This post was first published on December 5, 2011
By Andrew Dittmer, who recently finished his PhD in mathematics at Harvard and is currently continuing work on his thesis topic. He also taught mathematics at a local elementary school. Andrew enjoys explaining the recent history of the financial sector to a popular audience.
Simulposted at The Distributist Review
This is the fifth installment of a six-part interview. For the previous parts, see Part 1, Part 2, Part 3, and Part 4. Red indicates exact quotes from Hans-Hermann Hoppe’s 2001 book “Democracy: The God That Failed.”
ANDREW: In the last interview, you told us how GLOs in the Middle Ages were noblemen, publicly recognized as being a cut above the ordinary person. Have the rich people and corporate leaders of today also risen to the top by being natural leaders?
CODE NAME CAIN: No. Rich men still exist today, but more frequently than not they owe their fortune… directly or indirectly to the state. Hence they are often more dependent on the state’s continued favors than people of far lesser wealth… Their conduct is not marked by special virtue, dignity, or taste but is a reflection of the… proletarian mass culture of present-orientedness, opportunism, and hedonism. [73-74]
ANDREW: How did this happen?
CNC: Unfortunately, democracy has succeeded… in the ultimate destruction of the natural elites. The fortunes of great families have dissipated, and their tradition of culture and economic independence, intellectual farsightedness, and moral and spiritual leadership has been forgotten. 
ANDREW: It’s the fault of democracy? The noble families themselves bear no responsibility for their decadence?
CNC: Maybe the noble families should have tried harder to resist democracy, but yes – Hans-Hermann Hoppe proves in his book that democratic government always leads to welfare state socialism. The United States of today is a case in point.
ANDREW: Libertarians are in general very critical of modern democracies. Still, many think that a legitimate government could exist, provided that it is very small and only does things that libertarians think are good.
CNC: Ayn Rand, Robert Nozick, Milton Friedman, and even the sellouts at the Cato Institute have all worked hard to defend the rights of producers. However, they naïvely imagine that democratic government can be tamed: transformed into a reliable machine that will safeguard property and contracts without getting other ideas about its proper role in society.
ANDREW: Are you sure that they are wrong?
CNC: Completely sure. As I just told you, the destructive nature of government is a theorem, proven by applying the rules of elementary logic.
ANDREW: Can you explain the theorem to us?
CNC: The proof is best explained using the concept of “time preference” from Austrian economics. Draw a downward-sloping time preference curve for a given individual in the beginning of humanity…
ANDREW: Even though you might find a technical approach more elegant, you will reach a bigger audience if you explain the idea in ordinary language.
CNC: Some precision will of course be lost, but I can try… The idea is simple, yet profound. Begin by assuming that a government official is rational, and therefore acts in order to use the government apparatus to his personal advantage… [Since] he does not own [the government]… [h]e cannot sell government resources and privately pocket the receipts from such sales, nor can he pass government possessions to his personal heir… [Consequently, a] president… will use up as much of the government resources as quickly as possible, for what he does not consume now, he may never be able to consume. 
ANDREW: Past presidents like George W. Bush and Bill Clinton are millionaires. If your theory was correct, they would have plundered so much of the country’s resources that they would be richer – more like billionaires.
CNC: Ahh… That’s what I thought when I first read Hans-Hermann Hoppe’s book. But you see, Dr. Hoppe thinks at the level of abstract theory. You have to understand how to apply his categories to the real world.
Although Dr. Hoppe uses “president” as an example of a government official, there are many government officials, and they are all trying to plunder the government. What is more, there are official government officials, and there are also unofficial government officials, like lobbyists and campaign contributors and the presidents of too-big-to-fail (i.e. government-sponsored) banks. The plunder tally is too small if you don’t count the booty of both official and unofficial government officials.
ANDREW: Is this just your interpretation, or is it Dr. Hoppe’s, too?
CNC: Well, he could maybe have been a little clearer. But he definitely understands. For instance, he points out that it is not likely that dullards, even if they make up the majority, will systematically outsmart and enrich themselves at the expense of a minority of bright and energetic individuals… frequently it will actually be the better-off who succeed in being subsidized by the worse-off.  In other words, he agrees that welfare states mainly end up subsidizing “unofficial government officials.”
ANDREW: I see. Anyway, you were explaining why you think other libertarians are chasing a mirage when they strive for a government that is as small as possible…
CNC: Right. As I was saying, Dr. Hoppe’s theory is strikingly accurate. Even professors from the mainstream like Tom Ferguson and Simon Johnson admit that Dr. Hoppe is right and that U.S. government decisions are, in reality, made by lobbyists and large campaign contributors. There is also broad agreement that any given unofficial government official is not sure when “the party” will be over for the interests he represents, and so he tries to plunder as much as possible now, with no thought for the future.
Now let’s take those pro-government libertarians I just mentioned. They know that the masses are not intelligent, they know that democracy is just a theater where the unofficial government officials use coercion to steal from productive people – and then they forget it all and mindlessly accept and repeat nonsense such as that democracy is self-rule and government is of, by, and for the people . They foolishly think that they can use the democratic process to redirect the unofficial government officials! Or that they can persuade the unofficial government officials to give up the benefits of lobbying and move toward a free society!!
ANDREW: So you’re saying that lobbyists run the government, the corporations they represent don’t want a libertarian-style small government – so it won’t happen.
ANDREW: I’d like to prove a theorem, too. Can I try?
CNC: Sure – but keep in mind that it takes a lot of practice to reason correctly about economic affairs.
