The Illuminati, Rothbardian Natural Law, and Misesian Philosophies of History: Potential Areas for Future Research

Today, November 20, 2012, I received four new books in the mail. One of them is called Perfectibilists: The 18th Century Bavarian Order of the Illuminati  by Terry Melanson. As I normally do, I was flipping through my new books in order to get a "flavor" of what they are all about. In Melanson's book, I came across this fascinating quote that reminded me of two things right away:

1. Ludwig von Mises's book Theory and History: An Interpretation of Social and Economic Evolution, particularly his Chapter 8 called "Philosophy of History"
2. Murray N. Rothbard's book The Ethics of Liberty.

 At this point, I am not going to draw any definitive conclusions for the simple reason that I do not know what all of this implies. However, I just want to write this down so that I can keep track of the ideas that popped into my head about 10 minutes.

Let me begin with the quotation from Melanson (he is quoting from Sabine Roehr, A Primer on German Enlightenment: With a translation of Karl Leonhard Reinhold's The Fundamental Concepts of Ethics):

Weishaupt, the founder of the order [of the Illuminati], developed a philosophy of history that postulated three steps: the original state of nature, despotism, and the kingdom of reason and virtue. He thought that secret societies were the necessary means to that ultimate end of nature, the state in which reason alone would prescribe the laws to humankind. (196, bold emphasis is mine)

 The Pattern of 3-Stage Philosophies of History

Maybe, at the risk of sounding cliche, the most obvious illustration of a 3-Stage Philosophy of History is Marx's famous idea that societies pass through the stages of feudalism, capitalism, and inevitably socialism. Mises mentions that this "setup" is typical of most philosophies of history. Mises writes that

most philosophies of history not only indicate the final end of historical evolution but also disclose the way mankind is bound to wander in order to reach the goal. They enumerate and describe successive states or stages, intermediary stations on the way from the early beginnings to the final end. The systems of Hegel, Comte, and Marx belong to this class. (Theory and History, 108-9)

I also want to emphasize the popularity of having three stages in these philosophies of history. Obviously the Marxist example consists of three stages: (1) feudalism, (2) capitalism, and (3) the coming future socialism. Notice that some of the examples given by Mises in Theory and History also follow this three stage pattern. For example, Mises mentions how Christian theology is based on a three-stage process. Then, Mises points out that the Enlightenment thinkers modified the Christian approach in order to make it fit into their more scientific outlook on the world:

Christian theology discerns three stages in human history: the bliss of the age preceding the fall of man, the age of secular depravity, and finally the coming of the Kingdom of Heaven....The Enlightenment altered this scheme in order to make it agree with its scientific outlook. God endowed man with reason that leads him on the road toward perfection. In the dark past superstition and sinister machinations of tyrants and priests restrained the exercise of this most precious gift bestowed upon man. But at last reason has burst its chains and a new age has been inaugurated. (Theory and History, 114)

  Maybe there is a parallel between the three-stages of Christian theology and the three stages suggested by the founder of the Illuminati.

1. Christianity = the bliss of the age preceding the fall of man; Illuminati = the original state of nature. In the Illuminati book, we see that the "original state of nature" is painted in rosy terms. Melanson writes about the Illuminati: "It is worth noting that Weishaupt's concept of virtue stems from his Rousseauian influences. Jean-Jacques Rousseau equated true virtue with the purity of mankind in its infancy BEFORE IT WAS CORRUPTED BY CIVILIZATION" (100, bold emphasis mine, italics in the original). On the same page he adds the point that the next stage, "civilization," was viewed as a "despotism" and "inferior" to the previous state of nature. "By comparison, the despotism of western culture, with its class structures and inherent inequality, was considered inferior and contemptible" (ibid, bold emphasis mine).
2. Christianity = the age of secular depravity; Illuminati = Despotism. This middle stage sounds like the "fall of man" in both case. In both systems, stage one seems to be the "bliss stage" or the "pure mankind" stage. Stage two seems to be the "hell on earth stage" in both systems.
3. Christianity = Salvation and the Kingdom of Heaven; Illuminati = the Kingdom of Reason and Virtue. I found that language very suggestive. Notice how it is called the "Kingdom of Reason and Virtue," as though reason and virtue are standing in for "heaven." It seems like Stage 3 in both systems is a return to some blissful utopia. Or maybe we are supposed to think of the final stage (stage 3) as the "perfection" state of man. In the Christian system this final state is when man is now free from sin. He is no longer "corrupted" by his sinful body but is now "perfect" because he is sinless and living in a state of eternal life in heaven. Similarly, in the Illuminati version, man is now "perfect" because he is no longer "corrupted" by superstitions and tyrants from stage 2 but is now living in the "perfect" state of reason and virtue (stage 3).

 Rothbard's Views on Natural Law

Notice also that Stage 3 in the Illuminati scheme, mankind is now in the Kingdom of Reason and Virtue. This was defined as "the state in which reason alone would prescribe the laws to humankind." This reminds me of Rothbard's insistence in The Ethics of Liberty that mankind can find his laws solely by using reason. It shocked me how similar the line from the Illuminati sounds to Rothbard's version of "natural law."

 For example, Rothbard writes that

[Grotius's] definition of natural law has nothing revolutionary. When he maintains that natural law is that body of rules which Man is able to discover by the use of his reason, he does nothing but restate the Scholastic notion of a rational foundation of ethics. (The Ethics of Liberty, 5, bold emphasis mine)

 As another example of this "supremacy of reason," Rothbard notes that

even though God did not exist, or did not make use of His reason, or did not judge rightly of things, if there is in man such a dictate of right reason to guide him, it would have had the same nature of law as it now has. (The Ethics of Liberty, 4, bold emphasis mine)

 In conclusion, I am writing this blog more as a note to myself so that I can look into these ideas further in the future. I am in no way trying to claim (at this early point in my research I don't know where this is going) that either Mises or Rothbard have anything to do with the Illuminati. I am simply looking for points of congruence between them and the Illuminati at the level of ideas. Did either Mises or Rothbard borrow ideas that were held by the Illuminati back in the time of Adam Weishaupt? This is not a totally crazy question to ask. When I was looking through Melanson's book I also noticed very quickly that he mentioned Kant and the idea of the a priori. Obviously, this sounds like something Mises would talk about a lot! ("According to the empiricists, Kant was excessively rationalistic in assuming the existence of the a priori and in postulating a noumenal realm apart from experience" 194. There is also a mention of "Kant's categories" on page 195. I am thinking of maybe a link to Mises's book The Ultimate Foundation of Economic Science). So right now I am just thinking about maybe some points of overlap in ideas. I am also looking for points of inconsistencies between Weishaupt on the one hand and Mises and Rothbard on the other hand. At this point I am unclear as to what the "political agenda" of the Illuminati was. Melanson describes it as follows: "Weishaupt preached to his disciples the restructuring of society along lines similar to socialism and communism [I am guessing state socialism? social engineering? because he mentions the infamous "one world government plot"], tinged with elements of nihilism and anarchism [which contradicts the idea of one world government]."

Agorism and "Barbarians by Design": Parallels between Historical Asian Anarchism and Modern Day Revolutionary Market Anarchism

I am currently looking through the masterful work The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia by Yale University professor James C. Scott. I am still in the process of studying this book; consequently, I cannot come to any definitive conclusions about exactly how consistent historical Asian anarchism is with modern day ideas known as agorism (or revolutionary market anarchism). For a brief overview of what agorism is all about, see agorism.info. My purpose in this blog is to simply highlight some of the elements of Asian anarchist history that sound, at least to me, very similar to modern day agorism. In other words, I just want to document some of the key words and key concepts from Asian anarchist history that seem to be very consistent with what a modern day agorist would do in real life. In this blog I do not intend to go into some points that seem to be inconsistent with agorism such as some issues about egalitarianism and land ownership. My purpose here is just to look for some consistencies between agorism and Asian anarchism.

