SECTION 1: SOCIALISM 18. THE NEW COMMUNISM August 2001

The political and ideological forces that gave rise to Bolshevism at the turn of the century are similarly inspiring the movement that looted and burned last month in Genoa, and, before that in Quebec City, Davos, and Seattle. The experience of both causes shows how violent fanatics can gain a political stronghold, and influence the course of history, provided they choose their issues carefully—and just as carefully conceal their ambitions.

From 1916 through 1918, the Bolsheviks engaged in active protest against the Russian war on Germany. They were the party with one nonnegotiable demand: peace. The Communists were wrong on everything but that one issue, yet it was the most important to the general Russian population. An entire generation of young men was being drafted by the Tsar and sent to be killed, even as the war was crushing the economy and spreading misery and suffering.

The Tsar seemed impervious to the suffering. Meanwhile, Lenin and Trotsky, maniacal Communists with a lust for blood, said the war was a symptom of capitalism, which makes no sense, but they called for an end to an undeniable injustice that no one else talked about. Not until after they gained power did the Communists’ demonic intentions become obvious to most Russians. But once the Reds consolidated their power by murdering their adversaries, their bloody rule lasted 74 years.

The international communist movement didn’t disappear after 1989; it just took on new guises and causes. The media like to talk about how diverse the protesters were in Genoa (the whites, pinks, and blacks), but these labels apply only to their tactics and taste for blood.

All but a few agree that capitalism, as embodied in the leadership of industrialized nations, needs to be displaced by a revolutionary anticapitalist vanguard, or, if that doesn’t work, a heavy-handed regulatory and redistributionist regime that would cripple capitalist production.

In these ambitions, the protesters were homogeneous, save for a few straggling libertarians. However, the propaganda strength of the Genoa protesters was also based in genuine complaints about the present state of things. All over Europe, resentments against the consolidation of the international bureaucracies are coming to a boil.

Intimately bound up with this concern is growing opposition to US military imperialism. The United States has most of the guns and cares least about the effects of their use. Everywhere on the global map where you find US soldiers (in more than 100 countries), you will also find locals who despise them for their bad behavior and arrogance. US military dominance has given rise to other complaints: that the United States exercises undue political influence on governments and international agencies.

In fact, many political trends of our times are best seen as attempts to provide some counterweight to the one-superpower world. Despite assurances, for example, this is precisely what the Russia-China accord was all about.

The protest movement has been emboldened by the Bush administration’s resolve to build a nuclear shield—the biggest government boondoggle since the superconducting supercollider, and dangerous in the bargain. In true Marxist fashion, the protesters blame capitalism as the root problem (have they noticed that the military itself is a socialist institution, entirely funded by tax dollars?) and favor some sort of communism as the answer.

And so, inevitably, they lump together good positions the US government takes (against the Kyoto treaty) with the bad positions (global military domination). Just as the US military empire discredits its good economic works, the protesters mix their laudable opposition to militarism with a damnable hatred of liberty and property.

But in general these people are long on complaints and short on answers. The stock demand that international agencies do more to protect “human rights” plays right into the hands of the power elite. Thus Jacques Chirac, the French social democrat, made very sympathetic comments toward the protesters. The final statement of the G-8 included all sorts of pious rambling about the world’s poor, comments widely interpreted as concessions to the protesters.

The protesters have no principled objection to international agencies as such. Instead, they want to eliminate whatever good they do—opening world markets to capitalist exchange—and expand the bad that they do, which is imposing US-style regulation on the world.

Indeed, a main demand of the protesters is that the international bureaucrats inside be given more, not less, power over economic life. What may look like violent conflict between the plutocrat and the protester is merely a disagreement between moderate and extreme attempts to subject the world to global economic management.

To understand the extent of the ideological confusion, have a look at the manifesto of the antiglobalist movement. The book Empire is written by would-be Lenins Michael Hardt and Antonio Negri, and it is unabashedly promoted as the new Communist Manifesto.

The authors (Negri is in jail in Rome and Hardt is a literature professor at Duke) are economic ignoramuses. They live lives entirely shielded from commercial society. They know nothing of the library of books showing that their Marxoid views are nothing short of lunacy. And yet the book is so much in demand that the publisher (Harvard University Press) can barely keep it in stock. If you are paying tuition for your child to go to college, it’s a good bet that he or she will be reading this book in the next six months.

