Thursday, 28 May 2015

Seminar: Economic Calculation Debate

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Here’s what’s on tonight at the Auckland University Economics Group. Why not get along?

You’ve heard of the Keynes-Hayek debate.
You may have heard of  the Cambridge Capital debates.
In tonight’s seminar we examine the Economic Calculation Debate, perhaps the greatest yet least-known economic controversies of the twentieth century: Often referred to as the Socialist Calculation Debate, this argument drew in great thinkers from Vienna to Moscow, and from Warsaw to Chicago—and included at its climax a joke whose punchline was New Zealand.
Central planners had said scientific socialism would bury the west in goods.  Soviet leader Nikita Kruschev  banged his shoe on the podium at the U.N. saying: "History is on our side. We will bury you in fine [goods]. You hear that? Quality!" Meanwhile, successive editions of Samuelson’s textbook on economic principles – the most widely-used textbook worldwide – showed a graph all through the 1980s projecting the Soviet Union would overtake the United States in production terms.
That never happened. Instead, in 1989 when the Berlin Wall finally crumbled, the experiment of “scientific socialism” was shown to be a complete disaster.
It was a defining moment in twentieth-century history. "Scientific socialism," which started in Utopia and was continued midst bloodshed and famine, was revealed not as any kind of miracle of production (as many mainstream economists had seemed to think) but as a complete and utter bust.
The reasons for the collapse were explained all the way back in 1920 by one Viennese hero. In a slim pamphlet that was to shake the economic world Ludwig Von Mises identified the flaw at the heart of the socialist economy, of any economy organised along socialist lines, that means the system can never produce anything but misery--why it was inevitable that an economy organised along socialist lines would collapse--and after decades of debate, in 1989 he was finally conclusively proved right.
For Mises, it was not even possible for it to survive theoretically, let alone practically!
  • What ideas were at the heart of this argument?
  • Why did Mises insist collapse was inevitable?
  • What answers were his arguments given by the central planners?
  • And how did Hayek’s answers, when he joined the debate, differ radically from his teacher’s?
Join us tonight to discuss that fatal flaw and some of that history, as we discuss this landmark debate in twentieth-century economics--including several important lessons that debate still has for us today.
        Date: Thursday, 28 May
       
Time: 6-7pm
       
Place: Room 040C, Level Zero, Business School
                      (plenty of parking beneath the Business School, entry off Grafton Rd)

--
PS Keep up to date with Auckland Uni Econ Group on our 2015 Facebook page.

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Wednesday, 27 May 2015

Why is the best time to learn a language when you're young?

… the answer is neuroplasticity.

And it’s the reason no-one can ride this bicycle.



[Hat tip Michael Hurd]

Tuesday, 26 May 2015

Even a sunburnt country can’t make solar sustainable

If you’re in Melbourne and you want to read about global warming and how man is allegedly trashing the planet, then you need to read The Age -- which, like the BBC, never saw a scare story about global warming it didn’t like.

Readers of The Age yesterday morning however would have choked on their muesli when they turned to page 6.

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If there’s any place in the world that could make a success of solar, you would think that place would be the vast sunburnt land of Australia. What the story revealed however is that “the cost of installing and maintaining more than 1 million household solar power systems has outweighed their benefit by more than $9 billion.”

That is not  a typo.

$9 billion!

Ouch.

And by the time generous federal and state government subsidies run out, households without solar will have subsidised those that have made the switch to the tune of $14 billion.

That is not an insignificant number.

The Grattan Institute report, to be published Monday, says government incentives and rebates that have encouraged the uptake of household solar have "created a policy mess that should never be repeated" …
    The report calculates that the capital cost of installing and maintaining household solar systems since 2009 has been $18 billion, while their benefit in terms of greenhouse gas abatement and reduced conventional electricity generation has been $9 billion….

In other words, it’s cost $18 billion to generate $9 billion.

    The report finds that households that have installed rooftop solar have still benefited greatly in financial terms "because the incentives offered by state and federal governments have made an uneconomic decision financially viable." …
    Households with solar have also benefited from the fixed structure of electricity tariffs the report says, which has resulted in homes that don't have solar power effectively subsidising network use by those that do.

As I’ve said many time, so-called “renewable” energy may be defined as energy that is not economically sustainable without subsidies, grants or tax breaks.  In other words, it absorbs more value than it produces. It’s a fantasy. As Alex Epstein says, “It’s not really renewable, and it’s not really energy.”

If a country with more solar radiation than almost any other can’t make solar sustainable, and no-one anywhere else has either,  then perhaps it’s time it made the discard pile.

[Pic and caption by Fairfax]

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The greatest race on earth?

If you don’t have the beard or the tattoos for Ford and Holden racing, then this could be the motor racing for you …

[Hat tip Suzuki Samurai]

Thursday, 21 May 2015

Thursday morning ramble: The no-surplus edition

What do you mean, a Thursday morning ramble!? Simple answer: I’m off to Melbourne tomorrow to do a bit of business and watch the world’s most libertarian sport (not actually in that order), so you won’t hear from me until the final siren has gone. And certainly not tomorrow.

So here’s a few things now that caught my eye recently …


UPDATE: Some Budget reaction that’s worth a damn:


Finding good news from bad.
Housing affordability breakthrough! The capital gains tax has been given its chance to fail – Jim Rose, UTOPIA-YOU ARE STANDING IN IT

Margaret Thatcher allowed council house tenants to buy ‘their’ houses at a discount and become property owners – she elevated them, and changed a whole culture. Paula Bennett wants to sell state houses at a discount to “community providers” who don’t want them, to house tenants who are maintained in their welfare bondage.
But Paula Bennett is not Margaret Thatcher.
Will right to buy win over the working classes? – TELEGRAPH
Transfer of state houses gives choices – Bennett – 3 NEWS

“Last weekend, The Press published a timeline of progress on Christchurch's rebuild. Of the 19 projects listed, 14 will not be completed on time and some, let's face it, may not be completed at all… Systemic failure is not a cause for optimism; it's cause to rethink strategy.
Mr Brownlee ... Tear up your plan – Johnny Moore, THE PRESS

“Augustine, for all his many sins, finally found austerity.
”I doubt Mr English ever will.”
Bill English: Oh lord, give me surplus. But not yet. – NOT PC
Message to Bill English… – NOT PC
John Key lies – NOT PC, 2011
Who’s the Wastemaster General now, Bill? – NOT PC, 2011
It’s the economy, stupid. – NOT PC, 2011
Balance the damn budget, Bill – NOT PC, 2009
Message to National: Stop the spending – NOT PC, 2008

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You think donations to John Banks are news?
Vox: Hillary Clinton personally took money from companies that sought to influence her – AGAINST CRONY CAPITALISM
Clinton Foundation defends foreign fundraising – CBS NEWS
‘Hillary Clinton Sold Her Soul When They Accepted That Money’ – BLAZING CAT FUR
ABC News Anchor Donated $75,000 to Clinton Foundation, Failed to Disclose – TOWN HALL
Half of Hillary Clinton’s Speaking Fees Came From Groups Also Lobbying Congress - TIME
Clinton Foundation: "We made mistakes" on donor disclosures – CBS
Bill Clinton says foundation has 'never done anything knowingly inappropriate' – GUARDIAN
Cash Flowed to Clinton Foundation as Russians Pressed for Control of Uranium Company – NEW YORK TIMES
Bill Clinton Cashed In When Hillary Became Secretary of State – ABC NEWS

And that’s not her only problem.
Judicial Watch: Defense, State Department Documents Reveal Obama Administration Knew that al Qaeda Terrorists Had Planned Benghazi Attack 10 Days in Advance – PRESS ROOM

It’s Potemkin Villages all the way down: “On May 14, protesters, upset with not being paid their promised checks for protesting, protested outside MORE, Missourians Organizing For Reform and Empowerment, an ACORN organization which had received funding through George Soros to fund the protests.”
#Ferguson Protesters Protest Not Getting Their Checks For Protesting… – WEASEL ZIPPERS

“The emperor without any clothes…”
President Obama Jabs At Ayn Rand, Knocks Himself Out – Wendy Milling, FORBES

“David Cameron’s razor-thin win in the UK elections means he’s had to promise a new referendum on EU membership. If the UK were to leave the EU, it may trigger Scottish secession and a major shift in the EU balance of power...”
British Election Strikes Another Blow Against EU – Ryan McMaken, MISES DAILY

“What can an entrepreneur’s attempt to profitably ship ice from America to the Bahamas teach us about economics?” A neat story about property rights, profits and innovation.
Ice and Economics – David Herbert, THE FREEMAN

Yes, Virginia, scarcity can increase the price of property, but is not its cause...

“Far from changing his policy conclusions in light of his model’s botched predictions, Krugman kept running victory laps, claiming his model had been ‘right about everything.’”
Paul Krugman: Three Wrongs Don’t Make a Right – Robert Murphy, THE FREEMAN

“Everyone knows about the Great Depression which brought massive government intervention and lasted a decade. But few know of the Depression of 1920–21 which was ignored by government and lasted eighteen months... The Lesson: In the event of an economic downturn get government out of the way. Let markets clear. Then like a forest after a forest fire the economy will come back with real growth. 
How Government Inaction Ended the Depression of 1921 – Lew Rockwell, MISES DAILY

By contrast, in 2015 …
 15 Years Of Stimulus—–Nothing To Show – David Stockman, CONTRA CORNER

“Bottom line: What the 97% of climate scientists allegedly agree on is very mild and in no way justifies restricting the energy that billions need. But it gets even worse. Because it turns out that 97% didn’t even say that.”
'97% Of Climate Scientists Agree' Is 100% Wrong – Alex Epstein, FORBES

In 1977, National Geographic blamed nearly identical weather as 2015 - on global cooling.

