U.S. History: Recent Episodes
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U.S. History includes works on any aspect of US history. Includes economic topics, history of American railroads, Indian affairs, presidents, inventions, etc.
In a more reasonable world, people like Cheney, Rice, Bolton, et al., would all be forgotten, shamed, and disgraced for overseeing multiple disastrous wars abroad and the creation of a police state at home. Unfortunately, we don't live in a more reasonable world.
Original Article: "America Since 9/11: 22 Years of Lies and Despotism"
Contrary to the government's line that "inflation hurts everyone," inflation really is a wealth transfer from those without political power to the politically connected.
Original Article: "Inflation Is a Giant "Skim" on the American People"
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at county and city-level secession movements and what it means for political self-determination. In a recent article, Ryan McMaken highlighted renewed calls for Staten Island to secede from New York City, but other recent examples include attempts by taxpayers in areas of Georgia and Alabama to break away from the control of mismanagement of local governments. Tho and Ryan look at the value these initiatives have, and the arguments used to try to stop them.
Recommended Reading"Let Staten Island Secede!" by Ryan McMaken: Mises.org/RR_150_A
Download Anatomy of the State for free at Mises.org/Anatomy
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
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The real effects of the atomic bomb on Hiroshima were hidden from Americans until the New Yorker published an exposé in 1946. Americans finally were confronted with the truth—even if they didn't want to believe it.
Original Article: "The Bombing of Hiroshima: The Crime and the Cover-Up"
While the government promotes CBDCs as tools for "inclusion," it is more likely that they will be another vehicle for federal intrusion.
Original Article: "CBDCs: The Ultimate Tool of Financial Intrusion"
For the past fifty years, the US has not had a military draft. Unfortunately, the end of conscription did not mean US military interventions abroad ended.
Original Article: "How Conscription Ended Fifty Years Ago"
In a free society, political crimes like treason and "seditious libel" are few and far between. Under despotic regimes, on the other hand, political crimes multiply.
Original Article: "Why Governments Love Political "Crimes" Like Treason and Sedition"
Yellow Trucking Company has filed for bankruptcy and ceases to exist as a viable firm. Much of the blame is due to the Teamsters Union which has a long a violent history.
Original Article: "Yellow Trucking Goes Bankrupt, Thanks in Part to Onerous Labor Laws"
The regime has increasingly been consumed with paranoia over threats to itself—propagandistically termed "threats to democracy"—while real crime against private citizens is clearly not a priority at all.
Original Article: "The State Protects Itself While Crime against Ordinary People Surges"
Ryan and Tho examine how the US regime is in the midst of its latest panic over public faith in the state's legitimacy. This is why we keep hearing about misinformation, insurrection and "threats to democracy."
Recommended Reading "'Antidemocratic' Just Means 'Something the Regime Doesn't Like.'" by Ryan McMaken: Mises.org/RR_148_A
"Seditious Conspiracy Is Not a Real Crime" by Ryan McMaken: Mises.org/RR_148_B
"The State Protects Itself While Crime against Ordinary People Surges" by Ryan McMaken: Mises.org/RR_148_C
"Fewer than Half of Violent Crimes Are Solved in America" by Ryan McMaken: Mises.org/RR_148_D
Download Anatomy of the State for free at Mises.org/Anatomy
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
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On this episode of Good Money with Tho Bishop, Dr. Murray Sabrin joins the show. Dr. Sabrin shares his story of how he became an Austrian economist and discusses his analysis predicting a recession later in the year. Tho and Dr. Sabrin also talk about this week's anniversary of Nixon closing the gold window.
Join Dr. Sabrin in November for a Mises Circle in Ft. Meyers, FL on The White House, the Fed, and the Economy. Use promo code Tampa23 for $10 off registration.
Dr. Sabrin's Article on the Coming Recession: Mises.org/GM19a
Good Money listeners can order a special $5 book bundle that includes How To Think About the Economy and What Has Government Done to Our Money? with free shipping using promo code "GoodMoney" at Mises.org/Good
Receive a free subscription to The Austrian magazine at Mises.org/Magazine
Rothbard on the American Revolution: "There was no particular need for the formal trappings and permanent investing of a centralized government, even for victory in war."
Original Article: "The American Revolutionaries Didn't Need a Central Government. Neither Do We."
Study of business cycles must be based upon a satisfactory cycle theory. Gazing at sheaves of statistics without "pre-judgment" is futile. A cycle takes place in the economic world, and therefore a usable cycle theory must be integrated with general economic theory. And yet, remarkably, such integration, even attempted integration, is the exception, not the rule. Economics, in the last two decades, has fissured badly into a host of airtight compartments—each sphere hardly related to the others. Only in the theories of Schumpeter and Mises has cycle theory been integrated into general economics.Various neo-Keynesians have advanced cycle theories. They are integrated, however, not with general economic theory, but with holistic Keynesian systems—systems which are very partial indeed.
The bulk of cycle specialists, who spurn any systematic integration as impossibly deductive and overly simplified, are thereby (wittingly or unwittingly) rejecting economics itself. For if one may forge a theory of the cycle with little or no relation to general economics, then general economics must be incorrect, failing as it does to account for such a vital economic phenomenon. For institutionalists—the pure data collectors—if not for others, this is a welcome conclusion. Even institutionalists, however, must use theory sometimes, in analysis and recommendation; in fact, they end by using a concoction of ad hoc hunches, insights, etc., plucked unsystematically from various theoretical gardens. Few, if any, economists have realized that the Mises theory of the trade cycle is not just another theory: that, in fact, it meshes closely with a general theory of the economic system.There is, for example, not a hint of such knowledge in Haberler's well-known discussion. See Gottfried Haberler, Prosperity and Depression (2nd ed., Geneva, Switzerland: League of Nations, 1939). The Mises theory is, in fact, the economic analysis of the necessary consequences of intervention in the free market by bank credit expansion. Followers of the Misesian theory have often displayed excessive modesty in pressing its claims; they have widely protested that the theory is "only one of many possible explanations of business cycles," and that each cycle may fit a different causal theory. In this, as in so many other realms, eclecticism is misplaced. Since the Mises theory is the only one that stems from a general economic theory, it is the only one that can provide a correct explanation. Unless we are prepared to abandon general theory, we must reject all proposed explanations that do not mesh with general economics.
Business Cycles and Business Fluctuations It is important, first, to distinguish between business cycles and ordinary business fluctuations. We live necessarily in a society of continual and unending change, change that can never be precisely charted in advance. People try to forecast and anticipate changes as best they can, but such forecasting can never be reduced to an exact science. Entrepreneurs are in the business of forecasting changes on the market, both for conditions of demand and of supply. The more successful ones make profits pari passus with their accuracy of judgment, while the unsuccessful forecasters fall by the wayside. As a result, the successful entrepreneurs on the free market will be the ones most adept at anticipating future business conditions. Yet, the forecasting can never be perfect, and entrepreneurs will continue to differ in the success of their judgments. If this were not so, no profits or losses would ever be made in business.
Changes, then, take place continually in all spheres of the economy. Consumer tastes shift; time preferences and consequent proportions of investment and consumption change; the labor force changes in quantity, quality, and location; natural resources are discovered and others are used up; technological changes alter production possibilities; vagaries of climate alter crops, etc. All these changes are typical features of any economic system. In fact, we could not truly conceive of a changeless society, in which everyone did exactly the same things day after day, and no economic data ever changed. And even if we could conceive of such a society, it is doubtful whether many people would wish to bring it about.
It is, therefore, absurd to expect every business activity to be "stabilized" as if these changes were not taking place. To stabilize and "iron out" these fluctuations would, in effect, eradicate any rational productive activity. To take a simple, hypothetical case, suppose that a community is visited every seven years by the seven-year locust. Every seven years, therefore, many people launch preparations to deal with the locusts: produce anti-locust equipment, hire trained locust specialists, etc. Obviously, every seven years there is a "boom" in the locust-fighting industry, which, happily, is "depressed" the other six years. Would it help or harm matters if everyone decided to "stabilize" the locust-fighting industry by insisting on producing the machinery evenly every year, only to have it rust and become obsolete? Must people be forced to build machines before they want them; or to hire people before they are needed; or, conversely, to delay building machines they want—all in the name of "stabilization"? If people desire more autos and fewer houses than formerly, should they be forced to keep buying houses and be prevented from buying the autos, all for the sake of stabilization? As Dr. F.A. Harper has stated:
This sort of business fluctuation runs all through our daily lives. There is a violent fluctuation, for instance, in the harvest of strawberries at different times during the year. Should we grow enough strawberries in greenhouses so as to stabilize that part of our economy throughout the year.F.A. Harper, Why Wages Rise (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1957), pp. 118–19.
We may, therefore, expect specific business fluctuations all the time. There is no need for any special "cycle theory" to account for them. They are simply the results of changes in economic data and are fully explained by economic theory. Many economists, however, attribute general business depression to "weaknesses" caused by a "depression in building" or a "farm depression." But declines in specific industries can never ignite a general depression. Shifts in data will cause increases in activity in one field, declines in another. There is nothing here to account for a general business depression—a phenomenon of the true "business cycle." Suppose, for example, that a shift in consumer tastes, and technologies, causes a shift in demand from farm products to other goods. It is pointless to say, as many people do, that a farm depression will ignite a general depression, because farmers will buy less goods, the people in industries selling to farmers will buy less, etc. This ignores the fact that people producing the other goods now favored by consumers will prosper; their demands will increase.
The problem of the business cycle is one of general boom and depression; it is not a problem of exploring specific industries and wondering what factors make each one of them relatively prosperous or depressed. Some economists—such as Warren and Pearson or Dewey and Dakin—have believed that there are no such things as general business fluctuations—that general movements are but the results of different cycles that take place, at different specific time-lengths, in the various economic activities. To the extent that such varying cycles (such as the 20-year "building cycle" or the seven-year locust cycle) may exist, however, they are irrelevant to a study of business cycles in general or to business depressions in particular. What we are trying to explain are general booms and busts in business.
In considering general movements in business, then, it is immediately evident that such movements must be transmitted through the general medium of exchange—money. Money forges the connecting link between all economic activities. If one price goes up and another down, we may conclude that demand has shifted from one industry to another; but if all prices move up or down together, some change must have occurred in the monetary sphere. Only changes in the demand for, and/or the supply of, money will cause general price changes. An increase in the supply of money, the demand for money remaining the same, will cause a fall in the purchasing power of each dollar, i.e., a general rise in prices; conversely, a drop in the money supply will cause a general decline in prices. On the other hand, an increase in the general demand for money, the supply remaining given, will bring about a rise in the purchasing power of the dollar (a general fall in prices); while a fall in demand will lead to a general rise in prices. Changes in prices in general, then, are determined by changes in the supply of and demand for money. The supply of money consists of the stock of money existing in the society. The demand for money is, in the final analysis, the willingness of people to hold cash balances, and this can be expressed as eagerness to acquire money in exchange, and as eagerness to retain money in cash balance. The supply of goods in the economy is one component in the social demand for money; an increased supply of goods will, other things being equal, increase the demand for money and therefore tend to lower prices. Demand for money will tend to be lower when the purchasing power of the money-unit is higher, for then each dollar is more effective in cash balance. Conversely, a lower purchasing power (higher prices) means that each dollar is less effective, and more dollars will be needed to carry on the same work.
The purchasing power of the dollar, then, will remain constant when the stock of, and demand for, money are in equilibrium with each other: i.e., when people are willing to hold in their cash balances the exact amount of money in existence. If the demand for money exceeds the stock, the purchasing power of money will rise until the demand is no longer excessive and the market is cleared; conversely, a demand lower than supply will lower the purchasing power of the dollar, i.e., raise prices.
Yet, fluctuations in general business, in the "money relation," do not by themselves provide the clue to the mysterious business cycle. It is true that any cycle in general business must be transmitted through this money relation: the relation between the stock of, and the demand for, money. But these changes in themselves explain little. If the money supply increases or demand falls, for example, prices will rise; but why should this generate a "business cycle"? Specifically, why should it bring about a depression? The early business cycle theorists were correct in focusing their attention on the crisis and depression: for these are the phases that puzzle and shock economists and laymen alike, and these are the phases that most need to be explained.
The Problem: The Cluster of Error The explanation of depressions, then, will not be found by referring to specific or even general business fluctuations per se. The main problem that a theory of depression must explain is: why is there a sudden general cluster of business errors? This is the first question for any cycle theory. Business activity moves along nicely with most business firms making handsome profits. Suddenly, without warning, conditions change and the bulk of business firms are experiencing losses; they are suddenly revealed to have made grievous errors in forecasting.
A general review of entrepreneurship is now in order. Entrepreneurs are largely in the business of forecasting. They must invest and pay costs in the present, in the expectation of recouping a profit by sale either to consumers or to other entrepreneurs further down in the economy's structure of production. The better entrepreneurs, with better judgment in forecasting consumer or other producer demands, make profits; the inefficient entrepreneurs suffer losses. The market, therefore, provides a training ground for the reward and expansion of successful, far-sighted entrepreneurs and the weeding out of inefficient businessmen. As a rule only some businessmen suffer losses at any one time; the bulk either break even or earn profits. How, then, do we explain the curious phenomenon of the crisis when almost all entrepreneurs suffer sudden losses? In short, how did all the country's astute businessmen come to make such errors together, and why were they all suddenly revealed at this particular time? This is the great problem of cycle theory.
It is not legitimate to reply that sudden changes in the data are responsible. It is, after all, the business of entrepreneurs to forecast future changes, some of which are sudden. Why did their forecasts fail so abysmally?
Another common feature of the business cycle also calls for an explanation. It is the well-known fact that capital-goods industries fluctuate more widely than do the consumer-goods industries. The capital-goods industries—especially the industries supplying raw materials, construction, and equipment to other industries—expand much further in the boom, and are hit far more severely in the depression.
A third feature of every boom that needs explaining is the increase in the quantity of money in the economy. Conversely, there is generally, though not universally, a fall in the money supply during the depression.
The Explanation: Boom and Depression In the purely free and unhampered market, there will be no cluster of errors, since trained entrepreneurs will not all make errors at the same time.Siegfried Budge, Grundzüge der Theoretische Nationalökonomie (Jena, 1925), quoted in Simon S. Kuznets, "Monetary Business Cycle Theory in Germany," Journal of Political Economy (April, 1930): 127–28."Under conditions of free competition . . . the market is . . . dependent upon supply and demand . . . there could [not] develop a disproportionality in the production of goods, which could draw in the whole economic system . . . such a disproportionality can arise only when, at some decisive point, the price structure does not base itself upon the play of only free competition, so that some arbitrary influence becomes possible."Kuznets himself criticizes the Austrian theory from his empiricist, anti-cause and effect-standpoint, and also erroneously considers this theory to be "static." The "boom-bust" cycle is generated by monetary intervention in the market, specifically bank credit expansion to business. Let us suppose an economy with a given supply of money. Some of the money is spent in consumption; the rest is saved and invested in a mighty structure of capital, in various orders of production. The proportion of consumption to saving or investment is determined by people's time preferences—the degree to which they prefer present to future satisfactions. The less they prefer them in the present, the lower will their time preference rate be, and the lower therefore will be the pure interest rate, which is determined by the time preferences of the individuals in society. A lower time-preference rate will be reflected in greater proportions of investment to consumption, a lengthening of the structure of production, and a building-up of capital. Higher time preferences, on the other hand, will be reflected in higher pure interest rates and a lower proportion of investment to consumption. The final market rates of interest reflect the pure interest rate plus or minus entrepreneurial risk and purchasing power components. Varying degrees of entrepreneurial risk bring about a structure of interest rates instead of a single uniform one, and purchasing-power components reflect changes in the purchasing power of the dollar, as well as in the specific position of an entrepreneur in relation to price changes. The crucial factor, however, is the pure interest rate. This interest rate first manifests itself in the "natural rate" or what is generally called the going "rate of profit." This going rate is reflected in the interest rate on the loan market, a rate which is determined by the going profit rate.This is the "pure time preference theory" of the rate of interest; it can be found in Ludwig von Mises, Human Action (New Haven, Conn.: Yale University Press, 1949); in Frank A. Fetter, Economic Principles (New York: Century, 1915), and idem, "Interest Theories Old and New," American Economic Review (March, 1914): 68–92.
Now what happens when banks print new money (whether as bank notes or bank deposits) and lend it to business?"Banks," for many purposes, include also savings and loan associations, and life insurance companies, both of which create new money via credit expansion to business. See below for further discussion of the money and banking question. The new money pours forth on the loan market and lowers the loan rate of interest. It looks as if the supply of saved funds for investment has increased, for the effect is the same: the supply of funds for investment apparently increases, and the interest rate is lowered. Businessmen, in short, are misled by the bank inflation into believing that the supply of saved funds is greater than it really is. Now, when saved funds increase, businessmen invest in "longer processes of production," i.e., the capital structure is lengthened, especially in the "higher orders" most remote from the consumer. Businessmen take their newly acquired funds and bid up the prices of capital and other producers' goods, and this stimulates a shift of investment from the "lower" (near the consumer) to the "higher" orders of production (furthest from the consumer)—from consumer goods to capital goods industries.On the structure of production, and its relation to investment and bank credit, see F.A. Hayek, Prices and Production (2nd ed., London: Routledge and Kegan Paul, 1935); Mises, Human Action; and Eugen von Böhm-Bawerk, "Positive Theory of Capital," in Capital and Interest (South Holland, Ill.: Libertarian Press, 1959), vol. 2.
If this were the effect of a genuine fall in time preferences and an increase in saving, all would be well and good, and the new lengthened structure of production could be indefinitely sustained. But this shift is the product of bank credit expansion. Soon the new money percolates downward from the business borrowers to the factors of production: in wages, rents, interest. Now, unless time preferences have changed, and there is no reason to think that they have, people will rush to spend the higher incomes in the old consumption-investment proportions. In short, people will rush to reestablish the old proportions, and demand will shift back from the higher to the lower orders. Capital goods industries will find that their investments have been in error: that what they thought profitable really fails for lack of demand by their entrepreneurial customers. Higher orders of production have turned out to be wasteful, and the malinvestment must be liquidated.
A favorite explanation of the crisis is that it stems from "underconsumption"—from a failure of consumer demand for goods at prices that could be profitable. But this runs contrary to the commonly known fact that it is capital goods, and not consumer goods, industries that really suffer in a depression. The failure is one of entrepreneurial demand for the higher order goods, and this in turn is caused by the shift of demand back to the old proportions.
In sum, businessmen were misled by bank credit inflation to invest too much in higher-order capital goods, which could only be prosperously sustained through lower time preferences and greater savings and investment; as soon as the inflation permeates to the mass of the people, the old consumption-investment proportion is reestablished, and business investments in the higher orders are seen to have been wasteful."Inflation" is here defined as an increase in the money supply not consisting of an increase in the money metal. Businessmen were led to this error by the credit expansion and its tampering with the free-market rate of interest.
The "boom," then, is actually a period of wasteful misinvestment. It is the time when errors are made, due to bank credit's tampering with the free market. The "crisis" arrives when the consumers come to reestablish their desired proportions. The "depression" is actually the process by which the economy adjusts to the wastes and errors of the boom, and reestablishes efficient service of consumer desires. The adjustment process consists in rapid liquidation of the wasteful investments. Some of these will be abandoned altogether (like the Western ghost towns constructed in the boom of 1816-1818 and deserted during the Panic of 1819); others will be shifted to other uses. Always the principle will be not to mourn past errors, but to make most efficient use of the existing stock of capital. In sum, the free market tends to satisfy voluntarily-expressed consumer desires with maximum efficiency, and this includes the public's relative desires for present and future consumption. The inflationary boom hobbles this efficiency, and distorts the structure of production, which no longer serves consumers properly. The crisis signals the end of this inflationary distortion, and the depression is the process by which the economy returns to the efficient service of consumers. In short, and this is a highly important point to grasp, the depression is the "recovery" process, and the end of the depression heralds the return to normal, and to optimum efficiency. The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions imposed by the boom. The boom, then, requires a "bust."
Since it clearly takes very little time for the new money to filter down from business to factors of production, why don't all booms come quickly to an end? The reason is that the banks come to the rescue. Seeing factors bid away from them by consumer goods industries, finding their costs rising and themselves short of funds, the borrowing firms turn once again to the banks. If the banks expand credit further, they can again keep the borrowers afloat. The new money again pours into business, and they can again bid factors away from the consumer goods industries. In short, continually expanded bank credit can keep the borrowers one step ahead of consumer retribution. For this, we have seen, is what the crisis and depression are: the restoration by consumers of an efficient economy, and the ending of the distortions of the boom. Clearly, the greater the credit expansion and the longer it lasts, the longer will the boom last. The boom will end when bank credit expansion finally stops. Evidently, the longer the boom goes on the more wasteful the errors committed, and the longer and more severe will be the necessary depression readjustment.
Thus, bank credit expansion sets into motion the business cycle in all its phases: the inflationary boom, marked by expansion of the money supply and by malinvestment; the crisis, which arrives when credit expansion ceases and malinvestments become evident; and the depression recovery, the necessary adjustment process by which the economy returns to the most efficient ways of satisfying consumer desires.This "Austrian" cycle theory settles the ancient economic controversy on whether or not changes in the quantity of money can affect the rate of interest. It supports the "modern" doctrine that an increase in the quantity of money lowers the rate of interest (if it first enters the loan market); on the other hand, it supports the classical view that, in the long run, quantity of money does not affect the interest rate (or can only do so if time preferences change). In fact, the depression-readjustment is the market's return to the desired free-market rate of interest.
What, specifically, are the essential features of the depression-recovery phase? Wasteful projects, as we have said, must either be abandoned or used as best they can be. Inefficient firms, buoyed up by the artificial boom, must be liquidated or have their debts scaled down or be turned over to their creditors. Prices of producers' goods must fall, particularly in the higher orders of production—this includes capital goods, lands, and wage rates. Just as the boom was marked by a fall in the rate of interest, i.e., of price differentials between stages of production (the "natural rate" or going rate of profit) as well as the loan rate, so the depression-recovery consists of a rise in this interest differential. In practice, this means a fall in the prices of the higher-order goods relative to prices in the consumer goods industries. Not only prices of particular machines must fall, but also the prices of whole aggregates of capital, e.g., stock market and real estate values. In fact, these values must fall more than the earnings from the assets, through reflecting the general rise in the rate of interest return.
Since factors must shift from the higher to the lower orders of production, there is inevitable "frictional" unemployment in a depression, but it need not be greater than unemployment attending any other large shift in production. In practice, unemployment will be aggravated by the numerous bankruptcies, and the large errors revealed, but it still need only be temporary. The speedier the adjustment, the more fleeting will the unemployment be. Unemployment will progress beyond the "frictional" stage and become really severe and lasting only if wage rates are kept artificially high and are prevented from falling. If wage rates are kept above the free-market level that clears the demand for and supply of labor, laborers will remain permanently unemployed. The greater the degree of discrepancy, the more severe will the unemployment be.
Secondary Features of Depression: Deflationary Credit Contraction The above are the essential features of a depression. Other secondary features may also develop. There is no need, for example, for deflation (lowering of the money supply) during a depression. The depression phase begins with the end of inflation, and can proceed without any further changes from the side of money. Deflation has almost always set in, however. In the first place, the inflation took place as an expansion of bank credit; now, the financial difficulties and bankruptcies among borrowers cause banks to pull in their horns and contract credit.It is often maintained that since business firms can find few profitable opportunities in a depression, business demand for loans falls off, and hence loans and money supply will contract. But this argument overlooks the fact that the banks, if they want to, can purchase securities, and thereby sustain the money supply by increasing their investments to compensate for dwindling loans. Contractionist pressure therefore always stems from banks and not from business borrowers. Under the gold standard, banks have another reason for contracting credit—if they had ended inflation because of a gold drain to foreign countries. The threat of this drain forces them to contract their outstanding loans. Furthermore the rash of business failures may cause questions to be raised about the banks; and banks, being inherently bankrupt anyway, can ill afford such questions.Banks are "inherently bankrupt" because they issue far more warehouse receipts to cash (nowadays in the form of "deposits" redeemable in cash on demand) than they have cash available. Hence, they are always vulnerable to bank runs. These runs are not like any other business failures, because they simply consist of depositors claiming their own rightful property, which the banks do not have. "Inherent bankruptcy," then, is an essential feature of any "fractional reserve" banking system. As Frank Graham stated:"The attempt of the banks to realize the inconsistent aims of lending cash, or merely multiplied claims to cash, and still to represent that cash is available on demand is even more preposterous than . . . eating one's cake and counting on it for future consumption. . . . The alleged convertibility is a delusion dependent upon the right's not being unduly exercised."Frank D. Graham, "Partial Reserve Money and the 100% Proposal," American Economic Review (September, 1936): 436. Hence, the money supply will contract because of actual bank runs, and because banks will tighten their position in fear of such runs.
Another common secondary feature of depressions is an increase in the demand for money. This "scramble for liquidity" is the result of several factors: (1) people expect falling prices, due to the depression and deflation, and will therefore hold more money and spend less on goods, awaiting the price fall; (2) borrowers will try to pay off their debts, now being called by banks and by business creditors, by liquidating other assets in exchange for money; (3) the rash of business losses and bankruptcies makes businessmen cautious about investing until the liquidation process is over.
With the supply of money falling, and the demand for money increasing, generally falling prices are a consequent feature of most depressions. A general price fall, however, is caused by the secondary, rather than by the inherent, features of depressions. Almost all economists, even those who see that the depression adjustment process should be permitted to function unhampered, take a very gloomy view of the secondary deflation and price fall, and assert that they unnecessarily aggravate the severity of depressions. This view, however, is incorrect. These processes not only do not aggravate the depression, they have positively beneficial effects.
There is, for example, no warrant whatever for the common hostility toward "hoarding." There is no criterion, first of all, to define "hoarding"; the charge inevitably boils down to mean that A thinks that B is keeping more cash balances than A deems appropriate for B. Certainly there is no objective criterion to decide when an increase in cash balance becomes a "hoard." Second, we have seen that the demand for money increases as a result of certain needs and values of the people; in a depression, fears of business liquidation and expectations of price declines particularly spur this rise. By what standards can these valuations be called "illegitimate"? A general price fall is the way that an increase in the demand for money can be satisfied; for lower prices mean that the same total cash balances have greater effectiveness, greater "real" command over goods and services. In short, the desire for increased real cash balances has now been satisfied.
Furthermore, the demand for money will decline again as soon as the liquidation and adjustment processes are finished. For the completion of liquidation removes the uncertainties of impending bankruptcy and ends the borrowers' scramble for cash. A rapid unhampered fall in prices, both in general (adjusting to the changed money-relation), and particularly in goods of higher orders (adjusting to the malinvestments of the boom) will speedily end the realignment processes and remove expectations of further declines. Thus, the sooner the various adjustments, primary and secondary, are carried out, the sooner will the demand for money fall once again. This, of course, is just one part of the general economic "return to normal."
Neither does the increased "hoarding" nor the fall of prices at all interfere with the primary depression-adjustment. The important feature of the primary adjustment is that the prices of producers' goods fall more rapidly than do consumer good prices (or, more accurately, that higher order prices fall more rapidly than do those of lower order goods); it does not interfere with the primary adjustment if all prices are falling to some degree. It is, moreover, a common myth among laymen and economists alike, that falling prices have a depressing effect on business. This is not necessarily true. What matters for business is not the general behavior of prices, but the price differentials between selling prices and costs (the "natural rate of interest"). If wage rates, for example, fall more rapidly than product prices, this stimulates business activity and employment.
Deflation of the money supply (via credit contraction) has fared as badly as hoarding in the eyes of economists. Even the Misesian theorists deplore deflation and have seen no benefits accruing from it.In a gold standard country (such as America during the 1929 depression), Austrian economists accepted credit contraction as a perhaps necessary price to pay for remaining on gold. But few saw any remedial virtues in the deflation process itself. Yet, deflationary credit contraction greatly helps to speed up the adjustment process, and hence the completion of business recovery, in ways as yet unrecognized. The adjustment consists, as we know, of a return to the desired consumption-saving pattern. Less adjustment is needed, however, if time preferences themselves change: i.e., if savings increase and consumption relatively declines. In short, what can help a depression is not more consumption, but, on the contrary, less consumption and more savings (and, concomitantly, more investment). Falling prices encourage greater savings and decreased consumption by fostering an accounting illusion. Business accounting records the value of assets at their original cost. It is well known that general price increases distort the accounting-record: what seems to be a large "profit" may only be just sufficient to replace the now higher-priced assets. During an inflation, therefore, business "profits" are greatly overstated, and consumption is greater than it would be if the accounting illusion were not operating—perhaps capital is even consumed without the individual's knowledge. In a time of deflation, the accounting illusion is reversed: what seem like losses and capital consumption, may actually mean profits for the firm, since assets now cost much less to be replaced. This overstatement of losses, however, restricts consumption and encourages saving; a man may merely think he is replacing capital, when he is actually making an added investment in the business.
Credit contraction will have another beneficial effect in promoting recovery. For bank credit expansion, we have seen, distorts the free market by lowering price differentials (the "natural rate of interest" or going rate of profit) on the market. Credit contraction, on the other hand, distorts the free market in the reverse direction. Deflationary credit contraction's first effect is to lower the money supply in the hands of business, particularly in the higher stages of production. This reduces the demand for factors in the higher stages, lowers factor prices and incomes, and increases price differentials and the interest rate. It spurs the shift of factors, in short, from the higher to the lower stages. But this means that credit contraction, when it follows upon credit expansion, speeds the market's adjustment process. Credit contraction returns the economy to free-market proportions much sooner than otherwise.
But, it may be objected, may not credit contraction overcompensate the errors of the boom and itself cause distortions that need correction? It is true that credit contraction may overcompensate, and, while contraction proceeds, it may cause interest rates to be higher than free-market levels, and investment lower than in the free market. But since contraction causes no positive mal-investments, it will not lead to any painful period of depression and adjustment. If businessmen are misled into thinking that less capital is available for investment than is really the case, no lasting damage in the form of wasted investments will ensue.Some readers may ask: why doesn't credit contraction lead to malinvestment, by causing overinvestment in lower-order goods and underinvestment in higher-order goods, thus reversing the consequences of credit expansion? The answer stems from the Austrian analysis of the structure of production. There is no arbitrary choice of investing in lower or higher-order goods. Any increased investment must be made in the higher-order goods, must lengthen the structure of production. A decreased amount of investment in the economy simply reduces higher-order capital. Thus, credit contraction will cause not excess of investment in the lower orders, but simply a shorter structure than would otherwise have been established. Furthermore, in the nature of things, credit contraction is severely limited—it cannot progress beyond the extent of the preceding inflation.In a gold standard economy, credit contraction is limited by the total size of the gold stock. Credit expansion faces no such limit.
Government Depression Policy: Laissez-Faire If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don't interfere with the market's adjustment process. The more the government intervenes to delay the market's adjustment, the longer and more grueling the depression will be, and the more difficult will be the road to complete recovery. Government hampering aggravates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure. If, in fact, we list logically the various ways that government could hamper market adjustment, we will find that we have precisely listed the favorite "anti-depression" arsenal of government policy. Thus, here are the ways the adjustment process can be hobbled:
Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc.
Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their turn, will have to be liquidated in some later depression. A government "easy money" policy prevents the market's return to the necessary higher interest rates.
Keep wage rates up. Artificial maintenance of wage rates in a depression insures permanent mass unemployment. Furthermore, in a deflation, when prices are falling, keeping the same rate of money wages means that real wage rates have been pushed higher. In the face of falling business demand, this greatly aggravates the unemployment problem.
Keep prices up. Keeping prices above their free-market levels will create unsalable surpluses, and prevent a return to prosperity.
Stimulate consumption and discourage saving. We have seen that more saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved-capital even further. Government can encourage consumption by "food stamp plans" and relief payments. It can discourage savings and investment by higher taxes, particularly on the wealthy and on corporations and estates. As a matter of fact, any increase of taxes and government spending will discourage saving and investment and stimulate consumption, since government spending is all consumption. Some of the private funds would have been saved and invested; all of the government funds are consumed.In recent years, particularly in the literature on the "under-developed countries," there has been a great deal of discussion of government "investment." There can be no such investment, however. "Investment" is defined as expenditures made not for the direct satisfaction of those who make it, but for other, ultimate consumers. Machines are produced not to serve the entrepreneur, but to serve the ultimate consumers, who in turn remunerate the entrepreneurs. But government acquires its funds by seizing them from private individuals; the spending of the funds, therefore, gratifies the desires of government officials. Government officials have forcibly shifted production from satisfying private consumers to satisfying themselves; their spending is therefore pure consumption and can by no stretch of the term be called "investment." (Of course, to the extent that government officials do not realize this, their "consumption" is really waste-spending.) Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.
Subsidize unemployment. Any subsidization of unemployment (via unemployment "insurance," relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.
These, then, are the measures which will delay the recovery process and aggravate the depression. Yet, they are the time-honored favorites of government policy, and, as we shall see, they were the policies adopted in the 1929-1933 depression, by a government known to many historians as a "laissez-faire" administration.
Since deflation also speeds recovery, the government should encourage, rather than interfere with, a credit contraction. In a gold-standard economy, such as we had in 1929, blocking deflation has further unfortunate consequences. For a deflation increases the reserve ratios of the banking system, and generates more confidence in citizen and foreigner alike that the gold standard will be retained. Fear for the gold standard will precipitate the very bank runs that the government is anxious to avoid. There are other values in deflation, even in bank runs, which should not be overlooked. Banks should no more be exempt from paying their obligations than is any other business. Any interference with their comeuppance via bank runs will establish banks as a specially privileged group, not obligated to pay their debts, and will lead to later inflations, credit expansions, and depressions. And if, as we contend, banks are inherently bankrupt and "runs" simply reveal that bankruptcy, it is beneficial for the economy for the banking system to be reformed, once and for all, by a thorough purge of the fractional-reserve banking system. Such a purge would bring home forcefully to the public the dangers of fractional-reserve banking, and, more than any academic theorizing, insure against such banking evils in the future.For more on the problems of fractional-reserve banking, see below.
The most important canon of sound government policy in a depression, then, is to keep itself from interfering in the adjustment process. Can it do anything more positive to aid the adjustment? Some economists have advocated a government-decreed wage cut to spur employment, e.g., a 10 percent across-the-board reduction. But free-market adjustment is the reverse of any "across-the-board" policy. Not all wages need to be cut; the degree of required adjustments of prices and wages differs from case to case, and can only be determined on the processes of the free and unhampered market.See W.H. Hutt, "The Significance of Price Flexibility," in Henry Hazlitt, ed., The Critics of Keynesian Economics (Princeton, N.J.: D. Van Nostrand, 1960), pp. 390–92. Government intervention can only distort the market further.
There is one thing the government can do positively, however: it can drastically lower its relative role in the economy, slashing its own expenditures and taxes, particularly taxes that interfere with saving and investment. Reducing its tax-spending level will automatically shift the societal saving-investment-consumption ratio in favor of saving and investment, thus greatly lowering the time required for returning to a prosperous economy.I am indebted to Mr. Rae C. Heiple, II, for pointing this out to me. Reducing taxes that bear most heavily on savings and investment will further lower social time preferences.Could government increase the investment-consumption ratio by raising taxes in any way? It could not tax only consumption even if it tried; it can be shown (and Prof. Harry Gunnison Brown has gone a long way to show) that any ostensible tax on "consumption" becomes, on the market, a tax on incomes, hurting saving as well as consumption. If we assume that the poor consume a greater proportion of their income than the rich, we might say that a tax on the poor used to subsidize the rich will raise the saving-consumption ratio and thereby help cure a depression. On the other hand, the poor do not necessarily have higher time preferences than the rich, and the rich might well treat government subsidies as special windfalls to be consumed. Furthermore, Harold Lubell has maintained that the effects of a change in income distribution on social consumption would be negligible, even though the absolute proportion of consumption is greater among the poor. See Harry Gunnison Brown, "The Incidence of a General Output or a General Sales Tax," Journal of Political Economy (April, 1939): 254–62; Harold Lubell, "Effects of Redistribution of Income on Consumers' Expenditures," American Economic Review (March, 1947): 157–70. Furthermore, depression is a time of economic strain. Any reduction of taxes, or of any regulations interfering with the free market, will stimulate healthy economic activity; any increase in taxes or other intervention will depress the economy further.
In sum, the proper governmental policy in a depression is strict laissez-faire, including stringent budget slashing, and coupled perhaps with positive encouragement for credit contraction. For decades such a program has been labeled "ignorant," "reactionary," or "Neanderthal" by conventional economists. On the contrary, it is the policy clearly dictated by economic science to those who wish to end the depression as quickly and as cleanly as possible.Advocacy of any governmental policy must rest, in the final analysis, on a system of ethical principles. We do not attempt to discuss ethics in this book. Those who wish to prolong a depression, for whatever reason, will, of course, enthusiastically support these government interventions, as will those whose prime aim is the accretion of power in the hands of the state.
It might be objected that depression only began when credit expansion ceased. Why shouldn't the government continue credit expansion indefinitely? In the first place, the longer the inflationary boom continues, the more painful and severe will be the necessary adjustment process, Second, the boom cannot continue indefinitely, because eventually the public awakens to the governmental policy of permanent inflation, and flees from money into goods, making its purchases while the dollar is worth more than it will be in future. The result will be a "runaway" or hyperinflation, so familiar to history, and particularly to the modern world.For the classic treatment of hyperinflation, see Costantino Bresciani-Turroni, The Economics of Inflation (London: George Allen and Unwin, 1937). Hyperinflation, on any count, is far worse than any depression: it destroys the currency—the lifeblood of the economy; it ruins and shatters the middle class and all "fixed income groups"; it wreaks havoc unbounded. And furthermore, it leads finally to unemployment and lower living standards, since there is little point in working when earned income depreciates by the hour. More time is spent hunting goods to buy. To avoid such a calamity, then, credit expansion must stop sometime, and this will bring a depression into being.
Preventing Depressions Preventing a depression is clearly better than having to suffer it. If the government's proper policy during a depression is laissez-faire, what should it do to prevent a depression from beginning? Obviously, since credit expansion necessarily sows the seeds of later depression, the proper course for the government is to stop any inflationary credit expansion from getting under way. This is not a very difficult injunction, for government's most important task is to keep itself from generating inflation. For government is an inherently inflationary institution, and consequently has almost always triggered, encouraged, and directed the inflationary boom. Government is inherently inflationary because it has, over the centuries, acquired control over the monetary system. Having the power to print money (including the "printing" of bank deposits) gives it the power to tap a ready source of revenue. Inflation is a form of taxation, since the government can create new money out of thin air and use it to bid away resources from private individuals, who are barred by heavy penalty from similar "counterfeiting." Inflation therefore makes a pleasant substitute for taxation for the government officials and their favored groups, and it is a subtle substitute which the general public can easily—and can be encouraged to—overlook. The government can also pin the blame for the rising prices, which are the inevitable consequence of inflation, upon the general public or some disliked segments of the public, e.g., business, speculators, foreigners. Only the unlikely adoption of sound economic doctrine could lead the public to pin the responsibility where it belongs: on the government itself.
Private banks, it is true, can themselves inflate the money supply by issuing more claims to standard money (whether gold or government paper) than they could possibly redeem. A bank deposit is equivalent to a warehouse receipt for cash, a receipt which the bank pledges to redeem at any time the customer wishes to take his money out of the bank's vaults. The whole system of "fractional-reserve banking" involves the issuance of receipts which cannot possibly be redeemed. But Mises has shown that, by themselves, private banks could not inflate the money supply by a great deal.See Mises, Human Action, pp. 429–45, and Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953). In the first place, each bank would find its newly issued uncovered, or "pseudo," receipts (uncovered by cash) soon transferred to the clients of other banks, who would call on the bank for redemption. The narrower the clientele of each bank, then, the less scope for its issue of pseudo-receipts. All the banks could join together and agree to expand at the same rate, but such agreement would be difficult to achieve. Second, the banks would be limited by the degree to which the public used bank deposits or notes as against standard cash; and third, they would be limited by the confidence of the clients in their banks, which could be wrecked by runs at any time.
Instead of preventing inflation by prohibiting fractional-reserve banking as fraudulent, governments have uniformly moved in the opposite direction, and have step-by-step removed these free-market checks to bank credit expansion, at the same time putting themselves in a position to direct the inflation. In various ways, they have artificially bolstered public confidence in the banks, encouraged public use of paper and deposits instead of gold (finally outlawing gold), and shepherded all the banks under one roof so that they can all expand together. The main device for accomplishing these aims has been Central Banking, an institution which America finally acquired as the Federal Reserve System in 1913. Central Banking permitted the centralization and absorption of gold into government vaults, greatly enlarging the national base for credit expansion:When gold—formerly the banks' reserves—is transferred to a newly established Central Bank, the latter keeps only a fractional reserve, and thus the total credit base and potential monetary supply are enlarged. See C.A. Phillips, T.F. McManus, and R.W. Nelson, Banking and the Business Cycle (New York: Macmillan, 1937), pp. 24ff. it also insured uniform action by the banks through basing their reserves on deposit accounts at the Central Bank instead of on gold. Upon establishment of a Central Bank, each private bank no longer gauges its policy according to its particular gold reserve; all banks are now tied together and regulated by Central Bank action. The Central Bank, furthermore, by proclaiming its function to be a "lender of last resort" to banks in trouble, enormously increases public confidence in the banking system. For it is tacitly assumed by everyone that the government would never permit its own organ—the Central Bank—to fail. A Central Bank, even when on the gold standard, has little need to worry about demands for gold from its own citizens. Only possible drains of gold to foreign countries (i.e., by non-clients of the Central Bank) may cause worry.
The government assured Federal Reserve control over the banks by (1) granting to the Federal Reserve System (FRS) a monopoly over note issue; (2) compelling all the existing "national banks" to join the Federal Reserve System, and to keep all their legal reserves as deposits at the Federal ReserveMany "state banks" were induced to join the FRS by patriotic appeals and offers of free services. Even the banks that did not join, however, are effectively controlled by the System, for, in order to obtain paper money, they must keep reserves in some member bank.; and (3) fixing the minimum reserve ratio of deposits at the Reserve to bank deposits (money owned by the public). The establishment of the FRS was furthermore inflationary in directly reducing existing reserve-ratio requirements.The average reserve requirements of all banks before 1913 was estimated at approximately 21 percent. By mid-1917, when the FRS had fully taken shape, the average required ratio was 10 percent. Phillips et al. estimate that the inherent inflationary impact of the FRS (pointed out in footnote 23) increased the expansive power of the banking system three-fold. Thus, the two factors (the inherent impact, and the deliberate lowering of reserve requirements) combined to inflate the monetary potential of the American banking system six-fold as a result of the inauguration of the FRS. See Phillips, et al., Banking and the Business Cycle, pp. 23ff. The Reserve could then control the volume of money by governing two things: the volume of bank reserves, and the legal reserve requirements. The Reserve can govern the volume of bank reserves (in ways which will be explained below), and the government sets the legal ratio, but admittedly control over the money supply is not perfect, as banks can keep "excess reserves." Normally, however, reassured by the existence of a lender of last resort, and making profits by maximizing its assets and deposits, a bank will keep fully "loaned up" to its legal ratio.
While unregulated private banking would be checked within narrow limits and would be far less inflationary than Central Bank manipulation,The horrors of "wildcat banking" in America before the Civil War stemmed from two factors, both due to government rather than free banking: (1) Since the beginnings of banking, in 1814 and then in every ensuing panic, state governments permitted banks to continue operating, making and calling loans, etc. without having to redeem in specie. In short, banks were privileged to operate without paying their obligations. (2) Prohibitions on interstate branch banking (which still exist), coupled with poor transportation, prevented banks from promptly calling on distant banks for redemption of notes. the clearest way of preventing inflation is to outlaw fractional-reserve banking, and to impose a 100 percent gold reserve to all notes and deposits. Bank cartels, for example, are not very likely under unregulated, or "free" banking, but they could nevertheless occur. Professor Mises, while recognizing the superior economic merits of 100 percent gold money to free banking, prefers the latter because 100 percent reserves would concede to the government control over banking, and government could easily change these requirements to conform to its inflationist bias.Mises, Human Action, p. 440. But a 100 percent gold reserve requirement would not be just another administrative control by government; it would be part and parcel of the general libertarian legal prohibition against fraud. Everyone except absolute pacifists concedes that violence against person and property should be outlawed, and that agencies, operating under this general law, should defend person and property against attack. Libertarians, advocates of laissez-faire, believe that "governments" should confine themselves to being defense agencies only. Fraud is equivalent to theft, for fraud is committed when one part of an exchange contract is deliberately not fulfilled after the other's property has been taken. Banks that issue receipts to non-existent gold are really committing fraud, because it is then impossible for all property owners (of claims to gold) to claim their rightful property. Therefore, prohibition of such practices would not be an act of government intervention in the free market; it would be part of the general legal defense of property against attack which a free market requires.A common analogy states that banks simply count on people not redeeming all their property at once, and that engineers who build bridges operate also on the principle that not everyone in a city will wish to cross the bridge at once. But the cases are entirely different. The people crossing a bridge are simply requesting a service; they are not trying to take possession of their lawful property, as are the bank depositors. A more fitting analogy would defend embezzlers who would never have been caught if someone hadn't fortuitously inspected the books. The crime comes when the theft or fraud is committed, not when it is finally revealed., Perhaps a libertarian legal system would consider "general deposit warrants" (which allow a warehouse to return any homogeneous good to the depositor) as "specific deposit warrants," which, like bills of lading, pawn tickets, dock-warrants, etc. establish ownership to specific, earmarked objects. As Jevons stated, "It used to be held as a general rule of law, that any present grant or assignment of goods not in existence is without operation." See W. Stanley Jevons, Money and the Mechanism of Exchange (London: Kegan Paul, 1905), pp. 207–12. For an excellent discussion of the problems of a fractional-reserve money, see Amasa Walker, The Science of Wealth (3rd ed., Boston: Little, Brown, 1867), pp. 126–32, esp. pp. 139–41.
What, then, was the proper government policy during the 1920s? What should government have done to prevent the crash? Its best policy would have been to liquidate the Federal Reserve System, and to erect a 100 percent gold reserve money; failing that, it should have liquidated the FRS and left private banks unregulated, but subject to prompt, rigorous bankruptcy upon failure to redeem their notes and deposits. Failing these drastic measures, and given the existence of the Federal Reserve System, what should its policy have been? The government should have exercised full vigilance in not supporting or permitting any inflationary credit expansion. We have seen that the Fed—the Federal Reserve System—does not have complete control over money because it cannot force banks to lend up to their reserves; but it does have absolute anti-inflationary control over the banking system. For it does have the power to reduce bank reserves at will, and thereby force the banks to cease inflating, or even to contract if necessary. By lowering the volume of bank reserves and/or raising reserve requirements, the federal government, in the 1920s as well as today, has had the absolute power to prevent any increase in the total volume of money and credit. It is true that the FRS has no direct control over such money creators as savings banks, savings and loan associations, and life insurance companies, but any credit expansion from these sources could be offset by deflationary pressure upon the commercial banks. This is especially true because commercial bank deposits (1) form the monetary base for the credit extended by the other financial institutions, and (2) are the most actively circulating part of the money supply. Given the Federal Reserve System and its absolute power over the nation's money, the federal government, since 1913, must bear the complete responsibility for any inflation. The banks cannot inflate on their own; any credit expansion can only take place with the support and acquiescence of the federal government and its Federal Reserve authorities. The banks are virtual pawns of the government, and have been since 1913. Any guilt for credit expansion and the consequent depression must be borne by the federal government and by it alone.Some writers make a great to-do over the legal fiction that the Federal Reserve System is "owned" by its member banks. In practice, this simply means that these banks are taxed to help pay for the support of the Federal Reserve. If the private banks really "own" the Fed, then how can its officials be appointed by the government, and the "owners" compelled to "own" the Federal Reserve Board by force of government statute? The Federal Reserve Banks should simply be regarded as governmental agencies.
This excerpt is taken from the first chapters of Murray Rothbard's .America's Great Depression, published in 1963.
While Americans believe the First Amendment protects their speech, the US government and mainstream media have joined together to suppress speech that does not coincide with government policies.
Original Article: "Censorship through the Centuries: Free Speech Suppression by the Government and the Mainstream Media"
By corrupting the meaning of inflation, mainstream economists have given a false picture of what happens when monetary authorities expand the money supply. Mises and Rothbard understood.
Original Article: "Taking Back the Meaning of "Inflation""
Professor Quinn Slobodian believes that free markets must lead to tyrannical worker exploitation, and socialism is the only solution. In truth, market competition is the answer.
Original Article: "Cracked-Up Slobodian"
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""
To seriously threaten the regime, one must attack it at its roots. This would require rejecting the modern civil rights legal regime, something modern Buckleyite conservatives and James Lindsay-style liberals are not interested in, and unites paleoconservatives and paleolibertarians.
Original Article: "Paleoconservatives Need Better Critics"
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"
Although they professed to support "states' rights," many proslavery activists wanted a stronger federal government that could force slavery on the western territories and deny local sovereignty to territorial residents.
Original Article: "When Slave Owners Chose Federal Power over Local Sovereignty"
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.
Postwar Germany was occupied, in ruins, with an economy in chaos. Germans were reduced to using cigarettes supplied by American GIs as money.
Original Article: "To Smoke or Not to Smoke: The Cigarette Economy in Postwar Germany, 1945–48"
After 1820, growing numbers of propertyless squatters were voters, and this was an opportunity for politicians to offer cheap land in exchange for loyalty to the Democratic Party.
Original Article: "How "Squatter Democracy" Created America's First Welfare Program"
Ryan, Tho, and Kerry Baldwin take a look at why some politicians say they're "nationalists." Is nationalism a good thing or is it just another way to justify more government meddling in our lives?
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
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Ryan and Tho take a look at the legacy of Daniel Ellsberg's heroic leak of the Pentagon Papers and the evils of government secrecy. Modern leakers like Snowden, Manning, and Assange do important work educating voters and making the state more accountable.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
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In the pre-industrial world, aggression and physical domination were often labeled as "masculine" virtues because they were useful for survival. The rise of the cooperative market economy changed all that.
Original Article: "How Capitalism Redefined Masculine Virtue"
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Mises Senior Editor Bill Anderson to discuss his recent article, "David French Gets to Sit with the Cool Kids at the NYT Lunch Table." Bill explains the transformation of French from a "cultural conservative" commentator to the preferred "classical liberal" of the elite.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
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Recommended Reading "David French Gets to Sit with the Cool Kids at the NYT Lunch Table" by William L. Anderson: Mises.org/RR_138_A
"Review: Sohrab Ahmari's New Attack on Laissez-Faire Liberalism" by Zachary Yost: Mises.org/RR_138_B
""Libertarian" Is Just Another Word for (Classical) Liberal" by Ryan McMaken: Mises.org/RR_138_C
"To Stop the Left, America Needs a Rothbardian Right" by Tho Bishop: Mises.org/RR_138_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Modern progressives don't like to refer to their long-held support of eugenics. In fact, American progressives influenced the Nazis, who launched their own murderous eugenics schemes.
Original Article: "The Boston Brahmins, WASPs, and Nazis: The Pursuit of Eugenics"
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the role statistics play in promoting the regime. Topics include some interesting differences in recently reported unemployment data, changes to inflation reporting over time, government withholding of various reports — including crime and money supply measures — as well as alternative measures Austrians use to better cut through state propaganda.
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Recommended Reading "Yet Another Month of Questionable Federal Jobs Data as 310,000 Fewer People Report Having Jobs" by Ryan McMaken: Mises.org/RR_137_A
"The "True" Money Supply: A Measure of the Supply of the Medium of Exchange in the U.S. Economy" by Joseph Salerno: Mises.org/RR_137_B
"Does GDP Present an Accurate Picture of the Economy? Not Likely" by Frank Shostak: Mises.org/RR_137_C
"World War I as Fulfillment: Power and the Intellectuals" by Murray Rothbard: Mises.org/RR_137_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The Durham report reminds us it is well past time for a more realistic assessment of the FBI for what it is: a costly, unnecessary, unconstitutional, and incompetent agency.
Original Article: "End the FBI"
Volume 1, Number 4 (1977) New York's current financial woes have a precedent, and perhaps a solution, in the pages of the distant past. Well back in its history, in the late 1830s, New York State was spending and lending money lavishly. By the early 1840s, the rapidly mounting debt had occasioned a severe financial crisis. To avert the imminent possibility of bankruptcy and default, the state legislature in 1842 passed what was known as "the stop and tax law", a levy of one mill on each dollar of taxable property. The new revenue helped the state meet its most pressing obligations. But, even more importantly in terms of the future, New York decided to take steps to prevent another such fiscal disaster. Ambitious projects for internal improvements — mostly canal construction and loans for railroad building — were cut back or abandoned unless there was a reasonable expectation that they could be funded from tolls or taxation. And the legislature also issued a call for a constitutional convention. The new Constitution adopted in 1846 placed strict limits on the state's ability to borrow money. Thus the people of New York, facing problems similar to the state's later predicament, found the answer in an old-fashioned program of reduced spending and new taxes. What is surprising, however, is that such policies had the popular support of the most democratic and liberal elements in the state.
