Kim Jong Un rolls up to village devastated by floods in luxury SUV
Kim Jong Un cracks down on defectors with new pledge for North Koreans
Jung Gwang-il was a 36-year-old married father of two when a truck delivered him late one night to hell on earth.

“When we got there, I saw people who didn’t even look human, they looked like beasts,” he recalled. “It was extraordinarily frightening.”

It was April 2000. Jung had been a privileged seafood trader at a North Korean state-run company that did business with China. He was accused of espionage by a co-worker, arrested, and taken to one of the six terrifying political prison camps established by Kim Jong Un’s dictator grandfather in the late 1940s.

The “beasts” were inmates who “couldn’t walk properly because they’d been tortured and starved.”

Many of the men arriving with Jung at the mountain prison, Camp 15, also known as Yodok, wouldn’t survive the 16 daily hours of hard labor, usually dangerous logging, with little food and only light clothing in freezing temperatures. But conditions are even more horrific at remote and fearsome Camp 16, believed to be the worst in North Korea’s vast penal system, and a place no one has ever been known to escape.

Now, between defectors like Jung and the testimony of female detainees in a new UN report, the effort to expose North Korea’s murderous penal system might finally be working. Britain announced July 11 they were slapping sanctions on the country for its prison camps. North Korea’s leader Kim Jong-un predictably went ballistic, calling it a “flagrant political plot to jump on the bandwagon of the United States’ inimical policy” — and inadvertently shined a light on camps he and his family have always denied existed.

An estimated 120,000 “enemies of the state” are warehoused in Soviet-style political prison gulags, but even “regular” prison camps are extraordinarily brutal. According to the July UN report, about 100 North Korean women who escaped to China and were forcibly repatriated suffered “appalling violations.”

“I did not sleep and worked because I did not want to be beaten. It was excruciating to a level that I even attempted to commit suicide,” said one of the women interviewed by UN probers.

The detainees reported forced nudity, invasive body searches, and sometimes torture and rape. Several women told UN officials that prison guards tried to cause pregnant prisoners to abort by beating them or making them do hard labor. There was also infanticide.

“Guards beat the infants to death or bury them alive after they are born,” wrote Roberta Cohen, the former chair of Committee for Human Rights in North Korea (HRNK), in an earlier report.

In Camp 15, an already emaciated Jung was barely able to walk after nine months of daily punishment that included waterboarding, being electrocuted while bound to a barber chair and so-called “pigeon torture” — tied to the wall for hours in such a way that he could not sit down nor stand up.

Enlarge ImageKim Jong Un and Kim Jong Il
Kim Jong Un and Kim Jong IlAP Photo/Korean Central News Agency via Korea News Service
In an interview with The Post via Zoom from Seoul, South Korea, Jung said he managed to survive Camp 15 because the trainer-inmates warned him his family would be imprisoned if he died in the camp.

Unlike Camp 16, Jung’s prison was a so-called “revolutionizing zone.” Inmates faced nightly brainwashing sessions that often lasted until midnight. But these prisoners were sometimes let go, as Jung was after three years. He swam across the Tumen River into China 12 days after his release, and eventually made it to South Korea. He wife and two kids had escaped the country previously and joined him in Seoul.

Despite harrowing reports from the UN and human-rights groups and even the death of American college student Otto Warmbier in 2017 while detained in North Korea, most outsiders know little about the concentration camps.

North Korea has long adhered to the “three generation rule” when imprisoning dissidents, meaning their entire families often have to go with them. But no one has ever escaped to report what happens in Camp 16, thought to be a “total control zone.” Captives are reportedly worked until they drop dead, possibly at the Punggye-ri Nuclear Test Site about a mile away.

“It’s like the Matrix,” Sean King, an Asian specialist with Park Strategies, told the Post. “You’re grown and harvested for the regime.”

Greg Scarlatoiu, executive director of HNRK, said, “The level of cruelty in the North Korean prison camps is truly unsurpassed in modern history. I’ve interviewed hundreds of witnesses over the years. When it comes to a gulag system, they have out-Sovieted the Soviets.”

Thomas Buergenthal, an Auschwitz survivor and judge who served on the International Court of Justice, said in 2017 that North Korean’s political prisons are as bad, if not worse, than the Nazi death camps.

Jung, now 57, leads No Chain for North Korea, a group he founded that smuggles Hollywood movies, South Korean TV and other information about the outside world into the Hermit Kingdom. According to a recent video seen by the US-backed Radio Free Asia, Kim is so enraged at North Koreans secretly watching smuggled South Korean soap operas and K-pop music videos that he’s had dozens arrested, shackled, their heads shaved, and sent to the camps for interrogation.

Having grown up worshiping Kim Jong Un’s father, the second Supreme Leader of North Korea, Jung’s only wish now is to awaken what he says are the brainwashed masses of his former country.

He despises Kim Jong Un — but his real resentment is reserved for world leaders who appease him for their own political ends.

“I blame what’s happening in North Korea on large part on the politicians and leaders who enable Kim Jong Un,” Jung said. “South Korea nowadays is a vassal state of the north and they take their orders from the north. Kim is not a normal leader who deserves to meet Trump. Kim is a killer. He is not worthy of going to summits with.

Here is what strikes me as a profound political paradox. The US government is larger, more consolidated, more powerful, and more intrusive than it has ever been in its history —indeed our sweet land of liberty is now host to the most powerful Leviathan state that has ever existed.

Never before has a government in human history owned more weapons of mass destruction, looted as much wealth from a country, or assumed unto itself the power to regulate the minutiae of daily life as much as this one. By comparison to the overgrown behemoth in Washington, with its printing press to crank out money for the world and its annual $2.2 trillion dollars in largesse to toss at adoring crowds, even communist states were powerless paupers.

At the same time — and here is the paradox — the United States is overall the wealthiest society in the history of the world. The World Bank lists Luxembourg, Switzerland, and Norway as competitive in this regard, but the statistics don’t take into account the challenges to mass wealth that exist in the US relative to small, homogenous states such as its closest competitors. In the United States, more people from more classes and geographic regions have access to more goods and services at prices they can afford, and possess the disposable income and access to credit to put them to use, than any other time in history. Truly we live in the age of extreme abundance.

What is the relationship between the rise of big government and the rise of American prosperity? It seems that people on the right and left are quick to confuse correlation with causation. They believe that the US is wealthy because the government is big and expansive. This error is probably the most common of all errors in political economy. It is just assumed that buildings are safe because of building codes, that stock markets are not dens of thieves because of the SEC (Securities and Exchange Commission), that the elderly don’t starve and die because of Social Security, and so on, all the way to concluding that we should credit big government for American wealth.

Cause and Effect Commission
Now, this is where economic logic comes into play. You have to understand something about the way cause and effect operates in human affairs to understand that big government does not bring about prosperity. Government is not productive. It has no wealth of its own. All it acquires it must take from the private sector. You might believe that it is necessary and you might believe it does great good, but we must grant that it does not have the ability to produce wealth in the way the market does.

Lasting prosperity can only come about through human effort in the framework of a market economy that allows people to cooperate to their mutual advantage, innovate and invest in an environment of freedom, retain earnings as private property, and save generation to generation without fear of having estates looted through taxation and inflation. This is the source of wealth. This is the means by which a rising population is fed, clothed, and housed. This is the method by which even the poorest country can become rich.

Now, does this system as described characterize the United States? Yes and no. This is, after all, the country that recently jailed Martha Stewart, the world’s most successful woman entrepreneur, for the crime of having not disclosed to the inquisitors every last detail about the circumstances surrounding her choice to sell a stock before its bottom dropped out.

Some of our most successful magazines celebrate entrepreneurship, but recently enacted laws, such as the Sarbanes-Oxley Act, empowered the federal government to oversee the books of every publicly listed company and even manage their methods and operations in every detail. Some have compared this act to FDR’s National Industrial Recovery Act.

This is a country with cradle-to-grave security promises that just recently added a benefit of low-price prescriptions for seniors that is going to cost hundreds of billions over time. This is a country that, when faced with a problem of airport security, created a whole new federal bureaucracy to gum up the workings of every airport in the country.

These are incredibly bad policies, enterprise killers in every way. Why, then, does enterprise continue to thrive? The answer is complex. In many ways we continue to live off the borrowed capital of previous generations. Some economic sectors benefit too greatly from an artificial injection of created credit, making prosperity seem more real than it is in sectors such as housing and perhaps stocks. There is a bitter irony at work here too in that the larger the economy is, the more there is to tax, and so government grows as an aftereffect of economic growth.

People Resist Control
But here I would like to concentrate on what I think is an explanation that is too often overlooked. It requires that we understand something about the extraordinary capacity of the human mind to overcome obstacles put in its path. In all the history of states and the history of reflection on social organization and economics, this component is the most underestimated because it is the least predictable and the most difficult to comprehend. Human beings are creative and determined, and, if they have a love of liberty, and cooperate through exchange, they can overcome seemingly impassable obstacles.

It is because of this power of human ingenuity and determination to improve the world around us, despite the state, that a vast gulf has come to separate the accumulated power of the nation-state from its effective power in the management and guidance of society and the world economy.

Now, there is a sense in which the state is nowhere as effective as it claims. Economic law limits what the state can do. The state cannot raise wages for everyone. It cannot dampen prices that want to rise without causing shortages, or increase prices that want to fall without causing surpluses. It cannot predict the course of markets or human events. It can control surprisingly few forces that work in the world.

In all its central planning, government is forever declaring the major combat operations are over, whether in foreign or domestic policy, only to discover that its real struggles and battles last and last. A good example is in the area of foreign trade. If a good or service is more efficiently produced abroad, the logic of the market will reassign production patterns until they conform. An attempt to protect domestic industry can do nothing to change this reality. Instead, protection only increases prices for consumers, subsidizes inefficient firms, and brings about ever-increasing amounts of wasted time, work, and resources.

I only mention these few examples of the limits of the state as a prelude to my general claim. It’s my view that the gulf between accumulated power and effective power is going to grow ever wider in the coming years, to the point where the nation-state itself will grow effectively weaker, more anachronistic, and finally irrelevant to the course of social development.