My speculation over the possible existence of a link between historical Asian anarchism and modern day agorism began with one of Scott's earliest discussions about how these Asian anarchists behaved. Scott writes a lot about this "false dichotomy"--a product of "officially-sanctioned history--that distinguishes between the "civilized" state and the "ungoverned" barbarians. Scott emphasizes that these "barbarians by design" deliberately seek to function outside of the state while still engaging in mutually beneficial trade:

This account of the periphery is sharply at odds with the official story most civilizations tell about themselves. According to that tale, a backward, naïve, and perhaps barbaric people are gradually incorporated into an advanced, superior, and more prosperous society and culture. If, instead, many of these ungoverned barbarians had, at one time or another, elected, as a political choice, to take their distance from the state, a new element of political agency enters the picture. Many, perhaps most, inhabitants of the ungoverned margins are not remnants of an earlier social formation, left behind, or, as some lowland folk accounts in Southeast Asia have it, "our living ancestors." The situation of populations that have deliberately placed themselves at the state's periphery has occasionally been termed, infelicitously [i.e., inappropriately], secondary primitivism. Their subsistence routines, their social organization, their physical dispersal, and many elements of their culture, far from being the archaic traits of a people left behind, are purposefully crafted both to thwart incorporation into nearby states and to minimize the likelihood that statelike concentrations of power will arise among them. State evasion and state prevention permeate their practices and, often, their ideology as well. They are, in other words, "state effect." They are "barbarians by design." They continue to conduct a brisk and mutually advantageous trade with low-land centers while steering clear of being politically captured. (Scott 2009, 8; emphasis added)

 Notice how Scott mentions that "state evasion" and "state prevention" permeate their practices. This seems to be consistent with the definition of agorism in the sense that the focus of attention is the "real world" and pragmatic implementation of the underlying ideas: "the ideology which asserts that the Libertarian philosophical position occurs in the real world in practice as Counter-Economics."

The last part of the quotation, I think, is the key part: they want (1) to engage in mutually beneficial trades while (2) avoiding "capture" by the political process. The use of this language by Scott makes sense because, as he discusses at other points in his book, the early states really did engage in a lot of "capturing" and "enslaving" of people. Capturing and enslaving people was (and is still) the essence of the state: "The accumulation of population by war and slave-raiding is often seen as the origin of the social hierarchy and centralization typical of the earliest states" (Scott 2009, 67).

Scott captures this combination of "free trade" and "stateless" people nicely when he writes:

These stateless peoples were not, by and large, easily drawn into the fiscally legible economy of wage labor and sedentary agriculture. On this definition, "civilization" held little attraction for them when they could have all the advantages of trade without the drudgery, subordination, and immobility of state subjects. (Scott 2009, 10; emphasis added)

 This talk of all the advantages of trade WITHOUT the drudgery, subordination, and immobility of state subjects, is basically what got me really interested in looking for parallels between agorism and Asian history.
 
Some Points of Agreement between Agorism and Asian Anarchy:

 

1. Ignoring Borders

 

One point of consistency between modern day agorism and historical Asian anarchy is that both have nothing but contempt for the artificial border lines of nations. Scott's study of the historical anarchy in Asia definitely discusses the attitude of the people with regard to national borders. Basically, the people ignore the borders:

For much of the period we wish to examine there was no nation-state and, when it did come into being late in the game, many hill people continued to conduct their cross-border lives as if the state didn't exist. The concept of "Zomia" marks an attempt to explore a new genre of "area" studies, in which the justification for designating the area has nothing to do with national boundaries (for example, Laos) or strategic conceptions (for example, Southeast Asia) but is rather based on certain ecological regularities and structural relationships that do not hesitate to cross national frontiers. (Scott 2009, 26; emphasis added)

In the Against Borders pamphlet there is a section by Darian Worden entitled "Escalating the War on Freedom." With regard to the question of national borders, Worden writes that

Borders are gang turf boundaries, usually drawn by conquest and upheld through repressive measures. Those who cross lines drawn across the earth should not have to ask permission from tyrants who created those lines.

In other words, both the agorists and the Asian anarchists refuse to recognize national boundaries as barriers to their free movement and trade.

2. Tax Evasion

 

Agorism certainly advocates for tax evasion. Some of Samuel Edward Konkin III (SEK3) writings were complied by Wally Conger into a short book entitled Agorist Class Theory: A Left Libertarian Approach to Class Conflict Analysis.  This book really spells out the agorist position on taxation in the framework of the agorist version of class conflict theory, which is reminiscent of the class conflict theories presented by radical liberals. See for example, Ralph Raico's Classical Liberal Roots of the Marxist Doctrine of Classes: The "Industrialist Manifesto" section in which Raico begins by stating the core issue in the class conflict theory as follows: "the history of all hitherto existing society is the history of struggles between the plundering and the producing classes." 

This is pretty much how Conger begins his introduction to Agorist Class Theory. In summarizing Konkin's five major theses of his theory of classes, the very first thesis is that "the State is the means by which people live by plunder; the Market, in contradistinction, is the sum of human action of the productive." In the Foreword to this book, Brad Spangler elaborates on this theory of an oppressive class by specifically linking the ruling class to the coercive form of plundering known as taxation:

The political class is the parasitic class that acquires its livelihood via the "political means"--through "confiscation, taxation, and other forms of coercion."  Their victims are the rest of us--the productive class--those who make their living through peaceful and honest means. (emphasis added)

Implicit in this argument is the assumption that taxes are not voluntary. If taxes were voluntary, then obviously calling the "political class" a "parasitic class" would make absolutely no sense. People would be freely giving the "political class" money in exchange for state-provided goods and services. Of course, no agorist believes that taxes are voluntary. On the contrary, taxes are viewed as a form of involuntary wealth and property transfers. With regard to the question of whether taxes are voluntary or not, one could simply ask, as Murray Rothbard does in his Ethics of Liberty, "what would happen if the government were to abolish taxation, and to confine itself to simple requests for voluntary contributions. Does anyone really believe that anything comparable to the current vast revenues of the State would continue to pour into its coffers?"

This explains why agorism calls for both tax avoidance and tax evasion. Involuntary taxation implies that one is being robbed; hence, a short agorist pamphlet on taxation is called simply Tax Is Theft! Agorists openly advocate for tax resistance. As the pamphlet Tax Is Theft says right near the beginning: "remember that there are 40,000,000 successful tax resisters in the U.S. alone, and around 100,000,000 tax avoiders and evaders; yes, nearly everyone." As another excellent example of the agorist position on taxation, see the pamphlet called War or Liberty: The Real Choice. In this pamphlet, a number of suggestions are given regarding what one should do. The first thing on the list is tax rebellion!

• Tax Rebellion (not just "avoidance")
• Draft Resistance
• Smuggling (to circumvent the privileges producers get from trade protectionism)
• Wage and Price Control Breaking 
• Censorship Evasion
• Networking with like-minded individuals
• Propagating Revisionist History (such as my personal favorite, the works of Gabriel Kolko)

A similar tax avoidance and tax evasion type culture existed in Asia. James C. Scott repeatedly mentions that these people in Asia would move to Zomia in order to avoid the State for a variety of reasons, including taxation. "Subjects who were sorely tried by conscription, forced labor, and taxes would typically move away to the hills or to a neighboring kingdom rather than revolt" (Scott 2009, 33; emphasis added).

Scott mentions a specific example of a tax revolt, which was led by by a Buddhist rebel in the 18th century:

As a political location--outside the state but adjacent to it--the ethnicized barbarians represent a permanent example of defiance of central authority. Semiotically necessary to the cultural idea of civilization, the barbarians are also well nigh ineradicable [i.e., the barbarians are almost impossible to eradicate], owing to their defensive advantages in terrain, in dispersal, in segmentary social organization, and in their mobile, fugitive subsistence strategies. They remain an example--and thus an option, a temptation--of a form of social organization outside state-based hierarchy and taxes. One imagines that the eighteenth-century Buddhist rebel against the Qing in Yunnan understood the appeal of "barbarian-ness" when he exhorted people with the chant: "Api's followers need pay NO TAXES. They plow for themselves and eat their own produce." For officials of the nearby state, the barbarians represent a refuge for criminals and rebels, and an exit for tax-shy subjects. (Scott 2009, 125; emphasis added)

In fact, Scott goes on to point out how people would deliberately turn themselves in "barbarians." Some of the characteristics of these "barbarians-by-design" sound very similar to what a modern day agorist would support fully, including tax evasion:

"Self-barbarianization" could occur in any number of ways. Han populations wanting to trade, to evade taxes, flee the law, or seek new land were continually moving into barbarian zones. (Scott 2009, 126; emphasis added)

Jeff Riggenbach, in his The Art of Not Being Governed, mentions how the people in the anarchist area of Zomia practiced a method of production that was deliberately designed to make it really difficult for the state to take, i.e., to tax. "The residents of Zomia," writes Riggenbach, "typically practice was Scott calls 'escape agriculture: forms of cultivation designed to thwart state appropriation.'" 

