The standard line from US political elites is that failure to aid Ukraine would mean Russia’s destruction of what is left of the country. However, the likely result would be a negotiated peace.
Original Article: What Would Happen If the US Stopped Supporting Ukraine?
One of the cliches of the New Deal was that businesses were entitled to a “fair” profit. Leonard Read astutely pointed out that profits (and losses) have nothing to do with “fairness.”
Original Article: Are Businesses Entitled to a Fair Profit?
The Wall Street Journal reported last month that the ballot initiative to decriminalize all drugs in the state of Oregon is failing, and that efforts are underway to recriminalize hard drugs. Mark points out that decriminalizing drug possession does nothing to improve black market production of drugs, which makes drugs much more dangerous to consume. More importantly, it is Oregon’s socialist ideology that coddles homelessness and open hard drug use that is the real problem for the good citizens of the state—and is not helping the drug addicts either. The solution is for society—the nexus of private property owners—to reassert its will.
See also “Welcome to Needle Park” by Mark Thornton: Mises.org/Minor48_A
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Market processes rely on prices, which are not established by a government decree or by the randomness of the human mind but are instead determined by supply and demand. The consumer’s wants and needs are signaled through prices, which are in turn satisfied by the producers, who want to make a profit. Despite the success of this process, many still believe that government intervention is necessary to help the poor and to provide services that may not be available in the market.
So, throughout the world, many nations adopted a mixed economy model. While private property and private ownership exist, government intervention in the economy is still necessary in order to achieve social aims such as providing services to the poor and unemployed and intervening in industry, all of which is funded by the taxpayer. But Ludwig von Mises saw through the smoke and mirrors of this noble talk in his book Omnipotent Government:
A mixture of capitalist and socialist principles is not feasible. The enterprises owned and operated by the state or by municipalities do not alter the characteristics of the market economy. They must fit themselves, as buyers of raw materials, of equipment and of labor, and as sellers of goods and services into the scheme of the market economy. They must strive for profits, or, at least to avoid losses. When the government tries to eliminate or to mitigate this dependence by covering the losses of its plants and shops by drawing on the public funds, the only result is that this dependence is shifted to another field. The means for covering losses must be raised by the imposition of taxes. But this taxation has its effect on the market.
The intervention undertaken by governments to provide social services and production, whether provided in hopes of reelection or just by their good nature, produces consequences harmful to the common person.
Taxation is theft; any person or organization that takes your money or belongings using coercion is committing theft. There are multiple forms of taxation the government undertakes: The income tax takes from the wages and salary you earned that year. Inflation takes the purchasing power from your dollars. And of course, the government may tax an item such as soda.
All of these things influence the economy. The fall of Detroit can be traced back to the introduction of the municipal income tax in 1962. Professor Harry Veryser of Detroit Mercy University spoke about the downfall of Detroit in an interview with ReasonTV. He marked the beginning of the end with Mayor Jerome Cavanagh, saying:
Cavanagh brought in the Detroit city income tax, and as soon as you have an income tax, immediately you have pressure from companies to move out. AAA was the first one to move out across an eight-mile road; all they had to do was move eight miles where there was no income tax.
Businesses and people will face an opportunity cost as the government introduces or increases any kind of tax. American Automobile Association (AAA) decided it would be more beneficial to move their company rather than staying in Detroit. Taxation forces both businesses and the general population to make decisions they would otherwise not have to make if there was no taxation. Connecticut, for example, introduced a highway use fee; more accurately, it is a mileage tax. Vehicles weighing twenty-six to twenty-eight thousand pounds will have to pay 2.5 cents every mile they travel on the highway. This forces construction companies with heavy vehicles and tractor trailers to make difficult decisions: finding new routes, dumping weight off the trucks, or leaving the state altogether.
In 1922, Vladimir Lenin addressed the communist convention. During the speech, he assured state control over the commanding heights of the economy. To Lenin, the commanding heights were essential economic industries such as mining, transportation, and manufacturing that needed to be under complete government control. Under this system, a central planning board would be in charge of distributing goods and services to the people of the nation; this is an impossible task. Ludwig von Mises, in his essay “Economic Calculation in the Socialist Commonwealth,” outlines the relationship between private producers and the marketplace:
The owner of production goods, who has manufactured consumption goods and thus becomes their owner, now has the choice of either consuming them himself or of having them consumed by others. But where the community becomes the owner of consumption goods, which it has acquired in production, such a choice will no longer be obtained. It cannot itself consume; it has perforce to allow others to do so. Who is to do the consuming and what is to be consumed by each is the crux of the problem of socialist distribution.
