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• An Appeal for Austrianism

posted Jan 27, 2015, 6:53 AM by Sven Schiepers   [ updated Mar 16, 2015, 7:27 AM ]
The new-Keynesian hypocrisy: discrediting socialism, liberalism and the free market
Free market theory, I had these courses with the Krugman books, has always been a flawed theory in my experience. I quit my new-Keynesian economics program because of it. Summed up, I learned something like the following. "Free market is the theoretical consumer, therefore even socialist if you like that, optimum. In practice however, it doesn't work just as nice as in theory. Luckily we've got government to polish up these minor, practical inaccuracies." Everyone was cheerfully agreeing to do just a little trimming in the beautiful garden of competitiveness. Like the classic English garden represents the aesthetic, the new-Keynesian garden represents the sociological arrogance of creative superiority over nature.

Years later these minor inaccuracies are actually showing to be increasingly major. The current socio-economic system constructed by Krugman and his friends seems more inadequate with each passing day. His article about the situation regarding Greece says it all. He's asking for a political solution, where the German people should just agree on absolving Greek debt. Chief Architect Draghi can guarantee a shock-free transition by merely announcing the currency zone indivisible. Meanwhile in reality, Krugman's gentle garden trimming has become mechanised timber harvest. The ideological grounds for the interventionist practices of the 'economists of the scientific method' lies in the works of different social philosophers. 

The ideological basis is that everyone should have the the right and opportunity to build for himself an existence of prosperity. It is this, both liberal and socialist, notion from which the new-Keynesians claim democratic legitimacy for their policies. In reality, they're achieving exactly the opposite. The cunningness of it makes you wonder whether it's deliberate. First they simplified their ideological basis from 'the right and opportunity to build an existence of welfare' to 'the right to welfare'. Then they changed the definition of welfare from 'the health, happiness and fortune of a person' to 'the extent to which one receives junk for free'. They must have implemented this with the utmost refinement, as scores of people honestly believe the crises are over and behind us and prosperity lies ahead in our social democracies. In actuality, the system is highly elitist while pretending to be liberal-socialist. Their theory is a self-fulfilling prophecy. It approaches the average human being as a machine, and increasingly he acts like one. 

Being fed disinformation on a daily basis, one hopefully starts looking for truth on their own at some point. Someone advised me to check Lew Rockwell and the Mises Institute. He told me they offered real insight and solutions. I've been reading them thoroughly for the past months. Unfortunately I'm not an Austrian scholar yet, so I don't know all details of their pricing theories or business cycle. I have been having some thoughts that I would like to share. 

The scourge of productivity: legislative barriers
Barriers to entry are the sources of monopoly power in a market. They can be legislative, demographical or monetary in nature. Austrians tackle the problem of legislative barriers relying on libertarian, anarchist or minarchist ideologies. Suppose an economy could really abandon political entry barriers by abandoning 99.9 to 100% of government, the monetary and demographical barriers would arguably remain. The new-Keynesians acknowledge these other barriers and devised the most hypocrite system for 'controlling' them: Politically initiated, micro- and legislative intervention.

I asked one prominent Austrian how to tackle this problem. He agreed there would always be barriers to entry of some kind. He said they shouldn't necessarily be that big of a problem. He took to the example of the two US soft-drink giants. They've always competed fiercely with low prices as results. This despite the fact that monetary entry barriers to the market are enormous. Still, the internal soft-drink market may be pretty efficient. The socio-economic reality however is not a simple addition of isolated markets. I therefore asked about the giants' common oligarchic interest of keeping the public as misinformed as possible about the health effects of regular and light soft-drinks alike. About the idea that nearly all 'consumer surplus' in such a market doesn't benefit consumers to the slightest. In reality, the real market beneficiary is the great junk food-healthcare cartel. My Austrian responder agreed but argued that without a government to lobby their disinformation to, problems regarding information-manipulating cartels would be far, far less in the US than they are today.

