The Centenary of the Cartel’s Charter

The Centenary of the Cartel’s Charter.

So it’s the 100 year anniversary of the creation, by legislation, of the Federal Reserve. How appropriate that not more than two weeks ago I picked up a used (but basically new) copy of G. Edward Griffin’s The Creature from Jekyll Island? I’ve always wanted this book, but given opportunity cost, I tended to put off going out of my way to buy it. Finding a recent (perhaps the latest) edition at a bargain center for less than $2.00, however, proved irresistible. I think maybe I should start it tonight in honor of this day. Or at least give this another listen:

End the Fed!!!

What Ails You, Economy?

What Ails You, Economy?

The Keynesian is ever mistaking economic activity for economic growth, credit expansion for wealth creation, profligacy for progress. Growth, wealth, progress. He uses his own definitions of each to reinforce his definitions of the others. And they are all fallacious.

When the Austrian tells the Keynesian that the printing and spending of mere pieces of paper cannot lead to more wealth in society, the Keynesian retorts that it is undeniable that credit expansion and stimulus lead to more economic activity. In this he is technically correct. Printing more dollars and handing them out to those who would consume and invest them, does indeed lead to “activity,” even more perhaps than there otherwise would have been.

But our Keynesian assumes, or assumes that his audience will assume, that mere economic activity is growth, is wealth, is progress. Presumably this includes even that activity which our Austrian rightly considers overinvestment (more properly, malinvestment), overconsumption, and/or the proverbial breaking of windows, each of these a common side-effect of the Keynesian witchdoctor’s remedies (often intended to cure ailments caused by earlier interventions, some Keynesian, some not).

If the Keynesian’s definition of economic activity doesn’t (oh, but it does!) include these things then the burden of proof is on him to show that his prescriptions lead to more real growth than would their absence on an unhampered market. And that his incantations lead, on the whole, to economic health rather than disease. A free market is largely unencumbered by the ailments mentioned above so in order to do this it would need to be shown that the sicknesses that do affect it are somehow worse than those caused by intervention.

And to be sure, pure economic freedom isn’t perfect. It has its own share of maladies. But these are all coughs and sneezes by comparison. Cures, if they are needed at all, come from the market itself. The economic meddlers and potion peddlers only serve to make things worse.

We must admit that not even on the most unfettered of markets does all economic activity lead to growth. For human actors err, and the market punishes their errors. How much more is all this the case under a centrally-planned expansionary-monetary/stimulatory-fiscal regime?  And how much more severe will be the punishment?

Standard Oil, Like a Phoenix Rising from the Ashes (Bust the Trusts! The Right Way for Once!)

Standard Oil, Like a Phoenix Rising from the Ashes (Bust the Trusts! The Right Way for Once!).

What is it with me and bashing evil corporations of late (not necessarily on this blog, though I’m sure if you look through the archives…)? I hope it’s not habit-forming.

Well, could be that some of them, at least at some point in their history, became what they are with special thanks to the government. Could also be that some of them have been grandfathered in and are protected from competition from those who haven’t been grandfathered in. Might also have a little something to do with the fact that some of them have benefitted from foreign policy meddling and institutionalized theft committed by the state. But other than that, I have few complaints. Here’s a comment I left (since edited) at the end of a survey that sparked this article:

“I like surveys that have political and societal relevance. I believe in the desirability and functionality of free markets. And Exxon Mobil is a great company all things considered. However, they could not have gotten to where they are today without a little outside help. Some of this came from the consumer, to be sure. But some of it came from the state through the virtual cartel status granted to all major [US, Dutch, and British, at least] oil companies going back at least to the 1953 [CIA instigated] Iranian Coup… [This] greatly benefitted the Seven Sisters oil companies (a number of which [were Standard Oil descendants that later] merged to become Exxon Mobil) and is one of the main causes of unease in the Middle East and around the world today. They, like all oil companies, great and small, foreign and domestic, have also benefitted from oil’s status as de facto commodity backing for the US dollar. The world reserve currency known as the Federal Reserve Note is denominated in crude oil. The oil companies have a vested interest in maintaining this corrupt arrangement.”

Federal Reserve Octopus

What say you? Are some/most/all big corporations what they are today more thanks to competition or more thanks to monopoly? Here’s one for extra points: what about “small business,”? Aren’t they also protected from competition, in certain industries more than others, by regulations that keep newcomers out and by subsidies that keep competing technologies down?

For the record, anti-trust legislation actually has the effect of restraining competition, thereby securing monopoly, so when I say “bust the trusts” I don’t advocate anti-trust legislation, I simply want to let free market competition give some of these bigger guys a run for “their” money! The burden of proof is on them to show that they would really be as big as they are today were they under a system of laissez-faire capitalism. I guess you could say I’m with the left-libertarians on this one (except for the fact that I dared to use the word “capitalism”).

