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  1. Mises and the Renaissance of Austrian Economics

    Presented at Hillsdale College's Conference Commemorating the Centenary of the Birth of Ludwig von Miseson September 10, 1981.

    Special thanks to Bettina Bien Greaves for making this important audio recording available.

  2. Marxist Dreams and Soviet Realities

    The sharp contrast that Alexis de Tocqueville drew in 1835 between the United States and Tsarist Russia—"the principle of the former is freedom; of the latter, servitude"1—became much sharper after 1917, when the Russian Empire was transformed into the Soviet Union.

    Like the United States, the Soviet Union is a nation founded on a distinct ideology. In the case of America, the ideology was fundamentally Lockean liberalism; its best expressions are the Declaration of Independence and the Bill of Rights of the US Constitution. The Ninth Amendment, in particular, breathes the spirit of the worldview of late eighteenth-century America.2 The Founders believed that there exist natural, individual rights that, taken together, constitute a moral framework for political life. Translated into law, this framework defines the social space within which men voluntarily interact; it allows for the spontaneous coordination and ongoing mutual adjustment of the various plans that the members of society form to guide and fill their lives.

    The Soviet Union was founded on a very different ideology, Marxism, as understood and interpreted by V. I. Lenin. Marxism, with its roots in Hegelian philosophy, was a quite conscious revolt against the individual rights doctrine of the previous century. The leaders of the Bolshevik party (which changed its name to Communist in 1918) were virtually all revolutionary intellectuals, in accordance with the strategy set forth by Lenin in his 1902 work What Is to Be Done?3 They were avid students of the works of Marx and Engels published in their lifetimes or shortly thereafter and known to the theoreticians of the Second International. The Bolshevik leaders viewed themselves as the executors of the Marxist program, as those whom History had called upon to realize the apocalyptic transition to Communist society foretold by the founders of their faith.

    The aim they inherited from Marx and Engels was nothing less than the final realization of human freedom and the end of the "prehistory" of the human race. Theirs was the Promethean dream of the rehabilitation of Man and his conquest of his rightful place as master of the world and lord of creation.

    Building on the work of Michael Polanyi and Ludwig von Mises, Paul Craig Roberts has demonstrated—in books that deserve to be much better known than they are, since they provide an important key to the history of the twentieth century4— the meaning of freedom in Marxism. It lies in the abolition of alienation, i.e., of commodity production, production for the market. For Marx and Engels, the market represents not merely the arena of capitalist exploitation but, more fundamentally, a systematic insult to the dignity of Man. Through it, the consequences of Man's action escape from his control and turn on him in malign ways. Thus, the insight that market processes generate results that were no part of anyone's intention becomes, for Marxism, the very reason to condemn them. As Marx wrote of the stage of Communist society before the total disappearance of scarcity,

    freedom in this field can consist only in socialized man, the associated producers, rationally regulating their interchange with Nature, bringing it under their common control, instead of being ruled by it as by the blind forces of Nature.5

    The point is made most clearly by Engels:

    With the seizure of the means of production by society, production of commodities is done away with, and with it the dominion of the product over the producers. Anarchy of social production is replaced by conscious organization according to plan. The whole sphere of the conditions of life which surround men, which ruled men up until now comes under the dominion and conscious control of men, who become for the first time the real, conscious lords of nature, because and in that they become master of their own social organization. The laws of their own social activity, which confronted them until this point as alien laws of nature, controlling them, then are applied by men with full understanding, and so mastered by them. Only from then on will men make their history themselves in full consciousness; only from then on will the social causes they set in motion have in the main and in constantly increasing proportion, also the results intended by them. It is the leap of mankind from the realm of necessity to the realm of freedom.6

    Thus, Man's freedom would be expressed in the total control exercised by the associated producers in planning the economy and, with it, all of social life. No longer would the unintended consequences of Man's actions bring disaster and despair—there would be no such consequences. Man would determine his own fate. Left unexplained was how millions upon millions of separate individuals could be expected to act with one mind and one will—could suddenly become "Man"—especially since it was alleged that the state, the indispensable engine of coercion, would wither away.

    Already in Marx and Engels's day—decades before the establishment of the Soviet state—there were some with a shrewd idea of just who it was that would assume the title role when the time came to perform the heroic melodrama Man Creates His Own Destiny. The most celebrated of Marx's early critics was the Russian anarchist Michael Bakunin, for whom Marx was "the Bismarck of socialism" and who warned that Marxism was a doctrine ideally fitted to function as the ideology—in the Marxist sense: the systematic rationalization and obfuscation—of the power urges of revolutionary intellectuals. It would lead, Bakunin warned, to the creation of "a new class," which would establish "the most aristocratic, despotic, arrogant, and contemptuous of all regimes"7 and entrench its control over the producing classes of society. Bakunin's analysis was extended and elaborated by the Pole Waclaw Machajski.8

    Despite this analysis—or perhaps as a confirmation of it—the Marxist vision came to inspire generations of intellectuals in Europe and even in America. In the course of the vast, senseless carnage that was the First World War, the Tsarist Empire collapsed and the immense Imperial Russian Army was fragmented into atoms. A small group of Marxist intellectuals seized power. What could be more natural than that, once in power, they should try to bring into being the vision that was their whole purpose and aim? The problem was that the audacity of their dream was matched only by the depth of their economic ignorance.