Rational economic decision-making becomes impossible under a centrally planned economy. It is the private exchange in the marketplace that determines the prices of goods and services. The United States is not yet under such an oppressive system, but aspects of central planning exist. The Department of Agriculture, through infallible ignorance, produces price controls through its subsidies to farmers. In 2021, it spent $28.5 billion in subsidies to farmers in order to maintain farming income. However, further analysis reveals that 60 percent of subsidies from programs such as crop insurance go to the wealthiest 10 percent of farming households. This money is then used in the production of crops. Author James Bovard points out the effects these subsidies have on agricultural prices in his essay “The Federal Agricultural Swamp”:
The fundamental tool of agricultural policy is the price support. The government sets a price per bushel or pound it will pay for a commodity. Since the government guarantees to buy unlimited quantities of a crop at the price support level, farmers will not sell the crop on the market at a price lower than they can sell to the government, and the support price thereby becomes the minimum price for any sales of the crop in the United States.
Free markets benefit the general population most of all, not large businesses. The policies that are advocated by interest groups claiming to represent farmers—groups such as the National Corn Growers Association and the National Association of Wheat Growers—led to an increase in the price of farming produce across America. The taxpayer, who ultimately flips the bill for these subsidies, loses out completely, while the lobbyists, politicians, and the wealthiest farmers walk away rich.
Welfare subsidizes bad behavior. Inherent flaws in the policy create a situation where people rely on the government and have no reason to exit the system. Professor Casey Mulligan from the Committee to Unleash Prosperity released a study called “Paying Americans Not to Work.” The study presents multiple findings:
Even with existing unemployment benefits and the dramatic recent expansion of ObamaCare subsidies, a spouse would have to earn more than $80,000 a year from a 40 hour a week job to have the same after-tax income as certain families with two unemployed spouses receiving government benefits. In these states, working 40 hours a week and earning $20 an hour would mean a slight REDUCTION in income compared to two parents receiving unemployment benefits and health care subsidies.
Why would these recipients bother getting off welfare if they see they’re better off? It’s in their self-interest to remain in the system. All of this will be at the taxpayer’s expense; businesses that seek to employ new workers will have fewer applications, meaning social cooperation breaks down in society. A skilled construction worker with laborers can get more productive tasks done since the other tasks have been distributed to the laborers. Because of this, the construction worker produces greater value. But if the laborer decides that collecting unemployment is in his best interest, construction time and cost will increase as skilled labor is put to more menial tasks.
A mixed economy model has often been said to “combine the best of both socialism and capitalism,” but as we have seen, policies made by politicians and bureaucrats have interrupted the private economy. Taxation has caused people and businesses to pick up and move out of their cities and states, lobbying has given unfair advantages to large businesses by shutting out competition, and welfare has strangled the division of labor in the United States. There is no good side to socialist economics or leviathan government. We must realize that the best government is that which governs least.
Thousands of busybodies have descended on Abu Dhabi to forestall what they see as an imminent apocalypse. The twenty-eighth meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC COP28) being held in Dubai, United Arab Emirates (UAE), is presided over by its president, Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and UAE Special Envoy for Climate Change. Al Jaber is also the chief executive officer of Adnoc, the state-owned Abu Dhabi National Oil Company, as well as the chairman of Masdar, otherwise known as the Abu Dhabi Future Energy Company, a state-owned renewable energy firm. The irony of an oil executive leading a meeting intended to eliminate fossil fuels from the world economy was not lost on participants.
In fact, the climate conference was rife with controversy and intrigue even before it began. Immediately after Al Jaber’s appointment as president, climate activists decried his presidency as a conflict of interests and an outrage, with one activist complaining, “this appointment goes beyond putting the fox in charge of the henhouse.” COP28 is the first conference to have an industry CEO, let alone an oil industry CEO, placed at the helm of the climate change mitigation agenda. Calls for Al Jaber to step down from his CEO position at Adnoc soon followed his appointment and were promptly ignored.
The controversy only increased as the summit approached. A mere month before the conference began, in an online meeting of a She Changes Climate event, Al Jaber responded angrily to Mary Robinson—an Irish politician, the chair of the Elders group, and a former UN special envoy for climate change—after Robinson challenged Al Jaber to commit to phasing out fossil fuels entirely. Robinson claimed, “We’re in an absolute crisis that is hurting women and children more than anyone.” Making such absurd connections is typical of climate activists, who often roll identity politics into their climate activism, which apparently gives them the sense that they are tackling all the world’s supposed problems in a single effort.
Al Jaber responded by countering:
I accepted to come to this meeting to have a sober and mature conversation. I’m not in any way signing up to any discussion that is alarmist. There is no science out there, or no scenario out there, that says that the phase-out of fossil fuel is what’s going to achieve 1.5C [the temperature increase cap decreed in the Paris Climate Accord]. . . .