To understand the unusual sequence of events which culminated in the New York State Constitution of 1846, one must go back in history to the Jacksonian era and the political struggles between the Democrats and the Whigs. In New York the Jacksonian Democrats included a wide-ranging constituency of radical workingmen, Irish immigrants, farmers, intellectuals, and representatives of the new rising business or small capitalist class. The preponderance of the older landed aristocracy and wealthier classes, together with the most English or Anglo-Saxon elements in the population, gravitated toward the Whig Party. The Whigs, united nationally by their opposition to Andrew Jackson's Presidency, were the ideological heirs in New York State of DeWitt Clinton, five times governor and father of the Erie Canal. Like Clinton, the Whigs supported the generous use of state funds for internal improvements as well as for various cultural, humanitarian, and educational endeavors. The Whigs' belief in positive government and social reform reflected their paternalistic conception of politics and economics.Useful general interpretations include: Dixon Ryan Fox, The Decline of Aristocracy in the Politics of New York, 1801–1840, ed. Robert V. Remini (1st pub. 1919; New York: Harper Torchbooks, 1965); Edward Pessen, Jacksonion America: Society, Personality, and Politics (Homewood, Ill.: Dorsey Press, 1968); Glyndon G. Van Deusen, "Aspects of Whig Thought in the Jacksonian Period," American Historical Review, Vol. 63 (January, 1958). pp. 305–322.
Quite different were the ideas of the Democrats who, in contrast to their Whig opponents, stood for a strict construction of the United States Constitution, limiting the governing power to its least essentials. Both nationally and in New York State, the Jacksonian Democrats adhered to the Jeffersonian agrarian maxim that the least government it the best government. In New York the leader of the Democratic Party was Martin Van Buren, head of the famed Albany Regency which controlled the state governmental machinery through most of the 1830s and '40s. The most radical Democrats, known as Locofocos, were somewhat to the left of Van Buren and the Regency. They included an interesting collection of intellectuals and politicians who espoused a negative, anti-statist democracy. As against the paternalistic philosophy of the Whigs, the Locofoco Democrats stressed complete laissez faire in government-business relations. For example, the introduction in 1837 to the first issue of the United States Magazine and Democratic Review, organ of the more radical Democrats, defined the party's belief in democratic republicanism and majority rule. But the editors added:
The best government is that which governs least. No human depositories can, with safety, be trusted with the power of legislation upon the general interests of society so as to operate directly or indirectly on the industry and property of the community. Such power must be perpetually liable to the most pernicious abuse, from the natural imperfection, both in wisdom of judgment and purity of purpose, of all human legislation, exposed constantly to the pressure of partial interests; interests which, at the same time that they are essentially selfish and tyrannical, are ever vigilant. persevering, and subtle in all the arts of deception and corruption."Introduction," United States Magazine and Democratic Review, Vol. 1 (October, 1837), p. 6.
Most forthright of the radical Democrats was William Leggett, a Locofoco colleague in the 1830s of such New York Democratic writers as James Fenimore Cooper, William Cullen Bryant, Theodore Sedgwick, and Parke Godwin. Leggett coupled adherence to the Jeffersonian natural rights philosophy with demands for the equal right to property, not its abolition. Governments had no warrant to interfere with individual pursuits by offering financial advantages to any particular class or industry. Specially chartered banks, including the Bank of the United States, were a favorite target of Leggett's scorn. "Let the banks perish," he wrote. "Now is the time for the complete emancipation of trade from legislative thralldom."On Leggett, see his A Collection of the Political Writings, ed. Theodore Sedgwick, Jr. (2 vols.; New York: Taylor & Dodd, 1840); and the studies by Richard Hofstadter, "William Leggett: Spokesman of Jacksonian Democracy," Political Science Quarterly, Vol. 58 (December, 1943), pp. 581–594; Marvin Meyers, The Jacksonsian Persuasian: Politics and Belief (Stanford, Calif.: Stanford University Press, 1957), chap. 9; Edward K. Spann, Ideals & Politics: New York Intellectuals and Liberal Democracy, 1820–1880 (Albany: State University of New York Press, 1972).
As a part of their general laissez-faire philosophy and opposition to Whig paternalism, the Democrats were also dubious of those social and humanitarian reform movements which infringed upon individual liberty and private property. Thus they were hostile to the abolitionists even though this meant ignoring the question of freedom for the black slave. Imprisonment for debt attracted little attention from either Democrats or workingmen until public interest in the matter became too strong to be ignored. The workingmen's parties were, however, in a peculiar position because wage earners wanted preferential creditor status through a mechanics' lien law. Even public schools had difficulty winning Democratic support because their expense involved heavier taxation. Charity schools and use of the Lancastrian system of pupil tutors instead won Democratic favor. A system of statewide public education would also interfere with parents' control over their children and might undermine religious freedom.Herbert Ershkowitz and William G. Shade, "Consensus or Conflict? Political Behavior in the State Legislatures during the Jacksonian Era," Journal of American History, Vol. 58 (December, 1971), pp. 591–621, reinforces the view of the age of Jackson as essentially one of laissez Faire. See also Peter J. Coleman, Debtors and Creditors in America: Insolvency, Imprisonment for Debt, and Bankruptcy, 1607–1900 (Madison: State Historical Society of Wisconsin, 1974).
In Washington, Andrew Jackson, the Democrats' hero, enjoyed an uneasy and controversial Presidency. His years in office from 1829 to 1837 formed an era in which easy credit, cheap land, and internal improvements all contributed to an inflationary prosperity. At the same time, Jackson's own inclinations tended toward the limitations on federal spending favored by his friend and political adviser Van Buren. As governor of New York in 1828, Van Buren had secured passage of the Safety Fund System to safeguard the banks and assure the state of a source of credit and wealth to go along with the Erie Canal. The state-chartered New York banks cast doubt on the need for the federal United States Bank, while the state-constructed Erie Canal rebuked the western states' clamor for federal aid for their own internal improvements. Moreover, the Jeffersonian principle of states' rights and opposition to federal centralized power, espoused by Van Buren and the New York Locofoco Democrats, was also able to gain national success by Jackson's Bank of the United States and Maysville Road vetoes.New York and Van Buren's influence on Washington and Jackson is discussed in Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (Princeton, N.J.: Princeton University Press, 1957), p. 352.
In 1836 the United States for the only time in its history was without a national debt; a year later the federal government was briefly in a position to distribute its surplus revenues to the states. But the Jacksonians, despite the President's efforts to moderate or level out the economic boom, were unable to ward off its financial aftermath in the Panic of 1837. Van Buren, Jackson's successor in the White House, fell a political victim to the Panic, and in New York in 1838 the Democrats were overturned by the Whigs who elected William H. Seward as governor. Governor Seward, it should be noted, was an admirer of DeWitt Clinton who had earlier helped inaugurate the transportation revolution in New York. Upon completion of the Erie Canal in 1825, he had urged further state expenditures for new canals, turnpikes, and eventually railroads, as well as a generous policy of chartering banks and insurance companies. Now, in 1840, the Whigs under Governor Seward called for the appropriation of four million dollars for ten years to build additional canals and railroads. Henceforth dubbed "the forty million dollar party", the Whigs to their misfortune had ignored the adverse effects of the Panic of 1837 on the state's declining credit. Alarmed critics warned that the cost of public works would soon increase the state debt to as much as 75 million dollars with annual interest charges of 4.5 million. Already by 1842, when the Democrats regained control of the legislature and passed the stop and tax law, the state debt which five years earlier amounted to 7 million dollars had grown to 27 million dollars, and state bonds were unmarketable even at a discount of 20%. Instead of continuing to spend money for internal improvements, the Democrats, at a cost of 40 million dollars in principal and interest, proposed to extinguish the statedebt in twenty years. As a result of such conservative fiscal policies, within two months of the stop and tax law the state's 7% bonds sold at par, while 5% bonds reached that level in 15 month.Charles Z. Lincoln, The Constitutional History of New York (5 vols.; Rochester, N.Y.: Layers Co-Operative, 1906), Vol. 2, pp. 76, 81–84, 91ff., 165; Steward Mitchell, Horatio Seymour of New York (Cambridge, Mass.; Harvard University Press, 1938), p. 53.
By the 1840s national opinion in regard to state aid for internal improvements was undergoing a change. The former public enthusiasm for heavy state expenditures had run its course. Some of the new states in the West were in default on their bonds. State initiative and responsibility had been necessary earlier for such ambitious undertakings as the Erie Canal, but after the return of prosperity in the 1840s private capital, just beginning to be accumulated by American manufacturing and industry, was available for investment. Railroads were now becoming the most important means of transportation, but railroads with their special rolling stock could not be considered public in the same sense as a canal, a river, or a turnpike. Although railroad builders frequently turned to the states to help raise the large amounts of capital they required, most of their funds in New York came from individual savings and from credit extended by American banks. Accordingly, while there was little foreign investment in, or municipal aid for, New York State railroads until after the Civil War, the New York Central by 1853 had 2331 stockholders.Fox, Decline of Aristocracy, pp. 405–408; Carter Goodrich, "The Revulsion Against Internal Improvements," Journal of Economic History, Vol. 10 (November, 1950), pp. 145–169; Harry H. Pierce, Railroads of New York: A Study of Government Aid, 1826–1875 (Cambridge, Mass.: Harvard University Press, 1953), pp. 8. 16.
The decline of public aid and intervention in economic enterprise was most marked in some of the eastern states where the old colonial concept of the commonwealth fell victim to a surge of anti-government feeling. Although various economic and social groups continued to desire political intervention in behalf of their own self-interests, the fear of more state taxes and increasing state indebtedness blocked heavy public expenditures throughout the 1840s. Instead of continuing to take a positive, direct role in the economy, the state granted its economic powers to private banks and stock companies. For example, the Free Banking Act passed by New York in 1838 abolished the old system requiring special legislation for each bank charter and in effect introduced competition into banking. Under general incorporation laws, state charters were now granted to all manner of enterprises which, in pursuing their own private ends, were largely freed of the public responsibility associated with governmental agencies and the earlier semiprivate corporation. Democratic reluctance to continue the specially chartered corporation for a favored few had dispersed the privilege of incorporation among many stockholders and had separated it from responsibility to the state.Oscar and Mary Flug Handlin, Commonwealth: A Study of the Role of Government in the American Economy (1st pub. 1947; rev. ed. Cambridge, Mass.: Belknap-Harvard University Press, 1969), pp. 106ff., 160–161, 191.
Legislation for free banking and general incorporation laws accordingly had the support not only of the business community but also of those opposed to all governmental aid and protection for selected enterprises. Locofoco Democrats and workingmen united in the crusade against economic monopoly and special privilege, although labor sometimes identified its own true interest with that of the whole community. In any case, the state was usually too weak in an administrative sense to enforce either its own definition of the public interest, or to give its full support to various private or special interest groups. Thus laissez faire and the cry of equal rights for all and special privileges for none was a more appealing political philosophy in the 1830s and '40s than any Whiggish notions of a paternalistic and expensive government.Compare Walter Hugins, Jacksonian Democracy and the Working Class: A Study of the New York Workingmen's Movement, 1829–1837 (Stanford, Calif.: Stanford University Press, 1960) and Douglas T. Miller, Jacksonian Aristocracy: Class and Democracy in New York (New York: Oxford University Press, 1967).
It was in response to these views that the Democrats pushed ahead with their plans for drafting a new state constitution. William C. Bouck, the conservative or Hunker Democratic successor to Seward as governor in 1843 and 1844, favored a moderate course on internal improvements despite the Democrats' stop and tax law of 1842. But when Silas Wright, a close friend of Van Buren and the staunchest disciple of Jeffersonian agrarian democracy in New York State, was put forward for the nomination of governor, Bouck and the conservative Hunker faction had to retreat. Wright in his first annual governor's message in January 1845 praised the stop and tax law for restoring the state's credit. Three fifths of the state's debt charged to the General Fund, he pointed out, had been incurred by unwise loans to railroads that had proved unable to pay their obligations. Wright also announced that he favored calling a constitutional convention.John A. Garraty, Silas Wright (New York: Columbia University Press, 1949), pp. 292, 235.
In a series of articles analyzing the progress of constitutional reform, which appeared at this time in the Democratic Review, John Bigelow, one of the party's intellectuals, listed some of the changes which he believed New York and other states should adopt. These included a provision that "The state should have no power to contract debts, or loan its credit, except in case of war, invasion, or insurrection." In the matter of a general incorporation law, Bigelow urged: "The members of such Corporations, (not excepting those established for education or charity) should be individually liable for the debts, liabilities, and acts of such Corporation, and for the consequences resulting therefrom." Furthermore: "All laws or regulations interfering with the liberty of trade or industry (such as license and inspection laws) should be abolished, and their enactment for the future prohibited." Bigelow added as miscellaneous proposals the abolishment of the death penalty and permission for women to control their own property after marriage."The Progress of Constitutional Reform in the United States," United States Magazine and Democractic Review, Vol. 18 (June, 1846), pp. 408–412, 420.
The New York Constitutional Convention, which met in the summer of 1846, completed its labors in time for the voters to approve its handiwork that same year. Although the anti-statist views of such Jeffersonian Democrats as Bigelow and Wright were subject to some modification and compromise, the New York Constitution of 1846 embodied the laissez-faire position better than any document in the state's history. Only after all debts were paid through a sinking fund could the state appropriate any surplus for canal improvements and extensions not already mandated by law. Corporations including banks were to be chartered under general laws rather than by special act. Stockholders were made liable to the amount of their shares for all debts and liabilities contracted by their banks. As an epitaph to the anti-rent wars which had reached a climax in 1846, the Constitution abolished all feudal tenures and perpetual leases. Male suffrage was made universal except for Negroes who had to possess an estate of the value of $250, unless the people in a referendum on the question voted otherwise.New York State Constitution of 1846, Article I, Section 12; II, 1; VII, 1, 2, 3; VIII, 1, 4 7. This curious and illiberal provision, which was approved by the voters, retained the clause in the 1821 Constitution in which the property qualification was removed for whites but not for blacks. The Negro vote, traditionally cast in favor of the old Federalist slaveowning class, had continued to be exercised in behalf of Clinton and then the Whigs. Though never a large vote, it was opposed by the Democrats chiefly because of labor's influence.Fox, Decline of Aristocracy, p. 269.
In a retrospectwe article on constitutional government in the Democratic Review, Bigelow reiterated his libertarian views with the warning that "A great source of inequality in the conditions of men in respect of wealth and comfort arises from the action of law. Too much government has a direct tendency to aid one man or one set of men in the 'pursuit of happiness', and in the 'acquiring, possessing, and protecting property', if not at the expense of the rest, at least without rendering them the like assistance.""Constitutional Governments," United States Magazine and Democratic Review, Vol. 20 (March, 1847), p. 202. Unfortunately the Jacksonians, despite their defeat of the Bank of the United States, had not been able to slow the growth of wealth and inequality in New York and some of the larger cities in the East in the era before the Civil War. But their more radical laissez-faire views, as embodied in the stop and tax law and 1846 Constitution, disenchanted the wealthier business class which moved more than ever into the Whig Party. Work on the Erie Canal, which the Democrats had stopped in 1842, was resumed in 1847. Moreover, until 1850 railroads had to pay canal tolls to protect the state's vested interested in "Clinton's ditch". After that, canal tolls were reduced to provide competition to the growing volume of traffic carried by the railroad.Edward Pessen, Riches, Class, and Power before the Civil War (Lexington, Mass.: D.C. Heath, 1973); Frank Otto Gatell, "Money and Party in Jacksonian America: A Quantitative Look at New York City's Men of Quality," Political Science Quarterly, Vol. 82 (January, 1967), pp. 235–252; Don C. Sowers, The Financial History of New York State from 1789 to 1912 (New York: Columbia University Studies, 1914(, pp. 75, 85, 87.
Historians of a later generation have grown accustomed to interpreting democracy and liberalism in terms of the modern welfare state. The negative democracy of the New York Democrats of the 1840s accordingly wins little contemporary approval. Democracy in the eyes of its later adherents has become synonymous with power, preferably such power as may be exercised by a strong executive in the name of people. Some historians even question whether the negative state can be democratic and reason that laissez faire must automatically favor an aristocracy of wealth.See, for example, Arthur M. Schlesinger, Jr., The Age of Jackson (Boston: Little-Brown, 1945), pp. 512–514, 519–521; Lee Benson, The Concept of Jacksonian Democracy: New York as a Test Case (Princeton, N.J.: Princeton University Press, 1961), pp. 220ff. But what passes for the welfare state today rewards most of all its largest investors in the military-industrial complex. Beneficiaries of the welfare-warfare state's largesse would be horrified by a return to the spirit of the 1840s or to any consistent across-the-board application of laissez faire. Meanwhile New York's Constitution of 1846 remains an interesting, though passing, example of the enactment of Jeffersonian anti-statism into the fundamental law.
The Free Market 12, no. 9 (September 1994)
In recent years, Americans have been subjected to a concerted assault upon their national symbols, holidays, and anniversaries. Washington's Birthday has been forgotten, and Christopher Columbus has been denigrated as an evil Euro-White male, while new and obscure anniversary celebrations have been foisted upon us. New heroes have been manufactured to represent "oppressed groups" and paraded before us for our titillation.
There is nothing wrong, however, with the process of uncovering important and buried facts about our past. In particular, there is one widespread group of the oppressed that are still and increasingly denigrated and scorned: the hapless American taxpayer.
This year is the bicentenary of an important American event: the rising up of American taxpayers to refuse payment of a hated tax: in this case, an excise tax on whiskey. The Whiskey Rebellion has long been known to historians, but recent studies have shown that its true nature and importance have been distorted by friend and foe alike.
The Official View of the Whiskey Rebellion is that four counties of western Pennsylvania refused to pay an excise tax on whiskey that had been levied by proposal of the Secretary of Treasury Alexander Hamilton in the Spring of 1791, as part of his excise tax proposal for federal assumption of the public debts of the several states.
Western Pennsylvanians failed to pay the tax, this view says, until protests, demonstrations, and some roughing up of tax collectors in western Pennsylvania caused President Washington to call up a 13,000-man army in the summer and fall of 1794 to suppress the insurrection. A localized but dramatic challenge to federal tax-levying authority had been met and defeated. The forces of federal law and order were safe.
This Official View turns out to be dead wrong. In the first place, we must realize the depth of hatred of Americans for what was called "internal taxation" (in contrast to an "external tax" such as a tariff). Internal taxes meant that the hated tax man would be in your face and on your property, searching, examining your records and your life, and looting and destroying.
The most hated tax imposed by the British had been the Stamp Tax of 1765, on all internal documents and transactions; if the British had kept this detested tax, the American Revolution would have occurred a decade earlier, and enjoyed far greater support than it eventually received.
Americans, furthermore, had inherited hatred of the excise tax from the British opposition; for two centuries, excise taxes in Britain, in particular the hated tax on cider, had provoked riots and demonstrations upholding the slogan, "liberty, property, and no excise!" To the average American, the federal government's assumption of the power to impose excise taxes did not look very different from the levies of the British crown.
The main distortion of the Official View of the Whiskey Rebellion was its alleged confinement to four counties of western Pennsylvania. From recent research, we now know that no one paid the tax on whiskey throughout the American "back-country": that is, the frontier areas of Maryland, Virginia, North and South Carolina, Georgia, and the entire state of Kentucky.
President Washington and Secretary Hamilton chose to make a fuss about Western Pennsylvania precisely because in that region there was cadre of wealthy officials who were willing to collect taxes. Such a cadre did not even exist in the other areas of the American frontier; there was no fuss or violence against tax collectors in Kentucky and the rest of the back-country because there was no one willing to be a tax collector.
The whiskey tax was particularly hated in the back-country because whisky production and distilling were widespread; whiskey was not only a home product for most farmers, it was often used as a money, as a medium of exchange for transactions. Furthermore, in keeping with Hamilton's program, the tax bore more heavily on the smaller distilleries. As a result, many large distilleries supported the tax as a means of crippling their smaller and more numerous competitors.
Western Pennsylvania, then, was only the tip of the iceberg. The point is that, in all the other back-country areas, the whiskey tax was never paid. Opposition to the federal excise tax program was one of the causes of the emerging Democrat-Republican Party, and of the Jeffersonian "Revolution" of 1800. Indeed, one of the accomplishments of the first Jefferson term as president was to repeal the entire Federalist excise tax program. In Kentucky, whiskey tax delinquents only paid up when it was clear that the tax itself was going to be repealed.
Rather than the whiskey tax rebellion being localized and swiftly put down, the true story turns out to be very different. The entire American back-country was gripped by a non-violent, civil disobedient refusal to pay the hated tax on whiskey. No local juries could be found to convict tax delinquents. The Whiskey Rebellion was actually widespread and successful, for it eventually forced the federal government to repeal the excise tax.
Except during the War of 1812, the federal government never again dared to impose an internal excise tax, until the North transformed the American Constitution by centralizing the nation during the War Between the States. One of the evil fruits of this war was the permanent federal "sin" tax on liquor and tobacco, to say nothing of the federal income tax, an abomination and a tyranny even more oppressive than an excise.
Why didn't previous historians know about this widespread non-violent rebellion? Because both sides engaged in an "open conspiracy" to cover up the facts. Obviously, the rebels didn't want to call a lot of attention to their being in a state of illegality.
Washington, Hamilton, and the Cabinet covered up the extent of the revolution because they didn't want to advertise the extent of their failure. They knew very well that if they tried to enforce, or send an army into, the rest of the back-country, they would have failed. Kentucky and perhaps the other areas would have seceded from the Union then and there. Both contemporary sides were happy to cover up the truth, and historians fell for the deception.
The Whiskey Rebellion, then, considered properly, was a victory for liberty and property rather than for federal taxation. Perhaps this lesson will inspire a later generation of American taxpayers who are so harried and downtrodden as to make the whiskey or stamp taxes of old seem like Paradise.
Note: Those interested in the Whiskey Rebellion should consult Thomas P. Slaughter, "The Whiskey Rebellion" (New York: Oxford University Press, 1986); and Steven R. Boyd, ed., "The Whiskey Rebellion" (Westport, CT: Greenwood Press, 1985).
Professor Slaughter notes that some of the opponents of the Hamilton excise in Congress charged that the tax would "let loose a swarm of harpies who, under the denominations of revenue offices, will range through the country, prying into every man's house and affairs, and like Macedonia phalanx bear down all before them." Soon, the opposition predicted, "the time will come when a shirt will not be washed without an excise."
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop take a revisionist Rothbardian lens to American history. Was the American revolution a good thing? Was Andrew Jackson better than Thomas Jefferson? Does a historical narrative really matter? Tune in for this and more!
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Economically speaking, the US government is bankrupt even if the government won’t admit what is obvious. But how would an actual bankruptcy proceeding go?
Original Article: "In the Event of an Official US Bankruptcy"
One of the reasons that most economists of the 1920s did not recognize the existence of an inflationary problem was the widespread adoption of a stable price level as the goal and criterion for monetary policy. The extent to which the Federal Reserve authorities were guided by a desire to keep the price level stable has been a matter of considerable controversy. Far less controversial is the fact that more and more economists came to consider a stable price level as the major goal of monetary policy. The fact that general prices were more or less stable during the 1920s told most economists that there was no inflationary threat, and therefore the events of the Great Depression caught them completely unaware.
Actually, bank-credit expansion creates its mischievous effects by distorting price relations and by raising and altering prices compared to what they would have been without the expansion. Statistically, therefore, we can only identify the increase in money supply, a simple fact. We cannot prove inflation by pointing to price increases. We can only approximate explanations of complex price movements by engaging in a comprehensive economic history of an era—a task which is beyond the scope of this study. Suffice it to say here that the stability of wholesale prices in the 1920s was the result of monetary inflation offset by increased productivity, which lowered costs of production and increased the supply of goods.
But this "offset" was only statistical. It did not eliminate the boom-bust cycle; it only obscured it. The economists who emphasized the importance of a stable price level were thus especially deceived, for they should have concentrated on what was happening to the supply of money. Consequently, the economists who raised an alarm over inflation in the 1920s were largely the qualitativists. They were written off as hopelessly old-fashioned by the "newer" economists who realized the overriding importance of the quantitative in monetary affairs. The trouble did not lie with particular credit on particular markets (such as stock or real estate); the boom in the stock and real-estate markets reflected Mises's trade cycle: a disproportionate boom in the prices of titles to capital goods, caused by the increase in money supply attendant upon bank credit expansion.The qualitative aspect of credit is important to the extent that bank loans must be to business, and not to government or to consumers, to put the trade cycle mechanism into motion.
The stability of the price level in the 1920s is demonstrated by the Bureau of Labor Statistics Index of Wholesale Prices, which fell to 93.4 (100 = 1926) in June 1921, rose slightly to a peak of 104.5 in November 1925, and then fell back to 95.2 by June 1929. The price level, in short, rose slightly until 1925 and fell slightly thereafter. Consumer price indices also behaved in a similar manner.The National Industrial Conference Board (NICB) consumer price index rose from 102.3 (1923 = 100) in 1921 to 104.3 in 1926, then fell to 100.1 in 1929; the Bureau of Labor Statistics (BLS) consumer good index fell from 127.7 (1935–1939 = 100) in 1921 to 122.5 in 1929. Historical Statistics of the U.S., 1789–1945 (Washington, D.C.: U.S. Department of Commerce, 1949), pp. 226–36, 344. On the other hand, the Snyder Index of the General Price Level, which includes all types of prices (real estate, stocks, rents, and wage rates, as well as wholesale prices) rose considerably during the period, from 158 in 1922 (1913 = 100) to 179 in 1929, a rise of 13 percent. Stability was therefore achieved only in consumer and wholesale prices, but these were and still are the fields considered especially important by most economic writers.
Within the overall aggregate of wholesale prices, foods and farm products rose over the period while metals, fuel, chemicals, and home furnishings fell considerably. That the boom was largely felt in the capital-goods industries can be seen by (a) the quadrupling of stock prices over the period, and by (b) the fact that durable goods and iron and steel production each increased by about 160 percent, while the production of non-durable goods (largely consumer goods) increased by only 60 percent.
In fact, production of such consumer items as manufactured foods and textile products increased by only 48 percent and 36 percent respectively, from 1921 to 1929. Another illustration of Mises's theory was that wages were bid up far more in the capital-goods industries. Overbidding of wage rates and other costs is a distinctive feature of Mises's analysis of capital-goods industries in the boom. Average hourly earnings, according to the Conference Board Index, rose in selected manufacturing industries from $.52 in July 1921 to $.59 in 1929, a 12 percent increase. Among this group, wage rates in consumer-goods industries such as boots and shoes remained constant; they rose 6 percent in furniture, less than 3 percent in meat packing, and 8 percent in hardware manufacturing. On the other hand, in such capital-goods industries as machines and machine tools, wage rates rose by 12 percent, and by 19 percent in lumber, 22 percent in chemicals, and 25 percent in iron and steel.
Federal Reserve credit expansion, then, whether so intended or not, managed to keep the price level stable in the face of an increased productivity that would, in a free and unhampered market, have led to falling prices and a spread of increased living standards to everyone in the population. The inflation distorted the production structure and led to the ensuing depression-adjustment period. It also prevented the whole populace from enjoying the fruits of progress in lower prices and insured that only those enjoying higher monetary wages and incomes could benefit from the increased productivity.
There is much evidence for the charge of Phillips, McManus, and Nelson that "the end-result of what was probably the greatest price-level stabilization experiment in history proved to be, simply, the greatest depression."C.A. Phillips, T.F. McManus, and R.W. Nelson, Banking and the Business Cycle (New York: Macmillan, 1937), pp. 176ff. Benjamin Strong was apparently converted to a stable-price-level philosophy during 1922. On January 11, 1925, Strong privately wrote,
that it was my belief, and I thought it was shared by all others in the Federal Reserve System, that our whole policy in the future, as in the past, would be directed toward the stability of prices so far as it was possible for us to influence prices.Lester V. Chandler, Benjamin Strong, Central Banker (Washington, D.C.: Brookings Institution, 1958), p. 312. In this view, Strong was, of course, warmly supported by Montagu Norman. Ibid., p. 315.
When asked, in the Stabilization Hearings of 1927, whether the Federal Reserve Board could "stabilize the price level to a greater extent" than in the past, by open-market operations and other control devices, Governor Strong answered,
I personally think that the administration of the Federal Reserve System since the reaction of 1921 has been just as nearly directed as reasonable human wisdom could direct it toward that very object.Also see ibid., pp. 199ff. And Charles Rist recalls that, in his private conversations, "Strong was convinced that he was able to fix the price level, by his interest and credit policy." Charles Rist, "Notice Biographique," Revue d'Èconomie Politique (November–December, 1955): 1029.
It appears that Governor Strong had a major hand, in early 1928, in drafting the bill by Representative James G. Strong of Kansas (no relation) to compel the Federal Reserve System to promote a stable price level.Strong thus overcame his previous marked skepticism toward any legislative mandate for price stabilization. Before this, he had preferred to leave the matter strictly to Fed discretion. See Chandler, Benjamin Strong, Central Banker, pp. 202ff. Governor Strong was ill by this time and out of control of the system, but he wrote the final draft of the bill along with Representative Strong. In the company of the congressman and professor John R. Commons, one of the leading theoreticians of a stable price level, Strong discussed the bill with members of the Federal Reserve Board. When the Board disapproved, Strong felt bound, in his public statements, to go along with them.See the account in Irving Fisher, ibid., pp. 170–71. Commons wrote of Governor Strong: "I admired him both for his open-minded help to us on the bill and his reservation that he must go along with his associates."
We must further note that Carl Snyder, a loyal and almost worshipful follower of Governor Strong, and head of the statistical department of the Federal Reserve Bank of New York, was a leading advocate of monetary and credit control by the Federal Reserve to stabilize the price level.See Fisher's eulogy of Snyder, Stabilised Money, pp. 64–67; and Carl Snyder, "The Stabilization of Gold: A Plan," American Economic Review (June, 1923): 276–85; idem, Capitalism the Creator (New York: Macmillan, 1940), pp. 226–28.
Certainly, the leading British economists of the day firmly believed that the Federal Reserve was deliberately and successfully stabilizing the price level. John Maynard Keynes hailed "the successful management of the dollar by the Federal Reserve Board from 1923 to 1928" as a "triumph" for currency management. D.H. Robertson concluded in 1929 that "a monetary policy consciously aimed at keeping the general price level approximately stable . . . has apparently been followed with some success by the Federal Reserve Board in the United States since 1922."D.H. Robertson, "The Trade Cycle," Encyclopaedia Britannica, 14th ed. (1929), vol. 22, p. 354. Whereas Keynes continued to hail the Reserve's policy a few years after the depression began, Robertson became critical,
Looking back . . . the great American "stabilization" of 1922–1929 was really a vast attempt to destabilize the value of money in terms of human effort by means of a colossal program of investment . . . which succeeded for a surprisingly long period, but which no human ingenuity could have managed to direct indefinitely on sound and balanced lines.D.H. Robertson, "How Do We Want Gold to Behave?" in The International Gold Problem (London: Humphrey Milford, 1932), p. 45; quoted in Phillips, et al., Banking and the Business Cycle, pp. 186–87.
The siren song of a stable price level had lured leading politicians, to say nothing of economists, as early as 1911. It was then that Professor Irving Fisher launched his career as head of the "stable money" movement in the United States. He quickly gained the adherence of leading statesmen and economists to a plan for an international commission to study the money and price problem.
Supporters included President William Howard Taft, Secretary of War Henry Stimson, Secretary of the Treasury Franklin MacVeagh, Governor Woodrow Wilson, Gifford Pinchot, seven senators, and economists Alfred Marshall, Francis Edgeworth, and John Maynard Keynes in England. President Taft sent a special message to Congress in February 1912, urging an appropriation for such an international conference. The message was written by Fisher, in collaboration with Assistant Secretary of State Huntington Wilson, a convert to stable money. The Senate passed the bill, but it died in the House. Woodrow Wilson expressed interest in the plan but dropped the idea in the press of other matters.
In the spring of 1918, a Committee on the Purchasing Power of Money of the American Economic Association endorsed the principle of stabilization. Though encountering banker opposition to his stable-money doctrine, led notably by A. Barton Hepburn of the Chase National Bank, Fisher began organizing the Stable Money League at the end of 1920, and established the League at the end of May 1921—at the beginning of our inflationary era. Newton D. Baker, secretary of war under Wilson, and Professor James Harvey Rogers of Cornell were two of the early organizers.
Other prominent politicians and economists who played leading roles in the Stable Money League were Professor Jeremiah W. Jenks, its first president; Henry A. Wallace, editor of Wallace's Farmer, and later secretary of agriculture; John G. Winant, later governor of New Hampshire; Professor John R. Commons, its second president; George Eastman of the Eastman-Kodak family; Lyman J. Gage, formerly secretary of the Treasury; Samuel Gompers, president of the American Federation of Labor; Senator Carter Glass of Virginia; Thomas R. Marshall, vice president of the United States under Wilson; Representative Oscar W. Underwood; Malcolm C. Rorty; and economists Arthur Twining Hadley, Leonard P. Ayres, William T. Foster, David Friday, Edwin W. Kemmerer, Wesley C. Mitchell, Warren M. Persons, H. Parker Willis, Allyn A. Young, and Carl Snyder.
The ideal of a stable price level is relatively innocuous during a price rise when it can aid sound-money advocates in trying to check the boom; but it is highly mischievous when prices are tending to sag, and the stabilizationists call for inflation. And yet, stabilization is always a more popular rallying cry when prices are falling. The Stable Money League was founded in 1920–1921, when prices were falling during a depression. Soon, prices began to rise, and some conservatives began to see in the stable money movement a useful check against extreme inflationists. As a result, the league changed its name to the National Monetary Association in 1923, and its officers continued as before, with Professor Commons as president.
By 1925, the price level had reached its peak and begun to sag, and consequently the conservatives abandoned their support of the organization, which again changed its name to the Stable Money Association. Successive presidents of the new association were H. Parker Willis, John E. Rovensky, executive vice president of the Bank of America, Professor Kemmerer, and "Uncle" Frederic W. Delano. Other eminent leaders in the Stable Money Association were Professor Willford I. King; President Nicholas Murray Butler of Columbia University; John W. Davis, Democratic candidate for president in 1924; Charles G. Dawes, director of the Bureau of the Budget under Harding, and vice president under Coolidge; William Green, president of the American Federation of Labor; Charles Evans Hughes, secretary of state until 1925; Otto H. Kahn, investment banker; Frank O. Lowden, former Republican governor of Illinois; Elihu Root, former secretary of state and senator; James H. Rand Jr.; Norman Thomas, of the Socialist Party; Paul M. Warburg; and Owen D. Young. Enlisting from abroad came Charles Rist of the Bank of France; Eduard Benes of Czechoslovakia; Max Lazard of France; Emile Moreau of the Bank of France; Louis Rothschild of Austria; and Sir Arthur Balfour, Sir Henry Strakosch, Lord Melchett, and Sir Josiah Stamp of Great Britain.
Serving as honorary vice presidents of the association were the presidents of the following organizations: the American Association for Labor Legislation, American Bar Association, American Farm Bureau Federation, American Farm Economic Association, American Statistical Association, Brotherhood of Railroad Trainmen, National Association of Credit Men, National Consumers' League, National Education Association, American Council on Education, United Mine Workers of America, the National Grange, the Chicago Association of Commerce, the Merchants' Association of New York, and Bankers' Associations in 43 states and the District of Columbia.
Executive director and operating head of the association with such formidable backing was Norman Lombard, brought in by Fisher in 1926. The association spread its gospel far and wide. It was helped by the publicity given to Thomas Edison and Henry Ford's proposal for a "commodity dollar" in 1922 and 1923. Other prominent stabilizationists in this period were professors George F. Warren and Frank Pearson of Cornell, Royal Meeker, Hudson B. Hastings, Alvin Hansen, and Lionel D. Edie. In Europe, in addition to the above mentioned, advocates of stable money included: Professor Arthur C. Pigou, Ralph G. Hawtrey, J.R. Bellerby, R.A. Lehfeldt, G.M. Lewis, Sir Arthur Salter, Knut Wicksell, Gustav Cassel, Arthur Kitson, Sir Frederick Soddy, F.W. Pethick-Lawrence, Reginald McKenna, Sir Basil Blackett, and John Maynard Keynes. Keynes was particularly influential in his propaganda for a "managed currency" and a stabilized price level, as set forth in his Tract on Monetary Reform, published in 1923.
Ralph Hawtrey proved to be one of the evil geniuses of the 1920s. An influential economist in a land where economists have shaped policy far more influentially than in the United States, Hawtrey, director of financial studies at the British Treasury, advocated international credit control by central banks to achieve a stable price level as early as 1913. In 1919, Hawtrey was one of the first to call for the adoption of a gold-exchange standard by European countries, tying it in with international central-bank cooperation. Hawtrey was one of the prime European trumpeters of the prowess of Governor Benjamin Strong.
Writing in 1932, at a time when Robertson had come to realize the evils of stabilization, Hawtrey declared, "The American experiment in stabilization from 1922 to 1928 showed that an early treatment could check a tendency either to inflation or to depression. . . . The American experiment was a great advance upon the practice of the nineteenth century," when the trade cycle was accepted passively.Ralph O. Hawtrey, The Art of Central Banking (London: Longmans, Green, 1932), p. 300. When Governor Strong died, Hawtrey called the event "a disaster for the world."Leading stabilizationist Norman Lombard also hailed Strong's alleged achievement: "By applying the principles expounded in this book . . . he [Strong] maintained in the United States a fairly stable price level and a consequent condition of widespread economic well-being from 1922 to 1928." Norman Lombard, Monetary Statesmanship (New York: Harpers, 1934), p. 32n. On the influence of stable price ideas on Federal Reserve policy, see also David A. Friedman, "Study of Price Theories Behind Federal Reserve Credit Policy, 1921–29" (unpublished M.A. thesis, Columbia University, 1938). Finally, Hawtrey was the main inspiration for the stabilization resolutions of the Genoa Conference of 1922.
It was inevitable that this host of fashionable opinion should be translated into legislative pressure, if not legislative action. Rep. T. Alan Goldsborough of Maryland introduced a bill to "Stabilize the Purchasing Power of Money" in May 1922, essentially Professor Fisher's proposal, fed to Goldsborough by former Vice President Marshall. Witnesses for the bill were Professors Fisher, Rogers, King, and Kemmerer, but the bill was not reported out of committee. In early 1924, Goldsborough tried again, and Representative O.B. Burtness of North Dakota introduced another stabilization bill. Neither was reported out of committee.
The next major effort was a bill by Rep. James G. Strong of Kansas, introduced in January, 1926, under the urging of veteran stabilizationist George H. Shibley, who had been promoting the cause of stable prices since 1896. Rather than the earlier Fisher proposal for a "compensated dollar" to manipulate the price level, the Strong Bill would have compelled the Federal Reserve System to act directly to stabilize the price level. Hearings were held from March 1926 until February 1927. Testifying for the bill were Shibley, Fisher, Lombard, Dr. William T. Foster, Rogers, Bellerby, and Commons. Commons, Rep. Strong, and Governor Strong then rewrote the bill, as indicated above, and hearings were held on the second Strong Bill in the spring of 1928.
The high point of testimony for the second Strong Bill was that of Sweden's Professor Gustav Cassel, whose eminence packed the Congressional hearing room. Cassel had been promoting stabilization since 1903. The advice of this sage was that the government employ neither qualitative nor quantitative measures to check the boom, since these would lower the general price level. In a series of American lectures, Cassel also urged lower Fed reserve ratios, as well as worldwide central-bank cooperation to stabilize the price level.
The Strong Bill met the fate of its predecessors, and never left the committee. But the pressure exerted at the various hearings for these bills, as well as the weight of opinion and the views of Governor Strong, served to push the Federal Reserve authorities into trying to manipulate credit for purposes of price stabilization.
International pressure strengthened the drive for a stable price level. Official action began with the Genoa Conference, in the spring of 1922. This Conference was called by the League of Nations, at the initiative of Premier Lloyd George, who in turn was inspired by the dominant figure of Montagu Norman. The Financial Commission of the Conference adopted a set of resolutions which, as Fisher puts it, "have for years served as the potent armory for the advocates of stable money all over the world."Fisher, Stabilised Money, p. 282. Our account of the growth of the stable money movement rests heavily upon Fisher's work. The resolutions urged international central-bank collaboration to stabilize the world price level, and also suggested a gold-exchange standard.
On the Financial Commission were such stabilizationist stalwarts as Sir Basil Blackett, Professor Cassel, Dr. Vissering, and Sir Henry Strakosch.While Hawtrey was the main inspiration for the resolutions, he criticized them for not going far enough. The League of Nations, indeed, was quickly taken over by the stabilizationists. The Financial Committee of the League was largely inspired and run by Governor Montagu Norman, working through two close associates, Sir Otto Niemeyer and Sir Henry Strakosch. Sir Henry was, as we have indicated, a prominent stabilizationist.See Paul Einzig, Montagu Norman (London: Kegan Paul, 1932), pp. 67, 78. Furthermore, Norman's chief adviser in international affairs, Sir Charles S. Addis, was also an ardent stablizationist. Sir Henry Clay, Lord Norman (London: Macmillan, 1957), p. 138.
In 1921, a Joint Committee on Economic Crises was formed by the General Labour Conference, the International Labour Office (ILO) of the League of Nations, and the Financial Committee of the League. On this Joint Committee were three leading stabilizationists: Albert Thomas, Henri Fuss, and Major J.R. Bellerby. In 1923, Thomas's report warned that a fall in the price level "almost invariably" causes unemployment. Henri Fuss of the ILO propagandized for stable price levels in the International Labour Review in 1926.
The Joint Committee met in June 1925 to affirm the principles of the Genoa Conference. In the meanwhile, two private international organizations, the International Association for Labour Legislation and the International Association on Unemployment, held a joint International Congress on Social Policy, at Prague, in October 1924. The congress called for the general adoption of the principles of the Genoa Conference, by stabilizing the general price level. The International Association for Social Progress adopted a report at its Vienna meeting in September 1928 prepared by stabilizationist Max Lazard of the investment banking house of Lazard Frères in Paris, calling for price-level stability. The ILO followed suit in June 1929 terming falling prices a cause of unemployment. And, finally, the Economic Consultative Committee of the league endorsed the Genoa principles in the summer of 1928.
Just as Professors Cassel and Commons wanted no credit restraint at all in 1928 and 1929, so Representative Louis T. McFadden, powerful chairman of the House Banking and Currency Committee, exerted a similar though more powerful brand of pressure on the Federal Reserve authorities. On February 7, 1929, the day after the Federal Reserve Board's letter to the Federal Reserve Banks warning about stock-market speculation, Representative McFadden himself warned the House against an adverse business reaction from this move. He pointed out that there had been no rise in the commodity price level, so how could there be any danger of inflation? The Fed, he warned skittishly, should not concern itself with the stock market or security loans, lest it produce a general slump. Tighter money would make capital financing difficult, and, coupled with the resulting loss of confidence, would precipitate a depression.
In fact, McFadden declared that the Fed should be prepared to ease money rates as soon as any fall in prices or employment might appear.Cited in Joseph Stagg Lawrence, Wall Street and Washington (Princeton, N.J.: Princeton University Press, 1929), pp. 437–43. Other influential voices raised against any credit restriction were those of W.T. Foster and Waddill Catchings, leading stabilizationists and well known for their underconsumptionist theories. Catchings was a prominent investment banker (of Goldman, Sachs and Co.), and iron and steel magnate, and both men were close to the Hoover administration. (As we shall see, their "plan" for curing unemployment was adopted, at one time, by Hoover.)
In April 1929 Foster and Catchings warned that any credit restriction would lower the price level and hurt business. The bull market, they assured the public—along with Fisher, Commons, and the rest—was grounded on a sure foundation of American confidence and growth.Commercial and Financial Chronicle (April, 1929): 2204–06. Also see Beckhart, "Federal Reserve Policy and the Money Market," in Beckhart et al., The New York Money Market (New York: Columbia University Press, 1931), vol. 2, pp. 99ff. And the bull speculators, of course, echoed the cry that everyone should "invest in America." Anyone who criticized the boom was considered to be unpatriotic and "selling America short."
Cassel was typical of European opinion in insisting on even greater inflationary moves by the Federal Reserve System. Sir Ralph Hawtrey, visiting at Harvard during 1928–1929, spread the gospel of price-level stabilization to his American audience.See Joseph Dorfman, The Economic Mind in American Civilization (New York: Viking Press, 1959), vol. 4, p. 178. Influential British Labourite Philip Snowden urged in 1927 that the United States join in a world plan for price stabilization, to prevent a prolonged price decline. The London Statist and the Nation (London) both bemoaned the Federal Reserve "deflation."
Perhaps most extreme was a wildly inflationist article by the respected economist Professor Allyn A. Young, an American then teaching at the University of London. Young, in January 1929, warned about the secular downward price trend, and urged all central banks not to "hoard" gold, to abandon their "high gold reserve-ratio fetish," and to inflate to a fare-thee-well. "Central banks of the world," he declared, "appear to be afraid of prosperity. So long as they are they will exert a retarding influence upon the growth of production."Allyn A. Young, "Downward Price Trend Probable, Due to Hoarding of Gold by Central Banks," The Annalist (January 18, 1929): 96–97. Also see, "Our Reserve Bank Policy as Europe Thinks It Sees It," The Annalist (September 2, 1927): 374–75.
In an age of folly, Professor Young's article was perhaps the crowning pièce de résistance—much more censurable than the superficially more glaring errors of such economists as Irving Fisher and Charles A. Dice on the alleged "new era" prosperity of the stock market. Merely to extrapolate present stock market conditions is, after all, not nearly as reprehensible as considering deflation the main threat in the midst of a rampantly inflationary era. But such was the logical conclusion of the stabilizationist position.
We may conclude that the Federal Reserve authorities, in promulgating their inflationary policies, were motivated not only by the desire to help British inflation and to subsidize farmers, but were also guided—or rather misguided—by the fashionable economic theory of a stable price level as the goal of monetary manipulation.Seymour Harris, Twenty Years of Federal Reserve Policy (Cambridge, Mass.: Harvard University Press, 1933), vol. 1, 192ff., and Aldrich, The Causes of the Present Depression and Possible Remedies (New York, 1933), pp. 20–21.
This article is excerpted from America's Great Depression, part 2, chapter 6, "Theory and Inflation: Economists and the Lure of a Stable Price Level" (1963; 2008).
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Original Article: "Comprehensive Reform versus Piecemeal Reform"
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Recorded at The Depot Craft Brewery & Distillery in Reno, Nevada on May 20th, 2023.
Modern Western culture is dominated by demands for "social justice." But how does one even define this term, and does social justice even produce justice in the end?
Original Article: "Is Social Justice Just? A Review"
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Original Article: "The Dominion Lawsuit against Fox News Is Part of the War against Free Speech"
Mises had hoped that democracy would lead to free societies after World War II ended. He did not foresee the illiberal turn in the West in the last decade.
Original Article: "Libertarian Law by Democratic Means: The Power of Ideologies and Public Opinion"
While the horrors of the transatlantic slave trade have been well documented, people other than slave traders and slaveholders benefitted from it, with some surprising results.
Original Article: "Historical Effects of the Transatlantic Slave Trade"
[This article is excerpted from Conceived in Liberty, volume 1, chapter 6, "The Social Structure of Virginia: Bondservants and Slaves". An MP3 audio file of this article, narrated by Floy Lilley, is available for download.]
Until the 1670s, the bulk of forced labor in Virginia was indentured service (largely white, but some Negro); Negro slavery was negligible. In 1683 there were 12,000 indentured servants in Virginia and only 3,000 slaves of a total population of 44,000. Masters generally preferred bondservants for two reasons. First, they could exploit the bondservants more ruthlessly because they did not own them permanently, as they did their slaves; on the other hand, the slaves were completely their owners’ capital and hence the masters were economically compelled to try to preserve the capital value of their human tools of production. Second, the bondservants, looking forward to their freedom, could be more productive laborers than the slaves, who were deprived of all hope for the future.
As the colony grew, the number of bondservants grew also, although as servants were repeatedly set free, their proportion to the population of Virginia declined. Since the service was temporary, a large new supply had to be continually furnished. There were seven sources of bondservice, two voluntary (initially) and five compulsory. The former consisted partly of “redemptioners” who bound themselves for four to seven years, in return for their passage money to America. It is estimated that seventy percent of all immigration in the colonies throughout the colonial era consisted of redemptioners. The other voluntary category consisted of apprentices, children of the English poor, who were bound out until the age of twenty-one. In the compulsory category were: (a) impoverished and orphaned English children shipped to the colonies by the English government; (b) colonists bound to service in lieu of imprisonment for debt (the universal punishment for all nonpayment in that period); (c) colonial criminals who were simply farmed out by the authorities to the mastership of private employers; (d) poor English children or adults kidnapped by professional “crimps”—one of whom boasted of seizing 500 children annually for a dozen years; and (e) British convicts choosing servitude in America for seven to fourteen years in lieu of all prison terms in England. The last were usually petty thieves or political prisoners—and Virginia absorbed a large portion of the transported criminals.
As an example of the grounds for deporting political prisoners into bondage, an English law in force in the mid-1660s banished to the colonies anyone convicted three times of attempting an unlawful meeting—a law aimed mostly at the Quakers. Hundreds of Scottish nationalist rebels, particularly after the Scottish uprising of 1679, were shipped to the colonies as political criminals. An act of 1670 banished to the colonies anyone with knowledge of illegal religious or political activity, who refused to turn informer for the government.
During his term of bondage, the indentured servant received no monetary payment. His hours and conditions of work were set absolutely by the will of his master who punished the servant at his own discretion. Flight from the master’s service was punishable by beating, or by doubling or tripling the term of indenture. The bondservants were frequently beaten, branded, chained to their work, and tortured. The frequent maltreatment of bondservants is so indicated in a corrective Virginia act of 1662: “The barbarous usage of some servants by cruel masters being so much scandal and infamy to the country... that people who would willingly adventure themselves hither, are through fears thereof diverted”—thus diminishing the needed supply of indentured servants.
Many of the oppressed servants were moved to the length of open resistance. The major form of resistance was flight, either individually or in groups; this spurred their employers to search for them by various means, including newspaper advertisements. Work stoppages were also employed as a method of struggle. But more vigorous rebellions also occurred especially in Virginia in 1659, 1661, 1663, and 1681. Rebellions of servants were particularly pressing in the 1660s because of the particularly large number of political prisoners taken in England during that decade. Independent and rebellious by nature, these men had been shipped to the colonies as bondservants. Stringent laws were passed in the 1660s against runaway servants striving to gain their freedom.
In all cases, the servant revolts for freedom were totally crushed and the leaders executed. Demands of the rebelling servants ranged from improved conditions and better food to outright freedom. The leading example was the servant uprising of 1661 in York County, Virginia, led by Isaac Friend and William Clutton. Friend had exhorted the other servants that “he would be the first and lead them and cry as they went along who would be for liberty and freed from bondage and that there would be enough come to them, and they would go through the country and kill those who made any opposition and that they would either be free or die for it.”Abbot E. Smith, Colonists in Bondage. The rebels were treated with surprising leniency by the county court, but this unwonted spirit quickly evaporated with another servant uprising in 1663.
This servant rebellion in York, Middlesex, and Gloucester counties was betrayed by a servant named Birkenhead, who was rewarded for his renegacy by the House of Burgesses with his freedom and 5,000 pounds of tobacco. The rebel leaders, however,—former soldiers under Cromwell—were ruthlessly treated; nine were indicted for high treason and four actually executed. In 1672 a servant plot to gain freedom was uncovered and a Katherine Nugent suffered thirty lashes for complicity. A law was passed forbidding servants from leaving home without special permits and meetings of servants were further repressed.
One of the first servant rebellions occurred in the neighboring Chesapeake tobacco colony of Maryland. In 1644 Edward Robinson and two brothers were convicted for armed rebellion for the purpose of liberating bondservants. Thirteen years later Robert Chessick, a recaptured runaway servant in Maryland, persuaded several servants of various masters to run away to the Swedish settlements on the Delaware River. Chessick and a dozen other servants seized a master’s boat, as well as arms for self-defense in case of attempted capture. But the men were captured and Chessick was given thirty lashes. As a special refinement, one of Chessick’s friends and abettors in the escape, John Beale, was forced to perform the whipping.
In 1663 the bondservants of Richard Preston of Maryland went on strike and refused to work in protest against the lack of meat. The Maryland court sentenced the six disobedient servants to thirty lashes each, with two of the most moderate rebels compelled to perform the whipping. Facing force majeure, all the servants abased themselves and begged forgiveness from their master and from the court, which suspended the sentence on good behavior.
In Virginia a servant rebellion against a master, Captain Sisbey, occurred as early as 1638; the lower Norfolk court ordered the enormous total of one hundred lashes on each rebel. In 1640 six servants of Captain William Pierce tried to escape to the Dutch settlements. The runaways were apprehended and brutally punished, lest this set “a dangerous precedent for the future time.” The prisoners were sentenced to be whipped and branded, to work in shackles, and to have their terms of bondage extended.
By the late seventeenth century the supply of bondservants began to dry up. While the opening of new colonies and wider settlements increased the demand for bondservants, the supply dwindled greatly as the English government finally cracked down on the organized practice of kidnapping and on the shipping of convicts to the colonies. And so the planters turned to the import and purchase of Negro slaves. In Virginia there had been 50 Negroes, the bulk of them slaves, out of a total population of 2,500 in 1630; 950 Negroes out of 27,000 in 1660; and 3,000 Negroes out of 44,000 in 1680—a steadily rising proportion, but still limited to less than seven percent of the population. But in ten years, by 1690, the proportion of Negroes had jumped to over 9,000 out of 53,000, approximately seventeen percent. And by 1700, the number was 16,000 out of a population of 58,000, approximately twenty-eight percent. And of the total labor force—the working population—this undoubtedly reflected a considerably higher proportion of Negroes.