    In August 1917—three months before he took power—this is how Lenin, in State and Revolution, characterized the skills needed to run a national economy in the "first phase" of Communism, the one he and his associates were about to embark upon:

    The accounting and control necessary for this have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic.9

    Nikolai Bukharin, a leading "Old Bolshevik," in 1919 wrote, together with Evgeny Preobrazhensky, one of the most widely read Bolshevik texts. It was The ABC of Communism, a work that went through eighteen Soviet editions and was translated into twenty languages. Bukharin and Preobrazhensky "were regarded as the Party's two ablest economists."10 According to them, Communist society is, in the first place, "an organized society," based on a detailed, precisely calculated plan, which includes the "assignment" of labor to the various branches of production. As for distribution, according to these eminent Bolshevik economists, all products will be delivered to communal warehouses, and the members of society will draw them out in accordance with their self-defined needs.11

    Favorable mentions of Bukharin in the Soviet press are now taken to be exciting signs of the glories of glasnost, and in his speech of November 2, 1987, Mikhail Gorbachev partially rehabilitated him.12 It should be remembered that Bukharin is the man who wrote, "We shall proceed to a standardization of the intellectuals; we shall manufacture them as in a factory"13 and who stated, in justification of Leninist tyranny:

    Proletarian coercion, in all its forms, from executions to forced labor, is, paradoxical as it may sound, the method of molding communist humanity out of the human material of the capitalist period.14

    The shaping of the "human material" at their disposal into something higher—the manufacture of the New Soviet Man, Homo sovieticus—was essential to their vision of all the millions of individuals in society acting together, with one mind and one will,15 and it was shared by all the Communist leaders. It was to this end, for instance, that Lilina, Zinoviev's wife, spoke out for the "nationalization" of children, in order to mold them into good Communists.16

    The most articulate and brilliant of the Bolsheviks put it most plainly and best. At the end of his Literature and Revolution, written in 1924, Leon Trotsky placed the famous, and justly ridiculed, last lines: Under Communism, he wrote, "The average human type will rise to the heights of an Aristotle, a Goethe, or a Marx. And above this ridge new peaks will rise." This dazzling prophecy was justified in his mind, however, by what he had written in the few pages preceding. Under Communism, Man will "reconstruct society and himself in accord with his own plan." "Traditional family life" will be transformed, the "laws of heredity and blind sexual selection" will be obviated, and Man's purpose will be "to create a higher social biological type, or, if your please, a superman."17 (The full quotation can be found in the article on Trotsky in this volume.)

    I suggest that what we have here, in the sheer willfulness of Trotsky and the other Bolsheviks, in their urge to replace God, nature, and spontaneous social order with total, conscious planning by themselves, is something that transcends politics in any ordinary sense of the term. It may well be that to understand what is at issue we must ascend to another level, and that more useful in understanding it than the works of the classical liberal economists and political theorists is the superb novel of the great Christian apologist C.S. Lewis, That Hideous Strength.

    Now, the fundamental changes in human nature that the Communist leaders undertook to make require, in the nature of the case, absolute political power in a few directing hands. During the French Revolution, Robespierre and the other Jacobin leaders set out to transform human nature in accordance with the theories of Jean-Jacques Rousseau. This was not the only cause but it was surely one of the causes of the Reign of Terror. The Communists soon discovered what the Jacobins had learned: that such an enterprise requires that Terror be erected into a system of government.18

    The Red Terror began early on. In his celebrated November 1987 speech, Gorbachev confined the Communist Reign of Terror to the Stalin years and stated:

    Many thousands of people inside and outside the party were subjected to wholesale repressive measures. Such, comrades, is the bitter truth.19

    But by no means is this the whole of the bitter truth. By the end of 1917, the repressive organs of the new Soviet state had been organized into the Cheka, later known by other names, including OGPU, NKVD, and KGB. The various mandates under which the Cheka operated may be illustrated by an order signed by Lenin on February 21, 1918: that men and women of the bourgeoisie be drafted into labor battalions to dig trenches under the supervision of Red Guards, with "those resisting to be shot." Others, including "speculators" and counter-revolutionary agitators, were "to be shot on the scene of their crime." To a Bolshevik who objected to the phrasing, Lenin replied, "Surely you do not imagine that we shall be victorious without applying the most cruel revolutionary terror?"20

    The number of Cheka executions that amounted to legalized murder in the period from late 1917 to early 1922—including neither the victims of the Revolutionary Tribunals and the Red Army itself nor the insurgents killed by the Cheka—has been estimated by one authority at 140,000.21 As a reference point, consider that the number of political executions under the repressive tsarist regime from 1866 to 1917 was about forty-four thousand, including during and after the Revolution of 190522 (except that the persons executed were accorded trials), and the comparable figure for the French Revolutionary Reign of Terror was eighteen to twenty thousand.23 Clearly, with the first Marxist state something new had come into the world.

    In the Leninist period—that is, up to 1924—fall also the war against the peasantry that was part of "war communism" and the famine conditions, culminating in the famine of 1921, that resulted from the attempt to realize the Marxist dream. The best estimate of the human cost of those episodes is around 6 million persons.24

    But the guilt of Lenin and the Old Bolsheviks—and of Marx himself—does not end here. Gorbachev asserted that "the Stalin personality cult was certainly not inevitable."