In the final analysis, it is important to remember that the power to tax is the core foundation of all States. If you abolish the power to tax, you abolish the State.  This point is made explicitly by Michael Rozeff in his paper How the Power to Tax Destroys. He goes straight to the most fundamental point: no taxes, no ruling class. "Where the state is, there is the power to tax; for rulers cannot rule without taxation."

3. The Overblown History of the Importance of States

Scott also argues that, to quote Riggenbach's The Art of Not Being Governed, "the state's importance is usually exaggerated by historians." Such a claim is actually not surprising, especially coming from a revisionist historian such as Riggenbach. Remember, Riggenbach actually wrote a book entitled Why American History is Not What They Say, in which he argues that

Murray N. Rothbard, in his The Ethics of Liberty, explains why this alliance exists between the Court Intellectuals and the Ruling Classes:

For if the bulk of the public were really convinced of the illegitimacy of the State, if it were convinced that the State is nothing more nor less than a bandit gang writ large, then the State would soon collapse to take on no more status or breadth of existence than another Mafia gang. Hence the necessity of the State's employment of ideologists; and hence the necessity of the State's age-old alliance with the Court Intellectuals who weave the apologia for State rule. (Rothbard 2002, 169; emphasis added)

4. Avoiding and Ignoring Laws

5. Creating a Competing System

In a collection of lectures given in Argentina in 1958 at the University of Buenos Aires, Ludwig von Mises told his audience about the very early origins of the free market. These lectures were later printed as Economic Policy: Thoughts for Today and Tomorrow. The basic story is that the "official system" was rigged in order to favor a small group at the expense of the masses. Unfortunately, the masses were starving to death because of this government-created system of privilege. Consequently, in order to survive--quite literally from death--the masses of people started up an economic system "outside of the official economy," an "underground economy."  I will now quote Mises at length because I think it is so important to highlight the fact that the free markets were born when the ordinary people defied the authorities and set up their own "underground" economy. First, Mises paints a picture of a very bleak environment for the masses of people:

As the rural population expanded, there developed a surplus of people on the land. For this surplus of population without inherited land or estates, there was not enough to do, nor was it possible for them to work in the processing industries; the kings of the cities denied them access. The numbers of these "outcasts" continued to grow, and still no one knew what to do with them. They were, in the full sense of the word, "proletarians," outcasts whom the government could only put into the workhouse or the poorhouse. (Mises 2006, 2; emphasis added)

These "proletarians" were, quite literally, facing death as a result of this situation. At this time, Mises notes, out of a population of roughly 7 million in England, 2 million or 29% of the population were "poor outcasts."Mises also notes that the government officials, in typical form, were totally clueless about what to do. "The statesment did not know what to do, and the ruling gentry were absolutely without any ideas on how to improve conditions" (3).  To save themselves from both their incompetent rulers and starvation, the poor turned to innovation for their salvation. Mises notes that

Out of this serious social situation emerged the beginnings of modern capitalism. There were some persons among those outcasts, among those poor people, who tried to organize others to set up small shops which could produce something. This as an innovation. These innovators did not produce expenseive goods suitable only for the upper classes; they produced cheaper products for everyone's needs. (3; emphasis added)

These innovators were definitely upsetting the existing order, which, of course, was designed to benefit the upper classes. The ruling classes reacted, not surprisingly, by running to the government to undermine these innovators. Mises notes that

the landed aristocracy again reacted against the new production system. In Germany the Prussian Junkers, having lost many workers to the higher-paying capitalistic industries, invented a special term for the problem: "flight from the country-side"--Landflucht. And in the German Parliament, they discussed what might be done against this evil, as it was seen from the point of view of the landed aristocracy. (8; italics in the original, bold emphasis added)

For me, the key point in Mises's discussion is that in order to break the existing rigged system, the masses of poor people have to innovate, i.e., they have to invent a new system of production that isn't rigged for the benefit of a small ruling class.

The agorist, the revolutionary market anachist, would label this as an example of Counter-Economics.  A definition of "counter-economics" is provided at agorist.info: Counter-Economics is "the study and/or practice of all peaceful human action which is forbidden by the State." And this is exactly what Mises was documenting. There was a large collection of people who were forbidden by the kings to engage in production, so these people ignored the existing system of production and set up a new one. We easily see that the "establishment" did not like what was happening because they ran to the parliament looking for a legislative way to shut these innovators down.

Notice the obvious parallels between Mises's history of the early rise of capitalism and the two-choices for modern day people presented by Konkin in his book An Agorist Primer. "You must abandon Economics to the regulators and the political 'businessmen' who play ball with them. You are left with the alternatives: stifle yourself and starve OR embrace Counter-Economics" (38; emphasis added).  In Mises's history we have the political "landed aristocracy" working through the government apparatus in order to keep the masses in their "starvation-like" existence. In Konkin's statement we have the political "businessman class" working through the government regulators in order to keep the masses in their "starvation-like" existence as well.

6. Abolishing Both the Military and Conscription

7. Geography and Statelessness

In the New Libertarian Manifesto, Samuel Edward Konkin III mentions the issue of geography. Specifically, he notes that some areas might still be under state control while other areas might turn toward full-blown agorism. Konkin's suggestions, as I will point out momentarily, sound very similar to what the anarchists in Southeast Asia implemented in Zomia. Konkin writes that "some easily defendable territories, perhaps in space or islands in the ocean (or under the ocean) or big-city 'ghettos' may be almost entirely agorist, where the state is impotent to crush them. But most agorists will live within statist-claimed areas." The Zomian anarchists, of course, also used geography as a way of living where the state is impotent to crush them.Scott documents many examples of how geography can be used effectively as a way of evading state control. What is very interesting about Scott's study is that he presents examples not only from the Southeast Asian Zomia anarchy but also from other geographic areas including the United States.

Problems with Tom Woods's Claim of Misesian "Immutability" in the Face of Rockefeller Foundation Funding

Today (October 4, 2012), thanks to a Facebook comment, I noticed that there is a problem with Tom Woods claim that Mises never changed his views even though he received Rockefeller Foundation funding from roughly the late 1920s to the early 1940s. Moreover, in trying to formulate a cogent response to what Tom Woods wrote, I have lost my faith in the claim that Mises was an anarchist or a quasi-anarchist. The famous "anarchist" quote found in Mises's Liberalism (i.e., the one about self-determination) is not an endorsement of anarchy at all; it is, on the contrary, an endorsement for the creation of a whole bunch of new "pure language" states.

Let's begin with Woods's statement regarding the alleged Misesian immutability, i.e., the claim that somehow Mises never changed his views in the face of receiving Rockefeller Foundation funding:

 After he [Mises] was off RF money [Rockefeller Foundation money], Mises continued to profess and develop exactly the same views that he had already professed and developed BEFORE he got to meet any RF people. That's not the behavior of an intellectual prostitute. You would rather expect him to change his tune to the likings of his sponsors. (Tom Woods, Was Mises Bankrolled by the Financial Elite?, bold emphasis mine)

There you go. The claim is that Mises was 100% faithful to his views. He never changed no matter what. I am not so sure.

As I mentioned above, Mises seems to have been receiving Rockefeller Foundation money in one capacity or another (there are different "incidents" such as the Geneva one or the Business Cycle Research Institute one or the one where he gets Hayek to start some campaign to get funding etc.) from maybe 1926 to maybe 1944 or thereabouts. So to do some sort of an analysis on whether Mises actually was as faithful as Woods claims, I picked two books to scrutinize. 

I picked Mises's Liberalism: The Classical Tradition and his Omnipotent Government: The Rise of the Total State and Total War. In both cases, I am using the Liberty Fund editions (just in case my page numbers don't match up with the electronic versions of these books). There is "method" to my madness so to speak.

1. Mises wrote Liberalism around 1927, i.e., just at about the time the Rockefeller Foundation started interacting with him. (It sounds as though there was some meeting in 1926)
2. Mises wrote Omnipotent Government around 1944, near the end of his time with the Rockefeller Foundation.
3. In other words, I am trying to get a "before" and "after" look at what Mises is professing to believe.

