M.

Mises on State Control of a Specific Business: It’s Not Necessarily Socialism

Referencing this quote from Interventionism: An Economic Analysis, so I can link to it later.

One thing more must be noted. If within a society based on private ownership of the means of production some of these means are publicly owned and operated, this still does not make for a mixed system which would combine socialism and private property. As long as only certain individual enterprises are publicly owned, the remaining being privately owned, the characteristics of the market economy which determine economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods, and labor, and as sellers of goods and services, must fit into the mechanism of the market economy; they are subject to the same laws of the market. In order to maintain their position they, too, have to strive after profits or at least to avoid losses.

When it is attempted to mitigate or eliminate this dependence by covering the losses of such enterprises by subsidies out of public funds, the only accomplishment is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes; the burden of such taxes has its effects on the market, not on the government collecting the tax; it is the market and not the revenue department which decides upon whom the tax falls and how it affects production and consumption. In these facts the domination of the market and the inescapable force of its laws is evidenced.

M.

Myth: Austrians teach that the creation of new money causes the business cycle.

From my five myths about Austrian Economics:

Myth: Austrians teach that the creation of new money causes the business cycle.

This is a common one, but it technically misunderstands the Misesian view of the business cycle. In my amateur estimation, people misunderstand this point because they have not accurately grasped the Misesian taxonomy of money. In a lecture titled “Money, Credit, and the Business Cycle,” published in a Mises collection called The Free Market and Its Enemies: Pseudo-Science, Socialism, and Inflation, Mises writes:

If the fiduciary media [money substitutes that are not backed by the commodity money– see the above linked taxonomy] appear on the loan market, as an additional supply of loan money, there is another effect also [besides price inflation]; the increased supply causes, immediately and temporarily, a reduction in the rate of interest. […T]he rate of interest is affected by an increase in the amount of money appearing on the loan market. An increase in the amount of money appearing on the loan market brings about a drop in the monetary rate of interest. How does this readjustment take place? This is the problem of the trade cycle.

The “trade cycle,” also known as the Business Cycle is a product, not merely of money creation, but money creation which appears first on the loan market. Only a falsified increase in loanable funds can affect the interest rate and it is precisely this tampering with the interest rate that encourages entrepreneurs to presume, against the reality of things, that there is enough savings in the economy to fund their production efforts.

The creation of new “dollars” (or whatever) that goes directly to consumer spending will not, other things being equal, lead to the business cycle. Thus, schemes like UBI may cause rises in consumer prices, but to the extent that the money is given directly by the Treasury (or even some central bank scheme) to the consumer without first entering the loan market, it does not cause the boom-bust cycle. The boom-bust cycle, the peculiar historical set of circumstances in which the entire economy experienced a period economy-wide growth, followed by economy-wide failure, is something distinct– and is a more modern phenomenon that occurred more frequently with the practice of fractional reserve banking, especially as this was supported by the establishment of central banks.

S.

Shawn Ritenour on the Meaning of Socialism

I have offered plenty of thoughts over the months about the meaning of socialism and the fact that, according to some of the best historical definitions, democratic socialism doesn’t meet these definitions. In fact, this was the theme of episode 8.

Just last week Jeff Deist discussed socialism in Mises’ thought, especially as he analyzed it in his Socialism treatise. Ritenour made similar points that I have been making. Of particular note was his definition: that socialism means state ownership of the factors of production. Based on this, various forms of “social safety net” public policies are technically forms of what Mises would consider to be left interventionism. Ritenour warned that to broaden the meaning of socialism without nuance or care would cause us to lose some of the power of Mises’ socialist calculation argument against socialism.

This is exactly what I was driving at when I claimed that the way in which we critique interventionism and even democratic socialism (which I have categorized as a sort of neo-syndicalism) are not the ways we critique actual and historical marxist socialism.

Ritenour also mentioned the fact that Rothbard and Hoppe had in their writings broadened the meaning of socialism; and this is especially true in Hoppe’s Theory of Socialism and Capitalism where he breaks down the various styles of socialism. In my opinion, this is not per se objectionable, so long as one is at least aware of the historical definition and its differences with the way that Hoppe uses the phrase. Of course, they reason that Hoppe uses socialism in this broad way is because he first defines capitalism in a very specific and logical way, built upon praxeology and individual private ownership itself.

So to echo Ritenour, how we use socialism should really depend on our context and what we are trying to accomplish in a specific setting. I highly recommend the episode.

M.

Marx Against Inflationary Monetary Policy

In my recent episode with Bob Murphy I noted that Karl Marx himself was actually against inflationary monetary policy; or, since such a concept didn’t really exist in the same way it does in modern times with central banking, he was against paper money or what Mises referred to as fiduciary media (money substitutes not backed by money itself— see my Misesian taxonomy of money here).

