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)

The Fatal Conceit

The conception of a self-organising structure began to dawn upon mankind, and has since become the basis of our understanding of all those complex orders which had, until then, appeared as miracles that could be brought about only by some super-human version of what man knew as his own mind.  --F. A. Hayek, The Fatal Conceit (emphasis mine)

Professor Hayek proposes a dichotomy between a self-organizing system and a directed system with the directed system functioning as though God himself were giving the orders from heaven to mankind.  Hayek stresses that this distinction is the primary concern of his book, The Fatal Conceit:  The Errors of Socialism, when he explicitly states that he is addressing the distinction between the 

advocates of the spontaneous extended human order created by a competitive market, and on the other hand those who demand a deliberate arrangement of human interaction by central authority based on collective command over available resources.  (7)

First, I want to go over some of the "key quotes" that popped into my mind after reading these two quotations from F. A. Hayek.  These quotations remind me of not only Ludwig von Mises's discussions of both the materialistic philosophy and the philosophies of history but also Gustave de Molinari's discussions of the divine right of kings theory of government.  Then, I want to apply the concepts from the discussion to a real world example, namely, the story of the creation of the Federal Reserve System.

 Some Germane Quotations That Popped into my Head

When F. A. Hayek mentions the "super-human" mind and "miracles," he is suggesting a much bigger problem that embraces "supernatural" interventions into the affairs of mankind.  The theme here seems to be that some "exogenous" [i.e., originating from OUTSIDE] force is at work directing and guiding the affairs of mankind.  

I want to begin with Mises's Theory and History and his discussion on the "theme of the philosophy of history."  This is a term that probably most of you have never heard of before!  I have heard of it used before mainly in discussions of economic history.  Mises describes "philosophies of history" as being equivalent to Biblical prophecies.  They are at the level of "divine revelations," which pertain to the course of mankind's future--what will happen has already been written down in the book and so the future is inevitable.  Mises writes that "In pre-Marxian ages it was not customary to call philosophies of history scientific.  Nobody ever applied the term 'science' to the prophecies of Daniel, the Revelation of St. John, or the writings of Joachim of Flora" (104).

Philosophies of history often set up the "leader" as the "representative" of God himself.  God tells the "leader" what to do; the "leader" then relays these orders to the masses of the people, who are expected to obey the "leader" because the "leader" is God's representative on earth.  The "leader" must guide and direct the affairs of the masses because they are simply too stupid to run their own lives.  Mises writes about this version of the philosophy of history that 

the first group contends that Providence [i.e.,  God, especially when conceived as omnisciently directing the universe and the affairs of humankind with wise benevolence] elected some mortal men as special instruments for the execution of its plan.  In the charismatic leader superhuman powers are vested.  He [The leader] is the plenipotentiary [a diplomatic agent possessing full power and authority] of Providence [God] whose office it is to guide the ignorant populace the right way. (109)

In a similar vein, Mises discusses how this "superhuman" director of human affairs once again plays an integral role when one tries to apply a "materialistic philosophy" in the real world of running a government.  By "materialistic philosophy," Mises is referring to a doctrine that claims that "all human thoughts, ideas, judgments of value, and volitions [i.e., a choice or decision made by the will] are the product of physical, chemical and physiological processes going on in the human body" (Theory and History, 63).  Usually, a materialistic philosophy "declares that the only factors producing change are those that are accessible to investigation by the methods of the natural sciences (The Ultimate Foundation of Economic Science, 25).   Mises spends most of his time addressing a "quasi-materialistic doctrine" called the "Marxian dialectical materialism" (The Ultimate Foundation of Economic Science, 26).  The difference between a "pure" materialistic philosophy and the Marxian quasi-materialistic philosophy is over what we ascribe thinking, ideas, judgments of values, and volitions to.  In the pure materialistic philosophy, they are ascribed to physical, chemical and physiological processes.  In the Marxian version, "action and volition are ascribed to the material productive forces" (The Ultimate Foundation of Economic Science, 27).  What this means is that men do not think, do not form judgments of value, and do not act.  It means that "the production relations, the necessary effect of the prevailing stage of the material productive forces, are determining their ideas, volitions, and actions" (ibid).

For Mises, all of these materialistic and quasi-materialistic metaphysics involve creating a "God" (or a phantom as he calls it) who functions as a super-human entity.  This super-human entity ends up making all the choices, doing all the thinking, and performing all the acting.  Man no longer exists; he is being manipulated by something.  Man seems to be more like a puppet in these doctrines; someone or something is pulling all of the strings of the "puppet-man."  These metaphysical doctrines

must imply converting an inanimate factor into a quasi man and ascribing to it the power to think, to pass judgments of value, to choose ends, and to resort to means for the attainment of the ends chosen.  It must shift the specifically human faculty of acting to a nonhuman entity that it implicitly endows with human intelligence and discernment.  There is no way to eliminate from an analysis of the universe any reference to the mind.  Those who try it merely substitute a phantom of their own invention for reality.  (The Ultimate Foundation of Economic Science, 28)