    "Inevitable" is a large word, but if something like Stalinism had not occurred, it would have been close to a miracle. Scorning what Marx and Engels had derided as mere "bourgeois" freedom and "bourgeois" jurisprudence,25 Lenin destroyed freedom of the press, abolished all protections against the police power, and rejected any hint of division of powers and checks and balances in government. It would have saved the peoples of Russia an immense amount of suffering if Lenin—and Marx and Engels before him—had not quite so brusquely dismissed the work of men like Montesquieu and Jefferson, Benjamin Constant and Alexis de Tocqueville. These writers had been preoccupied with the problem of how to thwart the state's ever present drive toward absolute power. They laid out, often in painstaking detail, the political arrangements that are required, the social forces that must be nurtured, in order to avert tyranny. But to Marx and his Bolshevik followers, this was nothing more than "bourgeois ideology," obsolete and of no relevance to the future socialist society. Any trace of decentralization or division of power, the slightest suggestion of a countervailing force to the central authority of the "associated producers," ran directly contrary to the vision of the unitary planning of the whole of social life.26

    The toll among the peasantry was even greater under Stalin's collectivization27 and the famine of 1933—a deliberate one this time, aimed at terrorizing and crushing the peasants, especially of the Ukraine. We shall never know the full truth of this demonic crime, but it seems likely that perhaps 10 or 12 million persons lost their lives as a result of these Communist policies—as many or more than the total of all the dead in all the armies in the First World War.28

    One is stunned. Who could have conceived that within a few years what the Communists were to do in the Ukraine would rival the appalling butcheries of World War I—Verdun, the Somme, Passchendaele?

    They died in hell,
    They called it Passchendaele.

    But what word to use, then, for what the Communists made of the Ukraine?

    Vladimir Grossman, a Russian novelist who experienced the famine of 1933, wrote about it in his novel Forever Flowing, published in the West. An eyewitness to the famine in the Ukraine stated,

    Then I came to understand the main thing for the Soviet power is the Plan. Fulfill the Plan….Fathers and mothers tried to save their children, to save a little bread, and they were told: You hate our socialist country, you want to ruin the Plan, you are parasites, kulaks, fiends, reptiles. When they took the grain, they told the kolkhoz [collective farm] members they would be fed out of the reserve fund. They lied. They would not give grain to the hungry.29

    The labor camps for "class-enemies" had already been established under Lenin, as early as August 1918.30 They were vastly enlarged under his successor. Alexander Solzhenitsyn compared them to an archipelago spread across the great sea of the Soviet Union. The camps grew and grew. Who were sent there? Any with lingering tsarist sentiments and recalcitrant members of the middle classes, liberals, Mensheviks, anarchists, priests and laity of the Orthodox Church, Baptists and other religious dissidents, "wreckers," suspects of every description, then, "kulaks" and peasants by the hundreds of thousands.

    During the Great Purge of the middle 1930s, the Communist bureaucrats and intellectuals themselves were victims, and at that point there was a certain sort of thinker in the West who now began to notice the camps, and the executions, for the first time. More masses of human beings were shipped in after the annexations of eastern Poland and the Baltic states; then enemy prisoners of war, the internal "enemy nationalities," and the returning Soviet prisoners of war (viewed as traitors for having surrendered), who flooded into the camps after 1945—in Solzhenitsyn's words, "vast dense gray shoals like ocean herring."31

    The most notorious of the camps was Kolyma, in eastern Siberia—in actuality a system of camps four times the size of France. There the death rate may have been as high as 50 percent per year32 and the number of deaths was probably on the order of 3 million. It goes on and on. In 1940 there was Katyn and the murder of the Polish officers; in 1952, the leaders of Yiddish culture in the Soviet Union were liquidated en masse33—both drops in the bucket for Stalin. During the Purges there were probably about 7 million arrests, and one out of every ten arrested was executed.34

    How many died altogether? No one will ever know. What is certain is that the Soviet Union has been the worst reeking charnel house of the whole awful twentieth century, worse even than the one the Nazis created (but then they had less time).35 The sum total of deaths due to Soviet policy—in the Stalin period alone—deaths from the collectivization and the terror famine, the executions and the Gulag, is probably on the order of 20 million.36

    As glasnost proceeds and these landmarks of Soviet history are uncovered and explored to a greater or lesser degree, it is to be hoped that Gorbachev and his followers will not fail to point an accusing finger at the West for the part it played in masking these crimes. I am referring to the shameful chapter in twentieth-century intellectual history involving the fellow travelers of Soviet Communism and their apologias for Stalinism. Americans, especially American college students, have been made familiar with the wrongs of McCarthyism in our own history. This is as it should be. The harassment and public humiliation of innocent private persons is iniquitous, and the US government must always be held to the standards established by the Bill of Rights. But surely we should also remember and inform young Americans of the accomplices in a far different order of wrongs—those progressive intellectuals who "worshiped at the temple of [Soviet] planning"37 and lied and evaded the truth to protect the homeland of socialism, while millions were martyred. Not only George Bernard Shaw,38 Sidney and Beatrice Webb, Harold Laski, and Jean-Paul Sartre, but, for instance, the Moscow correspondent of the New York Times, Walter Duranty, who told his readers, in August 1933, at the height of the famine:

    Any report of famine in Russia is today an exaggeration or malignant propaganda. The food shortage which has affected almost the whole population in the last year and particularly in the grain-producing provinces—the Ukraine, North Caucasus, the lower Volga region—has, however, caused heavy loss of life.39

    For his "objective" reporting from the Soviet Union, Duranty won a Pulitzer Prize.40

    Or—to take another fellow traveler virtually at random—we should keep in mind the valuable work of Owen Lattimore of Johns Hopkins University. Professor Lattimore visited Kolyma in the summer of 1944, as an aide to the Vice President of the United States Henry Wallace. He wrote a glowing report on the camp and on its chief warden, Commandant Nikishov, for the National Geographic.41 Lattimore compared Kolyma to a combination of the Hudson's Bay Company and the TVA.42 The number of the influential American fellow travelers was, in fact, legion, and I can think of no moral principle that would justify our forgetting what they did and what they did it in aid of.