Bob mentioned that readers/listeners might find it peculiar to find a critique of MMT (which of course is an inflationary school of thought inasmuch as inflation refers to an expansion of the money supply) in a socialist outlet, especially given Ocasio-Cortez’s endorsement of MMT. As an aside, I believe she only “endorsed” it because she has Stephanie Kelton, an avid MMTer, advising her, not because she is well-studied or well-read enough to actually have an informed opinion about it. In any case, I don’t think seeing this essay of critique show up in a socialist outlet should be all that surprising.

After all, the author was clearly familiar, even if he didn’t explicitly say so, about sort of the Marxist instinct toward money expansion. Given Marx and Lenin’s anti-bourgeois sentiment, it makes sense that they would look at inflationary schemes as “capitalist” scams and prefer instead a hard money. Inflationary policy, as we know so well by reading Mises and Rothbard and so on, benefit the early recipients of the money creation. This isn’t the core reason why such schemes are bad (ethically or practically) but it is an actual side effect. Thus, Marx and Lenin would oppose it because it favors the rich; while we Austro Libertarians would oppose it because it distorts the capital structure, can lead to the boom bust cycle, and undermines private property theory.

Louis Rouanet’s short post, also linked on the show notes page, elaborates on all this. But the point is that Doug Henwood’s essay is not shocking. He’s just taking the traditional Marxist perspective on inflationary schemes and one can see this in his complaint that the MMT advocates never pay attention to what Henwood considers to be the most pressing “real life” issues of the economy; related, in good Marxist form, to exploitation, resource allocation, and then production of goods “for profit” rather than for the benefit of the masses.

N.

No, Trump is Not Cutting Social Security or Medicare

In Washington, words do not carry the normal, common sense meaning. If I told you that I was cutting back on my coffee expenses this year, you would assume I was spending less this year than I did last year.

But in Washington, the hysteria around budgets precludes normal cool-headed interpretations of things. Take Trump’s proposed budget, especially related to Social Security.

While he should be trying to cut these programs, because they should not exist, just like every other lousy Republican President since these programs were created he is not going to cut them.

Here is the actual document.

The “Baseline” expenditures predict the following for Social Security and Medicare in the years to come (page 109– numbers in billions of dollars):

The “proposed” expenditures are as follows (page 110– numbers in billions of dollars):

If it’s too small to read, here is Social Security:

2020: Baseline: $1,102; Proposed: $1,102
2021: Baseline: $1,166; Proposed: $1,165
2022: Baseline: $1,235; Proposed: $1,234
2023: Baseline: $1,309; Proposed: $1,307
2024: Baseline: $1,387; Proposed: $1,384
2025: Baseline: $1,468; Proposed: $1,465
2026: Baseline: $1,553; Proposed: $1,550
2027: Baseline: $1,642; Proposed: $1,638
2028: Baseline: $1,737; Proposed: $1,733
2029: Baseline: $1,835; Proposed: $1,831

Here is Medicare:

2020: Baseline: $702; Proposed: $679
2021: Baseline: $762; Proposed: $711
2022: Baseline: $861; Proposed: $800
2023: Baseline: $892; Proposed: $822
2024: Baseline: $920; Proposed: $840
2025: Baseline: $1,038; Proposed: $949
2026: Baseline: $1,121; Proposed: $1,025
2027: Baseline: $1,202; Proposed: $1,109
2028: Baseline: $1,385; Proposed: $1,251
2029: Baseline: $1,361; Proposed: $1,212

In other words… Trump suggested small increases in expenditures. Look at the proposed numbers, year by year. See how they get bigger? Let me translate: he is doing the opposite of cutting. He is growing them.

Even my 5 year old would get this.

T.

True Socialism Requires a Complete Social Restructuring

Interventionism is the system which keeps the private ownership aspect of capitalism and yet allows and encourages the state to jump in, wherever it deems necessary, to improve the machinations of the market and make things better than they would have been without government involvement. Interventionism takes a variety of forms, including those especially relevant to our western way of like: Keynesianism, Neo-keynesianism, and monetarism, as examples. They state must involve itself in certain industries and on behalf of certain interests, some of them “left-wing” concerns and others “pro-business” protections.

Socialism, true socialism, is not like that. Socialism requires a complete reconstruction of all of society– from the decision makers, to the allocation of resources. As I prepare a longer essay on the nature of democratic socialism, and seek to compare it with social democracy, one of the points that I want to hone in on is that social democracy and left-interventionism attempts to use the current social arrangements and make them better for the “workers” or for the “poor,” etc. The socialists need to completely upend all of it, the whole kit and caboodle.