ANDREW: I’ll never learn unless I try… Begin by assuming that CEOs are rational, and therefore act in order to use the corporate apparatus for their personal advantage. Since they don’t own the corporation, their incentive is to use up the corporation’s resources as quickly as possible – what they don’t consume now, they might never be able to consume.
CNC: Your amateurism is showing. The behavior you describe is impossible, since stockholders only allow a CEO to run a corporation if they are confident that the CEO will act in their best interests.
ANDREW: I thought there was lots of evidence that CEOs have been extracting much larger payments from their corporations than in the past. Are you sure you aren’t mindlessly accepting the myth that corporate governance is of, by, and for the stockholders?
ANDREW: But think of how well your theory generalizes from democratic governments to GLOs! For example, bank traders at European banks like UBS deliberately bought lots of risky securities so that they could manipulate their own accounting rules and get paid large bonuses. We could call the traders “unofficial corporate officials” who cooperated with the official corporate officials in consuming the banks’ resources.
CNC: If this was really happening, then stockholders would have stopped investing in the bank in question. Unless, of course, there was government interference. That’s why it’s so important to concentrate on the flaws of democratic government.
ANDREW: Hmm… If you and Dr. Hoppe think that the problem with democracy is that government decisions are bought and sold with money, why don’t you try to fix the democracy so that it is less about money and lobbyists?
CNC: Try to stop productive people from influencing elections using their money? That’s a terrible idea – it means stifling individuals and organizations with large sums of money. It means suppressing their views about politics.
ANDREW: Is it that you want everyone to be able to express their views about politics, or is it particularly important for some people to do so?
CNC: The latter, of course. [I]magine that… the right to vote were expanded to seven year olds. [The resulting government’s] policies would most definitely reflect the “legitimate concerns” of children to have “adequate” and “equal” access to “free” french fries, lemonade, and videos.  Similarly, if we had democratic decision-making on a global scale, the government would probably find that the so-called Western world had far too much wealth… With these “thought experiments” in mind, there can be no doubt about  the negative consequences of “one-person, one-vote.”
ANDREW: So the problem is that the wrong people will end up voting. But what if only the right people vote? Would you support turning the U.S. into a dictatorship ruled by the Chamber of Commerce? Or if you prefer, you could put Grover Norquist and Americans for Tax Reform in the top spot.
CNC: The result would certainly be more farsighted, future-oriented decisions than we have today… However, you have forgotten that libertarians do not make compromises when defending liberty. My principles would compel me to oppose a government of the sort you describe, no matter how economically sensible its policies might be.
And to set the record straight, I am confident that Grover shares my idealism.
ANDREW: Since you think the role of money in democracy should not change, that must mean that you accept lobbying as a necessary evil linked to the existence of a government.
CNC: There are certain dark realities that we have to deal with while living in an unfree society.
ANDREW: Do you lobby governments?
CNC: Personally, I wish only to work, produce, and enjoy the fruits of [my] labor. However, if politics… is permitted, even [people like me are]… affected. In order to defend themselves against attacks on their liberty and property by those who have fewer moral scruples, even… honest, hardworking people must become become “political animals” and spend more and more time and energy developing their political skills. [275-276]
ANDREW: You are sometimes forced to engage in lobbying.
CNC: Yes. For example, the current meme in the investment community is that the combination of climate change and population growth will make it almost impossible to have enough food for the world by the year 2050. Farmland is soaring in price.
My hedge fund discovered uncultivated land in the African country of ***. The land did not belong to anyone, and so we tried to buy it from the relevant government. Outrageously, certain officials from *** insisted on…
CNC: … arrangements before they would agree to sell the land at a fair price.
ANDREW: Was this farmland unoccupied?
CNC: No one owned the land before we bought it.
ANDREW: But was someone living there?
CNC: There were some local tribesmen who claimed that they had a vague traditional “right” to the land. Decisive action was necessary before they stopped squatting on our land.
ANDREW: Involving trucks of men carrying machine guns…. Has it ever occurred to you that this success for your hedge fund was achieved at the cost a lot of real coercion of real people?
CNC: It has occurred to me – an unruly band of people aggressively trespassed on my land. My rights were violated and I was forced to make a substantial financial sacrifice in order to defend myself from coercion.
ANDREW: It must have been terrible… One thing that I have been wondering about – it sounds like you do not have much respect for many GLOs of today. You believe that few of them are led by productive geniuses – instead, many business leaders are instead disreputable people who lobby governments and owe their fortunes to the State.
CNC: I criticize immoral behavior whether the perpetrators are government officials or businessmen. If CEOs spend their time lobbying and being political entrepreneurs, that is bad. You need to remember that …competition is not always good. Competition in the production of goods is good, but competition in the production of bads is not.  As a result of “open political competition” the entire character structure of society [becomes] distorted, and more and more bad characters [rise] to the top. 
ANDREW: But then why are you trying to help these people dominate the world of the future?
CNC: You ask an interesting question. It’s true that a lot of current GLOs are actually looters and moochers. But trying to sort out which GLOs are legitimate and which are illegitimate would be complicated and ultimately impossible – and so why not create a society in which at least some of the GLOs in charge will be people who have earned their wealth by engaging in productive activities?
ANDREW: People like you?
CNC: Yes, like me.
In the concluding part of this interview, Code Name Cain tries to delve deep into the cognitive biases that prevent his interviewer from having a mature understanding of libertarian principles.
“bank traders at European banks like UBS deliberately bought lots of risky securities”
Yves Smith’s ECONNED, Chapter 9