Are Tax Cuts Really Just Undemocratic Exploitation?

Will Wilkinson, the vice president for policy at the Niskanen Center, does not like the tax bill just passed by Congress. Writing in The New York Times, he finds the legislation ‘notably generous to corporations, high earners, inheritors of large estates and the owners of private jets.’
Wilkinson has discovered a surprising source for the legislation he dislikes so much. It is none other than the libertarian idea, promoted by Murray Rothbard and Ayn Rand, that taxation is theft. Under their theory of ‘absolute’ property rights, taxation was ‘morally criminalized.’ Democratic majorities, in this view, cannot override property rights.
Wilkinson rejects this account. ‘The idea that there is an inherent tension between democracy and the integrity of property rights is wildly misguided.’ Democracy is a means for the poor and middle class to protect themselves from exploitative elites. Democracy is a relatively recent innovation; in pre-democratic states, ruling elites exploited the ‘lower orders.’ Those not in the ruling elite need the redistributive democratic state for protection.
The fault is no doubt mine, but I find Wilkinson’s line of thought difficult to follow. How does the thought that taxation is morally wrong underlie a tax bill? If you reject taxation, would you not oppose taxes rather than enact new taxes? Perhaps what Wilkinson has in mind is this: in present circumstances, Republicans under nefarious libertarian influence could not proceed all the way to abolition of taxation. The best they could manage is not to tax the well-off as much as Wilkinson thinks appropriate.

This post was published at Ludwig von Mises Institute on 12/21/2017.

What China Can Learn from America’s Great Depression

When Murray Rothbard’s America’s Great Depression first appeared in print in 1963, the economics profession was still completely dominated by the Keynesian Revolution that began in the 1930s. Rothbard, instead, employed the ‘Austrian’ approach to money and the business cycle to explain the causes for the Great Depression, and to analyze the misguided and counterproductive policies that were followed in the early 1930s, which, in fact, only intensified and prolonged the economic downturn.
To many of the economists in the early 1960s, Rothbard’s ‘Austrian’ approach seemed out-of-step with the then generally accepted textbook, macroeconomic approach that focused on a highly ‘aggregate’ analysis of economic changes and fluctuations on general output and employment as a whole. There was also the widely held presumption that governments could easily maintain economy-wide growth and stability through the use of a variety of monetary and fiscal policy tools.
Mises, Hayek and the Austrian Theory of Money and the Business Cycle However, in the early and middle years of the 1930s, the Austrian explanation of the Great Depression was at the forefront of the theoretical and policy debates of the time. Ludwig von Mises (1881 – 1973), first developed this ‘Austrian’ theory of the causes of inflations and depressions in his book, The Theory of Money and Credit(1912; 2nd revised ed., 1924) and then in his monograph, Monetary Stabilization and Cyclical Policy (1928).
But its international recognition and role in the business cycle debates and controversies in the 1930s were particularly due to Friedrich A. Hayek’s (1899 – 1992) version of the theory as presented in his works, Prices and Production (1932) Monetary Theory and the Trade Cycle (1933), and Profits, Interest and Investment (1939). A professor of economics at the London School of Economics throughout the 1930s and 1940s, Hayek was, at the time, considered by many to be the main competitor against John Maynard Keynes’s ‘New Economics’ that emerged out of Keynes’s 1936 book, The General Theory of Employment, Interest and Money.

This post was published at Ludwig von Mises Institute on 12/19/2017.

Get Government out of the Welfare Business

Fighting poverty is a favorite pastime of government because politicians get to portray themselves as champions of the poor. However, the unfortunate few tend to be far fewer in number when aid is extended privately instead of through tax funded programs.
Government Bureaucracies Benefit from Welfare Programs
Coercion is used to acquire the revenue (taxes) to finance welfare programs. As evidenced by the commission it retains prior to redistributing this wealth, government bureaucracies are one of the beneficiaries of these programs, and thus highly incentivized to claim a perpetual need for the programs. I live in Canada, where the number of federal government welfare program employees increased by 43% between 2006 and 2012. Clearly, it serves the interests of politicians and bureaucrats to create (impose) a culture of dependency. As Murray Rothbard wrote in For a New Liberty:
Since welfare families are paid proportionately to the number of their children, the system provides an important subsidy for the production or more children. Furthermore, the people being induced to have more children are precisely those who can afford it least; the result can only be to perpetuate their dependence on welfare, and, in fact, to develop generations who are permanently dependent on the welfare dole.