Here’s what the book says, as gleaned from an equally insane op-ed in the New York Times (June 20, 2001). Apart from its arch tone, and cocksure sense that history is on their side, the authors’ complaints amount to the usual leftist prattle about racism, sexism, and multinational corporations. But whereas Marx and Engels were specific about what they demanded (the abolition of the family and private property, for example), Hardt and Negri are more circumspect. They merely ask for a “new system” that would “eliminate inequalities between rich and poor and between the powerful and the powerless” and “expand the possibilities of self-determination.”

That last point about self-determination could mean anything (I bet not secession, however). But the point about inequality is unmistakable. Think about what it would require to “eliminate” inequality, that is, to make everyone equal in wealth and power. Look it up: equal means the same, as in arithmetic. It cannot happen. The attempt would require a looter state on a scale that we haven’t seen since, well, since the early Soviet Union. As F.A. Hayek said, “a claim for equality of material position can be met only by a government with totalitarian powers.”

But Hardt and Negri don’t deal with Hayek, Ludwig von Mises, or any serious thinkers in the liberal tradition. Their religion, their lunacy, begins with the premise that Marxism is true, and they ignore or dismiss anything that departs from that premise.

Some may call their followers anarchists, but in fact what these people want is total control. What life would be like under a regime inspired by these people is foreshadowed in the streets of Genoa: looting, burning, destruction, and chaos. The protesters did us a favor in previewing exactly what would happen everywhere on the planet if they prevail.

How can they be beaten back? So long as the academic and welfare classes stay on the public payroll, there will always be those who will protest private property and capitalist economics. But what about their growing popular support, such that 100,000 people showed up to protest in Genoa?

Return to the Bolshevik parallel. What if the Tsar had ended the draft, pulled out the troops, stopped the war, and restored normalcy? He would have strangled the Communist movement by eliminating its whole political basis of support. The Russian people would have been spared seven and a half decades of Hell on earth, and 40 million corpses.

So it is with the new Communists. If we fear them, there is only one path to victory over them: the US military empire. Withdraw the troops. Dismantle the nuclear weapons. Scrap plans to build a provocative shield. Repeal sanctions against Iraq, Cuba, and other nations on the bad guy list. Withdraw from international agencies and mind our own business, while trading with the world.

This is not “caving in” to the demands of the protesters. It is simply doing what is right, and thereby denying them a just pretext for their political activities. To be sure, these actions would not stop the fanatic ideologues behind the antiglobalism movement, and it won’t stop would-be central planners in international agencies from conspiring. But it would take away whatever popular basis of support they enjoy.

To do this now is more important than any of the elites presently know or understand. The New Bolsheviks, already entrenched in academia and NGOs, are a growing force in world politics. Civilization is fragile, and if the protesters get their way, we will find out just how fragile.

19.
THE NEW FABIANS
April 1993

Before the Russian Revolution, the Communist Party had two wings: Bolshevik and Menshevik. The Bolsheviks believed in the immediate establishment of socialism through violence. The Mensheviks (who also called themselves social democrats) argued for a gradual, nonrevolutionary path to the same goal. Liberty and property were to be abolished by majority vote.

The Bolsheviks won, but after committing unimaginable crimes, they have pretty much disappeared. The Mensheviks, however, are taking over America.

At a recent town meeting in Hyde Park, New York, Bill Clinton was asked about a national sales tax (also called a value-added tax or VAT). Clinton—who is happily imposing income, corporate, energy, inheritance, and other taxes—said he could not include a VAT “right now.” There is “only so much change a country can accommodate at the same time.”

Our local Menshevism has its roots not in Lenin’s Russia, but in the London of 1883, when a group of go-slow socialists founded the Fabian Society. Headed by the appropriately named Herbert Bland, its most famous members were playwright George Bernard Shaw, authors Sidney and Beatrice Webb, and artist William Morris.

The Fabians took their name from Quintus Fabius Maximus, the Roman general who defeated Hannibal in the Second Punic War by refusing to fight large set-piece battles (which the Romans had lost against Hannibal), but only engaging in small actions he knew he could win, no matter how long he had to wait.

Founded the year of Marx’s death to promote his ideas through gradualism, the Fabian Society sought to “honeycomb” society, as Fabian Margaret Cole put it, with disguised socialist measures. By glossing over its goals, the Fabian Society hoped to avoid galvanizing the enemies of socialism.