In this way, so many social democrats will point to the welfare systems of Scandinavia as success stories. But welfarism is not socialism and it in fact presupposes capitalist structures; wherein the ownership of the means of production is held by capitalist, profit-seeking people. Welfarism is not a component of socialism because under socialism there is no need to redistribute the excesses of the rich back to the poor: there are no rich. Everyone allegedly shares in the cashflow, if there is any (some radical marxists don’t even believe in money), but in any case if all of the workers share equal parts of a company, and there is no capitalist to capture the profits, then all workers split the proceeds: welfare is irrelevant.

As was noted over at Jacobin:

Make no mistake: a Nordic-style welfare state would be vastly preferable to our neoliberal alternative, and we should work toward the construction of some of its most important institutions here in the US. But by calling ourselves democratic socialists, we signal our aspiration for a deeper democratization of society than social democracy will allow.

F.

From Jacobin: The Weirdest Explanation of Democratic Socialism

I’m preparing a longer essay in light of my exploration of the far left, in which I seek to summarize and unravel democratic socialism as a trend movement. Should be this week. In any case, my preparation brought me to the essay at Jacobin called “What is Democratic Socialism?” It’s a horrifically embarrassing piece, and I’m surprised Jacobin put it out.

I won’t go through the Jacobin piece in total right now, leaving my more substantial and systematic critiques to the aforementioned essay I am preparing.

But I couldn’t help but share my laughs at this Jacobin piece. He writes:

A tiny number of rich and powerful families lives off of the profits they make from trashing the environment and underpaying, overworking, and cheating the vast majority of society — the working class. They get richer precisely because the poor and working class get poorer.

This capitalist class turns workplaces into mini-authoritarian regimes, where bosses have the power to harass and abuse workers. And they protect their power in all corners of society by fanning the flames of racial, national, and gender conflict and prejudice in order to divide working people and stop us from organizing.

Democratic socialists want to end all of that.

Blah blah, typical stuff right? The funny thing is that many populist conservatives could basically say the same things. I would love to see the look on the author’s face if I responded with, “so like Tucker Carlson?” Obviously, Tucker hasn’t been at his best on specific economic issues, but it’s delightful to think about the meaninglessness of the above description as it allegedly attempts to summarize a far left impulse.

But it gets better. Because think about it. There’s apparently a “tiny” number of rich and powerful families right? And they underpay, overwork, and cheat the vast majority of society, right? Wrong. The author is trying to appeal to the near bifurcated class system of the 19th century in which Marx wrote. Thing is, after not even 200 years of capitalism, because we have better capital tools and more powerful means of production, MOST people are not among the “tiny number,” the 1% (by definition), but neither are they in this impoverished state of destitution. We have something called, hear me out, a middle class that completely renders the author’s antiquated interpretation of class struggle worthless.

But it. gets. better.

Like many progressives, we want to build a world where everyone has a right to food, healthcare, a good home, an enriching education, and a union job that pays well. We think this kind of economic security is necessary for people to live rich and creative lives — and to be truly free.

Except, you know, if we don’t actually currently have the “right” to food, healthcare, a good home, an enriching education, and yet hundreds of millions of people have these things in the west (those who don’t notwithstanding, of course) then obviously this “economic security” is not a necessity to live well and be free. What a doltish statement.

I could go on. But a full analysis of all this, with better sources, is in the works.

B.

Bernie Sanders on Government Ownership of the Means of Production

I say this nearly every week these days and this is the biggest area of contention for followers of this site. No issue has produced as much pushback as the idea that modern leftists, operating under the label of socialism to distinguish themselves from run of the mill progressive Democrats, aren’t really socialists in the traditional sense. I’ve pointed out that George Reisman agrees and writes that “Social democrats should stop calling themselves socialists.” Reisman:
Consistent with the laws of logic, the social democrats need to stop calling themselves socialists and to insist that no one else call them socialists. This is because the word “socialist” means “one who advocates socialism.” Inasmuch as socialism means government ownership of the means of production, the word “socialist” logically implies that one is an advocate of government ownership of the means of production, which, in the real world of choosing and acting, the social democrats—to their credit—have repeatedly shown that they are not.
I even elaborate on this here, arguing that if we are going to call them socialists, we should at least keep in mind that socialism means something different today and what we see now is more of a Neo-socialism. Nevertheless, here’s Bernie to support my case:
Democratic socialism, Sanders said, is not tied to any Marxist belief or the abolition of capitalism. “I don’t believe government should own the means of production, but I do believe that the middle class and the working families who produce the wealth of America deserve a fair deal,” he said.

Again, technically speaking, these leftists are far Left Interventionists (to use Mises’ phrase), not traditional socialists. Interventionism is, of course, horrible and destructive; but our arguments against it are distinct from our arguments against traditional socialism.

Socialism is basically a marketing phrase at this point to agitate against the sentiments of the centrists and capitalists.

G.

