 This is Jeff Deist, and you're listening to the Human Action Podcast. Ladies and gentlemen, welcome back once again to another installment of the Human Action Podcast. And as most of you know, who have been following along, we've been working our way through Mises' book, Human Action. We've been doing this as sort of a serial podcast, and we have reached the penultimate, second to last part of that book, part six, which is titled, The Hampered Market Economy. Last week we had our great friend, Dr. Peter Klein, help us go through the sort of half of that section, because again, we're doing more than one podcast in some of the parts of the book, simply because of the length of them. We want people to be able to read the book in digestible chunks. And so this week we're going to go through the remainder of part six, which consists of chapters 31 through 36. If you are reading along, hopefully in our scholars edition, that is pages 774 to 857. Fewer than 100 pages, you can get through this stuff pretty well. And again, we are talking about the hampered market economy. So after setting out the case for full socialism, or an example of full socialism, here Mises goes through section by section, chapter by chapter, some of the ways in which governments and central banks hamper what is otherwise a market economy. So all kinds of interventionism. And with Peter Klein last week, we talked about things like a third way system between socialism and laissez-faire. We talked about taxes and price controls and wage controls and tariffs and other forms of protectionism. So Mises is giving us sort of a survey of these various kinds of ways in which the state interferes or hampers, in his words, the market economy. Now we had a couple of different potential guests line up this week, economists and both of them, due to COVID and self-quarantine and other things, had some technical issues, problems, change of plans, different scheduling. So I am going to be your host and guide solo this week. So we will work through these chapters. Maybe a tad quicker than normal, but I hope that you enjoy my perspective. We do like getting economists, of course, to give us the real nitty-gritty as to some of the more technical or substantive or theoretical aspects of Mises's work here. But you will have to soldier on this week with me. And next week, when we get into the last part of the book, and actually next week will be the final podcast in this series on human action, we'll have a very special guest, someone a lot of you with whom many of you are familiar and like. So all that said, let's talk about the second half of Part 6 of Human Action, starting with Chapter 31, which is called Currency and Credit Manipulation. So I think we're all familiar with the idea that central governments like to manipulate their currency, and that central banks like to manipulate credit, and they do so in ways that hamper the market economy. In other words, these are not purely laissez-faire or free market actions. These represent a form of intervention. In a lot of ways, as I was rereading this, I thought that this section of the book could have almost belonged back in Part 4. If you recall, we went through that with Dr. Joe Salerno, where Mises was talking about credit and interest and what money is and what business cycles are. And so in a sense, this chapter could have fit somewhere perhaps in that part of the book, but nonetheless, because this is an express or explicit standalone form of interventionism, I guess Mises chose to position the chapter here. So what he gets into here at the beginning of the chapter is just currency debasement. And this has been around as long as there's been currencies. People have been trying to cheat it, whether that's the king or the sovereign, or whether that's the politicians or whether you fast forward to today, and that's the central bankers. So debasement is something that has been with us for a long time. And if you think about it, there's a lot of appeal to, let's say, a king. You take a gold coin, which has a certain weight of pure or .999 gold in it. And in that coin has a number attached to it, let's say a 1 or a 5 or a 10. And if the king can simply melt that coin down and take 90% of the gold content and then add 10% of lead or something that's much cheaper and reshape the coin and then still call it a 1 or a 5 or a 10, the king has effectively cut himself a 10% profit and taken that gold for himself. And so this is a form of debasement because the person who's now holding the coin is of course worse off in terms of how much gold is actually contained in that coin. So as Mises mentions here at page 775, I'm sure a lot of you have heard about Gresham's law. And Gresham's law briefly stated is the idea that bad money drives out good or drives good money underground. So, you know, if we think about that in our modern age, and I think this is the example that Tom Woods used in a book way back. It was around 2005. He came out with his book on the church and the market or how the Catholic church built Western civilization, I guess was the title. And he says, you know, what if all of a sudden the U.S. federal government just decreed that instead of needing four quarters to make change for a dollar, you only needed three? So instead of being worth 25 cents, I guess a quarter would just by decree be worth 33 and a third sense overnight. Well, a lot of people would be rushing to exchange three quarters for a dollar, right? And a lot of people would want to get rid of their quarters and hold their dollars. So that would be an exceedingly, I guess, simple conceptual example of how Gresham's law works. So when you had a period as the United States did, and a lot of Western European countries did a bimetalism. Another theme Mises touches on in this chapter where both silver and gold were currencies as gold increased relative to silver in its value and purchasing power. People wanted to use silver more and they wanted to hoard their gold. So silver for a long time has