Gold and Economic Freedom
by Alan Greenspan[written in 1966]
This article originally appeared in a newsletter: The Objectivist published in 1966 and was reprinted in Ayn Rand's Capitalism: The Unknown Ideal
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.
Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.
A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.
When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.
A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.
With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.
Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
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Alan Greenspan[written in 1966]
Tuesday, June 17, 2008
Monday, June 9, 2008
War and Inflation
This talk was delivered at the Future of Freedom Foundation’s conference on "Restoring the Republic: Foreign Policy and Civil Liberties," on June 6, 2008, in Reston, Virginia.
The U.S. central bank, called the Federal Reserve, was created in 1913. No one promoted this institution with the slogan that it would make wars more likely and guarantee that nearly half a million Americans would die in battle in foreign lands, along with millions of foreign soldiers and civilians. No one pointed out that this institution would permit Americans to fund, without taxes, the destruction of cities abroad and overthrow governments at will. No one said that the central bank would make it possible for the U.S. to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the U.S. government to establish a global empire that would make Imperial Rome and Britain look benign by comparison.
You can line up 100 professional war historians and political scientists and talk about the twentieth century, and not one is likely to mention the role of the Fed in funding U.S. militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions ever devised.
The state has no wealth that is its own. It is not a profitable enterprise. Everything it possesses it must take from society in a zero-sum game. That usually means taxes, but taxes annoy people. They can destabilize the state and threaten its legitimacy. They inspire anger, revolt, and even revolution. Rather than risk that result, the state from the Middle Ages to the dawn of the central banking age was somewhat cautious in its global ambitions simply because it was cautious in its need to steal openly and directly from the people in order to pay its bills.
To be sure, it doesn't require a central bank for a state to choose inflation over taxes as a means of funding itself. All it really requires is a monopoly on the production of money. Once acquired, the monopoly on money production leads to a systematic process of depreciating the currency, whether by coin clipping or debasement or the introduction of paper money, which can then be printed without limit. The central bank assists in this process in a critical sense: it cartelizes the banking system as the essential conduit by which money is lent to the public and to the government itself. The banking system thereby becomes a primary funding agency to the state, and, in exchange for its services, the banking system is guaranteed against insolvency and business failure as it profits from inflation. If the goal of the state is the complete monopolization of money under an infinitely flexible paper-money system, there is no better path for the state than the creation of a central bank. This is the greatest achievement for the victory of power over liberty.
The connection between war and inflation, then, dates long before the creation of the Federal Reserve. In fact, in America, it dates to the colonial era, and to the founding itself. The fate of the Continental currency, printed massively during and after the Revolutionary war, for example, was a very bad omen for our future, and the whole country paid a very serious price. It was this experience that later led to the gold clause in the U.S. Constitution. Except for the Hamiltonians, that entire generation of political activists saw the unity of freedom and sound money, and regarded paper money as the fuel of tyranny.
Consider Thomas Paine: "Paper money is like dram-drinking, it relieves for a moment by deceitful sensation, but gradually diminishes the natural heat, and leaves the body worse than it found it. Were not this the case, and could money be made of paper at pleasure, every sovereign in Europe would be as rich as he pleased…. Paper money appears at first sight to be a great saving, or rather that it costs nothing; but it is the dearest money there is. The ease with which it is emitted by an assembly at first serves as a trap to catch people in at last. It operates as an anticipation of the next year's taxes."
But the wisdom of this generation, subverted by Lincoln, was finally thrown out during the Progressive Era. It was believed that an age of scientific public policy needed a scientific money machinery that could be controlled by powerful elites. The dawn of the age of central banking was also the dawn of the age of central planning, for there can be no government control over the nation's commercial life without first controlling the money. And once the state has the money and the banking system, its ambitions can be realized.
Before the creation of the Federal Reserve, the idea of American entry into the conflict that became World War I would have been inconceivable. In fact, it was a highly unpopular idea, and Woodrow Wilson himself campaigned on a platform that promised to keep us out of war. But with a money monopoly, all things seem possible. It was a mere four years after the Fed was invented under the guise of scientific policy planning that the real agenda became obvious. The Fed would fund the U.S. entry into World War I.
It was not only entry alone that was made possible. World War I was the first total war. It involved nearly the whole of the civilized world, and not only their governments but also the civilian populations, both as combatants and as targets. It has been described as the war that ended civilization in the 19th-century sense in which we understand that term. That is to say, it was the war that ended liberty as we knew it. What made it possible was the Federal Reserve. And not only the U.S. central bank; it was also its European counterparts. This was a war funded under the guise of scientific monetary policy.
Reflecting on the calamity of this war, Ludwig von Mises wrote in 1919 that "One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier."
There is always a price to be paid for funding war through the central bank. The postwar situation in America was a classic case. There was inflation. There were massive dislocations. There was recession or what was then called depression, a direct result of capital dislocation that masked itself as an economic boom, but which was then followed by a bust. The depression hit in 1920, but it is not a famous event in United States economic history. Why is that? Because the Federal Reserve had not yet acquired the tools to manufacture an attempt to save the economy. Instead, neither the Fed nor Congress nor the President did much of anything about it – a wholly praiseworthy response! As a result, the depression was brief and became a footnote to history. The same would have happened in 1930 had Hoover not attempted to use the government as the means of resuscitation.
Sadly, the easy recovery of 1920–1922 tempted the central bank to get back into the business of inflation, with the eventual result of a stock market boom that led to bust, then depression, and finally the destruction of the gold standard itself. FDR found that even fascist-style economic planning and inflation could not restore prosperity, so he turned to the ancient method of looking for a war to enter. Here is where the history of the United States and the Fed intersects with the tragic role of the German central bank.
The German government also funded its Great War through inflation. By war's end, money in circulation has risen fourfold. Prices were up 140%. Yet, on international exchange, the German mark had not suffered as much as one might expect. The German government looked at this with encouragement and promptly attempted to manufacture a complete economic recovery through inflation. Incredibly, by 1923, the mark had fallen to one-trillionth of its 1914 gold value. The U.S. dollar was then equal to 4.2 trillion marks. It was an example of currency destruction that remains legendary in the history of the world – all made possible by a central bank that obliged the government and monetized its war debt.
But did people blame the printing press? No. The popular explanation dealt directly with the Treaty of Versailles. It was the harsh peace imposed by the allies that had brought Germany to the brink of total destruction – or so it was believed. Mises himself had written a full book that he hoped would explain that Germany owed its suffering to war and socialism, not Versailles as such. He urged the German people to look at the real cause and establish free markets, lest imperial dictatorship be the next stage in political development. But he was ignored.
The result, we all know, was Hitler.
Turning to Russia, the untold truth about the Bolshevik revolution is that Lenin's greatest propaganda tool involved the sufferings by the Russian people during World War I. Men were drafted and killed at a horrific level. Lenin called this capitalist exploitation, based on his view that the war resulted from capitalist motives. In fact, it was a foreshadowing of the world that socialism would bring about, a world in which all people and all property are treated as means to statist ends. And what made the prolongation of the Russian role in World War I possible was an institution called the State Bank of the Russian Empire, the Russian version of the Fed.
The Russian war itself was funded through money creation, which also led to massive price increases and controls and shortages during the war. I'm not of the opinion, unlike the neocons, that the Russian monarchy was a particularly evil regime, but the temptation that the money machine provided the regime proved too inviting. It turned a relatively benign monarchy into a war machine. A country that had long been integrated into the worldwide division of labor and was under a gold standard became a killing machine. And as horrific and catastrophic as the war dead were for Russian morale, the inflation affected every last person and inspired massive unrest that led to the triumph of Communism.
At this juncture in history, we can see what central-banking had brought to us. It was not an end to the business cycle. It was not merely more liquidity for the banking system. It was not an end to bank runs and bank panics. It certainly wasn't scientific public policy. The world's major economies were being lorded over by money monopolies and the front men had become some of the worst despots in the history of the world. Now they were preparing to fight each other with all the resources they had at their disposal. The resources they did not have at their disposal they would pay for with their beloved machinery of central banking.
In wartime, the printing presses ran overtime, but with a totalitarian level of rationing, price controls, and all-round socialization of resources in the whole of the Western world, the result of inflation was not merely rising prices. It was vast suffering and shortages in Britain, Russia, Germany, Italy, France, Austria-Hungary, the US, and pretty much the entire planet.
