Lies, Damn Lies, and the History of Capitalism

Modern historians have rarely told the truth about the history of capitalism, especially about the early days of the Industrial Revolution. In this Guest Post, Wanjiru Njoya reckons it's time to set the record straight...

Lies, Damn Lies, and the History of Capitalism
by Wanjiru Njoya

Mark Twain popularised the phrase, “There are three kinds of lies: lies, damn lies, and statistics.” It could equally well be adapted to depict the role of socialist narratives taught as “history”—narratives that wreak even more economic havoc than outright lies. Lies can be debunked with facts, but socialist narratives appeal to political and moral ideologies that are less easily dislodged once they take root.

The socialist view of economic history teaches that capitalism is based on exploiting the poor. It alleges that Western nations are rich due to colonising the Third World. As the economist Peter Bauer observed:

The principal assumption behind the idea of Western responsibility for Third World poverty is that the prosperity of individuals and societies generally reflects the exploitation of others.

The industrial revolution is said to have been powered by theft from poor countries, with white nations acquiring wealth by subjugating other races. Bauer details the essential facts proving these beliefs to be false. He also identifies some of the reasons why these types of anti-capitalist narratives are so influential, arguing that “acceptance of emphatic routine allegations that the West is responsible for Third World poverty reflects and reinforces Western feelings of guilt.”

These guilt narratives, which masquerade as “historical facts,” are more pernicious and more difficult to defeat than blatant lies because, much like statistics, they are assumed to be objective and factual—even when they bear no relationship to the truth. Bauer describes them as “not only untrue, but more nearly the opposite of the truth.”

These myths have fed the prevailing tendency to view “capitalism” as a catch-all phrase denoting cruelty to the less fortunate. In his book Capitalism and the Historians, Hayek explains that this hostile view of capitalism is based on false history:

Who has not heard of the “horrors of early capitalism” and gained the impression that the advent of this system brought untold new suffering to large classes who before were tolerably content and comfortable? We might justly hold in disrepute a system to which the blame attached that even for a time it worsened the position of the poorest and most numerous class of the population. The widespread emotional aversion to “capitalism” is closely connected with this belief that the undeniable growth of wealth which the competitive order has produced was purchased at the price of depressing the standard of life of the weakest elements of society.

That this was the case was at one time indeed widely taught by economic historians.

Hayek argued that despite the “thorough refutation of this belief,” it has not lost its influence—“Yet, a generation after the controversy has been decided, popular opinion still continues as though the older belief had been true.” He warned that this “socialist interpretation of history,” and in particular economic history, had “governed political thinking for the last two or three generations.” Like Bauer, he emphasised that it has no basis in truth:

Most people would be greatly surprised to learn that most of what they believe about these subjects are not safely established facts but myths, launched from political motifs and then spread by people of good will into whose general beliefs they fitted. . . most of what is commonly believed on these questions, not merely by radicals but also by many conservatives, is not history but political legend.

These political legends are depicted as merely descriptive of historical reality. Hayek attributed this in part to the claim of some historians to be objective:

One reason for this probably is the pretension of many modern historians to be purely scientific and completely free from all political prejudice. . . . There is indeed no legitimate reason why, in answering questions of fact, historians of different political opinions should not be able to agree. But at the very beginning, in deciding which questions are worth asking, individual value judgments are bound to come in.

Lacking a huge amount of time for independent study, many people rely on historians for factual analysis. When professional historians push their ideology over as “history” their readers are often none the wiser. Hayek saw this as a major reason why socialist ideology had become entrenched:

The remarkable thing about this [socialist] view is that most of the assertions to which it has given the status of “facts which everybody knows” have long been proved not to have been facts at all; yet they still continue, outside the circle of professional economic historians, to be almost universally accepted as the basis for the estimate of the existing economic order.

Why are false claims that have “long been proved not to have been facts at all” still taught as historical reality? It is not necessarily because socialist historians deliberately try to promote their own ideology—although that is sometimes the case. The more serious issue is failure to appreciate that interpretation of history requires selection and interpretation. As Hayek put it, value judgments necessarily influence historical interpretation:

And it is more than doubtful whether a connected history of a period or a set of events could be written without interpreting these in the light, not only of theories about the interconnection of social processes, but also of definite values—or at least whether such a history would be worth reading.

Further, the dissemination of historical narratives is not confined to formal study. When a historical narrative is dominant, in the manner described by Hayek, it is embedded as part of the general culture and generally accepted as being “obviously true.”

. . . it is via the novel and the newspaper, the cinema and political speeches, and ultimately the school and common talk that the ordinary person acquires his conceptions of history. But in the end even those who never read a book and probably have never heard of the names of the historians whose views have influenced them come to see the past through their spectacles.

Hayek emphasised the importance of getting the facts right, as “we can hardly hope to profit from past experience unless the facts from which we draw our conclusions are correct.” And one could certainly provide the detractors of capitalism with the facts about productivity and economic progress. Bauer’s work on economic development is a great resource for that purpose.

But it is not a simple matter of presenting the facts. Given people’s prior understanding of what they assume to be meant by “capitalism,” which reflects the commonly accepted narratives, any defense of capitalism merely reinforces their moral and ideological objection. Such defenses seem to be saying “yes, the rich brutally exploit the poor, but it’s worth it.”

To illustrate this point, take the example of Bauer’s observation that colonialism in fact introduced economic progress. He explained:

In the early 1890s there were in the Gold Coast no railways or roads, but only a few jungle paths. Transport of goods was by human porterage or canoe. By the 1930s there were railways and good roads; journeys by road required fewer hours than they had required days in 1890. In British West Africa public security and health improved out of all recognition over the period. Peaceful travel became possible; slavery, slave trading and famine were practically eliminated, and the incidence of the worst diseases greatly reduced.

