We're reminded today of a man ranked by Hayek as one of the greatest classical liberals.  In this guest post by Jim Powell, we learn about William Ewart Gladstone, who so often started on the wrong side of an issue, and so frequently thought his way to the right side ...

William Ewart Gladstone’s Great Campaigns for Peace and Freedom

by Jim Powell

IN THE HEYDAY OF CLASSICAL LIBERALISM, British politics was dominated by one man: William Ewart Gladstone. He entered Parliament at age 23, first held a cabinet post at 34, and delivered his last speech as a Member when he was 84. He served as Prime Minister four times.

Nobel Laureate F.A. Hayek ranked Gladstone among the greatest classical liberals. Lord Acton believed Gladstone’s supremacy was undisputed. Paul Johnson declared there is no parallel to his record of achievement in English history. One might add there are few parallels anywhere.

As Chancellor of the Exchequer in four ministries, Gladstone fought the most powerful interest groups. He helped abolish more than 1,000—about 95 percent—of Britain’s tariffs. He cut and abolished other taxes year after year. Imagine, if you possibly can, our income tax with a single rate of 1.25 percent. That’s what was left of the British income tax when Gladstone got through hammering it down. He wasn’t satisfied, because he wanted to wipe it out.

Gladstone believed the cost of war should be a deterrent to militarism. He insisted on a policy of financing war exclusively by taxation. He opposed borrowing money for war, since this would make it easier, and future generations would be unfairly burdened.

Gladstone’s most glorious political campaigns came late in life: to stop British imperialism and to give the oppressed Irish self-government. Gladstone showed that even in such lost causes, friends of freedom had the strength and courage to put up a tremendous fight that would never be forgotten.

TO BE SURE, GLADSTONE WASN'T A perfect hero. Having matured in an era when his government had limited power and committed few horrors, Gladstone figured it could do some good. For instance, he approved taxes for government schools. But part of the problem was that government revenues soared as Gladstone cut tariffs and other taxes, and political pressure became overwhelming for government to spend some of the loot.

Despite his errors, Gladstone towered above his rivals. His most famous opponent was Benjamin Disraeli, the Tory who promoted higher taxes, more powerful government, and imperial conquest. Gladstone’s liberal rivals were mostly fans of Viscount Palmerston, best known for his bullying of weaker countries. During the late nineteenth century, Gladstone’s chief Liberal rival was Joseph Chamberlain, a socialist who became a vigorous imperialist. Without Gladstone’s influence, there probably would have been fewer gains for liberty, and the losses probably would have come faster.

Gladstone’s enduring contribution was to stress the moral imperative for liberty. Influential British philosophers Jeremy Bentham and John Stuart Mill had almost banished morality from political discussion, as they touted the greatest-good-for-the-greatest-number principle, but Gladstone brought out the moral dimension of taxes, trade, everything. Whatever he did, remarked historian A.J.P. Taylor, was a holy cause. 

Gladstone’s moral fervor was a key to his popular appeal. As historian J.L. Hammond observed: It is safe to say that for one portrait of anybody else in working-class houses, there were ten of Gladstone.

Gladstone vanquishes Disraeli

Henry Clay’s “American System” Was Bad News for the American Economy *Then*, and Will Be Again [updated]

 

GUEST POST

This bizarre protectionist manifesto (above) was posted and now appears to have been scrubbed from the Daily Caller's website. No wonder.

The author—a former Senior Policy Advisor to JD Vance in the Senate—has recently been appointed as Trump's "Special Assistant for Domestic Policy." An archived link of his article gives a glimpse of what this "Special Assistant" and his bosses believe. In short, as Phil Magness and James Harrigan explain in this guest post, it's outright Neo-LaRouchie lunacy rooted in the mercantilist economic doctrines of 19th century arch-protectionist Henry Clay—and "American System" whose modern rehabilitators conveniently leave out the fact that every time it was tried in the 19th and early 20th centuries, Clay’s program unleashed a torrent of preventable policy disasters.”

In other words, it's protectionist junk all the way down that will lift no-one anywhere ....

Henry Clay’s “American System” Was Bad News for the American Economy Then, and Will Be Again

by Phil Magness & James Harrigan

Some ideas are so bad we are doomed to relive them with each successive generation. Until recently, economic central planning from the political right received far less attention than its well-known manifestations on the left. Think of all the repeated attempts to rehabilitate Marxism and socialism, despite their disastrous track record over the last century. Unfortunately, an emerging faction on the political right has decided to deploy economic planning of their own as an intended countermeasure against their progressive foes. For inspiration, they’ve resurrected a failed and long-forgotten idea from the 19th century: Henry Clay’s “American System.”

Clay’s program was first articulated in an 1824 speech, in which he proposed using the Constitution’s tax and regulatory powers to execute America’s first national foray into centralised economic planning. His basic idea was to enlist the might of the federal government to strategically develop certain sectors of the American economy by subsidising them with tax dollars, and penalizing their foreign competitors with high protective tariffs.

Clay maintained that import tariffs could be used to give American manufacturers a leg up over European goods, while also cultivating “infant industries” that he deemed to be in the young nation’s strategic interests. Topping off the package, Clay proposed a spending spree on federally subsidised “internal improvements,” such as roads and canals to facilitate internal commerce, and a strong central bank to facilitate the financing of large government programs through the issuance of sovereign debt. In total, the program amounted to a comprehensive attempt at economic planning around the mistaken belief that trade is a zero-sum game, and countries were locked in a continuous struggle to maximise their industrial outputs by subsidising themselves and taxing their perceived foreign competitors.

If all of this sounds vaguely familiar, it should. It’s part of the protectionist-tariff playbook we witnessed during the Trump presidency. Or maybe it’s better seen, as William Galston asserts, as representing “an effort to bring some ideological coherence to the impulses Donald Trump represents—nationalism, isolationism, social conservatism, and hostility to immigration.” Indeed, Robert Lighthizer, the former Trump cabinet official who is considered the architect of his international trade policy, recently called for the adoption of a “New American System” based on Clay’s 1824 proposal at a speech in Washington, D.C. Henry Clay’s scheme similarly assumed centre stage at a National Conservatism Conference in Miami, Florida, when historian Michael Lind depicted him as the true successor to the American founding, by way of Alexander Hamilton. Clay’s ideas have also found an institutional home at the American Compass, a think tank set up by Oren Cass, Mitt Romney’s former economic advisor. 

It would be difficult to overstate the rapid pace at which Clay’s ideas have surged out of obscurity and into political discussions on the right. Barely two decades ago, discussions of it were almost entirely relegated to the peripheral fringes of American politics. Today, Secretary of State Marco Rubio invokes Clay as a model for constructing a US industrial policy to counter the economic rise of China.

The fundamental problem with this line of reasoning is that it rests on bad economic history, overlaid with the logical fallacy post hoc ergo propter hoc.

The “new American System” advocates tell a version of US economic history that goes something like this: 

• In the early 19th century, the United States entered the world scene as an economic backwater facing insurmountable competition from the established industrial nations of Europe, and particularly Great Britain. 
• By the turn of the twentieth century, the United States had emerged as one of the world’s great industrial powers, even surpassing the Old World despite getting a later start. 
• The credit for this growth, they claim, goes to the “American System” policies that Clay championed: high protective tariffs, subsidized “internal improvements,” the gradual expansion of a powerful central bank, and all around economic planning.

Even the basic claims of this story are in error. however. As economist Douglas Irwin has shown, proponents of the theory that tariffs drove American economic growth “have tended to present statistics that overstate late nineteenth century US growth in comparison to other periods and countries.” After examining the empirical evidence, Irwin concludes, 

It is difficult to attribute much of a positive role for the tariff because import tariffs probably raised the price of imported capital goods, thereby discouraging capital accumulation.

He accordingly rules out the theory that trade protection, the main plank of Clay’s platform, caused the United States to become a world economic power.

But there are even-more-fundamental problems with the new “American System” theorists’ history. They get basic facts wrong about the nature of 19th century economic policy, while simultaneously obscuring or ignoring the many downsides of Clay’s program and its attempted implementation.

The Rise and Demise of the American System

Though once a popular political slogan, Clay’s American System fell into disrepute after a series of discrediting blows in the 19th and early 20th centuries. The first came in 1832, when President Andrew Jackson vetoed legislation to recharter the United States’ corruption-plagued central bank. The creation of the Federal Reserve in 1913 resuscitated this legacy, along with its tendency to engage in political manipulation of monetary policy, though the Bank War did manage to constrain the push for centralisation on that front for much of the 19th century.

Clay’s original tariff program endured a bit longer, finding legislative support at various points between 1824 and 1930. As the chart below shows, however, the 19th century was not an uninterrupted experiment in Clay-style protectionism. Clay only briefly got his way when a series of tariff measures between 1824 and 1828 jacked the average rate on dutiable goods to over 60 percent. The “Tariff of Abominations,” as the 1828 measure came to be known, sparked a political crisis that brought the country to the brink of disunion, after South Carolina attempted to nullify the high tax measure. As the graph shows, from 1833 until the Civil War, the United States charted a course of tariff liberalization, save for a brief interruption when Clay’s Whig Party attained power in 1842. In fact, in 1846 US Treasury Secretary Robert Walker orchestrated a major tariff liberalization to coincide with Great Britain’s famous repeal of the protectionist Corn Laws that same year.

The United States did not reimpose high tariffs in the Clay model with any degree of permanence until the second half of the nineteenth century. While this period did coincide with economic growth, the claim of a causal relationship ignores the fact that the American economic ascendance was already well underway, preceding those tariffs by several decades, and getting its start in a time of relative trade liberalisation on both sides of the Atlantic.

One of the main reasons Henry Clay struggled to get his American System launched in his own lifetime (1777-1852) was the political corruption it always attracted. In practice, the American System’s rationalization of trade protectionism provided cover for rampant graft and favoritism. From the moment of its inception, politically connected special interests seized control of federal tariff legislation and reshaped it to their own benefit. They lobbied for punitive tax rates on their competitors and pork-laden handouts for themselves, even if it meant overtaxing commerce at the expense of revenue itself. At several points in the 19th century, protectionist tariffs pushed the US tax system into the upper half of the Laffer Curve, where rates became so onerous that they undermined the intake of federal tax revenue. This was by design, as protectionist tariffs use taxes as a weapon to deter foreign goods from even entering the country.

The American System and Slavery

Clay’s American System also struggled to disentangle its doctrines from the institution of slavery. Its underlying theory held that the American economy could be “harmonised” and internally integrated through national economic planning. That meant deploying “internal improvements” and the tariff schedule to bind northern industry and southern agriculture together in economic symbiosis. Clay’s doctrines amounted to an early experiment in import substitution: the strategy of using tariffs and other commercial restrictions to divert raw-material production away from international markets and into a heavily subsidised domestic industry. In practice, this meant intentionally shifting southern cotton production away from transatlantic markets and into the textile mills of New England. In order for the American System to function as intended, it would have to subsidise plantation agriculture as well as northern industry.

Some of the American System’s proponents, including Clay himself, eventually recognized that a full “harmonisation” of the US economy under the American System would entail significant public expenditures to develop southern agriculture, thereby politically entrenching slavery in perpetuity. Clay (who, despite being a slave-owner, had reservations about the institution) therefore devised what is often referred to as the “Whig formula” for addressing slavery through a scheme of federally compensated gradual emancipation.

To facilitate this program, Clay appended the American System doctrine with another plank. In addition to paying for “internal improvements,” federal land sale revenue would be allocated to “colonise” or resettle the African-American population of the United States in faraway tropical locations such as Liberia or Central America. As Clay explained in an 1847 speech, federally subsidised colonisation “obviated one of the greatest objections which was made to gradual emancipation,” that being the “continuance of the emancipated slaves among us.” Following Clay, American System theorists such as economists Mathew Carey and his son Henry C. Carey began to champion the black colonisation movement as a “solution” to the problems that slavery presented to their tariff and subsidy scheme. In order to make the system work without plantation slavery, they would simply export the freed slaves abroad.

Aside from a few experiments such as the founding of Liberia, such schemes proved impractical, and eventually succumbed to political obstacles during the American Civil War. Clay’s tariff system nonetheless gained a foothold on the eve of the war, as protectionist interests exploited the chaotic “secession winter” legislative session of 1860-61 to cram the pork-laden Morrill Tariff Act through Congress—dramatically hiking tariffs from (declining) average rate of below twenty percent, to a suffocating imposition of almost fifty percent!

A Civil War Diplomatic Disaster

Although the 1861Morrill Tariff succeeded in finally installing an American-System-style tariff regime for the next half-century, it quickly turned into a diplomatic disaster. The new law’s steep protectionist rates alienated the British government, which would otherwise have been a natural anti-slavery ally to the Union cause. At the outbreak of the war, British abolitionist and free-trader Richard Cobden wrote his friend Charles Sumner, the US Senator from Massachusetts, to plead the importance of free trade to the anti-slavery cause. “In your case we observe a mighty quarrel: on one side protectionists, on the other slave-owners.” Citing the Morrill Tariff supporters’ publicly expressed reluctance to move against slavery, Cobden predicted the measure would imperil his efforts to steer Britain to the aid of the North. As he rhetorically asked his fellow abolitionist Sumner, “Need you wonder at the confusion in John Bull’s poor head?”