    In his speech of November 2, Gorbachev declared that Stalin was guilty of "enormous and unforgivable crimes" and announced that a special commission of the Central Committee is to prepare a history of the Communist party of the Soviet Union that will reflect the realities of Stalin's rule. Andrei Sakharov has called for the full disclosure of "the entire, terrible truth of Stalin and his era."43 But can the Communist leaders really afford to tell the entire truth? At the Twentieth Party Congress in 1956, Nikita Khrushchev revealed the tip of the iceberg of Stalinist crimes, and Poland rose up and there took place the immortal Hungarian Revolution, when they did

    high deeds in Hungary
    To pass all men's believing.

    What would it mean to reveal the entire truth? Could the Communist leaders admit, for instance, that during World War II, "the losses inflicted by the Soviet state upon its own people rivaled any the Germans could inflict on the battlefield"? That "the Nazi concentration camps were modified versions of Soviet originals," whose evolution the German leadership had followed with some care? That, in short, "the Soviet Union is not only the original killer state, but the model one"?44 If they did that, what might the consequences not be this time?

    But the fact that the victims of Soviet Communism can never be fully acknowledged in their homelands is all the more reason that, as a matter of historical justice, we in the West must endeavor to keep their memory alive.

    This essay was originally published in 1988, by the Cato Institute, Washington, DC. It is collected in Great Wars and Great Leaders (2010), chap. 4: "Marxist Dreams and Soviet Realities."

    Copyright © 2012 by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.