You would expect that to settle the matter for anyone who is genuinely concerned with the facts. But, on the contrary, socialists respond with yet more mockery —“just because you built railroads does not mean colonial brutality was acceptable.” They miss the point entirely, because they cling to their erroneous view of what capitalism is in the first place. Propaganda is based on false ideology and cannot be displaced by highlighting the facts. The underlying ideology itself must be countered: pointing out that capitalism itself is the only system allowing wealth and riches to be attained without exploitation, that the trader principle of capitalism allows each party a win-win, and that it is the only political system protecting an individual's rights.

Nor is it enough to inform people of the correct definition of capitalism, because socialist ideology cannot be displaced by semantic debates. Rather than merely informing socialists that they do not understand what “real” capitalism is, it is necessary also to defeat the underlying ideology, by defending the foundational principles of civilisation—private property, individual liberty, voluntary exchange, and limited government.

* * * * 

Dr. Wanjiru Njoya is the Walter E. Williams Research Fellow for the Mises Institute, and the author of Economic Freedom and Social Justice (2021), Redressing Historical Injustice (2023), “You Stole Our Land: Common Law, Private Property, and Rothbardian Principles of Justice” (2024) and “Individual Liberty, Formal Equality, and the Rule of Law.”
    Dr. Njoya earned her Ph.D. in Law from the University of Cambridge (UK) and taught law for over 20 years at a number of UK universities, including the University of Oxford and the London School of Economics.

    Her article previously appeared at the Mises blog.

"There is simply no such a thing as a 'cost-push' inflation."

"[I]n the strict sense, there is simply no such a thing as a 'cost-push' inflation. Neither higher wages nor higher prices of oil, or perhaps of imports generally, can drive up the aggregate price of all goods unless the purchasers are given more money to buy them."

~ Friedrich Hayek from his 1976 book Denationalisation of Money

What is "Neoliberalism" anyway?

A viral video by young lawyer Riana Te Ngahue is doing the rounds purporting to explain (for her aunties) something called Neoliberalism.

'A' for effort. 'F' for content. As libertarian Alberto Mingardi observes, very few who use the term have actually taken the time to define it correctly and to trace back its origins. She does take the time, but just like the folk she notes in her video (Tamitha Paul, Chloe Swarbrick, et al) Ms Te Ngahue fails to either define or understand where it came from. 

To be fair, it's not clear. Neoliberalism is like "trickle-down" in economics, or "austerity" in political economy: a term used almost exclusively by critics to characterise and critique a whole ill-defined whole cluster of policies and people, none of whom actually exist. (Take a look at Phil Magness for example explaining 'Why I Am Not a Neoliberal.') "Capitalism" of course was famously one of those words too -- used initially by French socialist Louis Blanc and anarchist Pierre-Joseph Proudhon -- before being taken up by capitalism's supporters. A bit like "queer."

But (apart from Scott Sumner, who thinks it's "awesome") there's no sign of that happening with "neoliberalism."

As Jeffrey Tucker explained way back in 2016, "We need a fix on what this term means. Is there a founding thinker, book, or meeting?" Or, in other words:

What is "Neoliberalism" anyway?

by Jeffrey Tucker

The term “neoliberalism” is being flung around everywhere these days, usually with a haughty sense of “everyone knows what this is.” But do we really? You may think you know, but there’s very little agreement among everyone else.

Is there a founding thinker, book, or meeting? The most common search phrases on Google are these: “definition neoliberalism,” “what is neoliberalism,” and “define neoliberalism.”

The confusion is understandable. Sometimes the term is used approvingly by the mainstream press, as for example to describe France’s Emmanuel Macron. Or Javier Milei. (As if there were much in common between the two.)

More often the term is used as a pejorative by the far left and the alt-right. Here it is said with a sneer to be a synonym for capitalism, globalism, elite rule, ruling-class privilege, and the administrative state.

It's true that there's more doubt around these days about cradle-to-grave government.

What are the reasons for this change?

First, there is the rather obvious fact that government management has failed to live up to its promise. People are far more likely to dread than appreciate any real-world contact with the state. Where would you rather be: the DMV or McDonald’s? The school-district office or a local bar? A military base or a car plant? The courthouse or the shopping mall? Want to deal with a government cop or a private security guard?

Second, private enterprise has turned out to produce far more amazing improvements in our lives; health, prosperity, education, transportation, security, and all the other “commanding heights” of life have been well-served by innovation stemming from entrepreneurship and commercial exchange. Pick your example, but a favourite one is how much transportation alone has improved with ride-sharing technology.

Third, a quiet intellectual revolution has been taking place in the postwar period, with generations of outstanding scholars having rediscovered, then improved, then propagated the insights of classical economics. To be sure, it is now conventional wisdom on the Left that this “neoliberal” intellectual shift is a result of an elite conspiracy dreamed up by billionaires and pushed by well-funded institutions and public intellectuals.

But there is a simpler explanation: the ideas of classical liberalism explain the world better than any alternative. Whether the intellectual change is the prime cause of the shift or incidental to it is unknowable. But this much is true: the shift in ideas is both real and necessary for a change in the paradigm.

Still, a classical liberal is not a neoliberal. We need a firmer fix on what this term "neoliberal" means. Is there a founding thinker, book, or meeting?