In these minutes, I would like to explain more in depth what I mean, and provide an account of how the relationship of society to the state has been dramatically changed over the last fifty years and will continue to do so in the years ahead. This change has fundamentally altered our view toward public life and our expectations concerning what institutions we depend upon for our security and well being. We have come to depend on the state less and less in our daily lives, even as the state has accumulated ever more power. Indeed, unless we work directly for the state, and sometimes even if we do, our activities and affairs owe ever more to the private sector.

In saying this, I am to some extent agreeing with what has become a common complaint made by neoconservative writers and left-liberal pundits. They have said for years that the civic culture is no longer coherent and cohesive. They complain that the nation-state has lost its hold on the public imagination. They whine and wail about how we have all retreated into our suburbs and internet connections and no longer rally around grand national projects that inspire us with a vision of all that government can do.

Or to put it another way, they worry that the government has run out of good excuses for spending money, taxing us, regulating us, drafting our kids, and getting us embroiled in wars. For the neoconservative crowd, 9/11 really was a godsend, just as the Oklahoma bombing was a godsend to the left-liberals of the 1990s. They were equally adept at exploiting these horrible tragedies to the great advantage of the state, and to browbeat the rest of the population into going along with the political priorities of the regime in power. But in retrospect, it is clear that these events only represented a brief parenthesis in the long-run decline of the nation-state in our social consciousness.

The Mythology of the Nation-State
Before proceeding further, it is useful to back up just a bit to remember that the nation-state as we know is a modern invention, and not an essential feature of society. In many ways, it is, as Bastiat said, nothing but an artifice that permits some to live at others’ expense. He was of course speaking of the modern state, particularly that of nineteenth-century France, and all that he wrote applies in our time as well.

But states were not always structured as we know them today. From the fall of the Roman Empire to the late Middle Ages, societies in Europe were governed not by bureaucrats, elected councils, regulations, or any kind of permanent structural apparatus of coercion and compulsion, but by competing cells of authority that were woven together not by ideology, but by separate function. The merchant class managed its affairs, the church had its purview and courts, the international traders developed their code, feudal lords were masters of their domain, free cities managed themselves, the family was largely autonomous, and the state, such as it was, consisted of extended families and lines of rulers who dared not transgress their traditional authority.

Every institution was supremely jealous of its power and authority. The emergence of liberty from feudalism occurred not because any institution brought it about but because they all stayed within their realms, cooperating where necessary but also competing for the loyalty of the public. All the institutions we associate with civilization—universities, stock markets, charities, global trade, scientific establishments, vocational schools, courts of law—were born or recaptured from the ruins of the ancient world in these supposed dark ages without nation-states.

Voltaire once wrote of how kings would conduct their wars, raising their own money and employing their own soldiers, always acquiring or losing territory and usually up to no good. But for the most part, though they dominate the history books, their activities had little or no impact on the people. It was during this time, historian Ralph Raico reminds us, that the process of accumulating capital began and the division of labor began to expand — two features that are essential to rising population and prosperity.

The nation-state as we know it — defined by a fixed governing class that enjoys the legal monopoly on the right to use aggressive force against person and property and holds a status that is higher in authority than any other institution — was a development of the breakup of Christendom and the wars of the late sixteenth century and early seventeenth century. As competitive sources of authority weakened, the state as an entity separate from its ruler came to be strengthened and consolidated, sometimes in opposition to competing authority centers and sometimes in cooperation with them.

The emergence of the modern state immediately gave rise to a countervailing force: the great liberal movement all over Europe and, shortly thereafter, in the United States. This liberal movement emphasized a single theme in its writings. It is as follows: society contains within itself the capacity for managing itself in all its affairs, especially its economic affairs, and states, to the extent that they do more than merely punish criminals, are a source of despotism and tyranny.

It was this conviction that was accepted as commonplace during the founding period of the United States, and not just by statesmen but also by merchants, farmers, ministers, and intellectuals. The conviction that society requires no central management, and should therefore be left alone by the governing class, had a name: it meant to love liberty.

The structure and founding ideology of the United States was intended to protect that idea of liberty, under the belief that if people are free to pursue their dreams, cooperating with each other and also competing with each other, freely associating to their mutual betterment, and governing their own affairs rather than permitting themselves to be governed from on high, the result will be human flourishing as never before known in history.

The Age of Leviathan
Now, it should be obvious that this model was rejected in the twentieth century, the century of government control. It began with a horrible war that brought the communists to power in Russia and the managerial class to power in the United States. Thomas DiLorenzo has discussed how we came to be saddled with an income tax, a central bank, and direct democracy all in one year. The interwar years provided an ever-so-brief respite before the world became uglier with two models of central control having presented themselves as the only viable systems: fascism and communism. We flatter ourselves if we think the New Deal represented a third choice, for it borrowed from the other two and added only the ingredient of democratic expediency.

World War II cemented into place the planned society in which all attention was directed toward the public sector as liberator and savior of mankind. The words economic development, technology, and security were bound up with one institution only: the nation-state. It was the nation-state that fought and won the war, launched the bomb, reconstructed economies, rescued the aged, educated the youth, stabilized the economy, and planned the exploration of space. The nation state was the new god: supposedly omniscient, omnipotent, and omni-competent.

The Mises Institute recently published an unpublished essay by Murray Rothbard written in the late 1950s on the subject of technology and the state. In it he departed from the whole of conventional wisdom at the time by arguing that the government was not the appropriate institution to trust with our technological future. Research and development is best done by the private sector, he said. All major innovations in world history have come about this way, he wrote, and it is from within the private sector that we should expect the next revolution. From government we can only expect technology that reinforces political priorities, but no real innovations that are both useful for the mass of the consuming public and economically viable.

These days, the paper is not shocking to read at all. Not so in those times. The paper was not published, because there was no one around to publish it. It was an argument that all his colleagues would have rejected outright. In those days, it didn’t even seem to have superficial plausibility. Even those who commissioned the piece found themselves squeamish about its contents. When you think about the public consensus that existed for the state in those days, it does indeed strike us as a different world.

In 1955, the federal government was relatively small but exercised enormous effective power. The federal budget was $68 billion, which is about one-thirty-sixth as large as that of today’s government. In fact, the whole federal government was smaller than a single department of the government today: the Department of Education, which, ironically, is the one that the Republicans keep saying that they will abolish.

But the size of the state by today’s standards masked its effective hold on the public mind. The G.I. bill, it was believed, would educate all soldiers, while the federal government would reconstruct the Europe the Nazis destroyed, even while it protected us from the demonized Soviets who had been our allies in the war the day before yesterday.

The Cold War purported to pit US capitalism against USSR communism, but the truth was that there was very little enthusiasm for market economics in the United States. It was not taught in the classrooms. Mises himself could not find a paid position as professor of economics. Keynesian thinking — which imagined the government to be an effective manager of the macroeconomy — was seen at the only real alternative to socialism.

The technological advances of the period mostly involved television and commercial flight, advances widely attributed to government wartime spending. Our information came from three approved networks and a handful of wire services. Publishing books was too expensive so self-publishing was out of the question. Intellectual and economic life was dominated by a kind of forced conformity and the culture seized by an unrelenting fear of nuclear holocaust.

The planned economy that had become fashionable in the 1930s continued its hold on public policy in the 1950s, and successfully kept many innovations at bay. The cell phone is a good example of this. Probably many people in this room carry one. As with most new technology that enters into mass distribution, we all wonder how we got along without them before. The development and expansion of this industry — which was born in 1994 — has been entirely a result of private sector initiative. We own our phones, manage our accounts, deploy the phones for email, web surfing, and even for taking and sending pictures.

The prices and plans are entirely market based, and accessible to a vast amount of the buying public. The industry is incredibly competitive. In every mall in America, cell phone dealers have their booths. When I was a kid we dreamed of personal communication devices that we read about in James Bond books. We imagined that they would be in our cars. But even Ian Fleming couldn’t have imagined their portability or the advance of wireless communications. Nor could we have imagined that they would be a mass product, available not just to spies or the rich but to everyone.

It is highly significant that this industry is rooted so deeply in the private sector. It was not too long ago that economists and political scientists believed that communication technology must always fall within the purview of the state. This belief was the basis of the creation of the old Bell system. I can recall as a young adult that the phone strapped to the wall was the only real-time contact we had with the outside world. It was owned by the one phone company, and maintained by the government. Our right to communicate was sustained and controlled by the state. No more.

So too with the mails. There was only one way to deliver a letter or package when I was a young adult, and very few imagined that it could be done any other way. A few exceptions in the law were made and now look what we enjoy: vast choice in package delivery, with the private sector offering far more choices than the public sector ever dreamed of offering. Here again the federal government had finally permitted an exception to the rule against using any provider but the federal government. Thus a slight bit of light into darkness has brightened the whole world.

Not enough can be said about the way the web has completely reshaped the world. While the internet was frozen and nearly useless after the government put it in place for purposes of military and bureaucratic communication, the private sector transformed this creaking and poorly constructed structure into the institution that would change the whole world.

A Privatized World
So it is in sector after sector. We have in these examples the story of the modern world, shaped by private enterprise, driven forward by the power of entrepreneurship, improving in a hundred million ways by employing private property toward the common good. It is done largely outside the government’s purview. Sometimes it seems as if government works as little more than an absentee mafia lord, showing up to collect a check and then retreating again to his private estate. You don’t want to make him angry but neither do you let the prospect of his sudden appearance deter your activities.

Most of our daily lives are conducted as if we are all striving to live in absence of government — precisely as the critics say. We live increasingly in private communities and use technologies that are provided for us by private enterprise. We depend on the matrix of exchange and enterprise to give us security in our homes and in our financial affairs. We manage our finances with no sense of anticipation that government will care for us in the future. Our churches and schools and workplaces and families have become the units that draw our social attention. Government and the old-fashioned civic religion just can’t find a place for themselves in this scenario. But rather than a bad thing, this strikes me as a wonderful thing, a return to the world of Tocqueville rather than the regimented national life of the postwar period.

To celebrate this is not really a matter of ideology. If the market had not been working spectacularly well despite attempts by government to hobble it and channel its energies, we would certainly find ourselves much poorer today than we were fifty years ago. And yet here we are, a country with a population that has fully doubled in size in that period and a GDP that has increased by a multiple of twenty-eight. This much we can say: by historical standards, this is a miracle, and the market, not the government, is responsible.

In the meantime, the market has outrun the state to such an extent that the whole planning apparatus of the postwar period, always based on a kind of pseudo-science, has become preposterously untenable.

