together into a unified language. If the Serbs did not use the Cyrillic alphabet and the Croats the Latin alphabet exclusively, then there would be no external sign for attributing a written work to one nation or the other. The difference of alphabets cannot split a unified nation in the long run; the Germans also use different forms of writing without this having acquired any national significance. The political development of the last years before the war and during the war itself has shown that the religious difference between Croats and Serbs upon which the Austrian policy of Archduke Francis Ferdinand and his followers had built castles in the air has long since lost its earlier significance. There seems to be no doubt that in the political life of the Serbs and Croats also, the national factor of a common language will override all impeding influences and that the religious difference will play no greater role in the Serbo-Croatian nation than it does in the German people.
Two other examples commonly named to show that speech community and nation do not coincide are the Anglo-Saxon and Danish-Norwegian cases. The English language, it is asserted, is used by two nations, the English and the Americans; and this alone shows that it is inadmissible to seek the criterion of nationality in language alone. In truth, the English and Americans are a single nation. The inclination to count them as two nations stems from the fact that people have become accustomed to interpret the nationality principle as necessarily including the demand for unifying all parts of a nation into a single state. It will be shown in the next section that this is not true at all and that, therefore, the criterion of the nation should in no way be sought in efforts to form a unified state. That Englishmen and Americans belong to different states, that the policies of these states have not always been in consonance, and that the differences between them have occasionally even led to war—all that is still no proof that Englishmen and Americans are not one nation. No one could doubt that England is bound together with its dominions and with the United States by a national bond that will show its binding force in days of great political crisis. The World War brought proof that disagreements between the individual parts of the Anglo-Saxon nation can appear only when the whole does not seem threatened by other nations.
It seems even more difficult at first sight to harmonize the problem of the Irish with the linguistic theory of the nation. The Irish once formed an independent nation; they used a separate Celtic language. At the beginning of the nineteenth century, 80 percent of the population of Ireland still spoke Celtic, and more than 50 percent understood no English at all. Since then the Irish language has lost much ground. Only somewhat more than 600,000 persons still use it, and only seldom are people still to be found in Ireland who understand no English. Of course, there are also efforts in Ireland today to awaken the Irish language to new life and to make its use general. That fact is, however, that very many of those who are on the side of the political Irish movement are English by nationality. The opposition between Englishmen and Irishmen is of a social and religious and not exclusively of a national nature; and so it can happen that inhabitants of Ireland who by nationality are no Irishmen also belong to the movement in great number. If the Irish should succeed in achieving the autonomy they strive for, then it is not ruled out that a large part of today's English population of Ireland would assimilate itself to the Irish nation.
The much-cited Danish-Norwegian example also cannot undercut the assertion that nationality lies in language. During the centuries-long political union between Norway and Denmark, the old Norwegian standard language was completely driven out by the Danish standard language; it still managed a miserable existence only in the numerous dialects of the rural population. After the separation of Norway from Denmark (1814), efforts were made to create a national language of its own. But the efforts of the party striving to create a new Norwegian standard language on the basis of the old Norwegian language definitely failed. Success went to those who seek only to enrich Danish by introduction of expressions from the vocabulary of the Norwegian dialects but otherwise are in favor of retaining the Danish language. The works of the great Norwegian writers Ibsen and Bjørnson are written in this language.Ibsen made fun of the efforts of the adherents of the separate "Norwegian" language in the person of Huhu in Peer Gynt (fourth act, madhouse scene). Danes and Norwegians still today, then, form a single nation, even though they belong politically to two states.
- Dialect and Standard LanguageIn primitive times every migration causes not only geographical but also intellectual separation of clans and tribes. Economic exchanges do not yet exist; there is no contact that could work against differentiation and the rise of new customs. The dialect of each tribe becomes more and more different from the one that its ancestors spoke when they were still living together. The splintering of dialects goes on without interruption. The descendants no longer understand one other.
A need for unification in language then arises from two sides. The beginnings of trade make understanding necessary between members of different tribes. But this need is satisfied when individual middlemen in trade achieve the necessary command of language. In early times, when the exchange of goods between distant regions had only a relatively slight significance, scarcely more than individual expressions and word families must have come into more general use in this way. Political changes had to be much more significant for the unification of dialects. Conquerors appeared and created states and political unions of all kinds. The political leaders of broad territories came into closer personal relations; members of all social strata of numerous tribes were united in military service. Partly independently of the political and military organization and partly in closest connection with it, religious institutions arise and spread from one tribe to another. Hand in hand with political and religious strivings for unity go linguistic strivings. Soon the dialect of the ruling or the priestly tribe gains predominance over the dialects of the subjects and laity; soon, out of the different dialects of fellow members of state and religion, a unified mixed dialect is formed.
Introduction of the use of writing becomes the strongest basis for the unification of language. Religious doctrines, songs, laws, and records preserved in writing give preponderance to the dialect in which they have been expressed. Now the further splintering of the language is impeded; now there is an ideal speech that seems worth striving to attain and to imitate. The mystical nimbus that surrounds the letters of the alphabet in primitive times and that even today—at least in regard to their printed form—has not yet quite disappeared raises the prestige of the dialect in which the writing is done. Out of the chaos of dialects there arises the general language, the language of rulers and laws, the language of priests and singers, the literary language. It becomes the language of the higher-placed and more educated persons; it becomes the language of state and culture;One must distinguish between written language and cultural or standard language. When dialects possess a written literature, it will no longer do to deny them the designation of written languages. All those languages should then be called standard languages that make the claim to express all human thoughts orally and in writing and thus also to be scientific and technical languages. The boundaries between the two naturally cannot always be sharply drawn. it appears finally as the sole correct and noble language; the dialects from which it has arisen, however, are thenceforth regarded as inferior. People consider them corruption's of the written language; people begin to despise them as the speech of the common man.
In the formation of unified languages, political and cultural influences are always working together from the very beginning. The natural element in the dialect of the people is that it draws its strength from the life of those who speak it. On the other hand, the standard and unified language is a product of studyrooms and chancelleries. Of course, it too stems in the last analysis from the spoken word of the common man and from the creations of gifted poets and writers. But it is always shot through with more or less pedantry and artificiality also. The child learns the dialect from his mother; it alone can be his mother tongue; the standard language is taught by the school.
In the struggle that now arises between standard language and dialect, the latter has the advantage that it already takes possession of the person in his most receptive years. But the former also does not stand helpless. That it is the general language, that it leads beyond regional disunity to understanding with broader circles, makes it indispensable to state and church. It is the bearer of the written heritage and the intermediary of culture. Thus it can triumph over the dialect. If, however, it is too distant from the latter, if it is or over time becomes so estranged from the latter that it is still intelligible only to persons who learn it with effort, then it must succumb; then a new standard language arises from the dialect. Thus Latin was displaced by Italian, Church Slavonic by Russian; thus in modern Greek the common speech will perhaps triumph over the katharevousa of classicism.
The luster with which the school and the grammarians are accustomed to surround the standard language, the respect they pay to its rules, and the contempt they show for anyone who sins against these rules cause the relation between the standard language and the dialect to appear in a false light. The dialect is not corrupted standard language; it is primeval language; only out of the dialects was the standard language formed, whether a single dialect or else a mixed form artificially formed out of different dialects was raised to the status of standard language. The question therefore cannot arise at all whether a particular dialect belongs to this or that standard language. The relation between standard language and dialect is not always that of unequivocal association or indeed of superiority and inferiority, and the circumstances of linguistic history and grammar are not alone decisive in that respect. Political, economic, and general cultural developments of the past and present determine to which standard language the speakers of a particular dialect incline; and it can happen that in this way a unified dialect attaches itself partly to one and partly to another standard language.
The process by which the speakers of a particular dialect make the transition to using a particular standard language thereafter, either exclusively or along with the dialect, is a special case of national assimilation. It is especially characterized by being a transition to a grammatically closely related standard language, with this way being as a rule the only conceivable one in a given case. The Bavarian peasant's son has in general no other way open to culture than through the German standard language, even though it may also happen in rare particular cases that, without this detour, he becomes French or Czech directly. Yet for the Low German there are already two possibilities: assimilation to the German or to the Dutch standard language. Which of the two courses he takes is decided neither by linguistic nor genealogical considerations but by political, economic, and social ones. Today there is no longer any purely Plattdeutsch village; at least bilingualism prevails everywhere. If a Plattdeutsch district were to be separated from Germany today and be joined to the Netherlands, with the German school and the German official and judicial language replaced by Dutch ones, then the people affected would see all that as a national rape. Yet one hundred or two hundred years ago, such a separation of a bit of German territory could have been carried out without difficulty, and the descendants of the people who were separated at that time would be just as good Hollanders today as they in fact are good Germans today.
In Eastern Europe, where school and office still do not have anywhere near as much significance as in the West, something of the kind is still possible today. The linguistic researcher will be able to determine of most of the Slavic dialects spoken in upper Hungary whether they are closer to Slovak than to Ukrainian and perhaps also to decide in many cases in Macedonia whether a particular dialect is closer to Serbian or to Bulgarian. Yet that still does not answer the question whether the people who speak this dialect are Slovaks or Ukrainians, Serbs or Bulgarians. For this depends not only on linguistic conditions but also on political, ecclesiastical, and social ones. A village with a dialect undoubtedly more closely related to Serbian can more or less adopt the Bulgarian standard language relatively quickly if it acquires a Bulgarian church and a Bulgarian school.
Only thus can one gain an understanding of the exceedingly difficult Ukrainian problem. The question whether the Ukrainians are an independent nation or only Russians who speak a particular dialect is senseless in this form. If the Ukraine had not lost its political independence in the seventeenth century to the Great Russian state of the Czars, then a separate Ukrainian standard language would probably have developed. If all Ukrainians, including those in Galicia, Bukovina, and upper Hungary, had come under the rule of the Czars as late as the first half of the nineteenth century, then this might not have hindered the development of a separate Ukrainian literature; but this literature would probably have assumed a position in relation to Great Russian no different from that of Plattdeutsch writings in relation to German. It would have remained dialect poetry without particular cultural and political pretensions. However, the circumstance that several million Ukrainians were under Austrian rule and were also religiously independent of Russia created the preconditions for the formation of a separate Ruthenian standard language. No doubt the Austrian government and the Catholic Church preferred that the Austrian Rusins develop a separate language instead of adopting Russian. In this sense there is a spark of truth in the assertion of the Poles that the Ruthenians are an Austrian invention. The Poles are wrong only in saying that without this official support of the early beginnings of the Ruthenian aspirations there would have been no Rusin movement at all in East Galicia. The national rising of the East Galicians could have been suppressed just as little as the awakening of other nations without history. If state and church had not sought to guide it into other channels, then it would probably have developed from the beginning with a stronger Great Russian orientation.
The Ukrainian movement in Galicia, then, significantly furthered, at least, the separatist strivings of the Ukrainians in South Russia and perhaps even breathed life into them. The most recent political and social upheavals have furthered South Russian Ukrainianism so much that it is not entirely impossible that it can no longer be overcome by Great Russianism. But that is no ethnographic or linguistic problem. Not the degree of relationship of languages and races will decide whether the Ukrainian or the Russian language will win out but rather political, economic, religious, and general cultural circumstances. It is easily possible for that reason that the final outcome will be different in the former Austrian and Hungarian parts of the Ukraine than in the part that has long been Russian.
Conditions are similar in Slovakia. The independence of the Slovakian language from Czech is also a product of an in a certain sense accidental development. If there had been no religious differences between the Moravians and Slovaks and if Slovakia had been politically linked with Bohemia and Moravia no later than the eighteenth century, then a separate Slovak written and standard language would hardly have evolved. On the other hand if the Hungarian government had given less emphasis to Magyarization of the Slovaks and had allowed their language more scope in school and administration, then it would probably have developed more strongly and would today possess more power of resistance against Czech.Still more examples could be cited, including, for example, the Slovene language also. Particular interest attaches to those cases in which something similar was attempted on a smaller scale. Thus—according to information for which I am indebted to the Vienna Slavicist Dr. Norbert Jokl—the Hungarian government tried in the county of Ung to make the Slovak and Ruthenian local dialects used there independent; it had newspapers appear in these dialects in which, for the Ruthenian dialect, Latin letters and a Magyarizing orthography were used. Again, in the county of Zala the effort was made to make a Slovene dialect independent, which was facilitated by the fact that the population, in contrast to the Austrian Slovenes, was Protestant. Schoolbooks were published in this language. In Papa there was a special faculty for training teachers of this language.
To the language researcher it may in general seem not impossible to draw language boundaries by classifying individual dialects with particular standard languages. Yet his decision does not prejudice the historical course of events. Political and cultural events are decisive. Linguistics cannot explain why Czechs and Slovaks became two separate nations, and it would have no explanation if the two in the future should perhaps blend into one nation.
- National ChangesFor a long time nations have been regarded as unchanging categories, and it has not been noticed that peoples and languages are subject to very great changes in the course of history. The German nation of the tenth century is a different one from the German nation of the twentieth century. That is even outwardly evident in the fact that the Germans of today speak a different language from that of the contemporaries of the Ottonians.
For an individual, belonging to a nation is no unchangeable characteristic. One can come closer to one's nation or become alienated from it; one can even leave it entirely and exchange it for another.
National assimilation, which must of course be distinguished from the blending and turnover of races, with which it undergoes certain interactions, is a phenomenon whose historical significance cannot be assessed too highly. It is one manifestation of those forces whose operation shapes the history of peoples and states. We see it at work everywhere. If we could fully understand it in its conditions and in its essence, then we would have taken a good step further on the path that leads to understanding of historical development. In striking contrast to this importance of the problem is the disregard with which historical science and sociology have so far passed it by.
Language serves for intercourse with one's fellow men. Whoever wants to speak with his fellow men and to understand what they say must use their language. Everyone must therefore strive to understand and speak the language of his environment. For that reason individuals and minorities adopt the language of the majority. It is always a precondition for that, however, that contacts occur between the majority and the minority; if this is not the case, then no national assimilation ensues either. Assimilation proceeds the faster the closer are the contacts of the minority with the majority and the weaker the contacts within the minority itself and the weaker its contacts with fellow nationals living at a distance. From that it immediately follows that the social positions of the different nationalities must be of special significance in this regard, for personal contacts are more or less bound up with class membership. Thus, particular social strata in an environment of a foreign nation can not only maintain their own customs and own languages for centuries but also assimilate others to them. A German nobleman who immigrated to Eastern Galicia around 1850 did not become a Ruthenian but a Pole; a Frenchman who settled in Prague around 1800 became not a Czech but a German. However, the Ruthenian peasant in Eastern Galicia who by upward social mobility joined the ruling class also became a Pole, and the Czech peasant's son who rose into the bourgeoisie became a German.Cf. Otto Bauer, "Die Bedingungen der Nationalen Assimilation," Der Kampf, vol. V, pp. 246 ff.
In a society organized by classes or castes, different nations can live side by side in the same territory for centuries without losing their national distinctness. History provides enough examples of that. In the Baltic lands of Livonia, Estonia, and Courland, in Carniola and in South Styria, the German nobility maintained itself for many generations amidst the environment of a different people; so did the German bourgeoisie in the Bohemian, Hungarian, and Polish cities. Another example is the Gypsies. If social contacts between the nations are lacking, if between them no connubium and only to a restricted extent commercium exists, if changing one's class or caste is possible only in rare exceptional cases, then the conditions for national assimilation are rarely present. Thus, self-contained peasant settlements inside a country inhabited by a population with another language could maintain themselves as long as the agricultural strata were bound to the soil. As, however, the liberal economic order set aside all bonds, removed the special privileges of classes, and gave the workers freedom of movement, the rigid national stratification was loosened. Upward social mobility and migrations made national minorities disappear rapidly, or at least pushed them into defensive positions tenable only with difficulty.
The tearing down of barriers that guarded against shifting from one social class to another, freedom of movement of the person, everything that has made modern man free, has very much facilitated the advance of standard languages against dialects. "Where the so greatly improved means of transport and communication have shaken people up today and mingled them together in an undreamed-of manner, this signals the end of local dialects, of local manners, traditions and usage's; the railroad whistle has sung their funeral dirge. In a few years they will disappear; in a few years it will be too late to collect them and perhaps still protect them," an English philologist already remarked decades ago.Cf. Socin, Schriftsprache und Dialekte im Deutschen nach Zeugnissen alter und neuer Zeit (Heilbronn; 1888), p. 501. Today one can no longer live even as a peasant or worker in Germany without at least understanding the standard High German language and being able, if necessary, to use it. The school is making its contribution to hastening this process.
Quite distinct from natural assimilation through personal contact with people speaking other languages is artificial assimilation—denationalization by state or other compulsion. As a social process, assimilation hinges on certain preconditions; it can only occur when its preconditions exist. Compulsory methods then remain powerless; they can never succeed when the preconditions are not at hand or are not created. Administrative compulsion can sometimes bring about these conditions and so indirectly bring about assimilation; it cannot bring about national transformation directly. If individuals are put into an environment where they are cut off from contact with their fellow nationals and made exclusively dependent on contacts with foreigners, then the way is prepared for their assimilation. But if one can use only compulsory means that do not influence the colloquial language, then attempts at national oppression have scarcely any prospect of success.
Before the opening of the age of modern democracy, when national questions did not yet have the political significance that they have today, for this reason alone there could be no question of national oppression. If the Catholic Church and the Habsburg state suppressed Czech literature in the seventeenth century in Bohemia, they were motivated by religious and political but not yet by national-policy considerations; they persecuted heretics and rebels, not the Czech nation. Only very recent times have seen attempts at national oppression on a large scale. Russia, Prussia, and Hungary, above all, have been the classical countries of compulsory denationalization. How much success Russianization, Germanization, and Magyarization have achieved is well known. After these experiences, the prognosis that one can make about possible future efforts at Polonization or Czechification is not a favorable one.
There were three ways available to cover the costs that the State Treasury incurred in the war.
The first way was confiscating the material goods needed for waging war and drafting the personal services needed for waging war without compensation or for inadequate compensation. This method seemed the simplest, and the most consistent representatives of militarism and socialism resolutely advocated employing it. It was used extensively in drafting persons into actually waging war. The universal military-service obligation was newly introduced in many states during the war and in others was substantially extended. That the soldier received only a trifling compensation for his services in relation to the wages of free labor, while the worker in the munitions industry was highly paid and while the possessors of expropriated or confiscated material means of war received an at least partially corresponding compensation, has rightly been called a striking fact. The explanation for this anomaly may be found in the fact that only a few people enlist today even for the highest wages and that in any case prospects of putting together any army of millions on the basis of enlistments would not be very good. In relation to the immense sacrifices that the state demands of the individual through the blood tax, it seems rather incidental whether it compensates the soldier more or less abundantly for the loss of time that he suffers from his military-service obligation. In the industrial society there is no appropriate compensation for war services; In such a society they have no price at all; they can be demanded only compulsorily, and then it is surely of slight significance whether they are paid for more generously or at the laughably low rates at which a man was compensated in Germany. In Austria the soldier at the front received a wage of 16 heller and a field supplement of 20 heller, 36 heller a day in all!And, moreover, the troops that had to fight through the fearful battles in the Carpathians and in the swamps of the Sarmatian plain, in the high mountains of the Alps, and in the Karst were poorly supported and inadequately clothed and armed! That reserve officers, even in the continental states, and that the English and American troops received a higher compensation is explained by the fact that a peacetime wage rate had been established for officer service in the continental states and for all military service in England and America which had to be taken as a point of departure in the war. But however high or however low the compensation of the warrior may be, it is never to be regarded as a full compensation for the compulsorily recruited man. The sacrifice that is demanded of the soldier serving by compulsion can be compensated only with intangible values, never with material ones.From the political point of view it was a grave mistake to follow completely different principles in the compensation of the officer and the enlisted man and to pay the soldier at the front worse than the worker behind the lines. That contributed much to demoralizing the army!
In other respects the uncompensated expropriation of war material was scarcely considered. By its very nature alone it could occur only with regard to goods on hand, in individual economic units in sufficient quality at the beginning of the war, but not also where producing new goods was concerned.
The second way available to the state for acquiring resources was introducing new taxes and raising already existing taxes. This method too was used everywhere as much as possible during the war. The demand was made from many sides that the state should try, even during the war, to cover the total war costs by taxes; in that connection reference was made to England, which was said to have followed this policy in earlier wars. It is true that England covered the costs of smaller wars that were only insignificant in relation to its national wealth in greatest part by taxes during the war itself. In the great wars that England waged, however, this was not true, neither in the Napoleonic Wars nor in the World War. If one had wanted immediately to raise such immense sums as this war required entirely by taxation without incurring debt, then, in assessing and collecting taxes, one would have had to put aside regard for justice and uniformity in the distribution of tax burdens and take from where it was possible to take at the, moment. One would have had to take everything from the owners of movable capital (not only from large owners but also from small ones, e.g., savings-bank depositors) and on the other hand leave the owners of real property more or less free.
If, however, the high war taxes were assessed uniformly (for they would have had to be very high if they were fully to cover each year the war costs incurred in the same year), then those who had no cash for paying taxes would have had to acquire the means for paying by going into debt. Landowners and owners of industrial enterprises would then have been compelled to incur debt or even to sell part of their possessions. In the first case, therefore, not the state itself but rather many private parties would have had to incur debts and thereby obligate themselves to interest payments to the owners of capital. However, private credit is in general dearer than public credit. Those land and house owners would therefore have had to pay more interest on their private debts than they had to pay indirectly in interest on the state debt. If, however, they had found themselves forced to sell a smaller or larger part of their property in order to pay taxes, then this sudden offer of a large part of real property for sale would have severely depressed prices, so that the earlier owners would have suffered a loss; and the capitalists who at this moment had had cash at their disposal would have gained a profit by buying cheaply. That the state did not fully cover the costs of the war by taxes but rather in largest part by incurring state debt, whose interest was paid from the proceeds of taxes, therefore does not signify, as is often assumed, a favoring of the capitalists.Cf. Dietzel, Kriegssteuer oder Kriegsanleihe? (Tübingen: 1912), pp.13 ff.
One now and then hears the interpretation expressed that financing war by state loans signifies shifting the war costs from the present onto following generations. Many add that this shifting is also just, since, after all, the war was being waged not only in the interest of the present generation but also in the interest of our children and grandchildren. This interpretation is completely wrong. War can be waged only with present goods. One can fight only with weapons that are already on hand; one can take everything needed for war only from wealth already on hand. From the economic point of view, the present generation wages war, and it must also bear all material costs of war. Future generations are also affected only insofar as they are our heirs and we leave less to them than we would have been able to leave without the war's intervening. Whether the state now finances the war by debts or otherwise ran change nothing about this fact. That the greatest part of the war costs was financed by state loans in no way signifies a shifting of war burdens onto the future but only a particular principle of distributing the war costs. If, e.g., the state had to take half of his wealth from each citizen to be able to pay for the war financially, then it is fundamentally a matter of indifference whether it does so in such a way that it imposes a onetime tax on him of half of his wealth or takes from him every year as a tax the amount that corresponds to interest payments on half of his wealth. It is fundamentally a matter of indifference to the citizen whether he has to pay 50,000 crowns as tax one time or pay the interest on 50,000 crowns year in, year out. This becomes of greater significance, however, for all those citizens who would not be able to pay the 50,000 crowns without incurring debt, those who would first have to borrow the share of tax falling on them. For they would have to pay more interest on these loans that they take out as private parties than the state, which enjoys the cheapest credit, pays to its creditors. If we set this difference between the dearer private credit and the cheaper state credit at only one percentage point, this means, in our example, a yearly saving of 500 crowns for the taxpayer. If year after year he has to pay his contribution to interest on his share of the state debt he saves 500 crowns in comparison with the amount that he would have had to pay every year as interest on a private loan that would have enabled him to pay the temporary high war taxes.
The more socialist thinking gained strength in the course of the war, the more were people bent on covering the war costs by special taxes on property.
The idea of subjecting additional income and the growth of property obtained during the war to special progressive taxation need not, fundamentally, be socialistic. In and of itself the principle of taxation according to ability to pay is not socialistic. It cannot be denied that those who achieved a higher income in the war than in peacetime or had increased their property were ceteris paribus more able to pay than those who did not succeed in increasing their income or their property. Moreover, one can quite rule out the question of how far these nominal increases in wealth and income were to be regarded as real increases in income and wealth and whether it was not a question here merely of nominal increases in amounts expressed in money in consequence of the decline in the value of money. Someone who had an income of 10,000 crowns before the war and increased it during the war to 20,000 crowns doubtless found himself in a more favorable position than someone who had remained with his prewar income of 10,000 crowns. In this disregard of the value of money, which only goes without saying in view of the general tenor of German and Austrian legislation, there did lie, to be sure, a deliberate disadvantaging of movable capital and a deliberate preference for landowners, especially farmers.
The socialistic tendencies of war-profit taxation came to light above all in their motives. War-profit taxes are supported by, the view that all entrepreneurial profit represents robbery from the community as a whole and that by rights it should be entirely taken away. This tendency comes to light in the scale of the rates, which more and more approach complete confiscation of the entire increase in property or income and doubtless finally will reach even this goal set for them. For one should indeed suffer no illusion about the fact that the unfavorable opinion of entrepreneurial income manifested in these war taxes is not attributable to wartime conditions alone and that the line of argument used for the war taxes—that in this time of national distress every increase in wealth and every increase in income is indeed unethical—can also be maintained in the period after the war with the same justification, even if with differences in detail.
Socialistic tendencies are also quite clear in the idea of a one-time capital levy. The popularity that the slogan about a one-time capital levy enjoys, a popularity so great that it makes any serious discussion of its appropriateness quite impossible, can be explained only by the entire population's aversion to private property. Socialists and liberals will answer quite differently the question whether a one-time property tax is preferable to a current one. One can refer to the fact that the current, yearly recurring, property tax offers the advantage in comparison with the one-time property tax that it does not remove capital goods from the disposal of the individual (quite apart from the fact that it is fairer and more uniform, since it permits errors made in one year's assessment to be corrected the next year and that it is independent of the accident of possession and evaluation of property at a particular moment because it deals with property year in and year out according to the current amount of wealth that it constitutes). When someone operates an enterprise with a capital of his own of 100,000 marks, then it is not at all a matter of indifference to him whether he has to pay an amount of 50,000 marks at one time as a property tax or pay each year only the amount corresponding to the interest that the state has to pay on a debt of 50,000 marks. For it is to be expected that with this capital beyond the amount that the state would have to demand from him for paying interest on the 50,000 marks, he could earn a profit that he could then keep. This is not what is decisive for the liberal's position, however, but rather the social consideration that by the one-time capital levy the state would transfer capital out of the hands of entrepreneurs into the hands of capitalists and lenders. If the entrepreneur is to carry on his business after the capital levy on the same scale as before it, then he must acquire the missing amount by obtaining credit, and as a private party he will have to pay more interest than the state would have had to pay. The consequence of the capital levy will therefore be a greater indebtedness of the enterprising strata of the population to the non-enterprising capitalists, who, as a result of the reduction of the war debt, will have exchanged part of their claims on the state for claims on private parties.
The socialists, of course, go still further. They want to use the capital levy not only for lightening the burden of war debts—many of them want to get rid of war debts in a simple manner by state bankruptcy—but they demand the capital levy in order to give the state shares of ownership in economic enterprises of all kinds, in industrial corporations, in mining, and in agricultural estates. They campaign for it with the slogan about the state's and society's sharing in the profit of private enterprises.Cf. above all Goldscheid, Staatssozialismus oder Staatskapitalismus, fifth edition (Vienna: 1917); idem., Sozialisierung der Wirtschaft oder Staatsbankerott (Vienna: 1919). As if the state were not sharing in the profits of all enterprises through tax legislation anyway, so that it does not first need a civil-law title to draw profit from the enterprises. Today the state shares in the profits of enterprises without being obliged to cooperate at all in the management of the production process and without being exposed to harm in any way by possible losses of the enterprise. If, however, the state owns shares in all enterprises, it will also share in losses; moreover, it will even be forced to concern itself with the administration of individual businesses, just that, however, is what the socialists want.
The authoritarian-militaristic spirit of the Prussian authoritarian state finds its counterpart and completion in the ideas of German Social Democracy and of German socialism in general. To hasty observation the authoritarian state and Social Democracy appear as irreconcilable opposites between which there is no mediation. It is true that they confronted each other for more than fifty years in blunt hostility. Their relation was not that of political opposition, as occurs between different parties in other nations also; it was complete estrangement and mortal enmity. Between Junkers and bureaucrats on the one hand and Social Democrats on the other hand, even every personal, purely human contact was ruled out; scarcely ever did one side or the other make an attempt to understand its opponent or have a discussion with him.
The irreconcilable hatred of the monarchy and of the Junker class did not concern, however, the social-economic program of the Social Democratic Party. The program of the German Social Democratic Party contains two elements of different origins tied together only loosely. It includes on the one hand all those political demands that liberalism, especially its left wing, represents and also has partly implemented already in most civilized states. This part of the Social Democratic Party program is built on the great political idea of the national state, which wants to dissolve the princely and authoritarian state and turn the subject into a citizen of the state. That the Social Democratic Party has pursued this goal, that it took the banner of democracy from the enfeebled hands of dying German liberalism and alone held it high in the darkest decades of German politics despite all persecutions—that is its great pride and fame, to which it owes the sympathy that the world accords it and that first brought it many of its best men and the masses of the oppressed and of "bourgeois fellow-travelers." The very fact, however, that it was republican and democratic drew onto it the inextinguishable hatred of the Junkers and bureaucrats; that alone brought it into conflict with authorities and courts and made it into an outlawed sect of enemies of the state, despised by all "right-thinking people."
The other component of the program of German Social Democracy was Marxian socialism. The attraction that the slogan about the capitalistic exploitation of the workers and that the promising utopia of a future state exerted on the great masses was the basis of an imposing party and labor-union organization. Many, however, were won over to socialism only through democracy. As the German bourgeoisie, after the annihilating defeats that German liberalism had suffered, submitted unconditionally to the authoritarian state of Bismarck, as, in line with the German protective-tariff policy, the German entrepreneurial class identified itself with the Prussian state, so that militarism and industrialism became politically related concepts for Germany, then the socialist side of the party program absorbed new strength from democratic aspirations. Many refrained from criticizing socialism in order not to harm the cause of democracy. Many became socialists because they were democrats and believed that democracy and socialism were inseparably connected.
In truth, though, close relations exist precisely between socialism In regard to economic policy, socialism and communism are identical; both strive for socialization of the means of production, in contrast with liberalism, which wants on principle to let private ownership even of the means of production continue. The distinction that has recently come into use between socialism and communism is irrelevant with regard to economic policy unless one also foists on the communists the plan of wanting to discontinue private ownership of consumption goods. On centralist and syndicalist socialism (actually, only centralist socialism is true socialism), see below, pp, 195 ff. and the autocratic-authoritarian form of state that correspond to the essence of both.On the intimate relation between militarism and socialism, cf. Herbert Spencer, loc. cit., vol. 3, p. 712. The imperialistic tendencies of socialism are treated by Seillière, Die Philosophie des Imperialismus, second edition of the German version (Berlin: 1911), vol. 2, pp. 171 ff., vol. 3, pp. 59 ff. Sometimes socialism does not even outwardly deny its intimate relation with militarism. That comes to light especially clearly in those socialistic programs that want to arrange the future state on the model of an army, Examples: wanting to solve the social question by setting up a "food army" or a "worker army" (cf Popper-Lynkeus, Die allegemeine Nährpflicht (Dresden: 1912], pp. 373 ff.; further, Ballod, Der Zukunftsstaat, second edition, [Stuttgart: 1919], pp. 32 ff.). The Communist Manifesto already demands the "establishment of industrial armies." It should be noted that imperialism and socialism go hand in hand in literature and politics. Reference was already made earlier (pp. 94 ff.) to Engels and Rodbertus; one could name Many others, e.g., Carlyle (cf Kemper, "Carlyle als Imperialist," Zeitschrift für Politik, XI, 115 ff.). Australia, which, as the only one among the Anglo-Saxon states, has turned away from liberalism and come closer to socialism than any other country, is the imperialistic state par excellence in its immigration legislation. For that reason the authoritarian state also did not fight socialist efforts at all as harshly as it confronted all democratic impulses. On the contrary, the Prussian-German authoritarian state evolved strongly toward the side of "social kingship" and would have turned still more toward socialism if the great workers' party of Germany had been ready even before August 1914 to give up its democratic program in exchange for the gradual realization of its socialistic goals.
The sociopolitical doctrine of Prussian militarism can best be recognized in the literary products of the Prussian school of economic policy. Here we find complete harmony established between the ideal of the authoritarian state and that of a far-reaching socialization of large industrial enterprise. Many German social thinkers reject Marxism—not, however, because they reject its goals but because they cannot share its theoretical interpretation of social and economic developments. Marxism, whatever one may say against it, nevertheless has one thing in common with all scientific economics: it recognizes a conformity to law in the historical process and presupposes the causal interconnection of all that happens. German statism could not follow it in this respect because it sees everywhere only marks of the activity of great kings and powerful states. The heroic and teleological interpretation of history seems more obvious to statism than the causal; it knows no economic law; it denies the possibility of economic theory.This spirit of hostility to theoretical investigation has also infected the German Social Democrats. It is characteristic that just as theoretical economics could flourish on German-speaking territory only in Austria, so also the best representatives of German Marxism, Kautsky, Otto Bauer, Hilferding, and Max Adler, come from Austria. In that respect Marxism is superior to German social-policy doctrine, which has no theoretical basis at all and never has sought to create one. All social problems appear to this school as tasks of state administration and politics, and there is no problem on whose solution it does not venture with a light heart. Always, however, it is the same prescription that it issues: commands and prohibitions as lesser means, state ownership as the great, never-failing means.
Under such circumstances Social Democracy had an easy position. Marxian economic theory, which in Western Europe and America was able to win only a small following and was not able to assert itself alongside the accomplishments of modern economic theory, did not have to suffer much under the criticism of the empirical-realistic and historical school of German economics. The critical work to be done against Marxian economic theory was carried out by the Austrian school, ostracized in Germany, and above all by Böhm-Bawerk.It is naturally not intended here to undertake a critical assessment of Marxism. The discussion in this section is intended only to explain the imperialistic tendencies of socialism. Also, enough writings are available anyway to whoever is interested in these problems (e.g., Simkhowitsch, Marxismus versus Sozialismus, translated by Jappe Jena; 1913]). Marxism could easily dispose of the Prussian school; it was dangerous to it not as an opponent but as a friend. Social Democracy had to take care to show that social reform such as German social policy strove for could not replace the social revolution and that state ownership in the Prussian sense was not identical with socialization. This demonstration could not succeed, but its failure did not damage Social Democracy. For it was, after all, the party eternally condemned to fruitless opposition, which was always able to make capital for its party position precisely out of the defects of the social-reform and socialization measures.
That Social Democracy became the most powerful party in the German Reich it owes primarily to the democratic part of its program, taken over as the heir of liberalism. That, however, socialism as such also enjoys the greatest sympathy among the German people, so that only isolated voices speak out seriously and in principle against socialization and that even so-called bourgeois parties want to socialize the branches of production that are "ripe" for socialization—that is the result of the propaganda work that statism has performed. Socialist ideas constitute no victory over the Prussian authoritarian state but are its consistent development; their popularity in Germany has been furthered no less by the academic socialism of privy councilors than by the propaganda work of Social Democratic agitators.
Among the German people today, thanks to the views advocated for fifty years by the Prussian school of economic policy, there is no longer even any understanding of what the contrast between liberalism in economic policy and socialism really consists of. That the distinction between the two orientations lies not in the goal but in the means is not clear to many. Even to the antisocialist German, socialism appears as the sole just form of economic organization, assuring the people the most abundant satisfaction of their needs; and if he himself opposes it, he does so in the consciousness of resisting what is best for the common interest, doing so for his own benefit because he feels himself threatened in his rights or privileges. The bureaucrats mostly take this position, which is often enough found, however, among entrepreneurs also. It has long been forgotten in Germany that liberalism also, just as socialism does, recommends its economic system out of concern not for the interests of individuals but for those of all, the great masses. That "the greatest happiness of the greatest number" should he the goal of policy was first maintained by a radical free-trader, Jeremy Bentham. Bentham also carried on his famous struggle against usury laws, for example, not out of concern for the interests of the moneylenders but out of concern for the interests of all.Cf. Bentham, Defence of Usury, second edition (London: 1790), pp. 108 f. The point of departure of all liberalism lies in the thesis of the harmony of rightly understood interests of individuals, of classes, and of peoples. It rejects the basic idea of Mercantilism that the advantage of the one is the disadvantage of the other. That is a principle that may hold true for war and plunder; for economics and trade it does not hold. Therefore liberalism sees no basis for opposition between classes; therefore it is pacifist in relations between peoples. Not because it considers itself called upon to represent the special interests of the possessing classes does it advocate maintenance of private ownership of the means of production, but rather because it sees the economic order resting on private ownership as the system of production and distribution that assures the best and highest material satisfaction for all sections of the people. And just as it calls for free trade at home not out of regard for particular classes but out of regard for the welfare of all, so it demands free trade in international relations not for the sake of foreigners but for the sake of one's own people.
Interventionist economic policy takes another standpoint. It sees irreconcilable antagonisms in relations among states. Marxism, however, has proclaimed the doctrine of class struggle; on the irreconcilable opposition of classes it erects its doctrine and its tactics.
In Germany liberalism was never understood; it never found a base here. Only thus can it be explained that even the opponents of socialism more or less accepted socialist doctrines. That appears most clearly in the position of the opponents of socialism on the problem of the class struggle. Marxian socialism preaches the struggle of the proletariat against the bourgeoisie. Elsewhere this battle cry is opposed by that of the solidarity of interests. Not so in Germany. Here the proletarians are confronted by the bourgeoisie as a class. The united bourgeois parties confront the proletarian party. They do not see that in this way they recognize the argumentation of the Marxists as correct and thereby make their struggle hopeless. He who can adduce in favor of private ownership of the means of production nothing other than that its abolition would harm the rights of the possessors limits the supporters of the antisocialist parties to the nonproletarians. In an industrial state the "proletarians" naturally have numerical superiority over the other classes. If party formation is determined by class membership, then it is clear that the proletarian party must gain victory over the others.
The question whether or not our economic development is already "ripe" for socialism originates in the Marxian idea of the development of the productive forces. Socialism can be realized only when its time has come. A form of society cannot perish before it has developed all the productive forces that it is capable of developing; only then is it replaced by another, higher, form. Before capitalism has lived out its course, socialism cannot take over its inheritance.
Marxism likes to compare the social revolution with birth. Premature births are failures; they lead to the death of the new creature.Cf. Kautsky, Die Soziale Revolution, loc. cit., I, pp. 13 ff. From this point of view Marxists inquire whether the attempts of the Bolsheviks in Russia to establish a socialist commonwealth are not premature. It must be difficult indeed for the Marxist, who regards a definite degree of development of the capitalistic mode of production and of heavy industry as a necessary condition for the appearance of socialism, to understand why socialism has achieved victory precisely in the Russia of small peasants and not in highly industrialized Western Europe or in the United States.
It is different when the question is raised whether or not this or that branch of production is ripe for socialization. This question is as a rule posed in such a way that the very posing of the question basically admits that socialized enterprises in general yield smaller outputs than those operating under private ownership and that, therefore, only particular branches of production should be socialized in which no excessive disadvantages are to be expected from this lesser productivity. Thus it is explained that mines, above all coal mines, are already ripe for socialization. Obviously people thus proceed from the view that it is easier to operate a mine than, say, a factory producing for the fashion market; people evidently believe that mining only involves exploiting the gifts of nature, which even the ponderous socialist enterprise can manage. And, again, when others regard the large industrial enterprise as above all ripe for socialization, they are proceeding from the idea that in the large enterprise, which already is working with a certain bureaucratic apparatus anyway, the organizational preconditions for socialization are given. Such ideas involve a serious fallacy. To prove the necessity of the socialization of particular enterprises, it is not enough to show that socialization does little harm in them because they still would not fail then even if they did work more poorly than would be the case under the administration of private enterprise. Whoever does not believe that socialization brings a rise of productivity would, to be consistent, have to consider any socialization as mistaken.