As part of the fallout, the Lincoln administration entered the White House facing an irate diplomatic landscape. In part alienated by the tariff, Britain adopted a stance of neutrality toward the two American belligerents. After successive missteps further soured the Lincoln Administration’s relationship with London, abolitionists such as Cobden had to mobilise opinion on the British homefront against the Confederacy by reminding people of slavery’s central role in the war. The diplomatic row, which began with an ill-conceived and opportunistic tariff bill on the eve of Lincoln’s inauguration, would plague US-UK relations for decades to come. Its wartime effect thrust the incoming administration into a needlessly hostile diplomatic situation, handicapping the Union’s war efforts from abroad.

As a domestic economic policy, the Morrill Tariff served a slew of special interests in the northeast by placing punitive taxes on their competitors. It did not finance the Union war effort (as is often incorrectly claimed by American System enthusiasts) as it was never intended for the purpose of raising revenue. The Morrill Tariff primarily aimed to deter commerce from abroad at the behest of domestic manufacturing, allowing them to capture increased prices on their own goods. As a war measure, it amounted to a self-inflicted wound by alienating Britain from the Union’s cause.

How Clay’s Tariffs Gave Us the Income Tax

After the Civil War, the tariff issue came to dominate American economic policy. Until 1909, the successors to Clay’s “American System” generally enjoyed the upper hand. That year, President William Howard Taft called for a routine revision to the federal tariff schedule that quickly devolved into a corrupt free-for-all of tariff favoritism and special-interest handouts.

Amidst the backlash against the Payne-Aldrich Tariff Act’s special-interest free-for-all, a coalition of free trade Democrats and breakaway Republican “insurgents” in the US Senate turned to a radical solution. Realising that they would never break the monied interests of the protectionist lobby, they proposed restructuring the entire federal tax system by shifting it away from the corruption-prone tariff schedule. The result was the 16th Amendment, a flanking move that tried to substitute the protective tariff system with the federal income tax. The amendment, one legislator boasted at the time, would serve as a “club to beat down the tariff” by separating the federal tax system from the entrenched protectionist lobby.

For a fleeting moment, the strategy worked. In 1913, Congress cut import tariffs to their lowest point since the 1850s, and imposed a modest income tax to make up for the loss of revenue. The special-interest groups quickly reconstituted though, and in 1922 they succeeded in exploiting an economic downturn in the agriculture sector to make the case for renewed protectionism. Since the income tax already provided the lion’s share of tax revenue, lawmakers no longer had to worry themselves about jacking up tariff rates to prohibitive levels. As a result of this post-World War I resurrection of Clay’s “American System,” the United States ended up with the worst of both worlds: high tariffs to raise the prices on imported goods at the behest of their domestic competitors, and a new federal income tax to extract revenue from them at every opportunity.

When Americans complete their income tax filings today, few realise that the interminable frustrations of this annual ritual have their origins in a now-obscure tariff bill. It was the corrupt overreach of Clay’s “American System,” though, that ultimately bequeathed us with the modern IRS.

Smoot-Hawley and the Collapse of Clay’s Doctrine

The legislative progeny of Henry Clay’s doctrines finally came to a catastrophic head in 1930 when Congress enacted the Smoot-Hawley Tariff. The measure passed in a desperate attempt to shield special interests from the 1929 stock market crash, although its legislative origin predated “Black Monday” – October 28, 1929 – by several months. The congressional record shows that Smoot-Hawley took its direct inspiration from Clay’s doctrines. The debate on the bill commenced in the House of Representatives earlier that May. Making the case for the protectionist side, Rep. Hamilton Fish (R-NY) declared that “the Republican Party has just one viewpoint, and that is to protect American labour and American industry, not through a competitive tariff but through a tariff that actually protects.” To reinforce his point, Fish quoted “a brief extract from a speech of Henry Clay in favor of a protective tariff…which has never been improved on and has constituted the Republican tariff doctrine for the past 70 years.” After quoting Clay’s American System speech from 1824, Fish offered his rationale for adopting a renewed protectionist policy in 1929. It reads like a talking point from Oren Cass’s American Compass today:

The prosperity of this Nation [claimed Fish] has been built up because the Republican Party has hewed to the line to protect American labor and American industry and to conserve the home markets from ruinous competition with the low-paid labour in foreign countries.;

In a prescient response, another representative challenged Fish by warning that a tariff hike could lead to economic turmoil, including triggering a harmful turn in already-uneasy unemployment numbers. If the tariff passed, was Fish ready to take “credit for the general condition of unemployment that now exists in the United States?” After dissembling over particular, contested tariff rates and the need to serve a multitude of special interest constituencies, Fish reiterated the philosophical justification for pushing ahead. He again invoked Henry Clay’s American System:

That principle was laid down by Henry Clay—the principle of protecting the home market. It is just the reverse of the English attitude. They export 90 percent and only absorb 10 percent of their products in their own home market: We consume in this country 90 percent of our home product and export 10 percent. The question is simply whether you prefer to conserve the home market and protect American wage earners or let the products of low-paid foreign labour destroy the home market for the American producer.

The stock market crash in October poured gasoline onto an already-burning fire as the Smoot-Hawley bill progressed through Congress. The pork-barrel free-for-all saw money changing hands between lobbyists and legislators on the floor of the committee rooms, as industry after industry attempted to purchase “protection” for itself from the unfolding economic recession. They thought they were weathering the storm by obtaining legislative favors. Instead, the cumulative hikes of Smoot-Hawley boosted tariff rates to a historic high of almost 60 percent on all dutiable goods entering the United States. The measure provoked a wave of retaliatory protectionism across the world. In just four short years, Smoot-Hawley had inadvertently triggered a global collapse in international commerce.

The effects may be seen in the famous “spiral” graph published by the League of Nations’ World Economic Survey in 1933. By pursuing the course advised under the “American System” doctrine, the United States directly helped to put the “Great” in “Great Depression.”

Repeating Old Mistakes

The National Conservative argument for the “American System” correctly observes that there were moments in United States history when the country largely adhered to Henry Clay’s suite of high protectionist tariffs, public works projects, and allegedly "strategic" industrial subsidies. They also choose to deemphasise, or may even remain ignorant of, the American System’s more ignominious legacies. You will seldom encounter, for example, a NatCon who seriously engages with the moral conundrum that slavery created for Clay’s import-substitution scheme before the Civil War. The American System’s colonisation plank is almost entirely absent from these discussions, and its propensity for attracting graft and corruption in its later iterations is almost always swept under the rug.

Instead, the version they present is an idealised form of seamlessly executed economic planning, albeit for “strategic” purposes in the “national interest” instead of the left’s usual litany of social justice causes. The inherent coordination problems of centralised economic planning do not simply melt away when it is directed at nationalist objectives instead of progressive, redistributive goals.

But there’s an even-more-fundamental problem with the American System narrative. Its modern rehabilitators conveniently leave out the fact that every time it was tried in the 19th and early 20th centuries, Clay’s program unleashed a torrent of preventable policy disasters.

In 1828, a protective tariff pushed the country to the brink of disunion while also demonstrating Clay’s own inability to extricate his program from the slave economy. In 1861, Clay’s economic philosophy triggered a diplomatic crisis with Britain that unwittingly alienated an anti-slavery ally from the Union cause. In 1909, the heirs of Clay’s economics became so thoroughly beholden to the corrupt dealings of the tariff lobby that a section of their own party revolted and ushered in the haphazardly designed federal income tax system that plagues us to this day. And in 1930, Clay’s political progeny steered the country directly into economic ruin by embracing an American-System-inspired tariff program as its main countermeasure to the unfolding Great Depression. While Clay’s latter-day advocates jump at every opportunity to credit him for late-19th-century American economic growth despite a weak empirical basis for the claim, they also conveniently omit the track record of real and tangible blunders that followed from a century of experiments in American System economic policy.

In the case of the Clay-inspired Smoot-Hawley Tariff, the resulting collapse in international trade proved so disastrous that it largely expunged the American System’s advocates from both political parties in the post-war 20th century. Starting with the Reciprocal Trade Agreement Act in 1934, Congress embarked on a slow-but-steady retreat from protectionism that continued until the early 2000s. The passage of time has, unfortunately, dampened our memory of Smoot-Hawley’s self-inflicted wounds, to say nothing of Clay’s 19th-century failings. Now the National Conservatives deceive themselves into believing that they have rediscovered hidden knowledge from our economic past: knowledge that will allow them to beat the central planners of the left by putting their own spin on central planning from the right. In reality, they risk haplessly stumbling into the same mistakes that discredited Clay’s American System in the eyes of the last generation to experience its results.

America’s progressive left have always, either tacitly or by expression, bought into the impulses of economic planning. The shocking thing happening now is that we have conservative participation in the American System too, and why wouldn’t we? Tariffs are a dyed in the wool political winner for anyone who wants to push them onto the American people—even as they're a loser economically. Those people never seem all that interested in getting past the emotive costume of tariffs. “Let the other guy, the foreigner, pay the bill for a change.” That tariffs are coming back around to steal all kinds of American wealth never quite makes the evening news.

So elements of the right have jumped onto this centrally-planned economic train. And why wouldn’t they? There are illusions of easy political wins to be had. And that’s all you really need to know.

* * * *

Phil Magness is a Senior Fellow at the Independent Institute and the David J. Theroux Chair in Political Economy. He has served as Senior Research Fellow at the American Institute for Economic Research, and as Academic Program Director at the Institute for Humane Studies and Adjunct Professor of Public Policy in the School of Public Policy and Government at George Mason University. He received his Ph.D. from George Mason University' s School of Public Policy.

He is the author of multiple books and essays including Social Science Quarterly (Summer 2019) “James M. Buchanan and the Political Economy of Desegregation,” Co-authored with Art Carden and Vincent Geloso; “The American System and the Political Economy of Black Colonization.” Journal of the History of Economic Thought, (June 2015); “Morrill and the Missing Industries: Strategic Lobbying Behavior and the Tariff of 1861.” Journal of the Early Republic, 29 (Summer 2009);  The 1619 Project: A Critique; and Colonization After Emancipation: Lincoln and the Movement for Black Resettlement.

James Harrigan is a former Senior Research Fellow at AIER. He is also co-host of the Words & Numbers podcast.
Dr. Harrigan was previously Dean of the American University of Iraq-Sulaimani, and later served as Director of Academic Programs at the Institute for Humane Studies and Strata, where he was also a Senior Research Fellow.
He has written extensively for the popular press, with articles appearing in the Wall Street Journal, USA Today, U.S. News and World Report, and a host of other outlets. He is also co-author of Cooperation & Coercion. His current work focuses on the intersections between political economy, public policy, and political philosophy.

This article was previously post at the AIER blog, and is republished here under a Creative Commons 4.0 License.

UPDATE:

So you now have the information to correct the bizarre a-historical assertion just made (below) by the Moron In Chief. So as a quick pop-quiz question, explain in 20 words or less why he is so mistaken. [HINT: In relation to tariffs and the production of wealth, you should probably use words like "despite" rather than "caused by."]

" I see in the Free-trade principle that which shall act on the moral world as the principle of gravitation in the universe,—drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace." QotD

Richard Cobden, the great nineteenth-century British "apostle" of free trade, understood it to be much
more than just a promise of widespread material plenty...

"But I have been accused of looking too much to material interests. Nevertheless I can say that I have taken as large and great a view of the effects of this mighty principle as ever did any man who dreamt over it in his own study. 

    "I believe that the physical gain will be the smallest gain to humanity from the success of this principle. 

    "I look farther; I see in the Free-trade principle that which shall act on the moral world as the principle of gravitation in the universe,—drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace. 

    "I have looked even farther. I have speculated, and probably dreamt, in the dim future—ay, a thousand years hence—I have speculated on what the effect of the triumph of this principle may be. I believe that the effect will be to change the face of the world, so as to introduce a system of government entirely distinct from that which now prevails. 

    "I believe that the desire and the motive for large and mighty empires; for gigantic armies and great navies—for those materials which are used for the destruction of life and the desolation of the rewards of labour—will die away; I believe that such things will cease to be necessary, or to be used, when man becomes one family, and freely exchanges the fruits of his labour with his brother man. 

    "I believe that, if we could be allowed to reappear on this sublunary scene, we should see, at a far distant period, the governing system of this world revert to something like the municipal system; and I believe that the speculative philosopher of a thousand years hence will date the greatest revolution that ever happened in the world’s history from the triumph of the principle which we have met here to advocate."

          ~ Richard Cobden, from his 'I Have a Dream' speech

[Hat tip Steve Horvitz]

. 

Backfire Economics: 6 ways Trump's tariffs are hurting the very people they're supposed to help

It seems almost embarrassing to have to rehearse the case for free markets and free trade, a case thoroughly established centuries ago by the likes of Adam Smith, Richard Cobden, and especially Frederic Bastiat. But support for Trump’s tariffs is not something generated by desire for greater prosperity, says Mark J. Perry in this guest post -- a compilation of soundings on how the tariff experiment is going this time round ...