This post was published at Ludwig von Mises Institute on Dec 4, 2017.

The Corrupt Origins of Central Banking

Central banking has been a corrupt, mercantilist scheme and an engine of corporate welfare from its very beginning in the late 18th century. The first central bank, the Bank of North America, was “driven through the Continental Congress by [congressman and financier] Robert Morris in the Spring of 1781,” wrote Murray Rothbard in The Mystery of Banking (p. 191). The Philadelphia businessman Morris had been a defense contractor during the Revolutionary War who “siphoned off millions from the public treasury into contracts to his own … firm and to those of his associates.” He was also “leader of the powerful Nationalist forces” in the new country.
The main objective of the Nationalists, who were also known as Federalists, was essentially to establish an American version of the British mercantilist system, the very system that the Revolution had been fought against. Indeed, it was this system that the ancestors of the Revolutionaries had fled from when they came to America. As Rothbard explained, their aim was
To reimpose in the new United States a system of mercantilism and big government similar to that in Great Britain, against which the colonists had rebelled. The object was to have a strong central government, particularly a strong president or king as chief executive, built up by high taxes and heavy public debt. The strong government was to impose high tariffs to subsidize domestic manufacturers, develop a big navy to open up and subsidize foreign markets for American exports, and launch a massive system of internal public works. In short, the United States was to have a British system without Great Britain. (p. 192)

This post was published at Ludwig von Mises Institute on Dec 4, 2017.

Cradles of Capitalism: the City-States of Greece and Italy

There long has been a persistent academic debate as to whether an “ancient economy,’ referring mainly to Greece, even existed at all. In a field dominated by Marx, Marxists, the 19th century sociologist Max Weber, and such scholars of renown as Sir Moses Finley, the lingering image of the economic world of the Greek polis is that of something very static. We imagine a leisure class lounging at the sandaled foot of an orator while slaves tended to the fields, flogging cows harnessed to ploughs stuck in the mud. It is the notion of a “primitive” economy: money made for status, not investment; credit extended for the purchase of slaves, war waged for the capture of booty, elites in control of craft guilds and tyrant-kings keeping the peace by randomly doling out the goods.
Then there is ancient epic itself, with the noble Odysseus disdaining seafaring for profit (though he did take all the pay-offs he could collect) and the great Achilles pondering a discovery of precious treasure only so far as it might estimate his aristocratic worth. From this rudimentary foundation, an entire field of Socialist-Keynesian views on the Greek economy has prevailed, with occasional libertarian scholars such as Murray Rothbard and Jess Huerta de Soto getting a word in edgewise. In recent time, however, academia has found much more evidence of technological advances and market-driven considerations on the part of the classical polis than previously thought.
Keeping in mind that in both ancient Greece (and Renaissance Italy) that democracy was not incompatible with aristocracy, and that oligarchies and tyrants were not necessarily illiberal, several points may be made in defense of the economic model of the city-state: 1) that the stronger the city-state, the greater the industrial and economic expansion; 2) that private property was considered a fundamental economic principle; 3) that banking standards were relatively conservative; 4) that the wealthiest city-states were of the most socially dynamic; 5) that city-state competition spearheaded the modern entrepreneurial Europe; and 6) that the visionary tyrant was almost always business-first in his rule.

This post was published at Ludwig von Mises Institute on 11/14/2017.

More Rigorous Populism Might Have Produced a Better Fed Chair

As I noted in my reaction to reports of Jerome Powell’s nomination, Trump’s endorsement was a significant defeat for the growing movement among Hill Republicans to force the Fed to adopt ‘rules-based monetary policy.’ Since I’ve already written on why I think such reform plans would largely fail to achieve their desired ends, I’m not particularly bothered by the defeat – but I do think there is a lesson to be gained here on libertarian strategy.
As Jeff Deist noted at the Mises Institute’s 35th Anniversary, along with some genuine disagreements regarding economics and political theory, Murray Rothbard and F. A. Hayek held very different opinions on the best strategy going forward to promote liberty. While both agreed, following Mises’s insights, that winning ‘hearts and minds’ was absolutely essential to a free society – government would not be limited by pursuing and tricking the populist into something it wasn’t prepare to adopt – they disagreed on the best way of accomplishing this task.
While Rothbard favored a libertarian-populist strategy aimed at educating and energizing laypeople, Hayek thought it was best to influence academics and intellectuals, what he termed ‘second handlers of ideas.’ A more classically liberal intelligentsia would influence policymakers and from that good – or at least better – public policy would follow.
While it may be a step too far to suggest that this approach can never lead to any form of substantial policy victory in Washington – and certainly no intellectual movement should be limited to a single strategy – Trump’s nomination of Powell I think does highlight one of the major flaws with Hayek’s strategy.