Standard Oil Octopus

Also, Brandon and I had our little chat on conspiracy theories. The collusion of big businesses (usually involving the state at some level) to form cartels (take note that Standard Oil, known to us today as Exxon Mobil and Chevron, was owned by John D. Rockefeller, who also had a hand in creating the Federal Reserve; I wouldn’t say everything that has happened in regards to these two was meticulously plotted, but I wouldn’t call it mere coincidence, either) happens to be one of the ones that I subscribe to. I think Adam Smith can back me up on this one. And unlike some who use the quote to support anti-trust legislation, I’ll give you more than just the first two sentences in order to show why such laws are not the best conclusion:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

Monopoly Octopus

Ron Paul, Change Agent

Ron Paul, Change Agent.

From what I can tell, a “change agent” in the lingo of the conspiracy theorist is a person who seems alright on the surface but in reality is bought and paid for by the New World Order/Illuminati/Bilderbergs and whose primary function is to co-opt the opposition and channel their frustration into fruitless endeavors, so that the powers that be may effect the change they desire with virtually no threats to their plan. If someone like Ron Paul can be accused of this, of course, then no one is safe. Which is why using the term “change agent” in this way has little effect. But as an actual agent of change, Ron Paul’s record speaks for itself, I think. No, I don’t mean his legislative record, for this is rarely something anyone should be proud of, and at best serves only to condemn the person in question for the misdeeds they have committed in the name of making law and doing the will of the people. I refer to his other record. His list of achievements in public life outside of the halls of Congress.

The man has single-handedly convinced thousands upon thousands of people to adopt a more freedom-oriented outlook on life, if not also to utterly transform their worldview. And he continues to do so with his latest book, which I received in the mail today not more than a few hours ago. I’m already reading it and in the first chapter he is keen to stress the ideas that liberty and personal responsibility go hand in hand (one might term this a “Virtuous Voluntaryism“) and that an education’s structure and content must be consistent with one another in order to be effective.

I hope that thousands if not millions of people read this book (and/or others like it) and come away from it with a fresh or reinforced opinion on what needs to be done with our education system (hint, the bulk of the fight takes place outside of “the system”), which is in a complete shambles. Because that’s just how many people it is going to take to reform fix restructure completely uproot the current establishment. Doing this is an end in itself, of course. But it is also a means to a far greater goal. Children raised by the state cannot help, on the whole, but to be children raised for the state. Ron Paul forcefully drives home the point that the status quo cannot be successfully challenged without first addressing the wholesale brainwashing of what many deem to be society’s greatest asset: the children. Stop the elites and bureaucrats on this front and victory over them in perhaps every other field of battle is all but assured.

So I encourage you to read this book, to suggest to others that they read it, and once done, to share (your/their) copy with still others (could be wrong, but I think it’s WAY easier to do this with a hard copy than with a Kindle or iPad). That is what I intend to do with mine. I hope and expect to be finished with it within the week.

Classical Liberals Who Weren’t Right About Everything

Classical Liberals Who Weren’t Right About Everything.

[The following is my entry for the second Thorpe-Freeman Blog Contest, originally published at Notes on Liberty on June 25th. It was one of two runners up. My entry for last July’s contest (I chose not to enter the August contest because The Freeman combines the two months into one issue), can be read here.]

Many classical liberals and their ideas have been maligned by their interpreters. We must set the record straight. Professor Ross Emmett, in “What’s Right with Malthus,” from The Freeman, champions the cause of Thomas Robert Malthus, who, contrary to what one might think after encountering Malthus’ followers and critics,

argued that private property rights, free markets, and…marriage were essential features of an advanced civilization.

Some disciples of Malthus took his erroneous population theory as evidence of the need for eugenics, population control, and environmental “regulation.” They ignored Malthus’ arguments favoring institutions more capable of (and more compassionate in) achieving their desired ends; institutions that first came about not by design, but by convention. The eugenicists Francis Galton and Julian Huxley (both related to Darwin), and eco-catastrophist Paul Ehrlich come to mind.

But there were also critics, who, preferring utopian visions of the perfectibility of mankind, denounced Malthus’ pessimistic views. Anarchists William Godwin and Pierre-Joseph Proudhon are most notable in this regard. Godwin and Malthus had exchanged criticisms (noted by Emmett) in some of their essays. Malthus attacked Godwin’s utopianism. Godwin assailed Malthus’ assumption of arithmetical increase in agricultural output, as compared to geometrical increase of population. And Proudhon targeted the overzealous Malthusians of his day, citing as grievances the former’s antagonism toward the lower classes. While neither Godwin nor Proudhon did terrible injustice to Malthus himself, they unintentionally contributed to the myth that the worst variety of population catastrophists were the most orthodox.