So we can see here the amazing irony of central banking at work. The institution that was promoted by economists working with bankers, in the name of bringing rationality and science to bear on monetary matters, had given birth to the most evil political trends in the history of the world: Communism, socialism, fascism, Nazism, and the despotism of economic planning in the capitalist West. The story of central banking is one step removed from the story of atom bombs and death camps. There is a reason the state has been unrestrained in the last 100 years and that reason is the precise one that many people think of as a purely technical issue that is too complicated for mere mortals.
Fast-forward to the Iraq War, which has all the features of a conflict born of the power to print money. There was a time when the decision to go to war involved real debate in the U.S. House of Representatives. And what was this debate about? It was about resources, and the power to tax. But once the executive state was unhinged from the need to rely on tax dollars, and did not have to worry about finding willing buyers for its unbacked debt instruments, the political debate about war was silenced.
In the entire run-up to war, George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population, was reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened. But he didn't have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars, or $4,681 per household. Imagine if he had gone to the American people to request that. What would have happened? I think we know the answer to that question. And those are government figures; the actual cost of this war will be far higher—perhaps $20,000 per household.
Now, when left-liberals talk about these figures, they like to compare them with what the state might have done with these resources in terms of funding health care, public schools, head-start centers, or food stamps. This is a mistake because it demonstrates that the left isn't really providing an alternative to the right. It merely has a different set of priorities in how it would use the resources raised by the inflation machine. It's true that public schools are less costly in terms of lives and property than war itself. But the inflation-funded welfare state also has a corrosive effect on society. The pipe dream that the inflation monster can be used to promote good instead of evil illustrates a certain naïveté about the nature of the state itself. If the state has the power and is asked to choose between doing good and waging war, what will it choose? Certainly in the American context the choice has always been for war.
It is equally naïve for the right to talk about restraining the government while wishing for global war. So long as the state has unlimited access to the printing press, it can ignore the pleas of ideological groups concerning how the money will be raised. It is also very silly for the right to believe that it can have its wars, its militarism, its nationalism and belligerence, without depending on the power of the Federal Reserve. This institution is the very mechanism by which the dreams of both the fanatical right and the fanatical left come true.
The effect of the money machine goes well beyond funding undesirable government programs. The Fed creates financial bubbles that lead to economic dislocation. Think of the technology bubble of the late 1990s or the housing bubble. Or the boom that preceded the current bust. These are all a result of the monopolization of money.
These days, the American consumer has been hit very hard with rising prices in oil, clothing, food, and much else. For the first time in decades, people are feeling this and feeling it hard. And just as in every other inflation in world history, people are looking for the culprit and finding all the wrong ones. They believe it is the oil companies who are gouging us, or that foreign oil dealers are restricting supply, or that gas station owners are abusing a crisis to profit at our expense.
I wouldn't entirely rule out the possibility that price controls are around the corner. When Nixon imposed them in 1971, neither he nor his advisors believed that they would actually result in controlling inflation. Rather, the purpose was to redirect the target of public anger from the government and its bank over to retailers, who would become scapegoats. In this sense, price controls do work. They make people believe that the government is trying to lower prices while the private sector is attempting to raise them. This is the real political dynamic at work with price controls.
The question is whether you will be taken in by these tactics. It is long past time for us to take note that the cause of the real trouble here is not the manufacturers or even the war as such but the agency that has been granted a legal right to counterfeit at will and lower the value of the currency while fueling every manner of statist scheme, whether welfare or warfare. We need to look at the Fed and say: this is the enemy.
Note that the Federal Reserve is not a political party. It is not a recognized interest group. It is not a famed lobby in Washington. It is not really even a sector of public opinion. It seems completely shielded off from vigorous public debate. If we truly believe in liberty and decry the leviathan state, this situation cannot be tolerated.
I say to the sincere right, if you really want to limit the state, you will have to give up your dreams of remaking the world at the point of a gun. Wars and limited government are impossible. Moreover, you must stop ignoring the role of monetary policy. It is a technical subject, to be sure, but one that we must all look into and understand if we expect to restore something that resembles the American liberty of the founders.
I say to the sincere left, if you really want to stop war and stop the spying state, and put an end to the persecution of political dissidents and the Guantánamo camps for foreign peoples, and put a stop to the culture of nationalism and militarism, you must join us in turning attention to the role of monetary policy. The printing presses must be unplugged. It's true that this will also hit programs that are beloved by the left, such as socialized health care and federalized education programs. But so long as you expect the state to fund your dreams, you cannot expect that the state will not also fund the dreams of people you hate.
And let me say a few words to libertarians, who dream of a world with limited government under the rule of law, a world in which free enterprise reigns and where the state has no power to interfere in our lives so long as we behave peacefully. It is completely absurd to believe that this can be achieved without fundamental monetary reform. And yet, until the most recent Ron Paul campaign, and aside from Murray Rothbard and the 26-year-long work of the Mises Institute, I don't recall that libertarians themselves have cared much about this issue at all.
In 1982, the Mises Institute held a large academic conference on the gold standard, and we held it in Washington, D.C. (There were scholarly papers and Ron Paul debated a Fed governor. Ron won.) Even back then, I recall that D.C. libertarians ridiculed us for holding such a meeting to talk about the Fed and its replacement with sound money. They said that this would make the Mises Institute look ridiculous, that we would be tarred with the brush of gold bugs and crazies. We did it anyway. And all these years later, the book that came out of that conference remains a main source for understanding the role of money in the advance of despotism or resistance to it, and a blueprint for the future.
Of course the Austrian tradition fought paper money and central banking from the beginning. Menger was an advocate of the gold standard. Böhm-Bawerk actually established it as finance minister to the Habsburg monarchy. Mises's book on the topic from 1912 was the first to show the role of money in the business cycle, and he issued dire warnings about central banking. Hayek wrote powerfully against the abandonment of gold in the 1930s. Hazlitt warned of the inevitable breakdown of Bretton Woods, and advocated a real gold standard instead. And Rothbard was a champion of sound money and the greatest enemy the Fed has ever had. But generally, I've long detected a tendency in libertarian circles to ignore this issue, in part for precisely the reasons cited above: it is not respectable.
Well, I will tell you why this issue is not considered respectable: it is the most important priority of the state to keep its money machine hidden behind a curtain. Anyone who dares pull the curtain back is accused of every manner of intellectual crime. This is precisely the reason we must talk about it at every occasion. We must end the conspiracy of silence on this issue.
I was intrigued at how Ron Paul, during his campaign, would constantly bring up the subject. Most politicians are out to play up to their audiences, so they say things that people want to hear. I promise you that early in the campaign, no one wanted to hear him talk about the Federal Reserve. But he did it anyway. He worked to educate his audiences about the need for monetary reform. And it worked. For the first time in my life, there is a large and very public movement in this country to take this topic seriously.
Monetary economist Joseph Salerno was called the other day by C-Span, which wanted to interview him on television on the need to restore gold as the basis of our currency. As I watched this excellent interview, I was struck by what a great triumph it truly is for liberty that this topic is again part of the national debate. In the 19th-century, this was a topic on everybody's minds. It can be again today, provided we do not eschew the truth in the formation of our message.
It might be said that advocating privatization is politically unrealistic, and therefore a waste of time. What's more, we might say that by continuing to harp on the issue, we only marginalize ourselves, proving that we are on the fringe. I submit that there is no better way to ensure that an issue will always be off the table than to stop talking about it.
Far from being an arcane and anachronistic issue, then, the gold standard and the issues it raises gets right to the heart of the current debate concerning the future of war and the world economy. Why do the government and its partisans dislike the gold standard? It removes the discretionary power of the Fed by placing severe limits on the ability of the central bank to inflate the money supply. Without that discretionary power, the government has far fewer tools of central planning at its disposal. Government can regulate, which is a function of the police power. It can tax, which involves taking people's property. And it can spend, which means redistributing other people's property. But its activities in the financial area are radically curbed.