This is especially true given the size and expanse of the global economy. In 1953, the dollar value of world merchandise trade between all countries totaled $84 billion, not a small sum but about one-fourth the size of the total US GDP in the same year. Today, the dollar value of world merchandise trade is $7.3 trillion, or nearly two-thirds the size of the total US GDP. This increasing integration of the world economy, which was given a huge boost by the collapse of Soviet satellites and the opening of China, has shattered the dreams of anyone who hoped national economic planning had a future.

If I can present the following metaphor of how I imagine the relationship of the productive matrix of human voluntarism to exist alongside the Leviathan state. Imagine a vigorous game of football with fast and effective players, cooperating with their teams and competing with the other team. These, we might say, constitute the activities of the market economy: consumers, producers, savers, investors, innovators, workers, and all institutions associated with the voluntary sector of society such as houses of worship, educational institutions, charitable endeavors, families, and artistic and literary associations of every sort. They are the players in this game.

However, right on the fifty-yard line sits a huge and overgrown elephant, enormously strong but also swelled up, slow, and completely unsuited to being a player in this game. Everyone knows that this monstrous animal is there, and they wish it were not. But rather than attempt to slay it and drag it away, the game proceeds apace, with runners, kickers, and throwers zipping around it. The elephant is powerful and authoritative, more so than ever, but it can hardly move. It can bat its trunk at players that prove especially annoying but it cannot finally stop the game from taking place. And the longer these players confront this strange obstacle, the better they become at working around it, and growing stronger and faster despite it.

I’ll block that metaphor before it becomes too implausible, but let me just say this about the future of this elephant state: like a dying, large, and once dangerous animal, the state will continue to be an annoyance and even deadly under certain conditions, but it will not be an effective player in our daily lives. The reason is this. The state cannot deal with change, and ours is a time of constant and relentless change. It does not navigate the world with attention to outcomes, and ours is a world in which all human endeavors are expected to achieve. Its bureaucratic structures are fine for dealing with repetitive tasks, but it cannot face new challenges. It can consume resources, but it is incapable of producing them. It is uninventive, unresponsive, unintelligent, uninformed, and unmotivated to succeed.

Ludwig von Mises provided the first full account for why this is so. The government exists outside the matrix of exchange. There are no market prices for the goods and services it endeavors to produce. The revenue it receives is not a reward for social services but rather money extracted from the public by force. It is not spent with an eye to return on investment. As a result there is no means for the government to calculate its own profits and losses. Its inability to calculate with attention to economic rationality is the downfall of governments everywhere. Its decision-making is ultimately economically arbitrary and politically motivated.

This feature of government can doom whole societies, as it did in the Soviet Union where the government presumed ownership over the whole capital stock. Because government control was complete, and there were few legal channels of escape, society and economy withered and died over time. Eventually the situation became so absurd that even the elite in the Soviet Union did not live as well as the middle class in most other well-developed countries. As much as power can be its own reward for some, this situation was clearly unsustainable.

But government control doesn’t always take that path. It always impoverishes relative to what might otherwise have been the case. But when its control is not comprehensive—or to extend that football metaphor, when the elephant doesn’t entire cover the field but still leaves room for the game to take place—the miracle that is the marketplace can still do remarkable things. Sometimes it only takes the government lessening control over one area of life to inspire stunning achievements. The government keeps trying to pave the world but private enterprise keeps growing through the cracks.

Socialist Islands
If you want a picture of the contrast between what Murray Rothbard called power and market — or the state and the private sector — consider what you see at most major airports in this country. You have two structures working side by side: the public sector as represented by the Transportation Safety Administration and the semi-private sector as represented by the airlines.

So you arrive with your luggage, and the TSA is the first to swing into action. And there you have it: the very picture of the bureaucrat: alternatively inattentive and belligerent, completely disregarding of customer well-being, so slow that they seem to exist out of time itself. They laugh amongst themselves as if they experience a real class identity and pay no mind to others. They treat mere citizens as subordinates, and are quick to accuse us mere mortals of wrongdoing.

Most of all, they don’t do their job well. They will apply a strict chemical test to a tube of Crest but will let a black ball with fuse in it go right through, unnoticed. They will give a thorough search to a young mother, and think nothing of ripping a baby out of her arms, only because she came up randomly on the list of those to get a thorough check.

Private enterprise could never work this way. If you applied a profit and loss test to such state services, bankruptcy would be a foregone conclusion. Once we get past the TSA, we are greeted with smiles and warmth hitherto unknown in the history of airline travel. They seem very much aware that the travelers have likely gone through hell in dealing with the TSA. Even these unionized employees do all they can to serve others. Somehow we arrive at our destinations in one piece and not suffering total humiliation, but this is not due to the TSA. It is due to the forces of private enterprise that still exist in the airlines.

We can think of this airport scene as a kind of microcosm of the whole economy. It is burdened, vexed, harassed, hampered, and hobbled by the state. But through the miracle of human creativity and determined effort, private enterprise has created a grand and glorious world that has surpassed the most far-flung dreams of the old utopians, a world where food once inaccessible to kings is available to the poorest of the poor, where no one need be without clothing or shelter, where even those we call poor would have been seen as enormously blessed only decades ago.

All of this leaves the question of what our political priorities should be. If it were up to me, I would push a button and reduce government to the size it was after the American Revolution, under the Articles of Confederation, and then look forward to debating whether we should get rid of the rest.

But because that is not likely to happen soon, my own sense is that if present trends continue, the years ahead will bear more in common with the Gilded Age of the late nineteenth century than the country and world as we knew it between the years of the Second World War and the end of the Cold War.

Unlike the planned and regimented economy of the postwar period, the Gilded Age was a time when technological advance and demographic shifts made the society essentially ungovernable, even given the vast power of the state. Not that this is any reason for the lovers of liberty to let down their guard: the War on Spain and the Great War that followed the post–civil war peace shattered civilization. The same can happen again to the great civilization being created and renewed in our own time. After all, the elephant can still do a lot of damage.

We can do our part to encourage the good developments and forestall the bad. What should our priorities be? Two politicians I saw on C-SPAN recently gave a speech to instruct us on the first question we should ask when we go to vote.

The first one said that we should think mainly about the children, that we should elect politicians who put their interest first. As an extension of that principle, we should ask the state to further the interests of our families and communities, this person said. Now, if all this means anything, it strikes me as highly dangerous. The state does not own the children and we don’t really want to live in a society in which the state is permitted to do with our children, family, or communities what it wishes.

Moreover, there is no such thing as the collective interests of children, families, and communities, and to pretend that there is potentially despotic. In any case, it solves no political issue, since right and left both have different plans for what they believe is best for our children. These days, their plans reach into every area of their lives, from what program they should be using to learn to read to the conditions under which they are permitted to take their first job. I can’t but think of Hannah Arendt’s warning that politicians who invoke the children are potential totalitarians.

The second politician said that we should think mainly about our security when we go to vote. The Constitution, he said, empowers the federal government to collect taxes to provide for the common defense, so that is what we should do. He proceeded to justify the whole of the American military empire that has generated so much hatred and opposition around the world and interfered so seriously with our trading relationships. He was the classic case of a person who completely ignores the founders’ warnings against war, standing armies, and militarism.

Neither Welfare nor Warfare
Now, these politicians disagree profoundly on what the political priorities should be and what we should be asking of the state. The first says we should ask for welfare. The second says we should ask for warfare. They agree to disagree, and spend our money on both. Why? Because, well, because it’s no skin off their noses. Such is the nature of public government as Hans Hoppe describes it: there is no real ownership, so of course there is a squandering of resources and ever-higher costs.

Rockwell on Everything
The only real restraint against all forms of government is public opinion. A public that says no to the state is the best defense against despotism, and the best cultural and political context in which liberty grows and thrives. Our times have taught that the world economy does not need the state. As the old liberals said, society contains within itself the capacity for self-management. Our experience in our families and communities has taught that the state does very little for our benefit. Our experience in our workplaces has taught us that the state makes productivity more difficult and gives us very little to nothing in return.

I’m often asked what an average person can to do further liberty. I say that the first and most important step is intellectual. We all need to begin to say no to the state on an intellectual level. When you are asked what you would like the government to do for you, we need to be prepared to reply: nothing. We should not ask it to save our children, nor provide security, nor give us anything at all.

We can still be good citizens. We can be good parents, teachers, workers, entrepreneurs, church members, students, and contributors to society in a million different ways. This is far more important to the future of liberty than how we vote. We must regain our confidence in our capacity for self-governance. I believe this is happening already. The empire is shrinking despite its every attempt to expand. Even if the public sector cannot and will not prepare for a future of liberty, we can. Let us look for and work toward the triumph of liberty unencumbered by Leviathan.

This speech was delivered to a business audience in East Lansing, Michigan, in Spring 2005 to a group founded by the late entrepreneur Don Foote.

Author:
Contact Llewellyn H. Rockwell Jr.

Llewellyn H. Rockwell, Jr., is founder and chairman of the Mises Institute in Auburn, Alabama, and editor of LewRockwell.com.

We are standing on the precipice of the biggest education revolution in generations.

As schools refuse at union behest to reopen full-time instruction in the fall, parents are flooding into alternative options like homeschooling and pandemic “pods.” For the first time in modern political memory, there is likely to be an exodus from public schools.

It will not just be the worst-served in poorer neighborhoods, to whom most school choice programs are geared, that leave. It will also be middle-class and wealthier families. This presents the biggest opportunity for domestic victory the Right has had in 70 years—if the Republican Party does not squander it.

William F. Buckley, Jr. may have started the conservative lament about the direction of higher education and academia in 1951, but the Right has only recently woken up to the political dangers of the elementary and secondary system. Perhaps this is because, in many ways, the common school system first implemented in the 19th century has, in the past, been an Americanizing, patriotic, and assimilatory institution.

But as it has done to so many institutions in American life, the Left’s long march has turned public school’s purpose upside down and inside out. Far from inculcating Reagan’s “informed patriotism,” today’s public schools now teach young citizens an outsized vision of America’s faults and a twisted, false view of her remarkable strengths.

While textbook information is proprietary, Howard Zinn’s A People’s History has long been a staple of high school classrooms, now bolstered by the 4,500 (at minimum) schools that have adopted the 1619 Project curriculum—a curriculum even the Project’s author now acknowledges is not factual history, but anti-American polemic.