__________________________________________________________________

1. How Trump’s Policy Decisions Undermine the Industries He Pledged to Help (New York Times):

Even as the president’s pro-business stance is broadly embraced by the corporate community, in some significant cases the very industries that Mr. Trump has vowed to help say that his proposals will actually hurt them. They also warn that policies designed to aid one group will eat into someone else’s business in ways that policymakers should have anticipated.
“I would like to tell the president, ‘Man, you are messing up our market,’” said Kevin Scott, a soybean farmer in South Dakota and the secretary of the American Soybean Association. The idea of changing Nafta, he said, “gives us a lot of heartburn in farm country.”
At the same time, Mr. Scott said, China’s threat to impose tariffs this week on United States soybeans—in direct response to Mr. Trump’s tariffs on other Chinese-made products—is already having a negative effect on the prices farmers see. In recent days, Canada imposed its own retaliatory tariffs against the United States. And on Friday, General Motors warned that Mr. Trump’s threat of tariffs on imported cars could backfire, killing American jobs and leading to “a smaller G.M.”

2. U.S. Exporters Will Be a Surprise Loser From Tariff Fight (Wall Street Journal):

Though completely counter-intuitive, theory and evidence show that taxes on imports act just like a tax on exports. Though it’s early, the Trump administration’s recent round of tariffs is already rippling out to exporters: Soybean farmers face plunging prices as China raises tariffs, Harley-Davidson will move production of motorcycles destined for the European Union out of the U.S., and BMW says foreign retaliation may hit exports from its South Carolina plant.
Economists credit Abba Lerner, then a graduate student at the London School of Economics, for proving theoretically in 1936 that an import tariff was equivalent to a tax on exports. The Lerner Symmetry Theorem is considered a key principle of trade economics, like 18th-century economist David Ricardo’s theory of comparative advantage.

3. New Chinese Tariffs Mean Lower Prices For Wisconsin Farmers (Wisconsin Public Radio):

Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, said it’s reminiscent of the “guns versus butter” model in economics. Normally, the concept is used to talk about the relationship between a country’s investment in defense versus civilian goods. But Stephenson said it feels relevant on the issue of tariffs. “Right now, agriculture in particular, and dairy for us especially is just getting the blow-back of these retaliatory tariffs on steel and aluminum,” Stephenson said.
Stephenson said the new tariffs have already caused Class III futures prices to decline by $2 per hundredweight or 100 pounds of milk. “Going into our fourth year of relatively low milk prices and now seeing the price that had been recovering stumble, and significantly stumble, it’s not a good thing,” Stephenson said. “So producers are not feeling good about that impact of tariffs.”

4. U.S. Soybeans Are A Prime Target For Chinese Tariffs (National Public Radio).

Minnesota soybean farmer Michael Petefish and president of the Minnesota Soybean Growers Association:

"Since the announcement of retaliatory tariffs, the soybean market has dropped almost $2 per bushel. For my family farm, with the amount of soybeans we produce, that’s close to $250,000 in lost value."

5. Donald Trump’s Trade War Is Proving The Free Traders Right (The Federalist):

It seems almost embarrassing to have to rehearse the case for free markets and free trade, a case thoroughly established centuries ago by the likes of Adam Smith and especially Frederic Bastiat. But Donald Trump is determined to make us learn that case all over again, the hard way.
The key argument for free trade is that a tariff on imports may benefit one particular industry or group of producers, but it raises prices for everyone else, including other manufacturers who import the taxed material. You think the country is getting ahead because you see the increased profits for, say, domestic steel producers. The problem, as Bastiat famously pointed out, is what you don’t see—or at least, what Trump refuses to see—namely, all of the costs that tariffs impose on other companies and individuals.
Part of the reason President Trump’s unilateral trade war is becoming such a quagmire is that it is carried out with no apparent plan or strategy. It is not a negotiating ploy to push other countries into a trade deal with the United States, because Trump announced this war by withdrawing from trade deal negotiations. Instead, his targets seem random and capricious. As with his hairstyle and many of his other political views, Trump’s attitude toward trade and industry seems to have been cemented in 1978, so he’s laying down trade barriers around the industries that associated with American economic might back then, like steel and cars.
Yet he is finding that even the quintessential American firms of 1978 are connected to the world if vast webs of trade. Take one of the brands Trump has lauded, Harley-Davidson. These days, Harley sells a lot of motorcycles in Europe, so Trump’s trade war is causing them to move some production overseas to avoid European retaliatory tariffs. Rather than rethink the tariffs, Trump threatened the company and accused it of “surrender” in his trade war.

6. Trump Voters Stand by Their Man as He Wrecks Their Jobs (Reason):

All of which leaves the impression that support for Trump’s tariffs is not something generated by a sense of a greater good. It’s not about voters agreeing to take a hit now because they understand it is necessary for something beneficial down the road. It seems to be, mostly, about tribalism. About the fact that our guy is “better than the Muslim we had in the White House,” even if his policies cost my job.
At least that’s how it seems for now. Once more jobs are actually lost, and perhaps once it becomes clear that the tariffs aren’t accomplishing whatever goals Trump has, perhaps that will change. The partisan hatred might not go away, but maybe voters will stay home. Until then, parts of so-called Trump country seem to be fine with their man destroying their jobs just to "own the libtards."

____________________________________________________________

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus. 

This post previously appeared at FEE, reprinted from AEI.

Friday Morning Ramble–18.03.16

 

So taxing the hell out of foreign companies will encourage them to do more business here? Really?!
The Apple Tax – DIM POST

One reason house-price inflation took off: QE.NZ. We may not have had QE officially, but compared to “New Zealand has had the second fastest rate of money supply growth” of all major developed countries – around half of which was borrowed into existence to buy houses.
A strange op-ed from a business lobby group – CROAKING CASSANDRA

“If spending money on Maori was the answer, they would be fixed by now. $1.7B a year.”
How much exactly is ‘special treatment’ for Maori that Kelvin Davis says doesn’t exist – WHALE OIL

Yet again, NZ got there first.
USS Gabrielle Giffords Christened As Navy’s First Gun-Free Warship – DUFFEL BLOG

A new Facebook campaign... if Britain votes Brexit, get Britain into a Commonwealth free-trade zone. “Facebook campaign to get New Zealand to be the first Commonwealth country to seek to strike a free trade and free movement of people and capital deal with Britain upon June 24th, should her people choose to leave the EU.
Welcome Home, Prodigal Mum – Andrew Bates, FACEBOOK
Commonwealth 'free movement' widely supported: poll – ABC

David Seymour: “If you haven't seen this heartbreaking story, it helps explain why I've introduced my End of Life Choice bill to the parliamentary ballot.”
'Rachel should have right to choose' – STUFF

Well, that's interesting.
Kauri campaigner cut down protected tree – 3 NEWS

“2016 could be the year governments admit the war on drugs has failed. Or they could maintain the status quo.”
Opponents of the War on Drugs Are Not Satisfied With the UN's Plan to End It - VICE

The Economist Intelligence Unit just included a Trump presidency as one of the top 10 risks for the global economy. Evil elitist bastards.
Trump presidency rated among top 10 global risks: EIU – BBC NEWS

It’s not like the ignoramus hasn’t been answered centuries ago: “Along came Adam Smith and made a different argument, that mercantilism punished consumers and the poor, while rewarding producers and the rich; that imports were a good thing because they raised people’s standard of living by giving them what they wanted at lower prices. With money to spare, consumers bought more things from producers, creating jobs and generating prosperity. If bread was cheaper, people could afford more textiles. Gradually, with the help of David Ricardo and John Stuart Mill, Britain was persuaded of this and by the time Robert Peel, William Ewart Gladstone and Richard Cobden were in charge, Britain had declared unilateral free trade and dared the world to follow.”
The Case Against Mercantilism – Matt Ridley, MATT RIDLEY
Donald Trump versus Adam Smith- Richard Ebeling, FACEBOOK

“If you listen to Trump’s answers to almost any question about how he will fix a problem, he uses up the first 95 percent of his time explaining, re-explaining and demagoguing about how bad the problem is. (That is, if he’s not talking about polls.) Then in the last few seconds, he says we’ll fix the problem by being really smart or by winning or by hiring the best people.
    "In other words, he has no idea how to fix it."
A Slow-Motion Invasion of the Body Snatchers ... – Jonah Goldberg, NRO

“No one who is as obsessed as Clinton obviously is with gaining power should be trusted with power. Nothing good will come of a Clinton presidency; it will be calamitous, at home and abroad.
    “But I do understand those who fear Trump more than they fear Clinton. Trump's lack of a political track record makes a President Trump even less predictable than a President Clinton. And while being less predictable means, in the abstract, that the policies pursued by Trump might turn out to be surprisingly better than those pursued by Clinton, in practice such an outcome is unlikely.
    “Nearly everything spouted from Trump's loud mouth should frighten the bejesus out of sane adults. Build a border wall? “Protect” ourselves from low-priced goods from China? “Rough up” protesters at political rallies? Really? These are the rantings of a thug, not the proposals of a civilized liberty-loving man.”
Which presidential candidate will do the least harm? - Donald Boudreaux, TRIB LIVE

These are your "grownups," people.
Kasich’s Despicable Play For King Maker – THE RESURGENT

“"Whenever you see the inequality gimmick at work, you can be sure that the goal of the speaker is not to end hardships or remedy injustices, but to smash the successful."
Bernie Sanders and the Inequality Gimmick – Don Watkins, YOU TUBE

“Today’s right is always complaining that the left holds the cultural high ground and that we need to do more to influence popular culture. But Ayn Rand is the only figure on the right who has really succeeded at it. She wrote some of the world’s most popular and enduring fiction, which has succeeded in the marketplace—for 70 years and still going strong—in the face of unrelenting hostility from mainstream critics."
5 Things the Right Can [Still] Learn from Ayn Rand – Robert Tracinski, THE FEDERALIST

“Conservatives wonder why they keep losing to the leftists. It’s because conservatives justify capitalism, individual rights and private property with faith. “God says it’s true!” This makes it easier for leftists to argue, “We have science, reason and logic on our side.” Conservatives apologize for human nature by saying, “Socialism may be ideal, but human nature requires capitalism.”
    “That’s not so.
    “Capitalism is great because it enables the best and the brightest to lift everyone out of poverty and because under capitalism, individuals are free to think and reason. Prayer and faith do not create comfort and material wealth...”
Governments, Rights Should Be Religion-Neutral – Michael Hurd, NEWSMAX

Nice fellow.
Bernie Sanders Supported Press Crackdowns, Bread Lines, and Castro's Cult of Personality – REASON

“Q: "What did socialists use before candles?" A: "Electricity."
Venezuela to shut down for a week to cope with electricity crisis – BLOOMBERG

    “But there is no justification, in a civilised society, for the kind of mass civil disobedience
    that involves the violation of the rights of others – regardless of whether the demonstrator’s
    goal is good or evil. The end does not justify the means. No one’s rights can be secured
    by the violation of the rights of others. Mass disobedience is an assault on the concept
    of rights: it is a mob’s defiance of legality as such."
      ~ Ayn Rand in “The Cashing-In: The Student ‘Rebellion’” 1965.

