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The Origins of Neoliberalism, Part I – Hayek’s Delusion | Philip Pilkington

"Von Hayek and his fellow Austrian aristocrats who were forced to flee from the fruits of their economic programs, did a complete revision of history and retold that same story as if the very opposite of reality had happened. Once they were safely in England and America, sponsored and funded by oligarch grants, hacks like von Mises and von Hayek started pushing a revisionist history of the collapse of Weimar Germany blaming not their austerity measures, but rather big-spending liberals who were allegedly in charge of Germany’s last government. Somehow, von Hayek looked at Chancellor Bruning’s policies of massive budget cuts combined with pegging the currency to the gold standard, the policies that led to Weimar Germany’s collapse, policies that became the cornerstone of Hayek’s cult—and decided that Bruning hadn’t existed." - Mark Ames

Friedrich Hayek was an unusual character. Although well known to be a libertarian political philosopher, he is also commonly associated with being an economist. And it’s certainly true that at one time Hayek’s focus was solely on economics. In the 1920s Hayek was still within the fold of pure economics, publishing papers and works that were taken seriously by the discipline. However, by the 1930s Hayek’s theories had started to come apart at the seams. Exchanges between Hayek and John Maynard Keynes and Piero Sraffa show Hayek as confused and even somewhat desperate. It was around this time that Hayek discontinued making any substantial contributions to economics. Not coincidentally this overlapped with the time when most economies, mired as in Great Depression, demonstrated that Hayek’s theories were at best impractical, at worst a complete perversion of facts.

So, Hayek turned instead to constructing political philosophies and honing a metaphysics rather than engaging in any substantial way with the new economics that was emerging. When pure logic and empirical reality ceased to support Hayek’s emotionally charged ideology he turned, to the more malleable sphere of meaning and metaphysics. He became concerned with watery terms like “freedom” and “liberty”, which he then set out to impregnate with a meaning that would support his dreams. The most famous result of this period of conversion, which resembled less St. Paul on the road to Damascus and more so an alcoholic who had hit rock bottom, was Hayek’s 1944 work The Road to Serfdom. In a very real way it was this book that marked the close of Hayek’s career as a serious economic thinker and set him on the path of the political propagandist, agitator and organiser.

The over-arching argument of the book is well-known and need not be repeated too extensively here. Hayek thought that all totalitarianisms had their origins in forms of economic planning. Economic planning was the cause of totalitarianism for Hayek, rather than the being just a feature of it. Underneath it all this was a rather crude argument. One may as well make the observation that totalitarianism was often accompanied by arms build-up, therefore arms build-ups “cause” totalitarianism. But Hayek pushed it and most probably believed it anyway, for reasons that we shall soon see.

The implicit argument here was that, Britain for example, which had begun to increasingly plan its economy during the war, was on a slippery slope that would end in totalitarianism. It must be understood that Hayek’s argument had no factual basis. Only a polemicist could argue that the two totalitarianisms that existed in this period – namely, Hitler’s Germany and Stalin’s Soviet Union – had formed because a naïve democratic government had engaged in some economic planning that then got out of hand and resulted in tyranny. But Hayek’s motivations probably lay somewhat deeper – probably so deep that he himself could not properly recognise them.

Continue reading

Bonus: Joseph Hansen with one of my favorite critiques of Hayek (written in 1945).

Right-to-work is big government | Matt Bruenig

So the Michigan lower house has decided to pass a right-to-work bill. This is a pretty standard right-wing maneuver over the last few decades. The idea is to make it impossible for unions to negotiate closed shops, which creates a free rider problem that will ultimately lead to their demise. That is good for owners and management who will have no countervailing workplace force to contend with and good for right-wing politicians who will have no countervailing political force to contend with.

It deserves mentioning that right-to-work laws are actually counter to the expressed philosophy of the right wing, and especially the libertarian sorts. Few seem to understand (or discuss) the mechanics of how right-to-work laws actually achieve their expressed aim. They do so by prohibiting freedom of contract. Specifically, the laws make it illegal for a union and a business to freely enter into a contract with one another over requiring that employees be union members. If these two actors want to enter into such a contract, it does not matter: the law says they cannot.

