Wednesday, May 15, 2019

Hayek’s Tragic Capitalism


My essay “Hayek’s Tragic Capitalism” appears in the Spring 2019 issue of the Claremont Review of Books.  (It’s behind a paywall at the moment.)  From the article:

Nor will one find in [Hayek’s] work the chirpy optimism with which many libertarians and Reaganite conservatives ritualistically defend the market economy.  Hayek’s case for free enterprise doesn’t fit any of the usual simplistic stereotypes.  He not only explicitly and persistently rejected laissez-faire, but could write as eloquently about the moral downside of capitalism and the emotional attractions of socialism as any left-winger.  In an era in which – young socialist chic notwithstanding – global capitalism appears to have swept all before it, it is the triumphalist defenders of the free market rather than its critics who have the most to learn from Hayek’s cautious, nuanced apologia…

For all its purported gritty realism, however, Hayek’s fusionism is no more stable than the more familiar kind.  Even putting aside Hayek’s agnosticism and his materialist assumptions about human nature (neither of which I share), his position is seriously problematic in at least three respects…

None of this implies a condemnation of capitalism per se.  The problem is one of fetishizing capitalism, of making market imperatives the governing principles to which all other aspects of social order are subordinate.  The irony is that this is a variation on the same basic error of which socialism is guilty – what Pope John Paul II called “economism,” the reduction of human life to its economic aspect.  Even F. A. Hayek, a far more subtle thinker than other defenders of the free economy, ultimately succumbed to this tendency.  Too many modern conservatives have followed his lead.  They have been so fixated on socialism and its economic irrationality that they have lost sight of other, ultimately more insidious, threats to Western civilization – including economism itself.  To paraphrase G. K. Chesterton, a madman is not someone who has lost his economic reason, but someone who has lost everything but his economic reason.

Read the whole thing.  The essay is something of a companion piece to my recent Heritage Foundation lecture on “Socialism versus the Family.”

40 comments:

  1. When your done with your next five books you should tackle economic theory for a book or two. I’d love to see a deep analysis of economics from a Thomistic perspective. Plus you could solve that whole usury controversy for us!

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    1. In addition to David Marcoe's list, I would highly recommend Jörg Guido Hülsmann's Ethics of Money Production. It's available for free online here: https://mises.org/library/ethics-money-production
      Mueller wrote an article summarizing his book, online here: https://mises.org/library/missing-element-modern-economics-0
      There's also a critique of some of Mueller's points here: https://mises.org/library/whats-love-got-do-it-action-exchange-and-gifts-economic-theory
      Hülsmann touches on the question of usury in his book, but only briefly. He did write an article in French specifically about charging interest and usury

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    2. While not a book, you may consider ZippyCatholic's blog. As a financial professional he considers many issues of "economic anti-realism" include Austrian pure subjective value theory, fiat currency qua security, BitCoins, intellectual property, fractional reserve banking and of course usury. Of course he had his own blogging style that is more or less abrasive and he is deceased, so one cannot question or challenge him further.

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  2. I've come across five books that address this issue.

    The first is "Redeeming Economics: Rediscovering the Missing Element," by John D. Mueller. It has some issues in its treatment of economic history (specifically with regards to Adam Smith), but brings Augustinian and Thomistic-Aristotelian thought to bear on "economism."

    The second is "Faith and Liberty: The Economic Thought of the Late Scholastics," by Alejandro A. Chafuen. This is a relatively short, but detailed look at the economic thought that developed at the University of Salamanca around the 16th century.

    The third is "A Humane Economy: The Social Framework of the Free Market," by Wilhelm Röpke. Röpke, though an Austrian economist like Hayek (with whom he was friends), stood apart in emphasizing and defending those values outside the market. In fact, he was influenced by Catholic social teaching (he was Lutheran). To quote an anecdote about a meeting between Mises and Röpke:
    Now Mises, who had been professor years before at the Geneva Institute of International Affairs, came to visit Roepke in Geneva, about 1947. Happy at the success of these garden allotments, Roepke took his guest to see Genevan working people digging and hoeing in their gardens. But Mises shook his head sadly: “A very inefficient way of producing foodstuffs!” he lamented. “Perhaps so,” Roepke replied. “But perhaps a very efficient way of producing human happiness.”

    The fourth and fifth are "Natural Law, Economics and the Common Good," by Harold James and Samuel Gregg, and "Natural Law: The Foundation of an Orderly Economic System by Alberto M. Piedra." Another somewhat related work is Ernesto Sirolli's "Ripples from the Zambezi," talking about methods he refined in cultivating local entrepreneurship for rural and developing economies. He also gave a TED talk (https://youtu.be/chXsLtHqfdM)

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    1. Hey thanks for the list!

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    2. Chris Ferrara has an interesting book on the Church and the Libertarian, which is quite a close and, to me devastating critique of Mises and Rothbard and their Catholic groupies from the perspective of Catholic social teaching. Well worth a read.

