Friday, March 28, 2014

A Social Philosophy - Two Kinds of Progressives

We were done with our summaries of chapter 1 of "Anti-Capitalistic Mentality" here and here. Now as we proceed to chapter 2 where Ludwig von Mises presented the social philosophy of an ordinary man, I just want to share six themes: the unfortunate state of economic ignorance, the continuous evolution of "material productive forces," three progressive classes, misrepresentation of capitalism, the three old powers, and the influence of socialism. 

The Unfortunate State of Economic Ignorance

Interest in the study of economics was short-lived. It lasted only on the "first decades of 19th century" (p. 35). Even during the most influential period of the free market, both the masses and businessmen failed to understand its basic qualities. Sound knowledge of economics is very rare. 

The reason for this unfortunate state is not only due to the inherent difficulty of the subject that requires unusual and demanding intellectual exertion, but also due to general impressions that the study of the subject is considered "strange," "repulsive," "nonsensical," and often "viewed with suspicion" (p. 35). 

Such lamentable situation has debilitating consequences. Not only that the common man failed to see the important contribution of the free-market to mankind's economic well-being, but also he has been left defenseless and susceptible to Marxist ideas. Instead of being grateful for the role of sound economic policies due to "classical liberalism, free trade, laissez faire and capitalism" that resulted into "unprecedented technological improvements of the last two hundred years," (p. 36) he thinks big businesses as exploiters of the productivity of the working class. 

Material Productive Forces' Continuous Evolution 

Corollary to the failure to account for the real cause of economic progress, our common man improperly ascribed all economic development to "natural sciences and technology" (p. 36) and he saw them as "self-acting" toward continuous development regardless of "political and economic organization of society" (ibid.). Marx followed this "popular interpretation of events and clothed it with a pseudophilosophical veil that made it gratifying both to Hegelian spiritualism and to crude materialism" (ibid.) and developed the concept of a "self-acting" "material productive forces," which continuous evolution is considered inevitable. This doctrine was well-received. 

In Marx's scheme, "the 'material productive forces' are a superhuman entity independent of the will and the actions of men" (ibid.) and operate on the basis of "inscrutable and inevitable laws of a higher power" (ibid.). These forces constantly evolve in a mysterious way, which makes mankind follow them, and restructure a suitable social organization. Out of this central motif, a philosophy of history had been developed, which is one of struggle of material productive forces for freedom from social chains. Let us read Mises' narration of Marx's tale: 
"Once upon a time, teaches Marx, the material productive forces were embodied in the shape of the hand mill, and then they arranged human affairs according to the pattern of feudalism. When, later, the unfathomable laws that determine the evolution of the material productive forces substituted the steam mill for the hand mill, feudalism had to give way to capitalism. Since then the material productive forces have developed further, and their present shape imperatively requires the substitution of socialism for capitalism. Those who try to check the socialist revolution are committed to a hopeless task. It is impossible to stem the tide of historical progress" (p. 37).
Three Progressive Classes

"Leftist parties differ from one another in many ways" (ibid.) says Mises, but they unanimously agree that "progressing material improvement" is "a self-acting process" (ibid.). I think popular progressivism has been shaped by this idea together with the foregoing concept about the unstoppable nature of "historical progress" towards "socialist revolution." Henceforth, the name "progressive" is used to describe this school of thought. 

However, in correcting a faulty understanding of the free market system, Mises introduced his own concept of the progressive character of the capitalist system. Unlike, the first kind of progressivism, Mises' kind of progressivism has been concretely demonstrated through the economic contribution of "the entrepreneurs, the capitalists, and the technologists" (p. 43). Mises described them as the "three progressive classes" (p. 40) in a capitalist society. 

Let us see the role of these progressives to economic well-being. For Mises', increase in productivity is not due to labor per se but the use of better tools and machines, which made possible through "the accumulation and investment of more capital" (p. 38) through saving. In fact, "Every step forward on the way toward prosperity is the effect of saving" (p. 39). Entrepreneurs "employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not yet satisfied wants of the consumers" (ibid.). Saving and the accumulation of capital when they surpass population growth have two advantageous results, increase of marginal productivity of labor and reduction in the price of goods. It is exactly the availability of the supply of capital that distinguishes "progressive" (which the mainstream describes as developed countries) from backward countries. 

Based on the above observation, we can evaluate the soundess of any economic policy. Any act on the part of the state or advocacy coming from interest groups that prevent these progressive classes to function freely is not really progressive, but regressive despite of the "progressive" rhetoric. Viewing from this lens, people can come up to the conclusion that interventionist and statist policies inspired by "progressive" ideas are actually anti-progressive. 

Misrepresentation of Capitalism

Under a capitalist society, anyone can "join the ranks of the three progressive classes" (p. 40). "What is needed to become a capitalist, an entrepreneur or a deviser of new technological methods is brains and will power" (ibid.). 

Unfortunately, the progressive character of capitalism has been denied and widely misrepresented. "Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity" (p. 41). Our ordinary guy prefers to believe that all the goods and services he has been enjoying "came into being by some mythical agency called progress" (ibid.). If there is any class that deserves credit with the increase in the productivity of labor, there is none other but the working class.

Exploitation is the common word to describe big business. It "skims the cream, and leaves" the crumbs "to the manual worker" (ibid.). "Consequently, 'the modern worker, instead of rising with the progress of industry, sinks deeper and deeper. . . . He becomes a pauper' " (ibid.).

Those who propagate this anti-capitalistic mentality "are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets" (p. 42). Unanimously, they proclaim: "The worst exploitation, say professors, 'labor' leaders and politicians, is effected by big business" (ibid.).

Our common man thinks that the wealth of the wealthy is the primary cause for poverty. He failed to see that the mark of big business is mass production aimed towards mass consumption, which the workers are the main consumers. He could not understand that "the entrepreneurs, the capitalists and the technologists prosper as far as they succeed in best supplying the consumers" (p. 43). 

The Three Old Powers

The pioneers of classical liberalism, free market, and representative government "did not suggest the annihilation of the three old powers: the monarchy, the aristocracy and the churches" (pp. 43-44). Instead, they aimed to substitute monarchical absolutism with "parliamentary monarchy," "to abolish the privileges of the aristocrats, but not to deprive them of their titles, their escutcheons and their estates," and "to grant to everybody freedom of conscience and to put an end to the persecution of dissenters and heretics, but they were anxious to give to all churches and denominations perfect freedom in the pursuit of their spiritual objectives" (p.44). However, this vision of society did not sink well into the minds of princes, aristocrats and clergyman. Inspite of the admission of the forerunners of socialism "that under socialist totalitarianism no room would be left for what they called the remnants of tyranny, privilege and superstition," and the fact that under socialism property will be confiscated and no religious freedom will be allowed, still these three powers did not "oppose the socialist attack upon the essentials of Western civilization," and instead "virtually joined hands with" them (ibid.). Mises gave us an overview of how these three powers combine their forces against classical liberalism and capitalism: 
"The Hohenzollern in Germany inaugurated a policy that an American observer called monarchical socialism. The autocratic Romanoffs of Russia toyed with labor unionism as a weapon to fight the "bourgeois" endeavors to establish representative government.· In every European country the aristocrats were virtually cooperating with the enemies of capitalism. Everywhere eminent theologians tried to discredit the free enterprise system and thus, by implication, to support either socialism or radical interventionism. Some of the outstanding leaders of present-day Protestantism-Barth and Brunner in Switzerland, Niebuhr and Tillich in the United States, and the late Archbishop of Canterbury, William Temple-openly condemn capitalism and even charge the alleged failures of capitalism with the responsibility for all the excesses of Russian Bolshevism" (pp. 44-45).
The Influence of Socialism

And so today, we find ourselves that "governments, political parties, teachers and writers, militant antitheists as well as Christian theologians are almost unanimous in passionately rejecting the market economy and praising the alleged benefits of state omnipotence" (p. 45). Only few people are able to see the danger of the marriage of these three powers with socialism. As a result, "the rising generation is brought up in an environment that is engrossed in socialist ideas" (ibid.).

