Devastating the State
by
David Gordon
Recently
by David Gordon: Must
America Embrace Empire To Be Safe?
Organized
Crime: The Unvarnished Truth About Government • By Thomas
J. DiLorenzo • Mises Institute, 2012 • xi + 219 pages
Thomas DiLorenzo
is probably best known to the public for his revisionist studies
of Lincoln, but he has a wide range of economic and historical
interests.[1]
Organized Crime, a collection of 52 short articles by him,
shows again and again his keen eye for the striking historical
detail that exactly illustrates the point he wants to make.
It will come
as no surprise to readers of the Mises Daily that price
control does not work. But DiLorenzo still manages to come up
with an unexpected point about this familiar topic. The Nazi leader
Hermann Goering warned the American occupation authorities that
they stood in danger of repeating the mistakes of his own recently
fallen regime. Speaking to the American correspondent (and, by
the way, later American Ambassador to Switzerland) Henry Taylor,
Goering said,
Your America
is doing many things in the economic field which we found out
caused us so much trouble. You are trying to control peoples’
wages and prices – peoples’ work. If you do that you must
control peoples’ lives. And no country can do that part way.
I tried and it failed. Nor can any country do it all the way
either. I tried that too and it failed. You are no better planners
than we. I should think your economists would read what happened
here. (p. 5)
Unfortunately
the American government has not managed to equal the level of insight
here displayed by the late and unlamented Reichsmarschall.
The Obama administration brought suit against
a proposed
merger between ATT and T-Mobile USA. According to the New
York Times on August 31, 2011, stopping the merger would
supposedly “help save jobs of American workers.” (p. 24)
To this contention,
DiLorenzo offers a brilliant riposte. Just as the mercantilists
wrongly thought that the way to national wealth was to amass gold
and silver, so do the modern opponents of economic progress falsely
believe that full employment requires that existing jobs be conserved:
“The Obama mercantilists apparently believed that existing jobs,
not gold, must be hoarded” (p. 25).
DiLorenzo
readily refutes the fallacy:
They [the
Obama administration] failed to recognize that the economy is
dynamic, with jobs constantly being created and destroyed as
new-and-improved industries and business practices replace the
older and less efficient ones (efficient in serving consumers,
that is). (p. 25)
DiLorenzo
supports the Austrian analysis of the business cycle over the
monetarist view of Milton Friedman, but this fact does not prevent
him from making use of Friedman’s apt insights on other topics.
Thus, writing about the current healthcare crisis, he calls attention
to an important study Friedman published in 1992:
Friedman
noted that 56 percent of all hospitals in America were privately
owned as for-profit enterprises in 1910…. It took decades,
but by the early 1990s government had taken over nearly the
entire hospital industry…. Friedman’s key contention was that,
as with all bureaucratic systems, government-owned or government-controlled
healthcare created a situation whereby increased “inputs”
such as expenditures on equipment, infrastructure, and the salaries
of medical professionals, actually led to decreased “output”
in terms of the quantity and quality of medical care…. This
kind of result is present in all government-run bureaucracies
because of the absence there of any kind of market feedback
mechanism. Since there are no profits in an accounting sense
in government, there is no reliable mechanism for rewarding
good performance and penalizing poor performance. (pp. 26–7,
emphasis in original)
DiLorenzo also
notes Friedman’s comment that
if the
average tariff rate in America were a few percentage points
lower than it would otherwise be thanks to influence of academic
economists, that would more than justify all of their salaries
and then some because of the wealth-enhancing effects of freer
trade. (p. ix)
In order
fully to benefit from free trade, peaceful relations among nations
are obviously desirable if not outright essential. There have
been cases of warring nations that continued to engage in trade;
but, obviously, states engaged in war are concerned with other
things than social cooperation through the free market. If a nation
wishes to gain as much as possible from trade, then, it seems
well-advised for it to pursue a foreign policy of peace.
So much seems
simple commonsense; but those who advocate such a policy are often
smeared as “isolationists.” DiLorenzo quite properly points
out that this name entirely reverses the truth. It is the supposed
isolationists who favor the greatest attainable commerce with
other nations, and it is their interventionist opponents who disrupt
trade by involving us in unnecessary wars. He suggests calling
such people “instigationists”:
War leads
to isolationism. People interact peacefully and beneficially
in the free market; they kill each other when they are at war….