And we are back to the "divine" or "super-human" entity once again trying to directing the course of human affairs.  Mises goes so far as to argue that the logical conclusion of this arrangement is tyranny.  It is the creation of a situation in which some men know the will of God while others do not.  If those who do not know the will of God do not conform they must be liquidated.  Mises writes that, under this doctrinal approach

the only way it can avoid a radical skepticism that does not have any means of sifting truth from falsehood in ideas is by distinguishing between "good" men, i.e., those who are equipped with the faculty of judging in conformity with the mysterious superhuman power that directs all affairs of the universe, and "bad" men, who lack this faculty.  It must consider as hopeless any attempts to change the opinions of the "bad" men by discursive reasoning and persuasion.  The only means to bring to an end the conflict of antagonistic ideas is to exterminate the "bad" men, i.e., the carriers of ideas that are different from those of the "good" men.  Thus, materialism ultimately engenders the same methods of dealing with dissent that tyrants used always and everywhere.  (The Ultimate Foundation of Economic Science, 29, emphasis mine)

What all of this sounds like to me is this:  X has idea A and Y has idea B, and idea A conflicts with idea B.  But how can this be?  How can our super-human force, our material productive forces, give off conflicting ideas?  If these material productive forces do all the thinking and acting then how can we have these conflicting ideas?  Shouldn't X have idea A and Y have idea A too?  Shouldn't our super-human force be consistent when it comes to implanting ideas into the minds of men?  Is X the "God-sent prophet" revealing to use the truth?  Is Y the "hell-born tempter" sent to deceive mankind?  Who is the legitimate leader and who is the devil incarnate  (Theory and History,109)?  All of this seems to boil down to one person claiming to have correctly discerned the message and therefore everybody else must either be a liar or must not have heard from our super-human force.  The person who does hear from the super-human force must then be telling the truth, and this person must be the legitimate leader.

From Mises's Theory and History and from his Ultimate Foundation of Economic Science, we have seen the operation of some sort of super-human entity or some sort of divinely-appointed leader who gets to direct the course of human affairs and gets to direct each and every individual.  Each human "being" seems to be reduced to the status of "puppet," i.e., a non-acting, non-thinking, non-choosing entity.  As you can tell, Mises's discussion is very abstract.  To bring this discussion a bit closer to the "concrete" level, I will take a look at Gustave de Molinari's treatment of this issue, which is found in his book The Production of Security.  I will then complete this blog with a very "concrete" look at the history of the Federal Reserve System.

Molinari, writing in 1849 France, discusses what he calls the Regime of Terror.  There are two variations on this theme:  the Divine Right of Kings and the Divine Right of Majorities.  


Mises's discussion above about philosophies of history and the materialistic philosophies seems to relate to the divine right of kings discussion found in Molinari's work.  Both involve invoking appeal to a mystical being that is going to direct and guide society and mankind.  Molinari speaks of how divine Providence (using the same language that Mises used) has appointed his representatives on earth to run society for him.

[Legislators] being the continuators of Providence on earth, they would have to be regarded as almost equal to God.... If you succeed in persuading the multitude that God himself has chosen certain men or certain races to give laws to society and to govern it, no one will dream of revolting against these appointees of Providence, and everything the government does will be accepted.  (The Production of Security, Chapter 9)

It seems to me that based on Mises and Molinari, we have somebody or some small group claiming to have heard the voice of God, the voice of Providence, the voice of the material productive forces, or whatever and nobody else is allowed to question this voice.  The voice has spoken.  The rest of you masses have only one function:  obey the leader.  The advantage here is simple:  how can anybody question the leader?  I object!  You are wrong Mr. Leader!  How do I go and investigate God?  Will God answer me from heaven with an answer?  Will the material productive forces shout out from heaven, "Neil, you are wrong?"  I don't think so.  There is no absolutely no way to verify what the leader says!  The leader could simply be making all of this stuff up!!!  And, in fact, this train of thought actually did happen.  According to Molinari (emphasis mine)

one fine day they took it into their heads to question and to reason, and in questioning, in reasoning, they discovered that their governors governed them no better than they, simple mortals out of communication with Providence, could have done themselves.  It was free inquiry that demonetized the fiction of divine right.  (The Production of Security, Chapter 9)

When the mystical divine right approach to directing society fell apart (i.e., obey use or be killed as a heretic), according to Molinari, the communist version of popular sovereignty was then tried.  This is the Divine Right of Majorities approach.  According to Molinari, the decisions of the majority must become the law; "the minority is obliged to submit to it."  "If there is no unanimity, if there is still dissension after the debate, the majority is in the right."  Just as the materialistic philosophy ends with the liquidation of all dissenters, so too the sovereignty of the "people" ends with death to all non-conformists.  Molinari writes in chapter 10 of how the Regime of Terror  unleashed by the "sovereign people" leads to the guillotine (emphasis mine):

If anyone does not recognize the authority of those chosen by the people, say the theoreticians of the school of Rousseau, if he resists any decision whatsoever of the majority, let him be punished as an enemy of the sovereign people, let the guillotine perform justice.