Most people are blinded by ignorance, envy, and hatred, and that's why they failed to analyze "the fundamental socialist idea that the economic interests of the masses are hurt by the operation of capitalism for the sole benefit of the 'exploiters' and that socialism will improve the common man's standard of living" (p. 46). Mises argued that "people do not ask for socialism because they know that socialism will improve their conditions, and they do not reject capitalism because they know that it is a system prejudicial to their interests. They are socialists because they believe that socialism will improve their conditions, and they hate capitalism because they believe that it harms them" (ibid.). Mises added: "They are socialists because they are blinded by envy and ignorance. They stubbornly refuse to study economics and spurn the economists' devastating critique of the socialist plans because, in their eyes, economics, being an abstract theory, is simply nonsense. They pretend to trust only in experience. But they no less stubbornly refuse to take cognizance of the undeniable facts of experience" (ibid.), that the ordinary man's standard of living is higher under free market than under socialism. 

Similar erroneous conclusion is observed among under-developed countries. What is anomalous is that poor countries want to get out of poverty, and yet their chosen means is contrary to their goal. They want to achieve economic freedom, but they hamper the operation of the free market. And this is a clear indication of present success of anti-capitalistic mentality. 

I like how Mises ended this chapter. It hurts, but I think his words are accurate: 
"People may disagree on the question of whether everybody ought to study economics seriously. But one thing is certain. A man who publicly talks or writes about the opposition between capitalism and socialism without having fully familiarized himself with all that economics has to say about these issues is an irresponsible babbler" (p. 47).

Wednesday, March 26, 2014

Psychological Roots for the Denigration of Capitalism

We just finished exploring the distinguishing features of a capitalist society. This time we will explore the psychological roots for the denigration of capitalism. The material in this article is taken from Ludwig von Mises' "The Anti-Capitalistic Mentality" chapter 1 numbers 4 to 9.

Mises identified six psychological roots. Among these six, he described four of them as "resentment": of frustrated ambition, of the intellectuals, of the white collar workers, and of the "cousins". I want to re-describe these six roots as I understand them. 

Search for Scapegoat

The first psychological root is the natural inclination of man to find a scapegoat for his own failure. Mises described this as "the resentment of frustrated ambition" (p. 11). 

Under an aristocratic society, people could place the blame on social situation beyond their control. If they remain poor, they could simply excuse themselves and point fingers to a society without social mobility.

On the other hand, under a capitalist society, a man can blame no one for his failure except himself. Perhaps, he is thinking that he is virtuous enough and he possesses the qualities to be successful. However, his personal assessment will be counter-checked by the assessment of the market, and if it finds him wanting, such deficiency will also be reflected in his income. 

Reading this economic insight shows that if anyone wants bigger income or profit he must place himself in the industry that has big demand and he must equip himself with the necessary skills required by the market. If he is not willing to do this, he cannot blame anyone for his meager income. 

At this point, Mises mentioned Justus Moser who "opened" "the long line of German authors who radically rejected the 'Western' ideas of the Enlightenment and the social philosophy of rationalism, utilitarianism and laissez faire. . . ." (p. 13). Mises explained that "one of the novel principles which aroused Moser's anger was the demand that the promotion of army officers and civil servants should depend on personal merit and ability and not on the incumbent's ancestry and noble lineage, his age and length of service" (ibid.). For Moser, a society that depends on personal merit as a requirement to success is simply unbearable. 

Free market is such a society. Those who fail resent the achievements of those who succeed. A fool releases his indignation by verbally maligning the achievers. A more refined one resorts into philosophical justification against the free market. The blame is not on the individual, but on the perverse socio-economic order called capitalism. In such a system, it is not enough to be brilliant, efficient, and industrious to be successful. Honesty and decency are punished. One must resort to trickery and deception to reach the top. Capitalism "crowns the dishonest unscrupulous scoundrel, the swindler, the exploiter, the 'rugged individualist' " (p. 14). The sophisticated thinker is glad and comforts himself that he made a better decision by choosing "virtue and poverty" over "vice and riches" (ibid.). 

Cover-up for Hatred

The second psychological root for the vilification of capitalism is coming from intellectuals' hatred and envy of the success of their colleagues. In this case, resentment for capitalism is just used as a kind of "cover-up" in order that such ill-feeling will not be exposed. Mises called this "the resentment of intellectuals" (p. 15) or "mere blind" for "hatred of some successful 'colleagues' " (p. 18). 

By "intellectuals" Mises meant the "physicians" (p. 16), "lawyers and teachers, artists and actors, writers and journalists, architects and scientific research workers, engineers and chemists" (p. 17). 

Mises explained the nature of this hatred. Unlike ordinary men who do not have the opportunity to associate with those who succeed in life, the intellectuals know personally and encounter daily their colleagues who went ahead of them. In the case of ordinary men, their resentment towards the successful is directed to "abstractions" like 'management,' 'capital,' and 'Wall Street' " (p. 16). But in the case of intellectuals, it is different "because they engender hatred of concrete living beings" (ibid.). They hate capitalism because this economic sytem has given the status to their colleagues that they desire for themselves (ibid.). Public appreciation and high income assigned to these "winners" gave them feeling of inferiority as if they "now belong to another class of men" (p. 17). 

However, an intellectual who harbors such ill-feeling must cautiously guard himself so that no one will recognize "his resentment and envy" for they are considered as "bad manners" (ibid.). And so the remaining option is to find a "vicarious target," the "unfair" economic system known as capitalism. Mises summed up the nature of this "cover-up": 
"To understand the intellectual's abhorrence of capitalism one must realize that in his mind this system is incarnated in a definite number of compeers whose success he resents and whom he makes responsible for the frustration of his own farflung ambitions. His passionate dislike of capitalism is a mere blind for his hatred of some successful 'colleagues ' " (p. 18). 
Socialites' Isolation

We now come to the third root, socialites' isolation. In order to understand this root, one must first see the difference in the concept of "society" between Europe and the United States.

In Europe, which specifically started in France, "society" is understood as a gathering of men and women who are "eminent in any sphere of activity" (p. 18). Mises identified the members of this gathering as the "statesmen and parliamentary leaders, the heads of the various departments of the civil service, publishers and editors of the main newspapers and magazines, prominent writers, scientists, artists, actors, musicians, engineers, lawyers and physicians" and "together with outstanding businessmen," "scions of aristocratic and patrician families" (ibid.). These people meet in different kinds of settings such as "dinner and tea parties, charity balls and bazaars, at first-nights, and varnishing days" (ibid.). They visit "the same restaurants, hotels and resorts" (ibid.). In their meeting, they enjoy intellectual conversation, and welcome "new ideas and ideologies" (p. 19). In this society, access is available to anyone who made great accomplishments in their field. Its distinguishing feature is the central influence of the intellectuals. 

On the other hand, the composition of "society" in the United States is different. It is exclusively composed "of the richest families" (ibid.), which the interests of most of them are playing cards, gossips, and sports rather than books and ideas or cultural matters (pp. 19-20). With such orientation, it is natural to expect that there is little communication between the intellectuals and the businessmen. The members of the society "do not meet socially the molders of public opinion and the harbingers of the ideas that will determine the future of the nation" (p. 19). 

