Economics/Class Relations

Paul Marks in Defense of the Merchant and Trader Class

By Paul Marks

Libertarian Alliance

Well there is only one form of economics – as Ludwig Von Mises makes plain in “Human Action” and other works. Economics shows that different policies, different “social systems” if you like, have different results – but they do not have different economics, any more than different “races” or “historical periods” do. In the end there is no “right and left”, just right and wrong – truth and error.

There is no libertarian reason why various forms of communes (religious or atheist) should not be allowed to exist – indeed even if they collapse the people in them can still perform useful tasks. For example the people from the failed Owenite community near where Dallas now stands helped create the city in its early days.

As for specific economic fallacies – well the only interesting thing about them is that no matter how many times the are refuted they keep coming back. I do not believe that bring back long refuted economic fallacies deserve any thinks (rather the contrary), but such people exist – and one must, therefore, oppose them (again and again and again), such is life. The only true peace is death – and even that may not be peaceful (we do not know).

For example the Labour Theory of Value (the basis for the “exploitation” theory) was refuted many times even whilst David Ricardo and James Mill were still alive (and not just by foreign writers – Richard Whately and Samuel Bailey were British). But it had to be refuted all over again by Carl Menger and so on.

The “land question” of Henry George and co really goes back to the economics of David Ricardo – it was refuted by Frank Fetter (amongst others) more than a century ago, but it keeps coming back and keeps needing to be dealt with (again – such is life), because some people envy (convert) the land of others (whether individuals or private organisations such as Churches) and look for intellectual excuses to either the tax the land or just take it.

Relative (I stress – relative) security of large scale landholdings has been the defining feature of Western Civilisation since at least the French Edict of Q in 877 AD – as opposed to “Oriental Despotism” (Islamic or other) where the ruler make take the land “for fair distribution”. But it still has to be defended – evil never sleeps and one just has to get used to eternal war against those who wish to destroy large scale land holdings.

One also (again and again) comes upon claims that limited liability (of clubs, societies, fraternities, trading companies, churches – and on and on) was the “invention of the state” – so one points out (again and again) that it was actually developed by private Law Merchant and Church Canon Law (often used in commercial matters) as long ago as the Middle Ages.

That does not mean that people should be forbidden to, for example, buy insurance from unlimited liability “Lloyds Names” or whatever (if they are willing to pay the expensive prices that people will demand for risking everything), any more than people should be forbidden to form communes (whether they call it “syndicalism” or whatever) as long as they are not subsidised by the state (as Israeli ones were up to the mid 1970s – in spite of the subsidies they still did not attract more than 5% of the population).

And, of course, there is the eternal “fools gold” of credit expansion – of lending out money that no one really saved (lending without the equal sacrifice of consumption – i.e. real saving).

Once this fallacy was the province of the “monetary cranks” refuted by the Classical economists (again and again), even David Ricardo and Karl Marx refuted (and mocked) what we would not call “Keynesianism” (long before Keynes was born) – but the classic refutation is by J. B. Say (hence “Say’s Law” – which Keynes misstates and then pretends to refute).

Whether Henry Hazlitt and W.H. Hutt in the 1950s or people such as Hunter Lewis (“Where Keynes Went Wrong”) in modern times, the expand-credit argument has to be defeated – again and again. And, no, it does not really help if one hand out the money to “the people” directly – rather than via the banking system.

Lastly on “Plutocracy”.

Most government spending (government spending is now almost half the entire economy in many countries) in Western nations is on the Welfare States – and these Welfare States were not created to please big business or in response to “problems” created by “big business” – the creation of the Welfare States was basically an IDEOLOGICAL development and their expansion (for example the explosion of the American Welfare State since the mid 1960s) is largely a matter of internal dynamics and the vast social (cultural) harm they do. The collapse of the family and so on is not a plot of “the capitalists” and it is not a unintended side effect of “capitalism” either.

It is also unlikely that most (although, yes, there are some who do like it) American “capitalists” like a situation where “the rich” provide a higher share of Federal government revenue than ever before, and where “big business” is so highly taxed and regulated that companies are moving out of the United States.

About the only real element of truth in the government-helps-the-rich argument is the that the expansion of the credit money supply does indeed tend to benefit the rich at the expense of the poor – that has been the story of most of Latin America for more than a hundred years, and Richard Cantillon noted this effect of boom-bust-ism as long ago as the 1700s. However, Keynes was no friend of “the rich” and neither are Keynesians such as the vile Krugman and Stiglitz now, helping the rich is not the intention of their monetary policy (although it is the effect – at least for some rich people, the rich who are more involved in financial dealing than they are in enterprises that produce physical goods). Also it is odd for “anti capitalist” “anarchists” to denounce the policy of low (or no) interest rates and general credit money expansion (lending that is not 100% from real saving) – as, historically, this is their own policy (indeed as far back as the 19th century they were suggesting it – in various forms).

The true nature of government regulation is best summed up by the ALCO case, where American Supreme Court “Justice” Learned Hand said the following, about the aluminium company he was attacking with “Anti Trust” doctrine…..

“It was not inevitable that it [ALCOA] should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organisation, having the advantage of experience, trade connections and the elite of personal”.

Well there you have it – as with Standard Oil of old, cutting prices and provide higher quality products is some sort of “crime” (at least according to Progressives and their statutes). G. Kolko (assuming this socialist was really sincere – which I do not think he was) was wrong – government regulation does not tend to be benefit “big business”. On the contrary government regulation tends to harm the productive, the hard working and the innovative (whether the enterprises are small or big) – Progressive “law” turns virtues (such as hard work and innovation) into some sort of “crime”.

To the government someone like Jon Huntsman (senior) must be some sort of sordid fellow – after all he did not know his place in life (born in a “house” made of cardboard), how DARE he build up a vast industrial enterprise…….

It was different all the way back with Plato – producers and traders were sordid fellows they had no real rights (“producers and traders” did not have real liberty rights even to Mr John Stuart Mill – see my recent post on this person at the “Counting Cats” blog).

Old points I know (but then everything has to be repeated – eternally), it was old, but true, long before someone like Dominick Armentano, or even Ayn Rand.

People such as J.J. Hill (of the Great Northern railroad) knew the truth more than a century ago – government may give to a productive enterprise with one hand, but it will take from that enterprise with two hands.

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