    • 1. Alexis de Tocqueville, Democracy in America, vol. 1 (New York: Vintage, 1945), p. 452.
    • 2. "The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people." Needless to say, the US government has seldom lived up to its proclaimed credo, or anything close to it.
    • 3. V.I. Lenin, What Is to Be Done? Burning Questions of Our Movement (New York: International Publishers, 1929).
    • 4. Alienation and the Soviet Economy: Towards a General Theory of Marxian Alienation, Organizational Principles, and the Soviet Economy (Albuquerque: University of New Mexico Press, 1971) and (with Matthew A. Stephenson) Marx's Theory of Exchange, Alienation, and Crisis (Stanford, CA: Hoover Insitution Press, 1973).
    • 5. Karl Marx, Capital: A Critique of Political Economy, vol. 3, ed. Friedrich Engels (New York: International Publishers, 1967), p. 820.
    • 6. Friedrich Engels, "Socialism: Utopian and Scientific," in Karl Marx and Friedrich Engels, Selected Works (Moscow: Progress Publishers, 1968), p. 432.
    • 7. See, for instance, Michael Bakunin, "Marx, the Bismarck of Socialism," in Leonard I. Krimerman and Lewis Perry, eds., Patterns of Anarchy. A Collection of Writings in the Anarchist Tradition (Garden City, NY: Anchor/Doubleday, 1966), pp. 80–97, especially p. 87. For a discussion of the theoretical problems involved in a "new class" analysis of Soviet society and a critique of James Burnham's attempt to generalize the interpretation to non-Marxist societies, see Leszek Kolakowski, Main Currents of Marxism, trans. P. S. Falla, vol. 3, The Breakdown, (Oxford: Oxford University Press, 1981), pp. 157–66.
    • 8. See Max Nomad, Political Heretics (Ann Arbor: University of Michigan Press, 1968), pp. 238–41. Also, Jan Waclav Makaïske, Le socialisme des intellectuels, ed. Alexandre Skirda (Paris: Editions du Seuil, 1979).
    • 9. V.I. Lenin, State and Revolution (New York: International Publishers, 1943), pp. 83–84.
    • 10. Sidney Heitman, in the “New Introduction” (unpaginated) to N. Bukharin and E. Preobrazhensky, The ABC of Communism (Ann Arbor: University of Michigan Press, 1966).
    • 11. Ibid., pp. 68–73.
    • 12. New York Times, no. 3, 1987.
    • 13. David Caute, The Left in Europe Since 1789 (New York: McGraw-Hill, 1966), p. 179.
    • 14. Ibid., p. 112.
    • 15. "The principal task of the fathers of the October Revolution was the creation of the New Man, Homo sovieticus," Michel Heller and Aleksandr Nekrich, L'utopie au pouvoir: Histoire de l'U.R.S.S. de 1917 á nos jours (Paris: Calmann-Lévy, 1982), p. 580. As for the result, Kolakowski states: "Stalinism really produced 'the new Soviet man': an ideological schizophrenic, a liar who believed what he was saying, a man capable of incessant, voluntary acts of intellectual self-mutilation." Kolakowski, vol. 3, p. 97.
    • 16. Heller and Nekrich, p. 50.
    • 17. Leon Trotsky, Literature and Revolution (Ann Arbor: University of Michigan Press, 1971), pp. 246, 249, 254–56. Bukharin entertained similarly absurd collectivist-Promethean notions of socialist achievement. He stated, in 1928 (when Stalin's domination was already apparent): "We are creating and we shall create a civilization compared to which capitalism will have the same aspect as an air played on a kazoo to Beethoven's Eroica Symphony." Heller and Nekrich, p. 181.
    • 18. Cf. J.L. Talmon, The Origins of Totalitarian Democracy (London: Mercury Books, 1961).
    • 19. New York Times, Nov. 3, 1987.
    • 20. George Leggett, The Cheka: Lenin's Political Police (Oxford: Clarendon Press, 1981), pp. 56–57.
    • 21. Ibid., pp. 466–67.
    • 22. Ibid., p. 468. The great majority of these occurred as a result of the 1905 revolutionary uprising.
    • 23. Samuel F. Scott and Barry Rothaus, eds., Historical Dictionary of the French Revolution, 1789–1799, L-Z (Westport, Conn.: Greenwood Press, 1985), p. 944.
    • 24. Robert Conquest, Harvest of Sorrow: Soviet Collectivization and the Terror-Famine (New York: Oxford University Press, 1986), pp. 53–55.
    • 25. Karl Marx and Friedrich Engels, The Communist Manifesto, in Selected Works, p. 49.
    • 26. On Marx's responsibility, Kolakowski (vol. 3, pp. 60–61) writes, "He undoubtedly believed that socialist society would be one of perfect unity, in which conflicts of interest would disappear with the elimination of their economic bases in private property. This society, he thought, would have no need of bourgeois institutions such as representative political bodies … and rules of law safeguarding civil liberties. The Soviet despotism was an attempt to apply this doctrine." See also ibid., p. 41.
    • 27. The "war against the nation"—Stalin's forced collectivization—was not the product of a power-mad cynic. As Adam Ulam has argued, "Stalin was seldom cynical….He was sincere and obsessed." His obsession was Marxism-Leninism, the science of society that unerringly points the way to total human freedom. If reality proved refractory, then the cause had to be the "wreckers"—whole categories and classes of people engaged in deliberate sabotage. Surely, the Marxist dream could not be at fault. Adam Ulam, Stalin. The Man and His Era (Boston: Beacon Press, 1973), pp. 300–01.
    • 28. Conquest, Harvest of Sorrow, pp. 299–307. The terrible famine year was 1933; after that, concessions were made to the peasant: a half-acre plot that he could work for himself and the right to sell crops on the market after the state's quota had been met. Stalin, however, begrudged these "concessions" to "individualism." Ulam, pp. 350–52.
    • 29. Cited in ibid., p. 346.
    • 30. Héléne Carrére d'Encausse, Stalin: Order Through Terror, trans. Valence Ionescu (London and New York: Longman, 1981), pp. 6–7.
    • 31. Aleksandr I. Solzhenitsyn, The Gulag Archipelago, 1918–1956. An Experiment in Literary Investigation, vols. 1–2.
    • 32. Nikolai Tolstoy, Stalin's Secret War (New York: Holt, Rinehart and Winston, 1981), p. 15.
    • 33. David Caute, The Fellow-Travellers. A Postscript to the Enlightenment (New York: Macmillan, 1973), p. 286.
    • 34. Robert Conquest, The Great Terror: Stalin's Purge of the Thirties (New York: Macmillan, 1968), p. 527.
    • 35. It should be obvious that, in logic and justice, the enumeration of Soviet crimes can in no way exculpate any other state — for instance, any Western democracy — for the crimes it has committed or is committing.
    • 36. Conquest, The Great Terror, pp. 525–35, especially p. 533. Caute, The Fellow-Travellers, p. 107, estimates the deaths in the camps between 1936 and 1950 at 12 million. He adds, "Stalin's policies may have accounted for twenty million deaths." Ibid., p. 303.
    • 37. Caute, The Fellow-Travellers, p. 259.
    • 38. George Bernard Shaw, for example, expressed his scorn for those who protested when the Soviet Union "judiciously liquidates a handful of exploiters and speculators to make the world safe for honest men." Ibid., p. 113.
    • 39. Quoted by Eugene Lyons, "The Press Corps Conceals a Famine," in Julien Steinberg, ed., Verdict of Three Decades. From the Literature of Individual Revolt Against Soviet Communism, 1917–1950 (New York: Duell, Sloan, and Pearce, 1950), pp. 272–73.
    • 40. Conquest, Harvest of Sorrow, pp. 319–20. As Conquest mentions, as of 1983 the New York Times still listed Duranty's Pulitzer Prize among the paper's honors. If the Times reporter and other correspondents lied so contemptibly about conditions in Soviet Russia and their causes, however, others were soon telling the truth: Eugene Lyons and William Henry Chamberlin published articles and books detailing, from personal experience, what Chamberlin called the "organized famine" that had been used as a weapon against the Ukrainian peasantry. See William Henry Chamberlin, "Death in the Villages," in Steinberg, p. 291.
    • 41. Caute, The Fellow-Travellers, p. 102.
    • 42. Conquest, The Great Terror, p. 354.
    • 43. New York Times, Nov. 7, 1987.
    • 44. Nick Eberstadt, Introduction to Iosif G. Dyadkin, Unnatural Deaths in the U.S.S.R., 1928–1954 (New Brunswick, NJ, and London: Transaction Books, 1983), pp. 8, 4.
  3. Is Free Market Economics Too "Ideological"?

    Free market economics is often ignorantly dismissed for being "ideological" rather than scientific. It probably sounds smart to the economically illiterate, but it is decidedly not. It doesn't mean nearly what most people assume it does. The word "free" in free market economics is not used as a normative value judgment but indicates an economy that is unaffected by exogenous (from the outside) factors.