This makes a lot of sense. Why even bother fighting monetary barriers for the time being. Lobbying practices by firms are obvious attempts at attaining legislative market-power, probably the worst barrier of them all. Rent-seeking is very common and successful since most people are easily persuaded by the huge promised monetary rewards. If we could take away the platform these firms use for their rotten strategy, we might fix most of the problem. Austrians see market-oriented attempts at establishing a monopoly as something that's not necessarily negative for consumer interests. In Dominick Armentano's 'Antitrust the Case for Repeal', we read about the infamous Microsoft antitrust process. He argues that most if not all of Microsoft's monopolizing behaviour, was merely a sincere attempt at keeping ahead of competition in the most innovative market at the time. He argues that consumers benefited greatly from this great strategy. Microsoft eventually set a very high competitive standard with their attempt to monopolise the operating system market. In short, this behaviour is not necessarily
bad, as long as it is a legitimate market attempt[1].

The impossibility of unthinking political ideology
Unfortunately, two major problematic questions arise. First, could it even be a realistic possibility to abolish legislative barriers by denouncing politics? Does the family still exist in this system? If so, can two family heads work together to pursue both their families' interests? In this reasonable scenario, political evolution would already be inevitable. Humans are politics. It's their families and their agreements, their language. Man is the socio-political animal. No amount of abstract theorizing can change that. Abolishing contemporary government would not free us from politics, it would throw us back to kinship politics that grow from Bertrand de Jouvenel's natural elites. Which would indeed be a good thing compared to the current situation. 

In the natural free state, what about the first man that can formulate an idea that's beneficial to a large group of people? Can he be considered an elite? Can a group of men then devise an ideological and ethical system, based on voluntary agreements, that benefits the interests of a large group over those of a far smaller group? In other words, are the natural social elites allowed to organise themselves to end the reign of a monopolizing King? In even more words, can Mises attempt to improve the efficient continuity of our species by engaging in political argument with the purpose of communicating their view to an expanding group of people?

They must. Since they are in possession of the most efficient macro-organizational general theory, one could easily regard it as their ethical responsibility. Implementation of Austrian principles would arguably create higher welfare for 99% of the people in the world. Austrians engage in politics using a libertarian ideology that takes a lot of its current form from the work of M. Rothbard. The dream of some, for libertarianism to become a major, broadly carried democratic ideology, has already been forfeited. The new course of politics seems that of secession. Instead of educating the peoples of the world to bring about real change, they choose the local approach of separatism, much the same like the people of eastern Ukraine. However, force will be used by the Western governments to suppress any separatist movements, starting with the individual cases. We've had reports lately on the current state of the American psychological health dogmas. Today apparently, anti-authoritarianism is a common indicator for several 'newly discovered' mental diseases.

The eastern-Ukrainian people are very lucky to have access to Russian weapons. Would they not, their bid for freedom would have faltered already in the first week of their movement. How are libertarians in the US planning to fight off the scores of drones introducing themselves to the living rooms of private residences? Do they simply trust Alex Jones' followers to have collected enough private weaponry to fight off the game-nerd soldiers of the American Army? With drone warfare, the '30 second spawning time' enjoyed by the youth in on-line war games has become reality. Got shot down? Re-spawn and try again. With one hand on their mouse and the other in their pants, they will annihilate all conventional opposition with the utmost ease and ethical indifference. 

The oldest and most persistent monopoly of modern history
The second problem is even more important. There are numerous illegitimate non-legislative attempts at securing monopoly positions. Even if government would be abolished, these barriers would not necessarily vanish too. The most important ones are those that Marx tried to dismantle with his socialist philosophy. These are the barriers that originate in the lack of ownership of capital resources. What we might consider, is that Western contemporary national governments are the mere institutions of a monopoly much older and much larger: The Financiers' Monopoly. The Austrian business cycle theory is a critique of banking policies like fractional reserve and face-value money. Criminal practices like these were actually punishable by law once. Today however, these banks are politically legitimized institutions, the most important ones are even carrying noble public mandates. 