In summary, we see various approaches to justify why a leader should be allowed to "direct" society.  The philosophy of history approach basically says:  the book of prophecy says that things will be this way.  What you see right now is inevitable; therefore, there is no reason for you to rebel.  The materialistic philosophies say to the people:  you can't think; you can't act; you can't choose.  Something else is doing all of that for us.  I the leader am the only one who hears the voice of this super-human force or I am the only one who can interpret it correctly.  Therefore, all the rest of you should obey my commands.  I am necessarily right; the masses are necessarily wrong.  Finally, the divine right of majorities is saying, the majority is right, because the majority is capable of discovering the "right laws."  All dissenters must obey.  In sum:  the leader is right because whatever he is doing was preordained.  The leader is right because he is following the material productive forces; these forces told him what to do.  The leader is right because he has the majority votes behind him.

Justifying the "Directing" of Society:  The Case of the Federal Reserve

One book that looks at the history of the Federal Reserve is called Secrets of the Temple:  How the Federal Reserve Runs the Country.  I find the title to be revealing.  The Federal Reserve is viewed as a "temple," which implies that maybe something similar to the "divine right of kings" is at work.  Except instead of calling themselves kings, the leaders of the Federal Reserve "temple" are all technocratic bureaucrats.  

The people, the masses of ordinary citizens "were incompetent to govern" (Secrets of the Temple 285) and so "a new ethic was born--faith in the technocratic approach to government" (ibid).  "Decisions on great public issues that were once left to politics should be consigned to disinterested experts, bureaucratic technicians who had specialized training" (284).  Notice how the "divine right of the majority" is no longer at work with our Federal Reserve System; the framers of this system do not want any public input at all--at least not directly into the operation of the Fed itself.  It seems as if what has happened here is that the technocratic bureaucrats are just emulating the old divine right of kings approach in order to justify why they get to make all the decisions.  Or, to be even more arrogant, to make the "right decisions" for society.  "The managers must occasionally ignore public opinion in order to make correct decisions" (Secrets of the Temple 284).  Instead of hearing the "voice of God" or the "voice of the material productive forces" or "read the prophecies of fortune," these temple-dwelling technocrats have heard the "voice of banking and business data" (ibid, 285).  The book of prophecy that was at the heart of the "philosophy of history" is now the collection of statistical data, i.e., the business and economic statistics filling up computer databases.  The masses are now supposed to worship the "divine right of the statistical model," i.e., the interpretation of the database interpreted by our "high priests" a.k.a. the technocratic bureaucrats at the Federal Reserve.  The "high priests" are no longer interpreting the book of prophecy; they are now interpreting the statistical models that come out of the databases.  Just as one is not supposed to question the representatives of God, so too one is not supposed to question the representatives of the divine statistical model.

These technocratic bureaucrats at the Federal Reserve--the modern day high priests--played an important role in helping out "God," i.e., the power elite masters.  Rothbard summarized all of this so brilliantly when he writes (emphasis mine)

To achieve a regime of big government and government control, power elites [our modern day Gods; "the Prophecy," "Providence," "the material productive forces"] cannot achieve their goal of privilege through statism without the vital legitimizing support of the supposedly disinterested experts and the professoriat [the representatives of God on earth; God's ambassadors; the high priests; the Federal Reserve technocratic bureaucrats].  (The Origins of the Federal Reserve, Section 10)

Concluding Remarks

I called this blog "The Fatal Conceit" and started with Hayek's book by the same name because I wanted to say that the idea that anyone can direct society has got to be the most "fanciful notion" ever conceived.  What I wanted to say is that every time some leader comes along and says:  here I am to direct society--do what I say, he has to always come up with some sort of "fanciful notion" in order to justify what he is doing.  Do what I say because it is written in the prophecy--yeah, the prophecy that the "leader" wrote up the night before, which conveniently makes him the leader!  I, your leader am the only one who knows how to properly  judge in accordance with the will of the material productive forces.  I have no way of knowing what is going on inside the minds of the masses, but that is irrelevant!  I am a "good" person; you are all "bad" people.  I am right; you are wrong.  If you don't obey me, you will die!  My technocratic bureaucrats have figured out the "right" answer, so you must submit to my technical expertise.  In all of these situations we see the same thing over and over again:  the masses are too stupid to make any decisions; I the leader will do all the thinking for you.  I think; you obey or die.  In order to get the masses to go along with this tyranny, the leader then has to invent some ridiculous story in order to justify what is happening.  These ridiculous stories are what I consider to be "the fatal conceit."

The Function of the Capitalist

In the Introduction to the Second edition of Murray N. Rothbard's Man, Economy, and State with Power and Market, a brief description is given of the vital role played by the capitalist in overcoming the temporal [time] issue raised by having a multi-state production process.

