Bill Black: How Hayek Helped the Worst Get to the Top in Economics and as CEOs

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

Libertarians are profoundly anti-democratic. The folks at Cato that I debate make no bones about their disdain for and fear of democracy. Friedrich von Hayek is so popular among libertarians because of his denial of the legitimacy of democratic government and his claims that it is inherently monstrous and murderous to its own citizens. Here’s an example from a libertarian professor based in Maryland.

[W]hen government uses its legal monopoly on coercion to confiscate one person’s property and give it to another, it is engaging in what would normally be called theft. Calling this immoral act “democracy,” “majority rule” or “progressive taxation” does not make it moral. Under democracy, rulers confiscate the income of productive members of society and redistribute it to various supporters in order to keep themselves in power.

In order to finance a campaign, a politician must promise to steal (i.e., tax) money from those who earned it and give it to others who have no legal or moral right to it. There are (very) few exceptions, but politicians must also make promises that they know they can never keep (i.e., lie). This is why so few moral people are elected to political office. The most successful politicians are those who are the least hindered by strong moral principles. They have the least qualms about confiscating other peoples’ property in order to maintain their own power, perks, and income. In his bestselling 1944 book, ‘The Road to Serfdom,’ Nobel laureate economist F.A. Hayek described this phenomenon in a chapter [10] entitled “Why the Worst Get on Top.”

But von Hayek’s critique of democratic government has proven to be the most monstrous blood libel of the post-World War II era – falsely declaring that democratic government must end in tyranny and the mass murder of its own people.

The political scientist Herman Finer … denounced [The Road to Serfdom] as “the most sinister offensive against democracy to emerge from a democratic country for many years.”

The economist Paul Samuelson, in a reminiscence of Hayek published last December, was more dismissive still. “Where are their horror camps?’ he asked, referring to right-wing bugaboos like Sweden, with its generous welfare spending. Almost 70 years after Hayek sounded his alarm, ‘hindsight confirms how inaccurate its innuendo about the future turned out to be.”

Why the Worst Get on Top – in Economics

Economists claim that their work should be evaluated based on predictive success. Von Hayek was made a Nobel Laureate in 1974, three decades after his prediction that democratic states were headed to tyranny and mass murder of their own citizens. In those three decades of experience in the nations he focused on (Western Europe, the U.S., Canada, Australia, and New Zealand) – and the forty years since his award – this happened in zero nations. He is batting zero for 70 years in roughly 30 nations with, collectively, thousands of elections. What he claimed was inevitable has never occurred.

Wesley Marshall and I are writing a book about why, disproportionately, economics bestows its top honors on those who fail their own purported test of success (predictive ability). This is the only field of academic study in which this occurs. We are trying to answer von Hayek’s question, but it his own field – “why the worst get on top.” Why do the von Hayeks of the world, the very worst of economists, “get on top?”

I recently wrote a piece about the spectacularly bad timing of a libertarian who chose the 70th anniversary of D-Day (a product of exceptionally competent government planning) to denounce democratic government as incapable of planning and invariably leading to tyranny and the mass execution of its own workers and CEOs. As “support” for this claim the columnist presented the cartoon version of The Road to Serfdom that General Motors spread via pamphlet – this the day after General Motor’s admissions about the quality of its cars and the indifference to the safety of everyone on the roads by its senior managers and attorneys.

Why von Hayek and Milton Friedman are the Patron Saints of Plutocracy

It is telling that libertarians’ economic hero, writing what they claim was his single best chapter, “Why the Worst Get on Top,” invariably proved wholly and grotesquely incorrect about the certainty of tyranny and mass murder. Worse, since the time von Hayek wrote his chapter, the democratic governments he demonized have ceased the worst abuses against their own citizens, such as forced sterilizations. The worst abuses – mass torture and murder – have been committed by fascist regimes that von Hayek supported such as Pinochet in Chile. When we ask why von Hayek receives a Nobel Prize and remains Glenn Beck’s hero we cannot explain the results based on facts and predictive success (failure). Instead, we must look outside the realm of reality and enter into the realms that von Hayek glorified – ideology and greed.

Von Hayek received his Nobel Prize because he was so willing to be so wrong about so many things. His blood libel about the democratic governments of “the West” was useful to another group in which “the worst get on top” in far too many cases – “imperial” CEOs. Von Hayek legitimizes that which cannot be legitimized through real economics, reality, ethics, or logic – plutocracy. Von Hayek and Milton Friedman are the patron saints of plutocracy.

Von Hayek’s Denunciation of Democracy Rests on His Disdain for the Poor

Von Hayek argues that there are three reasons why democratic government inherently leads to the elevation of the “worst” to the “top” – and by the “worst” he means murderous tyrants. Von Hayek begins Chapter 10 with the famous quotation from Lord Acton: “Power tends to corrupt, and absolute power corrupts absolutely.” Democratic government, of course, is consciously designed to prevent the creation of “absolute power” by the state or private entities. Von Hayek, therefore, has to argue that a democratic system of government designed to prevent the creation of absolute power will invariably produce absolute power.

Here is von Hayek’s explanation of the three reasons why democracy is inherently perverse.

There are three main reasons why such a numerous and strong group with fairly homogenous views is not likely to formed by the best but rather by the worst elements of any society. By our accepted moral standards, the principles on which such a group would be selected will be almost entirely negative.

In the first instance, it is probably true that the higher education and intelligence of individuals become, the more their views and tastes are differentiated and the less likely they are to agree on a particular hierarchy of values.

It is a corollary of this that if we wish to find a high degree of uniformity and similarity of outlook, we have to descend to the regions of lower moral and intellectual standards where the more primitive and “common” instincts and tastes prevail.

This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards.

It is, as it were, the lowest common denominator which unites the largest number of a numerous group is needed, strong enough to impose their views on the values of life on all the rest, it will never be those with highly differentiated and developed tastes it will be those who form the “mass” in the derogatory sense of the term, the least original and independent, who will be able to put the weight of their numbers behind their particular ideals.

If, however, a potential dictator had to rely entirely on those whose uncomplicated and primitive instincts happen to be very similar, their number would scarcely give sufficient weight to their endeavors. He will have to increase their numbers by converting more to the same simple creed.

Here comes in the second negative principle of selection: he will be able to obtain the support of all the docile and gullible, who have no strong convictions of their own but are prepared to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently.

It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.

It is in connection with the deliberate effort of the skillful demagogue to weld together a closely coherent and homogeneous body of supporters that the third and perhaps most important negative element of selection enters.

It seems to be almost a law of human nature that it is easier for people to agree on a negative program — on the hatred of an enemy, on the envy of those better off than on any positive task.

Yes, you read that correctly: democratic government invariably leads to the rule by “demagogues” who manipulate the most immoral segments of society. The core of this immoral coalition consists of “the lowest common denominator” – the “‘mass[es]’ in the derogatory sense of the term.” The masses consist of the least “educated” and least “intelligent” driven by “primitive instincts.”

The unethical leaders add to this core the “docile and gullible.” They are easily manipulated by propaganda that creates “a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently.” Their “passions and emotions are readily aroused” by demagogues “who will thus swell the ranks of the totalitarian party.”

The third component of the totalitarian troika is the “most important negative element.” These are the murderous bigots motivated by “hatred of an enemy … the envy of those better off.”

Von Hayek is Blighted by his Bigotry

What we are reading, of course, is the class hatred and bigotry common to minor Austrian aristocrats like von Hayek who were born in the 19th century. (The “von” was removed from all Austrian family names by statute when he was a young adult.) The idea of democratic rule by what he viewed as his inferiors appalled von Hayek. The fact that this kind of naked bigotry in this passage that I have quoted at length is viewed by his libertarian devotees as von Hayek’s finest work reveals the depths of libertarian hate for and fear of democratic government.

Von Hayek’s Other Predictive Failures

Under von Hayek’s theories, progressive and socialist candidates should be the great enemies of public education, for education would dramatically reduce their core “uneducated” group. For the same reasons, they should avoid at all costs teaching students how to engage in critical thinking and should instead spread nationalism/patriotism memes (such as American “exceptionalism” and flag pins) and spread racist propaganda attacking racial and ethnic minorities. The opposite is true. They should oppose legal protections, e.g., against job and housing discrimination. It is conservatives and European-style “liberals” who fought against public elementary and secondary education and the land grant colleges. It is conservatives who wear flag pins and claim that any acknowledgement of U.S. misconduct is unpatriotic. It is U.S. conservatives who to this day adopt variants of the racist “Southern strategy,” engage in state-sponsored homophobia, and oppose anti-discrimination laws. Von Hayek predicted that progressives would deny science. The cartoon version of his book portrays the government as preaching that the earth is flat. The reality is that it is corporate CEOs who lead the anti-science campaigns such as global climate change denial.

If You Object to an Economic System in Which “The Worst Get on Top” You are not “Envious”

Von Hayek tips his hand and dogmas when he uses the phrase “envy of those better off” and conflates it with virulent racism. Von Hayek assumes away the reality that all too often in business “the worst get on top” by the foulest means. Opposing their becoming “better off” through leading “control frauds” is not “envy” – it is justice, and it is essential to a well-functioning economy, society, and polity.

Von Hayek implicitly assumes that corrupt CEOs will not control and abuse any political system. Assume solely for purpose of analysis that von Hayek were correct that it demagogues can manipulate the three unethical groups he identifies and seize control of government. Under his own logic CEOs can use the seeming legitimacy, power, and wealth of “their” corporations to serve directly as these demagogues or fund and control proxy demagogues that will serve their interests. They have vastly greater economic resources and they have the expertise that comes from advertising to run propaganda campaigns. They also had tremendous expertise in the era von Hayek was describing in “divide and conquer” strategies in the colonies that would be easily translated into efforts to split workers along ethnic lines. The alliance of elite and poor whites in the U.S. South against the freed slaves is a classic example of how such a coalition can provide dominant political power for roughly a century. Under von Hayek’s own assumptions the “inevitable” result should be plutocracy through crony capitalism with anyone who complains about the resultant inequality denounced for being “envious” of his moral and intellectual superiors.

Why the Worst (CEOs) Get on Top: Accounting Control Fraud is a “Sure Thing”

I have explained this point enough times that I will simply direct any new readers to the scores of articles that explain why this is true. I also stress how important the “Gresham’s” dynamic is in explaining why such frauds can become epidemic and why such epidemics drive our recurrent, intensifying financial crises. The least ethical CEOs “get on top” in such a world and they produce plutocracy, massive inequality, and crony capitalism. Von Hayek wants progressives to declare unilateral political disarmament while the most corrupt CEOs dominate our economies and our political systems. Von Hayek’s blood libel about progressive, democratic government is a classic example of Frédéric Bastiat’s warning:

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.

What a wondrous irony it is that three ultra-rightists, Lord Acton, Bastiat and von Hayek, should combine so perfectly to explain our current plight in which plunder by elite CEOs has become “a way of life.” CEOs do not yet have “absolute” political power, but their power and corruption is rising steadily and has become so great that they are able to “plunder” with impunity. That impunity arose because von Hayek’s disciples were able to use his anti-democratic bigotry and failed economic dogmas to “create for themselves in the course of time a legal system that authorizes [plunder] and a moral code that glorifies it.” Von Hayek was one the principal framers of that immoral moral code that glorifies plunder by CEOs. Libertarians glorify von Hayek’s bigoted glorification of elites as our moral superiors who have a right to rule and plunder our Nation. Tyler Cowen calls plutocracy and pervasive plunder a “hyper-meritocracy,” but it is a rule by the most unethical for the most venal of purposes and it is the greatest enemy of merit and justice.

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  1. Guy2k

    You might want to check out “Tyranny of Experts” by William Easterly. It gives an interesting perspective on Hayek and issues of development and democracy in general.