Liberalism Needed a Champion

The answer is yes. The thinker is the American journalist Walter Lippmann (1889-1974). He is often called the founder of modern American journalism. Also, if any writer/thinker can be called the founding father of neoliberalism, it is he. His life and times roughly overlap with both Mises and Hayek, the twentieth century’s two most prominent proponents of the classical idea of liberalism. Unlike Lippmann, there was nothing particularly “neo” about either of them. 

In fact, Mises himself had already written the definitive book to champion liberalism in the classical form in 1929. But it was published in Austria, in German. Lippman, as a New Yorker, would never have seen it.

Lippmann was not a professor, though he had an elite education and his brilliance was unmistakable. He was one of the most famous public intellectuals of his time, and a paragon of what was called liberalism in the Progressive Era and through the New Deal. As a founding editor of the New Republic, he was a defender of civil liberties, a proponent of peace, and opponent of socialism and fascism. No one would call him a dissident intellectual but he did resist the totalitarian winds of his time.

The Ideological Crisis

In the interwar period, this class of intellectuals had a sincere concern for the preservation of all the gains of liberty in the past, and sought to find a way to protect them in the future. The situation they faced was grim both in the United States and Europe. Two main extremist factions were struggling for control: the communists/socialists and the fascists/Nazis, which, Lippman realised, were two sides of the same authoritarian coin. The New Deal seemed to be borrowing from both while trying to hold on to certain liberal ideals. It was an unstable mix.

Where was the opposition? In Europe, the U.S., and the U.K, there was also a rise of what might be generally called Toryism or conservatism (or, in the American South, agrarianism). This was not a positive program but rather a reactionary or revanchist pose, a longing for the order of days gone by. In Europe, there were waves of nostalgia for the old monarchies and, with it, the desire to roll back the legitimate gains of liberalism in the 19th century. And with this pose comes a series of demands that are absolutely incompatible with modern life and contemporary human aspirations. 

Lippman knew that some form of liberalism had to be the way forward. But not the old liberalism, which he believed had failed (it led to economic depression and social instability, in his view). His goal was a renovated liberalism. He never used the term neoliberalism (that was invented by a colleague), but that is what it came to be called.

The Good Society

Lippmann’s great book – and it truly is a great book and very much worth a read – appeared in 1937: The Good Society. The book celebrated liberalism and thus rejected socialism, fascism, and Toryism. However, it also rejected laissez faire with equal passion, although you have to get pretty deep into the book to discover this. Lippmann had very casually accepted the bulk of the Keynesian criticism of free markets. He tried to thread the needle: opposing statism, loving liberty, but innovating what he regarded as liberal ends through quasi-statist means.

The book made such an impact that it inspired the calling of a hugely important scholarly colloquium held in Paris in August 1938, in the midst of a growing conflict in Europe and the world. Six months later came the German annexation of Austria, and one year before the Nazi invasion of Poland. These were extremely volatile times, and these intellectuals believed they had a responsibility to do something about righting what was going wrong in the world.

The “Walter Lippmann Colloquium” was organized by French liberal philosopher and logical positivist Louis Rougier. It was attended by Lippmann, and included several other leading French intellectuals, including the great monetary theorist Jacques Rueff. Also in attendance Michael Polanyi from the UK, as well as Germans Wilhelm Röpke and Alexander Rüstow. Most notably Friedrich Hayek came from London, and Ludwig von Mises arrived from Geneva where he was then living in sanctuary after having fled the Nazi invasion of Vienna. 

In short, this was a high-powered group, consisting of the world’s most important liberal intellectuals in the year 1938. It was at this event that Alexander Rüstow coined the term "neoliberalism" to label what they favoured. It was intended to apply only to Lippmann’s vision.

Hayek: neither neoliberal, nor conservative

Again, this was a new way of thinking about liberalism. It was democratic, tolerated a wide degree of regulation, plus welfare states, public education, and public provision of healthcare and infrastructure. But it maintained the core competitive processes of the market economy. The hope was to come up with some stable mix of policies that would lead to rising prosperity and bring about a general public contentment with the social order such that the demand for extremist ideologies like fascism and socialism would be kept at bay. The rising progress and demand for new technologies among the public would similarly outcompete revanchist and conservative sentiments in the political marketplace.

That was the hope in any case. I’m not aware of a report of precisely what took place in this Colloquium but one can imagine that both Mises and Hayek were alternatively pleased and unhappy about being pressed to agree with this view.

Hayek was emerging as the main opponent to John Maynard Keynes, while the other participants had made their peace with Keynes. For his part, Mises held the view that any mixture of state management into the market mix only diminishes the individual’s range of choice, slows economic growth, and introduces distortions that cry out for some political fix at a later date. Neither were believers in the great new Lippmann/Rüstow vision.

The Ur Text

To really understand this vision, let’s take a look at Lippmann’s treatise. It is not shabby. In fact, it is an excellent tutorial in the history of liberty. If only it had stuck with that. Still, the rhetoric is powerful and inspiring. You get a flavour from this passage:

Everywhere the movements which bid for men’s allegiance are hostile to the movements in which men struggled to be free. The programmes of reform are everywhere at odds with the liberal tradition. Men are asked to choose between security and liberty. To improve their fortunes they are told that they must renounced their rights. To escape from want they must enter a prison. To regularise their work they must be regimented. To obtain great equality they must have less freedom. To have national solidarity they must oppress the dissenters. To enhance their dignity they must lick the boots of tyrants. To realize the promise of science they must destroy free inquiry. To promote the truth they must not let it be examined. The choices are intolerable. 

Absolutely wonderful! And for the most part, the book continues in this lovely spirit, enough to feed the soul of the most radical libertarian. You have to get pretty far into the book to discover the “neo” part of neoliberalism. He believed that “liberalism must seek to change laws and greatly to modify property and contract” in a way that rejects laissez faire, a term and a system he completely counterposes to his own.