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Most people misunderstand the nature of capital. They think that capital is money, or materials; that it’s cash or bricks and mortar.  Not true. Capital is in your head. “Just as Einstein showed that a single atom can be split to release tremendous energy, so capital lets us discover and unleash the energy locked in bricks… People, rich and poor alike, have accumulated lots of capital in the form of buildings. But not everyone can extract the capital from their bricks (buildings).”
Capital: It’s All in Your Head – Hernando de Soto, THE POWER OF THE POOR

“Thomas Piketty’s Capital in the 21st Century has attracted worldwide attention, not because he crusades against inequality – many of us do that – but because of its central thesis … Piketty worries about wars in the future, and suggests that they will come about in the form of a rebellion against the inequities of capital. Perhaps he hasn’t noticed that the wars over capital have already begun right under Europe’s nose in the Middle East and North Africa.  Had he not missed these events, he would have seen that these are not uprisings against capital, as his thesis claims, but for capital….”
The poor against Piketty – Hernando de Soto, EGYPT DAILY NEWS

“The U.S. population is growing less Christian while rising numbers of people don’t identify with any organised religion -- a trend in evidence in every region of the country and in many demographic groups.” But ….
America’s Changing Religious Landscape – RICHARD DAWKINS.NET

“The document that built a ‘brazen wall’ to guard the individual from the state.”
Eight hundred years on, why Magna Carta still matters – Brendan O’Neill, SPIKED

“The fundamental political conflict in America today is, as it has been for a century, individualism vs. collectivism. Does the individual’s life belong to him—or does it belong to the group, the community, society, or the state?”
Individualism vs. Collectivism: Our Future, Our Choice – Craig Biddle, OBJECTIVE STANDARD

“I think now that if I had the book fresh in my mind when it was time to apply to university, I would have never chosen to attend, and I would not have wasted two years trying to rediscover what I already knew: that uni wasn’t for me.”
6 Quotes in The Fountainhead for Aspiring Uni Dropouts – Derek Magill, PRAXIS

“Some parts of the world really are environmental Hells. They are dirty and depleted, making them unhealthy and economically unsustainable.”  But these are not the  parts of the world environmentalists say they wish to “fix.”
Read more: Blamestorming and Environmental Problems – STEPHEN HICKS

The killer air pollution that the Greens never mention

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You know that moment when you finish that speech or presentation and call for questions? These are the twenty questions you’re always bound to hear next …
Every Question In Every Q&A Session Ever – THE TOAST

“Beyond the five senses we learn about in school (sight, sound, smell, taste, and touch) there are actually two more…  you might be surprised to hear that these two make possible just about everything we do (even sleeping). And they do so without our notice…
The Seven Senses – MOVING SMART

"We must get back to authenticity in the classroom. Students must be challenged to find their own voices, encouraged by an educational system that truly "follows the child." They should be challenged to know as much about the world outside of the classroom windows as they do about the world within."
Following the Child – Amber Nichols-Buckley, HUFFINGTON POST

 

“Now we have learned that the world-changing sincerity felt fake from the inside, too: even as she was receiving the Nobel prize, she asked her confessor to pray for her because she could feel nothing when she prayed herself and no longer had any experience of God.”
Was Mother Teresa an atheist? – Andrew Brown, GUARDIAN

“Many smart people are hoping that the Reformation will come to Islam. Some are calling for an Islamic Martin Luther. Sorry, but no. Islam needs reforming but definitely not a Reformation.”
No Reformation for Islam, Please – Stephen Hicks, EVERY JOE

“Lovely interview with surrealist painter Dorothea Tanning from 2002 - insightful, charming, and honest. ‘Keep your eye on your inner world and keep away from ads, idiots and movie stars.’”
Oldest living surrealist tells all – SALON

From the things-not-a-lot-of-people-know-about file …
Please Don’t Forget That American Classic The Godfather Had An Important Subplot About A Big Vagina – THE TOAST

Where people live in cities … over-population? or under-building?

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If you’re in London, check out one of London’s greatest small spaces, now with added space!
Sir John Soane’s private apartments: obsessive, eccentric brilliance – GUARDIAN
In London, Creative Types Celebrate an Old Architect’s Restored Apartment – NEW YORK TIMES
John Soane's private apartment & Model Room will be seen by the public today for 1st time in 160yrs - JOHN SOANE’S MUSEUM
‘Opening up the Soane’ - JOHN SOANE’S MUSEUM


Sadly …

[Hat tips Geek Press, Jim Rose, Lawrence Reed, The Centre for Independent Studies, Michael Newberry, Anoop Verma, Jim Matzger, The Richard Dawkins Foundation for Reason and Science (Official), The Objective Standard, Montessori Australia', Richard Ruggiero, Max Roser, Daniel Hannan, John Rivers, Rog Tallbloke, Jim May , J. Neil Schulman, Steve Goddard]

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Wednesday, 20 May 2015

Quote of the day: On which side of the spectrum to find the god-awful

"If you hear some bad collectivistic notions, chances are that they came
from [modern] liberals. But if you hear or read something outrageously,
god-awfully collectivistic, you may be sure that the author is a conservative."

- Isabel Paterson, author of The God of the Machine

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Economics Group Seminar - Coase's Insights into ‘The Firm’

276464_137539366339987_1226509_nHere’s your update for this Thursday evening’s session run by our friends at the Auckland Uni Economics Group. (Why not head along: they’re a great way to discover and learn about the economic errors that repeatedly reproduce the same catastrophes.)

Only two years ago, the winner of the 1991 “Nobel Prize in Economics”, Ronald Coase, died aged 102. He was still writing. (Always intellectually curious, his last published book was his 2013 How China Became Capitalist.)
    Coase won the Nobel for the ideas contained in his celebrated 1937 paper "The Nature of the Firm," which went unnoticed for around forty years following publication. When it was “rediscovered” in the 1960s it then went on to transform not just the whole field of economic analysis but many economies around the world.
    How did his ideas influence the structure of the NZ economy?
    And how do the ideas of Ronald Coase influence how products are manufactured, including the very computer you using to read this message? 
    In this week's seminar, we will use real life examples to examine the ideas of an economist who some call “Britain’s greatest economist since John Maynard Keynes.” (Mind you, those were people who liked the meanderings Maynard...)
    Come join us!

    Date: Thursday, May 21
   
Location: Room 040C, Level Zero, Auckland University Business School (OGGB)
   
Time: 6pm-7pm

All welcome: We look forward to seeing you there.

--

PS: Keep up to date with us on our 2015 Facebook page.


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But where’s the hops?

The usual suspects are up in arms about tofu and quinoa appearing on “the new food pyramid.” “Hipster foods,” sniffs the Daily Mail.

Me, I have no problem with either.

But where on earth are the hops?

John Banks: justice delayed

So John Banks is innocent of filing phony electoral returns. But he is still guilty of being John Banks. And being John Banks now appears to be the reason for him being charged in the first place, and for evidence in his favour being withheld by the prosecutor.

But whatever you think about the former Minister of Rhyming Slang, and my own estimation is subterranean, his case highlights a serious problem with NZ justice. And I don’t just mean the problems of evidence.

I mean the extreme fricking delay in getting justice.

As they say, justice delayed is justice denied. Banks filed his electoral return in 2010. Five years ago. This first went to court in 2012. It’s only yesterday, when it was confirmed he wouldn’t face a retrial, that his name was finally cleared.

Three years.

He was put through the mill.  Utterly unable to get on with his life. His political career was terminated– for which some, me included, are very grateful. But a man, even this one, is entitled to something in the way of justice much swifter than this.

Justice delayed is justice denied. Even if it’s denied to John Banks.

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Tuesday, 19 May 2015

Quote of the day: “What more could a parent want for his child?"

istock-montessori

“Through a Montessori education, a child comes to realise that he lives in an orderly universe and that he can understand and succeed if he tries. He learns the value of being observant and exerting effort, the importance of forming accurate concepts of the things he encounters, the joy of writing and reading, and the fascinating nature and practicality of maths. Through a Montessori education, the child takes the first crucial steps on the road to becoming an independent, self-sustaining, life-loving adult. What more could a parent want for his child?"
—Heike Larson, from her article ‘The Montessori Method: Educating Children for a Lifetime of Learning and Happiness’ at The Objective Standard 

[Pic from The Objective Standard ]

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Speaking proper

Friends doing professional voice training tell me they’re required to recite an old Gilbert & Sullivan lyric for practice.

They might enjoy a modern update of the lyrics:

‘The Very Model of a Modern Monetary Economist’
I’m very well acquainted… with matters mathematical,
I understand equations, both the simple and quadratical,
About binomial theorem I’m teeming with a lot o’ news,
With many cheerful facts about the square of the hypotenuse.
I’m very good at integral and differential calculus;
I know the scientific names of beings animalculous:
In short, in matters vegetable, animal, and mineral,
I am the very model of a modern Major-General

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How GDP Metrics Distort Our View of the Economy

Everyone thinks that GDP measures all of a country’s economic activity. But everyone who thinks that would be wrong …
Guest post by Christopher Casey

Mirrors

GDP purports to measure economic activity while largely divorcing itself from the quality, profitability, depth, breadth, improvement, advancement, and rationalization of goods and services provided.

For example, even if a ship — built at great expense — cruised without passengers, fished without success, or ferried without cargo; it nevertheless contributed to GDP. Profitable for investors or stranded in the sand; it added to GDP. Plying the seas or rusting into an orange honeycomb shell; the nation’s GDP grew.1

Stated alternatively, GDP fails to accurately assess the value of goods and services provided or estimate a society’s standard of living. It is a ruler with irregular hash marks and a clock with erratic ticks.

As proof, observe this absurdity: in 1990, Soviet GDP equalled half of US GDP, according to the 1991 CIA Factbook. No one visiting the Soviet Union in 1990 would believe their economy came close to 50 percent of the quality and quantity of the goods and services produced in America. GDP-defined production may have been strong, but laying roads to nowhere, smelting unusable steel, and baking barely edible breads stretches the definition of “production.” And this describes the goods which were actually produced. There is no accounting for the opportunity cost of forfeited essential goods and services.

How can this be? Why does GDP poorly reflect economic size and vitality? The blame largely resides with three fallacious concepts embedded within GDP “measurements”:

    1. intermediate goods (e.g., steel) must be eliminated to avoid “double counting”;
    2. government expenditures consist of viable economic activities; and
    3. imports should be netted against exports.

Let’s look at each in turn.

1. The Overstatement of Consumption

GDP stands for Gross Domestic Production. It might more accurately be called Net Domestic Consumption.

Which transactions should be included within GDP? Since most products consist of other products, the architects of GDP attempted to avoid “double counting” transactions by largely including only “final” goods and services produced – the ones you see on your shelves. By their methods, the production of a car is counted (as an increase in inventory), but the metal, rubber, and plastic purchased in its creation is not. But the rules behind what makes a transaction “final” are arbitrary. The logic could just as easily justify including the sale of an automobile to a consumer and disregarding its previous production.

Intermediate goods are produced too, metal, rubber, plastic, but GDP’s gurus just don’t measure them. They’re already included, they say, in their measurements of “final” goods. But they’re not. They represent economic activity that is simply unmeasured.

In addition, any “final” transaction during a given time period does not necessarily include in it the intermediate goods that are produced in that same time period: metal, rubber, and plastic purchased today will likely be for a different car produced or sold in a different (future) time period.

Regardless as to the arbitrary nature of determining final sales and notwithstanding the problem of temporally matching intermediate goods with their associated final sales, the exclusion of certain “intermediate” transactions simply excludes massive volumes of economic activity. Thus, GDP understates the economy as a whole while grossly overstating its consumption component relative to business investment.

Thus, it allows ignoramuses to say that NZers rebuilding after an earthquake and selling houses to each other are the foundations for a “rock star” economy!