Crazy? Or just crazy enough to work?
Why Europe should build a Hong Kong in Syria – THE WEEK
Help Refugees 
Help Themselves - FOREIGN AFFAIRS

“A minimum wage law is a balancing act for politicians. They have to have the wage be just high enough to create a constituency for the wage that will support them but not so high that people who actually vote will lose their jobs...For every two people who benefit from a minimum wage law, one is put out of work. That’s okay if the people who are out of work don’t vote."
Oregon Legislature Repeals Laws of Supply & Demand – CATO

“Consider that Arabs wandered for centuries across desert sands that concealed vast petroleum deposits, but it was Western investors who actually made Middle Eastern petroleum valuable. These companies searched for many years in a vast wilderness, moving in frustration from one dry hole to another, risking utter failure and financial ruin. Eventually, by virtue of their ingenuity, courage and perseverance, world markets were flooded with oil that Middle Eastern governments should have deemed private property — 100 percent private.
    “Instead, those governments muscled in, claiming public ownership based on nothing but their sovereignty over the geographical areas where oil deposits happened to reside.”
Nationalisation Is Theft – Tom Bowden, ARI

“Under a proper gold standard, the rate of interest is kept in a band that is not only narrow, but which is also stable over long periods of time. This is the principal virtue of the gold standard. It does not fix the level of prices, which would be neither possible nor desirable. It keeps the rate of interest consistent, which serves the interests of wage earners, pensioners, and other savers, and of entrepreneurs whose work provides the goods, services, jobs, and interest payments, on which everyone else depends (and which they take for granted)."
Interest Rate Stability: The Primary Virtue of the Gold Standard – Keith Weiner, THE SAVVY STREET

Here’s the slogan that would acutually fulfil the empty promise:

“St. Patrick's Day in the United States is a celebration of immigrants. … People across the country will be celebrating today the legacy of a relatively more open boarders immigration policy of an earlier period. Between 1820 to 1860, roughly 2 million Irish arrived in the US, most fleeing the famine ravaging Ireland. They came poor, uneducated, and facing prejudice and discrimination. The lesson that this experiment was a strong net gain for America hopefully isn't lost amongst the fearmongering of politicians or the abundance of green beer.”
Celebrating Immigration – Emily Skarbek, ECON LOG

“It just came to my attention that if you don't like the group of organized racist thugs known as "Black Lives Matter," it makes you a racist. Who knew? A refresher article for those interested in a response.
    “I don't like black supremacist groups any more than white supremacist groups. Morally, they should be regarded as one and the same.
    "The moment you start treating black lives as either more or less important than anyone else’s life is the moment you have become a racist."
Do Black Lives Matter ... Or Do Lives Matter? – Michael Hurd, LIVING RESOURCES CENTER

In a nutshell:

“Alex Epstein faces off with Ben Mankiewicz from The Young Turks on the heated topic of "being green."
Jolted: The Big, Fat Lie Of "Being Green" - with Alex Epstein – THE SURGE

Oh, by the way …
NASA’s chief climate scientist admits record warm temps due to El Nino – JUNK SCIENCE

An essentially flat cost of living is "abysmal" according to the Bloomberg headline writers. Morons.
Imports Share Blame [sic] for Switzerland's Abysmal Inflation Rate – BLOOMBERG

How do we get richer? Things get cheaper. An example: The price for light in a household. From 1300 to 2006

“Which is to say , if you start looking for something carefully … you will often find it.”
Cancer Rates Spiked After Fukushima. But Don't Blame Radiation. – Sarah Fallon, WIRED

“The most educated (in terms of degrees) generation ever. The lowest overall ability to do anything …”
American Millennials Are Some Of The World's Least Skilled People – HUFFINGTON POST

Don’t make it complicated.
Simplifying Childhood May Protect Against Mental Health Issues – HUFFINGTON POST

Yes, YouTube gets a free ride.
Why Spotify's Royalty War Is a Giant Industry Distraction – DIGITAL MUSIC NEWS

The Road Runner episode we've waited 20 years to see:

Fairly fascinating look at the origins and use of the language we speak (or try to) every day—and immigration plays a large part! Not sure however whether “fo shizzle” would really constitute part of an expanded vocabulary.
25 maps that explain the English language – VOX

“Are you a “worry wort?” If so, then read on. If not, then don’t worry about it — unless you’re worried that you might miss something good….”
What, Me Worry? – Dr Michael Hurd, LIVING RESOURCES CENTER

“To understand Ayn Rand’s view that selfishness is a virtue and altruism a vice, one cannot take for granted the conventional meanings ascribed to these terms … “
Exploring ARI Campus: Ayn Rand on Altruism – AYN RAND CAMPUS

“This 1967 lecture is Ayn Rand’s flagship talk on capitalism. In it she explains in depth what capitalism is, why it is often misunderstood and why it is the only social system consonant with man’s nature.”
What Is Capitalism? – AYN RAND CAMPUS

Yeah, That one.
The Myth about Ayn Rand and Social Security – Onkhar Ghate, ARI

“Secluded behind a screen of tall bamboo shoots in West Hollywood, Los Angeles, the Kings Road House (above) may be considered the first [American] home ever built in the Modernist style. Designed by Rudolf Schindler in 1921, the architect’s use of tilt-slab concrete construction (highly innovative at the time) and an informal studio layout, set it apart from its contemporaries; indeed, the design would set the tone for other Modernist residential design for decades.”
AD Classics: Kings Road House / Rudolf Schindler – ARCH DAILY

See: I really did learn  something useful at architecture school: “Architecture school is a peculiar beast. It almost never actually prepares students to be practicing architects, and 90% of what is written by architects and architectural theorists is incomprehensible garbage. But being able to discern what is and what is not incomprehensible garbage is a profoundly useful life skill."
6 Phases Every Architecture Student Goes Through – ARCH DAILY

A fourth consecutive win and reported new world record for combined take-off/landing! 20 foot landing, 24 foot takeoff:

Is there anybody who hasn’t seen this yet? New Order on old instruments:

Older music on newer instruments:

Great music that never gets old:

I do. Do you?

[Hat tips John Strong, Michael Strong, Anoop Verma, Rust Watkins, Phil Oliver, Maria Montessori Education Foundation, Robert Bartnik, Stephen Berry, David Seymour, Betsy Speicher, Max Roser, stan stewart, Sassy Little Hobbit, Rudolf E. Havenstein]

Thanks for reading, and have a great weekend!
Cheers
PC

PS: Here’s what I’ll be drinking (heh, heh):

Frédéric Bastiat’s ‘Economic Sophisms’ is Now More Important Than Ever

Frédéric Bastiat’s Economic Sophisms was the first book on economics I ever found worth the reading. So I’m delighted to say that:

Frédéric Bastiat’s Economic Sophisms is Now More Important Than Ever
Guest post by Julian Adorney and Matt Palumbo

The great economist Frédéric Bastiat would have turned 214 today. His contributions to liberty have been many, but while so many advocates of free markets focus on The Law there is another book that represents his legacy even better: Economic Sophisms. This short work of essays epitomises perhaps his most important contribution: using taut logic and compelling prose to bring the dry field of economics to hundreds of thousands of laymen.

Bastiat did not, generally, clear new ground in the field of economics.¹ He read Adam Smith and Jean-Baptiste Say and found little to add to these giants of economic thought. [Ahem - Ed.] But like Richard Cobden, his English hero, Bastiat was active in promoting their free trade doctrines – and was possessed with the keen wit and clear, pithy writing style that gave them wings. His writings have become immensely popular. One-hundred-and-fifty years after his death, essays like “A Petition” are still circulated as an effective counter to progressive economics.

Bastiat makes three central contributions in Economic Sophisms.

First, he reminds us that we should care about the consumer, not just the producer.

Second, he dismantles the argument that there are no economic laws.

Third, and more generally, he is one of the few politicians and writers who thought with his head, not with his heart. Bastiat used logic to clearly lay out the consequences of political actions instead of hiding behind good intentions.

Surplus, Not Scarcity

Economic Sophisms expresses a common theme over and over again: we should craft policies that focus on consumers, not on producers.

When Bastiat uses these phrases, it can be easy to misinterpret him. Writing 100 years after Bastiat, Keynes hijacked the terms without the integration. Bastiat was no Keynesian. When Bastiat discusses how consumption is the end goal of the economy, what he means is: having goods (which benefits consumers) is more important than making goods (which benefits producers). Put another way, producers prefer scarcity, because it drives up prices. Consumers prefer surplus for the opposite reason.

Producers advocate all sorts of methods for reducing the total quantity of goods (theirs excepted, of course). Producers seek to tax goods from other countries that compete with their own. They outlaw machines that would replace them. Producers even favour policies like burning food to drive up food prices, a policy that caused much starvation when it was enacted in the United States during the Great Depression. Consumers, by contrast, prefer abundance. They are happiest when they have a plethora of goods to choose from at a low price.

Bastiat points out that we are all consumers, including the producers. The man who produces railroads also uses his wages to buy goods. One might imagine a world with no producers, a paradise in which man’s every need is fulfilled by nature or a benevolent God. But one cannot imagine a world with no consumption. In such a world, man would not eat or drink, have clothing or buy luxuries. Consumption, and quality of life, is the essential yardstick to measure a society’s economic prosperity.

When we enact producer-backed measures like tariffs, Bastiat argues, we favour producers’ interests over consumers’. We show that we’d rather have scarcity than surplus. Taken to its logical extreme, such a policy is absurd. Would anyone truly argue that total scarcity is preferable to having plenty?

The Principle of No Principles

In Bastiat’s day, it was fashionable to claim that no real principles exist. X may cause Y, but a smaller X needn’t cause a smaller Y; it could cause Z instead, or A. Today, we see the same logic: people who claim, for instance, that a minimum wage hike to $100 would kill jobs but that a hike to $10.10 would somehow create them.

In essay after essay, Bastiat destroys this myth. Economics is not a foggy morass where up is sometimes down, left can be right, and there are no absolute truths. Economics is not like nutrition, where a glass of wine can heal while two gallons can kill.

In economics, a cause will produce a correlational effect, regardless of how large the cause is. If small X causes small Y, large X causes large Y. A minimum wage hike to $100 will kill many jobs; a minimum wage hike to $10.10 will still kill some. The effect does not vary, only the size of it.

Indeed, one of Bastiat’s most common argumentative tools is reductio ad absurdum, or carrying a concept to its logical conclusion. Opponents of mechanisation want to force railroads to stop at one city and unload goods, thereby generating work for the porters? Very well, says Bastiat. Why not have them stop at three cities instead? Surely that would generate even more work for the porters. Why not stop at twenty cities? Why not have a railroad composed of nothing but stops that will make work for the porters – a sort of “negative railroad”?

By carrying concepts to their logical conclusion, Bastiat provides a firm antidote to the fuzzy thinking of protectionist advocates.

Think with Your Head

In Bastiat’s time, just as today, it was popular to think with one’s heart. “We must do something!” went the rallying cry; “this is something, then we must do it!” And never mind the consequences. Good intentions were enough.

Make-work, for instance, has always been a favourite policy of those who think with their hearts. They see men and women unemployed and demand government take action. Often, this action takes the form of impeding human progress: using porters instead of railroads, for instance. The initial consequence, for the porters, is positive: more end up employed. But Bastiat recognises that such policies, while they may protect the porters, harm the economy as a whole. They raise prices and create scarcity.

Bastiat looked at more than just the direct consequence of an action. He examined all the outcomes, using taut chains of logic to demonstrate how each policy would impact those whom he was most focused on — the consumer.

Bastiat’s Legacy

Bastiat did not invent any new economic tools or schools of thought¹. But the clear logic with which he thought through economic ideas, and the clear and witty prose with which he lambasted those who did not do so, have made him one of the most popular economic figures of all time.

Bastiat’s ideas in this text have been borrowed, rehashed, and republished for over 150 years. His insights have been appropriated by dozens of prominent thinkers. Most famously, Henry Hazlitt based Economics in One Lesson largely on the essays in Economic Sophisms.

As we make note of his 214th birthday, perhaps we should raise a toast to the man whose ideas — in all their adopted formats — have done so much for the cause of liberty.

 

---

Julian Adorney is an economic historian, entrepreneur, and fiction writer.
Matt Palumbo is the author of The Conscience of a Young Conservative and In Defence of Classical Liberalism.
This post first appeared at the Mises Daily.

NOTES:

1. “…did not, generally, clear new ground in the field of economics”? Bastiat was perhaps the first to concisely explain that economics necessitated long-chain thinking, without which we are all dead. Those who grasp his point would surely disagree, as would students of his Economic Harmonies, of his anatomy of plunder, and of his ricochet theory, among other contributions.- Ed.

The day classical liberalism died

There have been many 100-year anniversaries associated with the First World War, the most recent being the tragic invasion of the Dardanelles in which 130,000 died and three nations, strangely, see their birth.
But more than soldiers died in the war. This Sunday, there is the 100-year anniversary of the death of an idea. An idea that might yet be reborn, but which died its first death in the tragedy of that war.
Classical liberalism had promised peace.
It could not survive the war that seemed to explode its creed…
[NB: Yes, for some of you this will be tl;dr. But I am really looking forward to any comments you might have. Other than that, obviously. Oh, and the footnotes jump you around and then back again so you don’t have to. You’re welcome.]

MAY 17, 1915: The day classical liberalism died

“War appears to be as old as mankind,
but peace is a modern invention.”
- Sir Henry Maine (1822-88)

    Under the sun
Are sixteen million men,
Chosen for shining teeth,
Sharp eyes, hard legs,
And a running of young warm blood in their wrists.
    And a red juice runs on the green grass;
And a red juice soaks the dark soil
And the sixteen million are killing … and killing and killing.
- Carl Sandburg, “Killers,” 1916

Classical Liberalism died one-hundred years ago this week, its promise of peace and prosperity carried off like 16 million souls in the meat-grinder of the First World War.

If a date could be put on it, Liberalism in the classical tradition died one-hundred years ago this Sunday. Almost terminal already,¹ it was finally extinguished in the second year of that War, killed when the ruling British Liberal Party who had taken Britain into that war -- the party of John Stuart Mill, of Cobden, of Gladstone, and the ruling party for more than half of Britain’s glorious years of nineteenth-century prosperity – perished in the wake of Gallipoli², never to rise again.³

If a precise day could be put on it, it might be the day the British Liberal Cabinet split asunder in the wake of nine months of military and political disasters, never to rise again. That day, May 17, 1915, marked the end of the last all-Liberal government.⁴

In Britain, America, Austria, France, Germany, the lessons governments learned from their economies of ‘war socialism,’ applied in force when the war ended⁵, was that the more government you had, the better the health of the nation. This fact alone explains much of the century that followed.⁶

Liberalism in the classical tradition comes from the Latin “liber” meaning “free.” It refers to the philosophy of freedom, to the removal of privilege and the recognition of individual rights – what Ludwig Von Mises called in his great book Liberalism “the philosophy of Enlightenment.”⁷ (The contrast with today’s ‘liberals’ could not be more stark.⁸

"The program of liberalism [in the classical tradition] … if condensed into a single word,” said Mises, “would have to read: property, that is, private ownership of the means of production.”⁹

Translated into effect, this meant the creation of the widest possible peaceful network of division of labour.¹⁰ In world with few political restrictions on labour and capital flows, this was a worldwide division of labour.