As a result of such gap, the intellectuals "are prone to consider the wealthy businessman as a barbarian, as a man exclusively intent upon making money" (p. 20). "The men whose research has given rise to new methods of production hate the businessmen who are merely interested in the cash value of their research work" (ibid.). Such situation later developed into an unfortunate event that "a large number of American research physicists sympathize with socialism or communism" (ibid.). Since they do not know "economics and realize that the university teachers of economics are also opposed to" capitalism, there is no other attitude that can be expected from them, but resentment (ibid.). The isolation of the socialites from the intellectuals and the public made the former the object of hostility and criticism. Such exclusivism "kindles animosities which make the intellectuals inclined to favor anticapitalistic policies" (p. 21). 

Conceit and Resentment of White Collar Workers

Let us now proceed to the fourth psychological root. This time, it refers to the experience of white collar workers. Mises described it as resentment, but I see it as more of conceit. Mises explained that a white collar worker has "two special afflictions peculiar to his own category" (p. 21). By afflictions, Mises meant the tendency on the part of white collar worker to overestimate the value of his work and like the "intellectuals" previously considered, he is daily exposed to the reality that some of his fellow employees have advanced in their career better than him. 

The white collar worker due to apparent similarity, tends to equate his task with his boss', and considers his "intellectual" assignment higher than the manual workers of the firm. He cannot understand and it makes him angry to see that the manual workers receive more respect and higher salary. He considers it unfair that capitalism fails to recognize his real worth. This white collar worker fails to see the significance of advanced mechanical and technical skills on the part of manual workers for them to have the ability to operate complicated machinery. Compare such skills to his routine "intellectual" work, he basically needs a "simple training" (p. 22). 

The above description appears so naive for someone to believe it as one of the psychological roots for the denigration of capitalism. If such idea has no basis in Lenin's work, it can easily be dismissed as mere fabrication. However, Mises claimed that such "classical expression of the clerks' conceit and their fanciful belief that their own subaltern jobs are a part of the entrepreneurial activities and congeneric with the work of their bosses is to be found in Lenin's description of the 'control of production and distribution' as provided by his most popular essay" (pp. 22-23). Mises further argued that "Lenin himself and most of his fellow conspirators never learned anything about the operation of the market economy and never wanted to" (p. 23). Their knowledge of capitalism is so distorted and they simply accepted Marx's conclusion that it is "the worst of all evils" (ibid.). 

Lenin's idea of capitalism is so deficient. He simply depended on the information provided by his comrades when the latter prior to 1917 found "routine jobs in business firms" (ibid.) while exiles in Western and Central Europe. Mises elaborated this ignorance and summarized it as "the philosophy of the filing clerk" (p. 25): 
"As a Marxian he (referring to Lenin) was unaware of the problems the conduct of production activities has to face under any imaginable system of social organization: the inevitable scarcity of the factors of production, the uncertainty of future conditions for which production has to provide, and the necessity of picking out from the bewildering multitude of technological methods suitable for the attainment of ends already chosen those which obstruct as little as possible the attainment of other ends-i.e., those with which the cost of production is lowest. No allusion to these matters can be found in the writings of Marx and Engels. All that Lenin learned about business from the tales of his comrades who occasionally sat in business offices was that it required a lot of scribbling, recording and ciphering. Thus, he declares that 'accounting and control' are the chief things necessary for the organizing and correct functioning of society. But 'accounting and control,' he goes on saying, have already been 'simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic' " (pp. 24-25). 
Disgruntled Relatives of Capitalist Families

Another interesting psychological root for the vilification of capitalism can be traced from disgruntled relatives of capitalist families. Mises described them as "cousins" referring to the "brothers, cousins, nephews of the bosses, more often their sisters, widowed sisters-in-law, female cousins, nieces and so on" (p. 27). These relatives financially support various types of projects that promote anti-capitalistic mentality. They do this due to their quarrel with their "bosses" over their perceived unfairness of the amount of revenues they received from the company. They support "progressive" projects to annoy their bosses. 

The quarrel between these two groups within the capitalistic families started with the fact that not all members of the "patrician families" (referring to rich families who were able to preserve and increase their wealth through several generations due to the talents and skills of one or two of their members) possess the necessary qualities for the successful operation of big business. As a result, one or two among them are chosen as "bosses" of the company, and such arrangement created a scenario that divided the family into two categories: "bosses" and "cousins" (p. 27). 

Mises further divided the "cousins" into two groups, the useless and the achievers. Both groups "are foreign to business life and know nothing about the problems an entrepreneur has to face" and "have been brought up in fashionable boarding schools and colleges" (p. 28). Mises described the "useless" as people who "pass their time in night clubs and other places of amusement, bet and gamble, feast and revel, and indulge in expensive debauchery" (ibid.). On the other hand, the achievers are either those who became "most eminent authors, scholars and statesmen," "pioneers of new ideas" or financial donors of artists (ibid.). Mises claimed that the role of "moneyed men played in Great Britain's intellectual and political evolution has been stressed by many historians" (p. 28). 

And so this quarrel started first within the capitalistic families, but later influenced society at large. Mises recapitulated this evolution as follows: 
"The family feud between the bosses and the cousins concerns only the members of the clan. But it attains general importance when the cousins, in order to annoy the bosses, join the anticapitalistic camp and provide the funds for all kinds of 'progressive' ventures. The cousins are enthusiastic in supporting strikes, even strikes in the factories from which their own revenues originate. It is a well-known fact that most of the 'progressive' magazines and many 'progressive' newspapers entirely depend on the subsidies lavishly granted by them. These cousins endow progressive universities and colleges and institutes for 'social research' and sponsor all sorts of communist party activities. As 'parlor socialists' and 'penthouse Bolsheviks,' they play an important role in the 'proletarian army' fighting against the 'dismal system of capitalism' " (p. 30). 
Entertainers' Expectation of Deliverance from Public Capriciousness

The final psychological root comes from the entertainment industry. As we all know, many entertainers live an affluent lifestyle, and so it is difficult to accept that "Hollywood and Broadway, the world-famous centers of the entertainment industry, are hotbeds of communism" (p. 31). Diverse interpretations have been offered to explain this phenomenon, but insufficient. For Mises, "they all fail to take account of the main motive that drives champions of the stage and the screen into the ranks of revolutionaries" (ibid.).

To understand this phenomenon, one must first start with a comparison between the products offered by manufacturers and the entertainers. In the case of manufacturers, they sell tangible goods, which provide to some extent a measure of stability that entertainment industry does not have. In the case of entertainers, they are primarily dependent on the wishes and capriciousness of the public. People are bored, and that is why they "buy" the entertainers' "products." But people are very difficult to please for they crave for something "new," "unexpected," and "surprising" (p. 32). Once an entertainer fails to provide what the public expect, that's the beginning of his decline. This is why those who are famous today will be forgotten tomorrow. For those in the entertainment industry, this gives them instability and uncertainty. 

Mises accepts the very nature of the public and no relief can be found to cure the uneasiness of stage performers. However, in their search for remedy, some of them think that communism will give them deliverance. Since none of them "has ever studied the writings of any socialist author and still less any serious analysis of the market economy," (ibid.) they naively believe the ideas of reputable thinkers that the evils caused by capitalism can only be wiped out by communism. 

Monday, March 24, 2014

Distinguishing Features of a Capitalist Society

The advent of the free market has resulted to population growth and has increased the average standard of living. The reduction in the standard of living is not the result of free enterprise, but due to anti-capitalistic ideas and policies advanced by the state. Majority of people are unaware about the economic condition prior to the appearance of the free market. To believe intellectuals that life before the Industrial Revolution was happy and prosperous, and that capitalism brought nothing but misery is a proof that most people these days do not know the past. 

The message that capitalists do nothing but exploit workers in the name of profit is popular in our time. Everything hateful has its origin in capitalism from products that poison the body to lascivious books and films that corrupt the mind and soul. This type of messages did not just arise in a vacuum. Mises' task in his book, "The Anti-Capitalistic Mentality" is to analyze the roots and results of ideas that hate the free enterprise. But before we present Mises' analysis, let us first set forth the basic social features of a capitalist society. 