Think of your local and state governments. They tax and spend. They manipulate and intervene. As with all governments from the beginning of time, they generally retard social progress and muck things up as much as possible. What they do not do, however, is wage massive global wars, run huge deficits, accumulate trillions in debt, reduce the value of money, bail out foreign governments, provide endless credits to failing enterprises, administer hugely expensive and destructive social insurance schemes, or bring about immense swings in business activity.
State and local governments are awful and they must be relentlessly checked, but they are not anything like the threat of the federal government. Neither are they as arrogant and convinced of their own infallibility and indispensability. They lack the aura of invincibility that the central government enjoys.
It is the central bank, and only the central bank, that works as the government's money machine, and this makes all the difference. Now, it is not impossible that a central bank can exist alongside a gold standard, a lender of last resort that avoids the temptation to destroy that which restrains it. In the same way, it is possible for someone with an insatiable appetite for wine to sit at a banquet table of delicious vintages and not take a sip.
Let's just say that the existence of a central bank introduces an occasion of sin for the government. That is why under the best gold standard, there would be no central bank, gold coins would circulate as freely as their substitutes, and rules against fraud and theft would prohibit banks from pyramiding credit on top of demand deposits. So long as we are constructing the perfect system, all coinage would be private. Banks would be treated as businesses, no special privileges, no promises of bailout, no subsidized insurance, and no connection to government at any level.
This is the free-market system of monetary management, which means turning over the institution of money entirely to the market economy. As with any institution in a free society, it is not imposed from above, and dictated by a group of experts, but is the de facto result that comes about in a society that consistently respects private-property rights, encourages enterprise, and promotes peace.
It comes down to this. If you hate war, oppose the Fed. If you hate violations of your liberties, oppose the Fed. If you want to restrain despotism, restrain the Fed. If you want to secure freedom for yourself and your descendants, abolish the Fed.
June 9, 2008
The U.S. central bank, called the Federal Reserve, was created in 1913. No one promoted this institution with the slogan that it would make wars more likely and guarantee that nearly half a million Americans would die in battle in foreign lands, along with millions of foreign soldiers and civilians. No one pointed out that this institution would permit Americans to fund, without taxes, the destruction of cities abroad and overthrow governments at will. No one said that the central bank would make it possible for the U.S. to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the U.S. government to establish a global empire that would make Imperial Rome and Britain look benign by comparison.
You can line up 100 professional war historians and political scientists and talk about the twentieth century, and not one is likely to mention the role of the Fed in funding U.S. militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions ever devised.
The state has no wealth that is its own. It is not a profitable enterprise. Everything it possesses it must take from society in a zero-sum game. That usually means taxes, but taxes annoy people. They can destabilize the state and threaten its legitimacy. They inspire anger, revolt, and even revolution. Rather than risk that result, the state from the Middle Ages to the dawn of the central banking age was somewhat cautious in its global ambitions simply because it was cautious in its need to steal openly and directly from the people in order to pay its bills.
To be sure, it doesn't require a central bank for a state to choose inflation over taxes as a means of funding itself. All it really requires is a monopoly on the production of money. Once acquired, the monopoly on money production leads to a systematic process of depreciating the currency, whether by coin clipping or debasement or the introduction of paper money, which can then be printed without limit. The central bank assists in this process in a critical sense: it cartelizes the banking system as the essential conduit by which money is lent to the public and to the government itself. The banking system thereby becomes a primary funding agency to the state, and, in exchange for its services, the banking system is guaranteed against insolvency and business failure as it profits from inflation. If the goal of the state is the complete monopolization of money under an infinitely flexible paper-money system, there is no better path for the state than the creation of a central bank. This is the greatest achievement for the victory of power over liberty.
The connection between war and inflation, then, dates long before the creation of the Federal Reserve. In fact, in America, it dates to the colonial era, and to the founding itself. The fate of the Continental currency, printed massively during and after the Revolutionary war, for example, was a very bad omen for our future, and the whole country paid a very serious price. It was this experience that later led to the gold clause in the U.S. Constitution. Except for the Hamiltonians, that entire generation of political activists saw the unity of freedom and sound money, and regarded paper money as the fuel of tyranny.
Consider Thomas Paine: "Paper money is like dram-drinking, it relieves for a moment by deceitful sensation, but gradually diminishes the natural heat, and leaves the body worse than it found it. Were not this the case, and could money be made of paper at pleasure, every sovereign in Europe would be as rich as he pleased…. Paper money appears at first sight to be a great saving, or rather that it costs nothing; but it is the dearest money there is. The ease with which it is emitted by an assembly at first serves as a trap to catch people in at last. It operates as an anticipation of the next year's taxes."
But the wisdom of this generation, subverted by Lincoln, was finally thrown out during the Progressive Era. It was believed that an age of scientific public policy needed a scientific money machinery that could be controlled by powerful elites. The dawn of the age of central banking was also the dawn of the age of central planning, for there can be no government control over the nation's commercial life without first controlling the money. And once the state has the money and the banking system, its ambitions can be realized.
Before the creation of the Federal Reserve, the idea of American entry into the conflict that became World War I would have been inconceivable. In fact, it was a highly unpopular idea, and Woodrow Wilson himself campaigned on a platform that promised to keep us out of war. But with a money monopoly, all things seem possible. It was a mere four years after the Fed was invented under the guise of scientific policy planning that the real agenda became obvious. The Fed would fund the U.S. entry into World War I.
It was not only entry alone that was made possible. World War I was the first total war. It involved nearly the whole of the civilized world, and not only their governments but also the civilian populations, both as combatants and as targets. It has been described as the war that ended civilization in the 19th-century sense in which we understand that term. That is to say, it was the war that ended liberty as we knew it. What made it possible was the Federal Reserve. And not only the U.S. central bank; it was also its European counterparts. This was a war funded under the guise of scientific monetary policy.
Reflecting on the calamity of this war, Ludwig von Mises wrote in 1919 that "One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier."
There is always a price to be paid for funding war through the central bank. The postwar situation in America was a classic case. There was inflation. There were massive dislocations. There was recession or what was then called depression, a direct result of capital dislocation that masked itself as an economic boom, but which was then followed by a bust. The depression hit in 1920, but it is not a famous event in United States economic history. Why is that? Because the Federal Reserve had not yet acquired the tools to manufacture an attempt to save the economy. Instead, neither the Fed nor Congress nor the President did much of anything about it – a wholly praiseworthy response! As a result, the depression was brief and became a footnote to history. The same would have happened in 1930 had Hoover not attempted to use the government as the means of resuscitation.
Sadly, the easy recovery of 1920–1922 tempted the central bank to get back into the business of inflation, with the eventual result of a stock market boom that led to bust, then depression, and finally the destruction of the gold standard itself. FDR found that even fascist-style economic planning and inflation could not restore prosperity, so he turned to the ancient method of looking for a war to enter. Here is where the history of the United States and the Fed intersects with the tragic role of the German central bank.
The German government also funded its Great War through inflation. By war's end, money in circulation has risen fourfold. Prices were up 140%. Yet, on international exchange, the German mark had not suffered as much as one might expect. The German government looked at this with encouragement and promptly attempted to manufacture a complete economic recovery through inflation. Incredibly, by 1923, the mark had fallen to one-trillionth of its 1914 gold value. The U.S. dollar was then equal to 4.2 trillion marks. It was an example of currency destruction that remains legendary in the history of the world – all made possible by a central bank that obliged the government and monetized its war debt.
But did people blame the printing press? No. The popular explanation dealt directly with the Treaty of Versailles. It was the harsh peace imposed by the allies that had brought Germany to the brink of total destruction – or so it was believed. Mises himself had written a full book that he hoped would explain that Germany owed its suffering to war and socialism, not Versailles as such. He urged the German people to look at the real cause and establish free markets, lest imperial dictatorship be the next stage in political development. But he was ignored.
The result, we all know, was Hitler.
Turning to Russia, the untold truth about the Bolshevik revolution is that Lenin's greatest propaganda tool involved the sufferings by the Russian people during World War I. Men were drafted and killed at a horrific level. Lenin called this capitalist exploitation, based on his view that the war resulted from capitalist motives. In fact, it was a foreshadowing of the world that socialism would bring about, a world in which all people and all property are treated as means to statist ends. And what made the prolongation of the Russian role in World War I possible was an institution called the State Bank of the Russian Empire, the Russian version of the Fed.