If Liberalism of the classical nineteenth-century variety could have said to have a creed of foreign policy, it would be this: that if goods don’t cross borders, then armies will.¹¹ Said to have been expressed by both the French free-trader Frederic Bastiat and his English Liberal colleague Richard Cobden¹², and seemingly borne out by there having been (unusually) no European-wide conflicts for a century – not since Waterloo -- it would be fair to say however that in the year of 1914 when the guns of August began roaring, that creed was proved spectacularly wrong.

Because, at that time, never before had so much been traded with so many. Never before (and even since) had so much capital flown to so many parts of the globe. Never before had business networks buzzed so widely and so well.¹³

Surprising to many, but we are only now approaching the
level of globalisation achieved by the ‘liberal century’

With the network of world trade exporting the industrial revolution’s prosperity to every corner of the globe, the degree of ‘globalisation’ then has barely been surpassed even a century later. Never before nor since has movement of labour and capital been so free.¹⁴ Never before in the history of the world had there been more goods crossing more borders. Yet when Germany invaded France and the British Liberal Cabinet took Britain into the war, the German army was then at war with her country’s two largest trading partners.¹⁵

So much for the promise of free trade delivering peace, you might say.

But, well, you would be wrong.

Networks, we’ve got networks: from one end of the nineteenth-century world to another!

1. THE IMMEDIATE POLITICAL PROBLEM: WHO DECIDES TO GO TO WAR?

Like all general principles, the liberal promise of peace with free trade stands in a context. That context is both political and cultural.¹⁶

The argument does not say that "If goods do cross borders, armies won't." What it does say is that:

Free trade helps quell government's passion for war. It creates powerful lobbying groups on all sides that demand the preservation of peace and the triumph of diplomacy over hostility. International trade networks create intermediating structures of business relations that work as a barrier to bombs and belligerence.^17, 18

And “[h]istory demonstrates the peaceful influence of trade”:

The century of relative world peace from 1815 to 1914 was marked by a dramatic expansion of international trade, investment and human migration, illuminated by the example of Great Britain. In contrast, the rise of protectionism and the downward spiral of global trade in the 1930s aggravated the underlying hostilities that propelled Germany and Japan to make war on their neighbours.19

“Either goods will cross borders or armies will,” says a modern free-trader; “the golden age of free trade in the 19th century made possible the ‘long peace’ that ended in 1914.”²⁰

But it still ended in 1914.

Observe that the immediate political problem is that the men who made the decisions in 1914 to go to war (and, yes, Virginia, they were all men) were not the same men in whose self-interest it was to maintain a peaceful continent.

Remember that private citizens—whether rich or poor, whether businessmen or workers—have no power to start a war. That power is the exclusive prerogative of a government. Which type of government is more likely to plunge a country into war: a government of limited powers, bound by constitutional restrictions—or an unlimited government, open to the pressure of any group with warlike interests or ideologies, a government able to command armies to march at the whim of a single chief executive?21

The somewhat liberal Concert of Europe had been replaced by the sabre-rattling alliances of the “balance of power”²² but, even so, fewer restraints existed in some places than others, and in some political systems than others – and in the political environment as it then was and always will be, the influence of those desiring the peace for which we argue is necessarily indirect: by lobbying, or by the ballot box.

And those whom by free trade had been brought together and prospered were not those who split the world asunder.

2. THE CULTURAL PROBLEM: COMETH PROSPERITY, COMETH THE BACKLASH

Classical liberals were under few illusions.

The believed … that peace would be the natural consequence of the growth of international commerce and self-government, since it would increase the influence of those classes which, unlike the old ruling elites, had no interest in the perpetuation of war… this group became increasingly significant in western Europe as the urbanisation and modernisation of society increased their political power, and improvement in communications bound them closer. By the beginning of the twentieth century the professional middle classes of the western world were indeed beginning to constitute what was later to be termed an ‘international community.’ Some indeed saw themselves as the international community: mistakenly, alas.²³

Because even in Britain, then the most advanced of European countries, those importing, exporting, producing and consuming all those goods that were so resolutely crossing borders were not those making the decisions that sent men to war. Even with the recent expansion of the electoral franchise “[t]he upper levels of the civil service, the Church, the armed forces, the House of Commons, and of course the House of Lords were all dominated by the landed classes,” and in the new prosperity these were the very men who were losing out.

“Even in 1897, after successive reforms had widened the franchise and brought new sorts of men into politics, 60 per cent of Members of [the British] Parliament still came from those classes.”²⁴ And many in those classes were as violently opposed to the new commercial world that had brought peace as they were behind the idea of a new martial adventure that, it was felt, would offer a stiff moral tonic to a country grown “soft” and a generation obsessed with its own interests. As writer Norman Angell described it,

There is something in warfare, in its story and in its paraphernalia, which profoundly stirs the emotions and sends the blood tingling through the veins of the most peaceable of us, and appeals to I know not what remote instincts, to say nothing of our natural admiration for courage, our love of adventure, of intense movement and action.”²⁵

The same sad story of reactionary antediluvianism can be told in all the Great Powers; in a French ruling class eager to relive martial glory after the embarrassments of the Franco-Prussian War and a population whose bloodstained revolutionary conquests had now taken on a more glorious sheen; in a Russian military and nobility keen to shake off the embarrassment of its abject defeat in the Russo-Japanese War and flex newly-won industrial muscles in the only way they understood; perhaps most of all in a Germany that had most recently enjoyed both a unification and an Industrial Revolution, the beneficiaries of both being vastly different.

And even if democracy were a means by which to fully restrain the non-peacefulness of a Kaiser or a King or a Cabinet (which it isn’t), neither Britain’s prosperous merchant classes nor continental Europe’s emerging new industrialists had any real sway in the Palaces of Westminster, the deliberations of the Duma, or the rationalisations of the Reichstag. Even if their influence counted –and the influence of the Reichstag itself in decision-making was minimal, and that of the Russian Duma virtually nil -- those who still dominated these august bodies were not predominantly from the thrusting new classes needing peace to prosper but from the aging nobility resentful at being thrust aside. And “the absolutist powers had no intention of peacefully relinquishing their prerogatives.”²⁶

It was not just the resentment of class. It was also a product of economics. The nobility of every old European country was bolstered on a bulwark of ancient land-holdings supporting limited agricultural production that, for many static centuries, had been enough to pay the nobility’s way even as it kept the rest of humanity impoverished.

But as anyone familiar with the concept of creative destruction would be aware, (and as John Stuart Mill had predicted^26a) the new prosperity of the Industrial Revolution threatened not just the continuing prosperity of a noble class whose wealth was based on agriculture, but its very existence.²⁷ Every seed drill, horse hoe, moldboard plough and combine harvester that increased grain production and lowered the sale price of every bushel was a thrust to the wallet and a dagger to the heart of a class whose own agricultural returns due to the increased production were static and falling.

No wonder so many saw their enemies as the “new rich,” their salvation in politics, and their hopes for revival in a return to the fading glory of military conquest.

3. CRONYISM, AND THE ERRORS OF IMPERIALISM

A telling point is that when war was announced every stock market in Europe collapsed. Rather than being encouraged by the news, investors were appalled. War was not good for commerce, and investors themselves realised this.

It’s still said however that the fact capitalists controlled governments is the fact that explains the war – that trade itself is what caused the armies to cross borders in order to conquer new markets. Even if the former were true, and as we’ve seen it wasn’t, the latter is not.

Rosa Luxemburg has one of the the classic statements of the Marxist fallacy in her 1913 Accumulation of Capital:

Since capitalist accumulation needs … an additional market outside that provided by capitalists and workers, the necessity to expand into non-capitalist markets follows. Imperialism becomes an historical necessity and follows from the requirements and conditions of capital accumulation.²⁸

Yet her colleague Nikolai Bukharin himself asks her²⁹ “why should one annex [the] capitalist territories” that were invaded or later occupied by the European Powers when those territories were already buying their goods?

We might also wonder what advantage there is in invading territories that are already supplying a country with goods – or would freely supply them if trade were allowed to be free, as it largely was.

The argument doesn’t stack up in either direction.

Capitalism wins and holds its markets by free competition, at home and abroad. A market conquered by war can be of value (temporarily) only to those advocates of a mixed economy who seek to close it to international competition, impose restrictive regulations, and thus acquire special privileges by force. The same type of businessmen who sought special advantages by government action in their own countries, sought special markets by government action abroad. At whose expense? At the expense of the overwhelming majority of businessmen who paid the taxes for such ventures, but gained nothing. Who justified such policies and sold them to the public? The statist intellectuals who manufactured such doctrines as "the public interest" or "national prestige" or "manifest destiny."³⁰

In short:

For a liberal state, the question of whether or not the boundaries of its territory are to be further extended is of minor significance. Wealth cannot be attained by the annexation of new provinces, since the ‘revenue’ derived from a territory must be used to defray the necessary costs of its administration [and the lives of young men needed to acquire it].³¹

Another argument is that the bomb-makers themselves are a force for war.

Inconveniently for … [the argument], however, is that there is scarcely any evidence that those [interests in armaments] made businessmen want a major European war. In London the overwhelming majority of bankers were appalled at the prospect, not least because war threatened to bankrupt most if not all of the major acceptance houses engaged in financing international trade. The Rothschilds [who had financial links to Vickers, Maxim and ironworks supplying a preponderance of Austrian and German rearmament] strove vainly to avert an Anglo-German conflict, and for their pains were accused by the foreign editor of The Times … of “a dirty German-Jewish international financial attempt to bully us into neutrality.”³²

A similar story can be told of major ship-owners, bankers, industrialists and lobbyists,³³ -- and the reaction to them of an eager-for-war commentariat.

Basically the German bomb-makers argued that in the end war would reward no-one, least of all themselves. They too needed peace to produce goods and make profits. And none of them wanted to be nationalised, or subjected to government control.

And with all its vicissitudes, bomb-making was hardly as profitable as the alternatives. The Krupp armaments company for example, one of the German army’s main suppliers,”was actually less profitable than its competitors who concentrated on production for civilian consumption, and that its ‘special relationship’ with state authorities actually impeded it from maximising its profits.”³⁴ Sure, there were opportunities for cronyism, but that influence went from government to business, not the other way. “The actual war profiteers of all mixed economies were and are of that type: men with political pull who acquire fortunes by government favour, during or after a war—fortunes which they could not have acquired on a free market.”³⁵

But even if trade between continental neighbours hadn’t set off the war, what about the conflicts generated from colonial rivalries abroad? We might look at wars forgone due largely to trade.

If there was a war which imperialism should have caused it was the war between Britain and Russia which failed to break out in the 1870s and 1880s; or the war between Britain and France which failed to break out in the 1880s or 1890s. These three powers were, after all, the real imperial rivals, coming into repeated conflict with one another from Constantinople to Kabul … from the Sudan to Siam ... ³⁶

But war didn’t happen, largely because would-be participants realised the conflicts would have cost more than they could gain.

But hadn’t Germany’s search for foreign markets, for its “place in the sun,” caused it to butt up dangerously with its European neighbours in the colonial parts of their anatomy? Germany’s 1911 dispute over the French grab of Morocco offers a telling example: It was not about opening up markets but a simple grab for martial glory on the latter part and a place in the colonial sun for the former. And it was settled not by war between France and Germany, but “by a transfer of African territory to Germany, demonstrating that colonial rivalries, even though they produced tensions, were not central enough to lead to war among the powers.”³⁷

And while the Berlin-Baghdad railway is often cited as a factor in the war’s origins; closer study reveals it to be a useful example of the very differing interests of businessmen and bomb-makers.³⁸

Now, it is true that Britain’s colonial interests did put it in potential conflict worldwide; its interests in India and the trade routes thereto for example putting it in conflict with France’s in the Middle East and with Russia’s in the Black sea and the subcontinent. Indeed, this had motivated Britain joining the Entente with both that Germany feared had overbalanced the balance of power.

But while those colonial interests were thought to be trade the figures just don’t bear that out. “We may date the beginning of modern imperialism from the late seventies of the [nineteenth] century, when the industrial countries of Europe started to abandon the policy of free trade and to engage in the race of colonial ‘markets’ in Africa and Asia.”³⁹ “In 1901, the proportion of its [Britain’s] exports going to British possessions was only 36.5%, and the proportion of its imports coming from British possessions was only 20%.”⁴⁰

But what about private capital? Did that follow the flag?

In 1913 British overseas investment had reached an all-time peak of 9.1% of GDP (“a level not surpassed until 1990”⁴¹) and foreign assets had accumulated to 3.9 billion pounds, “around a third of the stock of British wealth.”