So it functions as an economic regulation that prohibits certain kinds of contracts. Naturally you would expect politicians that are vehemently against economic regulation and laws that restrict freedom of contract to be opposed to right-to-work. Right? Well, no. Because at the end of the day, those are simply shell arguments. Freedom of contract and less government regulation are principles to stand behind only as long as they flatter the needs of capital. When capital is better served by violating these principles, then the right is more than willing to do so.

I argue with libertarians a lot, often in venues where the conversation isn’t very productive. My greatest frustration is the selective definition of coercion and the refusal to grapple with what forces actually constrain liberty in the real world. You’ve got to eat to live and got to work to eat. That’s coercion. The fact that the coercion arises from a state of nature might mean that we can’t blame anyone for the coercion itself, but it certainly doesn’t prevent us from blaming those who exploit it. And capitalism doesn’t just permit that coercion, it can’t function without it. The distinction between someone who puts a gun to my head and says ‘you must work for me or die’ (bad coercion, to libertarians) and someone who points to my certain starvation if I don’t work and says ‘you must work for me or die’ (good coercion, to libertarians) is almost entirely irrelevant to how I actually experience life and liberty. And the latter condition afflicts many millions of people. The reality of death due to starvation and exposure might be a state of nature but the exploitation of that state of nature to satisfy self-interest certainly is not. But this exploitation is at the very heart of the libertarian and capitalist project.

L’Hôte (via azspot)

Libertarianism and capitalism seem like deeply incompatible systems to me. I don’t expect libertarians to wholesale abandon either in response to this incompatibility. But you’d think that there would be a large, extended, and frequently unhappy conversation within libertarianism about the exploitation of coercion in the labor force, the way there is a large, extended, and frequently unhappy conversation within the left about markets and their use. From my outsider’s perspective, any such conversation happens very rarely and in small forums that have little to do with libertarianism writ large.

My vantage is limited. But it seems to me that libertarian principles have huge consequences that are frequently in great tension with capitalism and totally antithetical to the desires of large corporations; libertarian discourse, in practice, is dominated by whining about tax rates on the wealthy and regulations that protect workers. I’ve read my Nozick and my Rand and my Hayek and yet find barely any consideration of the massive exploitation of the coercive state of nature in the libertarian media. When brought up, the topic is treated with the typical defensive snark. It’s depressing, and given the tendency of libertarianism to devolve into a defense of the powerful at the expense of the powerless, it doesn’t look good.

(via azspot)

Saved by the Invisible Hand | digby

randomactsofchaos:

John Stossel proves once again that he’s lives in a libertarian utopia only inhabited by arrogant teenagers and celebrity millionaires:

Christie would help more if he could suspend New Jersey’s foolish law forbidding price increases of more than 10% during an “emergency,” and if he’d apologize for bragging that the state will crack down on price “gouging!

What politicians call “gouging” is just the free market. When markets are allowed to work their magic, lines disappear… If gas stations could raise prices, many of those drivers would wait, and drive less. Drivers who really need gas would be able to get it. At the same time, entrepreneurs would rush gasoline to gas stations that have the highest prices. The lines would quickly vanish, and prices would come back down.

And the drivers who really “need” gas (not sure who it is that doesn’t, but apparently there are a lot of them) will just happen to be those who are flush with cash and can afford the stupid high prices. And hey, if a few people have to lose their jobs, go without food, are unable to get to a hospital or evacuate due to the lack of money, well they should have thought of that before they decided not to get rich. You’ve gotta take responsibility for your bad choices in life.

Seriously, this worship of markets is just as faith based as any other religion. And just like all the others it features an invisible Deity directing traffic from somewhere else. I’m not much of a believer in any of them but if I had to choose I’d pick one of the ones that doesn’t require the human sacrifices.

Also too: this.