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    3. Of course, there's Heinrich Pesch's classic work as well. I think Pesch has written the most detailed and deepest works on economics from a Catholic perspective. He is a great supplement to the more cultural and social arguments of the classic Distributists.

      Also, there's also E. F. Schumacher's famous Buddhist Economics. Despite the title, a Catholic or any traditional Christian should agree with much of it. I believe that Schumacher became a Catholic (perhaps already was when he wrote that work), and wished to call it Catholic Economics, but feared that that title would alienate too many people, alas.

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    4. This is a great list, and Prof. Feser's article looks great as well. Has anyone here read Le Goff's "Your Money or Your Life?" I have had a few friends recommend it to me as a historical take on the usury issue, but have not yet gotten to read it myself.

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  3. Ed,

    I did not read the article but whatever I read in this post is wonderful.

    I am a Muslim and what you wrote is what I believe.

    If people of faith can agree on the priority of practical and full access to opportunities across the land (real freedom) and the priority of safeguarding each person's dignity, then capitalism has a chance to be just and give happiness instead of the current fetishes of capitalism resulting in rampant injustice, the complete corruption and bribery of politicians, the making of person into a commodity, and the incentivising of wars.

    -Omer (grateful to God)

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    1. Omer,

      I think we agree on opposing injustice, whatever its source, and that people should have equal protection under the law. The sticking point, however, is how you would define “practical and full access to opportunities” and “safeguarding each person's dignity.” If the end result is “social democracy,” aka the Nanny State, a cloying, suffocating government bureaucracy that stretches and wraps itself around every aspect of human life, seeking to regulate and proscribe every possible activity, then I would be diametrically opposed.

      Indeed, the first (but hardly the only) defense that I would pose of market economics is on the grounds of justice. I have a right to what’s mine, what I justly own and earn, as anyone else does. Just because someone has more has not caused me to have less, nor does it give me a right to take what’s theirs—that’s the politics of envy. I have a right to use and dispose of my property how I please, as anyone else does. I have a right to exchange and form agreements with whom I please, as anyone else does. Thus, people may justly engage in mutually beneficial exchanges. How far those rights extend, what other moral concerns there may be, and how much government may regulate such activities, are legitimate grounds of concern, but there first has to be recognition of a right to private property.

      The crux of Ed’s critique, at least as I understand it, is that it’s not that fetishists of capitalism have directly caused, as you say, “...the complete corruption and bribery of politicians, the making of person into a commodity, and the incentivising of wars,” but that the market cannot itself magically manage the frailties of human nature. When “...libertarians and Reaganite conservatives ritualistically defend the market economy…” and emphasize economics at the expense of other goods such as faith, family, community, and so on—those ends for which economics ultimately exists and are the bulwark of defense against dehumanization—they unintentionally promote the kind of thinking that leads to the commodification of human life and the kind of corruption of which you speak, corruption those libertarians and conservatives would otherwise oppose.

      When businesses convert wealth into political influence, so that laws and policies are shaped in their favor, they seek to remove themselves from competition in the market. The end result is corporatism, where large commercial firms become closely entwined with government (China’s economy, for instance, is corporatist at this point), and is something which any ardent free market defender opposes.

      The problem isn’t big business per se, but again human nature, in the form of greed, avarice, and a lust for power. And exceptions prove the distinction. Chick-fil-A is a very successful and rapidly growing restaurant chain in the United States. The company’s founder, Samuel Truett Cathy, was devoutly religious and formed the company’s culture in accord with his religious principles, which were very “people-centric.” As a result, Chick-Fill-A has a general reputation for clean restaurants, excellent customer service, and good food at reasonable prices. Another example is Dennis Bakke, who co-founded AES, a large multinational energy company. He wrote “Joy at Work,” where he describes how he, “...empowered people to use their God-given talents free of needless bureaucracy...and pushed decision-making responsibility down to the plant floor,” in a pursuit make work more fulfilling for the company’s employees. These are or were big businesses run with respect for customers and employees, but were very intentional efforts running against the temptation of greed and tendency of impersonalization.

      (continued)

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    2. (continued from above)

      The ultimate core of Ed’s argument, I take it, is that insufficient attention has been paid to human nature. To quote from his review of “Curing Mad Truths” (his post previous to this one), “Modern science and politics have aimed at conducting themselves without reference to any theological or metaphysical foundation. What matters is simply what works, technologically and socially, and we needn’t bother with questions about why things work or what purpose they serve.” There is a definite human nature, with goods and ends proper to human beings. Rights then exist to secure those ends.

      However, business and politics in our age are often conducted without reference to human nature and its goods—socialism is fundamentally unjust, as it does violence to human nature, while “economism” ignores the moral hazards of an otherwise just market mechanism. The latter treats the market as autonomous, when it’s one part of a larger civic body, held together by social sinews like law, faith, family, community, and citizenship. Economism shuts out the richness and beauty of human existence.