 On the surface, it appears as though Mises makes a huge change in his views. As I will explain later, I think that this might be an erroneous interpretation. Nevertheless, I want to present it. I fear that there is a false perception that Mises was an anarchist or quasi-anarchist. I think that he was a statist. It is because Mises is being painted as an anarchist or near-anarchist that this very weird interpretation of him can be offered up.  So bear with me as I try to present some possible explanations and interpretations.

Let us begin by assuming that Hans-Hermann Hoppe is correct in his claim that Mises pretty much "crosses over" into anarchism based on Mises's statement in Liberalism. Let me cite Hoppe at length:

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to a state...their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars....If it were in any way possible to grant this right of self-determination to every individual, it would have to be done. (Mises, Liberalism, pp. 109-10)

Essentially, with this statement Mises has already crossed the line separating classical liberalism and Rothbard's private property anarchism; for a government allowing unlimited secession is of course no longer a compulsory monopolist of law and order but a voluntary association. Thus notes Rothbard with regard to Mises' pronouncement, "[o]nce admit any right of secession whatever, and there is no logical stopping-point short of the right of individual secession, which logically entails anarchism, since then individuals may secede and patronize their own defense agencies, and the State has crumbled." (Hans-Hermann Hoppe, Democracy--The God That Failed, footnote 29, page 238, bold emphasis mine)

So let us pretend for the moment that the Hoppe-Rothbard version of Mises's Liberalism is correct. Mises was really an anarchist because of his support for the right of self-determination. This now implies that the Tom Woods "immutable, never-changing Mises" hypothesis MUST BE FALSE.

If Mises is "immutable" then he must be a consistent anarchist. He must be an anarchist BEFORE receiving Rockefeller Foundation money and he must still be an anarchist AFTER receiving Rockefeller Foundation money. Let's now go look at Mises's Omnipotent Government for evidence of anarchism in Mises's writings. What we are going to find is this: Mises sounds like a horrible statist--if he really were an anarchist in 1927 then he certainly is NOT one in 1944.

 What alerted me to this fact was actually a comment made by a poster at the Mises Institute. It is a comment at the bottom of the page that allows you to download a free copy of Omnipotent Government. The comment can be found here. I will reproduce it verbatim (i.e., I won't change any of the grammatical or spelling mistakes made by "Roger"):

I read the book and the final chapter seems to me to be saying exactly what Bush said.
We must abondon the free market to save the free market. Huh?

He spends the whole book defending free markets and in the end succoms to socialsit ideals. 

He calls for a centrally planned economy in europe in the absence of laissez faire economics, or anywhere else it may be needed. 

He calls for a unitary government. ( which is what the US has devolved into, in my opinion ) 

Where else would Obama or Holder or any other beaurocrat get the idea that they have any say whatsoever in legally passed laws in the supposedly sovereign states.

A government where all power is seated in one all knowing central planner. 

He sees a need to force soverign nations to comply with a central government which answers to no one, and so long as they do they shall remain free. ( or what? ) 

Mises goes way off the reservation in this one.

  Now, when I consulted my copy of Omnipotent Government, I, too, was a bit shocked by the comments made by Mises. For example, Mises writes that

if we want to abolish all discrimination against minority groups, if we want to give to all citizens actual and not merely formal freedom and equality, we must vest all powers in the central government alone. (304, bold emphasis mine)

 It sounds as though Mises is talking about a "regional government" for all of Eastern Europe--sort of like a 1944 version of the European Union. He seems to think that national states should be reduced to province-like status under a powerful central state:

Let us call this new political structure the "Eastern Democratic Union" (EDU). Within its framework the old political units may continue to function. A dislocation of the historically developed entities is not required. Once the problem of borders has been deprived of its disastrous political implications, most of the existing national bodies can remain intact. Having lost their power to inflict harm upon their neighbors and upon their minorities, they may prove very useful for the progress of civilization and human welfare. Of course, these former independent sovereign states will in the framework of the EDU be nothing more than provinces. Retaining all their honorary forms, their kings or presidents, their flags, anthems, state holidays, and parades, they will have to comply strictly with the laws and administrative provisions of the EDU. But so long as they do NOT violate these laws and regulations, they will be free. The loyal and law-abiding government of each state will not be hindered but strongly supported by the central government. (305-6, bold emphasis mine)

No anarchist would ever write this. These former states will be reduced to province-like status and they will have to "comply strictly" with all of these rules made by a central government! They will be "free" as long as they obey the orders of their superiors. In other words, they will be slaves under Mises's system.

Mises does not even sound like a supporter of laissez-faire any more! On the next pages, pages 3078, Mises is advocating for state-subsidized education! Again, no anarchist would ever suggest state involvement in the school system:

The governments of Eastern Europe abused the system of compulsory education in order to force minorities to give up their own languages and to adopt the language of the majority. The EDU would have to be strictly neutral in this respect. There would be private schools only. Any citizen or group of citizens would have the right to run an educational institution. If these schools complied with standards fixed by the central government, they would be subsidized by a lump sum for every pupil. The local governments would have the right to take over the administration of some schools, but even in these cases the school budgets would be kept independent of the general budget of the local government; no public funds but those allocated by the central government as subsidies for these schools should be used. (307-8, bold emphasis mine)

 As one last example, Mises writes "Democracy can be maintained in the East only by an impartial government" (308). I find it shocking that Hoppe, the ultra-adversary of democracy, would claim that Mises can effectively be an anarchist when he openly calls for democracy. An anarchist wold never support democracy, nor would he or she support this claim that an "impartial government" exists. An anarchist would say that the government is biased in favor of benefiting the ruling class at the expense of the ruled over class.

Consequently, there is no way that Mises is an anarchist in 1944. This refutes Woods's claim of an "immutable Mises."

Or does it? Maybe Woods's claim of an "immutable Mises" is, in fact, correct! Maybe the problem is the claim that Mises was some sort of 1927 anarchist or near-anarchist based on his comment about the right of self-determination.

My gut feeling is that Tom Woods's "immutable Mises" hypothesis is probably correct but not in a way consistent with Hoppe or Rothbard. I get the impression that the "official version" is this: Mises was intellectually compatible with Rothbard when it comes to the question of anarchy. This way, there is a rather small gap or even no gap between Mises and Rothbard when it comes to their political views. Or put it this way: Mises is compatible with Rothbard's anarcho-capitalism.

I think that this is all nonsense. I think that Mises was NOT an anarchist and Rothbard and Hoppe are trying to "invent" a non-existent "anarchist" Mises. Consequently, I think that Tom Woods's is correct in saying that Mises is "immutable." Mises doesn't change. MISES DOESN'T CHANGE--HE STAYS CONSISTENTLY STATIST, regardless of Rockefeller Foundation funding intervention.

To demonstrate why I think that the correct interpretation is to assert a "consistently Statist" Mises, I think that all I have to do is this: to show that Mises was statist BEFORE really being sucked into the Rockefeller Foundation sphere of influence. It is obvious that he was a statist with his proposal for a gigantic central state for all of Eastern Europe found in his book Omnipotent Government. So let us go look at Mises's Liberalism in order to see if Mises was a statist back in 1927 as well.

The first, and in my opinion most obvious problem for the Hoppe-Rothbard interpretation, is that it violates the author's stated thesis! Mises comes out explicitly in Liberalism and say in no uncertain terms that HE IS NOT AN ANARCHIST! So it is a bit shocking that Hoppe and Rothbard can use a book that explicitly denies anarchism in order to prove that Mises really was an anarchist. This is what Mises says in his own book in 1927:

Liberalism is NOT anarchism, nor has it anything whatsoever to do with anarchism. The liberal understands quite clearly that without resort to compulsion, the existence of society would be endangered and that behind the rules of conduct whose observance is necessary to assure peaceful human cooperation must stand the threat of force if the whole edifice of society is not to be continually at the mercy of any one of its members. One must be in a position to compel the person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society. This is the function that the liberal doctrine assigns to the state: the protection of property, liberty, and peace. (17, bold emphasis mine)

On the same page, Mises denigrates anarchism as basically a utopian dream. Mises writes, "anarchism misunderstands the real nature of man. It would be practicable only in a world of angels and saints" (17). Yet, Hoppe and Rothbard, using THIS same book, claim that Mises really was advocating anarchy in 1927 by mentioning later on in this book the "right of self-determination."