Let's begin with the quotation (all emphasis is mine):

The function of the capitalist is to relieve the factor owners [i.e., the land owners and the labor owners] of the burden of waiting for income, as he advances them present money payments from his accumulated savings for the joint product of their labor and land services.  In exchange for the present wages and rents, the capitalist receives an interest return on his invested funds, which is based on time preference and reflects the value discount of the anticipated future monetary revenues he will be receiving relative to the present money payments he expends on the factor services.

Conversely, the factor owners [the land owners and the labor owners] agree to this deduction from the full-sale proceeds of their product that is embodied in their discounted wage and rent payments from the capitalist, because the present payments unshackle them from the temporal dimension of the production process.  

When I first read this yesterday, it reminded me of a typical time-value of money problem that would be taught to undergraduates in an introductory-level finance course.  So let me first interpret the quotation above in light of elementary undergraduate business finance.  Then I will try to answer the "so what does all of this mean" question, i.e., what is the importance or relevance of having capitalists in an economy.


Basically, in the first part I will provide a mathematical or technical explanation of what I think is going on here.  Then, I will give a verbal or qualitative explanation of what I think is going on in the quotation above.  I think that the latter explanation will be more meaningful to most of my readers.

Let us pretend that we are analyzing this problem from the point of view of the capitalist.  Normally, in finance we use positive numbers in order to denote the receipt of cash.  Conversely, we use negative numbers in order to denote the payment of cash.  Let us further assume that the production process begins today, at time 0, and that the production process ends at time 1, i.e., with the sale of the final end product to the consumer.  Let's assume that the gap of time between 0 and 1 conveniently works out to 1 year in time.

What this problem seems to boil down to is a situation in which the net present value of the "project" equals 0.  I suppose we could conclude, from a technical perspective, that the function of the capitalist is to set up and see through to completion this zero net present value project.

The production process begins today, at time 0.  Let's say that the capitalist pays the land owners $50, and let's say that the capitalist pays the laborers $40.  In other words, the capitalist pays out $90 today in order to buy these productive services.  This would be, for the capitalist, viewed as -$90 since it is a cash outflow today, at time 0.  Obviously, I am oversimplifying here.  Normally, labor would be paid weekly or bi-weekly, not in one big gigantic lump sum at the beginning of the project, i.e., one big annual payment at the start of the year.  I do this in order to simplify the mathematics.  One could, of course, set this up with weekly cash payments to the labor and land owners if one wanted to.  Then there would be 52 payments that would have to be discounted.  Moreover, there is a formulaic way of solving this problem; however, I am trying to avoid this computational issue.

Now, one year later, at time 1, the production process is finished.  What this means is that we have transformed the labor and land factors into a final consumer good.  So for example, we have transformed the labor services of authors and the land services of tree harvesters and paper producers into a book.  The book is sold, and the capitalist receives the cash inflow of +$100.

To summarize, the capitalist (the saver really) advanced $90 to the labor and land owners today, at time 0.  The capitalist then receives $100 one year from now, when the book is sold to the final consumer, at time 1.

Such an arrangement seems to imply that the interest rate is 11.11%.  I solved for the implicit interest rate by setting up the following equation:

90*(1 + i) = 100

And I solved for i, the interest rate.

The cash flows then are as follows (again, from the point of view of the capitalist):

Time 0:  -$90 to the land and labor owners
Time 1:  +$100 from the consumer who purchased the book (the final consumer good)

However, if we take the +$100 at time 1 and discount it back to time 0, it will become, because the rate of interest is 11.11%, +$90.

So, we now have, at time 0, -$90 (the payment to the land and labor owners) and a +$90 from the discounted value of the book sale (the actual book sale happens one year from now but I have discounted that cash flow back to time 0).  The -$90 and +$90 at time 0 obviously "wash out" to zero (i.e., cash inflow of $90 and cash outflow of $90 leaves one with $0).  This would imply a net present value of zero for this project.

This is how I have interpreted this introductory explanation from Rothbard's Second Edition of Man, Economy, and State with Power and Market.  As I read more of the book, I will be able to see if I have interpreted the introduction correctly or incorrectly.  Maybe I have missed something, which would allow for a more nuanced explanation in the future.  Regardless of what happens, I have tried to be faithful in my presentation of Rothbard's work (technically this introduction was written by Joseph T. Salerno).

This leads us to the ultimate question:  what then is the function of the capitalist?  From the above, we could answer using very textbook like language:  the capitalist's function is to initiate a zero net present value project.  The capitalist is just breaking even on his investment project, in this case, his book producing and selling business venture.  By advancing his savings today to the land and labor owners, the capitalist is effectively initiating the entire production process.  Now the labor and land owners can buy food and shelter (and other things) in order to stay alive!  This is obviously advantageous for the labor and land owners because now they don't have to sit around for one year slowly starving to death while waiting for the book to be produced and sold one year from now, at time 1.  Instead, they can eat tonight, at time 0.  This benefits the land and labor owners.  The capitalist's function is to first save money and then to advance those savings to the labor and land owners in order to launch a time consuming production process, in this case a one year long process.  The time consuming production process that the capitalist launches has broader implications for the welfare of society (thinking in terms of the standard of living for the masses of people).  To see this linking of the capitalist/saver, the longer-production process, and the higher standards of living for the masses, a look at the ideas of Eugen von Böhm-Bawerk is in order.