There’s an inverse relationship between civic knowledge and the now-fashionable opinions that America is a racist and sexist country. Among people under 45, only one in five can pass the extremely basic U.S. citizenship exam given to naturalized immigrants. But half of that generation are convinced that America is a racist country and 40% disagree that we should be proud of our history.

There can be little doubt that the effect of public schooling today is far from its original purpose of forming citizens capable of living in a self-governing republic. But for decades, despite a robust private school sector, two million homeschoolers, and dozens of limited school choice programs, public school has remained the default option for 90% of American students. That may be about to change.

The Catastrophe of Remote Learning

The pandemic, with a self-defeating assist from teachers’ unions, is transforming our education landscape beyond all recognition. Parenting Facebook groups and other online forums are currently being overrun by families desperate to get a handle on what learning at home in a “pod” might entail. Overnight, gathering together a handful to a dozen students into a “co-quarantined” teaching or tutoring group has become the hottest new trend in education.

Homeschooling and micro-school parents are finding themselves inundated with questions from friends who had never considered those options before. So many are notifying states of their intentions to withdraw from public schools that government servers, unused to the strain, are crashing. Agencies previously dedicated to the placement of au pairs and nannies are capitalizing on the madness and have switched to matching tutors and teachers with families.

Until enrollment counts in the fall are taken, we won’t know for sure the extent of the exodus. But it will almost certainly dwarf normal figures. In Montgomery County, Maryland, for example, local parents have heard that instead of an expected enrollment of 2500, as few as 300 students had signed up for their local public school as of early August.

Why is this happening? After struggling through the spring, parents know what districts refuse to acknowledge: distance learning has been an utter disaster. A majority of districts never actually implemented live online instruction, and instead saddled parents with a frustrating combination of homework and multiplying digital platforms.

And that was in the better schools; in already-struggling places like Chicago, almost half of the city’s teachers did not even bother to log in to the district’s learning platforms at least three times a week. While families limped across the finish line in the initial months of the pandemic, the prospect of beginning another year this way seems to many not just inadvisable, but impossible.

The push to reopen schools does not stem from downplaying or disbelief about the effects of the virus: to the contrary, polls consistently show high levels of anxiety about the safety of students and teachers. If parents felt that schools were negotiating with them in good faith and preparing to deliver a better form of hybrid instruction in the fall, we might not have seen the mad scramble to exit the system.

But instead of working with parents, teachers’ unions and districts have chosen this moment to fully reveal how low students and families are on their list of priorities with hysterical hyperbole and outrageous non-health-related demands.

The Unions Overplay Their Hand

First, of course, there’s the request for more money from Washington. Unions want $245 billion—more than three times the normal annual federal expenditure—to reopen, despite the fact that funds from the first bailout in the CARES Act mostly have yet to be put to good use. Americans, who consistently and vastly underestimate how much the country spends on education and who have largely bought the Left’s lie that schools are underfunded, might have swallowed that one.

But in cities across the country, unions overplayed their hand. In Los Angeles they demanded that a moratorium be placed on charter schools and that the police departments be defunded before schools could open. In state legislatures across the country, unions lobbied to restrict families from switching to already-operating virtual charter schools accustomed to providing online instruction. A coalition of ten teachers’ unions across the country and the Democratic Socialists of America put together a list of political demands for reopening that included banning private school choice, testing, and police in schools.

In places where local authorities initially determined it was safe to open schools, union objections have forced last-minute reversals. In Washington, D.C., unions lined up body bags outside school system offices to show their displeasure with a potential part-time reopening; Washington, D.C. public schools will now be virtual only through fall.

Furthermore, unions have been in a desperate bid to foreclose other possibilities for parents. As early as March, they were frantically lobbying state legislatures in a bid to control what they seem to view as their captive market share of families, regardless of the quality of services offered. In Oregon, in response to lobbying from unions, the state stopped 1,600 students from transferring to a single virtual charter school network alone. Similar arrangements were passed in Pennsylvania.

And it’s not just their public competition they want to put on ice. In aforementioned Montgomery County, the municipality initially tried to force private schools to close in fall alongside public schools, a move that resulted in a huge outcry and an appeal to the governor that was eventually honored.

Union and district representatives have been relentlessly encouraging parents to avoid homeschooling or learning pods for the sake of “equity,” ignoring that shoddy distance learning also widens education gaps. Even more blatantly self-serving is their demand that parents lie to the state and enroll their children for the funds even if they plan to provide alternate learning environments.

The message from unions and district schools to struggling parents during this difficult time cannot be described as anything but tone-deaf. Many—perhaps millions—of families are getting a hard wake-up call that the current public school system places the needs of their children last while advancing nakedly partisan self-interest. “We don’t owe you an education for your child,” schools are indirectly telling parents. “But you owe us your tax dollars.”

Seize the Day

Unions clearly think parents will tolerate being dictated to, hemmed in, and left bereft of any options other than the shoddy distance learning they experienced back in spring; I do not.

Conservatives should step directly into this opening. If parents are being asked to shoulder the duties of actually educating their children, the tax dollars allocated for that purpose should flow directly to them to use for learning pods, private school, homeschooling equipment and curricula, tutors, or any other educational purpose they see fit.

This policy solution is not novel. Education savings accounts, which allow exactly the type of flexible use of state education funds that families so desperately need in the coming months, are already in operation in five states and receive extremely high satisfaction ratings from those who utilize them. As chronicled by Bill Mattox of the James Madison Institute, they’ve even been used in Florida to fund micro-schools—that is, podding—for years.

Providing families with a portion of the state funds that currently flow directly to districts, whether they’re serving families or not, would allow parents of all income levels to hire teachers for small-group, in-person learning, alleviating both fears about risk from the virus and some of the equity concerns now raised by unions and the New York Times.

Frankly, it’s rare that circumstances and policy solutions fit so seamlessly together.

Unfortunately, outside of a few presidential tweets about school reopening, the Republican Party’s response has been muted. Senator Rand Paul put his fellow caucus members on blast for considering a $100 billion bailout for public schools, even as they refuse to reopen, and he recently introduced legislation proposing to reroute federal education funds (about ten percent of education funding overall) to families. Donald Trump and his surrogates continue to help the cause of school choice from the bully pulpit, and some states like South Carolina, Oklahoma and New Hampshire have redirected aid funds directly to families.

While welcome, these limited and temporary programs are weak sauce considering that the Right has been on its cultural heels for decades, grasping at new ways to make arguments in favor of the American system and way of life to a generation that increasingly, thanks to the public school system and academia, knows little about it other than that it’s evil.

The Republican Party and the Right face a vitally important choice in the next several weeks: back parents with funds to support alternative arrangements like pods and seize the offensive against one of the Left’s most crucial cultural assets, or patch through some temporary Band-Aids in the hopes that we can all go “back to normal” after the immediate threat has passed. If they choose the latter, the normal we return to—while blessedly happier in certain ways than life in the age of COVID-19—will nevertheless be a return to more decades of culture war losses that the country cannot afford.

Having examined the nature of fractional reserve and of central banking, and having seen how the questionable blessings of Central Banking were fastened upon America, it is time to see precisely how the Fed, as presently constituted, carries out its systemic inflation and its control of the American monetary system.

Pursuant to its essence as a post-Peel Act Central Bank, the Federal Reserve enjoys a monopoly of the issue of all bank notes. The US Treasury, which issued paper money as Greenbacks during the Civil War, continued to issue one-dollar “Silver Certificates” redeemable in silver bullion or coin at the Treasury until August 16, 1968. The Treasury has now abandoned any note issue, leaving all the country’s paper notes, or “cash,” to be emitted by the Federal Reserve. Not only that; since the US abandonment of the gold standard in 1933, Federal Reserve Notes have been legal tender for all monetary debts, public or private.

Federal Reserve Notes, the legal monopoly of cash or “standard,” money, now serve as the base of two inverted pyramids determining the supply of money in the country. More precisely, the assets of the Federal Reserve Banks consist largely of two central items. One is the gold originally confiscated from the public and later amassed by the Fed. Interestingly enough, while Fed liabilities are no longer redeemable in gold, the Fed safeguards its gold by depositing it in the Treasury, which issues “gold certificates” guaranteed to be backed by no less than 100 percent in gold bullion buried in Fort Knox and other Treasury depositories. It is surely fitting that the only honest warehousing left in the monetary system is between two different agencies of the federal government: the Fed makes sure that its receipts at the Treasury are backed 100 percent in the Treasury vaults, whereas the Fed does not accord any of its creditors that high privilege.

The other major asset possessed by the Fed is the total of US government securities it has purchased and amassed over the decades. On the liability side, there are also two major figures: demand deposits held by the commercial banks, which constitute the reserves of those banks; and Federal Reserve Notes, cash emitted by the Fed. The Fed is in the rare and enviable position of having its liabilities in the form of Federal Reserve Notes constitute the legal tender of the country. In short, its liabilities—Federal Reserve Notes—are standard money. Moreover, its other form of liability—demand deposits—are redeemable by deposit-holders (i.e., banks, who constitute the depositors, or “customers,” of the Fed) in these Notes, which, of course, the Fed can print at will. Unlike the days of the gold standard, it is impossible for the Federal Reserve to go bankrupt; it holds the legal monopoly of counterfeiting (of creating money out of thin air) in the entire country.

The American banking system now comprises two sets of inverted pyramids, the commercial banks pyramiding loans and deposits on top of the base of reserves, which are mainly their demand deposits at the Federal Reserve. The Federal Reserve itself determines its own liabilities very simply: by buying or selling assets, which in turn increases or decreases bank reserves by the same amount.

At the base of the Fed pyramid, and therefore of the bank system’s creation of “money” in the sense of deposits, is the Fed’s power to print legal tender money. But the Fed tries its best not to print cash but rather to “print” or create demand deposits, checking deposits, out of thin air, since its demand deposits constitute the reserves on top of which the commercial banks can pyramid a multiple creation of bank deposits, or “checkbook money.”