The Russian war itself was funded through money creation, which also led to massive price increases and controls and shortages during the war. I'm not of the opinion, unlike the neocons, that the Russian monarchy was a particularly evil regime, but the temptation that the money machine provided the regime proved too inviting. It turned a relatively benign monarchy into a war machine. A country that had long been integrated into the worldwide division of labor and was under a gold standard became a killing machine. And as horrific and catastrophic as the war dead were for Russian morale, the inflation affected every last person and inspired massive unrest that led to the triumph of Communism.
At this juncture in history, we can see what central-banking had brought to us. It was not an end to the business cycle. It was not merely more liquidity for the banking system. It was not an end to bank runs and bank panics. It certainly wasn't scientific public policy. The world's major economies were being lorded over by money monopolies and the front men had become some of the worst despots in the history of the world. Now they were preparing to fight each other with all the resources they had at their disposal. The resources they did not have at their disposal they would pay for with their beloved machinery of central banking.
In wartime, the printing presses ran overtime, but with a totalitarian level of rationing, price controls, and all-round socialization of resources in the whole of the Western world, the result of inflation was not merely rising prices. It was vast suffering and shortages in Britain, Russia, Germany, Italy, France, Austria-Hungary, the US, and pretty much the entire planet.
So we can see here the amazing irony of central banking at work. The institution that was promoted by economists working with bankers, in the name of bringing rationality and science to bear on monetary matters, had given birth to the most evil political trends in the history of the world: Communism, socialism, fascism, Nazism, and the despotism of economic planning in the capitalist West. The story of central banking is one step removed from the story of atom bombs and death camps. There is a reason the state has been unrestrained in the last 100 years and that reason is the precise one that many people think of as a purely technical issue that is too complicated for mere mortals.
Fast-forward to the Iraq War, which has all the features of a conflict born of the power to print money. There was a time when the decision to go to war involved real debate in the U.S. House of Representatives. And what was this debate about? It was about resources, and the power to tax. But once the executive state was unhinged from the need to rely on tax dollars, and did not have to worry about finding willing buyers for its unbacked debt instruments, the political debate about war was silenced.
In the entire run-up to war, George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population, was reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened. But he didn't have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars, or $4,681 per household. Imagine if he had gone to the American people to request that. What would have happened? I think we know the answer to that question. And those are government figures; the actual cost of this war will be far higher—perhaps $20,000 per household.
Now, when left-liberals talk about these figures, they like to compare them with what the state might have done with these resources in terms of funding health care, public schools, head-start centers, or food stamps. This is a mistake because it demonstrates that the left isn't really providing an alternative to the right. It merely has a different set of priorities in how it would use the resources raised by the inflation machine. It's true that public schools are less costly in terms of lives and property than war itself. But the inflation-funded welfare state also has a corrosive effect on society. The pipe dream that the inflation monster can be used to promote good instead of evil illustrates a certain naïveté about the nature of the state itself. If the state has the power and is asked to choose between doing good and waging war, what will it choose? Certainly in the American context the choice has always been for war.
It is equally naïve for the right to talk about restraining the government while wishing for global war. So long as the state has unlimited access to the printing press, it can ignore the pleas of ideological groups concerning how the money will be raised. It is also very silly for the right to believe that it can have its wars, its militarism, its nationalism and belligerence, without depending on the power of the Federal Reserve. This institution is the very mechanism by which the dreams of both the fanatical right and the fanatical left come true.
The effect of the money machine goes well beyond funding undesirable government programs. The Fed creates financial bubbles that lead to economic dislocation. Think of the technology bubble of the late 1990s or the housing bubble. Or the boom that preceded the current bust. These are all a result of the monopolization of money.
These days, the American consumer has been hit very hard with rising prices in oil, clothing, food, and much else. For the first time in decades, people are feeling this and feeling it hard. And just as in every other inflation in world history, people are looking for the culprit and finding all the wrong ones. They believe it is the oil companies who are gouging us, or that foreign oil dealers are restricting supply, or that gas station owners are abusing a crisis to profit at our expense.
I wouldn't entirely rule out the possibility that price controls are around the corner. When Nixon imposed them in 1971, neither he nor his advisors believed that they would actually result in controlling inflation. Rather, the purpose was to redirect the target of public anger from the government and its bank over to retailers, who would become scapegoats. In this sense, price controls do work. They make people believe that the government is trying to lower prices while the private sector is attempting to raise them. This is the real political dynamic at work with price controls.
The question is whether you will be taken in by these tactics. It is long past time for us to take note that the cause of the real trouble here is not the manufacturers or even the war as such but the agency that has been granted a legal right to counterfeit at will and lower the value of the currency while fueling every manner of statist scheme, whether welfare or warfare. We need to look at the Fed and say: this is the enemy.
Note that the Federal Reserve is not a political party. It is not a recognized interest group. It is not a famed lobby in Washington. It is not really even a sector of public opinion. It seems completely shielded off from vigorous public debate. If we truly believe in liberty and decry the leviathan state, this situation cannot be tolerated.
I say to the sincere right, if you really want to limit the state, you will have to give up your dreams of remaking the world at the point of a gun. Wars and limited government are impossible. Moreover, you must stop ignoring the role of monetary policy. It is a technical subject, to be sure, but one that we must all look into and understand if we expect to restore something that resembles the American liberty of the founders.
I say to the sincere left, if you really want to stop war and stop the spying state, and put an end to the persecution of political dissidents and the Guantánamo camps for foreign peoples, and put a stop to the culture of nationalism and militarism, you must join us in turning attention to the role of monetary policy. The printing presses must be unplugged. It's true that this will also hit programs that are beloved by the left, such as socialized health care and federalized education programs. But so long as you expect the state to fund your dreams, you cannot expect that the state will not also fund the dreams of people you hate.
And let me say a few words to libertarians, who dream of a world with limited government under the rule of law, a world in which free enterprise reigns and where the state has no power to interfere in our lives so long as we behave peacefully. It is completely absurd to believe that this can be achieved without fundamental monetary reform. And yet, until the most recent Ron Paul campaign, and aside from Murray Rothbard and the 26-year-long work of the Mises Institute, I don't recall that libertarians themselves have cared much about this issue at all.
In 1982, the Mises Institute held a large academic conference on the gold standard, and we held it in Washington, D.C. (There were scholarly papers and Ron Paul debated a Fed governor. Ron won.) Even back then, I recall that D.C. libertarians ridiculed us for holding such a meeting to talk about the Fed and its replacement with sound money. They said that this would make the Mises Institute look ridiculous, that we would be tarred with the brush of gold bugs and crazies. We did it anyway. And all these years later, the book that came out of that conference remains a main source for understanding the role of money in the advance of despotism or resistance to it, and a blueprint for the future.
Of course the Austrian tradition fought paper money and central banking from the beginning. Menger was an advocate of the gold standard. Böhm-Bawerk actually established it as finance minister to the Habsburg monarchy. Mises's book on the topic from 1912 was the first to show the role of money in the business cycle, and he issued dire warnings about central banking. Hayek wrote powerfully against the abandonment of gold in the 1930s. Hazlitt warned of the inevitable breakdown of Bretton Woods, and advocated a real gold standard instead. And Rothbard was a champion of sound money and the greatest enemy the Fed has ever had. But generally, I've long detected a tendency in libertarian circles to ignore this issue, in part for precisely the reasons cited above: it is not respectable.
Well, I will tell you why this issue is not considered respectable: it is the most important priority of the state to keep its money machine hidden behind a curtain. Anyone who dares pull the curtain back is accused of every manner of intellectual crime. This is precisely the reason we must talk about it at every occasion. We must end the conspiracy of silence on this issue.
I was intrigued at how Ron Paul, during his campaign, would constantly bring up the subject. Most politicians are out to play up to their audiences, so they say things that people want to hear. I promise you that early in the campaign, no one wanted to hear him talk about the Federal Reserve. But he did it anyway. He worked to educate his audiences about the need for monetary reform. And it worked. For the first time in my life, there is a large and very public movement in this country to take this topic seriously.
Monetary economist Joseph Salerno was called the other day by C-Span, which wanted to interview him on television on the need to restore gold as the basis of our currency. As I watched this excellent interview, I was struck by what a great triumph it truly is for liberty that this topic is again part of the national debate. In the 19th-century, this was a topic on everybody's minds. It can be again today, provided we do not eschew the truth in the formation of our message.