How the Negro slaves were treated may be gauged by the diary of the aforementioned William Byrd II, who felt himself to be a kindly master and often inveighed against “brutes who mistreat their slaves.” Typical examples of this kindly treatment were entered in his diary:
2-8-09: Jenny and Eugene were whipped.
5-13-09: Mrs. Byrd whips the nurse.
6-10-09: Eugene (a child) was whipped for running away and had the bit put on him.
11-30-09: Jenny and Eugene were whipped.
12-16-09: Eugene was whipped for doing nothing yesterday.
4-17-10: Byrd helped to investigate slaves tried for “High Treason”; two were hanged.
7-1-10: The Negro woman ran away again with the bit in her mouth.
7-15-10: My wife, against my will, caused little Jenny to be burned with a hot iron.
8-22-10: I had a severe quarrel with little Jenny and beat her too much for which I was sorry.
1-22-11: A slave “pretends to be sick.” I put a branding iron on the place he claimed of and put the bit on him.
It is pointless to criticize such passages as only selected instances of cruel treatment, counterbalanced by acts of kindness by Byrd and other planters toward their slaves. For the point is not only that the slave system was one where such acts could take place; the point is that threats of brutality underlay the whole relationship. For the essence of slavery is that human beings, with their inherent freedom of will, with individual desires and convictions and purposes, are used as capital, as tools for the benefit of their master. The slave is therefore habitually forced into types and degrees of work that he would not have freely undertaken; by necessity, therefore, the bit and the lash become the motor of the slave system. The myth of the kindly master camouflages the inherent brutality and savagery of the slave system.
One historical myth holds that since the slaves were their masters’ capital, the masters’ economic self-interest dictated kindly treatment of their property. But again, the masters always had to make sure that the property was really theirs, and for this, systematic brutality was needed to turn labor from natural into coerced channels for the benefit of the master. And, second, what of property that had outlived its usefulness? Of capital that no longer promised a return to the master? Of slaves too old or too ill to continue earning their masters a return? What sort of treatment did the economic self-interest of the master dictate for slaves who could no longer repay the costs of their subsistence?
Slaves resisted their plight in many ways, ranging from such nonviolent methods as work slowdowns, feigning illness, and flight, to sabotage, arson, and outright insurrection. Insurrections were always doomed to failure, outnumbered as the slaves were in the population. And yet the slave revolts appeared and reappeared. There were considerable slave plots in Virginia in 1687, 1709–10, 1722–23, and 1730. A joint conspiracy of great numbers of Negro and Indian slaves in Surry and Isle of Wight counties was suppressed in 1709, and another Negro slave conspiracy crushed in Surry County the following year. The slave who betrayed his fellows was granted his freedom by the grateful master. The 1730 uprising occurred in five counties of Virginia, and centered on the town of Williamsburg. A few weeks before the insurrection, several suspected slaves were arrested and whipped. An insurrection was then planned for the future, but was betrayed and the leaders executed.
Joint flight by slaves and servants was also common during the seventeenth century, as well as joint participation in plots and uprisings. In 1663 Negro slaves and white indentured servants in Virginia plotted an extensive revolt, and a number of the rebels were executed. The colonists appointed the day as one of prayer and thanksgiving for being spared the revolt. Neither slave nor indentured servant was permitted to marry without the master’s consent; yet there is record of frequent cohabitation, despite prohibitory laws.
It has been maintained in mitigation of the brutality of the American slave system that the Negroes were purchased from African chieftains, who had enslaved them there. It is true that the slaves were also slaves in Africa, but it is also true that African slavery never envisioned the vast scope, the massive dragooning of forced labor that marked American plantation slavery. Furthermore, the existence of a ready white market for slaves greatly expanded the extent of slavery in Africa, as well as the intensity of the intertribal wars through which slavery came about. As is usually the case on the market, demand stimulated supply. Moreover, African slavery did not include transportation under such monstrous conditions that a large percentage could not survive, or the brutal “seasoning” process in a West Indies way station to make sure that only those fit for slave conditions survived, or the continual deliberate breaking up of slave families that prevailed in the colonies.
From the earliest opening of the New World, African slaves were imported as forced labor to make possible the working of large plantations, which, as we have seen, would have been uneconomic if they had had to rely, as did other producers, on free and voluntary labor. In Latin America, from the sixteenth century on, Negro slavery was used for large sugar plantations concentrated in the West Indies and on the north coast of South America. It has been estimated that a total of 900,000 Negro slaves were imported into the New World in the sixteenth century, and two and three-quarter million in the seventeenth century.Over the seventeenth and eighteenth centuries, only about one-fifteenth of the total Negro imports into the New World arrived in the territory of what is now the United States. That the slaves fared even worse in the Latin American colonies is seen by the far higher death rate there than in North America.
Negroes came into use as slaves instead of the indigenous American Indians because: (a) the Negroes proved more adaptable to the onerous working conditions of slavery—enslaved Indians tended, as in the Caribbean, to die out; (b) it was easier to buy existing slaves from African chieftains than to enslave a race anew; and (c) of the great moral and spiritual influence of Father Bartolome de Las Casas in Spanish America, who in the mid-sixteenth century inveighed against the enslavement of the American Indians. Spanish consciences were never agitated over Negro slavery as they were over Indian; even Las Casas himself owned several Negro slaves for many years. Indeed, early in his career, Las Casas advocated the introduction of Negro slaves to relieve the pressure on the Indians, but he eventually came to repudiate the slavery of both races. In the seventeenth century two Spanish Jesuits, Alonzo de Sandoval and Pedro Claver, were conspicuous in trying to help the Negro slaves, but neither attacked the institution of Negro slavery as un-Christian. Undoubtedly one reason for the different treatment of the two races was the general conviction among Europeans of the inherent inferiority of the Negro race. Thus, the same Montesquieu who had scoffed at those Spaniards who called the American Indians barbarians, suggested that the African Negro was the embodiment of Aristotle’s “natural slave.” And even the environmental determinist David Hume suspected “the Negroes to be naturally inferior to the whites. There scarcely ever was a civilized nation of that complexion, nor even an individual, eminent either in action or speculation. No ingenious manufacturers amongst them, no arts, no sciences. On the other hand, the most rude and barbarian of the whites... have still something eminent about them.... Such a uniform and constant difference could not happen, in so many countries and ages, if nature had not made an original distinction between these breeds of men.”
Contrary to the views of those writers who maintain that Negroes and whites enjoyed equal rights as indentured servants in Virginia until the 1660s, after which the Negroes were gradually enslaved, evidence seems clear that from the beginning many Negroes were slaves and were treated far more harshly than were white indentured servants.Cf. Winthrop D. Jordan, “Modern Tensions and the Origins of American Slavery,” Journal of Southern History (February 1962), pp. 17-30. No white man, for example, was ever enslaved unto perpetuity—lifetime service for the slave and for his descendants—in any English colony. The fact that there were no slave statutes in Virginia until the 1660s simply reflected the small number of Negroes in the colony before that date.Ibid. Jordan cites many evidences of Negro slavery—including court sentences, records of Negroes, executions of wills, comparative sale prices of Negro and white servants—dating from 1640, before which time the number of Negroes in Virginia was negligible. From a very early date, owned Negroes were worked as field hands, whereas white bondservants were spared this onerous labor. And also from an early date, Negroes, in particular, were denied any right to bear arms. An especially striking illustration of this racism pervading Virginia from the earliest days was the harsh prohibition against any sexual union of the races. As early as 1630 a Virginia court ordered “Hugh Davis to be soundly whipped, before an assembly of Negroes and others for abusing himself to the dishonor of God and shame of Christians by defiling his body in lying with a Negro.” By the early 1660s the colonial government outlawed miscegenation and interracial fornication. When Virginia prohibited all interracial unions in 1691, the Assembly bitterly denounced miscegenation as “that abominable mixture and spurious issue.”“Spurious” in colonial legislation meant not simply illegitimate, but specifically the children of interracial unions.
Other regulations dating from this period and a little later included one that forbade any slave from leaving a plantation without a pass from his master; another decreed that conversion to Christianity would not set a slave free, a fact which violated a European tradition that only heathens, not Christians, might be reduced to slavery.
By the end of the seventeenth century, the growing Virginia colony had emerged from its tiny and precarious beginnings with a definite social structure. This society may be termed partly feudal. On the one hand, Virginia, with its abundance of new land, was spared the complete feudal mold of the English homeland. The Virginia Company was interested in promoting settlement, and most grantees (such as individual settlers and former indentured servants) were interested in settling the land for themselves. As a result, there developed a multitude of independent yeomen settlers, particularly in the less choice up-country lands. Also, the feudal quitrent system never took hold in Virginia. The settlers were charged quitrents by the colony or by the large grantees who, instead of allowing settlers to own the land or selling the land to them, insisted on charging and trying to collect annual quitrents as overlords of the land area. But while Virginia was able to avoid many crucial features of feudalism, it introduced an important feudal feature into its method of distributing land, especially the granting of large tracts of choice tidewater river land to favorite and wealthy planters. These large land grants would have early dissolved into ownership by the individual settlers were it not for the regime of forced labor, which made the large tobacco plantations profitable. Furthermore, the original “settlers,” those who brought the new land into use, were in this case the slaves and bondservants themselves, so it might well be said that the planters were in an arbitrary quasi-feudal relation to their land even apart from the large grants.
Temporary indentured service, both “voluntary” and compulsory, and the more permanent Negro slavery formed the base of exploited labor upon which was erected a structure of oligarchic rule by the large tobacco planters. The continuance of the large land tracts was also buttressed by the totally feudal laws of entail and primogeniture, which obtained, at least formally, in Virginia and most of the other colonies. Primogeniture compelled the undivided passing-on of land to the eldest son, and entail prevented the land from being alienated (even voluntarily) from the family domain. However, primogeniture did not exert its fully restrictive effect, for the planters generally managed to elude it and to divide their estate among their younger children as well. Hence, Virginia land partly dissolved into its natural division as the population grew. Primogeniture and entail never really took hold in Virginia, because the abundance of cheap land made labor—and hence the coerced supply of slaves—the key factor in production. More land could always be acquired; hence there was no need to restrict inheritance to the eldest son. Furthermore, the rapid exhaustion of tobacco land by the current methods of cultivation required the planters to be mobile, and to be ready to strike out after new plantations. The need for such mobility militated against the fixity of landed estates that marked the rigid feudal system of land inheritance prevailing in England. Overall, the wealth and status of Virginia’s large planters was far more precarious and less entrenched that were those of their landowning counterparts in England.
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.
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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.
Once the Southern states accepted the Thirteenth Amendment, Lincoln was entirely content for the old Southern elites to resume their positions of power and for many blacks to continue in a condition little better than bondage.
Original Article: "Lincoln's Main Target Was "Anarchy" and Secession, Not Slavery"
The current banking crises have deep roots in US financial history. Monetary authorities have engaged in inflationary behavior for more than a hundred years.
Original Article: "A Pyrrhic End to 130 Years of Vicious Bad Money and Banking Crises"
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
These short columns—usually no more than two typewritten pages each—appeared in the Freedom Newspapers. Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968, addressing the campus revolt; the massive antiwar demonstrations; the Six-Day War between Israel and the Arab powers; the Newark riots; the Vietnam war; the persecution of H. Rap Brown, the assassination of Martin Luther King, the abdication of Lyndon Baines Johnson, the rise of Richard Nixon — in those two crucial years there was, as they say, never a dull moment.
Read the text version here. Narrated by Jim Vann.
Download the complete audiobook (63 MP3 files) in one ZIP file here. This audiobook is also available via RSS.Purchase the Audiobook on iTunes/Audible/Amazon, or paperback at the Mises Store.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968. In those two crucial years, there was, as they say, never a dull moment.
Narrated by Jim Vann.
Today is the 30th anniversary of the Waco Massacre in which the media and the government self-congratulated each other in absolving the FBI of any crimes. Nothing has changed since then.
Original Article: "Waco 30 Years Later: It Is Not an Atrocity if the Feds Do It"
Scalia: Rise to Greatness, 1936–1986by James RosenRegnery Publishing, 2023496 pages
James Rosen, who has written biographies of John Mitchell and Dick Cheney, and was for many years a reporter for Fox News, is a neoconservative and Reagan Republican. He has found an ideal biographical subject in Antonin Scalia, a Reagan Republican, who served for thirty years on the Supreme Court. The volume under review, the first of two, covers the time from Scalia’s birth to his appointment to the court; it concludes with Scalia’s installation ceremony. Rosen has made much more extensive use of Scalia’s papers than two previous biographers, as he never ceases to remind us; and it is easy to see why he has been granted this access. His attitude toward Scalia falls little short of adulation.
The book also conveys, though, a fact about Scalia that one doubts Rosen had in mind in writing the book. Although Scalia made many effective criticisms of the excesses of the Left, in particular of the use of the “living Constitution” doctrine to promote judicial usurpation of power, he was not someone who saw the need for fundamental change in the system by which America is governed. Instead, he wanted to succeed within that system. In this respect, his career contrasts sharply with that of Ron Paul, who although a member of Congress for many years, was always an outsider. Their attitudes toward congressional investigation of the Central Intelligence Agency (CIA) and other intelligence agencies, to be discussed below, illustrate these different political approaches.
In Scalia’s years as a student at Harvard Law School, beginning in 1957, the faculty emphasized judicial restraint. In 1959, when Herbert Wechsler, a professor at Columbia Law School and one of the most influential legal theorists of the time, delivered the Oliver Wendell Holmes Lecture at Harvard, Scalia was attracted to his view that the law consists of a strict body of procedural rules from which judges should not deviate in efforts to achieve various social ends. “In his address, entitled ‘Toward Neutral Principles of Constitutional Law,’ Wechsler argued the benefits of the legal process’s ‘transcending the immediate result that is achieved.’ He asked the audience to consider whether Brown v. Board of Education (1954), the landmark Supreme Court ruling that struck down separate-but-equal treatment in public education for black students, reflected such a process. ‘For me, assuming equal facilities, the question posed by state-enforced segregation is not one of discrimination at all,’ Wechsler said.” (There is some doubt whether Scalia attended the lecture, but it generated great attention and was later published.)
Given his acceptance of judicial restraint and strict adherence to procedure, Scalia viewed with alarm the radical departures from precedent of the Warren court. The “living Constitution” of Justice William Brennan was abhorrent to him. At his confirmation hearing for Supreme Court justice in 1986, in answer to then senator Joseph Biden, Scalia said, “The Constitution is obviously not meant to be evolvable so easily that, in effect, a court of nine judges can treat it as though it is a bring-along-with-me statute and can fill it up with whatever content the current times seem to require. To a large degree, it is intended to be an insulation against the current times, against the positions of the moment that may cause individual liberties to be disregarded, and it has served that function valuably very often. So I would never use the phrase ‘living Constitution.’”
Scalia was much more committed to procedure and restraint than to individual liberty, and this led him to accept many of the incursions of the Leviathan state. One of the chief means by which our freedoms have been trampled on is administrative law, in which unconstitutionally broad legislation delegates to administrative agencies such as the Fair Trade Commission and the Food and Drug Administration the power to enact binding regulations that have the force of law. Scalia was not altogether blind to abuses of delegation, but his primary emphasis in this area was that courts must accept the procedures these agencies use to reach their decisions. Thus, “judicial restraint” became an instrument of judicial tyranny. In one instance, he praised an opinion by the Supreme Court that “rebuked the D.C. Circuit, one rung below the Supreme Court, for having ‘improperly intruded into the agency’s decision-making process.’”
The opinion of the foremost authority on administrative law, Philip Hamburger of Columbia Law School, was entirely different: “In sum, the conventional understanding of administrative law is utterly mistaken. It is wrong on the history and oblivious to the danger. That danger is absolutism: extra-legal, supra-legal, and consolidated power. And the danger matters because administrative power revives this absolutism. The Constitution carefully barred this threat, but constitutional doctrine has since legitimized this dangerous sort of power. It therefore is necessary to go back to basics. Among other things, we should no longer settle for some vague notion of ‘rule of law,’ understood as something that allows the delegation of legislative and judicial powers to administrative agencies. We should demand rule through law and rule under law. Even more fundamentally, we need to reclaim the vocabulary of law: Rather than speak of administrative law, we should speak of administrative power—indeed, of absolute power or more concretely of extra-legal, supra-legal, and consolidated power. Then we at least can begin to recognize the danger.”
There is an even more glaring instance in which Scalia’s views were at odds with individual freedom. He supported the CIA and other spy agencies after the Vietnam War, when revelations of abuses led to demands for congressional oversight and investigation. More generally, he favored a “strong” foreign policy, viewing this area as under the jurisdiction of the executive branch. Nor were his views merely a matter of academic interest. In the period under consideration, Scalia worked for the Office of Legal Counsel in the Justice Department and had a major impact in drafting the presidential responses to congressional efforts to limit executive discretion.
Scalia was especially concerned to counter attempts by Congress and members of the public to use the Freedom of Information Act to ferret out abuses of power. Defending Scalia, Rosen endeavors to counter those “who thought that every proposal that expanded the obligations of the federal government to release the records of the executive branch, no matter how voluminous or highly classified, was . . . wise and urgent, a bulwark against what Arthur Schlesinger, Jr., the former Kennedy adviser, called ‘the imperial presidency.’”
Never mind the abuses: for Scalia, at stake were historical tradition and the separation of powers. “As ‘the president’s lawyer’s lawyer’ at the dawn of an accidental presidency [Gerald Ford’s], it fell to Scalia to defend traditional executive authority precisely when Congress, the courts, and the news media made it the least fashionable. Scalia also thought the CIA was justified in engaging in illegal operations abroad: this too was a matter for the executive branch to decide, though not without some vague limits. For him, the CIA and FBI were not power-mad rogue agencies, but defenders of America.”
Ron Paul, a true champion of freedom, has a different opinion. He wrote last December in protest against the FBI’s use of Twitter to silence dissent: “As we learn more and more from the ‘Twitter Files,’ it is becoming all too obvious that Federal agencies such as the FBI viewed the First Amendment of our Constitution as an annoyance and an impediment.”
Despite his mistakes, Scalia was an impressive figure who showed himself more than a match for the left-wing elites who dominate the major law schools. The intelligence and wit manifest in his opinions made him one of the major jurists in the history of the Supreme Court, and if we must sometimes dissent from this great dissenter, we should not lightly dismiss him.
A generation ago, the Berlin Wall fell and the USSR collapsed. Today, US monetary authorities are bringing down our own country.
Original Article: "Role Reversal: The Collapse of the Dollar-Enforced Empire"
This Audio Mises Wire is generously sponsored by Christopher Condon.
David Gordon explores how Abraham Lincoln's stated view on secession was fundamentally Hobbesian, cynical, and violent.
Original Article: "If at First You Don't Secede . . ."
This Audio Mises Wire is generously sponsored by Christopher Condon.
San Francisco, as well as the government of California, is calling for millions in "reparations" for black people in that state. Reparations, unfortunately, are fast becoming another anti-property-owner racket.
Original Article: "Reparations Are a Statist Cudgel for Bludgeoning Property Owners"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The current job market strength partly reflects the ongoing monetary overhang from years of breakneck growth in money-supply inflation. The $6 trillion in money that was newly created since 2020 is still very much a factor.
Original Article: "The Fed's Huge Monetary Overhang Keeps Job Totals Up as Real Wages Fall"
This Audio Mises Wire is generously sponsored by Christopher Condon.
All of Al Gore's children went to Harvard. Are we really to believe that this is because the Gore kids had the most "merit"? The only real meritocracy is in the marketplace.
Original Article: "The "Meritocracy" Was Created by and for the Progressive Ruling Class"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The foreign policy "elites" have been wrong about regime change, sanctions, "the lesson of Munich," a "rules-based order," and pretty much everything else.
Original Article: "One Year Later in Ukraine: Washington and NATO Got It Very Wrong"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The answer lies not in doubling down on political unity, maintained through endless violence or threats of violence. Rather, the answer lies in peaceful separation.
Original Article: "Secession Is Inevitable. War to Prevent It Is Optional."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Thanks to copyright laws, the estate of Roald Dahl can not only rewrite his books, but can also essentially outlaw the old versions. Only books in the public domain are safe from this.
Original Article: "Roald Dahl and James Bond Books Are Getting Woke Rewrites. Copyright Law Ensures You Can't Stop Them."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Opponents of secession say secession is wrong if some people in the population don't want it and say they will be worse off. The American revolutionaries disagreed and seceded anyway.
Original Article: "Secession: Should the American Revolutionaries Have Quit to Appease the Loyalists?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
When we see real bipartisan action in Congress, it usually is for the worst.
Original Article: "Why You Should Fear "Bipartisan" Agreements in Congress"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It's a myth that the "Founding Fathers" made America a republic in 1787. It was the state governments and their constitutions that did this. But the top-down myth glorifying the central government endures.
Original Article: "Why the 1787 Constitution Did Not Bring Republican Government to America"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Judge Andrew Napolitano looks at the history of government and race relations in our nation's history. It's not a pleasant or uplifting story.
Original Article: "The Forgotten Lessons of Government-Enforced Race Relations"
This Audio Mises Wire is generously sponsored by Christopher Condon.
While the 1979 default was relatively small, the 1934 default affected millions of Americans who had bought Liberty Bonds mistakenly thinking the government would make good on its promises.
Original Article: "Yes, the US Government Has Defaulted Before"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The constitution has not protected our natural rights, nor did it prevent the US from becoming a blood-soaked failed state a mere 73 years after the constitution was ratified.
Original Article: "The Constitution Failed. It Secured Neither Peace nor Freedom."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Americans often have defended the atomic bombings of Hiroshima and Nagasaki as regrettable but necessary for ending World War II. The actual record tells us a much different story.
Original Article: "Questioning the Military Necessity of Dropping Atomic Bombs on Japanese Cities"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Fiat money is the fuel of the modern Leviathan state. If we wish to have freedom, we must have sound money.
Original Article: "The Modern State Cannot Exist without Fiat Money"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fed is insolvent, and that means that it will bail itself out by printing money. For ordinary people, that means inflation and a rising cost of living.
Original Article: "Why the Fed Is Bankrupt and Why That Means More Inflation"
This Audio Mises Wire is generously sponsored by Christopher Condon.
We like to think of the "deep state" as a conspiratorial entity. In reality, the term describes much of what the federal government does in broad daylight.
Original Article: "Yes, Virginia, There IS a Deep State—and It Is Worse than You Think"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It is no coincidence that the boom in mass-produced goods made specifically for children, "coincided closely with the rise of the middle-classes, industry, and capitalism."
Original Article: "How Capitalism Made Christmas a Holiday for Children"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It's been more than 150 years since most state boundaries were drawn in the US. Since then, demographic and political realities have changed enormously. The boundaries should change too.
Original Article: "The Borders Between US States Are Obsolete"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Ah yes, the Tea Party. Fifteen years after it was established by followers of Ron Paul, the so-called antiestablishment organization has been co-opted by establishment Republicans. Dale Steinreich is not surprised.
Original Article: "The Tea Party, Fifteen Years Later"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Wall Street has convinced itself that the Fed will soon engineer a "soft landing" by bringing down inflation without an accompanying recession. They need to rethink their beliefs.
Original Article: "History Shows High Inflation Can Last Over Ten Years"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Self-determination means the ability to make laws for one's own community free from intervention by Washington, DC. Most of the world can do this. Why can't Americans?
Original Article: "Secession: Why the Regime Tolerates Self-Determination for Foreigners but Not for Americans"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Pilgrims tried socialism at Plymouth. After two years, they returned to private enterprise. Likewise, Israel was founded as a socialist state but has back turned toward free markets.
Original Article: "A (True) Thanksgiving Tale of Socialism in America and Israel"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Like the police in similar communities, the Moscow, Idaho Police have long focused on petty drug offenses while more serious violent crime and property crime receives far less attention.
Original Article: "The Student Murders in Idaho Highlight the Unimpressive Police Record on Violent Crime"
This Audio Mises Wire is generously sponsored by Christopher Condon.
America's military technocrats (a.k.a. "generals") specialize in losing wars and also losing your money. Naturally, Congress wants to give them even more taxpayer cash.
Original Article: "As the Pentagon Fails Another Audit, Congress Wants to Spend Even More on "Defense""
This Audio Mises Wire is generously sponsored by Christopher Condon.
Thomas Paine, whose fiery essay "Common Sense" made a case for the American Revolution, is a much-neglected American founder.
Original Article: "Born on the Tenth of January"
This Audio Mises Wire is generously sponsored by Christopher Condon.
State regulation of marriage—and the ensuing secularization of marriage that followed—is a historical development that was part of the larger trend toward the expansion of state power.
Original Article: "How the State Seized Control of Marriage"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The January 6 trials remind us violence against a person or property should be prosecuted as exactly that, and not as a special category of crime against the regime.
Original Article: "January 6 Trials Remind Us Why We Must Abolish Seditious Conspiracy Laws"
This Audio Mises Wire is generously sponsored by Christopher Condon.
For families and friends gathering for Thanksgiving this year, many will assemble in a room called the "dining room." This is a modern luxury made possible by the bourgeois merchants of old.
Original Article: "How the Middle-Class Dining Room Revolutionized Domestic Life"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It is easy to think of the Fed as a good institution that simply lost its way. In truth, it was a bad idea and a bad institution from its beginning.
Original Article: "The Fed Is Not "a Good Idea that Became Corrupt": It Always Was Corrupt"
This Audio Mises Wire is generously sponsored by Christopher Condon.
For all the positive talk, Americans are piling on more debt just as real wages are falling, job losses are mounting, and debt costs are rising. Thanks, Fed!
Original Article: "After Years of "Stimulus" Come Surging Debt and Falling Wages"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Historians praise the US entry into World War I because it enabled an Allied victory. But it also led to the economic disasters of the 1920s and ’30s.
Original Article: "World War I: The Great War Was also the Great Enabler of Progressive Governance"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The author recalls the 1922 peace dollar his grandfather gave him sixty years ago. Real money.
Original Article: "What I Learned from my Grandfather about Money"
This Audio Mises Wire is generously sponsored by Christopher Condon.
This year’s midterm disappointment for Americans hoping the lunacy of the left would undermine the Democrat Party highlights that the very real problems we face will not fall under their own weight. Anti-human progressivism continues to rise, no matter how visually absurd it manifests itself.
Original Article: "The Midterm Lesson: Unserious People Can't Stop the Left"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
The jobs data is worse than the latest headlines suggest, and workers are staring at falling real wages, declining savings, and mounting debt. We can thank the Fed.
Original Article: "The Number of Employed Workers Fell in October and Price Inflation Continues to Outpace Wages"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
It will be nearly impossible to make any real changes in Washington for the next two years. The real battles are now in the states.
Original Article: "The Election Won't Change Much in DC. The Real Battle Is Now in the States."
This Audio Mises Wire is generously sponsored by Christopher Condon. '
The modern progressive narratives claim that the wealth of the West and especially of the USA was built upon the backs of slaves. In fact, slavery retarded economic growth.
Original Article: "The West Didn't Become Rich Because of Slavery But in Spite of It"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
This is the "American dream" the Fed has given us: work more jobs and longer hours to keep paying those bills that are now growing at 8 percent per year.
Original Article: "Thanks to the Fed, You'll Work More This Year to Keep Last Year's Standard of Living"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Joe Biden says the pandemic is over in an attempt to get a few more votes. But the administration certainly isn't acting like the "pandemic is over" in terms of actual policy.
Original Article: "The Pandemic Is "Over," but the Feds Aren't Giving Up Their Emergency Powers"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Both Murray Rothbard and Harry Jaffa began as men of the Right. However, Rothbard turned toward the view that individuals possess rights outside of the state; Jaffa turned toward conservatism.
Original Article: "Promoting Natural Rights Instead of Conservatism: Looking at Rothbard and Jaffa"
This Audio Mises Wire is generously sponsored by Christopher Condon.
If falling enlistments are an indication of declining faith in the military overall—and especially declining support among conservatives—that's very good news.
Original Article: "Falling Military Recruitment Is Another Sign of Waning Faith in the Regime"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In the past, many Americans may have simply trusted to the regime to provide "law and order." But that sentiment is apparently becoming more and more rare.
Original Article: "Rising "Constitutional Carry" Is a Sign of Failing Trust in Government"
This Audio Mises Wire is generously sponsored by Christopher Condon.
National divorce does happen, and debts are not necessarily repudiated as a result. We can look to examples from Latin America, Eastern Europe, and the Czech-Slovak split.
Original Article: "After Secession, What Happens to the National Debt?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
As political divisions worsen in the United States, one remedy besides secession might be to create semiautonomous regional territories.
Original Article: "Regional Territories: A Decentralization Plan for the USA"
This Audio Mises Wire is generously sponsored by Christopher Condon.
When Paul Volcker was Fed chairman forty years ago, he did what was necessary to bring down inflation. Unfortunately, the current Fed leadership at best is engaging in Volcker Lite.
Original Article: "The Economy Needs a Volcker Moment"
This Audio Mises Wire is generously sponsored by Christopher Condon.
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.
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.
"This reform will be resisted at every step; but it must be pressed persistently." —Sam Tilden
Download the slides from this talk at Mises.org/MU22_PPT_44.
Recorded at the Mises Institute in Auburn, Alabama, on 30 July 2022.
We live in a world of constant cronyism. Nothing seems to change, no matter the party or the people in power. Was it always like this? Can we learn from it?
Download the slides from this lecture at Mises.org/MU22_PPT_35.
Recorded at the Mises Institute in Auburn, Alabama, on 29 July 2022.
Politicians, academics, and the media often call for a new Manhattan Project to deal with economic issues. But there is a huge difference between technological problems and economic ones.
Original Article: "The Fallacy of Calls for a "Manhattan Project" to Solve National Economic Challenges"
This Audio Mises Wire is generously sponsored by Christopher Condon.
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
The Right: The Hundred-Year War for American ConservatismBy Matthew ContinettiBasic Books, 2022503 pp.
Why should readers of The Austrian be interested in this book? At first glance, it appears that we shouldn’t be. Though the history of American conservatism is of great importance, and the author has amassed a great deal of information about it, he lacks an illuminating analytic framework; the “history” he recounts is little more than one item after another, and when he touches on intellectual matters, he is often wrong. The answer to our question is this: Continetti has a distinctive vision of what American conservatism should be that is derived, for the most part, from neoconservatives. He views the political and economic ideas of Murray Rothbard and Ron Paul as inimical to the ideas he favors, and correctly so; to him, we are the enemy, albeit not the only one. We ought, then, to have a look at his book, if only to see what he says about us.
Continetti makes crystal clear where he stands. As a young man of twenty-two, he was employed at the Weekly Standard, located in an office building he regards as “an intellectual hub—the frontal cortex of the American Right.” Also to be found at this address was “the Project for a New American Century (PNAC). It was a small think tank cofounded by the magazine’s editor that since its inception in 1997 had advocated for a defense buildup, containment of China, and regime change in Iraq.” The editor mentioned is Continetti’s father-in-law, Bill Kristol, and throughout the book, Continetti proves a faithful follower of that paragon of neoconservatism. In sum, American hegemony, perpetual war, and a modified New Deal that recognizes the free market but calls for the state to promote virtue and welfare: that is the path to be followed.
Continetti does not confine his support for war to the recent past and the present; it is a motif present through the whole course of the book. He sees, and this is a real if hardly original insight, that elitism—the view that an educated and well-off upper class needs to keep the masses firmly in line— and populism—the view that wisdom resides in the American people—have been clashing strains within American conservatism. In Continetti’s opinion, the excesses of populism are particularly to be feared, especially when people have the audacity to oppose war. He says, “Antiwar populists and Progressives joined forces. They assailed the intervention [of Woodrow Wilson in World War I]. They said that shadowy business and political interests were behind it. They lamented the changing demographic makeup of the nation caused by immigration from eastern and southern Europe. Their writings were often anti- Semitic.” Away with those bigots!
Continetti is less than surefooted when he writes about the ideas of the Progressives. He says that Wilson “shared the view of historian Charles Beard, who had written in 1913 in The Economic Interpretation of the Constitution [sic] that the nation’s founding document was the product of a group of selfish men primarily interested in shielding themselves from revolt.” This is not Beard’s thesis: Beard argues, rather, that the framers of the Constitution wished to protect personal property, principally bonds, from devaluation by state governments—not, as Continetti has it, to protect against a revolt. Moreover, Beard does not claim that the framers were selfish.
The author’s accuracy does not improve when he reaches the 1920s. He tells us that “the main figures of the intellectual Right scorned politics. . . . The ‘New Humanists’, for instance, were a group of literary critics who urged their audience to return to the ‘great tradition’ of Western civilization. The leaders of the movement, Irving Babbitt and Paul Elmer More . . . were philosophical rather than political.” Babbitt in fact has a good deal to say about contemporary politics, as Continetti would have discovered had he opened Babbitt’s books.
Continetti is aware of H.L. Mencken and Albert Jay Nock, but he scorns these great figures of the Old Right: “Nock’s and Mencken’s exacting standards were meant to expose the inadequacies of their nation and its citizens. They were snappy and memorable writers, but they were oddballs estranged from the beliefs and behaviors of their countrymen. They pined for a departed age of chivalry and Nietzschean self-assertion that had never existed in the United States.” It is surprising that Continetti attributes to Nock a “snappy” style. By the way, it’s also surprising that he calls Hilaire Belloc and G.K. Chesterton “Anglo-Catholic writers.” Apparently, he does not know that “Anglo-Catholic” refers to a movement within the Anglican Church and does not mean “English Roman Catholics.”
In Continetti’s coverage of the Great Depression, the Austrian school of economics attracts his notice, but he much prefers the less principled Chicago school. “Mises’s commitment to liberalism led him to frame the choice between liberalism and socialism as either-or. [How dreadful!] For Mises, any expansion of government’s limited role was a surrender to bureaucracy and statism. He had little use for the empirical methods and real-world nuance of the Chicago scholars.” When Continetti says that Mises’s criticism of socialist central planning was that the planners “could not possibly account for all the variables in an economy,” readers familiar with the calculation argument will find it difficult to suppress a smile.
If Continetti is less than enthusiastic about Mises, this is as nothing compared with his revulsion toward the main group opposing American intervention in World War II, the America First Committee: “Its spokesman, Charles Lindbergh was . . . an icon to noninterventionists in the Midwest but a villain elsewhere. His refusal to denounce the moral depravity of the Nazis polarized audiences. He rubbed shoulders with Fascist sympathizers and anti-Semites . . . America First could not escape the stench of Nazism.”
As you might expect, Continetti is an ardent Cold Warrior as well, and he has this to say about the most extreme of the anti-Soviet crusaders: “The grandeur of [James] Burnham’s vision, the clarity of his expression, the force of his argument, and the iciness of his prose were overpowering. The Managerial Revolution became a best seller . . . Burnham became one of America’s most famous writers on foreign affairs. In 1947, he published The Struggle for the World, in which he declared that America was engaged in World War III whether it liked it or not . . . Burnham worried that America lacked the will to fight.” Continetti does not tell us that Burnham favored a preventive nuclear war against Russia.
In his account of the onset of the Cold War, Continetti has much to say about Whittaker Chambers and Alger Hiss, and in his account of that famous case, there is a surprising detail. Chambers in 1939 informed Adolf Berle, a famous law professor and advisor to Roosevelt then serving in the State Department, that he had worked with Alger Hiss as a Soviet agent. The surprise is that he calls Berle a Communist fellow traveler and shortly afterward names Berle as one of those New Dealers, along with Harry Dexter White, whom “the Right blamed for Soviet gains.” The accusation is of course false, as anyone with the slightest familiarity with the period would know. Though Berle was a New Dealer, he was a firm anti-Communist, and I’m unaware of anyone who has suggested otherwise.
The author devotes a few pages to an account of several books that influenced the post–World War II Right, and here once more he does something remarkable. In a brief discussion of Richard Weaver’s Ideas Have Consequences, Continetti says: “Denying the existence of God, the reality of good and evil, and transcendent, unconditional standards of right and wrong was a one-way ticket to the charnel house of Europe and the ruins of Japan. Ideas Have Consequences was unique in that it did not locate these intellectual errors in the recent past. The mistakes had been committed much earlier . . . Weaver blamed the fourteenth-century philosopher William of Ockham.” The remarkable thing Continetti has done is that he does not mention nominalism, the principal item in Weaver’s criticism of Ockham. It’s of course false that Ockham denied the existence of God and the reality of good and evil; he held a divinecommand theory of ethics.
Given his support for the Cold War, it is to be expected that Continetti would applaud William Buckley’s efforts to expel from the Right those who supported a noninterventionist foreign policy. The noninterventionist views of Franklin Roosevelt’s great critic John T. Flynn were not welcome in Buckley’s National Review; Buckley’s principal guide in foreign policy was James Burnham, who was joined in his advocacy of preventive war against Russia by Frank Meyer and Willi Schlamm. Continetti doesn’t discuss Flynn in this connection, but he describes at some length Buckley’s opposition to the John Birch Society. “After Robert Welch’s American Opinion called for US withdrawal from Vietnam in August 1965, Buckley decided to break with the group unequivocally. Weakness in the face of communism was the final straw.” Continetti cannot see how silly it is to accuse Robert Welch of being soft on communism.
In this book of surprises, it is difficult to pick a winner, but one contender is this: “Reagan . . . went to Eureka College, in Eureka, Illinois. . . . He read Ludwig von Mises and Friedrich Hayek. By the time he graduated, his individualistic, Christian, democratic world view was fully formed.” One wonders how Reagan managed this. He attended Eureka from 1928 to 1932, and Mises’s major works did not begin to become available in English translation until the mid-1930s. Perhaps Reagan read them in the original German. And if his individualistic world-view was fully formed, why was he a supporter of the New Deal?
Continetti rightly stresses the influence of Allan Bloom’s The Closing of the American Mind. He says that “Bloom wrote that the university had abandoned the theory of natural rights that informed the American founding.” This misrepresents Bloom’s view by omission. Bloom thinks that the Lockean concept of rights that influenced the American founding fathers already surrendered to relativism, in that it broke with classical philosophy as interpreted by Leo Strauss; the abandonment of the theory of natural rights in the modern university was a further stage in this break. Continetti again botches things in his remarks about Bloom’s friend Alexandre Kojève, “the French philosopher whose lectures on G.W.F. Hegel had reintroduced the framework of the Hegelian dialectic into European thought. History, in this understanding, was the unfolding story of the state’s recognition of man’s freedom.” But Kojève in his very influential lectures on Hegel’s Phenomenology of Spirit modified the familiar way to read Hegel, taken from the Lectures on the Philosophy of History, that history is the progressive realization of freedom; Kojève’s lectures would hardly have had much impact had he merely restated this conventional interpretation. To the contrary, he argued that for Hegel, history ends in the “universal homogeneous state,” in which mutual recognition is accompanied by the “disappearance of Man.” And though Kojève’s lectures were indeed important, it is silly to say that he reintroduced Hegel’s dialectic into European thought. I shall give just one more example of Continetti’s unusual talent for reversing the theses of books he discusses. He says that “Mancur Olson, in his Logic of Collective Action (1965) stated that the American economy had a free-rider problem: the majority benefited from public goods whose full cost they did not pay.” Olson’s thesis is the opposite: owing to the free-rider problem, large groups cannot produce public goods from which they would benefit.
I noted at the beginning that Continetti has no use for Rothbard and Ron Paul. Their failing was that they “opposed the ‘globalism’ of a ‘neoconservative’ foreign policy that sought to maintain Pax Americana.” Pat Buchanan, Sam Francis, and Joe Sobran are other offenders. Indeed, they opposed neoconservative globalism. And for some of us, that is a badge of honor.
On this episode of Radio Rothbard, Tho Bishop is joined by Mises Research Fellow Marcel Gautreau for a wide-ranging conversation about challenges to the American-dominated neoliberal order. Marcel is a Ph.D. candidate studying economic and other policy reforms in non-liberal states and offers his perspective on how Rothbardian power-elite analysis is a powerful tool in understanding the world's most pressing issues today. He also shares his favorite Mises U lecture.
Additional Resources "Egalitarianism as a Revolt Against Nature" by Murray Rothbard: Mises.org/RR_91_A
For a New Liberty: The Libertarian Manifesto by Murray Rothbard: Mises.org/RR_91_B
Never a Dull Moment: A Libertarian Look at the Sixties by Murray Rothbard: Mises.org/RR_91_C
"A Rothbardian Analysis of the Constitutional Convention" by Patrick Newman: Mises.org/RR_91_Video
Marcel Gautreau on Twitter: @anarchyinblack
Watch Mises University 2022 live: Mises.org/Live
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In the 1950s, McCarthyism targeted people who were accused of supporting Russia. Today's McCarthyism targets people accused of supporting … Russia. Some things never change.
Original Article: "Like the Old McCarthyism, the New McCarthyism Targets Russia"
This Audio Mises Wire is generously sponsored by Christopher Condon.
People often speak of the Constitution with reverence, as though it were infallible. However, the Constitution was a centralizing document that cast aside the decentralization of the Articles of Confederation.
Original Article: "Is the Constitution a Centralizing or Decentralizing Document?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Since the overturning of Roe v. Wade, pundits on the Left have demanded even more centralization of government. But federalism is the best way forward.
Original Article: "Federalism, Not Centralization, Is the Way out of the Current Conflicts"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Indian tribe sovereignty has long been a much neglected, yet important, tool in decentralizing and limiting government power in the US.
Original Article: "SCOTUS Attacked Indian Tribe Sovereignty in Castro-Huerta, and That's a Bad Thing."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Many of the best-known civil rights leaders eschewed entrepreneurship, emphasizing that blacks seek employment in the professions and government jobs.
Original Article: "Entrepreneurship Should Be the Goal, Not White-Collar Jobs"
This Audio Mises Wire is generously sponsored by Christopher Condon.
With his current timid, weak, and prevaricating position on price inflation, Powell is positioning himself as the new Arthur Burns, who did nothing to end 1970s inflation.
Original Article: "Powell Is the New Arthur Burns, Not the New Paul Volcker"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Real deflation—both monetary inflation and price inflation—is necessary, and that can only be accomplished if the Fed can resist the temptation to keep doing what it's been doing since 2008.
Original Article: "What Will It Take to End Rampant Home-Price Inflation?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
US foreign policy is a morass of lobbying, payouts, decisions, and power plays that violates the standards this country claims to promote.
Original Article: "Who Really Makes US Foreign Policy? Who Benefits and Who Loses?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It would be easy to write a very negative review of Robert Kuttner’s Going Big (New Press, 2022), but it would be a mistake to do. Kuttner is a well-known progressive economist and the founder of the Economic Policy Institute. He is an ardent New Dealer who regrets that political exigencies, as well as Franklin D. Roosevelt’s own hesitancies, made it impossible for FDR to proceed in as radical a fashion as the times required. Going against expectations, the moderate Senator Harry Truman grew in office when he ascended to the presidency and carried forward the New Deal, albeit not to the extent Roosevelt might have done had he lived. Of the succeeding Democratic presidents, John F. Kennedy did little, but Lyndon Johnson was another who grew in office; his Great Society programs achieved much, but the Vietnam War brought his presidency to an ignominious end. For Kuttner, Jimmy Carter, Bill Clinton, and Barack Obama are major disappointments; they were beguiled by the siren songs of the free market and economy in government. Obama’s radical rhetoric proved in practice a sham. Kuttner entertains great hopes for Biden, who might to turn out to become a true progressive paladin, despite his long-standing moderation. He too has grown in office. Kuttner evidently does not agree with Lord Acton that all power tends to corrupt; for him, it often leads to exemplary action. As I say, it would be easy to be very negative about all this, denouncing the New Deal and all its works, but we can learn more not by irate rhetoric, but by attending carefully to some of Kuttner’s admissions.
Though Kuttner thinks the New Deal a great success, he acknowledges that it hurt American blacks.
The wide array of relief agencies that delivered such practical benefits to the depressed rural South honored the tradition of segregation. Blacks were paid less than whites, and for the most part kept in separate relief projects, The TVA [Tennessee Valley Authority] employed not a single black foreman or clerk, and blacks were not allowed to live in the TVA’s showcase community of Norris…. Public housing complexes had to be rigidly segregated…. New Deal racial policies for homeownership were even worse…. When the New Deal created the Federal Housing Administration to insure and standardize mortgages, racially restrictive covenants and racial redlining maps became universally mandated practice…. This residential apartheid policy was reinforced by the secondary mortgage market created by Fannie Mae, and by the Home Owners’ Loan Corporation, which financed mortgages with direct federal loans…. These agencies were dead serious about enforcement. (pp. 40–42)
Kuttner also acknowledges that in “some ways, World War II intensified the New Deal revolution. In other respects, the war short-circuited it. The wartime buildup finally produced the return to full employment that had eluded Roosevelt throughout the 1930s. It gave government even more emergency powers, such as temporary wage and price controls. The war created a system of national economic planning” (p. 45). The planned economy leads to war, as John T. Flynn long ago taught us: a government powerful enough to control the economy is also powerful enough to embroil us in war, and those who wish to avoid war should for this reason give planning a wide berth, even if otherwise inclined to favor it.
Our author tells that “Roosevelt … hoped that wartime planning could be carried over into a postwar planned ‘reconversion’ program for full employment. Economists were worried, and with good reason, that the return of 12 million GIs, coupled with the end of the extraordinary wartime stimulus, would cause the economy to sink back into depression” (p. 46). Of course, it did not do so, but this does not cause Kuttner to lapse from his faith in planning.
Our confidence in postwar economic arrangements does not rise when we learn that “the Roosevelt Treasury was the home of radicals. The most radical was Harry Dexter White, the top U.S. government architect of the postwar global financial system…. In the 1930s. White had been either a communist or a fellow traveler” (p. 63). That is a considerable understatement; it is likely that White remained a Soviet agent until his death.
The close association between a powerful government that aims to control the economy and war continued under Lyndon Johnson, who “revived the New Deal coalition and its philosophy of activist government, working to complete FDR’s unfinished business on economic and racial justice…. He was easily primed to be the greatest president since Roosevelt” (p. 69). But just as he thought he could control the economy, he thought he could control the world: “He would show the doubters, by doing it all—winning civil rights, and winning Vietnam…. Vietnam was a distraction that could be solved only by winning, despite the mounting evidence that it could not be won. Johnson kept receiving reports from senior officials warning that the war could not be won. He chose to listen to those who insisted that it could” (pp. 77, 79).
Unfortunately, Kuttner is unlikely to draw the connection between economic planning and war. If there is a place for the free market in his economic cosmos, it is minuscule, and he would be happy to see the onset of socialism. He tells us that in “a democracy that is also a capitalist economy, there is an immense undertow of big money that undercuts possible policies. In the 1930s and 40s, there was a famous argument between John Maynard Keynes and his protégé, the more left-wing economist Michal Kalecki. As a matter of technical economics, Kalecki agreed with Keynes that it was indeed possible to have full employment in a capitalist economy. But as politics, he observed, the capitalists would never let you do it. When I was coming of age during the postwar boom, it looked like Keynes had the better of the argument. Today, Kalecki seems pretty persuasive” (p. 23). I suspect that readers of the Mises page will look at the matter rather differently.
Leftist regularly accuse capitalism of depending upon racism for its existence, but history tells a much different story.
Original Article: "Capitalism Is Not Racist; Capitalism Undermines Racism"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In last week’s article, I discussed some of the arguments Yoram Hazony gives in his book Conservatism: A Rediscovery in favor of an empiricist procedure in ethics that supports working within a particular national tradition and against the rationalist deductive method of those who without empirical evidence defend the supreme value of freedom by postulating it arbitrarily as an axiom. I tried to show that one could support the self-ownership principle by an empirical argument that appealed to human nature. In this week’s article, I’d like to look at how Hazony applies his view of tradition to American history.
Before doing so, though, I want to comment further on Hazony’s deprecation of “rationalism” in ethics. He says,
Enlightenment liberalism is a poorly constructed framework for understanding political affairs, and the poor quality of the theory stems, first and foremost, from the fact that it is a sub-species of the failed philosophical enterprise of Cartesian rationalism. Descartes believed he had uncovered the method for unfailingly ascertaining universal truth…. But it was all folly. There is no way to reach a final determination of the nature of the physical universe by moving from self-evident premises through infallible deductions to unassailable conclusions. Descartes’ Principles of Philosophy is today regarded as such an embarrassment that it is not studied anywhere. The same is true of Kant’s a priori physics. (p. 127)
Hazony contrasts this failed method with the successful “empiricist method of Newton’s Principia (1687).” Hazony is right that Newton’s physics was more successful than Descartes’s, but he exaggerates the badness of Descartes’s physics; Newton was influenced by Descartes’s laws of motion. It’s odd that Hazony would suggest Kant’s physics is not studied anywhere; hasn’t he heard of Michael Friedman’s massive Kant’s Construction of Nature (2013)?
But I don’t propose to challenge Hazony about physics. Suppose that he is entirely right about physics. Why would it follow from the failure of a priori physics that a priori deduction is the wrong procedure for metaphysics and ethics? Hazony might reply that philosophy is part of natural science, as Willard Van Orman Quine famously argues in “Epistemology Naturalized.” In my view, an unresolved problem with that view is that the thesis that philosophy is part of science is not itself part of science. If Hazony disagrees, I would ask him which science says that philosophy is part of science? Physics certainly does not.
Let us put this aside and turn to Hazony’s defense of tradition. By no means, Hazony says, is he a relativist who merely catalogs various traditions and denies that there is an objective truth about ethics.
I have proposed a theory of truth that is based on a real capacity of the individual human mind—the capacity to discern an improvement in the scheme of things that is applied in explaining and permitting relevant action in a given domain. A political theory based on such an account of truth recognizes that truth in the political and moral realm is real. It is found in those norms, or rules of behavior, that permit the causes of human health and prosperity to be effective within a nation, tribe, or family, thereby allowing its members to grow strong and the community itself to propagate through the generations…. There is no relativism, nihilism, positivism, or historicism here. (p. 204)
Hazony’s confidence is misplaced. Group survival and prosperity seems an implausible criterion for morality: what helps the survival of a bad society would seem rather to be bad and not good.
Hazony applies his ideas about group survival and prosperity to America through an interesting argument. The British system of government was a good one, and the American Federalists, under the intellectual leadership of Alexander Hamilton, aimed to emulate the British system as much as possible. The policies the Federalists favored continued in the “American System” favored by Henry Clay and Abraham Lincoln, and these policies should guide us today. He says,
But in the wake of war with Britain from 1812 to 1815, a new generation of nationalists emerged calling for a renewal of Hamiltonian economic policies…. This nationalist coalition supported what Clay called the “American System” which sought to end economic dependence on foreign imports … the nationalist economic ideas of Hamilton and Clay were taken up by the American Whig Party and then put fully into effect by Abraham Lincoln…. Economic nationalism guided the policies of Lincoln’s Republican Party during the long period of ascendancy from the Civil War into the twentieth century. (pp. 89–90)
Readers of Tom DiLorenzo will be startled by this, as the very programs that he shows in books such as Hamilton’s Curse to be economically harmful are the ones Hazony praises. It will come as no surprise that I agree with DiLorenzo, but rather than go over the controversy here, I’d like to raise two other points. First, although Hazony has firm views about economics, he deems it unnecessary to discuss economic theory. Perhaps he would respond that he need not do so, because America grew prosperous during the era under consideration, when the policies he favors were followed; but this leads us to my second point. Hazony has not shown that America prospered because of these policies, and the truth of this point does not depend on acceptance of the economic theory I take to be correct. For all Hazony has shown to the contrary, America might have done better with other policies.
I shall conclude with something that leaves me puzzled. A glance at the book’s notes suffices to show that Hazony is a scholar of considerable learning, but it is curious that he fails to mention two authors. In the section “Paradigm Blindness” at the beginning of chapter 3, he closely follows the famous account of paradigms given by Thomas Kuhn in The Structure of Scientific Revolutions, but Kuhn’s name does not appear in the book. Further, in section 2 of chapter 4, he asks, “How do we determine what is good and true in politics and morals? Three principal answers contend for our attention” (p. 111). The three answers are biblical tradition, Enlightenment rationalism, and “the answer of Nietzsche.” This is a paraphrase of Alasdair MacIntyre, in After Virtue and other books, but he too is not mentioned. Why these omissions? Does Hazony think the discussions of these authors so well-known to readers that it would insult their intelligence to mention them? I do not know.
In the final days of the Soviet Union, the Washington establishment was convinced nationalism was a greater threat than Soviet despotism. Thus, George Bush tried to prop up the USSR and prevent Ukrainian secession.
Original Article: "1991: When America Tried to Keep Ukraine in the USSR"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Johnny Vedmore is an independent journalist from Cardiff, Wales. He discusses his masterful article on Klaus Schwab's mentors, including Henry Kissinger and John Kenneth Galbraith.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interviewJohnny Vedmore’s article on Klaus SchwabPart 1, Part 2, Part 3, Part 4, and Part 5 of the BMS series on Klaus Schwab and the Great ResetAn evaluation of Herman Kahn’s “Year 2000” forecasts. Part 1 of John Kenneth Galbraith’s "The Age of Uncertainty"Trailer for the Kubrick film, “Dr. Strangelove”Bob’s novel, MinervaSchwab’s books The Fourth Industrial Revolution and Covid-19 and the Great Reset For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on Apple Podcasts, Google Podcasts, Stitcher, Spotify, and via RSS.
Among the states that performed the best during the pandemic were lockdown-light states like Utah and Florida. Among the states with the worst outcomes were lockdown-heavy California, New Mexico, New Jersey, and New York.