We can also find a hidden admission of the lesser productivity of the economy in a socialist social order in the idea on which many writers base the proposition that the war has set us back in development and has, therefore, further postponed the time of ripeness for socialism. Thus, Kautsky says: "Socialism, that is, general welfare within modern civilization, becomes possible only through the great development of productive forces that capitalism brings, through the enormous riches that it creates and that are concentrated in the hands of the capitalist class. A state that has squandered these riches through a senseless policy, perhaps an unsuccessful war, offers from the outset no favorable point of departure for the quickest diffusion of welfare in all classes."Cf. Kautsky, Die Diktatur des Proletariats, second edition, (Vienna: 1918), p. 40. Whoever—like Kautsky—expects a multiplication of productivity from socialistic production would, however, really have to see one more reason for hastening socialization precisely in the fact that we have become poorer because of the war.
The liberals are much more consistent in this. They are not waiting for another mode of production, perhaps the socialist one, to make the world ripe for liberalism; they see the time for liberalism as always and everywhere given, since, in general and without exception, they assert the superiority of the mode of production resting on private ownership of the means of production and on the free competition of producers.
The way that the socialization of enterprises would have to take place is clearly and distinctly indicated by the public ownership measures of the states and municipalities. One could even say that the administrative art of German states and cities is no more familiar than this practice, which has been followed for many years. With regard to administrative technique, socialization is nothing new, and the socialist governments that are now at work everywhere would have to do nothing beyond continuing what their predecessors in state and communal socialism have already done before.
Of course, neither the new power-holders nor their constituents want to hear anything about that. The masses, which today stormily demand the most rapid accomplishment of socialism, imagine it as something quite different from the extension of state and municipal enterprise. Indeed, they have heard from their leaders again and again that these public enterprises have nothing in common with socialism. What socialization should be, however, if not state and municipal ownership, no one can say.According to Engels (Herrn Eugen Dührings Umwälzung der Wissenschaft, seventh edition [Stuttgart: 11910], p. 299 n.), referring to "the case in which the means of production or of transport and communications have really outgrown the control by corporations and in which state ownership has thus become economically imperative," state ownership means economic progress and "the attainment of a new stage in the taking possession of all productive forces by society itself, even when the state of today carries it out." What Social Democracy previously cultivated is now bitterly taking revenge on it, namely, its always engaging for decades only in demagogic everyday politics and not in principled politics for the final triumph. In fact, Social Democracy has long since given up centralist socialism; in daily politics it has ever more and more become union- oriented, syndicalistic, and, in the Marxian sense, "petty bourgeois." Now syndicalism raises its demands, which stand in irreconcilable contradiction to the program of centralist socialism.
Both orientations have one point in common: they want to make the worker the owner of the means of production again. Centralist socialism wants to achieve this by making the whole working class of the entire world or at least of an entire country the owner of the means of production; syndicalism wants to make the work forces of individual enterprises or individual branches of production the owners of the means of production that they use. The ideal of centralist socialism is at least discussible; that of syndicalism is so absurd that one need waste few words on it.
One of the great ideas of liberalism is that it lets the consumer interest count alone and disregards the producer interest. No production is worth maintaining if it is not suited to bring about the cheapest and best supply. No producer is recognized as having a right to oppose any change in the conditions of production because it runs counter to his interest as a producer. The highest goal of all economic activity is the achievement of the best and most abundant satisfaction of wants at the smallest cost.
This position follows with compelling logic from the consideration that all production is carried on only for the sake of consumption, that it is never a goal but always only a means. The reproach made against liberalism that it thereby takes account only of the consumer viewpoint and disdains labor is so stupid that it scarcely needs refutation. Preferring the producer interest over the consumer interest, which is characteristic of antiliberalism, means nothing other than striving artificially to maintain conditions of production that have been rendered inefficient by continuing progress. Such a system may seem discussible when the special interests of small groups are protected against the great mass of others, since the privileged party then gains more from his privilege as a producer than he loses on the other hand as a consumer; it becomes absurd when it is raised to a general principle, since then every individual loses infinitely more as a consumer than he may be able to gain as a producer. The victory of the producer interest over the consumer interest means turning away from rational economic organization and impeding all economic progress.
Centralist socialism knows this very well. It joins liberalism in fighting all traditional producer privileges. It proceeds from the view that there would he no producer interest at all in the socialist commonwealth, since each one would recognize there that the consumer interest alone is worth considering. Whether or not this assumption is justified will not be discussed here; it is immediately evident that if it should not hold true, socialism could not be what it pretends to be.
Syndicalism deliberately places the producer interest of the workers in the foreground. In making worker groups owners of the means of production (not in so many words but in substance), it does not abolish private property. It also does not assure equality. It does remove the existing inequality of distribution but introduces a new one, for the value of the capital invested in individual enterprises or sectors of production does not correspond at all to the number of workers employed in them. The income of each single worker will be all the greater, the smaller the number of fellow workers employed in his enterprise or sector of production and the greater the value of the material means of production employed in it. The syndicalistically organized state would be no socialist state but a state of worker capitalism, since the individual worker groups would be owners of the capital. Syndicalism would make all repatterning of production impossible; it leaves no room free for economic progress. In its entire intellectual character it suits the age of peasants and craftsmen, in which economic relations are rather stationary.
The centralist socialism of Karl Marx, which once had triumphed over Proudhon and Lassalle, has, in the course of development of recent decades, been pushed back step by step by syndicalism. The struggle between the two views, which outwardly occurred in the form of a struggle between the political-party organization and the labor-union organization and behind the scenes took on the shape of a struggle of leaders risen from the working class against intellectual leaders, has ended with a complete victory of syndicalism. The theories and writings of the party chiefs still outwardly wear the garment of centralist socialism, but the practice of the party has gradually become syndicalist, and in the consciousness of the masses the syndicalist ideology lives exclusively. The theoreticians of centralist socialism have not had the courage—out of tactical concerns, because they wanted to avoid an open breach between the two positions, as in France—to take a decisive stand against the syndicalist policy; if they had mustered the courage for that, they would doubtless have been defeated in this struggle. In many respects they have directly furthered the development of the syndicalist line of thinking, since they fought the development toward centralist socialism that was taking place under the leadership of statist socialism. They had to do this, on the one hand to mark a sharp distinction between their position and that of the authoritarian state, and on the other hand because the economic failures being caused by state and municipal ownership were, after all, becoming so broadly and generally visible that they could become dangerous to the ardent enthusiasm with which the masses were following the obscure ideal of socialism. If one kept pointing out again and again that state railroads and city lighting works were in no way a first step toward realizing the state of the future, one could not educate the population in favor of centralist socialism.
As workers had become unemployed through introduction of improved methods of work, it was syndicalism that sought to destroy the new machines. Sabotage is syndicalistic; in the final analysis, however, every strike is also syndicalistic; the demand for introduction of the social protective tariff is syndicalistic. In a word, all those means of the class struggle that the Social Democratic Party did not want to give up because it feared losing influence on the working masses only stimulated the syndicalistic—Marx would have said "petty-bourgeois"—instincts of the masses. If centralist socialism has any adherents at all today, this is not the accomplishment of Social Democratic agitation but of statism. State and municipal socialism provided publicity for centralist socialism by putting socialism into practice; academic socialism provided literary propaganda for it.
What is going on before our eyes today is of course neither centralist socialism nor syndicalism; it is not organization of production at all and also not organization of distribution, but rather distribution and consumption of consumer goods already on hand and annihilation and destruction of means of production already on hand. Whatever is still being produced is being produced by the remnants of the free economy that are still allowed to exist; wherever this socialism of today has already penetrated, there is no longer any question of production. The forms in which this process is occurring are manifold. Strikes shut enterprises down, and where work is still being done, the ca' canny system itself sees to it that the output is only slight. By high taxes and by compulsion to pay high wages to the workers even when there is no work for them, the entrepreneur is forced to consume his capital. Working in the same direction is inflationism, which, as has been shown, conceals and thereby fosters capital consumption. Acts of sabotage by the workers and inept interventions by the authorities destroy the material apparatus of production and complete the work that war and revolutionary struggles began.
In the midst of all this destruction only agriculture remains, above all small farms. It too has suffered severely under the circumstances, and here too much of the working capital has already been consumed, and ever more of it is being consumed. The large units will probably be socialized or even broken up into small farms. In any case, their productive power will thereby suffer, even apart from the impairment of their capital. Still, the devastation of agriculture remains relatively slight in comparison with the ever-worsening dissolution of the apparatus of industrial production.
The dying out of the spirit of social cooperation, which constitutes the essence of the social revolutionary process that is occurring before our eyes, must entail different consequences in industry, in transport, and in trade—in short, in the city—than in agriculture. A railroad, a factory, a mine simply cannot be operated without that spirit, on which the division of labor and the coordination of labor rest. It is otherwise in agriculture. If the peasant withdraws from exchange and shifts his production back to the autarky of the self-sufficient household economy, he does live worse than he once lived, but he can keep on living anyway. Thus we see the peasantry becoming ever more and more self-sufficient. The peasant is again beginning to produce everything that he wishes to consume in his household and, on the other hand, to cut back his production for the needs of the city-dweller.That holds true of German-Austria especially. In the Reich the conditions are still different for the time being.
What that means for the future of the city population is clear. The industry of Germany and German-Austria has largely lost its foreign market; now it is losing the domestic market also. When work in the workshops is again resumed, the peasants will face the question whether it is not more advantageous for them to obtain industrial products cheaper and better from abroad. The German peasant will again be a free-trader, as he had been up to 40 years ago.
It is scarcely thinkable that this process should go on in Germany without the greatest disruptions. For it does signify no less than the decay of German urban civilization, the slow starvation of millions of German city-dwellers.
If revolutionary syndicalism and destructionism should not remain limited to Germany but instead should spread over all Europe and even to America also, then we would face a catastrophe comparable only with the collapse of the ancient world. Ancient civilization also was built on a far-reaching division of labor and coordination of labor; in it too the—even if limitedWe too have never really had "free competition."—operation of the liberal principle had brought about a great flourishing of material and intellectual culture. All that disappeared as the immaterial bond that held this whole system together, the spirit of social cooperation, disappeared. In the dying Roman Empire also the cities were depopulated; the man who owned no land sank into misery; whoever could somehow do so moved to the countryside to escape starvation.Numerous documents in late Roman legal sources. Cf., e.g., 1. un. C. Si curialis relicta civitate rus habitare maluerit, X, 37. Then, too, there occurred, accompanied outwardly by the most severe disturbances of the monetary system, the process of reversion of the monetary economy to a barter economy, the exchange economy to the economy without exchange. The modern process would differ from the decline of ancient civilization only in that what once occurred over centuries would now complete itself in an incomparably more rapid tempo.
The pages that I herewith submit to the public do not presume to be more than observations about the crisis in world history that we are living through and contributions to understanding the political conditions of our time. I know that any attempt to offer more would be premature and therefore mistaken. Even if we were in a position to see interrelations clearly and to recognize where developments are heading, it would be impossible for us to confront the great events of our day objectively and not let our view be blurred by wishes and hopes. Standing in the middle of battle, one strives in vain to keep cool and calm. It exceeds human capacity to treat the vital questions of one's time sine ira et studio [without anger and partiality]. I should not be blamed for not being an exception to this rule.
It may perhaps seem that the topics treated in the individual parts of this book hang together only superficially. Yet I believe that they are closely connected by the purpose that this study serves. Of course, reflections of this kind, which must always remain fragmentary, cannot deal with the completeness and unity of the whole. My task can only be to direct the reader's attention to points that public discussion does not usually take sufficiently into account.
Vienna, beginning of July 1919
Professor Dr. L. Mises
[Audio and epub editions forthcoming.]
In June 2004, Professor Hoppe visited the Mises Institute in Auburn to deliver an ambitious series of lectures titled Economy, Society, and History.
Over ten lectures, one each morning and afternoon for a week, Dr. Hoppe presented nothing short of a sweeping historical narrative and vision for a society rooted in markets and property. Delivered only from notes, to an audience of academics and intellectuals, the lectures showed astonishing depth and breadth.Even the most jaded scholars in the room were blown away by the erudition and scholarship of Hoppe’s presentation.
This project brings together the core of Hoppe’s lifetime of theoretical work in one vital and cohesive source. Here we find provocative themes developed by Hoppe in the 1980s and 90s, particularly in his essays found in A Theory of Socialism and Capitalism and The Economics and Ethics of Private Property. We also find his devastating critique of democracy, made famous in his seminal book Democracy—The God That Failed.
We’ve taken the recordings, edited them, and put them into a printed book. As always, Hoppe is equipped—and unafraid— to tackle history, anthropology, philosophy, sociology, ethics, politics, and economics, melding them into one coherent thesis:
Chapter 1: The Nature of Man and the Human Condition: Language, Property, and Production Property developed naturally, not artificially, as a consequence of human action. What is the philosophical justification for private property, and what does property mean for economics and justice?
Chapter 2: The Spread of Humans Around the World: The Extension and Intensification of the Division of LaborHow did man evolve to develop trade and specialization? What did that mean for the development of society?
Chapter 3: Money and Monetary Integration: The Growth of Cities and the Globalization of TradeMoney solves problems of barter and trade; good money makes global economics possible. But money is always and forever subject to corrupting monopolization by states and central banks. How do we separate money from the state, and separate trade from politics?
Chapter 4: Time Preference, Capital, Technology, and Economic GrowthTime, and our preference for present goods over future goods, informs everything we do. Low time preference, demonstrated by capital accumulation, is the key to advancing civilization. How do we encourage capital accumulation when the forces of statism work against us?
Chapter 5: The Wealth of Nations: Ideology, Religion, Biology, and EnvironmentHow did the West get rich? What intellectual movements threaten progress, or advance it?
Chapter 6: The Production of Law and Order: Natural Order, Feudalism, and FederalismMust law be positive rather than evolved? Who creates it, and who enforces it?
Chapter 7: Parasitism and the Origin of the StateHow did we get here? How does the ruling class derive its putative legitimacy, and what can the distant origins of governance teach us about the vast managerial social welfare states we endure today?
Chapter 8: From Monarchy to DemocracyIs democracy really the great advancement in human liberty we have been taught to believe? What is the role of natural and artificial elites?
Chapter 9: State, War, and ImperialismStates are necessarily expansionist and bellicose. How do we tame their warring and intervening nature?
Chapter 10: Strategy: Secession, Privatization, and the Prospects of LibertyCan private covenant communities replace the state? Why is a private property order morally urgent? Is secession viable? How do we move forward strategically?
As you can see, this book is a tremendous addition to Hoppe’s body of work, and a hugely important contribution to the “big picture” outlook for the West. Hoppe’s work is more important today than ever, given the penchant of modern bureaucratic states to war, intervene, tax, regulate, debase, and generally plunder the engines of peace and civilization.
Economy, Society, and History is a blueprint for understanding the world, rethinking it, and creating a better one.
The clearer it had to become in the course of the war that the Central Powers were bound to be finally defeated in the war of starving out, the more energetically were references made from various sides to the necessity of preparing better for the next war. The economy would have to be reshaped in such a way that Germany would be capable of withstanding even a war of several years. It would have to be able to produce inside the country everything required for feeding its population and for equipping and arming its armies and fleets in order to be no longer dependent on foreign countries in this respect.
No long discussions are needed to show that this program cannot be carried out. It cannot be carried out because the German Reich is too densely populated for all foodstuffs needed by its population to be produced at home without use of foreign raw materials and because a number of raw materials needed for production of modern war material just do not exist in Germany. The theorists of the war economy commit a fallacy when they try to prove the possibility of an autarkic German economy by reference to the usability of substitute materials. One supposedly must not always use foreign products; there are domestic products scarcely inferior to foreign ones in quality and cheapness. For the German spirit, which has already famously distinguished itself in applied science, a great task arises here which it will solve splendidly. The efforts previously made in this field have led to favorable results. We are said already to be richer now than we were before, since we have learned how to exploit better than before materials that earlier were neglected or were used for less important purposes or not fully used.
The error in this line of thinking is obvious. It may well be true that applied science is far from yet having spoken the last word, that we may still count on improvements in technology that will be no less significant than the invention of the steam engine and of the electric motor. And it may happen that one or the other of these inventions will find the most favorable preconditions for its application precisely on German soil, that it will perhaps consist precisely in making useful a material that is abundantly available in Germany. But then the significance of this invention would lie precisely in shifting the locational circumstances of a branch of production, in making the productive conditions of a country that were previously to be regarded as less favorable more favorable under the given circumstances. Such shifts have often occurred in history and will occur again and again. We will hope that they occur in the future in such a way that Germany will become, to a higher degree than at present, a Country of more favorable conditions of production. If that should happen, then many burdens will be lifted from the German people.
Yet these changes in the relative pattern of conditions of production must be sharply distinguished from introducing the use of substitute materials and producing goods under worse conditions of production. One can of course usse linen instead of cotton and wooden soles instead of leather soles. However, in the former case one has replaced a cheaper by a dearer material, that is, by one in whose production more costs must be incurred, and in the latter case a better by a less usable material. That means, however, that the meeting of needs becomes worse. That we use paper sacks instead of jute sacks and iron tires on vehicles instead of rubber tires, that we drink "war" coffee instead of real coffee, shows that we become poorer, not richer. And if we now carefully put to use garbage that we had earlier thrown away, then this makes us richer just as little as if we obtained copper by melting works of art.Cf. Dietzel, Die Nationalisierung der Kriegsmilliarden (Tübingen: 1919), pp. 31 ff. To be sure, living well is not the highest good; and there may be reasons for peoples as well as individuals to prefer a life of poverty to a life of luxury. But then let that be said openly without taking refuge in artificial theorems that try to make black out of white and white out of black; then let no one seek to obscure the clear case by allegedly economic arguments.Not only economists have been active in this direction; still more has been done by technicians, but most by physicians. Biologists who, before the war, declared the nutrition of the German industrial worker to be inadequate suddenly discovered during the war that food poor in protein is especially wholesome, that fat consumption in excess of the quantity permitted by the authorities is damaging to health, and that a limitation of the consumption of carbohydrates has little significance.
It should not be disputed that war needs can beget and, in fact, have begotten many useful inventions. How much they represent a lasting enrichment of the German economy can be known only later.
Only those proponents of the idea of autarky who subordinate all other goals to the military one are thinking consistently. He who sees all values as realized only in the state and thinks of the state above all as a military organization always ready for war must demand of the economic policy of the future that it strive, pushing all other considerations aside, to organize the domestic economy for self-sufficiency in case of war. Regardless of the higher costs that thereby arise, production must be guided into the channels designated as most suitable by the economic general staff. If the standard of living of the population thereby suffers, well, in view of the high objective to be attained, that does not count at all. Not the standard of living is the greatest happiness of people, but fulfillment of duty.
But there is a grave error in this line of thinking also. Admittedly it is possible, if one disregards costs, to produce within the country everything necessary for waging war. But in war it is important not only that weapons and war material just be on hand but also that they be available in sufficient quantity and in best quality. A people that must produce them under more unfavorable condition of production, that is, with higher costs, will go into the field worse provisioned, equipped, and armed than its opponents. Of course, the inferiority of material supplies can to a certain extent be offset by the personal excellence of the combatants. But we have learned anew in this war that there is a limit beyond which all bravery and all sacrifice are of no use.
From recognition that efforts for autarky could not be carried through, there arose the plan for a future state stockpiling system. In preparation for the possible return of a war of starvation, the state must build up stockpiles of all important raw materials that cannot be produced at home. In that connection a large stock of grain was also thought of, and even stocks of fodder.Cf. Hermann Levy, Vorratswirtschaft und Volkwirtschaft (Berlin: Verlag von Julius,Springer), 1915, pp. 9 ff.; Naumann, Mitteleuropa; pp. 149 f; Diehl, Deutschland als geschlossener Handelstaat im Weltkrieg (Stuttgart: 1916), pp. 28 f.
From the economic standpoint, the realization of these proposals does not seem inconceivable. From the political standpoint, though, it is quite hopeless. It is scarcely to be assumed that other nations would calmly look on at the piling up of such war stocks in Germany and not, for their part, resort to countermeasures. To foil the whole plan, they indeed need only watch over the exports of the materials in question and each time permit the export only of such quantities as do not exceed the current demand.
What has quite incorrectly been called war economy is the economic preconditions for waging war. All waging of war is dependent on the state of the division of labor rached at the time. Autarkic economies can go to war against each other; the individual parts of a labor and trade community can do so, however only insofar as they are in a position to go back to autarky. For that reason, with the progress of the division of labor we see the number of wars and battles diminishing ever more and more. The spirit of industrialism, which is indefatigably active in the development of trade relations, undermines the warlike spirit. The great steps forward that the world economy made in the age of liberalism considerably narrowed the scope remaining for military actions. When those strata of the German people who had the deepest insight into the world economic interdependence of the individual national economies doubted whether it was still at all possible that a war could develop and, if that should happen at all, expected at most a war that would end quickly, they thereby showed better understanding of the realities of life than those who indulged in the delusion that even in the age of world trade one could practice the political and military principles of the Thirty Years' War.
When one examines the catchword about war economy for its content, it turns out that it contains nothing other than the demand to turn economic development back to a stage more favorable for waging war than the 1914 stage was. It is a question only of how far one should go in doing that. Should one go back only as far as to make warfare between great states possible, or should one try to make warfare possible between individual parts of a country and between city and countryside also? Should only Germany be put in a position to wage war against the entire remaining world, or should it also be made possible for Berlin to wage war against the rest of Germany?
Whoever on ethical grounds wants to maintain war permanently for its own sake as a feature of relations among peoples must clearly realize that this can happen only at the cost of the general welfare, since the economic development of the world would have to be turned back at least to the state of the year 1830 to realize this martial ideal even only to some extent.
The question whether so-called war socialism is true socialism has been discussed repeatedly and with great passion. Some have answered yes just as firmly as others have answered no. In that connection the striking phenomenon could be observed that as the war continued and as it became even more obvious that it would end with failure of the German cause, the tendency to characterize war socialism as true socialism diminished also.
To be able to handle the problem correctly, one must first of all keep in mind that socialism means the transfer of the means of production out of the private ownership of individuals into the ownership of society. That alone and nothing else is socialism. All the rest is unimportant. It is a matter of complete indifference for deciding our question, for example, who holds power in a socialized community, whether a hereditary emperor, a Caesar, or the democratically organized whole of the people. It does not belong to the essence of a socialized community that it is under the leadership of soviets of workers and soldiers. Other authorities also can implement socialism, perhaps the church or the military state. It is to be noted, furthermore, that an election of the general directorship of the socialist economy in Germany, carried out on the basis of full universality and equality of the right to vote, would have produced a far stronger majority for Hindenburg and Ludendorff in the first years of the war than Lenin and Trotsky could ever have achieved in Russia.
Also nonessential is how the outputs of the socialized economy are used. It is of no consequence for our problem whether this output primarily serves cultural purposes or the waging of war. In the minds of the German people or at least of its preponderant majority, victory in the war was seen beyond doubt as the most urgent goal of the moment. Whether one approves of that or not is of no consequence.Max Adler (Zwei Jahre . . . ! Weltkriegsbetrachtungen eines Sozialisten [Nürnberg: 1916], p. 64) disputes the idea that war socialism is true socialism: "Socialism strives for the organization of the national economy for the sufficient and uniform satisfaction of the needs of all; it is the organization of sufficiency, even of superfluity; 'war socialism,' on the other hand, is the organization of scarcity and of need." Here the means is confused with the end. In the view of socialist theoreticians, socialism should he the means for achieving the highest productivity of the economy attainable under the given conditions. Whether superfluity or shortage reigns then is not essential. The criterion of socialism is, after all, not that it strives for the general welfare but rather that it strives for welfare by way of production based on the socialization of the means of production. Socialism distinguishes itself from liberalism only in the method that it chooses; the goal that they strive for is common to both. Cf. below, pp. 181 ff.
It is equally of no consequence that war socialism was carried out without formal reorganization of ownership relations. What counts is not the letter of the law but the substantive content of the legal norm.
If we keep all this in mind, then it is not hard to recognize that the measures of war socialism amounted to putting the economy on a socialistic basis. The right of ownership remained formally unimpaired. By the letter of the law the owner still continued to be the owner of the means of production. Yet the power of disposal over the enterprise was taken away from him. It was no longer up to him to determine what should be produced, to acquire raw materials, to recruit workers, and finally to sell the product. The goal of production was prescribed to him, the raw materials were delivered to him at definite prices, the workers were assigned to him and had to be paid by him at rates on whose determination he had no direct influence. The product, furthermore, was taken from him at a definite price, if he was not actually carrying out all the production as a mere manager. This organization was not uniformly and simultaneously implemented in all branches of industry—in many not at all. Also, its net had big enough meshes to let much get through. Such an extreme reform, which completely turns the conditions of production around, just cannot be carried out at one blow. But the goal being aimed at and being approached ever more closely with every new decree was this and nothing else. War socialism was by no means complete socialism, but it was full and true socialization without exception if one had kept on the path that had been taken.
Nothing about that is changed by the fact that the proceeds of production went first to the entrepreneur. The measures characterized as war-socialist in the narrow sense did not abolish entrepreneurial profit and interest on capital in principle, although the fixing of prices by the authorities took many steps in this direction. But precisely all the economic-policy decrees of the war period do belong to the full picture of war socialism; it would be mistaken to keep only particular measures in view and disregard others. Whatever the economic dictatorship of the various agencies of the war economy left free was gotten at by tax policy. War tax policy established the principle that all additional profit achieved beyond the profits of the prewar period was to be taxed away. From the beginning this was the goal that the policy aimed at and that it came closer to with each later decree. No doubt it would have completely reached this goal also if only it had had a little more time. It was carried out without regard to the change in the value of money that had occurred in the meanwhile, so that this meant a limitation of entrepreneurial profit not just to the amount obtained before the war but to a fraction of this amount. While entrepreneurial profit was thus limited on the top side, on the other side the entrepreneur was guaranteed no definite profit. As before, he still had to bear losses alone, while keeping no more chance of gain.
Many socialists declared that they were not thinking of an uncompensated expropriation of entrepreneurs, capitalists, and landowners. Many of them had the notion that a socialist community could allow the possessing classes to continue receiving their most recently received incomes, since socialization would bring such a great rise in productivity that it would be easy to pay this compensation. Under that kind of transition to socialism, entrepreneurs would have been compensated with larger amounts than under the one introduced by war socialism. They would have continued to receive as guaranteed income the profits that they had last received. It is incidental whether these incomes of the possessing classes would have had to continue only for a definite time or forever. War socialism also did not settle the question finally for all time. The development of wealth, income, and inheritance taxes would have been able, especially through extension of the progressivity of the tax rates, to achieve a complete confiscation soon.
The continued receipt of interest remained temporarily permitted to the owners of loan capital. Since they were suffering persistent losses of property and income from inflation, they offered no propitious object for greater intervention by the tax office. With regard to them, inflation was already performing the task of confiscation.
Public opinion in Germany and Austria, entirely dominated by the socialistic spirit, complained again and again that the taxation of war profits had been delayed too long and that even later it had not been applied with appropriate severity. One supposedly should have acted at once to collect all war profits, that is to say, all increases in wealth and income obtained during the war. Even on the first day of the war, therefore, complete socialization should have been introduced—leaving alone property incomes received before the war. It has already been explained why this was not done and what consequences for the conversion of industry onto a war footing would have resulted if this advice had been followed.
The better war socialism was developed, the more palpable did individual consequences of a socialistic order of society already become. In technical respects enterprises did operate no more irrationally than before, since the entrepreneurs, who remained at the head of the enterprises and formally filled their old positions, still harbored the hope of being able to keep for themselves—even if only by illegal means—a larger or smaller part of the surpluses earned and at least hoped for future removal of all measures of war socialism, which, after all, were still always officially declared exceptional wartime orders. Yet a tendency toward increasing expenses became noticeable, especially in trade, because of the price policy of the authorities and the practice of the courts in handling the provisions of penal law regarding exceeding the maximum prices: permitted prices were ascertained on the basis of the entrepreneur's outlays plus a margin of "simple profit," so that the entrepreneur's profit became all the greater the more dearly he had made purchases and the more expenses he had incurred.
Of greatest significance was impairment of the initiative of entrepreneurs. Since they shared more heavily in losses than in profits, the incentive to undertake risky ventures was only slight. Many production possibilities remained unused in the second half of the war because entrepreneurs shied away from the risk bound up with new investments and with introducing new production methods. Thus the policy of the state's taking over responsibility for possible losses, adopted especially in Austria right at the beginning of the war, was better suited for stimulating production. Toward the end of the war, views on this point had changed. With regard to importing particular raw materials into Austria from abroad, the question arose of who should bear the "peace risk," the danger of a loss from the price crash that was expected in the event of peace. The entrepreneurs associated in "centrals," whose chances of profit were limited, wanted to undertake the business only if the state were ready to bear the possible loss. Since this could not be arranged, the importation did not take place.
War socialism was only the continuation at an accelerated tempo of the state-socialist policy that had already been introduced long before the war. From the beginning the intention prevailed in all socialist groups of dropping none of the measures adopted during the war after the war but rather of advancing on the way toward the completion of socialism. If one heard differently in public, and if government offices, above all, always spoke only of exceptional provisions for the duration of the war, this had only the purpose of dissipating possible doubts about the rapid tempo of socialization and about individual measures and of stifling opposition to them. The slogan had already been found, however, under which further socializing measures should sail; it was called transitional economy.
The militarism of General Staff officers fell apart; other powers took the transitional economy in hand.
In June 2021, Missouri passed a new law stating it would not assist in the enforcement of federal gun laws. Tho and Ryan discuss how states can use strategies like this to resist federal laws within the states. Marijuana legalization and opposition to the Fugitive Slave Acts provide compelling historical examples.
Articles Mentioned in this Episode "Missouri Tells the Feds: We Won't Enforce Your Gun Laws" by Ryan McMaken: Mises.org/RR_58_01
"When Nullification Works, and When it Doesn’t" by Ryan McMaken: Mises.org/RR_58_02
"The Feds Collect Most of the Taxes in America—So They Have Most of the Power" by Ryan McMaken: Mises.org/RR_58_03
"Nebraska and Oklahoma Sue Colorado Over Legal Cannabis" by Ryan McMaken: Mises.org/RR_58_04
"Nullification Works: Congress Ends Federal Ban on Medical Marijuana" by Ryan McMaken: Mises.org/RR_58_05
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Politics degrades our lives in innumerable ways, from personal relationships to work to places of worship. Even sports and movies now seem to have become deeply politicized. The political class and political system in America appear intent on creating division and hatred rather than cooperation. The two political tribes in America—red and blue—are divided on everything: abortion, guns, immigration, Trump, and now Covid. Is there any way to reclaim some semblance of a truce between these warring nations?
Our guest Ross Benes has written an engrossing memoir of his experiences in both worlds, from small town life in his ultra-red Nebraska hometown to his writing career in ultra-blue Brooklyn. It's a fascinating look at how and why we have allowed politicians to alienate us, and a hopeful call for a less political America.
Find Rural Rebellion: How Nebraska Became a Republican Stronghold at Mises.org/RuralBook
Jeff Deist comments on the latest Democrat agenda of increasing the number of judges in SCOTUS.
Does the expansion bill stand any chance in the house? How can conservatives be forward-looking instead of being reactionary all the time? Should we expect a scandal involving Ron DeSantis? What can we learn from Ludwig von Mises about the bureaucratic and working classes in our society?
Find more from David Gornoski on A Neighbor's Choice.
Benjamin Boyce is a writer, interviewer, and filmmaker who rose to fame by relaying his experiences as a student during the infamous Evergreen State protests in 2017. He talks with Bob about the lessons we can learn as the rest of the country follows the same trajectory of identity politics.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interviewBenjamin Boyce’s YouTube channelBenjamin Boyce’s Complete Evergreen Story (chaps. 10 and 15 were specifically mentioned in the interview)Stephen King’s On Writing For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on Apple Podcasts, Stitcher, Spotify, and via RSS.
Daniel McCarthy joins the show to continue last week's discussion of the rapid breakdown of America's political order, with wokeism rising on the Left and Reaganism dying on the Right. McCarthy gives us his critique of the liberal technocratic order, and makes his case for where libertarians go wrong in their utilitarian and acultural approach. His prescription is for a new fusionism, with a reinvigorated Rothbardian populism as one critical element. The legacy of Ron Paul's presidential campaigns, McCarthy explains, is the philosophical critique of welfarism and warfarism. But changing society is a long game—one the Left plays well—so we must do the same.
Find McCarthy's article Why Libertarians Are Wrong at Mises.org/McCarthyArticle
US government agencies like the FBI remain incapable of bringing foreign online scammers to justice. Fortunately, in their place, internet “vigilantes” have answered the call to action.
Original Article: "Scam Baiters Take an Active and Entertaining Role in Fighting Cybercrime'"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Murray Rothbard died more than a quarter century before the outbreak of the covid mania and tyranny, but if he were alive today, he wouldn’t be surprised to see that the most common resistance at an institutional level comes from churches.
Original Article: "What Rothbard's Defense of Religion Teaches Us about Resisting the Covid State"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
While it is popular and accurate to blame our societal elites for being inept, the truth is that these leaders, both political and cultural, are reflections of us.
Original Article: "Politics Won't Fix the American Decline"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
We will never water down our message to satisfy censors or maintain a particular platform; instead we will work around them.
Original Article: "Surviving Tech Purges: What We're Doing at the Mises Institute"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Mobilization and separation, not persuasion, is the way forward.
Original Article: "2021: Welcome to Post-persuasion America"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The United States has gone through at least six "party systems." Populism, war, or economic crises usually trigger a change from one system to another. Ryan McMaken and Tho Bishop host Patrick Newman.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Expect more of the same in 2021. The Fed has no real plan. It is just lurching from one crisis to the next, hoping more easy money will buy some time. It's been doing this since 2008, and there's little chance it will stop now.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
From the War on Poverty to the War on Crime: The Making of Mass Incarceration in Americaby Elizabeth HintonCambridge, Mass.: Harvard University Press, 2016464 pp.
Tate Fegley (tjf59@pitt.edu) is a postdoctoral associate at the Center for Governance and Markets at the University of Pittsburgh.
American policing is in a crisis of legitimacy. Due to well-publicized deaths of suspects in custody and obvious increases in militarization, even those of a disposition normally supportive of the police instinctively know that something is wrong. In a growing number of ways, police officers less resemble Sheriff Andy Taylor and reveal their primary role, not as protectors of the public and individual rights, but as the enforcement arm of the state. Seeing police departments seemingly make a greater effort to prevent churches from meeting and people from conducting business while giving large groups of rioters free rein to gather closely together while destroying property was likely a red pill moment for many. The failure of local law enforcement to maintain order in several large cities has resulted in growing acceptance of federal law enforcement intervening in local matters, further establishing the precedent of the alleged necessity of a large federal role in criminal justice.
The great extent of federal involvement in local criminal justice matters was not established overnight, but over the course of several decades. This is the primary subject of Elizabeth Hinton’s book, From the War on Poverty to the War on Crime: The Making of Mass Incarceration in America, wherein she catalogs the vast increases in federal spending on grants to state and local governments for policing and prison initiatives that occurred during the presidential administrations of John F. Kennedy to Ronald Reagan. The coverage is very detailed.
What may surprise some readers is just how explosive the growth in federal funding of law enforcement was and how drastically the characteristics of American incarceration changed over such a short time span. For example, whereas Congress allocated $10 million to the War on Crime in 1965, the budget of the Law Enforcement Assistance Administration (LEAA), whose task it was to administer funding to state and local governments, had a budget of $850 million in 1973, ultimately spending more than $10 billion total before disbanding in 1981 (p. 2). But with federal funding comes federal strings, leading local law enforcement to prioritize federal priorities. During the Ford Administration, one of the LEAA’s primary initiatives was “Operation Disarm the Criminal,” establishing a federal handgun control squad that operated in urban centers in pursuit of what Hinton describes as an effort to disarm poor blacks by criminalizing the possession of cheap “Saturday night specials” (p. 253). In addition to targeting gun owners, the federal government incentivized local law enforcement to fight the War on Drugs through the Comprehensive Crime Control Act of 1984, which contained forfeiture provisions that allowed law enforcement agencies to keep as much as 90 percent of the proceeds from seizures of cash and property belonging to suspected drug offenders (p. 312). The federal government has also shaped local law enforcement through the distribution of discounted or free equipment, including military weapons and hardware as well as surveillance gadgets. This continues to this day with the distribution of Automatic License Plate Recognition technology and Stingray devices that mimic cell phone towers, allowing the user to extract data from cell phones within range.
Whereas the United States used to be unexceptional in incarceration rates as recently as the early 1970s, the federal government was integral to changing this as well. Hinton notes,
When Richard Nixon took office in 1969, he inherited a penal system that had been shedding prisoners. The 1960s produced the single largest reduction in the population of federal and state prisons in the nation’s history, with 16,500 fewer inmates in 1969 than in 1950. Despite this trend toward decarceration, under the auspices of the Nixon administration the federal government began to construct prisons at unprecedented rates. (p. 163)
Along with the growth in prison construction came changes in prisoner demographics:
Although ascendant numbers of black Americans were imprisoned at disparate rates following the Civil War, until the 1970s they constituted roughly a third of the nation’s prison population. Only after federal policymakers started investing in crime control measures, and only after the Nixon administration began to plan and incentivize prison construction, did black Americans encompass roughly half of the nation’s incarcerated citizens. (p. 178)
Changes in sentencing laws, the subsidization of police on the street, and the pursuit of the War on Drugs heavily contributed to the incarceration behemoth the United States have become. The reader is left with little doubt that the effect of federal involvement in criminal justice has been profound and in a manner detrimental to American liberties.
However, there was a missed opportunity in this book to connect the workings of the welfare state with federal involvement in law enforcement and criminal justice. I was hoping that Hinton would offer the reader something similar to Bruce Porter’s (1994) exposition of the relationship between the rise of the warfare state and that of the welfare state or Coyne and Hall’s (2018) explanation of how military tactics used abroad find their way into domestic law enforcement. Unfortunately, Hinton appears to see no connection between the expansion of the federal government’s role in alleviating social problems through welfare spending and the subsequent expansion of its role in the criminal justice system. She states, “One of the essential ironies of American history is that this punitive campaign began during an era of liberal reform and at the height of the civil rights revolution, a moment when the nation seemed ready to embrace policies that would fully realize its egalitarian founding values” (p. 1). It is indeed disappointing that a book called From the War on Poverty to the War on Crime would give us no explanation of why the latter would follow the former.
This reflects the general problem afflicting this book: it lacks any clear, discernible thesis. Chapter after chapter simply describe the activities of the federal government in influencing local law enforcement and the expansion of prisons over the relevant time period. While there is a great deal of information therein, with some interesting stories of boondoggles such as the Metropolitan Police Department’s “Operation Sting” that involved police officers posing as Mafia dons and encouraging larceny through their purchase of stolen property, the lack of any overarching argument leaves the reader feeling as though he is just reading a long series of facts.
Throughout the book there is a subtext that if the federal government had instead more strongly pursued the War on Poverty and spent sufficient amounts of money on it instead of criminal justice, the crime problems that existed throughout the War on Crime would have been better ameliorated. But such an argument is never explicitly made and so evidence for it is never presented. Although Hinton expresses support for the War on Poverty in the epilogue, stating that it included “promising initiatives that had been designed by grassroots organizations,” she laments that they were not allowed to come to full fruition: “Before community action programs were given a chance to work on a wider level and for entire communities rather than individuals, federal policymakers decided to defund them and switch course” (p. 336). The question of why they decided to switch course, particularly if such programs were so promising, is never addressed.