Unlike revolutionary Marxists, the Fabian socialists also knew the workings of British public policy. As the original “policy wonks,” they did much research, drew up plans, wrote pamphlets and books, and made legislative proposals, drawing on their allies in universities, churches, and newspapers for help. They also trained speakers, writers, and politicians, and Sidney Webb founded the London School of Economics in 1895 as headquarters for this work.

Although the Fabian Society never had more than 4,000 members, they originated, promoted, and steered through parliament most of British social policy in the last 80 years. The result was a wrecked economy and society, until Margaret Thatcher began to defabianize England.

The Fabians succeeded in their goal of establishing the “provider state,” a welfare state that would care not just for the poor, but also for the middle class, from cradle to grave.

Whether it was workmen’s compensation, old-age pensions, unemployment benefits, or socialized medicine, the Fabians always stressed “social reform,” noted John T. Flynn. They

saw early the immense value of social reform for accustoming the citizens to looking to the state for the correction of all their ills. They saw that welfare agitation could be made the vehicle for importing socialist ideas into the minds of the common man.

Another Fabian innovation: social reform invariably involved some sort of “insurance.” People were induced to accept socialism through the model of the insurance company.

Real insurance companies, relying on a random distribution of accidents, pool money to make the world less uncertain for all of us. Pool everyone’s wealth in the state—the Fabian argued—and we could be happy, healthy, and wise.

Aneurin Bevan, the Fabian cabinet minister in the post-war Labour government who imposed the National Health Service, actually argued that it would drastically increase everyone’s life span, eventually warding off death indefinitely.

The real Fabian vision of the state had been shown, however, in Sidney and Beatrice Webb’s Soviet Communism: A New Civilization? published in 1935 (the question mark was removed from the title after the first edition). The book praised Stalin’s U.S.S.R. as a virtual Heaven on earth.

As fellow Marxists, if of a different stripe, the Webbs were bound to approve of Stalinism—the end if not the means. “The Fabians were in a sense better Marxists than Marx was him-self,” said Joseph Schumpeter.

To concentrate on the problems that are within practical politics, to move in step with the evolution of things social, and to let the ultimate goal take care of itself is really more in accord with Marx’s fundamental doctrine than the revolutionary ideology he himself grafted upon it.

Bill Clinton was trained by modern Fabians during his Rhodes scholarship days at Oxford. Carroll Quigley, his mentor at Georgetown, was also a sort of Fabian. Perhaps this is why Clinton calls higher taxes “contributions,” government spending “investment,” blind obedience to him “patriotism,” and private property owners “special interests.”

Clearly socialism is what Clinton means by “change.” As E.J. Dionne has said, “President Clinton’s economic plan is a blueprint for recasting” our society into a “social democracy.”

For example, just as trade unions were about to die a merciful death in American economic life, Clinton signed several executive orders to ensure their prospering at the expense of property owners.

In his first budget, Clinton called on us to sacrifice ourselves to the government. The Fabians said the same, advocating, in the words of Beatrice Webb, the “transference” of “the emotion of self-sacrificing service” from God to the state.

Like other social democrats, Clinton lies to the public. He says that taxing the rich will have no effect on middle class wealth. But concentration of private capital at the top of the social hierarchy is good. It makes everyone better off. Plundering that wealth may lead to more equality, but it’s an equality of poverty.

Clinton has already shown his disdain for the market economy by berating drug companies for their prices and threatening controls on them (while expanding the welfare programs that drive these prices higher).

As to Hillary’s health and medical commission, we will get something more socialist than our present system, but short of the total state. More controls will come later.

The Fabian stained glass window, now installed at Beatrice Webb House in Surrey, England, shows George Bernard Shaw and Sidney Webb reshaping the world on an anvil, with the Fabian coat of arms in the background: a wolf in sheep’s clothing. That wolf is now at our door.

20.
THE VIOLENCE OF CENTRAL PLANNING
August 2003

For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, once praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.

The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League (ADL). “Regardless of the economic arguments” the letter said,

Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide. ...Analyzing his actions through any other lens severely misses the point.

The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.

In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that “Hitler found a cure against unemployment before Keynes was finished explaining it.”

What were those economic policies? He suspended the gold standard, embarked on huge public works programs like Autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national health care and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime’s rejection of the market economy and its embrace of socialism in one country.