      Omer, if you’re interested in reading more about Ed’s position on economic matters, I would recommend his essay, “Classical Natural Law Theory, Property Rights, and Taxation” (link here - https://bit.ly/2HnMp2B). It’s long and a bit dense, but it’s a good read. I would also recommend John Mueller's book, “Redeeming Economics: Rediscovering the Missing Element,” which I mentioned in my comment above this one.

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    3. John Mueller's book is indeed excellent. I gave a review of it, here:

      http://whatswrongwiththeworld.net/2013/09/to_fix_economics.html

      David's comments above are very good. I would add one point to his identification of the problem: The sticking point, however, is how you would define “practical and full access to opportunities”. My point is to flesh this out. Once you give a REAL opportunity to someone to flourish by giving them the opportunity for something successful, you necessarily give them also the opportunity to FAIL rather than succeed. Give 100 people the cash to go to college, (and the freedom to choose what to do with it) and at least 10 of them will blow it on parties and fast cars. Give them "free tuition" (thus taking away their freedom to do something else with the money), and at least 10 of them will blow it on stupid disciplines like "gay studies" or other equally pointless stuff, or they will study things that they are not suited to making use of (and then drop out later), or that they study in the wrong order because nobody made them study the proper underpinnings in the proper order (logic, rhetoric, grammar, philosophy of nature).

      Either society gives people the REAL opportunity to choose, which means some people will fail, or society refuses to let some people fail, and this means not giving them the freedom to choose what to do with their opportunities. But here's the real rub: if you fail, you ALSO affect other people negatively as well. If I screw up and invest in a stupid swindle, my kids WILL suffer for loss of other opportunities. Taking away room for my kids to suffer the consequences necessarily means taking away the freedom to choose what might be a screw-up. There is no way to avoid this, it is the very nature of "opportunity", the possibility of failure, and one person's failure must necessarily affect others. Only an ant-like communism could pretend to preclude this, and it is both inhumane and can't be done with humans anyway, because we are moral beings with our own minds and wills.

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    4. Hi David,

      1. Right now, the children born to rich have easy access to create more wealth of their parents. While for the children of poor parents, it is harder for them to make more than their parents when they reach adulthood even thought the amount their parents are making is so low.

      2. Corporations often pay zero tax even if they make hundreds of millions of dollars each year.

      3. The rich should by logic pay progressively more because they benefit more and more from the infrastructure and security of the state in safeguarding and helping to transport and in transacting their property...this ever increasing beneficial effect of the state requires the rich to pay progressively more just to be fair (even before we talk about helping the poor out of altruism).

      4. The Abrahamic Faiths demand a system by which the poor are not taken advantage of.

      There is more....

      Take care,
      Omer

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    5. 2. Corporations often pay zero tax even if they make hundreds of millions of dollars each year.

      Omer, the only way a corporation's profits accrue to the enjoyment of any human being is if the corporation pays out its profits to its shareholders in dividends. Dividends ARE taxed as income to the individuals who receive them.

      3. The rich should by logic pay progressively more because they benefit more and more from the infrastructure and security of the state...

      The rich DO pay more: the wealthiest 5% pay 60% of the income taxes of the nation. The $1 million income group pays a tax rate 10 times as high as the middle $50K - $75K income group pays. ONLY the wealthy pay estate taxes at all.

      4. The Abrahamic Faiths demand a system by which the poor are not taken advantage of.

      There is nothing in God's revelation to Abraham and later generations says that what God demands is a "system" that is determined by government mandates in forcibly taking from the rich and giving to others: gifts by the rich to those in need, and mutual support social systems (such as patronage / peonage) are also valid answers to the obligation of the rich to care for the poor.

      Omer, please open your eyes to a richer view of the possibilities available to see how the basic obligation we all have to care for each other can be worked out.

      1. Right now, the children born to rich have easy access to create more wealth of their parents.

      It is inevitable that SOME have more access to enriching themselves than others do, every system has some who benefit more than others. Under Soviet Communism, the party leaders' kids had VASTLY more access to paths of wealth than did the masses. There is no such thing (on this Earth) as a human society in which nobody has more opportunity than anyone else.

      Under our system, while the kids of wealthy parents have a lot more opportunities than the kids of poor parents, a large percentage of those rich kids blow their wealth on nonsense and end up far less wealthy than they might have been had they been even by simply saving the money in a savings account. And education opens more pathways and opportunities to success than does mere wealth, anyway, and at least a decent education is available to the vast majority, if they will work for it.

      It is true that our society would be better off if we had better designs for helping those who want to be helped toward better pathways for success, but there is no simple prescription for identifying those and getting them the right kind of help, while NOT making things worse for others.

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    6. David, thanks for your reply.

      According to americansfortaxfairness.org
      ***the richest 1% of Americans own 35% of the nation's wealth. The bottom 80% own just 11% of the nation's wealth.

      In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.

      The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.