been used as money, but also for a long time it's been considered worse money than gold. So there's always been a downward pressure on the price or value of silver and upward pressure on the price or value of gold relative to one another. And today we're seeing historically unprecedented ratios between gold and silver and their spot price, you know, now in 2020. And if you read Safedin Ammus or people like that, that's not necessarily going to change. In other words, silver is not coming back anytime soon relative to gold. Now how it fluctuates relative to the dollar, the fiat dollars are very different question. But relative to gold, and excuse my French, but in Safedin's terms, you know, silver is a shit coin compared to gold, just like certain cryptos are a shit coin compared to Bitcoin. Or at least in his view, and I tend to agree on the latter. So, you know, this is a case of where even when you have a little bit of competition between currencies, when we had a freer world and people could choose what kind of metal they wanted to choose, they tended to, gold tended to prevail nonetheless. So back when you had physical currencies, coins, debasement was a lot simpler because, you know, there was a metal property to the coin and you could simply meld it down and reformulate it. So that was how debasement took place. As Mises continues in this chapter, though, debasement comes into the paper money age, and we have to start to think about how debasement works in more modern times. Now, governments benefit from debasement in lots of ways. You know, there's seniorage, I'm sure a lot of you are familiar with this term, which is not debasement per se, but nonetheless, when you have a paper currency that doesn't require any actual gold or silver in it, and governments can just produce basically a $1 bill at the same cost as a $100 bill or a $500 bill, the difference between the cost to produce the bill. And I think it costs more than a dollar to produce the one. By the time you factor in all the accounting costs of the staff and the printing and the distribution, I think it's more than a dollar. So, government might actually lose money producing a $1 bill, but it makes money producing a $20 bill. So if the government just produces money, and this is not exactly what's happening today, but if the U.S. Treasury just produces a bunch of 20s and it costs them less than $20 to make them, and then they go out and spend it on whatever government buys or funds or pays, then that difference is called seniorage. And so that's a benefit to government. And one way in which governments can sort of, through their sovereign status as the sole provider of money in a society, make money for themselves. And of course, under bimetalism in the United States and other places when we had both gold and silver, the U.S. government and others tried to fix a rigid exchange ratio between gold and silver. And, you know, that doesn't work when the market doesn't agree that, you know, there's 17 silver ounces to one gold ounce, but the government comes along and says, oh, no, no, it's only 15. You know, again, Gresham's law surfaces, and so these manipulations which are designed to benefit government or the king or the central bank or whatever we're talking about are not so simple because the market always responds, and Gresham's law and its effects are an example of that response. So if we think about it, and Mises thought about it more than any of us did, and that's why he wrote this book and we didn't, you ask yourselves, why do governments devalue their own currencies? Well, at page 787 of the book, he lays out some of the objectives of devaluation. And there are rational objectives and there are benefits to people who are closer to government or to early money. We talked in an earlier episode about how money isn't neutral. It doesn't flow out across the economy evenly. Some people get new money or even to base new money earlier in the process than others, and I would say that includes Wall Street in large part, that includes government contractors in large part, that includes government personnel in large part. So he lays out five objectives of devaluation. So let me walk through this quickly. First is to preserve the height of nominal wage rates while real wage rates rather sink. So if you debase money, it becomes easier to continue paying people. Let's say a person's salary is $35,000 a year. Well, they're still getting that $35,000 a year. So there's a psychology there where they're like, well, at least I haven't had a pay cut. But if government is devaluing the currency, they have had a pay cut. So that's a way to keep nominal figures where they are but yet obscure the devaluation of currency. The second is to make commodity prices rise in terms of domestic money. And he points out here, especially farm prices. So if you are devaluing the dollar, you know, the people pay more for corn or soy or weed or something like that in dollar terms than that because the underlying commodity, the ag commodity is still worth what it's worth. It still feeds who it feeds, provides the calories it provides. So when you debase the currency, at least in the immediate short term, it appears that farmers, for example, benefit because agricultural prices rise in dollar terms. To favor debtors at the expense of creditors, of course, this is true. If you owe someone $200,000 on your house and all of a sudden $200,000 is only worth what, $210,000 or $220,000 used to be worth a few months earlier because of debasement, you know, you're better off as a debtor. The creditor is worse off, of course, and the creditor is going to take that into account when making future loans, that uncertainty, that risk of debasement. You know, ultimately, we're all going to pay because if governments debasing or devaluing our currency, then lenders are going to want a higher premium for their risk. To encourage exports and reduce imports, this is mercantilism. This has been a feature of just about every human society