The real “isolationists” who seek to destroy the peaceful
cooperation among the people of the world are a group of people
who might be called “instigationists.” They are the
egomaniacs and rent seekers … who instigate wars with their
lying, conniving, and manipulating behavior. They typically
have never participated in a war, or even the peace-time military,
themselves, and are deservedly labeled as “chickenhawks”
by many commentators.[2]
(pp. 45–47)
Readers of
the book who expect DiLorenzo to say something about Lincoln and
his war policy will not be disappointed. In pursuit of his policy
of imposing the American System of Alexander Hamilton and Henry
Clay on the recalcitrant Confederacy, Lincoln ruthlessly suppressed
opposition. In such stifling of dissent, he was joined by the Radical
Republicans in Congress.
In telling
the story “of how the Republican Party engaged in a Stalinist
spasm of political repression” (p. 91), DiLorenzo makes apt use
of a book by the Lincoln scholar William Marvel, Lincoln’s
Darkest Year: The War in 1862. In one respect, I fear,
he has been misled by his source. The Republican-controlled Senate
in 1862 expelled one of its most senior members, the Democrat
Jesse Bright of Indiana. Following Marvel, he says,
Using the
excuse that, in the years before the war, Senator Bright “had
known and admired [fellow Senator] Jefferson Davis of Mississippi,”
the Republican Party accused Senator Bright … of “retroactive
treason” and expelled him with a bare two-thirds majority
vote. (p. 91, quoting Marvel)
There was
rather more to it than that. An arms dealer had been apprehended
who had on his person a letter of introduction to Davis, written
by Bright. This was the principal charge that led to the expulsion.
Nevertheless,
Marvel and DiLorenzo are on firm ground in their general condemnation
of the Republican policy of repression.
Even Democrats
running for Congress were imprisoned before election day….
Republican Party thugs were not above beatings and murder
of Northern civilians who dissented from the “Grand Ole
Party” line. (p. 92, emphasis in original)
Unfortunately,
matters only worsened as the war continued.
DiLorenzo
views with shrewd skepticism attempts by his fellow economists
to provide theoretical justifications for interference with the
free market. The much-ballyhooed area of “happiness research”
has proved a fertile source of such justifications, and DiLorenzo
rejects them all.
Regardless
of the success of the free market in generating an ever-increasing
abundance of material goods, happiness researchers such as the
Swiss economist Bruno Frey complain that increases in wealth do
not always carry with them increases in happiness. Instead of
exclusive concentration on raising production, policymakers should
endeavor more directly to address the sources of unhappiness.
For example, even if poor people get more money, they may find
upsetting the still-greater wealth of the rich. Do we not have
here a reason for remedial action by the state? The negative externalities
that result from disparities in wealth should not be ignored.
DiLorenzo
responds that the
assertions
about the supposed ability of happiness researchers to finally
measure utility simply ignore all the reasons that have been
accepted for decades by the economics profession as to why utility
is “ordinal” instead of cardinal and not measurable.
(p. 186)
Happiness researchers
often make use of public-opinion surveys in their attempts to determine
levels of happiness, and against them DiLorenzo invokes the weighty
authority of Murray Rothbard:
Not only
will a person’s valuation differ when talking about them [choices]
from when he is actually choosing, but there is also no guarantee
that he is telling the truth. (p. 187, quoting Rothbard)
As to the
supposed negative external effects on the poor imposed by the
wealthy, DiLorenzo makes a penetrating observation:
The supposed
“negative external effect” is the envy by poorer people.
But it has always been true that intellectuals, not the poor,
have been the chief advocates of egalitarianism. Most poor people
want to become richer. It is the intellectual class that is
so often obsessed with envy and hatred of people who are more
financially successful than they are. That they can manipulate
survey questions that are used to make it appear that this view
comes from “the poor” and not themselves does not
make this statement untrue. (p. 189)
Organized
Crime is an outstanding presentation of the main themes of
DiLorenzo’s career as a scholar. Anyone who values a historically
informed and well-written defense of freedom will gain a great
deal from reading the book and absorbing its lessons.
August
23,
2012
Copyright
© 2012 by the Ludwig von Mises Institute.
Permission to reprint in whole or in part is hereby granted, provided
full credit is given.