This post was published at Ludwig von Mises Institute on November 6, 2017.

The Voluntaryist Constitution

[Editor’s note: The Mises Institute presents below’s “voluntaryist constitution” as a thought experiment, and is not presented here as an ideological or political ideal.] There have been a number of attempts to create the ideal constitution – one which enshrines liberty, autonomy, and property rights, while ensuring the highest degree of prosperity for those under its jurisdiction. Each attempt to do so, however, has been plagued by a seemingly indomitable problem: constitutions create governments. Once the malicious genie of government has sprung forth from its lamp, it seems no constitutional structure or language is capable of subduing it.
Some may assert in response that this is simply an inherent problem with Constitution-making in general, and that an anarchic libertarian society would need no such document to thrive. However, even the veritable father of anarcho-capitalism, Murray Rothbard, disagreed:
Politically, the [Benjamin] Tucker anarchists had two principal defects: (1) they failed to advocate defense of private landholdings beyond what the owner used personally; (2) they relied too heavily on juries and failed to see the necessity for a body of constitutional libertarian law which the private courts would have to uphold.
These “right-wing” anarchists did not take the foolish position that crime would disappear in the anarchist society. Yet they did tend to underestimate the crime problem, and as a result never recognized the need for a fixed libertarian constitution. Without such a constitution, the private judicial process might become truly “anarchic” in the popular sense.

This post was published at Ludwig von Mises Institute on Oct 23, 2017.

Money-Supply Growth Drops Again – Falls to 108-Month Low

Growth in the supply of US dollars fell again in August, this time to a 108-month low of 4.2 percent. The last time the money supply grew at a smaller rate was during August 2008 – at a rate of 4.1 percent.
The money-supply metric used here – an “Austrian money supply” measure – is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.
The “Austrian” measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler’s checks, and retail money funds).
M2 growth also slowed in August, falling to 5.3 percent, a 75-month low.

This post was published at Ludwig von Mises Institute on Sept 18, 2017.

For a New Libertarian

[This talk was delivered at the 2017 Mises University.] Greetings to everyone at the Corax 2017 conference, and greetings also to the audience here at our annual Mises University. As you can see both events are happening simultaneously, so I couldn’t be with you in person this evening. But I very much appreciate being invited by Sofia and Martin to speak, and I would indeed have joined you in Malta any other week. And I admire Sofia and Martin for having the courage to leave Sweden and start this new venture in Malta, which by their account is not only warmer but also far more reasonable!
What I’d like to talk about today is libertarians, more than libertarianism itself. And I’ll ask you to consider whether libertarians have lost their way.
The title ‘For a New Libertarian’ is I hope an obvious play on the title of Murray Rothbard’s famous book For a New Liberty. It’s an underrated book, less well-known perhaps than The Ethics of Liberty. Lots of authors have the ego to call their books ‘a manifesto,’ but few books actually live up to such an bold subtitle. This book does.
I love Murray’s line: ‘libertarianism, then, is a philosophy seeking a policy.’ I wonder if he’d change that line today, if he could see where the ‘public policy’ branch of libertarianism has become. Or maybe he should have written ‘libertarianism is a philosophy seeking better libertarians.’
I also chose the title to make the important point that we don’t need a ‘new libertarianism’ or anything so grand. Thanks to the great thinkers who came before us, and still among us, we don’t have to do the hard work – which is good news, because not many of us are smart enough to come up with new theory! We can all very happily serve as second-hand dealers in ideas.

This post was published at Ludwig von Mises Institute on July 29, 2017.

Money Supply Growth Falls Again, Dropping to 105-Month Low

Growth in the supply of US dollars fell again in May, this time to a 105-month low of 5.4 percent. The last time the money supply grew at a smaller rate was during September 2008 – at a rate of 5.2 percent.
The money-supply metric used here – an “Austrian money supply” measure – is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.
The “Austrian” measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler’s checks, and retail money funds).
M2 growth also slowed in May, falling to 5.6 percent, a 20-month low.

This post was published at Ludwig von Mises Institute on July 21, 2017.