that's had much of a government. It is a stubborn and enduring feature of the United States and its political landscape. All you have to do is look to Donald Trump, who is a protectionist and a big believer in a manufacturing economy that makes a fetish of exports over imports. So obviously, if you devalue your currency and people have to buy, or people buy automobiles or agricultural products or anything else made in the U.S. with dollars, then those dollars just got cheaper to obtain or to exchange for. So, you know, that makes a car or a bushel of wheat appear to cost less to that foreign buyer. So, currency devaluation does produce at least short-term benefits for certain favored domestic exporters. So, it's not like all of this happens just because people in government are stupid. And number five, to attract more foreign tourists and to make it more expensive for the country's own citizens to visit foreign countries. So, again, if you're in Europe and you want to visit Disneyland in the United States, and you want to stay in the embassy suites, and you want to buy or rent a car from Hertz, rent a car, and dollars are worth less relative to your own currency, all of those things become more affordable and more attractive to you. But for domestic Americans who are still being paid in those devalued dollars, you know, they're more likely to want to spend those dollars domestically and go to Disneyland themselves rather than go to Europe because traveling to Europe just got more expensive in exchange terms. So, you know, the main point that Mises makes here is that all these are temporary benefits. You know, they depend on the notion that only the United States devalues this dollar and foreign governments don't, for example. And that, you know, this is all just a temporary benefit to people who avail themselves of money and credit earlier in the process. And it doesn't really create any long-term benefits for us society as a whole. And as a matter of fact, it produces long-term detriment because this isn't a market phenomenon. So we know it's inefficient just by that. It makes the whole community poorer, as he says, but it enriches some strata of community. So, you know, unlike days of old where currency debasement was a little more obvious to the citizenry, credit expansion is now in the modern central banking age, is the government's, I'm quoting Mises, foremost tool in its struggle against the market economy. And that's really what governments are. I mean, they represent impediments to market economy. They produce bads, not goods, as Hapa puts it. And so they're here to intervene on behalf of one constituency against everybody else. And so none of this credit expansion helps us, but it's largely invisible to us because very few people watch what central banks do closely. Very few people really follow the Fed. And so in that sense, it's easier than a king or prince 400 years ago maybe melting down gold and then recirculating it where people could sort of hold it in their hand and say, wait a minute, this isn't as good. So, you know, none of this works. And even if the U.S. government tries to fix exchange rates against the foreign currency, that doesn't work either because Mises has this great explanation at the bottom of page 795 where he says, look, foreign exchange just means that the exporter gets for his proceeds in foreign exchange, not only the official exchange rate, but also the subsidy, right? Because he's being subsidized against the foreign currency. The importer pays for the foreign exchange. He pays the official rate of exchange plus a special premium tax or duty, which equals the market rate. So in effect, even when we put exchange controls on foreign currencies, government doesn't change the market dynamic. It just imposes a cost on the foreigner and provides a subsidy to the domestic producer. But those two even out and produce, you know, what's really a market rate for forex or foreign exchange. So that's, I thought that was a really interesting way to end the chapter. And that really helped me understand what he was saying. So that is chapter 31 on currency manipulation. And now we move forward into chapter 32, which he titles confiscation and redistribution. Here we get into something that unlike credit and money, devaluation is a little more visible to us. We all feel this. We all sense when government comes along and seizes property or imposes what Mises terms confiscatory levels of taxation. Here, we're getting into outright confiscation and redistribution as a form of interventionism, where in earlier chapters in this part, he just talked about taxation as something that's necessary in his view to provide the revenue the government needs, but ought to be done in the least oppressive way in the most economically efficient way and also in ways that don't, you know, give, dissuade people from engaging in market activity. And so that, that dissuasion is in a sense what this chapter is about. So he starts by talking about confiscation and land reform concepts. There have been throughout history ideas of agrarian socialism where we have an equal distribution of land. And usually this requires some sort of government action or action by the king to confiscate land and to redistribute land. And he says, you know, this has never really worked because at the end of the day, it's all about what land produces. It's not about the even distribution. And just by our nature, there will be landowners who despite, let's say, being given an exact equal parcel of land in terms of its size and in terms of, let's say, its quality or airability, if it's farming, there'll still be different outcomes. But if you try to sort of force all this through land reform schemes, it doesn't really work. Confiscatory taxation and risk taking. This is a really interesting little part of the book, a very short chapter. You're going to enjoy it. You can read it as a standalone if you like. It's beginning at page 805. I really enjoyed this because, you know, he says, you