A better measure of overall production was created in 2014 when the US Commerce Department began publishing Gross Output which does incorporate intermediate transactions. Using GDP, ignorant commentators  commonly cite the fantasy statistic that consumption accounts for 70 percent of all economic activity. Using Gross Output, we see that consumption  represents a mere 40 percent.

2. The Treatment of Government Expenditures as Productive

If the GDP figure purports to measures production, then why does it include government spending?

If GDP purports to measure economic activity which benefits society, the inclusion of government expenditures is dubious – especially because of the temptation for governments to goose the figures with extra spending they can’t afford (we’re looking at you, every finance minister in the western world).

If all government spending is included no matter the outcome, then GDP “produced” in the Soviet Union is no different than GDP “produced” by any government — the difference is but one of scale.

In this sense, reducing GDP would actually increase economic growth. Because, frankly, all government spending is not production but consumption. For as George Reisman notes:

In the same sense as a housewife, the government is not a producer but a consumer, who is dependent upon producers.  All of its physical production, like hers, is in the last analysis a consumptive production. It is a production which cannot replace the means with which it began ...  a production which leaves the government poorer by the amount of funds it has expended.  In order to continue the activity, resort must be had to an external source of funds -- in the government's case, the taxpayers or the printing press.

And all government spending is to some degree malinvestment, for as Murray Rothbard noted:

Spending only measures value of output in the private economy because that spending is voluntary for services rendered. In government, the situation is entirely different ... its spending has no necessary relation to the services that it might be providing to the private sector. There is no way, in fact, to gauge [the monetary value] these services.

Without voluntary action, the price system is impotent; without true price discovery, true monetary value cannot be ascertained. True price discovery is impossible with government spending.  This does not mean all goods and services provided by government would cease to exist; rather, some production (e.g., hospitals, schools, roads, etc.) would revert to the private sector (and then nurses and teachers might be paid what they deserve).

When measured (and produced) this way, the true government contribution to GDP may be positive but overstated (it currently approximates 20 percent of US GDP) – it also offers a flawed basis for a modern form voodoo economics that claims government deficits actually encourage saving. A more accurate depiction of economic activity would reduce if not eliminate altogether both voodoo economics and the contribution of government expenditures.

Or perhaps, as Murray Rothbard argued, the higher of government receipts or expenditures should actually be deducted from GDP since “all government spending is a clear depredation upon, rather than an addition” to the economy.

3. The Problems of Subtracting Imports from Exports

Way to ignore the benefits of trade, guys …

As Robert Murphy has noted several times, the netting of imports against exports in determining GDP seriously understates the contribution of trade to overall economic activity. To wit, an economy which exports $1 and imports $1 will have the same GDP contribution (zero) as one which exports $100 billion and imports $100 billion. Obviously, the latter economy would be far worse off with the sudden cessation of trade.

A fixture of GDP is the mercantilist mentality of treating exports positively and imports negatively. Why are exports additive to GDP while imports are deductive? If the goal of GDP is to measure the goods and services provided to people within a geographic region, then imports are the real benefit— not exports. Exports are but payment for imports.

The problem and confusion arises because the GDP calculation unrealistically excludes other forms of payment: it should make a difference if imports are funded with increasing debt levels or if funds are accumulated from previous years of compensated exports. If China converted over $1 trillion in US debt instruments into imports of American goods and services, then its people benefit today; but under GDP accounting, the negative impact of imports would offset greater consumption and/or government spending (the increase in GDP was previously realised in the years during which exports created a trade surplus).

Conclusion: GDP Advances the Failed Keynesian Agenda

Yes,  GDP does advance a failed agenda …

Simon Kuznets (1901–1985) revolutionised econometrics and standardized measurements of GDP, with his research culminating in his 1941 book, National Income and Its Composition, 1919–1938. While not a Keynesian per se, since central planning requires economic statistics the nature and timing of his research fuelled the Keynesian revolution. As Murray Rothbard noted:

Statistics are the eyes and ears of the bureaucrat, the politician, the socialistic reformer. Only by statistics can they know, or at least have any idea about, what is going on in the economy. Only by statistics can they find out ... who “needs” what throughout the economy, and how much government money should be channelled in what directions.

Further, the overstatement of consumption perfectly matches the Keynesian agenda, which happily dismisses the savings necessary for the production of the intermediate goods the GDP measurement system ignores.

The fact is, GDP’s faulty theoretical underpinnings and politically-motivated acceptance distort the performance and nature of an economy while failing to satisfactorily estimate a society’s standard of living. In fact, Kuznets himself partially understood this. In his very first report to the US Congress in 1934, Kuznets said “the welfare of a nation [can] scarcely be inferred from a measure of national income.”

Yet the blind usage of GDP persists. That its permanence and persistence only serves the Keynesian policies of greater consumer spending, increased government expenditures, and larger exports through currency debasement should not be considered coincidental. Unfortunately, the resulting economic stagnation, debt accumulation, and price inflation are as inevitable as they are predictable.


RELATED READING:

NOTES:

  • 1.Starting in December of 1991, the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce emphasised gross domestic product (GDP) over that of gross national product (GNP) as a measurement of production within the U.S. The difference between GNP and GDP lies in the treatment of income from foreign sources: GNP measures the value of goods and services produced by U.S. nationals, while GDP measures the value of goods and services produced within the boundaries of the U.S., regardless as to the nationality of ownership. For purposes of this article, the differences between each measurement are unimportant and therefore “GDP” is utilised synonymously with GNP.

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Monday, 18 May 2015

Social “justice”?

How often have you heard someone from the commentariat say “we should be judged by how we treat the poor/the children/the disadvantaged/he least advantaged/the under-privileged/the differently abled/the at-risk/the insert-favourite-allegedly-downtrodden-class.”

The class being so treated (or mistreated, it’s alleged) generally has the great virtue that it hasn’t asked the commentator to talk for them.  (And by “we” this group with the stolen virtue mean everyone who pays taxes, which often excludes themselves. And by “judged” they mean if “we” don’t cough up then we don’t care.)

This, they say, is “social justice.” The adjective is necessary, because it distinguishes their anti-concept from the real thing.

Philosopher Stephen Hicks makes a simple point. Actually, he makes several. (And I paraphrase his points ever-so slightly, since he’s actually talking about some folk most of you have never heard of):

1. As a political-philosophical method: Why start politics by dividing people into groups and granting one group special prior ethical status? In this case, so-called social “justice” divides people into poor and non-poor and holds the poor to have a special moral position in politics-making. That is not the way to ground politics, for two reasons: (a) Politics should start with individuals, not individuals-as-members-of-a-sub-group; and (b) politics should initially treat all individuals as having equal moral status — in my view, as self-responsible, free agents — not as having preferred status by belonging to a sub-group.
2. As a moral justification of liberty: So-called social “justice” says your liberty and mine are justified only if and to the extent that it serves or benefits the interests of others, especially poor others. This means that its moral principle is serving or benefiting others. This is not the way to do the ethics of politics: Liberty as a basic principle means that each individual’s life is his or her own, whether or not the individual’s choices serve or benefit others. Individuals’ political freedom is justified because they need it in order to think and act independently to produce the values their lives need. My liberty to be a philosopher or a poet or an explorer is not morally contingent upon my doing so’s demonstrably serving the interests of others….
3. As a conception of life’s core values: By focusing on the poor, so-called social “justice” seems to make politics essentially or primarily about economics. If political institutions are to be designed by reference to their relative economic impact on the poor and non-poor, then economic wealth is the critical factor. But that is much too narrow a conception of liberty’s scope and the proper purpose of politics. Family, art, sports, religion, and so on, as well as economic pursuits, are parts of life, and the principles of politics should cover them all generally. A narrow conception of so-called social “justice” would seem to imply that one is free to engage in art, religion, or whatever only if that can be shown to be to serve the interests of the poor…. Politicians should not care about the poor any more than they do about men who can’t get a woman to start a family with them — or any more than referees care about short basketball players.

NB: Hicks is not talking directly about social “justice,” “social justice,” or so-called social justice.  He’s actually criticising so-called Bleeding Heart Libertarians, who “accept the basic Rawlsian line about the morality of politics, and its advocates seek either (a) to wrest the ‘social justice’ label away from the lefties who use it most by showing that ends of social justice are best achieved by free-market liberalism … or (b) to find common ground with lefties on moral issues.”

Or, perhaps, to find academic lefties who will talk to them. As a commenter at his post suggests, a strategy that’s more than a little naive.

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Beneficiary calls for conscription

So one young beneficiary would “dread to think where I’d be without the Army” – says it has done “amazing things” for him and the rest of his family of beneficiaries– and on that basis wants conscription, compulsory military service, for all young people.

As if the lives of all young people were the property of the state, to dispose of as they wish.

Of all the statist violations of individual rights in a mixed economy, the military draft is the worst. It is an abrogation of rights. It negates man's fundamental right—the right to life—and establishes the fundamental principle of statism: that a man's life belongs to the state, and the state may claim it by compelling him to sacrifice it in battle. Once that principle is accepted, the rest is only a matter of time.

Fuck him and his whole thieving family.

Housing tax: Two quotes, two comments

“In the end, yesterday’s announcement looks a lot like political theatre.  As ministers, and the Reserve Bank, have rightly noted previously, CGTs don’t change the character of house price cycles, and attenuated ones like this are even less likely to.  Some will feel better that ‘something is being done,’ but it will just divert attention, and policy and legislative time, away from measures that grapple with the real issues.” 1

COMMENT: It looks a lot like political theatre to this government, and last weeks’ Reserve Bank meddling makes it a two-cast drama. But while its off-Broadway now, a diversion, now that the door to CGT has been opened it will soon become main-stage centre-Broadway.

“What strikes me about the government’s new tax – which is totally not a capital gains tax <sarcasm>– is that (a) it will probably not deliver … because property speculators can just defer their sales to avoid the tax [for now], but (b) [because] there is now a ‘brightline’ tax on capital gains instead of a huge nebulous loophole … this is a big deal on a psychological and political level. It means that subsequent governments – or maybe even this one – can incrementally increase the two year limit out to five years, ten years, then no limit, and New Zealand will have a realised capital gains tax on secondary property.
Yes, the way it came about is absurd. Labour campaigned on a Capital Gains Tax. National opposed it. More than opposed – they tore Labour apart over it. So Labour abandoned it and now National’s introduced a dummy one. Someone else will give it teeth.”

COMMENT: Oh yes. They sure will. Someone else will certainly give it teeth. Big teeth.

Nobody voted for it.

A lot of you voted against it.

And you believed the blue lot when they said they opposed it. Yet here it is; the wedge just gently slipped in. all ready to be hammered home.

So who are the stupid ones here?

It’s the same ones who voted for those “meaningful” tax cuts in this Government’s first term.

You voted for tax cuts you didn’t get. And you voted against a tax you are getting.

Will you ever get the feeling you’ve been cheated?