Ultimately, From the War on Poverty to the War on Crime serves as a good overview of the criminal justice activities of the federal government during the Kennedy to the Reagan years, but not much more.
We begin to understand the electoral college when we admit the United States is really supposed to be a collection of member states, and not a single unified nation. Abolishing the EC is likely to worsen national conflict and disunity.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Unless the Left's opponents focus on changing voters' ideological drift to the left, candidates who want to actually win elections will have to keep moving left also.
Original Article: "Why GOP Loyalists and Candidates Keep Moving Left".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The GOP is at its worst when it's run by the old Bush-Romney-Cheney faction that was in power before Trump. Will "Trumpism" endure, or will the party go back to its old warmongering, pro-establishment ways?
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
[This talk was given at the Mises Institute Spring Seminar Series, Auburn, Alabama, March 5, 2003, and included in Speaking of Liberty (2003).]
The Mises Institute was founded as a research center based on liberal ideas that have always been under fire: the ideas of Mises and the tradition of thought he represents. That means a focus on the Austrian school of economics, and, in political philosophy, individual liberty and the need to prevent the state and its interests from crushing it, as all states everywhere are inclined to do.
The first priority of such an institute is to keep a body of ideas alive. Great ideas have no inherent life of their own, especially not those that are opposed by the powers that be. They must circulate and be a part of the academic and public mind in order to avoid extinction.
And yet we must do more than merely keep a body of thought alive. We don’t just want our ideas to live; we want them to grow and develop, advance within the culture and public debate, become a force to be reckoned with among intellectuals, be constantly employed toward the end of explaining history and current reality, and eventually win in the great ideological battles of our times.
What is the best means of achieving such victory? This is a subject that is rarely discussed on the free market right. Murray Rothbard pointed out that strategy is a huge part of the scholarship of the Left. Once having settled on the doctrine, the Left works very hard at honing the message and finding ways to push it. This is a major explanation for the Left’s success.
Our side, on the other hand, doesn’t discuss this subject much. But since some sort of strategy is unavoidable, let me just list a few tactics that I do not believe work. The following, I’m quite sure, will fail for various reasons:
QUIETISM. Faced with the incredible odds against success, there is a tendency among believers in liberty to despair and find solace in being around their friends and talking only to each other. This is understandable, of course, even fruitful at times, but it is also irresponsible and rather selfish. Yes, we may always be a minority, but we are always either growing or shrinking. If we shrink enough, we disappear. If we grow enough, we win. That is why we must never give up the battle for young minds and for changing older minds. Our message has tremendous explanatory power. We must never hide our light under a bushel.
RETREAT. One mark of the liberal tradition is its intellectual rigor. It contains more than enough intellectual substance to occupy the academic mind for several lifetimes. There is a tendency, then, to believe that retreating into academia and eschewing public life is the correct path. The idea is that we should just use our knowledge to pen journal articles and otherwise keep to ourselves, in the hopes that someday this path will pay off in terms of academic respectability. But this has not been the path of brilliant minds from Turgot and Jefferson, Bastiat and Constant, Mises and Hayek, to Rothbard and the adjunct scholars of the Mises Institute. They are all engaged at some level in public debate. They believed that too much is at stake to retreat solely to private study. We cannot afford that luxury.
HOLDING CHAIRS IN THE IVY LEAGUE. I’ve seen this related error take a real toll on otherwise good minds. A young person can start out with real commitments, but he may fear the marginalization that comes with holding unpopular ideas. He tries to pass himself off as a conventional scholar, while sneaking in libertarian thoughts along the way. He may intend to reveal his true colors eventually, but then there are the demands of tenure and promotion, and social pressures to boot. Eventually, in short, he comes to sell out.
CONVINCING THE POLITICIANS. Another type of problem stems from the belief that political organizing is the answer. But this can only lead to despondency, as effort after effort fails to yield fruit. Despite what you hear, the political class is not interested in ideas for their own sake. They are interested in subsidizing their friends, protecting their territory, and getting re-elected. Political ideology for them is, at best, a hobby. It is only useful insofar as it provides a cover for what they would do otherwise. I’m generalizing here, and yes, exceptions are possible. In fact, I can think of one in our century: Ron Paul.
PLACING HIGH-PROFILE ARTICLES. I know think tank people who would do just about anything to get in the New York Times or Wall Street Journal. This is a snare and delusion. Once you put a priority on the medium over the message—and this is inevitable once you begin to think this way—you are forgetting why you got in this business to begin with. If these venues come to you and ask you to offer an opinion you hold, by all means do so. But that is not the way it works.
GETTING ON TV. The same applies here. I know people who were once dedicated to the ideas of liberty who developed a hankering for media attention, and eventually forgot why they got into the ideas business in the first place.
STARTING MORE THINK TANKS. I know this sounds silly, but some people on our side of the fence believe that the more nonprofit organizations there are, the more likely we are to win the battle of ideas. To me, this amounts to confusing the success that franchising represents in the commercial marketplace with ideological success, which is not guaranteed by the proliferation of websites and institutes. Indeed, ideology is not solely a commercial enterprise. We are a nonprofit research institute for a reason. What we do pays huge returns for civilization but not in the form of accounting profits. Our reward comes in other ways.
BUILDING AN IMMENSE ENDOWMENT AND HIRING A HUGE STAFF. Funding and staff alone will solve nothing. Funding is crucial and heaven knows the Mises Institute needs more of it. Staffing is great, so long as the people are dedicated and competent. But neither is an end in itself. The crucial question is whether the passion for ideas is there, not just the financial means. Amazing things are possible on small budgets, as I think the success of the Mises Institute shows.
WAIT FOR THE COLLAPSE. We know that socialism and interventionism cannot work. We know they fail, and we suspect that they might finally fail in a catastrophic manner. This may be true, but we are mistaken if we believe that the ideas of liberty will naturally emerge in such a setting. Crisis can present opportunities but no guarantees.
Finding errors such as these is easy, and I could list a dozen more. Let me offer a few points I think we should remember.
Our ideas are unpopular. We are in the minority. Our views are not welcome by the regime. They often fall on the deaf ears of an indifferent public. Big newspapers don’t often care what we think. In fact, they want to keep us out of their pages. Politicians will always find us impractical at best, and threatening at worst.
In short, we fight an uphill battle. We must recognize this at the outset. We are what Albert Jay Nock called the remnant, a small band of brothers who have special knowledge of theory and history and a concern for the well-being of civilization. What we do with that knowledge and concern is up to us. We can retreat or sell out, or we can use it as our battle cry and go forward through history to face the enemy.
Let me offer just a quick outline of some principles I use:
EDUCATE EVERY STUDENT who is interested in what we do. Never neglect anyone. One never knows where the next Mises or Rothbard or Hayek or Hazlitt is going to come from.
ENCOURAGE A PROLIFERATION OF TALENTS. Some people are great writers. Others are great teachers. Still others have a talent for research. There are other abilities too, like public speaking and technological competence. It takes all these abilities to make up the great freedom movement of our time. There is no need to insist on a single model; rather, we should make use of the division of labor.
USE EVERY MEDIUM we can to advance our ideas, from the smallest newsletter to the largest website. Never believe that a medium is beneath you, or above you. We must be in the academic journals and we must be in the pages of the local newspaper. Along these lines, the web has solved the major problem we faced throughout history, namely finding a medium to communicate our ideas in a way that makes them available to everyone who is interested. But it never happens automatically. It requires tremendous effort and creativity to bring about change.
ADHERE TO WHAT IS TRUE. This means avoiding fancy ways of pitching your ideas in keeping with current trends. It’s fine to be attentive to sales techniques. But never let this concern swamp your message.
SAY WHAT IS TRUE. Never underestimate the power of just stating things plainly and openly. Whatever the topic, the ideas of liberty have something to add that is missing from public debate. It is our job to make that addition.
DON’T NEGLECT ACADEMIA. Yes, colleges and universities are corrupt. But they are where the ideas that rule civilization come from. We must not neglect them. We must publish journals, sponsor colloquia, help faculty and students. Never let academia believe it has the luxury of forgetting about our ideas. This is why the Mises Institute holds seminars for professors and students, as well as financial professionals and interested people of every sort.
DON’T NEGLECT POPULAR CULTURE. Yes, popular culture is corrupt, but not entirely. We must not neglect it, because it has a huge impact on the way people see themselves and learn about their world.
USE YOUR MINORITY STATUS TO YOUR OWN BENEFIT. There is no sense in duplicating what others already do. If you publish, publish something radical and surprising. If you produce a book, make it a book that will change people’s minds. If you hold a seminar, say things that are worth saying. Never fear the unconventional. It is possible to be conventional in form and radical in content.
REMEMBER THAT INFLUENCE CAN BE INDIRECT. The effect of ideas on a civilization is like waves on water. By the time they reach the shore, no one remembers or knows for sure where they came from. Our job is to stick to the task. We should use every means at our disposal to get the ideas out there; what happens after that is as unpredictable as the future always is.
SUCCESS CAN TAKE MANY FORMS. I am often asked how we can think we are succeeding even as the government keeps growing. To me, this poses no great quandary. All governments want total control. What stops them, primarily, is ideological opposition. Without it, the government would grow much quicker and civilization would be doomed in short order. To what extent has the circulation of the ideas of liberty slowed down the growth of the state? How much worse off might we be?
CHANGE CAN HAPPEN QUICKLY. The ideological foundations of statism weaken in ways that are not always detectable. Change can happen overnight, after which all becomes clear in retrospect. If you had told the average Russian in 1985 that in five years the Soviet Union would be defunct, you would have been dismissed as a madman. It’s my opinion that statism in America may have run its course. We should all do our best to speed up the process.
In the history of warfare, there have always been armies that are ruled by the center and emphasize drills, lines, and discipline. They tend to treat their soldiers as expendable. They can win but at a huge price.
The other model is guerrilla warfare, usually undertaken by the underdog in the battle. Guerrilla armies usually consist of volunteers; every soldier is considered valuable. Their tactics are unpredictable. They are not ruled by the center but rather exploit the creativity of each member. Such armies have proven remarkably effective in the history of warfare.
I believe that the guerrilla model is what suits us best—a campaign of ideological guerrilla warfare conducted by the remnant. This is no guarantee of success but it is the best guarantee against failure that I know.
The key to our success, I believe, is that the Mises Institute is all about being attached to principle and truth before anything else. We’ve never traded short-term attention for building for the long term.
Mises did not either, and he paid a personal price. But his ideas are changing the world. We must all follow his lead, never giving in, never giving up, fighting for truth until our last breath. We have the passion and energy. Most importantly, we have truth on our side. I believe we can have the victory.
In spite of its relentless public relations efforts claiming the opposite, the Fed remains a leading reason for the impoverishment of working-class and middle-class families.
Original Article: "2021 Would Be a Great Time to Audit the Fed".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Murray Rothbard was enthusiastic about fighting for laissez-faire and freedom through both scholarship and political activism. He wasn't afraid to push freedom and free markets with everyone he could, including academics, politicians, the media, and the public.
Additional Resources "3 Reasons the Left Keeps Winning" by Ryan McMaken: Mises.org/RR_41_1
"Why GOP Loyalists and Candidates Keep Moving Left" by Ryan McMaken: Mises.org/RR_41_2
"Both Theory and Praxis: Rothbard's Plan for Laissez-Faire Activism" by Ryan McMaken: Mises.org/RR_41_3
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Even if he loses, Donald Trump still has time to change military policy, pardon allies, unseat the Federal Reserve Board of Governors, and throw a wrench in the deep state apparatus.
Original Article: "Here’s What Donald Trump Should Do Before Inauguration Day".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Let us continue to preach the truth of Liberty. Ideas have consequences, and unless we spread the ideas of freedom and free markets first, no election or politician will bring about the changes we want.
Presented at the Symposium with Ron Paul on Saturday, 7 November 2020, in Angleton, Texas.
Presented at the Symposium with Ron Paul on Saturday, 7 November 2020, in Angleton, Texas.
In a country of 330 million people, the idea that democracy produces outcomes that reflect "the consent of the governed… becomes entirely meaningless."
A panel featuring Jeff Deist, Daniel McAdams, and Tom Woods.
Presented at the Symposium with Ron Paul on Saturday, 7 November 2020, in Angleton, Texas.
ABSTRACT: The greatest challenge for libertarians, whether economic or otherwise, is to develop a grand historical narrative that is to counter and correct the so-called Whig theory of history that all ruling elites, everywhere and at all times, have tried to sell to the public: that is the view, that we live in the best of all times and that the grand sweep of history, notwithstanding some ups and downs, has been one of more or less steady progress. This Whig theory of history, despite some setbacks motivated in particular by the experiences of the two disastrous world wars during the first half of the twentieth century, has again become predominant in the public mind. But while the present democratic social order may be the technologically most advanced civilization, it most certainly is not the most advanced socially. In fact, by some measures it falls far behind the Middle Ages. The principal counterstrategy of recivilization must be a return to “normality” by means of decentralization. The process of territorial expansion that went hand in hand with the centralization of all authority in one monopolistic hand must be reversed. The paper concludes with comments on Steven Pinker’s attempt to rescue the Whig theory of history and demonstrate that we live in the best of all worlds—an attempt which is in fact an utter failure.
Hans-Hermann Hoppe is professor emeritus of economics at the University of Nevada at Las Vegas, distinguished senior fellow with the Mises Institute, and president of the Property and Freedom Society.
This paper is adapted from a lecture delivered to the Property and Freedom Society on September 16, 2018.
“To historians is granted a talent that even the gods are denied—to alter what has already happened!” (David Irving)
INTRODUCTION It is no secret that I am not a Hayekian. Still, I consider Hayek a great economist—not in the same league as Mises, but few if any economists are. Hayek’s fame in the public mind, however, has less to do with his economic writings but stems largely from his writings in political theory, and it is in this area that I consider him mostly deficient. Not even his system of definitions here is internally consistent. His excursions into the field of epistemology are quite ingenious, yet here he also falls short of the accomplishments of his teacher Mises. Nonetheless, owing to his wide-ranging interdisciplinary oeuvre, which contains a treasure trove of keen insights into many issues, I consider Hayek one of the twentieth century’s outstanding intellectuals writing in the social sciences.
As a reflection of this esteem, Hayek was also quoted in the programmatic statement of the Property and Freedom Society.
We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia, a programme which seems neither a mere defence of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty…, which is not too severely practical and which does not confine itself to what appears today as politically possible. We need intellectual leaders who are prepared to resist the blandishments of power and influence and who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization, however remote.…Unless we can make the philosophical foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.
Hayek of course did not follow his own advice, but ended up, in his political philosophy, with a mishmash full of internally inconsistent compromises. Yet this does not mean that his plea for an uncompromising intellectual radicalism, which has been the purpose and become the hallmark of the PFS, is not worthwhile or correct.
But this shall not be my topic here. Rather, I want to speak about another important, if you will complementary, insight of Hayek’s that can be found in the introduction he wrote for the collection of essays gathered in Capitalism and the Historians. Here, Hayek makes the point that although uncompromising intellectual radicalism is necessary as a source of energy and inspiration for the leaders of a liberal-libertarian movement, this is not sufficient to make for public appeal. Because the general public is not used to or capable of abstract reasoning, high theory, and intellectual consistency, but forms its political views and convictions on the basis of historical narratives, i.e., of prevailing interpretations of past events, it is upon those who want to change things for a better, liberal-libertarian future to challenge and correct such interpretations and propose and promote alternative, revisionist historical narratives.
Let me quote from Hayek to this effect:
While the events of the past are the source of the experience of the human race, their opinions are determined not by the objective facts but by the records and interpretations to which they have access.…Historical myths have perhaps played nearly as great a role in shaping opinion as historical facts.…The influence which the writers of history thus exercise on public opinion is probably more immediate and extensive than that of the political theorists who launch new ideas. It seems as though even such new ideas reach wider circles usually not in their abstract form but as the interpretations of particular events. The historian is in this respect at least one step nearer to direct power over public opinion than is the theorist.…Most people, when being told that their political convictions have been affected by particular views on economic history, will answer that they never have been interested in it and never have read a book on the subject. This, however, does not mean that they do not, with the rest, regard as established facts many of the legends which at one time or another have been given currency by writers on economic history. (Hayek 1954, 3–8)
The central theme of Capitalism and the Historians is the revision of the still popular myth that it was the system of free market capitalism, at the beginning of the so-called Industrial Revolution, around the early 1800s, which has been responsible for the economic misery that caused even little children to have to work for sixteen hours or more under atrocious conditions in mines or similarly uncomfortable workplaces, and that it was only due to the pressure of labor unions and government intervention in the economy by way of so-called social policy means and measures that this “inhumane” system of “capitalist exploitation” was gradually overcome and improved.
When first hearing this sad story, one would think that the immediate question coming to mind should be: Why would any parent subject his child to such a treatment and hand him over to some evil capitalist exploiters? Did these children have a jolly good time before, strolling around in meadows and fields, healthy and with red cheeks, picking flowers, eating apples off the trees, fishing and swimming in creeks, rivers, and lakes, playing with their toys and attentively listening to their grandparents’ tales? In that case, what horrible people must these parents have been! Merely asking these questions should be sufficient to realize that this story cannot be true. And in fact, as Hayek and his collaborators demonstrated, it is just about the opposite of the truth.
Until the Industrial Revolution, England and the rest of the world, for thousands of years, had lived under Malthusian conditions. That is, the supply of consumer goods provided by nature and by human production through means of intermediate tools and producer goods was not sufficient to ensure the survival of a growing population. Population growth exceeded the growth of production and any increases in productivity; hence, not only in England, but everywhere, an “excess” of population regularly had to die off due to malnutrition, ill health, and ultimately starvation. It was only with and since the Industrial Revolution that this situation fundamentally changed and the Malthusian trap was successively overcome, first in England, then in continental Europe and the European overseas dependencies, and finally also in much of the rest of the world, so as to allow not only for a steadily growing population, but one with continuously rising material standards of living. And this momentous achievement was the result of free market capitalism, or more precisely a combination and interplay of three factors. For one, the general security of private property; second, low time preference, i.e., the ability and willingness of a growing number of people to delay immediate gratification so as to save for the future and accumulate an ever larger stock of capital goods; and third, the intelligence and ingenuity of a sufficient number of people to invent and engineer a steady stream of new productivity-enhancing tools and machines.
The parents of the poor children, who handed them over to the “evil capitalists” during the Industrial Revolution were not bad parents, then, but like most parents everywhere who want the best for their children, they chose to do so, because they preferred their children alive, even if it was a miserable life, rather than dead. Contrary to still popular myth in leftist circles, then, capitalism did not cause misery, but literally saved countless millions of people from death by starvation and gradually lifted them from their previous state of abject poverty. Labor unions’ and governments’ so-called social policies did not help in this regard, but hampered and retarded this process of gradual economic improvement, and were and still are responsible for countless numbers of unnecessary deaths.
There are many other related myths, equally or even more absurd, propagated by, to use Nicholas Taleb’s label, IYIs (intellectuals yet idiots) and widely believed by the general public: that you can legislate greater economic prosperity by simply passing minimum wage laws, or else that economic misery can be overcome by simply increasing monetary spending.—But why, then, not legislate hourly wage rates of $100 or $1000, and why, then, is India, for instance, still a poor country? Are the ruling elites in India too dumb to know about this magic formula? —Why, then, since everywhere nowadays governments can easily increase the quantity of paper money in practically unlimited amounts, is there still any poor person around?
Nor are such faulty historical narratives restricted only to economic history. Rather, much of what we have learned as the established truth from our standard history books about World War I and World War II, about the American and the French Revolutions, about Hitler, Churchill, FDR or Napoleon, and on and on and on, also turns out to be faulty history—facts mixed in, whether intentionally or not, with hefty doses of fiction, and fake.
Important as the revision of all these myths is, however, the greatest challenge for libertarians, whether economic or otherwise, is to develop a grand historical narrative that is to counter and correct the so-called Whig theory of history that all ruling elites, everywhere and at all times, have tried to sell to the public: that is the view, that we live in the best of all times (and that they are the ones who will guarantee that this stays so) and that the grand sweep of history, notwithstanding some ups and downs, has been one of more or less steady progress. This Whig theory of history, despite some setbacks motivated in particular by the experiences of the two disastrous world wars during the first half of the twentieth century, has again become predominant in the public mind, as indicated by the success of such books as Francis Fukuyama’s The End of History and the Last Man (1992) or, still more recently, Steven Pinker’s The Better Angels of Our Nature (2011) and Enlightenment Now (2018).
According to the proponents of this theory, what makes the present age so great and qualifies it as the best of all times is the combination of two factors: for one, never before in human history have technology and the natural sciences reached as high a level of development and have the average material living standards been as high as today——which appears essentially correct and which fact without doubt contributes greatly to the public appeal and acceptance of the Whig theory. Secondly, never before in history have people supposedly experienced as much freedom as today with the development of “liberal democracy” or “democratic capitalism”— which claim, despite its widespread popularity, I consider a historical myth. In fact, since the degree of freedom and of economic and technological development are indeed positively correlated, this leads me to the conclusion that average material living standards would have been even higher than they presently are if history only had taken a different course.
But before offering an alternative, grand revisionist historical narrative and indicating where Pinker and his ilk go off the rails with their Whiggish world history, a few remarks on the history of science are in order. Until relatively recently, the belief in a steady growth of science, if nothing else, has never been much in doubt—until the early 1960s, with the historian of science Thomas Kuhn and his book The Structure of Scientific Revolutions (1962). Kuhn, in contrast to the orthodox Whig-ish view on the matter, portrayed the development of science not so much as a continuous march upward and into the light, but rather as a sequence of “paradigm shifts” that followed each other much like—directionless—one lady-fashion follows another. The book became a huge success and for quite some time Kuhn’s view became a widespread fashion in philosophical circles. Kuhn notwithstanding, however, I still regard the traditional view concerning the development of science as essentially correct. The central error of Kuhn as well as of many philosophers of science—revealingly expressed again and again, for instance, by Sheldon Cooper, the super science nerd–theoretical physicist character in the hugely popular TV series The Big Bang Theory—lies in a fundamental misconception regarding the interrelation between science on the one hand and engineering or technology on the other.
This is the popular misconception of science as coming before, having priority over, and assuming a higher rank and dignity vis-à-vis engineering and technology as only secondary and inferior intellectual enterprises, i.e., as mere “applied” science. In fact, however, matters are exactly the other way around. What comes methodologically first, and what makes science as we know it at all possible and at the same time provides its ultimate foundation, is human engineering and construction. Put plainly and bluntly: without such purposefully designed and constructed instruments as measuring rods, clocks, planes, rectangles, scales, counters, lenses, microscopes, telescopes, audiometers, thermometers, spectrometers, x-ray and ultrasound machines, particle accelerators, and on and on, no empirical and experimental science as we know it would be possible. Or to put it in the words of the great late German philosopher-scientist Peter Janich: “Handwerk” comes before and provides the stable foundation and groundwork of “Mundwerk.” Whatever controversies or quibbles scientists may have, they are always controversies and quibbles within a stable operational framework and reference system defined by a given state of technology. And in the field of human engineering, no one would ever throw out or “falsify” a working instrument until and unless he had another, better working instrument available.
Hence, it is engineering and advances in engineering that make science and scientific progress possible and at the same time prevent from happening that which Karl Popper’s “falsificationist” philosophy of science that currently dominates intellectual public opinion must admit as “always possible”: not only scientific regression but even the complete breakdown of our entire system of knowledge due to the supposedly “always possible” falsification of even its seemingly most basic hypotheses. What prevents this nightmare from happening and what exposes both Kuhn’s relativism and Popper’s related falsificationism as involving an elementary methodological error is the existence of “Handwerk” and its methodical priority and primacy over the mere “Mundwerk” of science.
(Note: I am not denying here the possibility of periods of regression in the development of science. But I would explain any such regression as the consequence of a prior loss of practical engineering knowledge. “Harmlessly” in the normal course of economic development, certain skills may die out and be forgotten, because there is no longer any demand for their products. This does not necessarily imply a step back in engineering knowledge, however. Indeed, such loss can be more than made up by the development of different skills required for the manufacturing of different, more highly demanded products. Loss here is the springboard of technological progress. Old tools and machines are replaced by better new ones. But another, less “harmless” development is possible as well, and has indeed taken place at certain times and places. Due to a pestilence, for instance, the population size, and with it also the division of labor, might dramatically shrink and lead to a huge and widespread loss of accumulated engineering knowledge and skills, so as to require a return to earlier and more primitive modes of production. Or a population might simply become less bright, for whatever reason, than its forebears and unable to maintain a given (inherited) level of technological advancement.)
With this out of the way, I can now turn to the fake part of the Whig theory of history—concerning social history. Although it is comparatively easy to diagnose technological progress, and along with this also scientific progress (progress occurs whenever we learn how to successfully accomplish some additional, quicker, or better result in our purposeful dealings with the nonhuman world of material objects, plants, and animals), it is significantly more difficult to define and diagnose social progress, i.e., progress in interpersonal dealings or man-to-man interactions.
To do this, it is first necessary to define a model of social perfection that is in accordance with human nature, i.e., of men as they really are, which can serve as a reference system to diagnose the relative proximity or distance of various historical events, periods, and developments to this ideal. And this definition of social perfection and social progress must be strictly separate, independent, and analytically distinct from the definition of technological and scientific growth and perfection (even if both progress or growth dimensions are empirically positively correlated). Conceptually, that is, it must be allowed that there can be societies that are (near) perfect socially but technologically backward, as well as societies that are technologically highly advanced and yet socially backward.
For the libertarian, this ideal of social perfection is peace, i.e., a normally tranquil and frictionless person-to-person interaction—and a peaceful resolution of occasional conflict—within the stable framework of private or several (mutually exclusive) property and property rights. I do not want to appeal only to libertarians with this, however, but to a potentially universal, or “catholic,” audience, because the same ideal of social perfection is essentially also the one prescribed by the ten biblical commandments.
Setting the first four commandments aside, which refer to our relation to God as the one and only ultimate moral authority and the final judge of our earthly conduct and the proper celebration of the Sabbath, the rest, referring to worldly affairs, display a deep and profoundly libertarian spirit.
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Honor your father and your mother, as the LORD your God has commanded you, that your days may be long, and that it may be well with you in the land which the LORD your God is giving you.
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You shall not murder.
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You shall not commit adultery.
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You shall not steal.
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You shall not bear false witness against your neighbor.
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You shall not covet your neighbor’s wife; and you shall not desire your neighbor’s house, his field, his male servant, his female servant, his ox, his donkey, or anything that is your neighbor’s.
Some libertarians may argue that not all of these commandments have the same rank or status. They may point out, for instance, that the fifth and the seventh commandments are not on a par and of the same dignity as the sixth, eighth, and tenth commandments; that this may also be the case with commandment nine, prohibiting libel; or that desiring another’s wife or servant is not on a par with coveting his house or field. However, the Ten Commandments do not say anything about the severity and suitable punishment of violations of its various commands. They proscribe all mentioned activities and desires, but they leave open the question of how severely any of them deserves to be punished.
In this, the biblical commandments go above and beyond what many libertarians regard as sufficient for the establishment of a peaceful social order: the mere strict adherence to commandments six, eight, and ten. Yet this difference between a strict and rigid libertarianism and the ten biblical commandments does not imply any incompatibility between the two. Both are in complete harmony if only a distinction is made between legal prohibitions on the one hand, expressed in commandments six, eight, and ten, violations of which may be punished by the exercise of physical violence, and extralegal or moral prohibitions on the other hand, expressed in commandments five, seven, and nine, violations of which may be punished only by means below the threshold of physical violence, such as social disapproval, discrimination, exclusion, or ostracism. Indeed, thus interpreted the full six mentioned commandments can be recognized as even an improvement over a strict and rigid libertarianism—given the common, shared goal of social perfection: of a stable, just, and peaceful social order.
For surely any society of people who habitually disrespect their parents and routinely mock the idea of natural ranks and hierarchies of social authority, which underlies the institution of the family; who pooh-pooh the institution of marriage and cavalierly regard adultery as inconsequential, faultless, or even liberating; or who habitually scoff at the idea of personal honor and honesty and routinely or even gleefully engage in libelous activity, i.e., the practice of “bearing false witness against one’s neighbor”—any such society will quickly disintegrate into a group of people ceaselessly disturbed by social strife and conflict rather than enjoying enduring and lasting peace.
Taking this biblical-libertarian ideal of social perfection as a benchmark, then, the next step in our argument must be the diagnosis, i.e., the comparative evaluation and ranking of various historical periods and developments regarding their relative proximity or distance to this ultimate, ideal goal.
In this regard, immediately a first diagnosis concerning the contemporary world impresses itself. Even if we may grant that the dominant Western model of “liberal democracy” or “democratic capitalism” comes closer to the ideal than the models of social organization presently followed elsewhere, outside the so-called Western world, it still falls glaringly short of the ideal. Indeed, it explicitly and unequivocally contradicts and violates the “Catholic” biblical commandments, and the proponents and promoters of this model, then, manifestly (even if not admittedly) deny and oppose God’s will and turn out advocates of the devil instead.
For one, even with the greatest intellectual contortions it is impossible to derive the institution of a state from these commandments. If no one may steal, murder, or desire another person’s property, then no institution that may steal, murder, and desire another person’s property can ever be permitted to come into existence. Yet like all other societies today, all present Western societies are societies with states, which may routinely steal (tax), murder (go to war), and covet other people’s property (legislate). Moreover, in Western democratic state societies in particular, the moral sin of desiring another man’s property is not only not strictly and universally outlawed (but routinely put in practice), but this sin is actually promoted and “cultivated” to its utmost—devilish—extreme. With democratic elections installed as the centerpiece of social life, everyone is “liberated” from God’s commandment and made “free” to desire whatever he wants of the property of others and to express his immoral desires through regular anonymous votes.
Surely, this liberal-democratic model of social organization cannot be the end of history, neither for a libertarian nor for anyone taking the biblical commandments to heart. Indeed, Fukuyama’s (1992) claim to the contrary borders on the blasphemous.
Regardless of how disastrous the diagnosis of the contemporary world turns out to be, however, it might still be the case that the present state of affairs represents some sort of progress. It might not be the end of history, but it might be a closer approximation to the goal of social perfection than anything historically preceding it. To refute the Whig theory of history in its entirety, then, it is further necessary to identify some earlier (and thus, naturally, technologically less advanced) society that adhered more closely to the biblical commandments and came nearer to social perfection. And so as to carry any weight in public debate (in the battle of rival historical narratives), the counterexample in question should be a “big” one. That is, it should not be only a short time span in some tiny place, but a large-scale and long-lasting historical phenomenon. And for the same reason of potential popular appeal, the example should be connected, both geographically and genealogically, as a historical predecessor to the contemporary Western model of democratic state societies, and it should not lie too far in the dark and distant past.
In my own attempts at offering a revisionist account of Western history—in particular in my two books Democracy: The God That Failed (2001) and A Short History of Man (2015)—I have identified the European Middle Ages, or what is sometimes also and better referred to as Latin Christendom—the roughly thousand-year period from the fall of Rome until the late sixteenth or early seventeenth century—as such an example. Not perfect in many ways, but closer to the ideal of social perfection than anything that followed it, and in particular closer than the present democratic order.
Not surprisingly, this is also the very period in Western history that our current—godless—democratic rulers and their court historians have chosen to portray in the darkest of terms. In Greek and Roman society, they can see some “good” and value, even if it supposedly lags far behind the level of social advancement reached with the contemporary democratic social order. But the Middle Ages are routinely portrayed as dark, cruel, and filled with superstition, best forgotten and ignored in all of standard history and historical narrative.
Why this particularly unfavorable treatment of the Middle Ages? Because, as many historians, old and contemporary, have of course noticed too, the Middle Ages represents a large-scale and long-lasting historical example of a stateless society and as such represents the polar opposite of the present, statist social order. Indeed, the Middle Ages, notwithstanding its many imperfections, can be identified as a God-pleasing—a gott-gefaellige—social order, whereas the present democratic state order, notwithstanding its numerous achievements, stands in constant violation of God’s commandments and must be identified as a satanic order. To answer the question, then, Satan and his earthly followers will of course go all out to make us ignore and forget about God and belittle, besmirch, and denigrate everything and anything that shows His hand.
This is all the more reason for any libertarian and God-pleasing “Catholic” to study and draw inspiration from this historical period of the European Middle Ages—something, incidentally, made easier nowadays and likely to encounter little opposition from the powers that be and their increasingly rigorously enforced speech code of “political correctness,” because any such study has long since been relegated to the status of a nerdy, quaint, and exotic interest, far distant in time from the present and without any contemporary relevance.
In standard (orthodox) history we are told, as a quasi-axiomatic truth, that the institution of the state is necessary and indispensable for the maintenance of social peace. The study of the Middle Ages and Latin Christendom shows that this is untrue, a historical myth, and how, for a lengthy historical period, peace was successfully maintained without a state and thus without open renunciation of libertarian and biblical precepts.
Although many libertarians fancy an anarchic social order as a largely horizontal order without hierarchies and different ranks of authority—as “antiauthoritarian”—the medieval example of a stateless society teaches otherwise. Peace was not maintained by the absence of hierarchies and ranks of authority, but by the absence of anything but social authority and ranks of social authority. Indeed, in contrast to the present order, which essentially recognizes only one authority, that of the state, the Middle Ages were characterized by a great multitude of competing, cooperating, overlapping and hierarchically ordered ranks of social authority. There was the authority of the heads of family households and of various kinship groups. There were patrons, lords, overlords, feudal kings with their estates, their vassals, and the vassals of vassals. There were countless different and separate communities and towns, and a huge variety of religious, artistic, professional, and social orders, councils, assemblies, guilds, associations, and clubs, each with its own rules, hierarchies and rank orders. In addition, and of utmost importance, there were the authorities of the local priest, the more distant bishop, and of the Pope in Rome.
But no authority was absolute, and no one person or group of people held a monopoly on its position or rank of authority. The hierarchical feudal lord-vassal relationship, for instance, was not indissoluble. It could be broken if either side violated the provisions of the fealty oaths they both had sworn to uphold. Nor was the relationship between lord and vassal a transitive one. That is, the lord of a vassal was not on account of his lordship also the lord of all his vassal’s vassals. Indeed, such vassals could be tied to a different lord, or they could, elsewhere and regarding other things, be lords themselves, which precluded any involvement in their affairs in question. It was thus near impossible for anyone to exercise any straight top-down authority and hence also immensely difficult in particular to raise and maintain a large standing army and engage in large-scale or even continent-wide war. That is, the phenomenon which we have come to regard as perfectly normal today, that a command that is directly binding on all of society is given from the top on down, from its highest ranks down to the lowliest, was absent in the Middle Ages. Authority was widely dispersed, and any one person or position of authority was constrained and kept in check by another. Even feudal kings, bishops, and indeed even the Pope himself could be called upon and brought to justice by other competing authorities.
“Feudal law” reflected this “hierarchic-anarchic” social structure of the Middle Ages. All of law was essentially private law (i.e., law applying to persons and person-to-person interactions), all of litigation was between a personal defendant and a personal plaintiff, and punishment typically involved the payment of some specified material compensation by the offender to his victim or his lawful successor. However, this central characteristic of the Middle Ages as a historical model of a private law society did not mean that feudal law was some sort of unitary, coherent, and consistent legal system. To the contrary, feudal law allowed for a great variety of locally and regionally different laws and customs, and the difference in the treatment of similar offences in different localities could be quite drastic. Yet at the same time, with the Catholic Church and the Scholastic teachings of the natural law, there was an overarching institutional framework and moral reference system in place to serve as a morally unifying force, constraining and moderating the range of variation between the laws of different localities.
Needless to say, there were many imperfections that future historians, to this day, would focus on and highlight so as to discredit the entire period. During the Middle Ages, under the influence of Catholic Church, the institution of slavery, which had been a dominant feature of Greek and Roman society, had been increasingly discredited and pushed back to near extinction, but it had not entirely disappeared. As well, the institution of serfdom, from a moral point of view “better” than slavery but still not without moral blemish, was yet a widespread social phenomenon. Moreover, plenty of small-scale wars and feuds took place during the entire period. And as we are never allowed to forget: the punishments dished out in various law courts for various offences here or there, were sometimes (for modern sensibilities, in any case) extreme, harsh, and cruel. A murderer might be hung or beheaded, quartered, burnt, boiled, or drowned. A thief might have his finger or hand cut off and a false witness his tongue torn out. An adulteress might be stoned, a rapist castrated, and a “witch” burnt.
It is these features in particular that we are told in standard history to associate with the Middle Ages so as to arouse our moral indignation and feel elated about our own enlightened present. Even if all true, however, any such exclusive concentration on these features as a distinctive characteristic of the Middle Ages is to miss the mark, or the wood for the trees. It takes accidents for nature and what is natural and normal. That is, it ignores, whether deliberately or not, the central characteristic of the entire period: the fact that it was a stateless social order with widely dispersed, hierarchically ordered, and rivaling centers of authority. And this focus then conveniently closes the eyes to the fact that the “excesses” of the Middle Ages actually pale in comparison to those of the present democratic state order, for surely slavery and serfdom have not disappeared in the democratic world. Rather, some increasingly rare “private” slavery and serfdom have been replaced by a near-universal system of “public” tax slavery and serfdom. As well, wars have not disappeared, but only become of a larger scale. And as for excessive punishments and witch hunts, they have not gone away either. To the contrary, they have multiplied. Enemies of the state are tortured in the same old gruesome or even technically “refined” ways. Moreover, countless people who are not murderers, thieves, libelers, adulterers, or rapists, i.e., people who live in complete accordance with the ten biblical commandments and once would have been left alone, are nonetheless routinely punished today, up to the level of lengthy incarceration or the loss of their entire property. Witches are no longer called that, but with just one sole authority in place, the “identification” of anyone as a “suspect of evil-doing” or a “troublemaker” is greatly facilitated, and the number of people so identified has accordingly multiplied; and although such suspects are no longer burnt at the stake, they are routinely punished by up to lifelong economic deprivation, unemployment, poverty, or even starvation. And while the primary purpose of punishment was once restitution, i.e., the offender had to compensate the victim, the primary purpose of punishment today is submission—the offender must compensate and satisfy not the victim, but the state (thus victimizing the victim twice).
With this we can state a first conclusion. The present democratic social order may be the technologically most advanced civilization, but it most certainly is not the most advanced socially. As measured by biblical-libertarian standards of social perfection, it falls far behind the Middle Ages. Indeed, as measured by those standards, the transition in European history from the anarchic medieval to the modern statist world is nothing less than the transition from a God-pleasing to a godless social order.
At various places, in the most condensed form in my essay From Aristocracy to Monarchy to Democracy (2014), I have analyzed and tried to reconstruct this process of decivilization, which has by now been going on for half a millennium, and to explain the calamitous and deleterious consequences and ramifications that it has had for the development of law and economics. I shall not repeat or recapitulate any of this here. Rather, I only want to shed some light on the principal strategy that all statists, from the late Middle Ages on until today, have pursued to reach their statist ends, so as to also gain (if only indirectly) some insight into any possible counterstrategy that could lead us out of the current predicament. Not back to the Middle Ages, of course, because too many permanent and irreversible changes have taken place since, both in regard to our mental and our material conditions and capacities, but to a new society that takes its cues from the study of the Middle Ages and understands and knows of the principal reason for its demise.