Original Article: "New Covid Study Shows Lockdown-Heavy States Had Some of the Worst Health Results"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Recorded at the 2022 Austrian Economics Research Conference hosted at the Mises Institute in Auburn, Alabama, March 18–19, 2022.
The F.A. Hayek Memorial Lecture, sponsored by Greg and Joy Morin. 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.
It is one thing to follow the law for prudential reasons and another thing entirely to assume the law brings with it some sort of moral imperative. Laws rarely do.
Original Article: "In the Age of Covid, We're Reminded an Unjust Law Is No Law at All"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Recorded at the 2022 Austrian Economics Research Conference hosted at the Mises Institute in Auburn, Alabama, March 18–19, 2022.
The Henry Hazlitt Memorial Lecture, sponsored by Yousif Almoayyed.
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.
More than critiquing vaccines, this book exposes Anthony Fauci’s career as a case study in crony capitalism. The key players are the government regulatory agencies headed by Fauci.
Original Article: "Anthony Fauci: Master of Medical Crony Capitalism"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Introduction to Cronyism: Liberty versus Power in Early America, 1607–1849. Narrated by Scott R. Pollack
History is a clash between the forces of liberty and the proponents of power. In Cronyism, Patrick Newman offers a compelling and important narrative on the early days of the American republic, and the rise of a Federal regime that conquers a nation conceived in liberty.
Narrated by Scott R. Pollack
Download the complete audiobook (17 MP3 files) in one ZIP file here. This audiobook is also available on Soundcloud, Google Podcasts, Apple Podcasts, Spotify, and via RSS. Purchase the Audiobook on MP3-CD and Audible/Amazon, or paperback at the Mises Store.
In this episode of Liberty vs. Power, Dr. Patrick Newman and Tho Bishop look at the connection between the imperialism of the Jacksonians and the corruption of America as an "empire of liberty." As manifest destiny — and the annexation of Texas — brings the United States to the Pacific Ocean, and the issue of slavery heightens sectional differences in Washington, the party of Jackson and Van Buren comes to embrace many of the same policies that it was created to tame.
Recommended Reading "Shadow Imperialism: American Filibusters in Latin America" by Chris Calton — Mises.org/LP11_A
"The Folly of 1845: Texas and the Evils of Annexation" by Ryan McMaken — Mises.org/LP11_B
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
In this episode of Liberty vs. Power, Dr. Patrick Newman and Tho Bishop look at the record of the Jackson administration on trade, spending, and corporate privilege, and how it tied into a larger shift within the Anglosphere.
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
Wokism and US foreign policy should not be viewed as isolated phenomena but rather inextricably linked concepts given the US’s universalist foreign policy modus operandi.
Original Article: "Wokism Could Provoke a Global Anti-American Backlash"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
General Andrew Jackson, fresh off the election of 1828, assumes the office of the presidency, armed with a battle plan to bring down the institutions he blames for the corruption of the republic: America's National Bank.
In this episode of Liberty vs. Power, Dr. Patrick Newman and Tho Bishop look at the Jacksonians' embrace of executive power and their battle against Nicholas Biddle of the Second Bank of the United States.
Recommended Reading "Bureaucracy and the Civil Service in the United States" by Murray Rothbard — Mises.org/LP9_A
"The War on Cash: Old and New" by Louis Rouanet — Mises.org/LP9_B
A Short History of Paper Money and Banking in the United States by William Gouge — Mises.org/LP9_C
The Jacksonian Persuasion: Politics and Belief by Marvin Meyers — Mises.org/LP9_D
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
California politicians say "gun owners should cover the costs of gun violence." Apparently, holding actual criminals responsible for their own misdeeds is too much work in California.
Original Article: "San Jose's Gun Tax Has Nothing to Do with Reducing Crime"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The election of 1824 pits the Old Republicans against the entrenched interests of one-party rule in America. In this episode of Liberty vs. Power, Dr. Patrick Newman and Tho Bishop discuss the collapse of the first party system of the United States, the corrupt bargain that haunts the political career of John Quincy Adams and Henry Clay, and the rise of a new political movement inspired by Jeffersonian ideals: the Jacksonians.
Recommended Reading Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
Often the biggest barrier secession movements face is the widely held (and ludicrous) belief that our current set of lines on a map are sacred and must be preserved.
Original Article: "It's Time to Break Up New York State"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Virginia's stranglehold over American politics continues with President James Monroe. While high school textbooks refer to this period of one-party rule as the "Era of Good Feelings," the reality is the Second Bank of the United States offers some of the most vulgar examples of corruption the American people have seen. In this episode, Patrick Newman and Tho Bishop discuss the Panic of 1819 and the impact it had on political alliances for decades to come.
Recommended Reading The Panic of 1819: Reactions and Policies by Murray Rothbard — Mises.org/LP7_A
A Short History of Paper Money and Banking in the United States by William Gouge — Mises.org/LP7_B
"The Scandal of Smith and Buchanan: The Skeletons in the McCulloch vs. Maryland Closet" by David Bogen (PDF) — Mises.org/LP7_C
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
Today, it’s easy for socialists to point to the Interstate Highway System and exclaim, "Look at what we socialists did to facilitate transportation." They're careful to always ignore the unseen downside.
Original Article: "The Unseen Consequences of the Interstate Highway System"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The reality is the primary quality of an entrepreneur can’t be taught: the stomach to risk everything and keep wanting more.
Original Article: "George Hearst: Entrepreneur in the Mises Mold"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
When the Democratic Colorado governor slightly scaled back covid mandates, he met furious opposition from the Left. Expect these people to push mandates forever.
Original Article: "Why They Want to Keep the 'Health Emergency' Going Forever"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The transformation of Jeffersonians into National Republicans continues under President James Madison. Following the Louisiana Purchase, the new administration sets its eyes on Florida and Canada for new American expansion. The result is the disastrous War of 1812 and the rise of a new central bank.
Recommended Reading "The Feds Before the Fed" by Scott Trask — Mises.org/LP6_A
"Our Oligarchs Can Thank James Madison" by Ryan McMaken — Mises.org/LP6_B
"Why James Madison Hated Democracy" by Ryan McMaken — Mises.org/LP6_C
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
The Revolution of 1800 removed the Hamiltonians from power, and in Jefferson's first term, America witnessed a major reduction of federal power. In his second term, however, an offer by French Emperor Napoleon to purchase the Louisiana territory would mark the fall of the Old Republicans.
In this episode, Patrick and Tho look at how dreams of conquest in Canada, Spanish Florida, Mexico, and beyond have had tragic consequences for Americans' liberty.
Recommended Reading "The Louisiana Purchase: Jefferson's Constitutional Crisis that Risked Dissolving the Union" by Dave Benner — Mises.org/LP5_A
"Was Thomas Jefferson a Great President?" by Scott Trask — Mises.org/LP5_B
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
In this episode of Liberty vs. Power, Patrick and Tho look at the success of the Jeffersonians following the corruption of Hamilton's Federalist Party. With the support of Treasury Secretary Albert Gallatin, the Jeffersonian Administration is able to slash the size of the federal bureaucracy. Unfortunately, the influence of Republican moderates — like James Madison — undermined a true restoration of old republican ideals.
Recommended Reading "Jefferson's Philosophy" by Murray Rothbard — Mises.org/LP4_A
"Jefferson as President: His Judicial Blunders" by Scott Trask — Mises.org/LP4_B
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
With the Constitution in place and George Washington made president, Treasury Secretary Alexander Hamilton was empowered to make the new government in his image. Unsurprisingly, a man who celebrated the corruption of the old European order was quick to install a regime inspired by mercantilists like Jean-Baptiste Colbert.
In this episode, Patrick and Tho pinpoint the special interest that benefitted most from the Hamiltonian era, and how its failings sowed the seeds for the Jeffersonian Revolution of 1800.
Recommended Reading "The Founding Father of Crony Capitalism" by Thomas DiLorenzo — Mises.org/LP3_A
"Alexander Hamilton: Centralist and Nationalist" by Daren A. Wiseley — Mises.org/LP3_B
"Central Banking as an Engine of Corruption" by Thomas DiLorenzo — Mises.org/LP3_C
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
Hamilton's Curse: How Jefferson's Arch Enemy Betrayed the American Revolution—and What It Means for Americans Today by Thomas J. DiLorenzo — Mises.org/LP_Curse
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
Genuine change will likely come only through muddling through at the state and local level. That kind of work will be instrumental in the creation of decentralized alternatives to our present political order.
Original Article: "Ron Desantis Plans to Revive Florida's State Militia"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The Human Action Podcast wraps up the year with none other than the venerable Professor Paul Gottfried!
This is our final show focused on the Old Right, the early 20th century political tradition which animated later libertarian figures like Murray Rothbard. How was this great legacy of peace and freedom on the Right—the Old Republic—lost to Cold Warriors and neoconservatives? Nobody is a better sociologist of American conservatism than Dr. Gottfried, and nobody is more compelling and erudite when it comes explaining how the Right went so horribly wrong (hint: former Commies). Lots of great names discussed, from Rothbard and Nock to Kirk, Strauss, Jaffa, Buckley, Meyer, and even Gore Vidal.
Don't miss this show!
Additional Resources Read Professor Gottfried's work on Conservatism: Mises.org/Gottfried-Book
How did a handful of colonies created by the European Old Order establish a unique nation conceived in liberty? In Episode 2 of the Liberty vs. Power Podcast, Patrick Newman and Tho Bishop discuss the lasting tension between the Spirit of 1776 and the Constitution of 1787. The results of America's successful war for independence is one of the most important victories for the cause of liberty, but the forces of power adapted to new opportunities.
Patrick and Tho also discuss the career of the infamous Robert Morris, and follow the rise of two men who are determined to mold America into the European nationalist tradition: Alexander Hamilton and James Madison.
Articles "America's Libertarian Revolution" by Murray Rothbard — Mises.org/LP2_A
"Bacon's Rebellion" by Murray Rothbard — Mises.org/LP2_B
"How the Constitutional Convention Vastly Expanded the Powers of the President" by Murray Rothbard — Mises.org/LP2_C
"The Founding Fathers' Coup d'État" by Albert Jay Nock — Mises.org/LP2_D
"Economic Determinism, Ideology, and the American Revolution" by Murray Rothbard — Mises.org/LP2_E
"Liberty and Property: the Levellers and Locke" by Murray Rothbard — Mises.org/LP2_F
Books Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
Conceived in Liberty, Volumes I-IV by Murray Rothbard — Mises.org/LP2_G
Conceived in Liberty, Volume V by Murray Rothbard, Edited by Patrick Newman — Mises.org/LP2_H
Movie The Patriot — Mises.org/LP2_J
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
I was astounded at how many despots the World Bank was propping up. Bankrolling tyrants is the equivalent of a Fugitive Slave Act for an entire nation, preventing a mass escape of political victims.
Original Article: "Raiding the World Bank: Exposing a Fondness for Dictators"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
"Science" is now indistinguishable from politics. As the "acid rain" hysteria showed back in the 1970s and 1980s, "follow the science" is just a political slogan, unrelated to actual science.
Original Article: "The "Acid Rain" Scare and the Science-Industrial Complex"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
In the first episode of the Liberty vs. Power Podcast, Tho Bishop and Patrick Newman take a deep dive into the intellectual framework of Rothbardian historical analysis. This includes looking at the "conspiracy analyst" as a praxeologist, identifying what personal incentives may motivate individual actors that directly influence government policy.
Tho and Patrick also discuss the importance of history as a vital tool in what Murray Rothbard considered "the science of liberty," and look at how battles over issues like Critical Race Theory highlight the ways the progressive left have leveraged historical narrative to strengthen their political agenda.
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP1_Crony
Important Links "The Conspiracy Theory of History Revisited" by Murray Rothbard — Mises.org/LP1_A
"Murray Rothbard and Jacksonian Banking" by Leonard Liggio — Mises.org/LP1_B
"Coming of Age With Murray" by Hans Hermann Hoppe — Mises.org/LP1_C
"The Forgotten Greatness of Rothbard’s Preface to Theory and History" by George Pickering — Mises.org/LP1_D
"The Fight over Economics Is a Fight over Culture" by Ryan McMaken — Mises.org/LP1_E
"How to Do Economic History" by Joseph T. Salerno — Mises.org/LP1_F
"The Case for Revisionism (and Against A Priori History)" by Murray N. Rothbard — Mises.org/LP1_J
Additional Reading Theory and History: An Interpretation of Social and Economic Evolution by Ludwig von Mises — Mises.org/LP1_G
The Economic Mind in American Civilization: 1606-1865, Volume One by Joseph Dorfman — Mises.org/LP1_H
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
Joe Biden thinks that unless there's widespread government intervention in the economy, economic inequality "brews and ferments political discord and basic revolutions."
Original Article: "How Market Freedom Combats Economic Inequality"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
California has announced it seeks to become a "sanctuary state" for abortion should the Supreme Court overturn Roe v. Wade. That is, the situation would return much to what it was before 1973.
Original Article: "End Roe v. Wade: It's Time to Defederalize Abortion Policy"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
[Excerpt from Murray N. Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II (Auburn, AL: Mises Institute, 2005), part 4, pp. 400–24.]
By the end of 1925, Montagu Norman and the British Establishment were seemingly monarch of all they surveyed. Backed by Strong and the Morgans, the British had had everything their way: they had saddled the world with a new form of pseudo gold standard, with other nations pyramiding money and credit on top of British sterling, while the United States, though still on a gold-coin standard, was ready to help Britain avoid suffering the consequences of abandoning the discipline of the classical gold standard.
But it took little time for things to go very wrong. The crucial British export industries, chronically whipsawed between an overvalued pound and rigidly high wage rates kept up by strong, militant unions and widespread unemployment insurance, kept slumping during an era when worldwide trade and exports were prospering. Unemployment remained chronically high. The unemployment rate had hovered around 3 percent from 1851 to 1914. From 1921 through 1926 it had averaged 12 percent; and unemployment did little better after the return to gold. In April 1925, when Britain returned to gold, the unemployment rate stood at 10.9 percent. After the return, it fluctuated sharply, but always at historically very high levels. Thus, in the year after return, unemployment climbed above 12 percent, fell back to 9 percent, and jumped to over 14 percent during most of 1926. Unemployment fell back to 9 percent by the summer of 1927, but hovered around 10 to 11 percent for the next two years. In other words, unemployment in Britain, during the entire 1920s, lingered around severe recession levels.Peter Clarke, "The Treasury's Analytical Model of the British Economy Between the Wars," in The State and Economic Knowledge: The American and British Experiences, Mary Furner and Barry Supple, eds. (Cambridge: Cambridge University Press, 1990), p. 177. See also Melchior Palyi, The Twilight of Gold 1914–1936 (Chicago: Henry Regnery, 1972), p. 109
The unemployment was concentrated in the older, previously dominant, and heavily unionized industries in the north of England. The pattern of the slump in British exports may be seen by some comparative data. If 1924 is set equal to 100, world exports had risen to 132 by 1929, while Western European exports had similarly risen to 134. United States exports had also risen to 130. Yet, amid this worldwide prosperity, Great Britain lagged far behind, exports rising only to 109. On the other hand, British imports rose to 113 in the same period. After the 1929 crash until 1931, all exports fell considerably, world exports to 113, Western European to 107, and the United States, which had taken the brunt of the 1929 crash, to 91; and yet, while British imports rose slightly from 1929 to 1931 to 114, its exports drastically fell to 68. In this way, the overvalued pound combined with rigid downward wage rates to work their dire effects in both boom and recession. Overall, whereas, in 1931, Western European and world exports were considerably higher than in 1924, British exports were very sharply lower.
Within categories of British exports, there was a sharp and illuminating separation between two sets of industries: the old, unionized export staples in the north of England, and the newer, relatively nonunion, lower-wage industries in the south. These newer industries were able to flourish and provide plentiful employment because they were permitted to hire workers at a lower hourly wage than the industries of the north.Benjamin M. Anderson, Economics and the Public Welfare: Financial and Economic History of the United States, 1914–1946 (New York: D. Van Nostrand, 1949), p. 166; D. E. Moggridge, British Monetary Policy, 1924–1931: The Norman Conquest of $4.86 (Cambridge: Cambridge University Press, 1972), p. 117. Some of these industries, such as public utilities, flourished because they were not dependent on exports. But even the exports from these new, relatively nonunionized industries did very well during this period. Thus from 1924 to 1928–29, the volume of automobile exports rose by 95 percent, exports of chemical and machinery manufactures rose by 24 percent, and of electrical goods by 23 percent. During the 1929–31 recession, exports of these new industries did relatively better than the old: machinery and electrical exports falling to 28 percent and 22 percent respectively below the 1924 level, while chemical exports fell only to 5 percent below and automobile exports remained comfortably in 1931 at fully 26 percent above 1924.
On the other hand, the older, staple export industries, the traditional mainstays of British prosperity, fared very badly in both these periods of boom and recession. The nonferrous metal industry rose only slightly by 14 percent by 1928–29 and then fell to 55 percent of 1924 in the next two years. In even worse shape were the once-mighty cotton and woolen textile industries, the bellwethers of the Industrial Revolution in England. From 1924 to 1929, cotton exports fell by 10 percent, and woolens by 20 percent, and then, in the two years to 1931, they plummeted phenomenally, cottons to 50 percent of 1924 and woolens to 46 percent. Remarkably, cotton and woolen exports were at this point their lowest in volume since the 1870s.
Perhaps the worst problem was in the traditionally prominent export, coal. Coal exports had declined to 69 percent of 1924 volume in 1931; but perhaps more ominously, they had fallen to 88 percent in 1928–29, slumping, like textiles, in the midst of worldwide prosperity.
So high were British price levels compared to other countries, in both of these periods, that Britain’s imports, remark ably, rose in every category during boom and recession. Thus, imports of manufactured goods into Britain rose by 32.5 percent from 1924 to 1928–29, and then rose another 5 percent until 1931. So costly, too, was the once-proud British iron and steel industry that, after 1925, the British, for the first time in their history, became net importers of iron and steel.
The relative rigidity of wage costs in Britain may be seen by comparing their unit wage costs with the U.S., setting 1925 in each country equal to 100. In the United States, as prices fell about 10 percent in response to increased productivity and output, wage rates also declined, falling to 93 in 1928, and to 90 in 1929. Swedish wages were even more flexible in those years, enabling Sweden to surmount without export depression and return to gold at the prewar par. Swedish wage rates fell to 88 in 1928, 80 in 1929, and 70 in 1931. In Great Britain, on the other hand, wage rates remained stubbornly high, in the face of falling prices, being 97 in 1928, 95 the following year, and down to only 90 in 1931.Moggridge, British Monetary Policy, p. 117–25. In contrast, wholesale prices in England fell by 8 percent in 1926 and 1927, and more sharply still thereafter.
The blindness of British officialdom to the downward rigidity of wage rates was quite remarkable. Thus, the powerful deputy controller of finance for the Treasury, Frederick W. Leith-Ross, the major architect of what became known as the “Treasury view,” wrote in bewilderment to Hawtrey in early August 1928, wondering at Keynes’s claim that wage rates had remained stable since 1925. In view of the substantial decline in prices in those years, wrote Leith-Ross, “I should have thought that the average wage rate showed a substantial decline during the past four years.” Leith-Ross could only support his view by challenging the wage index as inaccurate, citing his own figures that aggregate payrolls had declined. Leith-Ross doesn’t seem to have realized that this was precisely the problem: that keeping wage rates up in the face of declining money may indeed lower payrolls, but by creating unemployment and the lowering of hours worked. Finally, by the spring of 1929, Leith-Ross was forced to face reality, and conceded the point. At last, Leith-Ross admitted that the problem was rigidity of labor costs:
If our workmen were prepared to accept a reduction of 10 percent in their wages or increase their efficiency by 10 per- cent, a large proportion of our present unemployment could be overcome. But in fact organized labor is so attached to the maintenance of the present standard of wages and hours of labor that they would prefer that a million workers should remain in idleness and be maintained permanently out of the Employment Fund, than accept any sacrifice. The result is to throw on to the capital and managerial side of industry a far larger reorganization than would be necessary: and until labor is prepared to contribute in larger measure to the process of reconstruction, there will inevitably be unemployment.Draft memorandum to Chandellor of Exchequer Churchill, April 1929. Clarke, "Treasury's Analytical Model," p. 186. See also ibid., pp. 179–80, 184–87.
Leith-Ross might have added that the “preference” for unemployment was made not by the unemployed themselves but by the union leadership on their alleged behalf, a leadership which itself did not have to face the unemployment dole. More- over, the willingness of the workers to accept this deal might have been very different if there were no generous Employment Fund for them to tap.
It was in fact the highly militant coal miners’ union, led by the prominent leftist Aneurin “Nye” Bevan, that was the first to stir up grave doubt about the glory of the British return to gold. Not only was coal a highly unionized export industry located in the north, but already overinflated coal-mining wages had been given an extra boost during the first Labor government of Ramsay MacDonald, in 1924. In addition to the high wage rates, the miners’ union insisted on numerous cost-raising restrictive, featherbedding practices, some of them resurrected from the defunct postmedieval guilds. These obstructionist tactics helped rigidify the British economy, preventing changes and adaptations of occupation and location, and hampering rationalizing and innovative managerial practices. As Professor Benham trenchantly pointed out:
Employers who wished to make changes had to face the powerful opposition of organized labor. The introduction of new methods, such as the “more looms to a weaver” system, was resisted. Strict lines of demarcation between occupations were maintained in engineering and elsewhere. A plumber could repair a pipe conveying cold water; if it conveyed hot water, he had to call in a hot water engineer. Entry into certain occupations was rendered difficult. A man can become an efficient building operative in a few months; an apprenticeship of four years was required. British railways could not have their labour force as they chose. A host of restrictions, insisted upon by the Trade Unions, made this impossible.Palyi, Twilight of Gold, p. 79. Frederic C. Benham, British Monetary Policy (London: P.S. King, 1932), pp. 27f. A manifestation of this obstructive and restrictive trade-union spirit circulated to the members of the union of Building Trade Workers in 1926: “You should keep a keen control of overtime. Adopt a militant policy against all forms of piece work; be watchful and limit apprentices; remember the power you now occupy is conditioned by the scarcity of your labor.”
By 1925, the year of the return to gold, British coal was already facing competition of rehabilitated, newly modernized, low-cost coal mines in France, Belgium, and Germany. British coal was no longer competitive, and its exports were slumping badly. The Baldwin government appointed a royal commission, headed by Sir Herbert Samuel, to study the vexed coal question. The Samuel Commission reported in March 1926, urging that miners accept a moderate cut in wages, and an increase in working hours at current pay, and suggesting that a substantial number of miners move to other areas, such as the south, where employment opportunities were greater. But this was not the sort of rational solution that would appeal to the spoiled, militant unions, who rejected those proposals and went on strike, thereby generating the traumatic and abortive general strike of 1926.
The strike was broken, and coal-mining wages fell slightly, but the victory for rationality was all too pyrrhic. Keynes was able to convince the inflationist press magnate, Lord Beaverbrook, that the miners were victims of a Norman–Churchill–international banker conspiracy to profit at the expense of the British working class. But instead of identifying the problem as inflationism, cheap money, and the gold bullion–gold-exchange standard in the face of an overvalued pound, Beaverbrook and British public opinion pointed to “hard money” as the villain responsible for recession and unemployment. Instead of tightening the money supply and interest rates in order to preserve its own created gold standard, the British Establishment was moved to follow its own inclinations still further: to step up its disastrous commitment to inflation and cheap money.Palyi, Twilight of Gold, pp. 102–04.”
During the general strike, Britain was forced to import coal from Europe instead of exporting it. In olden times, the large fall in export income would have brought about a severe liquidation of credit, contracting the money supply and lowering prices and wage rates. But the British banks, caught up as they were in the ideology of inflationism, instead expanded credit on a lavish scale, and sterling balances piled up on the continent of Europe. “Instead of a readjustment of prices and costs in England and a breaking up of the rigidities, England by credit expansion held the fort and continued the rigidities.”Anderson, Economics and Public Welfare, p. 167.
The massive monetary inflation in Britain during 1926 caused gold to flow out of the country, especially to the United States, and sterling balances to accumulate in foreign countries, especially in France. In the true gold-standard days, Britain would have taken all this as a furious signal to contract and tighten up; instead it persisted in continuing inflationism and cheap money, lowering its crucial “bank rate” (Bank of England discount rate) from 5 percent to 4.5 percent in April 1927. This action further weakened the pound sterling, and Britain lost $11 million in gold during the next two months.
France’s important role during the gold-exchange era has served as a convenient whipping boy for the British and for the Establishment ever since. The legend has it that France was the spoiler, by returning to gold at an undervalued franc (pegging the franc first in 1926, and then officially returning to gold two years later), consequently piling up sterling balances, and then breaking the gold-exchange system by insisting that Britain pay in gold. The reality was very different. France, during and after World War I, suffered severe hyperinflation, fueled by massive government deficits. As a result, the French franc, classically set at 19.3¢ under the old gold standard, had plunged down to 5¢ in May 1925, and accelerated its decline to 1.94¢ in late July 1926. By June 1926, Parisian mobs protesting the runaway inflation and depreciation surrounded the Chamber of Deputies, threatening violence if former Premier Raymond Poincaré, known as a staunch monetary and fiscal conservative, was not returned to his post. Poincaré was returned to office July 2, pledging to cut expenses, balance the budget, and save the franc.
Armed with a popular mandate, Poincaré was prepared to drive through any necessary monetary and fiscal reforms. Poincaré’s every instinct urged him to return to gold at the prewar par, a course that would have been disastrous for France, being not only highly deflationary but also saddling French taxpayers with a massive public debt. Furthermore, returning to gold at the prewar par would have left the Bank of France with a very low (8.6-percent) gold reserve to bank notes in circulation. Returning at par, of course, would have gladdened the hearts of French bondholders as well as of Montagu Norman and the British Establishment. Poincaré was talked out of this path, however, by the knowledgeable and highly perceptive Emile Moreau, governor of the Bank of France, and by Moreau’s deputy governor, distinguished economist Charles Rist. Moreau and Rist were well aware of the chronic export depression and unemployment that the British were suffering because of their stubborn insistence on the prewar par. Finally, Poincaré reluctantly was persuaded by Moreau and Rist to go back to gold at a realistic par.
When Poincaré presented his balanced budget and his monetary and financial reform package to Parliament on August 2, 1926, and drove them through quickly, confidence in the franc dramatically rallied, pessimistic expectations in the franc were changed to optimistic ones, and French capital, which had understandably fled massively into foreign currencies, returned to France, quickly doubling its value on the foreign exchange market to almost 4¢ by December. To avoid any further rise, the French government quickly stabilized the franc de facto at 3.92¢ on December 26, and then returned de jure to gold at the same rate on June 25, 1928.Dr. Anderson estimates that it would have been “safer” for France to have gone back at 3.5¢ (which it could have done at the market rate in November). Anderson, Economics and Public Welfare, p. 158. On the saga of France and the French franc in this period, see ibid., pp. 154–61, 168–73; and Palyi, Twilight of Gold, pp. 185–90. For the influence of Moreau and Rist, see Judith L. Kooker, “French Financial Diplomacy: The Interwar Years,” in Benjamin M. Rowland, Balance of Power or Hegemony: The Interwar Monetary System (New York: New York University Press, 1976), pp. 91–93.
At the end of 1926, while the franc was now pegged, France was not yet on a genuine gold standard. Officially, and de jure, the franc was still set at the prewar par, when one gold ounce had been set at approximately 100 francs. But now, at the new pegged value, the gold ounce, in foreign exchange, was worth 500 francs. Obviously, no one would now deposit gold at a French bank in return for 100 paper francs, thereby wiping out 80 percent of his assets. Also, the Bank of France (which was a privately owned firm) could not buy gold at the current expensive rate, for fear that the French government might decide, after all, to go back to gold de jure at a higher rate, thereby inflicting a severe loss on its gold holdings. The government, however, did agree to indemnify the bank for any losses it might incur in foreign exchange transactions; in that way, Bank of France stabilization operations could only take place in the foreign exchange market.
The French government and the Bank of France were now committed to pegging the franc at 3.92¢. At that rate, francs were purchased in a mighty torrent on the foreign exchange market, forcing the Bank of France to keep the franc at 3.92¢ by selling massive quantities of newly issued francs for foreign exchange. In that way, foreign exchange holdings of the Bank of France skyrocketed rapidly, rising from a minuscule sum in the summer of 1926 to no less than $1 billion in October of the following year. Most of these balances were in the form of sterling (in bank deposits and short-term bills), which had piled up on the continent during the massive British monetary inflation of 1926 and now moved into French hands with the advent of upward speculation in the franc, and with continued inflation of the pound. Willy-nilly, and against their will, therefore, the French found themselves in the same boat as the rest of Europe: on the gold-exchange or gold-sterling standard.See the lucid exposition in Anderson, Economics and Public Welfare, pp. 168–70.
If France had gone onto a genuine gold standard at the end of 1926, gold would have flowed out of England to France, forcing contraction in England and forcing the British to raise interest rates. The inflow of gold into France and the increased issue of francs for gold by the Bank of France would also have temporarily lowered interest rates there. As it was, French interest rates were sharply lowered in response to the massive issue of francs, but no contraction or tightening was experienced in England; quite the contrary.The open market discount rate in Paris fell from 7 percent in August 1926 to 2 percent in August of the following year. Ibid., p. 172.
Moreau, Rist, and the other Bank of France officials were alert to the dangers of their situation, and they tried to act in lieu of the gold standard by reducing their sterling balances, partly by demanding gold in London, and partly by exchanging sterling for dollars in New York.
This situation put considerable pressure upon the pound, and caused a drain of gold out of England. In the classical gold-standard era, London would have responded by raising the bank rate and tightening credit, stemming or even reversing the gold outflow. But England was committed to an unsound, inflationist policy, in stark contrast to the old gold system. And so, Norman tried his best to use muscle to prevent France from exercising its own property rights and redeeming sterling in gold, and absurdly urged that sterling was beneficial for France, and that they could not have too much sterling. On the other hand, he threatened to go off gold altogether if France persisted—a threat he was to make good four years later. He also invoked the spectre of France’s World War I debts to Britain.Kooker, “French Financial Diplomacy, pp. 86–90. He tried to get various European central banks to put pressure on the Bank of France not to take gold from London. The Bank of France found that it could sell up to £3 million a day without attracting the angry attention of the Bank of England; but any more sales than that would call forth immediate protest. As one official of the Bank of France said bitterly in 1927, “London is a free gold market, and that means that anybody is free to buy gold in London except the Bank of France.”Anderson, Economics and Public Welfare, pp. 172–73.
Why did France pile up foreign exchange balances? The anti-French myth of the Establishment charges that the franc was undervalued at the new rate of 3.92¢, and that therefore the ensuing export surplus brought foreign exchange balances into France. The facts of the case were precisely the reverse. Before World War I, France traditionally had a deficit in its balance of trade. During the post–World War I inflation, as usually occurs with fiat money, the foreign exchange rate rose more rapidly than domestic prices, since the highly liquid foreign exchange market is particularly quick to anticipate and discount the future. Therefore, during the French hyperinflation, exports were consistently greater than imports.Thus, in 1925, the last full year of the hyperinflation, French exports were 103.8 percent of imports; the surplus was concentrated in manufactured goods, which had an export surplus of 23.8 billion francs, partially offset by a net import deficit of 5.4 billion in food and 16.8 billion in industrial raw materials. Palyi, Twilight of Gold, p. 185. Then, when France pegged the franc to gold at the end of 1926, the balance of trade reversed itself again to the original pattern. Thus, in 1928, French exports were only 96.1 percent of imports. On the simplistic-trade, or relative-purchasing-power criterion, then, we would have to say that the post-1926 franc was over- rather than undervalued. Why didn’t gold or foreign exchange flow out of France? For the same reason as before World War I; the chronic trade deficits were covered by perennial “invisible” net revenues into France, in particular the flourishing tourist trade.
What then accounted for the amassing of sterling by France? The inflow of capital into France. During the French hyperinflation, capital had left France in droves to escape the depreciating franc, much of it finding a haven in London. When Poincaré put his monetary and budget reforms into effect in 1926, capital happily reversed its flow, and left London for France, anticipating a rising or at least a stable franc.
In fact, rather than being obstreperous, the French, succumbing to the blandishments and threats of Montagu Norman, were overly cooperative, much against their better judgment. Thus, Norman warned Moreau in December 1927 that if he persisted in trying to redeem sterling in gold, Norman would devalue the pound. In fact, Poincaré prophetically warned Moreau in May 1927 that sterling’s position had weakened and that England might all too readily give up on its own gold standard. And when France stabilized the franc de jure at the end of June 1928, foreign exchange constituted 55 percent of the total reserves of the Bank of France (with gold at 45 percent), an extraordinarily high proportion of that in sterling. Furthermore, much of the funds deposited by the Bank of France in London and New York were used for stock market loans and fueled stock speculation; worse, much of the sterling balances were recycled to repurchase French francs, which continued the accumulation of sterling balances in France. It is no wonder that Dr. Palyi concludes that
[i]t was at Norman’s urgent request that the French central bank carried a weak sterling on its back well beyond the limit of what a central bank could reasonably afford to do under the circumstances. No other major central bank took anything like a similar risk (percentage-wise).Ibid., p. 187. The recycling of pounds and francs was pointed out by a leading French banker, Raymond Philippe, Le’Drame Financier de 1924–1928, 4th ed. (Paris: Gallimard, 1931), p. 134; cited in Palyi, Twilight of Gold, p. 194., 84,Moreau did resist Norman’s pressure to inflate the franc further, and he repeatedly urged Norman to meet Britain’s gold losses by tightening money and raising interest rates in England, thereby checking British purchase of francs and attracting capital at home. All this urging was to no avail, Norman being committed to a cheap-money policy. Rothbard, America’s Great Depression, p. 141
Monty Norman could neutralize the French, at least temporarily. But what of the United States? The British, we remember, were counting heavily on America’s continuing price inflation, to keep British gold out of American shores. But instead, American prices were falling slowly but steadily during 1925 and 1926, in response to the great outpouring of American products. The gold-exchange standard was being endangered by one of its crucial players before it had scarcely begun!
So, Norman decided to fall back on his trump card, the old magic of the Norman-Strong connection. Benjamin Strong must, once more, rush to the rescue of Great Britain! After Norman turned for help to his old friend Strong, the latter invited the world’s four leading central bankers to a top-secret conference in New York in July 1927. In addition to Norman and Strong, the conference was attended by Deputy Governor Rist of the Bank of France and Dr. Hjalmar Schacht, governor of the German Reichsbank. Strong ran the American side with an iron hand, keeping the Federal Reserve Board in Washington in the dark, and even refusing to let Gates McGarrah, chairman of the board of the Federal Reserve Bank of New York, attend the meeting. Strong and Norman tried their best to have the four nations embark on a coordinated policy of monetary inflation and cheap money. Rist demurred, although he agreed to help England by buying gold from New York instead of London, (that is, drawing down dollar balances instead of sterling). Strong, in turn, agreed to supply France with gold at a subsidized rate: as cheap as the cost of buying it from England, despite the far higher transportation costs.Ibid.
Schacht was even more adamant, expressing his alarm at the extent to which bank credit expansion had already gone in England and the United States. The previous year, Schacht had acted on his concerns by reducing his sterling holdings to a minimum and increasing the holdings of gold in the Reichsbank. He told Strong and Norman: “Don’t give me a low [interest] rate. Give me a true rate. Give me a true rate, and then I shall know how to keep my house in order.”Anderson, Economics and Public Welfare, p. 181. Schacht had stabilized the German mark in a new Rentenmark after the old mark had been destroyed by a horrendous runaway inflation by the end of 1923. The following year, he put the mark on the gold-exchange standard. Thereupon, Schacht and Rist sailed for home, leaving Strong and Norman to plan the next round of coordinated inflation themselves. In particular, Strong agreed to embark on a mighty inflationary push in the United States, lowering interest rates and expanding credit—an agreement which Rist, in his memoirs, maintains had already been privately concluded before the four-power conference began. Indeed, Strong gaily told Rist during their meeting that he was going to give “a little coup de whiskey to the stock market.”Charles Rist, “Notice Biographique,” Revue d’Economie Politique (November–December, 1955): 1006ff. Strong also agreed to buy $60 million more of sterling from England to prop up the pound.
Pursuant to the agreement with Norman, the Federal Reserve promptly launched its greatest burst of inflation and cheap credit in the second half of 1927. This period saw the largest rate of increase of bank reserves during the 1920s, mainly due to massive Fed purchases of U.S. government securities and of bankers’ acceptances, totaling $445 million in the latter half of 1927. Rediscount rates were also lowered, inducing an increase in bills discounted by the Fed. Benjamin Strong decided to sucker the suspicious regional Federal Reserve banks by using Kansas City Fed Governor W.J. Bailey as the stalking horse for the rate-cut policy. Instead of the New York Fed initiating the rediscount rate cut from 4 percent to 3.5 percent, Strong talked the trusting Bailey into taking the lead on July 29, with New York and the other regional Feds following a week or two later. Strong told Bailey that the purpose of the rate cuts was to help the farmers, a theme likely to appeal to Bailey’s agricultural region. He made sure not to tell Bailey that the major purpose was to help England pursue its inflationary gold-exchange policy.
The Chicago Fed, however, balked at lowering its rates, and Strong got the Federal Reserve Board in Washington to force it to do so in September. The isolationist Chicago Tribune angrily called for Strong’s resignation, charging correctly that discount rates were being lowered in the interests of Great Britain.Anderson, Economics and Public Welfare, pp. 182–83. See also Rothbard, America’s Great Depression, pp. 140–42; Beckhart, “Federal Reserve Policy,” pp. 67ff.; and Lawrence E. Clark, Central Banking Under the Federal Reserve System (New York: Macmillan, 1935), p. 314.
After generating the burst of inflation in 1927, the New York Fed continued, over the next two years, to do its best: buying heavily in prime commercial bills of foreign countries, bills endorsed by foreign central banks. The purpose was to bolster foreign currencies, and to prevent an inflow of gold into the U.S. The New York Fed also bought large amounts of sterling bills in 1927 and 1929. It frankly described its policy as follows:
We sought to support exchange by our purchases and thereby not only prevent the withdrawal of further amounts of gold from Europe but also, by improving the position of the foreign exchanges, to enhance or stabilize Europe’s power to buy our exports.Clark, Central Banking Under the Federal Reserve, p. 198.
If Strong was the point man for the monetary inflation of the late 1920s, the Coolidge administration was not far behind. Pittsburgh multimillionaire Andrew W. Mellon, secretary of the Treasury throughout the Republican era of the 1920s, was long closely allied with the Morgan interests. As early as March 1927, Mellon assured everyone that “an abundant supply of easy money” would continue to be available, and he and President Coolidge repeatedly acted as the “capeadores of Wall Street,” giving numerous newspaper interviews urging stock prices upward whenever prices seemed to flag. And in January 1928, the Treasury announced that it would refund a 4.5-percent Liberty Bond issue, falling due in September, in 3.5-percent notes. Within the administration, Mellon was consistently Strong’s staunchest supporter. The only sharp critic of Strong’s inflationism within the administration was Secretary of Commerce Herbert C. Hoover, only to be met by Mellon’s denouncing Hoover’s “alarmism” and interference.Unfortunately, Hoover shortsightedly attacked only credit expansion in the stock market rather than credit expansion per se. Rothbard, America’s Great Depression, pp. 142–43; Anderson, Economics and Public Welfare, p. 182; Ralph W. Robey, “The Capeadores of Wall Street,” Atlantic Monthly (September 1928); and Harold L. Reed, Federal Reserve Policy, 1921–1930 (New York: McGraw-Hill, 1930), p. 32.
The motivation for Benjamin Strong’s expansionary policy of the late 1920s was neatly summed up in a letter by one of his top aides to one of Montagu Norman’s top henchmen, Sir Arthur Salter, then director of Economic and Financial Organization for the League of Nations. The aide noted that Strong, in the spring of 1928, “said that very few people indeed realized that we were now paying the penalty for the decision which was reached early in 1924 to help the rest of the world back to a sound financial and monetary basis.”O. Ernest Moore to Sir Arthur Salter, May 25, 1928. In Chandler,Benjamin Strong, pp. 280–81. Similarly, a prominent banker admitted to H. Parker Willis in the autumn of 1926 that bad consequences would follow America’s cheap-money policy, but that “that cannot be helped. It is the price we must pay for helping Europe.” Of course, the price paid by Strong and his allies was not so “onerous,” at least in the short run, when we note, as Dr. Clark pointed out, that the cheap credit aided especially those speculative, financial, and investment banking interests with whom Strong was allied—notably, of course, the Norman complex.Willis was a leading and highly perceptive critic of America’s inflationary policies in the interwar period. H. Parker Willis, “The Failure of the Federal Reserve,” North American Review (May 1929): 553. Clark’s study was written as a doctoral thesis under Willis. Clarke, Central Banking Under the Federal Reserve, p. 344. The British, as early as mid-1926, knew enough to be appreciative. Thus, the influential London journal, The Banker, wrote of Strong that “no better friend of England” existed. The Banker praised the “energy and skillfulness that he has given to the service of England,” and exulted that “his name should be associated with that of Mr. [Walter Hines] Page as a friend of England in her greatest need.”Page was the Anglophile ambassador to Great Britain under Wilson and played a large role in getting the United States in the war. Clark, Central Banking Under the Federal Reserve, p. 315.
On the other hand, Morgan partner Russell C. Leffingwell was not nearly as sanguine about the Strong-Norman policy of joint credit expansion. When, in the spring of 1929, Leffingwell heard reports that Monty was getting “panicky” about the speculative boom in Wall Street, he impatiently told fellow Morgan partner Thomas W. Lamont, “Monty and Ben sowed the wind. I expect we shall all have to reap the whirlwind. . . . I think we are going to have a world credit crisis.”Chernow, House of Morgan, p. 313.
Unfortunately, Benjamin Strong was not destined personally to reap the whirlwind. A sickly man, Strong in effect was not running the Fed throughout 1928, finally dying on October 16 of that year. He was succeeded by his handpicked choice, George L. Harrison, also a Morgan man but lacking the personal and political clout of Benjamin Strong.
At first, as in 1924, Strong’s monetary inflation was temporarily successful in accomplishing Britain’s goals. Sterling was strengthened, and the American gold inflow from Britain was sharply reversed, gold flowing outward. Farm produce prices, which had risen from an index of 100 in 1924 to 110 the following year, and had then slumped back to 100 in 1926 and 99 in 1927, now jumped up to 106 the following year. Farm and food exports spurted upward, and foreign loans in the United States were stimulated to new heights, reaching a peak in mid-1928. But, once again, the stimulus was only temporary. By the summer of 1928, the pound sterling was sagging again. American farm prices fell slightly in 1929, and agricultural exports fell in the same year. Foreign lending slumped badly, as both domestic and foreign funds poured into the booming American stock market.
The stock market had already been booming by the time of the fatal injection of credit expansion in the latter half of 1927. The Standard and Poor’s industrial common stock index, which had been 44.4 at the beginning of the 1920s boom in June 1921, had more than doubled to 103.4 by June 1927. Standard and Poor’s rail stocks had risen from 156.0 in June 1921 to 316.2 in 1927, and public utilities from 66.6 to 135.1 in the same period. Dow Jones industrials had doubled from 95.1 in November 1922 to 195.4 in November 1927. But now, the massive Fed credit expansion in late 1927 ignited the stock market fire. In particular, throughout the 1920s, the Fed deliberately and unwisely stimulated the stock market by keeping the “call rate,” that is, the interest rate on bank call loans to the stock market, artificially low. Before the establishment of the Federal Reserve System, the call rate frequently had risen far above 100 percent, when a stock market boom became severe; yet in the historic and virtually runaway stock market boom of 1928–29, the call rate never went above 10 percent. The call rates were controlled at these low levels by the New York Fed, in close collaboration with, and at the advice of, the Money Committee of the New York Stock Exchange.Rothbard, America’s Great Depression, p. 116; Clarke, Central Banking Under the Federal Reserve, p. 382; Adolph C. Miller, “Responsibilities for Federal Reserve Policies, 1927–1929,” American Economic Review (September 1935). The stock market, during 1928 and 1929, went into overdrive, virtually doubling these two years. The Dow went up to 376.2 on August 29, 1929, and Standard and Poor’s industrials rose to 195.2, rails to 446.0, and public utilities to 375.1 in September. Credit expansion always concentrates its booms in titles to capital, in particular stocks and real estate, and in the late 1920s, bank credit propelled a massive real estate boom in New York City, in Florida, and throughout the country. These included excessive mortgage loans and construction from farms to Manhattan office buildings.On the real estate boom of the 1920s, see Homer Hoyt, “The Effect of Cyclical Fluctuations upon Real Estate Finance,” Journal of Finance (April 1947): 57.
The Federal Reserve authorities, now concerned about the stock market boom, tried feebly to tighten the money supply during 1928, but they failed badly. The Fed’s sales of government securities were offset by two factors: (a) the banks shifting their depositors from demand deposits to “time” deposits, which required a much lower rate of reserves, and which were really savings deposits redeemable de facto on demand, rather than genuine time loans, and (b) more important, the fruit of the disastrous Fed policy of virtually creating a market in bankers’ acceptances, a market which had existed in Europe but not in the United States. The Fed’s policy throughout the 1920s was to subsidize and in effect create an acceptance market by standing ready to buy any and all acceptances sold by certain favored acceptance houses at an artificially cheap rate. Hence, when bank reserves tightened as the Fed sold securities in 1928, the banks simply shifted to the acceptance market, expanding their reserves by selling acceptances to the Fed. Thus, the Fed’s selling of $390 million of securities was partially offset, during latter 1928, by its purchase of nearly $330 million of acceptances.On the unfortunate Fed acceptance policy of the 1920s, see Rothbard, America’s Great Depression, pp. 117–23. The Fed’s sticking to this inflationary policy in 1928 was now made easier by adopting the fallacious “qualitativist” view, held as we have seen also by Herbert Hoover, that the Fed could dampen down the boom by restricting loans to the stock market while merrily continuing to inflate in the acceptance market.
In addition to pouring in funds through acceptances, the Fed did nothing to tighten its rediscount market. The Fed discounted $450 million of bank bills during the first half of 1928; it finally tightened a bit by raising its rediscount rates from 3.5 percent at the beginning of the year to 5 percent in July. After that, it stubbornly refused to raise the rediscount rate any further, keeping it there until the end of the boom. As a result, Fed discounts to banks rose slightly until the end of the boom instead of declining. Furthermore, the Fed failed to sell any more of its hoard of $200 million of government securities after July 1928; instead, it bought some securities on balance during the rest of the year.
Why was Fed policy so supine in late 1928 and in 1929? A crucial reason was that Europe, and particularly England, having lost the benefit of the inflationary impetus by mid-1928, was clamoring against any tighter money in the U.S. The easing in late 1928 prevented gold inflows from the U.S. from getting very large. Britain was again losing gold; sterling was again weak; and the United States once again bowed to its wish to see Europe avoid the consequences of its own inflationary policies.
Leading the inflationary drive within the administration were President Coolidge and Treasury Secretary Mellon, eagerly playing their roles as the capeadores of the bull market on Wall Street. Thus, when the stock market boom began to flag, as early as January 1927, Mellon urged it onward. Another relaxing of stock prices in March spurred Mellon to call for and predict lower interest rates; again, a weakening of stock prices in late March induced Mellon to make his statement assuring “an abundant supply of easy money which should take care of any contingencies that might arise.” Later in the year, President Coolidge made optimistic statements every time the rising stock market fell slightly. Repeatedly, both Coolidge and Mellon announced that the country was in a “new era” of permanent prosperity and permanently rising stock prices. On November 16, the New York Times declared that the administration in Washington was the source of most of the bullish news and noted the growing “impression that Washington may be depended upon to furnish a fresh impetus for the stock market.” The administration continued these bullish statements for the next two years. A few days before leaving office in March 1929, Coolidge called American prosperity “absolutely sound” and assured everyone that stocks were “cheap at current prices.”Rothbard, America’s Great Depression, p. 148. See also ibid., pp. 116–17; and Robey, “Capeadores.” The leading “bull” speculator of the era, former General Motors magnate William Crapo Durant, who was to get wiped out in the crash, hailed Coolidge and Mellon as the leaders of the boom. Commercial and Financial Chronicle (April 20, 1929): 2557ff.,Some of Strong’s apologists claim that, if Strong had been at the helm, he would have imposed tight money in 1928. For an example, see Carl Snyder, Capitalism, the Creator: The Economic Foundations of Modern Industrial Society (New York: Macmillan, 1940), pp. 227–28. Snyder worked under Strong as head of the statistical department of the New York Fed. But we now know the contrary: that Strong protested against even the feeble restrictive measures during 1928 as being too severe, in a letter from Strong to Walter W. Stewart, August 3, 1928. Stewart, formerly head of the Fed’s research division, had a few years earlier shifted to become economic adviser of the Bank of England, and had written to Strong warning of unduly tight restriction on American bank credit. Chandler, Benjamin Strong, pp. 459–65.
The clamor from England against any tighter money in the U.S. was driven by England’s loss of gold and the pressure on sterling. France, having unwillingly piled up $450 million in sterling by the end of June 1928, was anxious to redeem sterling for gold, and indeed sold $150 million of sterling by mid-1929. In deference to Norman’s threats and pleas, however, the Bank of France sold that sterling for dollars rather than for gold in London. Indeed, so cowed were the French that (a) French sales of sterling in 1929–31 were offset by sterling purchases by a number of minor countries, and (b) Norman managed to persuade the Bank of France to sell no more sterling until after the disastrous day in September 1931 when Britain abandoned its own gold-exchange standard and went on to a fiat pound standard.Palyi, Twilight of Gold, pp. 187, 194.
Meanwhile, despite the great inflation of money and credit in the U.S., the massive increase in the supply of goods in the U.S. continued to lower prices gradually, wholesale prices falling from 104.5 (1926=100) in November 1925 to 100 in 1926, and then to 95.2 in June 1929. Consumer price indices in the U.S. also fell gradually in the late 1920s. Thus, despite Strong’s loose money policies, Norman could not count on price inflation in the U.S. to bail out his gold-exchange system. Montagu Norman, in addition to pleading with the U.S. to keep inflating, resorted to dubious short-run devices to try to keep gold from flowing out to the U.S. Thus, in 1928 and 1929, he would sell gold for sterling to raise the sterling rate a bit, in sales timed to coincide with the departure of fast boats from London to New York, thus inducing gold holders to keep the precious metal in London. Such short-run tricks were hardly adequate substitutes for tight money or for raising bank rate in England, and weakened long-run confidence in the pound sterling.Anderson, Economic and Public Welfare, p. 201.
In March 1929, Herbert Clark Hoover, who had been a powerful secretary of commerce during the Republican administrations of the 1920s, became president of the United States. While not as intimately connected as Calvin Coolidge, Hoover long had been close to the Morgan interests. Mellon continued as secretary of the Treasury, with the post of secretary of state going to the longtime top Wall Street lawyer in the Morgan ambit, Henry L. Stimson, disciple and partner of J.P. Morgan’s personal attorney, Elihu Root.Undersecretary of the Treasury Ogden Mills, Jr., who was to replace Mellon in 1931 and who was close to Hoover, was a New York corporate lawyer from a family long associated with the Morgan interests. Hoover’s secretary of the Navy was Charles F. Adams, from a Boston Brahmin family long associated with the Morgans, and whose daughter married J.P. Morgan, Jr. Perhaps most important, Hoover’s closest, but unofficial adviser, whom he regularly consulted three times a week, was Morgan partner Dwight Morrow.Philip H. Burch, Jr., Elites in American History, vol. 3, The New Deal to the Carter Administration (New York: Holmes and Meier, 1980), p. 280. For the important but private influence on President Hoover by Morgan partner Thomas W. Lamont, including Lamont’s inducing Hoover to conceal his influence by faking entries in a diary that Hoover left to historians, see Ferguson, “From Normalcy to New Deal,” p. 79.
Hoover’s method of dealing with the inflationary boom was to try not to tighten the money supply, but to keep bank loans out of the stock market by a jawbone method then called “moral suasion.” This too was the preferred policy of the new governor of the Federal Reserve Board in Washington, Roy A. Young. The fallacy was to try to restrict credit to the stock market while keeping it abundant to “legitimate” commerce and industry. Using methods of intimidation of business honed when he was secretary of commerce, Hoover attempted to restrain stock loans by New York banks, tried to induce the president of the New York Stock Exchange to curb speculation, and warned leading editors and publishers about the dangers of high stock prices. None of these superficial methods could be effective.
Professor Beckhart added another reason for the adoption of the ineffective policy of moral suasion: that the administration had been persuaded to try this tack by the old manipulator, Montagu Norman. Finally, by June 1929, the moral suasion was at last abandoned, but discount rates were still not raised, so that the stock market boom continued to rage, even as the economy in general was quietly but inexorably turning downward. Secretary Mellon once again trumpeted our “unbroken and unbreakable prosperity.” In August, the Federal Reserve Board finally agreed to raise the rediscount rate to 6 percent, but any tightening effect was more than offset by the Fed’s simultaneously lowering its acceptance rate, thereby once again giving an inflationary fillip to the acceptance market. One reason for this resumption of acceptance inflation, after it had been previously reversed in March, was, yet again, “another visit of Governor Norman.”Benjamin H. Beckhart, “Federal Reserve Policy and the Money Market, 1923–1931,” in The New York Money Market, Beckhart, et al. (New York: New York University Press, 1931), pp. 142ff. See also ibid., p. 127. Thus, once more, the cloven hoof of Montagu Norman was able to give its final impetus to the boom of the 1920s. Great Britain was also entering upon a depression, and yet its inflationary policies resulted in a serious outflow of gold in June and July. Norman was able to get a line of credit of $250 million from a New York banking consortium, but the outflow continued through September, much of it to the United States. Continuing to help England, the New York Fed bought heavily in sterling bills from August through October. The new subsidization of the acceptance market, mostly foreign acceptances, permitted further aid to Britain through the purchase of sterling bills.