Let us see how this process typically works. Suppose that the “money multiplier”—the multiple that commercial banks can pyramid on top of reserves, is 10:1. That multiple is the inverse of the Fed’s legally imposed minimum reserve requirement on different types of banks, a minimum which now approximates 10 percent. Almost always, if banks can expand 10:1 on top of their reserves, they will do so, since that is how they make their money. The counterfeiter, after all, will strongly tend to counterfeit as much as he can legally get away with. Suppose that the Fed decides it wishes to expand the nation’s total money supply by $10 billion. If the money multiplier is 10, then the Fed will choose to purchase $1 billion of assets, generally US government securities, on the open market.

Figures 10 and 11 below demonstrate this process, which occurs in two steps. In the first step, the Fed directs its Open Market Agent in New York City to purchase $1 billion of US government bonds. To purchase those securities, the Fed writes out a check for $1 billion on itself, the Federal Reserve Bank of New York. It then transfers that check to a government bond dealer, say Goldman Sachs, in exchange for $1 billion of US government bonds. Goldman Sachs goes to its commercial bank—say Chase Manhattan—deposits the check on the Fed, and in exchange increases its demand deposits at the Chase by $1 billion.

fed1
Where did the Fed get the money to pay for the bonds? It created the money out of thin air, by simply writing out a check on itself. Neat trick if you can get away with it!

Chase Manhattan, delighted to get a check on the Fed, rushes down to the Fed’s New York branch and deposits it in its account, increasing its reserves by $1 billion. Figure 10 shows what has happened at the end of this Step One.

The nation’s total money supply at any one time is the total standard money (Federal Reserve Notes) plus deposits in the hands of the public. Note that the immediate result of the Fed’s purchase of a $1 billion government bond in the open market is to increase the nation’s total money supply by $1 billion.

But this is only the first, immediate step. Because we live under a system of fractional-reserve banking, other consequences quickly ensue. There are now $1 billion more in reserves in the banking system, and as a result, the banking system expands its money and credit, the expansion beginning with Chase and quickly spreading out to other banks in the financial system. In a brief period of time, about a couple of weeks, the entire banking system will have expanded credit and the money supply another $9 billion, up to an increased money stock of $10 billion. Hence, the leveraged, or “multiple,” effect of changes in bank reserves, and of the Fed’s purchases or sales of assets which determine those reserves. Figure 11, then, shows the consequences of the Fed purchase of $1 billion of government bonds after a few weeks.

Note that the Federal Reserve balance sheet after a few weeks is unchanged in the aggregate (even though the specific banks owning the bank deposits will change as individual banks expand credit, and reserves shift to other banks who then join in the common expansion.) The change in totals has taken place among the commercial banks, who have pyramided credits and deposits on top of their initial burst of reserves, to increase the nation’s total money supply by $10 billion.

fed2
It should be easy to see why the Fed pays for its assets with a check on itself rather than by printing Federal Reserve Notes. Only by using checks can it expand the money supply by ten-fold; it is the Fed’s demand deposits that serve as the base of the pyramiding by the commercial banks. The power to print money, on the other hand, is the essential base in which the Fed pledges to redeem its deposits. The Fed only issues paper money (Federal Reserve Notes) if the public demands cash for its bank accounts and the commercial banks then have to go to the Fed to draw down their deposits. The Fed wants people to use checks rather than cash as far as possible, so that it can generate bank credit inflation at a pace that it can control.

If the Fed purchases any asset, therefore, it will increase the nation’s money supply immediately by that amount; and, in a few weeks, by whatever multiple of that amount the banks are allowed to pyramid on top of their new reserves. If it sells any asset (again, generally US government bonds), the sale will have the symmetrically reverse effect. At first, the nation’s money supply will decrease by the precise amount of the sale of bonds; and in a few weeks, it will decline by a multiple, say ten times, of that amount.

Thus, the major control instrument that the Fed exercises over the banks is “open market operations,” purchases or sale of assets, generally US government bonds. Another powerful control instrument is the changing of legal reserve minima. If the banks have to keep no less than 10 percent of their deposits in the form of reserves, and then the Fed suddenly lowers that ratio to 5 percent, the nation’s money supply, that is of bank deposits, will suddenly and very rapidly double. And vice versa if the minimum ratio were suddenly raised to 20 percent; the nation’s money supply will be quickly cut in half. Ever since the Fed, after having expanded bank reserves in the 1930s, panicked at the inflationary potential and doubled the minimum reserve requirements to 20 percent in 1938, sending the economy into a tailspin of credit liquidation, the Fed has been very cautious about the degree of its changes in bank reserve requirements. The Fed, ever since that period, has changed bank reserve requirements fairly often, but in very small steps, by fractions of one percent. It should come as no surprise that the trend of the Fed’s change has been downward: ever lowering bank reserve requirements, and thereby increasing the multiples of bank credit inflation. Thus, before 1980, the average minimum reserve requirement was about 14 percent, then it was lowered to 10 percent and less, and the Fed now has the power to lower it to zero if it so wishes.

Thus, the Fed has the well-nigh absolute power to determine the money supply if it so wishes.1 Over the years, the thrust of its operations has been consistently inflationary. For not only has the trend of its reserve requirements on the banks been getting ever lower, but the amount of its amassed US government bonds has consistently increased over the years, thereby imparting a continuing inflationary impetus to the economic system. Thus, the Federal Reserve, beginning with zero government bonds, had acquired about $400 million’s worth by 1921, and $2.4 billion by 1934. By the end of 1981 the Federal Reserve had amassed no less than $140 billion of US government securities; by the middle of 1992, the total had reached $280 billion. There is no clearer portrayal of the inflationary impetus that the Federal Reserve has consistently given, and continues to give, to our economy.

1.Traditionally, money and banking textbooks list three forms of Fed control over the reserves, and hence the credit, of the commercial banks: in addition to reserve requirements and open market operations, there is the Fed’s “discount” rate, the interest rate charged on its loans to the banks. Always of far more symbolic than substantive importance, this control instrument has become trivial, now that banks almost never borrow from the Fed. Instead, they borrow reserves from each other in the overnight “federal funds” market.

Author:
Murray N. Rothbard

Murray N. Rothbard made major contributions to economics, history, political philosophy, and legal theory. He combined Austrian economics with a fervent commitment to individual liberty.

This quote of Kamala Harris points to her totalitarian outlook. She’s claiming that we are all each other’s keepers–under the law, involuntarily. And based upon race. She’s paving the way for slavery reparations, which will do more damage to race relations in our country than anything since slavery itself. Also, she pulls out the idea that silence is akin to an act of force. Either you agree with her, or you’re basically a criminal. If demented Biden wins, she will soon be elevated to 47th President, undoubtedly America’s last; because true Americans will NOT put up with her. And, believe me: National mask mandates, defunded police and socialized medicine will be the least of our problems under the yoke of this toxic tyrant.

“Let’s speak the truth: People are protesting because Black people have been treated as less than human in America. Because our country has never fully addressed the systemic racism that has plagued our country since its earliest days. It is the duty of every American to fix. No longer can some wait on the sidelines, hoping for incremental change. In times like this, silence is complicity.”

Remember when integrity, competence & love of liberty were the requirement for a President? NOT race, gender, or ancestry?

Michael J. Hurd

Contrary to some attempts to portray Ludwig von Mises as a theorist who rejected radical solutions, we find in his works that Mises supported radical decentralization and widespread secession. Hans-Hermann Hoppe discusses Mises’s views below.

“A nation, therefore, has no right to say to a province: You belong to me, I want to take you. A province consists of its inhabitants. If anybody has a right to be heard in this case it is these inhabitants. Boundary disputes should be settled by plebiscite.” (Omnipotent Government, p. 90)

“No people and no part of a people shall be held against its will in a political association that it does not want.” (Nation, State, and Economy, p. 34)

“Liberalism knows no conquests, no annexations; just as it is indifferent towards the state itself, so the problem of the size of the state is unimportant to it. It forces no one against his will into the structure of the state. Whoever wants to emigrate is not held back. When a part of the people of the state wants to drop out of the union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so. The nation as an organic entity can be neither increased nor reduced by changes in states; the world as a whole can neither win nor lose from them.” (Nation, State, and Economy, pp. 39–40)

“The size of a state’s territory therefore does not matter.” (Nation, State, and Economy, p. 82)

“The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars.” (Liberalism, p. 109)

“If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done.” (Liberalism, pp. 109–10)

“The situation of having to belong to a state to which one does not wish to belong is no less onerous if it is the result of an election than if one must endure it as the consequence of a military conquest.” (Liberalism, p. 119)

“It makes no difference where the frontiers of a country are drawn. Nobody has a special material interest in enlarging the territory of the state in which he lives; nobody suffers loss if a part of this area is separated from the state. It is also immaterial whether all parts of the state’s territory are in direct geographical connection, or whether they are separated by a piece of land belonging to another state. It is of no economic importance whether the country has a frontage on the ocean or not. In such a world the people of every village or district could decide by plebiscite to which state they wanted to belong.” (Omnipotent Government, p. 92)

From an interview with Hans-Hermann Hoppe in the Austrian Economics Newsletter (AEN):

AEN: Was Mises better than the classical liberals on the question of the state?

HOPPE: Mises thought it was necessary to have an institution that suppresses those people who cannot behave appropriately in society, people who are a danger because they steal and murder. He calls this institution government.

But he has a unique idea of how government should work. To check its power, every group and every individual, if possible, must have the right to secede from the territory of the state. He called this the right of self-determination, not of nations as the League of Nations said, but of villages, districts, and groups of any size. In Liberalism and Nation, State, and Economy, he elevates secession to a central principle of classical liberalism. If it were possible to grant this right of self-determination to every individual person, he says, it would have to be done. Thus the democratic state becomes, for Mises, a voluntary organization.

AEN: Yet you have been a strong critic of democracy.

HOPPE: Yes, as that term is usually understood. But under Mises’s unique definition of democracy, the term means self-rule or self-government in its most literal sense. All organizations in society, including government, should be the result of voluntary interactions.

In a sense you can say that Mises was a near anarchist. If he stopped short of affirming the right of individual secession, it was only because of what he regarded as technical grounds. In modern democracy, we exalt the method of majority rule as the means of electing the rulers of a compulsory monopoly of taxation.

Mises frequently made an analogy between voting and the marketplace. But he was quite aware that voting in the marketplace means voting with your own property. The weight of your vote is in accord with your value productivity. In the political arena, you do not vote with your property; you vote concerning the property of everyone, including your own. People do not have votes according to their value productivity.

AEN: Yet Mises attacks anarchism in no uncertain terms.