The strategy was dictated by the quasi-libertarian, stateless medieval starting point, and it suggested itself “naturally,” first and foremost to the top ranks of social authority, in particular to feudal kings. In a nutshell, it boils down to this rule: instead of remaining a mere primus inter pares, you must become a solus primus, and to do this you must undermine, weaken, and ultimately eliminate all competing authorities and hierarchies of social authority. Beginning at the highest levels of authority, with your most immediate competitors, and from there on down, ultimately, to the most elementary and decentralized level of social authority invested in the heads of individual family households, you (every statist) must use your own initial authority to undermine each and every rival authority and strip away its right to independently judge, discriminate, sentence, and punish within its own territorially limited realm of authority.
Kings other than you must no longer be allowed to freely determine who is another or the next king, who is to be included or excluded from the rank of kings, or who may come before them for justice and assistance. And likewise for all other levels of social authority, for noble lords and vassals as well as all separate local communities, orders, associations, and ultimately all individual family households. No one must be free to autonomously determine his own rules of admission and exclusion. That is, to determine who is supposed to be “in” or “out,” the conduct to expect of those who are “in” and want to remain in good standing, and what member conduct instead results in various sanctions, ranging from disapproval, censure, and fines to expulsion and corporal punishment.
And how to accomplish this and centralize and consolidate all authority in the hands of a single territorial monopolist, first an absolute monarch and subsequently a democratic state? By enlisting the support of everyone resentful of not being included or promoted in some particular community, association, or social rank, or of being expelled from them and “unfairly” punished. Against this “unfair discrimination” you, the state or would-be state, promise to get the excluded “victims” in and help them get a “fair” and “nondiscriminating” treatment in return for their binding commitment to and affiliation with you. On every level of social authority, whenever and wherever the opportunity arises, you encourage and promote “deviant behavior” and “deviants” and enlist their support in order to expand and strengthen your own authority at the expense of all others.
Accordingly, the principal counterstrategy of recivilization, then, must be a return to “normality” by means of decentralization. The process of territorial expansion that went hand in hand with the centralization of all authority in one monopolistic hand must be reversed. Each and every secessionist tendency and movement, then, should be supported and promoted, because with every territorial separation from the central state another separate and rival center of authority and adjudication is created. And the same tendency should be promoted within the framework of any newly created separate and independent territory and center of authority. That is, any voluntary membership organization, association, order, club, or even household within the new territory should be free to independently determine its own house rules, i.e., its rules of inclusion, of sanctions, and of exclusion, so as to successively replace the current statist system of forced territorial and legal integration and uniformation with a natural, quasi-organic social order of voluntary territorial and legal-customary association and dissociation. Moreover, as an important addition, in order to safeguard this order of increasingly decentralized centers, ranks, and hierarchies of natural social authority from internal corruption or external (foreign) attack, each newly (re)emerging social authority should be encouraged to build as wide as possible a network with similarly placed and like-minded authorities in other, “foreign” territories and jurisdictions for the purpose of mutual assistance in case of need.
With this I have reached a stage of conceptual analysis and of historical insight and background information that allows me, as my second task, to comment in some detail on the most recent attempt by Steven Pinker, with his book The Better Angels of Our Nature (2011), to give new impetus to the Whig theory of history, i.e., the myth that human history has been a somewhat rocky but nonetheless steady march upward and into the light, and that we today, in the Western world, live, if not in the best of all possible worlds, in a world better than anything that came before.
The book, unsurprisingly, has been enthusiastically greeted by the ruling elites and become a great commercial success, further boosted, undoubtedly, by Pinker’s status as a charismatic Harvard professor. In eight hundred pages of small print, Pinker assembles a huge mass of interesting pieces of information and interpretation concerning all sorts of things, but as far as the case he makes for some steady social progress culminating in the present, my verdict is entirely negative. Pinker may be an excellent psychologist, but he is out of his depth in the areas of philosophy, methodology, economics, and history, which all are required to pass sound judgment on the degree of social perfection of the various stages and long-run development of human history. In particular, his historical narratives frequently strike one as cherry-picked and either missing the wood for the trees or vice versa, but more often the trees for the wood.See on the following also Blankertz (2018), Cirillo and Taleb (2017), and Gray (2015).
There is plenty to complain about in the book, not least the fact that Pinker is less than careful in unambiguously defining his terms so as to avoid all internal inconsistency or equivocation. Here, however, I shall concentrate my criticism on only two central points: first, Pinker’s “measurement” or criterion of social progress—his explanandum—and then his explanation for the thus “measured” phenomenon—his explanans.
Throughout his entire work, Pinker shows a remarkable hostility toward religion and hence it is hardly surprising that it does not cross his mind to use the biblical commandments (which, incidentally, he grossly misrepresents) as a benchmark for social perfection. Rather, his benchmark is “violence,” and social progress is defined as a reduction in violence. At first sight, this criterion does not seem too far away from the biblical-libertarian goal of peace. In fact, however, it turns out to be something quite different. His prime examples of violence are homicides and war casualties. The book is filled with tables and statistics on these indicators of violence. Incredibly, however, Pinker does not make a categorical distinction between aggressive and defensive violence. In the biblical commandments, with their explicit recognition of the sanctity of private property, such a distinction is made. It makes a difference if violence is used to take another man’s property or if a man uses violence in defense of his property against an aggressor. Murder is a categorically different thing from the killing of someone in self-defense. Not so for Pinker. Property and property rights do not systematically figure in his analyses. Indeed, the terms do not even appear in the book’s thirty-page subject index. For Pinker, violence is violence, and the reduction of violence is progress, regardless of whether this reduction is the result of the successful suppression of a people by and vis-à-vis another, conquering people, or the result of their own successful suppression of aggressors and conquerors. In Pinker’s world, a “stable” master-slave relationship is a sign of civilization, while a slave revolt accompanied by violence is a sign of decivilization. Likewise, a system of compulsory taxation—another term which like property is completely missing from the index (not coincidentally)—is an indicator of civilization regardless of the height of taxation, as long as it is simply stable, i.e., as long as the mere threat of punishment by the tax authority is sufficient to achieve general compliance on the part of the taxed. Any tax revolt and resistance is to count as decivilization. One is peace and progress to Pinker, whereas the other is violence and regression.
Pinker does not follow his own logic to the bitter end, but this must be done to reveal the full depravity of his thought. According to him, a smoothly run concentration camp, for instance, guarded by armed men who do not murder the inmates and in fact prevent them from killing each other, but who supply them with “happiness drugs” to keep them quietly working for the benefit of the guards until their natural (nonviolent) deaths, is the perfect model of peace and social progress, while the violent overthrow of the guards by the inmates is, well, violence and decivilization.
Based on this depraved view of social progress that knows no property and property rights violations, but only counts the number of unnatural deaths, bodily injuries, and broken bones, it should be expected that Pinker’s evaluations of various historical episodes must yield some rather awkward or even grotesque conclusions, as in fact they do. In particular, it also explains how Pinker could misrepresent the present democratic age as the best of all times.
But is it, even on Pinker’s own terms? Are we living in the least violent of times?
The answer is ambiguous. On the one hand there are wars, which throughout history have always been responsible for the largest number of casualties, far outweighing those resulting from “regular” small-scale interpersonal violence. In this regard, as Pasquale Cirillo and Nicholas Taleb ([2017]) have shown in response to Pinker’s progression thesis, no statistically discernable trend can be established. According to Taleb, for the 600-year period from about 1500 to today, for which we have relatively reliable data, no significant change to the frequency of war or the number of war casualties (always set in relation to the total population) can be made out. Indeed, if anything, there has been a slight uptick in war-related violence with the spread of democracy (contrary to the proponents of the so-called democratic peace theory). And as for the seventy-year period since the end of World War II, which Pinker identifies as exceptionally peaceful and warless, Taleb points out that wars and especially large-scale wars are highly irregular and comparatively rare events and that an observation period of just seventy years, then, is far too short to serve as the basis for any far-reaching conclusions. But, as John Gray (2015) has argued contra Pinker, even this assessment of “modern times” is likely too rosy a picture, because it tends to systematically underestimate the number of war-related casualties among noncombatants, i.e., the number of civilians dying from various diseases spread through war or from long-term side effects of war such as “slow deaths” caused by economic deprivation and starvation. (The same danger of underestimation does not exist, at least not to the same extent, for the wars of the European Middle Ages, because they were typically small-scale, territorially restricted events and involved a comparatively sharp distinction between and separation of combatants and noncombatants.)
On the other hand, there exists indeed plenty of empirical evidence to speak of a suprasecular trend toward a reduction in violence—not to be confused with a reduction ininfringements on property rights—as measured in particular by homicide rates (a homicide is a homicide regardless of who kills whom, why, or how). In this extra- or amoral sense, we can indeed speak of a “civilizing process,” as Pinker does and demonstrates in great detail. Pinker adopts this term from Norbert Elias and his book The Civilizing Process (1969), first published in German in 1939 and translated into English thirty years later. In this book, Elias describes and aims to explain the changes in everyday etiquette, from table manners to sexual mores, that occurred during the European Middle Ages and since. Put briefly, this process can be described as the gradual transition from brutish, gross, crude, boorish, bearish, immodest and intemperate, etc. pp., behavior to increasingly refined, controlled, considerate, modest and temperate, etc. pp., human conduct. Taking his cues from Elias, Pinker merely generalizes and expands Elias’s civilizing thesis from human etiquette to all of everyday life and behavior—and in this, in my judgment, he is by and large successful.
However, Pinker’s explanation for this extra- or amoral form of social progress from brutish to increasingly refined behavior is fundamentally mistaken. What he identifies as the principal cause of this development, and I will come to his cause in a moment, has actually, if anything, retarded and distorted this development. That is, absent Pinker’s cause, there would have been not less but more (and a significantly different) refinement in human conduct.
In fact, the grand, long-run historical tendency toward increasingly refined (or less brutish) behavior can be explained, simply enough, as the quasi-natural byproduct of the widening and deepening of the division of labor in the course of economic and technological development. The development of increasingly more and different productivity-enhancing tools and instruments proceeded hand in hand with the development and increasing differentiation of human crafts, skills, and talents. Put briefly, the importance of muscle power for economic success declined relative to the importance of brain power, physical finesse, and mental agility. Moreover, as I have tried to explain in my A Short History of Man, especially under Malthusian conditions, which prevailed for most of human history, a systematic premium for economic success and indeed human survival is placed on the progressive development and growth of human intelligence, of low time preference, impulse control, and patience (which personal characteristics are at least partially hereditary and thus passed on through subsequent generations).
Pinker’s explanation for this tendency toward a progressive refinement of human conduct is very different, however. His explanation for this development is the institution of states, i.e., territorial monopolists of ultimate decision-making. He claims that the most decisive and all-important step in the progressive refinement of human conduct has been the transition from a stateless social order to a statist society. And in this he is not entirely wrong—given that his definition of progressive refinement is an extra- or amoral one. Certainly, the institution of states, and more specifically of democratic states, is the principal cause of many central features and observations concerning our present-day conduct and routines—except to notice that many or most of them have little or nothing to do with moral progress and stand in open contradiction to biblical commandments. As well, violence as defined by Pinker may indeed have gone down—except to notice that the exercise of violence has been so “refined” and redefined under state auspices as to no longer fall under his narrow definition of the term. “Witches,” for instance, are no longer violently burnt, but shipped off instead, seemingly peacefully, into psychiatric wards to be drugged and pacified by medical professionals. Neighbors are no longer robbed of their property violently, but, in a much “refined” way and apparently without any physical violence, presented with regularly recurring tax bills to be quasi-automatically paid via bank transfer into the accounts of the state.
The central cause for social progress and increasing social perfection that Pinker identifies, then—the instituting of a state—actually turns out to be a central force of decivilization, retarding and distorting the underlying civilizing process naturally set in motion by the deepening and widening of the division of labor in the course of economic development. The institution of the state may explain the refinement of violence in the course of time, but it is itself a constant source of violence, however refined, and the driving force for its expansion and intensification. The subtitle of Pinker’s book, Why Violence Has Declined, would lead most potential readers to expect an answer to a moral question or problem, because of the typically negative of the term violence. Yet as such the book’s title is an ingenious attempt at false and deceptive advertisement, because Pinker does nothing of the sort. Instead, he answers the very different question of how to “technically” or “scientistically” define violence so as to make the morally most depraved and violent institution of all appear as a peacemaker, or to make Satan look like an angel.
And how does he do this? First, by throwing out logic and plain common sense and then fudging the data and historical narratives to fit his plain nonsensical basic premise. Pinker presents this basic premise in the form of a simple diagram (2011, 35). In any two-person scenario, both parties may have a motive for violence, either as an aggressor, to prey on the other, or as a victim, to retaliate. Consequently, similarly to Hobbes, Pinker pictures this state of affairs as one of interminable violent conflict, as a bellum omnium contra omnes, a war of all against all. But miraculously, there is a cure to this problem, a third party, which Pinker calls a bystander, that acts as judge and assumes the role of a territorial monopolist of violence so as create lasting peace. But would this bystander not also be a potential predator? And would his predatory motives not be even strengthened if he were the monopolist of violence and did not have to fear any retaliation from his victims? Pinker does not address these rather obvious questions, let alone provide a systematic answer to them. Nor does he provide an answer to the question of why anyone would submit himself, without resistance, to any such bystanding monopolistic judge. Would no one recognize the potential danger for his own property from such an arrangement and put up resistance against its establishment? To be sure, Pinker cannot cannot help noticing later on that empirically states qua territorial monopolists of violence did not emerge spontaneously or quasi-organically, but mafia-like, as some sort of protection racket. Yet this observation does not lead him to revise or reject his fundamental thesis about the principal role of the state as a peacemaker, nor does it lead him to the recognition that many if not most of the civilizing achievements that he ascribes to the workings of the state are in fact the results of popular resistance against state power, whether active and violent or passive and nonviolent. Indeed, as mentioned before, Pinker classifies any violent resistance against the state as decivilization, which implies that the prior violence exercised by the state vis-à-vis the resister must have been a civilizing and pacifying activity, not to be counted as violence at all. It is almost needless to say that such mental acrobatics inevitably lead to various contradictions from which Pinker can extricate himself only through more or less ingenious but always intellectually painful contortions.
Pinker’s identification of the state as the all-important force in the process of civilization coincides, of course, perfectly well with the assessment of all state rulers everywhere, and it is essentially the very same lesson that we all have been taught in school and university to accept as a quasi-axiomatic truth. In particular, it is the same lesson taught by all contemporary “leading economists.” And yet it flatly contradicts one of the most elementary laws of economics: production under monopolistic conditions will lead to higher prices and lower quality of whatever is produced as compared to the production of the same product under competitive conditions, i.e., under conditions of “free entry.” Most contemporary economists recognize this law, but they fail to apply it to the peculiar monopoly that is the state—most likely because most of them are employed by the state. But in fact it applies to the state as well, regardless of how one describes the specific product that it produces. If we describe the state, as Pinker does, as a territorial monopolist of peacemaking, then peace will be more expensive and of lower quality. If we describe it as a monopolist of justice, then justice will be of higher cost and of lower quality. If we describe it as a monopolist of violence, violence will be more expensive and of worse quality. Or if we describe it, as I think best, as a territorial monopolist of expropriation charged with the task of property protection, then we will predictably get much expropriation, which benefits the monopolist, and little protection, which will be only costly for the state. In any case, the result is always the same, and Pinker’s central thesis concerning the civilizing effect of the institution of a state, then, must be rejected on logical grounds alone.
What about Pinker’s empirical case, then? Logic cannot be refuted by empirical data, but if one throws out logic one is bound to misinterpret empirical data. Pinker offers a huge number of empirical data, tables, and graphs of great interest. I have quarrels with some of them, but here I accept them all for the sake of argument. My criticism concerns solely his interpretation of these data. In fact, and as mentioned before, I can largely go along with his generalized Elias-thesis about a civilizing process from brutish to refined human conduct. Based on logic, however, I would interpret it differently. Whatever civilizing process there was, it did not occur because of the state, but in spite of or in resistance against the state; and whatever decivilizing process there was, it did not occur because of the absence of a state, but in spite of its absence, or as the late lingering effect of a prior (now dissolved) state and its earlier decivilizing tendencies. Post hoc does not imply propter hoc.
I will restrict my criticism to two central exhibits that Pinker offers in empirical support of his thesis, one concerning global affairs and another more regionally specific one that is most directly related to my earlier observations on European or Western history.
The empirical support for the global progression thesis is summarized in two tables (Pinker 2011, 49, 53). The first is supposed to show the decline of war deaths (as percentage of population) from human prehistory to the present. For this Pinker distinguishes four historical stages: prehistory, hunter-gatherer societies, hunter-horticulturalist societies, and finally state societies. He then provides data to show that there was at best only a minimal improvement from the highly violent prehistoric era to the hunter-gatherer stage; that violence increased again with the introduction of horticulture and agriculture (as there was then more economic inequality and more to loot); and that it finally dropped off sharply to a level never seen before in human history with the introduction of state societies. To further bolster his thesis, the second table compares the rate of death in warfare for “modern” nonstate societies (of the nineteenth and twentieth centuries) with equally “modern” state societies, supposedly demonstrating once more the civilizing effect of states.
As said before, I shall not quibble about the numbers and estimates presented in these tables, except to note that any estimate concerning human prehistory and the far distant hunter-gatherer-horticulturalist stage(s) of human history must be viewed with a good dose of skepticism. Archeological findings of broken skulls, for instance, can provide a basis for some reasonable estimate of violence at particular places and times, and you may then also scale up such estimates to the approximated total world population at the time to calculate the violent death rate for any given period. But what you cannot do, and what is for rather obvious technical reasons and at least until today nearly impossible to do, is show that your sample of violence data is a representative random sample, from which alone it would be legitimate to generalize specific findings to the population total.
The central reason, however, why Pinker’s data fail to demonstrate what he wants to demonstrate is a different one. In his attempt to compare nonstate societies with state societies he is comparing what cannot be compared. His examples of nonstate societies, whether ancient or modern, refer almost exclusively to some obscure tribes outside of Europe (or in a few rare European cases to tribes living thousands of years prior to the Christian era); and all of them have either literally died out or else left no lasting trace in history in that it is nearly impossible today to trace any one contemporary society back to them genealogically as their historical predecessor. In distinct contrast, all the examples of state societies are taken from Europe and the Western world, where such genealogical back tracing is easily possible for periods of hundreds or even thousands of years. Obviously, such a comparison can yield an unbiased conclusion only under the assumption that the only relevant factor distinguishing European or “Western” people from Pinker’s various tribesmen is the presence or absence of a state and that otherwise both peoples are the same, with the same physical and mental constitution and endowment.
Pinker never explicitly states this assumption, crucial for his own case. Probably because it would cast some immediate doubt on the validity of his conclusion. And, indeed, as a matter of fact there have been countless empirical studies in the meantime, in many disciplines, that demonstrate the utter falsehood of this assumption. Substantial differences exist in the physical and mental makeup and endowments of different people. Europeans, or more generally “Westerners,” are decidedly not the same sort of people that Pinker’s tribesmen are—and with that his first “empirical proof” of his progression thesis collapses. His proof is a nonstarter and proves nothing.
In addition, Pinker misses the trees of humans for the global wood of mankind in another regard, for according to his own data there are also some nonstate societies, even if only a few, that equal or even surpass the level of peacefulness achieved in state societies.
As a brief aside, Pinker might not even be aware of the fact that some sort of (false) human “equality” assumption is necessary to make his point, but he assumes it anyhow, again and again, if only implicitly or surreptitiously. Deep down, Pinker is an egalitarian, as is particularly evident from his outspoken sympathy for the “progress” brought about by the so-called civil rights movement and the “noble” Dr. Martin Luther King Jr. as well as Nelson Mandela, “one of history’s greatest statesmen” (notwithstanding both men’s well-known communist connections). Pinker is not an extreme (and extremely silly) egalitarian, of course. He makes distinctions between sexes, ages, races, and classes, and he is well aware of the unequal distribution of various human traits and talents within society—of intelligence, diligence, impulse control, sociability, etc. But as a politically correct “progressive,” he cannot bring himself to the recognition that the unequal distribution of these human traits and talents within society may be very different in different societies.
With Pinker’s first, global empirical “proof” rejected, what about his second, regional one? Here, all data come from Europe and insofar the danger of comparing incompatibles is avoided. Pinker devotes some ten pages (2011, 228–38) to this case, and the key information is condensed in a single graph (ibid., 230) depicting the “Rate of Death in Conflicts in Greater Europe, 1400–2000.” If anything, however, this graph demonstrates the opposite of Pinker’s progress thesis. What it shows is that the longest period of (relative) peacefulness and low levels of violence was the almost two hundred years from 1400 until the very end of the sixteenth century. Yet this period falls precisely within the longer period of the European Middle Ages (and marks its end), and the Middle Ages, as I have argued before, are a prime example of a stateless social order. (Interestingly, Pinker concurs with this assessment of medieval Europe as stateless, but he then fails to see that it implies, according to his own data, an empirical refutation of his thesis.)
And it gets worse for Pinker’s case. According to the same graph, the following historical period, from the late sixteenth century to the present, is characterized by three huge spikes in the level of violence. The first spike, from the late sixteenth century until the Westphalian Peace in 1648, is largely associated with the Thirty Years’ War; the second, from the late eighteenth century until 1815 and somewhat less steep than the first, is associated with the French Revolution and the Napoleonic Wars; and the third and greatest spike, from 1914–45, is associated with the twentieth century’s two world wars. As well, for all intermediate periods the level of violence remained well above that of medieval times, a level that was only reached again three centuries later, during the period from 1815–1914 and again during the post–World War II era. All in all, then, the record for postmedieval Europe in terms of violence appears rather depressive. And yet the entire period, from the late sixteenth century until today, is the era of states, which Pinker considers the driving forces of a “civilizing process.”
Pinker associates the first drastic spike in violence with religion and the “Wars of Religion.” In fact, however, they were wars to make states. Feudal kings and princes aspiring to the rank of absolute ruler made war to bring increasingly larger contiguous territories under their supreme control. In this, they took advantage of the recent split within Latin Christendom between Catholics and Protestants, and it was they who actually invented the term “Wars of Religion”—if only to deceive and hide their real purpose of state making, which had little if anything to do with religion. The second spike marks the turning point from monarchic to democratic states and was the result of Napoleonic France using war in the attempt to establish hegemony over all of continental Europe. And the third and most drastic spike in the level of violence marks the beginning of the era of full-fledged democracy and is the result of Britain and the USA going to war to establish world hegemony.
In his interpretation of these data, Pinker tries to make the best out of (for him) a rather desperate looking case. For one, he points out with the help of a second graph (2011, 229), that throughout the entire period the number of violent conflicts declined as the number of states fell due to territorial consolidation and centralization. A greater number of small-scale wars with few casualties was replaced with a smaller number of large-scale wars with many casualties. This does not appear much like progress, however, especially if it is kept in mind that the rate of death in conflicts actually increased over the entire statist era, even if the number of violent conflicts declined. To rescue his progress thesis, then, Pinker advances two auxiliary arguments. First, he claims that the more lethal character of (less frequent) modern wars has nothing to do with states per se or with their territorial expansion and consolidation, but is instead the quasi-accidental result of advances in military technology (a thesis that he elsewhere rejects when he states that the development of technology is essentially “neutral” to the level of violence). And secondly, to add more weight to his thesis about the decline in the frequency of war (but not, to emphasize again, the decline of the war-related death rate!), he points out that the process of political centralization, i.e., the increasingly smaller number of states with increasingly larger territories was not accompanied by a corresponding increase in civil or intrastate war, and hence represents a real civilizing gain (and not just an accounting trick). Essentially, according to Pinker, with each political centralization, and ultimately the establishment of a world state, the likelihood of war declines and ultimately disappears, along with a parallel decline in and disappearance of civil war. In short: states civilize and a world state civilizes best. Or in reverse: each secession decivilizes and complete freedom of secession decivilizes most.
Economic logic (praxeology) dictates a very different interpretation of all this, however. States are not spontaneous voluntary associations. They are the result of war. And the existence of states increases the likelihood of further wars, because under statist conditions the cost of war making must no longer be borne privately, but can at least partially be externalized onto innocent third parties. That the number of wars then declines as the number of states falls and that there can be no interstate war once the number of States has been reduced to a single world state is not much more than a definitional truth. Even if less frequent, however, the further advanced the process of political centralization and territorial consolidation, i.e., the closer to the ultimate statist goal of a world state, the more lethal such wars will become.
Nor can the institution of a world state deliver what Pinker promises. True, there can then be no interstate wars, by definition. For the sake of argument, we may even concede that the frequency and the casualty rate of internal, civil wars may decline as well (although the empirical evidence for this appears increasingly doubtful). In any case, however, what can be safely predicted about the consequences of a world state is this: with the removal of all interstate competition, i.e., with the replacement of a multitude of different territorial jurisdictions with different laws, customs, and tax and regulation structures by a single worldwide uniform jurisdiction, any possibility of voting with one’s feet against a state and its laws is removed as well. Hence, a fundamentally important constraint on the growth and expansion of state power is gone, and the cost of the production of justice (or whatever it is that the state claims to produce) will accordingly rise to unprecedented heights, while its quality will reach a new low. There may or may not be less of the broken bones–type violence a la Pinker, but in any case there will be more “refined” violence, i.e., property rights violations that do not count as violence to Pinker, than ever before; and the world-state society, then, will look more like the stable concentration camp scenario mentioned earlier than anything resembling a free, convivial social order.
Stripped down to its bare bones Pinker’s central argument amounts to a string of logical absurdities: according to him, tribal societies somehow “merge” to form small states and small states successively “coalesce” into increasingly larger states. If this “merging” and “coalescing” were, as the terms insinuate, a spontaneous and voluntary matter, however, the result, by definition, would not be a state but an anarchic social order composed of and governed by free membership associations. If, on the other hand, this “merging” and “coalescing” results instead in a state, it cannot be a spontaneous and voluntary matter but must, of logical necessity, involve violence and war (in that any territorial monopolization necessitates the violently enforced prohibition of “free entry”). But how, then, can anyone such as Pinker, who wants to reduce violence and war to a minimum and possibly eliminate it entirely, prefer a social system, any system, that necessitates the exercise of violence and war to a system that does not do so? Answer: only in throwing out all of logic and claiming that the relationship between the state and violence and war is not a logically necessary one, but a merely contingent, empirical relationship instead—that just as it is indeed an entirely empirical matter whether or not you or I commit violence and go to war, so it is also a purely contingent, empirical matter whether or not a state commits violence and goes to war.
Thus, according to Pinker, World War II with all its atrocities, for instance, had essentially nothing to do with the institution of states but was a historical fluke, owing to the evildoings of a single, deranged individual, Adolf Hitler. Indeed, unbelievably and seemingly without blushing (although that is admittedly difficult to tell from a written text) Pinker approvingly quotes historian John Keegan saying that “only one European really wanted war—Adolf Hitler.” (2011, 208) Question: But how much evil can a single, deranged individual do without the institution of a centralized state? How much evil could Hitler have done within the framework of a stateless society such as those of the Middle Ages? Would he have become a great lord, a king, a bishop, or a Pope? Indeed, how much evil could he have done even within the framework of a thousand ministates, such as Liechtenstein, Monaco, or Singapore? Answer: not much, and certainly nothing comparable to the evils associated with World War II. “No Hitler, no Churchill, no Roosevelt, or no Stalin, then no war,” as Pinker would have it, holds not, then, but rather: “no highly centralized state, then no Hitler, Churchill, Roosevelt, or Stalin.” Remove the state, and they may have become a Jack the Ripper, a Charles Ponzi, or even harmless people, but not the mass-murdering monsters that we know them to have been. Institute the state, and you create, attract, and breed monsters.
In sum, then, Pinker’s attempt to rescue the Whig theory of history and demonstrate that we live in the best of all worlds turns out an utter failure. Indeed, one may even say that his book and its great commercial success is itself empirical proof of the contrary.
The votes still aren't counted, but when it's all over, we'll still be in a country at war with itself over which half of the country gets to boss around the other half. Ryan McMaken and Tho Bishop discuss the failure of the pollsters, the imaginary Blue Wave, and the end of naive democracy.
Additional Resources "The Election Was a Tie. Now What?" by Ryan McMaken: Mises.org/RR_40_3
"Close Elections Force Us to Ask Unpleasant Questions about Democracy" by Ryan McMaken: Mises.org/RR_40_2
"Why Threats of Election Violence May Be Here to Stay" by Ryan McMaken: Mises.org/RR_40_1
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
A very close or contested election would remind us that elections do not demonstrate "the will of the people" and that national unity is founded on some very fragile myths.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Close Elections Force Us to Ask Unpleasant Questions about Democracy".
Why don't elections bring harmony and closure rather than ever greater political friction? Hans-Hermann Hoppe explained all of the fundamental problems with mass democracy more than 20 years ago in Democracy: The God That Failed.
Jeff Deist finishes his series on this devastating classic with a look at Hoppe's final chapters, critiquing conservatism, liberalism, and constitutionalism. Why do both conservatism and liberalism fail? (hint: democratic mechanisms). Liberalism is property, not majority rule, and all governments tend to attack rather than defend property over time. So what is the best way forward, combining a liberal economic program with the old conservative understanding of natural order? And how do we get there? Don't miss this discussion of Hoppe's most controversial and forward-looking book.
Use the code HAPOD for a discount on Democracy: The God That Failed from our bookstore: Mises.org/BuyHoppe
Is it still possible to "rouse the masses of people against the elites that are looting them" in effective numbers? As late as 1992, Rothbard thought so. And he had historical examples on his side.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Populism Worked for the Pro-Freedom Party in the Past. Can It Work Again?".
Why did Murray Rothbard embrace populism and why did he think it could work to limit the power of the state? In short, Rothbard believed that a small elite had seized the power of the state to fleece and oppress the majority. Rothbard was in part basing his ideas on the historical narrative of the Democratic populists of the nineteenth century who formed the party of sound money, low taxes, and decentralized power. This laissez-faire party also managed to win a lot of elections.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Silicon Valley and the media are moving even further left. This is what is to be expected when a single ideological group controls educational institutions and major media outlets over a period of several decades.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "How Decades of Media and Faculty Bias Have Pushed America to the Left".
Hans-Hermann Hoppe has shown in his writings on democracy that democracy leads to economic impoverishment and political disaster under certain conditions.
But what are those conditions, and are they dominant in electoral institutions in the United States today? And what role does ideology play in limiting the abuse of the ballot box by voters?
Additional Resources "Stop Saying We're a Republic, Not a Democracy" by Ryan McMaken: Mises.org/RR_38_1
Patrick Newman's 2020 Supporters Summit talk, "The Jacksonians’ Bank War: Liberty versus Power": Mises.org/RR_38_2
"Nasty Politics and 'Low-Information Voters' Are Nothing New" by Ryan McMaken: Mises.org/RR_38_3
What Must Be Done by Hans-Herman Hoppe: Mises.org/RR_38_4
And, be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In Brazil, the most effective reforms seem to be accumulating at the state and local levels. There has been real success in pushing back against tax increases and more.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Hoppe's Localist, Decentralist Strategy Is Working in Brazil".
Trying to stay ahead of the government printing press is the modern citizen’s constant worry.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Can the Stock Market Protect Wealth Better Than Gold and Silver?".
Although many politicians and pundits have deified democracy, it often leads to the oppression of political minorities while encouraging abuse. Here are some strategies for lessening the damage democracy can do.
And be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The NRA would be wise to vote with its feet. Millions of Americans have already escaped the high taxes and freedom-destroying blue state regimes by doing the same. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "The NRA Would Be Wise to Leave New York ASAP".
There are two distinct classes in America, and we have to break up. And we have to break up sooner rather than later. If we are to avoid a disastrous conflict, each side has to let the other go.
From the 2020 Supporters Summit, presented at the historic Jekyll Island Club Resort on Jekyll Island, Georgia, on October 9, 2020.
Most of you know the great journalist Henry Hazlitt for his remarkable Economics in One Lesson. But in this episode, Jeff Deist discusses Hazlitt's virtually unknown 1942 book A New Constitution Now, which is nothing short of a how-to guide for remaking the US constitutional system. Hazlitt was concerned about FDR's third term and what it meant for presidential power, along with what he saw as the benefits of a quasi-parliamentary government for the US. This is a radical and controversial book, with detailed proposals and serious rebuttals to likely objections. It's a book that deserves a wider audience, especially by those frustrated with the two-party stranglehold on DC.
Also, get your free copies of Economics in One Lesson at Mises.org/OneLesson.
Rather than choose among a group of narcissists desperate to become popular by redistributing the income of others, why not choose officeholders by lot for a single term?
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Our Politicians Would Probably Be Better If We Picked Them by Lot".
Americans have been trained to regard the US Supreme Court as a principled, non-political institution whose rulings must be obeyed. This assessment of the court is very wrong.
And be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The best way to think about tradition is to view it like capital accumulation. Knowledge is accumulated through countless centuries of trial and error. The state seeks to destroy historical consciousness and old ways of life to secure power.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Why the State Seeks to Abolish Both Tradition and History".
As confidence in the dollar falls, Americans put more of their money in gold, silver, and cryptocurrencies. State governments can help this process along by deregulating sound money.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Why Americans Are Looking for a Safe Haven from the Dollar"
Last time we met in Orlando, Bob Murphy mentioned how much worse our political and social divide would be if the economy crashed like 2008. Now we face this very problem—with COVID-19 lockdowns and George Floyd protests decimating the economy and social media exposing raw animosity along racial and "woke" lines. Congress and the Fed have gone into overdrive creating new stimulus and "liquidity," but 40 million Americans are unemployed and major cities are still recovering from turmoil. The national debt tops $26 trillion while tax receipts at all levels of government plummet.
So what does it all mean for you, for freedom, and for the future of America—economic and otherwise?
Recorded in Orlando, Florida, on August 29, 2020. Special thanks to Mr. and Mrs. Greg Roe for making this event possible.
Every law must ultimately be enforced using the police power of the state. For those who resist, this means violent arrest and imprisonment. Or worse.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "More Laws Mean More Police Brutality".
Every major scientific advance challenged the “settled science” of its day and was often denounced as pernicious and false, even dangerous.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The COVID-19 Panic Shows Us Why Science Needs Skeptics".
Download the slides from this lecture at Mises.org/MU20_PPT_38.
Recorded at the Mises Institute in Auburn, Alabama, on 18 July 2020.
Whether or not race is a factor, the monopoly power enjoyed by police agencies (and other government agencies) creates the conditions likely to lead to more abuse of power.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "How the Monopoly Power of Police Agencies Encourages Abuse".
"Defunding" the police isn't likely to actually lessen the control the state has over our lives. But repealing countless laws that give police far too much power would certainly help.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Repealing Useless and Abusive Laws Might Do More Good Than "Defunding" the Police".
Just as America begins to reopen from the Coronavirus lockdowns, protests break out across the country over the killing of George Floyd by police in Minneapolis. Governors deploy riot police into the streets to deal with looting, Trump threatens to invoke the Insurrection Act of 1807, and millions of Americans wonder if they still have a job. Racial tensions grow, while groups like Antifa violently agitate for the abolition of property and capitalism. With curfews and business closures in effect, what does the rule of law even mean? How does government at any level maintain legitimacy when it cannot provide basic order?
Judge Andrew P. Napolitano, the Senior Legal Analyst for Fox News and a board member of the Mises Institute, joins Jeff Deist for an in-depth look at the legal crisis facing America in the wake of COVID-19 and ongoing civil unrest. Among the topics:
What powers do Trump and governors have to quell protests or prevent the spread of disease? Are orders not authorized by legislatures flatly illegal? Do they carry the force of law?Can Trump call out National Guard or federal military forces without congressional approval or consent of governors?What does due process mean during a crisis? Do constitutional protections disappear when public health is at stake or mass protests overtake the streets?What level of constitutional scrutiny should apply to measures taken by governors and mayors—quarantines, business closures, curfews, police mobilizations?Are qualified immunity protections keeping dangerous cops and politicians from accountability? Will business owners be able to sue state or local governments for violating their rights?Is "property vs. lives" a false choice from a legal perspective? Do police have any affirmative duty to safeguard either?What roles do the Ninth and Tenth Amendments play—or should they play—in how various states deal with these crises? Is federalism poised for a resurgence? This online seminar is a hard-hitting and uncompromising discussion of government malfeasance and lawlessness.
The state currently enjoys a vastly unbalanced share of the power within a society, such an arrangement is not in any way preordained, and the assumption that it must be betrays a narrowness of vision and a lack of historical knowledge.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Fed Is Doing "Whatever It Takes" to Prop Up the Economy. That's a Very Bad Thing."
With such chaos, confusion, and incompetence playing out, it is little wonder that more and more Pennsylvanians are refusing to obey lockdown decrees.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Shutdown May Soon Collapse in Pennsylvania Thanks to Local Resistance"
Jeff Deist and economist Daniel Lacalle present a special live seminar on the COVID-19 crisis and what it means for your economic future.
Is the world headed for another Great Depression, or will we enjoy a V-shaped recovery later this year as the virus fades and economies reopen? Are governments and central banks making the situation better or worse? Will stocks bounce back? Do we all face a less prosperous new normal, or will markets and human ingenuity overcome the economic tailwinds?
Mr. Lacalle and host Jeff Deist take an unflinching look at the economic reality.
Topics include:
Prospects for inflation vs. deflationFed and ECB responses to the crisisEffects of government "stimulus"Unemployment and small businessHousing and commercial real estateEquities and bondsOil and commoditiesGold and Bitcoin
Economist David R. Henderson returns to the podcast to explain some of the major problems with the so-called "stimulus" bill, including its payment of $600 a week to the unemployed, as well as perverse payments to airlines. He then discusses the protest he helped organize against California's lockdown.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Thanks to the growth of the state over time, political stakes have become much higher, and groups fear that they will be crushed by the other side if they lose. Crisis-induced cohesion is not a silver bullet, but rather a ticking time bomb.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "This Crisis Will Not Bring Americans Together and Maybe That Is a Good Thing"
So far, when it comes to disarming the population, governments haven't been quite as terrible as one might have predicted during the COVID-19 panic.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Gun Control: Americans Have Been Lucky during the COVID-19 Panic, but It's Still a Toss-Up"
The lasting and far-reaching harms caused by this authoritarian precedent far outweigh those caused by the COVID-19 virus. The American people must decide for themselves how and when to reopen society and return to their daily lives.
Narrated by Millian Quinteros.
Original Article: "End the Shutdown"
Pete Quinones, host of the Free Man Beyond the Wall podcast, and Ryan McMaken discuss the subjects of the articles Ryan has been covering recently about the government's and public’s responses to the Covid-19 crisis.
The hilarious stand-up comic and Rothbardian Dave Smith invites Bob onto his show, Part of the Problem, to talk about the government’s response to the coronavirus.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Pete Quinones, host of the Free Man Beyond the Wall podcast invited Jeff Deist to return to the show to go over the government’s response to the coronavirus, and to see if there are any positives that can be found in this situation.
Oren Cass is the executive director of American Compass (AmericanCompass.org), a conservative think tank that stresses the importance of family and domestic industry, in opposition to a singleminded devotion to economic efficiency. Cass was previously a senior fellow at the Manhattan Institute for Policy Research, and was the domestic policy director for Mitt Romney’s 2012 presidential campaign. Bob and Oren have a friendly discussion about their disagreements on economic policy.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Larry Reed has been an organizational leader for liberty for decades, first at the Mackinac Center and then at FEE. He talks with Bob Murphy about Solzhenitsyn’s ability to withstand the Soviet gulag, and more generally makes the case for optimism in the face of oppression. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Is Bernie right to say America has become a socialist country? Jeff Deist joins guest host Judge Andrew P. Napolitano on Kennedy (on Fox Business Network) to discuss the "Capitalism vs. Socialism" debate within the Democrat Party.
Original video © 2020 FOX News Network, LLC. Republished here under "Fair Use" for scholarship and research purposes by a nonprofit educational institution.