Neoliberalism includes public provision of education, health care, environmental protection, financial regulation, fiscal policy management, monetary control, and more. In fact, “the purpose of liberal reform is to accommodate the social order to the new economy; that end can be achieved only by continual and far-reaching reform of the social order.”

What Lippmann wanted was a new constitution for a “free state.” What he was rejecting was a state that is neutral to social outcomes – the “nightwatchman state” that the old liberals believed in.

Whereas the original liberals wanted law to be stable and general, pursuing only the most limited functions, the neoliberal vision is of a state that is an active part of the guarding, maintaining, and promoting liberty itself, as understood by a particular vision of what should be. It asserted that liberalism is so important that it must be the primary goal of the state to see it realised. 

In practice, there are no limits to how far this can go.

As an example of a state neutral to outcomes, consider the US Constitution. It is a framework for government and law. It specifies what various branches can do and why, and spells out what they cannot do and why. It contains no great aspiration for how society should look (well, perhaps the “general welfare” clause might apply) but mostly sticks to creating a framework and letting the people take it from there.

Neoliberalism instead wants a living state that is not only adaptive but even aspirational. It should take an active role in the lives of people with the expressed purpose of helping them live freer, flourishing, more fulfilling lives. The state must never lord it over the population but rather be the people’s partner in building prosperity and living out the promise of liberalism.

Where Lippmann Goes Wrong

All of this is interesting, but mostly fantasy. In his many chapters on the liberal state, Lippmann lays out all the ways in which his vision of an expansive state does not trend authoritarian. The official and the citizen are just people and there are no royal prerogatives. Bureaucracies aren’t issuing commands such much as behaving like publicly held corporations, always responsive to the public. There are all kind of intermediate institutions between the individual and the state. The public sector is humane, hospitable, adaptive, creative, and why? Because their power comes from the people, not the dictator or king.

All of this is interesting, but it is mostly fantasy.

Lippman, writing in 1938, was blind to important developments that took place in liberal theory, mostly in response to his vision.

The first is that crucial Hayekian point concerning epistemic humility. Lippmann writes as if he knows for sure how to achieve and judge social results that accord with his vision. It is a normal presumption of most intellectuals. Hayek’s innovation was to see that the knowledge necessary for the right ordering society is not accessible in whole to intellectuals and much less to presidents, legislators, or bureaucrats. It is deeply embedded in social processes themselves, and, in turn, in the minds of individuals making the choices that constitute the driving parts of that process.

The second point completely overlooked by Lippmann is that the players within the state itself have their own interests and designs, just as market actors do. They pursue their own interests. They seek to maximise their welfare. They look for more power, more funding, more prerogatives, and those they serve are the interest groups who can bring them more of it.

The idea that a public bureaucracy can be consistently much less permanently directly toward serving the genuine public interest is lacking in evidence. In other words, Lippman was blind to how the truths that would later be associated with the Public Choice school of economics might impact his vision of liberty.

A third problem is the one Mises identified: neoliberalism chooses the wrong means to realise its ends. Legislating higher wages does not actually raise wages; it throws people out of work. Regulating to protect the environment doesn’t end in doing so; it only devalues property which leaves it to be ravaged by irresponsible stewards. Instituting single-payer health care guts the sector of its signaling systems, its incentives for innovation, and its capacity to be rolled out to ever broader sectors of the population. And because intervention doesn’t achieve its stated ends, it becomes the pretext for ever more meddling in the market process.

These problems doom his system to be as much a fantasy as the authoritarian ideologies he opposed.

The Dangers of Neoliberalism

It was in response to Lippmann that both Hayek and Mises crafted many of their arguments over the coming years. Mises never stopped pointing out that laissez faire does not mean “let soulless forces operate,” as Lippmann seems to suggest. It means letting individuals make the choice over what kinds of lives they want to live, and let those choices drive forward the path of social evolution. Mises’s book Human Action was as much a response to Lippmann as it was to Keynes, Marx, and all the other anti-liberals.

Let’s just posit that we have a state that is determined to advance the cause of liberty – not a state neutral to outcomes but one directed at a certain end. Where will this lead us? It could lead to another form of top-down planning. It can result in practices such as social insurance schemes, heavy regulation in zoning and the environment, taxes and redistribution with the aim of bringing more effective liberty to ever more people. In an imperial state, it can lead to the imposition of planning on foreign nations: the IMF, the World Bank, the so-called Washington Consensus, and the United Nations Declaration on the Rights of Indigenous Peoples. 

It can be the excuse for wars for “spreading democracy” and nation building abroad.

You can say that all these policies are well intentioned. In fact, neoliberalism is the very embodiment of good intentions: we shall free all people! In the best case, neoliberalism gives us a post-war German economic miracle. But it could just easily land in Pinochet’s Chile, often cited as a neoliberal state. In foreign policy, neoliberalism can inspire beautiful reform (Japan after the war), or create a destructive terror state that seethes in resentment (see Libya, Iraq, and Afghanistan).

All of which is to say: the neoliberal can quickly become the anti-liberal state. There is no institutional reason why it would not be so. A state with a social mandate is a roaming beast: you might hope for it not to do bad things but you wouldn’t want to be alone with it in a dark alley.

To be sure, the world owes a debt to neoliberalism. It was this formulation that inspired many countries to liberalise their economies, and even been a reason for many of the loosening of controls in the United States. It led to the reforms in Latin America, China, and even Eastern Europe after the collapse of socialism. Neoliberal ideology is partially responsible for the liberation of billions of people from suffering, poverty, and tyranny.