    "Free" therefore means that it is the market economy in and by itself that is subject to theoretical analysis. This is, in fact, the only way to identify any and all "pure" market mechanisms and processes.

    If economics tried to inductively extract theory from data, we could never know what it is we capture in those data: is it the actual (underlying) economic mechanisms, or the effect of regulations, or of a specific temporal context, or some mix?

    As all such things in the real economy always coexist and are interdependent, we could never accurately separate them, and so could not figure out how the economy actually works. The results would be haphazard and contingent, which would make both predictions and understanding impossible. Any actual and specific mechanisms that are intrinsic to a market economy, i.e., its nature of market quamarket, which determines the outcomes also when other things are involved, would be beyond our reach.

    One can, of course, claim that there are no such mechanisms, and therefore that studying and theorizing about the market without such influences is irrelevant. But this claim requires first that the idea of "pure" economic mechanisms is properly dismissed. It is not sufficient to just claim this so, especially if the claim is made based on one's own preferred worldview and/or wishful thinking (i.e., ideology).

    To dismiss any workings or mechanisms of the "pure economy" one need first seriously consider them, which means that one must still begin by theorizing on the free market economy.

    In other words, such a critique of free market economics must itself take free market economics as starting point.

    Another common but mistaken critique of free market economics is that it is based on presumed ideological concepts. Some claim that the individual as actor is ideological, which is too absurd to take seriously. But another and, at least on the surface, seemingly better critique is that free market economics assumes some form of (private) property. Especially those who are ideologically opposed to the concept consider this an unjust infringement on people's basic or natural right to freedom.

    Yet they miss the point. The fundamental building block of any market is the exchange, which necessarily is an exchange of some claim of ownership. Exchange without ownership is no exchange. Whether or not one agrees with ownership, it is a necessary prerequisite for markets.

    We can study socialist regimes without making the study itself ideological, and similarly we can study markets (assuming some form of ownership) without taking a normative stand on the existence or nature of ownership. Needless to say, any such free market reasoning would not (and could not) apply to situations where there is no ownership. But to the degree that free market mechanisms are simply human action, even though the specific outcome may be contingent on some form of ownership, the mechanisms should apply also to nonownership contexts. (Note, however, that this is the case for and due to the nature of human action and not the nature of markets, which are emergent from human action given ownership and exchange.)

    These critiques are further mistaken for the simple reason that without a theory of "pure" market mechanisms we cannot separate, trace, and measure the effects of other influences on the market economy. How do we know the effect of, say, dramatically increasing the minimum wage on unemployment? Just looking at employment before and after is not enough (and it certainly provides no guidance regarding what to expect from such change).

    A lot of things are involved before and after such a change, and in order to accurately assess the effect of the minimum wage increase itself, we need to know all those other things. This is simply impossible. But if we understand the mechanisms in play in the "pure" (free) market, we can predict how such other influences should affect the outcomes and workings of the market.

    We can thus separate this impact, which allows us to make predictions and produce knowledge about the world. Yet any such predictions and knowledge require that we first have a good idea of how the mechanisms of the free market (would) work. If we do not, we are lost—and any attempts to understand are futile. And, as was already noted, even the assumption or assertion that there are no such mechanisms requires that the idea of a "market quamarket" be properly rejected (not ideologically, but rationally, logically, and theoretically).

    Consequently, it is blatantly ignorant, and a fundamental mistake and misunderstanding, to dismiss all free market economic theory as "ideology." Such claims cannot and should not be taken seriously, because they are only ignorant; they reveal a fundamental misunderstanding of the study of economics.

    Yet it is sadly done all the time by people who should know (a lot) better. 

    Formatted from Twitter @PerBylund

  4. Why It's so Hard to Escape America's "Anti-Poverty" Programs

    One of the most common debates that has occurred in the United States for the past six decades is the discussion of the poverty rate. As the narrative goes, the US has an unusually high poverty rate compared to equivalent nations in the OECD (Organisation for Economic Co-operation and Development). Although it’s true that the measure of poverty is flawed, especially when compared cross-nationally, this piece addresses the reasons why the poverty rate in the US in particular has not improved.

    If we look at the graph below, we see that official poverty rates fell 44 percent between 1960 and 1969 then spent the next fifty years fluctuating between an 11 and 15 percent poverty rate. It’s this lack of improvement over a five-decade period that is interesting, especially considering that poverty rates had consistently been dropping for over a century.

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    Incentive Problems

    One of the key problems is that during the 1960s the Great Society programs were implemented, particularly the War on Poverty. Over this period, spending on anti-poverty programs exploded five times in inflation adjusted dollars, going from 3 percent of public spending to 20 percent between 1973 and today.

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    Yet the poverty rate stubbornly ignored all this lucrative expenditure. A key problem is that none of these programs built in an incentive system to graduate people off the assistance. Push systems, systems where a person is ejected from assistance if they prove unwilling to improve themselves, are nonexistent, while pull systems, like job training programs, are ineffective at best. Without these systems, people neither have the tools nor the drive to exit these programs.

    These programs, in effect, have generated a culture of dependency. Out of sixty-nine welfare programs that the government operates, just two, EITC (earned income tax credit) and the child refund credit, require any kind of employment and even then are tax discounts. Further, the expansion of various handout programs has successfully eradicated the stigma of public assistance, removing the social pressure to improve and exit. When nearly half the population receives public assistance, not including individuals receiving a paycheck for public sector work, people view it as normal and acceptable.