It might be said that advocating privatization is politically unrealistic, and therefore a waste of time. What's more, we might say that by continuing to harp on the issue, we only marginalize ourselves, proving that we are on the fringe. I submit that there is no better way to ensure that an issue will always be off the table than to stop talking about it.
Far from being an arcane and anachronistic issue, then, the gold standard and the issues it raises gets right to the heart of the current debate concerning the future of war and the world economy. Why do the government and its partisans dislike the gold standard? It removes the discretionary power of the Fed by placing severe limits on the ability of the central bank to inflate the money supply. Without that discretionary power, the government has far fewer tools of central planning at its disposal. Government can regulate, which is a function of the police power. It can tax, which involves taking people's property. And it can spend, which means redistributing other people's property. But its activities in the financial area are radically curbed.
Think of your local and state governments. They tax and spend. They manipulate and intervene. As with all governments from the beginning of time, they generally retard social progress and muck things up as much as possible. What they do not do, however, is wage massive global wars, run huge deficits, accumulate trillions in debt, reduce the value of money, bail out foreign governments, provide endless credits to failing enterprises, administer hugely expensive and destructive social insurance schemes, or bring about immense swings in business activity.
State and local governments are awful and they must be relentlessly checked, but they are not anything like the threat of the federal government. Neither are they as arrogant and convinced of their own infallibility and indispensability. They lack the aura of invincibility that the central government enjoys.
It is the central bank, and only the central bank, that works as the government's money machine, and this makes all the difference. Now, it is not impossible that a central bank can exist alongside a gold standard, a lender of last resort that avoids the temptation to destroy that which restrains it. In the same way, it is possible for someone with an insatiable appetite for wine to sit at a banquet table of delicious vintages and not take a sip.
Let's just say that the existence of a central bank introduces an occasion of sin for the government. That is why under the best gold standard, there would be no central bank, gold coins would circulate as freely as their substitutes, and rules against fraud and theft would prohibit banks from pyramiding credit on top of demand deposits. So long as we are constructing the perfect system, all coinage would be private. Banks would be treated as businesses, no special privileges, no promises of bailout, no subsidized insurance, and no connection to government at any level.
This is the free-market system of monetary management, which means turning over the institution of money entirely to the market economy. As with any institution in a free society, it is not imposed from above, and dictated by a group of experts, but is the de facto result that comes about in a society that consistently respects private-property rights, encourages enterprise, and promotes peace.
It comes down to this. If you hate war, oppose the Fed. If you hate violations of your liberties, oppose the Fed. If you want to restrain despotism, restrain the Fed. If you want to secure freedom for yourself and your descendants, abolish the Fed.
June 9, 2008
The Singing Revolution
Movie Review
The Singing Revolution (2007)
The Singing Revolution (2007)
Mountain View
Estonians sang in celebration after a successful non-violent defense of the nation's capitol in May of 1990 from "Revolution."
December 14, 2007
http://movies.nytimes.com/2007/12/14/movies/14revo.html
By MATT ZOLLER SEITZ
Published: December 14, 2007
By MATT ZOLLER SEITZ
Published: December 14, 2007
Can singing change history? “The Singing Revolution,” a documentary by James Tusty and Maureen Castle Tusty about Estonia’s struggle to end Soviet occupation, shows that it already has.
The first part of “Revolution” provides a thumbnail sketch of 20th-century Estonian history, and it’s not pretty. This small nation was a satellite state of the former Soviet Union for much of that time, except for a brief period when the Germans controlled it.
Under the Soviets, especially, Estonian culture was brutishly suppressed, but it welled up every five years in July, when Estonians gathered in Tallinn for the Estonian song festival, which often drew upward of 25,000 people. The images of these festivals are moving already; the force of the singers and the precision of their conductors are stunning to behold.
But the emotion swells further when Estonians defy their occupiers by singing nationalist songs. This bold act reclaimed Estonian identity and set the stage for a series of increasingly daring rebellions under the Soviet President Mikhail S. Gorbachev, who advocated glasnost and got more than he bargained for.
Imagine the scene in “Casablanca” in which the French patrons sing “La Marseillaise” in defiance of the Germans, then multiply its power by a factor of thousands, and you’ve only begun to imagine the force of “The Singing Revolution.”
THE SINGING REVOLUTION
Opens on Friday in Manhattan.
Directed by James Tusty and Maureen Castle Tusty; written by Mr. Tusty, Ms. Castle Tusty and Mike Majoros; narrated by Linda Hunt; director of photography, Miguelangel Aponte-Rios; edited by Mr. Majoros; music by John Kusiak; produced by Ms. Castle Tusty, Mr. Tusty, Bestor Cram, Artur Talvik, Piret Tibbo-Hudgins and Thor Halvorssen; released by Abramorama. At the Village East, Second Avenue at 12th Street, East Village. Running time: 1 hour 34 minutes. This film is not rated.
The first part of “Revolution” provides a thumbnail sketch of 20th-century Estonian history, and it’s not pretty. This small nation was a satellite state of the former Soviet Union for much of that time, except for a brief period when the Germans controlled it.
Under the Soviets, especially, Estonian culture was brutishly suppressed, but it welled up every five years in July, when Estonians gathered in Tallinn for the Estonian song festival, which often drew upward of 25,000 people. The images of these festivals are moving already; the force of the singers and the precision of their conductors are stunning to behold.
But the emotion swells further when Estonians defy their occupiers by singing nationalist songs. This bold act reclaimed Estonian identity and set the stage for a series of increasingly daring rebellions under the Soviet President Mikhail S. Gorbachev, who advocated glasnost and got more than he bargained for.
Imagine the scene in “Casablanca” in which the French patrons sing “La Marseillaise” in defiance of the Germans, then multiply its power by a factor of thousands, and you’ve only begun to imagine the force of “The Singing Revolution.”
THE SINGING REVOLUTION
Opens on Friday in Manhattan.
Directed by James Tusty and Maureen Castle Tusty; written by Mr. Tusty, Ms. Castle Tusty and Mike Majoros; narrated by Linda Hunt; director of photography, Miguelangel Aponte-Rios; edited by Mr. Majoros; music by John Kusiak; produced by Ms. Castle Tusty, Mr. Tusty, Bestor Cram, Artur Talvik, Piret Tibbo-Hudgins and Thor Halvorssen; released by Abramorama. At the Village East, Second Avenue at 12th Street, East Village. Running time: 1 hour 34 minutes. This film is not rated.
Saturday, May 31, 2008
Corporate executives forced pro-Bush, pro-war narrative
http://www.salon.com/opinion/greenwald/2008/05/29/yellin/index.html
Glenn Greenwald
Thursday May 29, 2008 06:03 EDT
CNN/MSNBC reporter: Corporate executives forced pro-Bush, pro-war narrative
(updated below - Update II)
Jessica Yellin -- currently a CNN correspondent who covered the White House for ABC News and MSNBC in 2002 and 2003 -- was on with Anderson Cooper last night discussing Scott McClellan's book, and made one of the most significant admissions heard on television in quite some time:
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: I think the press corps dropped the ball at the beginning. When the lead-up to the war began, the press corps was under enormous pressure from corporate executives, frankly, to make sure that this was a war that was presented in a way that was consistent with the patriotic fever in the nation and the president's high approval ratings.
And my own experience at the White House was that, the higher the president's approval ratings, the more pressure I had from news executives -- and I was not at this network at the time -- but the more pressure I had from news executives to put on positive stories about the president.
I think, over time...
(CROSSTALK)
COOPER: You had pressure from news executives to put on positive stories about the president?
YELLIN: Not in that exact -- they wouldn't say it in that way, but they would edit my pieces. They would push me in different directions. They would turn down stories that were more critical and try to put on pieces that were more positive, yes. That was my experience.The video of that exchange is here. As noted in Update II below, Yellin today said that she was referring to her time at MSNBC.