The first three sections of the book under chapter 1 show us the distinguishing features of capitalism. They include mass production, mass consumption, consumer sovereignty, freedom, economic democracy, and social mobility. 

The outcome of mass production aimed at mass consumption is the "improvement in the average standard of living" (p. 1) of the majority. Contrary to Marxist analysis, "Capitalism deproletarianizes the 'common man' and elevates him to the rank of a 'bourgeois' " (ibid.). Through this process, an entreprise will have a chance to "attain the size of big business" (p. 2). 

The way to achieve prosperity is open in a capitalist society. It is acquired by those who satisfy the masses by providing products that are either cheaper or better. It is in this context that we must understand the concept of "consumer sovereignty." Mises compared it to a "daily plebiscite in which every penny gives a right to vote" (p. 2). 

Freedom is closely associated to consumer sovereignty where every man is free to choose the life that he wants and not "according to the plan of a planning authority enforcing its unique plan" (p. 3) on the people. 

Another idea correlated to consumer sovereignty is economic democracy where a person's prosperity is determined by the "evaluation on the part of his fellow men who exclusively apply the yardstick of their own personal wants, desires and ends" (p. 9). In other words, those who serve the majority will receive greater income or greater profit than those who satisfy the wants of the minority. It is in this situation that a movie actor surpasses the income of a philosopher or a composer of symphonies (p. 10). 

And finally about social mobilitiy. This is best appreciated if we compare the condition of society between capitalism and the period prior to its advent. For Mises, comparing the aristocrats to both entrepreneurs and capitalists fails to see the primary distinction between the sources of wealth of the two classes. In the case of the aristocrats, the public did not have a role in the accumulation of their wealth. Their wealth did not originate from the market, but from war or gifts from a conqueror. As such, the decision of the public could not shrink their wealth; it may be lost "through revocation on the part of the donor or through violent eviction on the part of another conqueror or it may be dissipated by extravagance" (p. 6). In such a society, the economic situation of common man is fixed. It cannot be changed except through extra-ordinary situations, but as a general condition, nothing will change unless the entire social class is also changed. 

This is the major difference under capitalism. An individual can change his status even without a change in the entire class where he belongs to. As to the source of wealth, ordinary people play a significant role in the increase of wealth of the entrepreneurs and the capitalists; their wealth is a market phenomenon. Likewise, the decision of ordinary people can also reduce the wealth of businessmen once they fail to serve the interest of the consumers. 

Based on the foregoing observation, if ever at present the decision of the consumers no longer affect the wealth of those at the top of the social ladder, it only shows that something strange is happening to the market. Moreover, if a common man finds it difficult to change his social status despite possessing all the necessary qualities to economically succeed, this proves further that something abnormal is introduced into the market. Furthermore, if we find the situation today closer to the society of aristocracy than the free society described by Mises, it is proper to inquire what brought us into this kind of situation? 

Mises himself gave us a hint about what's wrong in our time. He said that to desire for the advancement of economic well-being is normal and appropriate. What is inappropriate is the means used to acquire this, and this is due to "spurious ideologies" (pp. 4-5). There are people who "favor policies which are contrary to their own rightly understood vital interests" (p. 5). This reminds me of Henry Hazlitt's book, "Economics in One Lesson," where he summarized economics in one sentence: the test of the soundness of economic policy is not just to see its short-term result for merely one group in the society, but its long-term consequences to the entire society. Mises explained the slowness of the people to understand the difference between their desired end and their chosen means: 
"What is wrong with most of our contemporaries is not that they are passionately longing for a richer supply of various goods, but that they choose inappropriate means for the attainment of this end. They are misled by spurious ideologies. They favor policies which are contrary to their own rightly understood vital interests. Too dull to see the inevitable long-run consequences of their conduct, they find delight in its passing short-run effects. They advocate measures which are bound to result finally in general impoverishment, in the disintegration of social cooperation under the principle of the division of labor and in a return to barbarism" (pp. 4-5). 
The closeness of similarity between most nations' societies to aristocrat society is an outcome of anti-capitalistic mentality. It is exactly this kind of mindset that prevents the realization of the basic features, which characterized a free society. Most states and political parties, which include both conservative and "progressive" foes of capitalism are determined to destroy this economic system. After explaining the only way to improve the economic condition of humanity, Mises precisely identified the goal of most states and political parties:
"There is but one means available to improve the material conditions of mankind: to accelerate the growth of capital accumulated as against the growth in population. The greater the amount of capital invested per head of the worker, the more and the better goods can be produced and consumed. This is what capitalism, the much abused profit system, has brought about and brings about daily anew. Yet, most present-day governments and political parties are eager to destroy this system" (p. 5). 

Thursday, March 20, 2014

Unacceptable Greatness in an Interventionist Age

This review has two major parts. The first part is about the book, which I divided into three sections: writing style, content, and other benefits in reading the book. The second part is about my personal reflection, which I presented Margit's response to the silence of journalists and economists about the influence of Mises, and three reasons for the greatness of the man. And then I concluded with the danger of mainstream ignorance.

About the Book

1. Writing style

I am impressed with the author's writing style, I was hooked, and did not stop reading until I finished it. I think it took me around 10 to 12 hours to complete it. I really enjoyed reading the book. 

While reading, I sense numerous connections between the writer's stories and my world. I cannot enumerate them all. This review will show those connections. 

I like Margit's joke that she is "the human touch" (p. 44) in her husband's life. I need a reminder like that.

I admire Margit's memory and mastery of English language. Her stories were so detailed, and like an artist she beautifully painted her words especially in describing their friends and acquaintances, the places they visited, and the sad stories she narrated. I feel as if I am watching a beautiful movie leaving me with an unusual impression. 

2. Content

  • As to Mises' weaknesses

True to her words, Margit von Mises showed us the other side of her husband. She described her man as lonely and mysterious, not a good driver, didn't like to wait, and not interested in money. This last description puzzled me for if I were in his case, I would have used my economic knowledge in a more profitable way. 

Mises had other limitations. All his political and economic foresights came true except one, his mistaken assessment of France's strength to resist Hitler's aggressions. As normal man, Mises also had his own share of fears, and among them, I think losing Margit was the greatest of all. He showed it when he met Margit and Gitta at the station in Zurich. His other fears were related to his hesitation and temper. When Margit convinced him to leave Geneva due to Hitler's threat, he was hesitant that time to move to America, and one reason was his fear of language difference (p. 54). And still another fear was connected to his work as an economist. He knew that the world was in serious danger due to its rejection of capitalism and liberalism. And this gave him depression and sense of hopelessness that caused him to flare up even on small things. Margit explained the nature of this fear and outbursts of emotion: 