HOPPE: His targets here are left-utopians. He attacks their theory that man is good enough not to need an organized defense against the enemies of civilization. But this is not what the private-property anarchist believes. Of course murderers and thieves exist. There needs to be an institution that keeps these people at bay. Mises calls this institution government, while people who want no state at all point out that all essential defensive services can be better performed by firms in the market. We can call these firms government if we want to.

Authors:
Ludwig von Mises

Ludwig von Mises was the acknowledged leader of the Austrian school of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that he called praxeology.

Contact Hans-Hermann Hoppe

Hans-Hermann Hoppe is an Austrian school economist and libertarian/anarcho-capitalist philosopher. He is the founder and president of The Property and Freedom Society.

People preoccupied with race are RACISTS. Democrats and leftists are obsessed with race. It’s all they talk or think about. They accuse others of racism, people who don’t even think about race at all. These race-obsessed bullies are trying to quiet the noise of their own minds. They’re trying to quell the guilt caused by their own racism, or by their fear they might be racist. Their neurosis should not be OUR problem. And yet it is. Cities are paralyzed by anarchy and we’re watching them disappear, one by one: New York, Chicago, Seattle, Minneapolis, Portland. They promise to come for suburbs and small towns next.

Leftism is a cancer. It’s a malignancy that swallows up civilization, beauty and freedom. We have to stop these tyrants. Voting is essential. But we need more than that. We need resistance. If we have to storm the palace gates, like America’s founders did, then so be it. Passive resistance is powerful, too. Millions of people disobeying these idiots, with their pointless mask orders and denunciation of everything American. Sometimes there IS strength in numbers. We have to learn that. These fools are worse than what the American colonists faced with the British. There’s no rationality, no civility, no justice. It’s sheer destruction. If we let it all go, it would be the greatest crime in human history.

Michael J. Hurd

Deep Inside, Rioters Are Angry That They Never Learned Anything But Lies; Our institutions have stolen critical knowledge from young people and replaced it with the poison of identity politics and political correctness.

I suspect many members of today’s street mobs have a secret in common: At some deep level, they know they are awash in ignorance of core knowledge. Claiming to be “woke” is cover for the ignorance educrats have systematically instilled in them.

For decades, leftist academics have attacked the study of history and real humanities, and now an Illinois legislator has openly called to abolish the study of history. Recent episodes of Bible burning in the streets of Portland indicate the trashing of America’s cultural memory is well past the boiling point.

Our educational institutions have committed intellectual grand theft. They have withheld critical knowledge from students and replaced it with the poison of identity politics and political correctness. This makes it difficult for students to express independent thoughts, or even to think them. Where does that leave the victims who have been forcibly injected with this ignorance?

They can’t really articulate what has been stolen from them, but they seem to sense the loss deeply. How else can one explain their primal screams and street theater, in which they both accuse and confess “systemic racism?” After educrats and media hounded them for years with the talking point that Western culture is just tales of “dead white males,” how can they even be openly curious about it without the threat of being smeared?

It’s no wonder they can’t, since the rabbit hole into which they’ve been thrown is very deep. Imagine being trained to “think” only with your emotions. The consequence is unbridled passions and confusion, like that of someone who can’t read but pretends to. The resulting impulse undergirds the perverse toppling of a statue of abolitionist Frederick Douglass, or the burning and vandalizing of a beloved elk statue in Portland while “protesting” for justice. Could the angst behind such senseless acts amount to the deep frustration of knowing so little about so much?

The Anguish and Isolation of Ignorance
If you don’t understand what it feels like to be in the dark about core knowledge, consider the poignant excerpt below. It’s from a 2012 high school newspaper in which a student mourns her ignorance of basic Bible references. The letter illustrates how illiteracy of a huge part of our culture, whether biblical or secular, can cause painful feelings of alienation. While in English class, this student felt disconnected from the culture and from others because of her ignorance.

We were discussing biblical references in passages of Mary Shelley’s ‘Frankenstein,’ and how the story of Adam and Eve was reflected into the novel.
 I thought to myself, Adam and Eve — isn’t that the passage about someone eating an apple?
 I had no idea what the story was about, and no idea what the lesson or moral was. And this wasn’t the first time something like this had occurred.
 Genesis? What is that? Moses parting the Red Sea? How did that work? When people bring up these essential topics in religious history, I feel like I am the only one who doesn’t know the story.

My lack of religious knowledge, no matter what religion it may be, is also keeping me from being a well-versed person.

Forget for a minute that today’s public school classrooms are unlikely to allow such discussions. This student felt alone because of her lack of general cultural knowledge of the Western canon. Probably millions of millennials and Gen Zers feel the same way but cannot articulate what it’s like to be in that darkness.

I can personally relate to it. I spent a long time educating myself in the humanities after miseducation in my high school and college years left huge gaps in my own cultural knowledge. It’s a miserable feeling.

The ‘Crowning Achievement’ of Cultural Ignorance
Notre Dame Professor Patrick Deneen offered a deep and compelling reflection on this situation, writing in 2016 that “our students’ ignorance is not a failing of our educational system — it is its crowning achievement.” He described his students as “know nothings” while acknowledging they were good test-takers and nice people.

Their brains are largely empty. Ask them some basic questions about the civilization they will be inheriting, and be prepared for averted eyes and somewhat panicked looks. Who fought in the Peloponnesian War? … Who was Saul of Tarsus? … Why does the Magna Carta matter? … What did Lincoln say in his Second Inaugural? … What are the Federalist Papers? … At best, they possess accidental knowledge, but otherwise are masters of systematic ignorance.

What our educational system aims to produce is cultural amnesia, a wholesale lack of curiosity, history-less free agents, and educational goals composed of content-free processes and unexamined buzz-words like ‘critical thinking,’ ‘diversity,’ ‘ways of knowing,’ ‘social justice,’ and ‘cultural competence.’

On the surface, students seem to make do with what little real knowledge they glean. But mostly they go through the politically correct motions demanded of them by some 90 percent of higher education personnel who are on board with the curriculum of cultural amnesia. When asked a simple question about a basic historical event or classic work, they “avert” their eyes. They panic.

How Did This Happen?
The process of imparting this systematic ignorance has been generations in the making. One of the many turning points in recent times was the gutting of Stanford University’s Western Civilization program. Ironically, Stanford’s program had been immensely popular among students. Those intent on destroying it used the most potent weapon they could: a smear and fear campaign, by which anyone who might promote the program would feel intimidated into silence from accusations of bigotry or white supremacy for supporting it.

When Jesse Jackson and a cohort of activists marched through the Stanford campus in 1987 chanting, “Hey hey! Ho ho! Western Civ has got to go!” that was pretty much all it took to create a domino effect in at least 50 other universities. It’s odd how easily people give up something they love just because of social pressure from a tiny minority.

The upshot is that our institutions — academia, media, government, medicine, and more — are now filled with a lot of know-nothings who pretend to know it all. Most don’t understand basic biblical allusions or standard terms from William Shakespeare embedded in the culture.

They’ve not a clue what it means to “cross the Rubicon.” Maybe they think “baroque” means something doesn’t work anymore, or that “Trinity” only means Neo’s girlfriend, or that Norway (unlocatable on a map) flies the Confederate flag. Perhaps saddest of all is the inability of the culturally ignorant to appreciate good comedy, especially satire.

The Sense That You’ve Been Cheated
Nevertheless, Deneen writes that these students deeply sense a great loss from having the study of their heritage and all of Western civilization stolen from them: “I discern their longing and anguish and I know that their innate human desire to know who they are, where they have come from, where they ought to go, and how they ought to live will always reassert itself.”

The desire for real cultural knowledge is innate because it’s tied into the need to connect with our common humanity as well as to “know thyself.” Identity politics frustrates and mocks those deeply human desires by assigning students into demographic boxes and locking them in. They must spend all their God-given time in those boxes thinking of themselves only as victims or oppressors. Victims must stay where they are. Oppressors must do the hard work of trying to be an “ally,” an exhausting and total waste of life.

Our instinct is to thrash about when locked up for long in any kind of box, but especially that kind. The raging of many of today’s wannabe wokesters likely has much in common with this deep sense of loss. They seem to be trying to make sense of the senseless, thirsting for the real knowledge that comes from open conversations and strong relationships. They don’t know how to go about getting it in a world that seems so hostile to curiosity and learning, to civilization and love.

I’m sure Deneen is right that the desire for real knowledge will reassert itself. The big question going forward is for those who can understand the pain of losing it. How can we begin to rectify this loss, if only for those who are not too far gone down the rabbit hole?

Stella Morabito is a senior contributor to The Federalist. Follow Stella on Twitter.

In order to discuss the “future of capitalism,” we must first decide what the meaning of the term “capitalism” really is. Unfortunately, the term “capitalism” was coined by its greatest and most famous enemy, Karl Marx. We really can’t rely upon him for correct and subtle usage. And, in fact, what Marx and later writers have done is to lump together two extremely different and even contradictory concepts and actions under the same portmanteau term. These two contradictory concepts are what I would call “free-market capitalism” on the one hand, and “state capitalism” on the other.

The difference between free-market capitalism and state capitalism is precisely the difference between, on the one hand, peaceful, voluntary exchange, and on the other, violent expropriation. An example of a free-market exchange is my purchase of a newspaper on the corner for a dime; here is a peaceful, voluntary exchange beneficial to both parties. I buy the newspaper because I value the newspaper more highly than the dime that I give up in exchange; and the newsdealer sells me the paper because, he, in turn, values the dime more highly than the newspaper. Both parties to the exchange benefit. And what we are both doing in the exchange is the swapping of titles of ownership: I relinquish the ownership of my dime in exchange for the paper, and the newsdealer performs the exact opposite change of title. This simple exchange of a dime for a newspaper is an example of a unit free-market act; it is the market at work.

In contrast to this peaceful act, there is the method of violent expropriation. Violent expropriation occurs when I go to the newsdealer and seize his newspapers or his money at the point of a gun. In this case, of course, there is no mutual benefit; I gain at the expense of the victimized newsdealer. Yet the difference between these two transactions—between voluntary mutual exchange, and the holdup at gunpoint—is precisely the difference between free-market capitalism and state capitalism. In both cases we obtain something—whether it be money or newspapers—but we obtain them in completely different ways, ways with completely different moral attributes and social consequences.