      ***That is obsene---my comment*** -Omer

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    7. David, thanks for your reply.

      According to americansfortaxfairness.org
      ***the richest 1% of Americans own 35% of the nation's wealth. The bottom 80% own just 11% of the nation's wealth.

      In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.

      The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.

      ***That is obsene---my comment*** -Omer

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    8. Omer,

      Do please keep in mind several things:

      1. The "wealthiest" Americans are different from the "highest-income" Americans. The two groups overlap, but a man who sells a house, some land, or a share in a company may, for a single year, be in the top 10% of income earners, while not having anywhere near the top 10% of wealth.

      Consequently one must speak of "high income earners" not "the wealthy" when discussing income taxes. (Income taxes are taxes on INCOME, not on WEALTH.)

      2. Also, please be aware that in the U.S., back during the years when the LAW gave a top income tax rate of 91%, there were also far more deductions and exceptions. As a consequence, during that period, the top-tax-bracket income-earners actually did not pay 91% (after deductions and exceptions were accounted for). On average, they paid around 30%.

      So it is not as if that period of time was a period when "wealthy" people, or even "high income earners," were somehow having 91% of their income redistributed to others. That has never happened, at least not in the U.S.

      3. Also, it could never happen. There are factors which make it an economic and cultural impossibility.

      Consider: If you had the skills and cash to be in the top income category, you would also have the skills and cash to easily move yourself and your family to another country. If your own country decided to tax you at 91%, the moral obligation to wisely steward your family's assets would probably require you to move to another country...and, because of your skills and cash, you could. So, you probably would. Even if you didn't, you could restructure your assets and your investments more freely than a lower-income person could. Consequently, you could move your income-streams out of categories that were highly-taxed into categories that were less-taxed (or not taxed at all).

      The sad truth is this: The higher a person's skills, the higher his income; the higher his income; the more easily he can make changes to avoid high taxes. The higher the tax rate, the greater the incentive for avoiding high taxes. As a consequence, every country which imposes high tax rates on high income earners gets LOWER revenue as a a result. The high-earners simply change habits (or change country) to avoid high taxes.

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    9. R.C.

      Thanks for your comments.

      Here is an interesting brief discussion/debate that was held very recently on UpFront.

      https://www.youtube.com/watch?v=2NiK3aEZztI&feature=youtu.be

      Omer

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  4. The problem, as usual in crumbling academia, is one of self-reference---or reflexivity if you're a typically irrelevant "philosophy" vocabularic gearhead.

    Capitalism forgot to be capitalist about itself as a theory. It needs to compete with both perception and reality in terms of outdoing those other competing capitalistic theorizers, the socialists and communists who compete with it in the real forehead-hits-the-concrete world.

    The way to do this is simply to outdo the collectivists in benefiting the poor etc., in spite of the fact that most of them are lazy zeroes and blanks.

    That's not just good circumspect capitalism applied to itself as a competing theory: it's just good first-order capitalism to be far more left wing than the left in terms of benevolence and spiritual grace.

    It's just a matter of innovating itself into the entire set of social problems, outdoing collectivism's never-fulfilled promises, and making it obvious to the poor people that the professional collectivists weepers fake caring about. Real benefits to the socio-political target market would render collectivist schemes a fading world-historical memory.

    [Philosophical H/T to Soph on Bitchute (soon to be banned from YT) for inspiring this comment]

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  5. What does 'fetishizing' mean? I've seen that word a thousand times and still have no idea what it means. If it simply means "making the market the paramount source of value" or something like that, then what does that have to do with a fetish?

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  6. @David Marcoe

    Thanks for the list!

    @Ed

    Pius XI, if I recall, also slammed the worship of money which is modern economics. Not, please note, mere amoral materialism, or consumerism, but the fundamental principle that economic activity should be subject to monetary considerations as the primary factor. He described this as an inversion of reality. Can't say which encyclical, but it's excellent analysis, as always. (Can't say the same for JP2, whose turgid and impenetrable ramblings only permit precision extraction of useful tidbits by those already knowledgeable of the relevant subject, whilst ignoring respectively his heterodoxy and scandalous ambiguity.)

    Regards,
    John.

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  7. Pius XI, Quadragesimo anno:

    http://w2.vatican.va/content/pius-xi/en/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno.html

    Really worth reading right through.

    "The ultimate consequences of the individualist spirit in economic life are those which you yourselves, Venerable Brethren and Beloved Children, see and deplore: Free competition has destroyed itself; economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain; all economic life has become tragically hard, inexorable, and cruel. To these are to be added the grave evils that have resulted from an intermingling and shameful confusion of the functions and duties of public authority with those of the economic sphere - such as, one of the worst, the virtual degradation of the majesty of the State, which although it ought to sit on high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is become a slave, surrendered and delivered to the passions and greed of men. And as to international relations, two different streams have issued from the one fountain-head: On the one hand, economic nationalism or even economic imperialism; on the other, a no less deadly and accursed internationalism of finance or international imperialism whose country is where profit is."