1. This comment is by Michael Reddell at the Croaking Cassandra blog. Unfortunately, he concludes by revealing himself to be anti-immigration. So, there’s that.
2. The comment is Danyl’s at the Dim Post blog. His analysis is spot on. His evaluation however is 100% removed from mine; he calls it Progress!

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Friday, 15 May 2015

The day classical liberalism died

There have been many 100-year anniversaries associated with the First World War, the most recent being the tragic invasion of the Dardanelles in which 130,000 died and three nations, strangely, see their birth.
But more than soldiers died in the war. This Sunday, there is the 100-year anniversary of the death of an idea. An idea that might yet be reborn, but which died its first death in the tragedy of that war.
Classical liberalism had promised peace.
It could not survive the war that seemed to explode its creed…
[NB: Yes, for some of you this will be tl;dr. But I am really looking forward to any comments you might have. Other than that, obviously. Oh, and the footnotes jump you around and then back again so you don’t have to. You’re welcome.]

MAY 17, 1915: The day classical liberalism died

“War appears to be as old as mankind,
but peace is a modern invention.”

- Sir Henry Maine (1822-88)

    Under the sun
Are sixteen million men,
Chosen for shining teeth,
Sharp eyes, hard legs,
And a running of young warm blood in their wrists.
    And a red juice runs on the green grass;
And a red juice soaks the dark soil
And the sixteen million are killing … and killing and killing.
-
Carl Sandburg, “Killers,” 1916

Classical Liberalism died one-hundred years ago this week, its promise of peace and prosperity carried off like 16 million souls in the meat-grinder of the First World War.

If a date could be put on it, Liberalism in the classical tradition died one-hundred years ago this Sunday. Almost terminal already,1 it was finally extinguished in the second year of that War, killed when the ruling British Liberal Party who had taken Britain into that war -- the party of John Stuart Mill, of Cobden, of Gladstone, and the ruling party for more than half of Britain’s glorious years of nineteenth-century prosperity – perished in the wake of Gallipoli2, never to rise again.3

If a precise day could be put on it, it might be the day the British Liberal Cabinet split asunder in the wake of nine months of military and political disasters, never to rise again. That day, May 17, 1915, marked the end of the last all-Liberal government.4

In Britain, America, Austria, France, Germany, the lessons governments learned from their economies of ‘war socialism,’ applied in force when the war ended5, was that the more government you had, the better the health of the nation. This fact alone explains much of the century that followed.6

Liberalism in the classical tradition comes from the Latin “liber” meaning “free.” It refers to the philosophy of freedom, to the removal of privilege and the recognition of individual rights – what Ludwig Von Mises called in his great book Liberalism “the philosophy of Enlightenment.”7 (The contrast with today’s ‘liberals’ could not be more stark.8

"The program of liberalism [in the classical tradition] … if condensed into a single word,” said Mises, “would have to read: property, that is, private ownership of the means of production.”9

Translated into effect, this meant the creation of the widest possible peaceful network of division of labour.10 In world with few political restrictions on labour and capital flows, this was a worldwide division of labour.

If Liberalism of the classical nineteenth-century variety could have said to have a creed of foreign policy, it would be this: that if goods don’t cross borders, then armies will.11 Said to have been expressed by both the French free-trader Frederic Bastiat and his English Liberal colleague Richard Cobden12, and seemingly borne out by there having been (unusually) no European-wide conflicts for a century – not since Waterloo -- it would be fair to say however that in the year of 1914 when the guns of August began roaring, that creed was proved spectacularly wrong.

Because, at that time, never before had so much been traded with so many. Never before (and even since) had so much capital flown to so many parts of the globe. Never before had business networks buzzed so widely and so well.13

clip_image002
Surprising to many, but we are only now approaching the
level of globalisation achieved by the ‘liberal century’

With the network of world trade exporting the industrial revolution’s prosperity to every corner of the globe, the degree of ‘globalisation’ then has barely been surpassed even a century later. Never before nor since has movement of labour and capital been so free.14 Never before in the history of the world had there been more goods crossing more borders. Yet when Germany invaded France and the British Liberal Cabinet took Britain into the war, the German army was then at war with her country’s two largest trading partners.15

So much for the promise of free trade delivering peace, you might say.

But, well, you would be wrong.

clip_image004Networks, we’ve got networks: from one end of the nineteenth-century world to another!

1. THE IMMEDIATE POLITICAL PROBLEM: WHO DECIDES TO GO TO WAR?

Like all general principles, the liberal promise of peace with free trade stands in a context. That context is both political and cultural.16

The argument does not say that "If goods do cross borders, armies won't." What it does say is that:

Free trade helps quell government's passion for war. It creates powerful lobbying groups on all sides that demand the preservation of peace and the triumph of diplomacy over hostility. International trade networks create intermediating structures of business relations that work as a barrier to bombs and belligerence.17, 18

And “[h]istory demonstrates the peaceful influence of trade”:

The century of relative world peace from 1815 to 1914 was marked by a dramatic expansion of international trade, investment and human migration, illuminated by the example of Great Britain. In contrast, the rise of protectionism and the downward spiral of global trade in the 1930s aggravated the underlying hostilities that propelled Germany and Japan to make war on their neighbours.19

“Either goods will cross borders or armies will,” says a modern free-trader; “the golden age of free trade in the 19th century made possible the ‘long peace’ that ended in 1914.”20

But it still ended in 1914.

Observe that the immediate political problem is that the men who made the decisions in 1914 to go to war (and, yes, Virginia, they were all men) were not the same men in whose self-interest it was to maintain a peaceful continent.

Remember that private citizens—whether rich or poor, whether businessmen or workers—have no power to start a war. That power is the exclusive prerogative of a government. Which type of government is more likely to plunge a country into war: a government of limited powers, bound by constitutional restrictions—or an unlimited government, open to the pressure of any group with warlike interests or ideologies, a government able to command armies to march at the whim of a single chief executive?21

The somewhat liberal Concert of Europe had been replaced by the sabre-rattling alliances of the “balance of power”22 but, even so, fewer restraints existed in some places than others, and in some political systems than others – and in the political environment as it then was and always will be, the influence of those desiring the peace for which we argue is necessarily indirect: by lobbying, or by the ballot box.

And those whom by free trade had been brought together and prospered were not those who split the world asunder.

2. THE CULTURAL PROBLEM: COMETH PROSPERITY, COMETH THE BACKLASH

Classical liberals were under few illusions.

The believed … that peace would be the natural consequence of the growth of international commerce and self-government, since it would increase the influence of those classes which, unlike the old ruling elites, had no interest in the perpetuation of war… this group became increasingly significant in western Europe as the urbanisation and modernisation of society increased their political power, and improvement in communications bound them closer. By the beginning of the twentieth century the professional middle classes of the western world were indeed beginning to constitute what was later to be termed an ‘international community.’ Some indeed saw themselves as the international community: mistakenly, alas.23

Because even in Britain, then the most advanced of European countries, those importing, exporting, producing and consuming all those goods that were so resolutely crossing borders were not those making the decisions that sent men to war. Even with the recent expansion of the electoral franchise “[t]he upper levels of the civil service, the Church, the armed forces, the House of Commons, and of course the House of Lords were all dominated by the landed classes,” and in the new prosperity these were the very men who were losing out.

“Even in 1897, after successive reforms had widened the franchise and brought new sorts of men into politics, 60 per cent of Members of [the British] Parliament still came from those classes.”24 And many in those classes were as violently opposed to the new commercial world that had brought peace as they were behind the idea of a new martial adventure that, it was felt, would offer a stiff moral tonic to a country grown “soft” and a generation obsessed with its own interests. As writer Norman Angell described it,

There is something in warfare, in its story and in its paraphernalia, which profoundly stirs the emotions and sends the blood tingling through the veins of the most peaceable of us, and appeals to I know not what remote instincts, to say nothing of our natural admiration for courage, our love of adventure, of intense movement and action.”25

The same sad story of reactionary antediluvianism can be told in all the Great Powers; in a French ruling class eager to relive martial glory after the embarrassments of the Franco-Prussian War and a population whose bloodstained revolutionary conquests had now taken on a more glorious sheen; in a Russian military and nobility keen to shake off the embarrassment of its abject defeat in the Russo-Japanese War and flex newly-won industrial muscles in the only way they understood; perhaps most of all in a Germany that had most recently enjoyed both a unification and an Industrial Revolution, the beneficiaries of both being vastly different.

And even if democracy were a means by which to fully restrain the non-peacefulness of a Kaiser or a King or a Cabinet (which it isn’t), neither Britain’s prosperous merchant classes nor continental Europe’s emerging new industrialists had any real sway in the Palaces of Westminster, the deliberations of the Duma, or the rationalisations of the Reichstag. Even if their influence counted –and the influence of the Reichstag itself in decision-making was minimal, and that of the Russian Duma virtually nil -- those who still dominated these august bodies were not predominantly from the thrusting new classes needing peace to prosper but from the aging nobility resentful at being thrust aside. And “the absolutist powers had no intention of peacefully relinquishing their prerogatives.”26

It was not just the resentment of class. It was also a product of economics. The nobility of every old European country was bolstered on a bulwark of ancient land-holdings supporting limited agricultural production that, for many static centuries, had been enough to pay the nobility’s way even as it kept the rest of humanity impoverished.

But as anyone familiar with the concept of creative destruction would be aware, (and as John Stuart Mill had predicted26a) the new prosperity of the Industrial Revolution threatened not just the continuing prosperity of a noble class whose wealth was based on agriculture, but its very existence.27 Every seed drill, horse hoe, moldboard plough and combine harvester that increased grain production and lowered the sale price of every bushel was a thrust to the wallet and a dagger to the heart of a class whose own agricultural returns due to the increased production were static and falling.

No wonder so many saw their enemies as the “new rich,” their salvation in politics, and their hopes for revival in a return to the fading glory of military conquest.

3. CRONYISM, AND THE ERRORS OF IMPERIALISM

A telling point is that when war was announced every stock market in Europe collapsed. Rather than being encouraged by the news, investors were appalled. War was not good for commerce, and investors themselves realised this.

It’s still said however that the fact capitalists controlled governments is the fact that explains the war – that trade itself is what caused the armies to cross borders in order to conquer new markets. Even if the former were true, and as we’ve seen it wasn’t, the latter is not.

Rosa Luxemburg has one of the the classic statements of the Marxist fallacy in her 1913 Accumulation of Capital:

Since capitalist accumulation needs … an additional market outside that provided by capitalists and workers, the necessity to expand into non-capitalist markets follows. Imperialism becomes an historical necessity and follows from the requirements and conditions of capital accumulation.28

Yet her colleague Nikolai Bukharin himself asks her29 “why should one annex [the] capitalist territories” that were invaded or later occupied by the European Powers when those territories were already buying their goods?