Such programs remain widely praised today, even given their failures. They are features of every “capitalist” democracy.

Keynes himself admired the Nazi economic program, writing in the Foreword to the German edition to the General Theory:

[T]he theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire.

Keynes’s comment, which may shock many, did not come out of the blue. Hitler’s economists rejected laissez-faire, and admired Keynes, even foreshadowing him in many ways. Similarly, the Keynesians admired Hitler (see George Garvy, “Keynes and the Economic Activists of Pre-Hitler Germany,” Journal of Political Economy 83, no. 2 [April 1975]: 391–405).

Even as late as 1962, in a report written for President Kennedy, Paul Samuelson had implicit praise for Hitler:

History reminds us that even in the worst days of the great depression there was never a shortage of experts to warn against all curative public actions. ...Had this counsel prevailed here, as it did in the pre-Hitler Germany, the existence of our form of government could be at stake. No modern government will make that mistake again.

On one level, this is not surprising. Hitler instituted a New Deal for Germany, different from FDR and Mussolini only in the details. And it worked only on paper in the sense that the GDP figures from the era reflect a growth path. Unemployment stayed low because Hitler, though he intervened in labor markets, never attempted to boost wages beyond their market level. But underneath it all, grave distortions were taking place, just as they occur in any nonmarket economy. They may boost GDP in the short run, but they do not work in the long run.

“To write of Hitler without the context of the millions of innocents brutally murdered and the tens of millions who died fighting against him is an insult to all of their memories,” wrote the ADL in protest of the analysis published by the Glenview State Bank. Indeed it is.

But being cavalier about the moral implications of economic policies is the stock-in-trade of the profession. When economists call for boosting “aggregate demand,” they do not spell out what this really means. It means forcibly overriding the voluntary decisions of consumers and savers, violating their property rights and their freedom of association in order to realize the national government’s economic ambitions. Even if such programs worked in some technical economic sense, they should be rejected on grounds that they are incompatible with liberty.

So it is with protectionism. It was the major ambition of Hitler’s economic program to expand the borders of Germany to make autarky viable, which meant building huge protectionist barriers to imports. The goal was to make Germany a self-sufficient producer so that it did not have to risk foreign influence and would not have the fate of its economy bound up with the goings-on in other countries. It was a classic case of economically counterproductive xenophobia.

And yet even in the United States today, protectionist policies are making a tragic comeback. A huge range of products from lumber to microchips are being protected from low-priced foreign competition. These policies are being combined with attempts to stimulate supply and demand through large-scale military expenditure, foreign-policy adventurism, welfare, deficits, and the promotion of nationalist fervor. Such policies can create the illusion of growing prosperity, but the reality is that they divert scarce resources away from productive employment.

Perhaps the worst part of these policies is that they are inconceivable without a leviathan state, exactly as Keynes said. A government big enough and powerful enough to manipulate aggregate demand is big and powerful enough to violate people’s civil liberties and attack their rights in every other way. Keynesian (or Hitlerian) policies unleash the sword of the state on the whole population. Central planning, even in its most petty variety, and freedom are incompatible.

Ever since 9-11 and the authoritarian, militarist response, the political left has warned that Bush is the new Hitler, while the Right decries this kind of rhetoric as irresponsible hyperbole. The truth is that the left, in making these claims, is more correct that it knows. Hitler, like FDR, left his mark on Germany and the world by smashing the taboos against central planning and making big government a seemingly permanent feature of western economies.

The author of the article for Glenview was being naïve in thinking he could look at the facts as the mainstream sees them and come up with what he thought would be a conventional answer. The Anti-Defamation League is right in this case: central planning should never be praised. We must always consider its historical context and inevitable political results.

21.
NATIONAL TREASURES
October 2000

It is election time, which means open season on the well-to-do. We are supposed to favor expropriating them in order to meet social needs to be provided by the government. Candidates who want to cut taxes go on the defensive, assuming that they must assure their audiences that the rich won’t benefit from their tax plan to any great extent.

It’s all nonsense. The rich are the driving force behind wealth creation, economic innovation, job and income growth, and the improvement of living standards generally. Those responsible for the current prosperity daily undertake activities that never make it into the headlines, but they make social and economic progress a reality for society as a whole as well as for themselves.