If this is true, then should we not then accuse Mises of being totally incapable of developing a consistent argument? In one part of his book he totally condemns anarchy as impossible for us mere mortals, but later in the same book he thinks anarchy should be implemented under the title of "right of self-determination." That seems really inconsistent to me. I, of course, do not believe that Mises is that bad of an author that he can't maintain a consistent argument in a relatively short book. I think that Rothbard and Hoppe are imposing an alien interpretation on Mises's book by trying to make him appear as a Rothbardian anarchist (anarcho-capitalist) when Mises clearly is no such thing.
 
Maybe Mises is attacking one version of anarchy since there are, in fact, many different variations on anarchism out there. This seems to be the line of defense taken by Jörg Guido Hülsmann in his book Mises: The Last Knight of Liberalism. Hülsmann argues that Mises was not attacking Rothbardian- style anarchism. He was only attacking Proudhonian-style anarchism. Hülsmann writes that

Mises used the term "anarchism" to refer to the Proudhonian idea of a society without the defense of private property rights, and "anarchy" to designate the chaos he believed to be inevitable for such a society. He did not have in mind the anarchism of his later student Murray Rothbard, who used these same words to advocate a free market society without a modern state--a system in which even the defense of property rights would be provided privately. (Jörg Guido Hülsmann, Mises: Last Knight of Liberalism, end note 44, chapter 13, bold emphasis mine)

Maybe Hülsmann is thinking of what Mises wrote in Liberalism with regard to anarchy and property: "if private property were abolished, then everyone, without exception, would spontaneously observe the rules demanded by social cooperation" (16).  Maybe that is why Hülsmann is framing Mises's definition of anarchy as an anti-property type anarchy.

I do not understand why Hülsmann then calls this "Proudhonian." He seems to be accusing Proudhon of wanting to have absolutely no defense of private property whatsoever. I am not a mutualist, but I think that this is a rather unfair and inaccurate representation of what Proudhon stood for.  In the book Anarchy and the Law: The Political Economy of Choice, edited by Edward P. Stringham, we find a fascinating article (chapter 33) by David Osterfeld entitled Freedom, Society, and the State: An Investigation Into the Possibility of Society without Government (excerpt). Osterfeld's portrayal of Proudhon differs sharply from that of Hülsmann. To me, Hülsmann seems to be painting Proudhon as some sort of anti-property communist, but this is certainly not how Osterfeld portrays him. Osterfeld writes this about Proudhon: "Proudhon, in fact, proclaims that property 'is the only power that can act as a counter weight to the State...' Thus, property he says, 'is the basis of my system of federation'" (511-12).

I don't know what could possibly be clearer with regard to Mises's political philosophy than this:

Liberalism is therefore far from disputing the necessity of a machinery of state, a system of law, and a government. It is a grave misunderstanding to associate it in any way with the idea of anarchism. For the liberal, the STATE IS AN ABSOLUTE NECESSITY. (Liberalism, 19, bold emphasis mine)

Now let us return to the alleged "proof" that Mises was really an anarchist because--in this same book of denouncing anarchy--he came out in favor of anarchy by supporting the "right of self-determination." This "proof" quote that Rothbard and Hoppe pounced upon is found on pages 79-80 of Mises's Liberalism. (The page numbers differ between Hoppe and me because I am using the Liberty Fund edition.) The first thing I want to do is reproduce the FULL QUOTE without Hoppe's deletions. When we stick back in the deleted part, we will quickly see that: Mises is NOT talking about setting up an anarchy at all. There is NO talk of private defense forces, nor is there any talk of individual secession. Mises IS talking about ESTABLISHING NEW STATES.

In order to see this, I will reproduce the ENTIRE QUOTATION and I will especially highlight the part that Hoppe deleted in his quotation above. (I faithfully copied out Hoppe verbatim above, at the start of my blog).

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars. (79)

 The part that Hoppe deleted above is the crucial part. Mises didn't say "go declare anarchy" or "go become a Rothbardian anarcho-capitalist!" He said that the people WISH to either form a NEW STATE or JOIN an existing state. This is NOT ANARCHY at all!

Notice how Mises is clearly stating that this right of self-determination leads to the FORMATION OF STATES. This is totally inconsistent with the anarchistic spin provided by Rothbard and Hoppe.  Mises writes that

so far as the right of self-determination was given effect at all, and wherever it would have been permitted to take effect, in the nineteenth and twentieth centuries, it led or would have led to the FORMATION OF STATES composed of a single nationality (i.e., people speaking the same language) and to the dissolution of states composed of several nationalities, but only as a consequence of the free choice of those entitled to participate in the plebiscite. THE FORMATION OF STATES COMPRISING ALL THE MEMBERS OF A NATIONAL GROUP WAS THE RESULT OF THE EXERCISE OF THE RIGHT OF SELF-DETERMINATION, not its purpose. (Liberalism, 80, bold emphasis mine)

Notice that Mises is not talking about the resulting anarchy of this process. It sounds like he is expecting just the opposite: he seems to be fairly confident that new states would form, based on a "purity" of language.

Mises does NOT use the term "right of self-determination" to imply "individual sovereignty" or "individual secession." This seems to be something that Rothbard is "reading into" Mises, and I think that it is totally unjustified. In fact, Mises seems to be saying the complete opposite of what Rothbard is saying. Mises speaks of restricting this right--in a way that sounds suspiciously similar to democracy and "majority rule." Mises writes "that the right of self-determination be restricted to the will of the majority of the inhabitants of areas large enough to count as territorial units in the administration of the country" (Liberalism, 80, bold emphasis mine).

In conclusion, I think that I have demonstrated the following points:

• Mises never was an anarchist
• Mises was "immutably" a statist--so Tom Woods is right in claiming that Mises remained consistent in his beliefs 
• The Rockefeller Foundation funding did not change the essential beliefs of Mises. Mises was statist in 1927, and he was still statist in 1944.
• Hülsmann, Hoppe, and Rothbard are trying way too hard to make Mises appear to be an anarchist (they are trying too hard to make him look Rothbardian/anarcho-capitalist)
• The "right to self-determination" passage in Mises's Liberalism does not prove that Mises supported anarchism; it actually shows Mises's support for "pure language" states
• Proudhon's position on property is misrepresented in order to create a false dichotomy of "anti-property" anarchists and "pro-property" anarchists

Mises mentioned in the Reece Committee Investigation of Tax Exempt Foundations

The research question that I am currently investigating is: "Why did the Rockefeller Foundation fund Ludwig von Mises?" In doing my research, I added to my library René A. Wormser's book Foundations: Their Power and Influence. I learned about the existence of this book from Murray N. Rothbard. Rothbard mentioned Wormser's book and the associated Reece Committee Investigation in his book The Betrayal of the American Right. The Rothbardian quote that really launched this part of my larger investigation is as follows:

A valuable summary of the Committee's work can be found in a book by its general counsel, René A. Wormser, Foundations: Their Power and Influence (New York: Devin-Adair, 1958). Some of Wormser's section heads are instructive: "Politics in the Social Sciences," "The Exclusion of the Dissent," "Foundation-Fostered Scientism," "The 'Social Engineers' and the 'Fact-Finding Mania,'" "Mass Research-Integration and Conformity" (The Betrayal of the American Right, p. 136, footnote 3)

 So I ordered and received a copy of Wormser's book. I was unable to find a copy from the major booksellers in Canada; consequently, I had to order a copy from a bookseller in Chicago. When I was looking through the book early this morning (maybe 2 AM!), I came across a quotation that mentions Ludwig von Mises. This, of course, is the purpose of the current blog entry.