Gerard Casey and Murray Rothbard on the Nature of the State

Casey doesn’t mess around:

States are criminal organizations. All states, not just the obviously totalitarian or repressive ones. […] I intend this statement to be understood literally and not as some form of rhetorical exaggeration.

The argument is simple. Theft, robbery, kidnapping and murder are all crimes. Those who engage in such activities, whether on their own behalf or on behalf of others are, by definition, criminals.

In taxing the people of a country, the state engages in an activity that is morally equivalent to theft or robbery; in putting some people in prison, especially those who are convicted of so-called victimless crimes or when it drafts people into the armed services, the state is guilty of kidnapping or false imprisonment; in engaging in wars that are other than purely defensive or, even if defensive, when the means of defence employed are disproportionate and indiscriminate, the state is guilty of manslaughter or murder.

Clearly he is echoing Rothbard from For a New Liberty:

The libertarian, in short, insists on applying the general moral law to everyone, and makes no special exemptions for any person or group. But if we look at the State naked, as it were, we see that it is universally allowed, and even encouraged, to commit all the acts which even non-libertarians concede are reprehensible crimes.

The State habitually commits mass murder, which it calls “war,” or sometimes “suppression of subversion”; the State engages in enslavement into its military forces, which it calls “conscription”; and it lives and has its being in the practice of forcible theft, which it calls “taxation.” The libertarian insists that whether or not such practices are supported by the majority of the population is not germane to their nature: that, regardless of popular sanction, War is Mass Murder, Conscription is Slavery, and Taxation is Robbery.

The libertarian, in short, is almost completely the child in the fable, pointing out insistently that the emperor has no clothes.

M.

Massie is Correct: Food is Not a Right

It is precisely because over the last 300 years food has not been treated as a right (which would obligate the government to provide it or force some to give food to others), that we don’t need to speak of it in terms of rights. The market has done more to feed the western world and bring people out of hunger than any other institution in history. In fact now we are concerned with obesity problems!

The majority of people swoon when they hear someone deny that food is a right, but they do not realize that it does not need to be a right in order for it to be produced in historically unprecedented quantities such that the global population can be sustained at levels unimaginable several centuries ago.

M.

Mises on the Anti-Capitalist Bias

From Planned Chaos, which itself is an excerpt of Mises’s Socialism treatise.

Nothing is more unpopular today than the free market economy, i.e., capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to capitalism.

The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint.

Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.

The characteristic mark of this age of dictators, wars and revolutions is its anti-capitalistic bias. Most governments and political parties are eager to restrict the sphere of private initiative and free enterprise. It is an almost unchallenged dogma that capitalism is done for and that the coming of all-round regimentation of economic activities is both inescapable and highly desirable.

None the less capitalism is still very vigorous in the Western Hemisphere. Capitalist production has made very remarkable progress even in these last years. Methods of production were greatly improved. Consumers have been supplied with better and cheaper goods and with many new articles unheard of a short time ago. Many countries have expanded the size and improved the quality of their manufacturing. In spite of the anti-capitalistic policies of all governments and of almost all political parties, the capitalist mode of production is in many countries still fulfilling its social function in supplying the consumers with more, better and cheaper goods.

It is certainly not a merit of governments, politicians and labour union officers that the standard of living is improving in the countries committed to the principle of private ownership of the means of production. Not offices and bureaucrats, but big business deserves credit for the fact that most of the families in the United States own a motor car and a radio set. The increase in per capita consumption in America as compared with conditions a quarter of a century ago is not an achievement of laws and executive orders. It is an accomplishment of business men who enlarged the size of their factories or built new ones.

One must stress this point because our contemporaries are inclined to ignore it. Entangled in the superstitions of statism and government omnipotence, they are exclusively preoccupied with governmental measures. They expect everything from authoritarian action and very little from the initiative of enterprising citizens. Yet, the only means to increase well-being is to increase the quantity of products. This is what business aims at.

The dogma that the State or the Government is the embodiment of all that is good and beneficial and that the individuals are wretched underlings, exclusively intent upon inflicting harm upon one another and badly in need of a guardian, is almost unchallenged. It is taboo to question it in the slightest way. He who proclaims the godliness of the State and the infallibility of its priests, the bureaucrats, is considered as an impartial student of the social sciences. All those raising objections are branded as biased and narrow-minded. The supporters of the new religion of statolatry are no less fanatical and intolerant than were the Mohammedan conquerors of Africa and Spain.

History will call our age the age of the dictators and tyrants. We have witnessed in the last years the fall of two of these inflated supermen. But the spirit which raised these knaves to autocratic power survives. It permeates textbooks and periodicals, it speaks through the mouths of teachers and politicians, it manifests itself in party programmes and in plays and novels. As long as this spirit prevails there cannot be any hope of durable peace,… of the preservation of freedom or of a steady improvement in the nation’s economic well-being.