We might also wonder what advantage there is in invading territories that are already supplying a country with goods – or would freely supply them if trade were allowed to be free, as it largely was.

The argument doesn’t stack up in either direction.

Capitalism wins and holds its markets by free competition, at home and abroad. A market conquered by war can be of value (temporarily) only to those advocates of a mixed economy who seek to close it to international competition, impose restrictive regulations, and thus acquire special privileges by force. The same type of businessmen who sought special advantages by government action in their own countries, sought special markets by government action abroad. At whose expense? At the expense of the overwhelming majority of businessmen who paid the taxes for such ventures, but gained nothing. Who justified such policies and sold them to the public? The statist intellectuals who manufactured such doctrines as "the public interest" or "national prestige" or "manifest destiny."30

In short:

For a liberal state, the question of whether or not the boundaries of its territory are to be further extended is of minor significance. Wealth cannot be attained by the annexation of new provinces, since the ‘revenue’ derived from a territory must be used to defray the necessary costs of its administration [and the lives of young men needed to acquire it].31

Another argument is that the bomb-makers themselves are a force for war.

Inconveniently for … [the argument], however, is that there is scarcely any evidence that those [interests in armaments] made businessmen want a major European war. In London the overwhelming majority of bankers were appalled at the prospect, not least because war threatened to bankrupt most if not all of the major acceptance houses engaged in financing international trade. The Rothschilds [who had financial links to Vickers, Maxim and ironworks supplying a preponderance of Austrian and German rearmament] strove vainly to avert an Anglo-German conflict, and for their pains were accused by the foreign editor of The Times … of “a dirty German-Jewish international financial attempt to bully us into neutrality.”32

A similar story can be told of major ship-owners, bankers, industrialists and lobbyists,33 -- and the reaction to them of an eager-for-war commentariat.

Basically the German bomb-makers argued that in the end war would reward no-one, least of all themselves. They too needed peace to produce goods and make profits. And none of them wanted to be nationalised, or subjected to government control.

And with all its vicissitudes, bomb-making was hardly as profitable as the alternatives. The Krupp armaments company for example, one of the German army’s main suppliers,”was actually less profitable than its competitors who concentrated on production for civilian consumption, and that its ‘special relationship’ with state authorities actually impeded it from maximising its profits.”34 Sure, there were opportunities for cronyism, but that influence went from government to business, not the other way. “The actual war profiteers of all mixed economies were and are of that type: men with political pull who acquire fortunes by government favour, during or after a war—fortunes which they could not have acquired on a free market.”35

But even if trade between continental neighbours hadn’t set off the war, what about the conflicts generated from colonial rivalries abroad? We might look at wars forgone due largely to trade.

If there was a war which imperialism should have caused it was the war between Britain and Russia which failed to break out in the 1870s and 1880s; or the war between Britain and France which failed to break out in the 1880s or 1890s. These three powers were, after all, the real imperial rivals, coming into repeated conflict with one another from Constantinople to Kabul … from the Sudan to Siam ... 36

But war didn’t happen, largely because would-be participants realised the conflicts would have cost more than they could gain.

But hadn’t Germany’s search for foreign markets, for its “place in the sun,” caused it to butt up dangerously with its European neighbours in the colonial parts of their anatomy? Germany’s 1911 dispute over the French grab of Morocco offers a telling example: It was not about opening up markets but a simple grab for martial glory on the latter part and a place in the colonial sun for the former. And it was settled not by war between France and Germany, but “by a transfer of African territory to Germany, demonstrating that colonial rivalries, even though they produced tensions, were not central enough to lead to war among the powers.”37

And while the Berlin-Baghdad railway is often cited as a factor in the war’s origins; closer study reveals it to be a useful example of the very differing interests of businessmen and bomb-makers.38

Now, it is true that Britain’s colonial interests did put it in potential conflict worldwide; its interests in India and the trade routes thereto for example putting it in conflict with France’s in the Middle East and with Russia’s in the Black sea and the subcontinent. Indeed, this had motivated Britain joining the Entente with both that Germany feared had overbalanced the balance of power.

But while those colonial interests were thought to be trade the figures just don’t bear that out. “We may date the beginning of modern imperialism from the late seventies of the [nineteenth] century, when the industrial countries of Europe started to abandon the policy of free trade and to engage in the race of colonial ‘markets’ in Africa and Asia.”39 “In 1901, the proportion of its [Britain’s] exports going to British possessions was only 36.5%, and the proportion of its imports coming from British possessions was only 20%.”40

But what about private capital? Did that follow the flag?

In 1913 British overseas investment had reached an all-time peak of 9.1% of GDP (“a level not surpassed until 1990”41) and foreign assets had accumulated to 3.9 billion pounds, “around a third of the stock of British wealth.”

This private capital investment was paying its way.42 But it wasn’t coming from conquest. “[I]n 1910 British investment in Asia and Africa, the only two continents in which Britain had recently pursued or was still pursuing a policy of territorial annexation, accounted for merely 20% of Britain’s foreign investment. Of the eleven countries receiving the most British capital, apart from the self-governing Dominions of Canada and New Zealand, only three were part of the British Empire.”43

The flood of foreign investment wasn’t encouraging conflict, it produced instead a Pax Britannica – the overwhelming impetus of the liberal century was towards naval power as a keeper of the peace, not as a hammer to break down commercial doors. (Conversely, it was Germany’s very low level of foreign investment that meant she faced fewer financial impediments in going to war.)

However while the Pax Britannica of the sea lanes had made peaceful world trade possible, the colonies they were intended to protect were a net cost to Britain both financially and as flashpoints for future conflicts which caused, in large part, the fateful alliances that helped start the world war. (And as the much later example of resource-poor Japan proved so spectacularly, trading with countries to acquire the resources you lack is a far richer and more peaceful path to prosperity than invading them.44)

So while private investment did pay, imperialism did not. “The grand commercial objectives aimed at by the policy of imperialism were nowhere attained.”45

We might well wonder why imperialism persisted? The simple answer is economic error: the imperialists either never heard the economic arguments, or heard them and didn’t understand them. It’s more accurate to say they heard them and didn’t care. They had other motives.

imageAdam Smith and Frederic Bastiat and free-trader Richard Cobden had argued “that the modern application of the principles of political economy has destroyed the motive of self-interest which formerly tempted us to wars of conquest.”46

And so it had.

But as Smith and Bastiat had taught, it was self-interest that was the engine of both trade and economic harmony47. Yet as long as economic error still taught that foreign conquest on behalf of mercantilist interests were also in a nation’s interests, which increasing numbers of error-ridden mercantilists still advocated, then the motive for conquest remained.48

image

And when motivations other than self-interest took over --- patriotism, self-sacrifice, duty to king or Kaiser – all the ideals we still hear every Anzac Day -- then the modern applications of liberal political economy were impotent. In other words, that “the imperialist engine” is not “always … governed by financial interests”: “political motives have an independent origin.”49, 50

So too the real engine of war is not primarily economic (not at least unless economic errors like mercantilism are a factor), but political. And cultural. And both motives have an independent origin.

The tragedy is that the motive of free trade in the institutional structure of 1914 was insufficiently powerful to counterbalance them.

Let’s look at them in turn.

image

4.1 THE MOTIVE OF MERCANTILISM

Free trade is not the signing of Treaties. Signing treaties is what the ruling classes do. Free trade is what happens when the ruling classes get out of the way.

The motive of trade agreements is often not free trade, but mercantilism, “trade policy as a continuing system of manoeuvrings to try to force other countries to purchase more … exports.”

In the first place, genuine free trade doesn’t require a treaty (or its deformed cousin, a “trade agreement”) … If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other … restrictions on trade. No foreign policy or foreign manoeuvring is needed…
Whereas genuine free traders look at free markets and trade, domestic or international, from the point of view of the consumer (that is, all of us), the mercantilist, of the 16th century or today, looks at trade from the point of view of the power elite, big business in league with the government. Genuine free traders consider exports a means of paying for imports, in the same way that goods in general are produced in order to be sold to consumers. But the mercantilists want to privilege the government-business elite at the expense of all consumers, be they domestic or foreign.
51

Only under the motive of mercantilism does “issue linkage” become a problem.52 As first U.S. President George Washington said in his Farewell Address, intending to set the tone for every presidency thereafter,

[T]he great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connection as possible. (Emphasis in the original).

And only with the motive of mercantilism does imperialism even begin to make economic sense – and, as we see above, it doesn’t. Because it was never economic sense that animates mercantilists.

4.2 THE CULTURAL MOTIVE

Examining the reasons for British involvement in the Boer War, and wanting to pin the blame on financial interest, J.A. Hobson discovered instead that “the chief agents of this policy, [Austen] Chamberlain, [Cecil] Rhodes and Lord Milner, were, so far as history shows, actuated by political motives in which the idea of imperial expansion doubtless coalesced with the sense of personal ambition, but in which distinctively economic gains either for themselves of for others played no determinant part.”53

More's the pity!

Change the players, and that describes the origins of many wars including the first world war. Yet allow the economic motive to prevail, and the temptation for war would prevail. That was the liberal creed.

Liberalism perished not because the creed proved wrong. It perished because the institutional framework for it was never fully supported nor understood; the creed itself was neither fully supported, nor philosophically defended, nor sufficiently well entrenched in the culture for it ever to prevail .

As a simple way to think about it, folk were not yet ready (and nor are they any closer today) to replace their veneration for the warrior with that of the trader.54

image

Over the course of the ‘liberal century,’ classical liberalism had been spectacularly successful in exporting the prosperity of the Industrial Revolution, and moderately successful in exporting the creed of individual rights that underpinned it. (Indeed, it is one of the reasons we have a prosperous and still largely British-based (and sometimes even still rights-based) culture down here at the far end of the South Seas.)

But its alleged philosophical defenders were thoroughly undercut by their own collectivism, making them unable to fully answer the statist revanchment, (John Stuart Mill himself a prominent example55) and those who did follow the creed, most especially the capitalists and entrepreneurial geniuses who had actually delivered the prosperity, were not those who were in power, most especially because a moral code that recognised the rights of the common man would always attract opposition from those who saw themselves as his masters.

The opposition to the liberal tide was twofold, and since war started in continental Europe it is to there we must look.

4.3 MORE OPPOSITION: Intellectual and Artistic

Germany had undergone a liberal flowering and an industrial revolution. Later than other countries, because it had been involved with its unification wars, so the first barely took hold before war destroyed it and the second came as a sudden shock.

A simple table tells the tale:

clip_image006My source: Niall Ferguson’s Pity of War

From the middle row we see the nascent power of Germany’s late but potent industrial revolution: Germany’s gross domestic capital formation – in other words, both its total industrial potential and its ability to pay real wages – its real wealth! -- had increased 5-fold in 23 years, and its population and wealth had grown even more. Per capita wealth was now 3.4 times higher! And from this golden age, a new middle class sprung into existence.