    1. DakotabornKansan

      Excerpt from David Rieff’s review of William Easterly’s The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor:

      “For in The Tyranny of Experts, Easterly relies heavily—in my view far too heavily—on the work of Friedrich Hayek. Indeed, the second chapter of his book, “Two Nobel Laureates and the Debate They Never Had,” counterposes Hayek’s views on economic development with those of Gunnar Myrdal, whose magisterial three-volume study, Asian Drama: An Inquiry into the Poverty of Nations, published in 1968, had a profound influence—as Easterly concedes ruefully, a far greater one than Hayek’s—on the thinking of several generations of development economists…

      … Hayek is presented as having believed in spontaneous solutions rather than central planning, and Easterly portrays him as the champion of “individual rights in development” as both “an end in and of themselves and the means by which societies escape poverty and move into prosperity.” This portrait too is on balance defensible, even if Easterly glosses over Hayek’s extremely peculiar ideas about democracy, including his proposal that legislatures should be composed of lawmakers who would be elected to a sole fifteen-year term by voters who would exercise their suffrage only once, at the age of forty-five.

      Seeing Hayek at least partly through rose-colored glasses and Myrdal in the harshest possible light may help explain, but still does not justify, Easterly’s presentation of the former as having been completely right and the latter completely wrong. Nor does it justify the charge that if only the development establishment had listened to Hayek, development would have sided with freedom rather than autocracy, and as a result would have been a success rather than the failure Easterly believes it largely to be.”

  2. David Mills

    Hayek only stayed on in the US after being convinced by David Koch (no explanation necessary) that he would qualify for Social Security having had 10 years of employment and, therefore, contributions. Black quite aptly picks him as a supporter of the “Plutonomy”, he must have an eye for talent.

  3. Jason

    Straw man alert.

    According to this article:
    Democratic governments = governments who confiscate property

      1. Jason

        I think if you read the context to the quote from Hayek, Hayek is arguing against totalitarian government, not against democratic government. Unless the author believes that democratic = totalitarian, then the whole article is a straw man argument.

        I think that our current system of capitalism is totally stuffed but articles like this one don’t help our cause. Private property rights is a privilege granted by all of society, and the main reason wealth concentrates. Lets tax that more fairly and set the rules in advance rather than confiscate arbitrarily.

        1. Ben Johannson

          I’m sorry but you’re wrong. Hayek very clearly believed that democracies go bad because the lower ordees gain power over their betters. Furthermore Hayek’s praise for and support of Pinochet’s fascist dictatorship cannot be reconciled with your image of a man opposed to totalitarianism.

          Unlike our democracies, Pinochet’s Chile did have death camps, execution squads and prisons for anyone making a nuisance of themselves.

          1. Jason

            Yes, Hayek was wrong in many things, I am not defending Hayek per se. A more accurate description of Hayeks position on democratic governments can be found in this quote about pinochet’s Chile:
            “my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism.”
            So yes, given the choice between those two he would choose the non democratic option. But its wrong to say he was against democracy, he was strongly libertarian which does not make him anti-democratic as this article implies.

                1. YankeeFrank

                  The article clearly states Hayek’s disdain for democracy because he believes the “masses” will rule. Of course what he thinks of as troublesome and dirty peasants we call the citizenry. Hayek’s aristocratic snobbery is showing, and it isn’t pretty.

                  1. Bob Roddis

                    The quote Black uses (and the entire piece itself) is deliberately out of context. See my comment below. Hayek was talking about socialist central planning in “The Road to Serfdom” which never appeared in the western democracies after WWII.

  4. Moneta

    Intriguing how it is immoral for government to confiscate property but they don’t seem to delve into how that property was acquired in the first place. Isn’t it immoral to accumulate too much property thanks to skewed monetary policies?

    They’re like children who complain about unfairness because they did not get EVERYTHING they wanted.

    1. Roquentin

      That’s the thing with the Chicago Boys/Austrian Crowd, they’d die before they admitted that force and violence were the only thing backing up their property rights, making sure no one gets it, and ensuring that everyone else has to play a game they are destined to lose. Coercion and violence always have been and always will be there. As the great Max Weber said, the state is “the monopolization of legitimate violence.” This talk of “spontaneous order” is a mixture of fraud and outright fiction. They don’t even believe it themselves. That’s why they didn’t have a problem getting chummy with Pinochet and instituting “shock therapy.” All that stuff about is and was a canard.

      On a side note. More people should read Thorstein Veblen these days. He’s the antithesis to all of this neoliberal economic ideology. I’m sure it’s no coincidence that little attention is paid to The Theory of the Leisure Class anymore.

    2. RanDomino

      The Primitive Accumulation of Capitalism was the mass land thefts from peasants an indigenous people in the 17th-19th centuries. The ancestors of today’s capitalist class got all this property for basically free, then started selling it or charging rent. All capitalist property is hot.

  5. EoinW

    The largest quote of von Hayek described today’s 1% perfectly, plus the gullible(apathetic) voting public equally accurately. Too bad his prediction hasn’t been prompt enough. a little patience please.

    I remember growing up and people complaining about how the politicians were all dishonest. Even forty years ago there was recognition of an immoral class ruling democratic society and an electorate considering itself helpless to do anything about it.

    The mass murder pass given western democracies is ridiculous. Never heard of Vietnam? 50,000 dead US servicemen is my idea of mass murder(not to mention the 2 million Vietnamese). True these governments are not murdering their own citizens at home on that scale…yet. That’s because they’ve been able to express their blood lust on others. Another factor being that these citizens have basically rolled over and given in to authority. Governments’ ability to steal from the developing world to give to their own citizens has bought compliance. However those who have opposed these governments – AIM as one example – have felt the full weight of government come down on them. Today we are more poised than ever for Hayek to be proven correct. The fact we had to wait 7 decades will be small consolation for the victims.

    Cato and political Conservatives are handy Trojan Horses for Liberals to bash because they are NOT conservative nor libertarian. They are pro-1% and pro-war. Nothing else matters to them.

    Blaming Hayek for plundering CEO’s is like blaming Nietszche for the Nazis…pretty thin. It’s based on the assumption that such CEO rubes would have gone on to be Sunday school teachers had they not been corrupted by Hayek. Yeah right. Furthermore, no group is more critical in opposing the 1% than libertarians. Maybe visit Lew Rockwell’s site once in a while. On the other hand the MSM is made up of liberal journalists who have sold out and now work for the 1%.

    1. YankeeFrank

      Many nations kill peoples of other nations. Its not right, but it happens whether that nation is democratic or not. And historically, democratic nations are as a rule less warlike (the White Elephant in the room not withstanding). Germany before the 1st and 2nd world wars was most decidedly NOT democratic, for the two largest examples. Nor was imperial Japan.

      And you are completely missing Hayek’s assertion that democracy leads to mass murder of the citizenry of that democracy. This has not happened, and protests like yours that its just around the corner are wearing pretty thin. Its just like hyper-inflation, right? Always coming, never here, yet we should overturn our entire society to avoid them. Libertarianism could only exist as an ideology in a society so wealthy and peaceful that entire classes of people never have to deal with the realities of power.

      1. Mirco Romanato

        Hayek predictions are coming true, just at a slower pace and in a different fashion, but fundamentally they are all coming true.
        In the US, you have 8 times more chances to be killed by a law enforcer than by a terrorist (“white supremacist” included). Why?
        In Italy people kill themselves because the tax burden is so high they are unable to pay their taxes and afford to live.
        The War on Drugs is a War on people and a facet of the “soft” totalitarian regime.

        What, IMO, Hayek got wrong is the part on how thing would go south. Having only the examples of Germany and Russia at the start of XX century he draw from them. What was a tragedy then is now repeating as a farce. A diabolical, destructive travesty. People will die, but not in concentration camps.
        People is not reproducing enough to keep up the population. It is not mass starvation, but will do the same in 50 years instead of 5 years.

        1. Yves Smith Post author

          Spurious reasoning. Your odds of getting hit by lightning are also higher than being killed by a terrorist. And a recent authoritative study showed that the crisis, as in loss of jobs and work, have produced a marked increase in suicides. People kill themselves because they are out of money and desperate, not due to taxes per se.

          The odds of being hit by lightning are 1 in 3000.

          The odds of being killed by a terrorist are one in 20 million.

          Therefore just about ANYTHING is more likely than being killed by a terrorist. In fact,

          Now the terrorist odds are based on five years. If you assume people have on average 50 more years to live (a generous assumption), you need to make it 20 million/10, or one in 2 million

          In fact, based on those odds, using your 8X figure, your odds of being killed by a cop are still lower than being hit by lightning. 2 million/8 is one is 250,000, or nearly 100 times the odds of being hit by lightning.

          Better trolls, please.

  6. Larry Headlund

    In the US at least it is common for Hayek citing conservatives to also denounce ‘moral relativism’ but Hayek’s first instance

    In the first instance, it is probably true that the higher education and intelligence of individuals become, the more their views and tastes are differentiated and the less likely they are to agree on a particular hierarchy of values.

    is predicated on there being no absolute values. If there were absolute, true values then individuals of higher education and intelligence would converge and agree on them. These would then, as education increased, be the values the plurality agreed on.
    So to conservatives: Hayek or absolute morals. Choose one.

    1. flora

      yes, I picked up on Hayek’s “it is ‘probably’ true that…”.
      He bases his entire “reasoning” on an untested probability? He merely asserts it as true. probably true. maybe.

    2. Eric Yee

      I’m no fan of Hayek, but you’re using fallacious reasoning.

      The idea that people are less likely “to agree on a particular hierarchy of values”, does not preclude the existence of absolute values. Absolutes exist independently of opinions.

      1. Larry Headlund

        It is not that people do not agree, it is that “the higher education and intelligence of individuals become … the less likely they are to agree on a particular hierarchy of values.” So either absolute values and their relative importance do not exist or intelligence and education lead you away from them. Which would be an interesting comment on intelligence and education.

        Before you use terms like fallacious you might read more carefully.

  7. Paul P

    Take it a step farther and ask how wealth is created. Our wealth is a gift from nature and from the labor of all who came before us. Smith, Ricardo, and Marx expressed this belief in their labor theories of value. These labor theories undermine the legitimacy of private ownership of wealth. They make private ownership a taking from the common inheritance of humanity, a privatization of the commons.

    We can’t have such dangerous ideas, however abstractly expressed, entering in the consciousness of people.
    So, labor theories came to be replaced by utility theories, which focus on the individual, individual choice, individual freedom, and a democratic market place where the individual votes with her dollar.

    “The ideas of the ruling class are in every epoch the ruling ideas.”

  8. Jim Haygood

    ‘The democratic governments [Hayek] demonized have ceased the worst abuses against their own citizens, such as forced sterilizations.’

    Yep, mass surveillance is a LOT better than forced sterilizations. (Of course, the two million-plus in the Gulag are effectively prevented from reproducing.)

    They aren’t quartering troops in our homes either. So the Third Amendment is secure!

    1. YankeeFrank

      But you miss the point. Hayek doesn’t care about the suffering and mass imprisonment of the lower classes. His claim was that democracy would lead to mass murder and incarceration of the elites. Oh well.

      Democracy is flawed, and US democracy is particularly flawed. But that doesn’t mean there’s an alternative that would be better.

      1. TheCatSaid

        So if we do exactly what Hayek proposed, will we get mass incarceration of the elites, instead?