Yellin's admission is but the latest in a growing mountain of evidence demonstrating that corporate executives forced their news reporters to propagandize in favor of the Bush administration and the war, and censored stories that were critical of the Government. Katie Couric yesterday said that threats from the White House and accusations of being unpatriotic coerced the media into suppressing its questioning of the war. But last September, Couric revealed even more specifically the type of pressure that was put on her by NBC executives to refrain from criticizing the administration, after she conducted a "tough interview" with Condoleezza Rice:
After the interview, Couric said she received an email from an NBC exec "forwarded without explanation" from a viewer who wrote that she had been "unnecessarily confrontational."
"I think there was a lot of undercurrent of pressure not to rock the boat for a variety of reasons, where it was corporate reasons or other considerations," she said in an interview with former journalist and author Marvin Kalb during "The Kalb Report" forum at the National Press Club in Washington, D.C.In April of 2003, then-MSNBC star Ashleigh Banfield delivered a speech at Kansas State University and said that American news coverage of the Iraq war attracted high ratings but "wasn't journalism," because "there are horrors that were completely left out of this war." She added, echoing Couric:
The other thing is that so many voices were silent in this war. We all know what happened to Susan Sarandon for speaking out, and her husband, and we all know that this is not the way Americans truly want to be. Free speech is a wonderful thing, it's what we fight for, but the minute it's unpalatable we fight against it for some reason.
That just seems to be a trend of late, and l am worried that it may be a reflection of what the news was and how the news coverage was coming across. . . . I think there were a lot of dissenting voices before this war about the horrors of war, but I'm very concerned about this three-week TV show and how it may have changed people's opinions. It was very sanitized.Shortly thereafter, Banfield was demoted, then fired altogether, and -- as Digby put it in her great analysis of Banfield's speech -- "she's now a co-anchor on a Court TV show."
At the same time, MSNBC fired the only real war opponent it had, Phil Donahue, despite very healthy ratings (the highest of any show on MSNBC, including "Hardball"). When interviewed for Bill Moyers' truly superb 2007 documentary on press behavior in the run-up to the war, Donahue reported much the same thing as Yellin, Couric, and Banfield revealed:
BILL MOYERS: You had Scott Ritter, former weapons inspector. Who was saying that if we invade, it will be a historic blunder.
PHIL DONOHUE: You didn't have him alone. He had to be there with someone else who supported the war. In other words, you couldn't have Scott Ritter alone. You could have Richard Perle alone.
BILL MOYERS: You could have the conservative.
PHIL DONOHUE: You could have the supporters of the President alone. And they would say why this war is important. You couldn't have a dissenter alone. Our producers were instructed to feature two conservatives for every liberal.
BILL MOYERS: You're kidding.
PHIL DONOHUE: No this is absolutely true.
BILL MOYERS: Instructed from above?
PHIL DONOHUE: Yes. I was counted as two liberals.A leaked memo from NBC executives at the time of his firing made clear that Donahue was fired for ideological reasons, not due to ratings:
The study went on to claim that Donahue presented a "difficult public face for NBC in a time of war . . . . He seems to delight in presenting guests who are anti-war, anti-Bush and skeptical of the administration's motives." The report went on to outline a possible nightmare scenario where the show becomes "a home for the liberal antiwar agenda at the same time that our competitors are waving the flag at every opportunity."NBC executives then proceeded to hire Dick Armey as an MSNBC commentator and give a show to Michael Savage. Michael Savage.
This is nothing less than compelling evidence that, in terms of our establishment press, our media is anything but "free." Corporate executives continuously suppressed critical reporting of the Government and the war and forced their paid reporters to mimic the administration line. The evidence proving that comes not from media critics or shrill left-wing bloggers but from those who work at these news outlets, including some of their best-known and highest-paid journalists who are attesting to such facts from first-hand knowledge despite its being in their interests not to speak out about such things.
* * * * *
Yesterday was actually quite an extraordinary day in our political culture because Scott McClellan's revelations forced the establishment media to defend themselves against long-standing accusations of their corruption and annexation by the government -- criticisms which, until yesterday, they literally just ignored, blacked-out, and suppressed. Bizarrely enough, it took a "tell-all" Washington book from Scott McClellan, of all people, to force these issues out into the open, and he seems -- unwittingly or otherwise -- to have opened a huge flood gate that has long been held tightly shut.
Network executives obviously know that these revelations are quite threatening to their brand. Yesterday, they wheeled out their full stable of multi-millionaire corporate stars who play the role of authoritative journalists on the TV to join with their White House allies in mocking and deriding McClellan's claims. One media star after the next -- Tom Brokaw, David Gregory, Charlie Gibson and Brian Williams, Tim Russert, Wolf Blitzer -- materialized in sync to insist that nothing could be more absurd than the suggestion that they are "deferential, complicit enablers" in government propaganda.
I have little doubt that they would be telling the truth if they denied what Yellin reported last night. People like Williams, Gibson and Gregory don't need to be told to refrain from reporting critically about the war and the White House because challenging Government claims isn't what they do. And amazingly, they admitted that explicitly yesterday. Gibson and Gregory both invoked the cliched excuse of the low-level bureaucrat using almost identical language: exposing government lies "is not our job."
Brian Williams, Charlie Gibson and company are paid to play the role of TV reporters but, in reality, are mere television emcees -- far more akin to circus ringleaders than journalists. It's just as simple as that. David Halberstam pointed that out some time ago. Unlike Yellin, Donahue and Banfield, nobody needed to pressure the likes of Williams, Gibson and Russert to serve as propaganda handmaidens for the White House. It's what they do quite eagerly on their own, which is precisely why they're in the corporate positions they're in. They are smooth, undisruptive personalities who don't create problems for their executives. Watching them finally describe how they perceive of "their role" leaves no doubt about any of that.
* * * * *
This is the most vital point: this is not a matter of mere historical interest. This is not about how the media operated five years ago during an aberrational time in our history. This is about how they functioned then and how they function now. The same people who did all of this still run these media organizations and it's the same coddled, made-up personalities still playing the role of "journalist."
That's what makes the NYT "military analyst" story so significant, and it's why it's so revealing that the establishment media black-out of that story continues. Not just in 2003, but through 2008, the networks relied upon Pentagon-controlled propagandists to masquerade as their "independent analysts." Those analysts repeatedly spouted patently false government propaganda without challenge. The numerous financial incentives and ideological ties these analysts had were concealed. And these networks, now that this is all revealed and even with multiple investigations underway, still refuse to tell their viewers about any of it.
Clearly, if these network media stars think they did nothing wrong in the run-up to the war and in their coverage of the Bush administration -- and they don't -- then it's only logical to conclude that they still do the same things and will do the same things in the future. As people like Jessica Yellin, Katie Couric, Phil Donahue and Scott McClellan are making clear, these media outlets are controlled propaganda arms of the Government, of the political establishment generally. For many people, that isn't a new revelation, but the fact that it's becoming clearer by the day -- from unimpeachable sources on the inside -- is nonetheless quite significant.UPDATE: The central excuse offered by self-defending "journalists" is that they didn't present an anti-war case because nobody was making that case, and it's not their job to create debate. This unbelievably rotted view found its most darkly hilarious expression in a 2007 David Ignatius column in The Washington Post. After explaining how proud he is of his support for the attack on Iraq, Igantius explains why there wasn't much challenge made to the Administration's case for war (h/t Ivan Carterr):
In a sense, the media were victims of their own professionalism. Because there was little criticism of the war from prominent Democrats and foreign policy analysts, journalistic rules meant we shouldn't create a debate on our own. And because major news organizations knew the war was coming, we spent a lot of energy in the last three months before the war preparing to cover it.They were "victims of their own professionalism." It's not up to them to create a debate where none exists. That's the same thing Charlie Gibson, David Gregory, and Tim Russert -- among others -- have all said in defending themselves.
The idea that journalists only convey statements from politicians rather than "create debates" is the classic Stenographic Model of "Journalism" -- "we just write down what people say. It's not our job to do anything else." Real reporting is about uncovering facts that the political elite try to conceal, not ones they willingly broadcast. It's about investigating and exposing -- not mindlessly amplifying -- the falsehoods and deceit of government claims. But our modern "journalists" (with some noble exceptions) don't do that not only because they can't do it, but also because they don't think it's their job. That's because, by definition, they're not journalists.