know, when government comes along and just issues a confiscatory level of taxation, we see that. Let's say you, let's apply that today to like a syntax. Let's say in New York City, you put 100% tax on a pack of cigarettes. And I do know some friends in New York where I think I believe just a single pack of cigarettes now is well over $10 or something like $15, half of which is tax or something. So that I would call a confiscatory level of taxation, which is designed to get people to just not buy cigarettes at all. And so at that level, we can sort of recognize government for what it's doing. But what I thought to myself as I was reading this is there's an awful lot of ways in which government confiscates things from us that aren't always in the realm of taxes and that aren't always as obvious. I have a dear friend, Joe Becker, who is running our new graduate program here at the Mises Institute, who spent many years as a public interest lawyer, suing both federal and state governments for overreach. And I think a noble thing. It's very difficult to sue governments in their own court. But nonetheless, he had a case, for example, where the Army Corps of Engineers came in and diverted a waterway on someone's land in Arid, Nevada. And so they had an easement. They had the legal right to do so. But as a result of that diversion of water, all of a sudden the fair market value of that piece of land in the desert plummeted. And so the landowner has a property that he or she can't sell for nearly as much. And we've had a lot of famous takings cases in American history. We've had some recent ones, the one at the Supreme Court about the house up in, I guess, New Hampshire or whatever. So this kind of confiscation takes different forms over time. Sometimes it's very clear and open. Sometimes it's more in the form of a regulatory taking. But we have to understand government confiscation either way. We have to oppose it. And we have to have the knowledge of the economics behind it, I think, to make coherent arguments against it. So at the bottom of page 805, Mises gets to the heart of the matter, which is that what confiscatory taxes do is they slow capital accumulation. They take capital that otherwise would benefit society and they suck it into the black maw of government. Where something like 70% of every dollar taken in just goes into administrative overhead and paying salaries up in DC. So clearly an inefficient use of capital. So he says at the bottom of 805, he says, and speaking of someone who's being taxed, he says he is forced by the very operation of the market economy to invest his funds in such a way as to supply the most urgent needs of the consumers to the best possible extent. Okay, that's someone who's got their own capital. If the methods of taxation resorted to by the government bring about capital consumption or restrict the accumulation of new capital, the capital required for marginal employments is lacking and an expansion of investment which would have been affected in the absence of these taxes is prevented. So that's really what confiscation is all about here. It slows capital accumulation, it slows productivity and as Mises has pointed out in multiple points in the book, what really makes a society wealthier is more capital investment so that workers and businesses and production becomes more productive. And that's it. There's no different way to go about that. So the idea here that there's this fallacy that he points out that entrepreneurial profit is some sort of reward for risk taking. He says that's not really true. That's not the way to look at it. What it is is that profit is allocated to people who use capital efficiently in ways that benefit all of us from providing a more productive good or service. And so that's really what confiscatory taxes come along and ruin. So even if we don't have an outright socialist economy where government either seizes or has always owned the means of production, there are other ways of confiscation that represent an interventionism that make us all poor. So that's really what's behind that chapter in the book. Chapter 33, syndicalism and corporatism. And I'll be honest here. I had to go sort of dig around and see if there was a difference between corporatism and corporatism. And I think that this is mostly just a semantic difference and it relates to the time period in which Mises was writing this in English and that the term corporatism is more of what we use today to more or less represent the same thing. And syndicalism is, of course, again, in the news there are a lot of people from Bernie Sanders to left libertarians talking about employee ownership of their businesses, of the means of production. So that's not something that's gone away in the, what, 70 odd years or so since Mises wrote this book. They're still with us. And in terms of syndicalism, Mises gives us two definition. He says, well, there's one kind that sort of the Marxist kind, which is direct action where we bust up employers altogether. But he says the second definition of syndicalism, and I'm quoting him, refers to a program of society's economic organization. While socialism aims at the substitution of government ownership and the means of production for private ownership, syndicalism wants to give the ownership of the plants to the workers employed in them. So it becomes a form of democratic ownership. And there's a lot of hot air being thrown around now by people like Bernie Sanders and Alexandria Ocasio-Cortez, you know, about democratic capitalism and democratic ownership and all this and that. And in just a few pages, Mises takes an absolute butcher knife, a sharp butcher knife to these arguments and really cuts them to ribbons. You know, there's this fallacy that we can have self-government of production. But the problem, as he points out, is that the fallacy that's so important to understand all the way from J.B. Say even to today, we still don't understand this, which is that the sole source of production is