. . . Please help me, show me the roadmap for a phase-out of fossil fuel that will allow for sustainable socioeconomic development, unless you want to take the world back into caves. (emphasis mine)
Al Jaber’s remarks have been regarded as verging on, if not explicitly representative of, climate change science “denial,” and he has been savaged for them. Yet, they represent the only rational, evidence-based statements made during this embattled conversation.
Further charges that Al Jaber aims to undermine the climate change agenda came from leaked communications between COP28 and Adnoc staff members, some of whom have been working in both capacities. The leaked documents strongly suggest that Al Jaber planned to use his position as the COP28 president to make oil deals on the side with government officials of participating nations. These revelations caused a frenzy among climate activist groups. One can only hope that these plans are true and that Al Jaber will have succeeded in making some oil deals for Adnoc and its potential customers. Such economic activity is not so much a sign of hypocrisy as it is evidence that economic actors will pursue rational exchanges, despite the obstacles posed by the market interference of interventionists like the United Nations and its political accomplices, including obstacles that are self-imposed by the economic actors themselves.
Other accusations leveled at Al Jaber’s presidency of COP28 include the charge that Adnoc “has the largest net-zero-busting expansion plans of any company in the world.” Adnoc, it is claimed, has been vastly expanding its development of fossil fuels, which would betray efforts to achieve carbon neutrality by 2050. Given that fossil fuel exports account for approximately 70 percent of the UAE’s merchandise exports, such efforts at expansion only make economic sense.
Al Jaber may be the only sane person in attendance at COP28, but he will likely be pressured into acceding to the demands of climate catastrophists. The rest of the participants appear to be in hysterics while under the sway of a mass delusion. Against the facts of science and the benefits of fossil-fuel-enabled technology, they believe that CO2 is “pollution,” that “sustainability” requires imposing an enormous tax on humanity for the respiration and growth of plant life, and that the farming methods of the original Green Revolution—which have increased yields by many factors—must be eliminated and replaced with a new environmentalist Green Revolution. They believe that industrial production must be undertaken using non-fossil-fuel inputs and that myriad industrial products must exclude fossil-fuel-based materials. These demands are as delusional as anything enacted by Chairman Mao Zedong during the Great Leap Forward.
Carbon neutrality by 2050 is an insanely impossible demand. Our industrial civilization, and the population it supports, depends on the advances made in fossil fuel extraction and use. Even Canadian scientist and polymath Vaclav Smil—a believer in climate change, who is an otherwise credible source—agrees. In his book, How the World Really Works, Smil writes:
For those who ignore the energetic and material imperatives of our world, those who prefer mantras of green solutions to understanding how we have come to this point, the prescription is easy: just decarbonize—switch from burning fossil carbon to converting inexhaustible flows of renewable energies. The real wrench in the works: we are a fossil-fueled civilization whose technical and scientific advances, quality of life, and prosperity rest on the combustion of huge quantities of fossil carbon, and we cannot simply walk away from this critical determinant of our fortunes in a few decades, never mind years.
Complete decarbonization of the global economy by 2050 is now conceivable only at the cost of unthinkable global economic retreat, or as a result of extraordinarily rapid transformations relying on near-miraculous technical advances.
As Sultan Ahmed Al Jaber seemed to suggest, the climate change catastrophists of COP28 would consign humanity to preindustrial conditions—relegating those in poorer regions to misery and hunger—all while tackling a phantom whose existence is dubious at best.
The economics of climate change catastrophism involve global centralized planning and interventionism on a scale hitherto unexampled. It is irrational to the extent that it purposefully forgoes known economic advantages, jettisons tried-and-true methods, and rejects the market-based approach that has proven to maximize inputs for efficient wealth production. It artificially imposes technological change rather than allowing it to develop of its own accord. Furthermore, it aims to curtail economic freedom by supplanting the choices of producers and consumers and overwriting them with the plans of a climate change dictatorship.
The full results of COP28 will become known by December 14. One can only hope that it ends in abject failure. Climate activists have suggested that it already has.
[This essay was originally published as “Die Legende von Versagen des Kapitalismus” in Der Internationale Kapitalismus und die Krise, Festschrift für Julius Wolf (1932)1
The nearly universal opinion expressed these days is that the economic crisis of recent years marks the end of capitalism. Capitalism allegedly has failed, has proven itself incapable of solving economic problems, and so mankind has no alternative, if it is to survive, then to make the transition to a planned economy, to socialism.
This is hardly a new idea. The socialists have always maintained that economic crises are the inevitable result of the capitalistic method of production and that there is no other means of eliminating economic crises than the transition to socialism. If these assertions are expressed more forcefully these days and evoke greater public response, it is not because the present crisis is greater or longer than its predecessors, but rather primarily because today public opinion is much more strongly influenced by socialist views than it was in previous decades.