A perceptive epitaph on the qualitative-credit politics of 1928–29 was pronounced by A. Wilfred May:
Once the credit system had become infected with cheap money, it was impossible to cut down particular outlets of this credit without cutting down all credit, because it is impossible to keep different kinds of money separated in water-tight compartments. It was impossible to make money scarce for stock-market purposes, while simultaneously keeping it cheap for commercial use. . . . When Reserve credit was created, there was no possible way that its employment could be directed into specific uses, once it had flowed through the commercial banks into the general credit stream.A. Wilfred May, “Inflation in Securities,” in The Economics of Inflation, H. Parker Willis and John M. Chapman, eds. (New York: Columbia University Press, 1935), pp. 292–93; Charles O. Hardy, Credit Policies of the Federal Reserve System (Washington, D.C.: Brookings Institution, 1932), pp. 124–77; Oskar Morgenstern, “Developments in the Federal Reserve System,” Harvard Business Review (October 1930): 2–3; and Rothbard, America’s Great Depression, pp. 151–52.
We continue our look at leading figures from the Old Right with guest Tom Woods, who helped publish the late Murray Rothbard's The Betrayal of the American Right. Rothbard admired the courageous and revisionist voices promoting the Old Republic, and shared their antagonism for war and economic intervention. Tom and Jeff discuss great essays like Albert J. Nock's "Isaiah's Job" and Frank Chodorov's "The Ethic of the Peddler Class;" the latter a rousing defense of the merchant class against both bureaucrats and the country-club conservatism which would emerge under William F. Buckley. The old antiwar and anti-New Deal works of figures like Menken, Hazlitt, Howard Buffett, Chodorov, and Nock deserve far wider consideration, especially as the "New Right" spirals into the worst of Buckleyite foreign policy and know-nothing economics. You owe it to yourself to explore this great but underappreciated tradition.
Additional Resources Read Rothbard's important work: Mises.org/Betrayal
Albert J. Nock's "Isaiah's Job:" Mises.org/HAPNock
Frank Chodorov's "The Ethic of the Peddler Class:" Mises.org/HAPChodorov
Jeff Leskovar on "The Psychology of Human Action:" Mises.org/HAPLeskova
The Washington area was traumatized for weeks by two dimwitted psychopaths who rode around brazenly shooting people from the trunk of their ancient Chevrolet. Sadly, law enforcement officials had apparently met their match.
Original Article: "The DC Sniper Rampage: The Biggest Police Debacle of the Century?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
A big factor behind Youngkin’s electoral success in Virginia: the rural voter and their reaction to Richmond's overreach on guns, schools, and centralized political power.
Original Article: "Rural Voters, Guns, and Decentralization Sank the Democrats in Virginia"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
It is clear that there are situations in which the unions’ interests diverge from the public’s interest in transparency and good policing. But the unions’ interests also often diverge from the interests of individual members.
Original Article: "Why Don’t Police Unions Protect Whistleblowers?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Not all of America’s young men of the North bought into the federal propaganda. When the federal government was forced to resort to a military draft, many Americans resisted.
Original Article: "The Heroic Draft Dodgers of the American Civil War"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
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
Patrick Newman is a fellow at the Mises Institute who have just published his new book. He talks about Rothbard's approach to history, whether the US revolution was libertarian, and the proper way to interpret Andrew Jackson.
Mentioned in the Episode and Other Links of Interest: Patrick Newman’s new book Cronyism: Liberty vs. Power in Early America, 1607-1849Patrick’s previous appearance on ep. 49 of the Bob Murphy ShowDan Sanchez’s article on Andrew Jackson’s fight with Nicholas Biddle over the Second Bank of the United StatesBob’s review of MMT (including Andrew Jackson’s payoff of the federal debt)The YouTube version of this interview For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on Apple Podcasts, Google Podcasts, Stitcher, Spotify, and via RSS.
While 9/11 is mainly forgotten, a deafening trumpet announces the presence of other supposed crises, such as covid and climate change. The Leviathan is now excited and encouraged by the possibilities of new rules and new IDs.
Original Article: "The REAL ID Means a Real Leviathan"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
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
Support for federal conscription is contrary to principles of decentralization or a "limited republic." Early Americans would have viewed this Jacobin-inspired scheme with dismay and fear.
Original Article: "Military Conscription Is a Tool for Centralization, State Building, and Despotism"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The US military's turn to "wokeness" is a result of decades of high military spending and public deference toward military "experts." That gave us a military that is overfunded and highly political.
Original Article: "A Fat, Comfortable Military Is a "Woke" Military"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Vaccine mandates are much easier to enforce thanks to the spread of government spending, government contracting, and monopolized government services.
Original Article: "Employer Vaccine Mandates: When the Feds Pay the Piper, They Call the Tune"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
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 Jeff Deist and audience question and answer period. Recorded in St. Petersburg, Florida on October 21, 2021.
Find Dr. Newman's new book, Cronyism: Liberty versus Power in Early America, 1607–1849: Mises.org/CronyismBook
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?
Neo-Spoonerism: there is no treason against the federal government, because the federal government does not abide by the document which it claims as its foundational authority to govern.
Original Article: "What Spooner Can Teach Us in Our Age of Neofascism"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
If people decide to save rather than spend, this could lead to a fall in GDP, even though people are becoming better off beyond the short term.
Original Article: "GDP Tells Us Little about the Health of an Economy"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The story of the Americas as the violent “pacifying” and corralling of free indigenous peoples by white outsiders erases the long history of statism in many areas of the New World.
Original Article: "Pre-Columbian America Wasn't Exactly a Paradise of Freedom"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
It is important to get some much-needed context when examining a disease which is being used to justify unprecedented increases in state power and violations of human rights.
Original Article: "Age-Adjusted Mortality Is at 2004 Levels. Yet They Tell Us Covid Is Worse Than the 1918 Flu."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Raising the debt limit will only delay the inevitable while courting fiscal and monetary chaos: higher interest rates, cuts to social programs, a declining dollar, and price inflation.
Original Article: "Defaulting on the Debt Is the Moral Thing to Do"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Let's stop pretending default is unprecedented. The US defaulted on debts in 1934 and again in 1979. Today it engages in de facto default through financial repression and monetary inflation.
Original Article: "Yellen Is Wrong. The US Government Doesn't Always Pay its Debts."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The FBI’s power and federal legitimacy are far more tenuous than Washington recognizes. Beyond the nation’s big cities, federal authority hinges largely on the consent of local citizens.
Original Article: "My Time with the FBI"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
When a politician says "do the right thing," what he means is "do what I say, or else."
Original Article: "What They Really Mean When They Say 'Do the Right Thing'"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
After the Apocalypse: America’s Role in a World TransformedBy Andrew BacevichMetropolitan Books, 2021Xiv + 206 pages
Andrew Bacevich, a history professor at Boston University for twenty-three years, has written an excellent book on American foreign policy, but it is embedded within a larger and more questionable book. Fortunately, the merits of the former book outweigh the problems of the latter.
Bacevich tells us that “cumulative policy failures ought to have made it clear that a national security paradigm centered on military supremacy, global power projection, decades-old formal alliances, and wars that never seemed to end was at best obsolete, if not itself a principal source of self-inflicted wounds. The costs, approximating a trillion dollars annually, were too high. The outcomes, ranging from disappointing to abysmal, have come nowhere near to making good on promises issued from the White House, the State Department, or the Pentagon and repeated in the echo chamber of the establishment media.”
As will already be clear, Bacevich writes with moral passion, and he has modeled his book on a work expressing similar passion written eighty years ago, Strange Defeat. In that book, the great French medievalist Marc Bloch indicted the French military and political leadership of the 1930s for the failures that led to the collapse of France before the German onslaught in 1940. “My purpose in writing After the Apocalypse compares with Bloch’s. In books and essays published over the past twenty years, I have called attention to various failures of American leadership, particularly related to this country’s recurring misuse of military power. ... Like Bloch, I make no pretense of dispassion.”
Bacevich’s indictment of American foreign policy is far reaching. Under the guise of what he calls American exceptionalism, we have sought to impose our will on the world. “[R]edefining the nation’s role in the world will remain all but impossible until Americans themselves abandon the conceit that the United States is history’s chosen agent...”
The illusion of American exceptionalism has had bad consequences. Among these, “and most troubling of all, is U.S. involvement in the intentional killing of noncombatants, which is always wrong and can never be justified by ‘military necessity.’ ... Targeting civilians became a central component of the American way of war ... we can no more tabulate how many civilians were killed by made-in-the- USA fragmentation, incendiary, cluster, or atomic munitions since the 1940s than we can calculate the number of people who died during the Stalinist purges of the 1930s or the Cultural Revolution that Mao Zedong launched in the mid-1960s. All we can say for certain is that the death toll exacted by U.S. bombing was massive and correlated imperfectly at best with intended political outcomes.”
Even if one were to put morality aside, Bacevich says, we need to ask “the most fundamental of questions: Does the United States possess the military wherewithal to oblige adversaries to endorse its claim of being history’s indispensable nation? And if the answer is no, as the post-9/11 wars in Afghanistan and Iraq suggest, wouldn’t it make sense for Washington to temper its ambitions accordingly?”
And it is clear that America does not possess the military wherewithal to continue to rule the world: we are over-committed. “Here we arrive at the abiding, unspoken premise of basic U.S. policy, spanning both the Cold War and all the years since: the conviction that containing or deterring or coercing nation-states that are both far away and classified as dangerous holds the key to keeping Americans safe at home and guaranteeing their freedom ... On occasion the United States has found itself face-to-face with threats that did not conform to the profile of Pentagon-preferred adversaries. On each such occasion, with the American people gripped by fear, the existing natural security paradigm was found wanting.”
It is a great strength of Bacevich’s book that he brings into question the entire conventional narrative of American foreign policy in the twentieth century. He says about World War I: “The United States went off to fight, Woodrow Wilson declared, ‘for the ultimate peace of the world and for the liberation of its peoples,’ a stirring vision considerably at odds with the actual war aims of the belligerents on both sides. Alas, the war brought neither permanent peace nor liberation. No sooner did it end than Americans began having second thoughts. Revisionist historians like Harry Elmer Barnes, eventually joined by Charles A. Beard—among historians of his day an acknowledged superstar—argued that U.S. entry into the Great War had been a huge blunder.”
In another fine passage, Bacevich says, “Here, in a nutshell, is the narrative that props up American exceptionalism: the conviction that a succession of victories, engineered by the United States, had ‘created the free world,’ thereby weaving past, present, and future into a single seamless garment. That this narrative cannot withstand even minimally critical scrutiny is beside the point. (Does the outcome of World War I qualify as a victory or did it pave the way for something worse? And didn’t Soviet leader Josef Stalin, neither democratic nor liberal, somehow figure in defeating fascism in World War II?)”
It is a sign of Bacevich’s courage that he is willing to cite Barnes, a leading American public intellectual in the 1920s and 1930s but now viewed by our Orwellian guardians of public orthodoxy as beyond the pale. He also merits praise for his succinct characterization of Arthur Schlesinger Jr., as “the influential historian-political operative.”
That said, one must with regret note that there are limits to Bacevich’s revisionism. He nowhere says that the revisionists are correct, but confines himself to bringing their position to our attention. It is unclear whether he thinks the whole course of American twentieth-century foreign policy a mistake or, instead, thinks that America had the resources in the years following World War II to pursue the policy of global dominance but now no longer does so.
Further, his proposals for a new foreign policy are not all one could wish for. On the one hand, he wants to halt our “special relationships” with Britain and Israel and to bring NATO to an end; but, on the other hand, he calls for continued American presence in East Asia. “The case of East Asia differs: Under a strategy of sustainable selfsufficiency, the United States should continue to maintain a military presence there. Here, once more, the axiom: ‘First, do no harm’ applies. The rise of China and provocations by the Chinese government have caused unease throughout the region. A potential new Cold War centered on Asia looms. The possibility of an actual shooting war cannot be excluded. An abrupt change in the U.S. military posture in the Indo-Pacific could trigger such a disaster.” Is this not an example of the very Cold War logic of the need for America, the “indispensable nation,” to deter foreign “aggression” which Bacevich for much of the book brings into question?
Our confidence in him cannot increase when we find him praising that inveterate Anglophile and Cold Warrior Reinhold Niebuhr as a guide we would do well to follow. “How might Niebuhr’s emphasis on self-awareness, humility, and prudence—his advocacy of realism combined with moral responsibility—find application in the Next Order that now beckons? The chapters that follow will explore the application of Niebuhrian moral realism to specific challenges awaiting the United States as it leaves the New Order behind.” One must say, against Bacevich, that though Niebuhr was indeed an important thinker worthy of study, he in the end provided no genuine alternative to the policy of American global dominance. Instead, he replaced the magniloquent rhetoric of Woodrow Wilson and his acolytes with the language of original sin. The upshot was that, regrettably, we must do moral wrong but be aware of our pretensions in doing so. I venture to suggest that Bacevich would find a better guide here in Niebuhr’s less bellicose brother, H. Richard Niebuhr.
At the outset, I said that Bacevich’s good book on foreign policy was embedded within a larger and more questionable book. We can best approach this other book by asking, why does Bacevich believe the apocalypse is at hand? I regret to say that the “catastrophes” he has in mind are familiar leftist bromides. We must spend less on our military establishment, he avers, so we can confront the menaces of climate change and covid-19. Further, in his zeal to combat American global dominance, he has adopted the “woke” narrative of the New York Times 1619 Project, and he tells us, it has much to teach us. Evidently, its well-documented distortions leave him unmoved, and the white race must repent in sackcloth and ashes for its sins. But enough of that: let us rather concentrate on Bacevich’s contributions to our understanding of American foreign policy.
Eleven states ban happy hour. These laws restrict the sale of alcohol at discounted prices during specially designated times. Unfortunately, many citizens regard these backdoor price controls as perfectly legit.
Original Article: "Happy Hour May Be Getting a Little Happier"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Bob gives a brief history of money in the United States, explaining that the dollar was much “harder” in, say, 1810 than it was in 1910. This explains why there was significant consumer price inflation even in 1970, the year before Richard Nixon officially severed the dollar’s link to gold.
Mentioned in the Episode and Other Links of Interest: Bob’s chapter in the new book, Understanding Money Mechanics, discussing the history of the US gold/silver standardsHis chapter on Mises’ theory of the business cycleBob’s articles discussing the 50th anniversary of Nixon closing the gold window: (1) Basic intro, (2) discussing the different regimes of the US gold standard, and (3) explaining the different inflation rates and the connection to Austrian business cycle theory [Note that this third article hadn’t posted as of the original publication of the podcast episode; this link will be updated when available.]Bob’s article in the Quarterly Journal of Austrian Economics on Mises’ theory of the business cycle. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on Apple Podcasts, Google Podcasts, Stitcher, Spotify, and via RSS.
Victor Davis Hanson's cartoonish conception of how foreign states act is not supported by history and contributes to the US government’s insane defense expenditures and destructive crusades around the globe.
Original Article: "Paranoia about American Weakness Rests on a Flawed Understanding of History"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
It's not just the civilian politicians. For twenty years, the military itself pressed for more war, endlessly claiming that victory was right around the corner.
Original Article: "The Pentagon and the Generals Wanted This Disastrous War"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Nixon's decision to end the gold redeemability of the greenback was probably the most comprehensive act of monetary expropriation of modern times.
Original Article: "The Crime of '71: When Nixon Ended the Dollar's Last Connection to Gold"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
From the Introduction to Cronyism: Liberty versus Power in Early America, 1607–1849.
The present book is an economic and political history of early America, describing government policies and their effects on marketplace activity. In particular, it is a history of cronyism: when the government passes policies to benefit special-interest politicians, bureaucrats, businesses, and other groups at the expense of the general public. Examples include a central bank’s selective credit expansion, discriminatory taxes and regulations, business subsidies, territorial acquisitions, and other foreign policy maneuvers, and new constitutions. The rewards of cronyism take the form of monetary gains, particularly increased incomes and profits for individuals and businesses, or psychic gains from greater power and authority. The government’s claim that it passed legislation to enhance public welfare is only a thin veneer for privileges and redistribution.
Special-interest legislation is inherent in the very nature of government. On the free market, the network of voluntary exchanges, all activity is based on individual liberty and results in mutually beneficial outcomes. The competitive profit and loss mechanism incentivizes individuals to produce goods and services that consumers desire. However, the government, the legitimated monopoly of power, lacks this mechanism and produces outcomes that are harmful to society. The incentive structure is different: unlike the Invisible Hand of the market, individuals that control the coercive Visible Hand are encouraged to pass legislation that benefits themselves at the expense of others. The stronger the government, the more lucrative the rewards. To control the government machinery is to control the levers of cronyism.
Researchers have analyzed American special privileges before, but their studies focus on individual cases in select time periods that remain unintegrated into an overarching narrative. There is still a need for an overview of cronyism that covers the motivations behind and development of relevant policies, their effects on the economy, and the critical attempts to reform the system. To achieve this goal, I utilize the “Liberty versus Power” theory, developed by Murray Rothbard in his five-volume Conceived in Liberty series. It contains three core components.
First, history is a clash between the forces of liberty, or those in favor of individual decision making and the market allocating resources, and the proponents of power, the factions that support coercion and government organization of production. Libertarians want to reduce government power to limit cronyism while statists strive for the opposite. Favoritism is limited when a substantial interest with an ideological and pecuniary incentive to promote freedom exists. Otherwise, only clashing groups that want to control power mitigates special privileges. The liberty and power forces, with a spectrum in between, continually define the evolution of a government’s interference with the free society. When liberty triumphs overpower, cronyism is reduced; when the opposite occurs, privileges increase.
Second, those who control the government’s power are corrupted over time. To quote Lord Acton, “power tends to corrupt and absolute power corrupts absolutely.” I define corruption as the willingness of government officials to push for interventions that benefit themselves and other favored interests. Coercion and the use of force increases the ability to dispense favors, which incentivizes its occurrence. While there is often a strong moral element to corruption, my primary focus is the increased inducement to secure special-interest policies. Lord Acton’s famous quote can be modified accordingly: “power tends to incentivize cronyism and absolute power incentivizes cronyism absolutely.” Cronyism is due to the corrupting nature of government power and only by eliminating it can society destroy such favoritism.
Third, reforms that eliminate restrictions and redistributions are difficult to achieve because they require smaller government. This can only be accomplished through an outside amputation of power, particularly secession, or a change in the administrative leadership that internally dismantles the government’s power. The problem with reform, internal or external, is that any attempt requires laissez-faire proponents to use the coercive structure to enact their preferred policies. However, power tends to corrupt, which means that the previous advocates of freedom ineluctably start to pass their own special privileges. Radicals lose sight of their original goals, moderates stress the need to compromise with the opposition, and political office increases the incentive to provide favors to supporters. Soon the temptation to grant cronyism becomes irresistible. While in office, the libertarian faction transforms into a new coalition indistinguishable from the former statist party.
My thesis is the following: in early American history, special privileges increased in a staggered fashion and the Liberty versus Power theory explains this evolution. A majority of the population adhered to a basic libertarian ideology while the remainder supported big government. When the interventionist parties, i.e., the Federalists, National Republicans, and Whigs, secured control, cronyism shot upwards. When the people elected the reform parties—the Anti-federalists, Republicans, and Democrats—cronyism declined before increasing due to the corrupting nature of power. The ultimate driver of privileges on both sides was the insatiable urge to create an empire, a territorially vast and influential country. Statists wanted to replicate the European empires that easily facilitated cronyism. In stark contrast, libertarians envisioned their empire consisting of small independent governments that shared classical-liberal values. However, power and the lure of territorial acquisition corrupted the libertarian parties into creating the same belligerent empires they previously weakened.
Therefore, cronyism increased in a nonlinear fashion. To prove my thesis, I describe the history of special-interest legislation over the backdrop of political history. My narrative concentrates on the motivations of the major “players,” or America’s “Great Men”— the politicians and businessmen involved in the legislative process— and their attempts at reform. As a result, my work is “a throwback to a traditional approach to politics, focusing on elections, parties, and the maneuvering of elite white males in government.”
By utilizing the Liberty versus Power theory and a political narrative that stresses the Great Man perspective, I have intentionally made this work “old fashioned,” and deservedly so, given that the goal is to accurately study American cronyism.
Patrick Newman at Mises University [[{"fid":"125272","view_mode":"full","fields":{"format":"full","alignment":"center"},"type":"media","field_deltas":{"1":{"format":"full","alignment":"center"}},"attributes":{"class":"media-element file-full media-wysiwyg-align-center","data-delta":"1"}}]]
Patrick Newman on the Human Action Podcast [[{"fid":"125598","view_mode":"full","fields":{"format":"full","alignment":"center"},"type":"media","field_deltas":{"2":{"format":"full","alignment":"center"}},"attributes":{"class":"media-element file-full media-wysiwyg-align-center","data-delta":"2"}}]]
Many people want the state to take the lead in revitalizing run-down towns. How does this make sense, when it is private industry that conceived these towns in the first place?
Original Article: "Private Investment Is the Answer to Declining Postindustrial Towns"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
While it’s easy to fixate on the handful of success stories, the litany of government innovation failures should be enough to sober up even the most enthusiastic proponent of state-backed entrepreneurship.
Original Article: "The Seen and the Unseen of Government R&D"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The Fed says it "provides the nation with a safe, flexible and stable monetary and financial system." Can we all breathe easier now?
Original Article: "The Fed Says It Stabilizes the Economy. I'm Skeptical."
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.
Download the slides from this lecture at Mises.org/MU21_PPT_34.
Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Download the slides from this lecture at Mises.org/MU21_PPT_37.
Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Click here to learn more about Dr. Newman's book.
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.
Political candidates are offering endless government spending and "free stuff" for everyone. But at the same time, governments appear incapable of performing even basic duties like ending street riots.
Original Article: "Governments Are Failing at Their Most Basic Duties—While Promising Free Stuff"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Fannie and Freddie were long quasi-government corporations that typified the corrupt union between the feds and corporate America. But now it looks like both companies are just full-on government corporations.
Original Article: "Fannie and Freddie Are Just Government Agencies. They're Likely to Stay That Way."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The experts claimed that if any state ended its stay-at-home orders “prematurely,” its economy would become even more devastated than if it remained locked down. The experts were wrong.
Original Article: "Experts Said Ending Lockdowns Would Be Worse for the Economy than the Lockdowns Themselves. They Were Wrong."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Wokeness may now be a public relations strategy—a method of appealing to the moral sensibilities of the upper-middle-class woke American consumer.
Original Article: "Why America's Oligarchs Are Moving Left"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
However one may feel about immigrants, both historical experience and an honest reading of the US Constitution makes it clear that the federal government is not, in fact, empowered to enforce immigration.
Original Article: "Texas Says It Can Enforce Immigration Restrictions. Texas Is Right"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
That gold was used as money in the past is merely a historical fact. But the fact that gold was a form of private money, and thus not easily manipulated for government schemes, made it a target of countless intellectual and governmental assaults.
Original Article: "They Don't Hate Gold Because It's Gold. They Hate It Because It's Not Government Money."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Today, the political system really is in many ways what H.L. Mencken suggested when he described elections as a sort of "advance auction of stolen goods." The only answer lies in reducing the number of stolen goods available.
Original Article: "Why Corporate Lobbyists and Special Interest Groups Won't Go Away"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Price "stability" has never been a feature of a free marketplace. Stability is an obsession of central banks, and the day may come when central bankers intervene to "stabilize" crypto prices. That will be a bad thing.
Original Article: "Why "Wild Swings" In Crypto Prices are Not Really a Problem"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
There is no place in a free society for a government that sues private citizens for defamation. But even between private parties, defamation suits are often used by the powerful to silence others.
Original Article: "How Defamation Suits Are Used to Stifle Free Speech"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Anyone considering going to the very conservative College of the Ozarks knows what he's getting into. Yet the Biden administration has launched a war on this tiny college in the name of "equality" for transgendered students who have no reason to ever set foot there.
Original Article: "Why Are Progressives Obsessed with the Transgender Policies at the College of the Ozarks?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Corporate America—from Facebook to Google to Major League Baseball—got rich by giving the consumers what they want. Now these big firms will use their riches to crush their ideological enemies. That's life in a "mixed economy."
Original Article: "How Facebook Turned its Market Success Into a Culture War on America"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Biden and congressional Democrats are seeking to turbocharge their push for a new domestic terrorism law to permit widespread federal crackdowns on their opponents. Any rigged commission would likely pour gasoline on a fire that could singe far more American rights and liberties.
Original Article: "The Bogus January 6 Commission Poses a Real Threat to Freedom"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Like any other piece of aggregate government data, cause-of-death data is used to justify new government interventions and policies. But there are good reasons to suspect there are many problems in compiling and auditing this data.
Original Article: "Why Cause-of-Death Stats Aren't as Reliable as the CDC Wants You to Think"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Murray Rothbard's The Ethics of Liberty is a sweeping treatise which creates nothing short of a normative political philosophy of liberty. Contra Hume, Rothbard attempts to derive an "ought" from an "is," using natural law precepts and rigorous logic. Professor Walter Block joins the show to discuss the first section of the book, and gives us his unstinting (and always deontological!) take on Rothbard's vitally important treatment of natural law philosophy as the foundation for a free society. There are also lots of great Blockean anecdotes you'll want to hear!
The Audiobook version of The Ethics of Liberty is available at Mises.org/EthicsAudio Read Hans-Hermann Hoppe's introduction to the 1998 edition work at Mises.org/EthicsHoppe Find David Hume's A Treatise on Nature at Mises.org/Hume
American journalists and academics have invented a fairy tale in which "free market orthodoxy" has dominated political thinking in America for the past forty years. This is not even slightly true, but pundits repeat the lie again and again.
Original Article: "We Cannot Build an Economy on Lies"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
America's "Old Right"—rooted in 19th century liberalism but birthed in the 1930s to oppose the New Deal—was strongly laissez-faire and non-interventionist. Murray Rothbard wrote the comprehensive story of that movement, it's influences and influence, and its destruction at the hands of Buckleyite Cold Warriorism. Modern conservatism sadly bears little resemblance to the Old Right, and America is worse off for it.
Dr. Patrick Newman and Tho Bishop join the show to dissect the book, which is both a critical history and a fascinating political memoir of Rothbard's own journey to libertarianism.
Read this historic work at Mises.org/Betrayal
Now that Cuban president Raul Castro has resigned the presidency of Cuba, will the US government lift its six-decade economic embargo against Cuba? Don't bet on it.
Original Article: "It's Time to End the Embargo against Cuba"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The post office can't seem to balance its books. So like all monopolists, the postal service plans to "improve" things by increasing prices and making its service even worse.
Original Article: "The Plan to Save the the Postal Service by Making It Even Worse"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The covid-19 lockdowns have unexpectedly brought into clear view the fact governors wield immense power over the daily lives of Americans. Some state legislatures have moved to limit this power. Better late than never.
Original Article: "State Legislatures Are Finally Limiting Governors' Emergency Powers"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
When politicians claim to deplore violence, its hard to take them seriously when they have a long track record of supporting brutal and arbitrary violence both at home and abroad.
Original Article: "Politicians Concerned about Violence Should Start by Ending Their Wars and Their Police State"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Like other "antidiscrimination" schemes, the Equality Act is just another way to to extend federal power over every private institution and aspect of private life.
Original Article: "The Equality Act's Attack on Religion Is Really about Private Property Rights"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The government tantrum over the Capitol riot has shown that the regime sees its own property as sacrosanct. Your private property, on the other hand, is completely expendable and of no importance whatsoever.
Original Article: "Government Property Is Sacred. Your Property? Not So Much."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Major League Baseball's boycott of Georgia only makes any sense at all if we conflate every single Georgia resident with the regime itself. But in the real world the claim that "we are the government" has always been nonsense.
Original Article: "Major League Baseball Punishes Georgians for the Acts of a Handful of Politicians"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Private property is an institution central to civilization and beneficial human interaction. When central banks distort this institution with easy money, the social effects can be disastrous.
Original Article: "The Property-Based Social Order Is Being Destroyed by Central Banks"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The new covid relief bill signals that whatever restraint on public spending existed before 2020 is now all but gone. And the bill represents the beginning of a new era: an era that can be likened to that of the New Deal.
Original Article: "The New New Deal Has Already Arrived. Thank the Covid Panic."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
James Grant is editor of Grant’s Interest Rate Observer, which he founded in 1983. He is the author of nine books, including Money of the Mind, The Trouble with Prosperity, John Adams: Party of One, The Forgotten Depression, and more recently Bagehot: The Life and Times of the Greatest Victorian. In 2015 Grant received the prestigious Gerald Loeb Lifetime Achievement Award for excellence in business journalism. James Grant is an associated scholar of the Mises Institute.
Kevin Duffy is principal of Bearing Asset Management, which he cofounded in 2002. The firm manages the Bearing Core Fund, a contrarian, macro-themed hedge fund with a flexible mandate. He earned a BS in civil engineering from Missouri University of Science and Technology and has a passion for financial history, Austrian economics, and pithy quotes. He also publishes a bimonthly investment letter called the Coffee Can Portfolio. Duffy attended Mises University in 1990 after seeing Lew Rockwell on CNN’s Crossfire in 1989.
Kevin Duffy interviewed James Grant for his newsletter Coffee Can Portfolio. It is reprinted with permission.
KEVIN DUFFY: 2020 has been part dystopian fiction, part tulip mania. How do we reconcile the two?
JAMES GRANT: I’m not sure there’s much distinction. To me, the current form of dystopia is the bubble form, so I think this is the year of the dystopian bubble.
KD: There has been a worship of authorities. For the past thirty-seven years you’ve focused mainly on the Fed, but this year we’ve seen a reverence for medical authorities. Who has done more damage?
JG: The medical authorities remind me of the economic authorities. Both pretend to draw a bead on the future. Let’s compare them both to the meteorological authorities. The National Weather Service spends over a billion dollars a year and takes tens of millions, if not billions, of discrete observations of wind, weather, tide, temperature, what have you. But notice the five- and ten-day forecasts on your trusty iPhone are ever changing. This is the weather. Temperature gradients don’t have feelings, they don’t get jealous of the millionaire next door, they don’t watch CNBC, yet our forecasting ability goes out, maximum, ten days. Even so, the economists think nothing of calling next year’s GDP.
KD: This sounds very much like Friedrich Hayek and the pretense of knowledge. There’s a certain hubris taking place. What might the alternative to top-down planning look like?
JG: Counselor is leading the witness! “Pretense of knowledge” is a three-dollar phrase; in Brooklyn it’s called bluffing. Of course knowledge is dispersed. Every individual knows what he or she wants. An economist would say that we know our own demand curves and supply curves. Governor Cuomo can only guess—as brilliant as the governor is—at what we want and what risks we are prepared to run with our lives.
I am seventy-four years old and every day I get out of bed I am beating the odds. The idea of suspending ordinary living pending the arrival of a vaccine is absurd. Still worse is the forced suspension of the lives of people seventy years younger than I. My grandchildren, for instance. “We can’t sacrifice our children out of our own fear,” said Dr. Scott Atlas in so many wise words.
Life is a matter of tradeoffs. And early on people would plague you if you held this view in public by saying, “You mean to tell me that you are willing to trade off profits for human lives?” Well no, I’m willing to trade off risks, and it’s what we all do, whether we realize it or not, whether we can express this or not. We are all, at least subconsciously, living according to our tolerance for risk. We look both ways or no, we don’t look both ways. We scrupulously observe fifty-five miles an hour or we are young and quick and bold and drive seventy-five miles an hour and probably not run a risk to ourselves or others. So people by and large, not exclusively and not entirely, but people by and large know these things about themselves. And what Hayek was driving at is that the Soviet Union failed for a reason.
KD: Let’s take a step back and talk about some of the early influences on you. When did Jim Grant start to become “Jim Grant”?
JG: July 26, 1946.
KD: [Laughter] When did you realize you were an independent thinker? Was there a lightbulb moment or were you just wired that way?
JG: I’ve always been a “yes, but” guy, a skeptic. At Indiana University, I took a course in the history of economic thought. It gave me a sense of the cycle of ideas—how today’s certitudes become tomorrow’s heresies.
Ideas about markets, individual enterprise, individual freedom—they wax and they wane.
Edmund Burke, in his monumental Reflections on the Revolution in France, described English financial arrangements along about 1790. He pointed out that there was no legal tender law in Britain. The only kind of money a creditor had to accept for a debt was gold or silver. Not even the Bank of England could force its notes on the public. Could anything be better, more equitable? Not for me, but notice that system is extinct.
You could say that economic freedom, broadly defined, peaked around 1914, the year following enactment of the income tax and the signing of the Federal Reserve Act.
KD: And the direct election of senators…
JG: Right. And then came World War I, following which (after the 1920s roared) was the war mobilization of the 1930s and 1940s. High taxes, heavy regulation, economic regimentation. But statism, too, has its cycles. The 1947 founding of the Mont Pèlerin Society, a group of old-style liberal thinkers led by Friedrich Hayek, might represent the bottom of the long twentieth-century bear market in economic liberty.
KD: The roots of our monetary meddling go back further, don’t they—even to the Civil War?
JG: Right. It was to fight that war that the Lincoln administration issued the first greenbacks— paper money not convertible on demand into gold or silver. Salmon P. Chase, Lincoln’s Treasury secretary, pushed the greenback plan while holding his nose. He called the legal tender clause “repugnant,” a form of monetary coercion. Later, as chief justice of the United States, he actually judged that clause to be unconstitutional. Subsequent course held otherwise, of course, and the green notes in your wallet today are “legal tender for all debts public and private.” Hardly anyone gives it a thought. Certainly the precedent for what happened in 1913 was set many decades before during the Civil War.
KD: So 1913 brought us the modern incarnation of our central bank, the Federal Reserve. Its first test, from a monetary policy standpoint, was the depression of 1921, which you wrote about in The Forgotten Depression. What was the policy response back then, and how was it different than today?
JG: The policy response was old-time religion. It was monetary and fiscal orthodoxy. President Warren G. Harding inherited a rip-roaring depression in 1921. The roots of that business cycle downturn lay in the wartime inflation of 1914–18. America entered the war in 1917 and proceeded to do what belligerent countries invariably do—to spend more than they earn and to borrow the difference.
The Harding administration balanced the budget—so no fiscal stimulus. Real interest rates were punitively high—there was no QE. Treasury secretary [Andrew W.] Mellon used his influence to reduce those rates. Meanwhile prices fell and wages fell. The stock market was sawed in half. Corporate profits collapsed. Unemployment was then unmeasured, but it soared. But the price mechanism, more or less freely functioning, did its job. Because wages did fall, businesses could regain profitability at lower levels of prices.
The depression of 1920–21 began in inflation, ended in deflation, but it did end: eighteen months from business cycle top to business cycle bottom.
Compare the Hoover administration’s response to the 1929 stock market crash. President Herbert Hoover (he had been Harding’s secretary of commerce) called on business leaders like Henry Ford not to cut wages. And they didn’t, with the result that falling prices, not neutralized by falling wages, devastated corporate earnings, and thus corporate investment. Mass unemployment followed.
KD: The Fed also responded to the slump by injecting money into the financial system by buying government securities. And yet Milton Friedman and others claimed they didn’t do enough.
JG: Yes, that was the lesson according to Milton Friedman and Anna Schwartz. They wrote this big, thick book, always referred to as a magisterial history, A Monetary History of the United States. Its most famous chapter is called “The Great Contraction, 1929–33.” Friedman says the money supply declined by a third, and he thought that that was what put the “great” in “Great Depression.”
Ben Bernanke, you recall, on the occasion of Milton Friedman’s ninetieth birthday apologized to Milton and Anna, saying, “Regarding the Great Depression, you’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
They have not done it again. And they have done everything in their power to ignore the lessons of 1920–21, too. They are all in for interest rate suppression and other such radical nostrums— the “buttinski method.” Do you know what a buttinski is?
KD: No, I don’t.
JG: Somebody who butts in. To them, interest rates are not prices to be discovered in the market, but administered by experts like themselves.
KD: This cycle is perhaps unique in the sense that there is so little price discovery while there are so many price-insensitive buyers, not just the Federal Reserve, but also index fund investors and virtue-signaling millennials. How price insensitive are the banks, and how coerced are their purchases of government bonds?
JG: Well, they need the government securities to fulfill the regulatory requirements for so-called high-quality liquid assets. And yes, central banks are price insensitive, credit insensitive, value insensitive, and they are buyers of corporate debt as well as of government debt and, in some countries, of equities besides.
KD: Why has this so-called “everything bubble” gotten as big as it has? Has that surprised you at all? It certainly has me.
JG: Oh yes. I wake up surprised and go to bed surprised. I mean, consider the $17 trillion plus in securities priced to yield less than nothing. That’s a surprise. It’s a singularity, nothing like it in the entire history of interest rates. Certainly, a financial journalist is privileged to live in this world in which so much is new, so much is to some sense shocking (or gratifying, depending on how you’re positioned).
KD: A friend once said, “It’s okay to forecast the end of the world, just don’t ever give a date.” When people ask you about timing, what do you tell them?
JG: Oh, I’ve become very wily. Years ago, someone asked me to forecast the ten-year yield one year hence, and I had the presence of mind to say no, thank you. I count that as my journalistic coming of age. Only rookies pick levels and dates.
KD: Is it easier to look ten years out? If you take the long view, what do you feel confident in predicting?
JG: I’m fairly confident about the arc of monetary change. Every succeeding crisis brings a more muscular monetary response—a lower funds rate, a larger Fed balance sheet. But ultra-low rates encourage more credit formation, which leads to greater fragility and thus to the next crisis. The Fed is arsonist and fireman all rolled up into one.
KD: Let’s consider a scenario. Let’s say in the next year or so we get a severe global recession which starts to tip over some of these credit dominoes. How might such a scenario play out?
JG: It depends on the nature of the financial crisis. Say it’s an inflationary one. And say that instead of 2 percent inflation, it’s 4 percent or 5 percent. The indicated response would be to raise the federal funds rate, but rivets start popping when money gets tight in a leveraged economy.
KD: So we’re in an inflationary crisis. Let’s face it, the Fed has had a license to print money partially due to Amazon driving prices down. There’s also been a commodity bust. Everything has gone their way. Are you suggesting, in your own words, that “inflation is kryptonite to bonds” and that this is something the Fed does not anticipate?
JG: Well, as a rule, the Fed anticipates nothing. As a rule, most of us anticipate nothing, the future being complex and, for the most part, unpredictable. By the way, the phrase “foreseeable future,” is an oxymoron.
Yes, inflation has been a no-show, though maybe that’s changing. Charles Goodhart and his coauthor Manoj Pradhan, in their fine new book, The Great Demographic Reversal, point out that the past thirty years have delivered a huge positive supply shock. That is, a supply shock in labor. But they contend that, for a number of reasons, the future will be very different, featuring rising inflation and interest rates alike. It’s an impressive and persuasive argument they make.
People my age will no longer be productive, the book says. They will be needful, they will be in the hospital, they will be attended to by their loving aides who will help them either walk or remember, or both. And the dependency ratio [the ratio of those not in the labor force to those in it] is going to rise. So there will be less labor serving and greater demand. And I will add that these will be added to the perhaps inevitable central bank response, which is to be more generous in provisioning the system with money and credit.
So all of this is going to add up to years of inflation, which will shock the bond markets, especially that portion of the bond market, the $17 trillion portion, which is now priced for the certainty—not the risk, mind you, but seemingly the certainty—of either stable prices or gently dwindling prices. What the world is not set up for is an inflation, to be sure.
KD: Just to clarify, you’re talking about labor from China, particularly, and from India…
JG: India, Eastern Europe.
KD: So we’ve gotten the benefits, up front, but these people, as they prosper, will demand more energy, more protein, etc. Are the authors saying the demand side is coming with a lag and that, in turn, adds to inflationary pressures?
JG: Yes. I’m going to read you a paragraph from this book.
It’s China’s “globalisation and the reincorporation of Eastern Europe into the world trading system, together with the demographic forces, the arrival of baby boomers into the labour force and the improvement in the dependency ratio, together with greater women’s employment [that] produced the largest ever, massive positive labour supply shock. The effective labor supply force for the world’s advanced economy trading system more than doubled over those 27 years, from 1991 to 2018.”
But that’s in the bank. It’s behind us. What lies ahead is a deteriorating dependency ratio. More needy people, fewer productive ones, fewer working ones, perhaps more monetary stimulus, and rising prices at the checkout counter rather than falling ones.
KD: In North America, the oil rig count is down 61 percent year-to-date and the natural gas rig count is down 18 percent. So on top of all of this, we’re now getting a commodity supply shock. Is this another tailwind for commodities?
JG: Yes, and you don’t need a big inflation to generate returns. Years of subpar investment in productive capacity in the things that the world needs more of is the essence of the bull case. The key is the supply side.
KD: Socially responsible investing, a.k.a. ESG [environmental, social, and governance], has led to fossil fuel divestment as well. How does ESG enter into the equation for investors?
JG: ESG is a bull-market luxury. In a bear market, people, I think, are much more concerned about survival than they are about making a political statement.
Will Thomson, founder and managing partner of Massif Capital LLC, has a really smart approach to choosing effective ESG-themed investments. Don’t go buying the exchange-traded funds labeled ESG, he says. They own Apple and Microsoft and Facebook and Alphabet. Instead, buy the kind of dirty industrial business that’s cleaning itself up. It makes sense to me.
KD: That’s an interesting arbitrage. Is there a similar opportunity in more accurate accounting? I’m thinking about a company like Tesla, where everyone is focused on the lack of emissions, but they’re overlooking where this electricity is coming from, not to mention the costs of recycling batteries.
JG: I am all for better accounting. And now Tesla’s entering the S&P 500 on the strength of its virtue and flash and momentum and of the tax credits by which alone it achieves profitability. So there’s a singularity of the year 2020 along with $17 trillion in negative-yielding bonds.
KD: You talked about the cyclical nature of markets. Right now youth is elevated. Has the digital revolution made this a young man’s game or is there still room for elder wisdom?
JG: Based upon my experience, there’s no room for elder wisdom.
KD: [Laughter]
JG: Raging bull markets are always young people’s thing. Old guys always say, “I wouldn’t be so quick to pay 170 times revenues for that particular stock. I seem to recall something like this in 1968, or was it 1868?” This is what old people always sound like. Do you remember the author George Goodman? I think his pen name was Adam Smith; he wrote a book called The Money Game.
KD: Oh sure. The go-go ’60s.
JG: If you’re starting a hedge fund, you want young people buying the stocks that are going to go up. Because they don’t know enough not to buy them. People who know enough not to buy them are going to underperform. So in a way it was ever thus. Youth will be served, and youth especially will be served in great raging liquidity-driven bull markets.
Witness bitcoin and the charm and the demonstrated excellence of the FAANG [Facebook, Amazon, Apple, Netflix, Google] stocks. The young people don’t imagine that they have great business models. What they do imagine is that the possibilities for expansion are infinite, whereas the expansion may be limited in the case of Facebook, for example, by such mundane things as the size of the world’s advertising market.
But those objections, the wisdom of the ages, play very badly on the upswing. Again, I think this is nothing new.
KD: Regarding youthful exuberance, I remember the late ’90s tech bubble. On February 15, 2000, 60 Minutes aired a story by Bob Simon called “Dot- Com Kids” where Simon interviewed several young founders of web-based startups that were housed in old buildings in downtown Manhattan, dubbed Silicon Alley. One even told him, essentially, “We’re coming after your job. You’re going to be roadkill.” I guess it didn’t quite turn out that way, did it?
JG: No, but in fairness there’s something to this. There’s something to the displacement of human beings by human ingenuity. It is certainly a fact that technology has improved lives, reduced costs, increased comfort, amused countless millions, and cost some jobs while creating others. That’s the nature of capitalist progress. Capitalist progress is not always to everyone’s aesthetic taste, but it is the ultimate democratic expression of how resources ought to be allocated. The sovereignty of the consumer, whatever the consumer’s taste might be, that’s what will be served.
So young people, whether they can express it just that way or not, do live it. They buy what they themselves like, and what they like often mystifies their elders.
KD: Elders often worry about the next generation. Look at some of the toxic ideology young people have imbibed. How concerned are you? Is there hope?
JG: Oh, of course. I am the father of four and the grandfather of five, and those nine people are fabulous!
KD: That’s the hope! That’s the future.
JG: Right, but everybody else is very questionable.
KD: [Laughter]
JG: Go back to the ’30s and Marxism, without any of the gloss of democratic liberalism, Marxism itself— hammer and claw—was culturally and politically prevalent. And if it wasn’t Marxism, it was the vogue in fascism. We forget that the top tax rate in the Eisenhower years was in the upper ’80s, in fact, into the ’90s. Very few people actually paid that, but that was a legacy of the ideas that reigned, not quite uncontested, but dominated in the ’30s and into the ’40s. That gradually gave way, but don’t forget what happened in the ’60s. There was a Marxist resurgence and then, lo and behold, come the inflationary ’70s, and people find they’ve had enough of that, and then comes Ronald Reagan.
So there’s a cyclicality, there’s an episodic quality to our politics. I don’t think these are end times politically. I think it’s worrying that freedom of speech seems to be back on its heels as much as it has ever been. Freedom of speech, in America, was not quite so endangered even in the ’30s as it is now. That is genuinely frightening. I’m frightened by it.
KD: Rollo May, an American psychiatrist, once said, “The opposite of courage in our society is not cowardice, it is conformity.” It seems like we’re at a point in time when it takes courage to distance oneself from the crowd and from some of these really toxic ideas.
JG: It takes steadfastness, though just how much depends. If you are in a position to lose your job and instead of holding on to that job in the face of ideas and the insistence on ideas you think are wrong, instead of that, you stand up and you object at the risk of losing your livelihood in the case of this master of Eton College in England [he was fired for refusing to withdraw his posted lecture on the virtues of manliness] (and he has five kids)—if you do that, that is courageous.
If you have your own soapbox and you are not really at risk of losing your livelihood, it takes a modicum of bloody mindedness to stand up in front of a mass of opinion. It takes a certain amount of moxie to risk social ostracism. That’s part and parcel of it sometimes, but it doesn’t require a Medal of Honor in that setting. So that’s the distinction I wanted to draw: it depends on how you’re situated in life.
KD: CNBC certainly isn’t the worst of the cancel culture, but nonconformists like Peter Schiff, Marc Faber, and Michael Pento have all been excommunicated. Jim Grant is still there. How have you been able to pull that off?
JG: I’m not sure that the premise of the question is quite correct. I’m on the squawk box every so often, but not very frequently. Take another kind of financial personage. Ed Yardeni is a successful economist. He’s made his living by serving his clients, by trying to make money for them without passing judgment on public policy. Whether the Fed is doing the right thing or the wrong thing is not his remit, he says. His remit, in fact, is not fighting the Fed, but adapting to monetary policy (whatever it is) to make money.
So people like you, like me, like others you mentioned, have chosen a different job description. Grant’s takes a stand on the integrity of the currency. It takes a stand on the nature of markets. It takes a stand on price discovery as opposed to price administration. And we say those things in public and print. We say them on air when given the chance. But they have not lately helped people make money.
CNBC’s viewers—I think most of them—want to know where the markets are going, and if you are not on the right side of that question, you wear out your welcome as a public voice. So I don’t begrudge the producers at CNBC for choosing people with a hot hand.
I am happy, retrospectively, to have been in the wilderness in the early 2000s. Let’s not forget how long they lasted: 2001, ’02, ’03, ’04, ’05, ’06, ’07, yes?
KD: I remember.
JG: If you had had a correct, informed, bearish view on house prices and mortgage-backed securities, you were more than a half decade of wrong before being gloriously right. You have to stick with your guns and have to believe in what you believe and accept that the world can get tired of hearing your foreboding (or, as the case may be, annoyingly bullish) voice.
KD: At a time when other skeptics are routinely dismissed as “the bear crying wolf,” you have somehow managed to stay relevant. The bottom line is you are delivering value. You’re doing a lot more than just bashing the Fed. Grant’s has made some great bullish calls over the years. For example, you saw the economy recovering in 2009 and were bullish on Google fairly early in the bull market, when it was considered a value stock. I would posit that the reason you have this platform is that you’re not just a broken record.
JG: Well, thank you. I am happy to agree with that, and I would credit the fine analysts we have had here over the years. Now, of course, Evan Lorenz is a terrific securities analyst, and, way back when, Dan Gertner—this in 2006 and 2007—did a lot of very early and important securities analysis on complex mortgage structures.
So, yes, thank you. We have indeed earned a voice. I think sometimes, when I get discouraged, that we have earned our reputation a little bit too well of being critics of contemporary monetary arrangements, but I wouldn’t change that. I think that these institutions and these policies are wrongheaded. I think they are dangerous. I think they are possibly even bad for the planet!
It comes down to, Where do you want to make a stand? What matters to you? What matters to me—and to my journalistic lemonade stand—is not saying the correct things to insinuate myself into the good graces of the financial establishment. It’s speaking up against bubbles and the monetary manipulations that inflate them. It’s speaking up for the incredibly outré institutions of the gold standard and for the great institution of corporate solvency (you’d be surprised how controversial it can become at the end of a boom).
That’s the way we’ve run things for a long time. We’ve been in business for thirty-seven years, and that’s the way we intend to keep doing it.
KD: You recently published the “Grant’s Manifesto,” in which you actually tooted your own horn (very unusual), specifically your track record of identifying excesses. Looking at this everything bubble, where do you see the areas of greatest fragility?
JG: To me, the most excessive of all the excesses is these $17 trillion plus of nominal negatively yielding bonds. Nothing like it in four thousand years of interest rate history. They seem to be priced for one outcome alone, the noninflationary one.
Cocksure people baffle me. You run across them all the time on Wall Street, somebody who simply declares, “this is going to happen,” or “that’s going to happen.”
How do you know that? This is a probabilistic world; it’s not a world of certainty.
The great nineteenth-century historian Thomas Babington Macaulay was one of the type. “I wish I was as certain of anything as Tom Macaulay is of everything,” someone said of him. I feel that way with a lot of the Wall Street pundits I read and listen to.
The people who are holding on to these guaranteed- loss securities seem certain of the benevolent path of stable or falling prices. I think by the time Mr. Market puts them through the slicing and dicing machine, there won’t be much left of them.
KD: Will the next banking crisis have sovereign debt at the center of it?
JG: It could. It’s one candidate. Corporate credit is another. With every downward lurch in the stock market, central banks barge in to help. But in helping—with their credit infusions and interest rate slashing—they invite still more lending and borrowing, therefore greater leverage, therefore greater fragility, therefore a greater likelihood that the next financial disturbance will elicit an even greater monetary response, thereby bringing still more leverage, more fragility, etc., and on and on.
KD: Until something breaks.
JG: And maybe that something is going to be the people’s confidence in the central banks.
The central bankers have gotten everyone flummoxed. How would you like to own the stock of a company like the Fed, that did not, shall we say, distinguish itself in 2005, ’06, ’07, ’08, ’09, yet comes out of it with greater power, more prestige…? Now that’s a franchise. My hope is that the next crisis will become also a crisis of belief in central banks and in the judgment of the people who staff them.
One of the big trends of the past century is the socialization of financial risk. Increasingly, individuals bear less of it, governments more, and I wonder if the sheer inequity of this trend has poisoned our politics. Not many people know that up until the 1935 Banking Act, it was the stockholders who got a capital call if the institution in which they held a fractional interest became impaired or insolvent. Mind you, the stockholders, not the taxpayers. Compare and contrast 2008, when, in effect, the government issued a capital call to the taxpayers. That’s all wrong.
KD: This is collectivism, is it not?
JG: It’s financial collectivism. It’s the nationalization of loss and the privatization of gain. Remind me to fix it when I become president.
Think of Minneapolis and Portland and then apply that model nationwide. Then you have an idea where progressive radicals want to take us.
Original Article: "This Is What the Progressives Want To Do to Us"
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.
The bill’s supporters may talk about how it will give workers the ability to choose to organize at work, but much like the mafia, this bill will ensure that the choice to unionize is one that workers can’t refuse.
Original Article: "The PRO Act Is Not Just a Union Handout—It's an Assault on the Freedom of Association Itself"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The media-government alliance has clamped down against the populist right harder than ever before. Yet, one can sense a hint of panic within establishment ranks that the threads of their dominance may finally be unraveling.
Original Article: "Why the Capitol Riot Terrified the Elite"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
When police ineptly scanned a car's license plate and wrongly decided the car was stolen, they proceeded to force a group of children to the ground at gunpoint. Will this qualify as a rights violation if "qualified immunity" is absent? The courts will decide.
Original Article: "Even without "Qualified Immunity," It Won't Be Easy to Prove When Police Are Abusive"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Before 2020, there were growing signs of increasing economic prosperity for a wide variety of income groups in America. Whether or not this prosperity survives covid lockdowns and ever higher levels of government regulations remains to be seen.