    What a phrase, "whose country is where profit is." What better words could describe the mentality and actions of those who have no real loyalty to their own country, but only to their own personal profit?

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    1. Rerum novarum > Quadragesimo anno.
      Pius XI is simply wrong in blaming 'Manchester Liberals' for the failures of the burgeoning welfare state. There is not a tendency for "capital" to demand more and more and to impoverish workers. On the contrary, it's a historical fact, and a conclusion of economic science, that the richer a country is, the more capital it has, the higher are the wages of the workers.
      It's also simply not true that there was a special problem of poverty in the late 19th / early 20th century caused by capitalism. In so far as there were problems - which there was, and Italy might have been worse beset than other countries - this was caused by minimum wage laws, special privileges, unions, tariffs and so on. Bismarck, for instance, did not aim at solving a pressing social problem when he introduced the welfare state in Germany in the 1880's - rather, he wanted to nip the rise of independent provision of welfare by the workers themselves in the bud, while making them dependent on the government, not private charity.
      As for the passage you quote: again, there is no sense in which you can say that the market economy destroyed itself. It was destroyed by repeated government interventions. But it's certainly true to say that economic dictatorship had replaced it. I could maybe go along with his condemnation of international finance, but it's just not clear what he's referring to - if it's the Bank of England and the machinations of central bankers (again, government, not the market), then I'm all for it. If it's private individuals trying to preserve wealth in a world of capital controls and degradation of economic life across Europe - then not so much.

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    2. @Kristoffer

      If you haven’t read Polanyi, The Great Transformation, it’s very worthwhile. Much valuable fact and analysis. I'm not giving approval to all of it, just recommending it as a useful source. The market, as understood in modern economics, is a human construct, and ought to be treated as one. You sound like you think it’s a naturally occurring phenomenon or a complex of natural rights like private property or the Just Wage. In any case, like everything, it has its place, and for too long it has been treated as master rather than servant.

      The Bank of England is at best a Quango, but in reality it’s a private institution run by insiders primarily for the benefit of the club.

      The source of new money is absolutely a question of sovereignty, and every effort has, successfully so far, been made by those who benefit from the current arrangements to keep the question off the agenda. Pius XI was exactly and indisputably right.

      Up until the Depression, bankers flatly denied that the banks create credit, and the economists agreed, and the media ridiculed anybody who said otherwise. Once the Depression produced too much interest in the question, and several Royal Commissions placed various bankers under oath, with perjury penalties hanging over their heads, they calmly told the truth, that banks do indeed create credit. The economists and the compliant media then proceeded to pretend that everybody always knew and admitted this, that it was neither here nor there, and expressed surprise that anybody was concerned by so natural and mundane a fact, and of course, proceeded to ridicule anybody who suggested otherwise. That's how these things are managed in our thoroughly dishonest and unjust era.

      Please tell me what is wrong with the following factual description of "the market" as it operates internationally.

      Follow the money, and follow the real wealth. An exporter sends real goods offshore. This is a real loss to his native economy. He receives payment, ultimately, in his native currency. He can then make effective demands on his native economy and live well. He is doing so at the expense of his fellow citizens, without any possibility of dispute. He has no interest in the balance of trade over-all, except insofar as it may affect exchange rates, and many other much more artificial and controllable factors affect exchange rates...

      Actually, men like him and the public opinion he pays for, always argue for “free trade” and a “favourable balance of trade,” which is actually an unfavourable balance of trade in real wealth, but “favourable” in money terms. This is very obviously not in the general interest of the native population, but suits him nicely. It results, if persisted in, in other countries being indebted to his country, and the debt cannot be paid without a period of “unfavourable balance of trade” which of course he and his club won’t permit. Hence his own countrymen labour for the benefit of foreigners and the few in the club, while their safety is placed at risk by the buildup of international tensions caused by impossible-to-pay international debt. This debt, in turn, is employed (by the club, of course) to leverage foreign nations for, ultimately, private benefit. This is, in sum, what led Britain to enter the First World War. The business class were highly enthusiastic for it.

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    3. Continued:

      The manufacturer of goods for domestic consumption is no more interested in foreign countries paying their debt than is the exporter, of course, for the only way this could happen is if those countries exported to his country goods that will compete in his home market with his own products. He will, of course, describe any attempt by foreigners to pay the debt in this way as "dumping" and will pay for public opinion to see this as aggressive and unjust activity which is to the detriment of the native population. So, he is for a "favourable balance of trade" too. Both the exporter and the producer for domestic consumption (when they are not the same person) are therefore agreed that the native population should apply its labour to producing for his benefit and for that of foreigners, who receive more real wealth than they give back (the so-called "favourable balance of trade"). Neither of these men is primarily interested in the common good, but rather have powerful motives for harming the common good, and history demonstrates that they don't generally resist the temptation. In the long term, as WW1 illustrates, this dynamic isn't in anybody's interest, even the foreigners living on borrowed real wealth produced by the sweat of others.