The downside is also present: the continuation of colonialism by other means, the spread of global bureaucracy, the entrenchment of the welfare state, and the rise of deep-state control over culture, society, and the economy. It is also not politically stable. These institutions feed public resentment and fuel populist extremism, which is the very opposite of what Lippmann wanted. 

At the same time, genuine liberals (often called libertarians today) absolutely need to understand: we are not neoliberals. The great part about neoliberalism is the noun not the modifier. Its primary value is not in what it innovated but what it recaptured. To the extent that it diverges from the beautiful system of liberty itself, it can be the source of the opposite.

Neoliberalism Today

That the term is strewn throughout viral videos and public discourse today is a tribute to the power of an idea. This little seed planted in 1938 has grown into a massive global presence, mostly embodied in international bodies, public bureaucracies, political establishments, media voices, and pretexts for every manner of foreign, domestic, and global action. 

And what has been the result? Some good but a vast amount of highly conspicuous bad. Huge public sectors have held back economic growth. Large bureaucracies have compromised human freedom. It gave life to what is called "crony capitalism" today. Global control has bred nationalist blowback, while corporate monopoly has fed socialist longings.

We are again faced with the same problem today that confronted Lippmann in 1938. Everywhere there are ideologies that seek to put men in chains. We do need an alternative to socialism, fascism, and Toryism. We need to get it right this time. Let’s take the neo out of liberalism and accept nothing less than the real thing.

Freedom is not the correct implementation of a public policy plan. It is not the condition of appointing high-minded and intelligent social and economic managers. It is not the result of sound intentions from a fleet of ruling class intellectuals and major economic stakeholders.

Freedom exists when a people, an economy, and a culture, undirected and unmolested by administrative elites with power, are permitted to live and evolve in peace according to the principle of human choice in all areas of life.

* * * * * 

Jeffrey Tucker is the founder and president of the Brownstone Institute, organiser of the Great Barrington Declaration, and a former Director of Content for the Foundation for Economic Education, where his post first appeared. 

Collectivism v Democracy

“It is now often said that democracy will not tolerate 'capitalism.' If 'capitalism' means here a competitive system based on free disposal over private property, it is far more important to realise that only within this system is democracy possible. When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself.”

~ Friedrich Hayek from The Road to Serfdom, Ch. 5

“‘Emergencies’ have always been the pretext on which the safeguards of individual liberty have been eroded"

“‘Emergencies’ have always been the pretext on which the safeguards of individual liberty have been eroded — and once they are suspended it is not difficult for anyone who has assumed such emergency powers to see to it that the emergency will persist." 

~ Friedrich Hayek, from his 1979 book Law, Legislation & Liberty, Vol III: The Political Order of a Free People

No Kings

"The chief evil is unlimited government…nobody is qualified to wield unlimited power.”

~ F.A. Hayek from his book The Constitution of Liberty

We're reminded today of a man ranked by Hayek as one of the greatest classical liberals.  In this guest post by Jim Powell, we learn about William Ewart Gladstone, who so often started on the wrong side of an issue, and so frequently thought his way to the right side ...

William Ewart Gladstone’s Great Campaigns for Peace and Freedom

by Jim Powell

IN THE HEYDAY OF CLASSICAL LIBERALISM, British politics was dominated by one man: William Ewart Gladstone. He entered Parliament at age 23, first held a cabinet post at 34, and delivered his last speech as a Member when he was 84. He served as Prime Minister four times.

Nobel Laureate F.A. Hayek ranked Gladstone among the greatest classical liberals. Lord Acton believed Gladstone’s supremacy was undisputed. Paul Johnson declared there is no parallel to his record of achievement in English history. One might add there are few parallels anywhere.

As Chancellor of the Exchequer in four ministries, Gladstone fought the most powerful interest groups. He helped abolish more than 1,000—about 95 percent—of Britain’s tariffs. He cut and abolished other taxes year after year. Imagine, if you possibly can, our income tax with a single rate of 1.25 percent. That’s what was left of the British income tax when Gladstone got through hammering it down. He wasn’t satisfied, because he wanted to wipe it out.

Gladstone believed the cost of war should be a deterrent to militarism. He insisted on a policy of financing war exclusively by taxation. He opposed borrowing money for war, since this would make it easier, and future generations would be unfairly burdened.

Gladstone’s most glorious political campaigns came late in life: to stop British imperialism and to give the oppressed Irish self-government. Gladstone showed that even in such lost causes, friends of freedom had the strength and courage to put up a tremendous fight that would never be forgotten.

TO BE SURE, GLADSTONE WASN'T A perfect hero. Having matured in an era when his government had limited power and committed few horrors, Gladstone figured it could do some good. For instance, he approved taxes for government schools. But part of the problem was that government revenues soared as Gladstone cut tariffs and other taxes, and political pressure became overwhelming for government to spend some of the loot.

Despite his errors, Gladstone towered above his rivals. His most famous opponent was Benjamin Disraeli, the Tory who promoted higher taxes, more powerful government, and imperial conquest. Gladstone’s liberal rivals were mostly fans of Viscount Palmerston, best known for his bullying of weaker countries. During the late nineteenth century, Gladstone’s chief Liberal rival was Joseph Chamberlain, a socialist who became a vigorous imperialist. Without Gladstone’s influence, there probably would have been fewer gains for liberty, and the losses probably would have come faster.

Gladstone’s enduring contribution was to stress the moral imperative for liberty. Influential British philosophers Jeremy Bentham and John Stuart Mill had almost banished morality from political discussion, as they touted the greatest-good-for-the-greatest-number principle, but Gladstone brought out the moral dimension of taxes, trade, everything. Whatever he did, remarked historian A.J.P. Taylor, was a holy cause. 