Original Article: "American Households Made Economic Gains before Covid, but This Progress Can Be Lost"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The latest impeachment saga simply confirms Thomas Paine’s adage: “The trade of governing has always been monopolized by the most ignorant and the most rascally individuals of mankind.” Score another victory for the Swamp.
Original Article: "The Biggest Lies of the Impeachment Saga"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
As Mark Thornton has shown, the big legislative change that FDR made at the start of his presidency, the decision that affected every single American citizen from one coast to the other, was the repeal of the thirteen-year hell of Prohibition.
Original Article: "Prohibition's Repeal: What Made FDR Popular"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
We're now hearing many calls for more antitrust legislation applied to Big Tech because these firms are allegedly monopolies. But old-fashioned antitrust was a disaster, as will be new efforts against tech companies.
Original Article: "The Problem with the "Robber Baron" Narrative"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Explaining good economic theory is about explaining how the other side is ripping you off.
Original Article: "The Fight over Economics Is a Fight over Culture"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Professor Patrick Newman, known for his incredible work editing Murray Rothbard's The Progressive Era and Conceived in Liberty, just finished a staggering new historical work titled Cronyism: Liberty vs. Power in Early America. Newman joins the show to give us a preview of this tour de force book, which chronicles the special interests and state favoritism embedded in US society almost from the start. The Rothbardian analysis of "liberty vs. power" informs Newman's approach throughout, and history buffs will want to get their hands on this book immediately upon release later in 2021. You will never see the American colonies, revolution, Constitution, or great men like Hamilton, Madison, and Jefferson the same way after reading this book.
Help the Mises Institute publish Cronyism: Liberty vs. Power in Early America by Dr. Patrick Newman at Mises.org/Cronyism.
Read Rothbard's The Progressive Era at Mises.org/ProgEra
James Grant is editor of Grant’s Interest Rate Observer, which he founded in 1983. He is the author of nine books, including Money of the Mind, The Trouble with Prosperity, John Adams: Party of One, The Forgotten Depression, and more recently Bagehot: The Life and Times of the Greatest Victorian. In 2015 Grant received the prestigious Gerald Loeb Lifetime Achievement Award for excellence in business journalism. James Grant is an associated scholar of the Mises Institute.
Kevin Duffy is principal of Bearing Asset Management, which he cofounded in 2002. The firm manages the Bearing Core Fund, a contrarian, macro-themed hedge fund with a flexible mandate. He earned a BS in civil engineering from Missouri University of Science and Technology and has a passion for financial history, Austrian economics, and pithy quotes. He also publishes a bimonthly investment letter called the Coffee Can Portfolio. Duffy attended Mises University in 1990 after seeing Lew Rockwell on CNN’s Crossfire in 1989.
Kevin Duffy interviewed James Grant for his newsletter Coffee Can Portfolio. It is reprinted with permission.
KEVIN DUFFY: 2020 has been part dystopian fiction, part tulip mania. How do we reconcile the two?
JAMES GRANT: I’m not sure there’s much distinction. To me, the current form of dystopia is the bubble form, so I think this is the year of the dystopian bubble.
KD: There has been a worship of authorities. For the past thirty-seven years you’ve focused mainly on the Fed, but this year we’ve seen a reverence for medical authorities. Who has done more damage?
JG: The medical authorities remind me of the economic authorities. Both pretend to draw a bead on the future. Let’s compare them both to the meteorological authorities. The National Weather Service spends over a billion dollars a year and takes tens of millions, if not billions, of discrete observations of wind, weather, tide, temperature, what have you. But notice the five- and ten-day forecasts on your trusty iPhone are ever changing. This is the weather. Temperature gradients don’t have feelings, they don’t get jealous of the millionaire next door, they don’t watch CNBC, yet our forecasting ability goes out, maximum, ten days. Even so, the economists think nothing of calling next year’s GDP.
KD: This sounds very much like Friedrich Hayek and the pretense of knowledge. There’s a certain hubris taking place. What might the alternative to top-down planning look like?
JG: Counselor is leading the witness! “Pretense of knowledge” is a three-dollar phrase; in Brooklyn it’s called bluffing. Of course knowledge is dispersed. Every individual knows what he or she wants. An economist would say that we know our own demand curves and supply curves. Governor Cuomo can only guess—as brilliant as the governor is—at what we want and what risks we are prepared to run with our lives.
I am seventy-four years old and every day I get out of bed I am beating the odds. The idea of suspending ordinary living pending the arrival of a vaccine is absurd. Still worse is the forced suspension of the lives of people seventy years younger than I. My grandchildren, for instance. “We can’t sacrifice our children out of our own fear,” said Dr. Scott Atlas in so many wise words.
Life is a matter of tradeoffs. And early on people would plague you if you held this view in public by saying, “You mean to tell me that you are willing to trade off profits for human lives?” Well no, I’m willing to trade off risks, and it’s what we all do, whether we realize it or not, whether we can express this or not. We are all, at least subconsciously, living according to our tolerance for risk. We look both ways or no, we don’t look both ways. We scrupulously observe fifty-five miles an hour or we are young and quick and bold and drive seventy-five miles an hour and probably not run a risk to ourselves or others. So people by and large, not exclusively and not entirely, but people by and large know these things about themselves. And what Hayek was driving at is that the Soviet Union failed for a reason.
KD: Let’s take a step back and talk about some of the early influences on you. When did Jim Grant start to become “Jim Grant”?
JG: July 26, 1946.
KD: [Laughter] When did you realize you were an independent thinker? Was there a lightbulb moment or were you just wired that way?
JG: I’ve always been a “yes, but” guy, a skeptic. At Indiana University, I took a course in the history of economic thought. It gave me a sense of the cycle of ideas—how today’s certitudes become tomorrow’s heresies.
Ideas about markets, individual enterprise, individual freedom—they wax and they wane.
Edmund Burke, in his monumental Reflections on the Revolution in France, described English financial arrangements along about 1790. He pointed out that there was no legal tender law in Britain. The only kind of money a creditor had to accept for a debt was gold or silver. Not even the Bank of England could force its notes on the public. Could anything be better, more equitable? Not for me, but notice that system is extinct.
You could say that economic freedom, broadly defined, peaked around 1914, the year following enactment of the income tax and the signing of the Federal Reserve Act.
KD: And the direct election of senators…
JG: Right. And then came World War I, following which (after the 1920s roared) was the war mobilization of the 1930s and 1940s. High taxes, heavy regulation, economic regimentation. But statism, too, has its cycles. The 1947 founding of the Mont Pèlerin Society, a group of old-style liberal thinkers led by Friedrich Hayek, might represent the bottom of the long twentieth-century bear market in economic liberty.
KD: The roots of our monetary meddling go back further, don’t they—even to the Civil War?
JG: Right. It was to fight that war that the Lincoln administration issued the first greenbacks— paper money not convertible on demand into gold or silver. Salmon P. Chase, Lincoln’s Treasury secretary, pushed the greenback plan while holding his nose. He called the legal tender clause “repugnant,” a form of monetary coercion. Later, as chief justice of the United States, he actually judged that clause to be unconstitutional. Subsequent course held otherwise, of course, and the green notes in your wallet today are “legal tender for all debts public and private.” Hardly anyone gives it a thought. Certainly the precedent for what happened in 1913 was set many decades before during the Civil War.
KD: So 1913 brought us the modern incarnation of our central bank, the Federal Reserve. Its first test, from a monetary policy standpoint, was the depression of 1921, which you wrote about in The Forgotten Depression. What was the policy response back then, and how was it different than today?
JG: The policy response was old-time religion. It was monetary and fiscal orthodoxy. President Warren G. Harding inherited a rip-roaring depression in 1921. The roots of that business cycle downturn lay in the wartime inflation of 1914–18. America entered the war in 1917 and proceeded to do what belligerent countries invariably do—to spend more than they earn and to borrow the difference.
The Harding administration balanced the budget—so no fiscal stimulus. Real interest rates were punitively high—there was no QE. Treasury secretary [Andrew W.] Mellon used his influence to reduce those rates. Meanwhile prices fell and wages fell. The stock market was sawed in half. Corporate profits collapsed. Unemployment was then unmeasured, but it soared. But the price mechanism, more or less freely functioning, did its job. Because wages did fall, businesses could regain profitability at lower levels of prices.
The depression of 1920–21 began in inflation, ended in deflation, but it did end: eighteen months from business cycle top to business cycle bottom.
Compare the Hoover administration’s response to the 1929 stock market crash. President Herbert Hoover (he had been Harding’s secretary of commerce) called on business leaders like Henry Ford not to cut wages. And they didn’t, with the result that falling prices, not neutralized by falling wages, devastated corporate earnings, and thus corporate investment. Mass unemployment followed.
KD: The Fed also responded to the slump by injecting money into the financial system by buying government securities. And yet Milton Friedman and others claimed they didn’t do enough.
JG: Yes, that was the lesson according to Milton Friedman and Anna Schwartz. They wrote this big, thick book, always referred to as a magisterial history, A Monetary History of the United States. Its most famous chapter is called “The Great Contraction, 1929–33.” Friedman says the money supply declined by a third, and he thought that that was what put the “great” in “Great Depression.”
Ben Bernanke, you recall, on the occasion of Milton Friedman’s ninetieth birthday apologized to Milton and Anna, saying, “Regarding the Great Depression, you’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
They have not done it again. And they have done everything in their power to ignore the lessons of 1920–21, too. They are all in for interest rate suppression and other such radical nostrums— the “buttinski method.” Do you know what a buttinski is?
KD: No, I don’t.
JG: Somebody who butts in. To them, interest rates are not prices to be discovered in the market, but administered by experts like themselves.
KD: This cycle is perhaps unique in the sense that there is so little price discovery while there are so many price-insensitive buyers, not just the Federal Reserve, but also index fund investors and virtue-signaling millennials. How price insensitive are the banks, and how coerced are their purchases of government bonds?
JG: Well, they need the government securities to fulfill the regulatory requirements for so-called high-quality liquid assets. And yes, central banks are price insensitive, credit insensitive, value insensitive, and they are buyers of corporate debt as well as of government debt and, in some countries, of equities besides.
KD: Why has this so-called “everything bubble” gotten as big as it has? Has that surprised you at all? It certainly has me.
JG: Oh yes. I wake up surprised and go to bed surprised. I mean, consider the $17 trillion plus in securities priced to yield less than nothing. That’s a surprise. It’s a singularity, nothing like it in the entire history of interest rates. Certainly, a financial journalist is privileged to live in this world in which so much is new, so much is to some sense shocking (or gratifying, depending on how you’re positioned).
KD: A friend once said, “It’s okay to forecast the end of the world, just don’t ever give a date.” When people ask you about timing, what do you tell them?
JG: Oh, I’ve become very wily. Years ago, someone asked me to forecast the ten-year yield one year hence, and I had the presence of mind to say no, thank you. I count that as my journalistic coming of age. Only rookies pick levels and dates.
KD: Is it easier to look ten years out? If you take the long view, what do you feel confident in predicting?
JG: I’m fairly confident about the arc of monetary change. Every succeeding crisis brings a more muscular monetary response—a lower funds rate, a larger Fed balance sheet. But ultra-low rates encourage more credit formation, which leads to greater fragility and thus to the next crisis. The Fed is arsonist and fireman all rolled up into one.
KD: Let’s consider a scenario. Let’s say in the next year or so we get a severe global recession which starts to tip over some of these credit dominoes. How might such a scenario play out?
JG: It depends on the nature of the financial crisis. Say it’s an inflationary one. And say that instead of 2 percent inflation, it’s 4 percent or 5 percent. The indicated response would be to raise the federal funds rate, but rivets start popping when money gets tight in a leveraged economy.
KD: So we’re in an inflationary crisis. Let’s face it, the Fed has had a license to print money partially due to Amazon driving prices down. There’s also been a commodity bust. Everything has gone their way. Are you suggesting, in your own words, that “inflation is kryptonite to bonds” and that this is something the Fed does not anticipate?
JG: Well, as a rule, the Fed anticipates nothing. As a rule, most of us anticipate nothing, the future being complex and, for the most part, unpredictable. By the way, the phrase “foreseeable future,” is an oxymoron.
Yes, inflation has been a no-show, though maybe that’s changing. Charles Goodhart and his coauthor Manoj Pradhan, in their fine new book, The Great Demographic Reversal, point out that the past thirty years have delivered a huge positive supply shock. That is, a supply shock in labor. But they contend that, for a number of reasons, the future will be very different, featuring rising inflation and interest rates alike. It’s an impressive and persuasive argument they make.
People my age will no longer be productive, the book says. They will be needful, they will be in the hospital, they will be attended to by their loving aides who will help them either walk or remember, or both. And the dependency ratio [the ratio of those not in the labor force to those in it] is going to rise. So there will be less labor serving and greater demand. And I will add that these will be added to the perhaps inevitable central bank response, which is to be more generous in provisioning the system with money and credit.
So all of this is going to add up to years of inflation, which will shock the bond markets, especially that portion of the bond market, the $17 trillion portion, which is now priced for the certainty—not the risk, mind you, but seemingly the certainty—of either stable prices or gently dwindling prices. What the world is not set up for is an inflation, to be sure.
KD: Just to clarify, you’re talking about labor from China, particularly, and from India…
JG: India, Eastern Europe.
KD: So we’ve gotten the benefits, up front, but these people, as they prosper, will demand more energy, more protein, etc. Are the authors saying the demand side is coming with a lag and that, in turn, adds to inflationary pressures?
JG: Yes. I’m going to read you a paragraph from this book.
It’s China’s “globalisation and the reincorporation of Eastern Europe into the world trading system, together with the demographic forces, the arrival of baby boomers into the labour force and the improvement in the dependency ratio, together with greater women’s employment [that] produced the largest ever, massive positive labour supply shock. The effective labor supply force for the world’s advanced economy trading system more than doubled over those 27 years, from 1991 to 2018.”
But that’s in the bank. It’s behind us. What lies ahead is a deteriorating dependency ratio. More needy people, fewer productive ones, fewer working ones, perhaps more monetary stimulus, and rising prices at the checkout counter rather than falling ones.
KD: In North America, the oil rig count is down 61 percent year-to-date and the natural gas rig count is down 18 percent. So on top of all of this, we’re now getting a commodity supply shock. Is this another tailwind for commodities?
JG: Yes, and you don’t need a big inflation to generate returns. Years of subpar investment in productive capacity in the things that the world needs more of is the essence of the bull case. The key is the supply side.
KD: Socially responsible investing, a.k.a. ESG [environmental, social, and governance], has led to fossil fuel divestment as well. How does ESG enter into the equation for investors?
JG: ESG is a bull-market luxury. In a bear market, people, I think, are much more concerned about survival than they are about making a political statement.
Will Thomson, founder and managing partner of Massif Capital LLC, has a really smart approach to choosing effective ESG-themed investments. Don’t go buying the exchange-traded funds labeled ESG, he says. They own Apple and Microsoft and Facebook and Alphabet. Instead, buy the kind of dirty industrial business that’s cleaning itself up. It makes sense to me.
KD: That’s an interesting arbitrage. Is there a similar opportunity in more accurate accounting? I’m thinking about a company like Tesla, where everyone is focused on the lack of emissions, but they’re overlooking where this electricity is coming from, not to mention the costs of recycling batteries.
JG: I am all for better accounting. And now Tesla’s entering the S&P 500 on the strength of its virtue and flash and momentum and of the tax credits by which alone it achieves profitability. So there’s a singularity of the year 2020 along with $17 trillion in negative-yielding bonds.
KD: You talked about the cyclical nature of markets. Right now youth is elevated. Has the digital revolution made this a young man’s game or is there still room for elder wisdom?
JG: Based upon my experience, there’s no room for elder wisdom.
KD: [Laughter]
JG: Raging bull markets are always young people’s thing. Old guys always say, “I wouldn’t be so quick to pay 170 times revenues for that particular stock. I seem to recall something like this in 1968, or was it 1868?” This is what old people always sound like. Do you remember the author George Goodman? I think his pen name was Adam Smith; he wrote a book called The Money Game.
KD: Oh sure. The go-go ’60s.
JG: If you’re starting a hedge fund, you want young people buying the stocks that are going to go up. Because they don’t know enough not to buy them. People who know enough not to buy them are going to underperform. So in a way it was ever thus. Youth will be served, and youth especially will be served in great raging liquidity-driven bull markets.
Witness bitcoin and the charm and the demonstrated excellence of the FAANG [Facebook, Amazon, Apple, Netflix, Google] stocks. The young people don’t imagine that they have great business models. What they do imagine is that the possibilities for expansion are infinite, whereas the expansion may be limited in the case of Facebook, for example, by such mundane things as the size of the world’s advertising market.
But those objections, the wisdom of the ages, play very badly on the upswing. Again, I think this is nothing new.
KD: Regarding youthful exuberance, I remember the late ’90s tech bubble. On February 15, 2000, 60 Minutes aired a story by Bob Simon called “Dot- Com Kids” where Simon interviewed several young founders of web-based startups that were housed in old buildings in downtown Manhattan, dubbed Silicon Alley. One even told him, essentially, “We’re coming after your job. You’re going to be roadkill.” I guess it didn’t quite turn out that way, did it?
JG: No, but in fairness there’s something to this. There’s something to the displacement of human beings by human ingenuity. It is certainly a fact that technology has improved lives, reduced costs, increased comfort, amused countless millions, and cost some jobs while creating others. That’s the nature of capitalist progress. Capitalist progress is not always to everyone’s aesthetic taste, but it is the ultimate democratic expression of how resources ought to be allocated. The sovereignty of the consumer, whatever the consumer’s taste might be, that’s what will be served.
So young people, whether they can express it just that way or not, do live it. They buy what they themselves like, and what they like often mystifies their elders.
KD: Elders often worry about the next generation. Look at some of the toxic ideology young people have imbibed. How concerned are you? Is there hope?
JG: Oh, of course. I am the father of four and the grandfather of five, and those nine people are fabulous!
KD: That’s the hope! That’s the future.
JG: Right, but everybody else is very questionable.
KD: [Laughter]
JG: Go back to the ’30s and Marxism, without any of the gloss of democratic liberalism, Marxism itself— hammer and claw—was culturally and politically prevalent. And if it wasn’t Marxism, it was the vogue in fascism. We forget that the top tax rate in the Eisenhower years was in the upper ’80s, in fact, into the ’90s. Very few people actually paid that, but that was a legacy of the ideas that reigned, not quite uncontested, but dominated in the ’30s and into the ’40s. That gradually gave way, but don’t forget what happened in the ’60s. There was a Marxist resurgence and then, lo and behold, come the inflationary ’70s, and people find they’ve had enough of that, and then comes Ronald Reagan.
So there’s a cyclicality, there’s an episodic quality to our politics. I don’t think these are end times politically. I think it’s worrying that freedom of speech seems to be back on its heels as much as it has ever been. Freedom of speech, in America, was not quite so endangered even in the ’30s as it is now. That is genuinely frightening. I’m frightened by it.
KD: Rollo May, an American psychiatrist, once said, “The opposite of courage in our society is not cowardice, it is conformity.” It seems like we’re at a point in time when it takes courage to distance oneself from the crowd and from some of these really toxic ideas.
JG: It takes steadfastness, though just how much depends. If you are in a position to lose your job and instead of holding on to that job in the face of ideas and the insistence on ideas you think are wrong, instead of that, you stand up and you object at the risk of losing your livelihood in the case of this master of Eton College in England [he was fired for refusing to withdraw his posted lecture on the virtues of manliness] (and he has five kids)—if you do that, that is courageous.
If you have your own soapbox and you are not really at risk of losing your livelihood, it takes a modicum of bloody mindedness to stand up in front of a mass of opinion. It takes a certain amount of moxie to risk social ostracism. That’s part and parcel of it sometimes, but it doesn’t require a Medal of Honor in that setting. So that’s the distinction I wanted to draw: it depends on how you’re situated in life.
KD: CNBC certainly isn’t the worst of the cancel culture, but nonconformists like Peter Schiff, Marc Faber, and Michael Pento have all been excommunicated. Jim Grant is still there. How have you been able to pull that off?
JG: I’m not sure that the premise of the question is quite correct. I’m on the squawk box every so often, but not very frequently. Take another kind of financial personage. Ed Yardeni is a successful economist. He’s made his living by serving his clients, by trying to make money for them without passing judgment on public policy. Whether the Fed is doing the right thing or the wrong thing is not his remit, he says. His remit, in fact, is not fighting the Fed, but adapting to monetary policy (whatever it is) to make money.
So people like you, like me, like others you mentioned, have chosen a different job description. Grant’s takes a stand on the integrity of the currency. It takes a stand on the nature of markets. It takes a stand on price discovery as opposed to price administration. And we say those things in public and print. We say them on air when given the chance. But they have not lately helped people make money.
CNBC’s viewers—I think most of them—want to know where the markets are going, and if you are not on the right side of that question, you wear out your welcome as a public voice. So I don’t begrudge the producers at CNBC for choosing people with a hot hand.
I am happy, retrospectively, to have been in the wilderness in the early 2000s. Let’s not forget how long they lasted: 2001, ’02, ’03, ’04, ’05, ’06, ’07, yes?
KD: I remember.
JG: If you had had a correct, informed, bearish view on house prices and mortgage-backed securities, you were more than a half decade of wrong before being gloriously right. You have to stick with your guns and have to believe in what you believe and accept that the world can get tired of hearing your foreboding (or, as the case may be, annoyingly bullish) voice.
KD: At a time when other skeptics are routinely dismissed as “the bear crying wolf,” you have somehow managed to stay relevant. The bottom line is you are delivering value. You’re doing a lot more than just bashing the Fed. Grant’s has made some great bullish calls over the years. For example, you saw the economy recovering in 2009 and were bullish on Google fairly early in the bull market, when it was considered a value stock. I would posit that the reason you have this platform is that you’re not just a broken record.
JG: Well, thank you. I am happy to agree with that, and I would credit the fine analysts we have had here over the years. Now, of course, Evan Lorenz is a terrific securities analyst, and, way back when, Dan Gertner—this in 2006 and 2007—did a lot of very early and important securities analysis on complex mortgage structures.
So, yes, thank you. We have indeed earned a voice. I think sometimes, when I get discouraged, that we have earned our reputation a little bit too well of being critics of contemporary monetary arrangements, but I wouldn’t change that. I think that these institutions and these policies are wrongheaded. I think they are dangerous. I think they are possibly even bad for the planet!
It comes down to, Where do you want to make a stand? What matters to you? What matters to me—and to my journalistic lemonade stand—is not saying the correct things to insinuate myself into the good graces of the financial establishment. It’s speaking up against bubbles and the monetary manipulations that inflate them. It’s speaking up for the incredibly outré institutions of the gold standard and for the great institution of corporate solvency (you’d be surprised how controversial it can become at the end of a boom).
That’s the way we’ve run things for a long time. We’ve been in business for thirty-seven years, and that’s the way we intend to keep doing it.
KD: You recently published the “Grant’s Manifesto,” in which you actually tooted your own horn (very unusual), specifically your track record of identifying excesses. Looking at this everything bubble, where do you see the areas of greatest fragility?
JG: To me, the most excessive of all the excesses is these $17 trillion plus of nominal negatively yielding bonds. Nothing like it in four thousand years of interest rate history. They seem to be priced for one outcome alone, the noninflationary one.
Cocksure people baffle me. You run across them all the time on Wall Street, somebody who simply declares, “this is going to happen,” or “that’s going to happen.”
How do you know that? This is a probabilistic world; it’s not a world of certainty.
The great nineteenth-century historian Thomas Babington Macaulay was one of the type. “I wish I was as certain of anything as Tom Macaulay is of everything,” someone said of him. I feel that way with a lot of the Wall Street pundits I read and listen to.
The people who are holding on to these guaranteed- loss securities seem certain of the benevolent path of stable or falling prices. I think by the time Mr. Market puts them through the slicing and dicing machine, there won’t be much left of them.
KD: Will the next banking crisis have sovereign debt at the center of it?
JG: It could. It’s one candidate. Corporate credit is another. With every downward lurch in the stock market, central banks barge in to help. But in helping—with their credit infusions and interest rate slashing—they invite still more lending and borrowing, therefore greater leverage, therefore greater fragility, therefore a greater likelihood that the next financial disturbance will elicit an even greater monetary response, thereby bringing still more leverage, more fragility, etc., and on and on.
KD: Until something breaks.
JG: And maybe that something is going to be the people’s confidence in the central banks.
The central bankers have gotten everyone flummoxed. How would you like to own the stock of a company like the Fed, that did not, shall we say, distinguish itself in 2005, ’06, ’07, ’08, ’09, yet comes out of it with greater power, more prestige…? Now that’s a franchise. My hope is that the next crisis will become also a crisis of belief in central banks and in the judgment of the people who staff them.
One of the big trends of the past century is the socialization of financial risk. Increasingly, individuals bear less of it, governments more, and I wonder if the sheer inequity of this trend has poisoned our politics. Not many people know that up until the 1935 Banking Act, it was the stockholders who got a capital call if the institution in which they held a fractional interest became impaired or insolvent. Mind you, the stockholders, not the taxpayers. Compare and contrast 2008, when, in effect, the government issued a capital call to the taxpayers. That’s all wrong.
KD: This is collectivism, is it not?
JG: It’s financial collectivism. It’s the nationalization of loss and the privatization of gain. Remind me to fix it when I become president.
In a free society, peaceful citizens deserve the legal benefit of the doubt. In an age where government agents have endlessly intruded onto people’s land and into their emails, citizens should not be scourged for transgressing unknown or unmarked federal boundaries.
Original Article: "In a Paranoid Nation, "Treason" Is Everywhere"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Professor Jonathan Newman joins the show for a look at America's Great Depression, Rothbard's classic explanation of a terrible period in US history. This book provides one of the best short surveys of Austrian business cycle theory, along with deep history surrounding the inflationary run-up of the 1920s and the disastrous mistakes made by the "laissez-faire" Hoover administration in the 1930s. Any serious student of booms and busts needs to read this cautionary tale, as does anyone worried about unconstrained monetary policy in the wake of Covid-19 lockdowns. It can happen here, and it can happen again, if Rothbard's counsel goes unheard.
Find the online version of the book at Mises.org/GreatDepression Receive a discount on America's Great Depression in the Mises Bookstore with code HAPOD15%
Colonial America was a society of smugglers and scofflaws who regarded government regulations as worthy of contempt. Twenty-first century America is quite different.
Original Article: "Why Americans Abandoned Smuggling in Favor of Lobbying and Welfare"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
With Donald Trump safely out of the way, it is now safe for politicians and their friends in the media to begin scaling back their panicked hysteria over covid-19.
Original Article: "With Trump out of the Way, Suddenly We're Hearing Good News about Covid"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Both theory and the empirical research shows a competitive marketplace is incongruous with racism, but the Left insists capitalism is "inherently" racist.
Original Article: "The Myths Behind the "Capitalism Is Racist" Claim"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
America’s founders did not envision the federal government as the domineering senior partner in almost everything. What was once best described as “sovereign States, united solely for specified joint purposes” has been largely eviscerated.
Original Article: "Why Governments Want More Centralization—and Less Federalism"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Scott Horton of antiwar.com and the Libertarian Institute has a new book chronicling 20 years of America's "War on Terror." Enough Already is a compelling history of modern US interventionism and a scathing critique of American foreign policy in the Middle East.
Horton joins Jeff Deist for a sobering look at American hubris overseas, along with the blowback and destruction it causes. You don't want to miss this conversation.
Expect opponents of secession and decentralization to start claiming that neither option is acceptable because any big change to the status quo could endanger American "strength" in foreign policy. Don't listen to them.
Original Article: "Halfway to Secession: Unity on Foreign Policy, Disunity on Domestic Policy"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Will Biden/Harris be a transformative administration?
Original Article: "What Biden/Harris Will Do"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
What can be done now? President Trump should not urge us all to “come together.” Instead, he should support secession.
Original Article: "The Truth about January 6, and Where We Should Go from Here"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
If California voters and politicians do not understand the current crisis, we will see the continuous march to perdition as California politicians refuse to acknowledge that they are killing the geese laying the golden eggs.
Original Article: "California Is Worse Than You Think"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Coups are nearly always acts committed by elites against the sitting executive power using the tools of the elites. It's clear the elites want Trump gone, and Wednesday's riot was no coup.
Original Article: "The Capitol Riot Wasn’t a Coup. It Wasn't Even Close."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
On January 15, Wikipedia turns 20. Its anniversary is a good time to celebrate the success of a service that has become so useful to so many.
Original Article: "Wikipedia, Markets, and Collaboration"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
There are few sacred cows in American politics more revered than the New Deal. Yet the New Deal did nothing to end the Depression and it still negatively impacts our economy today. Now we're being told the United States needs a new New Deal.
Original Article: "No, We Don't Need a New New Deal"
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.
The Boston Tea Party was an opening act in what came to be a violent culture war and war of national liberation. And it helps us understand how America in 2020 could become as bitterly divided as America during the revolution.
Original Article: "The American Revolution Was a Culture War".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
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.
The "New Historians" can identify the ostensible economic prowess of slavery, but they have ignored the many unseen costs imposed by slave economies.
Original Article: "Slavery: The "Broken Window" of American Economic History".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Break It Up: Secession, Division, and the Secret History of America's Imperfect Unionby Richard KreitnerLittle, Brown, 2020viii + 486 pages
The extreme polarization in American politics today has led many people to ask: Is the United States too large? Don’t people who find the centralizing policies of the Leviathan state oppressive have the right to leave and govern themselves? Ron Paul thinks so. As Richard Kreitner notes, “Ron Paul called secession ‘a deeply American principle.’ For a country founded in the act of secession, Paul argued, there was ‘nothing treasonous or unpatriotic about wanting a federal government that is more responsive to the people it represents....If a people cannot secede from an oppressive government, they cannot be considered free.’”
Dr. Paul has many precursors for his view. As Kreitner observes, in 1863, the individualist anarchist Josiah Warren argued that “individuals were inherently sovereign; no government could legitimately wield power over them. ‘A state or a nation is a multitude of indestructible individualities, and cannot, by any possibility, be converted into anything else!’ Warren declared. He called for ‘a “Union” not only on paper, but rooted in the heart.’ As for the [Civil] war, Warren opposed slavery as the most extreme possible violation of individual sovereignty, but he could find no justification for forcing the South back into the Union. As he wrote, ‘There can be no secession from the freedom to secede!’”
You may wonder whether this position, held not only by Paul and Warren but by Ludwig von Mises and Murray Rothbard as well, is extreme within the context of American history. It is the great merit of Richard Kreitner’s excellent book to show that it isn’t. Kreitner, a writer for The Nation who has devoted five years of research to Break It Up, shows the remarkable extent to which disunity is the dominant theme in American history. He is by no means a supporter of the free market, and his own policy proposals, such as a call for action against “the coming climate chaos,” are best ignored. Nevertheless, his work is of great value to us. It covers American history from colonial times to the present, but I’ll concentrate on only a few items of particular interest.
Like Murray Rothbard, Kreitner notes that ratification of the Constitution was a veritable coup d’état against the American people. “Celebrated as the most profound debate in American history...the ratification struggle was hardly a fair fight. Throughout the contest, those who favored the Constitution resorted to deceit, censorship, and force. They suppressed critical pamphlets and accelerated votes to keep their predominantly rural opponents from scrutinizing the text....Ratification, though it occurred nearly two and a half centuries ago, remains the one time the Constitution was ever put to a vote. Even then, it barely squeaked to passage, and it did so thanks only to a scorched-earth campaign of violence, trickery, and threats.”
Despite these underhanded efforts, supporters of the new order gained only a limited result: “Though the Constitution itself was silent on secession, contemporaries clearly believed ratification could be withdrawn the same way it had been tendered: by popularly elected delegates voting at a statewide convention. No state would have joined the Union had its citizens not believed that such a right was necessarily implied.”
Indeed, the Constitution is best viewed as a “peace pact.” “I [Kreitner] have been influenced by ‘the unionist paradigm,’ which holds union to have been the central problem...of the American founding. Its urtext is David C. Henrickson’s Peace Pact: The Lost World of the American Founding...[it] suggests the Constitution is best considered a treaty among quasi-independent nations that prevented them from falling into a ghastly and brutal civil war. I only doubt, given that the war did come, how successful that diplomatic breakthrough really was.”
Kreitner ably shows that even zealous proponents of the Constitution sometimes abandoned their quest for national unity. “Ever since the Revolution, Gouverneur Morris had been a strong champion of national government, a close ally of Hamilton and Washington....Like most of his business-minded brethren, Morris saw ‘Mr. Madison’s War [of 1812] as hostile to Northern interests’....Morris preferred to break up the Union rather than surrender it to the South. ‘The Union, being the means of freedom, should be prized as such,’ he wrote in 1813 ‘but the end should not be sacrificed to the means.’ He thought Northerners should ‘examine the Question freely, whether it be...consistent with the Freedom of the Northern and Eastern States to continue in Union with the Owners of Slaves.’”
John Quincy Adams is rightly regarded as an ardent nationalist, but in 1839, “the former president had suggested to the New York Historical Society that it might someday be better for ‘the people of the disunited states, to part in friendship from each other, than to be held together by constraint.’”
The claim that the federal government exploits one section of the country to help others persisted, and it lay behind Southern opposition to Franklin Roosevelt’s New Deal. “In a 1937 book, Divided We Stand, Texas Historian Walter Prescott Webb attacked Roosevelt’s program as contributing to the massification of American life. Taking aim at everything from Wall Street finance to chain stores and industrial automation, Webb depicted Americans in the heartland as colonial subjects forced to pay tribute to coastal masters.”
The great anti-statist Albert Jay Nock emphasized another sort of sectional exploitation. “In a 1934 journal entry, Nock wrote that he had ‘asked several businessmen what actual good New England is getting out of membership in the Union, and they could not think of any, even though they tried hard. As for myself, I can think of none.’ Nock, however, was hardly a consistent advocate of Yankee nationalism: the only time he ever voted in a presidential election, he cast a write-in ballot for Jefferson Davis—on the principle, as he put it, that ‘if we can’t have a fine man who amounts to anything, by all means let’s have a first-class corpse.’ [!]”
One of the ways that states have endeavored to thwart the federal government is nullification of laws deemed unconstitutional. Kreitner, who throughout the book displays a pronounced anti-Southern bias, is sometimes unsympathetic to it, but he admits that it can be used to support freedom. Several of the Northern states nullified the Fugitive Slave Act of 1851, and on this occasion it was the Southern states that sought an increase in federal power. “A massive extension of federal power,...[it] preempted Northern states’ ‘personal-liberty laws,’ which granted accused runaways the right to a jury trial and other legal protections. For slavery’s sake, Southerners dropped all pretense of caring about state sovereignty and local control....Northerners were equally opportunistic in response. Once enthralled by Daniel Webster’s soaring odes to the glorious Union, many now took up the nullification doctrines he had denounced. After the fugitive-slave bill passed Congress, Northern states enacted even stronger personal-liberty laws, directly challenging the new statute. Vermont’s legislature extended the right of habeas corpus to accused runaways, essentially voiding the law in the state. Northern juries refused to convict citizens of disobeying the act. While a pro-Southern paper in Washington denounced the North’s embrace of ‘Nullification and Disunion,’ the poet John Greenleaf Whittier proudly called himself a ‘nullifier.’”
Kreitner concludes that secession is likely to grow in importance in our present dark times. “The twentyfirst century has seen an unmistakable resurgence of the idea of leaving or breaking up the United States—a kaleidoscopic array of separatist movements shaped by the conflicts and divisions of the past but manifested in new and potentially destabilizing ways. Earlier periods were defined by the ambitions of one or another region or the separatist impulses of this or that aggrieved minority. The new secessionism has appeared in multiple states at once, each pushing for departure from a Union that no longer functions. If the country as a whole is beyond saving, perhaps one’s own state is not.”
Those of us who wish to advance the ideas of Mises, Rothbard, and Ron Paul can take heart from this rich and detailed book.
As notorious as the Democrat political machines are, the origins of vote fraud in America lie in the party of Lincoln.
Original Article: "The Origins of American Vote Fraud".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Remember savings bonds? They were popular before the central bank made sure that safe, low-interest investments became a thing of the past.
Original Article: "The US Savings Bond Scam".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Romanticizing the history of nonwhites to portray them as saints is dehumanizing.
Original Article: "A Brief History of Nonwhite Slave Owners in America".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
All of a sudden the tweets are gone, the Facebook is gone, the media is gone. Only crazy people are questioning the most pristine — the most perfect — election of all time.
Presented at the Symposium with Ron Paul on Saturday, 7 November 2020, in Angleton, Texas.
ABSTRACT: This paper recounts the history of food inspection from a voluntaryist perspective. In England and the United States, the efforts to achieve food safety have relied upon two main methods: education and legislation. Governments did nothing that could not be done on the free market (and in many cases was already being done). Books on how to test for adulterated products at home were published. Some manufacturers voluntarily observed the highest standards of sanitation and cleanliness in their manufacturing plants. Private commercial testing labs were established, and third-party certifications such as the Good Housekeeping Seal came into being. At the same time, we might ask: Why was not strict liability for causing sickness or death imposed upon manufacturers and retailers that sold foods or drugs? Where were the insurance companies that might have provided product liability insurance? To answer these questions, this article looks at the historical evolution of negligence, product liability, and tort law.
Carl Watner (editor@voluntaryist.com) is an independent scholar. This article appeared in The Voluntaryist, digital issue 192, at voluntaryist.com.
When I took over the operation of Inman Feed Mill in late 1987, none of the animal products that we processed and bagged were tagged. Cracked corn, whole corn, sweet feed, and chicken scratch all went out the loading door in plain, unmarked bags. The feed mill had been started in the early 1950s in a very rural area of upstate South Carolina, and most of its customers had face–to–face contact with the various owners. Never was there a doubt in the customer’s mind about what they were getting. Feed bags were not sewn; pieces of string tied in the ubiquitous miller's knot secured their contents. If there was a question, we only had to untie the bag, show the contents to the customer, or place it on the scale if somehow the customer doubted how many pounds he was buying. If there were federal feed and grain laws, there was no evidence of their enforcement. However, there were South Carolina Department of Agriculture regulations which mandated that statements of feed ingredients and analysis (of protein, fat, and fiber content) be placed on the bags. Due to very lax enforcement by state inspectors and the very local nature of our business, the tagging laws were not enforced until about 2015.
Why am I recounting this history? Because this was how most food and drugs for people were sold well into the late nineteenth and early twentieth centuries—no food labels; no statements of ingredients; no stated weight; no serving breakdowns of calories, fat, fiber, sugar, and protein; and no prescriptions required—not even for dangerous drugs. What first called my attention to this topic was a book by Deborah Blum titled The Poison Squad: One Chemist's Single-Minded Crusade for Food Safety at the Turn of the Twentieth Century. The Poison Squad consisted of young healthy men who volunteered as human guinea pigs to test the safety of additives, adulterants, and preservatives in foods sold for human consumption. It was an experimental program designed to test the toxicity of ingredients in food. It was begun in late 1902 by Harvey Wiley, who was chief chemist of the United States Department of Agriculture from 1882 to 1912. Wiley used the the Poison Squad’s results and the publicity surrounding the publication of Upton Sinclair’s The Jungle to promote the Pure Food and Drug Act, which was passed in 1906.
The purpose of this paper is to recount the history of food inspection from a voluntaryist perspective. In England and the United States, the efforts to achieve food safety have relied upon two main methods: education and legislation (Whorton 2010, 156). I suppose one could argue that if education were sufficient and successful, legislation would be unnecessary, but we shall see how this argument worked out historically. But even if legislation were necessary, which I am not granting, governments did nothing that could not be done on the free market (and in many cases was already being done). Books on how to test for adulterated products at home were published. Some manufacturers voluntarily observed the highest standards of sanitation and cleanliness in their manufacturing plants and used only the best ingredients in their products. . Private commercial testing labs were established, and third-party product certifications such as the Good Housekeeping Seal came into being. At the same time, we might ask: Why was not strict liability for causing sickness or death imposed upon manufacturers and retailers that sold foods or drugs? Where were the insurance companies that might have provided product liability insurance? To answer these questions requires a look at the historical evolution of negligence, product liability, and tort law.
As B. I. Smith (2013) has noted, “Legislation designed to prevent the sale of unsafe or unwholesome food represents one of the oldest forms of government” intervention in the marketplace. The English Assize of Bread and Ale, enacted during the reign of King John during the mid-1200s, contains one of the earliest references to food adulteration. Both in England and in British North America the establishment of public markets was usually a prerogative of city governments. The first meat inspection law in North America was enacted in New France (now Canada) in 1706 and required butchers to notify the authorities before animals were slaughtered (Institute of Medicine 1990). Municipal legislation covered everything from licensing vendors, mandating the use of just weights and measures, and “prohibitions on buying and selling outside the public market, prohibition on reselling, forestalling, and engrossing.” “In New York, unsound beef, pork, fish, or hides were to be destroyed by municipal officials by ‘casting them into the streams of the East or Hudson rivers,’” and in New Orleans, officials were authorized to throw diseased meat into the Mississippi. In 1765, Lord Mansfield upheld the existence of public market regulations by referring to “the need for the ‘preservation of order, and the prevention of irregular behavior’” (Novak 1996, 95–98).
In England, during much of the nineteenth century there were few regulations on the sale of adulterated foods and poisons. For example, arsenic—which is very similar in color and texture to white sugar, flour, or baking powder—was sold by grocers and an odd assortment of tradesmen and hucksters. “In short, anyone could sell” and anyone could buy. “Nothing more was expected of buyers than they must mind what they were buying.” The rule was caveat emptor. The burden of proof was on the buyer to be sure that his purchase caused him no harm. Since there was no statutory definition of a druggist or chemist, anyone could sell arsenic, and people commonly purchased it for use as a rat killer. The British Pharmaceutical Society, founded in 1841, devoted much of its activity to “achieving a Parliamentary definition of the title ‘Chemist and Druggist’” and agitated for a law that would permit only those vendors who met the legislative requirements to traffic in drugs and poisons (Whorton 2010, 113–14, 135).
As a result, arsenic was often implicated in both accidental and purposeful deaths. Unhappy wives often used arsenic to poison their husbands, and even if they were indicted for manslaughter, “juries were reluctant to convict unless it could be demonstrated that the suspect had actually bought some of the poison.” People who caused accidental poisoning were usually not punished at all. Between 1837 and 1839, over five hundred cases of accidental poisoning by arsenic were reported. Deaths continued to mount during the 1840s. A classic example of a possible poisoning was that of a little girl in 1851 who was sent to a rural grocer to get “tea, sugar, flour, currants, red herrings, and two ounces of arsenic to deal with rats.” Absent labeling, how was her mother to know which was arsenic? Parliament finally passed An Act to Regulate the Sale of Arsenic in June 1851, which required records be made of every sale and mandated that any quantity of less than ten pounds be colored so that it could not be confused with food ingredients (Whorton 2010, 114, 131, 133).
The law was often ignored by both buyers and sellers. Less than three months after its passage a woman used uncolored arsenic to kill her husband. She was executed, and the two pharmacists who sold her the arsenic were fined. Violations of the law continued, finally culminating in a ghastly tragedy in Bradford, Yorkshire, on October 25, 1858, when a confectioner’s assistant requested a quantity of plaster of Paris, which was supposed to be used as an adulterant in the candy they were making, but was mistakenly sold uncolored arsenic. Despite the fact that one worker became sick while mixing the arsenic into the peppermint lozenges that he was preparing and that “the candies took an unusually long time to dry and were darker in color than usual,” the confectioner did not realize there was a problem. He sold forty pounds of the lozenges to a vendor at Bradford’s Saturday market and mixed the remainder into an assortment of other sweets, known as a Scotch mixture. In less than three days, twenty-one people had died from eating the candy and over seventy–eight were known to be seriously ill. The confectioner and the chemist and his apprentice, who had sold the arsenic, were arrested and indicted for manslaughter. “When the trial was held…the jury could find no violation of the law. The episode was simply a highly regrettable accident” even though it was a case of gross negligence (Whorton 2010, 135–37, 139, 163).
Similar incidents of death and sickness due to food poisoning occurred in the United States. In his 1853 book The Milk Trade in New York and Vicinity, John Mullaly “included reports from frustrated physicians that thousands of children were killed in New York City every year by dirty (bacteria-laden) and deliberately tainted milk,” which was commonly known as “swill” milk. Thomas Hoskins, a Boston physician, published his What We Eat: An Account of the Most Common Adulterations of Food and Drink with Simple Tests by Which Many of Them May Be Detected in 1861. In an 1879 speech before the American Social Science Public Health Association, George Thorndike Angell “recited a disgusting list of commercially sold foods that included diseased and parasite-ridden meat…that poison and cheat the consumer.” Jesse Battershall, a New York chemist, published his book Food Adulteration and Its Detection in 1887, in which he decried “candy laced with poisonous metallic dyes, mostly arsenic and lead chromate,” and “warned of cyanide, indigo, soapstone, gypsum, sand, and turmeric in teas” (Blum 2018, 2, 15, 29).
During the Spanish-American War, the US Army contracted with Swift, Armour, and Morris, three of the biggest meat-packing companies in Chicago, to supply refrigerated and canned meat provisions to soldiers in Cuba and the Philippines. Much of the meat arriving in Cuba “was found to be so poorly preserved, chemically adulterated, and/or spoiled that it was toxic and dangerous to consume.” After the war a court of inquiry was held to investigate these problems, and Commanding General Nelson A. Miles of the American forces in Cuba referred to the refrigerated products provided to the army as “embalmed beef.” General Charles P. Eagan, commissary general, defended his procurement practices and in the end “there were no official findings of large-scale trouble with meat supplies” (“United States Army Beef Scandal” 2020).
The “embalmed beef scandal” was just one of many events that gave impetus to the passage of new federal laws. Muckrakers at the beginning of the twentieth century highlighted the problems they saw in the Chicago meat-packing industry. The publication of Upton Sinclair's The Jungle as a magazine series in 1905, and then its publication as a book in early 1906, brought pressure to bear on President Theodore Roosevelt to push for the adoption of the Meat Inspection Act and the Pure Food and Drug Act. Prior to their passage on June 30, 1906, there had been a number of what can only be called “political inspections” of the meat processors in Chicago. One inspection supported the the meat companies’ claims that their processing facilities and methods were sufficiently up to industry standards, while another confirmed the descriptions in The Jungle. On March 10, 1906, investigators sent by Secretary of Agriculture James Wilson arrived in Chicago to report on the conditions in the packing houses. They held Sinclair responsible for “willful and deliberate misrepresentation of fact” (Schlosser 2006). In their initial report a month later, they “concluded that meat inspection could and should be improved, but (they) also refuted most of the charges made in…The Jungle” (Ogle 2013,78). Finally, in a June 8, 1906, letter to the president transmitting the reports of the Agricultural Department’s committee’s inspection of the stock yards, the inspectors stated that they believed that Sinclair had “selected the worst possible conditions which could be found in any establishment as typical of the general conditions existing in the Chicago abattoirs, and…willfully closed his eyes to establishments where excellent conditions prevail” (US House of Representatives 1906, 349). By early May 1906, Roosevelt had already decided to dispatch Commissioner of Labor Charles P. Neill and Assistant Secretary of the Treasury James B. Reynolds to Chicago for further investigation. This time “Roosevelt's inspectors found stockyard conditions comparable to those Sinclair had portrayed and told of rooms reeking with filth, of walls, floors, and pillars caked with offal, dried blood, and flesh of unspeakable uncleanliness” (Goodwin 2013, 462).
The Meat Inspection Act of 1906 amended the earlier Meat Inspection Acts of 1890, 1891, and 1895, which had provided for “inspection of slaughtered animals and meat products but (which) had proven ineffective in regulating many unsafe and unsanitary practices” (Rouse 2020). The new law provided for the inspection of “all cattle, swine, sheep, goats, and horses both before and after they were slaughtered for human consumption,” as well as establishing new sanitary standards and ongoing monitoring and inspection of all slaughter and processing operations (ibid.) The Pure Food and Drug Act of 1906, on the other hand, banned all “foreign and interstate traffic in adulterated or mislabeled food and drug products” (“Pure Food and Drug Act” 2020). It was primarily a “truth in labeling law” that for the first time in federal legislation defined “misbranding” and “adulteration” by referring to the standards set by the US Pharmacopoeia and the National Formulary. As Harvey Wiley, chief chemist and the chief proponent of the new law put it, “The real evil of food adulteration (and mislabeling) was the deception of the consumer” (Blum 2018, 103).
Despite these laws a new tragedy occurred some three decades later. During September and October of 1937, more than one hundred people in fifteen states died after having taken the Elixir Sulfanilamide, which had been formulated by the chief chemist of the S. E. Massengill Company of Bristol, Tennessee. Sulfanilamide had been used in powder and tablet form to treat streptococcal infections. When it was found that it could be dissolved in diethylene glycol, it was marketed in liquid form after being tested for flavor, appearance, and fragrance. It was not, however, tested for toxicity, and the formulating chemist failed to realize that diethylene glycol was a deadly poison. After the product had been distributed, reports came back of deaths and sickness. The Food and Drug Administration then attempted to retrieve all of the product that had been sold. “Although selling toxic drugs was undoubtedly bad for business and could damage a firm’s reputation, it was not illegal. In 1937 the law did not prohibit sale of dangerous, untested, or poisonous drugs.” The unsold and unused elixir was seized, because it was misbranded, not because it was poisonous. According to the FDA, “elixir” implied that the product was in an alcoholic solution, whereas diethylene glycol contained no alcohol. “If the product had been called a ‘solution’ instead of an ‘elixir’ no charge of violating the law could have been made.” Dr. Samuel Evans Massengill, the owner of the firm, refused to accept any responsibility: “My chemists and I deeply regret the fatal results, but there was no error in the manufacture of the product. We have been supplying a legitimate professional demand and not once could have foreseen the unlooked-for results. I do not feel there was any responsibility on our part.” The company paid a fine of $ 26,100 for mislabeling and the commissioner of the FDA at that time, Walter Campbell, “pointed out how the inadequacy of the law had contributed to the disaster….[T]hen citing other harmful products, [he] announced that ‘The only remedy for such a situation is the enactment by Congress of an adequate and comprehensive national Food and Drug Act,’” which came about the following year (Ballentine 1981).
How would these tragedies have been handled on the free market? No one can say for sure that they could have been avoided, because there are no guarantees in this world. Would the free market provide more equitable, practical, and moral solutions to the problems of swindling and cheating that have been part of human history? We do not maintain that market solutions woulud solve all of humanity’s problems, but neither can we assume that because markets and other social mechanisms produce imperfect results that a central monopolistic authority will produce better ones. “Markets are desirable not because they lead smoothly to improved knowledge and better coordination, but because they provide a process for learning from our mistakes and the incentives to correct them” (Knych and Horwitz 2011, 33). As voluntaryists, we conclude from examining human nature, human incentives, and human history that a stateless society would not be perfect but would be a more moral and practical way of dealing with human aggression than reliance on a centralized, monopolized institution. Governments require taxes; taxes require coercion; coercion necessitates the violation of persons and properties, hardly moral or practical alternatives. Furthermore, we can say that government regulation usually gives consumers a false sense of security and reduces their incentive to do their own checking and acquire information about what they are buying. Government inspection and meeting government standards tend to preempt nongovernmental forms of inspection, such as product testing by third parties.
It is safe to say that a thorough application of the libertarian common law legal code and common sense would go far in preventing the kinds of catastrophes described here. The first thing to recognize is that in the absence of the state every manufacturer and every retailer would have strict liability for the products they sold. This incentive would induce them to exercise extreme care. As we have seen, particularly in the Massengill episode, neither the manufacturer nor any officials in the government’s Food and Drug Administration recognized that they had any personal responsibility for what happened. So long as they met the technical requirements of the statutory law, they were not liable for the deaths caused by sulfanilamide. As Rothbard has pointed out in Power and Market, with government regulation and reliance on government experts there is not the same measure of success or failure as when the individual relies on competitive market experts. “On the market, individuals tend to patronize those experts whose advice proves most successful. Good doctors or lawyers reap rewards on the free market, while the poor ones fail; the privately hired expert tends to flourish in proportion to his demonstrated ability” (Rothbard 1970, 17).
Where governments exist and government regulations and government inspections fail to prevent something like the sulfanilamide tragedy, what do the government regulators do? They call for new and more encompassing regulations. It is comparable to a successful terrorist attack today being used to call for stricter gun regulations and new antiterrorist laws. This is a perfect example of one government intervention leading to another.
How would the disasters described here be handled under the libertarian legal code? As Rothbard has written, “The free-market method of dealing, say, with the collapse of a building killing several persons is to” hold the owner of the building responsible for manslaughter.” Furthermore “a mis-statement of ingredients is a breach of contract—the customer is not getting what the seller states in his product.” This is “taking someone else’s property under false pretenses,” and therefore “under…the legal code of the free society which would prohibit all invasions of persons and property” the perpetrator would become liable. If the adulterated product injures the health of the buyer by substituting a toxic ingredient, the seller is further liable for prosecution for injuring and assaulting the person of the buyer (Rothbard 1970, 34).