…the moral secret of capitalism, its existential fundament, is not that we are free to choose but that we are forced to choose. Only when we are confronted with the reality of scarcity, says the Austrian economist, only when we must reckon with the finite resources at our disposal, are we brought face to face with ourselves. In deciding how to deploy those limited resources—whether they be time, money, effort—we’re compelled to answer the great questions of life: What do I value? What do I believe? What do I want in this life, in this world? (“Every man who, in the course of economic activity, chooses between the satisfaction of two needs, only one of which can be satisfied, makes judgments of value,” says Mises.) That decision must not only remain free; it must also remain mine. Most important of all, says the Austrian economist, it must remain a decision. Should what he calls the “economic situation” disappear from the human world, the disciplining agent of all ethical action—the necessity to choose among a limited set of options—would go with it. If our “ends dominate economy and alone give it meaning,” as Mises says, it’s also true, as Menger discovered, that economy alone is what gives our ends meaning. That, it seems to me, is the center of gravity of free-market economics.

Corey Robin (via azspot)

In other words, your “coercion” arguments are bunk, Austrians.

(via azspot)

Libertarianism in Honduras

One of the stranger fallouts from the 2009 Honduran coup has been the scheme hatched by an NYU economist, Paul Romer, along with free-market libertarians—including Milton Friedman’s grandson, Patri; you can’t make this shit up—to start a bunch of “year-zero” cities in the country, free-market utopias with their own laws, etc. It’s like Empire’s Workshop meets The Shock Doctrine meets Fordlandia (except Henry Ford at least had his year-zero city provide free health care). If they were to come to fruition, they would be little more than free-trade maquila zones, like the kind that run along the US-Mexican border, except more savage.

In any case, the plan has hit a snag in that a committee of the Honduran Supreme Court has declared them unconstitutional, though that ruling could be reversed by the full court. Recently, a lawyer who argued for their unconstitutionality was gunned down, joining the long list of decent people killed as a result of the US-endorsed coup.

By the way, related to the discussion Corey Robin had on his blog about whether Hayek’s and Friedman’s support for dictatorships were inherent to their thought or just situational, Patri Friedman has cleared that point up, saying, in relation to these kind of start-up cities, that “Democracy is the current industry standard political system, but unfortunately it is ill-suited for a libertarian state.” Peter Thiel, founder of Paypall and bankroller of FB and another supporter of the Honduran scheme, wrote: “Most importantly, I no longer believe that freedom and democracy are compatible.” Glad that particular contradiction has gotten resolved. Adelante.

BONUS: Honduras: Now Open for Political Murder

(Source: azspot, via other-stuff)

Failed Philosophies of Property Rights | Matthew Bruenig

I know more about liberal theories of property rights than I do any other philosophical subject. I am not sure why, but I was fascinated by procedural accounts of the origination of property rights for a multi-year long span of time, during which I read just about every canonical text in the debate. Much to my delight then, I see Matt Yglesias and Bryan Caplan sparring over an esoteric property rights problem: if property rights are to be justified based on just procedures, then how can any they exist given that those procedures have not been followed.

Backing up a bit, here is how this particular brand of property rights arguments are supposed to work. Initially nobody owns anything. Then someone grabs up a piece of the world and now owns it. From that point, voluntary trades are made indefinitely for that piece of the world. This process is said to be voluntary, non-aggressive, and non-coercive, and it is the following of this process that is supposed to justify whatever holdings exist at any given time. The problem of course is that we haven’t followed this process, not anywhere close to it (see also Native Americans).

In the debate between Caplan and Yglesias, the primary point of discussion is what exactly to make of this. Caplan — as Yglesias rightly points out — begs the question in the debate: he assumes that libertarian property rights are just and then constructs an ad-hoc policy to move forward despite the unjust origin of all existing property holdings. But whether you can come up with a policy to move forward or not is irrelevant. The debate is about whether a just-process theory of property ownership can explain why any existing property claims ought to be respected. It cannot do so because just processes were not followed. This remains true even if practical policies can be put in place that allow existing holdings to remain.

But just-process libertarian theories of property rights beg the question in a much more fundamental way than Caplan does. The just-process theory of libertarian property rights basically works like this:

1. Economic processes are just if they are voluntary, non-coercive, and non-aggressive.

2. The libertarian process of homesteading followed by consensual trades is voluntary, non-coercive, and non-aggressive

3. Therefore libertarian process of homesteading followed by consensual trades is a just economic process

You can attack either premise one or premise two or both. I happen to think both are false, and that premise one is actually impossible in a finite world where scarcity exists. But I will leave that aside. The easier move here is just to point out that premise two is wrong. The libertarian process of homesteading is not voluntary, non-coercive, and non-aggressive.