When there was no economic theory, the belief was that whoever had power and was determined to use it could accomplish anything. In the interest of their spiritual welfare and with a view toward their reward in heaven, rulers were admonished by their priests to exercise moderation in their use of power. Also, it was not a question of what limits the inherent conditions of human life and production set for this power, but rather that they were considered boundless and omnipotent in the sphere of social affairs.
The foundation of social sciences, the work of a large number of great intellects, of whom David Hume and Adam Smith are most outstanding, has destroyed this conception. One discovered that social power was a spiritual one and not (as was supposed) a material and, in the rough sense of the word, a real one. And there was the recognition of a necessary coherence within market phenomena which power is unable to destroy. There was also a realization that something was operative in social affairs that the powerful could not influence and to which they had to accommodate themselves, just as they had to adjust to the laws of nature. In the history of human thought and science there is no greater discovery.
If one proceeds from this recognition of the laws of the market, economic theory shows just what kind of situation arises from the interference of force and power in market processes. The isolated intervention cannot reach the end the authorities strive for in enacting it and must result in consequences which are undesirable from the standpoint of the authorities. Even from the point of view of the authorities themselves the intervention is pointless and harmful. Proceeding from this perception, if one wants to arrange market activity according to the conclusions of scientific thought — and we give thought to these matters not only because we are seeking knowledge for its own sake, but also because we want to arrange our actions such that we can reach the goals we aspire to — one then comes unavoidably to a rejection of such interventions as superfluous, unnecessary, and harmful, a notion which characterizes the liberal teaching. It is not that liberalism wants to carry standards of value over into science; it wants to take from science a compass for market actions. Liberalism uses the results of scientific research in order to construct society in such a way that it will be able to realize as effectively as possible the purposes it is intended to realize. The politico-economic parties do not differ on the end result for which they strive but on the means they should employ to achieve their common goal. The liberals are of the opinion that private property in the means of production is the only way to create wealth for everyone, because they consider socialism impractical and because they believe that the system of interventionism (which according to the view of its advocates is between capitalism and socialism) cannot achieve its proponents’ goals.
The liberal view has found bitter opposition. But the opponents of liberalism have not been successful in undermining its basic theory nor the practical application of this theory. They have not sought to defend themselves against the crushing criticism which the liberals have leveled against their plans by logical refutation; instead they have used evasions. The socialists considered themselves removed from this criticism, because Marxism has declared inquiry about the establishment and the efficacy of a socialist commonwealth heretical; they continued to cherish the socialist state of the future as heaven on earth, but refused to engage in a discussion of the details of their plan. The interventionists chose another path. They argued, on insufficient grounds, against the universal validity of economic theory. Not in a position to dispute economic theory logically, they could refer to nothing other than some “moral pathos,” of which they spoke in the invitation to the founding meeting of the Vereins für Sozialpolitik [Association for Social Policy] in Eisenach. Against logic they set moralism, against theory emotional prejudice, against argument the reference to the will of the state.
Economic theory predicted the effects of interventionism and state and municipal socialism exactly as they happened. All the warnings were ignored. For 50 or 60 years the politics of European countries has been anticapitalist and antiliberal. More than 40 years ago Sidney Webb (Lord Passfield) wrote,
it can now fairly be claimed that the socialist philosophy of to-day is but the conscious and explicit assertion of principles of social organization which have been already in great part unconsciously adopted. The economic history of the century is an almost continuous record of the progress of Socialism.2
That was at the beginning of this development and it was in England where liberalism was able for the longest time to hold off the anticapitalistic economic policies. Since then interventionist policies have made great strides. In general the view today is that we live in an age in which the “hampered economy” reigns — as the forerunner of the blessed socialist collective consciousness to come.
Now, because indeed that which economic theory predicted has happened, because the fruits of the anticapitalistic economic policies have come to light, a cry is heard from all sides: this is the decline of capitalism, the capitalistic system has failed!
Liberalism cannot be deemed responsible for any of the institutions which give today’s economic policies their character. It was against the nationalization and the bringing under municipal control of projects which now show themselves to be catastrophes for the public sector and a source of filthy corruption; it was against the denial of protection for those willing to work and against placing state power at the disposal of the trade unions, against unemployment compensation, which has made unemployment a permanent and universal phenomenon, against social insurance, which has made those insured into grumblers, malingers, and neurasthenics, against tariffs (and thereby implicitly against cartels), against the limitation of freedom to live, to travel, or study where one likes, against excessive taxation and against inflation, against armaments, against colonial acquisitions, against the oppression of minorities, against imperialism and against war. It put up stubborn resistance against the politics of capital consumption. And liberalism did not create the armed party troops who are just waiting for the convenient opportunity to start a civil war.