This private capital investment was paying its way.⁴² But it wasn’t coming from conquest. “[I]n 1910 British investment in Asia and Africa, the only two continents in which Britain had recently pursued or was still pursuing a policy of territorial annexation, accounted for merely 20% of Britain’s foreign investment. Of the eleven countries receiving the most British capital, apart from the self-governing Dominions of Canada and New Zealand, only three were part of the British Empire.”⁴³

The flood of foreign investment wasn’t encouraging conflict, it produced instead a Pax Britannica – the overwhelming impetus of the liberal century was towards naval power as a keeper of the peace, not as a hammer to break down commercial doors. (Conversely, it was Germany’s very low level of foreign investment that meant she faced fewer financial impediments in going to war.)

However while the Pax Britannica of the sea lanes had made peaceful world trade possible, the colonies they were intended to protect were a net cost to Britain both financially and as flashpoints for future conflicts which caused, in large part, the fateful alliances that helped start the world war. (And as the much later example of resource-poor Japan proved so spectacularly, trading with countries to acquire the resources you lack is a far richer and more peaceful path to prosperity than invading them.⁴⁴)

So while private investment did pay, imperialism did not. “The grand commercial objectives aimed at by the policy of imperialism were nowhere attained.”⁴⁵

We might well wonder why imperialism persisted? The simple answer is economic error: the imperialists either never heard the economic arguments, or heard them and didn’t understand them. It’s more accurate to say they heard them and didn’t care. They had other motives.

Adam Smith and Frederic Bastiat and free-trader Richard Cobden had argued “that the modern application of the principles of political economy has destroyed the motive of self-interest which formerly tempted us to wars of conquest.”⁴⁶

And so it had.

But as Smith and Bastiat had taught, it was self-interest that was the engine of both trade and economic harmony⁴⁷. Yet as long as economic error still taught that foreign conquest on behalf of mercantilist interests were also in a nation’s interests, which increasing numbers of error-ridden mercantilists still advocated, then the motive for conquest remained.⁴⁸

And when motivations other than self-interest took over --- patriotism, self-sacrifice, duty to king or Kaiser – all the ideals we still hear every Anzac Day -- then the modern applications of liberal political economy were impotent. In other words, that “the imperialist engine” is not “always … governed by financial interests”: “political motives have an independent origin.”⁴⁹, ⁵⁰

So too the real engine of war is not primarily economic (not at least unless economic errors like mercantilism are a factor), but political. And cultural. And both motives have an independent origin.

The tragedy is that the motive of free trade in the institutional structure of 1914 was insufficiently powerful to counterbalance them.

Let’s look at them in turn.

4.1 THE MOTIVE OF MERCANTILISM

Free trade is not the signing of Treaties. Signing treaties is what the ruling classes do. Free trade is what happens when the ruling classes get out of the way.

The motive of trade agreements is often not free trade, but mercantilism, “trade policy as a continuing system of manoeuvrings to try to force other countries to purchase more … exports.”

In the first place, genuine free trade doesn’t require a treaty (or its deformed cousin, a “trade agreement”) … If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other … restrictions on trade. No foreign policy or foreign manoeuvring is needed…
Whereas genuine free traders look at free markets and trade, domestic or international, from the point of view of the consumer (that is, all of us), the mercantilist, of the 16th century or today, looks at trade from the point of view of the power elite, big business in league with the government. Genuine free traders consider exports a means of paying for imports, in the same way that goods in general are produced in order to be sold to consumers. But the mercantilists want to privilege the government-business elite at the expense of all consumers, be they domestic or foreign.⁵¹

Only under the motive of mercantilism does “issue linkage” become a problem.⁵² As first U.S. President George Washington said in his Farewell Address, intending to set the tone for every presidency thereafter,

[T]he great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connection as possible. (Emphasis in the original).

And only with the motive of mercantilism does imperialism even begin to make economic sense – and, as we see above, it doesn’t. Because it was never economic sense that animates mercantilists.

4.2 THE CULTURAL MOTIVE

Examining the reasons for British involvement in the Boer War, and wanting to pin the blame on financial interest, J.A. Hobson discovered instead that “the chief agents of this policy, [Austen] Chamberlain, [Cecil] Rhodes and Lord Milner, were, so far as history shows, actuated by political motives in which the idea of imperial expansion doubtless coalesced with the sense of personal ambition, but in which distinctively economic gains either for themselves of for others played no determinant part.”⁵³

More's the pity!

Change the players, and that describes the origins of many wars including the first world war. Yet allow the economic motive to prevail, and the temptation for war would prevail. That was the liberal creed.

Liberalism perished not because the creed proved wrong. It perished because the institutional framework for it was never fully supported nor understood; the creed itself was neither fully supported, nor philosophically defended, nor sufficiently well entrenched in the culture for it ever to prevail .

As a simple way to think about it, folk were not yet ready (and nor are they any closer today) to replace their veneration for the warrior with that of the trader.⁵⁴

Over the course of the ‘liberal century,’ classical liberalism had been spectacularly successful in exporting the prosperity of the Industrial Revolution, and moderately successful in exporting the creed of individual rights that underpinned it. (Indeed, it is one of the reasons we have a prosperous and still largely British-based (and sometimes even still rights-based) culture down here at the far end of the South Seas.)

But its alleged philosophical defenders were thoroughly undercut by their own collectivism, making them unable to fully answer the statist revanchment, (John Stuart Mill himself a prominent example⁵⁵) and those who did follow the creed, most especially the capitalists and entrepreneurial geniuses who had actually delivered the prosperity, were not those who were in power, most especially because a moral code that recognised the rights of the common man would always attract opposition from those who saw themselves as his masters.

The opposition to the liberal tide was twofold, and since war started in continental Europe it is to there we must look.

4.3 MORE OPPOSITION: Intellectual and Artistic

Germany had undergone a liberal flowering and an industrial revolution. Later than other countries, because it had been involved with its unification wars, so the first barely took hold before war destroyed it and the second came as a sudden shock.

A simple table tells the tale:

My source: Niall Ferguson’s Pity of War

From the middle row we see the nascent power of Germany’s late but potent industrial revolution: Germany’s gross domestic capital formation – in other words, both its total industrial potential and its ability to pay real wages – its real wealth! -- had increased 5-fold in 23 years, and its population and wealth had grown even more. Per capita wealth was now 3.4 times higher! And from this golden age, a new middle class sprung into existence.

As we saw above, one form of opposition Europe-wide to the growing prosperity and liberal culture was aristocratic, from the class in power being so spectacularly displaced by the new prosperity. In Germany this was the Junkers whose nobility they held was based on blood and soil. The other was intellectual, and artistic.

Artists do not yet set a country’s direction, but they do illustrate the culture that does. In continental Europe, even by the artistic avant garde, the trader who had produced this prosperity was still seen as the enemy, the warrior still venerated as the foe who would vanquish him. Here for example is a potent pre-war print taken to depict the fate of the masses under the Industrial Revolution Germany had been enjoying:

Kathe Kollewitz’s 1906 Die Pfluger (The Ploughmen) “referred to the German peasants’
revolt of the 1520s,” but with its suggestions of alleged capitalist exploitation it
“resonated with her contemporaries.”[56] [Pic from Auckland Art Gallery]

Here, as illustration of the reaction is an exhibition card from a powerful current exhibition at Auckland’s Art Gallery of pre-war German prints and etchings⁵⁷:

Artists as a group are so often the reflection of a society’s soul.⁵⁸ Theirs was a society, or at least a class, that was sickened by the peace and prosperity delivered by the liberal industrial age. “The spread of liberalism and free markets caused … [the] members of the artistic avant garde to see political developments as a series of disappointments.”⁵⁹

They were like a later generation and another country’s Charles Dickens. But a Dickens with a death wish: The promise of war’s revivifying primitivism reinvigorated their spirit. (With the romance of war soon dispelled by its results, however, the avant garde launched Dada, anti-art; in emulation of the war’s destruction “self-immolation was written into Dada's very DNA.”⁶⁰)

The sentiment was fully shared by the intellectuals who set Germany’s cultural tone – from the Lutherans who dominated much of German religious life who “rejected capitalism as an evil, Jewish idea, incompatible with the spirit of Christianity”⁶¹– to the writers of philosophical and literary manifestoes who maintained “[m]odern science and its products, the Industrial Revolution … thwart the emotional development of everyone” and counselled that “selfless service to the Volk (the people) to the people … is the essence of virtue”⁶² – to the academics called even by many at the time as “the intellectual bodyguards of the Hohenzollern”⁶³: Private property, they taught, should be run by government authority.⁶⁴

The German social scientists who dominated Austro-German academia known as “the socialists of the chair” no longer even taught economics, observed Von Mises; “they were preaching the doctrines of war.”⁶⁵

All this in the face of the astonishing prosperity industrialisation and freedom had unleashed. No, not despite: because. In their almost total opposition to the new commercial culture, you could almost call it a town versus gown competition, with the winner getting to set the country’s culture.

Town lost.

No wonder the smart young men of the time who were taught this, like the young Friedrich Hayek, simply assumed socialism was the scientific system of the future.⁶⁶ And “[t]heir belief in the redemptive social mission of the state resonated widely in a political environment … looking for alternatives to a liberal doctrine of laissez faire …”⁶⁷

But economists and social scientists don’t exist in an intellectual vacuum. They are so often the transmission belts, as even Keynes should have recognised, of some long-dead and defunct philosopher.

The least defunct and still most influential philosophical current had emerged from the bowels of George Wilhelm Friedrich Hegel, whose very middle names linked one conqueror to his would-be triumphant successor, and who conquered German-speaking Europe intellectually as thoroughly as Bismarck would later unify it.

The state, Hegel argued, was an organism possessing will, rationality and purpose. Its destiny – like that of any living thing – was to change, grow and progressively develop. The state was ‘the power of reason actualising itself as will’; it was a transcendent domain in which the alienated, competitive ‘particular interests’ of civil society merged into coherence and identity. There was a theological core to Hegel’s reflections on the state: the state had a quasi-divine purpose; it was ‘God’s march through the world’; in Hegel’s hands it became the quasi-divine apparatus by which the multitude of subjects who constituted civil society was redeemed into universality….
The Hegelian state was not an imposed construct, but the highest expression of the ethical substance of a people, the unfolding of a transcendent and rational order, the ‘actualisation of freedom.’ ⁶⁸

Stripped of its jargon, observes philosopher Leonard Peikoff, “might makes right … this is the meaning of Hegel’s doctrine.”⁶⁹

As the historian quoted above dryly notes, “Hegel’s was not a liberal vision.”⁷⁰

No wonder the smart young men of the time who were taught this would see themselves two decades later marching through Europe on some quasi-divine purpose at the head of a state possessing (they felt) the organic will of a people.

Hegel’s influence was profound and lasting. His arguments diffused swiftly into the culture … Hegelianism – like post-modernism – became ambient, infiltrating the language and thinking even of those who had never read or understood the master’s work. Hegel’s influence helped to establish the modern state as a privileged object of enquiry and reflection.⁷¹

Like the artists, those who absorbed Hegel’s influence were not just ready for war, they were begging for it. They were opposed to everything to do with what they saw as the weak-kneed version of individualistic freedom represented by capitalism and its rampant consumerism. For them, freedom meant only the freedom to drown in the authority of the state, for which they ached for the opportunity.⁷²

5 “THE LAST INTELLECTUAL SOURCE OF HOPE”?

Yet even in a milieu drenched in all this muck, its influence was still neither universal nor Europe-wide.

Until August 1914 a sensible, law-abiding Englishman [for example]could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country for ever without a passport or any sort of official permission. He could exchange his money for any other currency without restriction or limit. He could buy goods from any country in the world on the same terms as he bought goods at home. For that matter, a foreigner could spend his life in this country without permit and without informing the police. Unlike the countries of the European continent, the state did not require its citizens to perform military service. An Englishman could enlist, if he chose, in the regular army, the navy, or the territorials. He could also ignore, if he chose, the demands of national defence. Substantial householders were occasionally called on for jury service. Otherwise, only those helped the state who wished to do so. The Englishman paid taxes on a modest scale: nearly £200 million in 1913-14, or rather less than 8 per cent. of the national income. The state intervened to prevent the citizen from eating adulterated food or contracting certain infectious diseases. It imposed safety rules in factories, and prevented women, and adult males in some industries, from working excessive hours. The state saw to it that children received education up to the age of 13. Since 1 January 1909, it provided a meagre pension for the needy over the age of 70. Since 1911, it helped to insure certain classes of workers against sickness and unemployment. This tendency towards more state action was increasing. Expenditure on the social services had roughly doubled since the Liberals took office in 1905. Still, broadly speaking, the state acted only to help those who could not help themselves. It left the adult citizen alone.
    All this was changed by the impact of the Great War.^73a

Even “[t]he new Bismarckian Reich was not in any sense [the] ‘organic’ or historically evolved entity [proclaimed by Hegel]– it was the highly artificial product of four years of diplomacy and war.”73

And “[o]utside the conservative heartlands … and especially in the western provinces and the major cities, there flourished a robust and predominantly middle-class political culture.”⁷⁴

And even in Prussia which was frequently describes as a state inhabited by an army, military prowess was not everything. The stories of Zabern were greeted with as much horror as praise, and that of with as much humour as chagrin. And the liberal hope, “stifled and marginalised,”⁷⁵ still existed in southern Germany.