Our Lawless Central Bank

The economic arguments against central banks are numerous to say the least. Through the writings of Ludwig von Mises and Murray Rothbard we have a wide variety of critiques that explain the many ways the central banks distort economies, cause booms and busts, punish savers, and chose winners and losers through monetary policy.
But, even if confronted with these arguments, and one remains supportive of central banks, other non-economic arguments must still be addressed.
For example, it is becoming increasing important – in our current age of “non-traditional” monetary policy – to take note of the fact that central banks, and especially the Federal Reserve, are essentially unrestrained by law.
Economists themselves often defend this total unmooring from legal or political accountability, saying it is necessary for the Fed to have “independence” from elected officials.
In reality, however, this “independence” is best described as “total lack of accountability.”
Writing in today’s Dallas Morning News, Texas Tech economist Alexander William Salter writes:

This post was published at Ludwig von Mises Institute on 06/22/2017.

Government as the Source of Monopoly: US Airlines Edition

“Is Government the Source of Monopoly?” asked Chicago economist Yale Brozen in an essay first published in 1968. Yes, he answered – not only directly, by awarding exclusive licenses and contracts, but also indirectly, via regulation, minimum-wage legislation, and other forms of government intervention. Austrian economists such as Murray Rothbard and Dominick Armentano went further, arguing that monopoly per se is impossible on the free market, as long as government does not restrict entry into markets. More successful firms will tend to grow and increase their market share, but this does not constitute monopoly, as long as other firms are free to compete, or try to compete. The concept of monopoly only makes sense, theoretically and empirically, when the government protects privileged firms from competition, either directly or through the kinds of indirect means discussed by Brozen.
I recently came across a lucid example of government-created monopoly in Thomas Petzinger excellent book Hard Landing: The Epic Contest for Power and Profits That Plunged the Airlines into Chaos (Crown, 1996). Petzinger explains the emergence of the US commercial airline industry in the 1930s as the result of efforts by Walter F. Brown, Postmaster General in the Hoover Administration, to reorganize the nascent airmail business.

This post was published at Ludwig von Mises Institute on June 17, 2017.

How We Should Name Business Cycles

Economists have long played semantic games with business cycles. In particular, they try to downplay the significance of the crisis and to obfuscate its cause.
First of all, bubbles and economic crises are initially denied and then usually not named until after they end and particular sectors of the economy are revealed to be what Lionel Robbins called ‘a cluster of entrepreneurial errors.’
The housing bubble was an exception because it was obvious to Austrian economists that there was a bubble as early as 2002 and that it was concentrated in housing due to various government subsidies, tax breaks, and regulations.
Murray Rothbard explained that economists have played semantic games regarding the naming of business cycles. Up until the Great Depression an economic crisis typically started with a boom, followed by a ‘panic’ and concluded with a ‘depression.’
After the disaster of 1929, economists and politicians resolved that this (i.e., a ‘depression’) must never happen again. The easiest way of succeeding at this resolve was simply to define ‘depression’ out of existence. From this point on, America was to suffer no further depressions.

This post was published at Ludwig von Mises Institute on June 16, 2017.

Bitcoin — Your Newest, Most Powerful Tool of Subversion

Murray Rothbard often described the government as a ‘gang of thieves writ large.’
His description captures the State’s true essence… coercion.
Any government, anywhere in the world, and at any time in history is simply a group of people with a monopoly on coercion in a certain geographic area. That’s it.
It doesn’t matter if it’s a democracy, monarchy, dictatorship, or something else.
Government is not about selfless public servants advancing some vague common good. It’s about brute force.
They don’t teach this in public schools. But it’s true.

This post was published at International Man

Are Central Banks Worthy of Trust?

In an essay on Edmund Burke’s view of the nature of government, Murray Rothbard quoted him as saying:
In vain you tell me that Artificial Government is good, but that I fall out only with the Abuse. The Thing! The Thing itself is the Abuse!”
Our complaint isn’t just with “abuse of the system,” it is with the system itself! The system is the abuse. Everything else is a symptom, a surface issue.
When BOE Governor Mark Carney spoke on various banking sector abuses at the Banking Standards Board Panel, he misses the entire point. The title of the speech is ‘Worthy of trust? Law, ethics and culture in banking’ and he is concerned that such abuses have produced a “crisis of legitimacy.”
“This immense progress has been overshadowed by a crisis of legitimacy. A series of scandals ranging from mis-selling to manipulation have undermined trust in banking, the financial system, and, to some degree, markets themselves.”
Bad behaviour went unchecked, proliferated and eventually became the norm.