    Public Sector Interference

    For those who do legitimately want to break the cycle of dependency, the public sector isn’t making things any easier. One of the major problems with the welfare structure is that it requires funding in the form of taxes, debt, and inflation. The tax structure necessary to fund redistribution schemes naturally creates a Tax Dead Zone. What this dead zone does is create an income range where, after all taxes and benefits are accounted for, earning an extra dollar in gross income results in either no change or a reduction in net income.

    Essentially, the extra dollar in earnings is taxed at 100 percent or more, penalizing the current recipient for attempting to exit public assistance. This dead space is nearly $20,000 in range, meaning that if the person estimates they’re unable to consistently earn above roughly $60,000 a year, it’s better to not try and to stick around $18,000 a year since the net benefit structure at $18,000 results in more resources to live on than at $45,000. It is mathematically impossible to design a welfare and tax structure that doesn’t, at some point, penalize a welfare recipient for earning more money.

    Another insidious trap is the regulatory structure. People who are current welfare recipients tend to have few or no job skills. This is particularly true for younger individuals who haven’t had a first job yet. What the regulatory state does is drive up the cost of employment. When employment costs are raised, be it through a minimum wage or workplace rules, a higher skill level is demanded from the worker to generate sufficient revenues to justify the cost. If the applicant isn’t sufficiently skilled, they won’t get hired.

    Unemployment can create a cycle of further unemployment in this environment. Since skills degrade over time, a person who elects to take twenty-six weeks of paid unemployment instead of a temporary lower-skilled role will be at a major disadvantage. Long-term unemployment becomes a trap, since the individual will no longer possess sufficient skills to cover the cost in wage mandates, taxes, and regulatory impositions of hiring them. If public unemployment benefits didn’t exist and the state didn’t artificially inflate the cost of employment, this individual wouldn’t have been lured into taking a six-month vacation and wouldn’t have struggled to justify the costs of their employment.

    The impacts are particularly bad in terms of generational poverty. The minimum wage has a strong negative impact on youth employment rates. Teens who are unemployed enjoy significantly lower lifetime earnings and are more likely to be unemployed as adults compared to their peers who held a part-time job. This, in turn, leads to greater utilization of public sector benefits.

    Incentives for Government

    Based on its poor track record, one wonders if government even wants to solve the poverty problem. Seattle, for instance, spends roughly $100,000 per homeless resident of the city on homeless relief programs. The major beneficiaries of this public largess are charity organizations that claim to assist the poor but use that money to pay themselves salaries in excess of $200,000 for a single executive. Major agencies, including the Department of Health and Human Services, employ tens of thousands of people.

    What would happen should poverty and homelessness be eradicated? No more $200,000 salary. No more job for tens of thousands of people. No more $8 million temporary tents.

    Poverty and homeless assistance has turned into a big business. We now have a Homeless Industrial Complex, and poverty assistance has become big business. The public sector appears to be fully invested in ensuring that poverty and homelessness persist. Without the homeless, what do we need with a Low-Income Housing Institute? Without the poor, how could the Department of Agriculture justify $100 billion a year in the farm bill? There is little evidence that the state cares to solve the issue, only caring to make homelessness and poverty a viable lifestyle choice.

    The Future

    The state has, by accident or by design, created a permanent underclass. Radical elimination of regulatory impositions and the elimination of the minimum wage are merely the first steps toward solving the problem of poverty. The underlying issue is that the transition into a nation that can truly eradicate poverty will be painful. People trapped in public dependency won’t develop skills overnight, and odds are that they may never develop the skills needed for well-paid employment. Breaking habits is difficult and the sad reality is that catching up is a myth. People behind now will always be behind; if there were a magical means to accelerate skill development, everyone would be using it and the same person would still be behind.

    But we can lay the groundwork for future generations not to have to battle through these public sector barriers, and we can return to the poverty improvement rate seen before the Great Society disrupted the process.

  5. Nationalism as National Liberation: Lessons from the End of the Cold War

    During the early 1990s, as the world of the old Soviet Bloc was rapidly falling apart, Murray Rothbard saw it all for what it was: a trend of mass decentralization and secession unfolding before the world's eyes. The old Warsaw Pact states of Poland, Hungary, and others won de facto independence for the first time in decades. Other groups began to demand full blown de juresecession as well.

    Rothbard approved of this, and he set to work encouraging the secessionists over the opposition of many foreign policy "experts."

    "Nationalism" versus Powerful States

    For example, when it became clear in early 1990 that the Baltic states were preparing to secede from the rapidly fading Soviet state, the Soviets asked the West for help. As the Los Angeles Times noted at the time, "Soviet officials are stressing in their warnings…the danger of unleasing [sic] new and difficult-to-control forces through the separation of not only the Baltics but other Soviet republics."

    Unfortunately, the Bush administration expressed similar misgivings and the "'global democracy' establishment," as Rothbard called it, set to work trying to convince the world that these "nationalist" liberation movements were a threat to global peace.

    The playbook then was similar to what it is now: "The concerns and demands of nationalities are dismissed as narrow, selfish, parochial, and even dangerously hostile per se and aggressive toward other nationalities."

    Thus, it was presumed that it was better for the Baltic-state nationalists to remain under Russian control and submit to the "democratic ideal." Rothbard summed up the endgame favored by the antinationalists:

    The Baltic nations…are "part" of the Soviet Union, and therefore their unilateral secession, against the will of the majority of the USSR, becomes an affront to "democracy," to "majority rule," and, last but far from least, to the unitary, centralizing nation-state that allegedly embodies the democratic ideal.