consumption, right? That is what makes production possible. So consumer sovereignty is completely at odds with syndicalism. And of course, even where we have employee stock ownership of companies, you hear about this a lot, an employee-owned company, it really isn't what Bernie types and left libertarians imagine. So take public shopping centers. I happen to live in Auburn, Alabama. Publix is a southern grocery chain based in Florida. As a matter of fact, I believe it is still the single largest private employer in the state of Florida. So it employs a lot of people and it employs people throughout the South. And I like public supermarkets. I have one near my house. So Publix is employee-owned. But what that really means is that employees receive some stock compensation as they work there and that increases, I believe, as they work there a longer period. And so you can't just go buy Publix shares the same way you can buy, I don't know if Kroger or other grocery stores are publicly traded. Okay, well enough. But does that really mean anything more than glorified profit sharing at the end of the day? If you build up a lot of employee stock comp, there's a little bit of risk taking because your shares you own are tied to the market in that sense, even if it's wholly private, you know, the market for selling to private buyers. But more importantly, it's mostly just profit upside. So it's mostly a profit sharing plan in effect because your average employee at Publix, first of all, is in a union. Second of all, are they really going to go at the end of a long shift? They've been on their feet for eight or 10 hours in the bakery, let's say. Are they really going to clock out and then spend an extra two hours meeting with the store manager and maybe even some higher ups in the administration of Publix on the phone talking about what's working and what's not working in the bakery, what kind of things they should be buying and not buying, what they should be advertising. I mean, honestly, a lot of hourly workers are just not doing that and are not going to do that. And there's nothing wrong with that. They are in effect exchanging their time for a set hourly wage in exchange for uncertain future profits that the real business owners, the management are paying them now regardless of whether Publix could have losses in the future. That's uncertain. So I don't have any problem with this business arrangement. I think it's great if we can have employee-owned companies voluntarily. Gene Epstein has talked about this in his debate over socialism against Richard Wolfe in the SOHO Forum. Look, if you want to have an employee-owned company do it, there's nothing stopping you. There's no legal requirements here. There's no legal impediments. People could have employee-owned companies as things stand, but they generally don't do so. And I think it's for the reasons I mentioned. It's a lot of people just want to work for a paycheck and don't want to bear the uncertainty beyond losing their jobs. Of course, unemployment is a form of uncertainty. But beyond that, they don't want to have the uncertainty or risk of true profit and loss. Let's say they were paid at the end of every month based on how their particular Publix did. Most workers don't want to have that. Even management doesn't want to have that. A lot of management, they might have a bonus compensation structure, but they still have a salary. And so, you know, there's just some people want to have the entrepreneurial risk of ownership and the upside and downside which that entails. Some people don't. There's nothing wrong with that. As a matter of fact, it's a beautiful thing. It's part of the division of labor. It's part of social cooperation. But it remains a boogeyman for the left. They just can't get past this idea that it's exploitative per se to work for an hourly wage because you have to eat, you have to have an apartment, whatever. And I think that's almost an insurmountable argument if someone believes that. So, corporatism, the second part of this chapter on cynicalism and corporatism. Mises goes through some of the ideas of British Guild socialism where you have an industry or business which is largely self-contained. Again, it strives to have total democratic ownership within its self-contained unit. And so, the ideal here is like government by trade union. So, unions present a unified face to the world if you want carpentry work done. For example, you have to deal with them. And this still exists in the United States. Unionism is not as strong as it once was, but it exists. And again, Mises just points out that this is just a form of protectionism for producers. It's great if you're inside the Guild. It's great if you are a licensed carpenter. It's great if you are a licensed attorney. It's great if you are a licensed medical doctor. But if you think about it, the ABA, the Bar Association, the AMA, the American Medical Association, these are just cartels. They're really designed to limit and restrict competition and make things good for people inside the cartel, which is what unions do. But they make things bad for people outside the cartel who may be actually the lower skilled, lower wage rate people, the poorest people in society. Really poor people in society might not have carpentry skills, but they can push a wheelbarrow around a construction site and do purely manual labor. There ought to be a different pay scale for them. That's fine. But the idea here is that, as Mises points out, this is just protectionism for the benefit of people within the Guild. Again, none of this overcomes the fact that all production is driven by consumption, that consumers are sovereign ultimately over what gets made or doesn't get made at least profitably when you don't have a centrally planned economy. And any attempt to overcome this, whether through syndicate or through corporatism, is just simply not going to work in the long run in terms of economic efficiency. Some people are going to be made worse off as a result. And I