In a lot of 18th century German states however, the practice of banking was frowned upon. It was a dirty, unethical occupation. Creating paper without a 100% backing of gold or silver was strictly illegal in most places. Probably under influence of Christian anti-Semitic sentiment in Europe, a lot of Jewish people were condemned to engage in the money-changing business. The local wealth they often built up was seized regularly, much the same like estates of modern trafficking criminals. Then, halfway through the 18th century in The Free City of Frankfurt, there was a banker that managed to 'elevate' his possessions. Amsel de Rothschild created financial instruments that were impervious to local attacks. He created stocks, bonds and debts circulating among the political and business elite of the old cities of Europe. These virtual 'assets' generated income, but could not be dispossessed. His wealth grew and analogously did his influence on European states, to whom he and his sons eventually became the main creditors. Financing both sides in the World Wars and other disputes.

In the years before, numerous states had already engaged in the practice of money creation. This had always been a one sided, state-level competitive practice. The states that engaged in it enjoyed direct executive direction of productive power. It was an extremely powerful strategical tool for things like short-term warfare. Beyond the short term however, it often heavily undermined the productive competitiveness of the state opposed to others surrounding it. Aside from the occasional spoils of war, it was not a strategy that brought any long-term efficiencies. Lending from an international paper creditor however proved to be much more stable to the international competitiveness of the states of Europe, and consequently the financier dynasties thrived.

In the contemporary world market, creation of the world reserve does not necessarily destroy the economic prowess of those that create it. Losing faith in the dollar is losing faith in all finance structures across the globe. Virtually every salary of every person in the developed world is eventually connected to the gargantuan apparatus of the international dollar. Abolishing it seems impossible without bringing forth heavy shocks to the real economy, affecting real people. The financial and political imperial elites have constructed a system that's of vital importance to the survival of millions of people. Without it, the Western population would effectively be decapitated.

Therefore, the system of fiat money and interest rate policy is experienced as the only reasonable system. Without it, the very fabric of our civilizations would transform and the Western comfort still experienced by the largest minority would cease to be evident. The pyramid scheme is in it's final stages, but the collapse can not yet commence. First, the system's most prominent profiteers must secure their spoils. As it has historically always been the case, this last and desperate attempt at securing power is the unambiguous one: War.

Capitalism and Islamophobia
Paper money has a longer history. In the medieval Islamic world, various strenuous monetary economies had flourished and perished as their territorial sovereigns sought to conquer. The economic activity in these economies was unmatched. Persistent coin minting and the prohibition of receiving interest made that any economic activity was always more worthwhile than no activity at all. Saving didn't really exist. When one had income to spare it was encouraged to donate it or social-spend it. In these economies, scholars were the most highly paid of all, matching salaries comparable to modern day professional athletes[3]. 

The Islamic interpretation of a society differs fundamentally from the Western one as it lacks most contributions of the great modern western philosophers. Fundamental differences between the Western interpretation and those of other continents are the most prominent threat to the longevity of the system. What if the Western academic world could incorporate some beneficial ideas from other continental ideologies? They could actually start moving toward a synthesis of ideas that would radically change the current socio-economic reality. The entrenched politico-capitalist elite doesn't want this to happen, even though it could be highly beneficial to our societies. 

They have succeeded with respect to Islam insofar that any fundamental ideas of the Qu'ran are likely to be instantly disregarded. The very idea of an economy without formal interest rates is an idea laughed upon in the global credit economy.

What they probably do like, is Austrian economists getting caught up in a 19th century interpretation of property rights, the interpretation they build their legitimacy on.

Legislative lunacy: The vast judiciary systems and gigantic legal sectors are the last barrier for social democracy to claim victory over property-elitism. The whole system is one enormous barrier to entry, to anything. A huge investment in legal personnel is an absolute survival necessity for any firm that might wish to survive. Those who cannot spend excessively on the elite legal- and financial workforces are obliterated within weeks.

Further, there is no competition when it comes to finance. Every financial institution has become the embodiment of that one principle: handsome capital returns. Since the sole objective of monetary policy around the world is growth, grow we shall. It was Edward Abbey who wrote "growth for the sake of growth is the ideology of the cancer cell". As a result, all financial interactions involving money pass up a little tiny amount up the growth-pyramid. Serving the one and only God their system knows.

Rediscovering political philosophy: Austrianism , the social-organizational theory that could unite the freedom seeking masses of the world
Not by a world government, but united by freedom and prosperity. Austrian economists around the world can be divided by

The founders of the Austrian School were not united by political ideology. There actually existed an ideological division among them. Some called themselves liberals and some called themselves socialists.