". . . . I believe I understand the reason for them. Lu wrote some notes in 1940, and I read them again and again. He wrote of Austria and of Carl Menger, who as early as 1910 recognized that not only Austria but the whole world was getting nearer to a catastrophe. Lu, thinking alike, tried to fight this with all the means he had at his disposal. But he recognized the fight would be hopeless, and he got depressed as were all the best minds in Europe in the twenties and thirties. He knew that if the world would turn its back to capitalism and liberalism (in the old sense of the word) it would tumble into wars and destruction that would mean the end of civilization. This terrible fight against corruption, against the foes of liberty and the free market had broken the spirit of Menger, had thrown a dark shadow over the life of Lu's teacher and friend Max Weber, and had destroyed the vitality and the will to live of his friend and collaborator Wilhelm Rosenberg" (pp. 44-45).
"Theirs was a fight for a world that did not want to be helped. Few people recognized the danger, and even fewer were ready to fight alongside Lu. It was like being on a sinking ship on which people were dancing though the end was near. Lu recognized the danger. He knew how to help his fellow passengers. He tried to lead them to the right exit, but they did not follow him-and now doom knocked at the door" (ibid.). 
  • Margit as a mother and wife
Ludwig von Mises was a blessed man to have Margit as a wife. As a widow with two children, she managed to support them through her job. She also displayed strength of character by waiting for Mises' decision to marry her despite the existence of other options, which economically speaking would be more advantageous on her part (pp. 29-30). Her love for Mises is far more important to her than material well-being. As a wife aiming for a successful marriage, she was also willing to change her priority to make her husband happy by making her husband's life her life (p. 45). I think Margit achieved such union of life. We know that she possessed her husband's mind by sharing to us her special dream:
"If I myself could realize one special dream, it would be that every president of the United States should get for his inauguration a complete set of Lu's books, destined for the Oval Office in the White House. These books should be marked for special recommended readings concerning government interference, socialism, and inflation. Perhaps they would help to preserve freedom in the United States. My second wish would be that every university or college where economics and political science are taught would - of their own free will - add a course on freedom of the market to their curriculum" (p. 181).
  • Other qualities of Mises
Margit saw her husband as punctual and patient with the shortcomings of others. She also described him as "a great defender of women" (p. 141). Many of those who attended his seminar in Vienna were intelligent women who "later became leading figures in economics and education" (ibid.). Proving Mises high regard for women, Margit quoted from Socialism: " 'All mankind would suffer if woman should fail to develop her ego and be unable to unite with man as equal, freeborn companions and comrades . . . . To preserve the freedom of inner life for the woman, is the real problem of women: it is part of the cultural problem of humanity' " (ibid.).

Another interesting aspect of Mises' personality was his concern for the intellectual development of his wife. Prior to their marriage, Mises gave Socialism and The Theory of Money and Credit to Margit. The latter admitted that the content of these two books was difficult for her, and it took her years to understand them (p. 30). Moreover, even after marriage, Margit perceived that travelling with Mises was like taking "a private course in history and art" (p. 49).

3. Other benefits in reading the book 

Besides from what have already been mentioned, other benefits in reading the book include practical suggestion in the use of waiting time, wise advice to students with socialist professors, and insights as to the basic tools for public speakers. Ludwig once told his wife that Boehm-Bawerk gave a suggestion to his male students to bring a book always with them once they decided to get married (p. 50). In this way, they can wisely use their time while waiting for their wives. 

Moreover, in the case of students forced "to read socialist and leftist literature" (p.172), Mises advised them to follow their professors so that they will know "the subject from every point of view, be it socialist-Marxist, liberal, libertarian" (p. 173), and only in that way they can "decide what is right and what is wrong," only then they are prepared to engage in intellectual exchange because they are aware of all questions their opponents will throw at them. 

Furthermore, a public speaker of substance is first of all a thinker and a writer. As a thinker, the role of an active audience or listeners is very important in processing ideas (p. 65). And as a writer, for Ludwig, paper and pen should always be handy to express one's ideas in writing; Margit added peace of mind (pp. 60-61). And still another skill required for public speakers is proper pronunciation of the language being used (pp. 72-73). 

Nevertheless, there are other lessons we can learn in facing critical times. If we fail to learn them, there is a big possibility that the past will be repeated due to absence of awareness about the destructive consequence of the expansion of statist and interventionist ideas. In a time of crisis, the ability to survive is crucial in order to escape the powerful claws of the state. In particular, I remember here the situation of certain Dr. Helene Lieser, a very intelligent woman who married an unknown man in order to avoid Hitler's power. Margit narrated that such unfortunate event was common in Austria: 
"Such marriages were very common. They were marriages in name only and were never consummated. The man who married a woman in this way asked a high price for giving her his name and the opportunity for her to leave Austria. He also consented to immediate divorce once his 'wife' was safely out of the country" (p. 52). 
Finally, I could not erase in my mind the scene of Mises' last day here on earth. I include this here as part of benefits in reading the book to remind us of our own mortality. Margit described this in the last chapter, Our Last Years Together:
"We now lived very quietly, but nevertheless I invited friends every week, for I did not want Lu to feel isolated. The ones he loved to see most were Larry Fertig, Henry Hazlitt, and Percy and Bettina. They all had strong, clear voices, spoke distinctly, and chose subjects that interested Lu, so he could participate in the conversation. But mostly he wanted to be alone with me. 'If it were not for you,' he often said, 'I would not want to live anymore' " (p. 179). 
"Lu's mind was especially clear the day before his death. He held my hand all day long, but he was very weak and his voice was barely audible when he told me in the evening, 'You look so tired; you must go home now and get some rest.' At 9 P. M. the doctor insisted on my leaving. Shortly afterward, Lu went into a coma and never woke up. He died at 8:30 in the morning of October 10, 1973. His doctor and three of the kindest young floor nurses were with him" (p. 180). 
I wish to be reminded by this section of the book or similar to this in facing my own death. However, I want my sons to be with me and one of them reading selected portion of the Bible with a hymn praising God as a background music. 

Personal Reflection

1. Margit's Response

Margit von Mises provided a response to the question about the silence of economists and journalists after Mises' death. Her response will give us a hint about the reason for such silence. I consider this kind of silence really intriguing for there is no question in the mind of those who are familiar with Mises' works about the greatness of the man. 

Margit saw her husband as a great man - "a great thinker, a great scholar, a great teacher" (p. 7). I am not sure if "greatness" is suitable to describe other aspects of Mises' life - his courage, love for his wife, and friendship. But one thing is sure, these aspects of Mises' life contributed to the man that he is. 

In chapter 8, Margit narrated the story of her husband's magnum opus, the Human Action. In it we learn how a coward and an invisible enemy hid behind the impersonality of Yale University Press to sabotage the spread of Mises' ideas, and yet at the same time his enemy refused to reject the publication of Mises' book due to anticipated profit. Such an attack happened during the second revised edition of the book. Margit quoted Henry Hazlitt's explanation of that attack "in 'Mangling a Masterpiece,' an article in the May 5, 1964, National Review":
The Press does not honor Professor Mises in this new edition. And it does not honor itself. The new edition is a typographical disgrace.

The 1949 edition was originally priced at $10; the revised edition is offered at $15. Yet qualitatively it is cheaper in every respect. It is full of misprints. On page 322 four lines are omitted. Page 468 is missing altogether. Page 469 is printed twice. On page 563 two paragraphs are transposed. On page 615 eight lines are wrong. The running heads that appeared at the top of each page of the 1949 edition are all gone.

In belated reparation, the Yale University Press has printed errata pages (though they are not bound in). But these make wholly inadequate amends for an inexcusable printing job. On page after page one finds some paragraphs printed in a comparatively light type, and others in a blacker, thicker type that can only be described as at least quasi-boldface. The reader will inevitably assume that this marked contrast is intentional, and that the author meant to give special emphasis to the passages printed in Accidental Bold....

I started to note merely the pages on which the contrast in type between various paragraphs was particularly glaring, and got a list of seventy. I leave it to the Yale Press to explain the technical reasons for the type contrasts....

I have said nothing about the uncountable instances in which whole pages of quasi-boldface are found opposite whole pages of lighter type. This must irritate any reader sensitive to typographical tidiness; but it is at least less likely to mislead him into supposing that changes in emphasis are intended. What possible human explanation can there be for this typographical botch, which would disgrace a third-rate commercial publisher? Who reads galley proofs? Who saw page proofs? Who let this mess pass?

I asked Professor Mises what light he could throw on the matter. He was able to supply very little, because the publishers had been extraordinarily reticent. It appears that, in order to do as cheap a job as possible, the press had resorted to some mixture of photo-offset and reset never tried before. When Dr. Mises asked for page proofs, they were denied "for mechanical reasons." When he protested, Chester Kerr, director of the press, replied on Jan. 22, 1963: "We are entirely willing to take responsibility for seeing that the new edition of Human Action is printed without error. I am confident that you will have no cause to regret not having seen page proofs." When the first copies were sent out to the distributors, the author did not receive one.