At time 1, nobody owns anything, and everyone can access any piece of the world. At time 2, someone has “homesteaded” a piece of the world. This homesteading is done entirely unilaterally. Everyone else in the world is not consulted; their consent is not provided. If someone from the set of “everyone else in the world” decides to take advantage of their previously existing access to the piece of the world that was homesteaded, what happens? Violence is acted on them. That is, aggression is acted on them.

Libertarians typically respond that the violence mentioned here is not aggression: it is defense because the person owns the land. Wait a minute! That begs the question. The central question is: do you actually own the land? I am claiming you do not; and you are claiming you do. The way we are supposed to adjudicate that question is to ask: do the processes involved in you coming to own it involve aggression? The libertarian is saying he owns the land because he is being non-aggressive, and saying he is being non-aggressive (defensive) because he owns the land. The circularity is apparent.

If I never agreed to the economic regulation that says “if a person homesteads unclaimed land, he may violently keep others from it for the rest of history,” imposing that rule upon me is not voluntary. At an initial point — according to the libertarians — I have access to every piece of the world. I never agreed to forego that access. It is taken from me, bit by bit, through unilateral actors who use violence against me if I resist. The act of homesteading literally involves threatening every other human being on earth with violence. It says: this piece of the world is now mine, you may no longer access it ever again, and if you try to do so, I will physically assault you.

The process of unilaterally stripping access away from every other human being on earth is clearly not voluntary, and involves coercive threats of violence. When those threats end up being acted out because a person does not go along with these unilateral proclamations of ownership, it is aggression. And the only thing libertarians ever do when confronted with that obvious reality is beg the question on ownership by assuming it already exists even as its existence is precisely what is in contention. [read the rest]

Workplace Coercion and Libertarianism | Matthew Bruenig

A three-author piece on libertarianism and workplace coercion has been ripping through the popular political blogs in the last few days. The piece is long, and its points are varied, but the biggest one is that laissez-faire capitalism — the favored economic form of libertarianism — generates conditions of coercion that violate the very liberty that libertarians claim to treasure. The libertarian focus on government power ignores the very substantial amount of private power held by those who control the gates of employment, i.e. bosses.

At any moment, bosses can terminate at-will employees for no reason at all, thereby eliminating those employees’ access to food, clothing, housing, and any other basic necessity that requires an income. It is not hard to imagine then how the constant threat of termination can coerce employees to do what the boss wants. The choice between doing what the boss says or having your kids go hungry is not really a choice at all. You do what the boss says. If the boss is a conservative willing to fire anyone who speaks out against the war for instance, an employee has to consider that when she decides whether to attend an anti-war rally. That is, she must decide whether to exercise her freedom of speech or not. The consequence of doing so will be employer retaliation instead of state retaliation, but that seems to many to be a distinction without a difference. [++]

Professor Hayek … says, ‘I have not been able to find a single person even in much maligned Chile who did not agree that personal freedom was greater under Pinochet than it had been under Allende.’ It is hard to believe that he does not well understand that such absolute unanimity only exists when those who disagree have been imprisoned, expelled, terrified into silence, or destroyed.

Ronald Cohen, 1978

Libertarianism, neoliberalism, etc. Whatever your “ism”, oh great reactionary defenders of Capitalism, your definition of liberty and “personal freedom” is perverse, and your guiding light, Dr. Friedrich Hayek, was, for lack of a better word, a dick.

For further examples, read Corey Robin’s Hayek von Pinochet and But wait, there’s more: Hayek von Pinochet, Part 2

Joseph Hansen: Hayek Pleads for Capitalism (June 1945)

[Friedrich] Hayek, of course, is not original in his logic. He simply states more baldly the assumption at the bottom of the whole school which maintains Nazism and Marxism are twins; that Nazi Germany and Soviet Russia are species of one genus; that Stalinists and Nazis are both representatives of a new class hitherto unknown and unforeseen in history. Hayek’s method is characteristic of the petty bourgeois approach to this subject. Its appeal to petty bourgeois renegades from socialism has been demonstrated again and again, one of the most prominent recent instances being that of James Burnham, whom Hayek mentions favorably in a foot note.