Here I can’t resist the temptation of pointing out that I have an entirely different interpretation of Jefferson and Hamilton from that of Professor Averitt. I don’t regard Jefferson as some sort of early Franz Boas–type, an early Left-Wing anthropologist. He wasn’t. My reading of Jefferson is completely different; on my reading, Jefferson was very precisely in favor of laissez-faire, or free-market, capitalism. And that was the real argument between them. It wasn’t really that Jefferson was against factories or industries per se; what he was against was coerced development, that is, taxing the farmers through tariffs and subsidies to build up industry artificially, which was essentially the Hamilton program.

Jefferson, incidentally, along with other statesmen of his time, was a very learned person. He read Adam Smith, he read Ricardo, he was very familiar with laissez-faire classical economics. And so his economic program, far from being the expression of bucolic agrarian nostalgia, was a very sophisticated application of classical economics to the American scene. We must not forget that laissez-faire classicists were also against tariffs, subsidies, and coerced economic development.

Furthermore, the term “equality,” as used by Jefferson and Jeffersonians, was employed in the same sense as Jefferson’s friend and colleague George Mason used when he framed the Virginia Declaration of Rights shortly before Jefferson wrote the Declaration of Independence:

“that all men are by nature equally free and independent.” In other words, “equality” did not then mean what we often mean by equality now: equality of condition or uniformity. “Equality” meant that each person has the right to be equally free and independent, to enjoy the right to “equal liberty,” as Herbert Spencer would phrase it a century later. In other words, again what I am saying is that the Jeffersonian wing of the Founding Fathers was essentially free-market, laissez-faire capitalists.

To return to the market: the free market is really a vast network, a latticework, of these little, unit exchanges which I mentioned before: such as exchanging a dime for a newspaper. At each step of the way, there are two people, or two groups of people, and these two people or groups exchange two commodities, usually money and another commodity; at each step, each benefits by the exchange, otherwise they wouldn’t be making it in the first place. If it turns out that they were mistaken in thinking that the exchange would benefit them then they quickly stop, and they don’t make the exchange again.

Another common example of a free market is the universal practice of children swapping baseball cards—the sort of thing where you swap “two Hank Aaron[s]” for “one Willie Mays.” The “prices” of the various cards, and the exchanges that took place, were based on the relative importance that the kids attached to each baseball player. As one way of annoying liberals we might put the case this way: liberals are supposed to be in favor of any voluntary actions performed, as the famous cliché goes, by “two consenting adults.” Yet it is peculiar that while liberals are in favor of any sexual activity engaged in by two consenting adults, when these consenting adults engage in trade or exchange, the liberals step in to harass, cripple, restrict, or prohibit that trade. And yet both the consenting sexual activity and the trade are similar expressions of liberty in action. Both should be favored by any consistent libertarian. But the government, especially a liberal government, habitually steps in to regulate and restrict such trade.

It is very much as [though] I were about to exchange two Hank Aarons for one Willie Mays, and the government, or some other third party, should step in and say: “No, you can’t do that; that’s evil; it’s against the common good. We hereby outlaw this proposed exchange; any exchange of such baseball cards must be one for one, or three for two”—or whatever other terms the government, in its wisdom and greatness, arbitrarily wishes to impose. By what right do they do this? The libertarian claims by no right whatsoever.

In general, government intervention can be classified in two ways: either as prohibiting or partially prohibiting an exchange between two people—between two consenting adults, an exchange beneficial to both parties; or forcing someone to make an “exchange” with the government unilaterally, in which the person yields something up to the government under the threat of coercion. The first may include outright prohibition of an exchange, regulating the terms—the price—of the exchange, or preventing certain people from making the exchange. As an example of the last intervention, in order to be a photographer in most states, one must be a duly licensed photographer—proving that one is of “good moral character” and paying a certain amount of moolah to the state apparatus. This in order to have the right to take somebody’s picture! The second kind of intervention is a forced “exchange” between us and the government, an “exchange” that benefits only the government and not ourselves. Of course, taxation is the obvious and evident example of that. In contrast to voluntary exchange, taxation is a matter of leaping in and coercively seizing people’s property without their consent.

It is true that many people seem to believe that taxation is not imposed without our consent. They believe, as the great economist Joseph Schumpeter once said, that taxes are something like club dues, where each person voluntarily pays his share of the expenses of the club. But if you really think that, try not paying your taxes sometime and see what happens. No “club” that I know of has the power to come and seize your assets or jail you if you don’t pay its dues. In my view, then, taxes are exploitation—taxes are a “zero-sum” game. If there’s anything in the world that’s a zero-sum game, it’s taxation. The government seizes money from one set of people, gives it to another set of people, and in the meanwhile of course lops off a large chunk for its own “handling expenses.” Taxation, then, is purely and pristinely robbery. Period.

As a matter of fact, I challenge any of you to sit down and work out a definition of taxation that would not also be applicable to robbery. As the great libertarian writer H. L. Mencken once pointed out, among the public, even if they are not dedicated libertarians, robbing the government is never considered on the same moral plane as robbing another person. Robbing another person is generally deplored; but if the government is robbed all that happens, as Mencken put it, “is that certain rogues and loafers have less money to play with than they had before.”

The great German sociologist Franz Oppenheimer, who wrote a magnificent little book called The State, put the case brilliantly. In essence, he said, there are only two ways for men to acquire wealth. The first method is by producing a good or a service and voluntarily exchanging that good for the product of somebody else. This is the method of exchange, the method of the free market; it’s creative and expands production; it is not a zero-sum game because production expands and both parties to the exchange benefit. Oppenheimer called this method the “economic means” for the acquisition of wealth. The second method is seizing another person’s property without his consent, i.e., by robbery, exploitation, looting. When you seize someone’s property without his consent, then you are benefiting at his expense, at the expense of the producer; here is truly a zero-sum “game”—not much of a “game,” by the way, from the point of view of the victim. Instead of expanding production, this method of robbery clearly hobbles and restricts production. So in addition to being immoral while peaceful exchange is moral, the method of robbery hobbles production because it is parasitic upon the effort of the producers. With brilliant astuteness, Oppenheimer called this method of obtaining wealth “the political means.” And then he went on to define the state, or government, as “the organization of the political means,” i.e., the regularization, legitimation, and permanent establishment of the political means for the acquisition of wealth.

In other words, the state is organized theft, organized robbery, organized exploitation. And this essential nature of the state is highlighted by the fact that the state ever rests upon the crucial instrument of taxation.

I must here again comment on Professor Averitt’s statement about “greed.” It’s true: greed has had a very bad press. I frankly don’t see anything wrong with greed. I think that the people who are always attacking greed would be more consistent with their position if they refused their next salary increase. I don’t see even the most Left-Wing scholar in this country scornfully burning his salary check. In other words, “greed” simply means that you are trying to relieve the nature-given scarcity that man was born with. Greed will continue until the Garden of Eden arrives, when everything is superabundant, and we don’t have to worry about economics at all. We haven’t of course reached that point yet; we haven’t reached the point where everybody is burning his salary increases, or salary checks in general. So the question then becomes: what kind of greed are we going to have, “productive greed,” where people produce and voluntarily exchange their products with others? Or exploitative greed, organized robbery and predation, where you achieve your wealth at the expense of others? These are the two real alternatives.

Returning to the state and taxation, I would point out incidentally that Saint Augustine, who is not famous for being a libertarian, did however set forth an excellent libertarian parable. He wrote that Alexander the Great had seized some pirate, and asked the pirate what he meant by seizing possession of the sea. And the pirate boldly replied: “What you mean by seizing the whole earth; but because I do it with a little ship, I am called a robber, while you, because you do it with a great fleet are called an emperor Here Augustine highlights the fact that the state is simply robbery writ large, on an enormous scale, but robbery legitimated by intellectual opinion.

Take, for another example, the Mafia, which also suffers from a bad press. What the Mafia does on a local scale, the state does on an enormous scale, but the state of course has a much better press.

In contrast to the age-old institution of statism, of the political means, free-market capitalism arrived as a great revolutionary movement in the history of man. For it came into a world previously marked by despotism, by tyranny, by totalitarian control. Emerging first in the Italian city-states, free market capitalism arrived full scale with the Industrial Revolution in Western Europe, a revolution that brought about a remarkable release of creative energy and productive ability, an enormous increase of production. You can call that “greed” if you wish; you can attack as “greed” the desire of someone on a poverty level who wishes to better his lot.

This reminds me of an interesting point on “greed” that cuts across the usual “Left-Right” continuum. I remember when Russell Kirk first launched the contemporary conservative movement in this country, in the mid-1950s. One of the leading young conservatives of that era addressed a rally, and opined that the whole trouble with the world, and the reason for the growth of the Left, is that everyone is “greedy,” the masses of Asia are “greedy,” and so on. Here was a person who owned half of Montana, attacking the mass of the world population, who were trying to rise above the subsistence level, to better their lot a bit. And yet they were “greedy.”

At any rate, free-market capitalism, the Industrial Revolution, saw an enormous outpouring of productive energies, an outpouring that constituted a revolution against the mercantilist system of the seventeenth and eighteenth centuries. In fact the mercantilist system is essentially what we’ve got right now. There is very little difference between state monopoly capitalism, or corporate state capitalism, whatever you want to call it, in the United States and Western Europe today, and the mercantilist system of the pre–Industrial Revolution era. There are only two differences; one is that their major activity was commerce and ours is industry. But the essential modus operandi of the two systems is exactly the same: monopoly privilege, a complete meshing in what is now called the “partnership of government and industry,” a pervasive system of militarism and war contracts, a drive toward war and imperialism; the whole shebang characterized the seventeenth and eighteenth centuries. The really key difference is that they didn’t have a gigantic P.R. apparatus; they didn’t have a fleet of intellectuals trumpeting to all and sundry the wonders of the system: how it promotes the common good and the general welfare, how this is Liberalism In Action. They said, “We’re out to shaft the public and we’re doing it!” They were very honest in those days. It’s really refreshing, by the way, to go back and read the material before 1914 and bask in the honesty of the period.