Commenting on the ideas of Eugen von Böhm-Bawerk in 1963 was Ludwig von Mises, in an article entitled The Economic Role of Saving and Capital Goods.  In this paper, Mises stresses that without this "capitalistic" method to production, civilization as we know it would simply not exist.

All material civilization is based upon this "capitalistic" approach to the problems of production.

Mises then stresses why these longer and more complex production processes are so vitally important to the welfare of the average man.  He mentions a term called "roundabout methods of production," which just means the capitalistic means of production, i.e., first we produce capital goods, then with the help of these capital goods, we produce the final consumer goods.  But where do the capital goods come from, the capital goods that get the ball rolling so to speak in our production process?  They capital goods come from saving and the saving comes from the capitalist.  And so, we see again that the capitalist plays an integral role in launching the entire production process.  To elaborate on these observations, Mises writes (all emphasis is mine):

Capital goods come into existence by saving...."Roundabout methods of production," as Böhm-Bawerk called them, are chosen because they generate a higher output per unit of input.  Early man lived from hand to mouth.  Civilized man produces tools and intermediary products [these are more specific examples of capital goods] in the pursuit of long-range designs that finally bring forth results which direct, less time-consuming methods could never have attained, or could have attained only with an incomparably higher expenditure of labor and material factors.

Finally, these longer, more complex production processes brought about initially by the capitalist/saver force the capitalists into the role of servants to the consumers.  The capitalists do NOT control the production process; the final consumer does. This makes sense.  For example, take our mathematical example above.  Suppose the capitalist ignores the consumers.  The consumers want condoms but our capitalist produces books.  What is going to happen?  The capitalist advances $90 to the land and labor owners today, at time 0.  Then, the capitalist brings the books to market one year later, in time 1.  But the consumers don't want these books; the consumers want condoms.  So the price of the books will be very low, let's say +$2 at time 1.  The capitalist then has to discount the +$2 that he receives at time 1 back to time 0 in order to compute the net present value on this project.  Using the 11.11% interest rate, the +$2 becomes +$.1.80 at time 0.  So the net present value at time 0 is -$90 (the land and labor cash outflow) +$1.80 (the discounted revenue from the sale of the unwanted books), which works out to -$88.20.  The capitalist has a negative net present value, which means that he should not be engaged in this project.  He has wasted his savings on this project.  He should have listened to his customers and produced what they wanted--and the consumers signal their desires by offering higher prices for the things they want more urgently.

Continuing with the same paper from Mises (emphasis mine):

In order to attend to the orders received from the consumers, their real bosses, the capitalists must either themselves proceed to investment and the conduct of business or, if they are not prepared for such entrepreneurial activity or distrust their own abilities, hand over their funds to men who they consider as better fitted for such a function.  Whatever alternative they may choose, the supremacy of the consumers remains intact.  

In conclusion, we see that a wealthy civilization with a relatively high standard of living depends upon the existence of long and complex production processes, not simple and direct ones.   To get these longer and more complex production processes, we need capitalists/savers because the savings can then be turned into capital goods, and the capital goods eventually are turned into consumer goods.  The savers/capitalists launch this entire process, which enriches society by producing more consumer goods than could be produced without this process, by advancing funds to the owners of land and to the owners of labor.  These land and labor factors can then be transformed into capital goods and eventually into consumer goods.  The land and labor owners don't have to wait for this entire process to be completed in order to get paid--the capitalist advances them the money before the final consumer good is sold.  The difference between the wages and rent paid today and the future sales price of the final good is the interest return earned by the capitalist.  The most important point here is that more consumer goods are being produced.  This means that overall, the standard of living is rising--and this is a very good thing indeed.

Secession As A Way to End the State

With this statement Mises had 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...once 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.

Recently, I have become rather intrigued by the idea of "secession."  When I say secession, and even when Hoppe says secession, neither of us means repeat the 1860s.  The strategy used by the Confederate States of America didn't work, and this same approach to secession should not be tried again.  What is meant by secession now is to first change the minds of individuals.  Secession begins as an ideological war.  It is about getting people to see that democratic institutions, in fact all government institutions, are illegitimate.  No government has the right to claim legitimate consent because no government is voluntary.  Then, secession begins at the local level.  Towns, villages, small regions.  The idea of secession is to slowly destroy the state from within by creating hundreds of pockets of resistance.

I should also point out that secession, in the modern sense, has nothing to do with violence.  I abhor violence; I want to live in a society of voluntary cooperation.  Organized violence has its provenance in the state.  So a secessionist movement must never engage in violence--to do so would be hypocritical.  You can't say:  I want to set up a peaceful voluntary society and then go about launching wars of aggression to get it.  A consistent philosophy of secession then says that the means and the ends must both be non-violent and non-invasive.  