    2. steelhead23

      I note that several of the commenters to this fine article tend to see a bit of ironic truth in Hayek’s anti-democratic argument by looking at the horrors of U.S. Government behaviors toward its citizenry. Unfortunately, there is a modicum of contrarian rationality to Hayek’s argument. As Jimmy Carter recently explained, the U.S. is not longer a democracy – it is a plutocracy. Let us not confuse plutocracy with meritocracy – our plutocrats are not philosopher kings, they are mostly control frauds, skilled in deception and connivance. That they shroud themselves in the flag, and constantly spew nationalistic rhetoric, while effectively undermining democratic rule should be seen for what it is – another manifestation of their skilfull connivance. And sadly, there is pretty strong evidence that this connivance works well on angry citizens who seek an enemy on whom to express their anger. Hence, a post-modern Hayek might argue not that the vulgar (to borrow a term from another neoconservative, Leo Strauss) would come to rule over the meritorious, moral, and hard working, under a liberal democracy, but that the most gifted and immoral connivers would.

  9. Justicia

    “This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards.”

    The largest group of people in the US whose values are very similar are white Christians. Perhaps, Hayek had a point.

    1. YankeeFrank

      Actually, if you ask the American people, especially the ones Hayek hates, what to do about the various and sundry problems plaguing us they often agree on very sensible solutions. Its translating that into reality in D.C. that is failing, and causing us to fail as a nation.

  10. RanDomino

    It’s wrong to treat the supposedly benign first-world democracies as somehow distinct from third-world dictatorships. Yes, Pinochet, for example, was evil, but he was merely an extension of American corporate interests. One cannot divorce the high standard of living and (supposed) democracy in America in the 1950s-60s from the Dirty War in Chile, Argentina, Mexico, etc. That period was a capitalist divide-and-conquer movement, with white middle-class Americans (who just 20 years earlier had been organizing and striking in vast numbers) being given a wide array of privileges in order to bind their loyalty to American capitalism so they would not even consider showing any kind of solidarity with their fellow workers in the parts of the world where pillage and oppression provided cheap copper, rubber, and oil for automobiles and color TVs.

    The funny thing about National Socialism is that it is indeed socialist, for members of the specified nation. So it appears that the problem with Hayek may not be that he was wrong, but that the assumption was that he was saying that the victims would be white middle-class Americans and Western Europeans. But someone’s got to be the beneficiary of all this tyranny, right? Well, who do you think it’s been?

    1. YankeeFrank

      But that means Hayek was wrong, not that he was “right about the wrong target”. Hayek was a small-minded minor Austrian aristocrat. If you don’t know the type I highly recommend watching “The Third Man”. Its a classic.

  11. Denis Drew

    [cut and paste]
    Labor extracting the max consumers will pay — versus — the [REAL] road to subsistence-plus serfdom

    What I call a subsistence-plus labor market exists when employees have no mechanism with which to withhold labor from employers in attempt to extract the maximum price consumers may be willing to pay — pay levels set to suit employers needs only.

    Examples: Fast food pays subsistence (or less). Starbucks — pays up a rung — a couple of dollars an hour more plus benefits for more yuppie-attuned employees (English as a first language). Starbucks employees may expect they are headed for better things (likely) — may be why they endure pay too close to bottom money. Whole Foods — up another rung — pays a couple of more bucks plus benefits (to the 80% who turn over) because it needs what Starbucks needs plus some additional industry.

    My (un)favorite example of subsistence-plus is regional airline pilots whose pay and benefits may hover around Whole Foods level – with typically $100,000 educations and years of building flight hours – but who hope for much better things (which may be getting less hopeful all the time).

    When employees whose wages extract the max consumers will pay have the opportunity to purchase products made by employees whose wage potentials are skinned (skimmed) under subsistence-plus, then, the labor price/value spectrum as assessed by consumers only becomes distorted. Ditto for any labor-price extraction differential.

    If all employees were paid according to the maximum price their products could command from consumers – instead of too many by how little (how few rungs) above subsistence the boss can skin them – the working rubric would be: from each consumer according to their needs; to each employee according to their abilities. (You had it all backwards, Vladimir Ilyich. :-])

    There is only one modality — introduced by legal mandate in late 1940s continental Europe, since picked up elsewhere in the world and established by the Teamsters Union National Master Freight Agreement in 1964 in the US — that ownership cannot work its ratcheting-down, subsistence-plus ways around: centralized bargaining – where all employees doing the same category of work in the same locale (nationwide where applicable) work under a single collectively bargained contract with all employers. (This should eliminate the use of scabs who don’t have a legal contract – I’ve never heard of scabs in Europe.)

    My old Teamsters local 804 (left in 1970, age 26) recently won (as they like to phrase it) a 30-and-out retirement benefit of $3900 a month. Which may double what regional pilots earn while still active.

    Time is a-waisting. A few years ago, Northwest Airlines squeezed a billion dollars in givebacks out of its major airline flight crews only to next year award a billion dollars in bonuses to a thousand of its execs. The pace on the [REAL] road to serfdom may be speeding up. Help! Now!

  12. impermanence

    You could write a dissertation on each sentence in the above article, which is to suggest that the complexity of the ideas clearly reveals the levels of bullshit contained.

    Regardless of how you wish to define/defend the organization of society, the outcome is ALWAYS the same.

  13. Bob Roddis

    One might think that Mr. Black has never read “The Road to Serfdom” and is unfamiliar with its theme even though that general theme is set forth in the cartoon version to which he links. The point of “The Road to Serfdom” is that CENTRAL PLANNING of the Nazi and Russian variety is the cause of the associated horrors of those regimes. Even a democratic society that forges ahead with such central planning is likely to end up the same way. The problem for Mr. Black is that after WWII, western nations DID NOT ENGAGE in the type of economic central planning of the type about which Hayek warned. No central planning, no totalitarian nightmare.

    Since Mr. Black has included a long quote from Chapter 10 from “The Road to Serfdom, we must presume that his intent was to dishonestly and purposefully misrepresent the point of the book. Preceding that long quote is the following quote which demonstrates that the topic of the book is the problems caused by COMPULSORY SOCIALIST ECONOMIC CENTRAL PLANNING and not democracy per se:

    We must here return for a moment to the position which precedes the suppression of democratic institutions and the creation of a totalitarian regime. In this stage it is the general demand for quick and determined government action that is the dominating element in the situation, dissatisfaction with the slow and cumbersome course of democratic procedure which makes action for action’s sake the goal. It is then the man or the party who seems strong and resolute enough “to get things done” who exercises the greatest appeal. “Strong” in this sense means not merely a numerical majority-it is the ineffectiveness of parliamentary majorities with which people are dissatisfied. What they will seek is somebody with such solid support as to inspire confidence that he can carry out whatever he wants. It is here that the new type of party, organised on military lines, comes in. [emphasis added]

    In the Central European countries the socialist parties had familiarised the masses with political organisations of a semimilitary character designed to absorb as much as possible of the private life of the members. All that was wanted to give one group overwhelming power was to carry the same principle somewhat further, to seek strength not in the assured votes of huge numbers at occasional elections, but in the absolute and unreserved support of a smaller but more thoroughly organized body. The chance of imposing a totalitarian regime on a whole people depends on the leader first collecting round him a group which is prepared voluntarily to submit to that totalitarian discipline which they are to impose by force upon the rest. Although the socialist parties had the strength to get anything if they had cared to use force, they were reluctant to do so. They had, without knowing it, set themselves a task which only the ruthless, ready to disregard the barriers of accepted morals, can execute. That socialism can be put into practice only by methods which most socialists disapprove is, of course, a lesson learnt by many social reformers in the past.

    The old socialist parties were inhibited by their democratic ideals, they did not possess the ruthlessness required for the performance of their chosen task. It is characteristic that both in Germany and Italy the success of Fascism was preceded by the refusal of the socialist parties to take over the responsibilities of government. They were unwilling wholeheartedly to employ the methods to which they had pointed the way. They still hoped for the miracle of a majority agreeing on a particular plan for the organisation of the whole of society; others had already learnt the lesson that in a planned society the question can no longer be on what a majority of the people agree, but what is the largest single group whose members agree sufficiently to make unified direction of all affairs possible; or, if no such group large enough to enforce its views exists, how it can be created and who will succeed in creating it.

    Central Planning is problematic because EVERYONE in the nation is compelled at the point of a gun to follow the plan. If 80% of the population is on board with the plan, there would be no need for the compulsion by SWAT team to force compliance because the plan could be accomplished voluntarily. As I never tire of repeating, the fact that “progressives” ALWAYS misrepresent libertarian and Austrian positions demonstrates that they fear a fair and direct engagement of those views. This helps explain why no “progressive” in the galaxy seems to understand even basic Austrian concepts.

      1. Bob Roddis

        Thanks for the substantial, detailed and thoughtful response. I knew you guys could do it.

    1. James Levy

      But for Hayek, Social Security, anti-discrimination laws, anti-poverty programs, jobs programs, progressive taxation, were ALL MANIFESTATIONS OF WHAT HE CALLED CENTRAL PLANNING. In fact, anything that alleviated the plight of the poor at a cost to the rich was a manifestation of central planning. But what’s the use talking to a true believer in the amoral bullshit that is libertarianism.

      1. Bob Roddis

        Of course, social democracy in multi-cultural nations results in atrocities as in East Pakistan and Iraq.

        But that is not the subject of The Road to Serfdom which is specifically about LARGE SCALE SOCIALIST CENTRAL PLANNING. Both you and Mr. Black are misrepresenting what the book is about.

          1. Bob Roddis

            Nice avoidance of the topic. How about:

            a) “Multi-ethnic democracies with large public sectors and weak property rights” tend to ethnic strife.

            b) a) is not the topic of “The Road to Serfdom” which is Central Economic Socialist Planning leads to totalitarianism.

            c) Mr. Black has purposely misrespresented the gist of “The Road to Serfdom”.

              1. Bob Roddis

                So the people who were slaughtered lived under a regime which strongly and rigorously protected their bodies and possessions? Interesting.

            1. OIFVet

              What avoidance? You tried to invent “facts” to fit you propaganda narative and I called your BS. Again, it is doubtful these two are democracies, and they are definitely not “social”. You must be quite divorced from reality, or a demagogue, to call them “social democracies.” You Austrian talibans see “socialism” in everything that does not confirm to the sociopathic anti-human hatred spewed by your cult leaders. If anything, Black went easy on Hayek, but only because no human language exists that can adequately capture in words the evilness of that thing called Hayek.

    2. TheCatSaid

      Did “The Road to Serfdom” consider any form of direct democracy?
      I wonder what the author would think of Porto Alegre (Brazil) and their experience with direct democracy–it sounds like he believed such a situation was impossible.

    3. skippy

      Basic Austrian economic concepts are result of, what was payed for, by its financial backers.

      Skippy… in AET dicta you have only two sorts of human organization, theirs and socialists, ergo democracy is a socialist form of human organization and every die hard libertarian knows in his/her gut that socialists are murderers and responsible for the death of millions.

      1. Doug Terpstra

        Bingo. The self-evident contradictions and self-serving circular logic of elitist arrogance neatly exposed.

        Black’s post is devastating to the divine right of neo-feudal lords. Sorry, frat boys; you are not God’s gift to the lower orders. Behold the mess you have made by crushing democracy under neoliberal militarism.

        1. skippy

          Austrian-ism is just an apologia for Aristocratic social organization. People should put down the canons and research the actual history behind ideological movements, it tells a much more expansive and granular story.

          Skippy…. you have been missed.

      2. Bob Roddis

        1. There were no “financial backers” of Austrian Economics. Mises was a loan Jew in fascist Austria who managed to get out of Austria one step ahead of the Nazis who, as socialists, seized his library of books. The Soviets later seized the Mises library from the Nazis and it was found in Moscow in 1991.

        2. The fundamental concept of Austrian Economics is economic calculation which allowed Mises to predict in 1922 the demise of the USSR and socialism. No “progressive” in the galaxy understands (or wants to understand) the concept of economic calculation.