think that's Mises' point here in this chapter on syndicalism and corporatism. So that's chapter 33. Chapter 34. And I hope I'm not boring you guys without the guests. We just want to keep the podcast going and we want to continue forward and keep people moving through this book. And so I just felt the need to make sure that we are covering these chapters and we're about done as I mentioned next week. And again, this is really a great part of the book. You're going to enjoy this. This shouldn't be tough reading. There's a lot of pleasure here in Mises' language and in some of those little aha moments which we've alluded to throughout this podcast where you get something because of his prose. And man, chapter 34, the economics of war. This is really powerful stuff. And the Mises Institute has always been pro-peace and anti-war. People ask us, you know, why don't you stick to economics? Well, because you can't neatly separate the two. And I think Mises makes that point beautifully in this chapter. It's not super long. You know, if you're interested in war and peace and you want to understand war economy better, you can just read this chapter solo and you'll understand a lot better. But the economics of war, I think it's so, so powerful. And he begins with this discourse about total war. And recall that he's writing this book in the 1940s. It's not coming out to the late 40s, but he was obviously a soldier in World War I, so he understands what happens when a great war between multiple countries that seems to consume the whole world comes along. And World War II, if anything, was a larger conflagration. So he's writing this book against a background of surely what he must have thought of as total war and very depressing in that sense. And he points out that, you know, what war really is is the result of substituting socialism for laissez-faire because socialism is sort of a miniature form of war. It's a domestic form of war against your own people. And so once you accept the idea that government needs to intervene in the economy, it's difficult to make the argument that, well, it ought not then intervene in foreign affairs because really the latter is an extension of the former. He has this wonderful quote, which I really liked at page 820, where he says, What has transformed the limited war between royal armies? And, you know, if you go back a few hundred years, two sovereign kings might go to war with each other, but their armies were just that. They were paid armies and soldiers that, you know, average people, farmers, tradesmen, et cetera, might, well, not have been part of those armies or not been conscripted like they are today. So a war between England and France could very well proceed without average Englishmen and Frenchmen being that much affected. You know, they might be taxed for it. It might reduce, you know, the economic output for a little bit, but for the most part, the economy and wars were more separated back in the time of monarchs. But he says, limited war between royal armies into total war, the clash between peoples is not technicalities of military art, but the substitution of the welfare state for the laissez-faire state. And I thought that was such an interesting perspective because what he tells us is that durable peace, and that's the goal. That's the goal is enduring peace. I hope we all understand that, except for the worst broken window fallacy types who think war stimulates the economy. Let's go destroy Dresden so we can have a bunch of economic activity by rebuilding it. You know, those people, they're sort of on a different plane, but for most of us, we understand that war is the exact opposite of voluntary exchange and economics. So war is a very uneconomic activity. So he says it's 19th century liberalism and the market economy that gave us durable peace. And so war, he says, is futile to us. As a matter of fact, the futility of war is one of his great little subsections here. War is futile because modern civilization is the product of social cooperation, the division of labor. And the division of labor, as he points out, is international. International trade is one of the big benefits we all get. And a lot of people are questioning right now whether we should be getting so much stuff from China. For example, that becomes more of a political question or, you know, a national security question if you believe in that sort of thing. But nonetheless, we all understand why we traded with China. So we get that. And the division of labor that exists within the United States or within a single state continues to exist beyond any nation's borders. I think we all understand that that stands to reason. So war is futile because it destroys civilization. And ultimately, it can't benefit everyone in the long run. That's Henry Hazlett's famous point. We have to look at the effects of policies on all people over the long run, not just a certain group of people in the short run. And so while war may benefit of certain interests in society, in the long term, it can't. And so I thought that was just a really beautiful exposition by Mises in this chapter of why war is really incompatible with what we think of as civilization and market economies today. So I'll leave you with this great quote from the end of the chapter. It's at page 828, and I'm quoting him. He says, modern civilization is a product of the philosophy of laissez-faire. Would our friends on the left accept that? I don't know. I think that's really a profound statement. He says, it cannot be preserved under the ideology of government omnipotence. Statolletry owes much to the doctrines of Hegel. However, when we pass over many of Hegel's inexcusable faults for Hegel, also coined the phrase, the futility of victory. Onmach desiges in German. Excuse my bad pronunciation. To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war. So if the Mises Institute in any tiny way helps to discard the ideology that generates war, if we just do that, I'll feel better and sleep better at night and think that working at the Mises Institute is worth my time. So, you know, not to overstate things, but this book is a powerful book. It's a treatise. It's a textbook. And that chapter is really an excellent example of why it is that, because you're not going to get paragraphs like that from Samuel Center, Greg Mankiw, or anybody else like that, really putting things into context and framing them. And, you know, this is really about the sum total of human civilization. That's what economics strives to improve, thought of correctly. And I thought that was very powerful. So chapters 35 and 36, the end of part six, I'm going to sort of treat those together because they're just both so brief. 