Linking 16th Century French Political Philosophy and Modern Monetary Theory

Obviously there is no need of fighting to overcome this single tyrant, for he is automatically defeated if the country refuses consent to its own enslavement.  --Etienne de la Boetie, The Politics of Obedience:  The Discourse of Voluntary Servitude, 44

Etienne de la Boetie, the famous French political philosopher of the 16th century who is still greatly admired as the founding father of Western libertarian thought, writes that all governments, including tyrannies, fall if the people withdraw their consent.  In fact, this idea was restated by David Hume who said in  his famous Essays, Moral, Political, and Literary (volume 1 of Essays and Treatises on Several Subjects in Two Volumes, 29) that

nothing appears more surprising to those, who consider human affairs with a philosophical eye, than the easiness with which the many are governed by the few; and the implicit submission, with which men resign their own sentiments and passions to those of their rulers.  When we enquire by what means this wonder is effected, we shall find, that, as force is always on the side of the governed, the governors have nothing to support them but opinion.  It is, therefore, on opinion only that government is founded.  (emphasis mine)

After I read la Boetie's discourse, I attempted to interpret what he really meant by his plan for the masses of common men and women to "withdraw their consent."  From Rothbard's introduction to la Boetie's discourse, the direct lived experience of la Boetie was a religious conflict in France between the Protestants and the Catholics.  Rothbard also used examples of towns in America going on a "tax strike," meaning that all the people in the town refused to pay their local taxes.  By refusing to pay their taxes, the people put pressure on the local government to change the government's policies and budget to something that the people would accept.  Rothbard also mentions a number of later anarchist writers who adopted and extended la Boetie's initial argument.  Finally, Rothbard mentions how la Boetie influenced Gandhi implying that la Boetie's book serves as a blue-print for non-violent civil disobedience movements.

When I initially tried to interpret la Boetie's discourse, I focused on the fraudulent nature of "property rights" under a feudal tyranny.  The people kept sending resources to the tyrant; to withdraw their consent, the people should cut off the resources they allow the tyrant to take from them.  The people consented to this ongoing wealth transfer.  Some of the quotations that led me to focus on a "consent to property theft must be withdrawn by the masses" explanation of what la Boetie really meant shall be explored next.

For example, in Hans-Hermann Hoppe's A Theory of Socialism and Capitalism, we see a tendency for the people to want to run away to the towns set up by the merchants.  These towns are attempting to operate outside of the feudal system.  Hoppe writes that

in order to escape this threat the merchants were forced to organize themselves and help establish small fortified trading places at the very fringes of the centers of feudal power. As places of partial exterritoriality and at least partial freedom, they soon attracted growing numbers of the peasantry running away from feudal exploitation and economic misery, and they grew into small towns, fostering the development of crafts and productive enterprises which could not have emerged in the surroundings of exploitation and legal instability characteristic of the feudal order itself.  (85)

The economic exploitation aspect of the feudal system was stressed by la Boetie himself when he writes that

you sow your crops in order that he may ravage them, you install and furnish your homes to give him goods to pillage; you rear your daughters that he may gratify his lust; you bring up your children in order that he may confer upon them the greatest privilege he knows--to be led into his battles, to be delivered to butchery, to be made the servants of his greed and the instruments of his vengeance; you yield your bodies unto hard labor in order that he may indulge in his delights and wallow in his filthy pleasures; you weaken yourselves in order to make him the stronger and the mightier to hold you in check. (46-47)

My basic assumption was this:  la Boetie's model is similar to the explanation given on the movie Jaws regarding how to get rid of a shark.  In the movie, the oceanographic institute representative says that you can either kill the shark or you can starve it.  If you starve it, if you cut off its food supply, then the shark will leave the area looking for an area that will provide the shark with more food.  Similarly, it seems as if la Boetie wants the people to cut off the tyrant's "food supply."  Stop consenting to his pillaging of your farms!  Stop consenting to the conscription of your children, therefore cutting off his supply of troops, and so on.  Don't consent to the resources transfer from you to the tyrant!  Furthermore, from Hoppe's quote, the people could "exercise" their "withdrawal of consent" by using their feet and physically moving themselves to one of the relatively free towns set up by the merchants.