Gladstone’s moral fervor was a key to his popular appeal. As historian J.L. Hammond observed: It is safe to say that for one portrait of anybody else in working-class houses, there were ten of Gladstone.

Gladstone vanquishes Disraeli

John Key is still a fucking moron

Cartoon by Richard McGrail from The Free Radical

I've been reminded this morning about what a clueless fucking moron we had as a Prime Minister for two-and-a-half terms. Back a few years ago when we were "rock stars." Remember that?

Anyway, here's John Fucking Key last month giving his considered analysis of what's wrong with New Zealand's economy now:

"The guts of what’s wrong is that the housing market is going down, not up,' he said.
    “When house prices go up, everybody tells the pollsters, ‘Oh that’s terrible, my son or daughter can’t buy a house. I feel really bad.’ The technical term for that is ‘bullshit’.
    “What they really do, is they say to their wife – or the wife says to her husband – ‘God, we paid $1 million for this house and it’s worth $1.7 million now.’ Quietly they go, ‘Oh, we feel rich’.
    “And then they go and borrow a bit from the ANZ and they go on holiday and they upgrade their kitchen, they feel good about life. So when you have a negative wealth effect, they feel bad.”

And I bet the roomful of home owners and property "investors" and National Party political advisors — no to mention all his former colleagues on the ANZ board —had a smug little chuckle into their at their man's shrewd witticisms. It's hard to know where to begin at his economic acumen however, 'cos apparently it's never begun.

Let's make it simple, since that's the best description of Key's grasp of things. Trump's been called a fucking moron for not understanding the economic destruction of tariffs. And rightly so. But Trump doesn't pretend to be in any way clued up about economics. Key does. And yet the fucking moron apparently knows nothing about a simple enough concept: capital consumption. It's a process of converting someone else’s wealth into your income.

And this is his one simple trick to fix the fucking economy.

You wouldn't believe it.

Here's what the fucking moron either doesn't know, or doesn't care to know.

That fucking "wealth effect" the moron talks about is paid for by one thing: it's paid for by eating the fucking seed corn. The seed corn is the part of your harvest you put aside to plant again next year. Without that seed corn, you have nothing to plant, and nothing further to harvest. What Key wants to "fix" the economy, the simple guts of it, is for is to eat the fucking seed corn. That's his recipe for success. 

Any fucking moron could get a "wealth effect" (and a poll bump) by consuming the seed corn.  But ultimately the farmer will pay a price; he'll no longer have anything to farm.

Fellow on the right enjoys Key's "wealth effect." Not so much farmers on the left.

But the difference in what Key proposes is even worse: he wants home owners to consumer other people's seed corn. Hayek used to call this "forced saving." Savers have to save more, or else, because the "seed corn" being consumed is theirs. 

Here's the thing: When mum and dad borrow a bit from the ANZ and go on holiday and upgrade their kitchen and put in another fucking ensuite, that's paid for by what was, or would have been, accumulated capital. The accumulated capital of those other savers. It's called "forced saving" because what pays for John Key's fucking borrowing is new counterfeit capital: i.e., new money that's been borrowed into existence to pay for the holiday, the new kitchen, the fucking ensuite. That counterfeit capital means savers are forced to save more just to keep up.

That's because this new borrowing is new money "injected into the economic system at a specific point" that advantages those consuming the counterfeit capital while disadvantaging those trying to save.

If the money or credit were evenly distributed among all economic agents, no “expansionary” effect would appear, except the decrease in the purchasing power of the monetary unit in proportion to the rise in the quantity of money. 

However if the new money enters the market at certain specific points, as always occurs, then in reality a relatively small number of economic agents initially receive the new loans. Thus these economic agents temporarily enjoy greater purchasing power, given that they possess a larger number of monetary units with which to buy goods and services at market prices that still have not felt the full impact of the inflation and therefore have not yet risen.

The purchasing power of these home-owners is paid for by the losses of savers. 

Hence the process gives rise to a redistribution of income in favour of those who first receive the new injections or doses of monetary units, to the detriment of the rest of society, who find that with the same monetary income, the prices of goods and services begin to go up. “Forced saving” affects this second group of economic agents (the majority), since their monetary income grows at a slower rate than prices, and they are therefore obliged to reduce their consumption, other things being equal.

In a nutshell Key's quick-fix for poll-driven success, and economic growth, is to grant home-owners purchasing power by quietly, secretly and unobserved, stealing from savers. ("By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." ~ John Maynard Keynes)

Recall that he said something similar when the problem erupted of paying to repair leaky homes. He said quite bluntly, not to worry,  inflation would fix that. Remember that when housing unaffordability was bad before he took office, and he promised to fix it. He didn't, of course. Instead, he did everything he could to put rocket fucking fuel under house prices. It would, he claimed, 'fix" the problem of paying for the problem. 

This prick has form.

He's either a calculating Machiavellian.

Or he's pig ignorant.

My money's on the latter.

RELATED:

• Key on housing affordability and elsewhere - NOT PC, 2007
• Counterfeit capital - NOT PC, 2008
• Mr Key’s dirty little secret - NOT PC, 2009
• We’re rock stars! - NOT PC, 2014
• How Do People Destroy Capital? - Keith Weiner, SNBCHF, 2015
• Housing bubble is consuming our capital - NOT PC, 2015
• The Reserve Bank’s war on capital - NOT PC, 2016
• Key admits to ‘crisis theatre’ and talks up house-price inflation - NOT PC, 2016
• John Key has had an unbelievable solution for affordable housing - NOT PC, 2017

"A movement that changed a country." Peacefully.