35 is called the welfare principle versus the market principle. And chapter 36 is called the crisis of intervention. So in these chapters, I think he really gets into some of the criticisms, criticisms and critiques of the market economy. There's nothing new in these criticisms, things he's bringing up back in the 40s are the kinds of things that are still with us today. We still hear this kind of nonsense like capitalism causes poverty. You know, it's just abject nonsense. And, you know, as he takes pains to point out, it's actually the absence of capitalism that causes poverty. What's wrong with poor countries is that the poor per capita quote of capital invested is extremely low when compared with the capital investment in a rich country. And if you want an example of this, you don't have to look any farther than what's happening in India right now, which is absolutely heartbreaking. I wrote a short article on this earlier this week alluding to it, BBC, which I get via brief clips on YouTube. I don't subscribe to anything that gives me BBC like cable, but I do think BBC for all of its faults does an excellent job of international coverage on the ground coverage in many cases and they've been in India where you have migrant workers from small towns, rural villages in huge cities like Delhi, because that's where the work is. And they're paid very small wages. They're unskilled. They just work day by day. They purchase their food day by day. They either live outside or in very poor accommodations. And so when Modi came along and shut down the nation's economy, these people have very little capital accumulated in their own lives and they've had very little capital invested in them as workers. They used very simple manual labor by hand. So the minute the economy was shut down, neither they nor the wider economy nor their employers had any savings accumulated to fall back on. So these Indian migrant workers literally without food, without pay, without shelters started walking hundreds and hundreds of miles in 40 degrees Celsius heat back to their home villages in hopes that at least their families would be able to give them something to eat because they have nothing to eat in let's say Delhi. And that's not because of capitalism, folks. That's because of the absence of capitalism. It's because in India there is far less per capita capital accumulation than there is in the United States. And that's why a lot of people in the United States sit at home for a couple months and not work and we still have food in the grocery stores. We still have gasoline at the pumps. We still have cash coming out of the ATM machines because America has more capital accumulated and more capital investment to make us more productive and rich. I don't know what more to say about that but the idea that capitalism is a dirty word and that it impoverishes people, it's the exact opposite is true. Capital accumulation, which is really just what capitalism means. It means someone has a profit or a surplus which they do not consume. That accumulates. They use that to make investments into productivity and that makes all of us wealthier and it's that accumulation which is actually the stuff of civilization itself. So we have to be prepared on principle. Not just on factual argument about minimum wage or something but on principle. We have to be prepared on principle to fight back about this idea that capitalism produces poverty. Capitalism might create inequality in a sense because some people get very, very wealthy and some people just get somewhat better off and in a really poor country everyone might be sort of more equally bad off but there's nothing wrong with that and that really leads to the point he makes in chapter 36, the crisis of intervention, people don't understand that inequality is a fundamental element of market economies. It's a big part of what makes us rich. It's a big part of what goes into the division of labor and social cooperation is that we all have different talents, unique talents. We're not all the same and as much as we like to believe it it's not so easy to just run a company. Not everybody can do that. Not everybody can do advanced thermodynamics or calculus. Not everybody can be a brain surgeon. Not everybody can do all kinds of things. We're all unique. We're all different. There's nothing wrong with that and our goal ought to be to make the poorest people in society the least among us, material, materially not morally, but the least among us in terms of their sustenance we ought to be trying to make them better off. That should be our overriding concern especially in a terrible economy like we seem to be entering right now and we're really concerned about the poorest people among us and lifting them up. There's nothing wrong with that but socialism goes about that in exactly the wrong way. It ignores the actual driver of improvement in people's lives which is capital accumulation and capital investment. So in Chapter 36 the crisis of interventionism he says well you know all of these things that socialists accuse capitalism of like wars and economic depressions and mass unemployment and famines and what we have right now, a pandemic which of course isn't caused by capitalism or socialism, it's caused by a virus. You know all of these things are actually not caused