The Press has conceded in a letter of Sept. 30 that "the general quality of the work is undeniably below our customary standard." But it apparently does not intend to do anything but go on selling the new edition at $15. The least reparation that could be made, to the author and to the readers of Human Action, would be to order the press to start on a new edition immediately (instead of waiting till the present botched edition is exhausted), and meanwhile to sell copies of the present edition at a cut price in candid recognition of their defectiveness.

A final question. Why, in a press that has shown itself capable of producing first-rate work, did this particular book go wrong? Do the present editors of the Yale University Press (who are not those who originally accepted the book) know that this is the most important work on general economic theory that has appeared In our generation? They know it is commercially profitable; they know it sold six printings and brought in revenues from translation and quotation. But if they had any idea of its true greatness, if they even had any real respect for its author and its readers, if they had any respect for their press' own reputation, would they have permitted such a slovenly edition to go out under its imprint? (pp. 110-112). 
The person behind the attack on Mises and his book remained unidentified until his death. His wife knew that ideological differences were the primary reasons. And though Mises' ideas are now gaining increasing number of followers, such differences are still evident today. The common descriptions associated to Austrian school attest to this. Revisionist, alternative, and contrarian are the usual designations given to the school championed by Mises. 

2. Three Reasons for Mises' Greatness

Besides being a great man in the eyes of his wife, the greatness of Mises can also be measured by the size and number of his ideological enemies, and the extent of his intellectual influence. 

Mises' name was on the black list of both the Nazis and the Russians (pp. 35, 53). His writings were hated by all socialists including the American version. Margit recalled what the Nazis did on the night they arrived to Vienna: "They had rushed into the apartment where Lu had lived with his mother, had taken his valuable library, his writings, his documents and everything they found of importance, packed it all into thirty-eight cases, and drove away" (p. 35). Primarily, chapters 2 to 4 gave us an overview of Mises' ideological enemies. The story of Human Action mentioned earlier in chapter 8 also provides us another concrete example of hostility to Mises' ideas. 

Concerning Mises' influence, we can just select here few examples for its extent reaches numerous prominent personalities who became strong defenders of free market in various institutions and different parts of the world. We see here what someone said "the power of compound ideas." The material is scattered throughout the book, and specifically found in chapters 5 to 7, 9, and 10. 

At the end of chapter 8, you will see pictures from pages 115 to 132, which I assume the personalities in those pictures have been influenced by Ludwig von Mises in one way or another. You can see there Wilhelm Roepke, F. A. von Hayek, Philip Cortney, Sylvester Petro, Professor Vernon Carbonari, George Koether, Henry Hazlitt, Otto von Habsburg, Fritz Matchlup, Leonard E. Read, Lawrence Fertig, and Jacques Rueff. I googled each of them, and most of them are influential free market defenders. 

In browsing other chapters of the book, you will gain an overview of Mises' intellectual influence by identifying several key positions that he held. He became "the full-time legal adviser and financial expert of the Chamber of Commerce; he had his lectures at the University of Vienna; he had his seminar; he had conferences and luncheons with visiting authorities . . . . " (pp. 31-32). 

"The Austrian ambassador, Baron von Phuegl," was a frequent visitor (p. 49). In 1940, Mises "delivered a lecture before a banking seminar at the School of Business, Columbia University, on 'Postwar Economic Reconstruction of Europe'; on November 19 he spoke at the Political Economy Club on the 'Non-Neutrality of Money' " (p. 64). On the same year, "he had lunch with Drs. Herbert B. Dorau and J. T. Madden, dean of the School of Commerce and Finance," which both demonstrated "a lively interest in him" (p. 69). 

In 1941, he "met Senor Montes de Oca, former secretary of the treasury of Mexico and at that time president of Mexico's Banco Internationale" (p. 74). This bank president displayed familiarity with all of Mises' books. In 1942, Mises held a lecture in Mexico attended by Dr. Gustavo Velasco, Montes de Oca's relative, and Eduardo Suarez, the Mexican Minister of finance (pp. 78-79). The former "is one of Lu's greatest admirers" and claimed that he "translated at least half a dozen of Mises' writings" (p. 79). (I think translating Mises' books into other languages is another practical project to spread his ideas to greater number of readers). 

Other names influenced by Mises include "Frank Dierson, a prominent lawyer in New York City. . . ." (p. 133); "Jack Holman, who for many years was director of Johnson & Johnson and has a Ph.D. in economics and is a licensed professional engineer in the state of New York, . . . ." (p. 134); Hans Sennholz who "had studied law and political science in Germany, and in 1949" studied economics at NYU, attended Lu's seminar for years, and became the head "of the Economics Department at Grove City College" (p. 136); even the famous Ayn Rand once attended Mises' lecture in 1957-58 (p. 138); and of course not to mention other influential economists such as F. A. Hayek, Israel Kirzner, and Henry Hazlitt. Furthermore, just want to add three unusual students, which include a Filipina, Phebes Tan (p. 139), and two Jesuit priests, William McInnes and Michael Mansfeld who are also both professors of economics (p. 138). 

Reaching chapters 10 and 11, we find Mises remained active even months after his illness. "He wrote articles for The Freeman" and contributed few to "Dr. Howard E. Kershner's Christian Economics" (p. 153). 

Three more people deserve concluding attention due to the importance of their words about the influence of Mises. One is Sylvester Petro, "professor of labor law at NYU" and also served as "director of Wake Forest Institute for Labor Policy Analysis in WinstonSalem, North Carolina" (p. 157). He described Mises intellect and books as follows: 
"I told him in that letter that I had never encountered such a work and thought it should easily rank among the greatest writings of mankind.... The main things that attracted me to Lu were the virtually superhuman qualities of intellect, of judgment, and of wisdom that he possessed in such extraordinary abundance. I have done my fair share of reading in the classics, in logic, in philosophy, in epistemology, in law, in economics, in social theory, in politics and all the rest. In spite of this rather wide reading, Lu's work seemed to stand out sharply and brilliantly. It was on a different level from anything I had ever read before" (ibid.).
The second person is Lawrence Fertig. His comparison between mainstream economists and Ludwig von Mises is worthy of attention:
"Economic historians of the 21st Century will undoubtedly bepuzzled by the reception accorded to economic theorists of the 20th Century. They will be particularly puzzled by what occurred in the span of years between World War I and 1970.... Great honors were showered on economists whose major accomplishments had been to promote a major inflation which, by the end of the 20th Century, was acknowledged to be the source of tremendous social unrest and economic crises. These were the fashionable economists who were sponsored by wealthy Foundations and indeed by most of the intellectuals of Academe. But when economic historians of the future came to evaluate precisely who had made the most significant contributions to economic theory-to those broad and fundamental principles which explain human actions in the practical world people must live in-their puzzlement increased. For they could find only a meager record of academic honors or monetary prizes by leading ivy-league universities accorded to the one economist who had discovered and formulated some of the most brilliant economic theories of that century. His name was Ludwig von Mises" (p.178).
And then the third person is Leonard Read. The message of the plaque he presented on the 89th birthday of Ludwig von Mises captured the greatness of Mises' ideas:
"To A Great Teacher: You, Mises, are truly a Teacher. Two generations of students have studied under you, and countless thousands of others have learned from your books. Books and students are enduring monuments of a Teacher, and these monuments are yours. This generation of students will pass away, but the ideas set in motion by your writings will be a fountain source of new students for generations to come" (p.133). 
And of course the most important of all is the personal assessment of the writer herself, the wife of Ludwig von Mises. This is how Margit summed up her husband's character:
"His most eminent qualities were his inflexible honesty, his unhesitating sincerity and his unflinching patriotism. He never yielded. He always freely enunciated what he considered to be true. If he had been prepared to suppress or only to soften his criticism of popular, but obnoxious policies the most influential positions and offices would have been offered to him. But he never compromised. This firmness marks him as one of the outstanding characters in this age" (p. 181).