        1. skippy


          BROOKLYN, NY: Last Friday, November 9, saw the big “Milton Friedman Centennial” celebration at the University of Chicago’s Becker Friedman Institute for Research in Economics. It was a big day for fans of one of the Founding Fathers of neoliberal/libertarian free-market ideology, and those fans are legion on both sides of the narrow Establishment divide —as Obama’s economy czar Larry Summers wrote in 2006, “Any honest Democrat will admit that we are all Friedmanites now.”

          One episode in Milton Friedman’s career not celebrated (or even acknowledged) at last week’s centennial took place in 1946, the same year Friedman began peddling his pro-business “free market economics” ideology.

          According to Congressional hearings on illegal lobbying activities ’46 was the year that Milton Friedman and his U Chicago cohort George Stigler arranged an under-the-table deal with a Washington lobbying executive to pump out covert propaganda for the national real estate lobby in exchange for a hefty payout, the terms of which were never meant to be released to the public.

          The arrangement between Friedman and Stigler with the Washington real estate lobbyist was finally revealed during he Buchanan Committee hearings on illegal lobbying activities in 1950. But then it was almost entirely forgotten, including apparently by those celebrating the “Milton Friedman Centennial” last week in Chicago.

          I only came across the revelations about Friedman’s sordid beginnings in the footnotes of an old book on the history of lobbying by former Newsweek book editor Karl Schriftgiesser, published in 1951, shortly after the Buchanan Committee hearings ended. The actual details of Milton Friedman’s PR deal are sordid and familiar, with tentacles reaching into our ideologically rotted-out era.

          It starts just after the end of World War Two, when America’s industrial and financial giants, fattened up from war profits, established a new lobbying front group called the Foundation for Economic Education (FEE) that focused on promoting a new pro-business ideology—which it called “libertarianism”— to supplement other business lobbying groups which focused on specific policies and legislation.

          The FEE is generally regarded as “the first libertarian think-tank” as Reason’s Brian Doherty calls it in his book “Radicals For Capitalism: A Freewheeling History of the Modern Libertarian Movement” (2007). As the Buchanan Committee discovered, the Foundation for Economic Education was the best-funded conservative lobbying outfit ever known up to that time, sponsored by a Who’s Who of US industry in 1946.

          A partial list of FEE’s original donors in its first four years includes: The Big Three auto makers GM, Chrysler and Ford; top oil majors including Gulf Oil, Standard Oil, and Sun Oil; major steel producers US Steel, National Steel, Republic Steel; major retailers including Montgomery Ward, Marshall Field and Sears; chemicals majors Monsanto and DuPont; and other Fortune 500 corporations including General Electric, Merrill Lynch, Eli Lilly, BF Goodrich, ConEd, and more.

          The FEE was set up by a longtime US Chamber of Commerce executive named Leonard Read, together with Donaldson Brown, a director in the National Association of Manufacturers lobby group and board member at DuPont and General Motors.

          That is how libertarianism started: As an arm of big business lobbying.

          Before bringing back Milton Friedman into the picture, this needs to be repeated again: “Libertarianism” was a project of the corporate lobby world, launched as a big business “ideology” in 1946 by The US Chamber of Commerce and the National Association of Manufacturers. The FEE’s board included the future founder of the John Birch Society, Robert Welch; the most powerful figure in the Mormon church at that time, J Reuben Clark, a frothing racist and anti-Semite after whom BYU named its law school; and United Fruit director Herb Cornuelle.

          The purpose of the FEE — and libertarianism, as it was originally created — was to supplement big business lobbying with a pseudo-intellectual, pseudo-economics rationale to back up its policy and legislative attacks on labor and government regulations.

          This background is important in the Milton Friedman story because Friedman is a founder of libertarianism, and because the corrupt lobbying deal he was busted playing a part in was arranged through the Foundation for Economic Education.

          False, whitewashed history is as much a part of the Milton Friedman mythology as it is the libertarian movement’s own airbrushed history about its origins; the 1950 Buchanan Committee hearings expose both as creations of big business lobby groups whose purpose is to deceive and defraud the public and legislators in order to advance the cause of corporate America.

          The story starts like this: In 1946, Herbert Nelson was the chief lobbyist and executive vice president for the National Association of Real Estate Boards, and one of the highest paid lobbyists in the nation. Mr. Nelson’s real estate constituency was unhappy with rent control laws that Truman kept in effect after the war ended. Nelson and his real estate lobby led what investigators discovered was the most formidable and best-funded opposition to President Truman in the post-war years, amassing some $5,000,000 for their lobby efforts—that’s $5mln in 1946 dollars, or roughly $60 million in 2012 dollars.

          So Herbert Nelson contracted out the PR services of the Foundation for Economic Education to concoct propaganda designed to shore up the National Real Estate lobby’s legislative drive — and the propagandists who took on the job were Milton Friedman and his U Chicago cohort, George Stigler.

          To understand the sort of person Herbert Nelson was, here is a letter he wrote in 1949 that Congressional investigators discovered and recorded:

          “I do not believe in democracy. I think it stinks. I don’t think anybody except direct taxpayers should be allowed to vote. I don’t believe women should be allowed to vote at all. Ever since they started, our public affairs have been in a worse mess than ever.”

          It’s an old libertarian mantra, libertarianism versus democracy, libertarianism versus women’s suffrage; a position most recently repeated by billionaire libertarian Peter Thiel —Ron Paul’s main campaign funder.

          So in 1946, this same Herbert Nelson turned to the Foundation for Economic Education to manufacture some propaganda to help the National Association of Real Estate Boards fight rent control laws. Nelson knew that the founder of the first libertarian think-tank agreed with him on many key points. Such as their contempt and disdain for the American public.

            1. skippy

              Milton was a con artist and as such wrote what ever his handlers wanted, low ethical standards will have that effect.

              New Keynesian is what I think your saying, a synergism of rational expectations imperfect compatision and sticky wages, bit of a cock up if you ask me, but, that’s what happens when monetarism goes splat. Sort of de-burnishes the old Sveriges Riksbank Prize and leaves one searching for any thing that might offer a chimera of validity.

              At the end of the day its just an ideological cover for capital accumulation by multinational corporations. I mean how can you constantly get so much wrong yet still gain any kind of academic creditability see: Econometrician David Hendry criticized part of Friedman’s and Anna Schwartz’s 1982 Monetary Trends.[91] When asked about it during an interview with Icelandic TV in 1984, Friedman said that the critique applied to a different problem than that which he and Schwartz had tackled, and was thus not relevant,[92] and also pointed to the (as of 1984) lack of consequential peer review amongst econometricians on Hendry’s work.[93] In 2006, Hendry stated that Friedman was guilty of “serious errors” of misunderstanding that meant “the t-ratios he reported for UK money demand were overstated by nearly 100 per cent”, and said that, in a paper published in 1991 with Neil Ericsson,[94] he had refuted “almost every empirical claim […] made about UK money demand” by Friedman and Schwartz.[95] A 2004 paper updated and confirmed the validity of the Hendry–Ericsson findings through 2000.[96]

              Skippy…. Don’t know how to tell you Bob, but, if your economic theory [sociopolitical template] is premised on a faulty understanding of “Human Nature” or a completely contrived notion, it will fail endlessly.

            2. skippy

              You link David Stockman… really?

              “Business career

              After leaving government, Stockman joined the Wall St. investment bank Salomon Brothers and later became a partner of the New York–based private equity company, the Blackstone Group.[12] His record was mixed at Blackstone, with some very good investments, such as American Axle, but also several large failures, including Haynes International and Republic Technologies.[13] During 1999, after Blackstone CEO Stephen A. Schwarzman curtailed Stockman’s role in managing the investments he had developed,[14] Stockman resigned from Blackstone to start his own private equity fund company, Heartland Industrial Partners, L.P., based in Greenwich, Connecticut.[15]

              On the strength of his investment record at Blackstone, Stockman and his partners raised $1.3 billion of equity from institutional and other investors. With Stockman’s guidance, Heartland used a contrarian investment strategy, buying controlling interests in companies operating in sectors of the U.S. economy that were attracting the least amount of new equity: auto parts and textiles. With the help of about $9 billion in Wall Street debt financing, Heartland completed more than 20 transactions in less than 2 years to create four portfolio companies: Springs Industries, Metaldyne, Collins & Aikman, and TriMas. Several major investments performed very poorly, however. Collins & Aikman filed for bankruptcy during 2005 and when Heartland sold Metaldyne to Asahi Tec Corp. during 2006, Heartland lost most of the $340 million-plus of equity it had invested in the business.[16]
              Collins & Aikman Corp.

              During August 2003, Stockman installed himself as CEO of Collins & Aikman Corporation, a Detroit-based manufacturer of automotive interior components. He was ousted from that job days before a Chapter 11 filing on May 17, 2005.
              Criminal and civil charges

              On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in “a scheme … to defraud [Collins & Aikman]’s investors, banks and creditors by manipulating C&A’s reported revenues and earnings.” At the same time, the Securities and Exchange Commission brought civil charges against Stockman related to actions he performed while CEO of Collins & Aikman.[17] Stockman suffered a personal financial loss, estimated at $13 million, along with losses suffered by as many as 15,000 Collins & Aikman employees worldwide. Stockman said in a statement posted on his law company’s website that the company’s end was the consequence of an industry decline, not fraud.[18] On January 9, 2009, the U.S. Attorney’s Office announced that it did not intend to prosecute Stockman for this case.”

              Skippy… why is it, that there always seems to be an issue with ethical behavior amongst some Ideological cults.

                1. skippy

                  I don’t personally care if Stockman is anti AET, hes irrelevant to the historical record.

                  “The first great advantage the neoliberals possessed was an unceasing fountain of money. US oligarchs and their foundations – Coors, Olin, Scaife, Pew and others – have poured hundreds of millions into setting up thinktanks, founding business schools and transforming university economics departments into bastions of almost totalitarian neoliberal thinking. The Heritage Foundation, the Hoover Institute, the American Enterprise Institute and many others in the US, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute in the UK, were all established to promote this project. Their purpose was to develop the ideas and the language which would mask the real intent of the programme – the restoration of the power of the elite – and package it as a proposal for the betterment of humankind.

                  Their project was assisted by ideas which arose in a very different quarter. The revolutionary movements of 1968 also sought greater individual liberties, and many of the soixante-huitards saw the state as their oppressor. As Harvey shows, the neoliberals coopted their language and ideas. Some of the anarchists I know still voice notions almost identical to those of the neoliberals: the intent is different, but the consequences very similar.

                  Hayek’s disciples were also able to make use of economic crises. An early experiment took place in New York City, which was hit by budgetary disaster in 1975. Its bankers demanded that the city follow their prescriptions – huge cuts in public services, smashing of the unions, public subsidies for business. In the UK, stagflation, strikes and budgetary breakdown allowed Thatcher, whose ideas were framed by her neoliberal adviser Keith Joseph, to come to the rescue. Her programme worked, but created a new set of crises.

                  If these opportunities were insufficient, the neoliberals and their backers would use bribery or force. In the US, the Democrats were neutered by new laws on campaign finance. To compete successfully for funding with the Republicans, they would have to give big business what it wanted. The first neoliberal programme of all was implemented in Chile following Pinochet’s coup, with the backing of the US government and economists taught by Milton Friedman, one of the founding members of the Mont Pelerin Society. Drumming up support for the project was easy: if you disagreed, you got shot. The International Monetary Fund and the World Bank used their power over developing nations to demand the same policies.” –

                  Skippy…. Bernays on Roids….

                2. skippy

                  Oops theirs that Economic Education (FEE), thingy again, which you seemingly disavow via Milton… ummm… lets see about that.

                  “Together with House, Lippmann was one of the founding members of the Council on Foreign Relations. Lippmann, who viewed journalism as “intelligence work”, was very interested in the manipulation of public opinion, as evidenced by his book by that same title published in 1922. His political views apparently changed in the 1930s, and he openly began discussing liberalism as a viable alternative to socialism.