Notice the themes that Professor Emmett brings to our attention. First, that even in their controversial and disputable contributions, great theorists illuminate the path for later philosophers. Second, that human institutions can mitigate human nature’s undesirable effects.

In light of these, consider two other social theorists whose ideas have been abused by overenthusiastic students and overreactive peers alike: Herbert Spencer (insightful Malthus adherent), and the aforementioned Mr. Proudhon (noteworthy Malthus critic).

Leading “social Darwinist” (a pejorative used to link eugenics and capitalism), Herbert Spencer (considered a conservative anarchist by Georgi Plekhanov) was, like Darwin, influenced by Malthus’ idea that the fittest tend to survive overpopulation-induced catastrophes. He is known for having coined “survival of the fittest,” a term later used by Darwin in the fifth edition of On the Origin of Species (1859). Spencer originally used it to convey Darwin’s concept of natural selection, and drew parallels between biological evolution through natural selection and social evolution through market competition. But he never implied that they were identical or that marketplace competition was necessarily an outgrowth of natural selection.

If anything, it should be thought of as an alternative to natural selection. Humans, to survive as a species, might practice natural selection as a matter of biological fact. And without the ability to reason this might eventually lead to a Hobbesian jungle. But since man is rational, natural selection’s role in social evolution is significantly lessened. Society arises from the natural order of things. There is no need for the Commonwealth or the General Will to step in and provide it.

Friedrich Engels saw things differently when he wrote in the introduction to his Dialectics of Nature (1872/1883):

Darwin did not know what a bitter satire he wrote on mankind…when he showed that free competition…is the normal state of the animal kingdom. Only…production and distribution…carried on in a planned way, can lift mankind above the rest of the animal world…

Competition exists in both the natural world and free markets, so the connection between natural selection and marketplace competition, though spurious, seems all too obvious for critics of one or the other. They wrongfully project the cold, deterministic properties of nature onto economic freedom. But marketplace competition is an outgrowth of the ability to reason, not base survival instincts. The will to survive is certainly a factor of social progress, but taken on its own would tend toward more similarities with nature, such that the life of man would be “solitary, poor, nasty, brutish, and short.” Man has the faculties to escape the jungle, to leave the animal kingdom, to better his life without worsening others’.

Communist anarchist Pyotr Kropotkin (influenced by Godwin) juxtaposed social Darwinism, evolution requiring competition, with his own take, evolution requiring cooperation, in his book Mutual Aid: A Factor of Evolution (1902). In so doing, he disagreed with Engels on Darwin, by describing how natural selection depended at least as much upon cooperation as it did biological competition. But unfortunately he conformed to Engels on the false dichotomy between rational competition (free markets) and cooperation (mutual aid).

Our second subject, Pierre-Joseph Proudhon was a mutualist, an anarchist and a socialist. Yet some of his ideas are more in line with libertarianism than with contemporary socialism. They were often based on a fairly consistent concept of natural rights, but understood in light of fallacious economic principles, especially the labor theory of value (held by Locke, Smith, Ricardo, and Marx).

But utility-based theories are in vogue among today’s classical liberals and much of Proudhon’s economics has been rightly tossed aside. But his theory of spontaneous order and support for free markets should not be so readily discarded. Leave that to conservatives fearful of anything tainted by the socialist label, and to leftists whose only alternative would be to admit that the labor theory is passé.

Proudhon (General Idea of the Revolution in the Nineteenth Century, 1851) was also opposed to Hobbes’ and Rousseau’s social contract theories, having his own:

What really is the Social Contract? An agreement of the citizen with the government? No…The social contract is an agreement of man with man…from which must result what we call society…Commerce…the act by which man and man declare themselves essentially producers, and abdicate all pretension to govern each other.

Organic institutions, neither designed nor imposed!

It seems there’s much knowledge and inspiration to be gained by examining the forgotten words of discredited intellectuals. Warts and all.

Ham-Fisted Coercion and Incompetence versus the Invisible Hand of Self-Interest

Ham-Fisted Coercion and Incompetence versus the Invisible Hand of Self-Interest.

[The following is my entry for the first ever Thorpe-Freeman Blog Contest, originally published at Notes on Liberty on May 22nd. My entry for last month’s contest, which was one of two runners up mentioned here, can be read here.]