American politics is in crisis. Is this because of the Constitution, or in spite of it?
For many libertarians, the Constitution is a dead letter. Nobody alive today signed it or consented to it. And politicians ignored it almost from the beginning.
What can liberty-minded people do?
Recorded at Loyola University New Orleans on February 15, 2020. Includes an introduction by Jeff Deist.
American politics is in crisis. Is this because of the Constitution, or in spite of it?
For many libertarians, the Constitution is a dead letter. Nobody alive today signed it or consented to it. And politicians ignored it almost from the beginning.
What can liberty-minded people do?
Recorded at Loyola University New Orleans on February 15, 2020.
Don Boudreaux is an economist at George Mason University who blogs at Cafe Hayek. He has a long history with the Austrian and Public Choice schools, and is in the trenches daily making the case for free trade.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
In attempting to promote the libertarian viewpoint, particularly in its anarchic variety, one is faced with a variety of problems. Some problems are theoretical and are well treated in the comprehensive literature;A division may be drawn between libertarians and nonlibertarians, with nonlibertarians running the gamut from ultraconservative Individualists to ultrasocialist statists. The keenest dispute, however, is within the libertarian camp between those libertarians who espouse anarchism (such as Murray Rothbard and Hans-Hermann Hoppe) and those who do not (such as Ludwig von Mises and Tibor Machan). In The Ultimate Foundation of Economic Science, Mises writes as follows:peaceful human cooperation…cannot exist without a social apparatus of coercion and compulsion, i.e., without a government. The evils of violence, robbery, and murder can be prevented only by an institution that itself, whenever needed, resorts to the very methods of acting for the prevention of which it is established. There emerges a distinction between the illegal employment of violence and the legitimate recourse to it. In cognizance of this fact some people have called government an evil, although admitting that it is a necessary evil. However, what is required to attain an end sought and considered as beneficial is not an evil in the moral connotation of this term, but a means, the price to be paid for it. Yet that fact remains that actions that are deemed highly objectionable and criminal when perpetrated by “unauthorized” individuals are approved when committed by the ‘authorities. (pp. 59–60) other problems, however, are practical or rhetorical and, while the theoretical problems (and their solution) are intrinsically the more important, it is vital that the practical/rhetorical problems be overcome if the theoretical points are to get a fair hearing.See the Mises Economics Blog on Polycentric Law, July 2005 to January 2007. http://blog.mises.org/archives/003803.asp. As human beings, we perceive and understand in accordance with our needs, our desires and our interests.Quidquid recipitur recipitur secundum modum recipientis—“whatever is received is received according to the mode of the receiver.” No matter how marvellous a theory may be, it is useless if its intended audience is unreceptive. The point of rhetoric, then, is to open the eyes of the blind and the ears of the deaf so that they may see and hear.
THE GRIP OF MYTH Someday I’d like to write a book entitled Things We All Know That Just Ain’t So! Included in this book will be the following: There was a time when everybody believed the world was flat—maybe, but not any half-educated person in the last two thousand years. The Barbarians brought about the collapse of the Roman Empire and the onset of the Dark Ages. No, they didn’t, at least not without significant help from the Romans. Galileo was an apostle of reason, brutally treated by a tyrannical and obscurantist Church. He wasn’t and it didn’t. These “facts,” however misguided, are refutable in principle. However, some of our epistemic structures go deeper and are more difficult to dislodge.
Our patterns of belief are constituted by myth. As I use the term “myth,” it is not a euphemistic way of saying that something is untrue but simply a way of naming the foundational narratives, the ultimate framing devices, in the context of which our humdrum beliefs and practices find their place. Such myths, whatever their ultimate truth, cannot be called into question from within—from that point of view, their falsity is literally unthinkable. The English philosopher R. G. Collingwood referred to such a set of such myths as “absolute presuppositions” (Collingwood 1940); similarly, Wittgenstein recognized a functional class of propositions as “standing fast” in relation to any given mode of thought (Wittgenstein 1969, passim). Because we see through (by means of) myths, we find it difficult to see through them, i.e., to recognize their nonnecessity, their lack of foundation, their contingency.
Political theory—and, I suggest, most political practice—is dominated by a myth to the effect that the state is necessary, for many things, perhaps, but primarily for the provision of peace and security; without the state (the state being that group of people which wields a territorial monopoly of alleged legitimate force financed by a compulsory levy of the inhabitants of that territory) there would be anarchy—anarchy being understood to be widespread disorder, violence, and chaos. In the words of Bruce Ackerman, without the state and its laws, we would live in a world “where everyone is free to grab anything he can without ever being obliged to justify his conduct before any institution charged with settling disputes” (Ackerman 1980, p. 252, n. 8).
Such is the power of being first in the field (“positioning” in advertising terms) that the state can literally get away with murder if it can foster the notion that it is legitimate. As Murray Rothbard puts it,
One of the crucial factors that permits governments to do the monstrous things they habitually do is the sense of legitimacy on the part of the stupefied public. The average citizen…has been imbued with the idea—carefully indoctrinated by centuries of governmental propaganda—that the government is his legitimate sovereign, and that it would be wicked or mad to refuse to obey its dictates. It is this sense of legitimacy that the State’s intellectuals have fostered over the ages, aided and abetted by all the trappings of legitimacy: flags, rituals, ceremonies, awards, constitutions, etc. (Rothbard 1973, p. 35)
The important rhetorical point of the historical examples of functioning anarchic societies and the contemporary evidence of functionally anarchic elements in Statist societies is, among other things, to emphasize the sheer contingency of what seems like a necessity—to show that it wasn’t always like this, that it isn’t like this everywhere or in every respect even now, and that it doesn’t have to be like this. For example, Bruce Benson, in the second chapter of The Enterprise of LawSee also Benson (1991, pp. 41–65; 2007, pp. 624–38). (1990), shows clearly that the system of criminal law which we now possess—state legislatures,Parliament was originally not a lawmaking body but a tax-granting body opposed to the executive. After the “Glorious Revolution” of 1689, the opposition gradually disappeared so that tax-levying was unopposed. (War was primarily a private business, a matter of hostile [actual, as distinct from metaphorical] takeovers, as it were!). public prosecution, prisons, juries, crimes against the State, public police forces—all of which seem as if they sprang, like Venus, fully armed from the head of Jove, are merely historically contingent developments. Moreover, the pressure for these developments came not from any perceived increase in efficiency but from motives that were far less noble. And Harold Berman demonstrated in his remarkable book Law and Revolution that polycentrism was the norm in medieval Europe.
EARLY IRISH SOCIETY REVISITED In Austrian treatments of anarchism it is not unusual to point to Medieval Iceland (Friedman 1979) and Medieval Ireland, inter alia, as examples of societies that functioned successfully for substantial periods of time without coercive central government.
Joseph Peden published his groundbreaking article on early Irish Law in 1977. Much of what he had to stay still stands. Since his article was published, a diplomatic edition of the surviving legal material has been published (Binchy 1978) and an introductory but comprehensive guide was published by Fergus Kelly in 1988. This was followed by Stacey’s The Road to Judgment (1994) and McLeod’s Early Irish Contract Law (1992) so that we now have a much fuller and more detailed picture of how things were some 1500 years ago. None of this material contradicts any of Peden’s substantive points (Peden 1977).See also Kelly 1988, McLeod 1992, and Stacey 1994.
The Irish law texts originated in the seventh–eighth centuries, surviving in fourteenth–sixteenth century manuscripts.The material immediately following is a précis of Kelly. While not completely coherent, the texts manifest a basic unity.
The society in which these texts found a home was a largely self-sufficient mixed farming economy, with pasture for cattle, sheep and pigs, and cereal production. Lord and client related to one another economically. Society also supported a set of professionals—poets, judges, smiths, physicians and wrights.
The tuath was the basic territorial unit, ruled over by a king (ri). There were approximately 150 of these tuatha in the whole country. The population of Ireland at this period was about five hundred thousand with, approximately three thousand people per tuath.
The king, as the wealthiest and most powerful man in the neighborhood, was central to the affairs of the tuath. All free men owed him loyalty and paid a special tax. He could call upon the freemen to repel invaders or to attack a neighboring tuath. He also had the power to convene an oenach (a fair) for political, social, and commercial purposes. Another type of meeting was the aireacht (meeting of freemen) at which legal business was transacted. Freemen generally stayed within their own tuath; only the professionals normally travelled outside the tuath’s borders. The large degree of legal uniformity suggests that the tuath’s lawyers kept in close touch with their colleagues in other tuatha.
The kingThe role of the king was quasi-sacerdotal, no doubt reflecting an earlier stage of social development, which persisted in other societies and recurred with surprising frequency until relatively recently, e.g., the Chinese emperor, the Egyptian pharaoh, the Roman and Byzantine emperors, and the notion of the divine right of kings. was responsible for external relations, treaty making, treaties of this kind being confirmed at an oenach. Under such treaties, a victim of a crime in one tuath committed by a member of another was entitled to legal redress. Crimes that were redressable included homicide, rape, wounding, and robbery with violence, theft, housebreaking, arson, and satire.
It is important to realize that early Irish society was not egalitarian. One’s legal rights and obligations were a reflection of one’s social status, though upward and downward social mobility was an accepted fact of life. The measure of a person’s status was what was called his honor-price (log n-enech—literally, the price of his face). The greater one’s honor-price, the greater the cost of any injury done to one: the honor-price of a provincial king could be as much as 42 milch cows, whereas that of a young man still living at home could be as little as a yearling heifer. There was a basic distinction between outsiders and those with legal standing in the tuath. Generally, those without a place in a tuath were either ambuae (nonpersons), “grey dogs” (cu glas)—exiles from overseas—or castaways (murchoirthe).
The basic distinction in Irish society was between those who were nemed and those who were not, and those who were free (soer) and those who were unfree (doer). The basic unit of currency was the female slave (cumal) or various kinds of cows. A typical ocaire (small free farmer) was said to possess a dwelling house nineteen feet in diameter and an outhouse of fourteen feet. His land was worth seven cumals and supported seven cows, one bull, seven pigs, seven sheep and a horse. Additionally, he had a share in a plough-team (one-quarter) and a share in a kiln, mill, and barn.
The categorization of nemed/non-nemed, and soer/doer can be diagrammatically (see Figure 1).
A nemed had special privileges. There were limits to the distraint of his property and some legal obligations did not fall on him. Nemed failing in their duties or obligations were liable to be reduced in rank. Cowardly kings, sexually immoral bishops, fraudulent poets, and dishonest lords could be degraded to commoner rank. Similarly, a lord who could not maintain the requisite number of clients was similarly degraded. Upward mobility was possible, if not for a given individual, then for his children or their children. A customary expression in Irish literature is “A man is better than his birth.” Typically, a boaire would become wealthy enough to attract and retain clients. In so doing, he moved into a grey area between commoner and lord. If his sons could maintain or increase this level of wealth and retainership, they or their children would attain nemed status.
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According to Peden, private ownership played a critical role in the social and legal institutions of early Irish society: “Thus ownership of property in all its forms was the basis of a man’s legal status and marked the extent of his participation in and protection within the legal system” (Peden 1977, p. 87).See Dillon and Chadwick (1967, pp. 98–99). Peden remarks on social mobility as a striking characteristic of early Irish society. So, while economic self-sufficiency was the hallmark of free status, someone unfree could, with the accumulation of wealth, or the possession of a particular talent or skill, achieve that status.
Not only was early Irish society not egalitarian, it was also not one in which individualism was unrestrained. The kin-group (derbfine), all those descended from the same great-grandfather, exercised legal powers over its members. Each kin-group had its own land; an individual’s share in such common land could not be alienated contrary to the wishes of the rest of the group. It was possible to own land outside the kin-group and such land could be alienated freely. The kin-group was, in certain circumstances, responsible for the crimes and debts of its members, being obliged to pay the debts or fines of one who absconded after judgement. The body-fine (eraic) due when a member of a kingroup had been illegally killed was payable to the kin-group. The head of a kin-group was chosen, largely on the basis of his wealth, rank and demonstrated good sense.
While many early law codes in other societies were instigated by powerful kings “there is little evidence of royal involvement in the composition of the Old Irish law-texts” (Kelly 1988, p. 21). In fact, the law and its formulation seems to have been the preserve of a special class of practitioners, more or less dispersed through the whole country, and not under the control of any king. Kelly attributes this low- or noninvolvement of the kings in the lawmaking process to what he terms the “political fragmentation” of the country at the time of their composition/redaction, clearly seeing this as a negative point and assuming, without grounds for so doing, a prior state of nonfragmentation. Kings could, however, issue emergency legislation (after defeat in battle or in the presence of a plague). If the king was not involved in lawmaking, neither was he involved in law implementation. This was done via a tort-like process involving suretyship, pledging and distraint.
Irish society in the historic period up to the seventeenth century constitutes one of the best examples of a functioning anarchic society. Irish law was the product of a body of private and professional jurists (called brithim or brehons) and was flexible and capable of development in response to evolving social conditions (Peden 1977, p. 82). Law was a (largely) family business, enjoying high status. It is important to note that Irish law did not differentiate between what we now distinguish as tort and criminal law, in this respect resembling most systems of customary law that seem to come late, if at all, to this distinction. From the point of view of traditional law, crimes against the person tend to be regarded a special kind of offense against property.
The jurists gave judgement—enforcement was effected via a system of sureties. Sureties came in three forms: (1) a surety might guarantee payment by pledging his eneclann; or (2) a surety could pledge his person and freedom; or (3) the surety could guarantee the payment in the case of default. As Peden puts it, “Law and order, and the adjustment of conflicting interests, were achieved through the giving of sureties rather than State-monopolized coercion” (Peden 1977, p. 83).Peden notes that while the Irish had kings, it is important to realize that they were not lawmakers. Moreover, they could, in fact, be sued, just as any other freeman albeit with difficulty. Each freeman had what was known as his honorprice, his dire or enclann. This honor-price was essential to the working of the systems of sureties. In taking or in defending an action, a petitioner or a defendant took sureties to ensure the honoring of the judgement of the brehon court. See also Hughes (1966).
Irish society, organized on anarchical principles, lasted for almost twenty-five hundred years! During that time it showed a capacity, vital to any organic and developing system of social organization, to absorb alien elements and internalize them. The Brehon Law was adapted by the English/Norman invaders/settlers, despite repeated attempts to dissuade them (e.g., statutes of Kilkenny, etc.), so much so that, to the disgust of the English authorities, they became “more Irish than the Irish themselves.” The Irish legal system came to an end only when native Irish society collapsed after the Battle of Kinsale and the Flight of the Earls. It ended, not as the result of insupportable internal strains, but as a consequence of external assault. To sum up its salient characteristics:
the possession of property, with its rights and duties, was central to one’s legal standing;there was no substantive distinction between criminal law and tort law;the legal system was private, customary, evolutionary, and agreed-upon;justice was primarily restorative, with restitution going to the victims rather than to a state; enforcement operated via a system of sureties and pledges, the ultimately recalcitrant being excluded from society and its protections.See Whiston (2002); Runolfsson Solvason (no date); Murphy (2005); Friedman (1979); Long (2002); and Morrow (2007). The Icelandic case provides an interesting counterpoint to the Irish experience. Unlike the Irish situation, we have an historical beginning to the Icelandic Commonwealth and a date for its end. In contrast, the Irish case has no discernible beginning. When the records start, it is already in operation and has been so for who knows how long. Whereas in the Icelandic case, one’s connection with a godi was extraterritorial, in the case of Ireland, one’s connection was fixed via the tuath in which one resided or in which one had property. Whereas the Icelandic Commonwealth lasted for about three hundred years, the Irish system lasted from probably 1000 BC until the beginning of the seventeenth century. In both cases, the precipitating cause of the change was political; in the case of Iceland, a reduction in competition caused by the emergence of five large families—in the case of Ireland, the impact of the Anglo-Norman invasion was to add impetus to an already present tendency on the part of the Irish kings to a more assertive and dominant role.
ANARCHIC LIFE-SIGNS IN A STATIST WORLD In the early 1990s, Tom Bell, then a student at University of Chicago Law School and now a law professor at Chapman, wrote a paper on legal polycentrism for some courses taught by Richard Posner. This paper was primarily an attempt to provide a theoretical justification for nonstatist legal systems, for which Bell adapted (presumably from Michael Polanyi) the term “polycentric law,” its subcategories being customary law and privately produced law. Around the same time, Bell published a paper on the same topic in the Human Studies Review and still later, a short paper on practical applications in a Cato Policy Report in 1998 (Bell 1991–92, 1992, and 1998).
Bell notes that, once one becomes familiar with the notion of polycentric law, one sees instances of it everywhere—in churches, clubs, businesses, and so on. Without the focusing lens of the concept, polycentric law is largely invisible. Although he provides a concise account of some historical examples of polycentric legal systems, Bell notes that a justification of polycentric law requires more than case studies of small and/or insular societies; it requires a justification for how polycentric law would work here and now. Following Benson, he isolates six features common to most systems of customary law, the first five of which would likely be mirrored in systems of privately produced law. Modified slightly, these are:
individual rights and private property take centre stage;victims are the enforcers of the law;violence is avoided by the emergence of standard (and, I would add, mutually agreeable) adjudicative procedures;restitution/reparation (primarily economic) would follow from treating offenses as torts (invasions of personal rights) rather than crimes (offenses against the state);the enforcement mechanism is ostracism, blackballing, blacklisting, banishment, exclusion from society;legal change comes about by evolution rather than by (legislative) revolution. One can immediately see that these features are all characteristic of early Irish law.
Critics of anarchistic theory have not been slow to point out that Medieval Ireland is dead and gone (likewise Medieval Iceland). “It is all very well to point to historical instances of anarchic order but what,” they ask, “has anarchism done for us recently?” A complete answer to this question would take us well beyond the confines of this paper but, following Bell’s lead, some green shoots of contemporary anarchic order can be detected in the emergence and flourishing of alternative dispute resolution (ADR) institutions, private communities, and the internet.
With its historical antecedents in the medieval Law Merchant and the Maghribi law of the Mediterranean, ADR today is a fast-growing alternative to State-Law. As Bell notes: “The largest private provider of ADR services in the United States, the American Arbitration Association, administered 62,423 cases in 1995,” twice as much as it had handled twenty years earlier. There are about one thousand other agencies competing with the AAA. Bell writes: “The state’s courts have less and less time to find the law for civil litigants because their dockets overflow with criminal prosecutions enforcing legislation. That the Drug War generates most of those prosecutions merely illustrates the manifold hazards of unjust legislation.” (Bell 1998, p. 10)
In 1970 there were about ten thousand private communities in the USA. This rose to 55,000 in 1980 and 130,000 in 1990. In 1992 the number reached 150,000, encompassing some 28 million people. I don’t have the latest figures but projections would indicate that the numbers should be significantly higher. Bell writes: “Residents of private communities experience polycentric law, not as a theoretical abstraction, but as a working reality. Those people have deliberately removed themselves from the inefficient political machinations of municipal governments, seeking instead to live under regulations of their own choice and making. Faced with the futility of trying to exercise any real influence over the politicians and bureaucrats, who would run their lives, residents of private communities have rediscovered the pleasures—and undoubtedly the pains—of reaching consensus with their neighbors.” (Bell 1998, p. 10)
The internet is, perhaps, the most spectacular example of emergent order in contemporary society. Although originating in a military environment, it quickly migrated into the academic world and then moved into the worlds of business and the general public. Through the use of email and the World Wide Web, anyone with a computer and the appropriate connection is now a part of a worldwide community with access to a staggeringly large and oftentimes bewildering amount of data.
No longer can the gatekeepers of society regulate, channel and censor what there is to know. Of course, no one can guarantee the quality of the information available online, but that simply restores to each individual the responsibility to judge the value of what is received. Within the WWW world, Wikipedia must stand as an outstanding example of what can be done from the bottom up. The material contained therein is variable in quality but it contains some outstanding entries and, of course, the alert users of the resource are at liberty to question and dispute controversial material.
RESTORATIVE JUSTICE Finally, even within Statist circles, the feeling that all is not well with the criminal justice system is growing. Victim-impact statements, flawed as they might be, are recognition that the one offended in the commission of most crimes is not the state, but Joe Soap.
Just recently, in Ireland, we have been experimenting with what is being called “Restorative Justice.” Such programs are in use in other countries, and the Irish government is keen to evaluate their effectiveness. My cynical impression is that this is motivated not so much by concern for victims of crime or the welfare of criminals as it is by a concern for the spiralling cost of imprisonment.
The director of the experimental pilot program, Máire Hoctor, notes in the Irish Times, 10 March 2007, “It has given offenders an opportunity to rebuild their life without a criminal record.” She adds: “It’s also very cost-effective. For example, our voluntary service here costs €40,000 to run for a year and deals with around 20 offenders. In contrast, it costs €80,000 a year to keep one person in jail.” Assuming a better or at least the same rate of recidivism (and the indications are that around 70 percent of offenders do not reoffend), then the Restorative Justice program is fiscally more effective by a factor of 4,000 percent!
There is much to commend in the notion of restorative justice. The basic principle of law, or what should be its basic principle, namely, the restoration of the status quo ante, is the desideratum. The victim, so often shunted to one side as a kind of disagreeable ghost at the wedding in your standard criminal justice system, takes centre stage, and the offender makes reparation directly to the victim, not to the state.
In keeping offenders out of jail, the state not only saves massively (money which it would be idle to hope would be returned to the long-suffering taxpayer), but also keeps the neophyte criminal away from being better tutored in crime, and limits the creation of criminal networks. Of course, this restorative justice system is intended to work alongside the bloated and ineffective criminal justice system; it is not intended as a substitute. However, we live in hope.
CONCLUSION Much of the resistance to libertarian anarchic proposals stems from a genuine inability on the part of one’s audience to entertain such proposals as serious alternatives to the status quo. To be able to demonstrate convincingly to that audience that what one is proposing has already been done and continues to be done, albeit in different historical circumstances or in a variety of (not-so-obvious) ways, cannot but have a salutary effect on the receptivity of that audience to the theoretical arguments.
Bob Murphy gives a pragmatic case for pacifism, appealing to Christians who would like to take "The Sermon on the Mount" literally, but are worried it would spell disaster.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy interviews Lindsay Goldwert on her years performing at and organizing stand-up comedy shows in NYC, the interaction between comedy and finance, and her new book, BOW DOWN.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
[Why Cities Lose: The Deep Roots of the Urban-Rural Political Divide. By Jonathan Rodden. Basic Books, 2019. 313 pages.]
Jonathan Rodden is unhappy. In American elections, Democrats often receive a larger number of votes than their Republican rivals, but they nevertheless frequently fail to win elections. “In most democracies, the path to victory is simple: win more votes than your competitors. For the Democratic Party in the United States, however, this is often not good enough.…Democrats must win big in the overall popular vote, as they did in the ‘blue wave’ elections of 2018 and 2006, in order to win a majority of seats in the House. The Democrats’ problem with votes and seats is even more pronounced in state legislatures.”
Rodden, who is a professor of political science at Stanford, specializes in political geography. In Why Cities Lose, he devotes enormous effort to finding out the reasons the situation just described has come about, but the gist of his answer is simple. Democrats are highly concentrated in cities, but Republicans are spread out in the suburbs and rural areas. As a result, a Democrat who wins in a city will likely gain a large majority. In our “first-past-the-post” electoral system, a large majority is no better than a narrow victory. The winner of a seat in Congress, for example, gets one seat regardless of the margin of his victory. “Surplus” votes do him no good. Republicans in rural areas are more spread out. Their votes tend to be more “efficient,” as Rodden puts it, than the wasted votes of the concentrated Democrats. They win by narrower margins but gain more seats. Rodden spends a great deal of time showing that partisan gerrymandering does not bear exclusive responsibility for the situation. Through careful comparison with Britain and the Commonwealth nations that have a “first-past-the-post” system but no gerrymandering, he shows that cities still suffer from “wasted” votes.
Rodden argues that proportional representation would change matters. Under this system, votes are not wasted. “There are important variations from one country to another, but in most cases, the country is divided up into a series of multimember districts, and within each district, every party receives a number of seats that is proportionate to its share of the vote.…In highly proportional systems with large districts, like those in northern Europe, the geography of a party’s support is largely irrelevant for the transformation of votes to seats. It is just as useful to have 30 percent of the vote that is highly concentrated in cities as to have 30 percent of the vote evenly dispersed throughout the country.” I have said that Rodden is unhappy with the dilution of votes in American cities, but why does he regard this situation as bad? (One might object that this misreads him; he is simply an objective political scientist describing and analyzing an important trend in voting patterns. But his dismay is unmistakable.) Speaking of countries in northern Europe with proportional representation, he says: “Above all, the proportional systems of Europe have developed larger public sectors, more generous social expenditure, higher levels of redistribution, and more stringent efforts at environmental protection.”
These are the measures Rodden favors, but then the question arises, what is so good about them? Not only does Rodden fail to tell us, but his way of looking at political values prevents him from doing so. He never discusses the reasons in favor of and against any “progressive” legislation. Instead, he amalgamates all political values into “objective” scales. “In joint work with Aina Gallego, I [Rodden] have selected a series of questions about abortion, homosexuality, and other social issues.…We used these questions to generate a scale measuring how liberal or conservative each respondent is on this set of social issues. We have done the same thing for classic economic issues related to the role of the government in the economy.”
Rodden might reply that he has done this purely as a way to analyze trends, and that he has not claimed to have shown that progressive measures are good and conservative ones bad. But if that is so, he has not given us any reason to endeavor to alter the urban-rural disparity in voting about which he spends so much time complaining.
One might object to what I have so far contended in this way: “Even if you are not an urban progressive, we do after all live in a democracy. Shouldn’t people be equally represented, rather than have fewer representatives than others? Isn’t it unfair that some votes pack more electoral ‘power’ than others?” To which our answer must be, “No, not at all. It depends on aims sought by those voting. People cannot legitimately invade the rights of others, and to the extent they try to do so, a weakening of their voting power is to be welcomed.”
As Murray Rothbard, writing in Power and Market, noted with characteristic wisdom: “Democracy may be thought of, not so much as a value in itself, but as a possible method for achieving other desired ends. The end may be either to put a certain political leader into power or to attain desired governmental policies. Democracy, after all, is simply a method of choosing governors and issues, and it is not so surprising that it might have value largely to the extent that it serves as a means to other political ends. The socialist and the libertarian, for example, while recognizing the inherent instability of the democratic form, may favor democracy as a means of arriving at a socialist or a libertarian society. The libertarian might thus consider democracy as a useful way of protecting people against government or of advancing individual liberty.” Like democracy, equal voting power isn’t an end itself, but valuable only to the extent it protects people’s rights.
A similar point applies to the proportional representation that Rodden favors. It is true that voters have more choices than they do in a system with only two parties, but whether this is good or bad depends on the nature of the choices. More choices for socialism are not a good thing. Further, European political parties in proportional systems are often rigidly controlled by the central party organization. Those who vote against the party’s dictates will be expelled from the party. Voters have a choice only between ideological platforms, not persons.
Rodden at one point adopts a more sensible position. Given the unalterable fact that people differ so widely in their political preferences, is it not desirable to deal with problems at the state or, even better, local level rather than to engage in a futile effort to impose the same policies on diverse regions? “As federal politics becomes increasingly mired in gridlock, investigations, and partisan posturing, voters come to rely on state and municipal governments for practical policy solutions to everyday problems.…As long as people with strong preferences are clustered conveniently into different jurisdictions, decentralization can, at least in theory, increase the number of people who are satisfied with government policy.”
But decentralization from his perspective is of limited value. “A broad constraint on decentralization as a way of managing polarization is the fact that local governments must often compete with one another.…Wasteful taxes and regulation and poor governance can lead to capital flight, which forces local governments to be prudent. For the left, this has always been a liability, not an asset of decentralization. Strong labor unions and protections for workers were hard to maintain in the North when southern states began competing for investment, and today, intergovernmental competition makes it difficult for blue cities and states to enact generous welfare policies or costly regulations.” (Possibly, though, what Rodden calls the “third industrial revolution” may brighten the prospects for a leftist local government, at least in the wealthiest cities.)
Contrary to Rodden, the path to progress does not lie in tinkering with our political system to make it easier for the Left to enact its political and social agenda. Instead, we need a free people living in a free market.
Greta, a college student in New York, is working on an honor’s thesis covering libertarian thought in America. In this short interview, she asks Bob what libertarianism is, his perspective on voting, and how he views the American political system.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy evaluates four different campaigns where people pushed-back against the State: The National Opt Out Day in 2010, Free Keene’s “Robin Hood” parking meter approach, the “Taxation Is Theft” approach to tipping, and the “Epstein Didn’t Kill Himself” meme campaign. He then crystallizes his remarks into 7 Lessons for Libertarians.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Justin Clark explains the intriguing strategy of a committed group of Texans to restore the sovereignty of their Republic: Like the Baltic states did with respect to the Soviet Union, argue to the UN that Texas has been occupied by a foreign power.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Recorded on November 9, 2019, in Lake Jackson, Texas. From the 2019 Ron Paul Symposium, "State Propaganda and the 2020 Election." See all lectures from this event.
Includes an introduction by David Gornoski. Recorded on November 9, 2019, in Lake Jackson, Texas. From the 2019 Ron Paul Symposium, "State Propaganda and the 2020 Election." See all lectures from this event.
Includes an introduction by Lew Rockwell. Recorded on November 9, 2019, in Lake Jackson, Texas.
From the 2019 Ron Paul Symposium, "State Propaganda and the 2020 Election." See all presentations from this event.
Recorded on November 9, 2019, in Lake Jackson, Texas. From the 2019 Ron Paul Symposium, "State Propaganda and the 2020 Election." See all lectures from this event.
Titus Gebel has a PhD in international law, and has written a book, Free Private Cities: Making Governments Compete For You. Bob discusses Titus’ proposal and how it differs from other types of abstract libertarian theorizing.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Includes an introduction by Jeff Deist.
Ludwig von Mises and his work remain incredibly prescient and relevant today. The world needs his voice more than ever, and our speakers celebrate Mises as a supremely vital thinker well-suited for today's challenges. Recorded in Los Angeles, California, on October 26, 2019.
[All lectures from the Supporters Summit 2019 are available here.]
Ryan McMaken and Tho Bishop join for a discussion on the differences between Congress and state legislatures. Drawing from personal experiences, the two look at the differences in incentives, leadership power, and legislative process, to look at what makes Washington DC so particularly dangerous to liberty.
Per Bylund teaches us to explore the only two fields that matter for entrepreneurial success: understanding the laws of economics and understanding the mind of the customer. Isabel Aneyba is an expert in the techniques of empathic diagnosis that yield the understanding of the customer’s mind, and she shares these techniques — and her success in starting and growing a customer research company — on the Economics For Entrepreneurs podcast.
Key Takeaways and Actionable Insights Listening to customers is a planned activity. Yes, we suggest regular, frequent, conversational interaction with customers. But not without a calculated purpose. You need to know in advance what you will do with the information — what decisions will you make that you can’t make now. This enables you to define the expected value of the information, and how much of your scarce resources of time and money to allocate to gathering and processing it. If you don’t know the purpose and estimated value of the research, don’t conduct it.
Conduct conversations with customers at least every week. Isabel includes conversations in the customers’ homes or offices, conversations in your offices, face-to-face (including digital face-to-face using webcams). To make emotional connections, we look into each others’ eyes. Certainly, these conversations can be integrated with findings from other customer data sources, but they can’t be replaced.
Exercise your passion for listening; don’t focus on asking questions. The style of conversational research is the opposite of interrogation. Don’t work too hard on composing a list of questions, and sticking to your list. Once the conversation starts, let it flow. Focus on what the customer is thinking and feeling, not on facts. Use non-verbal cues to do so (Isabel tells us how during the podcast). Employ gentle probes (“Tell me more about that”) rather than direct questions. Let the customer do the talking and make it comfortable and easy for them. Good researchers, and all entrepreneurs, have a passion for listening.
Storytelling is the great revealer. Rather than ask a structured set of questions about, for example, the stages of a customer journey, it’s better to get the customer to tell a story, in their own words. Invite them to start at the beginning and continue to the end, without interruption. For example, the story of a visit to the doctor might begin with feeling symptoms and end with the doctor’s prescription. The customer will tell you everything that went on in between, from the drive to the office to the time in the waiting room to the doctor’s demeanor. Let them tell the story uninterrupted. You can loop back later into internal details.
Try other exercises besides asking questions. In some cases, Isabel favors the exercise of having a customer make a collage out of photos, magazine pages and other materials. The choices in the collage can revel preferences, and the customer is naturally open to explaining why they made the choices and what the collage and its elements means to them.
Listen with the heart to uncover hidden truths. Isabel explains how:
Open the conversation with an “emotional handshake”. Find a conversational path (which might not concern your business question) for the customer to express emotion. “What do you love to do?”Listen for the customer’s emotional drivers — expressions like “I feel” or “I enjoy” — when they talk about a behavior or choice or a functional benefit. These expressions reveal emotions, and you can gently probe whether these emotions represent the subjective reason why customers behave as they do.Interpretation is required — the customer won’t tell you that they take action X because of emotional driver Y. You have to make the connection. Then gently probe to see if you can find confirmation. Apply the learning to design a better customer experience. Remember that customer research has a purpose. Your purpose in business is to create and keep a customer. Customers purchase your good and services for the experience they anticipate. By listening for their emotional drivers, you’ll identify gaps in the current experience — examples of customer unease. Use the information you gather to eliminate the gaps, and relieve the unease.
Compute the return on information. How much does the information gathering cost? How much value will you able to facilitate for the customer by designing an experience they feel better about?
Additional Resources "5 Steps To Help You Listen With Your Heart" (PDF): Mises.org/E4E_33_PDF
Isabel Aneyba's company, COMARKA Consulting & Marketing Research
"Qual Method Aims to Unite Clients, Respondents in Co-creation"
"Let’s Work Together: The Consumer Co-Creation Camp"
Presented during the "Law and History" session at the Libertarian Scholars Conference on 28 September 2019, at The King's College in New York City.
Presented during the "Comparative Economics" session at the Libertarian Scholars Conference on 28 September 2019, at The King's College in New York City.
Bob Murphy asks a series of tough (but fair, he hopes) questions for progressives, ranging from abortion to the minimum wage to climate change.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
It appears many Indians and Brazilians and Chinese are willing to risk the global warming for a chance at experiencing even a small piece of what wealthy first-world climate activists have been enjoying all their lives.Original Article: Greta Thunberg To Poor Countries: Drop Dead.
James Beardsley owns and runs a law practice. He decided from the outset that he would run it like a business — not all lawyers do — and, once he had discovered Austrian Economics, he saw more clearly how to succeed in reaching his goal.
Hunter Hastings and James discuss the principles of Austrian Economics that James puts to work.
Key Takeaways And Actionable Insights Self-assessment: The entrepreneur is an individual with a role to play in society — someone who breaks new economic ground as a business owner, leader, team member, or contributor. That’s why we say that the entrepreneurial journey starts with self-assessment. James Beardsley’s was that he wanted to be a different kind of lawyer — one who ran a business rather than just a professional practice. That’s a commitment to approach, method and lifelong learning — a commitment he has maintained for many years.
Find applicable models: James sought models and principles for successful businesses of all kinds. Entrepreneurs break new ground, but before they do, there is no reason to ignore the empirical and historical data that can provide a foundation on which to build a new approach.
Read the books that can help you establish core principles: James was reading business and investment texts, and discovered Austrian Economics, which he felt covered the same topics with better logic and greater clarity. Austrian logic — breaking issues and challenges down to their simplest and most basic levels, establishing understanding at that level, and then building up from there — helped him immensely. He did not become an expert on economics, but identified and applied the core principles.
Identify the customer and their problem-to-solve with precision: James’s chosen target customer is very precise: people who experienced injury in a car accident. This precision yields certainty in the process of developing services for the customer.
Think from the perspective of the customer: Having identified the customer, think like they think. Accident victims are jarred; their lives have been changed dramatically; they are experiencing emotional turmoil; they don’t know how the legal process works; they may be angry or scared. Trying to think the way they think, and accepting their need, can lead to providing the compassionate help they are seeking.
Know their personal value scales: Every individual has their own value scale, and what is most important to one customer is not the same as what is most important to another. James’s firm seeks to understand each individual client’s personal value scale and to respond appropriately.
The customer creates value: At E4E, we try to stress that value is subjective and therefore created by the customer; the entrepreneur is a facilitator. James’s process is a striking example: accept the customer’s perspective, identify and adjust to their personal value scale, and let them determine the kind of service they prefer.
Empathy is the most important entrepreneurial skill: Throughout our conversation, James stressed the central role of empathy as the skill that he and his team employ to enable them to think from the customer’s perspective, identify their values, and to provide them with the reassurance they need in a difficult period in their life. The empathic process builds trust and long-term relationships.
Empathic diagnosis is the specific application of empathy: James stresses listening, trying to understand how the customer is feeling, understanding that perhaps they do not know how to react and therefore may not be able to communicate clearly, or may do so through a veil of denial or anger or frustration.
Hire people with the right disposition for the empathic process: Assembling the best set of entrepreneurial resources includes hiring the right people. Some people — but not all — can be trained to serve the customer with empathy. Provide them with a process and system to guide them, but recognize that not everyone will prove themselves at the task, and make a change as soon as the need for one is indicated. It’s critical for the health of your business.
Marketing is a fundamental tool for business success: Many entrepreneurs don’t leave enough resources for marketing, and this can be an error. James takes the Austrian causal-realist approach, which is the professors’ term for the base logic of Austrian Economics. “Realist” means seeing the world as it really is, rather than how you would like it to be. Law firms need clients and they are not just going to walk through the door. James’s target customers are unaware of the availability of the services that can help them. Therefore advertising is required. “Causal” means understanding what works to solve the problem at hand. In this case, James built up a database of “what works and what doesn’t” to bring clients to the firm, and advertising — specifically TV advertising — proved to be the right tool, as measured by revenue realized minus costs expended.
Understand and employ the concept of opportunity cost: Resource allocation and spending decisions are always trade-offs and the best tool to make them definitively is to apply the concept of opportunity cost. If I allocate resource X (e.g. an advertising budget), what is the next best resource I am choosing not to allocate (e.g. hiring an additional staff member)? Is that the best use of resources? Which one will serve the client best? Which one will deliver most revenue for the firm? The point is to do the analysis carefully and honestly, so that you can be confident in the decision.
Understand the value (and cost) of time: Austrian Economics focuses quite specifically on the time it takes to produce, and the cost to the entrepreneur of this production timeline. Costs are incurred while no revenue comes in. James methodically addressed this cash flow challenge, and has become adept at identifying cases that can be expected to settle faster, and he will select for that attribute even if the end-revenue is smaller. “The prospect of getting paid two years out is less risky than getting paid four years out.”
Take active steps to manage and reduce uncertainty: We always highlight the role of uncertainty about the future as an important component of entrepreneurial action. James has found ways to narrow uncertainty. One example is to take only cases where the responsibility is clear, and so the uncertainty is limited to the settlement. That is less uncertain than being unsure whether you will win or lose the case. Another uncertainty-narrowing action is to keep a sufficient cash reserve so that fluctuations in cash flow will not impair ongoing business processes. This makes possible the avoidance of debt obligations, which are always troublesome for a professional services business.
Additional Resource Download "Austrian Economics: A New Lens" (PDF): Mises.org/E4E_32_PDF.
The Gary G. Schlarbaum Prize For excellence in research and teaching for a promising young scholar.
2021 Jonathan Newman2021 Karl-Friedrich Israel2020 Patrick Newman2019 Timothy D. Terrell2018 Lucas Engelhardt2017 Carmen Dorobat and Matthew McCaffrey2016 David Howden2015 Philipp Bagus2014 Tom Woods For lifetime defense of liberty, awards $10,000 to a public intellectual or distinguished scholar (1999-2012).