The line of argument that leads to blaming capitalism for at least some of these things is based on the notion that entrepreneurs and capitalists are no longer liberal but interventionist and statist. The fact is correct, but the conclusions people want to draw from it are wrong-headed. These deductions stem from the entirely untenable Marxist view that entrepreneurs and capitalists protected their special class interests through liberalism during the time when capitalism flourished but now, in the late and declining period of capitalism, protect them through interventionism. This is supposed to be proof that the “hampered economy” of interventionism is the historically necessary economics of the phase of capitalism in which we find ourselves today. But the concept of classical political economy and of liberalism as the ideology (in the Marxist sense of the word) of the bourgeoisie is one of the many distorted techniques of Marxism. If entrepreneurs and capitalists were liberal thinkers around 1800 in England and interventionist, statist, and socialist thinkers around 1930 in Germany, the reason is that entrepreneurs and capitalists were also captivated by the prevailing ideas of the times. In 1800 no less than in 1930 entrepreneurs had special interests which were protected by interventionism and hurt by liberalism.
Today the great entrepreneurs are often cited as “economic leaders.” Capitalistic society knows no “economic leaders.” Therein lies the characteristic difference between socialist economies on the one hand and capitalist economies on the other hand: in the latter, the entrepreneurs and the owners of the means of production follow no leadership save that of the market. The custom of citing initiators of great enterprises as economic leaders already gives some indication that these days it is not usually the case that one reaches these positions by economic successes but rather by other means.
In the interventionist state it is no longer of crucial importance for the success of an enterprise that operations be run in such a way that the needs of the consumer are satisfied in the best and least expensive way; it is much more important that one has “good relations” with the controlling political factions, that the interventions redound to the advantage and not the disadvantage of the enterprise. A few more marks’ worth of tariff protection for the output of the enterprise, a few marks less tariff protection for the inputs in the manufacturing process can help the enterprise more than the greatest prudence in the conduct of operations. An enterprise may be well run, but it will go under if it does not know how to protect its interests in the arrangement of tariff rates, in the wage negotiations before arbitration boards, and in governing bodies of cartels. It is much more important to have “connections” than to produce well and cheaply. Consequently the men who reach the top of such enterprises are not those who know how to organize operations and give production a direction which the market situation demands, but rather men who are in good standing both “above” and “below,” men who know how to get along with the press and with all political parties, especially with the radicals, such that their dealings cause no offense. This is that class of general directors who deal more with federal dignitaries and party leaders than with those from whom they buy or to whom they sell.
Because many ventures depend on political favors, those who undertake such ventures must repay the politicians with favors. There has been no big venture in recent years which has not had to expend considerable sums for transactions which from the outset were clearly unprofitable but which, despite expected losses, had to be concluded for political reasons. This is not to mention contributions to non-business concerns — election funds, public welfare institutions, and the like.
Powers working toward the independence of the directors of the large banks, industrial concerns, and joint-stock companies from the stockholders are asserting themselves more strongly. This politically expedited “tendency for big businesses to socialize themselves,” that is, for letting interests other than the regard “for the highest possible yield for the stockholders” determine the management of the ventures, has been greeted by statist writers as a sign that we have already vanquished capitalism.3 In the course of the reform of German stock rights, even legal efforts have already been made to put the interest and well-being of the entrepreneur, namely “his economic, legal, and social self-worth and lasting value and his independence from the changing majority of changing stockholders,”4 above those of the shareholder.
With the influence of the state behind them and supported by a thoroughly interventionist public opinion, the leaders of big enterprises today feel so strong in relation to the stockholders that they believe they need not take their interests into account. In their conduct of the businesses of society in those countries in which statism has most strongly come to rule — for example in the successor states of the old Austro-Hungarian Empire — they are as unconcerned about profitability as the directors of public utilities. The result is ruin. The theory which has been advanced says that these ventures are too large to be run simply with a view toward profit. This concept is extraordinarily opportune whenever the result of conducting business while fundamentally renouncing profitability is the bankruptcy of the enterprise. It is opportune, because at this moment the same theory demands the intervention of the state for support of enterprises which are too big to be allowed to fail.
It is true that socialism and interventionism have not yet succeeded in completely eliminating capitalism. If they had, we Europeans, after centuries of prosperity, would rediscover the meaning of hunger on a massive scale. Capitalism is still prominent enough that new industries are coming into existence, and those already established are improving and expanding their equipment and operations. All the economic advances which have been and will be made stem from the persistent remnant of capitalism in our society. But capitalism is always harassed by the intervention of the government and must pay as taxes a considerable part of its profits in order to defray the inferior productivity of public enterprise.