What do Austrians really need for a functioning system. Is it essentially freedom regarding property or is it freedom regarding economic transaction? 
The Rothbardian approach to property rights is derived from classical European liberalism. It's merely an ideological construction that should be open to debate in the current paradigm. 

Maybe it's time to get back to more basic questions like the singularity of money. Everything is exchangeable for everything. Is this a good thing? Could it be changed? Anthropologists have pointed out that alot of ancient tribal societies used dual monetary systems, with a regular and a special currency that were not freely interchangeable. This money has been called "non-commercial", "ceremonial", "primitive". "social" or "special-purpose" currency[2].

What about a global economy 

What is the basic unit of a democracy? Is it an individual, or could it be a group.
Wouldn't it be possible for the Misesian scholars 

The democratic state could be viewed as the sociological entity of shared consensual restrictions on individual autonomy. These restrictions are the sole essence of politics. They are already present in the natural family life. All siblings get a proportionate amount of food by restricting each others' behaviour.  

Marx' ideology was very strong and naturally evident for many people. Great revolutions were empowered by it. To summarize socialism in one sentence is impossible. I'll give my own interpretation of it:  'egalitarianism with respect to essential humanitarian criteria'.

The old governments of Europe were pure coercive kingdoms designed to facilitate only different kinship elites. This had all ended now, because of democratic peasant and worker revolutions alike. The common man now, is off surely a lot better than some centuries agoWhat though, if our governments aren't by any means democratic. What if they do not at all represent the institutions of important ideology of the great political philosophers? What if these contemporary governments were only a form institutionalized oligarchic compromise, as governments have always been in some form or other? What if par example, any contemporary socialist political party had absolutely nothing to do with Marx' philosophy, but only with his economics? What if common people weren't at all better off now then centuries ago, when weighing an economic productivity factor?

Our governments aren't democratic, and they don't want to be. We've had the internet laying around for decades now. Every aspect of life is integrated with it, except for one: political legitimate decision making. Our governments are merely tools of the invested elite. Is this elite's real power political or monetary in nature? It could be argued it's mostly monetary. Real democracy has the potential to disintegrate their power structure, and they're afraid of it. The new-Keynesians are very keen for the idea that contemporary central banks are independent institutions, bound solely by their mandate. They are legitimized institutions and publicly supported by our representatives. Their monetary policy has created a financial industry with elites of risk addicted psychopaths, prospering alongside the political elite. They appear to be the same elite, same interests, same agenda's. What could we call that thing which they both are? Do we simply call them government, or could we perhaps offer a more thorough characterization?

We will need a better understanding of 'government' first. Max Weber calls it the territorial monopolist of ultimate decision making. It could be a faulty premise.
We're dealing with the classic problem: The statement 'Barack is a tyrant' is not the same as 'a tyrant is Barrack'. In the same way, when 'a territorial monopolist of compulsion is a government', it does not necessarily constitute Weber's assumption: 'a government is a territorial monopolist of compulsion'. Arguably, a government could be a number of different things. 

Let's investigate the classic liberal property-rights. First of all, the ideas of Mises and other modern classic liberals are formulated according to the late 19th century socio-political reality. Since a 100 years however, the paradigm has shifted beyond recognition. This fact could be accepted and incorporated in Austrian economics much more thoroughly than the ideology of Rothbard can prescribe. 

A new synthesis of both socialist and liberal ideologies, could be the exact opposite of liberal socialism. The good and the evil twins. It could consist of all kinds of liberal and socialist notions and aspects not incorporated in the contemporary liberal socialist systems. 

Capitalism isn't a synonym for free market interaction whatsoever. 

The most prominent proponents of the ideal social economic allocation appear to be the furthest removed from genuine Marxist and socialist philosophy. I do not claim Mises should rebrand as a socialist institution. I'm merely asking for deep investment in the rediscovery of the importance of political philosophy. 

Philosophy vs the Scientific Method: Continuity vs Extinction

Graeber 2011: 130

I still suspect the solution lies within some democratic appeal of the masses.