One time, I read a reputable professor described Mises' ideas as concrete and superb, but old-fashioned, and no longer applicable in guiding us from the maze of present-day problems. I see it as an excuse for laziness and ignorance. 

If Mises' ideas are inapplicable today, what type of answers can we expect in facing critical issues, which are taken for granted by the majority of intellectuals and those in authority? The violation of moral law of existing monetary system, the many faces of socialism, the popularity of the mindset against free-market capitalism, the harm caused by statist and interventionist policies, and the unproductivibility of state bureaucratism are the primary economic issues need to be dealt with if we hope to see a brighter future for our civilization. What will give the entrepreneurs, non-professional economists and writers, or any citizen willing to seriously thinks the necessary mental tools to be able to see the consequences of destructive ideas? Perhaps, it is more appropriate to say that exactly the absence of such analytical tools provided by Mises both in mainstream education and media is the primary reason for the invisibility and widespread influence of those destructive forces. 

Tuesday, March 11, 2014

Capitalism's Last Stand?

I started a thread in one group in Facebook with this post:

"I think the advocates of interventionist policies are more than happy to implement the ideas of Walden Bello. If those running in public office cannot see the economic fallacy of Bello's proposals, we should not expect to see that something will change in our economy."

Here is an excerpt from Pietro Manzella's review of "Capitalism's Last Stand?"

"Bello maintains that a shift should take place towards a pluralistic system of global economic governance, making it possible for governments to set up initiatives for development in accordance with their own values and opportunities."

"For this reason, the author points to the need for a reorganisation of production, consumption and distribution which would deal with the climate emergency and provide a response to the environmental crisis."

"Capitalism’s Last Stand: Deglobalization in the Age of Austerity attempts to present measures for a fairer and more equitable society, taking as a starting point a far-reaching process of deglobalization. Those who are concerned with a just society and a more balanced distribution of global financial resources will find this volume both engaging and enlightening."

A respected pastor and my seminary professor commented: "Nothing substantial happens without sufficient force to make it happen. What is that sufficient force?"

I replied: "I think Sir as far as the socialists are concerned, they see egalitarian laws as 'sufficient force,' but for advocates of free enterprise, it depends on the number of citizens who are economically informed that give them the ability to see the impact of increasing size of the government and bigger taxes on both individual and economic liberty and personal responsibility."

Related Article:

Saturday, March 8, 2014

Too Young to Appreciate

I was 19 when I first stumbled with Gary North's Bible economic commentary. That was 1986 when I was taking my bachelor's degree in theology. I was surprised with Its content. I find his "sarcasm" and "arrogance" entertaining and his concrete thoughts enlightening. After reading several chapters, I thought that time that better to assign it as part of my future reading task for I had other academic obligations. After 28 years, still I never finished reading even one of his books. 

I forgot the exact year I returned to North's books. If my mind serves me right, I think that was the time when I was pursuing my master's degree in theology. I think it was 1998. The primary reason for my return was prompted by my dissatisfaction with then existing discipleship materials for I was also pastoring a church at that time. It was then that I discovered North's deep connection to Cornelius Van Til's thoughts. Through North and then later John Frame, I started tracking the books of writers coming from Christian Reconstruction. So the names and works of John Rousas Rushdoony, Greg Bahnsen, Gary deMar, James Jordan, and David Chilton became familiar to me. Still, I faiiled to come up with discipleship materials from those resources, maybe because I considered them too difficult and academic for church members or perhaps their sizes were intimidating or maybe I was too lazy and disorganized. 

It took me 8 years to finish my master's degree. I was tasked to teach Pentateuch in our seminary, and so I took that chance to create lectures using North's and Rushdoony's materials. I only came up with 7 lectures. And then in 2006, I pursued my doctoral course in educational leadership and incorporated Van Til's and North's books in my papers. Since I had the financial resources that time, I took advantage of it to collect Van Til's books, Rushoodny's Institutes of Biblical Law Volume 1, and 2 volumes of North's Bible economic commentary.

The third and I hope the last influence that brought me again to North's books was most unusual; it was a personal crisis. It happened in 2009. And as a result of that, I could no longer concentrate in pursuing my doctoral course, and so I stopped. And due to that crisis, I resigned from my teaching job.

After more or less six months of suffering pain, I finally decided to face reality, and besides I have three sons who are depending on me. And so I tried to look for other sources of income. It was that time that I met a business community advocating financial literacy. The books of Robert Kiyosaki were their primary sources, and it was Kiyosaki that led me to Edward Griffin, then to Ron Paul, to the Austrian school, and then back to North again. 

The realization that Gary North is both an Austrian economist and a Van Tilian thinker is something I did not see before. This time I am thinking of making it a goal to read his books and that's the reason why I am writing this article, to remind myself. Unlike North, I don't want to make it as a vow. It is just that at this point I want to take North's challenge that none except him has read his 31 volumes Bible economic commentary. It is really surprising to know that it took him 52 years to finish this project. Compared to Murray N. Rothbard, which many are already impressed with his 7 years of commitment to finish 'Man, Economy, and State," I can't find appropriate words to describe North's perseverance. To serve as my guide, I want to post here Gary North's past accomplishments and future goals in his so-called "four phases" of his calling:

  • Phase 1 - Contributor to The Freeman, Marx Religion of Revolution (1968), The Concept of Property in Puritan New England, 1630-1720 (1972), Introduction to Christian Economics (1973).
  • Phase 2 - Bible economic commentary
  • Phase 3 - Conversion of the commentary into YouTube videos, a new website - The Covenantal Structure of Economics, and a comprehensive treatise comparable to Ludwig von Mises' Human Action.
  • Phase 4 - A book on epistemology of economics and historiography

North wrote: "Be careful what you select as your life's calling. Do it early. The clock is ticking." I can no longer recover my "wasted years." My interest as of now is to read both North's and Rothbard's books. I hope that before 2014 ends, I can finish "Man, Economy, and State" and a couple of books from North's Bible economic commentary. 

Thursday, March 6, 2014

From Misesian Revival to Christian Reconstruction

Just finished reading this morning Joseph T. Salerno's "The Rebirth of Austrian Economics - In Light of Austrian Economics." In it, I gleaned at least three insights: the tension between creativity and institutionalization within the Austrian camp, an overview of Murray Rothbard's works, and the revival of Austrian school through his influence. The second insight provides a good reading list for those like me who want to study the Austrian school from Rothbardian perspective. After reading Salerno's essay, I thought of the need for a parallel revival within the camp of those who adhere to reformed theology. Under this, I also want to give an overview of distinctive of one school of thought within the umbrella of reformed theology. 

Creative Thinking and Institutional Framework

Joseph T. Salerno started his argument by identifying two strands of thoughts within the Austrian camp. These thoughts are about the creativity of an isolated genius and the need for an "institutional framework." The founding fathers of the Austrian school, Carl Menger and Eugen von Bohm-Bawerk, says Salerno, had committed a mistake for emphasizing only the creative aspect at the expense of the institutional framework. Because of this one-sided emphasis, the contribution of the Austrian school to the growth of economic science has suffered setbacks. Nevertheless, Salerno saw that even in Menger's theory of goods and Bohm-Bawerk's theory of "time preference", ideas can be deduced that could support the need for institutional framework. In this aspect, Salerno argues, the two founding thinkers are inconsistent. 

Ludwig von Mises' position concerning these two issues was "ambivalent" says Salerno and if not for the works of Murray Rothbard, Mises' recovery of Austrian tradition would perhaps be buried due to the absence of that necessary institutional framework. So it was through the influence of Rothbard that creative Austrian thinking was institutionalized and revived. 