2012 Butler Shaffer2011 Walter Block2010 Jim Rogers2009 Jesus Huerta de Soto2008 Pascal Salin2007 Robert Higgs2006 Hans-Hermann Hoppe 2005 William H. Peterson2004 Hans F. Sennholz2003 Ron Paul2002 Bettina Bien Greaves2001 Antony GN Flew2000 Ralph Raico1999 Otto von Habsburg Murray N. Rothbard Medal of Freedom In recognition of significant and wide-ranging libertarian leadership, as a scholar or public intellectual, established through the generosity of George W. Connell.
2017 Judge Andrew P. Napolitano2015 Robert Higgs2015 Hans-Hermann Hoppe2012 Douglas E. French2008 Ron Paul2006 David Gordon2005 Walter Block2004 Gary North2003 Burton Blumert The Peterson-Luddy Chair in Austrian Economics at the Mises Institute Established through the generosity of William H. Peterson and Robert L. Luddy to support research, teaching, and leadership in Austrian economics.
2021 Mark Thornton2018-2020 Jörg Guido Hülsmann2015-2017 Joseph T. Salerno The Lawrence W. Fertig Prize in Austrian Economics $1,500 to the author of a paper that best advances economic science in the Austrian tradition
2022 Vytautas Žukauskas Measuring the Quality of Money
2020-2021 Kristoffer Mousten Hansen The Menger-Mises Theory of the Origin of Money—Conjecture or Economic Law
2019 Jeffrey M. Herbener Time and the Theory of Cost
2018 Arkadiusz Sieron The Non-Price Effects of Monetary Inflation2017 Jeffrey M. Herbener and David J. Rapp Toward a Subjective Approach to Investment Appraisal in Light of Austrian Value Theory2016 Patrick Newman The Depression of 1873-1879: An Austrian Perspective2015 Per Bylund Ronald Coase's 'Nature of the Firm' and the Argument for Economic Planning2014 Andreas Hoffmann and Gunther Schnabl Monetary Nationalism and International Economic Instability2013 Laura Davidson Against Monetary Disequilibrium Theory and Fractional Reserve Free Banking2012 Malavika Nair Money or Money Substitutes? Implications of Selgin's Small Change Challenge2011 Xavier Méra, "Factor Prices Under Monopoly"2010 Matthew McCaffrey, "Entrepreneurship, Economic Evolution, and the End of Capitalism: Reconsidering Schumpeter's Thesis"2009 Mateusz Machaj, "Market Socialism and the Property Problem: Different Perspectives of the Socialist Calculation Debate"2007 Renaud Fillieule, "The 'Value-Riches' Model: An Alternative to Garrison's Model in the Austrian Macroeconomics of Growth and Cycle"2005 Samuel Bostaph, "Wieser on Economic Calculation under Socialism"2003 Nikolay Gertchev, "The Case Against Currency Boards"2001 Joseph Salerno, "The Place of Human Action in the Development of Modern Economic Thought" The O.P. Alford III Prize in Political Economy $1,500 to the author of the paper that best advances libertarian scholarship.
2022 Joseph T. Salerno, Carmen Elena Dorobăț, and Matthew C. McCaffrey Monopoly as a 'Culture-history Fact': Knight, Menger, and the Role of Institutions
2020-2021 Tate Fegley Police Unions and Officer Privileges
2019 Mark Thornton Incorporating Cantillon: A Face and a Family for the First Modern Economist?
2018 Pavel Ryska Deflation and Economic Growth: The Great Depression as the Great Outlier2017 Philipp Bagus, David Howden, and Amadeus Gabriel Reassessing the Ethicality of Some Common Financial Practices2016 David Howden and Yang Zhou Why Did China's Population Grow So Quickly?2015 Carmen Elena Dorobat Foreign Policy and Domestic Policy Are But One System: Mises on International Organizations and the World Trade Organization2014 G.P. Manish Market Reforms in India and the Quality of Economic Growth2013 William Butos Monetary Orders and Institutions: A Hayekian Perspective2012 Thorsten Polleit and Jonathan Mariano Credit Default Swaps from the Viewpoint of Libertarian Property Rights and Contract Theory2011 Philipp Bagus: “Austrian Business Cycle Theory: Are 100 Percent Reserves Sufficient to Prevent a Business Cycle?”2010 Gil Guillory and Patrick C. Tinsley, "The Role of Subscription-Based Patrol and Restitution in the Future of Liberty"2008 Robert F. Mulligan, "Time Preference and Property Rights"2006 J.G. Hülsmann, "Fact and Counterfactuals in Economic Law"2004 Thomas E. Woods, "Symposium on Federalism, War, and Reconstruction"2002 Stephan Kinsella, "Against Intellectual Property" Ludwig von Mises Entrepreneurship Award Certificate and beautifully inscribed medallion awarded to businesspeople exhibiting entrepreneurial success and devotion to the free-market ideal.
2018 William Lowndes III, Tindall Corporation2017 Francisco Garcia Parames, Cobas AM2016 James M. Rodney, Detroit Forming, Inc.2014 Louis E. Carabini, Monex2013 Henry Getz, Morton Buildings 2010 James M. Wolfe, Pasco Washington2006 Robert L. Luddy, Econ-Air, Inc. The George F. Koether Free-Market Writing Award A medal and a $2,500 honorarium, presented for an outstanding book or essay.
2019 Patrick Newman: Editor, Conceived in Liberty, Volume 52018 Hunter Lewis: Economics in Three Lessons and One Hundred Economic Laws2016 Ron Paul: Swords into Plowshares2012 Thomas J. DiLorenzo: Organized Crime: The Unvarnished Truth About Government2009 Thomas Woods: Meltdown2008 Judge Andrew Napolitano: A Nation of Sheep The Elgin Groseclose Award $20 Liberty Head Double Eagle, goes to the best piece of money writing in the previous year.
The Douglas E. French Prize $2,500 for the student who emerges from the Mises University oral examinations with the best record, as chosen by the examining committee.
2021 Chase Roycroft, Mises Institute Graduate Program2020 David Hoffa, Michigan State University College of Law2019 Christian Mullins, George Mason University2018 HJ Lee, University of Wisconsin-Madison2017 Kristoffer Hansen, University of Angers2016 Hunter Morris, Baylor University2015 Karl-Friedrich Israel, University of Angers, France2014 Kyle Marchini, Grove City College2013 James Chappelow, University of Missouri2012 Patrick Newman, Rutgers University2011 Jakub Wisniewski of Queen Mary, University of London2010 G.P. Manish of Suffolk University2009 Ed Perry of Indiana University2008 David Howden of Universidad Rey Juan Carlos, Spain2007 Benjamin Darrington of Yale University2006 Mateusz Machaj of the University of Wroclaw, Poland Kenneth Garschina Prizes at Mises University and the Austrian Economics Research Conference $1,500 for the student who emerges from the Mises University oral examinations with the second best record, as chosen by the examining committee.
2021 Porter Burkett, University of South Carolina2020 Porter Burkett, University of South Carolina $750 for the student who emerges from the Mises University oral examinations with the third best record, as chosen by the examining committee.
2021 Samuel Cartagena-Sergenian2020 Benjamin Bies, Hillsdale College Kenneth Garschina Prize at the Austrian Economics Research Conference $1,500 for the best graduate student paper at the Austrian Economics Research Conference
2022 Jeffery L. Degner, University of Angers, "Cantillon Effects and the 'Coming Apart' of the American Family Experience: How Inflationary Monetary Policy Alters Family Life"
2021 Kesong Wang, Hokkaido University, "A Further Clarification of Ludwig von Mises as a Currency School Free Banker"
2021 Second place $500, Pedro Alemida Jorge, Universidad Francisco Marroquín , "The Two Traditions of Marginalist Thought"
2021 Third place $250, Jeffrey Degner, University of Angers, "Family Economics and the Socialist State: The Calculation Problem Applied to Eastern Bloc Fertility Economics"
2020 Kristoffer Hansen, University of Angers, "Are Free-market Fiduciary Media Possible?"
2020 Second place $500, Bernardo Ferrero, Universidad Rey Juan Carlos, "The Myth of the Developmental State: An Austrian Perspective"
Grant Aldrich Prize $1,000 for the best graduate student paper at Austrian Economics Research Conference
2019 Nicholas Cooper, George Mason University, "Reinterpreting the Historical Episode of the Bank of Amsterdam"2018 Tate Fegly, George Mason University, "Policing and Economic Calculation"2017 Louis Rouanet, Paris Institute of Political Studies, "Monetary Policy, Asset Price Inflation and Inequality" $1,000 for the second-highest score on the Mises University oral examination
2019 Vytautas Zukauskas, University of Angers2018 Bernardo Ferrero, School of Oriental and African Studies, London2017 Joakim Book, University of Glasgow $500 for the third-highest score on the Mises University oral examination
2019 Antón Chamberlin, Troy University2018 Yannis Petrzak, Hillsdale College2017 Benjamin Juhlin, Stockholm Sweden2016 Daniel Sánchez Piñol Yulee, Universidad Rey Juan Carlos, Spain George and Joele Eddy Prize $1,500 for the second-highest score on the Mises University examinations, and $750 for the third-highest score. (2007 - 2015). $1,800 for second-highest score (2016)
2016 George Pickering, London School of Economics2015 Louis Rouanet, Paris Institute of Political Science2014 Matei Apavaloaei (2nd Place), Academy of Economic Studies, Bucharest; and Edgar Duarte Aguilar (3rd Place), Francisco Marroquin University2013 Daniel Costa (2nd Place), University of Porto School of Economics, Portugal, and Michael Leahy (3rd Place), Saint Joseph's University2012 Matthew McCaffrey (2nd Place), University of Angers, and Wolf von Laer (3rd Place), University Rey Juan Carlos2011 Samuel Selikoff (2nd Place), Boston College, and Robyn Harte-Bunting (3rd Place), University Rey Juan Carlos and University of Angers2010 Jakub Wisniewski (2nd Place), Queen Mary, University of London, Matthew McCaffrey (3rd Place), University of Angers2009 G.P. Manish (2nd Place) of Suffolk University, Christopher Oppermann (3rd Place) of Holy Spirit Preparatory School2008 Gary Danelishen (2nd Place) of Auburn University, Gennady Stolyarov (3rd Place) of Hillsdale College2007 Helene Haabegaard of the University of Copenhagen (2nd Place), Jack Parker of the University of Alabama (3rd Place) Mündliche Prüfung Conference Examinations Mises University 2020 overall results
40 students took the preliminary written exam, 13 proceeded to oral exams Passed oral exams: Marcel Gautreau (George Mason University); Antòn Chamberlin (Troy University); Devin Cooper (McNeese State University); Mitchell Robson (University of Chicago); Karras Lambert (George Mason University); Levi Edwards (University of California, Irvine)Passed oral exams with honors Benjamin Bies (Hillsdale College); Porter Burkett (University of South Carolina); David Hoffa (Michigan State University College of Law)Douglas E. French Prize for Most Learned: David Hoffa (Michigan State University College of Law)Kenneth Garschina Second Prize: Porter Burkett (University of South Carolina)Kenneth Garschina Third Prize: Benjamin Bies (Hillsdale College) Mises University 2019 overall results
78 students took the preliminary written exam, 19 proceeded to oral exams Passed oral exams: Juan Ignacio Ibañez (Catholic University of Cordoba); Thomas McGugin (Tenneessee Tech University) ; Noah Mickel (Missouri Univerisity of Science and Technology); Rohan Rai (Washington University in St. Louis); Nate Strum (University of Mobile); Evan Vincent (Oakland University)Passed oral exams with honors Katherine Agent ; Antón Chamberlin (Troy University); Jacob Dowell (Saint Louis University); Levi Edwards (State Univerity of New York at Potsdam) ; Alan Futerman (Torcuato Di Tella University); Gor Mkrtchian (Texas Tech University); Christian Mullins (George Mason University); Ohad Osterreicher (University of Bayreuth); Vytautas Zukauskas (University of Angers)Douglas E. French Prize for Most Learned: Christian Mullins (George Mason University)Grant Aldrich Second Prize: Vytautas Zukauskas (University of Angers)Grant Aldrich Third Prize: Antón Chamberlin (Troy University) Mises University 2018 overall results written exam, 18 proceeded to oral exams
83 candidates took the preliminary written exam, 18 proceeded to oral examsPassed oral exams: Chris Calton (University of Florida); Benjamin Juhlin (Stockholm, Sweden); Luke Marcus (Bowling Green State University); Vitor Melo (Gettysburg College); Agnieszka Plonka (Utrecht University); James Reilly (Carthage College); and Julius Uotila (University of Nottingham Ningbo)Passed oral exams with honors: Anton Chamberlin (Troy State University); Bernardo Ferrero (Soas University of London), Marcel Gautreau (George Mason University); Kevin Hitchings (George Washington University); HJ Lee (University of Wisconsin-Madison); Mohammed Younes Megrini (Paris-Diderot University); and Yannis Petrzak (Hillsdsale College)Douglas E. French Prize for Most Learned: HJ Lee (University of Wisconsin-Madison)Grant Aldrich Second Prize: Bernardo Ferrero (Soas University of London)Grant Aldrich Third Prize: Yannis Petrzak (Hillsdale College) Mises University 2017 overall results
59 candidates took the preliminary written exam, 19 proceeded to oral examsPassed oral exams: Alexander Cline (The Independent School), Michael DeGan (Ivy Tech College), Nathan Keeble (Walters State College), Luke Marcus (Bowling Green State University), HJ Lee (University of Wisconsin, Madison), Curtis Williams (San Diego State University)Passed oral exams with honors: Fernando D'Andrea (Politecnico di Milano), Bernardo Ferrero (Soas University of London), Christian Newman (University of Arkansas, Fort Smith), Kurtly Wallace (Monash University)Douglas E. French Prize for Most Learned: Kristoffer Hansen (University of Angers)Grant Aldrich Second Prize: Joakim Book (University of Glasgow)Grant Aldrich Third Prize: Benjamin Juhlin (Stockholm University) Mises University 2014 overall results
64 candidates took the written exam, 30 were admitted to oral exams, 6 proceeded to finalFinalists: Edgar Duarte Aguilar, Matei Apavaloaei, Davis Bourne, Kyle Marchini, Jonathan Newman, and Arkadiusz SieronPassed Oral Exam with Honors: Edgar Duarte Aguilar (Francisco Marroquin University, Guatemala), Matei Apavaloaei (University of Economic Studies, Bucharest), Davis Bourne (Millsaps College), Blaine Kelley (Illinois Central College), Paulo Kogos (Insper Institute of Education & Research, Brazil), Kyle Marchini (Grove City Colllege), Jonathan Newman (Auburn University), Brice Rothschild (Paris XI University), Arkadiusz Sieron (University of Wroclaw, Poland)Passed Oral Exam: Matt Battaglioli (John Tyler College), Guilherme Benezra (Escola Superior de Popaganda e Marketing, Brazil), Joakim Book (University of Glasgow), Georg Buhler (University of Mannheim, Germany), Douglas Calder (Clemson University), Joel Crenshaw (Liberty University), Eric Faden (Florida International University), Darrell Falconburg (College of Idaho), Juan Igarzabal (Broward College), Lasse Kristensen (Aalborg University, Denmark), Savannah Liston ( Veritas et Libertas), Daniel Rothschild (San Jose State University), John Soriano (Duke University), Carel van der Linden (Tilburg University, Netherlands), Jonathan Wilbur (University of Florida) Mises University 2013 overall results
85 candidates took the written exam, 21 were admitted to oral exams, 6 proceeded to finalFinalists: Edgar Duarte Aguilar, James Chappelow, Daniel Costa, Michael Leahy, Matthew Schaffer, Wolf von LaerPassed Oral Exam with Honors: James Chappelow (University of Missouri), Daniel Costa (University of Porto), Edgar Duarte Aguilar (Francisco Marroquin University), Michael Leahy (Saint Joseph's University), Jonathan Newman (Auburn University), Matthew Schaffer (Central Michigan University), Wolf von Laer (King's College London)Passed Oral Exam: Matthew Advent (Benedictine College), Daniel Bennett (Wofford College), Davis Bourne (Millsaps College), Joseph Diedrich (University of Wisconsin, Madison), Ryan Griggs (Mises Academy Intern), Jared Hausmann (Saint Louis University), Andrew Herbener (Grove City College), Blaine Kelley (Illinois Central College), (Alexander Kelly (Wofford College), Jan Skapa (Brno University of Technology), Christopher Zimny (State College of Florida) Mises University 2012 overall results
79 candidates took the written exam, 25 were admitted to oral exam, 6 proceeded to final examFinalists: Mattheus von Guttenberg, Wolf von Laer, Christopher Oppermann, Patrick Newman, Mateusz Benedyk, Matthew McCaffreyPassed Oral Exam with Honors: Christopher Oppermann (Harvard University), Kristoffer Hansen (University of Oxford), Patrick Newman (Rutgers University), Wolf von Laer (University Rey Juan Carlos), Gabriel Oliva (Unversity Sao Paulo), Matthew McCaffrey (University of Angers), David Grzybowski (Case Western Reserve University), Mateusz Benedyk (University of Wroclaw)Passed Oral Exam: Tabor Barranti (Johns Hopkins University), Justin Bradfield (Johns Hopkins University), Stephen Farrington (University of Central Florida), Walter Melnik (Michigan State University), Andy Herbener (Grove City College), Ted Sonnier (Carnegie Mellon University), Mattheus von Guttenberg (Flagler College), Edgar Carlos Duarte Aguilar (Universidad Francisco Marroquin), Eric Perkerson (University of Georgia) Mises University 2011 overall results
125 candidates took the written exam, 33 were admitted to oral examPassed Oral Exam with Honors: Danny Hintze, Thomas Vergote, Ed Dehm, Jose Mora, Raymond Walter, David Grzybowski, Abhinandan Mallick, Matthew McCaffrey Passed Oral Exam: Bardhyl Salihu, David Bholat, Walter Melnik, Daniel Rodrigues Carreiro, Anita Acavalos, Ted Sonnier, Patch Newman, Daniel Krawisz, Cameron Belt, Michael Wiebe, Brent Myren, Hendrik Hagedorn Mises University 2010 overall results
122 candidates, 28 admitted to oral exam after written testHonors: Zachary Caceres, Lode Cossaer, Robyn Harte-Bunting, Stan Kwiatkowski, G.P. Manish, Matthew McCaffrey, Xavier Mera, Chris Oppermann, Leonid Shapiro, Jacub Wisniewski, Ken ZahringerPassed: Dante Bayona, Mateusz Benedyk, Maciej Bitner, Aaron Brown, Oscar Rodriguez Carreiro, Daniel Danta, Paul Labro, Dion MacDonald, Michael Marsocci, Sam Selikoff, Raymond WalterDouglas French Prize for Most Learned ($3,000): G.P. ManishGeorge and Joele Eddy Prize, Second Place ($1000): Jakub WisniewskiGeorge and Joele Eddy Prize, Third Place ($500): Matthew McCaffrey Mises University 2009 overall results
129 candidates; 22 admitted to the oral exam after written testHonors: Grant Babcock, Lode Cossaer, G.P. Manish, Matt McCaffrey, Xavier Mera, Malavika Nair, Christopher Oppermann, Ed Perry, Toban WiebePassed: Michael Douma, Philip Impellizzeri, Guillem Laporta, David Leighton, Abhinandan Mallick, Ted Phalan, Raymond Walter, Michael Wiebe, Guillaume VuillermeyDouglas French Prize for Most Learned ($3,000): Ed Perry George and Joele Eddy Prize, Second Place ($1000): G.P. ManishGeorge and Joele Eddy Prize, Third Place ($500): Christopher Oppermann Mises University 2008 overall results
82 candidates; 29 admitted to the oral exam after written testHonors: Serenity Wang, Stanislaw Kwiatkowski, Gary Danelishen, Jeff Henderson, David Howden, Gennady Stolyarov, Matt McCaffrey, Marcin ZielinskiPassed:David Snead, Marco Brun del Re, Jorg Merret, Jordan Carley, Norman Horn, Daniel Luna, Max Raskin, Anne Longman, Toban Wiebe, Ed Perry, Christopher Oppermann, Kelsey Winther, Sebastian Quick, Matt Mortellaro, Brandon Harnish, Graham NearyDouglas French Prize for Most Learned ($2,500): David HowdenGeorge and Joele Eddy Prize, Second Place ($1000): Gary DanelishenGeorge and Joele Eddy Prize, Third Place ($500): Gennady Stolyarov Mises University 2007 overall results
51 candidates; 20 admitted to the oral exam after written testHonors: Daniel D'Amico, Benjamin Darrington, Helene Haabegaard, Jack ParkerPassed: Eduard Braun, Marco Brun del Re, Dmitry Chernikov, Nick Curott, Benjamin Eberlei, Martin Fronek, Karl Gregory, Daniel Halvarsson, Juliusz Jablecki, Robert Orndofff, Robert Rahn, Max Raskin, Nathan Shore, Alex WellerDouglas French Prize for Most Learned ($2,500): Benjamin DarringtonGeorge and Joele Eddy Prize, Second Place ($1000): Helene HaabegaardGeorge and Joele Eddy Prize, Third Place ($500): Jack Parker Mises University 2006 overall results
53 candidates; 23 admitted to the oral exam after written testHonors: Aaron Singleton, Philipp Bagus, Philip Ruijs, Carl Jacobsson, Jack Parker, David Heinrich, Mateusz MachajPassed: Daniel Carreiro, Tomasz Maslanka, Anthony Gregory, Elliot Olson, Matt Simpson, Manny Glover, Manuel Abalo, Amadeus Gabriel, Eric Phillips, Marcin ZielinskiDouglas French Prize for most learned ($2,500): Mateusz Machaj Mises University 2005 overall results (out of 34) H-4, P-15
Honors: Pavel Chalupnicek, Devin Gould, Juliusz Jablecki, Randall McElroyPassed: Jan Krepelka, Geoffrey Plauche, Mike Dougherty, Allan Medwick, Marissa Slany, William Mullen, Ron Brown, Lukasz Szostak, Daniel Halvarsson, Christopher Byrnes, Art Moy, Francis Dumouchel, Rafael Raciborski, David Heinrich, David van der Goes Mises University 2004, Session Two overall results (out of 28): H-5, P-10
Honors: Lisa Casanova, Matt Machaj, Jacob Lyles, Peter van Maanen, Barret SnipesPassed: Remigijus Simasius, Daniel D'Amico, Anthony Batty, David Skarbek, Bretigne Shaffer, Cameron Carswell, Miloslav Zajicek, Matt Bower, Jeffrey Zhang, Pawel Skrzynecki Mises University 2004, Session One overall results (out of 16): H-1, P-6
Honors: Adam MartinPassed: David Heinrich, Rafal Raciborski, Simon Bilo, Ale Hartmann, Aaron Gunn, Harry David Mises University 2003 overall results (out of 23): H-2, P-7
Honors: Juan Fernando Carpio, Lucas EngelhardtPassed: Juan Fernando Aldana, Peter Anderson, Josh Bachmann, Nicholas Curott, James William Kimball, Andrew Neumann, Braden Robinson Rothbard Graduate Seminar 2003 overall results (out of 6): H-2, P-2
Honors: Jan Havel, Peter van MaanenPassed: Brad Barlow, Stephen Carson Mises University 2002 overall results (out of 34): H-5, P-15
Honors: Michael Boyle, Philipp Bagus, Andrew Kashdan, Dag Rowe, Noah TylerPassed: Bibiana Gomez, Art Carden, Jack Estill, Scott Rosen, Jim Massey, Ben Kelly, Justin Newton, Carl-Magnus Ewerhard, Scott Bushee, Jeremy Livingston, Radek Nemecek, Brad Barlow, Marcus Epstein, Arthur Foulkes, Matus Petrik Rothbard Graduate Seminar 2002 overall results (out of 9): H-3, P-3
Honors: Philipp Bagus, Oskaari Juurikkala, Matus PetrikPassed: Art Carden, Gustavo Souza, Tibor Silber Human Action Seminar 2002 overall results (out of 6): H-1, P-3
Honors: Gustavo Matta y TrejoPassed: Jan Havel, Oskaari Juurikkala, Luis Lopez History of Liberty 2002 overall results (out of 6): P-2, H-2
Honors: Brad Barlow, Jason JewellPassed: Ed Zeman, Howard Schmidt
Austrian Economics Research Conference Named Lectures .
Year
HazlittHayekMisesRothbardLou ChurchSpecial Guest Lecture 2021Steve MariottiDouglas RasmussenSamuel BostaphMatthew McCaffreyFrancis Beckwith 2020cancelled due to Covid 2019Robert LuddyRandy HolcombeMichael RectenwaldDavid DurrDaniel AjamianHans-Hermann Hoppe 2018James BovardRoger GarrisonKevin DowdRichard EbelingShawn Ritenour 2017David M. HartPaul RubinGlenn FoxPer BylundYousif Almoayyed 2016David CowanBruce YandleJeffrey HerbenerPaul GottfriedGuido Hulsmann 2015John TamnyPatrick ByrneHans-Hermann HoppeWilliam BoyesJohn Mueller 2014Jim GrantEdwin DolanJ. Huston McCullochPeter KleinJudge Andrew P. Napolitano 2013
Robert WenzelNikolay GertchevDominick ArmentanoBrendan BrownGary North 2012Hunter LewisNicolai FossRenaud FillieuleDavid HowdenDavid Gordon 2011
David StockmanWilliam ButosHelio BeltraoPhilipp BagusMustafa Akyol .
2010
Caroline BaumRobert MurphySteven KatesMark ThorntonGerard CaseyPaul Cantor and John Papola.
2009Peter SchiffGeorge SelginThorsten PolleitRoberta ModugnoDaniel Lapin .
2008Martin FridsonLorenzo InfantinoLarry SechrestStephan KinsellaLaurence Vance .
2007Declan McCullaghGerald SteeleAntony MuellerEdward Stringhamn/a .
2006William L. AndersonRobert HiggsJosef SimaRoderick LongRobert MurphyMichael Rozeff.
2005Alberto MingardiEdward FeserThomas DiLorenzoMark ThorntonRobert NelsonMartin van Creveld.
2004Sean CorriganToby BaxendaleRichard EbelingJoseph StrombergThomas WoodsYuri Maltsev.
2003Gene CallahanSudha ShenoyJohn CochranButler ShafferTimothy Terrell .
2002James BovardRonald HamowyPaul CantorWalter Blockn/a .
2001Tom BethellChandran KukathasGeorge ReismanDavid Gordonn/a .
2000Gene EpsteinDonald LivingstonDavid ConwayJoseph Salernon/a .
1999Charles AdamsRoger BackhausMorgan ReynoldsHans-Hermann Hoppen/a .
1998James GlassmanJeremy ShearmurLeland YeagerHenri LePagen/a .
1997lectures not named Jesus Huerta de Soto, Barry Smith, Irving Louis Horowitz, Raimondo Cubeddu.
1996lectures not named Anthony de Jasay, Michael Prowse, Hans Sennholz, JoAnn Rothbard.
Predictive analytics can’t predict! That was Dr. Per Bylund’s provocative introduction to our discussion of the uses and drawbacks of big data in the context of the entrepreneurial mission.
Key Takeaways and Actionable Insights The claims made on behalf of the analytical powers of big data may be exaggerated, and entrepreneurs should learn what they can and can not expect from the application of big data analytics to business. Otherwise there is the chance of both error and wasted spending on the tools of business intelligence. It’s important to distinguish between the different roles of multiple data types.
Pattern recognition is not prediction. Dr Bylund contrasted what Big Data can and can’t do for entrepreneurs. He used an example of analytics predicting the outcomes of future NFL games. Here there are large sets of historical data on players, teams, plays and previous outcomes. There are limited potential outcomes (e.g. one team will win the game — there is no third team that will unexpectedly turn up to change the range of possible outcomes). The predictive analytics got the outcome right about 75% of the time. In a world of more open-ended results (e.g. predicting the outcome of a multi-team tournament), big data could be expected to be right fewer times. There is danger in over-reliance on the law of large numbers and tendencies like reversion to the mean. Pattern recognition from historical data sets (which is what big data does well) is not prediction.
Download the "Big Data vs. Big Ideas" PDF.
In fact, in the world of economics and entrepreneurship, there is no prediction. Entrepreneurs deal with social phenomena that emerge from individuals’ actions and interactions, across billions and trillions of instances. Entrepreneurial outcomes depend on how people act, and how they act depends on their feelings, how they see the world (subjectivism) and what they feel like doing. We can’t know or predict that. There may be some general rules that apply in many cases (for example, raising prices rapidly and significantly in a competitive market will, all other things being equal, result in a reduced unit volume of sales). But those rules don’t predict the decisions of specific individuals in specific cases.
Mainstream economists and central planners long for a mechanistic world: turn a dial, get a result. But this approach is not valid. In the economy or any market, all variables are dependent on all other variables. Everything affects everything. The consequences of any action — like central bank interest rate tinkering — affect different people in different ways, and whoever is affected first or last will experience different consequences and react in different ways.
The core of the issue is that human behavior is unpredictable. Subjective choices can’t be predicted. Prediction implies precision, and that’s not available.
Yet the entrepreneur must deal with the future. The entrepreneur seeks to produce a good or a service that consumers will consider valuable at some point in the future. Even if they tell you today that they will value your offering in the future, they may change their minds.
Is there any contribution that big data can make, any help that it can offer? We discussed these areas:
It’s hard to know what people might want in the future. But it might be possible to identify what specific people will not want, based on their past behaviors. Data can show you which purchases cluster together, and which don’t. Beef purchasers may also buy red wine. Vegans won’t buy beef. Facebook and other ad targeting tools (which use big data effectively) can help you avoid marketing beef to vegans or pasta to keto diet followers.Data can sometimes detect dissatisfactions, which are the universal raw material for entrepreneurs. Analysis of sentiments expressed in reviews can guide you in the right direction. Writing a negative review on Yelp or Trip Advisor is both a behavior and an expression of sentiment and data analytics can detect patterns here. But Dr.Bylund advises us that it can only provide a guide – there is no substitute for talking directly to consumers, human to human.Data can help with segmentation. If you want to better understand a geographical market segment or a demographic segment or a behavioral segment, there are lots of data that can detect the differences between segments, and this can help you with targeting of communications (but not necessarily with the message).Quantitative data can be combined with qualitative data to sharpen insights. Dr. Smita Bakshi, in our episode #24 described how analysis of student performance data (50% of computer science students don’t complete their first year course) combined with personal discussions with students in class, delivered an empathic understanding of their struggles, from which her team developed a winning interactive learning tool for computer programming languages. Sometimes an entrepreneur can skip the big data analytics, but never the empathic diagnosis. Entrepreneurship consists of understanding the mind of the consumer and understanding the economics of the marketplace. Where the market is heading and what will be in consumers’ minds in the future are more the realm of judgment than analytics.
Entrepreneurs behave differently than dig data driven large corporates. They think harder about the customer, they study human motivation, they utilize the rich qualitative data that comes from talking to customers, and they concentrate their capital and resources on developing and extrapolating their customer understanding. They uncover subjective value — the value that only exists in the mind of the consumer. Imagination is the key to the future. Entrepreneurs try to succeed in bringing about that imagined future. Big data might help them avoid mistakes, but it’s impossible to rely on the past to produce the future.
Additional Resource Download "Big Data vs. Big Ideas" (PDF): Mises.org/E4E_31_PDF.
Recorded at the Mises Circle in Seattle, 14 September 2019. Includes an introduction by Jeff Deist.
Recorded at the Mises Circle in Seattle, 14 September 2019. Includes an introduction by Jeff Deist.
Recorded at the Mises Circle in Seattle, 14 September 2019.
Elites in America spent the twentieth century lecturing us about the unquestioned virtue of democracy and voting. But they change their tune when the wrong guy wins. Donald Trump, Brexit, and the rise of right-populist movements in Europe all challenge the West's great sacred cow.
Hans Hoppe famously reconsidered the cult of democracy in his 2001 book Democracy: The God that Failed. Democratic politicians and voters, with high time preference and no skin in the game, give us endless spending, debt, entitlements, and war — not liberty.
Our speakers will apply Hoppe's critique to the upcoming 2020 presidential election, which promises to be brutal. What are the limits of democracy in a country of 320 million people? Have we reached the end of the myth of democratic consensus? What if democratic voting, so called, doesn’t yield any compromise between Left and Right — but only creates endless division and an entrenched political class? And what might the future of democracy look like? Hint: decentralized, smaller, local.
A Q&A and Panel featuring Laura Davidson, Noah Bonn, Bob Murphy, and Jeff Deist. Recorded at the Mises Circle in Seattle, 14 September 2019.
Recorded at the Mises Circle in Seattle, 14 September 2019. Includes an introduction by Jeff Deist.
Virtually all laws involve "legislating morality." When people use this phrase they often really just mean "I want laws to back my version of morality, not yours."
Original Article: "Libertarian" Is Just Another Word for (Classical) Liberal.
Bob Murphy uses some samples from Dan Carlin’s amazing podcast, Hardcore History, to illustrate the flaws with state-provided military services. Bob concludes that minarchists have nothing to fear, and they should embrace the full vision of a voluntary society with no institutional coercion.
Mentioned in the episode: Dan Carlin’s Hardcore History series on World War 1. Audio excerpts in this episode came from Parts IV and V in the series.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Robert Anthony Peters is a professional actor as well as a promoter of liberty. His most recognizable film roles were appearances in The Pursuit of Happyness (with Will Smith) and Steve Jobs. His latest creation is the short film Tank Man.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
In Austrian Capital Theory, Brands are valuable financial assets. Brands are architected in response to the subjective value preferences of consumers, and the more accurate the responsiveness, the higher, faster, longer and more reliable are the future cash flows. Brands are promises of value and, when the promise is kept, the result is delighted, enthusiastic and loyal consumers.
In this episode of the E4E Podcast (Mises.org/E4E), global branding expert Trini Amador explains how every business and every entrepreneur can methodically build a strong brand to deliver consumer value and unleash cash flow.
The entrepreneur makes a promise that the consumer will experience value. The brand is the promise. Here are the principles for building a strong brand:
Key Takeaways and Actionable Insights There are two pillars to the construction: Relevance and Differentiation.
Pillar 1: Relevance
It’s central to economics, because economics deals with individuals and their preferences and their choices. Your brand is not for everyone, it’s for specific individuals. It’s important to know them and understand them deeply.
Relevance Box 1: Core Target
Many brand owners think that the more customers they target, the more they will sell. The opposite is true. Define your target audience as narrowly as possible.
Relevance Box 2: Core Needs and Insights
Strong brands are built on unique entrepreneurial insights into the motivations of their core target audience. Entrepreneurs use the deductive method: observing behavior and deducing motivations from those observations, using tools like the Means-End Chain.
Relevance Box 3: Customer’s Frame Of Reference
This component is based on the Austrian value principle that the customer finds value in meeting a need in a way that is better (for them) than direct substitutes, indirect substitutes, or than non-purchase or deferred purchase.
Pillar 2: Differentiation
In Pillar two, we build an implementation of the Austrian principle of uniqueness in your entrepreneurial offering. A brand is the ideal platform for communicating uniqueness.
Differentiation Box 1: Brand Promise
The brand promise is to deliver in a unique way the highest possible level of benefit, which is an emotional benefit, the consumer feeling that your offering assures they will achieve their highest fulfillment.
Differentiation Box 2: Brand Delivery
Brand delivery is how the brand keeps the promise it makes.
Differentiation Box 3: Brand Character
Customers are people and they relate to brands subjectively — almost as if the brand were a person.
Building the 6-Box Brand Foundation brings clarity about what your brand stands for, defines your competitive advantage, and ensures that your entire team knows what they must deliver, and what the customer expects.
Additional Resources Download the free "Brand Uniqueness Blueprint" (PDF) to help you implement your own brand-building process: Mises.org/E4E_30_PDF.
Have you heard of the knowing-doing gap? Accumulating unique knowledge — expertise, processes, experience, skills, recipes, qualifications etc — is important, as we always emphasize at Economics For Entrepreneurs (Mises.org/E4E). In business, that’s half the story. The second part is effective action, judged by results. Knowing what to do translated into actually doing it. Becoming not just a learning organization but a doing organization.
Key Takeaways and Indicated Actions Dr. Per Bylund frames it this way: having a great idea for a business is not the crucial element for success. It’s whether you can pull off the idea in implementation. That’s what investors and customers are looking for — not the idea, but executing the idea.
Dr. Bylund guides us with 5 Austrian action principles.
Principle 1: Consumer sovereignty. The consumer is boss and decides whether a business is executing well, i.e. to customers’ satisfaction. The only purpose of a business is to make and keep customers. Amazon calls this customer obsession — everything starts and ends with the customer, and the customer is central to every decision, in every resource allocation, and is invisibly present in every meeting and presentation. Does your company act this way? Are you certain you know and understand your customers’ needs and preferences, and their hopes and dreams? Are you deeply immersed in customer knowledge? Do you talk one-on-one with customers as often as possible? Do you go out to the building sites where they use your equipment, or to the offices where they use your software, or to the homes where they consume your food and beverage products? The consumer culture is exemplified by anthropology — getting out there with your users. Jeff Bezos observes that consumer-obsessed companies act differently. What actions are you taking to observe, understand and serve individual customers better?
Principle 2: Subjective Value. The consumer or customer you are getting close to by implementing Principle 1 is the decision-maker on whether or not your firm is providing value. Their decision is subjective — it’s entirely theirs, entirely emotional, entirely about their perception. Do you know what factors are the most persuasive and influential in creating a positive perception? We discussed a case study of premium vodka. The basic liquid is to a great extent an undifferentiated commodity. Differentiation comes from the varied subjective experience a consumer can feel in ordering and consuming and sharing a brand of vodka. How much of that perception is affected by the bottle shape design and the label design? How much by the social prestige of the location where the brand is served? How much by the consumer’s perception of the merit of the people who drink this brand? It’s hard to know but necessary to find out.
One route to implementation success in business is to manage expectations. Find out what customers expect, then make a promise to meet those expectations and keep your promise. So often in business, promises are made but not kept. That means you created an expectation, then did not meet it. You should make sure to do the opposite.
Principle 3: Dynamic Resource Allocation. The Austrian principle is that the firm’s capital and resources are, at all times, a reflection of the market and of customer preferences. What does that mean and how can a firm activate this principle? In practice it means two things. First, do not lock in to any asset or resource that is difficult to change or adjust on short notice. Stay flexible at all times. Second, make sure that you are collecting market signals — data — that tell you what you need to know about customer preferences today (not yesterday) and will provide you with insights into where they might shift tomorrow. Based on those insights, conduct experiments and tests that can be quickly scaled up when they show results, and quickly shut down when they don’t. If you find yourself responding to changes in customer preferences — or, even worse, changes in competitors’ behavior that seem to be more responsive to customers than your own — it’s too late. Get comfortable with continuous change.
Principle 4: Dynamic organization. How can you identify and eliminate all the barriers to your team’s empowerment to serve the customer in the way the customer prefers? Often, the barriers can be found in rules. In customer service, for example, there may be rules about the level of decision-making delegated to a customer representative, or even the amount of time a representative can spend on the phone with a customer. Examine all your rules, standardized protocols and bureaucratic structures. For each one, ask: does this contribute to the satisfaction of the customer? Does it produce customer value? Or is it to cut cost and minimize risk? Cutting costs will never add value. To be great at implementation, examine all practices to make sure they are value-creating and not value-consuming. Who decides? Your customer.
Perhaps you have employees who are not value-creating. You can’t afford them.