Forbes Magazine features profiles of many of these people. What amazing and inspiring stories! Their every decision affects the lives of thousands of people and the fate of billions of dollars. Everyone envies their wealth, but who among us would be willing to undertake the risk or bear the enormous burdens they live with on a daily basis?

The total net worth of the top 400 is $1.2 trillion, and the average net worth is $3 billion. Three-quarters of them are billionaires. The price of admission to the club is a cool $725 million. Nearly 1 in 8 of the members are new this year, having displaced 55 who fell from the list; 263 members are entirely self-made, while only 77 inherited their wealth. (The name Rockefeller doesn’t appear until No. 104.) One quarter never graduated from college. One quarter live in California—as far from Washington, DC, as possible on the mainland.

The top five include no one from traditional industries. Three represent software (Bill Gates, Paul Allen, Larry Ellison), with one each from hardware (Gordon Moore) and securities (Warren Buffet). Many names you have never heard of are the secret behind the Internet getting faster, websites more navigable, and computers ever more sophisticated.

Unlike the political class, which enjoys fawning interviews from the press and the cheers of servile supporters, the business class is abused and reviled by popular culture. Whereas the news media love nothing better than reprinting government press releases, the only time business leaders make it into the headlines is when they run afoul of government law. They also suffer bad press because they are mostly white men, the class that has been designated as evil oppressors.

It is commonly believed—even taught in business school—that these people are “taking” from the community. Hence, they have a moral obligation to “give back” in the form of philanthropy and other forms of “community service.” The problem here is not charity itself. Rich or poor, capitalist or worker, giving is always a good idea (whether that should be done at the expense of stockholders is a different issue). Indeed, American businessmen are the most generous in the world and are the foundation of the half-trillion dollar nonprofit sector in the United States.

The trouble is the idea that charity should be a quid pro quo for making money. In truth, making money in a free market is identical to giving to the community. Economic profits are an indication that one is serving one’s fellow man. The richer you become in business, the more you have contributed to the betterment of humanity—even if you are doing so for purely selfish reasons.

Even more than the individuals involved, the real miracle is what these 400 represent. Many of them are competitors with each other. Some of them are surely ruthless and greedy rogues; others, however, are pious family men. Some you would find intolerably arrogant; others you could trust with your life. Some are decidedly secular, and others are profoundly religious.

Regardless, the market economy channels their rare impulses in socially productive ways, forcing them to turn their ambitious personalities toward the goal of serving others, and making them constantly accountable to consumers and investors. Their activities coordinate within a capitalist structure to improve every aspect of our lives, whether in education, entertainment, health care, communication or a million and one other products and services. The market economy works to turn the love of money into the service of the consuming public, which is to say the community at large.

Not that most of the rich understand this. They are largely unconscious of their contribution to society, oddly ignorant of the larger picture, and loath to praise the virtue of capitalism in public. They mostly accept the accusations made against them by the media, by the religious establishment, by intellectuals of the left and the right, and by government. Their profession has few defenders. When the attacks are so intense that they threaten their companies, they find themselves without the intellectual resources to explain their social merit.

This is less a problem in the United States than in Europe. But only America has billionaires such as Ted Turner, who make their living off capitalist successes while using their profits to fund socialist activism. This is corporate suicide. Once the journalist John Stossel asked him whether it would be a better idea to invest a billion than to dump it on a bureaucracy like the United Nations. Turner walked off the set in outrage.

Lacking intellectual interest in market economics, some of them also lack principles in the way they conduct their affairs. For example, look at the pictures and profiles of Number 1 and Number 2, which clarify the real nature of the antitrust attack on Microsoft. Gates of Microsoft has $63 billion. Ellison of Oracle has $58 billion, and has been the leading cheerleader behind the attack on Gates, once even hiring people to dig through Microsoft’s garbage to find incriminating evidence. Worse, he’s got the government on his side. The bottom line is that Ellison can’t stand being Number 2 and is using the government to dislodge the guy on top!

Microsoft itself seemed to be on the verge of launching a principled defense of free enterprise, but then weighed in on behalf of an antitrust investigation of America Online for the success of its Instant Messaging software. This was a cheap assault on a competitor, a tactic no better than those used by Ellison against Gates. There’s nothing more tragic than seeing people who make their fortunes from voluntary exchange turning to the levers of coercive power to get their way.

But this kind of behavior is the exception, not the norm. The American business class, and in particular the richest 400, deserve our admiration and respect.