                  Upon hearing the news about Lippmann’s visit, Rougier, who already in 1934 had received a grant from the Rockefeller Foundation to investigate totalitarianism in Central Europe, contacted Swiss academic William Rappard to discuss a list of attendees for the colloquium. Rappard, a hardcore globalist, had known both Lippmann and House for several years (he taught at Harvard in 1911-12), and had been instrumental in convincing Wilson to choose Geneva for the seat of the League of Nations in 1920. Rappard’s globalist achievements are celebrated nowadays in the form of the Center William Rappard, the headquarters of the World Trade Organization in Geneva.

                  Rappard was also the co-founder of the Graduate Institute for International Studies in Geneva. The Institute for International Studies, which hosted several professors and visiting scholars associated with the neoliberal or Austrian ideologies, such as Friedrich von Hayek, Ludwig von Mises, Michael Heilperin, and Wilhelm Röpke, was almost entirely funded by the Rockefeller Foundation. Not surprisingly, Rougier’s list of invitees to the WLC included, in addition to the above-mentioned scholars, the name of Tracy B. Kittredge, a longtime trustee of the Rockefeller Foundation.

                  As pointed out in The Road from Mont Pèlerin, the list of attendees to the WLC reads like a who’s who of postwar economic and political prominence: we find a future Nobel Prize (Hayek), the first general secretary of the Organization for European Economic Cooperation (Robert Marjolin), De Gaulle’s financial adviser (Jacques Rueff), the director of the Bank of International Settlements (Roger Auboin) and its manager (Marcel van Zeeland), Ronald Reagan’s adviser on the Star Wars project (Stephan T. Possony), and a prominent French philosopher (Raymond Aron), to name but a few.

                  From the Walter Lippmann Colloquium to the Mont Pèlerin Society

                  Although there were some dissensions between Austrian economists such as Mises and “softer” neoliberals like Lippmann and German economist Alexander Rüstow, WLC participants agreed on an agenda which would provide the cornerstone of the postwar neoliberal propaganda. One of the fundamental tenets of this agenda was that “only the mechanism by which prices are determined by the free market allows the optimal organization of the means of production and leads to the maximal satisfaction of human needs”.

                  The WLC led to the creation of the “Society for the Renovation of Liberalism”, whose activities were interrupted by the onset of World War II. Nevertheless, the seed was planted, and as soon as the war ended, Hayek, Mises, Röpke and their colleagues devoted their energies to creating a society that would further the neoliberal aims enunciated at the WLC. This led in 1947 to the first meeting of the Mont Pèlerin Society in Switzerland, a reunion which was sponsored by the Volker Fund, the Foundation for Economic Education (FEE), and most notably the multinational bank Credit Suisse, which paid 93% of the total conference costs.

                  The continuity between the WLC and the MPS becomes obvious when one considers than 12 of the 26 participants to the WLC participated in the first meeting of the MPS, and another four eventually joined. Moreover, it was the arch-globalist Rappard, who was at the center of the WLC network, who gave the opening address of the first-ever MPS meeting.

                  From a modest gathering of 36 attendees in 1947, the MPS grew quickly to include 167 members in 1951, and 500 members by the late 1990s. Nevertheless, the MPS remained an exclusive club whose members are co-opted and must generally first attend as guests.” –

                  Wellie it seems heaps of AET proselytizers are up to their eye balls in FEE and other assorted Bernays PR/Marketing agency front groups masquerading as “Think Tanks” [that term always sets off a fit of giggles imo].

                  Skippy…. Bob are you trying to rewrite history or just woefully uninformed?

                    1. skippy

                      Bob it would be nice if you could stick to the historical evidence above, rather than attempt to obfuscate by proxy of some film [political label pigeonholing].

                      I take your silence or lack of rebuttal wrt the material information, myself provided above, as conformation of its validity.

                      Skippy… If your versed enough in AET property rights, why don’t we regale the commentate in property rights and the birth process, from your cults perspective. That always seems to get the natives restless.

                      PS. BTW how does a hierarchical bequeathed set of incoherent linear suppositions – some how – equate to personal freedom anyhow?

                    2. skippy

                      “As I never tire of explaining, no non-libertarian or non-Austrian understands basic Austro-libertarian concepts or analysis and none seem to want to understand.” – Bob Roddis blog

                      Skippy… That’s some heavy duty quasi religious exclusion by membership you got going there Bob…. nice~

            1. skippy

              Love how your mob – eats its own – at the slightest sign of any weakness, “survival of the fittest” on public display.

              That and Hoppe calling the Von Mises mob socialists. Well such things occur in the evolution of thought, preceded by biblical like assemblage of extraneous thoughts about stuff ex nihilo i.e. praxeology et al.

              Skippy…. AET the Amway of specious metaphysical reasoning.

              1. Bob Roddis

                Friedman believed in a government monopoly funny money system which is a major violation of the non-aggression principle. He never showed any understanding of basic Austrian concepts such as economic calculation which even Robert Heilbronner finally came to understand. This isn’t some minor technical dispute. In fact, I see no evidence that you understand these concepts at all. You shouldn’t write on topics about which you know nothing.

                Download and read this article by Peter Boettke on economic calculation. If you are going to try to refute something, I would think it a good idea to first understand the concepts you are attempting to refute.


                1. skippy

                  OK now its just getting ludicrous, NAP – ZAP is anti fraud right.

                  So when both AET and Chicago school mobs spend decades promoting deregulation as a core tenement of “Free Market Freedom”, yet at the end of it all, the deregulation was the very agency in allowing the largest ***fraudulent credit bubble*** [private issuance] humanity has ever seen.

                  And you have the audacity to link to a paper on the Economic calculation problem, Mon Dieu! Oh well Kantian jargon and Specious reasoning [bias conformation seeking] will do that to ya…

                  As far as ECP goes the cold war was just fine, now its proponents are gabbing on about eb’vil gumberment, fickle ideologues are problematic imo. Then as energy is the primary economic resource ECP has zero methodology to quantify this little problem.

                  skippy… 300s BC – Epicurus – ataraxia—peace and freedom from fear—and aponia—the absence of pain… Bloody funny stuff… libertarians are the most anxiety ridden zealots and insecure lot in all of our species history… you can’t make this stuff up.

            2. Yves Smith Post author

              Anyone who calls Friedman a Keynesian has just discredited himself completely and utterly. And is not trustworthy. If that’s all you can come up with in the way of backup, you got nuthin’.

          1. Bob Roddis

            Austrian theory via Mises and Hayek in mostly solitary work (and going against the grain of a full blown horde of European socialist intellectuals) was essentially fully formed in Europe by the 1930s in German before it was ever translated into English. Austrian business cycle theory was practically unheard of in the US until the Libertarian Party formed in 1972 in response to Nixon’s price controls, funny money regime and mad bomber Vietnam war. Austrian theory has absolutely nothing to do with Chicago theory and is totally hostile to Chicago theory. Even the basic outline of the Austrian theory is never stated in the MSM or in academia (hence we see you guys knowing nothing about it). Still, it frightens you authoritarian “progressives” so deeply that you dare not even learn a basic outline of its theories.

            1. skippy

              The label projection is a feature of your ilk, hint I don’t do isms or ologys ergo no frighted authoritarian progressive here Bob, but, thanks for the obligatory drive by smear – attempt to pigeonhole.

              As far as understanding AET – I’ll let PPK do the evisceration see:

              Friedrich Hayek was an unusual character. Although well known to be a libertarian political philosopher, he is also commonly associated with being an economist. And it’s certainly true that at one time Hayek’s focus was solely on economics. In the 1920s Hayek was still within the fold of pure economics, publishing papers and works that were taken seriously by the discipline. However, by the 1930s Hayek’s theories had started to come apart at the seams. Exchanges between Hayek and John Maynard Keynes and Piero Sraffa show Hayek as confused and even somewhat desperate. It was around this time that Hayek discontinued making any substantial contributions to economics. Not coincidentally this overlapped with the time when most economies, mired as in Great Depression, demonstrated that Hayek’s theories were at best impractical, at worst a complete perversion of facts.

              So, Hayek turned instead to constructing political philosophies and honing a metaphysics rather than engaging in any substantial way with the new economics that was emerging. When pure logic and empirical reality ceased to support Hayek’s emotionally charged ideology he turned, to the more malleable sphere of meaning and metaphysics. He became concerned with watery terms like “freedom” and “liberty”, which he then set out to impregnate with a meaning that would support his dreams. The most famous result of this period of conversion, which resembled less St. Paul on the road to Damascus and more so an alcoholic who had hit rock bottom, was Hayek’s 1944 work The Road to Serfdom. In a very real way it was this book that marked the close of Hayek’s career as a serious economic thinker and set him on the path of the political propagandist, agitator and organiser.

              The over-arching argument of the book is well-known and need not be repeated too extensively here. Hayek thought that all totalitarianisms had their origins in forms of economic planning. Economic planning was the cause of totalitarianism for Hayek, rather than the being just a feature of it. Underneath it all this was a rather crude argument. One may as well make the observation that totalitarianism was often accompanied by arms build-up, therefore arms build-ups “cause” totalitarianism. But Hayek pushed it and most probably believed it anyway, for reasons that we shall soon see.

              The implicit argument here was that, Britain for example, which had begun to increasingly plan its economy during the war, was on a slippery slope that would end in totalitarianism. It must be understood that Hayek’s argument had no factual basis. Only a polemicist could argue that the two totalitarianisms that existed in this period – namely, Hitler’s Germany and Stalin’s Soviet Union – had formed because a naïve democratic government had engaged in some economic planning that then got out of hand and resulted in tyranny. But Hayek’s motivations probably lay somewhat deeper – probably so deep that he himself could not properly recognise them.” –

              skippy… 3 part series with lots of historical goodies, enjoy!

              My Fav…. “An Existential Choice

              It is not hard to discern whether Hayek was lying or simply deluded. He was not lying – at least not consciously. For the rest of his life he was driven by a genuine belief in the idea, put forward in The Road to Serfdom, that economic planning was what had led to totalitarianism in Europe. It was not hard to discern if Hayek was lying simply by looking at the zeal with which he pursued the crusade against planning. This was not the cynical enthusiasm of a charlatan, but instead the forward impetus of a man who, as if riding a bicycle, would come crashing down emotionally if lost his momentum.

              Hayek’s entire ideology and career had begun to come apart in the 1930s. His theories were shown to be inconsistent in the academic journals of the time and the practical implications of those theories had shown themselves to be both discredited and dangerous. A man in such a position only has two choices: he can either completely re-evaluate his ideas which, if they were held with unshakeable conviction and constituted a core component of his emotional make-up, as seems to have been the case with Hayek, would have likely resulted in a mental collapse; or, alternatively, he can engage in a massive repression, shut out reality and construct around himself a fantasy world.

              Hayek opted for the latter. So too did all of what was to become the neo-Austrian school which soon developed into a sealed hermetic cult of True Believers who reinforced each other’s unsubstantiated ideas and defended each other from the threatening world outside the circle. But this cult was largely fringe. Although it did command some respect among neoliberals in the Thatcher and Reagan administrations, it was the respect accorded to the eccentric rather than that accorded to the practical man. Lip service was paid to the doctrines of Hayek and the Austrians, but their extremist and impractical economic policy implications were sterilised and kept out of immediate contact with the levers of power. Milton Friedman’s more pragmatic doctrines of monetarism were preferred so far as economic policies went.

              But we should not fool ourselves. Hayek’s delusion did indeed have profound effects on history. Indeed, as we shall see, it was even directly responsible for Friedman’s rise. For Hayek, in his crusade against what he thought the germ from which totalitarianism spread, became a tireless worker and organiser. With the ingenuity of a Leninist, Hayek formed around him a host of like-minded thinkers and politicians. Backed by the funding of right-wing millionaires, Hayek constructed a network of people who he initiated into his delusion and convinced that every manifestation of collective intervention into the free market was just one more stepping stone on the road to serfdom.