Wormser mentions (p. 143) a Mr. Aaron Sargent, "one of the witnesses before the Reece Committee." According to Wormser, Sargent's qualifications are as follows. "Mr. Sargent is a lawyer who has had considerable experience in special investigations and research in education and subversion" (143). The important quotation for my research is found on page 145 (bold emphasis is mine):

The growing radicalism which was beginning rapidly to permeate academic circles was no grass-roots movement. Mr. Sargent cited a statement by Professor Ludwig Von Mises that socialism does not spring from the masses but is instigated by intellectuals "that form themselves into a clique and bore from within and operate that way. It is not a people's movement at all. It is a capitalization on the people's emotions and sympathies toward a point these people wish to reach." (145)

I want to conclude that Mr. Sargent's witness testimony to the Reece Committee certainly appears to be consistent with what I know already about Ludwig von Mises. When I read this Sargent citation originally, what popped into my mind was Mises's conclusion to his book Planned Chaos. Mises's Planned Chaos was originally published in 1947 by the Foundation for Economic Education. The Reece Committee was around roughly from 1952 to 1954; hence, both of my sources are from the same period of history, i.e., circa 1950. You will immediately see the parallels that exist between what Sargent said and what Mises said:

It is not true that the masses are vehemently asking for socialism and that there is no means to resist them. The masses favor socialism because they trust the socialist propaganda of the intellectuals. The intellectuals, not the populace, are molding public opinion. It is a lame excuse of the intellectuals that they must yield to the masses. They themselves have generated the socialist ideas and indoctrinated the masses with them....The intellectual leaders of the peoples have produced and propagated the fallacies which are on the point of destroying liberty and Western civilization. The intellectuals alone are responsible for the mass slaughters which are the characteristic mark of our century. (Planned Chaos, p. 76, bold emphasis mine)

On Anarchy by William Graham Sumner

According to Thomas J. DiLorenzo's book Hamilton's Curse: How Jefferson's Archenemy Betrayed the American Revolution--and What It Means for America Today, William Graham Sumner was "the great Yale University social scientist" (44). I first learned about Sumner from DiLorenzo's book. Sumner had some really strong views on central banking; he saw in central banking a conspiracy between the rich and the government. "This [National Bank] was...only a measure for carrying out the...interweaving of the interests of wealthy men with those of the government" (58). He also had strongly opposed protectionism especially when it was advocated by Alexander Hamilton. "The system of protection[ism] to be found in this report of Hamilton's," wrote Sumner, "is the old system of mercantilism of the English school, turned around and adjusted to the situation of the United States."

Both protectionism and central banking are forms of privilege granted by the State to benefit a small group at the expense of a much larger group. We see winners and losers, i.e., those benefiting from the existence of the State and those losing from its existence. The "winners" are called the ruling class; the "losers" are called the ruled over class. From this it is not surprising that William Graham Sumner would eventually advocated for anarchism because anarchy means abolishing the ruling class. Apparently, he "came out of the closet" and declared to his classroom of students at Yale University that he was an anarchist! What I find to be very interesting is that Sumner associates anarchy with laissez-faire economics. Sumner appeared to be an anarcho-capitalist before the term was even coined! 

I admire Sumner's courage for standing up in his class and speaking these memorable words:

Gentlemen, the time is coming when there will be two great classes, Socialists, and Anarchists. The Anarchists want the government to be nothing, and the Socialists want the government to be everything. There can be no greater contrast. Well, the time will come when there will be only these two great parties, the Anarchists representing the laissez faire doctrine and the Socialists representing the extreme view on the other side, and when that time comes I am an Anarchist.

Part 2 Preliminary Research on the 2-Stage Hypothesis of Foundation Funding of Libertarians

When a funding relationship is discovered to exist between a libertarian researcher and a Foundation--usually perceived of as an "evil" Foundation with malevolent intentions--the standard explanation seems to be what I will call the 2-Stage Hypothesis of Foundation Funding.  Let me illustrate what I mean with two cogent examples from libertarian history.

In the Mises Institute forum post entitled Lyndon Larouche's Mises-Hayek conspiracy theories, a poster named Aragon notes, in part, that one of the accusations against the Austrian School of Economics is that the Austrian School is a "front" for the Central Intelligence Agency or CIA. "The National Review is considered the most influential CIA publication. It consistently puffs Jean Kirkpatrick, Milton Friedman, and other cognoscenti of the intelligence community and the Viennese School of Economics" (emphasis mine). What this argument is trying to say is simply that Murray N. Rothbard was a "puppet" for the Central Intelligence Agency.

Did Murray N. Rothbard work for the CIA-publication called the National Review? The answer is unequivocally yes. Was the National Review really a CIA-publication in the first place?

According to Dr. Hans-Hermann Hoppe, the CIA did fund the National Review. Hoppe writes in his book Democracy: The God That Failed (p. 190, footnote 3, paragraph 2) that

a second, somewhat older but nowadays almost indistinguishable branch of contemporary American conservatism is represented by the new (post World War II) conservatism launched and promoted, with the assistance of the CIA, by William Buckley and his National Review. Whereas the old (pre-World War II) American conservatism had been characterized by decidedly anti-interventionist (isolationist) foreign policy views, the trademark of Buckley's new conservatism has been its rabid militarism and interventionist foreign policy. (bold emphasis mine; italics in the original)

There is also no question that Murray N. Rothbard did, in fact, work for the National Review and for William or Bill Buckley. We know that Rothbard worked for the National Review because he speaks quite candidly about his role in the organization. Rothbard himself was quite aware of the fact that he was working for the CIA. Rothbard writes in his book The Betrayal of the American Right that the CIA was pulling pretty much all the strings at the National Review:

We should now ask whether or not a major objective of National Review from its inception was to transform the right wing from an isolationist to global warmongering anti-Communist movement; and, particularly, whether or not the entire effort was in essence a CIA operation. We now know that Bill Buckley, for the two years prior to establishing National Review, was admittedly a CIA agent in Mexico City, and that the sinister E. Howard Hunt was his control. His sister Priscilla, who became managing editor of National Review, was also in the CIA; and other editors James Burnham and Willmoore Kendall had at least been recipients of CIA largesse in the anti-Communist Congress for Cultural Freedom. In addition, Burnham has been identified by two reliable sources as a consultant for the CIA in the years after World War II. (168)

 Rothbard also speaks quite openly about the role he played at the National Review. Rothbard, writing about himself, observes that

National Review's image of me was that of a lovable though Utopian libertarian purist who, however, must be kept strictly confined to propounding laissez-faire economics, to which National Review had a kind of residual rhetorical attachment....But above all I was supposed to stay out of political matters and leave to the warmongering ideologues of National Review the gutsy real-world task of defending me from the depredations of world Communism, and allowing me the luxury of spinning Utopias about private fire-fighting services. I was increasingly unwilling to play that kind of a castrate role. (177)

Common sense tells me that something is rotten here in our metaphorical State of Denmark. The issue of "shared confession" plays a predominant role in this type of "conspiracy theory" research. As serious historical researchers, we must look for "a shared world view" and for "shared ideas." In fact, Gary North explains, in his article Writing Conspiracy History: Lists Are Not Enough, the correct procedure for doing historical research in a "conspiracy theory" type setting:

There are many levels of association, dependence, and interaction among political groups and activist organizations. What matters most is shared confessions, not shared money. Shared ideas, not a long list of names on the yellowing letterhead stationery of a short-lived, peripheral, one-man organization like the Religious Roundtable, are what matters.

Serious historical research involves more than collecting membership lists and letterhead lists from old archives or Web-based data bases.  The researcher must ask himself: "So what?" He must show that the connections have to do with a shared worldview and shared sources of funding, especially funding by an organization or a family with an identifiable agenda that stretches across two generations or more. (bold emphasis mine)

So, is there a "shared worldview" or "shared ideas" between the National Review and Rothbard? From Rothbard's own discussion above, the National Review saw him as "lovable though Utopian libertarian purist" who was "strictly confined" to "safe topics." But on the core issue--i.e., on foreign policy--ROTHBARD AND THE NATIONAL REVIEW STRONGLY DISAGREE. The National Review became an advocate of "rabid militarism and interventionist foreign policy." The obvious question to ask is: did Rothbard support militarism or an interventionist foreign policy? The simple answer is NO, he did not. Some evidence to support this conclusion can be found in David Gordon's article entitled Rothbard against War.  Gordon writes of a Rothbard who not only intellectually disagrees with the National Review but also openly opposes their policies. Gordon writes of Rothbard's strong stand against the National Review and the Cold War:

Although Rothbard was an early contributor to William Buckley's National Review, he rejected the aggressive pursuit of the Cold War advocated by Buckley and such members of his editorial staff as James Burnham and Frank S. Meyer. He broke with these self-styled conservatives and thereafter became one of their strongest opponents. (bold emphasis mine)