As we saw above, one form of opposition Europe-wide to the growing prosperity and liberal culture was aristocratic, from the class in power being so spectacularly displaced by the new prosperity. In Germany this was the Junkers whose nobility they held was based on blood and soil. The other was intellectual, and artistic.

Artists do not yet set a country’s direction, but they do illustrate the culture that does. In continental Europe, even by the artistic avant garde, the trader who had produced this prosperity was still seen as the enemy, the warrior still venerated as the foe who would vanquish him. Here for example is a potent pre-war print taken to depict the fate of the masses under the Industrial Revolution Germany had been enjoying:

clip_image008
Kathe Kollewitz’s 1906 Die Pfluger (The Ploughmen) “referred to the German peasants’
revolt of the 1520s,” but with its suggestions of alleged capitalist exploitation it
“resonated with her contemporaries.”
[56] [Pic from Auckland Art Gallery]

Here, as illustration of the reaction is an exhibition card from a powerful current exhibition at Auckland’s Art Gallery of pre-war German prints and etchings57:

clip_image010

Artists as a group are so often the reflection of a society’s soul.58 Theirs was a society, or at least a class, that was sickened by the peace and prosperity delivered by the liberal industrial age. “The spread of liberalism and free markets caused … [the] members of the artistic avant garde to see political developments as a series of disappointments.”59

They were like a later generation and another country’s Charles Dickens. But a Dickens with a death wish: The promise of war’s revivifying primitivism reinvigorated their spirit. (With the romance of war soon dispelled by its results, however, the avant garde launched Dada, anti-art; in emulation of the war’s destruction “self-immolation was written into Dada's very DNA.”60)

The sentiment was fully shared by the intellectuals who set Germany’s cultural tone – from the Lutherans who dominated much of German religious life who “rejected capitalism as an evil, Jewish idea, incompatible with the spirit of Christianity”61– to the writers of philosophical and literary manifestoes who maintained “[m]odern science and its products, the Industrial Revolution … thwart the emotional development of everyone” and counselled that “selfless service to the Volk (the people) to the people … is the essence of virtue”62 – to the academics called even by many at the time as “the intellectual bodyguards of the Hohenzollern”63: Private property, they taught, should be run by government authority.64

The German social scientists who dominated Austro-German academia known as “the socialists of the chair” no longer even taught economics, observed Von Mises; “they were preaching the doctrines of war.”65

All this in the face of the astonishing prosperity industrialisation and freedom had unleashed. No, not despite: because. In their almost total opposition to the new commercial culture, you could almost call it a town versus gown competition, with the winner getting to set the country’s culture.

Town lost.

No wonder the smart young men of the time who were taught this, like the young Friedrich Hayek, simply assumed socialism was the scientific system of the future.66 And “[t]heir belief in the redemptive social mission of the state resonated widely in a political environment … looking for alternatives to a liberal doctrine of laissez faire …”67

But economists and social scientists don’t exist in an intellectual vacuum. They are so often the transmission belts, as even Keynes should have recognised, of some long-dead and defunct philosopher.

The least defunct and still most influential philosophical current had emerged from the bowels of George Wilhelm Friedrich Hegel, whose very middle names linked one conqueror to his would-be triumphant successor, and who conquered German-speaking Europe intellectually as thoroughly as Bismarck would later unify it.

The state, Hegel argued, was an organism possessing will, rationality and purpose. Its destiny – like that of any living thing – was to change, grow and progressively develop. The state was ‘the power of reason actualising itself as will’; it was a transcendent domain in which the alienated, competitive ‘particular interests’ of civil society merged into coherence and identity. There was a theological core to Hegel’s reflections on the state: the state had a quasi-divine purpose; it was ‘God’s march through the world’; in Hegel’s hands it became the quasi-divine apparatus by which the multitude of subjects who constituted civil society was redeemed into universality….
The Hegelian state was not an imposed construct, but the highest expression of the ethical substance of a people, the unfolding of a transcendent and rational order, the ‘actualisation of freedom.’
68

Stripped of its jargon, observes philosopher Leonard Peikoff, “might makes right … this is the meaning of Hegel’s doctrine.”69

As the historian quoted above dryly notes, “Hegel’s was not a liberal vision.”70

No wonder the smart young men of the time who were taught this would see themselves two decades later marching through Europe on some quasi-divine purpose at the head of a state possessing (they felt) the organic will of a people.

Hegel’s influence was profound and lasting. His arguments diffused swiftly into the culture … Hegelianism – like post-modernism – became ambient, infiltrating the language and thinking even of those who had never read or understood the master’s work. Hegel’s influence helped to establish the modern state as a privileged object of enquiry and reflection.71

Like the artists, those who absorbed Hegel’s influence were not just ready for war, they were begging for it. They were opposed to everything to do with what they saw as the weak-kneed version of individualistic freedom represented by capitalism and its rampant consumerism. For them, freedom meant only the freedom to drown in the authority of the state, for which they ached for the opportunity.72

5 “THE LAST INTELLECTUAL SOURCE OF HOPE”?

Yet even in a milieu drenched in all this muck, its influence was still neither universal nor Europe-wide.

Until August 1914 a sensible, law-abiding Englishman [for example]could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country for ever without a passport or any sort of official permission. He could exchange his money for any other currency without restriction or limit. He could buy goods from any country in the world on the same terms as he bought goods at home. For that matter, a foreigner could spend his life in this country without permit and without informing the police. Unlike the countries of the European continent, the state did not require its citizens to perform military service. An Englishman could enlist, if he chose, in the regular army, the navy, or the territorials. He could also ignore, if he chose, the demands of national defence. Substantial householders were occasionally called on for jury service. Otherwise, only those helped the state who wished to do so. The Englishman paid taxes on a modest scale: nearly £200 million in 1913-14, or rather less than 8 per cent. of the national income. The state intervened to prevent the citizen from eating adulterated food or contracting certain infectious diseases. It imposed safety rules in factories, and prevented women, and adult males in some industries, from working excessive hours. The state saw to it that children received education up to the age of 13. Since 1 January 1909, it provided a meagre pension for the needy over the age of 70. Since 1911, it helped to insure certain classes of workers against sickness and unemployment. This tendency towards more state action was increasing. Expenditure on the social services had roughly doubled since the Liberals took office in 1905. Still, broadly speaking, the state acted only to help those who could not help themselves. It left the adult citizen alone.
   
All this was changed by the impact of the Great War.73a

Even “[t]he new Bismarckian Reich was not in any sense [the] ‘organic’ or historically evolved entity [proclaimed by Hegel]– it was the highly artificial product of four years of diplomacy and war.”73

And “[o]utside the conservative heartlands … and especially in the western provinces and the major cities, there flourished a robust and predominantly middle-class political culture.”74

And even in Prussia which was frequently describes as a state inhabited by an army, military prowess was not everything. The stories of Zabern were greeted with as much horror as praise, and that of with as much humour as chagrin. And the liberal hope, “stifled and marginalised,”75 still existed in southern Germany.

Indeed, it existed even in the man who became Kaiser – but alas, only too briefly.

William I’s son and successor, Frederick III, was a charismatic man with strong ties to the German liberal movement. He was also respected for the important command role he had played in the wars of unification. Given the chance, he might well have become a genuinely national-imperial monarch. But by the time Frederick came to the throne in March 1888, he was already dying of throat cancer and had only three months to live.76

And, just one more tragedy in the heap that piled up into war, it existed in the man named Franz Ferdinand who was heir to the Hapsburg throne. But he was shot in Sarajevo by a Serbian terrorist who put nationalism above rational self-interest.

And there were liberals fighting back. In the last decades of the liberal world, in what Ayn Rand called “the last afterglow of the most radiant cultural atmosphere in human history”77and Austrian author Stefan Zweig called “individual freedom at its zenith, after [which] I saw liberty at its lowest point in hundreds of years,”78 there were still continental liberals who knew what the world was losing as the lamps went out, and with the intellectual ammunition to relight them.

But there were few prepared to listen.

Carl Menger (1940-1921), the founder of Austrian economics, was one. Where the intellectual bodyguards of the Hohenzollern argued there were no economic laws beyond those mandated by the state, Menger (as one of Europe’s last practicing Aristotelians) “emphasized that economics was a unified science involving the search for cause-and-effect relationships or causal laws (‘exact laws’) that would explain the prices, wages, and interest rates actually observed in reality.”79

But beyond the small group of enthralled admirers few were listening, and fewer still were hiring. Menger struggled for a university position, and after his first and seminal book in 187080, published only a book-length rejoinder to the intellectual bodyguard before falling silent.

Before he had even reached forty, Menger observed in conversation:

The policies as conducted by the European powers will lead to a horrible war that will end with gruesome revolutions, with the extinction of European culture and the destruction of prosperity of all nations.81

Stefan Zweig who experienced it all committed suicide in 1942. Menger who foresaw it all fell silent after 1892.

His student Eugen Von Böhm-Bawerk (1851-1914) continued the fight, not just in the academies and journals, but in the corridors of Hapsburg power. Until monetary union recently Böhm-Bawerk still appeared on the Austrian 100 schilling note as a result of three terms as Austrian Finance Minister, the last from 1900 to 1904, in which he fought for balanced budgets and the proper maintenance of the classical gold standard, resigning finally over the increased demands of army spending. He died in August 1914, three weeks after war started; it is said of a broken heart.

Böhm-Bawerk’s student Ludwig Von Mises (who once said that no citizen who takes his civic duties seriously should exercise his right to vote until he has read Böhm-Bawerk!) “arrived too at this hopeless pessimism,”82 finishing short what he thought would be his major work, Theory of Money & Credit, to head reluctantly to the Eastern Front. “This pessimism,” he said, “had broken the strength of Carl Menger, and it over-shadowed the life of Max Weber. … We know today from the letters of Jacob Burckhardt that this great historian, too, had no illusions about the future of European civilisation.”83

Mises saw the controversies that raged between the dominant German intellectuals in social science and the Austrian economists led by Menger, and subsequently Böhm-Bawerk, as having a significance extending far beyond the substance or methodology of economic theory. Most of the German professors, Mises wrote, “more or less eagerly made propaganda in their writings and in their courses for the policies of the Imperial [German] Government: authoritarian conservatism, Sozialpolitik, protectionism, huge armaments, and aggressive nationalism.” Mises saw the Mengerian school as the champion of liberalism and the last intellectual source of hope for the preservation of freedom and civilisation…84

Mises himself shrugged off his pessimism to carry that flame forward. “It is a matter of temperament how we shape our lives in the knowledge of an inescapable catastrophe”85

In high school I had chosen a verse by Virgil as my motto: Tu ne cede malis sed contra audentior ito [“Do not concede to evil, but proceed against it ever more strongly”]. In the darkest days of the war, I recalled this dictum. Again and again I faced situations from which rational deliberations could find no escape. But then something unexpected occurred that brought deliverance. I would not lose courage even now. I would do everything an economist could do. I would not tire in professing what I knew to be right.86

What more can an honest man do?