Where his purposes require it, our bourgeois pundit not only amalgamates the unamalgamable, he divides the indivisible. This gives his logic a symmetry that should please the petty bourgeois eye. The petty bourgeois renegades from socialism have long pondered the question of means and ends in order to construct a suitable rationalization to cover their base retreat. Hayek does not overlook this powerful instrument of bourgeois propaganda. “All the consequences with which we shall be concerned in this book,” he declares, “follow from the methods of collectivism irrespective of the ends for which they are used.” Thus does Hayek drive an axe between means and ends. In dialectic logic on the contrary, means and ends reciprocate, are in mutual dependence. A revolutionary takes as his end the building of a political party of the working class so that it can become the means to reach a new end, the dictatorship of the proletariat, which in turn becomes the means to inaugurate the socialist society of peace and plenty. Hayek’s logic, however, makes an arbitrary abstraction of “means,” amputates it from “ends” and opens it up like an empty sack in which he can place whatever content he requires to “prove” his thesis.

Only a soul-sick petty bourgeois, unable to think clearly, could be taken in by logic as “remorseless” as this. But it is precisely such individuals Hayek addresses, and the efficacy of arbitrarily separating ends from means in driving the petty bourgeoisie from Marxism has been demonstrated many times over. I do not know of an exception among the renegades from Marxism who has not passed through the stage of sweating over “means and ends.” It is now a standardized argument in bourgeois propaganda. [++]

Joseph Hansen | Hayek Pleads for Capitalism (June 1945)

An excellent (highly recommended), old-tymie takedown of libertarian hero, Friedrich Hayek:

[In Road to Serfdom, Friedrich] Hayek deals quite concretely with the dangers, terrors and horrors of socialist means. Among his major exhibits is planning. This spokesman of the capitalist order holds that planning leads to the very opposite of what it sets out to accomplish. Instead of a means of achieving greater freedom, planning in the eyes of the professor becomes the means leading to slavery and chaos. Under the fascists freedom was lost, but the fascists are only one species of collectivism of which the socialists are another, therefore freedom would be lost under the socialists just as much as under the fascists. Or to drop more deeply with Hayek into the logical abyss: Since ends (by this Hayek implies good or bad intentions) have nothing to do with what happens from the use of certain means, and since planning is inherently a bad means, no matter who uses it evil results will follow; but planning is characteristic of socialism, therefore …

The facts are so well known one is astonished that even the most delirious petty bourgeois could bring himself to accept such “reasoning.” The fascists in both Germany and Italy used “planning” to crush the working class, drive down the standard of living, intensify exploitation and unite the capitalist class in a bid for world power through imperialist war. This “end” had nothing to do with good or bad intentions. The capitalist class utilized fascist “planning” in order to preserve its rule.

Socialist planning, on the other hand, begins with the expropriation of capitalist property, the expansion of the productive machinery, the raising of the standard of living and the balancing of the economy through correlation of its various sections by means of a general plan. Planning in this case too has nothing to do with good or bad intentions. It is the means the working class must utilize to preserve itself from utter disintegration. At the same time it becomes the means to end the class struggle. Under fascism the class struggle continues; under socialism the classes eventually disappear.

It is not necessary to be a Marxist to see the fallacy in Hayek’s analysis of planning. Anyone who understands the class struggle, as do the capitalists, can see that the result of planning is not implicit in planning in and of itself as a means, but is implicit in what class does the “planning” and for what end.

Read the whole thing

(h/t arielnietzsche)

Why libertarians apologize for autocracy | Michael Lind

Libertarians and conservatives, to be sure, can point to many examples of naive liberals in the last century who embarrassed themselves by praising this or that squalid, tyrannical communist regime, from the Soviet Union and communist China to petty police states like North Korea, communist Vietnam and Castro’s Cuba. But the apologists for tyranny on the left were always opposed by anti-communist liberals and anti-communist democratic socialists. Where were the anti-authoritarian libertarians, denouncing libertarian fellow travelers of Pinochet like von Hayek and Milton Friedman?