One attempt to explain this "bizarre" relationship between the pro-militarist and statist National Review and the anti-militarist and anarchist Rothbard is to use what I am calling the 2-Stage Hypothesis of Foundation Funding mentioned by Daniel McCarthy in his National Review Isn't Right.  McCarthy writes explicitly about this 2-Stage Hypothesis when he describes the history of Rothbard's relationship with the National Review. The basic sequence of events for a NEW Foundation is (1)Stage 1: hire big names in order to build credibility for the new foundation, (2)purge the undesirables in order to transition into Stage 2; (3)Stage 2: now launch the "real" politically motivated agenda:

 Was there ever a time when National Review was conservative? Certainly conservatives were once published in its pages, especially in the early years when National Review was seeking to establish itself as the voice of the American Right and American conservatives were in desperate need of a journal. But once National Review had counterfeited its credentials it soon began to purge anyone on the Right who disagreed with its line, from the John Birch Society to Murray Rothbard, and later Joseph Sobran.... Having slandered most of its rivals on the Right as kooks or anti-Semites, National Review can now afford to be more open about its imperial agenda. (bold emphasis mine in order to highlight the process: first credibility building, then purging of heretics, and finally real agenda launching, i.e., coming out of the closet in favor of American imperialism)

To summarize, the 2-Stage Hypothesis of Foundation Funding is:

1. Hire famous names in order to build credibility for the new Foundation
2. After purging the heretics (who were hired in Stage 1), launch the "real" political agenda 

Recently, on August 31, 2012, the 2-Stage Hypothesis of Foundation Funding was applied by Tom Woods in his Circle Bastiat article entitled Was Mises Bankrolled by the Financial Elite? In this article, Woods is addressing another Lyndon LaRoche inspired conspiracy theory leveled against the Austrian School of Economics. In this conspiracy theory, the claim is made that Austrian School Economics is a front for the power elites. The rich, powerful, and famous apparently want to adopt the policies advocated for by Mises. In Woods's explanation of what he thinks happened between Mises and the Rockefeller Foundation, Woods follows the same 2-Stage Hypothesis that Daniel McCarthy followed earlier. I will, once again, add emphases in order to make it explicit that Woods is following the 2-Stage Hypothesis:

 The RF [Rockefeller Foundation] started funding Mises because he was already a major representative of Viennese intellectual life. Mises was part of the European intellectual establishment before he received financial support from US financial aristocracy. Like all new private research institutions, the RF first tried to hop into bed with the already existing scientific establishment to prop up its own reputation [or get the credibility it needs as the new kid on the block]. Only in a second step did the RF (and similar organizations) try to steer the scientific agenda according to its own political and philosophical prejudices. When they proceeded from Step One to Step Two, there was no more place for Mises precisely because his views were unacceptable to RF. (bold emphasis mine)

Summarizing Woods's discussion:

1. The Rockefeller Foundation as the new foundation (just as the National Review was the new voice of conservatives back during the Cold War) hires a famous name, Mises, in order to build up the Foundation's credibility and reputation.
2. Mises gets purged (fired) when the Foundation proceeds from Step One to Step Two. Mises is the heretic who got purged. Then the real "steered scientific agenda" comes out into the open.

I am going to stop this blog at this point. For my next blog, Part 3, I plan to carry on where this blog ends. The plan for Part 3 is to attempt to answer the following research question: Does the 2-Stage Hypothesis fit the historical facts pertaining to the history of Mises being funded by the Rockefeller Foundation? To be frank, I am not sure at this point. From Part 1, I think that Mises's liberalism might have been of value to the Rockefeller Foundation because liberalism enables foreign imperialism and the Rockefellers might favor more American imperialism. I am also unsure about whether this Stage 1 and Stage 2 type setup actually existed. I kind of think that the Rockefeller Foundation was "steering the political agenda" from day one, that is, the Foundation did not wait for a Stage 2 in order to finally launch its manipulations. But I still have to do a lot more research before coming to any definitive conclusions.    

Part 1 Some Preliminary Research on the Mises-Rockefeller Foundation Funding

On the Ludwig von Mises webpage, one can find a few posts discussing the historical fact that Ludwig von Mises did, in fact, receive funding from the Rockefeller Foundation. My curiosity regarding the funding of Mises was aroused when I stumbled across the post entitled WTF Rockefeller funded Mises? I have been thinking about this for some time because this funding arrangement seems really odd to me. Why on earth would the Rockefeller Foundation show any interest in Mises? In the introduction to Murray N. Rothbard's A History of Money and Banking in the United States: The Colonial Era to World War II, Joseph T. Salerno raises an important point. He notes that "the question of 'Cui bono?'--or 'Who benefits?'--from changes in policies and institutions receives very little attention." This has been precisely the question I have been asking myself for some time: how did the Rockefeller Foundation benefit (if at all) from funding Ludwig von Mises? What were their motives for funding him? Moreover, how does Mises benefit (if at all) from receiving Rockefeller Foundation support? Actually I have a number of unanswered questions such as the following:

1. Could the motive for funding Mises be to advance an imperialist agenda, which would probably be beneficial to the Rockefellers? The reason I put this forward as a possibility is because of three fascinating (at least to me) quotations. One is by Hans-Hermann Hoppe in his article The Paradox of Imperialism, and another is by Samuel Edward Konkin III who is quoted by Wally Conger in the essay entitled Agorist Class Theory: A Left Libertarian Approach to Class Conflict Analysis.  The third is by Gary North in his article EUthanasia. 
1. Hoppe mentions that internal or domestic liberalism in states such as the United States of America--remember Mises was a strong advocate for classical liberalism--is the breeding ground for external imperalism.  Conversely, the internal or domestic repression of states such as the former Soviet Union is the breeding ground of just the opposite foreign policy, namely, a peaceful foreign policy. Let me quote Hoppe at length because it seems to suggest that a motive for funding domestic liberalism is to advance foreign imperalism.
1. "Other things being equal, the lower the tax and regulation burden imposed on the domestic economy, the larger the population will tend to grow and the larger the amount of domestically produced wealth on which the state can draw in its conflicts with neighboring competitors. That is, states which tax and regulate their economies comparatively little--liberal states--tend to defeat and expand their territories or their range of hegemonic control at the expense of less-liberal ones. This explains, for instance, why Western Europe came to dominate the rest of the world rather than the other way around. More specifically, it explains why it was first the Dutch, then the British and finally, in the 20th century, the United States, that became the dominant imperial power, and why the United States, internally one of the most liberal states, has conducted the most aggressive foreign policy, while the former Soviet Union, for instance, with its illiberal (repressive) domestic policies has engaged in a comparatively peaceful and cautious foreign policy.
2. Konkin also comes out, more directly than Hoppe did, and says that liberalism is a trick of the ruling class. Konkin basically sees liberalism in the same way that Hoppe does, namely, that liberalism is just a more efficient way of feeding the state apparatus. I want to also cite Konkin at length because he seems this internal "skimming" process going on with classical liberalism. Konkin is effectively saying that the classical liberalism advocated for by Mises is purely statism. From Roderick T Long, the State is the cause of the ruling class. Long writes in his article Can We Escape the Ruling Class? that "economic analysis suggests that the ruling class is primarily a creation of the state and not vice sersa." Hence, the ruling class is inherently statist; the ruling class has a motive to keep the state in existence. Since Mises's liberalism is statist as well, then Mises poses no threat to the ruling class when he advocates for classical liberalism.
1. "Remember, the liberal statists want to restrain the State to increase the production of the host to maximize eventual parasitism. They 'control their appetites' but continue the system of plunder. The recent political example of supply-side economics starkly illustrates the basic statist nature of such ideas: the tax rate is lowered in order to encourage greater economic production and thus a greater total tax collection in the long run."
3. North mentions in his article, EUthanasia, that Raymond Fosdick, who wrote the important book The Story of the Rockefeller Foundation and who was definitely a long-time Rockefeller "insider," approached Mises supposedly for the purpose of advancing the cause of "free trade." I suspect that "free trade" is being used euphemistically to mean "mercantilism." This is the same problem with modern "free trade" agreements such as NAFTA. They pretend to be about "free trade" when, in fact, they are really about its opposite. This is what I like to think of as the "bait-and-switch" problem with these alleged "free trade" agreements. Moreover, maybe by "free trade" they are really talking about some sort of "imperialism" in the sense of using the United States government to "open up" foreign markets. This was the argument used to justify imperialism in the 19th century and reported upon by Murray N. Rothbard in his book The Origins of the Federal Reserve. Rothbard notes that the imperialists of the late 19th century dressed up imperialism as "free trade" or as "opening up new markets." Rothbard writes that "By the late 1890s, groups of theoreticians in the United States were working on what would later be called the 'Leninist' theory of capitalist imperialism....To save advanced capitalism, it was necessary for Western governments to engage in outright imperialist or neo-imperialist ventures, which would force other countries to open their markets for American products and would force open investment opportunities abroad" (emphasis added). Gary North's important quotation is as follows.
1. "Raymond Fosdick was a long-term strategist. In the 1940s, he financed the best free market economists he could locate to promote the ideal of free trade. Ludwig von Mises and his disciple Wilhelm Roepke each published a book that had been financed by the Rockefeller Foundation. [Given the 1940s date and the Rockefeller funding, my best guess is that Gary North is alluding to Mises's Omnipotent Government: The Rise of the Total State and Total War, published in 1944 originally and admittedly funded by "the Rockefeller Foundation and...the National Bureau of Economic Research."] Yet neither of them believed in setting up a world government. This did not bother Fosdick. He and [Jean] Monnet adopted the same strategy: first free trade [or maybe bait and switch by telling the public you want free trade but then implementing "managed" or "rigged" trade, but that is my guess], then the creation of a regional government that possess judicial sovereignty. This plan has been systematically promoted by the Trilateral Commission, created in 1973 by John D. Rockefeller, Jr.'s son, David.