Even with the existence of government, meat packers and manufacturers such as Armour and Swift still had an incentive to maintain quality and prevent food poisonings and deaths caused by their products. But they also had an incentive to use the fact that their products met government minimum standards as a shield against potential liability. As one commentator put it, “the responsible packer cannot afford to put upon the market meat virulently diseased. Government inspection, however…permits the packer to sell under sanction of law questionable products as first class” (US House of Representatives 1906, 345). This confirms Rothbard's analysis that setting quality standards has an injurious effect upon the market:
Thus, the government defines “bread” as being of a certain composition. This is supposed to be a safeguard against “adulteration,” but in fact it prohibits improvement. If the government defines a product in a certain way, it prohibits change. A change, to be accepted by consumers, has to be an improvement, either absolutely or in the form of a lower price. Yet it may take a long time, if not forever, to persuade the government bureaucracy to change the requirements. In the meantime, competition is injured, and technological improvements are blocked. “Quality” standards, by shifting decisions about quality from the consumers to arbitrary government boards, impose rigidities and monopolization on the economic system. (Rothbard 1970, 18, 34)
Even in the face of government inspection and regulation, there is nothing to keep reputable producers from trying to exceed government standards. In England, Crosse and Blackwell, purveyors of food to the royalty, began using purity as a general marketing device in the mid-1850s. (Wilson, 141–143) Henry J. Heinz’s company, which is still in existence today, is another example. “Between 1865 and 1880, the H. J. Heinz Company had established a reputation for high-quality condiments.” Heinz predicated his business upon his belief that a “wide market awaited the manufacturer of food products who set purity and quality above everything else.” All of the company’s marketing and advertising efforts were focused on “Pure Food for the Table” and maintaining an unblemished brand record. In 1890, Heinz opened his factories to the public and invited his customers to come and inspect his operation for themselves. “Within a decade, more than 20,000 people per year were touring (his) manufacturing facilities.” As early as 1901, Heinz became one of the first companies to hire chemists and establish a quality control department. Nevertheless, Heinz was one of the few large-scale producers that supported government legislation covering “food production, labeling, and sales” (Koehn 2001, 72–86). As one historian has noted:
Heinz's involvement in the campaign for food regulation grew out of his commitment to producing safe, healthy food. But he also had strategic reasons for championing federal regulation. Heinz believed that such legislation would help increase consumers’ confidence in processed foods, legitimating the broader industry and guaranteeing its survival. Stringent guidelines for food manufacturing and labeling, he believed, would enhance the reputation of the overall (food processing) business. Such guidelines might also focus public attention on his brand’s core attributes of purity and quality. Heinz’s standards for ingredients, production processes, and cleanliness were among the highest in the industry. The entrepreneur welcomed another opportunity to promote his products and his company’s identity.
From Heinz’s perspective, there were other advantages to endorsing federal regulation. Government-imposed standards for food manufacturing, labeling, and distribution would alter the terms of competition in the industry, forcing some companies to change their operating policies, usually at higher cost. Other manufacturers would be driven out of business. Both possibilities, Heinz realized, would enhance the Heinz Company’s competitive position. (Koehn 2001, 86–87)
So, there were definitely mixed motives at work among those who supported or opposed the passage of government legislation governing food inspection. The problem is that given the existence of government, opposition to specific legislation is exactly that. One can support it, or call for its amendment, but in either case one is in effect legitimizing the government. True opposition on voluntaryist grounds would be to oppose the government itself, calling for its abandonment rather than trying to challenge it on grounds that certain of its regulations are too stringent or inadequate.
What historical elements can we discern at work that give us some idea of how the free market in food safety might work were there no government? As we have seen, there were books written about food adulteration and how to detect adulterants. The What to Eat Magazine began publishing in August 1896 and made consumers aware of the importance of food safety. In England, the names of manufacturers and of their toxic food products were made known to the public via books and lectures (Whorton 2010, 148, 151). During the nineteenth century, “Canada’s Hiram Walker Company, producer of Canadian Club blended whiskey, reacted to fakery in the U.S. market by hiring detectives to hunt cheats. The company took out newspaper advertisements listing the perpetrators or had names listed on billboard posters proclaiming ‘A Swindle, These People Sell Bogus Liquors.’” From the company's perspective this was more effective than instituting legal proceedings against those who copied their blend. Other nineteenth-century examples include a variety of clubs such as the General Federation of Women’s Clubs, the National Consumers League, and the Woman’s Christian Temperance Union (which opposed the use of cocaine in Coca-Cola), all of which could have mobilized consumer boycotts that would have pressured producers to change their ways (ibid., 148, 151, 157). Today, other professionals and their associations, such as the National Association of Nutrition Professionals, would certainly promote healthy foods. Health insurance companies, who have a proprietary interest in seeing that their customers come to no harm, would want to alert them to untested, potentially dangerous, and toxic food and chemicals (Blum 2018, 50, 114, 299).
The Good Housekeeping magazine was a commercial enterprise sustained by subscription and advertising revenues. It was first published in 1885, and by 1912, when Harvey Wiley (of Poison Squad notoriety) resigned his post at the Department of Agriculture and became director of the Good Housekeeping Bureau of Foods, Sanitation, and Health, it had over four hundred thousand subscribers (Blum 2018, 272). By 1925 it had over 1.5 million subscribers (Anderson 1958, 24). Its Experiment Station was started in 1900 and was the predecessor of the Good Housekeeping Research Institute, which was established in 1910. “In 1909, the magazine established the Good Housekeeping Seal of Approval,” which continues to this day. Consumers’ Research was started in 1929, and its spinoff, Consumers Union, was organized in 1936. Both were devoted to publishing “comparative test results on brand-name products and publicized deceptive advertising claims (“Consumers’ Research” 2020). The principals involved in these organizations published a best-selling book in 1933 titled 100,000,000 Guinea Pigs in which they pointed out that “pure food laws do not protect you” (Blum 2018, 285). The Non-GMO Verified Project is another example of a consumer education organization. Begun in 2007 by two food retailers who wanted consumers to know that their products contained no genetically modified ingredients, its first official food label was applied to tea products in 2012. A more recent effort can be found in The Moms Across America’s Gold Standard seal program, which began in late 2019. It “is a multi-tiered level of verification that can be achieved only by food and supplement brands that” meet the most stringent standards (Temple 2019). There can be problems with corruption and violation of trust within such private groups, but this same criticism applies equally to government organizations, which are supported by taxes and even more prone to be influenced by lobbyists.
As we ponder this history, several overriding questions remain. Whether we champion the free market or the state, why did these abuses happen? Why weren't manufacturers and retailers held responsible? Where were the insurance companies that could have provided some measure of protection to both the consumers and manufacturers? It certainly is a criticism of both the common law and government legislation that people who were readily known and identified were not held responsible for their actions, which caused death and harm to others. The bottom-line answer is that “during the 19th century, manufacturers had no liability for the goods they made. The liability of manufacturers for the losses suffered by consumers took several centuries to be established” in both common law and statutory legislation ( “Example of the Development of Court Made Law” n.d.).
There are two aspects of the common law with which we need to be concerned. The common law concerns itself with contracts, under which two parties engage in a transaction in which the terms are normally outlined in advance and evidenced by a written or oral agreement. Fraud, which is intentional deception, usually occurs within the context of a contract (“Fraud” 2020). Torts, which are “wrongdoings not arising out of contractual obligations” evolved out of the common law of prosecutions in eighteenth-century England ( “The Historical Development of Law of Torts in England” 2017, introduction). Negligence is a form of tort. “A person who is negligent does not intend to cause harm” but is still held responsible, “because their careless actions injured someone” (FindLaw 2018a). Most of the deaths we have discussed here are examples of torts. The people who died were not intentionally poisoned but rather died due to accidents caused by carelessness.
As Rothbard explains,
In the free economy, there would be ample means to obtain redress for direct injuries or fraudulent “adulteration.”…If a man is sold adulterated food, then clearly the seller has committed fraud, violating his contract to sell the food. Thus, if A sells B breakfast food, and it turns out to be straw, A has committed an illegal act of fraud by telling B he is selling him food, while actually selling straw….The legal code of the free society…would prohibit all invasions of persons and property….[I]f a man simply sells what he calls “bread,” it must meet the common definition of bread held by consumers, and not some arbitrary specification. However, if he specifies the composition on the loaf, he is liable for…breaching a contract—taking someone else’s property under false pretenses. (Rothbard 1970, 19)
Under the common law, as it was interpreted throughout most of the nineteenth century, “a plaintiff could not recover for a defendant's negligent production or distribution of a harmful instrumentality unless the two were in privity of contract” (“Common Law” 2020). Under this doctrine, there was no privity between a consumer who bought a product from a retailer and the manufacturer that produced it. An 1837 case in England, well-known to law students, illustrates how privity was originally seen.
A man purchased a gun from a gun maker, warranted to be safe. The man’s son used the gun and one of the barrels exploded, resulting in the mutilation of the son’s hand. As the son did not buy the gun there was no remedy in contract law. The court was asked to consider if the son could sue the gun seller or manufacturer, and if so what for. The Court said he could not sue because 1) in contract the son did not buy the gun and 2) could not sue for negligence because negligence did not exist in law. (“Example of the Development of Court Made Law” n.d.)
In another English case five years later, the court “recognized that there would be ‘absurd and outrageous consequences’ if an injured person could sue any person peripherally involved, and knew it had to draw the line somewhere…. The Court looked to the contractual relationships, and held that liability would only flow as far as the person in immediate contract (‘privity’) with the negligent party.” An early exception to the privity rule is found in a New York State case of 1852. Here it was held that mislabeling a potentially poisonous herb which could “put human life in imminent danger” was reason enough to breach the privity rule, especially since the herb was intended to be sold through a dealer. In an English case of 1883, a ship’s painter was injured when the platform (slung over the side of the ship) on which he was standing collapsed. The platform was faulty but there was no contract between the injured painter and the company that built it. The court ruled that the builder of the platform owed a duty to whomsoever used it, regardless of whether there was privity between them. As the court opined, “It is undoubted, however, that there may be the obligation of such a duty from one person to another although there is no contract between them with regard to such duty” (“Common Law” 2020).
Nevertheless, the privity rule survived. In 1915, a federal appeals court for the New York region held that “a car owner could not recover for injuries (caused by) a defective wheel.” The car’s owner’s contract was with the automobile dealer, not with the manufacturer. The court concluded that manufacturers were “not liable to third parties for injuries caused by them, except in cases of willful injury or fraud” (“Common Law” 2020). Finally, in 1932, the English courts recognized that third parties had the right to seek damages even if they had no direct dealings with the manufacturer of defective goods. A new rule of law, known as the duty of care, was enunciated. “The new law placed on the manufacturer a direct duty of care (due) to the consumer, not just the purchaser.” The ultimate consumer—“the person for whom the goods were intended”—was now protected under the law of negligence even though there was no contract between the end user and the producer of the product (“Example of the Development of Court Made Law” n.d.). Thus the core concept of negligence as it has developed in English and American law is that “people should exercise reasonable care in their actions, by taking account of the potential harm they might foreseeably cause to other people or their property” (“Negligence” 2020).
So, to return to our question: where were the insurance companies? The answer must be that for the most part, until the development of product liability, implied warranty, and negligence laws, there was nothing for the insurance companies to insure. However, it is clear from the general role that insurance companies would play in a free society that they would have a very significant impact on assuring food safety and setting requirements which their insureds would have to meet in order to maintain product liability coverage.
It is interesting to see how recent federal laws were applied to those responsible for a deadly outbreak of salmonella poisoning that occurred in 2008 and 2009. Executives and owners of the Peanut Corporation of America knowingly ordered that tainted peanut butter be shipped out to their distributors with the result that nine people died and at least 714 others were sickened. Here are excerpts from a CNN report: “Food safety advocates said the trial was groundbreaking because it’s so rare corporate executives are held accountable in court for bacteria in food. Never before had a jury heard a criminal case in which a corporate chief faced federal felony charges for knowingly shipping out food containing salmonella.” (Basu 2014) “Stewart Parnell (one of the owners) and his co-defendants were not on trial for poisoning people or causing any deaths stemming from the outbreak, and prosecutors did not mention these deaths to the jury” (ibid.). In other words, the perpetrators were still not held responsible for the death and sickness caused by their bad product. This was little different from the Bradford, Yorkshire, case 150 years ago, where the claim was that “no law was violated” or from the 1937 Massengill tragedy, where the most that could be claimed was a case of mislabeling. Would the libertarian legal code be more robust in response to such events? All we can hope is that it would be so.
Who is responsible for the foods that consumers put into their mouths, the market or the government, the buyer or the seller? As one consumer advocate has concluded, “government intervention to stop bad food has always come later than it should; and it has never been adequate to the problem” (Wilson 2008, 326–27). “Who is right? Who can say?” (Wilson 2008, 247) Paraphrasing Ayn Rand: Who decides what is the right way to make an automobile? Her answer was: “any man who cares to acquire the appropriate knowledge and to judge, at and for his own risk and sake.” So, to return to the question posed in our title: Who should decide what goes into a can of tomatoes? (Ogle 2013, 67) The answer is relatively simple: the owner of the can, the owner of the tomatoes, the insurance company that insures them, and the person who acquires the appropriate knowledge as to what is safe and is not safe, and is willing to take the responsibility for that decision (Rand 1990). Additionally, it is up to us as individual consumers to “do what is in our power to prevent ourselves and our families” from being cheated and poisoned. “Buy fresh foods, in whole form. Buy organic, where possible. Buy food from someone you can trust…. Cook it yourself…. Above all, trust your own senses” (Wilson 2008, 326–27).
A repeated pattern of close elections accompanied by threats of violence (or actual violence) is a sign that something is wrong with a nation's political system.
Original Article: "Why Threats of Election Violence May Be Here to Stay".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
The fact that some Americans supported slavery in the eighteenth century is not at all remarkable. Most of the world agreed with them. What is remarkable is that many of them sought to abolish slavery in the new republic.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "No, the American Republic Was Not Founded on Slavery".
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.
In a slave economy, slave owners seek technological innovations that make slave labor more productive. But they also place inefficient and artificial limits on innovations that might change the established social order.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Why Slave Economies Thwart Entrepreneurial Innovation".
The Jacksonians saw central banking for what it was: a way of making the rich even richer, while ripping off ordinary people. We remember the Jacksonians not just because they were right about the central bank, but because they were also very successful in their fight against the Bank and its allies.
From the 2020 Supporters Summit, presented at the historic Jekyll Island Club Resort on Jekyll Island, Georgia, on 9 October 2020.
[From the 2020 Supporters Summit, presented at the historic Jekyll Island Club Resort on Jekyll Island, Georgia, on October 9, 2020.]
At breakfast, I ran into Ed Griffin who wrote that wonderful book The Creature from Jekyll Island, the greatest book written about the monstrosity that was created 110 years ago and he said, “I heard you’re talking this afternoon. What are you going to talk about?” I said, well the title of my talk is the Constitution and Central Banking. He said, “Oh, you’re going to go for about thirty seconds,” because there’s nothing in the Constitution about central banking whatsoever. But there is, of course, a history that brought us to where we are now and my job, with deference to the great speakers who have appeared before me, is to try and tie a lot of this together by telling you about the history and telling you about how the Constitution has been tortured and twisted even as we speak in an effort to allow big government to control our lives. And then I have a little surprise for you at the end of my talk. Don’t let me forget the surprise. I’ve revealed it to one person, Professor Newman, I know he’s going to remind me to reveal the surprise.
So, when we were colonists and the king was looking for ingenious ways to raise money, one of those ingenious ways was the Stamp Act. This required that every adult in the colonies—not in Great Britain; it would have fomented a revolution there—but every adult in the colonies have in their possession, on every piece of paper in their home, every book, every pamphlet, every financial document, every letter, a stamp issued by the British government. So, you went to a British government—you think the post office is bad today—you went to a British government post office here in the colonies and purchased these stamps to put them on the papers in your home. Question: How did the King and the Parliament three thousand miles away know if you had the stamps on the papers in your house here? The answer, the Writs of Assistance Act. The Writs of Assistance Act permitted British agents—see if this sounds familiar—to go to a secret court in London and ask the secret court for a search warrant to search wherever they wished and seize whatever they found which was evidence of any lawbreaking by not having the stamps on your papers. So, it would not be uncommon for you to hear a knock on the door, and it was a British soldier very politely showing you the writ of assistance and telling you, We have the right to come in your household—ostensibly to look for the stamps. Of course, he might be looking for alcohol that you couldn’t prove you had paid tax on; he might be looking for furniture that you had imported from the island that you couldn’t prove you paid tax on. He might even be looking to expel you from the house so that he could take it over for himself and his buddies, which is why we have the Third Amendment written ten years later.
This all happened in 1765. The Stamp Act was so unpopular that Parliament eventually rescinded it, but before Parliament rescinded it, a group of students at the College of New Jersey, now called Princeton, did some quick math and concluded it cost the government more to enforce the Stamp Act than was generated by the sale of the stamps. Now that’s a headscratcher. We all know that George III was an idiot, but was he that stupid that he would enact that tax that cost more to enforce it than was generated and collected by it? Unless the purpose of the Stamp Act was not to collect money, but to remind the colonists that the king was still the king and he could enter their homes at his whim. One of the Princeton students who wrote the report was a 5’4” kid from Virginia by the name of James Madison, known then and throughout his life to his colleagues as Little Jimmy. I hope when I go to heaven I get to stand next to Little Jimmy, because I’ll look like Shaquille O’Neal by comparison.
We fought a revolution; we won the Revolution. Jefferson wrote that “We are endowed by our creator with certain inalienable rights.” Tom Woods explained them: they are life, liberty, and the pursuit of happiness, and they come from our humanity, they don’t come from the government. And because they are natural rights, the government can’t take them away, whether it’s by edict under the name of science, whether it’s by edict under the name of power, whether it’s by a majority of votes, whether it’s by the vote of everyone but one. These rights belong to us and they are ours to exercise as we see fit.
That is, at least, the theory of the Declaration of Independence; the rights that Jefferson calls inalienable we also refer to as natural. Most judges are too secular to use the word natural, so they’ll call those rights fundamental, but they basically mean rights that preexist the government. After we won the Revolution and we wrote the Constitution, Little Jimmy is the scrivener in Pennsylvania. He’s the one collecting the notes; he’s the one refining the language. We all know that that constitution would never have been adopted, but for the promise of the addition of a bill of rights. We also know that that constitution would not have been adopted but for a bribe. The bribe was an agreement by the new federal government to assume the debts of the state governments that they had incurred in the Revolutionary War. Now you can’t call it a bribe. When I call it a bribe—the government actually bribes people?—I get my fingers burned. That’s like saying abortion is murder, taxation is theft; you’re not supposed to say these things on television, but when you do say them, people’s ears perk up. Yeah, it was a bribe. New Jersey got its debts removed and the feds agreed to take over those debts in return for New Jersey ratifying the Constitution, yes, and the same was the case with the majority of the other states as well.
Madison is the most interesting character in all of this because of the various phases of his career. As a student at Princeton and during the Revolutionary era, he’s a radical along with Thomas Jefferson. When he’s crafting the declaration of the Constitution of the United States, he’s a big government person that’s using all kinds of artifices to craft this constitution which allows the federal government to sap the authority of the states and even to take away liberties from individuals. But then something happens to him. He’s a member of Congress; it’s time to write the Bill of Rights. He’s the chair of the committee of the House of Representatives to write the Bill of Rights, and he writes twelve amendments; only ten were adopted, the ten that we now know as the Bill of Rights. So, that iconic language, “Congress shall make no law abridging the freedom of speech,” is Madison’s. All of that beautiful language, your right to say what you want, to think what you say, to publish your thoughts, your rights, your worship or not to worship, your right to assemble or not to assemble, your right to keep and bear arms—which is not the right to shoot deer, it’s the right to shoot tyrants if they take over the government.
That quintessential American right, your right to be left alone—all of those rights are articulated by Madison in the Bill of Rights. The Bill of Rights, of course, is adopted in record time and the first ten amendments are part of the Constitution. And then it becomes time for the Federal government to pay off that debt that it assumed. And so, Alexander Hamilton, who was the secretary of the Treasury, persuades President George Washington and Vice President John Adams and all the big government Federalists who control the House of Representatives and the Senate to enact the First National Bank of the United States. And who do they look to as to whether there is authority in the Constitution to enact a bank? The guy that wrote the Constitution, the guy that just wrote the Bill of Rights, the congressman from Charlottesville, Virginia, little Jimmy Madison. But, this is a different Madison at this point. Madison knows there’s no authority in the Constitution for a central bank and Madison gives one of the greatest speeches in American history, known simply as the bank speech. Google it. It is a masterpiece of the following argument: the federal government has no authority but what was given to it in the Constitution. He doesn’t say this because he was too modest: I know because I wrote the Constitution. But the argument is clearly there. (By the way, if you do Google it, they didn’t have stenographers in those days, they had people writing as fast as they could, so some of the bank speech is literally what came out of Madison’s mouth, some of the bank speech is a summary by the persons taking notes of what they heard Madison say.
But by the time of the bank speech, the former radical, the then big government guy, now becomes a small government Anti-Federalist. They call themselves by the name that’s alien to our ears today, the Democratic Republicans, but this was Jefferson’s maximum individual liberty, maximum state rights, minimum federal government party. Madison has now left the Federalists and he’s back with them. Maybe some of this was personal, I don’t know, but clearly when he gave that bank speech, he exalts two of the ten amendments: the Ninth Amendment, which says, Just because we listed rights in the first eight, doesn’t mean that those are the only rights. There are other rights that human beings have, which the government shall not disparage. And the Tenth Amendment, which says, Those powers not delegated in this Constitution to the federal government are reserved to the states or to the people, respectively. Among those powers never delegated away and among the rights never articulated in the first eight, was the right of the states to create a bank. So, Madison’s argument is clear: there’s no authority under the Constitution for the federal government to create a bank. This argument will come back to haunt him. The bank, of course, passes. Professor Newman gave us a wonderful historical description. It was a disaster. It passes, and then it passes out of existence because it was such a disaster.
When it comes time for the Second National Bank, Madison is in the second half of his second term as president of the United States. He vetoes the Second National Bank of the United States, and then his buddies start to get to him and he changes his mind and he signs into law the Second National Bank of the United States—and by doing so contradicts everything he said in the bank speech, all the arguments that he made about how the federal government can only do what is delegated to it in the Constitution. And this is 1816; the bank comes into existence in 1817. In 1819, the State of Maryland decides to tax the bank. It taxes the Baltimore branch of the Bank of the United States and that tax is challenged in the Maryland state courts, and the State of Maryland prevails in the state courts, and then the federal government appeals it to the Supreme Court, and we have arguably the most consequential Supreme Court case in American history after Marbury v. Madison, which gives the court the right to engage in judicial review, to void what the Congress and the president have done when they exceed their authority under the Constitution. This case is called McCulloch v. Maryland.
McCulloch is the head cashier at the branch of the Second National Bank of the United States in Baltimore, and he is suing Maryland, asking the Supreme Court of the United States to invalidate the tax by invalidating the bank. So, the issue before the Supreme Court is, Does the Constitution of the United States authorize the Congress to establish a national bank? If you read the Bank Speech, Madison’s greatest artistry next to the Bill of Rights, it is clear that it doesn’t, but this is a different Madison and this is a different era, and by this point John Marshall—who, as Professor Newman pointed out, was an investor in the Second National Bank of the United States but sold the investment before ruling on the case—John Marshall writes again, one of the more consequential decisions he’s ever written. But this one—rather than restraining the government as judicial review did in Marbury v. Madison—this one unleashes the government.
So, where in the Constitution can the federal government establish a bank? Here is the government’s argument: well, the federal government can tax, the federal government can collect taxes, so the federal government needs a bank in which to put the taxes that it collects. Well, wait a minute, up to this point the federal government has put tax dollars that it collected into private and state-chartered banks. Why do they need their own bank? Ah, after the seventeen clauses in the Constitution giving seventeen specific, unique, discrete powers to the federal government is the Elastic Clause, also known as the Necessary and Proper Clause, which says, I summarize, I paraphrase, Congress shall have the power to do whatever is necessary and proper to put into action the foregoing authorities that we have given it. So, is the bank necessary and proper—not necessary or proper, necessary and proper—in order for the government to collect taxes and to store the tax dollars before it wastes them?
So, I’m going to take a little break from this. I’m going to come back to necessary and proper. Two theories of the origins of law: one is our humanity, natural rights; by the exercise of reason, we know right from wrong. The other is what’s known as positivism—whatever the lawgiver says the law is, as long as the lawgiver has written it down and it’s been ratified, that’s the law. So, positivism would say “necessary and proper” literally means necessary and proper. John Marshall comes up with an inverse positivism. Because the Constitution didn’t say absolutely necessary, the word necessary doesn’t mean necessary. It means needful or helpful. So, McCulloch v. Maryland says “necessary and proper” doesn’t mean necessary and proper because it didn’t say “absolutely necessary” and Little Jimmy could have put the word absolutely in there but he didn’t. So, by arguing from a word not present in the Constitution, Marshall upholds the constitutionality of the bank.
What about the Tenth Amendment? The bank speech dwells on the Tenth Amendment: the states never delegated away the authority to establish banks. We know that because the states have established their own banks. Ah, Marshall says, But the Tenth Amendment doesn’t say whatever is expressly delegated to the federal government. So, again, this inverse positivism. Two words that are not in the Constitution authorize him to expand the power of the federal government, and in doing so, he writes the following language, which is frequently quoted today, much to our dismay. “Let the end be legitimate. Let it be within the scope of the Constitution an all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the Constitution, are constitutional.” Basically meaning, If Congress wants to do something because it is helpful to the specific powers given to Congress, it can do so. This case, and Marshall’s language, has been cited thousands of times. Regrettably, it is still the law of the land; it is the lynchpin to allow the federal government to get away with the chicanery that it gets away with today.
We’re fighting the War between the States. Lincoln’s government is issuing greenbacks pursuant to a statute the Congress authorizes which allows them to pay the government’s bills in worthless, not gold- or silver-backed, but worthless greenbacks because people are accepting the greenbacks. This is challenged shortly after Lincoln’s death in a very famous case called Hepburn v. Griswold. A lot of these challenges are not somebody suing the federal government because they think the greenbacks are unconstitutional. It’s two private citizens suing each other because one wants to pay his debt to the other in greenbacks and the other says, The war is over, Lincoln’s dead, the legislation was temporary, I’m not going to accept the greenback. So, the litigation is over whether or not a debt, a legitimate, not denied debt under a contract, can be paid in greenbacks. And the Supreme Court says, No, Congress did not have the authority during the Civil War to issue greenbacks because the Constitution says only gold and silver is money in the United States, and there’s no central bank at this point in time.
And then there occurs something that everybody’s talking about today called court packing. So, Andrew Johnson is the president of the United States and the radical Republicans who control the Congress do not want him to be able to appoint new justices to the Supreme Court. So instead of expanding the Supreme Court, they shrink it. It goes from nine to six, meaning when somebody dies or leaves the court there’s no seat for him [Johnson] to replace somebody with. The Supreme Court goes down to six, Johnson is impeached, he survives the impeachment, he doesn’t run for reelection. Ulysses S. Grant is elected. What do the radical Republicans do? Increase the court back up to nine, and Ulysses S. Grant appoints three of his buddies to the Supreme Court. And then there’s a second challenge, again involving a private contract, this one called Knox v. Lee, and the same issue is before the court in 1871 that had been before it in 1869, except you have a different makeup on the court. And this time the court says, Greenbacks, greenbacks. The government can issue whatever it wants and these are lawful for debt.
This case, Knox v. Lee, and its companion cases are known to lawyers and judges as the Legal Tender Cases. They have been argued by scholars time and again, over whether the Legal Tender Cases were properly decided. Justice Scalia told me he did not think they were properly decided but believed that it would be cataclysmic if the Legal Tender Cases were to be overruled and greenbacks not backed by gold or silver were to become money. That is the last time this issue of the power of the federal government to issue paper money is resolved, and the challenges to the Federal Reserve never succeed. There have been a dozen efforts by various litigants to challenge the constitutionality of the Federal Reserve as we now understand it, and all of these challenges are swatted away by judges saying either, This is a political question and if you don’t like the Federal Reserve, go elect a Congress that will undo the Federal Reserve, or—this is judge-made law, this is what judges do when they don’t want to decide cases—You don’t have the standing to bring this litigation, meaning, Your injury is not unique to you and therefore under the Case or Controversy requirement of the Constitution, we’re not going to hear the case. So, the last time the courts examined the constitutionality of the Federal Reserve, it had to do with how people get on the Federal Reserve and is it constitutional for the president to appoint these people and for the Senate to confirm them. And the court said, We’re washing our hands of it.
Some years ago, Lew Rockwell asked me to give a talk entitled “Do We Still Have a Constitution?” At the time I gave the talk, I said barely. I’m not sure that we still have a Constitution now because of the ability of the government, the ability of courts, to twist and torment words, and we have this thing called precedent. Just because John Marshall in 1819 said that “necessary and proper” really means needful and helpful, should we be bound by that? For those of us who believe that the Constitution is an instrument of restraint, this is the contrary of that. For those who believe like the progressives and the Left today that the Constitution is an instrument that unleashes the federal government, they delight in this. The Madisonian view of the Constitution was, I take this from the bank speech, I don’t take this from his signing the legislation. (By the way, when you sign the legislation establishing the Second National Bank, he never repudiated the bank speech; he never repudiated his veto. He just signed it because the popular will was so strong. He also signed it because he wanted to help his fellow Virginian James Monroe get elected president of the United States and he didn’t want the issue of a Second National Bank to be a campaign issue in the presidential election of 1816.) But just because we have these precedents that permitted the big government people to get away with what they wanted 150 years ago, should we be bound by them today?
Unfortunately, that’s the way the legal system works. All those beautiful words in the Declaration of Independence and the Bill of Rights, some of which I summarized for you, work in a law school classroom and can excite us in an environment like this. But unless we resist the forces of government that are sapping power liberty, whether it is our liberty to say to the government, I have the right to take chances and you can’t take that right away from me, or whether it’s our liberty to leave, or liberty to ignore the government, our right to travel, our right to say to the government You shall not pass this threshold. Whatever these rights are, they only work when we exercise them. We can talk about them all day. We can write about them well into the night, but unless courageous people exercise these rights, we are going to be stuck under the thumb of government, whether it’s a state government like New Jersey or Michigan or New York or whether it’s a federal government like we have today.
There’s an argument that I made holding up my iPhone during the Justice Kavanaugh hearings which evolved around his personal behavior in which I said, Here’s my problem with him: he thinks that the federal government and the state governments can get in here without a search warrant and he’s written that. And I encouraged Republicans on the Senate Judiciary Committee to ask him about that. Nobody asked him about it. He may be conservative politically on certain social issues, but not when it comes to the power of the government to intrude in our lives. I fear that with the court today. I once had the privilege to interrogate Justice Scalia before about twenty-five hundred people at the Brooklyn Academy of Music, and I was pounding him on the natural law, and he looked at me and he goes, “You’re a freak for the natural law. The fourth amendment only protects persons, houses, papers, and effects. That’s the language in the fourth amendment.”
I say, “Justice Scalia, this is an iPhone.”
“Yes, I know. I may be older than you, but I know what it is.”
“In the iPhone is a computer chip. Is the computer chip an effect?”
“I’d rather not answer; I think that case is coming before us. You tried to trap me and tried to trick me.”
Well, I mean, I knew the case was coming before them and I did try and trap and trick him, but I also wanted to make a point. The language that Madison used—persons, houses, papers, and effects—was intended to protect our right to privacy, what Madison called the right to be left alone.
So, where does all of this leave us today? We know that most of what we have heard about covid is utter nonsense, driven by those in power who want to use a crisis to control us. I have never heard a more articulate vision and version of that nonsense than my longtime bosom buddy Tom Woods just gave us earlier this afternoon. We know from reading Bob Hicks’s masterpiece Crisis and Leviathan that government always grows in crisis. We also know that there is nothing in the world more permanent than a temporary government program. And we know, we can laugh at the juxtaposition of words, but we know what the government will do. It will hang on to that power, keep it long, keep us under its thumb, get us accustomed to it. There is no concentration camp easier to manage than one where the inmates are familiar with its terrors, because they have allowed its terrors to be visited upon them in the name of democracy and electing people to terrorize them.
I expect that when I die, I will die in my bed peacefully surrounded by those who love me, faithful to first principles; but not everybody will have the luxury of dying that way. Some young people here may die in a government prison, faithful to first principles. Some young people here may die in a government town square, to the sound of the government’s trumpets blaring, but faithful to first principles. When the time comes, you will know what to do, because freedom lies in the human heart and no government, no army, no tyrant can take it away. But it must do more than lie there. We must exercise it. We must terrify the government, because, as Jefferson said, “When the people fear the government, there is tyranny. When the government fears the people, there is liberty.” Thank you and God bless you.
About twelve years ago [in 2016], an obscure law professor wrote a law review article arguing that the Federal Reserve, Social Security, Medicare, and paper money is unconstitutional. Her name: Amy Coney Barrett.
What we are now witnessing in the larger society is the result of decades of work within academia and government to destroy the private-property system of the West and replace it with a new socialist order. From the 2020 Supporters Summit, presented at the historic Jekyll Island Club Resort on Jekyll Island, Georgia, on 9 October 2020.
We're building a bridge from Austrian theory to its application in business. This can help us gain a greater understanding of the merits of Austrian economics.
Presented at the historic Jekyll Island Club Resort on Jekyll Island, Georgia, on 9 October 2020.
For more information on the Economics for Business program, visit Econ4Business.com.
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.
The disputed election of 1876 could have led to another civil war. Fortunately, civilian institutions intervened to create a compromise, and the military was kept out of it.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "If the Election Produces No Clear Winner, the Military Is Definitely Not the Answer".
The fact that Yalta can now clearly be seen to have been a betrayal is another reason to be wary when pundits and talk show hosts jump on the bandwagon for the next killing spree abroad.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Roosevelt’s Fraud at Yalta and the Mirage of the 'Good War'".
Janet Yellen was concerned that low inflation could "paralyze the economy," especially during economic downturns.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Origins of the 2 Percent Inflation Target".
If you like high taxes, crony capitalism, central banking, and a central authority that can regulate everything you do, thank Alexander Hamilton.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Alexander Hamilton: Centralist and Nationalist".
Whether we're commanded to trust the experts, abandon the rule of law, or venerate government for "keeping us safe," the 9/11 panic and our current crisis have many things in common.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "From 9/11 to Covid-19: Nineteen Years of Permanent 'Emergency'".
Thomas Sowell concluded that, “A vastly expanded welfare state in the 1960s destroyed the black family, which had survived centuries of slavery and generations of racial oppression.” This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "The Welfare State Did What Slavery Couldn't Do".
Amity Shlaes is chairman of the board of trustees of the Calvin Coolidge Presidential Foundation, she is a classical liberal, and she knows economics. She much appreciates Mises’s emphasis on property and bureaucracy, both of which influence her work. She has authored six books, including three New York Times bestsellers, on Calvin Coolidge, the New Deal, and the Great Society.
JEFF DEIST: Let’s start by letting readers know a little bit more about you. Do you consider yourself an historian, journalist, biographer? How do you describe your work?
AMITY SHLAES: A historian. In all my work, the goal is to impart knowledge about the past.
JD: You went to undergrad at Yale. Did you imagine a career in writing and history?
AS: When I was at Yale I said, I’ll give journalism five years and if it doesn’t work out I’ll go to law school. I thought I should play to my comparative advantage and my comparative advantage at the time was in the humanities.
JD: It sounds like it worked out. Did you consider yourself a conservative at the time?
AS: No, I considered myself someone interested in history and in English, German, and French.
JD: After Yale you made your way into financial journalism. Over the years you’ve written for Forbes, Financial Times, Bloomberg, and on the editorial board for the Wall Street Journal. What do you think of financial journalism today? A lot of our readers think these publications are overly credulous about markets and the Fed.
AS: I don’t know about today. But good journalism is genuine inquiry. One reason I was attracted to the Wall Street Journal in the day, was it did pursue inquiry. The WSJ could have been called Wall Street Journal University, where one was lucky to be admitted. What makes the market go up, what makes it go down, and reporting on that movement—we learned that in real time. Herman Melville said of whaling: “for a whale ship was my Yale College and my Harvard.” I could also say: the Journal was my Yale College and my Harvard.
JD: I bet that was quite an education.
AS: The Journal in the 1980s was an institution that took a commonsense attitude. The paper was not particularly ideological. Its work was marvelously empirical, and fairly accurate. The penalty for reporter error was high. After all, if we got something wrong, that error moved company share prices or interest rates. Within seconds, a company, or even a central bank, would be on the phone to the editor. The editor would turn to—or turn on—the reporter. Let us just say the dynamic wasn’t dissimilar to basic training in the army. In this way the Journal served as a university to many. The paper’s contribution remains undertold.
JD: Did you come away from the Journal with any strong sense about economists and their role? Is the profession doing much good?
AS: The Journal is not an economics newspaper; it is a business newspaper. My time there was like the difference between going to a PhD economics program and an MBA program. Though I was an MBA, so to speak, after a while, it was the economists who interested me, because the economists explained what business people were doing—sometimes better than the business people, who were too busy for seminar sessions. The economists also had a playful aspect that attracted me from my early twenties. An economist would tell the Journal—“well the obverse could also be true.” Other institutions—corporations, or the Securities and Exchange Commission—saw only a single solution to a challenge.
JD: What else helped shape your viewpoint?
AS: Two other parts of my education were very important. One was my father’s businesses, and the other was my time in Europe, where I went to Communist countries. That was even before I went to the Wall Street Journal.
My father, Jared Shlaes, was a real estate appraiser, but he also tried his hand at real estate development, built buildings. He thought a lot about what people like and what they don’t like, and he found himself bumping up against subsidy programs whose perverse incentives created subpar, unsatisfying buildings. He couldn’t stomach the architecture that resulted from urban renewal programs and federal subsidies. As some of your readers might know, urban renewal was an especial disaster in Chicago, where I come from. On the South Side of Chicago, where the University of Chicago is, a comment made by one comic became legend: “Urban renewal,“ it was said, “is black and white marching together, hand in hand, against the poor.“ And my father saw firsthand what it meant to eminent domain a whole swath of the city, bulldoze homes of poor people, sometimes homes they loved, and then see nothing to replace the rubble, because various jurisdictions were fighting over the land, or because there was a shortage of capital to build. “Improvement“ was actually destruction. The rubble lot just stood there for years. The new building when it finally came might be hideous. Cinder block.
Shoddy construction is also an expression of too much political intervention. My father took it all in and tried at first to work with government—governments, actually, and the very imperial University of Chicago.
As children we actually played in those vacant lots. At the time I didn’t think what my father was doing had much to do with me, but later I came to appreciate the struggle and my father’s choices. For example, he built with more expensive materials than some developers—special red brick—and everyone asked why. He responded, “I want to build places where people actually want to live.” He was more interested in the customer than the rent seekers who ruled real estate.
JD: That sounds like a real-world MBA right there.
AS: I remember when I was in Germany they asked, What does your father do? And I said, He’s a developer. But the closest word in the German dictionary was “speculator.“ There’s another nicer word in German for consultant, and I ended up saying consultant because Germans rejected the concept of a developer as too exploitive and capitalist. German is a Marx cartoon language a lot of the time! You could barely explain what my father did in German, and you could barely explain it to an American high school or college student either.
JD: This experience shows in your writing. There is definitely something very pragmatic and human in your books.
AS: There’s a great tension in writing history between the chronological and the thematic. Do you write about your theme or about your events and people? Because events and people are quirky and they don’t fit into themes very well. This is always the tension all of us have. Had I gotten a doctorate in econ, I would have been more inhibited about writing chronologically.
JD: Considering your work about the Great Depression, do you see political parallels today? We have calls for universal basic income and free rent and Medicare for All and a Green New Deal. Are the 2020s going to look like the 1930s?
AS: Today looks more like the Great Society of the 1960s, and the result will be more like the 1970s. The scale of ambition among some voters and some politicians now recalls the scale of some of the Great Society advocates. I’m thinking specifically of Charles Reich, who was a guru for Great Society culture and a law professor at Yale. Reich wrote The Greening of America, which is kind of a flaky book. But he also wrote a deeply influential paper on property rights where he suggested welfare should be property—as, say, a patent is. The Supreme Court mentioned him in a case called Goldberg v. Kelly and ruled welfare really is property of the recipient. In the Great Society there was the sanctioning of permanent redistribution that was more serious than any such sanctioning in the New Deal. Remember, the New Deal won its mandate because of economic emergency. The New Deal gave us the National Recovery Administration, but the NRA, crafted to run the whole industrial economy, was regarded as a function of the economic emergency. It was not much defended when the economic emergency lessened, and was overturned by the Supreme Court anyhow fairly quickly. By 1936 to 1937, there was the sense that redistribution was an important symbolic activity for politicians, to please voters who were angry at the duration of the Depression—Get the rich guy; I hate his guts. But there was more of a systematic shift with the courts in the 1960s. The Supreme Court particularly supported entitlements. So, I look to the 1960s and what I’m afraid of is something like the 1970s, which is to say a spongy economy with a lot of crisis solutions because of government involvement. And this is putting aside whether there’s inflation or not, a weakening currency, a challenge to the dollar—I think that’s very likely.
JD: Does all this potentially happen without any kind of transformative figure, without an FDR? Trump and Biden don’t strike me as transformative figures, in any sort of substantive or ideological sense.
AS: Yes, destructive change can happen without a transformative figure. It happens by accident. That’s what my Great Society book is about—things happening by accident. An example: JFK signed Executive Order 10988, which is the executive order facilitating public sector unions and collective bargaining. Daniel Patrick Moynihan [then an administration staffer], one of the drafters of the order, didn’t think the order was important. Moynihan told himself conservatives could live with his order because it did not give public sector employees in federal government the right to strike. JFK was not a radical. If he’d thought about it, JFK might not have signed. But the president was distracted, maybe his daughter was in the office, something with her pony, Macaroni [laughing]. JFK signed. It was just another document, and yet Executive Order 10988 set the standard for public sector unions across the United States, transformed trade groups and associations into powerful bodies. So, you don’t need a transformative figure. You just need a social process like the one we have to get results that lead to real trouble down the line.
JD: Isn’t that flawed process the result of having a government that’s too big and a bureaucratic sector that’s too big? Small things snowball in ways we couldn’t have imagined?
AS: Oh, yes. Franklin Roosevelt. When he was president, the federal government was smaller than the states, all the way up to 1935. The New Deal, mighty as it was, was not that mighty. In the early 1930s, states and towns had a larger presence in the economy than the federal government. By 1936, that ratio had flipped. Still, the federal government was small by our standards until World War II. Robert Higgs has a fabulous chart and books on this. Today what we call “normal” for the federal government would have been called “war footing” in the old days.
JD: When you say these things happen by accident, does that implicate good intentions or simple bungling?
AS: Both. Good intentions combined with a few busy or pernicious characters. Did the Russian Revolution have to happen, Jeff? Not necessarily. “History is like that, very chancy,” as Samuel Eliot Morison said. It could happen. It did.
JD: So much of what we ascribe to ideology is more the result of chance.
AS: Yes.
JD: My instinct is to view LBJ as some kind of monster, FDR as some kind of monster.
AS: No, no, they weren’t monsters. They were only half aware of what they were doing. The monster is in our government structure. What happened in the case of the New Deal is we had an extraordinary global downturn with 25 percent unemployment during the campaign. This was in 1932. With 25 percent unemployment, there’s a national emergency and nobody knows what to do. So, FDR was elected really as a fairly conservative candidate. FDR wasn’t a Marxist, but the electorate and emergency gave him license, and he exploited the license. He enjoyed the license. FDR wasn’t very interested in economics, and the economically oriented members of his administration took advantage. In The Forgotten Man, I describe a trip that some of them, marginal players mostly, took to Russia well before the New Deal. The trip for them crystallized the possibility of a deeply progressive nation—and a role for them in politics. “Why should Russians have all the fun?” Stuart Chase, one author, asked. These professors and officials came back and exploited the accident of the Great Depression to promote progressive ideals to a federal government that, it turned out, was willing to try the ideas out on the American populace.
JD: That sounds like now.
AS: Right.
JD: Covid is the Great Depression.
AS: I don’t think it’s the Great Depression—at least not yet. I think it’s the Great Society, though. The occasion for the period we’re in is the idealism, not economic disaster, really. You could also argue covid is the occasion. So, instead of having a depression, we have covid. Covid gives the medical establishment more license than it’s accustomed to, and it has enjoyed that. What we have in common with the Great Society period, what makes 2020 like 1960 to 1965, is that we’re not really poor. If you want to change government, even though people are doing more or less pretty well, that starts with idealism. 2021 may be different.
JD: Do 2020 riots in cities have parallels with 1960s riots in Detroit and Newark?
AS: Yes. But the intellectuals of the 1960s realized they wouldn’t manage a revolution. The country was too conservative. So they said “We will undertake a long march through the institutions,“ as Antonio Gramsci called it, along with the German protest leader Rudi Dutschke. We’re going to march up through the institutions and then we will prevail, and that actually happened. One of the things they did was create identity politics departments at colleges, which seemed to most people interesting, maybe good, but not really dispositive when it came to the future of our national thinking. They created large departments of bilingual programs, with Spanish, and everyone thought, well, let them do that, it’s not really going to bother us. But it turned out this idea of identity politics took over our culture gradually, and the people who believed in it are now in positions of power.
JD: There is a sense of a slow, gradual march, and then occasionally there are great leaps forward. It feels like we’re in the latter phase at the moment.
AS: The current period reminds us of the Cultural Revolution in China—heavy pressure from youth, and dangerous youth sanctimony. Young people telling older people the way things must be. It’s disconcerting to observe such a dynamic in the United States.
JD: How do you feel about academia?
AS: There’s plenty of good in academia in 2020. The trouble is that certain history professors, certain economics professors, and certain social studies area professors seem to predominate and impart the wrong ideas. In these fields, hyper-progressive guilds shut out thought and inquiry. The bright side of 2020 is that covid policy of shutdown is weakening these guild’s hold. New schools, new summer programs such as the ones at Mises, new extracurricular activities, new home school curricula—students and parents are turning to them. Covid is heaven for workarounds. At the Coolidge Foundation our debate contest drew a record number of candidates, all of whom learned both sides of the resolution. Covid or no, innovation in education, whether in college or secondary school, is key. That is why projects like Robert Luddy’s experiments with schools in North Carolina or the BASIS school experiments, which commenced in Arizona and California, are key.
The BASIS school achievements are underreported. Essentially Michael and Olga Block, the founders, turned a process-driven education into an education driven by results. Some BASIS schools are charters and some private. The public ones are ranked; they dominate the US News and World Report ranking of high schools. That’s a charter innovation. We have to focus on that. I mean clearly something is wrong with regular high school, for whatever reasons.
JD: Everyone, if they can, should get a liberal arts education, not only STEM (science, technology, engineering, and mathematics) or finance. We need broadly educated people.
AS: Absolutely. What has happened in the past is that we neglected the humanities. Or we added humanities into curricula in token fashion, and gave humanities instructors too much license. Those responsible focused on the hard stuff and said—oh, humanities are subjective, let the teachers do what they like, or the textbook authors do what they like. Scientists tend to abdicate when it comes to humanities. If a teacher told us he or she was teaching US history, the scientists or other stakeholders said, That sounds fine, and did not scrutinize the actual syllabus. Had they done so, they would have been shocked in the dramatic shift of what books and what ideas are being taught. Most Americans, my guess is, have little understanding of the extent to which identity politics have come to supplant standard history in instruction, whether college or high school. That’s why the Woke Revolution is proving such a rude shock.
Instructors in humanities tend to blinker out the role of property or prosperity in human progress. What my book The Great Society notes is that everyone in the early 1960s, as now, wanted something transformative, a great society. The program of LBJ was not called the Good Society, it was called the Great Society, after all. The only question is and was, Do you get great through the public sector or the private sector? Or some mixture of the two, like the space program? In my book I trace how the private sector actually demonstrated that it was the better vehicle for getting to greatness for the United States. In a way, progressives acknowledged that—because they regarded the private sector as a sort of splendid milk cow to feed government while we developed a public sector great society. Well, the private sector is more than a milk cow to keep progressive experiments in the public sector fat and happy. It actually is its own innovator, with a better result.
So, in The Great Society, I cover three companies in order to remind readers of the exciting culture of innovation of the period and the changes in the 1960s. One of the biggest revelations of the 1960s was the discovery that if you were in electronics, you did not have to develop only innovations that would serve the military-industrial complex. You could develop something consumers might use. You could actually make a living in electronics making something that wasn’t for the military. That was a new idea. Oh, you could make a personal computer, wow. This was way before, decades before, the personal computer actually came to market. But the seed was planted.
Fairchild Semiconductor, whose employees eventually moved on to build Intel, is another example of getting to great through the private sector. Fairchild execs even turned to a problem that concerns us today: Native American poverty and employment. Native Americans in New Mexico were pretty good with fine hand work because they did a lot of needlework and weaving. Fairchild thought, well maybe these Navajo can make microchips. They actually established a microchip factory in Shiprock, New Mexico, and became the greatest employer in the private sector of Native Americans. That was just as interesting as any federal program for Native Americans that came out of the Great Society. So, that story needs to be told!
But the story very often isn’t told. In fact even market advocates often fail to appreciate what business is contributing, or to recognize that business has the answer to social problems. That’s why Hazlitt is so important. It’s why Mises is important. What is a bureaucracy, what impedes a business, what doesn’t impede a business? The wonderful fact about business is that it doesn’t even need optimal conditions to contribute to quality life. All business needs to contribute is an environment that is “not too bad.”
JD: Right.
AS: Ask a business owner: What would cause you to hire again? Oh, we’ll hire when conditions are not too bad. That’s wonderful. I mean that is the essence of the United States. As long as things are not too bad, we can move forward. Even the 1960s show that.
JD: What a great thing about America.
AS: Right. The other question is whether we’re at the stage in Hayek’s road to serfdom that we’re too late? And I don’t want to say that.
JD: Or the Higgs ratchet effect.
AS: Right, the Higgs ratchet. I think of the Adam Smith quote too, “Peace, easy taxes, and a tolerable administration of justice.” This is all we need for economic growth.
JD: Let’s talk about Calvin Coolidge a little bit. You’ve devoted a lot of your professional life to him, a politician who really avoided the limelight. Do you think somebody like Coolidge could be elected today, when we have social media? Someone taciturn?
AS: Yes, I do.
JD: Is this person out there? Should we find them?
AS: They’re not hard to find. The real problem is that Americans haven’t yet realized the consequences of our government’s actions. When the interest rate goes over 10 percent, then the culture changes, people start looking for answers—and Coolidge-like leaders.
JD: Nobody under fifty or so remembers interest rates over 10 percent.
AS: Right. Well of course interest rates can go over 10 percent. A more likely awakening is through a currency crisis. When the dollar is challenged and another currency crisis arises, some new currency, a currency stronger than bitcoin, will challenge the dollar, and then Americans will also realize the need for change.
There was a period in the 1980s when you had to buy a house that had two bedrooms fewer than you wanted because of the interest rates. This is important to explain, especially to younger people. Higher interest rates mean too that there isn’t enough money when you want to start a business. They mean your little start up business has to succeed in ten weeks instead of half a year. Higher rates mean that indeed the house you buy is smaller than you hoped. For every five percentage points the interest rate goes up, that’s one fewer bedroom for your house. Perhaps we can quantify prosperity in square footage. In the 1950s each new house a family moved into was “the nicest house we ever lived in.” What the 1970s did was stall that progress for the next generation. As the journalist Michael Kinsley once commented with irony—I’m paraphrasing—“little did our parents realize that 1950s house would also be the nicest house we ever lived in.”
JD: Do you think people ought to be reading Coolidge now, learning from him now?
AS: After America prevailed in World War I, it still wasn’t clear America would be a global power. The UK could come back as the global financial power. Who was going to be the leader was an open question. The two nations each had to adopt policies. The UK went more of the socialist way. That was the period where the dole became a concept and then a pejorative. The US turned away from social democracy or socialism through Harding and Coolidge. What was the result? The result was we stabilized as the world’s economic power. Because of our policy of normalcy, because we had genuine growth, because of productivity, because of electrification and what that did for productivity, all those things. So that fork in the road in the 1920s isn’t too dissimilar to the fork we confront now. Are we going to stay the number one power or are we going to fall back? And the decision has to emulate more the Harding and Coolidge decision than the UK decision. At least if the US is to sustain its primacy and the advantages of that primacy.
JD: So, we’re lucky we did have Coolidge, right?
AS: We’re very lucky. The thing about Coolidge I find transcendent is his understanding of bureaucracy. I know many Mises readers would really understand what he’s saying. As governor of Massachusetts, for example, he had two hard tasks toward the end of his first year as governor. One was a Boston Police strike, supported by their public sector union. He fired the policemen because they violated their contract when they struck. The other was the decision by his administration to prune back all the progressive bureaucracies that had built up. The government of Massachusetts was too big and Coolidge had to shut down departments, to prune, to make the tree a much smaller tree. Lots of branches went down, and he had friends who worked in those departments—friends who had helped elect him as governor—and yet he did it. Policemen were also his friends because they were Irish Americans, and Coolidge had a very good relationship with Irish Americans. He was famous for being able to attract the immigrant vote. And when asked which was harder, firing policemen or laying off his friends in the government bureaucracy, he said the latter was harder.
JD: That’s interesting.