But beyond that, this claim is just categorically, demonstrably false. As Eric Boehlert and Atrios both demonstrated yesterday, Ted Kennedy in September, 2002 "delivered a passionate, provocative, and newsworthy speech raising all sorts of doubts about a possible invasion." Moreover, Al Gore (the prior presidential nominee of the Democratic Party) and Howard Dean (the 2003 Democratic presidential frontrunner) were both emphatically speaking out against the war.
Thus, three of the most influential voices in the Democratic Party -- arguably the three most influential at the time -- were vehemently opposing the war. People were protesting in the streets by the hundreds of thousands inside the U.S. and around the world. In the world as perceived by the insulated, out-of-touch and establishment-worshiping likes of David Ignatius, Brian Williams, David Gregory, and Charlie Gibson, there may not have been a debate over whether we should attack Iraq. But there nonetheless was a debate. They ignored it and silenced it because their jobs didn't permit them to highlight those questions. Ask Jessica Yellin. She'll tell you. She just did last night.UPDATE II: Yellin clarifies in a post today that her comments "involved [her] time on MSNBC where [she] worked during the lead up to war" and that she was referring to "senior producers." She says that "many people running the broadcasts wanted coverage that was consistent with the patriotic fever in the country at the time." That, of course, is the same network that fired Ashleigh Banfield and Phil Donahue, and where David Gregory, Tom Brokow, Brian Williams and Tim Russert all now insist that they performed superb journalism in the run-up to the war.
On a different note, contrary to the standard establishment journalist excuse that there were no real anti-war advocates for them to include in their coverage, there were ample politicians and experts speaking out against the war. Aside from the numerous examples listed above, many of the nation's leading international relation scholars were forced to pay for ads in places such as the The New York Times to make their anti-war case because the media would not -- and still will not -- include them in its coverage. Numerous non-liberal factions -- from foreign policy scholars at the Cato Institute to former Reagan defense officials -- were vehemently against the war. But the networks featured an endless stream of know-nothing war cheerleaders while almost completely excluding actual opponents of the war.
Glenn Greenwald
Thursday May 29, 2008 06:03 EDT
CNN/MSNBC reporter: Corporate executives forced pro-Bush, pro-war narrative
(updated below - Update II)
Jessica Yellin -- currently a CNN correspondent who covered the White House for ABC News and MSNBC in 2002 and 2003 -- was on with Anderson Cooper last night discussing Scott McClellan's book, and made one of the most significant admissions heard on television in quite some time:
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: I think the press corps dropped the ball at the beginning. When the lead-up to the war began, the press corps was under enormous pressure from corporate executives, frankly, to make sure that this was a war that was presented in a way that was consistent with the patriotic fever in the nation and the president's high approval ratings.
And my own experience at the White House was that, the higher the president's approval ratings, the more pressure I had from news executives -- and I was not at this network at the time -- but the more pressure I had from news executives to put on positive stories about the president.
I think, over time...
(CROSSTALK)
COOPER: You had pressure from news executives to put on positive stories about the president?
YELLIN: Not in that exact -- they wouldn't say it in that way, but they would edit my pieces. They would push me in different directions. They would turn down stories that were more critical and try to put on pieces that were more positive, yes. That was my experience.The video of that exchange is here. As noted in Update II below, Yellin today said that she was referring to her time at MSNBC.
Yellin's admission is but the latest in a growing mountain of evidence demonstrating that corporate executives forced their news reporters to propagandize in favor of the Bush administration and the war, and censored stories that were critical of the Government. Katie Couric yesterday said that threats from the White House and accusations of being unpatriotic coerced the media into suppressing its questioning of the war. But last September, Couric revealed even more specifically the type of pressure that was put on her by NBC executives to refrain from criticizing the administration, after she conducted a "tough interview" with Condoleezza Rice:
After the interview, Couric said she received an email from an NBC exec "forwarded without explanation" from a viewer who wrote that she had been "unnecessarily confrontational."
"I think there was a lot of undercurrent of pressure not to rock the boat for a variety of reasons, where it was corporate reasons or other considerations," she said in an interview with former journalist and author Marvin Kalb during "The Kalb Report" forum at the National Press Club in Washington, D.C.In April of 2003, then-MSNBC star Ashleigh Banfield delivered a speech at Kansas State University and said that American news coverage of the Iraq war attracted high ratings but "wasn't journalism," because "there are horrors that were completely left out of this war." She added, echoing Couric:
The other thing is that so many voices were silent in this war. We all know what happened to Susan Sarandon for speaking out, and her husband, and we all know that this is not the way Americans truly want to be. Free speech is a wonderful thing, it's what we fight for, but the minute it's unpalatable we fight against it for some reason.
That just seems to be a trend of late, and l am worried that it may be a reflection of what the news was and how the news coverage was coming across. . . . I think there were a lot of dissenting voices before this war about the horrors of war, but I'm very concerned about this three-week TV show and how it may have changed people's opinions. It was very sanitized.Shortly thereafter, Banfield was demoted, then fired altogether, and -- as Digby put it in her great analysis of Banfield's speech -- "she's now a co-anchor on a Court TV show."
At the same time, MSNBC fired the only real war opponent it had, Phil Donahue, despite very healthy ratings (the highest of any show on MSNBC, including "Hardball"). When interviewed for Bill Moyers' truly superb 2007 documentary on press behavior in the run-up to the war, Donahue reported much the same thing as Yellin, Couric, and Banfield revealed:
BILL MOYERS: You had Scott Ritter, former weapons inspector. Who was saying that if we invade, it will be a historic blunder.
PHIL DONOHUE: You didn't have him alone. He had to be there with someone else who supported the war. In other words, you couldn't have Scott Ritter alone. You could have Richard Perle alone.
BILL MOYERS: You could have the conservative.
PHIL DONOHUE: You could have the supporters of the President alone. And they would say why this war is important. You couldn't have a dissenter alone. Our producers were instructed to feature two conservatives for every liberal.
BILL MOYERS: You're kidding.
PHIL DONOHUE: No this is absolutely true.
BILL MOYERS: Instructed from above?
PHIL DONOHUE: Yes. I was counted as two liberals.A leaked memo from NBC executives at the time of his firing made clear that Donahue was fired for ideological reasons, not due to ratings:
The study went on to claim that Donahue presented a "difficult public face for NBC in a time of war . . . . He seems to delight in presenting guests who are anti-war, anti-Bush and skeptical of the administration's motives." The report went on to outline a possible nightmare scenario where the show becomes "a home for the liberal antiwar agenda at the same time that our competitors are waving the flag at every opportunity."NBC executives then proceeded to hire Dick Armey as an MSNBC commentator and give a show to Michael Savage. Michael Savage.
This is nothing less than compelling evidence that, in terms of our establishment press, our media is anything but "free." Corporate executives continuously suppressed critical reporting of the Government and the war and forced their paid reporters to mimic the administration line. The evidence proving that comes not from media critics or shrill left-wing bloggers but from those who work at these news outlets, including some of their best-known and highest-paid journalists who are attesting to such facts from first-hand knowledge despite its being in their interests not to speak out about such things.
* * * * *
Yesterday was actually quite an extraordinary day in our political culture because Scott McClellan's revelations forced the establishment media to defend themselves against long-standing accusations of their corruption and annexation by the government -- criticisms which, until yesterday, they literally just ignored, blacked-out, and suppressed. Bizarrely enough, it took a "tell-all" Washington book from Scott McClellan, of all people, to force these issues out into the open, and he seems -- unwittingly or otherwise -- to have opened a huge flood gate that has long been held tightly shut.
Network executives obviously know that these revelations are quite threatening to their brand. Yesterday, they wheeled out their full stable of multi-millionaire corporate stars who play the role of authoritative journalists on the TV to join with their White House allies in mocking and deriding McClellan's claims. One media star after the next -- Tom Brokaw, David Gregory, Charlie Gibson and Brian Williams, Tim Russert, Wolf Blitzer -- materialized in sync to insist that nothing could be more absurd than the suggestion that they are "deferential, complicit enablers" in government propaganda.
I have little doubt that they would be telling the truth if they denied what Yellin reported last night. People like Williams, Gibson and Gregory don't need to be told to refrain from reporting critically about the war and the White House because challenging Government claims isn't what they do. And amazingly, they admitted that explicitly yesterday. Gibson and Gregory both invoked the cliched excuse of the low-level bureaucrat using almost identical language: exposing government lies "is not our job."