    Rothbard was forced to return to the topic in 1991, when Slovenia seceded from Yugoslavia in a nearly bloodless maneuver that led to a ten-day war with fewer than one hundred deaths. This all occurred, Rothbard noted "despite the U.S. and other powers moaning about the 'territorial integrity of Yugoslavia.'"1

    Again in 1993, Rothbard had to defend secession for "national" groups when in late 1992, the Czechoslovakian state began talking about breaking itself up into two countries.2 Once again, the New York Timesand other guardians of the "respectable" foreign policy establishment objected. When the separation finally took place, the Times was sure to run a one-sided editorial contending that the dissolution of the country was greeted with "wide regret" and ominously predicted that the move would add "new potential trouble spots to a Central Europe already convulsed by nationalism."3

    Again and again, defenders of powerful centrally controlled states wrung their hands over the possibility that states might be broken up into smaller, independent, and more locally controlled pieces.

    It should be noted that in all of these cases—from the Baltics to Prague, to Budapest and down to Slovenia—secession took place with very limited bloodshed, and certainly far less bloodshed than occurred under earlier communist strongmen. This, of course, is all studiously ignored today. Instead, national liberation is today denounced as "balkanization" and said to be synonymous with what happened in the minority of cases, namely, the bloodshed of the Yugoslav Wars.

    In most cases, for all the warnings about Central Europe being "convulsed by nationalism," the fact remains that there were no massacres of Czechs by Slovenians, or vice versa. Outside Yugoslavia the travails suffered by ethnic minorities in the wake of the Soviet retreat were miniscule compared to what had been standard operating procedure under Soviet domination. The new Baltic ethnic majorities in the 1990s were not especially liberal toward the Russian-speaking minority, but in the nearly thirty years since the Baltic secessions, the Russian minorities have not been subjected to anything even approaching the same magnitude of terrors, killings, and Siberian deportation endured by the Baltic peoples under the Soviet state.

    Yet, had the foreign policy elites had their way thirty years ago Lithuanians, Estonians, and Latvians would still today be forced to live as a tiny minority within the Russian state. It's not hard to guess which way majority rule would go under those conditions. Yet democracy, we were told, would ensure that everything would turn out fine.

    But, as Rothbard pointed out in 1994, in his essay "Nations by Consent," the prodemocracy, antisecession party failed even on its own terms. After demanding respect for the territorial integrity of Yugoslavia (by then known as Serbia) the prodemocracy party ended up calling for secession after all:

    Take, for example, the current mess in Bosnia. Only a couple of years ago, Establishment opinion, Received Opinion of Left, Right, or Center, loudly proclaimed the importance of maintaining "the territorial integrity" of Yugoslavia, and bitterly denounced all secession movements. Now, only a short time later, the same Establishment, only recently defending the Serbs as champions of "the Yugoslav nation" against vicious secessionist movements trying to destroy that "integrity," now reviles and wishes to crush the Serbs for "aggression" against the "territorial integrity" of "Bosnia" or "Bosnia-Herzegovina," a trumped-up "nation" that had no more existence than the "nation of Nebraska" before 1991. But these are the pitfalls in which we are bound to fall if we remain trapped by the mythology of the "nation-state" whose chance boundary at time tmust be upheld.

    The Logic of National Liberation

    Although Rothbard returned to this issue in the 1990s because of the Soviet crack-up, his work in that period closely reflects his earlier writings on political independence movements.

    Writing in September 1969, he frequently supported secession for the purpose of "national liberation," since "Aside from being a necessary condition to the achievement of justice, national liberation is the only solution to the great world problems of territorial disputes and oppressive national rule." 

    Rothbard supported the secession of Biafra from Nigeria in an editorial in 1970. In 1977, he supported Quebecois nationalists, stating his hope that separatism and secession would lead to a "domino principle" in which secession would breed even more secession. 

    It was very much in this line of thinking that Rothbard described the America Revolution as a case of national liberation:

    The American Revolution was radical in many other ways as well. It was the first successful war of national liberation against western imperialism. A people’s war, waged by the majority of Americans having the courage and the zeal to rise up against constituted “legitimate” government, actually threw off their “sovereign.” A revolutionary war led by “fanatics” and zealots rejected the siren calls of compromise and easy adjustment to the existing system.

    Not in this case or in any other case did Rothbard deny or ignore that there were those who ended up on the losing side as a result of secession. This was true of the Loyalists in America, of Russians in the Baltics, and of ethnic Serbs in Slovenia. But defending the mythical sanctity of the nation-state's status quoborders takes us down a road that is even more problematic. According to Rothbard, those who take this position "mistakenly scorn the idea of national liberation and independence as simply setting up more nation-states"—end up  "becom[ing] in the concrete, objective supporters of the bloated, imperialistic nation-states of today."

    After all, if secession in the name of national liberation is bad, we end up on principle supporting the Soviet Union, and every empire or two-bit dictator who manages to hammer together a variety of disparate groups under a single national banner.

    • 1. Murray Rothbard, "Welcome, Slovenia!," in The Irrepressible Rothbard(Burlingame, CA: Center for Libertarian Studies, 2000), pp. 238–41.
    • 2. Murray Rothbard, "Ex-Czechoslovakia," in The Irrespressible Rothbard (Burlingame, CA: The Center for Libertarian Studies, 2000), pp. 242–44.
    • 3. Stephen Engleberg, "Czechoslovakia Breaks In Two, to Wide Regret," New York Times, Jan 1, 1993.

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