Overview of Rothbard's Works

At this point, I just want to enumerate Rothbard's "institutionalization" of Austrian ideas through his published books and essays and two influential journals:

  • Man, Economy, and State (1962)
  • America's Great Depression (1963)
  • Power and Market (1970)
  • For a New Liberty (1973)
  • The Journal of Libertarian Studies (1977)
  • The Myth of Neutral Taxation (1981)
  • Law, Property Rights, and Air Pollution (1982)
  • The Ethics of Liberty (1982)
  • Quarterly Journal of Austrian Economics (1982)
  • The Mystery of Banking (1983)
  • The Federal Reserve as a Cartelization Device (1984)
  • The Case for a Genuine Dollar (1985)
  • What Has Government Done to Our Money? (1990)
  • Egalitarianism as a Revolt against Nature (2000) 
Salerno gave a brief description of selected works from the above literature. He described "Man, Economy, and State" (1962) as follows:

". . . . a contribution to Austrian economics and to pure economics in general that ranks as one of the most brilliant performances in the history of economic thought. The book was a two-volume treatise of nearly 1,000 pages written in scintillating English that logically deduced the entire corpus of economic theory step by step from the undeniable fact of purposeful human action. It integrated the insights and theorems of dozens of previous Austrian economists from Menger to Mises into a systematic and comprehensive organon of economic theory. Perhaps the greatest of Rothbard’s many contributions in his treatise was the elaboration of a unified theory of production, extending over five of the treatise’s 12 chapters and encompassing the capital structure, interest rate determination, factor pricing, and the entrepreneurial role in production. While many elements of the theory had been developed previously by various Austrian economists, they had never been fully integrated and several elements were still missing. Rothbard’s methodical treatment of production repaired one of the few serious gaps remaining in Austrian economics after Mises. Rothbard’s book also contained critiques of contemporary neoclassical and Keynesian theories and a critical analysis of typical state interventions into the economy" (pp. 116-117).

Salerno gave an overview of other works of Murray Rothbard. "America's Great Depression" (1963) and "What Has Government Done to Our Money" (1990) are follow-ups to Rothbard's 1962 book. Salerno described the first book as an application of Austrian Business Cycle Theory to analyze the Great Depression in the 1930s. The second work is a booklet, which Rothbard aimed to provide "a primer on Austrian monetary theory" (p.117) where he "originated a praxeologico-historical analysis of the transformation of gold money into fiat money. . . ." (ibid.). "Power and Market" (1970) contains "an exhaustive . . . . analysis, based on value-free economic theory, of the myriad of government interventions into the economy" (ibid.). Rothbard also dissected here the existence of "taxation and government spending as types of intervention into the free market economy. . . . (ibid.). In "For a New Liberty" (1973) and "The Ethics of Liberty" (1982), we read here the "anarcho-capitalist" version of libertarian political economy. 

In terms of monetary theory, Rothhbard also published a book, "The Mystery of Banking" (1983) and two essays, "The Federal Reserve as a Cartelization Device" (1984) and "The Case for a Genuine Godl Dollar" (1985). To appreciate the importance of the book, Salerno mentioned historical details related to the distortion of monetary system caused by an influential book co-authored by Milton Friedman and Anna Schwartz, "Monetary History of the United States." Salerno narrated:

"The Mystery of Banking was a theory and history of money and banking written from an Austrian perspective and, as its title suggests, accessible to the non-specialist in economics. Nonetheless it contained an important extension of Austrian monetary theory. Specifically, Rothbard integrated a detailed exposition of the multiple bank credit expansion process into Austrian monetary theory. This task had never been undertaken before by Mises or by Rothbard in his treatment of money in earlier works and constituted a lacuna in the Austrian explication of the money supply process. The arcane process by which a fractional reserve banking system operates to multiply demand deposits was first systematically expounded by the Austrian-oriented American economist, C.A. Phillips in 1920. In addition to this expository contribution, Rothbard corrected an erroneous deviation from Phillips’s path-breaking analysis that began to crop up after World War II and especially after the publication of Milton Friedman’s and Anna Schwartz’s influential Monetary History of the United States in 1963. Whereas Phillips had derived a simple but versatile 'reserve' multiplier capable of distinguishing between the influences of central bank policy, commercial bank operations, and the actions of the non-bank public on the money stock, modern money and banking textbooks following Friedman and Schwartz (1963, pp. 50–51) operated with a seemingly more sophisticated formula, the 'high powered money' or 'monetary base' multiplier, which conflates these separate influences. In rectifying this technical error and rescuing Phillips’s original analysis from oblivion, Rothbard restored the proper analytical framework for interpreting historical boom-bust episodes such as the Great Depression" (p.123).

The Significance of Rothbard's Institutionalization

I mentioned earlier that without Rothbard's institutionalization (According to Salerno, it was actually Llewellyn H. Rockwell who ought to be credited for this institutionalization) of Austrian thoughts, Mises' recovery of Austrian tradition would have been lost due to the influence of other thinkers within the Austrian camp. It is a new realization for me that there are diverse versions of "Austrianism" such as "Lachmannians," "Hayekians," "Kirznerians," and "Misesians." For Rothbard, Misesians are the true Austrians. Salerno cited two relevant quotations to describe this internal tension within the Austrian school. In the first quotation, Rothbard exposed Ludwig M. Lachmann as "nihilist," "Keynesian," and "anti-economist", and therefore not an Austrian in the Misesian sense (p. 121). In the second quotation, Rothbard identified that the real contention over the naming of the scholarly journal aimed for the institutionalization of the Austrian thought is "the abandonment of Austrianism itself" (pp. 124-125). In that battle over the journal's name, finally Rothbard gained the upper-hand, and so the "The Review of Austrian Economics" as the official name for the journal serves as a landmark in the victory of Misesian version of Austrianism. 

Personal Assessment of Trend in Reformed Theology

As a theological educator, after reading Salerno's essay on economics, I could not avoid reflecting on the present state of Reformed theology. I see a parallel experience. My mind led me to think about the works of the pioneers of Reformed theology - John Calvin, Abraham Kuyper, Herman Bavinck, and Benjamin Warfield. After a year or two of exchanging ideas with my fellow educators both offline and online, I suspect that the existing trend in theological education particularly in the Philippines and as far as the "evangelicals" are concerned is either leaning towards new modernism through the influence of Karl Barth or the Kantian idea of historical consciousness, existentialism, and process theology either through the British or German branch. Unfortunately, some proponents of this trend still want to retain an appearance of orthodoxy and adherence to reformed theology. I think, it is in situation like this that the recovery of reformed theology through the works of Cornelius Van Til plays a significant role. 

One school of thought within the Van Tilian camp is known as the "Christian Reconstruction." Gary North, an Austrian economist belongs to this school. Among the many expressions of reformed theology, the Christian Reconstruction came up with five distinctives: sovereignty of the Triune God over creation, providence, and redemption; covenant theology; the three uses of the law; eschatology of victory, and; presuppositional apologetics. Difficult theological questions such as free will and theodicy are covered under the first point. Understanding covenant theology and the three uses of the law provides a distinctive social theory. The fourth point, which is victorious eschatology appears a baseless utopian at first glance. But a deeper look will help you see that such view of future things is actually rooted in Christology, most especially the finished work of Christ. And finally, presuppositional apologetics is about explaining the worldview of Christian Theism to non-theists.

For now, in my mind, there is a disconnection between these two schools of thought: Austrian and Christian Reconstruction. My goal is to study the Austrian school from the lens of Christian Reconstruction. Rothbard's list provides a good start in the study of Austrian ideas. Concerning Christian Reconstruction, I also consider reading the Bible economic commentaries of Gary North a worthwhile goal.