CONCLUSION

So what can we conclude from all this?

I started by trying to answer a simple question: if it’s argued that free trade discourages war, then why at a time of “peak trade” did the world plunge itself into war. And does our answer discredit the theory?

When goods don’t cross borders armies will is the liberal mantra. What I discovered is that its truth, like all truth, is valid within a context.

First: The forces from trade discouraging war were powerful, just as the argument explains, and had helped secure the most peaceful century Europe had ever enjoyed.

Second: Those forces however had little effect on those in European capitals making the decision for war.

Third: Those making the decisions had other motives. For whatever reason the culture of the trader was either alien to them or anathema. They were either indifferent to the effect of their decision on prosperity, had been harmed themselves by the new prosperity, or they hated the liberal culture that had produced it and flourished because of it. Or all of the above.

Fourth: Opponents to trade and the culture it created were artistic, aristocratic, religious, academic. Their motives were based either on economic error, cultural philistinism, or philosophical corruption.

Fifth: For the argument to take effect, it requires a real philosophical sea change that values human life and human prosperity and all that promotes it, and reviles all that destroys it; and an institutional sea change that cements in that culture. That was the culture and the institutions the liberal century was producing. But too late, too little, and the philosophical defenders had gone bush.

This last in the end was ultimately the disaster that caused the greater disaster.

So long as a country is even semi-free, its mixed-economy profiteers are not the source of its warlike influences or policies, and are not the primary cause of its involvement in war. They are merely political scavengers cashing-in on a public trend. The primary cause of that trend is the intellectuals.
Observe the link between statism and militarism in the intellectual history of the nineteenth and twentieth centuries. Just as the destruction of capitalism and the rise of the totalitarian state were not caused by business or labour or any economic interests, but by the dominant statist ideology of the intellectuals—so the resurgence of the doctrines of military conquest and armed crusades for political "ideals" were the product of the same intellectuals' belief that "the good" is to be achieved by force.
87

This was the greatest disaster, and the greatest evil still to proceed against: the philosophical doctrine of statism: “If men want to oppose war, it is statism that they must oppose. So long as they hold the tribal notion that the individual is sacrificial fodder for the collective, that some men have the right to rule others by force, and that some (any) alleged ‘good’ can justify it—there can be no peace within a nation and no peace among nations.”88

The forces of free trade are powerful. They are beneficial. They are civilising. But free trade itself is an effect as well as a cause. Its ultimate cause is philosophic, and it cannot survive its destruction.


NOTES:

[1] Herbert Spencer had already given it an obituary in 1884, declaring “Most of those who now pass as Liberals, are Tories of a new type” (Quoted in the Cobden Centre’s 2012 post Classical Liberalism in the Liberal Party Since 1886)
[2] In May 1915 the ruling British Liberal Cabinet collapsed in the wake of war losses and the disastrous Gallipoli campaign to form a wartime coalition with the opposition Conservatives in what proved to be a death hug for the Liberal Party.
[3.] Sorry, if you think Nick Clegg with last weekend’s wipe-out was any kind of successor you are very much mistaken.
[4] Yes, other dates could with equal point be chosen, but this one does provides a clean and visible break.
For Australian readers, who still call conservatives Liberals, it is an accident of history that because the Australian Liberal Party remained in office through the war and again through the Great Depression that they remain a political power, even as the philosophy they once espoused was undercut from without.

[5] Big Government was welcomed even into previous arid ground. “World War I brought the fulfilment of all … ‘progressive’ trends. Militarism, conscription, massive intervention at home and abroad, a collectivised war economy, all came about during the war and created a mighty cartelised system that most of its leaders spent the rest of their lives trying to re-create.” (From Murray Rothbard’s essay ‘World War I as Fulfilment: Power & the Intellectuals,’ collected in John Denson’s 1999 book The Costs of War )
And that only refers to the United States!
The “war undercut American liberties and fed the growth of big government. Notwithstanding the accretions of governmental authority during the Progressive Era, the American economy remained, as late as 1916, predominantly a market system. The next two years however witnessed an enormous and wholly unprecedented intervention of the federal government in the nation’s economic affairs. By the time of the armistice the government had taken over the ocean shipping, railroad, telephone, and telegraph industries; commandeered hundreds of manufacturing plants; entered into massive economic enterprises on its own account in such varied departments as ship building, wheat trading, and building construction; undertaken to lend huge sums to businesses directly or indirectly and to regulate the private issuance of securities…It had, in short, extensively distorted or wholly displaced markets, creating what some contemporaries called ‘war socialism.’ (From Robert Higgs’s classic account of Crisis and Leviathan, p. 123, of how government gains ground as liberty yields with every crisis.)

[6] Bolshevism, a direct result. Nazism, an indirect result. Barbarism and genocide: the inevitable outcome. Nationalism, totalitarianism, dictatorship: all were made inevitable.
[7] From Ludwig Von Mises’s Liberalism: The Classical Tradition, p. 19
[8] The word today has been taken over. Todays’ liberals might be best defined as useful idiots utilising big government to advance their social goals, or to try to. “Today,” said Ludwig Von Mises in 1962 (and his outline would only be worse now), “the tenets of this nineteenth-century philosophy of liberalism are almost forgotten. In continental Europe it is remembered only by a few. In England the term ‘liberal’ is mostly used to signify a programme that only in details differs from the totalitarianism of the socialists. In the United States ‘liberal’ means today a set of ideas and political postulates that in every regard are the opposite of all that liberalism meant to the preceding generations. The American self-styled liberal aims at government omnipotence, is a resolute foe of free enterprise, and advocates all-round planning by the authorities, i.e., socialism.” Ibid. xiii-xiv
[9] Ibid, p. 19
[10] For a partial explanation see George Reisman’s book Capitalism, p. 135-139; for a fuller explanation see the see the book’s ‘Part Two: The Division of Labour and Capitalism,’ starting p.123.
[11] “The Classical Liberals of the nineteenth century were certain that the end of the old Mercantilist system--with its government control of trade and commerce, its bounties (subsidies) and prohibitions on exports and imports--would open wide vistas for improving the material conditions of man through the internationalisation of the system of division of labour. They also believed that the elimination of barriers to trade and the free intercourse among men would help to significantly reduce if not end the causes of war among nations.
    “The economists of that earlier era had demonstrated the mutual gains from trade that would develop and be reinforced from specialization in productive activities among the people of the world. No longer would the material improvements of one nation be viewed as the inevitable cause of the poverty and economic hardships of other countries.
    “And with the addition of the theory of comparative advantage these economists were able show that even the ‘weak’ and less productive in the world community could find a niche for their material betterment in the network of trade among nations. At the same time, the ‘strong’ and more productive in that same community of nations would improve their circumstances by purchasing goods from the less productive so they could be freed to specialize in those lines of production in which they had a relative superiority.”
From Richard Ebeling’s 2002 article ‘Can Free Trade Really Prevent War’

[12] Okay, as far as we know neither of the two actually said those exact words. But it’s still a fair summary of their position (in his Economic Sophisms chapter ‘Our Products Are Burdened With Taxes’ he does say: "If commerce were free, what use would you have for your great standing armies and powerful navies?"), and it’s a fair summary of many free traders who do use it.
As far as we know, and what we do know is from Bastiat scholar David Hart, “the quote comes from Otto T. Mallery (1881-1956) who wrote a book Economic Union and Durable Peace (Harper and Brothers, 1943). This sounds very like Bastiat but he does not cite Bastiat in the book.” Ref Don Boudreaux and Paul Walker.

[13] The human stories tell the tales the aggregates sometimes hide. For even in far off New Zealand, historian Ian Hunter writes of “entrepreneurs’ networks” routinely straddling the globe (“defined as ‘informal alliances of independent decision-makers (people or firms) that band together to promote mutual interests relying on bonds of trust’”), among them: Bendix Hallenstein, whose brother Isaac ran the London office and Michaelis ran the Melbourne tannery; William Winstone, with whose brother in Queensland he shared business interests; John Kirkcaldy and Robert Stains who had their UK contacts keep them abreast of fashion; draper Thomas Warnock who played off the prices of local and UK suppliers; A.J. Burns who was a frequent traveller between the UK and NZ to purchase supplies and machinery and engage staff. That all this was considered routine by the 1890s indicates how much globalisation was simply taken for granted even in this far-off land. See especially Ian Hunter’s book 2007 book The Age of Enterprise: Rediscovering the NZ Entrepreneur 1880-1910
[14] The Classical gold standard underpinned a world without capital controls. And it’s easy to forget, but it was possible to travel from one end of the world to another without such a thing as a passport or a visa. Or a mawling by a TSA agent.
[15] This despite “German steel giants investing heavily in French iron ore production sites in Normandy; 3.4 million migrant workers labouring in Germany's agricultural sectors and the coalfields of the Ruhr Valley; rail networks expanding across Europe and further east … Exports reaching record levels year-on-year, with trade accounting for a higher level of GDP than ever before.” See Finbarr Bermingham’s 2014 article ‘WWI 100th Anniversary: How Global Trade Changed Forever’ at the International Business Times
[16] The context killing the equation was hardly a new one. “France and Britain traded with each other – and could have traded more, except for the mercantile political economy practised by All European governments, which Smith criticised in Book IV of Wealth Of Nations – and were at war several times in the 18th century and in the early 19th century when Bastiat wrote his article.
    “The problem is one of what David Hume called ‘jealousy of trade’ – the proclivity to treat neighbouring trading partners as deadly rivals, which festers into hostile actions and eventually into wars. Tariff protection often is a prelude to war. Armies cross borders in pursuit of commercial advantage, apart from wars of dynastic succession, of which there were many in Europe.
    “Trade is a civilising influence, but it is subject to ideology, religious extremism, passionate causes, economic illiteracy, politics and emotional ignorance. Add in mercantile fallacies, protectionism, discrimination, short-term advantage, and the cussedness of people, and Bastiat’s optimism is soon compromised.” From Gavin Kennedy’s blog post ‘Trade is Beneficial But Not Free’