Indeed, it existed even in the man who became Kaiser – but alas, only too briefly.

William I’s son and successor, Frederick III, was a charismatic man with strong ties to the German liberal movement. He was also respected for the important command role he had played in the wars of unification. Given the chance, he might well have become a genuinely national-imperial monarch. But by the time Frederick came to the throne in March 1888, he was already dying of throat cancer and had only three months to live.⁷⁶

And, just one more tragedy in the heap that piled up into war, it existed in the man named Franz Ferdinand who was heir to the Hapsburg throne. But he was shot in Sarajevo by a Serbian terrorist who put nationalism above rational self-interest.

And there were liberals fighting back. In the last decades of the liberal world, in what Ayn Rand called “the last afterglow of the most radiant cultural atmosphere in human history”77and Austrian author Stefan Zweig called “individual freedom at its zenith, after [which] I saw liberty at its lowest point in hundreds of years,”⁷⁸ there were still continental liberals who knew what the world was losing as the lamps went out, and with the intellectual ammunition to relight them.

But there were few prepared to listen.

Carl Menger (1940-1921), the founder of Austrian economics, was one. Where the intellectual bodyguards of the Hohenzollern argued there were no economic laws beyond those mandated by the state, Menger (as one of Europe’s last practicing Aristotelians) “emphasized that economics was a unified science involving the search for cause-and-effect relationships or causal laws (‘exact laws’) that would explain the prices, wages, and interest rates actually observed in reality.”⁷⁹

But beyond the small group of enthralled admirers few were listening, and fewer still were hiring. Menger struggled for a university position, and after his first and seminal book in 1870⁸⁰, published only a book-length rejoinder to the intellectual bodyguard before falling silent.

Before he had even reached forty, Menger observed in conversation:

The policies as conducted by the European powers will lead to a horrible war that will end with gruesome revolutions, with the extinction of European culture and the destruction of prosperity of all nations.⁸¹

Stefan Zweig who experienced it all committed suicide in 1942. Menger who foresaw it all fell silent after 1892.

His student Eugen Von Böhm-Bawerk (1851-1914) continued the fight, not just in the academies and journals, but in the corridors of Hapsburg power. Until monetary union recently Böhm-Bawerk still appeared on the Austrian 100 schilling note as a result of three terms as Austrian Finance Minister, the last from 1900 to 1904, in which he fought for balanced budgets and the proper maintenance of the classical gold standard, resigning finally over the increased demands of army spending. He died in August 1914, three weeks after war started; it is said of a broken heart.

Böhm-Bawerk’s student Ludwig Von Mises (who once said that no citizen who takes his civic duties seriously should exercise his right to vote until he has read Böhm-Bawerk!) “arrived too at this hopeless pessimism,”⁸² finishing short what he thought would be his major work, Theory of Money & Credit, to head reluctantly to the Eastern Front. “This pessimism,” he said, “had broken the strength of Carl Menger, and it over-shadowed the life of Max Weber. … We know today from the letters of Jacob Burckhardt that this great historian, too, had no illusions about the future of European civilisation.”⁸³

Mises saw the controversies that raged between the dominant German intellectuals in social science and the Austrian economists led by Menger, and subsequently Böhm-Bawerk, as having a significance extending far beyond the substance or methodology of economic theory. Most of the German professors, Mises wrote, “more or less eagerly made propaganda in their writings and in their courses for the policies of the Imperial [German] Government: authoritarian conservatism, Sozialpolitik, protectionism, huge armaments, and aggressive nationalism.” Mises saw the Mengerian school as the champion of liberalism and the last intellectual source of hope for the preservation of freedom and civilisation…⁸⁴

Mises himself shrugged off his pessimism to carry that flame forward. “It is a matter of temperament how we shape our lives in the knowledge of an inescapable catastrophe”⁸⁵

In high school I had chosen a verse by Virgil as my motto: Tu ne cede malis sed contra audentior ito [“Do not concede to evil, but proceed against it ever more strongly”]. In the darkest days of the war, I recalled this dictum. Again and again I faced situations from which rational deliberations could find no escape. But then something unexpected occurred that brought deliverance. I would not lose courage even now. I would do everything an economist could do. I would not tire in professing what I knew to be right.⁸⁶

What more can an honest man do?

CONCLUSION

So what can we conclude from all this?

I started by trying to answer a simple question: if it’s argued that free trade discourages war, then why at a time of “peak trade” did the world plunge itself into war. And does our answer discredit the theory?

When goods don’t cross borders armies will is the liberal mantra. What I discovered is that its truth, like all truth, is valid within a context.

First: The forces from trade discouraging war were powerful, just as the argument explains, and had helped secure the most peaceful century Europe had ever enjoyed.

Second: Those forces however had little effect on those in European capitals making the decision for war.

Third: Those making the decisions had other motives. For whatever reason the culture of the trader was either alien to them or anathema. They were either indifferent to the effect of their decision on prosperity, had been harmed themselves by the new prosperity, or they hated the liberal culture that had produced it and flourished because of it. Or all of the above.

Fourth: Opponents to trade and the culture it created were artistic, aristocratic, religious, academic. Their motives were based either on economic error, cultural philistinism, or philosophical corruption.

Fifth: For the argument to take effect, it requires a real philosophical sea change that values human life and human prosperity and all that promotes it, and reviles all that destroys it; and an institutional sea change that cements in that culture. That was the culture and the institutions the liberal century was producing. But too late, too little, and the philosophical defenders had gone bush.

This last in the end was ultimately the disaster that caused the greater disaster.

So long as a country is even semi-free, its mixed-economy profiteers are not the source of its warlike influences or policies, and are not the primary cause of its involvement in war. They are merely political scavengers cashing-in on a public trend. The primary cause of that trend is the intellectuals.
Observe the link between statism and militarism in the intellectual history of the nineteenth and twentieth centuries. Just as the destruction of capitalism and the rise of the totalitarian state were not caused by business or labour or any economic interests, but by the dominant statist ideology of the intellectuals—so the resurgence of the doctrines of military conquest and armed crusades for political "ideals" were the product of the same intellectuals' belief that "the good" is to be achieved by force.⁸⁷

This was the greatest disaster, and the greatest evil still to proceed against: the philosophical doctrine of statism: “If men want to oppose war, it is statism that they must oppose. So long as they hold the tribal notion that the individual is sacrificial fodder for the collective, that some men have the right to rule others by force, and that some (any) alleged ‘good’ can justify it—there can be no peace within a nation and no peace among nations.”⁸⁸

The forces of free trade are powerful. They are beneficial. They are civilising. But free trade itself is an effect as well as a cause. Its ultimate cause is philosophic, and it cannot survive its destruction.

---

NOTES:

^{[1] Herbert Spencer had already given it an obituary in 1884, declaring “Most of those who now pass as Liberals, are Tories of a new type” (Quoted in the Cobden Centre’s 2012 post Classical Liberalism in the Liberal Party Since 1886)↩
[2] In May 1915 the ruling British Liberal Cabinet collapsed in the wake of war losses and the disastrous Gallipoli campaign to form a wartime coalition with the opposition Conservatives in what proved to be a death hug for the Liberal Party.↩
[3.] Sorry, if you think Nick Clegg with last weekend’s wipe-out was any kind of successor you are very much mistaken.↩
[4] Yes, other dates could with equal point be chosen, but this one does provides a clean and visible break.
For Australian readers, who still call conservatives Liberals, it is an accident of history that because the Australian Liberal Party remained in office through the war and again through the Great Depression that they remain a political power, even as the philosophy they once espoused was undercut from without.↩
[5] Big Government was welcomed even into previous arid ground. “World War I brought the fulfilment of all … ‘progressive’ trends. Militarism, conscription, massive intervention at home and abroad, a collectivised war economy, all came about during the war and created a mighty cartelised system that most of its leaders spent the rest of their lives trying to re-create.” (From Murray Rothbard’s essay ‘World War I as Fulfilment: Power & the Intellectuals,’ collected in John Denson’s 1999 book The Costs of War )
And that only refers to the United States!
The “war undercut American liberties and fed the growth of big government. Notwithstanding the accretions of governmental authority during the Progressive Era, the American economy remained, as late as 1916, predominantly a market system. The next two years however witnessed an enormous and wholly unprecedented intervention of the federal government in the nation’s economic affairs. By the time of the armistice the government had taken over the ocean shipping, railroad, telephone, and telegraph industries; commandeered hundreds of manufacturing plants; entered into massive economic enterprises on its own account in such varied departments as ship building, wheat trading, and building construction; undertaken to lend huge sums to businesses directly or indirectly and to regulate the private issuance of securities…It had, in short, extensively distorted or wholly displaced markets, creating what some contemporaries called ‘war socialism.’ (From Robert Higgs’s classic account of Crisis and Leviathan, p. 123, of how government gains ground as liberty yields with every crisis.)↩
[6] Bolshevism, a direct result. Nazism, an indirect result. Barbarism and genocide: the inevitable outcome. Nationalism, totalitarianism, dictatorship: all were made inevitable. ↩
[7] From Ludwig Von Mises’s Liberalism: The Classical Tradition, p. 19↩
[8] The word today has been taken over. Todays’ liberals might be best defined as useful idiots utilising big government to advance their social goals, or to try to. “Today,” said Ludwig Von Mises in 1962 (and his outline would only be worse now), “the tenets of this nineteenth-century philosophy of liberalism are almost forgotten. In continental Europe it is remembered only by a few. In England the term ‘liberal’ is mostly used to signify a programme that only in details differs from the totalitarianism of the socialists. In the United States ‘liberal’ means today a set of ideas and political postulates that in every regard are the opposite of all that liberalism meant to the preceding generations. The American self-styled liberal aims at government omnipotence, is a resolute foe of free enterprise, and advocates all-round planning by the authorities, i.e., socialism.” Ibid. xiii-xiv↩
[9] Ibid, p. 19↩
[10] For a partial explanation see George Reisman’s book Capitalism, p. 135-139; for a fuller explanation see the see the book’s ‘Part Two: The Division of Labour and Capitalism,’ starting p.123. ↩
[11] “The Classical Liberals of the nineteenth century were certain that the end of the old Mercantilist system--with its government control of trade and commerce, its bounties (subsidies) and prohibitions on exports and imports--would open wide vistas for improving the material conditions of man through the internationalisation of the system of division of labour. They also believed that the elimination of barriers to trade and the free intercourse among men would help to significantly reduce if not end the causes of war among nations.
    “The economists of that earlier era had demonstrated the mutual gains from trade that would develop and be reinforced from specialization in productive activities among the people of the world. No longer would the material improvements of one nation be viewed as the inevitable cause of the poverty and economic hardships of other countries.
    “And with the addition of the theory of comparative advantage these economists were able show that even the ‘weak’ and less productive in the world community could find a niche for their material betterment in the network of trade among nations. At the same time, the ‘strong’ and more productive in that same community of nations would improve their circumstances by purchasing goods from the less productive so they could be freed to specialize in those lines of production in which they had a relative superiority.”
From Richard Ebeling’s 2002 article ‘Can Free Trade Really Prevent War’↩
[12] Okay, as far as we know neither of the two actually said those exact words. But it’s still a fair summary of their position (in his Economic Sophisms chapter ‘Our Products Are Burdened With Taxes’ he does say: "If commerce were free, what use would you have for your great standing armies and powerful navies?"), and it’s a fair summary of many free traders who do use it.
As far as we know, and what we do know is from Bastiat scholar David Hart, “the quote comes from Otto T. Mallery (1881-1956) who wrote a book Economic Union and Durable Peace (Harper and Brothers, 1943). This sounds very like Bastiat but he does not cite Bastiat in the book.” Ref Don Boudreaux and Paul Walker.↩
[13] The human stories tell the tales the aggregates sometimes hide. For even in far off New Zealand, historian Ian Hunter writes of “entrepreneurs’ networks” routinely straddling the globe (“defined as ‘informal alliances of independent decision-makers (people or firms) that band together to promote mutual interests relying on bonds of trust’”), among them: Bendix Hallenstein, whose brother Isaac ran the London office and Michaelis ran the Melbourne tannery; William Winstone, with whose brother in Queensland he shared business interests; John Kirkcaldy and Robert Stains who had their UK contacts keep them abreast of fashion; draper Thomas Warnock who played off the prices of local and UK suppliers; A.J. Burns who was a frequent traveller between the UK and NZ to purchase supplies and machinery and engage staff. That all this was considered routine by the 1890s indicates how much globalisation was simply taken for granted even in this far-off land. See especially Ian Hunter’s book 2007 book The Age of Enterprise: Rediscovering the NZ Entrepreneur 1880-1910↩
[14] The Classical gold standard underpinned a world without capital controls. And it’s easy to forget, but it was possible to travel from one end of the world to another without such a thing as a passport or a visa. Or a mawling by a TSA agent.↩
[15] This despite “German steel giants investing heavily in French iron ore production sites in Normandy; 3.4 million migrant workers labouring in Germany's agricultural sectors and the coalfields of the Ruhr Valley; rail networks expanding across Europe and further east … Exports reaching record levels year-on-year, with trade accounting for a higher level of GDP than ever before.” See Finbarr Bermingham’s 2014 article ‘WWI 100th Anniversary: How Global Trade Changed Forever’ at the International Business Times↩
[16] The context killing the equation was hardly a new one. “France and Britain traded with each other – and could have traded more, except for the mercantile political economy practised by All European governments, which Smith criticised in Book IV of Wealth Of Nations – and were at war several times in the 18th century and in the early 19th century when Bastiat wrote his article.
    “The problem is one of what David Hume called ‘jealousy of trade’ – the proclivity to treat neighbouring trading partners as deadly rivals, which festers into hostile actions and eventually into wars. Tariff protection often is a prelude to war. Armies cross borders in pursuit of commercial advantage, apart from wars of dynastic succession, of which there were many in Europe.
    “Trade is a civilising influence, but it is subject to ideology, religious extremism, passionate causes, economic illiteracy, politics and emotional ignorance. Add in mercantile fallacies, protectionism, discrimination, short-term advantage, and the cussedness of people, and Bastiat’s optimism is soon compromised.” From Gavin Kennedy’s blog post ‘Trade is Beneficial But Not Free’↩
[17] From Lew Rockwell’s article ‘Bastiat was Right’↩
[18] Don Boudreaux points out: “The argument is not that the slightest bit of international commerce ensures world peace; it is, rather, that the greater the commercial integration between two societies, the less likely are the governments of those societies to launch wars against each other. There is good empirical evidence for this proposition. See, for example, this 2006 paper by Solomon Polachek and Carlos Seiglie: [‘Trade, Peace and Democracy: An Analysis of Dyadic Dispute’]”↩
[19] From Daniel Griswold’s 1998 article ‘Peace On Earth, Free Trade For Men’↩
[20] From John Zmirak’s 2013 article ‘Austrians Don’t Blow Bubbles’↩
[21] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal↩
[22] And the men who had administered the Concert of Europe had been giants of diplomacy who wanted to keep the European peace, men such as Talleyrand, Metternich, Castlereagh and even Bismarck once his border battles had achieved his goal of unifying Germany. The men who replaced them by the turn of the century – Berchtold, Paléologue, Sasonov, Grey, Jago – were not just pygmies by comparison, the calculations required to stop the balance of martial power from tipping over had become vastly more difficult.↩
[23] From Michael Howard’s 2001 book The Invention of Peace, p. 44↩
[24] From Margaret MacMillan’s The War that Ended Peace: How Europe abandoned peace for the First World War.↩
[25] Norman Angell, from his book The Great Illusion: A Study of the Relation of Military Power to National Advantage, first published in the United Kingdom in 1909 under the title Europe's Optical Illusion and republished in 1910 and subsequently in various enlarged and popular editions.↩
[26] From Ludwig Von Mises’s Liberalism, p. 122↩
[26a] “It thus appears that the interest of the landlord is decidedly hostile to the sudden and general introduction of agricultural improvement…” – From John Stuart Mill's 1868 book Principles of Political Economy,Book IV, Ch. III, s.4↩
[27] Britain’s Enclosure Acts and the recognition under classical liberalism of real property rights had broken through this class-based man-trap to produce, first, the Green Revolution that for the first time produced an agricultural surplus, and then with that surplus fed the population that drove the Industrial Revolution.↩
[28] Quoted in David Yaffe’s review article: ‘Imperialism and the Accumulation of Capital’↩
[29] See Nikolai Bukharin’s 1924 review ‘Imperialism and the Accumulation of Capital’↩
[30] From Ayn Rand’s essay ‘The Roots of War’ collected in her book Capitalism: The Unknown Ideal↩
[31] Von Mises’s, p. 121↩
[32] From Niall Ferguson’s 1998 book The Pity of War, p. 32-33↩
[33] Ferguson’s book has other such tales, pp. 31-45↩
[34] From James Joll’s The Origins of the First World War, p. 188. David Stevenson’s conclusion can be examined in his Armaments and the Coming of War: Europe 1904-1914, p. 23↩
[35] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal↩
[36] Ferguson, p. 39↩
[37] From Ralph Raico’s essay ‘World War I: The Turning Point,’ appearing in John Denson’s 1999 The Costs of War↩
[38] The railway was to unite Berlin with the Gulf, one point in Berlin’s new plans for a place in the imperialist sun. That much is true. And while the British military were initially disturbed by German influence in a region they considered their own, very quickly investors in both countries saw the benefits of involvement. For their part, "the Germans accepted the fact that they lacked sufficient capital to build the railway on their own, and that they were in no position to overcome the well-established British interests in Mesopotamia." And "whereas 'imperial' interests might have dictated that the British government should compete with the expansion of German interests wherever these appeared, 'commercial' ones inclined the British to cooperate with the Germans to protect their investment."
    So within a short time, the values of the marketplace had turned an apparent casus belli into another victory for commerce. Such can be the sanitising effect of commercial values when given free rein.
    Quotes from James Joll’s classic The Origins of the First World War, which has the fuller story, esp. pp. 236-41↩
[39] From Ludwig Von Mises’s Liberalism, p. 123↩
[40] From Michael Schneider’s 1996 J.A. Hobson. The figures are Hobson’s.↩
[41] From Niall Ferguson’s 1998 book The Pity of War, p. 35, from whence these figures come.↩[42] “In the 1890s net investment amounted to 3.3% of gross national product, compared with net property income from abroad of 5.6%. For eth next decade the figures were respectively 5.1 and 5.9.” – Ferguson, p. 37↩
[43] Writing in 1902 on the basis of these figures, J.A. Hobson argued: “An individual doing business in this fashion could not avoid bankruptcy, and a nation, however rich, pursuing such a policy is loaded down with a millstone which must eventually drag her down.” From Hobson’s Imperialism: A Study, p. 70. It seems “unintelligible,” he said “that the enormous costs and risks of the new Imperialism should be undertaken for such small results … especially when the size and character of the new markets were taken into consideration.” Ibid, p.60↩
[44] See for example Peter Cresswell’s blog post ‘Trade versus conquest’↩
[45] Von Mises, p. 124↩
[46] Quoted in Hobson’s 1919 Richard Cobden: International Man, p. 89↩
[47] The driving force of trade, said Smith, is our appeal to each other’s self-interest: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” From this developed the great liberal theme Bastiat sought to demonstrate in his Economic Harmonies, i.e., that “all men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.”
    Imperfectly constructed however, economist George Reisman argues it was not until Ayn Rand’s introduction of ‘The Pyramid-of-Ability Principle’ (a complement to Ricardo’s principle of Comparative Advantage) that the argument could be fully nailed down.
    See Reisman’s Capitalism, p. 357-358, and the many entries under his index heading of ‘Harmony of Interests.’↩
[48] The driving point of Smith’s Wealth of Nations, for years the classical liberal text of choice, was that this was not so. ↩
[49] Schneider, p. 103; J.A. Hobson, Democracy After the War, p.89↩
[51] From Murray Rothbard’s 1993 essay ‘The NAFTA Myth,’ collected in his 1995 Making Economic Sense↩
[52] On issue linkage in the Cold War and beyond see Paul Buchanan’s 2012 analytic brief ‘Issue Linkage in Foreign Policy.’ It seems to have little direct relevance to the causes of the 1914-18 war, however Niall Ferguson (Pity of War, p.34-39) cites Paul Kennedy’s work as having advanced a version of the idea, which he describes then discounts.↩
[53] From J.A. Hobson’s 1917 book Democracy After the War, p. 84↩
[54] From Peter Cresswell’s blog post ‘The three horsemen of non-apocalypse’: “[A]cross all the pages of history there have been two fundamental antagonists who have been variously venerated and eviscerated: the trader culture, and the warrior culture. Those who survived by trade, and the cultures that supported that; versus those who survived by bloodshed and plunder, and the cultures that survived off their warriors' loot.
    “Observe the heroes a culture venerates above all others, and you'll understand which kind of culture it is. Is it the producers of wealth, or those who loot it. The men of profits, or the men of plunder. Men who produced value; or the men who looted it. The sellers of ploughshares; or the bearers of swords. The defenders of wealth, or their barbarian conquerors.
“For all of human history, the culture of the trader has been the bringer of peace and prosperity and civilisation, yet for most of history it has been the warrior who's been most revered, and the values of the trader most derided.
    “Strange, don’t you think?”↩
[55] Not only in his intellectual relationship to his wife Harriet, but also in his later capitulation to socialism, holding that cooperative socialism would eventually outpace capitalism by direct and open competition (the “joint property” resulting being “the nearest approach to social justice, and the most beneficial ordering of industrial affairs for the universal good, which it is possible at present to foresee”) and declaring in 1861 that “whenever it ceases to be true that mankind, as a rule, prefer themselves to others … from that moment Communism is not only practicable, but the only defensible form of society.”↩
[56] From the Auckland City Art Gallery exhibition card to the print in its exhibition ‘Age of Turmoil: Art in Germany 1900–1923’↩
[57] Auckland City Art Gallery: ‘Age of Turmoil: Art in Germany 1900–1923’↩
[58] From philosopher Stephen Hicks’s article ‘Why Art Became Ugly’ : “Despite occasional invocations of "Art for art's sake" and attempts to withdraw from life, art has always been significant, probing the same issues about the human condition that all forms of cultural life probe. Artists are thinking and feeling human beings, and they think and feel intensely about the same important things that all intelligent and passionate humans do. Even when some artists claim that their work has no significance or reference or meaning, those claims are always significant, referential, and meaningful claims. What counts as a significant cultural claim, however, depends on what is going on in the broader intellectual and cultural framework. The world of art is not hermetically sealed—its themes can have an internal developmental logic, but those themes are almost never generated from within the world of art.”↩
[59] Ibid↩
[60] From Peter Fleming’s 2015 article in the Hamilton Spectator, ‘Unpopular Culture: Dada’↩
[61] From Leonard Peikoff’s Ominous Parallels, p. 151↩
[62] Ibid p.47↩
[63] The House of Hohenzollern of course being the dynasty of former princes, electors, kings, and emperors that had controlled Imperial Germany since its unification in 1871.↩
[64] It is illustrative of the rapid change in what was called liberalism that in 1936 John Maynard Keynes, adviser to Lloyd George and a self-identifying member of what remained of the British Liberal Party, could write in his introduction to the German edition of his magnum opus published in the full flowering of the Nazi disease that his theory “can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.” ↩
[65] From Ludwig Von Mises’s Notes and Reflections, p. 65↩
[66] At least until he had read Von Mises’s 1922 opus Socialism.↩
[67] From Christopher Clark’s Iron Kingdom: The Rise and Downfall of Prussia, 1600-1947, Kindle edition, location 11513↩
[68] Ibid, locations 8112-8118↩
[69] From Leonard Peikoff’s Ominous Parallels, p. 31↩
[70] Clark, location 8118↩
[71] Ibid, location 8155↩
[72] Philosopher Leonard Peikoff writes: “A well-known German historian has remarked that the romanticist element in German thought [as this strain is known] would appear to Western eyes as ‘a queer mixture of mysticism and brutality.’ The formulation errs only in the adjective queer.” Peikoff, p. 47↩
[73] Clark, location 10627↩
[73a] From AJP Taylor’s 1965 book, The Effects and Origins of the Great War. Which does bear a startling similarity to J. M. Keynes's eloquent description of 'Europe Before the War' in The Economic Consequences of the Peace'(1919). See pp. 10-12 starting at 'What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914!’ But Taylor’s is at least unaccompanied by a book-weight of economic error. (On this last, see especially The Economic Consequences of Mr Keynes by Young Frenchman Ettienne Mantoux, written in 1943 during the war in which he was killed, and which he partially blamed Keynes’s book for having encouraged.) I am indebted to Riko Stevens for bringing Keynes’s quote to my attention, and to Jim Rose for Taylor’s.↩
[74] Clark, location 10506↩
[75] Ibid, location 196↩
[76] Ibid, location 10980↩
[77] From Ayn Rand’s introduction to her essay collection The Romantic Manifesto: A Philosophy of Literature.↩
[78] From Stefan Zweig’s 1942 autobiography, which is also a biography of the collapse of Europe into barbarism, The World of Yesterday↩
[79] From Joseph Salerno’s introduction to the 2007 seminar ‘Fundamentals of Economic Analysis: A Causal-Realist Approach’↩
[80] Principles of Economics, in which marginal economics was first presented (Menger was co-creator with Jevons and Walras of the theory, which all developed and published independently).↩
[81] Quoted in Ludwig Von Mises’s Notes and Reflections, p. 34, where Mises says his grandfather had told him of the conversation in 1910.↩
[82] Ibid, p. 69↩
[83] Ibid, p.69↩
[84] From Israel Kirzner’s 2001 biography of the great man, Ludwig Von Mises↩
[85] Von Mises, Notes & Reflections, p. 70↩
[86] Ibid, p. 708↩
[87] From Ayn Rand’s essay ‘The Roots of War,’ collected in her book Capitalism: The Unknown Ideal↩
[88] Ibid↩}

Phew!