The crisis under which the world is presently suffering is the crisis of interventionism and of state and municipal socialism, in short the crisis of anticapitalist policies. Capitalist society is guided by the play of the market mechanism. On that issue there is no difference of opinion. The market prices bring supply and demand into congruence and determine the direction and extent of production. It is from the market that the capitalist economy receives its sense. If the function of the market as regulator of production is always thwarted by economic policies in so far as the latter try to determine prices, wages, and interest rates instead of letting the market determine them, then a crisis will surely develop.
Bastiat has not failed, but rather Marx and Schmoller.
Ivory Tower economists continue to tell us that the US economy is booming, but consumers disagree. Paul Krugman has a new explanation for the economic gloom: Republicans. In a recent New York Times article, Krugman touts that partisanship and media bias drive a wedge between consumer sentiment and economic reality. But is this actually what’s going on?
Dr. Jonathan Newman is back with Bob to break down Krugman’s shifting economic predictions and to consider the trajectory of the US economy.
Human Action Podcast listeners can get a free copy of Murray Rothbard’s Anatomy of the State: Mises.org/HAPodFree
The Biden administration claims it wants to get out in front of the development of artificial intelligence. However, the likely scenario is that AI will leave government regulators in its wake.
Original Article: Can Government Regulate Artificial Super Intelligence?
Politics in all its variants, particularly the politics of political parties, is the archenemy of freedom, prosperity, and peace. Yet, wherever one looks, more government is invoked as the solution.
Very rare are the voices that claim that a different way is possible. Few speak out in favor of anarchocapitalism and a libertarian social order.
It is quite common nowadays to announce with confidence the verdict that anarchism, a society free of a repressive state, is not possible. For most people, a libertarian social order is a pipe dream. False accusations abound, such that anarchocapitalism would bring injustice and disadvantage the poor.
The precarious standing of libertarianism has partly to do with how history evolved. Societal evolution took a wrong turn when Rome vanquished Carthage, and instead of a commercial society, militaristic statehood gained the upper hand. More than two thousand years of Caesarism have made the belief widespread that there is no alternative to politics and the state. Hierarchy and authoritarianism have come to be seen as the natural way of societal organization, not recognizing that such orders are imposed.
Libertarianism means a private-law society. In a social commonwealth, private businesses in the marketplace provide the traditional functions of the state. The voluntary contract order of anarchocapitalism substitutes the hierarchical commando-coordination of activities of the state. The basic meaning of anarchocapitalism is an order where horizontal cooperation based on voluntary exchange dominates the coordination of human activities.
The spontaneous order of an anarchocapitalistic society requires that it must come about as a gradual process of privatization. Beginning with the ending of subsidies and regulations as well as the sale of semipublic enterprises and public utilities, privatization should extend step by step to education and health and finally to encompass security and the judicial system.
There is ample evidence that the so-called public services will become better and cheaper under anarchocapitalism. Under a comprehensive free-market system, the demand and offer for education, healthcare, defense, and domestic security would be much different from how it is now. Privatizing these activities, which are now under the authority of the state, would not only lead to a decrease in the costs per unit of the services but also change the character of the products.
Because most of the current supply of so-called public goods is a useless waste, a huge burden would fall off the taxpayers once these products are privatized. With none of the genuine benefits of education, healthcare, and defense getting lost, these goods would be tuned to the wishes of the consumers and be provided most efficiently. Costs would fall to a fraction of their present size.
If one includes the overblown judicial and public administration apparatus into the reduction of state activity, government spending—which nowadays is close to 50 percent of the gross domestic product in most industrialized countries—would come down to single digit percentages. Contributions would fall by 90 percent, while at the same time, the quality of the services would rise.
Different from what is presently the dominant belief, privatizing the police functions and the judiciary is not such a big problem. It would mean extending what is already going on. In several countries, including the United States, the number of private police and security already exceeds the number of official policemen. The private provision of judicial services is also on the rise. Arbitration courts have experienced a strong and increasing demand, including services for cross-border disputes.
These trends will continue because private protection and arbitration are cheaper and better than public provision. In Brazil, for example, which entertains one of the most expensive judicial systems in the world, about eighty million cases are currently pending without a decision, and legal uncertainty has become monstrous. In the United States, many parts of the judicial system have gone berserk.
The solution for the present problems is not more but less government, not more but less state, and not more but less politics. The current curse on young people to either have a well-paid fixed job or live on the borderline would vanish. Anarchocapitalism means high productivity and ample free time. In an anarchocapitalistic society, salaried drudgery will no longer be the norm, replaced by individual self-employment.