      That is “the market” controlling things. None of it is good.

      The USA has, due to its unique position (especially the status of the USD as the world's reserve currency), after doing exactly the above for decades, has recently reversed the dynamic in that it has the world's (especially China's) debtor and is now living off the sweat of foreigners. In the USA's case, the controllers of the market are now the importers, whether they are importing goods purchased offshore, or producing the goods offshore themselves ("offshoring jobs"). But the key factor to focus on is that in either scenario - that of export or import dominating - the key business figures' lifestyle is entirely decoupled from that of local workers. His income can and is greatly augmented by policies that damage the common good, and which in the long term are unsustainable. The only way this very damaging dynamic can be fixed by "market forces" is if the exporter and importer are somehow made to share the interests of the native population generally. This has never been done in any major Western country, and there are no prospects for it being done. And government is not the problem here, except insofar as government has never been permitted to act in these matters for the common good.

      Regards,
      John.

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    4. Correction: "The USA has, due to its unique position (especially the status of the USD as the world's reserve currency), after doing exactly the above for decades, recently reversed the dynamic in that it has BECOME the world's (especially China's) debtor and is now living off the sweat of foreigners."

      And on the US balance of trade, see this article: https://www.thoughtco.com/history-of-the-us-balance-of-trade-1147456

      Note how the orthodox view is that sending more real wealth offshore for the benefit of foreigners than one receives, is "the favorable state as it indicates a net inflow of capital from foreign markets into the domestic economy." So money is preferred over real wealth. Actually, the only sane trade policy is a balanced one, but don't expect to hear that from people who benefit from trade imbalances in either direction. The thing to emphasise, as already pointed out, is that neither the importer nor the exporter bears the risks or costs of the trade imbalance. He is paid in his own currency (even if initially in foreign currency, which is then converted), and buys his property, his luxury goods, his lifestyle, locally. He isn't owed the foreign debt, the country as a whole effectively is; and he isn't owing any foreign debt, his country effectively is. His interests are not the interests of his country, which is why he doesn't behave as though they are.

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    5. In theory, of course, the net foreign debt represents stored value for future redemption in real wealth. In reality, much of it ends up being written off, either due to financial crises in poorer countries, or by war. So from the point of view of the creditor, foreign debt is value that is largely non-recoverable, a total loss; and from the perspective of the debtor, it is a chain on its neck, only to be released by write-offs secured by additional chains, or by worse catastrophes, such as war.

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    6. @Aquinian
      I Haven't read Polanyi, but I will add it to my list.

      You're pretty accurate in your impression of what I think the market is - I would probably say it's a complex of exchanges of privately owned goods and services. I don't think it is accurate to call it a human construct if that means it was planned out and implemented by politicians and merchants some time back in the 18th or 19th century (that seems to be Polanyi's point, if I can brutally summarize wikipedia's page about the book). I think the historical record is pretty clear that there has been markets and money since ancient times.

      I've got no qualms with calling the BoE, and all other central banks for that matter, an institution run by insiders for their own private benefit as opposed to the common good. But they can only do this because they have legal protection and are specially privileged. The history of central banking is one long series of swindles and frauds on a massive scale, but it has always been closely connected to politics and the state.

      I'm not familiar with the episode about the Royal Commissions you describe, I would be interested if you have a source. But I absolutely believe that it is accurate. I do think the truth is that some economists knew this and some didn't - it sounds like a re-run of the old Banking vs. Currency School debate. I don't know what the mainstream position in England was at the time, but Mises' Theory of Money and Credit from 1912 (Eng. translation 1934) make the connection between modern banking and money creation crystal clear. I already recommended Hülsmann's Ethics of Money Production above, but it is a very good book if you're interested in an updated take on the subject following in Mises's footsteps.

      When it comes to money and sovereignty, I'm not sure I understand your point. Creating new money is now the prerogative of the state in all countries so far as I know, and the banking system is only the junior partner in this process. I don't think there is any necessity in this: the theory that posits money as the "spontaneous" creation of individual actions in society - the result of human action but not of human design in one of Hayek's favorite phrases - appears to me correct. Kings and governments have shown an extreme degree of irresponsibility and disregard for the common good ever since they usurped the right to create money, whether in the form of coins or of bank notes. One of the Spanish scholastics, Juan de Mariana, was very emphatic and eloquent on this point, and Nicholas Oresme too focused on the mismanagement (to put it politely) of the currency in the hands of the monarch.

      I unfortunately don't have time to respond to your comments on international trade in detail, but I don't think they are correct. What exactly is the difference between the exporter who sends his goods "abroad" and the merchant who sends his goods from Georgia to South Carolina? Or the one who trades between Atlanta and Savannah? If we had free trade, international trade would simply mean that trade was organized according to the law of comparative advantage: all countries would specialize in what they are comparatively best at producing (I forget who, but one of the Spanish scholastics emphasized this fact as one of the ways all mankind is bound together for their mutual support). You're right that modern finance sort of changes this outcome, but I don't have time to go into more depth right now.