However, from my recent reading of Murray N. Rothbard's book The Mystery of Banking, I am starting to wonder if maybe my initial interpretation of la Boetie's discourse is incomplete.  Rothbard provides in his book a sketch of the process by which kings and governments gradually manipulate the people to give their consent to an arbitrary fiat money system.  In Rothbard's historical sketch, we begin with a story about how nobody will accept fiat paper money.  In the beginning, people will only accept "real money," i.e., gold or silver coin.  Then we see a gradual process by which people are slowly but surely encouraged to use the metallic coins less and less in their daily transactions.  So maybe early on the government will issue paper money but promise to make it fully redeemable in gold or silver coin.  Then later we start to see numerous attempts to make the paper money irredeemable in either gold or silver.  Propaganda campaigns are launched to demonize the use of gold and silver coin in daily transactions.  Moreover, temporary "war measures" that "suspend redemption temporarily" are part of the "training process," i.e., the process to slowly teach people to use irredeemable paper notes.  All of this has me wondering:  did la Boetie also intend his discourse to be a warning against the use of paper fiat money?  Since Rothbard's historical sketch is all about the "government" trying to get people to give their consent to irredeemable paper money and to get people to withdraw their consent to using gold and silver coin in their daily transactions, then maybe la Boetie also meant to warn the people that they should NOT CONSENT to the tyrant's plan to substitute irredeemable paper money for gold and silver coin.  In other words, maybe la Boetie saw an attempt by tyrants to get rid of silver and gold coin; la Boetie's response was that the people should not consent to this transition from metal to paper money.

It is easy to demonstrate that la Boetie wanted people to withdraw their consent from the tyranny.  Moreover, it is easy to find many examples in la Boetie's book about how the tyrants try to "engineer consent."  The laundry list of tricks used by tyrants in order to "get consent" is rather extensive and includes things such as:  manipulating religion, feasts, bribery, "it is all in the common good," and so on. La Boetie also criticizes the people for not declaring self-ownership, i.e., ownership over their own bodies.  La Boetie writes that

still men accept servility in order to acquire wealth; as if they could acquire anything of their own when they cannot even assert that they belong to themselves, or as if anyone could possess under a tyrant a single thing in his own name. Yet they act as if their wealth really belonged to them, and forget that it is they themselves who give the ruler the power to deprive everybody of everything, leaving nothing that anyone can identify as belonging to somebody. (74-75, emphasis mine)

So it is clear to me that la Boetie was concerned about the exploitation of property by the tyrant. People were giving their consent to a gigantic plundering operation because the tyrant was plundering not only the physical possessions of the masses but also the actual bodies of the masses.  Since money is also private property and since la Boetie was concerned about the fact that the masses were consenting to the robbery of their property (including their bodies), then maybe la Boetie's treatise can be interpreted as a warning against consenting to irredeemable paper money.  Maybe la Boetie is trying to warn people:  you need to stop consenting to the robbing of your body, stop consenting to the robbing of your physical property (e.g., the produce grown on your farm) and STOP CONSENTING TO THE ROBBING OF YOUR MONEY'S PURCHASING POWER THAT INEVITABLY WILL HAPPEN WHEN IRREDEEMABLE PAPER MONEY IS ADOPTED (i.e., the irredeemable paper money will permit unchecked inflation and the destruction of your real cash balances)!  I am still in the speculation stage of my thinking; I just noticed that Rothbard's historical sketch was full of key ideas stressed by la Boetie.  In Rothbard's historical sketch about how governments try to get people to stop consenting to the use of gold and silver coin and about how governments try to get people to consent to the use of irredeemable paper money instead, the governments are continually trying to get people to develop bad habits so that they will consent to their own enslavement.  Rothbard stresses ideas such as the "habituation to tyranny" and "consent to one's own enslavement." Since the exact same ideas (consent, habituation etc.) were also stressed in la Boetie's discourse, I began thinking that maybe la Boetie's treatise has a monetary theory dimension to it.  I began to think to myself, Rothbard's account sounds eerily similar to la Boetie's in terms of vocabulary used and in terms of underlying ideas.  Maybe a link exists between the two?

The Corporate Welfare Origins of the Environmental Movement

Meanwhile, the states moved in to compel cartellization and virtual socialization of the crude oil industry.  The oil-producing states enacted laws to enable governmental commissions to fix the maximum amount of oil produced, and this system is basically still in effect.  The state laws were enacted under the public guise of "conservation," which is a pat excuse for any compulsory monopoly or cartel in a natural resource. --Murray N. Rothbard, America's Great Depression, 5th edition, 283 (emphasis mine).

The origin of the environmental or "conservation" movement, (or today the term "sustainability" seems to be more popular) is in an anti-competition and pro-corporate welfare movement designed to protect the interests of the producers.  In Murray N. Rothbard's introductory quotation, the natural resource monopolists, who are getting their monopoly-privileges from favorable state laws, are using "environmentalism" and "conservationism" as an excuse for fixing production levels so that they can then increase their prices.  Rothbard's quote is a textbook example of how monopolies are deliberately formed through government interventionism.  This fact should be trivially obvious; in fact, back during the Great Depression Era these observations were fairly well-known.  In his 1944 masterpiece, the Nobel Prize winning economist F. A. Hayek observes that the deliberate formation of monopolies by government policy was commonplace.  Hayek writes that

anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development.  (93, emphasis mine)

This deliberate policy of government to create monopolies, which are meant to protect the vested interests of a handful of producers by protecting them for the effects of competition, is at the heart of Rothbard's introductory quotation.  The rational behind the "conservation" scheme in the oil industry has nothing to do with "saving the earth" or about "sustainability."  Instead, the real motivation is to raise the prices of oil in order to improve the profitability of the oil companies.  The "conservation movement" is simply a cover story for state created and state enforced (as we will see using coercive state power) corporate welfare:

In 1931, new oil discoveries in East Texas drove the price of crude down from one dollar a barrel to 2 1/2 cents a barrel, and cartelists and conservationists set up a hue and cry.  The lead was taken by Oklahoma's Governor "Alfalfa Bill" Murray, who ordered a general shutdown of the crude oil industry until the price of oil should rise to the "MINIMUM FAIR PRICE" of one dollar a barrel.  (Murray N. Rothbard, America's Great Depression, 5th ed., 283, emphasis mine).