It's been risible watching statists here struggling over recent months to get their heads around the Atlas Network think tank—and what exactly think tanks do.

What troubles them most perhaps is the word "think" in the description. Many have forgotten how to.

Nonetheless, to help them understand, the think tank Students for Liberty sets out to explain what they do. 

They begin by asking: "Why is the President of Argentina wearing THIS pin while announcing major policy changes?"

The story goes back to 1945, when a war hero wanted to save his country—and a Nobel Prize winner told him to forget about politics.

This isn't just about a pin. It's about how ideas travel from university classrooms to presidential palaces. And why every student needs to understand this journey—because you're living through it right now.

In 1945, World War II just ended. F.A. Hayek, teaching at the London School of Economics, meets Antony Fisher—a combat aviator and war hero. Fisher had read Hayek's The Road to Serfdom and was terrified about Britain's socialist direction. "I want to enter politics," Fisher declared.

Hayek stopped him cold. "The political battle isn't won in the political arena," he explained. "It's fought—and ultimately won—by intellectuals." Politicians follow public opinion. But intellectuals? They shape it. 

 

Fisher listened. Instead of running for political office, he founded the UK's Institute of Economic Affairs. For decades, IEA scholars published papers, hosted debates, and educated a generation about free markets. The result? Britain elected Margaret Thatcher. 

 

Legend has it that in her first Cabinet meeting, Thatcher slammed down Hayek's book Constitution of Liberty—published by the IEA—and declared: "This is what we believe!" Ideas had become policy. Intellectuals had changed a nation. 

This wasn't an accident. Hayek had studied how ideas spread. It's like a pyramid:

        Scholars develop ideas ...

                ... Intellectuals* spread them 

                        ... Media amplifies them

                                ... Politicians adopt them

Every revolution starts at the top of that pyramid.

[* Note that the bar for "intellectual" here is clearly set very low.] 

Now look at American universities today (and this is fairly universal everywhere):  

X Professors teaching government as the solution to everything  

X Students defending socialism (70% of Gen Z consider voting socialist)  

X 53% of graduates feel unqualified for jobs in their field  

X Ideology of resentment toward achievement

 The pyramid is working—just not for liberty.

This is why Students For Liberty exists. 

Our Local Coordinators host events, educate peers, and develop as leaders worldwide. 

In 2024 alone: 3,881 events reaching 150,000+ people. 

One person who helped SFL in Argentina? An economist named Javier Milei.

Milei didn't just wear our pin—he partnered with us. 

He attended our events, explained our mission on TV, and mentored pro-liberty students across Argentina. 

Why? Because he understood: to change politics, you first have to change culture. 

 

Take Ethan Yang. Started with "no leadership experience, no professional skills. Just a small libertarian club that met in the basement of our dining hall." 

As a Students for Liberty coordinator, his Freedom of Information Act request helped halt the Biden administration's social-media censorship. The case reached the Supreme Court.

A federal judge called the Biden Administration's collusion with/threats to Big Tech "the most massive attack against free speech in US history." 

Stopped by one student. One request. Supreme Court case. 

That's the power of the pyramid when it works for liberty. 

 

Here's what every student needs to understand: 

You're not just getting a degree. 

You're being shaped by ideas that will define the next fifty years. 

The question isn't whether ideas will spread from campus—it's which ideas will spread.

Milton Friedman explains the point: "Our basic function is to develop alternatives to existing policies, to keep them alive until the politically impossible becomes the politically inevitable." 

Before Milei became president, he was attending SFL events. 

That pin? It represents a movement that changed a country.

Tired of feeling outnumbered, silenced, or lost in campus groupthink? 

The College Survival Kit is your first step into this global movement. 

Learn how real change begins—with students who refuse to stay silent: DOWNLOAD YOURS HERE. 

Seymour's Bill is frightening the luvvies so much they can't read

DAVID SEYMOUR'S REMARKABLY TEPID Regulatory Standards Bill is getting frightened and bewildered luvvies to put down their lattes and type indignant emails to their MPs.

Fuel for many of this outraged commentariat (Anne Salmond was the first; Brian Easton is the latest) is provided by a book-length screed by one Quinn Slobodian called Hayek's Bastards, "The premise of Quinn Slobodian’s new book," says the bookplate, "is that authoritarian right-wing populism is a mutated version of classical liberal economics." A version labelled "neoliberalism" by its opponents.

A counter-intuitive thesis to be sure, So I checked on some actual classical liberals to see what they thought of the book. (Pointless asking Trump followers, since we know none of them can read. Or "neoliberals," none of whom actually exist.)

Phil Magness, an economic historian  who most recently convinced over 150 economists and scholars to sign a declaration opposing Trump's economically harmful, constitutionally dubious tariff policies, wonders aloud at the absurdity of the book's central thesis. Which is Slobodian's apparent conviction "that Trumpism traces its intellectual origins to the Austrian economists Friedrich Hayek and Ludwig von Mises." This would undoubtedly astonish all three. 

Slobodian's attempts to link the three suffers, Magness says wryly, "from a lack of clear evidence for the parentage. Undeterred, Slobodian supplies the links by making them up."

As they say, if you have to lie to make up your criticisms, it suggests you probably don't have any.

Slobodian of course relies on the fact that few if any of his credulous readers will bother to actually read Hayek or Mises. (Easton for one would benefit hugely from the experience.) But if you want a candid study of how to quote somebody to say the precise opposite of what they say — in this case Mises quoting others to denounce their racial prejudice is used to suggest their vile views are his own — then Magness's review is a good place to start. 