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    7. @Kristoffer

      "I think the historical record is pretty clear that there has been markets and money since ancient times."

      Yes, of course, but they were kept in their place, which is one of subservience to real things and ethics (another real thing, the most real of all in many ways).

      "The history of central banking is one long series of swindles and frauds on a massive scale, but it has always been closely connected to politics and the state."

      You can't have this both ways, you need to say whether you see that the bankers have corrupted the political in order to arrange things in their interests, or whether the State has appointed the bankers to take care of the common good in the matter of money creation and distribution. I say the former, not the latter.

      I don't have a source for the info about the Royal Commissions, but there were three that I recall, in the UK, Canada, and Australia respectively, and they were held in the first half of the '30s. No doubt the relevant material is online.

      "Creating new money is now the prerogative of the state in all countries so far as I know, and the banking system is only the junior partner in this process. I don't think there is any necessity in this: the theory that posits money as the "spontaneous" creation of individual actions in society - the result of human action but not of human design in one of Hayek's favorite phrases - appears to me correct."

      The State doesn't create money, it licenses banks to do so, but it exercises no effective control over the quantity of money issued. That is how the banks want it, so that's how it is. I am arguing for a return to a situation where the State not only controls the issuing of new money but also decides how much will be issued. This is how it was done in the Middle Ages. The fundamental principle against which the State decided how much money was required was price stability. That is, if prices were falling (absent other real causes, such as a technology improvement adding to productivity), then more money was required, and if prices were rising, less money was required. The stability of prices in the Middle Ages was, to the modern observer, wondrous. No inflation, or deflation, for literally hundreds of years. Professor Thorold Rogers is the authority on these facts. I think his book is online. Money was seen as the pure abstraction that it is, an artificial and totally controllable human construct, and something that had to be managed in the common interest. There was none of the black magic of modern economics that treats it as if it's a profoundly mysterious effluent of natural law, magically appearing from places unexplored, and only able to be influenced, not controlled, by remote levers made of rubber, such as "official interest rates" or "open market operations."

      Regards,
      John.

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    8. @Kristoffer

      "Kings and governments have shown an extreme degree of irresponsibility and disregard for the common good ever since they usurped the right to create money, whether in the form of coins or of bank notes. One of the Spanish scholastics, Juan de Mariana, was very emphatic and eloquent on this point, and Nicholas Oresme too focused on the mismanagement (to put it politely) of the currency in the hands of the monarch."

      Your first statement is wrong, and demonstrably so. No doubt there were occasions in the Middle Ages when a bad king did some dodgy stuff with the money supply, but those were exceptions and they prove the rule. Money was understood, it was controlled properly and responsibly, and the system worked. The Spanish scholastics and all other Catholic theologians would have condemned bad management, where it occurred, and would have been horrified by the notion of throwing out the baby with the bathwater, as you seem to be suggesting.

      It was the advent of Protestantism that really began the era of fraudulent and irresponsible private interference in money. Elizabeth of England followed that advice of the thieves that infested her court, and other monarchs continued the evil practices. The new system really reached its maturity with the founding of the Bank of England (a private institution), by which new money was created out of nothing, under license by the State, to be lent to the State at interest, so that the subscribers to the B of E essentially became pensioners of the State, living off the taxation of everybody else, but via an opaque method that they then paid the journalists and history-text writers to keep secret. Read Christopher Hollis, The Two Nations, for a description of this (if memory serves!).

      On the difference between local and international trade, the key differences are twofold: one, a common currency, preventing irresponsible indebtedness on a large scale, and two, a common legal framework, preventing among many other evils, widespread fraudulent practices such as subsidising production in one place at the cost of the other (yeah, I know the New Deal introduced this on an industrial scale domestically in the USA, but that was both late and evil, and will eventually all be swept away by a reforming, Catholic, government when the world returns to God and sanity). One example of how this works today - a US manufacturer is encumbered by ethical and procedural limits placed upon him by US laws, including environmental and labour-practice limits. "Free Trade" means he is competing with a Chinese firm which oeprates largely without these limits. There is no such thing as a level playing field and won't be until and unless you have world government and a single currency. And guess what? That's been the trend towards which all of this Free Trade dogmatising has been taking the world. The open and clear example is the EU, with the one currency and the loss of local sovereignty. You can't have "Free Trade" without the legal control and the common currency, or you get fraud (unfair competition). It's axiomatic. This is why, even if confusedly, the Brexit movement exists. Everybody lied about sovereignty while pushing more internationalisation, and now it is sufficiently clear to enough people that the lies were and are lies, so they are reacting. But the issues won't be clear until and unless people focus on the the facts that I have described, I believe, in which international trade is carried on without reference to the local common good, because those who engage in international trade are permitted by the system as it stands to benefit even at the cost of the local common good. If we leave it as it is, the money will always corrupt the political process, and prevent any meaningful reform.