[17] From Lew Rockwell’s article ‘Bastiat was Right’
[18] Don Boudreaux points out: “The argument is not that the slightest bit of international commerce ensures world peace; it is, rather, that the greater the commercial integration between two societies, the less likely are the governments of those societies to launch wars against each other. There is good empirical evidence for this proposition. See, for example, this 2006 paper by Solomon Polachek and Carlos Seiglie: [‘Trade, Peace and Democracy: An Analysis of Dyadic Dispute’]”
[19] From Daniel Griswold’s 1998 article ‘Peace On Earth, Free Trade For Men’
[20] From John Zmirak’s 2013 article ‘Austrians Don’t Blow Bubbles’
[21] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal
[22] And the men who had administered the Concert of Europe had been giants of diplomacy who wanted to keep the European peace, men such as Talleyrand, Metternich, Castlereagh and even Bismarck once his border battles had achieved his goal of unifying Germany. The men who replaced them by the turn of the century – Berchtold, Paléologue, Sasonov, Grey, Jago – were not just pygmies by comparison, the calculations required to stop the balance of martial power from tipping over had become vastly more difficult.
[23] From Michael Howard’s 2001 book The Invention of Peace, p. 44
[24] From Margaret MacMillan’s The War that Ended Peace: How Europe abandoned peace for the First World War.
[25] Norman Angell, from his book The Great Illusion: A Study of the Relation of Military Power to National Advantage, first published in the United Kingdom in 1909 under the title Europe's Optical Illusion and republished in 1910 and subsequently in various enlarged and popular editions.
[26] From Ludwig Von Mises’s Liberalism, p. 122
[26a] “It thus appears that the interest of the landlord is decidedly hostile to the sudden and general introduction of agricultural improvement…” – From John Stuart Mill's 1868 book Principles of Political Economy,Book IV, Ch. III, s.4
[27] Britain’s Enclosure Acts and the recognition under classical liberalism of real property rights had broken through this class-based man-trap to produce, first, the Green Revolution that for the first time produced an agricultural surplus, and then with that surplus fed the population that drove the Industrial Revolution.
[28] Quoted in David Yaffe’s review article: ‘Imperialism and the Accumulation of Capital’
[29] See Nikolai Bukharin’s 1924 review ‘Imperialism and the Accumulation of Capital’
[30] From Ayn Rand’s essay ‘The Roots of War’ collected in her book Capitalism: The Unknown Ideal
[31] Von Mises’s, p. 121
[32] From Niall Ferguson’s 1998 book The Pity of War, p. 32-33
[33] Ferguson’s book has other such tales, pp. 31-45
[34] From James Joll’s The Origins of the First World War, p. 188. David Stevenson’s conclusion can be examined in his Armaments and the Coming of War: Europe 1904-1914, p. 23
[35] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal
[36] Ferguson, p. 39
[37] From Ralph Raico’s essay ‘World War I: The Turning Point,’ appearing in John Denson’s 1999 The Costs of War
[38] The railway was to unite Berlin with the Gulf, one point in Berlin’s new plans for a place in the imperialist sun. That much is true. And while the British military were initially disturbed by German influence in a region they considered their own, very quickly investors in both countries saw the benefits of involvement. For their part, "the Germans accepted the fact that they lacked sufficient capital to build the railway on their own, and that they were in no position to overcome the well-established British interests in Mesopotamia." And "whereas 'imperial' interests might have dictated that the British government should compete with the expansion of German interests wherever these appeared, 'commercial' ones inclined the British to cooperate with the Germans to protect their investment."
    So within a short time, the values of the marketplace had turned an apparent casus belli into another victory for commerce. Such can be the sanitising effect of commercial values when given free rein.
    Quotes from James Joll’s classic The Origins of the First World War, which has the fuller story, esp. pp. 236-41

[39] From Ludwig Von Mises’s Liberalism, p. 123
[40] From Michael Schneider’s 1996 J.A. Hobson. The figures are Hobson’s.
[41] From Niall Ferguson’s 1998 book The Pity of War, p. 35, from whence these figures come.[42] “In the 1890s net investment amounted to 3.3% of gross national product, compared with net property income from abroad of 5.6%. For eth next decade the figures were respectively 5.1 and 5.9.” – Ferguson, p. 37
[43] Writing in 1902 on the basis of these figures, J.A. Hobson argued: “An individual doing business in this fashion could not avoid bankruptcy, and a nation, however rich, pursuing such a policy is loaded down with a millstone which must eventually drag her down.” From Hobson’s Imperialism: A Study, p. 70. It seems “unintelligible,” he said “that the enormous costs and risks of the new Imperialism should be undertaken for such small results … especially when the size and character of the new markets were taken into consideration.” Ibid, p.60
[44] See for example Peter Cresswell’s blog post ‘Trade versus conquest’
[45] Von Mises, p. 124
[46] Quoted in Hobson’s 1919 Richard Cobden: International Man, p. 89
[47] The driving force of trade, said Smith, is our appeal to each other’s self-interest: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” From this developed the great liberal theme Bastiat sought to demonstrate in his Economic Harmonies, i.e., that “all men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.”
    Imperfectly constructed however, economist George Reisman argues it was not until Ayn Rand’s introduction of ‘The Pyramid-of-Ability Principle’ (a complement to Ricardo’s principle of Comparative Advantage) that the argument could be fully nailed down.
    See Reisman’s Capitalism, p. 357-358, and the many entries under his index heading of ‘Harmony of Interests.’

[48] The driving point of Smith’s Wealth of Nations, for years the classical liberal text of choice, was that this was not so.
[49] Schneider, p. 103; J.A. Hobson, Democracy After the War, p.89
[51] From Murray Rothbard’s 1993 essay ‘The NAFTA Myth,’ collected in his 1995 Making Economic Sense
[52] On issue linkage in the Cold War and beyond see Paul Buchanan’s 2012 analytic brief ‘Issue Linkage in Foreign Policy.’ It seems to have little direct relevance to the causes of the 1914-18 war, however Niall Ferguson (Pity of War, p.34-39) cites Paul Kennedy’s work as having advanced a version of the idea, which he describes then discounts.
[53] From J.A. Hobson’s 1917 book Democracy After the War, p. 84
[54] From Peter Cresswell’s blog post ‘The three horsemen of non-apocalypse’: “[A]cross all the pages of history there have been two fundamental antagonists who have been variously venerated and eviscerated: the trader culture, and the warrior culture. Those who survived by trade, and the cultures that supported that; versus those who survived by bloodshed and plunder, and the cultures that survived off their warriors' loot.
    “Observe the heroes a culture venerates above all others, and you'll understand which kind of culture it is. Is it the producers of wealth, or those who loot it. The men of profits, or the men of plunder. Men who produced value; or the men who looted it. The sellers of ploughshares; or the bearers of swords. The defenders of wealth, or their barbarian conquerors.
“For all of human history, the culture of the trader has been the bringer of peace and prosperity and civilisation, yet for most of history it has been the warrior who's been most revered, and the values of the trader most derided.
    “Strange, don’t you think?”

[55] Not only in his intellectual relationship to his wife Harriet, but also in his later capitulation to socialism, holding that cooperative socialism would eventually outpace capitalism by direct and open competition (the “joint property” resulting being “the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee”) and declaring in 1861 that “whenever it ceases to be true that mankind, as a rule, prefer themselves to others … from that moment Communism is not only practicable, but the only defensible form of society.”
[56] From the Auckland City Art Gallery exhibition card to the print in its exhibition ‘Age of Turmoil: Art in Germany 1900–1923’
[57] Auckland City Art Gallery: ‘Age of Turmoil: Art in Germany 1900–1923’
[58] From philosopher Stephen Hicks’s article ‘Why Art Became Ugly’ : “Despite occasional invocations of "Art for art's sake" and attempts to withdraw from life, art has always been significant, probing the same issues about the human condition that all forms of cultural life probe. Artists are thinking and feeling human beings, and they think and feel intensely about the same important things that all intelligent and passionate humans do. Even when some artists claim that their work has no significance or reference or meaning, those claims are always significant, referential, and meaningful claims. What counts as a significant cultural claim, however, depends on what is going on in the broader intellectual and cultural framework. The world of art is not hermetically sealed—its themes can have an internal developmental logic, but those themes are almost never generated from within the world of art.”
[59] Ibid
[60] From Peter Fleming’s 2015 article in the Hamilton Spectator, ‘Unpopular Culture: Dada’
[61] From Leonard Peikoff’s Ominous Parallels, p. 151
[62] Ibid p.47
[63] The House of Hohenzollern of course being the dynasty of former princes, electors, kings, and emperors that had controlled Imperial Germany since its unification in 1871.
[64] It is illustrative of the rapid change in what was called liberalism that in 1936 John Maynard Keynes, adviser to Lloyd George and a self-identifying member of what remained of the British Liberal Party, could write in his introduction to the German edition of his magnum opus published in the full flowering of the Nazi disease that his theory “can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.”
[65] From Ludwig Von Mises’s Notes and Reflections, p. 65
[66] At least until he had read Von Mises’s 1922 opus Socialism.
[67] From Christopher Clark’s Iron Kingdom: The Rise and Downfall of Prussia, 1600-1947, Kindle edition, location 11513
[68] Ibid, locations 8112-8118
[69] From Leonard Peikoff’s Ominous Parallels, p. 31
[70] Clark, location 8118
[71] Ibid, location 8155
[72] Philosopher Leonard Peikoff writes: “A well-known German historian has remarked that the romanticist element in German thought [as this strain is known] would appear to Western eyes as ‘a queer mixture of mysticism and brutality.’ The formulation errs only in the adjective queer.” Peikoff, p. 47
[73] Clark, location 10627
[73a] From AJP Taylor’s 1965 book, The Effects and Origins of the Great War. Which does bear a startling similarity to J. M. Keynes's eloquent description of 'Europe Before the War' in The Economic Consequences of the Peace'(1919). See pp. 10-12 starting at 'What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914!’ But Taylor’s is at least unaccompanied by a book-weight of economic error. (On this last, see especially The Economic Consequences of Mr Keynes by Young Frenchman Ettienne Mantoux, written in 1943 during the war in which he was killed, and which he partially blamed Keynes’s book for having encouraged.) I am indebted to Riko Stevens for bringing Keynes’s quote to my attention, and to Jim Rose for Taylor’s.
[74] Clark, location 10506
[75] Ibid, location 196
[76] Ibid, location 10980
[77] From Ayn Rand’s introduction to her essay collection The Romantic Manifesto: A Philosophy of Literature.
[78] From Stefan Zweig’s 1942 autobiography, which is also a biography of the collapse of Europe into barbarism, The World of Yesterday
[79] From Joseph Salerno’s introduction to the 2007 seminar ‘Fundamentals of Economic Analysis: A Causal-Realist Approach’
[80] Principles of Economics, in which marginal economics was first presented (Menger was co-creator with Jevons and Walras of the theory, which all developed and published independently).
[81] Quoted in Ludwig Von Mises’s Notes and Reflections, p. 34, where Mises says his grandfather had told him of the conversation in 1910.
[82] Ibid, p. 69
[83] Ibid, p.69
[84] From Israel Kirzner’s 2001 biography of the great man, Ludwig Von Mises
[85] Von Mises, Notes & Reflections, p. 70
[86] Ibid, p. 708
[87] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal
[88] Ibid

Phew!

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