This is not even sleight of hand. It's a conjurer simply assuming his audience are too dumb to notice. "Deliberate deception" is how another commentator describes it. It's a consistent pattern. Here's Slobodian in 2015, for example, showing how to get Mises to support something he was writing to oppose:

Slobodian demonstrates his pattern of ripping quotes from their
context to give the opposite impression of an author's intention.

It's complete dishonesty: a "scurrilous  ... slipshod attempt to taint and tarnish the reputation of one of the leading economists of the 20th century, and one of the most consistent and outspoken defenders of the classical liberal ideal of political, social and economic liberty and the free society," says Misesian Richard Ebeling in his response to the deception.

We live at a time when one of the worst accusations that can be thrown at someone is the charge of “racist.” Have that word tied to your name and it not only results in moral condemnation, it potentially throws into discredit almost anything and everything that person has said or done. That makes it a serious matter when an individual never identified with such racist views or values has that accusation attached to them. ... The actual facts show this is a fundamentally baseless accusation that attempts to taint and tarnish the reputation of one of the leading economists of the 20th century ...

[O]ne of the most embarrassing observations that can made about an author’s work [is] being slipshod scholarship. Professor Slobodian has 93 footnotes in his article. Over 50 of them reference Mises’s writings or correspondence. Looking them up, I found many instances in which the page reference to a paraphrase of a passage or a quote in one of Mises’s works was not to be found where Professor Slobodian indicated it to be.

In some instances, this was not simply being off a page or two; the page referenced turned out to be in a portion of one of Mises’s works that had nothing to do with the theme or idea that Professor Slobodian was referring to....

In addition, there are instances in which Professor Slobodian asserts or implies views or states of mind held by Mises at some point in time. But the footnoted reference sometimes refers to some other scholar’s work that when looked up did not refer to or imply anything about Ludwig von Mises. For example, at one point (p. 4), Professor Slobodian says, “But for Mises, a war had shaken him the most. Japan’s defeat of Russia in 1905 brought about a non-white power into the elite white club of empires. The event resonated with the rhetoric of the ‘yellow peril’ widespread at the turn of the century, understood as both a racial demographic and commercial threat.” And he footnotes a[nother author's] work about Asian intellectuals in the period before the First World War.

Professor Slobodian then says, “Mises’s response was different but no less radical,” and then references how Mises [allegedly] saw the economic significance of increased global competition from Asia ... The juxtapositioning of these two ideas, one following the other, easily creates the impression that Mises, while having a “different” response, was part of the group worried about a “yellow peril.

There is nothing to suggest in Mises’s writings actually referenced that he held or expressed any such race-based fear in the wake of the Japanese victory over Russia. But the implication is easily left in the reader’s mind.

Slobodian is fundamentally dishonest.

Christopher Snowdon has more:

The first two chapters find Slobodian searching for hints of racial prejudice in the work of Hayek and Mises. For the former, the best he can manage is a reference to ‘the Christian West’ in a 1984 speech. For the latter, who may well have been Austria’s least racist man in the 1930s, it is an even greater challenge. 

Slobodian revives two articles he wrote about the lifelong supporter of open borders in 2019 that have been heavily criticised by Phillip W. Magness and Amelia Janaskie for ‘inverting Mises’s meaning in a light that erroneously casts him as sympathetic to racism or colonialism.’ 

One does not need to be an expert on Mises to see that Slobodian is guilty of selective quotation. One only needs to read the whole paragraph from which the quote is taken. For example, Mises is quoted as writing in 1944: ‘There are few white men who would not shudder at the picture of many millions of black or yellow people living in their own countries.’ Slobodian puts this in a context that implies that Mises shared this revulsion and cites it as evidence that Mises had ‘partially legitimised closed borders for nonwhite migrants as a near-permanent feature of the world order.’ But the very next sentence of Mises’ text reads: ‘The elaboration of a system making for harmonious coexistence and peaceful economic and political cooperation among the various races is a task to be accomplished by coming generations.’ It should be obvious that Mises was not endorsing the prejudices of the majority, but merely acknowledging the existence of such prejudices and hoping that they could be overcome.

And here's Slobodian's problem, and the reason he must so transparently mis-quote: "There is simply no through-line from Mises or Hayek to the alt-right." 

By referring to right-wing populists of the present day as Hayek’s illegitimate offspring (‘bastards’) Slobodian allows himself a certain amount of wriggle room, but if a student believes the exact opposite of the teacher, can he really be portrayed as a follower?

The fatal flaw in this book is that Slobodian has clearly started with his conclusion and worked backwards. An author who was interested in writing about the roots of the current wave of right-wing populism would start with the right-wing populists and study their words and deeds.

Which is what Misesian Jeffrey Tucker did many moons before Slobodian even thought about slithering into print — "the most important political book in recent memory" is what my own reviewer called it.

BUT THIS BRIEF GLIMPSE  into a fetid authorial swamp was not just to alert you to a shitty book from an author too incompetent to even formulate real arguments. It's to show you how bereft of clothing are the nakedly insubstantial objections to Seymour's bill, that so many rest their objections on a ad-hominem without even a home. As Richard Ebeling says so tellingly in a recent article, "“Progressives” Blame F. A. Hayek for Everything They Dislike."

That so many of these "progressive" objections to a fairly unobjectionable Bill rest unthinkingly on Slobodian's animus and deception — for a historian used to checking sources, Anne Salmond's was an example of one of the most dishhonest — suggests the same thing said of Slobodian's book could be said about the objections to the Bill: if you have to lie to make your arguments, then perhaps you don't really have any.

I only wish they were right that it is something they need to be scared about.