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  8. I really enjoy the political works Ed. The socialist lecture was brilliant.

    I heard in Stephen Barr's episode on the Thomistic institute podcast that you were going to respond to a certain polish Thomist about evolution and Thomism in First Things. This was mentioned last year but I couldn't find it on the website?

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  9. Considering Hayek because he represents a milder form of capitalism is a bit like considering Castro because his socialism was not as harsh as Lenin's.

    However the ideological imperatives of Burkean capitalism are evident in Hayek:
    The base of society being the market, instead of the market being an instrument of society.
    The market being a "spontaneous order" divinised in Burkean fashion as an evolutionism beyond human understanding and intervention.

    A hatred for the concept of social justice. Hatred of the Just Price and the Just Wage, revered by centuries of Christian practice and Church teaching.

    Hayek's idea of a social safety net through a minimum wage (in rich countries) is not the same thing as social justice in the Catholic sense; it's just palliative care for terminal social losers in his mind, for people who are not smart enough to compete in the market for optimum wages.
    Result: the working poor in the US (a rich country one presumes), living in trailers on Hayek's minimum wage.

    The market left to its own devices as a "spontaneous order" is about as just and natural as Somalia in its well-known "spontaneity".
    A just social order isn't about planning everything; it's about doing some weeding in the garden, hedges and orderly flower beds. Spontaneity taken to its logical extreme is piracy by the "smarter" upon others in society. Social Darwinist ideologies? No thanks.

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    1. A hatred for the concept of social justice.

      Whatever might have been true of the expression "social justice" once upon a time, it is no longer an expression that allows common (univocal) understanding among parties. It has been abused for so long by so many that it no longer carries a coherent meaning. To the left-liberals it mean (to their delight) taking from the rich and giving to the poor. To the right liberals it means (to their disgust) taking from the deserving rich and giving to the undeserving poor. To the communist, in practice, it means taking from everyone and giving back only subsistence, so that (eventually) there is no surplus to take any more (to their surprise). To the early Christian it would have meant none of these, but he probably would not have invented a term for the practice of employing his wealth with charity (love of God). "Social Justice Warriors" are anti-social and neither just nor warriors, but that doesn't stop them.

      The term can no longer be used, except to accuse those who attempt to use it to define themselves of falling away from the Christian ideal, in that they do not promote the virtues with caritas at the top.

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  10. The term Christian is one which many people have strange ideas about and the early Christians did not know the Nicene Creed. These are not reasons for giving up either.


    If the term Social Justice has been used since the time of Pius XI, it's not for us to abandon it because conservatism's ideological nose is put out of joint.

    The Papal encyclicals directly contradict Burke and Hayek on the very core of their ideologies: the sovereignty of the market, the inviolability of the contract and the redistribution of wealth.

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  11. The Papal encyclicals directly contradict Burke and Hayek on the very core of their ideologies: the sovereignty of the market,

    Agreed: the popes opposed the idea of markets that were not restrained to fit human needs and human nature.

    the inviolability of the contract and the redistribution of wealth.

    Not sure what you mean. Too cryptic.

    If the term Social Justice has been used since the time of Pius XI, it's not for us to abandon it because conservatism's ideological nose is put out of joint.

    It's not conservatism's nose that's the main problem with the expression. The main problem is that the term has been co-opted by left-liberalism to mean something the popes did not intend, and unless you qualify your use of the expression in virtually every single sentence, you will be misunderstood to mean what left-liberals mean by it. If you don't care about being misunderstood, then go ahead and use it. At this point, it's almost as bad as trying to use "gay" as it's definition of 60 years ago provided.

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  12. Conservatism's nose is all-important here. Ideologically conditioned, it is not only put out of joint but broken by Papal teaching that speaks of Social Justice. Nobody else's is troubled by the term.

    The term was already being misused before being taken up by Papal teaching. Its meaning is clear enough and, like almost all the vocabulary we use to express Christian teaching, good or neutral in itself. We've all heard people (including many clergy and nuns) mouthing off about
    something they call Social Justice, but which is heavily influenced by their own ideologies. These are easy to discern. They will often tell you themselves exactly which non-religious ideology provided them with their particular slant.


    The term does not have purely false connotations for most people. In view of the conservative invasion of the church that has been taking place, the term Social Justice is more necessary than ever, and providential. No, it won't be going away. Steve Bannon and Cardinal Burke ought to though.

    Church teaching rejects the contracts that the poor are forced into by socially unjust societies. Burke and Hayek defended their inviolability.


    Any government spending which directs money (coming for example from companies or the richer parts of society) to provide services and infrastructure for poorer sectors and regions, is in fact, "redistributing wealth". Papal teaching says this is necessary in justice. Burke and Hayek say no.

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