Some evidence from the historical record suggests that it was Mises who approached the Rockefeller Foundation initially for funding, and not the other way around. "In Vienna, one of the first to seize the Rockefeller opportunity was actually von Mises, who, in 1930, although he viewed social planning and control as antithetical to contemporary civilization, approached Van Sickle for support," writes Robert Leonard in his essay entitled From Austroliberalism to Anschluss: Oskar Morgenstern and the Viennese Economists in the 1930's.  However,  in Jörg Guido Hülsmann's biography of Mises's life entitled Mises: The Last Knight of Liberalism, Mises seemed to be somewhat delighted or maybe even flattered that the Rockefeller Foundation had begun to hang out with him around 1926. [I think, but I can't remember for sure at the moment, that Mises says somewhere that the Rockefeller Foundation had been "following his work" for some time prior to this.] Writing about Mises's 1926 journey to America, Hülsmann observed that Mises was interacting with the movers and shakers in the Rockefeller world. He wrote that "In New York City, he [Mises] also met the leadership of the Rockefeller Foundation and seems to have made an excellent impression....He later recalled that the Rockefeller Foundation had 'taken a kind interest in my teaching and research work.'"

Hülsmann's book also provides another possible motive for the Rockefeller Foundation's funding of Mises. It might be that the Rockefeller Foundation needed to keep Mises around as opposition to one of their other stated objectives of this time period, namely, the objective of turning economics into applied statistics. Maybe they wanted to create the illusion of "intellectual choice" even though they were funding the positivist side of this debate very heavily. Hülsmann writes that

[Allyn] Young was known as a diehard positivist, and he was expected to make the economics department [at the London School of Economics] a center for the transformation of economic science into applied mathematics. This had been a longstanding plan of the socialist founders of the school, and of the New York-based Laura Spelman Memorial [i.e., the Laura Spelman Rockefeller Memorial], which donated large sums to LSE for research on the "natural bases" of economics.

 

Mises on Why Capitalism is to Blame for Everything Bad in this World

This is a hilariously funny quotation from Ludwig von Mises on why capitalism is to blame for everything bad in this world!

Mises writes that

nothing is more unpopular today than the free market economy, i.e., capitalism.  Everything that is considered unsatisfactory in present-day conditions is charged to capitalism.  The atheists make capitalism responsible for the survival of Christianity.  But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed.  Friends of peace consider our wars as an offshoot of capitalist imperialism.  But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its "bourgeois" pacifism, contrary to human nature and to the inescapable laws of history.  Sermonizers accuse capitalism of disrupting the family and fostering licentiousness.  But the "progressives" blame capitalism for the preservation of allegedly outdated rules of sexual restraint.  Almost all men agree that poverty is an outcome of capitalism.  On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism.  These contradictory accusations of capitalism cancel one another.  But the fact remains that there are few people left who would not condemn capitalism altogether.  

Austrian Macroeconomics on Economic Depressions with a Monetarist Twist!

This is a quotation from Richard M. Ebeling's Austrian Macroeconomics:  Review of Roger W. Garrison's Time and Money.

What is going on here is this:  Ebeling first provides the standard Austrian School explanation of economic depressions.  This is the story involving the money supply being artificially increased followed by the artificial lowering of the market interest rate.  This then causes resources to shift into producing long-term investment projects as opposed to consumer goods production.

Then, he mentions an objection raised by Sir John Hicks.  Hick argues that the traditional Austrian theory cannot be the explanation of depression because the economy, based on this theory, will self-correct too quickly, i.e., a serious investment boom could never really start up and get going.  Resources would quickly shift back to the consumer goods industry from the longer-term investment projects and the "boom" in the longer-term investment area would quickly come to an end.  However, since long-term investment booms have started and have lasted for some time, then there is obviously a problem with having a theory that does not allow for the boom phase to even get started.

Then Ebeling mentions Roger W. Garrison's proposed solution to this problem.  Garrison brings in ideas from the Monetarist school in order to "stick a time delay" into the model.  Then, with this "time delay" a prolonged "investment boom" will occur, to be followed by the "bust" part of the business cycle.

Here is how Ebeling puts it (all emphasis is mine):

Garrison retells the Austrian story by taking his cue from the type of analysis used by the Monetarists in explaining how in the short-run a monetary expansion can push unemployment and resource use BELOW the "natural rate of unemployment."  In the short-run, an economy always has some slack, even when it is operating at "full employment."

Garrison argues an economy has the capability of temporarily functioning BEYOND its "normal" full employment production possibilities.  This, he says, is what enables the investment boom to continue for a significant period of time before the "self-reversing" process of rising consumer demand brings the investment boom to a halt.

 The longer-term investment projects CAN CONTINUE for a prolonged period of time because simultaneous with this, the short-term slack in the economy enables consumer goods production to expand as well, delaying any reduced supply of consumer goods and a rise in their prices sufficient to swamp the investment boom.

 Let me try to put this into my own words.  In the standard Austrian model of depression here is what happens.

1. The monetary authority expands the money supply and creates an artificially low market interest rate. 
2. Investors (assuming "elastic expectations," i.e., investors will react to the lower interest rates and start investing in longer-term projects) are induced to borrow and invest in longer term projects (as opposed to shorter-term projects and consumer goods production)
3. To invest in these longer-term projects, they have to "bid away" resources (labor, tools, equipment) from the other shorter-term and consumer goods industries.  
4. The factor owners (owners of the factors of production) in these longer-term industries are making really good large monetary incomes.  They want to spend their money on consumer goods.
5. The problem is this:  if the factors of production have been shifted to longer term projects then obviously they are not available to work on the shorter term and consumption goods projects.  In other words, if the workers and machines are all dedicated to building bridges they cannot be dedicated to building consumer goods. 
6. So now the pent up demand for consumer goods will tend to bid up prices for consumer goods.  Also, consumer goods manufacturers, seeing the potentially much higher prices, can bid up wages and other payments to factors in order to shift the factors of production BACK to the consumer goods producing industries.

Now, Garrison wants to introduce a "time delay" into his model in order to explain the prolonged investment boom.  To do so, he brings up this Monetarist idea of SLACK in the economy.  With slack (e.g., marginal workers, people working overtime, factories being used below 100% of capacity and so on), the economy can expand in BOTH sectors, i.e., the longer-term investment boom can happen AND more consumer goods can also be produced!  In the traditional version above, resources would have to "shift back" from the longer-term projects TO the consumer goods production section.  But, if the economy can tap into this "slack," then the resources DO NOT HAVE TO SHIFT BACK RIGHT AWAY.  The resources dedicated to the longer term projects can STAY THERE; the slack can fill the needs to produce the additional consumer goods demanded.

That is my interpretation of what Ebeling wrote about Garrison's model.