Principle 5: Measuring The Right Things. With metrics, most business advice is to be objective and numeric. You are advised to measure sales, profits, distribution, etc., and take surveys of customer satisfaction expressed as numbers on a scale or percentages compared to a norm. For great execution, it is far more important to measure subjective value, and to shed light on what the firm is doing right in the creation of consumer value and where it is falling short. This is a challenge, but not an impossible one. There are places to look, such as sources of spontaneous praise. Your firm’s Trip Advisor comments from recent visitors, for example, if natural, honest and spontaneous, can be great indicators for you. The same goes for other spontaneous commentary channels. Commit to conducting a minimum number of in-person one-on-one customer conversations every week. Summarize them. Conduct sentiment analysis. Try to develop data on the direction that sentiment is trending — modern tools can do this via language analysis and emotional content analysis. Commit your firm to becoming the best at monitoring, projecting and analyzing subjective customer perceptions.
Additional Resources 5 Ways To Analyze Executional Excellence (PDF): Mises.org/E4E_29_PDF
Do you have any experience of measuring subjective value creation? What has worked for you? Share your ideas in the Mises for Business group on LinkedIn.
Negotiation is a capability that entrepreneurs use almost all the time. It’s an area of entrepreneurial performance where an understanding and application of Austrian Economics can be very helpful.
It’s all Austrian! Negotiation skills represent one of the resources entrepreneurs must assemble and maintain. The value of any resource is subjectively determined, and so the price is never fixed, it’s subject to negotiation. Two people can have different subjective opinions about the value of a resource – and those opinions can change, e.g. during the course of a negotiation, when one agent changes the opinion of another.
Key Takeaways Negotiation starts on Day 1 and never stops. Founders deciding to set up a company negotiate over who plays what role, who gets what share of the equity, and so on. From Day 1, the entrepreneur bargains for advantage, putting the best case forward at all times, and always thinking ahead to the next negotiation.
In Bargaining For Advantage (Revised Edition, 2018), Richard Shell lays out six principles of negotiation that Professor Steven Phelan, himself a teacher of negotiation strategies to entrepreneurs in business school, reviewed and illustrated with examples.
Subjectivism: Know Your Own Bargaining Style. The entrepreneurial journey starts from self-assessment: Who Am I? Some people are uncomfortable with negotiation, and sellers might take advantage by making only fixed offers. There is a competitive negotiation style and a cooperative negotiation style, and some points on the spectrum between them. (Most professional negotiators think of themselves as cooperative.) Don’t feel bad if you hate the confrontation of traditional negotiation. You don’t have to drive the hardest bargain. You can control the timeline for greater reflection. You can prepare yourself well to reduce your anxiety. Know yourself, accept your self—knowledge, and learn how to apply it for advantage.
Know your ends and select the best means. Ends-means analysis is fundamental to entrepreneurship, as it is to negotiation. Identify your own expectations, set your goals high, and be ambitious. Remember that a goal is not a fixed point — like a price to settle on. It’s complex and layered and can have a lot of non-monetary components. These are the elements you can vary to adjust the bargaining advantage in your favor, by using them as concessions, or trading them for a better deal. For example, you may be able to reach the price you want by providing seller financing.
Use external — and authoritative — standards and norms to help you. Norms can narrow the uncertainty in negotiation for both sides. For example, real estate agents use “comps” (recent sales prices of comparable homes in the local area) to narrow the range of possible prices in a transaction. Of course, there are multiple norms and standards that could be used — like price per square foot, or lot size, or views — and you should know them all, select your preference, and then argue persuasively in favor. Pick a standard that shows your offer in the best light.
Time preference — thinking long term. A negotiation might seem like the very definition of short-term: you want a good outcome now! But is this the last time you’ll negotiate with this party? Does your agreement in this situation potentially affect future negotiations? If you bargain a new hire down to the lowest compensation level, do you risk them leaving in the future and jeopardizing a team project? Think of the second order consequences and the lifetime of your business. It’s a mark of the good economist — and the good negotiator — to always think in the long term.
Use empathy as the planning basis of all negotiations. We’ve emphasized many times that the core skill of the entrepreneur is empathy — understanding the feelings of the other party, whether that’s a customer or a party to a negotiation. Why is the other party negotiating with you at all? What do they want — or need? Get to know them as people. Take them to dinner. Meet their family. Can you ethically meet their personal needs as well as their corporate needs? You can never eliminate all uncertainty, but deeply understanding the other party can go a long way towards doing so.
Find your leverage: the situational advantage to reach agreement on your terms. Of course, leverage in a negotiation can be positive or negative at the outset, depending on the situation. You should always look for ways to reduce the value of the other party’s alternatives (that’s their leverage) and increase the value of their own. Put scarcity on your side by having more than one bidder for what you are offering. Use time — leverage can change over time, especially if you can wait and the other party can not. One useful tool is BATNA — best alternative to a negotiated agreement. If you have more alternatives than the party on the other side of the table, that gives you leverage.
Use the six principles to prepare a strategy. Shell recommends that you make your opening position as aggressive as you can, and support it with the best norms and standards you can compile. That will put the other party in the position of having to find contrary logic as a counter — it’s called anchoring: your opening bid becomes the anchor for locating the range of negotiation. Never meet in the middle. Let the other party concede first. Shell refers to if — then thinking. If you’re called upon to make a concession, then you know exactly what counter — concession you are going to call for from the other party. Never concede voluntarily, always ask for a responding concession.
Have a specific negotiation plan in mind. Use the accompanying planning tool, adapted from Richard Shell’s book. Physically fill it out, use empathy, acknowledge uncertainty, gather as much information as you can, find your own norms and predict which ones the other party will use, find a good agent if you need one. Planning in advance will give you confidence and help you succeed, even if you don’t relish negotiating.
Additional Resource 10-Step Planning Guide (PDF): https://Mises.org/E4E_28_PDF
There are many, many pathways of entrepreneurial opportunity in creative services, where it is eminently possible to succeed on talent, where big companies are eager to work with small creative companies and individuals, where agile low-overhead business models are thriving, and where technology is the entrepreneur’s friend.
It’s an exciting time for entrepreneurs to be in the creative industry, say Cheryl and Cliff Pia, founders of the Pia Agency, a leading video and audio production firm working with many of the leading brands and largest companies worldwide. It’s an industry of rapid change — for example from the orderly process of television advertising to the frantic chaos of social media and web advertising and YouTube and Twitter videos. Change is confusing and scary for established businesses, and therefore full of opportunity for innovative entrepreneurial creativity. Centripetal forces of decentralization are breaking up the “Big Agency” structures and their retainer fee-based business model. If you can become the best at a specialized service, many doors are open.
Key Takeaways and Indicated Actions The pathways of the creative industry often start very differently than for more traditional industries. Cheryl and Cliff provided E4E listeners with their creative origin stories.
Cliff played in bands and as a studio musician. He played some jazz and learned the “jazz method” (you don’t know what is coming next so relax and pick it up when it comes to you). He performed comedy in clubs and learned how to act on his intuition, read the mood of the room, and be hyper-responsive to audience input. By “always sitting next to the sound engineer” — and asking questions — he learned the technology and techniques of recording.
Cheryl worked in the music industry because that’s what her friends were involved in, and then in the film industry. She learned about music publishing through another friend, saw an opportunity and started her own publishing company. She also worked in the film industry and the non-profit sector, learning development and fundraising. Learning, learning, learning all the time.
Force majeure can be the catalyst to make the ultimate creative leap to start a new company. The key is to do it fearlessly, with grit and courage.
Cliff’s position at a corporate was eliminated in an economic downturn. He had started a new division for his company to produce television advertising. Faced with a need, he and Cheryl started their own TV production company: The Pia Agency. “The phone didn’t ring for seven months,” Cliff told us. They didn’t quit. Entrepreneurs embrace that uncertainty and answer it with problem-solving action.
Often, the first problem for entrepreneurs to solve is their own. The Pia Agency opened in Arizona and the critical mass of clients was located on the East Coast. The new agency found the solution in the adoption of cutting-edge technology for time-shifting and location-shifting (e.g. working with animators and voice talent all over the world) and remote online collaboration (e.g. online real-time video editing with remote studios, which sounds commonplace today but for which the Pia agency had to invent a new digital toolbox at the time).
Growth comes from demonstrating value, and a people-first approach. The new system worked, and the Pia Agency began to get work from big name clients like Hewlett Packard and Merrill Lynch, among many more. High quality work generates recommendations — from one brand manager to another in a multi-brand company, and from one company to another when clients change jobs and take their valued relationships with them. Cliff told us that a “people-first” approach — treat clients like people, empathize with them holistically, not just in their business lives — generate not only meaningful relationships but the pass-along recommendations that cause service businesses to grow. Austrian empathy and the role of trust are all pervasive in successful service providers. It’s the human moments that are the most valuable; paydays follow.
Innovation consists simply of new ways to serve clients by responding to their expressed needs.
Innovation 1: Speed and Responsiveness. TV Production processes were traditionally slow and linear and expensive. But clients preferred speed and responsiveness to rapid market change. The Pia Agency developed speed and responsiveness capabilities (e.g. multiple editors working on the same video at the same time) and a fast-turnaround culture (e.g. hired a key producer from the news industry who was used to high-speed turnaround). This became part of the agency’s unique value to clients.
Innovation 2: Sonic Branding. In the internet age, when we listen on laptop computers, phones and earbuds, audio has taken a second position to video. Consumers put up with generically poor quality. But as voice-shopping evolves, consumers are going to hear brands instead of seeing them. Audio will regain its importance. Cheryl and Cliff understand audio and have developed and invested in capabilities in “sonic branding”: distinctively identifying brands though their audio signature. There is huge growth potential in this new field.
Greater growth comes with adding new external resources. Cheryl took an MBA so she could better direct the growth phase of the Pia Agency. She found she was able to apply this resource directly and immediately. And then Cliff and Cheryl merged their agency into a larger global group called Creative Drive, to establish the organization model of the future, an independent collective of content creators, a larger expression of the speed and responsiveness operational model. The Pia Agency has access to a larger client base, a more widely distributed set of relationships, and to expertise in new channels, such as e-commerce. The journey continues.
Cheryl and Cliff recommend their journey map to creative entrepreneurs for consideration.
If you enjoy music or film or art, and you have a talent, there is every opportunity to do what you love and what you are good at, and the challenge is to learn how to get paid for it. The recommendation they make is to work in an appropriate part of the industry for an established company. For example, you might love music and performing, but you also might realize that music production is more lucrative than performing. The key is to create value, and therefore to understand what others find valuable, and what they will pay for the value brought into their lives. Get a job where you can learn in an area you’re passionate about, and learn what the world will pay for. Start there. Learn more, work with like-minded people. The pathways of entrepreneurship will open up to you.
Additional Resources Cheryl and Cliff’s Entrepreneurial Journey Map (PDF): https://mises.org/E4E_27_PDF
Creative freelancers can register at the CreativeDrive Work Market.
Bob Murphy analyzes John Carpenter’s 1988 cult classic They Live, starring Roddy Piper. After making some general observations about the major thematic elements, Bob critiques the main character’s strategy for dealing with an alien takeover of the media and government.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Dr. Bylund observes that students, when selecting entrepreneurial projects for his course, lean heavily towards consumer products and services. Does this represent smart entrepreneurial thinking, or not? Is it biased by (lack of) marketplace experience? Is it biased by media reporting and “buzz”? And what can practicing entrepreneurs learn from a reasoned analysis of the profit opportunities in Business-to-Business ventures compared to Business-to-Consumer ventures?
Key Takeaways and Actionable Insights The economy — measured by Gross Output — is 70% production. That means that 70% of entrepreneurial opportunities arise in the supply chain stages that are prior to the final consumer purchase.
Keynesian economists believe that the economy is defined by consumption. Hence all their policies are justified as supporting or boosting consumption. Austrian economists think differently, and recognize that production is the health of the economy. People produce so that they can then exchange with others — that’s simple way to invoke Say’s Law. Keynesians use the metric of GDP to indicate economic growth or decline, and that metric is 70-75% composed of consumption. Economist Mark Skousen led the charge for an alternative metric, Gross Output or GO to track the size of the economy. GO measures the value of all production at every stage of the supply chain, i.e. every transaction where one entrepreneur or firm sells to another. GO identifies pre-consumption transactions as 75% of the economy. As Dr. Bylund says, it’s where the money is for entrepreneurs.
For the entrepreneur, B2B — producing input for other firms — offers advantages of structure, standardization and scale.
Structure: When an entrepreneur sells inputs for another firm’s production, the customer provides structured guidance on measurements, quality, delivery methods and timing — a blueprint for what they want to receive and how they want to receive it. Demand is codified. If the supplying entrepreneur can meet these codes, and a bid and a supply contract are approved, then a great deal of certainty is created around the business relationship.
This does not mean that there is no room for innovation. That comes in the elements of the business relationship that are not contracted. The creative entrepreneur can innovate in speed, responsiveness, ideation, and spotting new opportunities for efficiency. Innovation occurs at the edges of the structure, while the structure itself provides stability.
Standardization: Once the structured relationship is defined and agreed and the production interchange is established, the supplier-entrepreneur benefits from maintenance of the standard. There is precise knowledge of the ingredients to use, the production process to follow, the production rate and delivery specifications. This adds to certainty, and allows for the negotiation of lower costs.
Scale: Obviously the scale opportunity for the supplier is dependent on the size of the buyer and the size of the contract — it’s in the buyer’s hands. Nevertheless, contract reliability represents scale over time, and future volume assumes some (although not complete) predictability. The supplier can concentrate on efficiency measures to lower costs when there is no need to concern themselves with throughput variability.
These advantages are reversed in B2C businesses, where the trend is towards the opposite of structure, standardization and scale: personalization. Dr. Bylund called the B2C market ephemeral and flimsy. He was referring to the changeability of the consumer. Austrians understand that value is the subjective perception of the consumer. And the consumer is emotional, idiosyncratic and inconsistent in their continual rearrangement of value scales — what they prefer today is often different than what they prefer tomorrow, even if it is not obvious to the entrepreneur what change in conditions has brought this about. Consumers’ moods change and their choices change. Our free pdf points out the techniques required to manage in this context — tight targeting, deep empathy, and micro-segmentation.)
An entrepreneur’s production cycle may be 5 months or 5 weeks, but the consumer can change their mind in 5 minutes. They are on a different cycle. Their demand can not be relied upon. Continuous change is required of the entrepreneur competing for the consumer’s dollar, and continuous change is a tough business model. (Listen to our previous podcast on Austrian Capital Theory for the best tips on how to manage for continuous change.)
There are business channels where both B2B and B2C models are required. Some entrepreneurs find themselves moving their consumer goods to their end-consumer through distribution channels owned and operated by big businesses, such as CPG manufacturers of foods and beverages that sell on the shelves of Whole Foods or Walmart. The Walmart and Whole Foods relationships are B2B, even though the entrepreneur is in the B2C space. It is necessary to focus on producing value for the consumer, and educating the retailer about their benefit in passing on that value, as well as their role in communicating it to the consumer. At the same time, it is necessary to comply with the structure, standardization and scale rules set by the big business. We might call this a B2B2C business. It requires skills for both B2B and B2C.
Competing in B2B remains challenging, of course, but entrepreneurs should consider the size of the opportunity and the reduced uncertainty that are potentially available. In B2B, the entrepreneur is required to compete with other suppliers, to get costs and prices right to meet the customer’s needs, and to work hard to meet supply chain standards and specifications, and to negotiate contracts. Those requirements may be preferable and less uncertain than the ephemerality and flimsiness of consumer markets.
Additional Resource B2B, B2C, and B2B2C (in PDF): https://Mises.org/E4E_26_PDF
Austrian economics has valuable and important things to say about organizing entrepreneurial firms.
Key Takeaways And Actionable Insights Organization can make a crucial difference to entrepreneurial success. Ideas alone are not enough — execution is needed and the details of execution are important. The entrepreneur must design an organization for detailed, effective and efficient execution. Some entrepreneurs shy away, thinking it drudgery. That’s a mistake.
Organization is never static, but always dynamic. It’s not a structure, it’s a process. It’s your business model. It’s the collaboration that achieves the desired return on the entrepreneur’s imagination. Austrian economics doesn’t prescribe a fixed way to “do” organization (unlike the rules- and framework-based approaches of consultants and organization gurus). It provides the right way to think about organization.
Organizational design starts with the entrepreneur’s ends in mind. The purpose of the organization is to create customer value. Everything about the entrepreneurial firm is customer value, and so organization must be all about customer value. Elevate those elements that deliver customer value, and eliminate those that don’t. Everything that is not customer value, or gets in the way of creating customer value, or diverts resources from customer value, is waste and inefficiency.
Start with the best combination you can — in the current moment — of people and resources and capabilities to create the most customer value possible.
Delegate as much entrepreneurial judgment as you can — to people with the same customer value-creation focus as you, but greater expertise and knowledge in specific areas of the business. Hire good people (or engage good contractors and vendors) who have the right skills and experience for a specific task or field, and then give them as much authority as possible. Don’t worry about over-delegating. Rather, worry about retaining too much control and becoming a limiting factor. Employees may find better ways to utilize an asset or expand a capability than you could have done in their place. They may show more ingenuity. Make sure your organization is consistent with the most productive use of available resources. It’s becoming more and more inefficient over time to exercise authority through control mechanisms. You can’t afford the transaction costs. By delegating, you lower your monitoring and management costs.
The owner-entrepreneur’s role is to design the rules of the game: making specifying decisions and determining how performance will be evaluated. You retain ownership control by making what Peter Klein calls specifying decisions up-front: how you are going to run the business, tight or loose; defining in advance what discretion employees have, so that they don’t have to ask about every decision.
The second tool of control is defining the measurements of success and holding your team members to your metrics.
Outsource as much as possible. The entrepreneur defines what resources and functions are crucial and proprietary to the business of customer value creation, and keeps control over them. Everything else can be outsourced — items like payroll services, accounting, transportation, legal, anything that constitutes overhead, and any tasks that are routinized. Just make sure there is no possible damage to the customer experience.
Employment contracts and compensation systems are tools of entrepreneurial control. The specifying decisions can often be captured in the employment contract, where decision rights can be traded for benefits, and incentives can be defined to motivate the right levels of performance and the right feelings of participation and motivation. Go-getters and exceptionally creative people can be turned into “proxy-entrepreneurs”, exercising entrepreneurial judgment that is derived from the owner’s original judgment. There are no hard and fast rules about this trade-off, and it’s often a matter of gut feel. The savvy entrepreneur constructs a mental model of how the organization operates when it’s “just right” and makes adjustments when it’s not.
How you finance your business has major implications for your governance of your own company. Venture capitalists want a major say, often a board seat and supervision of critical decisions. Lenders may have covenants that affect your governance decisions, and most definitely affect reporting. Friends and family will want to look over your shoulder, at minimum. When you are planning your financing, be sure to think about how it will affect your organization, and whether you want to accept the inevitable constraints.
In all cases, be ready to make adjustments to your organization design, your specifying decisions, your resources, and your metrics. The entire point of flexible, dynamic organization is to facilitate change and adjustment on the fly. Plan to monitor continuously, and make changes whenever indicated. Never get locked in to a poorly functioning organization: change it.
Additional Resource Organizational Designs (PDF): https://Mises.org/E4E_25_PDF
Dr. Smita Bakshi, an engineer passionate about her mission, makes an impact by combining what the world needs and what the world will pay for.
Key Takeaways And Actionable Insights What is the nature of the journey from growing up in India and Africa, to an education in America and the successful founding, growing and managing a high-impact ed tech business that helps instructors teach and students learn computer science?
The answer is: it’s not direct, and it’s not planned from start to finish.
It’s powered by individual drive, assembling knowledge, collaborating with a changing circle of smart and accomplished people, identifying the right pain point to address, and eventually finding — and then keeping — your focus.
The journey starts with individual drive: to better your own circumstances and those of your family. You are not necessarily called to change the world or start a brilliant new company. You find your drive at an early age to do better, move forward, expand your opportunity and improve life for you and your family. Perhaps there is some hardship in your early experience that provides greater determination and zeal. Channel it well.
Don’t necessarily expect a direct path. Keep moving forward, accumulate knowledge and experiences, and gradually start to narrow your preferences. Dr. Smita Bakshi identified engineering as her pathway. Her undergraduate degree was gained in India, and her Master’s and Doctor’s in the USA. Then she taught. Then she took an MBA. Then she worked for a small company in an engineering role, then a large one. There was diverse knowledge around engineering and its application in business and commerce. She established what she was good at.
Finding out what the world needs is a process of experimentation and discovery. It’s not always clear, and sometimes the people with the need can’t articulate it. Dr. Bakshi realized that her passion could not be fulfilled working on server configuration software, because, important though it undoubtedly is, it was too far removed from observable human impact. She made human impact her passion and began to experiment and investigate — in finance, healthcare and education. The idea was not necessarily to start and own a business, but to find the right place and the right way to make an impact.
There are two challenges in finding out what the world needs. The first is articulation: the customer can’t translate their felt unease into an articulated need. No-one "needed" Uber to fix the problems of the taxi industry. All the taxi user knew was that they were unhappy with the existing experience. In what way? In many, many ways. Uncertainty of getting a ride when wanted; uncertainty of the quality; uncertainty of the costs. It takes entrepreneurial skill to articulate a solution and a business model.
The second challenge is scale. Is the need big enough to support a business? Answering that question also requires entrepreneurial imagination.
A mission emerges when you can identify a pain point within your circle of human impact that’s big enough and important enough to generate significant revenues. Dr. Bakshi started a consulting business helping start-ups to fashion business plans for their ideas and technologies. She rapidly found that it’s easy to identify pain points — engineering-speak for market needs or problems-to-be-solved — but that many of them are not significant enough to generate a business. A pain point is only half of a value proposition. Customers can live with pain points that don’t cripple them. It’s important to find the ones that they can’t live with. She advised all of her consulting clients that their ideas would not translate into effective business plans.
Having identified a significant pain point, with a potential for real human impact via a new solution, the next step is product-market fit. Imperfect is OK at the outset, improving steadily over time. Product-market fit is Silicon Valley-speak for the solution to the two challenges of articulation and scale: a set of features and benefits that truly meets the market’s need, and delivers an experience that matches the expectations that a sufficient customers have in their mind when they buy the product, and for which they will pay.
Dr. Bakshi found an unarticulated need in Higher Education for teaching Computer Science (CS). The inputs were part data (more than 50% of students abandon their CS course in Year 1 because the struggle to learn is too difficult) and part sentiment (instructor unease not only at this student struggle, but also at the instructor struggle of teaching with tools that were a poor fit to the task — text books — and the imbalance of administration (especially grading) versus teaching.
The answer was an educational technology solution — a web application instead of a text book, facilitating learning in as interactive a manner as possible, with limited text, interactive, animation, built in labs (tests for students to see if they can write short pieces of code), and auto grading. The brand name was Zybooks.
Importantly, the pilot looked nothing like the Zybooks product today. Once the product was in the market and began to generate feedback, there was a process of continuous updating, improvement and adding features. The MVP (minimum viable product) model worked for Zybooks because the first experience, though imperfect, was a sufficient improvement over the status quo of CS textbooks.
The harder part of success is adoption, rather than product design and launch. Even though the market has confirmed the need, that doesn’t mean adoption is ensured. Dr. Bakshi had commitments from target customers that “if you build it, I will use it”. That turned out to be an unreliable promise. Dr. Bakshi had to take an engineer’s approach to understanding how the market really worked. In this case, the higher education market, there is no incentive for the adoption of the best technology and best practice. In business, there is an expectation of switching to a new service — e.g. a CRM suite — if it is the best performer and an improvement over existing choices. This is not true in higher ed. The instructor has the academic freedom to use whatever techniques he or she prefers.
The engineering solution was direct sales: one-on-one, telephone, email, online and in-person, whatever it took to influence one instructor at a time.
The final part of the journey is “crossing the chasm” from early adopters to early majority. The famous technology adoption life cycle chart suggests that the first 2.5% of a market are the innovators who grab at new technology. The next 13.5% are the early adopters who like to be not necessarily the first but at the front end of adoption. But then there is a chasm to cross before bringing in the early majority, who are more skeptical and less open to change. Dr. Bakshi feels she is still not across the chasm, but is making progress.
The keys, she suggested are:
Focus: don’t be tempted to stray from your core mission and core product. Stick with what you do well, and what your core knowledge and core capabilities fully support.Never compromise — and always keep improving — product-market fit. Is the user experience exactly what the customer wants — and ideally, even exceeds their expectations. Obsess about this fit, and make sure the people in your company think and act as one in their alignment around this singular purpose. When there is time to reflect on the journey, Ikigai is a good philosophy.
IKIGAI CIRCLESSMITA’S IKIGAIFind out what you love.Engineering.Invest in becoming really good at it.3 degrees, teaching, working at small and large engineering companies.Impact: find out what the world needs.A better way to teach and learn computer science.Business model: make sure you can be paid.Design, launch, get adoption for, and scale Zybooks.
The result is a life well-lived.
Additional Resource Ikigai (PDF): https://Mises.org/E4E_24_PDF
Auburn University professor Dr. Liliana Stern joins a special live episode of the Human Action Podcast for an unvarnished look at the state of economics education today. Why are theory and history ignored, while warmed-over Keynesian models dominate? How can Austrians reclaim their rightful place in the curriculum? Are economics students finding jobs? Why do academic publishing and textbook rackets persist? And why is actual teaching such a low priority?
If you care about how economics is taught today, don't miss this show!
Business strategy in books and business schools has tended to towards metaphors of sports or war. There are playing fields or battlefields, and the strategy question is “Where to play, and how to win?” In other words, it’s competitive strategy, where one firm wins and others lose, within some pre-set boundaries of industry structure. This is hardly useful for the start-up or SME entrepreneur, or indeed for any executive in any company who is dedicated to delivering customer value.
Austrian entrepreneurship, built on foundations from Austrian Economics, focuses on the strategic question of how to facilitate customer value. That requires a 100% focus on the customer — not competitors or industry structures. Per Bylund explains how adherence to this one core principle drives a very different approach to business strategy.
Show Notes Strategy in business schools is about how to gain competitive advantage. Austrian entrepreneurs think differently — they are constantly probing their own customer understanding rather than thinking about competition. An entrepreneur’s time is his or her most valuable resource, and they don’t waste it thinking about other entrepreneurs. Competition is usually understood as a firm’s relative position in a well-defined industry. It’s an idea from the economics of the early 20th century, when economists were thinking about market structures like oligopolies producing near-identical goods and services, and how firms performed within these structures. 21st century entrepreneurs don’t think that way.
Entrepreneurs pursue uniqueness: to become the customer’s choice by delivering the greatest value. Entrepreneurs spend their strategy time focused externally on customers and target customers. They are the ones who create value, in the form of an experience of satisfaction or pleasure. The entrepreneur’s task is to facilitate that value experience by offering a product or service that will be perceived as valuable. If the customer is dissatisfied with the status quo, then the entrepreneur’s strategy is to bring to market a solution that eliminates that felt dissatisfaction.
Deep understanding and deep empathy are the entrepreneur’s strategy tools. How can entrepreneurs facilitate value, if customers are the only ones who can create it? The answer lies in deep understanding of customers at the emotional level — how they feel. There is no shortage of data to help shed light: just initiate a conversation with them and they’ll talk about their dissatisfactions and hopes and concerns. They won’t design new products and services for you — that’s the entrepreneur’s job. But the application of deep empathy — truly understanding how the customer feels by seeing things from their perspective rather than yours — will take you to the level of understanding that’s required. If you are really, really good at this — in fact, if you can make it a unique capability — then you’ll realize success. Empathy is the best strategy.
Austrian entrepreneurs are rivals with each other for the customer’s dollar. Entrepreneurs’ continuous striving for uniqueness enables more and more satisfying and valuable customer experiences. All entrepreneurs are rivals — to do a better job of facilitating value for customers. If the customer buys a new digital printer rather than a new dress, the printer maker and the dressmaker are rivals. The dressmaker is stimulated to raise their game in value facilitation so that, next time, the customer buys the dress instead of, say, a bathroom rug.
There are some tools for customer understanding. The best one is conversation. We discussed various research techniques and tools such as the Voice Of The Customer, a method of data and information collection across all kinds of knowledge categories, capable of analysis and potentially leading to insightful interpretation. Dr. Bylund thought these tools worthwhile, but with the risk of being too formalistic. The Austrian route to deep understanding is one-on-one conversation: talking with customers about their feelings and their lives and their preferences, and perhaps getting them to discuss a prototype or rough description of a product or service. Numerical surveys and quantitative analysis are less useful.
There are also tools for internal allocation of resources to support uniqueness of products and services. We discussed the VRIN principle: reviewing the resources and capabilities of the entrepreneurial firm to ensure they are:
VALUE-CREATING: how much does a resource or capability or software feature or service element directly contribute to facilitating a valuable experience for the customer.
RARE: to achieve your uniqueness in delivering value, look for resources and capabilities that are unique, or at least rare. These could be particularly skillful individuals on the team or processes and recipes developed over time that are uniquely refined and uniquely aligned with the value preferences of your target customers.
Inimitable: if your capability can be imitated with a similar (but perhaps not identical) feature that delivers the same level of customer value, then your uniqueness is temporary.
Non-substitutable: if you are able to preserve uniqueness, but customers find they can substitute an alternative about which they feel just as good, then you are marketplace position in not sustainable. Customers can sometimes find value not only in direct substitutes but also indirect substitutes — like choosing a glass of wine over a glass of beer. Your unique beer recipe isn’t non-substitutable.
The VRIN formula is a useful lens to look at your internal capabilities. But Dr. Bylund stressed again and again that the strategy answer can not be found inside the company. Entrepreneurs must only think about the customer, and how to facilitate the greatest possible value for them. It’s the only way to build and sustain a business. Always reinvent and innovate. Always look for some new value that you can deliver. Keep talking to the customer, keep tapping in to the infinite resource that their dissatisfactions represent — just ask them, they’ll tell you.
Additional Resource Voice of the Customer (PDF): https://Mises.org/E4E_23_PDF
This is Nathan Moore's first year at Mises University. The Auburn University student shares what he's most excited to learn about.
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Nationalism, globalism, cosmopolitanism, and immigration are heated topics today—but Mises systematically addressed them 100 years ago, in his seminal work Nation, State, and Economy. What is a nation, and what does the nationality principle mean for liberalism? Mises argues that nations arise spontaneously, predating governments. Liberal nations exist to the extent they respect self-determination, peace, and international trade. But illiberal nations produce war and privation, discriminate against minorities, and distort natural migration. So how do we deal with aggressive nationalism?
Economist Ryan McMaken, editor of Mises.org, joins Jeff Deist to wrestle with this important and relevant book. Don't miss their great discussion of immigration toward the end of the podcast, referencing Professor Ben Powell's recent paper "Solving the Misesian Migration Conundrum". And use the code HAPOD for a discount on Nation, State, and Economy from our bookstore.
Mises Institute Research Fellow Vytautas Žukauskas first attended Mises U in 2009. Now finishing his PhD in economics, he explains why the experience at Mises U is worth the trip halfway around the world.
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Featuring Tho Bishop, Joseph Salerno, Jeff Deist, and the Mises University Faculty.
Recorded at the Mises Institute in Auburn, Alabama, on 14 July 2019.
Mises Institute Fellow Patrick Newman discusses what originally brought him to Mises University, and what it means to now be teaching as a Mises U faculty member.
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Like the Matrix, you cannot be told about a three-hour conversation with Donnie Gebert; you must hear it for yourself. But here’s the blurb from his book, A Direct Republic: The Null Hypothesis of Politics:
All members of a direct republic sign… the constitution/social contract. This contract states you will not engage in murder, rape, theft, and basic crimes against humanity. Once signed, the individual becomes their own representative and places social contributions directly into the funding pools for the social projects they approve of.
NOTE: Bob Murphy erroneously describes Gebert as an “intelligence officer” in the introductory remarks, but in fact Gebert was a sergeant. The mistake was Murphy’s, not due to Gebert.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Austrians will be vindicated, but will they be heard?
Original Article: "Austrian Economics is No Longer the Unheard Music"
Does Carlson honestly think Republican members of Congress are overly theoretical and ideological? And here we thought they were a bunch of unprincipled and poorly-read hacks!Original Article: "Tucker Carlson's Broadside Against Austrian Economics"
Please help us distribute Economics in One Lesson far and wide to students across the US. From home schools and high schools to universities and graduate programs, our network of professors, teachers, student groups, business owners, supporters, and activists stands ready to blanket the country. We will put this book in the hands of thousands of young people. Donate today!
Original Article: "Reaching the Next Generation".
Bob brings on Robbie “The Fire” Bernstein, host of Run Your Mouth and junior host to Dave Smith on the popular libertarian podcast Part of the Problem. Bob and Robbie discuss the NYC stand-up comedy scene, and give a tutorial on jokes using some examples. Bob asks Robbie whether the mocking campaign against AOC might backfire, and then Robbie turns the tables by asking Bob about the coming economic crash.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Hosted by Young Americans for Liberty at Auburn University and the Mises Institute. Recorded 20 April 2019 at the Mises Institute in Auburn, Alabama.
The Henry Hazlitt Memorial Lecture, sponsored by Hunter Lewis. Recorded at the Mises Institute on March 22, 2019. Includes an introduction by Joseph T. Salerno.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
Lecture Text: In 1946, a book named Economics in One Lesson was written by a man who did not think it would have a great impact beyond the economic fallacies of his day.
That amazing man was Henry Hazlitt.
Now over one million copies have been sold and it remains in print.
It is a personal honor to lecture about Hazlitt: He is one of my favorite writers on economics, political economy, and ethics. Economics in One Lesson, which was based in part on Bastiat’s essay, “What Is Seen and What Is Not Seen,” debunks the most prominent economic fallacies of the past and the present, summing up economics as long-term versus ephemeral thinking.
He wrote more than twenty books and was the principal editorial writer on finance and economics for The New York Times for twelve years and a columnist for Newsweek for twenty years. More importantly, his writing was thoughtful, incisive, and influential, and he played a significant role in supporting, introducing, and explaining the ideas of Mises and also Hayek. He is a stellar example of the impact one person can have on our society. My mentor, Dr. Bill Peterson (a student and colleague of Mises) and his wife Mary were good friends of Hazlitt, so although I never met Henry, I did receive first-hand knowledge of his life and work from the Petersons.
I am thankful to Laura Bennett Peterson, Bill and Mary Peterson’s daughter, for assisting me with this lecture. Laura grew up knowing Hazlitt and she has been exceptionally helpful with her knowledge and insights about him. Dr. Peterson was very complimentary of Hazlitt’s writing and personal courage, especially when he opposed the Bretton Woods agreement. Hazlitt knew Bretton Woods would cause inflation. The New York Times had no interest in criticizing this agreement, and that sent Hazlitt looking for a new job.
Hulsmann indicates in Mises: The Last Knight of Liberalism that Hazlitt may have been one of Mises’ first close American friends. In 1940, Hazlitt received a call from “Mises speaking,” and he described the encounter as if “John Stuart Mill were speaking.” This was the beginning of a long-term friendship between Hazlitt and Mises. By explaining economic theory, Hazlitt enabled many entrepreneurs to think clearly and correctly. Most of the time the world promotes compliance with existing ideas and punishes critical thinking and new ideas. This was Germany’s mentality in the early 20th century, Mises was treated miserably because of what he thought; this is common today. Profound thinkers are rarely appreciated and often scorned. Today we are witnessing this in our universities, which were created for thinkers but now suppress original thoughts.
This talk focuses on three of Hazlitt’s central concerns:
His book, The Foundations of Morality, established a high standard of morality. Current events demonstrate a widespread lack of morality in our society.His book, Thinking as a Science, elevates thinking to a new level. Today everyone is “thinking outside of the box.” The problem is, most people are not thinking most of the time.His book, Economics in One Lesson, introduces us to classical-liberal thinking, which is foreign to most Americans He wisely pointed out, along with Mises, that economics “is a description, explanation, or analysis of the determinants, consequences, and implications of human action and human choice.” Hazlitt’s economic thinking is thus grounded on human behavior. The recent gyrations of the stock market, based on fears of tariffs or higher interest rates, illustrate how markets react in real time to the effects of current policies. Hazlitt was a giant in financial journalism, as noted in Jim Grant’s Hazlitt lecture. But Hazlitt was also a public intellectual with unique insights on morality, thinking, and political economy. We will begin with Hazlitt’s understanding of morality as embodying long-term thinking, his foundational theme.
This is his most powerful message.
Morality For Hazlitt, “morality is essentially, not the subordination of the ‘individual’ to ‘society’ but the subordination of immediate objectives to long-term ones.” Hazlitt realized that the long-term interests of the individual would serve the long-term interests of society. The long-term interests of the individual depend on social cooperation, as Hazlitt points out:
“Social cooperation is the foremost means by which the majority of us attain most of our ends.” (The Foundations of Morality, 13) CAS stresses cooperation as the primary way we can progress as a company. It can be challenging and requires humility. We witness the parade of lobbyists seeking government favors: lobbyists from GM, the U.S. steel industry and Tesla, to name just a few. I might add our universities to this list, since the federal government helps to fund their excessive spending. These companies and institutions are rent seekers and tariff promoters.
German and Asian automakers, which also manufacture in America, received no bailouts and don't want tariffs. In fact, BMW exports 75 percent of the SUVs it makes in South Carolina. Hazlitt reminds us to let the market decide, as “dying industries absorb labor and capital that should be released for growing industries.” Hazlitt believed that bailouts and tariffs are short-term solutions to long-term industry problems. Hazlitt’s concept of morality can be summed up in two of his own sentences: “The conduct we call moral is the conduct we consider likely to lead to the most satisfactory situation in the long run.” And “immoral action is nearly always short-sighted action.”
These important principles are lost on our society today.
The challenge for entrepreneurs:
We must focus on the long term in spite of tremendous pressure to think only over the short term. Markets are very competitive, and sometimes promote short-term thinking and solutions. But we know, short-term decisions can be very costly in the long run. It is imperative to teacher our students about Hazlitt. Many domestic steel manufacturers raised prices over this past year even higher than the steel tariffs. It did not work, Users take notice and take action. In the long term our domestic steel industry will be harmed by tariffs.
This is human action in the marketplace.
We are witnessing a parade of successful entrepreneurs, as well as leaders in all walks of life, fall from grace because they lacked morality. These individuals may have brilliant ideas, but they lost sight of the long term and failed to learn Hazlitt’s most important lesson on morality:
High integrity is required for the sustainability of an enterprise over the long term. Our society promotes and praises loud and unethical leaders such as Elizabeth Holmes, Elon Musk, but companies and investors suffer. Companies suffer because of these unethical individuals in charge: think of VW, Lehman Brothers, Tesla, and now Boeing. Conversely, Warren Buffet is not an Austrian Economist but he is an excellent investor, capital allocator has an exceptional reputation for honesty and became rich in the long run. Companies and Investors flock to him. The market requires moral leaders because the market cannot function without integrity.
In addition to morality, Hazlitt makes the need for freedom very clear:
This freedom applies to entrepreneurs: In order to have the freedom to succeed, we must have the freedom to fail. For Hazlitt, capitalism allows for freedom, It does not hinder freedom:
Modern capitalism is not an inevitable or inescapable system but one that has been chosen by Americans. It is a system of freedom.
In America, some 300 million people produce 24 percent of the world’s goods. America leads the world in innovation, which is the essence of American exceptionalism.
Too Many countries undermine freedom and the results are clear. The EU has slow growth and high unemployment. In Venezuela, freedom is denied to the point of starvation.
There is concern that the free market creates inequities and failures. But Hazlitt points out that “a free-market system tends to give to every social group, and to every individual within each group, the value of what it or he has contributed to production.”
Hazlitt sums it up perfectly. Socialists refuse to understand free markets. They fail to see that production is based on incentives, not coercion. Some politicians live off the fat of the land but hate producers, freedom and success. It would be entertaining to read what Hazlitt might write about the lunacy of the Green New Deal and massive government debt.
Successful businesses must have a strong record of morality and must think long term to survive in a competitive marketplace.