For that matter, where was the libertarian right during the great struggles for individual liberty in America in the last half-century? The libertarian movement has been conspicuously absent from the campaigns for civil rights for nonwhites, women, gays and lesbians. Most, if not all, libertarians support sexual and reproductive freedom (though Rand Paul has expressed doubts about federal civil rights legislation). But civil libertarian activists are found overwhelmingly on the left. Their right-wing brethren have been concerned with issues more important than civil rights, voting rights, abuses by police and the military, and the subordination of politics to religion — issues like the campaign to expand human freedom by turning highways over to toll-extracting private corporations and the crusade to funnel money from Social Security to Wall Street brokerage firms.

An old piece, but worth a read.

(Source: theamericanbear)

The libertarian is generally not interested in arguing about empirical facts or the empirical validity of a theory […] Instead, they are only comfortable when making broad-sweeping moral or metaphysical arguments – and so, a typical rhetorical tactic is to assign a moral or metaphysical point-of-view to the opponent and then take this apart. Meanwhile the opponent sits there in a complete daze, trying to get a point in sideways about the structure of the banking system or something so banal while being accused of being a ‘primitivist’, a ‘communist’ or some other such nonsense. This is the ground, the ground of generalisations and stereotypes that the libertarian inhabits. The world is divided up into ‘good guys’ and ‘bad guys’ with clearly delineated metaphysical positions that can be attacked or approved of. Meanwhile, those of us who eschew such pat generalisations try to argue with facts and are baffled when the libertarians begin once more to talk about their metaphysics. But such is nature of the libertarian mind.

Philip Pilkington | The Austrian Disease – Poor Scholarship, a Priori Bias (via theamericanbear)

reblogging this for politicalprof and anticapitalist and all of the rest of you that have had the pleasure of one of these debates.

(via theamericanbear)

Desert Theory and Social Darwinism | Matthew Bruenig

Paul Ryan has never specifically spelled out which conservative economic philosophy, if any, he supports. However, he is an avid Ayn Rand fan and even requires his staff to slog through her comical treatises. I suspect then that Ryan subscribes to a desert theory view (high-productivity people morally deserve higher incomes) as that is the view Rand clumsily puts forward. For Rand, business people are the most productive and intelligent people in the world, and without them the entire economy would fall to pieces. As such, they are deserving of immense compensation. […]

What should we make of the comparison of Ryan’s budget to social Darwinism? Social Darwinism interacts with desert theory as an ultimate, biological explanation of deservedness. One of the problems with buying into conservative desert theory at all is that it supports awarding people according to how much they produce, but it does not take into account what factors affect how productive a person winds up being. Immense amounts of evidence show that where one winds up in life economically has a lot to do with one’s socio-economic background. America is not the beacon of social mobility we like to pretend it is.

That fact seems to cut against the very notion of deservedness because it suggests that people from wealthier households for instance wind up capturing more productive jobs for reasons totally outside their control. When rich kids who do not go to college have a better chance at making a top 20% income than poor kids who do go to college, it sure seems like those rich kids wind up in high-productivity jobs for reasons other than their own merit and hard work.

But the social Darwinist can dismiss those charges. For social Darwinists, rich kids doing better than poor kids can be explained by the rich kids’ superior genes. As Romney adviser Greg Mankiw once wrote “Smart parents make more money and pass those good genes on to their offspring.”

The social Darwinist explanation is also extended to discount race-based inequalities as well. Social Darwinist conservatives like John Derbyshire, an admitted racist, remark simply that Blacks, Hispanics, southeast Asians, and so on wind up poor because they — like poor whites — possess inferior genes.

Social Darwinism represents the biological and racist wing of the desert theory view. It exists for all sorts of sociological reasons to be sure, but it is used within argument to get around the immensely problematic data that shows parental background has way more to do with how much income one pulls down as an adult than any other variable. To the extent that Paul Ryan appears to have desert theory views, Obama’s charge that his budget is driven by social Darwinism is entirely plausible. Not all desert theory conservatives are social Darwinists, but many — like Mankiw and Derbyshire — certainly are.