              Likewise in the popular mind – for Hayek did effectively become a political propagandist rather than a respected intellectual in the 1940s – Hayek’s delusion, with all its emotional overtones, spread quite effectively. Today whenever we encounter an anxiety-ridden Tea Partier or a fearful and paranoid internet Austrian, it is Hayek’s delusion that we are hearing echoed through the chambers of history, albeit in slightly vulgarised form. It is the fear, distrust and paranoia which Hayek’s portrait of a free society descending into barbarism evokes that captures the minds of those it touches. That it is completely deluded and ignorant of history only makes it more effective, like all propaganda, in its role as propaganda. The bigger the lie, the more emotional investment it requires to believe in and so the more it captures the uncritical and the emotionally weak.

              The inner sanctum from which Hayek’s delusion emanated was called the Mont Pelerin Society. In the next piece in this series we will turn to how Hayek’s delusion was diluted by those in the Mont Pelerin Society to fit with the American political system; this is what we might call the American version of neoliberalism. While in the final piece we will consider how Hayek’s delusion was gradually converted into the European form of neoliberalism when it was confronted with the problem of trade unions. As we shall see there is much overlap between these two forms of neoliberalism and each borrows from the other – this, of course, being the reason why they are not generally distinguished between – but most importantly, they share a common root in the wall that Hayek erected in his mind in the 1930s and 1940s to block out a world that he himself had played a part in creating.”

        2. Septeus7

          Quote from Bob Roddis: “There were no “financial backers” of Austrian Economics. Mises was a loan Jew in fascist Austria who managed to get out of Austria one step ahead of the Nazis who, as socialists, seized his library of books.”

          Bullshit. The facts are that Ludwig Von Mises taught at the Vienna University from 1913 to 1934, while also serving as a principal economic adviser to the Fascist Austrian government during the Austro-fascist regime of Engelbert Dollfuss. He was a fascist. If he wasn’t Jewish he would have supported Hilter by all evidence.

          You said he had no financial backers. You lying piece of shit. What about Lawrence W. Fertig, the American advertising executive?

          I’m sorry but Bob Roddis is openly lying with the intent to deceive. I and many others have repeated pointed out the facts but Bob continues to spam comment boards with his lies. Mark Ames and others have repeatedly pointed out the connection of the libertarian movement that link to holocaust denial and the connections to the Nazi Willis Carto and then Bob then goes on a rant about about how the “Nazi were leftwing socialists” canard.

          Why is he still allowed to comment he when he has no intent for productive or honest discuss? He is trolling.

          The Austrian School has no fundamental concepts. It is blind classism, and racism and nothing more. No Austrian predicted the collapse of the USSR. Blogger Lord Keynes has documented this repeatedly and yet Bob still continues to lie.

  14. Hamilton

    All communities divide themselves into the few and the many. The first are the rich and well born, the other the mass of the people. The voice of the people has been said to be the voice of God; and however generally this maxim has been quoted and believed, it is not true in fact. The people are turbulent and changing; they seldom judge or determine right. Give therefore to the first class a distinct, permanent share in the government. They will check the unsteadiness of the second, and as they cannot receive any advantage by a change, they therefore will ever maintain good government. Can a democratic assembly, who annually revolve in the mass of the people, be supposed steadily to pursue the public good?
    Farrand’s Records of the Federal Convention, v. 1, p. 299. (June 19, 1787)

  15. Wat Tyler

    ” The alliance of elite and poor whites in the U.S. South against the freed slaves is a classic example of how such a coalition can provide dominant political power for roughly a century. ”

    As a 71 year old Southerner I can vouch for this – although a story I have heard all my life illustrates the strategy in local terms.

    A wealthy good-ol-boy is sitting at a table with a poor white man and a poor black man. In the middle of the table is a pile of cookies. The good-ol-boy rakes all but one of the cookies into his lap and then turns to the poor white man and says – “Vote for me and I will stop this nigger from stealing YOUR cookie”.

    And the poor white man votes for the elite because he REALLY needs that cookie to feed his family and he has been taught that resistance is futile and blacks are undeserving. Works beautifully.


  16. Wat Tyler

    ” The alliance of elite and poor whites in the U.S. South against the freed slaves is a classic example of how such a coalition can provide dominant political power for roughly a century. ”

    As a 71 year old Southerner I can vouch for this – although a story I have heard all my life illustrates the strategy in local terms.

    A wealthy good-ol-boy is sitting at a table with a poor white man and a poor black man. In the middle of the table is a pile of cookies. The good-ol-boy rakes all but one of the cookies into his lap and then turns to the poor white man and says – “Vote for me and I will stop this n-word from stealing YOUR cookie”.

    And the poor white man votes for the elite because he REALLY needs that cookie to feed his family and he has been taught that resistance is futile and blacks are undeserving. Works beautifully.


  17. masterslave

    Jason : “” Lets tax that more fairly …””

    The only fair tax is a flat rate tax — the same rate for everyone — on income . This means that your rate-of-return (( where your return is the money that you have remaining after all gov [ federal , state , local ] taxes [ includes sales taxes and all other kinds ] have been paid )) on your investment ( ie. paid taxes ) in gov , as previously defined , is the same as for everyone .

    What could be more fair than everyone having the same rate-of-return on their investment in government ?

    The ancient Egytians of Babylon realized this thousands of years ago when they first collected a flat rate income tax of 10% . Russia understands this and has only a flat rate income tax — same rate for everyone — and a corporate tax . The corporate tax exists only because that money can be moved thru offshore tax havens where it gets lost and becomes virtually untaxable ; otherwise it would simply become taxable income .

    Why do progressives not understand this simple fair tax concept ? No other kind of tax has the quality of fairness that a flatrate income tax has . Why would anyone anywhere ever want to pay a less fair tax than the flat rate income tax as described herein ?

    The question is — how much should YOU , no matter who you are , pay for government ( federal , state , local combined ) ?
    The answer is — YOUR fair share no matter who you are .
    The next question obviously is — what is your fair share of payment for government ?
    The answer is — the same flat rate on your income as everyone else has . That way your rate-of-return on your investment in government is exactly the same as everyone else in your locale . How can the gov justify any other tax scheme ? Get rid of all taxes except the flat rate income tax and perhaps the corporate tax unless the offshore tax haven fraud can be eliminated . Get rid of unjustifiable governments wherever they may be .

  18. masterslave

    EoinW : “” Today we are more poised than ever for Hayek to be proven correct. “”

    Amen . Karl Marx said capitalist democracies would destruct into communism ; and we all know that the historical account clearly shows that communists exterminate their internal opponents . Hayek was simply paraphrasing Marx .

  19. Bob Roddis

    Who knew that our Democratic Kleptocratic Keynesian government has been at war with the world for half a century?

    Don’t Walk Away from War
    It’s Not the American Way
    By Tom Engelhardt

    The United States has been at war — major boots-on-the-ground conflicts and minor interventions, firefights, air strikes, drone assassination campaigns, occupations, special ops raids, proxy conflicts, and covert actions — nearly nonstop since the Vietnam War began. That’s more than half a century of experience with war, American-style, and yet few in our world bother to draw the obvious conclusions.

    Given the historical record, those conclusions should be staring us in the face. They are, however, the words that can’t be said in a country committed to a military-first approach to the world, a continual build-up of its forces, an emphasis on pioneering work in the development and deployment of the latest destructive technology, and a repetitious cycling through styles of war from full-scale invasions and occupations to counterinsurgency, proxy wars, and back again.

    So here are five straightforward lessons — none acceptable in what passes for discussion and debate in this country — that could be drawn from that last half century of every kind of American warfare:

    1. No matter how you define American-style war or its goals, it doesn’t work. Ever.

    2. No matter how you pose the problems of our world, it doesn’t solve them. Never.

    3. No matter how often you cite the use of military force to “stabilize” or “protect” or “liberate” countries or regions, it is a destabilizing force.

    4. No matter how regularly you praise the American way of war and its “warriors,” the U.S. military is incapable of winning its wars.

    5. No matter how often American presidents claim that the U.S. military is “the finest fighting force in history,” the evidence is in: it isn’t.,_a_record_of_unparalleled_failure/

    1. skippy

      Bob…. Kelptocratic Keynesian government or bastardized wealth- power class kleptocratic looting apologia… nuance old boy…

      1. Bob Roddis

        Cantillon Effects resulting directly from the elite’s funny money regime is a theft of purchasing power by the elite from the masses. The people who get the new money first (the affluent) get to spend it first before flows through society with diluted value for the masses. They also get free reign to play the funny money asset bubble casino at the expense of the masses. Our funny money system is government program meant to allow the elite to loot the masses. Nuance, skippy. You guys are so afraid of your own shadow so that you have never even have heard these arguments, much less addressed them..

        “The amount of U.S. income controlled by the top 10 percent of earners starts at about 40 percent in 1910, rises to about 50 percent before the Crash of 1929, falls thereafter, returns to about 40 percent in 1995, and thereafter again rises to about 50 percent before falling somewhat after the Crash of 2008.

        Let’s think about what this really means. Relative income of the top 10 percent did not rise inexorably over this period. Instead it peaked at two times: just before the great crashes of 1929 and 2008. In other words, inequality rose during the great economic bubble eras and fell thereafter.

        And what caused and characterized these bubble eras? They were principally caused by the U.S. Federal Reserve and other central banks creating far too much new money and debt. They were characterized by an explosion of crony capitalism as some rich people exploited all the new money, both on Wall Street and through connections with the government in Washington.”

        Further, one of the main purposes and functions of your beloved Democratic Kleptocratic Keynesian funny money system is to facilitate perpetual war so that the masses are not taxed in real time to pay for it. Those are everyday libertarian and Austrian themes that I’ve seen daily for 40 years. You guys, being the buffoonish and profoundly anti-intellectuals that you are, would not know this (and would not want to know this).

        Recall that the theme of the day was that I demonstrated Mr. Black’s dishonesty with a long quote from “The Road to Serfdom”. Having changed the subject to deflect from the fact the Mr. Blacks’s dishonesty was undefendable, you guys have stepped in it again on different topics about which you know nothing, and what you know it wrong.

        1. Bob Roddis

          Typo: “and what you know it wrong” should have read:

          “and what you know IS wrong.”

        2. James Levy

          Factual point: inequality has not fallen after 2008 bubble, it has risen. Another fact: it fell after 1929 because of deliberate government policies to make it fall. The “hidden hand” of the omnipotent, omniscient, all-loving market had nothing to do with it. Your argument is dust.

          Fess up: you worship Hayek and will refute and defame all his detractors because you have a moral commitment to rewarding the haves and punishing the have-nots–in short, you want the poor to suffer and the rich to be rewarded, the bottom to serve and the top to rule. That’s the appeal. The rest is window dressing. You and Hayek have no problem with serfdom so long as it is enforced by economic power on people you hold in contempt. What you fear is your own wealth and life chances threatened by redistributive state. It’s OK–you can feel that way. But stop trying to dress it up in intellectual absolutes and pretending that you care about anyone but yourself and your “fuck the poor, I gots mine” mentality.

          1. Bob Roddis

            Since 2009, the elite used the Klepto Keynesian government funny money system to artificially reflate the artificially high prices of the assets owned by the elite at the expense of the poor and middle class. Duh. Much to the constrant outrage and condemnation of the Austrians and libertarians, btw.

            1st graders are able to discern the difference between a system where subsidies for the elite are forbidden and non-existent vs. a system where they are ubiquitous. Being a “progressive” depends upon not being able to discern such extreme differences. Sad.