The CEO of Boeing would probably affirm this statement, at least right now. Unfortunately, Boeing’s marketing group convinced the FAA the 737 Max was the same as the old reliable 737. This wasn’t true. Even many pilots were not aware of the complexity of the new MCAS software. The FAA did not understand the new Boeing technology, so why are they regulating. The 737 Max’s software relied on a single sensor, which failed. Some important safety features were sold as “options,” not standard equipment. Those options weren’t chosen by Lion Air or Ethiopian Air, but you can count on them being standard in the future. Internal concerns from Boeing engineers and pilots’ reports to the NASA system were ignored.
Why? Boeing was focusing on competing with Airbus, which had the lead; morality and long-term thinking be damned. No one will ever think of Boeing in the same way and there could be criminal as well as civil liability.
Lesson learned: One must bear in mind, as Hazlitt taught, the long-term consequences of conduct. Industries must be 100 % responsible 100 % of the time.
Thinking H. L. Mencken described Hazlitt as "one of the few economists in human history who could really write." Hazlitt wrote well because he thought well. Hazlitt, affirms in his book, Thinking as A Science, that most people are not thinkers. I love Hazlitt’s observation that if there is a problem and a solution is needed, “They want to look it up.”In today’s world, they’d want to “Google it.”
Too many of our educational institutions are propaganda centers and not cultivators of thinking people. Many institutions suppress thinkers and demand compliance with politically correct, non-thinking popular culture, which undermines an entrepreneurial America.
I often tell our students and our interns: How you think will determine your future. Good thinking and cooperation are critical to making progress in life. Hazlitt was a great thinker by analyzing the long-term consequences of economic policies, such as tariffs and monetary and fiscal policy. He knew that our thinking will have major consequences, for good or evil. His book, The Failure of the New Economics, masterfully refutes Lord Keynes’s General Theory by showing Keynes’s theories as nothing more than bad thinking.
Two great thinkers in the 20th century were the Wright brothers. The Wright brothers were successful in flight because they visualized the need for “suitable controls” to balance the plane once it is in the air. Our government sponsored Samuel Langley who failed to realize the need for suitable controls in flight.
The Wright Brothers took no government money, they are a perfect future model for Entrepreneurs. Thinking ability is the greatest single advantage of the entrepreneur. “The greatest resource,” as Julian Simon put it, “is the human mind.”
Thinkers in business applied the principles of “exit” and disruption. Think of technologist Balaji Srinivasin in genomics and mobile money, and of UBER, Airbnb, and self-driving cars. Harvard business professor Clayton Christensen is among those who have studied old industries that were disrupted by new companies with a better approach.
Nucor Steel, an upstart in 1960 with its minimills, is now the largest steel company in the U.S. Our only task as entrepreneurs is to serve the user.
CaptiveAire thinks in the long-term, continuously. Even with the steel tariffs in effect since 2018, CaptiveAire has refused to raise prices beyond our normal level. We gain market share because we think long-term, and we generate profits by always putting our users’ interests first.
We witness short-term ideas and fallacious claims every day.
Socialism is being sold hard as a solution to a problem that does not exist in America.There is a Green New Deal to save our planet, which is doing pretty well.Debt and deficits do not matter, as long as interest rates are low. Congress does not even attempt to balance the budget.Free trade is portrayed as the enemy of prosperity but in fact it has made us rich. Hayek in The Road to Serfdom described those who would “buy” such fallacious claims as the gullible.
Problems and solutions must be well-thought out and understood before changes are made. Good decisions require real thinking, which is hard and time-consuming.. Yet without good thinking, the consequences may be catastrophic.
Long-Term Economics Hazlitt sets a clear path for entrepreneurs who think long term.
The entrepreneur must make the hard decisions at the right time, based on the known facts that are often sparse in the creative world. In 1978, when we began making kitchen ventilation hoods, the machines to create more hoods faster did not exist… In 1983, the computerized hydraulic-press brakes we needed were invented by Darley in Holland. This technology revolutionized the sheet metal industry. Hydraulic-press brakes increased productivity four times and the now fully-automated machines produce eight times what they did in 1982. In 1988, international alloy prices were spiking, causing stainless steel prices to increase dramatically. My solution was to find an stainless steel product less vulnerable to volatile alloy price spikes.
CaptiveAire adopted two important changes that transformed the industry:
We light-weighted Commercial hoods, saving 20% of the metal.We changed the standard from 304 to 430 stainless steel, saving another 20%. In 2008, most of the food service industry adopted our 1988 standards using 430 metal when possible. CaptiveAire was a little-known manufacturer with sales of nine million dollars in 1988. These and other decisions propelled us to a half-billion dollars in sales last year. Changes are risky, but the long-term outcome was that CaptiveAire became the leading producer of commercial kitchen hoods in North America.
In 1925, Treasury Secretary Andrew Mellon and President Calvin Coolidge applied a supposedly “scientific” method in determining the marginal federal income tax rate. They chose 25 percent. The decreased income tax rate helped America to enjoy the Roaring Twenties’ economy. After the stock market crashed in 1929, Hoover prolonged the Great Depression by raising the marginal rate to 63 %. Tariffs averaged 40 % with the Smoot-Hawley Act.
Hazlitt clearly describes the tax dilemma:
When the total tax burden grows beyond a bearable size, the problem of devising taxes that will not discourage and disrupt production becomes insoluble.
Hazlitt cautioned that tariffs do not raise the standard of living; they have the opposite effect, which we witness today.
Tariffs are self-inflicted wounds and the current trade wars are slowing economic growth here and abroad. Growth is slowing internationally because of tariffs.
On free trade, Hazlitt quotes Adam Smith:
In every country it always is and must be the interest of the great body of people to buy whatever they want of those who sell the cheapest.
Free trade should be intuitive, especially with the example of the 50 American states, which comprise the largest unilateral free-trade zone in history.
But despite the value of free trade, large numbers of Americans believe tariffs raise our standard of living and create jobs. The steel tariffs under President George W. Bush were meant to help American steel companies, but ended up hurting even more companies and causing the loss of 200 thousand jobs in industries using steel.
This exemplifies how a short-sighted policy hurts entire industries in the long term. Hazlitt’s long-term approach is imperative for America.
Three things we desperately need to think about in regard to the long term are:
Eliminating fiscal deficitsEducating our childrenFocus on integrity to the market place, not special interests. These policies would greatly benefit our economy: The more the deficit Reducing Government spending allows more investment capital, allocated by entrepreneurs not government. The better our students are educated, the more productive our workforce will be.
U.S. K-12 public schools are one of the largest monopolies in history. Costs are high, quality is low, discipline and character formation are gone. In America’s public schools, you don’t get what you pay for. In 2007, I opened a private K-12 chain of private schools named The Thales Academy. Hazlitt’s morality, thinking, and long-term outcomes formed our philosophy.
The Thales standard is the highest possible academic quality and character formation for each student at the lowest possible cost. The cost for K-5 is $ 5,000.00 per year and has not changed since the founding. Today we have 8 campuses and 3,100 students. My goal is to grow Thales to 25,000 students as an example of what can be done. The Thales model is changing the way parents think of K-12 education.
One important lesson I have learned, which is contrary to conventional wisdom, is that it takes a very long time to establish a great company. And the process never ends! Individuals, companies, and our government must think about the long-term effects of their actions.
Conclusion: Why Hazlitt Matters for the Entrepreneur Hazlitt states that an entrepreneur is "a capitalist willing to take unusual risks." His theories of morality and long-term economics are found in every story of a successful entrepreneur. When an entrepreneur is able to achieve excellence, society is benefited as a whole. However, the entrepreneur can only achieve excellence when freedom prevails. Calls for the government to provide its citizens with every necessity, whim, and craving lead to chaos. Venezuela is a leading example of this. This is why the moral entrepreneur is critical to the market: He is not concerned with garnering the most rights for himself, but rather gaining the most customers by serving.
Hazlitt explains, “the rules of morality are those rules of conduct that tend most to increase human cooperation, happiness and well-being” The entrepreneur’s morality directly correlates with society’s well-being; the job is never done for entrepreneurs and economists. Hazlitt never went to college: his thoughts were not dependent on what he already knew, but rather on trying to explore things he did not know. Edwin Land affirmed this way of learning and thinking when he said: “Creativity begins at the edge of the known.”
This is how successful entrepreneurs operate: They make guesses and take risks off of the edge of what they already know. They apply their thinking skills to make the best possible decisions using the information they have today to positively influence the long-term future. My Message to entrepreneurs: Maintain humility in realizing that you don’t and can’t know everything.
In the words of Dr. Bill Peterson, “None of us get it all right.” No matter how much you know, it will always be a fraction of what is already known.
In the 40 plus years that CaptiveAire has existed, we have made many mistakes but our policy is that if we are wrong, we pay the price, not our users. In 2016, we designed a new leading-edge Roof Top Heating and Cooling unit for commercial buildings. This new technology uses a modulating compressor so it’s very efficient and can provide 100 % outside fresh air to buildings. We learned from past errors and elected to have a three-year BETA testing of this product. We know we are 100 % responsible for the performance of this product for the next 20 plus years. Hazlitt’s long term philosophy does work in the market and it fact this is how the market works. Entrepreneurs aggressively seek new knowledge and rethink everything: they carry the torch of Hazlitt. We live at a time where Entrepreneurs & Producers are the villains and the heroes are the Government and Politicians. I quote Bill Peterson: “Entrepreneurs are every bit the heroes of our society.”
I might add, the takers are the real villains. As we witness rallies and hear cheers for the short-term economic policies, we must think of the long-term to achieve the American dream. Hazlitt, Mises and Hayek lived in more challenging times, but our society is on the road to Serfdom unless the Austrian School prevails; as economic illiteracy rules the day. Hazlitt’s morality through long-term thinking is hard to sell to the public because Human Nature lives in the present and wants it now. Our country’s foundation is being shaken by the lack of and therefore it is imperative that we integrate long-term thinking into our homes, our schools, our places of work. I challenge you to take up the mantle of Hazlitt and be a courageous writer, debater and teacher of morality and long-term thinking.
We could use an army of Hazlitts today: men and women of courage and wisdom, who are unafraid to speak and write the truth.
I conclude with Hazlitt’s words.
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.
Bob goes solo to discuss a particular aspect of outrage mobs on social media, in which people intentionally spread misleading or outright false smears against their opponents. He covers the fate of Scott Alexander (who had to shut down a subreddit thread because of online harassment accusing him of supporting Nazis), Nick Sarwark’s latest (feigned) ignorance of Tom Woods’ views on prostitution, the hatchet job on Bob’s Wikipedia entry, the smears of Jordan Peterson, and—in the interest of fairness—some examples of overreach by “his side” too. Bob wraps up by explaining the harm of this behavior, and how comedians are the only ones left who can speak the truth.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Nelson Nash is the developer of the Infinite Banking Concept (IBC), which uses properly designed whole life insurance policies as a cashflow management vehicle. Although Bob (along with Carlos Lara and David Stearns) has worked closely with Nelson over the years in building the Nelson Nash Institute, this interview focuses on some of Nelson’s charming stories about learning to fly and being mentored by FEE’s founder, Leonard Read. The conversation then turns to the pernicious role that commercial bankers have played in history, and how IBC allows individuals to secede from that evil system.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
What is the real state of life in America? Why are we so divided, politically and otherwise? How fragile is the economy, and how much longer can debt and deficits go unaddressed? Will culture wars destroy any remaining sense of a shared American vision? Is a cold civil war—or worse—inevitable? Recorded at "The Mises Institute in Orlando: The Real State of the Union" on February 16, 2018.
What is the real state of life in America? Why are we so divided, politically and otherwise? How fragile is the economy, and how much longer can debt and deficits go unaddressed? Will culture wars destroy any remaining sense of a shared American vision? Is a cold civil war—or worse—inevitable? Recorded at "The Mises Institute in Orlando: The Real State of the Union" on February 16, 2018.
What is the real state of life in America? Why are we so divided, politically and otherwise? How fragile is the economy, and how much longer can debt and deficits go unaddressed? Will culture wars destroy any remaining sense of a shared American vision? Is a cold civil war—or worse—inevitable? Recorded at "The Mises Institute in Orlando: The Real State of the Union" on February 16, 2018.
Gene Epstein, former Barron’s economics editor and founder of the Soho Forum, joins Bob for a lively discussion covering a variety of topics. Gene explains that his mother, a card-carrying member of the Communist Party, had an FBI file and was responsible for Gene’s original position as a democratic socialist. It was only through his reading of Murray Rothbard’s Man, Economy, and State that Gene became a free-market libertarian. Gene recounts his experiences teaching economics and working on the New York Stock Exchange, and shares examples of the abuse of economic statistics as detailed in his book Econospinning. Finally, Gene offers Bob some advice for his upcoming debate with Tom Woods.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
The great comic Dave Smith is the proud dad of a newborn baby girl. Will she witness fewer American wars in her lifetime than a girl born in 1918?
Dave and Jeff Deist discuss the astounding news from Trump about reducing troops in Syria and Afghanistan, the growing push-back against neoconservative foreign policy from ordinary Americans of all stripes, the impassible rift in Conservatism Inc. caused by Trump, and how Rand Paul may lead a new noninterventionist resurgence.
Climate Change (née Global Warming) is based on three premises: the earth's atmosphere is warming; humans are responsible for that warming; and warming is inherently bad.
But even if we accept these premises, what economic trade-offs are warranted in response? No more air conditioning or private automobiles? Heavy carbon taxes? Outlawing relatively cheap fossil fuels and mandating expensive renewable sources? Slower economic growth in the developing world? One child policies?
Dr. Robert Murphy joins Jeff Deist to discuss how the political landscape and media narratives fail to consider obvious choices and trade-offs inherent in the climate change debate.
Carabini explains how individuals achieve results that are “better than rational” when seeking ways to manage the resources of the commons, and how government intervention only obstructs the process. Pages 63–74 in the text. Narrated by Daniel Bennett.
The Introduction to Liberty, Dicta and Force by Louis E. Carabini. Pages 7–18 in the text. Narrated by Daniel Bennett.
Carabini explores the inherent inhumanity of political democracy as a social scheme in which common sense and goodwill are scorned and individual predation upon others is praised. Pages 101–108 in the text. Narrated by Daniel Bennett.
Carabini explains why so many people remain trapped in a political box, holding firmly to the illusion that politics and government serve a beneficial social function. Pages 19–24 in the text. Narrated by Daniel Bennett.
Carabini explains the selfish nature of living organisms and the natural selection of human cooperation over force as a more adaptive behavior for surviving and propagating. Pages 29–40 in the text. Narrated by Daniel Bennett.
Carabini discusses the nonsense and divisiveness of the political use of “fairness” and “equality” to disguise acts of inhumanity as moral in order to gain votes and power, while reducing the potential welfare of all. Pages 41–54 in the text. Narrated by Daniel Bennett.
Carabini explains the importance of discrimination and how political laws prohibiting selective associations — as well as disassociations — are inhumane. The nonpolitical world is an individual one where relationships are voluntary, joint ventures based on preferences. Pages 55–62 in the text. Narrated by Daniel Bennett.
Carabini discusses the degree to which the most compassionate people can become desensitized and conduct themselves in abhorrent ways when they are obedient to authority. Pages 75–82 in the text. Narrated by Daniel Bennett.
Carabini explains the multifaceted, revolutionary new science of complexity theory (also called chaos theory) that shows why the political top-down ordering of society is disruptive to social order. Pages 83–100 in the text. Narrated by Daniel Bennett.
Carabini discusses the duality of standards of conduct in which people condone dastardly conduct in public (political) matters that they would never think of using in their personal affairs. Pages 25–28 in the text. Narrated by Daniel Bennett.
Carabini concludes, and considers finding purpose in life while trying to make the world a better place. Pages 109–112 in the text. Narrated by Daniel Bennett.
This article is excerpted from a talk delivered at the 2018 annual meeting of the Property and Freedom Society.
Introduction Ladies and gentlemen, the first task for any intellectual or ideological effort is to understand the environment surrounding it. Whether we like it or not, we live in a decidedly illiberal age: an age hostile to private property, individualism, civility, speech, academic freedom, culture, even to civilization itself. The spirit and tenor of our time are not at all conducive to liberal arguments; in fact such arguments are perverted into justifications for state action. Because of this sober reality we should resist the zeitgeist, and resist the language, narratives, issue framing, incivility, and purported egalitarian ends of the anti-intellectual landscape around us.
If you've read Murray Rothbard on the Progressive Era, you know he hated a reformer. And he especially hated a Yankee pietist reformer. No one embodied this kind of reformer like John Dewey, the psychologist who earned Rothbard's wrath through his evangelical though secular zeal for saving the world through progress and statism.
Dewey had what Rothbard called a "seemingly endless" career, with significant influence— which he bolstered with frequent columns in The New Republic— a new magazine in 1914, created as an unholy alliance between big business and leftwing public intellectuals.
An astonishing article Dewey produced for The New Republic in 1917 bore the perfect title for our discussion today: "The Conscription of Thought." Dewey, like his colleagues at the magazine, urged the US to enter the Great War in Europe, and they did everything they could to encourage a "war spirit" among stubbornly doubtful Americans.
Now his pro-war perspective had nothing to do with the realities on the ground in Germany or Britain or France, or even US interests in those areas. His focus was entirely domestic— war would help lead America to socialize its economy and greatly expand the powers of the state. War collectivism in Europe should be admired and emulated. War could be used as an "aggressive tool of democracy" at home and help "foist innovation upon the country."
For Dewey, then, rejecting neutrality had nothing to do with the outcome of the war per se, but instead was critically important to his quest for achieve National Greatness— America could not afford to miss out on an opportunity to join an historic war and unite its citizens as a world power rather than a provincial observer.
In other words, he adopted a pro-war view solely to advance the Progressive program at home. And he knew that once "Conscription of Thought" was achieved— once American minds were conscripted for the war effort or any other Progressive cause— then their bodies and wallets would follow.
What an astonishingly honest phrase- "Conscription of Thought." It applies in spades to America and the West still today, even more so today. We have accepted the premises and framework of the state, and thus we accept the degradations that follow from statism. The only corrective, in Dewey's time and our own, was a full-throated intellectual challenge to those premises and framework.
Yet it is precisely this challenge from which the Zeitgeister shrinks.
Succumbing to The Zeitgeist Lew Rockwell brings up the old adage, the smaller the movement the more— and louder— the factions. Now I know what you’re thinking, but this is not a talk about libertarian factions: Left vs. Right, thick vs. thin, modal vs. paleo, or Beltway vs. populist.
No, this is not about factions. The Zeitgeist Libertarian transcends these categories by accepting the purported ENDS of Progressivism and state action while only suggesting different MEANS— and in most cases only slightly different means.
Like John Dewey hectoring stubborn Americans still stuck on WWI neutrality, the Zeitgeisters hector us to give up the old modes of thinking— that dreary talk about rights and property and the state— and instead happily accept the spirit and tenor of the age. The details matter less than being in the game. In this sense the Zeitgeister accepts the Conscription of Thought— accepts the parameters set by the political world, and focuses on influence within those parameters over all other considerations.
There is a great story involving David Gordon, whom I’m sure many of you know, and the late Ronald Hamowy, who was a wonderfully funny un-PC scholar and a member of Murray Rothbard’s Circle Bastiat group in New York.
David and Ronald attended a conference at Stanford University in the 1980s, and were walking to their car when a scraggly looking person approached them obviously hoping for a ride. Upon being asked by the stranger “Which way are you going?” Ron rushed to answer: “The other way. We’re going the other way.”
And so it it for many of us in this room I suspect: we feel at odds not only with the dominant western politics and economics of our day, but also with the cultural landscape. We don’t want to be, in Mises’s term, “historians of decline,” but we are clear-eyed and honest about where we are after a progressive century of war, central banking, and statism.
Not so for the Zeitgeisters, who as their name suggests are not only caught up in the spirit and tenor of our age, but mostly approve of it. They cheer, even advance the prevailing narratives: America and the West are deeply racist, sexist, homophobic, and transphobic. Western wealth is the result of colonialism and conquest. Climate change is an immediate civilizational threat. Income inequality is the most pressing economic issue of our time. And so forth.
Above all the Zeitgeisters go along along to get along. Unlike the happy radicals Murray Rothbard and David Gordon and Ron Hamowy—all going the other way— they treat radicalism— at least libertarian radicalism—with reflexive suspicion and contempt.
Recall how Murray Rothbard used the term “libertarian movement,” a phrase we might regret him using. It’s a loaded term, certainly. Of course by “movement” he meant a multi-pronged approach involving top-down intellectualism, bottom-up rightwing populism, leftwing antiwar instincts, and libertarian political action— mostly educational, mind you, and always purist— all combined with a healthy dose of bourgeois sensibility and a willingness for ordinary people to engage in a bit of Irish Democracy when the state oversteps. Above all he called for radicalism and real opposition to state power.
Yet “movement libertarianism” must be seen as a failure today, in the political sense. And it is in every way political; how could it not be? The Zeitgeisters pushing political libertarianism accept the politicization of everything just as they accept other injuries to liberty. They take what ought to be a radical nonpolitical movement— one dedicated not only to reducing the size and scope of the state, but to diminishing politics itself, a movement to make society less political— and reduce it to a set of watered-down “public policy” choices.
And as a result of this neutering, political libertarianism has crashed, as all political movements must, on the rocky shoals of compromise, dilution, and ultimately co-option.
The Horseshoe: Neoliberalism and Neoconservatism Now to be fair to the Zeitgeist Libertarians, and to understand that Zeitgeist, we must take a look at where we are and how we got here.
You’re probably familiar with the horseshoe theory. While we would reject the Left-Right continuum, the horseshoe theory takes this linear concept and bend it into a horseshoe shape.
It’s used in a facile way to suggest that the far Left and far Right have so much in common that they almost come together, like the two ends of a horseshoe. The Left veers toward radical socialism or Communism; the Right toward virulent nationalism or fascism. Both movements, if left unchecked and taken to their logical extremes, lead to violent suppression of freedom, devolving economies, and an authoritarian ruling class that badly mistreats or even kills its subjects.
Again, it’s a facile argument, but useful for making the larger point that widely divergent political motivations can lead to similar destinations. Quoting from a progressive website called The Conversation:
“When fascists reject liberal individualism, it is in the name of a vision of national unity and ethnic purity rooted in a romanticised past; when communists and socialists do so, it is in the name of international solidarity and the redistribution of wealth.”
Well thanks for clearing that up! Yet it remains true, at the policy level, when it comes to what governments actually do, there is a great degree of convergence— regardless of the motivations behind those policies.
That’s why we might view the horseshoe today as having been cut off on the end and shaped into two parallel tracks: neoliberalism and neoconservatism. These are the two dominant political views of our time, we might almost call them default ideologies because they represent devolutions of older, better versions of left-liberalism and conservatism. The old ideological causes and motivations scarcely seem to matter anymore, the only fight now is over who controls the political apparatus and turf.
And by parallel we mean neoliberalism and neoconservatism appear to be converging rather than diverging:
Both purport to represent “Third Way” thinking between fully planned economies and complete laissez-faire;
Both are fully globalist and universalist in outlook, elitist, technocratic, hostile to populism; and both treat political decentralization and breakaway sentiments as dangerous developments to be quashed;
Both hate Trump and Brexit, and far more importantly, Trump and Brexit voters, while viewing Hillary Clinton and Remainers as self-evidently preferable to anyone other than an exasperating child;
Both advocate a robust global role for the US as the chief, even unilateral enforcer of a global world order— a militarily order courtesy of US armed forces and NATO, and an economic order courtesy of the US Federal Reserve Bank and the US Treasury market;
Both support nation building as an obvious and just endeavor for western nations, oblivious to their own neo-colonialist impulses;
Both support the legitimacy of supra-national organizations like the EU and UN and IMF and various trade bodies;
Both give lip service to market capitalism as a necessary ingredient for a wealthy society, but only within a robust regulatory environment and with robust restrictions on private property rights;
Both advocate some variant of social democracy as the accepted way to organize society, with a robust social safety net—the current vogue term is “welfare capitalism”— and plenty of taxes to fund it;
Both support political correctness over robust free speech and academic truth-seeking;
Both support activist governance, i.e. both see the state as an active participant in society rather than a referee or neutral arbiter; and
Both purport to be pragmatic rather than ideological.
Today, accordingly, the differences between neoliberals and neoconservatives are more tone and style than substance. Yet shockingly, or perhaps not shockingly, our Zeitgeist Libertarians are right there with them, on a parallel track between them: sharing their ends and only quibbling about means.
Today’s Zeitgeist Libertarians:
Are similarly globalist and universalist in outlook— and not the good kind of globalist, the market globalist who cheers when commerce triumphs over government, but the bad kind of political globalist;
Hate Trump and consider Hillary Clinton the lesser of evils—when they aren't openly praising her;
Accept, or at least fail to be exercised by, US interventionism, nation building, and pax Americana— foreign policy always takes a distant back seat to social and cultural issues. They dislike Ron Paul, for example, but offer only muted criticisms of "statesmen" like the late John McCain;
Accept the role of the Federal Reserve, and merely advocate tinkering with “rules-based” reforms;
Accept the legitimacy of supra-national organizations— even as such organization clearly attenuate supposedly cherished democracy— lest they be lumped in with those reactionary “Get Out of the UN” types;
Accept regulated capitalism and the regulatory state as pragmatic, and not only dismiss property rights absolutism but reject the concept of property as the core element of libertarian thought;
Dismiss concerns about PC overreach and campus intolerance;
Accept the overarching narrative that liberals are well-intentioned buy only misguided as to means, while conservatives are evil almost by definition; and as a result they obsess about the tiny, fringe "alt-Right"— with no institutional support, money, or influence— even as Bernie Sanders and Alexandria Ocasio-Cortez win elections running on openly socialist platforms; and
Perhaps most importantly, Zeitgeist Libertarians increasingly seek to minimize the intellectual and philosophical components of libertarianism in favor of pragmatic and empirical approaches.
In other words, they sound a lot like neoliberals and neoconservatives— and thus they push political libertarianism toward a convergence with those doctrines. In doing so they take the marrow out of the bone, and reduce liberty to a variant of “public policy.” And by this we mean approved public policy—nothing too radical or intellectual. They make a fetish of appearing neither Left nor Right, and engage in endless "whataboutism," but end up with a milquetoast message that sounds to ordinary people precisely like a mishmash of Left and Right.
The Progressive Triumph Why should this be so?
Why does movement libertarianism lack the stomach to present a truly radical, anti-state program to the world— a program bold enough defy government as the central organizing principle in society?
Yes, there is a sense of wanting to be in the game, in the fray, in Washington DC and New York and Brussels, of being taken seriously and invited to the right parties. That's why they are happy to write progressive-friendly articles for the Washington Post or New York Times, hoping for that next step up to The Atlantic or The New Yorker. That's fine in a sense, and understandable.
But there is more to all of this. We need to view the Zeitgeist Libertarians through the lens of recent history, and perhaps judge them leniently. They are, after all, creatures of their environment. Over the past 140 or so years, Progressivism went from, say, 10 on a scale to 100 on that scale today. Anyone who suggests dialing the state back to 95, or merely proceeding from 100 to 105 more slowly, risks immediate branding as a reactionary. And that is the one thing Zeitgeisters seek to avoid being called above all.
Progressivism has been the overwhelming force in western politics for the last 100-odd years. Political progressives—defined not by their party, but by their desire to remake man into a more obedient political animal, absolutely dominated the 20th century.
Consider: anti-trust legislation, central banking, income taxes, the League of Nations giving way to the UN, two world wars, the rejection of economic freedoms by the Supreme Court, the New Deal with its old age pensions and public works, the Great Society with its welfare entitlements and food stamps, healthcare schemes, and finally the absolute triumph over each and every culture war issue by the Left.
What kind of movement libertarianism should we expect to emerge from this?
In every meaningful way, progressives control politics, government, business, and culture in America and the west. The 20th century was so irretrievably progressive that we’ve stopped paying attention to the baseline state all around us. Thanks to that progressive century—a century of war and socialism—government has become like the furniture or potted plants around us: we’re so accustomed to it we no longer even see it.
Progressives overwhelmingly control both major political parties in the US;
Progressives control the federal judiciary, along with all federal departments and agencies;
Progressives dominate academia, universities, and K-12 education, both government and private;
Progressives run the American Medical Association and the American Bar Association, and thus the traditionally “conservative” professions of medicine and law are now steered leftward;
Major corporations, both global and domestic, are run by progressives. Their boards are progressives. Their corporate branding and messaging is progressive;
Progressives run Wall Street, and give far more campaign money to progressive candidates;
Silicon Valley and the tech industry are dominated by progressives, from Google to Apple to Microsoft; also donating overwhelmingly to Left politicians;
Progressives overwhelmingly control traditional media, including broadcast news and print publications (virtually all journalists self-identify as progressive);
Progressives overwhelmingly run important social media outlets like Facebook, and Twitter;
Progressives run Hollywood: they hold sway over the film, TV, and video industries, including the growing market for streaming content from HBO, Netflix, and others; and
All major religious institutions in the west, from the Vatican to mainline Protestant churches to virtually all synagogues, are now thoroughly progressive both politically and doctrinally.
Conclusion The point here is that modern libertarianism did not evolve separate and apart from this Progressive juggernaut— and how could it? Our point is to understand the impossibility of political or movement libertarianism within the current progressive framework. No truly libertarian movement will advance when it accepts the wrong premises, asks the wrong questions, and cedes the terms of the debate. It's not a matter of selling out principles for influence, it's a matter of preemptively accepting the organizing principle of the state.
Our responsibility to libertarians is the same as our responsibility to the world at large: to truth, wherever it takes us, and to promoting the timeless ideas that yield peace and human flourishing. We are not required to engage in watered-down political movements, or to engage in politics at all. We are not required to participate in ideological or intellectual movements that accept Progressive ends. We are not required to append a set of leftwing cultural precepts onto political liberty any more than we are required to append rightwing militarism. What matters is getting first principles right. Without that nothing good follows.
Thank you.
Connor Boyack is back with another book in the Tuttle Twins series called The Fate of the Future. It's based on Murray Rothbard's famous Anatomy of the State, and like Rothbard it pulls no punches when describing government as predatory, violent, and coercive. Connor and Jeff Deist discuss why it's so important to offer an early alternative to the fantasyland view of the state that kids get in schools, and how the revolutionary act of home schooling may prove more powerful than any other libertarian activism.
The midterm elections failed to produce an overwhelming Blue Wave, and political rancor in the US remains feverishly high. Now an astonishing new article in The Intelligencer considers the idea of a "federated" America, broken up into several political entities associated via compacts. It's not a dystopian view of a possible future, but rather a clear-eyed projection of what a political breakup of America might actually look like.
But is a breakup feasible? Does it have to involve outright secession by several states, or can some form of federalism allow Team Red and Team Blue to live together, even uneasily? Is Mises's conception of true self-determination, implemented by smaller administrative units rather than huge centralized states, lost to us today? Michael Boldin of the Tenth Amendment Center joins Jeff Deist to discuss the realities behind breaking up the US politically.
The legacy media doesn't report news, it produces a show. "The Show" lies to us, divides us, inflames the culture wars, and creates political division. The old broadcast networks, cable channels, newspapers, and magazines all actively work against liberty and correct economics—so the importance of alternative sources for news, economics, history, and politics has never been greater.
Jeff Deist spoke on the topic of new and old media at our recent event in Texas.
We're often told that submission to government edicts is "voluntary" because we have "representative" government. The evidence suggests, however, that politicians don't represent their constituents. Nor could they, even if they wanted to.
Original article: "No Matter How You Vote, Politicians Don't Represent You".
Voting "no" on a tax increase doesn't mean you really consented to it. And, Lysander Spooner argued there's not anything wrong with voting "defensively."
Original article: "No, Voting Doesn't Mean You "Support the System".
Dr. Yoram Hazony's new book The Virtue of Nationalism asks several provocative questions: are nation-states necessarily illiberal? Are globalism and universalism inevitable? If so, why do we blithely assume a post-national world will be liberal and benign? Are movements toward supranational governance, always ordered around western political conceptions, a new form of imperialism? And what does history teach us about ordering human affairs to best ensure prosperity, peace, and human flourishing?
Ludwig von Mises—quoted in the book—asked these questions almost a century ago in Liberalism, and they're every bit as relevant today in the age of Trump. Dr. Hazony joins Jeff Deist for a compelling interview.
Related article: Dr. Joe Salerno on Mises and the nation state.
This week, we feature a recent episode of Ryan McMaken's Radio Rothbard podcast.
We continue to hear about how capitalism and industrialization distract us from the important things in life. In reality, the historical record shows that it was industrialization and capitalism that propagated the conditions under which we can afford to treat each other more humanely.
Radio Rothbard is a series of short podcasts based on columns and research from the Mises Institute's Mises Wire. Topics include economics, comparative politics, and history. Subscribe to Radio Rothbard today on iTunes, Google Play, Stitcher, Soundcloud, or via RSS.
Globalists: The End of Empire and the Birth of Neoliberalismby Quinn SlobodianHarvard University Press, 2018x+381 pages
Quinn Slobodian, a historian at Wellesley College, tells us that Globalists “is a long-simmering product of the Seattle protests against the World Trade organization in 1999. I was part of a generation that ... became adolescents in the midst of talk of globalization and the End of History ... we were made to think that nations were over and the one indisputable bond uniting humanity was the global economy. Seattle was a moment when we started to make collective sense of what was going on and take back the story line. ... This book is an apology for not being there and an attempt to rediscover in words what the concept was that they went there to fight.”
Slobodian discloses here a confusion that mars his book. He sees little difference between the free market and a governmentally imposed regime of globalization. Rule over the European economy by Brussels bureaucrats and attempts to control world trade by the WTO and the World Bank stem from a “Geneva School” that includes Ludwig von Mises. His view must at once confront an objection. Mises supported a complete free market, with a minimal state; how then can he have helped bring about a globally directed economy? Slobodian’s answer is this: Mises wished to use force to compel people to accept a system of private property, run in the interests of business. He professed to favor freedom but in fact supported coercion. The distance between Mises and global governance of the economy, which likewise imposes its plans on people, is not far.
Friedrich Hayek counts even more than Mises as a supporter of this line of thought, and many contemporary neoliberals have been influenced by him. Like Mises, he wanted to limit democracy to promote private property and the market. Hayek, though, countenanced more government intervention than Mises. Slobodian, by the way, cites Hans Hoppe’s criticism of Hayek for this, though he has missed Mises’s review of Hayek’s The Constitution of Liberty, dealing with the same issue.
As Slobodian sees matters, the rise of colonial peoples to independence in the twentieth century posed a problem for those, like Mises and Hayek, committed to capitalism. What would happen if the new countries, dissatisfied with what they viewed as exploitation by the developed countries, enacted restrictions on trade? Combined with this was a threat to business interests by anti-capitalist classes and parties in the developed world. What if, e.g., socialists won power in a democratic election?
To prevent these dire developments, Mises and Hayek promoted world federalism. The power of national governments to control the free market would be strictly limited. Property rules would be a matter of international law, enforced by a central authority.
Slobodian merits great credit for his detailed account of Mises and Hayek’s interest in world federalism, but he fails to grasp the fundamental issue motivating what they said. For Mises, the free market was the only viable system of social cooperation. Accepting it fully would bring peace and prosperity. Government interferences with the economy would necessarily fail to achieve their purpose. Price controls would not make goods available to the poor but would instead cause shortages. Socialism would collapse into chaos.
For Mises, these were incontrovertible truths established by economic science. The issue for him was not imposing economic freedom on people by force, but rather persuading them that freedom was the best course of action. Constitutional limits to democracy, including federalist plans, were strictly subordinate to promoting the free market. Mises does not say that he favored forcing people to accept these limits, if they were to vote freely against them. Violent attempts to overthrow a legal system of private property are an altogether different matter. It is hardly “undemocratic” to oppose them.
Slobodian does not agree. For him, to suppress violence against property is undemocratic. Mises claimed that the free market was controlled by the monetary votes of consumers, but Slobodian finds this freedom lacking: “[D]emocracy was not an absolute value for Mises ... a crucial complement to voters’ democracy was what he would later call a ‘consumer’s democracy,’ expressed by purchases and investments in the marketplace. ... Wealth, he wrote, was ‘always the result of a consumer’s plebiscite.’” But when the Social Democrats called a general strike in Vienna in 1927, Mises supported its violent suppression. Does this not show his commitment to democracy was limited? “In 1927, democracy had ceased to fulfill its primary function. It did not prevent revolution. In that case, Mises believed, it was perfectly legitimate to suspend it and enforce order by other means.”
Contrary to Slobodian, Mises’s position was perfectly consistent. Mises supported peaceful cooperation through the free market. Political democracy, in his view, promoted peace. But it is not undemocratic to use emergency powers to suppress violence.
For Mises, schemes for international organization were intended only as means to promote the free market. When Mises realized that in the statist climate of the day, these plans could not work, he for the most part abandoned them. In Omnipotent Government, e.g., he says: “Under present conditions an international body for foreign trade planning would be an assembly of the delegates of governments attached to the ideas of hyper-protectionism. It is an illusion to assume that such an authority would be in a position to contribute anything genuine or lasting to the promotion of foreign trade.”
Slobodian does not see what is at stake in the dispute over the free market because, for him, economic arguments for the market are mere business propaganda. He does not grasp that the argument for free exchange follows from elementary economic theory. People would not willingly engage in trade if they did not expect to benefit. This consideration by itself strikes a fatal blow at tariffs and other trade restrictions.
Slobodian ignores this and, displaying both his fascination with Hayek’s thought and his repulsion from it, he takes the case for the free market to be complex and mystifying. “Yet even as he [Hayek] disparaged the fallacy of computer-aided models, he drew inspiration from the same source of system theory. From the language of ‘pattern predictions’ to his citation of Warren Weaver, Hayek did not argue against system theory in his Nobel speech but with it.”
In trying to establish a line of continuity between the “Geneva School” and today’s global bureaucrats, Slobodian places great stress on the “Ordo liberals.” This group, which included Franz Böhm and Walter Eucken, favored a very active government to promote the social institutions for a “social market economy.” Many of these authors were influenced by Hayek, but in his erudite discussion, Slobodian has missed the fact that Mises had little use for them. As Guido Hülsmann points out in Mises: The Last Knight of Liberalism, “And the prospect of cooperating with the fashionable Ordo School, be it in the Mont Pèlerin Society or elsewhere, did not exactly warm his heart either. He believed the Ordo people were hardly better than the socialists he had fought all his life. In fact, he eventually called them the ‘Ordo-interventionists.’”
The book contains many strengths. The discussion of the activities of Michael Heilperin, an outstanding supporter of free trade, is especially well done. Slobodian displays a fine eye for architectural detail, evident, e.g., in his description of the Chamber of Commerce building on Vienna’s Ringstrasse.
That said, the book also has its share of errors. Harold Laski was a political scientist, not an economist. Garrett Hardin was a biologist, not a philosopher. Hans Kelsen was not among the Austrian elite who moved in the 1930s in the same circles as the British elite. Arthur Balfour is given the wrong title.
The book’s main failing, though, does not lie in these minor errors. It lies rather in Slobodian’s refusal to take seriously arguments for the free market. Limits on government control of property are for him simply ideological efforts by business to limit the popular will. He here adopts exactly the viewpoint of Nancy MacLean’s Democracy in Chains, a disaster for scholarship. Slobodian operates on a much higher level than she does, though he does not scruple to cite her book.
Almost twenty-five years after his death, unpublished material by Murray Rothbard is still being released. Professor Patrick Newman, editor of The Progressive Era, is hard at work on the long lost fifth volume of Conceived in Liberty—Rothbard's epic history of colonial America.
How did one man write so much, and what can he still teach us today? Don't miss this terrific talk from a leading Rothbard scholar.