One of the concepts important in this connection is that of Albert Jay Nock, a great libertarian thinker and follower of Franz Oppenheimer. Nock coined two concepts: what he called “social power” on the one hand, and “state power” on the other. Social power is essentially what I have been talking about: the productive energies released by the free market, by voluntary exchanges, people interacting voluntarily and peacefully. “State power” is parasitism, exploitation, and the state apparatus in general—organized taxes, regulation, etc. And Nock saw history as essentially a race between social power and state power. In the Industrial Revolution period, for example, from various circumstances state power was minimal, and this allowed social power to take a tremendous burst upward. And what has happened in the twentieth century is essentially that state power has caught up; they’ve moved in on society and started crippling it once again.

What, then, is my view of the “future of capitalism”—our topic for today? My view of the future is highly optimistic. I really think that free-market capitalism, even though it is supposed to be a reactionary, Neanderthal institution, is the wave of the future. For one thing, it was the wave of the future a hundred and two hundred years ago, and what we have now is only a reactionary reversion to the previous system. The present system is not really “progressive” at all.

Second, it was discovered by Ludwig von Mises back in 1920 that socialism—the other polar alternative to our present neomercantilism—cannot run an industrial system. An agricultural system can be run indefinitely by almost anyone, as long as you leave the peasants alive. You can have almost any kind of tyrannical system over the peasants. But in an industrial system you need much more than that: you need a market, you need profit-and-loss tests, you can’t run the system haphazardly. And Mises proved that a socialist system cannot calculate economically, because it doesn’t have a price system for capital goods, and therefore socialism will not be able to run an industrial system. All the textbooks say that Mises was quickly refuted by Oskar Lange and others, but he really wasn’t refuted. I haven’t got time to go into the theoretical argument. But in practice what has happened is that, in response to industrialization, there has been a tremendous shift in the last fifteen years in the socialist countries of Eastern Europe away from socialism and towards a free market.

For a believer in freedom and the free market, this shift is one of the most exciting developments of the past two decades. Now there are only two interpretations of this development: either you have to say, as the Chinese do, that the Yugoslavs, the Poles, the Czechs, the Slovaks, the Hungarians have all sold out to capitalism—they’ve gone in secret to the American Embassy and received their pay. Or you have to say that something deeper is happening, that what is essentially happening is that they tried socialism and it didn’t work, especially as the economies began to industrialize. They found in practice, pragmatically, without reading Mises (though there’s evidence that they’ve read Mises by this time) and Hayek and others, that socialism can’t calculate, they came to that conclusion themselves.

Lenin, indeed, came to that conclusion very early, when “War Communism” was scrapped in 1921. “War Communism” was an attempt, shortly after the Bolshevik Revolution, to leap into full communism, into an economy without money and without prices, in which everyone was supposed to—and in practice was forced to—present his goods to the common heap, and withdraw from that heap to satisfy his needs. The system of War Communism proved to be a total disaster–not because of the Civil War (that rationalization only came much later), but because of the communist system itself.1

Lenin soon realized what was happening, and quickly instituted the New Economic Policy, which was essentially a return to a quasi-free-market system. And now the Eastern European countries, especially Yugoslavia, have been moving very rapidly since the 1950s away from socialism and central planning and toward a free-market system.

In Yugoslavia, for example, agriculture, still the main industry, is almost completely private; a flourishing private sector exists in trade and small manufacturing; and the “public sector” has been turned over in fact as well as in law by the state to the ownership of the workers in the various plants—essentially functioning as producers’ cooperatives. Furthermore, there is substantially a free market between these producers’ co-ops, with a flourishing price system, stern profit-and-loss tests (when a firm loses enough money, it goes bankrupt). Moreover, the most recent Yugoslav economic reform, which began in 1967 and is still underway, saw a tremendous drop in the rate of taxation of their co-ops—a drop from the previous approximately 70 percent income tax rate to about 20 percent. This means that the central Yugoslav government no longer exercises complete control over investment: investment, too, has been decentralized and destatized. As a matter of fact, if one reads the Communist economists in Yugoslavia—especially in the relatively industrialized areas of Croatia and Slovenia—they sound very much like Barry Goldwater or Ronald Reagan. “Why should we productive Croats or Slovenes,” they ask, “be taxed in order to subsidize those lazy slobs down in Montenegro?” And: “why should we build uneconomic (‘political’) factories? Everyone should stand on their own feet,” etc. The next step in Yugoslavia is that the banks—which, incidentally, are largely competitive private co-ops owned by their business clients—are agitating for a stock market in a Communist country, which would have been considered incredible ten or twenty years ago. And what they are proposing to call this system—literally—is “socialist people’s capitalism.”

On this point, a few years ago I was teaching a course in Comparative Economic Systems. Naturally, I spent the term praising the free market, and attacking socialism and central planning. Finally, I invited an exchange professor from Hungary—an eminent Communist economist—to give a guest lecture, and the kids felt: “Ah, at least we’re going to get the other side of the picture.” And what did the Hungarian economist do? He spent the entire lecture praising the free market and attacking central planning. He said almost exactly what I had been saying up till then.

In Eastern Europe, then, I think that the prospects for the free market are excellent—I think we’re getting free-market capitalism and that its triumph there is almost inevitable. In the United States, the prospects are a little more cloudy, but here too we see the “New Left” picking up a lot of the positions that we “extreme Right-Wingers” used to have. Much of the position that used to be called “extreme Right-Wing” twenty years ago is now considered quite leftish.

As a result, I, with the same position I had then, have been shifted bodily from extreme right to left without any effort on my part at all. Decentralization; community control; attack on Leviathan government, on bureaucracy, on government interference with each person’s life; attack on the state-ridden educational system; criticism of unionism, which is tied up with the state; opposition to militarism, war, imperialism, and conscription; all these things that the Left is now beginning to see, [are] precisely what we “extreme Right-Wingers” have been saying all along. And, as far as “decentralization” goes, there is nothing that is so decentralized as the free market, and perhaps this too will come to the attention of the public.

And so, I’m very optimistic about the future of free-market capitalism. I’m not optimistic about the future of state capitalism—or rather, I am optimistic, because I think it will eventually come to an end. State capitalism inevitably creates all sorts of problems which become insoluble; as Mises again has pointed out, one intervention into the system to try to solve problems only creates other problems, which then demand further interventions, etc., and so the whole process keeps snowballing until you have a completely collectivist, totalitarian system. It’s very much like the escalation in Vietnam, by the way; the principle, as we all know by this time, is that government intervention in Vietnam creates problems which demand further escalation, etc. The same thing happens in domestic intervention, the farm program being a splendid example of this process.

Both in Vietnam and in domestic government intervention, each escalating step only creates more problems which confront the public with the choice: either press on further with more interventions, or repeal them—in Vietnam, withdraw from the country. Now in Yugoslavia and the rest of Eastern Europe, they have taken the opposite path: of progressive deëscalation, of continuing repeal of one intervention after another, and on toward the free market. In the United States we have so far taken the path of accelerating interventions, of ever greater hobbling of the free market. But it is beginning to become evident that the mixed system is breaking down, that it doesn’t work. It’s beginning to be seen, for example, that the Welfare State does not tax the rich and give to the poor; it taxes the poorer to give to the richer, and the poor in essence pay for the Welfare State. It is beginning to be seen that foreign intervention is essentially a method of subsidizing favored American corporations instead of helping out the poor in the undeveloped countries. And it is now becoming evident that the Keynesian policies only succeeded in bringing us to the present impasse of inflation-cum-recession, and that our Olympian economists have no way of getting out of the present mess at all, except to cross their fingers and their econometric models and pray. And, of course, we can look forward to another balance-of-payments crisis in a couple of years, another episode of inflationary crisis in a couple of years, another episode of gold-outflow hysteria.

Thus, we have a lot of crises looming in America, some on their way, others imminent or already here. All of these crises are the products of intervention, and none of them can really be solved by more intervention. Again, I believe that we will eventually reverse our present course—perhaps taking Yugoslavia as our paradigm. Incidentally, Professor Averitt mentioned the Great Depression. The Great Depression has always been considered as the product of free-market capitalism of the 1920s. It was the result of very heavy government intervention in the 1920s, an intervention, by the way, that is very similar to the current intervention. In the 1920s, we had the newly imposed Federal Reserve System, which all the Establishment economists of the day assured us would eliminate all future depressions; the Federal Reserve System would henceforth manipulate prices and the money supply and iron out business cycles forever. Nineteen twenty-nine and the Great Depression were the results of that manipulation guided by the wise hands of Establishment economics—they were not the results of anything like free-market capitalism.

In short, the advent of industrialism and the Industrial Revolution has irreversibly changed the prognosis for freedom and statism. In the pre-industrial era, statism and despotism could peg along indefinitely, content to keep the peasantry at subsistence levels and to live off their surplus. But industrialism has broken the old tables; for it has become evident that socialism cannot run an industrial system, and it is gradually becoming evident that neomercantilism, interventionism, in the long run cannot run an industrial system either. Free-market capitalism, the victory of social power and the economic means, is not only the only moral and by far the most productive system; it has become the only viable system for mankind in the industrial era. Its eventual triumph is therefore virtually inevitable.

Murray N. Rothbard

Interesting little development in my neck of the woods, and also the town where Joe Biden owns a beach house. The mayor of Rehoboth Beach, Delaware, was decisively defeated yesterday in his reelection bid for mayor. For months, the mayor has throttled, harassed and threatened small town businesses over COVID, even as the death numbers for the mostly nonfatal virus have gone down, down, down. He has ruined the boardwalk and shopping district for the summer (their prime earnings season), and has already driven some restaurants into bankruptcy.

At one low point last spring, the mayor threatened to build a wall blocking the view of the ocean from the boardwalk (Joe Biden’s oceanfront view would remain intact, of course). Earlier in the summer, he forced sunbathers on the beach to wear face diapers (excuse me, face masks) and after the ensuing outcry he defensively replied that at least “you don’t have to wear them in the water.” He was forced to back down on this one, but ordered the police to harass vacation goers who refused to wear face diapers.

It’s the kind of disgusting tyranny and thuggery disguised as compassion and concern that has dominated blue states and cities in particular throughout what was once our land of liberty. Rehoboth Beach is a pretty Democratic area, but they still threw the arrogant prick out. It’s a gleam of hope for November. If people are this angry in Joe Biden’s summer beach home, hopefully they’re mad as hell everywhere. While I know next to nothing about the mayor’s successor, kudos to Rehoboth Beach voters for putting out the trash.

Michael J. Hurd