            However, it’s funny to watch the “progressives” take their case against libertarians and Austrians to the public without understanding anything about them and (funnier yet) without being able to discern the differences between crony capitalism and a truly free market.

            1. Septeus7

              Bob will never respond to the facts or the argument by James. He openly lies when he claims that property asset bubble was created by the Fed rather than private speculation and fraud by the private banks in the shadow banking sector. The Federal Reserve didn’t force the Banks to speculate or commit fraud.

              The market actors did that on their own without any government help and blame the “Fed” is a deception to distract from the fact that the freest and most unregulated market in the world aka the “derivatives market” created this mess. It simply did what all free markets do with such lack of oversight and regulation i.e. create fraud, chaos, and drive out productive behavior in favor of scams.

              Bob Robbis is a lying fraud apologist who protecting the Banksters. The goal libertarianism is a corporate dictatorship where no democratic or republican form government can exist to check private looting. The purpose of the libertarian movement is to deny the people their rightful sovereignty. Libertarianism is treason against humanity and the humane.

              Libertarianism isn’t to be debated. It is to be smashed.

            2. Yves Smith Post author

              Straw man. Asset reflation has nothing to do with either Keynes or the distortion of his theory of “Keynesianism”.

              Keynes would have recommended vastly more aggressive government deficits to stimulate demand. Propping up asset prices using MONETARY devices has bupkis to do with Keynes. In fact, Bernanke is a monetarist, which means he comes out of the Friedmanite tradition.

              Hint: people on this site are smarter than you are giving them credit for and can see through your cheap tricks. You are repeatedly resorting to dishonest argumentation, which is usually a sign that you can’t win on the merits. Your dismissive tone is another tell.

  20. Paul Tioxon

    I have read “Road To Serfdom” half way through, waiting for the substance and only found a polemic of vague undefined notions of ideals, repeated over and over about freedom, liberty, property, tyranny, as if some system of formal logic was being deposited for the social sciences. In the preface to the book, the American promoters of Von Hayek was “Readers Digest” magazine, which as is their hallmark, produced shortened version of the book, still a lengthy article and produced !,000,000 separate copies which were distributed in bulk to various local American social organizations. The drive behind the popularization of Hayek’s work, was explicitly to blunt the FDR New Deal programs in their dizzying success of removing America from poverty and the further unfailing well founded patriotism towards America during WWII which saw centralized planning by the Federal Government further enhance the employment of the whole population. That and its world changing programs in research facilities showing resounding success of government planning along with the increasing standard and quality of living pushing all of America out of a third world stupor.

    Readers Digest found in this polemic, a counterweight to all of the good that was gushing out of government power. The exact opposite of the nightmare that was Fascist Europe, lead by German Imperialism. If there was ever to be an end to Roosevelt and his campaign for a better world, free from want, free from fear, it needed an intellectual champion to demonize government as the fountain of human misery, as opposed to the engine of material progress and a fondly cared for democracy deserving our allegiance. Why anyone would listen to a German intellectual in the America of the 1940’s was the height of desperation on the part of Reader’s Digest to find anyone with a high sounding professorial name from Europe who could be confused with an Einstein.

    The University of Chicago found a home for the publishing of this sad, angry book, as it was reviewed. Milton Friedman found it to be a treasure trove. Of course, at the time and for years to come, Friedman was an intellectual joke in academia and only with his new found power in the reactionary counter-movement of American conservatism and its gradual take over of American politics did he gain stature, base more upon influence as a needed prop for intellectual heft to substantiate corporate greed and plutocratic privilege.

    Von Hayeks simplistic logical discourse of rules of human behavior are a creation of his mind and a reinforcing fairy tale for the like minded. Like so many one dimensional economists, to this day, Newtonian mechanism are distilled from history and presented are logical arguments based on the premise of the social order as a machine with people as the parts. Once he sets up his premise of the state as having ultimate power, it follows that individuals are doomed to having any power that contradicts who ever gains control over the mechanism of state. And of course, he fabricates a law of human society, that only weak, easily tempted immoral people who lust for power, see the mechanism of state as the prize to take control over in order to satiate their needs. Moral people have internalized circuit breakers that keep them from taking power and leaving the door wide open to lowest common denominator of mob rule. Democracy is turned into Frankenstein monster, in the form of a howling, mindless mob, stitched together with the parts of humanity least representative of the heights of classical European Civilization. A giant powerful, lumbering monster that kills because it does not know its own strength with the evil mind of a killer controlling the body politic. Von Hayek is Mary Shelly with a cautionary tale about modern society creating an unstoppable monster that can only do one thing well and that is kill. It is not social science, it is a Gothic political horror story pick up by the biggest right wing magazine publisher of it era and used as a battering ram to turn Fortress Democracy into a ruin, sacked city, left in flames. Von Hayek is revenge of the German Imperial mindset let loose upon the American bourgeoisie as a propaganda piece to do what Hitler could not, conquer America.

  21. Bob Roddis

    Hayek won the Nobel Prize for his work on the “Austrian Business Cycle Theory” about which it is clear you guys also know absolutely nothing. The “Road to Serfdom” (as I have shown here repeatedly) was specifically about SOCIALIST CENTRAL PLANNING, a different topic, and something that was never attempted in the western democracies after WWII, probably due to Hayek’s warnings.

    Austrian theory has demonstrated since 1912 that it is the ability of central banks to artificially lower interest rates and create credit loans out of nothing that is the cause of the business cycle and the looting of the masses by the elite. The key concept of the theory might be called “the problem of knowledge” but it would be pointless trying to explain it to anti-intellectual “progressives” such as yourselves (who certainly should have heard of it by now).

    I enjoy seeing you guys go to the public with your attacks on libertarian and Austrian analysis when you don’t even know the first thing about either. Even if we are wrong (we’re not), how do expect to demonstrate that we are wrong with your profound ignorance of everything about it?

    1. Septeus7

      Quote: “Hayek won the Nobel Prize for his work on the “Austrian Business Cycle Theory” about which it is clear you guys also know absolutely nothing”

      There is no Nobel Prize in economics but a fraud called that the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” The reason Hayek won anything was due to bribery by Hayek’s backer Charles Koch the Birch Society Fascist…see this article

      The award is a fraud created and promoted by Banksters to support the notion of Bank ‘Independence” so naturally they awarded to the biggest shills for Banksterism like Hayek. They also liked Paul Krugmen so that shows us what caliber of shilling economics they are looking.

      Anyone that believes that central banking is the cause of the “business cycle” and this what Austrian school or Von Hayek thought is a imbecile.

      I’m pretty Von Hayek is turning over in his grave at thought of being defend by the likes of Roddis.

      The comment by Paul Tioxon is great.

      Mark Shelly’s story itself was an Imperialist British attack on Ben Franklin, Percy Shelley, and William Godwin i.e. anyone who attacked aristocratic privilege via the Romantic movement. The Romantic movement attacks on classical culture was course created and promoted by the aristocracy and has unfortunately dumbed-down the populations of the West to the point where such drivel like Von Hayek can be taken seriously rather than treated like the badly written pop fiction that it is.

      So in the end the Empire wins against Republicanism…strangely via a imported German clone Imperialism.

      Well, at least we will all burn up this planet creating a literal hell of our own making due to believing this unregulated stupidity in a somewhat literal “Fiat justitia ruat caelum” when all this said and done.

      1. Bob Roddis

        Anyone that believes that central banking is the cause of the “business cycle” and this what Austrian school or Von Hayek thought is a imbecile.

        Because funny money loans created out of thin air had nothing whatsoever to do with artificially bidding up the price of $50,000 homes to $600,000 with the price thereafter collapsing because no one actually had $600,000 worth of goods and services to trade for a $50,000 house, right?. We can always count on Septeus7 for deep analysis.

        Did I forget to mention that inflation is a purposeful GOVERNMENT policy? How’s that working out for poor and working class people?

        1. Septeus7

          None of that “funny money” was created by the central bank which is your claim and it is a lie.

          Asset price inflation was created by the private sector entirely. It was dishonest actors in the private sector that where creating the asset price inflation not a purposeful government policy. And I can prove it.

          Please cite exactly which governmental policy made which private lender commit accounting control fraud. I wants names and numbers and you don’t dare try that CRA bullshit here or Yves will drop the hammer on your racist ass.

          You can’t because no such policy exists. The inflation of asset prices was entirely a private sector affair. To say otherwise means you are a fraud denialist and bankster apologist.

        2. Yves Smith Post author

          I suggest you familiarize yourself with how credit is created. Your “funny money loans” are create privately, by banks. Loans precede deposits. And anyone can create credit. A bar tab is credit.

          A low and stable rate of inflation is broadly endorsed by the economics profession, save for austerians, um, Austraians. This is hardly a “government” project. It is more or less official policy because it is seen as the least bad of the available policy options. Even Milton Friedman endorsed setting a steady rate of money supply GROWTH, which also accepts the notion that mild inflation is better than a hard money policy (which has been shown repeatedly to lead to far more destructive deflation). However, his money supply policy was an utter failure in practice, as early Reagan and Thatcher era experiments showed.

      2. Bob Roddis

        Septeus7 was awarded numbskull of the week in 2012 for this brilliant gem:

        The Austrian school denies the existence of human beings with their apriori assumptions about human action which deny the possibility of human creativity which of course is man’s most defining characteristic. The Austrian school also denies the existence of accounting.[!!!!!!!]

        Septeus7 writes comedy for me without even asking for a commission.

        1. Septeus7

          I’m afraid I find your sense of humor rather strange but I’m you’re right that I should really be getting paid for this job.

  22. Bob Roddis

    In 1989, socialist Robert Heilbroner famously wrote in The New Yorker:

    “Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won… Capitalism organizes the material affairs of humankind more satisfactorily than socialism.”

    In The New Yorker again the next year, he reminisced about hearing of Ludwig von Mises at Harvard in the 1930s. But of course his professors and fellow students scoffed at Mises’s claim that socialism could not work. It seemed at the time, he wrote, that it was capitalism that was failing. Then, a mere 50 years later, he acknowledged: “It turns out, of course, that Mises was right” about the impossibility of socialism.

  23. William Woody

    Generally most people who follow a polemic don’t quote the full breadth of his works, but only the parts which resonate with them. And this is appropriate: otherwise, saying that by quoting something someone said in agreement means you agree with everything they ever said or ever will say means that, for example, quoting excerpts of Marx with approval means we get to bash you over the head with his anti-semitism.

    The principle thing that most people who quote Hayek with approval agree with is the idea that the best way to allocate resources is through price signaling and the supply/demand curve–disrupt that (as you do with a socialism), and you get massive inefficiencies. (This is also the point Milton Friedman makes in a number of places that also get quoted by free market libertarians.)

    What’s funny is that the principle complain raised in this essay–that this sort of free market capitalism leads to a very small powerful few controlling the system–creates economic problems for precisely the same reason: a powerful and monopolistic few can manipulate the markets and thus distort the supply/demand curve, leading to inefficiencies.

    Meaning you are inadvertently agreeing with those libertarians who are quoting Hayek.

    The primary problem with Hayek and Friedman is not the oft-quoted idea that disrupting the supply/demand curve is inefficient, but that in the quotes I’ve seen they fail to examine large corporations and the internal political pressures which disrupt the supply/demand curve within. Middle managers have no incentive to do what is in the best interest of the corporation or the community in which that corporation exists, since they are positioned in jobs where their rewards are determined by internal political considerations rather than by personal productivity. And large corporations have the resources to attempt to manipulate the political system in order to remove themselves from the demands of a supply/demand curve that otherwise would require them to be innovative in order to remain relevant.

    (Instinctually you can see a lot of anti-capitalist folks on the left agreeing with this when they mourned the passing of noted industrialist Steve Jobs, whose road to success was paved with innovation rather than through manipulating the system.)