Anarchocapitalism is not a system to be established by some party or a strongman. A libertarian commonwealth should emerge as a spontaneous order. The right way, then, toward a libertarian society is negative action. The task ahead is the removal of subsidies and regulations. Instead of creating more laws and new institutions, the mission is to abolish laws and institutions. For that to happen, a change of public opinion is required.
Inasmuch as the insight gains ground that less politics and less state is the solution, the more the libertarian movement will gain momentum. To accomplish this, the will is necessary to demand and achieve privatization of as many public institutions as possible.
Privatization is a means, not a goal. Privatization serves to bring a supplier of goods under the control of the general public. In the free market, the customers determine which companies stay in business and which need to close. Under the current system of state capitalism, large parts of the economy are controlled by politics and the technocratic apparatus.
Privatization puts businesses under the regime of profit and loss and thus under the control of the customer. Profit is the key to capital accumulation and thus prosperity. Corporate profit is the engine of economic progress and, at the same time, the result of economic advancement. Only an economy that thrives generates profits. By the same logic, one can say that profits drive the economy toward prosperity.
For private companies, the size of the profit depends on the degree to which a company operates efficiently and its product is useful in satisfying the tastes of the public. Yet, privatization per se is not enough. It must be accompanied by deregulation. In the past, many cases of privatization failed because the regulatory framework was not removed. Old barriers to entry continued to exist.
Another error often made has been hastily privatizing public companies that provide essential services instead of beginning with the obvious: cutting the subsidies. Deregulation and removing subsidies are crucial preconditions for privatization to succeed. Capitalism requires competition, and competition needs low barriers to entry.
Anarchocapitalism denotes an economic order where the entrepreneur guides the company according to the command of profit and loss. These, in turn, depend directly on the actions of the customers. The laws of profit and loss compel the entrepreneur to employ his capital for the benefit of the consumers. In this sense, the market economy functions as a permanent selection mechanism in favor of the allocation of resources where there is the greatest degree of productivity and well-being.
To be successful, privatization needs to be seen as a step within a set of measures to establish a free-market economy. To work well, privatization needs to be accompanied by the opening of markets—including free international trade—by reducing bureaucracy and making the labor market more flexible.
Fundamental prerequisites for free markets to work are sound money and a low tax burden. Privatization of the economy will fail as long as the monetary system is subject to political and technocratic control and high tax burdens constrict the economic actions of the individual.
In the market economy, there is a permanent plebiscite regarding the ideas of entrepreneurs. Private companies need to respond to the desires of consumers because the consumers are the ones who indicate their preferences with their acts of purchase. Democratic choice in politics is systematically worse than decisions in the market. While most purchasing decisions allow for correction and replacement immediately or in a short space of time, political decisions have long-term consequences that often go beyond the control and intellectual horizon of the electorate.
Prosperity is the goal, and anarchocapitalism delivers it. The basic tenet in favor of privatization follows from the insight that private ownership of the means of production—and thus privatization—guarantees economic progress and prosperity for all.
Markets aren’t perfect—and neither are entrepreneurs nor consumers. Capitalist production cannot fulfill all the wants or needs of every person. No system can. The market system does not eliminate scarcity for everyone, but the market system is the economic order that best deals with the universal presence of scarcity.
Anarchocapitalism, correctly understood, does not fall into the same category as socialism. Socialism needs to be imposed. Its establishment and maintenance require violence. With anarchocapitalism, it is different. It will arise spontaneously through the removal of the barriers that stand against the natural order of things.
When we think of Milton Friedman and Murray Rothbard, what come to mind first are their contrary views on economics, but I’d like to discuss a different subject that might surprise some of my readers because they don’t associate Friedman with positions on it: American foreign policy. Jennifer Burns’s outstanding new biography Milton Friedman: The Last Conservative (Farrar, Straus and Giroux, 2023) enables us to grasp more fully the differences between the foreign-policy views of Friedman and Rothbard, who unfortunately is not mentioned at all in the book.
Friedman strongly favored America’s entry into World War II, backed the Cold War, and egged William F. Buckley Jr. on to purge isolationists and “extremists” from the ranks of the Right.
Friedman secured his first academic job in 1940, a temporary appointment at the University of Wisconsin. He did not get along with most of his colleagues in the department. As Burns explains, “Still home to generations of German immigrants and their descendants, Wisconsin was isolationist and even pro-German, whereas Friedman made no secret of his desire for intervening in the war in Europe. ‘Around here, I am a real warmonger,’ he reported to Arthur Burns.”
Burns notes that after the war, Friedman continued to support an activist American foreign policy:
Friedman’s support for a robust U.S. presence in Europe was widely held among moderate Republicans and helped motivate the 1952 candidacy of Dwight Eisenhower. Courted by both parties, the popular general was worried that a [Robert] Taft presidency would undo the victories of World War II. He would eventually run as a Republican, enraging Taft’s grassroots supporters. Sharing Eisenhower’s global outlook, and alert to dangerous currents on the American right, Friedman supported his candidacy.