This post was published at Ludwig von Mises Institute on March 24, 2017.

Money Supply Growth Falls to 17-month Low in February

The supply of US dollars has slowed during early 2017 with February’s year-over-year percentage increase hitting a 17-month low of 7.7 percent. Monthly year-over-year growth rates in the money supply have been falling each month since October.
Over the past eight months or so, money supply growth rates have become somewhat volatile with the growth rate surging from 6.7 percent in late 2017 up to 11.3 percent by late 2016, and down again to under 8 percent by February of this year.
This recent period of volatility comes after a long period of relatively sedate and consistent growth in the money supply through most of 2013, 2014, and 2015.
The “Austrian” money supply measure (AMS) used here is a measure of the money supply pioneered by Murray Rothbard and Joseph Salerno and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.
The “Austrian” measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler’s checks, and retail money funds).
Since 2014, money supply growth has ranged from about 7 percent to 8.5 percent. In October of last year, money supply growth hit a seven-year low of 6.8 percent, although this proved not to be an indication of any new trend.

This post was published at Ludwig von Mises Institute on March 23, 2017.

Can state spending ever be cut?

President Trump was elected on several promises, including one that he would fund tax cuts by cutting public spending. Cynics might note that his first action was to increase spending on the military by $54bn, the equivalent of six Polish armies. This is not a good start. Trump is hailed, in some quarters, as a latter-day Reagan, a Republican president who understood the impotence of the state, and how it is a burden on free enterprise. This is not a good precedent either.
Taxes and deficits increased under Reagan. As Murray Rothbard put it in a 1988 retrospective on Reagan’s years in the White House:
‘In the first place, the famous tax cut of 1981 did not cut taxes at all. It’s true that tax rates for higher income tax brackets were cut; but for the average person, taxes rose, rather than declined. The reason was that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was ‘bracket creep,’ a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall.’

This post was published at GoldMoney on MARCH 16, 2017.

Money Supply Growth Moderated in December

In our last update on money supply – using the “Austrian” measure of money supply developed by Murray Rothbard and Joseph Salerno – we found that money supply growth hit a 46-month high of 11.2 percent in October.
Growth has moderated since then, however, with year-over-year growth in US dollars dropping to 10.3 percent in November and 8.8 percent in December.
This change somewhat follows a change in M2 over the same time period as 1M2 growth hit a multi-year high of 7.5 percent in October, but fell to 7.3 percent and 7.0 percent in November and December, respectively.

This post was published at Ludwig von Mises Institute on February 4, 2017.

Crisis and Legitimacy: The Fork in the Road

Remnant Review
Those of us who are known as conspiracy historians argue that the Council on Foreign Relations, the Trilateral Commission, and various other high-level elite societies provide most of the leadership at the national level of the United States. In other words, we think that the system is rigged.
At the same time, we are well aware of the fact that the general public is persuaded that there are significant issues at stake politically, and once every four years the voters wake up from their slumber, and they get interested in who wins the Presidency. Then they go back to sleep. Those of us who are conspiracy historians don’t think the elections make much difference in terms of the overall direction in which the nation is moving.
Nevertheless, there are times in history, which generally are times of crisis, in which fundamentally new political procedures and new political ideas that begin to shape the direction in which a nation is moving. The election of 1912 was such an election, but even more important was the Spanish-American War (1898), which launched a new era of empire for the United States. The key figure in all of this was Teddy Roosevelt.
The next major change was the Great Depression. Politically, it looked as though Hoover and Roosevelt had radically different programs. In fact, they were both Progressives. If anything, in 1932 Hoover was the more radical. The public thought it was making a fundamental decision in 1932 when it voted for Roosevelt, but the New Deal was simply an extension of what Hoover had already begun to construct. On this, read Murray Rothbard’s book, America’s Great Depression (1963).
Obviously, the atomic bomb changed the nature of warfare and therefore changed the nature of conflict between empires. Next, the collapse of the Soviet Union in 1991 made the United States the sole superpower. This has now degenerated into a series of no-win wars, and these wars are against non-state combatants. We do not know how this is going to turn out, except to say that at some point, the United States government is not going to be able to afford to maintain its present empire. At that point, there will be a fundamental reconsideration of the United States as the world’s only superpower. In all likelihood there is not going to be a single superpower. But we don’t know that for certain.

This post was published at Gary North on January 04, 2017.