The issue of ongoing "new oil discoveries leading to 'ruinous' competition for the existing established players" is an issue going back to the American Progressive Era.  As Gabriel Kolko notes in his study of the American Progressive Era entitled The Triumph of Conservatism:  A Reinterpretation of American History, 1900-1916, the new and independent oil companies were seriously attacking the dominant position of Standard Oil.  "In a spiralling market for oil," writes Kolko, "such as existed from the turn of the century on, Standard, conservative and technologically uncreative, was no match for the aggressive new competitors" (42).   Kolko's major thesis is that all voluntary attempts to cartelize a market will normally fail; consequently, the only effective way to establish a cartel is through the coercive power of the state.  Kolko summarizes his findings by writing that

voluntary agreements among corporations in the forms of pools and agreements of EVERY kind usually failed.  Consolidations and mergers were the next logical step, and also failed.  The proliferation of new competitors undermined the possibility of attaining economic rationalization, with profit, by voluntary economic means.  (56, emphasis mine)

Therefore, to establish a cartelized natural resource industry, the tools of state intervention and physical coercion were employed.  As Thomas J. DiLorenzo notes in his book How Capitalism Saved America:  The Untold History of Our Country, from the Pilgrims to the Present, the entire oil industry was deliberately cartelized by the National Industrial Relations Act or NIRA (June 16, 1933, see page 186) as well as almost every other industry in the United States.  Di Lorenzo writes that "the NIRA also cartelized the oil industry with a provision that created state 'control boards' to restrict the amount of oil sold in interstate and international commerce" (188).  To ensure legislative compliance, the oil producers got the help from the police state to enforce their "environmental conservation" movement.  Rothbard notes that in the oil industry, Oklahoma Governor "Alfalfa Bill" Murray "sent the Oklahoma National Guard into the oil fields to enforce his decree with bayonets" (Murray N. Rothbard, America's Great Depression, 5th ed., 283, emphasis is mine).

Using the "environmental protection" line as a cover story for a policy of deliberate corporate welfare is not limited to the oil industry.  In fact, the American Progressive Era is full of examples of most industries crying "save the environment" so that they could line their own pockets with federal taxpayer dollars.  Thomas Di Lorenzo, in his book entitled Hamilton's Curse:  How Jefferson's Archenemy Betrayed the American Revolution--and What It Means for America Today, notes that the loudest environmentalists are usually the biggest supporters of corporate welfare and cartelization of industries.  Di Lorenzo writes that

Teddy Roosevelt was a "progressive era" president (and admirer of Hamilton) who is credited with being a great environmentalist for having nationalized thousands of acres of land and built dams and other "conservation" projects with taxpayer dollars.  But this, too, was a form of NEO-HAMILTONIAN CORPORATE WELFARE.  Mining, farming, timber, and other interests lobbied for these programs because they would be enriched with "free" dams and irrigation, waterway improvements, cheap, subsidized water (mostly for agriculture), cheap timber lands (leased for next to nothing from the government), and cheap access to grazing lands.  (142-143, all emphasis is mine)

One could go on and on with examples but the point remains:  ENVIRONMENTALISM IS JUST A "SOCIALLY RESPONSIBLE" WAY OF SNEAKING THROUGH CORPORATE WELFARE PROGRAMS.  Environmentalism manipulates people by playing on their sense of "trying to do the 'right thing' for the 'common good.'"  However, this is actually just one of the oldest tricks in the book for tyrants to manipulate the mob.  In fact, Etienne de la Boetie mentions this "oh but we in the government are doing the common good" trick in his 16th century discourse on tyranny.  The rhetoric about saving the environment is just the cover story for getting the public to go along with these neo-Hamiltonian corporate welfare schemes i.e., the big federal government must subsidize big businesses and the federal government must protect big businesses from competition because competition has a strong tendency to progressively lower prices.  No justification exists for corporate welfare; consumers who want products will pay for them and make the producers of the desired (desired by the consumers' based on the consumers' value judgments) goods profitable.  Finally, there is no such thing as a "fair price" imposed by government decree and enforced by the National Guard armed with bayonets.  Fairness of price can only be determined by the voluntary agreement of the buyer and the seller.  It should be obvious now that the "environmental conservation" movement uses patently unfair methods to achieve its patently unfair goal.  The assumption that the "environmentalists" are somehow taking the "moral high ground" in debates is, I think, a false assumption.