    Meaning that the real problem is that large corporations can become like little “socialist empires” run by people who are insulated to some degree from the results of their efforts–a point which you also inadvertently agreed with when you discuss CEOs achieving success through “account manipulation.”

    1. Septeus7

      You are saying that political manipulation aren’t part of capitalist innovative?

      If you saying that market are efficient then doesn’t it follow that we do in fact have a very efficient political system since it is totally for sale on the market and therefore the price signaling on government policy is simply responding to the market in government policies which are for sale on the free market?

      The since public policy is a resource isn’t a system of open bribery and corruption the best means of government? *smirk*

      No, the principle being argued for isn’t that the natural market efficiency is being distorted it is that without a regulatory context to direct markets there is no market efficiency at all so frauds will take place. Market do not produce efficiency, but regulation on markets can produce a relative efficiency.

      Games need rules and refs in order to allow players to know how to compete fairly and thus be innovative relative to the objectives of the game hence efficient and business need standards and accountability to do the same. It not socialism to demand this but It is called be rational observer of human behavior i.e. not an economist.

      The first principle of real economics is that government and politics exist. Any discussion of apolitical economy i.e. “free market”, “free enterprise,” or any other oxymorons used to refer to that nonsense means you dealing with a moron with no grasp on reality.

      You don’t debate crazy and rabid. You put them down. Likewise you don’t debate with libertarians or corporate fascists. You smashed them.

      1. Bob Roddis

        The first principle of real economics is that government and politics exist. Any discussion of apolitical economy i.e. “free market”, “free enterprise,” or any other oxymorons used to refer to that nonsense means you dealing with a moron with no grasp on reality.

        The libertarian proposal is for the extension of the protections of private property in things and persons to all human beings, regarding of power, race, gender, sexual orientation etc… The proposal is to strictly enforce those protections. Rich people generally already have those protections. Poor people do not. Thus, “the market” would be strictly “regulated” to prohibit violence and fraud. No murder, theft or fraud allowed, no matter how rich or poor you are.

        “Progressive” “regulation” weakens those protections and allows the elite to capture the regulators and police forces thereby violating the libertarian non-aggression principle against the powerless. It is the supposed cure for the problem that does not exist the causes the problems that do.

        “Progressives” such as Septeus7 and Mr. Black know that they cannot engage this argument but instead must rely upon the distortion of language in their failed attempts to refute it.

        1. Yves Smith Post author

          Oh, really? This is in fact not the stance of most libertarians. It is amusing to see it redefined in a more flattering direction when tough questions are raised.

          Our Andrew Dittmer addressed this is a 2011 series. From his final post:

          What is Libertarianism?

          The critics of libertarianism often describe it as a theory that privileges liberty, or freedom, over other values like equality, or social justice, or tradition. They often respond by agreeing that liberty is important, but that it is important to balance liberty with other essential commitments.

          However, after reading a number of libertarian authors, such as Hayek, Friedman, and Nozick, it started to seem to me that libertarianism is not a theory of freedom at all. Reader Marat cited an example by libertarian Walter Block, in which a person is hanging for dear life to a flagpole protruding from the 15th floor of a high-rise. Block says that if the apartment owner demands that the person let go, and the flagpole hanger attempts instead to climb down into the balcony, then if “the occupant shoots him for trespassing… the answer is clear. The owner… is in the right, and the trespasser is in the wrong.”

          In my experience, libertarians often enjoy citing examples like this, in which the freedom of the flagpole hanger to survive is trumped by the right of the owner to maintain sovereignty over her apartment. Is is possible that libertarianism is a theory of sovereignty, and not a theory of freedom?

          Libertarian Sovereignty

          If libertarianism is a theory of sovereignty, it is natural to wonder whether libertarian sovereignty can be just as tyrannical as the kind of governments that libertarians dislike. If libertarianism defends the rights of corporations to govern themselves as they see fit, will some people end up signing contracts that effectively make them quasi-slaves? Many libertarians specify that no one will be allowed to sign a contract to make themselves a slave. However, what if people sign contracts that effectively make them into slaves without doing so explicitly? Then they could be slaves in a rights-respecting manner – would that be okay? If not, what is the alternative? Should the government be allowed to police every possible contractual arrangement and annul the ones that it thinks could lead to effective slavery?

          John Holbo of the blog Crooked Timber made an argument along these lines, arguing that a certain form of libertarianism can become something close to feudalism.

          On the other hand, Widerquist has written an interesting article (A Dilemma for Libertarianism) taking this observation in a slightly different direction. He points out that the same arguments that libertarians use to defend the sanctity of property rights can be used just as easily to defend the rights of governments to tax individuals and to regulate businesses – or the rights of a hereditary, unconstitutional monarch.

          At this point it becomes to seem like libertarian ideas of sovereignty can justify many different possible societies. Some of these societies would not be considered very free by normal definitions of the word…

          Frustrating Contradictions

          Most libertarians are not in favor of restoring the property rights of native peoples who were dispossessed. But if we get rid of the claims of American Indians by arguing that their lands were taken away so long ago that we can’t possibly fix it, then (as Widerquist points out) it becomes hard to argue that governments (many of whom got their powers long before the discovery of America) should not also get to keep their rights to tax and regulate. Since pretty much no libertarian would say that governments have the right to tax and regulate as they see fit, there is a problem: it is very difficult to make the legitimacy of property rights argument work so that the correct rights are legitimate, and the incorrect rights are illegitimate. Code Name Cain wrestles with this tortuous problem in parts IV and V of the series.

          The libertarian Lamont Rodgers produced a rejoinder to Widerquist’s Dilemma. While his counterarguments did not seem very convincing to me, his commenters were very excited. One said:

          I was pondering this “problem” earlier with regards to the notion that aboriginal property rights inevitably force libertarians to violate their own principles. But gladly someone has already done the hard thinking for me!

          Argumentative Strategies

          Although certain libertarians are forced to deal with frustrating contradictions when trying to defend their views, they have a wide array of strategies at their disposal in order to make up for this seeming disadvantage. One is simply to ignore all signs of discomfort in the listener and proudly continue. The estimable John Médaille, who read the series before it was posted, confided that “what scares me is that libertarians will read it and take it seriously; they might find the questions perplexing, but they will find the answers brilliant.” This prediction was duly confirmed by one reader, who found that the interviewer’s “questions and replies to CNC are often childish and emotional. CNC seems like a very smart fellow, though he does have several mistakes in his axioms and conclusions.”

          Another approach is to attack other people for using specific terms in “incorrect” ways, so that the discussion gets mired in questions of proper linguistic usage. Code Name Cain provided some examples of this strategy – he became angry when I said that his future society would make people slaves, or involve coercion. Fortunately, I was able to satisfy him by referring instead to people being made effective slaves in a rights-respecting manner, and to noncoercive coercion. A few readers also provided examples of this approach, insisting vehemently that it is wrong to call Rothbard, Hoppe, and CNC libertarians when they are really anarchists, or anarcho-capitalists, or neoliberals. Other readers rebutted that only libertarians who insisted on complete elimination of the state could truly call themselves libertarians. Hans-Hermann Hoppe might agree with this last view.

          A somewhat similar technique is to take advantage of the fact that no two libertarians ever think exactly alike. The key is to listen to what is being said, and then announce that it doesn’t apply to real libertarians (i.e. libertarians like you) at all. Then you condemn the author for shoddy and possibly dishonest writing. If you use the phrase “straw man” a few times, there will be no need to ask questions about whether any of the author’s arguments apply to your type of libertarianism.

        2. Septeus7

          Bob, you always fall back on the perfect world fallacy as your last resort by assuming the perfect ends of the free market i.e. a world without murder, fraud, theft or violence without discussing any of the real world difficulties of the means in a real context.

          You can’t simply question beg like saying my “free market” is perfect therefore anyone who disagree with position isn’t addressing my argument. Of course, I’m not addressing your argument; You haven’t made one. You just made vacuous statements about a perfect world in your head and declared yourself the winner. Frankly, it is rather sad and pathetic.

  24. Septeus7

    Well, since my posts were removed from this blog I believe that last personal attack against me should be removed as well.

    1. Bob Roddis

      Maybe I misread your various essays, but I thought you implied or even stated that libertarians should be killed or beaten and not debated for advocating that the non-aggression principle be enforced for the benefit of poor and powerless people. BTW, I had nothing to do with the deletions.

      1. Septeus7

        Sorry, Lambert. I didn’t mean to be whiny, I just thought it would be confusing to everyone to have Bob addressing my comment without my comment being present which is what it looked like while comment where on queue. Thanks for clearing up what happened.

        Now Bob, I know you didn’t have anything to do with the backlog. I have never said that physical violence is necessary against libertarian persons.

        I have explained the origin of the quote defining the best dealing with corporatism and fascism from Buenaventura Durruti.

        You don’t debate the sophist rhetoric used to defend it which the entirety of libertarian babble. You fight the the source violent oppression of the masses which has always been the enforcement of property rights. No right of property has ever been enforced to the benefit of the poor and dispossessed and never will be. Enforcement of the corporate property rights as the highest interest of the state is the essence of fascism and libertarianism is just the American form of fascism.

        Smashing libertarianism is done by pointing out the facts that is creation corporate PR Ad men and that libertarianism has been on the wrong side of history on everything i.e. civil rights, women’s rights, pollution, free trade, etc… and the reason for its absolute failure to do anything for humanity is that is an anti-humanist philosophy of irrational hate and bigotry toward the lower classes.

        Libertarian statements about the ‘productive classes” and “moochers” should be treated like statements about superior whites and inferior blacks or “weak and emotional” women and “strong and logic” men.i.e. banned entirely as classist trolling.

        Any citation of Hayek, Mises, Rothbard, Ron Paul should be treated the same as quoting David Duke or George Rockwell because they are essentially cut from the same cloth.

        Polite company doesn’t talk about how the poor should pull themselves up out poverty and it doesn’t talk about environmental regulation as a burden. Polite company doesn’t whine about “high” corporate taxes and how cutting off the unemployment benefits will motivate those lazy poors. Polite company doesn’t whine about inflation while demanding that wages be cut. Polite Company doesn’t glorify greed and unaccountability.

        Libertarianism is simply poor-shaming.

  25. Rosario

    Fatal flaw of Austrian economics and economic libertarianism in general: property is the ONLY measure of worth. It is hard to identify with an ideology that is so dull and linear. I feel that these schools of though are always in the wings to exclaim all of the ways we have strayed from the “true” path of capitalism. They were saying the same thing about the economic system in the Soviet states years ago, look how well that worked out for them.

  26. Jeff lee

    Bob roddis has never read the road to serfdom because it is about a far wider spectrum of economic policy than soviet planning

  27. Lefterakis

    The worst may get on top in many different political systems. In democracy, it depends on the sense of the people. For example, modern Greece after 1980 had (according to the majority of the locals) “the worst ever” on top.
    But why? Because people voted for them, after promises that they would be hired in the public sector (automatic permanency regardless of performance, benefits double than private sector).
    But the same can happen under any political system – I think it depends on the morals of the people themselves.

    The morals of the voters determine the morals of the leaders.

  28. commieBob

    The reality is that it is corporate CEOs who lead the anti-science campaigns such as global climate change denial.

    I’m a CAGW skeptic. I don’t appreciate being lumped in with holocaust deniers. I would bet that, off the top of your head, you can’t make the case why there would be more than about one degree C. of warming for a doubling of CO2. It makes me wonder what else you are taking for granted. That bugs me because I agree with your position on Hayek.

    The economy (like the climate) is complex beyond belief. Anyone who wants to bet on the predictions of economists should become familiar with the work of Philip Tetlock. For many years he has studied the predictions of experts and has found that they are no more reliable than chance. wiki Hayek has the misfortune that his predictions performed much worse than chance.

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