AS: “It’s better to kill a bad law than to pass a good one,” as Coolidge said. He always understood the dangers of creating a bureaucracy and the difficulty in dismantling it. That to me is the essence of Coolidge. There’s some wonderful material from his presidency. There was a law called the Budget and Accounting Act of 1921, which gave the executive more authority when it came to the US budget. He had his own research staff and he had to pull the budget together and unify it, and he also had to oversee cutting. In those days [of the legislation] a president could impound money, and if Coolidge saw a department wasn’t using all the money it got or was using it unwisely, he impounded money that department was expecting because it had already been appropriated. That was very exciting! (Later the law was undone, by the way, which makes it easier for government offices to just keep spending.) Coolidge summoned all government officials in the executive branch to a meeting twice a year and made them sit before him like schoolchildren. He berated them for spending too much. This ritualistic berating was very counter to our culture today; shame was part of the dynamic. Very unmodern. You should be ashamed of yourselves, you used two pencils instead of one. But it’s through cajoling and shame, and by demonstrating the merit of his thrift, Coolidge managed to whip the federal government into fiscal discipline. When Coolidge left office, the federal budget was actually lower than when he came in.
JD: Last question. At the Coolidge Foundation, you work with a lot of young people. Are you hopeful about Generation Z?
AS: I’m very impressed. Remember, young people deeply resent being infantilized, and to feed young people a monoline about the wonders of government is to infantilize them. They want to form their own opinions. Many conservative philanthropies make the mistake of trying to build an alternate movement, to make cheerleaders for capitalism—politicized cheerleaders. That's infantilizing, too. At the Coolidge Foundation we simply offer young people information about Calvin Coolidge and his era. Because Coolidge is kind of a footnote in mainstream secondary school history. The standard secondary school texts treat Coolidge as a kind of seat warmer between two Roosevelts. At the Coolidge Foundation we seek to provide more information about Coolidge and his values, but not so much through sit-down pedagogy as through the sport of debate. The Coolidge hypothesis is that kids learn faster when they are competing—Coolidge himself proved a better debater than student. We have that national debate program, which culminates in a national cup in Plymouth Notch, Vermont, the birthplace of President Coolidge and a Vermont historic site. The Notch is beautiful, and also dauntingly isolated: even today, the internet doesn’t work very well there, and imagining what life must have been like without any electricity at all—and no autos—takes guests’ breath away. By now we have brought more than a thousand kids to Vermont to debate topics such as the merits and demerits of redistribution. Coolidge said: “Don’t expect to help the weak by pulling down the strong.” Of course the kids do argue both sides. Another way we impart knowledge through competition is via the Coolidge merit scholarship. This year more than three thousand students applied for four scholarships. All those candidates submit two essays about Calvin Coolidge; the emphasis in those essays this year is economics, though the topics might be the Constitution or Coolidge’s affection for the common law another year. That’s more than six thousand essays written about Calvin Coolidge. The scholarship winners don’t have to marry Calvin Coolidge, they don’t have to be Republican, they could hate Calvin Coolidge—but at least, through our process, they’ve encountered him and tried on his ideas, the same way one tries on a tie or scarf. The finalists go to Washington and they learn all about government, but they also learn all about the business that funds it. The most thoughtful young Americans are often tracked—one could say funneled—willy-nilly straight from high school to college to graduate school to the national institutes of health—without ever having worked in the private sector. We point out to such kids that some of the most important events in any field happen in the private sector. The covid vaccine doesn’t come from the FDA, it comes from Moderna or another company.
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".
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.
Bob explains some of the highlights of his newly released chapter for the Mises Institute book on “Understanding Money Mechanics.” He explains the operation of the classical gold standard, as well as some of the issues of US bimetallism during the 1800s.
Mentioned in the Episode and Other Links of Interest: Bob’s new essay on the gold standardBob’s book on capitalism #CommissionsEarned (as an Amazon Associate I earn from qualifying purchases)Bob on the 1920–21 Depression For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
The crisis we faced in 2008 has not gone away, as we failed to heed its warning to change course and reduce debt levels. Instead, it has become bigger and more dangerous.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Throwing Printed Money at This Problem Won't Make It Go Away".
Tom DiLorenzo is a Senior Fellow with the Mises Institute who has written several books critical of Lincoln. His latest is "The Problem With Lincoln." Bob asks Tom about his early career in economics, and then they discuss the various ways in which Abe Lincoln was actually a horrible president.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interview.Tom DiLorenzo’s books The Problem With Lincoln and The Real Lincoln, and with Jim Bennett The Food and Drink Police. #CommissionsEarned (As an Amazon Associate I earn from qualifying purchases.)BMS ep. 71 with Mark Thornton, and ep. 81 with Jeffrey Rogers Hummel, both on the economics of slavery.Tom’s 1982 article (with Jim Bennett) in the American Economic Review.Rothbard on “just war” theory. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Debt and recession in the United States are big problems. But in both cases, metrics show a better situation in the US than in the eurozone.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Why the US Economy Is Stronger Than the Eurozone's".
Contrary to the popular narrative that government police establish law and order, there is good reason to believe that the advent of militarized police in the 1800s led to an escalation of riots and political corruption while offering little law or order.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "American Police Forces Were Created to Fight Rioters. But Police Probably Made Things Worse."
David Friedman is one of the pioneering theorists of anarcho-capitalism, as laid out in his book The Machinery of Freedom. In this free-wheeling discussion, he discusses physics versus economics, the work of Ronald Coase, his dad’s view of anarchism, and what happened to the SlateStarCodex site.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interview.David Friedman’s homepage.David’s book The Machinery of Freedom. Heinlein’s classic The Moon Is a Harsh Mistress. #CommissionsEarned (As an Amazon Associate I earn from qualifying purchases.)David debates Bob at Porcfest on Austrian vs. Chicago School methodology in economics.One of Walter Block’s essays on hanging from an apartment flagpole.The website SlateStarCodex and the post Bob mentioned, “You Are Still Crying Wolf,” which defended Trump from accusations of racism. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Brett Venoitte is host of the School Sucks podcast. After explaining his background in education, Brett explains how Horace Mann drew from authoritarian Prussian in designing public education in the US. He and Bob then discuss the competing experts in the debate over the coronavirus.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interview. The School Sucks Project website. Brett’s video “The American Way” on US education and Nazi Germany. The Harper’s Open Letter on cancel culture that caused such controversy. Bob’s undergrad essay for FEE on the roots of the US public school system. Bob’s Porcfest routine which featured impressions, including one of Wheels Off Liberty. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
The Left has an enormous desire to "do good to" the mass of other people. But since many people often resist, the leftist inevitably ends by reaching for the big stick with which to push the ungrateful masses around.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Great Society: A Libertarian Critique".
There are at least four good reasons for removing Wilson’s name from Princeton buildings—racial bigotry, his embroiling the US in World War I, his founding of the Fed, and his enactment of the US income tax.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Other Reasons to Remove Wilson’s Name at Princeton".
Download the slides from this lecture at Mises.org/MU20_PPT_26.
Recorded at the Mises Institute in Auburn, Alabama, on 16 July 2020.
Download the slides from this lecture at Mises.org/MU20_PPT_29.
Recorded at the Mises Institute in Auburn, Alabama, on 16 July 2020.
Includes question and answer period. Recorded at the Mises Institute in Auburn, Alabama, on 13 July 2020.
Old coins vaccinated me against trusting politicians long before I grew my first scruffy beard. I began collecting coins when I was eight years old in 1965, the year President Lyndon Johnson began removing all the silver from American coins.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Collecting Old Coins Taught Me to Never Trust the Government".
Woodrow Wilson was an especially devoted white supremacist, even by the standard of his day. The Left is finally targeting Wilson for this, but Wilson's legacy is far worse than even the Left will admit.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Disastrous Legacy of Woodrow Wilson".
The saddest aspect of this economic ignorance is that these evangelicals have completely ignored the real reductions in poverty rates in the past forty years, reductions that are due to liberalizing economies that once were in socialist straitjackets.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "What Anticapitalist Christian Economists Get Wrong".
A second round of lockdowns will assault an America already suffering from widespread unemployment and a fragile economy. Even worse, round two is likely to last longer than round one, bringing an even larger economic and social toll.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Second Round of Lockdowns Won't Be as Easy as the First".
Keith Knight walks Bob through a meticulous critique of Krugman’s new book on Arguing With Zombies. Topics include the babysitter co-op, the deregulation that allegedly caused the housing bubble, and the tax rates of the 1950s.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interview.Krugman’s latest book, Arguing With Zombies. #CommissionsEarned (As an Amazon Associate I earn from qualifying purchases.)Keith Knight’s YouTube channel.Help support the Bob Murphy Show. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Did the hardliners win at Versailles because the Americans were too weak with the flu to object? If so, it would be just one way that disease profoundly affected public policy in the wake of the 1918 flu.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "1918: A Study in How Disease Can Shape Public Policy".
Like during the 1930s, governments are turning to new programs and schemes that will only prolong the crisis and makes things worse.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "After the Lockdowns, Government "Fixes" for the Economy Will Make Things Even Worse".
Thanks to the COVID-19 panic this year, graduates at America's institutions of higher education missed the "opportunity" to be lectured by some celebrity or politician about the importance of "giving back" to the community, or being yourself, or following your dreams.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The COVID Panic Canceled Many Graduation Speeches. Thank Goodness."
Marilyn Singleton, MD, JD joins the Accad and Koka Report.
Dr. Singleton comes from a long line of American physicians. She shares with us her fascinating family history and her insights into the rich history of Black physicians in America. We also discuss the deleterious effects of race victimization manifest today.
[From The Life of Colonel David Crockett, compiled by Edward S. Ellis (Philadelphia: Porter & Coates, 1884). Included in Free Market Economics: A Basic Reader, compiled by Bettina B. Greaves (Irvington-on-Hudson, NY: Foundation for Economic Education, 1975).]
One day in the House of Representatives, a bill was taken up appropriating money for the benefit of a widow of a distinguished naval officer. Several beautiful speeches had been made in its support. The Speaker was just about to put the question when Davy Crockett arose:
"Mr. Speaker—I have as much respect for the memory of the deceased, and as much sympathy for the sufferings of the living, if suffering there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it. We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right so to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I have never heard that the government was in arrears to him.
"Every man in this House knows it is not a debt. We cannot, without the grossest corruption, appropriate this money as the payment of a debt. We have not the semblance of authority to appropriate it as a charity. Mr. Speaker, I have said we have the right to give as much money of our own as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week’s pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks.”
He took his seat. Nobody replied. The bill was put upon its passage, and, instead of passing unanimously, as was generally supposed, and as, no doubt, it would, but for that speech, it received but few votes, and, of course, was lost.
Later, when asked by a friend why he had opposed the appropriation, Crockett gave this explanation:
"Several years ago I was one evening standing on the steps of the Capitol with some other members of Congress, when our attention was attracted by a great light over in Georgetown. It was evidently a large fire. We jumped into a hack and drove over as fast as we could. In spite of all that could be done, many houses were burned and many families made homeless, and, besides, some of them had lost all but the clothes they had on. The weather was very cold, and when I saw so many women and children suffering, I felt that something ought to be done for them. The next morning a bill was introduced appropriating $20,000 for their relief. We put aside all other business and rushed it through as soon as it could be done.
"The next summer, when it began to be time to think about the election, I concluded I would take a scout around among the boys of my district. I had no opposition there, but, as the election was some time off, I did not know what might turn up. When riding one day in a part of my district in which I was more of a stranger than any other, I saw a man in a field plowing and coming toward the road. I gauged my gait so that we should meet as he came to the fence. As he came up, I spoke to the man. He replied politely, but, as I thought, rather coldly.
"I began: 'Well, friend, I am one of those unfortunate beings called candidates, and—'
"'Yes, I know you; you are Colonel Crockett, I have seen you once before, and voted for you the last time you were elected. I suppose you are out electioneering now, but you had better not waste your time or mine. I shall not vote for you again.'
"This was a sockdolager…I begged him to tell me what was the matter.
"'Well, Colonel, it is hardly worth-while to waste time or words upon it. I do not see how it can be mended, but you gave a vote last winter which shows that either you have not capacity to understand the Constitution, or that you are wanting in the honesty and firmness to be guided by it. In either case you are not the man to represent me. But I beg your pardon for expressing it in that way. I did not intend to avail myself of the privilege of the constituent to speak plainly to a candidate for the purpose of insulting or wounding you. I intend by it only to say that your understanding of the Constitution is very different from mine; and I will say to you what, but for my rudeness, I should not have said, that I believe you to be honest….But an understanding of the Constitution different from mine I cannot overlook, because the Constitution, to be worth anything, must be held sacred, and rigidly observed in all its provisions. The man who wields power and misinterprets it is the more dangerous the more honest he is.'
"'I admit the truth of all you say, but there must be some mistake about it, for I do not remember that I gave any vote last winter upon any constitutional question.'
"'No, Colonel, there’s no mistake. Though I live here in the backwoods and seldom go from home, I take the papers from Washington and read very carefully all the proceedings of Congress. My papers say that last winter you voted for a bill to appropriate $20,000 to some sufferers by a fire in Georgetown. Is that true?'
"'Well, my friend; I may as well own up. You have got me there. But certainly nobody will complain that a great and rich country like ours should give the insignificant sum of $20,000 to relieve its suffering women and children, particularly with a full and overflowing Treasury, and I am sure, if you had been there, you would have done just as I did.'
"'It is not the amount, Colonel, that I complain of; it is the principle. In the first place, the government ought to have in the Treasury no more than enough for its legitimate purposes. But that has nothing to do with the question. The power of collecting and disbursing money at pleasure is the most dangerous power that can be intrusted to man, particularly under our system of collecting revenue by a tariff, which reaches every man in the country, no matter how poor he may be, and the poorer he is the more he pays in proportion to his means. What is worse, it presses upon him without his knowledge where the weight centers, for there is not a man in the United States who can ever guess how much he pays to the government. So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he. If you had the right to give anything, the amount was simply a matter of discretion with you, and you had as much right to give $20,000,000 as $20,000. If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other. No, Colonel, Congress has no right to give charity. Individual members may give as much of their own money as they please, but they have no right to touch a dollar of the public money for that purpose. If twice as many houses had been burned in this county as in Georgetown, neither you nor any other member of Congress would have thought of appropriating a dollar for our relief. There are about two hundred and forty members of Congress. If they had shown their sympathy for the sufferers by contributing each one week’s pay, it would have made over $13,000. There are plenty of wealthy men in and around Washington who could have given $20,000 without depriving themselves of even a luxury of life. The congressmen chose to keep their own money, which, if reports be true, some of them spend not very creditably; and the people about Washington, no doubt, applauded you for relieving them from the necessity of giving by giving what was not yours to give. The people have delegated to Congress, by the Constitution, the power to do certain things. To do these, it is authorized to collect and pay moneys, and for nothing else. Everything beyond this is usurpation, and a violation of the Constitution.
"'So you see, Colonel, you have violated the Constitution in what I consider a vital point. It is a precedent fraught with danger to the country, for when Congress once begins to stretch its power beyond the limits of the Constitution, there is no limit to it, and no security for the people. I have no doubt you acted honestly, but that does not make it any better, except as far as you are personally concerned, and you see that I cannot vote for you.'
"I tell you I felt streaked. I saw if I should have opposition, and this man should go to talking, he would set others to talking, and in that district I was a gone fawn-skin. I could not answer him, and the fact is, I was so fully convinced that he was right, I did not want to. But I must satisfy him, and I said to him:
"'Well, my friend, you hit the nail upon the head when you said I had not sense enough to understand the Constitution. I intended to be guided by it, and thought I had studied it fully. I have heard many speeches in Congress about the powers of Congress, but what you have said here at your plow has got more hard, sound sense in it than all the fine speeches I ever heard. If I had ever taken the view of it that you have, I would have put my head into the fire before I would have given that vote; and if you will forgive me and vote for me again, if I ever vote for another unconstitutional law I wish I may be shot.'
"He laughingly replied: 'Yes, Colonel, you have sworn to that once before, but I will trust you again upon one condition. You say that you are convinced that your vote was wrong. Your acknowledgment of it will do more good than beating you for it. If, as you go around the district, you will tell people about this vote, and that you are satisfied it was wrong, I will not only vote for you, but will do what I can to keep down opposition, and, perhaps, I may exert some little influence in that way.'
"'If I don't,' said I, 'I wish I may be shot; and to convince you that I am in earnest in what I say I will come back this way in a week or ten days, and if you will get up a gathering of the people, I will make a speech to them. Get up a barbecue, and I will pay for it.'
"'No, Colonel, we are not rich people in this section, but we have plenty of provisions to contribute for a barbecue, and some to spare for those who have none. The push of crops will be over in a few days, and we can then afford a day for a barbecue. This is Thursday; I will see to getting it up on Saturday week. Come to my house on Friday, and we will go together, and I promise you a very respectable crowd to see and hear you.'
"'Well, I will be here. But one thing more before I say good-by. I must know your name.'
"'My name is Bunce.'
"'Not Horatio Bunce?'
"'Yes.'
"'Well, Mr. Bunce, I never saw you before, though you say you have seen me, but I know you very well. I am glad I have met you, and very proud that I may hope to have you for my friend.'
"It was one of the luckiest hits of my life that I met him. He mingled but little with the public, but was widely known for his remarkable intelligence and incorruptible integrity, and for a heart brimful and running over with kindness and benevolence, which showed themselves not only in words but in acts. He was the oracle of the whole country around him, and his fame had extended far beyond the circle of his immediate acquaintance. Though I had never met him before, I had heard much of him, and but for this meeting it is very likely I should have had opposition, and had been beaten. One thing is very certain, no man could now stand up in that district under such a vote.
"At the appointed time I was at his house, having told our conversation to every crowd I had met, and to every man I stayed all night with, and I found that it gave the people an interest and a confidence in me stronger than I had every seen manifested before.
"Though I was considerably fatigued when I reached his house, and, under ordinary circumstances, should have gone early to bed, I kept him up until midnight, talking about the principles and affairs of government, and got more real, true knowledge of them than I had got all my life before.
"I have known and seen much of him since, for I respect him—no, that is not the word—I reverence and love him more than any living man, and I go to see him two or three times every year; and I will tell you, sir, if every one who professes to be a Christian lived and acted and enjoyed it as he does, the religion of Christ would take the world by storm.
"But to return to my story. The next morning we went to the barbecue, and, to my surprise, found about a thousand men there. I met a good many whom I had not known before, and they and my friend introduced me around until I had got pretty well acquainted—at least, they all knew me.
"In due time notice was given that I would speak to them. They gathered up around a stand that had been erected. I opened my speech by saying:
"'Fellow-citizens—I present myself before you today feeling like a new man. My eyes have lately been opened to truths which ignorance or prejudice, or both, had heretofore hidden from my view. I feel that I can today offer you the ability to render you more valuable service than I have ever been able to render before. I am here today more for the purpose of acknowledging my error than to seek your votes. That I should make this acknowledgment is due to myself as well as to you. Whether you will vote for me is a matter for your consideration only.'
"I went on to tell them about the fire and my vote for the appropriation and then told them why I was satisfied it was wrong. I closed by saying:
"'And now, fellow-citizens, it remains only for me to tell you that the most of the speech you have listened to with so much interest was simply a repetition of the arguments by which your neighbor, Mr. Bunce, convinced me of my error.
"'It is the best speech I ever made in my life, but he is entitled to the credit for it. And now I hope he is satisfied with his convert and that he will get up here and tell you so.'
"He came upon the stand and said:
"'Fellow-citizens—It affords me great pleasure to comply with the request of Colonel Crockett. I have always considered him a thoroughly honest man, and I am satisfied that he will faithfully perform all that he has promised you today.'
"He went down, and there went up from that crowd such a shout for Davy Crockett as his name never called forth before.
"I am not much given to tears, but I was taken with a choking then and felt some big drops rolling down my cheeks. And I tell you now that the remembrance of those few words spoken by such a man, and the honest, hearty shout they produced, is worth more to me than all the honors I have received and all the reputation I have ever made, or ever shall make, as a member of Congress.
"Now, sir," concluded Crockett, "you know why I made that speech yesterday.
"There is one thing now to which I will call your attention. You remember that I proposed to give a week’s pay. There are in that House many very wealthy men—men who think nothing of spending a week’s pay, or a dozen of them, for a dinner or a wine party when they have something to accomplish by it. Some of those same men made beautiful speeches upon the great debt of gratitude which the country owed the deceased—a debt which could not be paid by money—and the insignificance and worthlessness of money, particularly so insignificant a sum as $10,000, when weighted against the honor of the nation. Yet not one of them responded to my proposition. Money with them is nothing but trash when it is to come out of the people. But it is the one great thing for which most of them are striving, and many of them sacrifice honor, integrity, and justice to obtain it."
George W. Bush has resurfaced to pander to the Left and the media in hopes of getting some attention. Apparently, Bush's brutal history of lies, wars, and torture is all fine now since he said some nice things condemning racism.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Media Has Conveniently Forgotten George W. Bush's Many Atrocities".
Recorded at Avondale Brewing Company in Birmingham, Alabama, on June 6, 2020. Special thanks to Mark Walker for sponsoring this event.
Governments often demand that you "ask what you can do for your country," but those governments never guarantee us anything in return for our sacrifice.
Narrated by Daniella Bassi.
Original Article: "The Folly of 'Ask What You Can Do for Your Country'"
Abstract: Murray Rothbard wrote an unpublished note in the early 1960s on the economics of antebellum slavery. Essentially, it was a criticism of the methodology of the New Economic History, or cliometrics, of which Conrad and Meyer (1958a) was the breakthrough application, on the topic of the profitability of slavery. Rothbard points out that their procedure in no way supports their conclusion that slavery was profitable or their ideological conclusion that the Civil War was necessary to end American slavery.
civil war — economic history — slavery — cliometrics — new economic historyJEL Classification: B53, N31, N91
Dr. Mark Thornton (mthornton@mises.org) is senior fellow at the Mises Institute and serves as the book review editor of the Quarterly Journal of Austrian Economics.
A manuscript was found in the Rothbard Archives titled “A Note on the Economics of Slavery.” It appears to be an unpublished communication concerning an article and comment that appeared in the Journal of Political Economy. Given the dearth of analysis of the economics of slavery in Murray N. Rothbard’s writings and the revolution in the subject matter that was taking place at the time it was written, the manuscript is certainly worth publishing at this time.By 1956, Rothbard had planned to write about the economic analysis of slavery as an appendix to a chapter on government intervention in his treatise Man, Economy and State (1962). According to Stromberg, the editor of the 2004 edition of Man Economy and State, in a private memo, Rothbard outlined the contents of that appendix and that sketch mimics the contents of Rothbard’s (1960) note. The purpose of this article is to provide the necessary context in which the note was written.
In 1994, I published a paper on the economics of slavery, “Slavery, Profitability, and the Market Process,” in the Review of Austrian Economics, then edited by Rothbard. He had encouraged me to write on the economics of antebellum slavery based on comments I made during an impromptu debate I had with economic historian Robert Higgs at Mises University in the early 1990s.
Not only did Rothbard encourage me to write the article, he guided me with multiple single-spaced pages of references and suggestions. In the process I examined an enormous amount of literature on the economic issues of slavery in antebellum America. It could have easily turned into a second dissertation. However, there was nothing written by Rothbard himself among those recommended sources.
When I was writing, I was well aware of one of the articles that Rothbard commented on in the note. It was a landmark study in the “New Economic History” by Conrad and Meyer that was published in the Journal of Political Economy in 1958. However, I was unaware of the comments by Douglass Dowd (1958) and John E. Moes (1960), which were published in the same journal. The second comment is the direct subject of the Rothbard note. Conrad and Meyer published two revealing replies to both comments. This literature is reviewed here to provide the context of Rothbard’s note.
We assume that Rothbard’s note was submitted and rejected, if for no other reason, because it would have been submitted more than two years after the original article was published. Also, the “note” would have been the third comment on the article, and no other article in the JPE during this period had more than one published comment. For now, I will note that Rothbard did not bring my attention to either the Moes comment or his own note during the process of researching, writing, or publishing my 1994 article. Both would have been helpful, welcome additions to my research. Moes (1960) argues against the seminal article by Conrad and Meyer, a precursor to the classic and highly controversial work by Robert Fogel and Stanley Engerman, Time on the Cross (1974). Rothbard supplements Moes with a more theoretical commentary. It is worth noting here that the Conrad and Meyer (1958a) article was the epicenter of a methodological revolution in economic history.
The Conrad and Meyer article is an attempt to establish whether or not antebellum slavery was in fact profitable. At thirty-five pages, it is an empirical analysis of the available data, much like an historical accounting exercise with the assistance of economic modeling. This article marks the very beginning of cliometrics, a.k.a. the New Economic History, in which economic history would be studied primarily using models and statistics. It was a revolution that would eventually sweep the field of traditional economic history.
Conrad and Meyer’s article is an effort to measure the ordinary profitability of slavery using an economic, as opposed to an accounting, formula of profit. In addition to the revolutionary method, the article confronted a critical ideological issue at the time: can the American Civil War be justified? Was slavery inefficient and unprofitable and would it have soon died off, making the American Civil War unnecessary? Or, was slavery efficient and profitable, thus necessitating, or at least justifying, the war? Rothbard represents a view that slavery is narrowly profitable (due to external forces) but inefficient and could plausibly and quickly wither away.
Conrad and Meyer begin with a production function for slave-based agriculture (i.e., cotton) and a production function for slave breeding as the joint product of slavery. They then bring together various data to examine the cost and the value of slave production in terms of cotton and slave breeding. They conclude that the joint product of slave labor in terms of crop production and slave breeding exceeded the returns on alternative investments and therefore that slavery was profitable.
That they find that slavery was profitable is not surprising, as any ongoing risky business should produce an ongoing positive return. This would be especially true in an expanding business such as cotton, which along with coal and iron was a primary raw material during the Industrial Revolution! The fact that prices were high and output was rising circa 1849–60 is a strong indication that the market for slaves was not in any kind of long-run equilibrium but instead was experiencing sustained increases due to increasing demand for cotton and other forces.
Their result of profitability is not surprising, because any good, factor of production, or institution that remains in use over a significant period of time must be profitable in some sense. The laws of economics dictate this result. However, in the long-run equilibrium economy, or evenly rotating economy, economic profits should always be bid away.
This might not be true for things that provide psychic income, which offsets the lack of monetary profits, but it is only true until losses consume all the invested capital. Therefore this would not be an equilibrium situation. Or it could be that cross subsidies maintain an unprofitable operation in order to provide support for a profitable operation. For example, the owner of an apartment building might continue to operate an unprofitable laundry service on the premises because it increases the demand for the apartments or generates “good will” with tenants.
But what could the logic be with antebellum slavery? Did the slave owners get some kind of psychic income from slave ownership? Did they enjoy whipping their slaves? Or did they feel some kind of personal obligation to maintain slave ownership? Such arguments have been made about antebellum slavery, including by Moes (1960), but it seems doubtful that under ordinary conditions, such concerns could be maintained for centuries and over multiple generations.
In any case, those arguments fail, because the number of slaves continued to grow. Slave markets continued to grow and were increasingly vibrant and resilient during the late antebellum period. There was also an increasing long-term trend in inflation-adjusted slave prices. This evidence suggests that such psychic reasons could not be an important factor here, if they existed at all.
However, the fact that Conrad and Meyer (1958a) found slavery to be profitable satisfies their desire to justify the American Civil War:
In sum, it seems doubtful that the South was forced by bad statesmanship into an unnecessary war to protect a system which must soon have disappeared because it was economically unsound. This is a romantic hypothesis which will not stand against the facts. (Conrad and Meyer 1958a, 121)
Moreover, they also blame “inexorable economic forces” for the stability of slavery from the “strict economic standpoint.”
Furthermore, the American experience clearly suggest[s] that slavery is not, from the strict economic standpoint, a deterrent to industrial development and that its elimination may take more than the workings of inexorable economic forces. (Conrad and Meyer, 1958a, 122, emphasis added)
They reiterate in the closing paragraph of the article that slavery is the fault of the market, that the market would continue to support slavery, and that ending slavery would necessarily require “the adoption of harsh political measures,” i.e., the American Civil War.
To the extent, moreover, that profitability is a necessary condition for the continuation of a private business institution in a free-enterprise society; slavery was not untenable in the ante bellum American South. Indeed, economic forces often may work towards the continuation of a slave system, so that the elimination of slavery may depend upon the adoption of harsh political measures. Certainly that was the American experience. (Conrad and Meyer 1958a, 122, emphasis added)
The first comment on the Conrad and Meyer article was by Douglas F. Dowd (1958). He challenges Conrad and Meyer for taking a simple and narrow approach to something that is very complex, particularly the question of the lack of economic development in the slave states. More generally, Dowd argues, correctly, that the institution of slavery prevented “the basic elements of a capitalist society” from taking root. He notes that the maintenance of slavery in the “land of the free” required the development of an “irrational ideology” which had a pervasive impact on society. Dowd writes:
The authors argue as though slavery were merely another, more manipulable, form of labor; as though it were, one might say, institutionally neutral. And, working essentially within the methodology of neoclassical economics (with time allowed in occasionally) they have analyzed the “economic” meaning of slavery as though they were analyzing the representative firm in the long run (or even, at times, in the short run). (Dowd 1958, 441)
In other words, although Dowd agrees that slavery was profitable, he finds that result largely insignificant compared with the impact of the institution on Southern society, particularly its displacement of capitalism and its drag on economic development. In a different context, it could be argued that dealing illegal drugs on the streets is profitable, but that fixes our attention on an obvious and irrelevant aspect of this issue (of course it must be profitable in some sense) and disregards all the real problems (e.g., crime, corruption, overdose deaths, violence, among others).
In their reply, Conrad and Meyer (1958b) do not disagree with Dowd, but rather claim that he is commenting on issues that were beyond the scope of their paper. They reemphasize that their result “means that the imminent demise of slavery in the ante bellum South must be argued on grounds other than unprofitability from now on.” This is a curious claim given such facts as the steam tractor’s development in the 1870s and its full commercialization during the first quarter of the twentieth century. Would slavery have survived this development?
The true economic question, if not the only important question, is why slavery was profitable. Conrad and Meyer essentially bypass the economic question. They attribute the cause of the profitability to murky and ill-defined “market forces.” As we will see, Rothbard asks the right question.
The second comment was by John E. Moes (1960). It is a brute-force frontal assault on Conrad and Meyer (1958a). He argues that the decline of slavery in Rome depended on voluntary manumission, i.e., granting a slave freedom, but that manumission was not a widespread procedure in the antebellum South. According to Moes (1960, 185) “it remained a very minor affair” for the following reasons:
- Antimanumission laws restricting or prohibiting the freeing of slaves2. Racial prejudice and white supremacy3. Freed slaves’ very precarious legal status (unlike in Rome)4. Antiabolitionist ideology turned slave owning from a business into a calling. The ideology made manumission unprofitable in a real sense due to personal repercussions from family, friends and neighbors.
Moes suggest that with free manumission, the relative inefficiency of slaves (without prospects for freedom), and the increasing diversification of the Southern economy, slavery would certainly have declined or disappeared altogether. In other words, if slaves could buy their freedom and that of their family and friends, then leased slaves would work harder and save their income to make purchases of freedom. They would try to get themselves leased by their owners into higher-paying industries, such as manufacturing and railroads, and high-skill occupations, such as blacksmithing and telegraph operation. Based on historical experience, Moes thinks that this would have been more profitable for slave owners too, generating higher returns compared to slave-based agriculture. This argument undermines the ex post facto argument that the American Civil War was necessary to end slavery in the antebellum South.
In their reply to Moes, Conrad and Meyer (1960, 187) note that Moes’s concerns were beyond “our original discussion of the economics of slavery in the American South.” Their main concern was to test the hypothesis that slavery as it existed in the antebellum American South was profitable according to the “private-enterprise standards of the period.” Again, they simply ignore relevant and important issues and subtly place the blame for slavery on private enterprise.
One can well image that Rothbard would be opposed to Conrad and Meyer for several reasons, methodological, theoretical, and historical, among others. Their linking of slavery with capitalist institutions would obviously be unacceptable to him or any good historian of the subject, as slavery has historically been the result of war, not commerce. Antebellum slavery was hardly a capitalist institution: African states were the largest slave hunters, the Royal African Company (founded by the English monarchy) was one of the largest transporters of slaves to the New World, and slavery only survived in the Southern states due to an extensive system of government intervention made up of slave codes, slave patrol statutes, fugitive slave laws, etc.
The first argument that Rothbard makes in the manuscript is that the true economic profits of slavery occurred in the past, when slave hunters and traders exploited the original supply of slaves. The original price would have reflected the anticipated present value of the flow of net revenues over time. The price would have also included the anticipated present value of the net revenues from slave breeding. In the long run, even slave hunting would only yield a normal market return on investment. Rothbard is arguing from a long-run equilibrium view that in the short term slave hunters could earn an economic profit while subsequent owners would only earn a normal operating profit ceteris paribus.
What this means is that any detection and measurement of economic profits in a short-run disequilibrium situation in the real world would be the result of some factors other than slavery per se. For example, both Rothbard (1960) and Moes (1960) note that antimanumission laws passed in slave state legislatures were a key element in preventing the withering away of slavery. Rothbard also notes that the constitutional measure to shut down international trade in slaves increased the profitability of slave breeding.
Other exogenous factors—including the US Constitution’s slave clause, the 1793 Fugitive Slave Act, the invention of the cotton gin in 1793, the Industrial Revolution, the expansion or strengthening of slave codes and slave patrol statutes (laws designed to prevent runaways by socializing the costs of slave security), and of course the passage of the Fugitive Slave Act of 1850—also increased the profitability of slave-based agriculture. The invention of the farm tractor, the weakening of slave codes (especially the antimanumission laws), and Southern secession and the likely repeal of the Fugitive Slave Act would all have decreased profitability and increased the likelihood of the breakdown of slavery.
Relative to Ludwig von Mises’s (2003, 239) topology of malinvestments in capital, antebellum slave labor could qualify as a capital malinvestment in three of five possible cases. First, it could be classified as labor that was economically justified at one time but in the future would no longer be justified because of the rise of new methods, e.g., the adoption of farm machinery. Second, it could become economically unjustified due to other changes in the market data, e.g., a decrease in slave security or a decrease in the demand for the product of the labor. Third, it could be classified as labor that was uneconomic but could still be used “by virtue of interventionist measures that have now been abandoned,” e.g., by repealing antimanumission laws and adapting the land tenure system to more profitably exploit the labor.
Rothbard therefore makes two main points in his note. First, slavery itself was not economically profitable past the early slave-hunting stage and was more generally inefficient; it was other factors that made slave-based cotton agriculture highly profitable in the antebellum period. Second, political forces were the primary factor keeping the system from withering away. This second point is what I expanded on in my 1994 paper and other publications on this topic.See Thornton (1994), and Brad Ewing, Mark Thornton, and Mark Yanochik (2001, 2003a, and 2003b). Therefore Rothbard (1960), Moes (1960), Dowd (1959), Hummel (1996), Tullock (1967), myself, and many others are in a tradition that concedes that slavery is potentially “profitable” but otherwise inefficient and requires government support to remain viable.
In conclusion, Rothbard, writing from the vantage point of economic theory, asked the correct economic question and provided the correct answers to the fathers of the “New Economic History” at the time of its birth. Rothbard was not opposed to mathematics or statistics in economic articles and books. In fact, in a private memo written around this time (2010a, May 1961), he criticizes two mainstream economists for the dearth of basic statistics, among other things, in their book on American history.For a fuller version of his critique, written in a private unpublished memo at the time, see Rothbard (2010b, September 1961). Rather his primary criticism is a fundamental attack on the methodology of the New Economic History and the subsequent dangerous ideological conclusions that are drawn from it, e.g., that war does good things for society. Historiography might have been different had the editors of the Journal of Political Economy decided to publish his note.
A Note on the Economics of Slavery Murray N. Rothbard
Professor Moes, in his illuminating contribution to the discussion of the economics of slavery, points out that slavery has an inherent tendency to wither away because the keen incentive of working to buy one’s freedom will foster the practice of selling manumission to the slave, a practice profitable to master and slave alike.John E. Moes, “The Economics of Slavery in the Ante-Bellum South: Another Comment,” Journal of Political Economy LXVIII (April, 1960): pp. 183–87. There is another economic factor operating also to make slavery unprofitable, which Moes does not mention. And this is the fact that the price of any capital good on the market, will always tend to equal the discounted value of the sum of future net earnings from that capital. In the slave economy, of course, slaves are capital. Therefore, the price of slaves will tend to equal the discounted value of the sum of future net returns that the master is expected to gain from exploiting the slave’s labor. Any rise in returns from slaves will raise the slave price. Therefore, since the rate of net return in every business and from every piece of capital on the market, including slaves, tends to be the same, the profit from exploiting slave labor will be imputed backward, from the slaveholder, to the slave trader, and eventually to the slave hunter. Only the slave hunter, therefore, the original person who converted a free man into a slave, reaps a long-run economic gain from slavery; the current slave-master earns only the usual “natural interest” rate of return that every business earns in the long run.
In their reply to Moes, Professors Conrad and Meyer assert that the particular factor making slavery profitable in the South was a high return on slave breeding.Alfred H. Conrad and John R. Meyer, “Reply,” ibid., pp. 187–89. But in the natural course of the market, the particular breeding-productivity of any slave would have been discounted in the original slave price that the master paid for the slave-ancestors. For the price of a slave bought from a trader (ultimately from the hunter), included the expected future value of the increase of slave population from slave-breeding. In short, slave-breeding was just another productive return which the market price of slaves would have discounted. To deny this, we would have to say that the slave hunters and traders were systematically and persistently less able and insightful entrepreneurs then the final slave-masters, and there is certainly no reason to make such an assumption.
In the long run, in fact, even slave-hunting will be unprofitable. For if the slave hunting business enjoys the extra imputed profit of slave-exploitation, then more people will flock to slave hunting and the increased competition will raise the costs of slave-hunting, and lower slave prices, until the long-run fate of net return is no greater in slave hunting than in any other industry. And this is why the business of slavery can only continue to be profitable when the supply of slaves is replenished suddenly and fitfully, from non-market resources, e.g., from wars, which can surmount, for a time, the limiting forces of competition.
It should be clear that the supply of new slaves will come only from two sources: external people newly-enslaved, and domestic breeding. For it is difficult to see how any stable society can exist where domestic free citizens are continually enslaved. Such a condition would certainly bring about a perpetual “war of all against all” with everyone trying to enslave everyone else, and an end to any sort of civilization. The newly-enslaved must therefore originate from beyond the borders. War, of course, is an ideal method of building fresh supply, because the ethic engendered by wa[r]Original reads “way.” leads to the idea that the one’s prisoners are one’s to command. When, therefore, as Moes, Conrad, and Meyer agree, the drying up of external sources of supply caused slavery to decline in the Roman Empire, this too demonstrated the inherent economic weakness of slavery, and the natural tendency of the backward-capitalization of slave prices and the equalization of rates of return, to eliminate the exploitation-gains of slavery. A system, in short, where no one—master or even slave-hunter—gains, and the slaves themselves definitely lose, is a system where new supply will dry up and the incentives of voluntary manumission will cause slavery to wither away. Only prisoners taken in war can temporarily reverse this decline.
In the case of slavery in the South, Moes has pointed out how anti-manumission laws greatly slowed the process of decline. There were also other factors. After 1808, the outlawing of the slave trade paradoxically made the withering process much more difficult, for it meant an effective crippling of the slave market. With the slave market hobbled, domestic slaveholders could only increase their supply by domestic breeding—and any increase in the rate of breeding could no longer be fully capitalized backward in the prices of purchased slaves. Hence, the gains from higher productivity of breeding were no longer imputed backward to the slave traders and slave hunters. Thus, given a rise in breeding rates, the constitutional prohibition of the slave trade helped perpetuate slavery at home. Before 1808, another factor delayed the onset of competitive decline and kept the slave trade profitable longer than it would have been. For many slaves were not so created by the slave-hunters, but instead were bought from their existing “slave-masters,” the tribal chieftains of Africa. And since the tribal chieftains were outside the market framework, and were therefore poor entrepreneurs, the slave traders were able to reap great gains from the trade and leave the chieftains with a much lower return than they could have obtained. Of course, even these gains would have been competed away in the long run, but the fact the chieftains were the original enslavers delayed the process of eliminating the exploitation-gains of slavery.
Conrad and Meyer conclude their reply by chiding the Roman Empire for not realizing the rich gains of slavery, presumably from slave-breeding. But [A. H. M.] Jones has shown, in an important and neglected article, that slave-breeding in the Roman Empire, after the Pax Romana had ended the great wars (as well as that other main source of external slaves—piracy), was a costly and ineffective business. When not breeding, after all, the female slaves were largely a net liability, while children were per se a total loss, especially since so many children of ancient days died before reaching working age. That slave breeding was a shaky affair may be seen by the government laws and regulations trying to prop it up. For example, Rome decreed in 52 A.D. that if a free woman cohabitated with a slave, the slave’s owner was entitled to claim ownership of her—and her subsequent offspring. Here was a clear-cut attempt to prevent slaves from breeding outside of the slave framework. Moreover, the emperors decreed that any infants of free parents abandoned and brought up as slaves could not be reclaimed by their parents unless the latter repaid the costs of rearing the children. Augustus would not free any of his personal slaves until they had produced slave-sons to substitute for them in his service. In such ways did the Roman Empire try to shore up the dwindling supply of bred slaves.A.H.M. Jones, “Slavery in the Ancient World,” The Economic History Review IX (April, 1956): pp. 185–99, especially pp. 190–97. Jones also points out that only widespread piracy, kidnapping, and perpetual inter-tribal wars permitted slavery to flourish in Athens. Even aided by these laws, breeding was unsuccessful, and slavery gave way to the processes of voluntary sale of manumission.
American Bonds: How Credit Markets Shaped a NationSarah L. QuinnPrinceton, N.J.: Princeton University Press, 2019289 pp.
Patrick Newman (patrick.newm1@gmail.com) is assistant professor of economics at Florida Southern College and a fellow of its Center for Free Enterprise. He is also a fellow of the Mises Institute.
This is a frustrating book. Quinn’s American Bonds shows that the federal government’s credit policies were important factors behind the particular evolution of securitization and credit markets in the United States. Quinn’s historical narrative, from the country’s founding to the present day, is intertwined with a brief overview of important business cycles and economic crises that affected credit markets, such as the Panic of 1819 and the 2008 financial crisis. Although Quinn investigates how federal legislation and institutions were important in facilitating the intermediation of credit in various markets, including in land, railroads, and mortgages, she completely omits an analysis of the policies’ efficiency. She also fails to contribute to our understanding of whether the government was necessary for the formation and development of these particular markets or if private actors could have provided similar financial specialization in the absence of government involvement. In the end, American Bonds merely provides a historical overview of credit markets without seriously investigating whether the government’s intervention was indispensable or weighing the costs and benefits of its involvement.
The main problem of the book is its theoretical framework. According to Quinn markets cannot function, let alone exist, without significant government assistance and intervention. Moreover, misguided government intervention does not promote inefficiency or economic recessions, because without government involvement the outcome would have been even worse. In fact, laissez-faire is “a utopian dream,” and “attempts to move into a laissez-faire world would mean deregulation, which inevitably causes instability, crisis, and human suffering, leading people to demand protection from the government” (p. 203). Although Quinn argues that free markets are an illusion, quite astonishingly this does not stop her from describing various financial markets as “laissez-faire” because they lack (or purportedly lack) direct government oversight. Quinn naturally leaves out the indirect oversight of those financial markets, such as the Federal Reserve’s regulation of the banking system and its ability to inject credit into financial markets. Although Quinn utilizes the theories of Hyman Minsky and recognizes that “all bubbles depend on credit expansion,” expansionary monetary policy is surprisingly absent from the list of potential culprits in the start a boom (p. 27). Whenever the government does clearly contribute to a financial crisis, the escape hatch is that the unfettered market would have been much worse, so that in reality the government did nothing wrong. Quinn succinctly states her view when she discusses the recent 2008 financial crisis and the government’s decades-long involvement in securitization of mortgages and cheap credit policies:
Does this all mean that the federal government is to blame for the crisis? After all…the government played a central role in keeping credit cheap, and cheap credit fueled the crisis. While it is a fair question, I nevertheless worry that it is a misleading one. It is obviously bad policy for a government to hit the accelerator on financial markets while also removing the brakes. Aside from the issue of whether this question deflects responsibility from Wall Street…it carries the unspoken assumption of a world where advanced capitalist markets somehow exist without extensive government participation….the real problem was not regulation but overzealous deregulation. (p. 210)
Quinn’s theory of markets and the indispensable nature of state assistance allows her to sidestep investigating the efficiency and possible adverse consequences of government policies. Thus, Quinn is able to write about the development of land sales on credit without questioning whether it was an important factor behind the land speculation that led to the Panic of 1819. More importantly, Quinn fails to discuss how the government’s suspension of specie payments from 1814 through the post–War of 1812 era (with only nominal resumption in 1817) and the newly created Second Bank of the United States (established in 1816) were important factors in facilitating an increase in the money supply and a postwar boom. A similar lack of analysis is shown in Quinn’s section on federal assistance to railroads in the post–Civil War era, because she does not link the generous loan and land assistance with the transportation companies’ inefficiency and corruption (pp. 23–36).
Most aggravating are her overviews of the development of credit markets in the early twentieth century. Quinn champions the Federal Farm Loan Act of 1916, which established a system of land banks to lend to farmers. She documents the Treasury’s subsequent assistance and describes how the banks had lent roughly $350 million by the end of 1920. However, she does not link these actions at all with the difficulties that farmers experienced in the post–World War I era (pp. 82, 86–87). Could the new legislation, in addition to the European demand for US agricultural products during the war, have encouraged an overexpansion of farming and then delayed recovery by subsidizing agriculture after it was no longer needed in such large amounts? Quinn provides no answer. Quinn also neglects how other misguided government regulation in the housing market around this time gave a superficial indispensability to federal assistance. She recognizes that during the Progressive Era housing reformers advocated new construction codes that were important factors in driving up building costs beyond the increase in consumer prices, as well as how the war increased the profitability of manufacturing relative to the real estate market and led to rent controls and prohibitions on the construction of houses. However, Quinn then documents the government’s subsidization of home construction through the Army’s Ordinance Department, the Emergency Fleet Corporation, and the United States Housing Corporation without ever raising the possibility that the government created the crisis that the public and intellectuals came to believe only it could solve (pp. 92–93, 99–103). Instead, “the defenders of laissez-faire had good reasons to be worried,” because there was a clear need for the government to step into the breach (p. 103).
Overall, although this book provides important empirical information on the development of credit markets and various related government programs, it lacks a serious theoretical and interpretative framework.
The Great Reversal: How America Gave Up on Free MarketsThomas PhilipponCambridge, Mass.: Harvard University Press, 2019343 pp.
David Gordon (dgordon@mises.org) is a senior fellow at the Mises Institute.
Thomas Philippon, a French economist who teaches at New York University and advises both the US and French governments, likes the free market. He says:
Economists like competition for several reasons. The first reason is that competition pushes prices down, since the most direct way for a company to increase its market share is to offer a lower price than its competitors…In a competitive market, firms seek to attract customers not only by reducing prices, but also by offering a wide menu of quality goods and services. Competition leads to more choices for consumers as businesses cater to different segments of the population and then try to differentiate their products from those of their competitors. (pp. 18–19)
Given the manifest superiority of competition as a way to allocate scarce resources, why don’t we have a fully free market? Philippon knows the answer: “The lack of competition is explained largely by policy choices, influenced by lobbying and campaign finance contributions…[A]cross time, state, and industries, corporate lobbying and campaign finance contributions lead to barriers to entry and regulations that protect large incumbents” (p. 9). He discusses in great detail lobbying and the influence of money on politics. These ways of interfering with the free market help to explain the “great reversal.” Most people think that America has a freer and more competitive economy than Europe, and for the most part this is right. In some goods and services, though, such as air travel and cell phone plans, Europe has a freer economy and lower-cost products than we do, and this latter fact is what he means by the “great reversal.”
The way to proceed seems obvious. Government should stay out of the economy. In that way competition, unhindered by the “regulatory capture” of government agencies by entrenched interests, will be able to satisfy consumer demand.
Philippon unfortunately does not accept this simple view. As readers of the book will quickly discover, he is a convinced technocrat who cannot restrain his desire to “improve” the free market. To attempt to do this requires many technical tools, and he explains these with great enthusiasm. You will learn all you ever wanted to know about the Herfindahl-Hirschman index, Tobin’s q and the fundamental law of investment, the North American Industry Classification System (NAICS) way of classifying industries, and other arcane matters.
What is the problem with the simple view? Sometimes, Philippon says, large firms take over too much of the market for their product, and the government needs to break them up. By no means does he think that large firms are always bad. To the contrary, they sometimes become large by giving consumers what they want:
The growth of Walmart provides us with an example of efficient concentration. Its profit margins remain stable or even decline, and, most important, prices go down. Consumers benefit from Walmart’s expansion. It is fair to debate and challenge Walmart’s labor and management practices, but there is little doubt that Walmart has been good for US consumers. (p. 34)
Sometimes, though, concentration as Philippon measures it does not have such beneficial results. Why not? “If the industry is competitive, the price must equal the marginal production cost—the price to build one extra car or to produce one extra ounce of chocolate….[W]hen firms have market power[,] [t]he price is now above the marginal production cost” (pp. 27, 29). In this sad circumstance, “consumer surplus” is less than it could be. Hence the government might need to take corrective measures. As is usually the case with Philippon’s presentation of his views, this requires qualification. It’s often very hard to establish whether an industry is concentrated and, if it is, whether the concentration is “efficient.”
From an Austrian perspective, we have to distinguish two cases. Is the industry concentrated because the government has granted certain firms special privileges that enable them to exclude or restrict competition? Then, there is indeed a reason to act. These measures must be repealed. Matters are different, though, if firms do not get special privileges from the government but simply fail to generate enough “consumer surplus.” This is an artificial standard imposed on the free market, and Austrians reject it.
Philippon does not mention the Austrian view, but he does note a Chicago school position that is different from his own: “an idea from the Chicago School is that high concentration does not necessarily imply market power as long as the threat of entry is real, that is, as long as the market is contestable” (p. 87). This idea makes perfect sense, and it is difficult to understand why Philippon is more demanding.
Philippon also fails to confront another problem for his view, one that he himself recognizes. Suppose that he is right about concentration. How can the government remedy the situation, given the probability of regulatory capture by the very entrenched firms that he wishes to regulate? He has no answer to this, so far as concerns the US economy. He just hopes for the best.
He also embraces another idea at odds with the free market. He rightly notes that subsidies to particular businesses distort the market. If the government uses tax money to help a business, then the company’s success isn’t entirely a response to consumer preferences. Unfortunately, he takes “tax breaks” to be subsidies as well:
Lobbying for lower taxes is fundamentally inefficient because tax breaks create distortions in the allocations of economic resources, and because someone else must then pay these taxes…You might think that lower taxes can have beneficial incentive effects….When economists advocate for lower taxes, we mean lower marginal tax rates on as broad a base as possible. The tax breaks obtained by lobbyists take the form of loopholes and rarely improve investment and hiring decisions. (p. 163)
Later in the book, Philippon condemns “corporate tax evasion, which is legal for the most part but costly and inefficient nonetheless.” (p. 263)
Murray Rothbard brilliantly exposed the fallacy of this view in Power and Market ([1970] 2009, 1219–20):
Many writers denounce tax exemptions and levy their fire at the tax-exempt, particularly those instrumental in obtaining the exemptions for themselves. These writers include those advocates of the free market who treat a tax exemption as a special privilege and attack it as equivalent to a subsidy and therefore inconsistent with the free market. Yet an exemption from taxation or any other burden is not equivalent to a subsidy. There is a key difference. In the latter case a man is receiving a special grant of privilege wrested from his fellowmen; in the former he is escaping a burden imposed on other men. Whereas the one is done at the expense of his fellowmen, the other is not. For in the former case, the grantee is participating in the acquisition of loot; in the latter, he escapes payment of tribute to the looters. To blame him for escaping is equivalent to blaming the slave for fleeing his master. It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone. The exemption itself cannot be considered unjust unless the tax or other burden is first established as just.
Despite these problems, Philippon does have some good suggestions. He attacks occupational licensing with great force:
Geographic mobility has been declining for thirty years in the US. Workers are less likely to move between states and metropolitan areas than they were in the past. There are several plausible explanations for this trend. One of them is the steady increase in the number of workers whose occupations require some sort of license or certification…Licensing is always “officially” motivated by concerns for health, safety, and consumer protection. And sometimes it is legitimate. Often, however, it is the perfect way for incumbents to protect their rents. Indeed, they actively lobby for the extension of lobbying requirements because they understand that these are efficient barriers to entry. (p. 283)
Attempts to restrict entry range far beyond licensing:
Entry in finance is also limited by heavy—and sometimes biased—regulations…Why did we get the bloated financial industry of today instead of the lean and efficient Walmart? As it turns out, Walmart applied for a banking license in 2005, but it was denied under—who would have guessed—heavy lobbying by bankers. (p. 216)
The Great Reversal should thus be read with caution. Philippon likes competition but, like many other technocrats, he thinks he can do better than the unhampered market economy. He cannot.
Hacking off soldiers' limbs was a favorite technique of Civil War surgeons, largely because doctors wanted to avoid blame for later cases of gangrene. So doctors erred on the "safe" side. Many patients may have disagreed.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Hacksawing the Economy: How Lockdowns Are in the Tradition of Civil War Surgeons"
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part III: The Nationalists Triumph: The Constitutional Convention.
Narrated by Millian Quinteros.
Part III: The Nationalists Triumph: The Constitutional Convention.
Narrated by Millian Quinteros.
Part V: The Nationalists Triumph: The Constitution Ratified.
Narrated by Millian Quinteros.
Part III: The Nationalists Triumph: The Constitutional Convention.
Narrated by Millian Quinteros.