Among these dangerous currents, Friedman found especially disturbing Senator Joseph McCarthy’s battle against Communists and their sympathizers. Burns notes that in correspondence with Fritz Machlup, who voted for the Democrat Adlai Stevenson in the 1952 election because he “saw in McCarthy the second coming of Nazism,” Friedman asserted that Eisenhower would be better able than Stevenson to clamp down on McCarthy:
Friedman argued that, bad as McCarthy was, he would be better contained by a Republican administration. “Extremists are always far more potent when their party is out of power than when it is power,” he wrote . . . Friedman argued that the greater danger was that an Eisenhower defeat would embolden McCarthyites and weaken moderate Republicanism: “They will be able to say that 4 times now the me-tooers + internationalist wing of the party has led them down to defeat.” The triumph of this extreme wing of the party, which Friedman identified with both McCarthy and the Chicago Tribune, would be an “unmitigated disaster.”
Murray Rothbard, by contrast, supported a noninterventionist foreign policy and allied with the Old Right. He opposed the Cold War and supported McCarthy. Professor Joseph Salerno explains:
I was enlightened on this matter by Murray Rothbard’s analysis of the Joe McCarthy phenomenon of the early 1950s. Rothbard delighted in standing the established view of McCarthy on its head.
The entire political and academic establishment, from New Deal/Truman Democrats to Eisenhower Republicans, from moderate liberals to moderate conservatives, concurred in the necessity of waging a Cold War to contain the alleged Soviet conspiracy to take over the so-called Free World and therefore were in explicit agreement with McCarthy’s ultimate goals. What they detested, they said, was McCarthy’s means.
Rothbard, in sharp contrast, never believed that the Soviet Union, albeit a bloody and repressive dictatorship, had the ability or intention of taking over the West. Rather, he argued that the Cold War was a ruse devised by the American ruling elite to justify the continuation and expansion of the massive, tax-consuming, welfare-warfare state built up during World War II at home and to rationalize postwar US imperialist ambitions for assorted military interventions abroad. While dismissing McCarthy’s ridiculous and contrived Cold War ideology—which, to repeat, he shared with most of his respectable establishment detractors—Rothbard had a profound appreciation for the means McCarthy employed. According to Rothbard,
The unique and glorious thing about McCarthy was not his goals or his ideology, but precisely his radical, populist means. For McCarthy was able, for a few years, to short-circuit the intense opposition of all the elites in American life: from the Eisenhower-Rockefeller administration to the Pentagon and the military-industrial complex to liberal and left media and academic elites—to overcome all that opposition and reach and inspire the masses directly. And he did it through television, and without any real movement behind him; he had only a guerrilla band of a few advisers, but no organization and no infrastructure.
The rise of the American Right in the 1960s did not entirely please Friedman because it included people whose views he strongly opposed. “Looking across this new landscape,” Burns says, “Friedman saw at least three types of conservatives; libertarians, traditional conservatives, and ‘crackpot conservatives of the radical right fringe.’ Friedman considered himself to have little in common with the latter group.”
When Buckley battled against the John Birch Society, which, unlike the Cold Warriors, saw the struggle against communism as internal rather than external, Friedman joined forces with him because Buckley supported both the free market and an interventionist foreign policy. Friedman didn’t “warm to the young upstart right away,” but
relations [between Friedman and Buckley] thawed as Buckley mounted a public campaign against the John Birch Society, publishing disapproving editorials in 1961 and 1962 . . . Friedman soon appeared helpful in this cause. Buckley solicited (unsuccessfully) a paper on foreign aid for National Review, and in turn Friedman congratulated his recent sallies against [Robert] Welch [the founder of the society]. The struggle against Welch marked a new and critical phase in the evolution of conservatism from intellectual pet project to coming political force. In earlier days, Friedman had gone up against the likes of Ludwig von Mises on an isolated European mountaintop. Now the battle to define conservatism played out on a much larger landscape, and the stakes were far higher.
Rothbard, to say the least, didn’t agree with Buckley’s purges:
And so the purges began. One after another, Buckley and National Review purged and excommunicated all the radicals, all the non-respectables. Consider the roll-call: isolationists (such as John T. Flynn), anti-Zionists, libertarians, Ayn Randians, the John Birch Society, and all those who continued, like the early National Review, to dare to oppose Martin Luther King and the civil rights revolution after Buckley had changed and decided to embrace it.
Who was right—Friedman or Rothbard? I do not think most readers will find it difficult to answer.