A Tale of Two Hands

I came across Gary Galles’ recent article in The Freeman about Leonard Read’s analogy of government coercion as a clenched fist, “The Clenched Fist and the General Welfare.” I see a symmetry between this analogy and Adam Smith’s about self-interest unintentionally channeled into market organization, one that is so familiar to free market proponents and detractors alike that it is a common metaphor: the invisible hand.

Government coercion and market organization. Two very important concepts for any libertarian to master. Which one better provides for the general welfare? Smith and Read would contend the latter. The reasons for this are contained in the analogies. As Read and Galles point out, not much good can come from a clenched fist. Only violence and incompetence. It can punch. It can pound. That’s about it. What better description of government? Likewise, as Smith notes, the usefulness of markets is that they do better than government many of the noble things government tries to do, thereby rendering it redundant, if not unnecessary, in those areas. The all-too obvious fist of government regulations and mandates is no match for a more efficient, less obvious hand: self-interest.

The clenched fist of government coercion is quite visible. It holds up the occasional good it achieves, downplays the great expense at which such good comes about, and blames its own inadequacies on “free” markets. The invisible hand, however, is open. It is able to do more, and better, than the clenched fist, without stifling progress in other areas.

Coercion seems like a question of ethics, and organization a question of economics, but they are each, in essence, questions of both. What is unethical for an individual is also unethical for a group of individuals. And if made policy, it is no longer simply unethical, but uneconomical as well, because of the fear,  uncertainty, and even exuberance that arises among market actors, leading to misallocation of resources into unprofitable lines of production.

The questions are irrevocably linked. Even natural, inalienable rights—ethical concepts—are, for our purposes, best understood as constructs devised to protect the economic interests (the pursuit, use, and extension of life, liberty, and property) of individuals. They exist to help us avoid, and ultimately, resolve what are really economically motivated disputes.

Cantillon, Smith, Menger

Mark Thornton’s “Cantillon and the Invisible Hand” suggests that Richard Cantillon was Adam Smith’s influence in his description (in The Theory of Moral Sentiments, 1759, and The Wealth of Nations, 1776) of the mechanism (self-interest’s effect of inadvertently providing for the general welfare) that he calls “an Invisible Hand.” In Thornton (2009), this standard interpretation appears to be upheld against several modern theories of the metaphor’s meaning.

With this interpretation and then further development of the idea to incorporate “newer” concepts, we can say that actions taken for personal gain accumulate in the marketplace in the form of signals indicating supply, demand, cost, loss, and profit, leading to various levels of further risk, production, and consumption, which have serendipitous advantages for others participants in the marketplace. The marketplace facilitates trade. In a free market, this means voluntary exchange. Since the Marginal Revolution, it has been acknowledged that voluntary exchanges benefit all parties to them, or they would simply not take place. Thus, the general welfare is provided for.

In The Theory of Moral Sentiments, on the subject of landlords’ relationships with tenants, writes Smith (pp. 184-85):

They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.

Cantillon and Smith appear not to have incorporated the idea that landlord and tenant could each receive something they valued more in exchange for what they valued less. So how could they say that tenant benefit at all? Because the things they received were necessities, without which they might have starved.

Before the Industrial Revolution was in full swing, tenancy was often just a higher form of serfdom. Even so, the self-interest of tenants benefited landlords, not just the other way around. And there were relationships besides those of tenants and landlords. Merchants and laborers would have also had mutually beneficent dealings with tenants and landlords. But Smith focused on one aspect of one relationship in his first economic use of the phrase “an Invisible Hand.”

Market’s Good Invisible, State’s Evil Unseen

Because social benefits derived from self-interest go unseen, they are often taken for granted. It is assumed that man must either benefit only himself or rely on handouts. The first implies a zero-sum game at best and a Hobbesian jungle at worst. The second implies charity, but where that alone is insufficient in caring for the needy and the lazy, forced wealth redistribution. To the (sometimes willfully) unobservant, the concept of markets as fortuitous is an unfathomable alternative.

The clenched fist (government) often gestures towards the progress it has made. It has certainly made some progress for some. The favored classes. Individual autocrats placating the coalitions of their supporters, plutocrats pulling the levers of power, or democrats vying for public privilege. But, usually, some stable combination thereof. This progress comes at the expense of that (superior) progress which would have been achieved had producers’ wealth not been expropriated. But, as Bastiat (That Which is Seen and that Which is Not Seen, 1850) and Hazlitt, (Economics in One Lesson, 1946) have shown, this ill effect goes unseen, and so, government-driven progress is made out to be, by those with more influence, larger platforms, and louder voices, equal or superior to market-driven progress.

Why can’t they let things be? The world goes on by itself!