by capitalism and are hugely improved by capitalism by having the ability, the accumulated capital to withstand hardship and that's what we're seeing. That's why people in America right now are doing better than people in America are doing better than average people in India. Now obviously there's a very wealthy class in this country but average people and the simple reason is that we have more capital accumulation here in the United States than we do in India. So he calls interventionism a crisis and I think what he means by that in this short chapter is that it's a crisis of mindset. So at page 85 when he talks about the metaphysical arguments advanced in favor of a right to sustenance are based on the doctrine of natural right and we all want everyone around us to have shelter and decent accommodations and decent food to eat and opportunities in life and some chance at an education and some chance to receive healthcare but the question is how do we best accomplish that? The question is not what makes us feel good and I think a lot of interventionism and we can you know think of that as third way thinking not outright socialism not laissez-faire capitalism but some sort of middle point mixed economy interventionism as Mises' term for all of this actually doesn't improve things. So he talks a lot in this chapter about inequality which is still a shibboleth of the left and a boogeyman today and he gets into a little bit of a discourse of social justice so that's not a concept that is or a term that's just brand new in our day the people have been talking about that for a long time and he gets into the concept of insecurity. People are insecure about their future ability to sustain themselves and everyone I think it's just there's something very natural in human beings that we all fear poverty and we all fear losing our money or losing our jobs or something and so he says that's understandable but restrictive measures always just restrict the output and the amount of goods so all of these varieties of interference which we've been talking about throughout this whole part of the book price controls, wage controls, tariffs taxes syndicalism, guilds protectionism of all stripes he says all these varieties of interference with the market phenomenon not only fail to achieve the ends aimed at which is the alleviation of poverty let's say but bring about a state of affairs which is less desirable than the previous state of affairs definition by Mises' exposition every new intervention actually makes us poorer and ultimately that's going to hurt the poorest people in society the most so this is a crisis and as he points out the essence of all this interventionist mindset and that's the crisis the crisis in thinking but the essence of this interventionist mindset is just to take from one group to give to another and the whole doctrine of interventionism collapses when this fountain is drained off capital responds to incentives when you tax the rich enough this is happening in the state of New Jersey right now even as we speak there are wealth taxes there and also very punitive real estate taxes property taxes when you tax the rich enough they leave for Florida or they leave for Texas or they do something like that they leave America all together so you never achieve the results you think you're going to achieve with interventionism but what you do is you reduce the amount of wealth in a society and so however you divvy that up you're divvying up less of it and I think that's really the key to understanding what this entire part of the book is about part 6 again called the hampered market economy so it's been really fun going through this part of the book I'm excited about part 7 which is kind of takes us all the way back to part 1 because part 1 was about human action it was more philosophical if you recall that's when we had David Gordon join us part 7 gets is titled the place of economics in society so he really gets a little bit more into the big picture stuff less about just pure economics he gets into the conceptual stuff and framing economics as it fits in the greater society and how we ought to be thinking about it and how we ought to approach promoting what we would consider sound economics how we ought to approach learning economics and how we ought to approach thinking about the role of economics in society because from my perspective economists aren't doing any good right now and in fact they're probably doing a lot of active harm in other words they aren't helping us understand the world better with their BS models which are constantly adjusted and never right they're not helping us get wealthier they're promoting interventionism they're promoting central banking they're promoting stimulus they don't seem much to understand human action they don't understand economics as a social science they're trying to apply the methods of the natural sciences with very bad results they don't seem to predict anything accurately and to the extent they're whispering in the ears of policy makers they're doing a very bad job of it so the place of economics in society is not some esoteric question for us it's a very important question and we need to get back to a point where economists were actually helping us understand the world around us and be more prosperous as a result so part 7 of the book is really about that and we're going to have a very special guest next week to discuss that I hope everyone's been reading along and enjoying this book I hope you've considered reading it during the shutdown I hope you've gone to Mises.org and just typed in Human Action where you can find the book in a beautiful HTML format for free you can also find it at our bookstore using the code HA-P-O-D for Human Action Podcast get a discount on either the beautiful hardcover or the softcover both are very inexpensive and we hope that you'll stick with us as we wrap up the book next week and we want all of you to have a great weekend. 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