Brian Williams, Charlie Gibson and company are paid to play the role of TV reporters but, in reality, are mere television emcees -- far more akin to circus ringleaders than journalists. It's just as simple as that. David Halberstam pointed that out some time ago. Unlike Yellin, Donahue and Banfield, nobody needed to pressure the likes of Williams, Gibson and Russert to serve as propaganda handmaidens for the White House. It's what they do quite eagerly on their own, which is precisely why they're in the corporate positions they're in. They are smooth, undisruptive personalities who don't create problems for their executives. Watching them finally describe how they perceive of "their role" leaves no doubt about any of that.
* * * * *
This is the most vital point: this is not a matter of mere historical interest. This is not about how the media operated five years ago during an aberrational time in our history. This is about how they functioned then and how they function now. The same people who did all of this still run these media organizations and it's the same coddled, made-up personalities still playing the role of "journalist."
That's what makes the NYT "military analyst" story so significant, and it's why it's so revealing that the establishment media black-out of that story continues. Not just in 2003, but through 2008, the networks relied upon Pentagon-controlled propagandists to masquerade as their "independent analysts." Those analysts repeatedly spouted patently false government propaganda without challenge. The numerous financial incentives and ideological ties these analysts had were concealed. And these networks, now that this is all revealed and even with multiple investigations underway, still refuse to tell their viewers about any of it.
Clearly, if these network media stars think they did nothing wrong in the run-up to the war and in their coverage of the Bush administration -- and they don't -- then it's only logical to conclude that they still do the same things and will do the same things in the future. As people like Jessica Yellin, Katie Couric, Phil Donahue and Scott McClellan are making clear, these media outlets are controlled propaganda arms of the Government, of the political establishment generally. For many people, that isn't a new revelation, but the fact that it's becoming clearer by the day -- from unimpeachable sources on the inside -- is nonetheless quite significant.UPDATE: The central excuse offered by self-defending "journalists" is that they didn't present an anti-war case because nobody was making that case, and it's not their job to create debate. This unbelievably rotted view found its most darkly hilarious expression in a 2007 David Ignatius column in The Washington Post. After explaining how proud he is of his support for the attack on Iraq, Igantius explains why there wasn't much challenge made to the Administration's case for war (h/t Ivan Carterr):
In a sense, the media were victims of their own professionalism. Because there was little criticism of the war from prominent Democrats and foreign policy analysts, journalistic rules meant we shouldn't create a debate on our own. And because major news organizations knew the war was coming, we spent a lot of energy in the last three months before the war preparing to cover it.They were "victims of their own professionalism." It's not up to them to create a debate where none exists. That's the same thing Charlie Gibson, David Gregory, and Tim Russert -- among others -- have all said in defending themselves.
The idea that journalists only convey statements from politicians rather than "create debates" is the classic Stenographic Model of "Journalism" -- "we just write down what people say. It's not our job to do anything else." Real reporting is about uncovering facts that the political elite try to conceal, not ones they willingly broadcast. It's about investigating and exposing -- not mindlessly amplifying -- the falsehoods and deceit of government claims. But our modern "journalists" (with some noble exceptions) don't do that not only because they can't do it, but also because they don't think it's their job. That's because, by definition, they're not journalists.
But beyond that, this claim is just categorically, demonstrably false. As Eric Boehlert and Atrios both demonstrated yesterday, Ted Kennedy in September, 2002 "delivered a passionate, provocative, and newsworthy speech raising all sorts of doubts about a possible invasion." Moreover, Al Gore (the prior presidential nominee of the Democratic Party) and Howard Dean (the 2003 Democratic presidential frontrunner) were both emphatically speaking out against the war.
Thus, three of the most influential voices in the Democratic Party -- arguably the three most influential at the time -- were vehemently opposing the war. People were protesting in the streets by the hundreds of thousands inside the U.S. and around the world. In the world as perceived by the insulated, out-of-touch and establishment-worshiping likes of David Ignatius, Brian Williams, David Gregory, and Charlie Gibson, there may not have been a debate over whether we should attack Iraq. But there nonetheless was a debate. They ignored it and silenced it because their jobs didn't permit them to highlight those questions. Ask Jessica Yellin. She'll tell you. She just did last night.UPDATE II: Yellin clarifies in a post today that her comments "involved [her] time on MSNBC where [she] worked during the lead up to war" and that she was referring to "senior producers." She says that "many people running the broadcasts wanted coverage that was consistent with the patriotic fever in the country at the time." That, of course, is the same network that fired Ashleigh Banfield and Phil Donahue, and where David Gregory, Tom Brokow, Brian Williams and Tim Russert all now insist that they performed superb journalism in the run-up to the war.
On a different note, contrary to the standard establishment journalist excuse that there were no real anti-war advocates for them to include in their coverage, there were ample politicians and experts speaking out against the war. Aside from the numerous examples listed above, many of the nation's leading international relation scholars were forced to pay for ads in places such as the The New York Times to make their anti-war case because the media would not -- and still will not -- include them in its coverage. Numerous non-liberal factions -- from foreign policy scholars at the Cato Institute to former Reagan defense officials -- were vehemently against the war. But the networks featured an endless stream of know-nothing war cheerleaders while almost completely excluding actual opponents of the war.
Thursday, May 29, 2008
How the World's Richest Governments Starve the World's Poorest People
Daily Article Posted on 5/28/2008 by Bogdan C. Enache
World food prices have increased dramatically, by almost 60 percent on average since March of last year, according to the index compiled by the World Food and Agricultural Organization, and there's no sign yet that they're going to substantially fall back in the near future. With record prices on the Chicago Board of Trade for futures contracts on agricultural commodities, it seems very likely that the high food prices are here to stay for the next few years.
Naturally, governments all over the world now feel compelled to rectify the situation and are busy enacting or preparing to enact various measures that they believe will help ease the rise of food prices. In general, however, they only succeed in making things worse.
In some places, like Argentina, Egypt, India, Kazakhstan, or Indonesia, for example, local governments have imposed new export tariffs in order to protect the domestic food market from rising international price pressures, thus setting the stage for endemic shortages. In other places, like Russia or China, things have gone much further, and export tariffs have been coupled with price controls on basic foods such as bread, milk, and eggs.
The Mexican government, on the other hand, has reacted by mixing one bad idea — namely, price controls for food — with a good idea rather a little too late: lowering import tariffs for various agricultural products. Governments in several other countries from Latin America, Europe, Africa, and Asia, including the European Union — despite protests from the French minister of agriculture — have lowered or even suspended import tariffs for various agricultural commodities coming from certain trading partners. While this is far from the ideal of an immediate abolition of all tariffs — and it's as distortionary as politically managed trade can be, even in time of crisis — it is certainly a small step in the right direction and might help ensure a smoother supply of food in some places.
All in all however, there seems to be little that can be done in the short term for the world's poorest people. The hundreds of millions of people who live on the border of poverty, who spend almost all their income on food, are now faced with the threat of starvation. Already, in more than seventeen countries around the world, from Mexico to Indonesia, from Argentina to Mongolia, and from Mozambique to Morocco, the hungry poor have sparked riots and civil unrest in the wake of higher food prices that they cannot afford. The anger felt by these rough but fragile people, the fruit of desperation born out of the usual mixture of poverty and oppression that characterizes the underdeveloped parts of the world, can sometimes be misguided; but in its most fundamental expression, it is just, courageous, and even commendable.
But how did this happen? With hundreds of billions of dollars spent each year on development aid and various antipoverty programs in the so-called third world, with an array of governmental and intergovernmental agencies designed to lift the planet's poorest out of earthly misery, and with no notable natural disaster affecting crops and agricultural production, how can a food crisis that threatens millions with starvation have come about?
Undoubtedly, rising prices for oil and oil-derived fertilizers did have an impact on food prices, but oil prices cannot entirely account for the soaring food prices observed. It is certainly true that increased demand from emerging markets, such as China and India, has also put pressure on prices. Moreover, the increased demand for meat and dairy emanating from these countries — a result of diets moving away from more traditional vegetarian foods, in favor of more western-style meals — must have triggered a process of adjustment along the capital structure that necessitates some time before it is capable of supplying the additional specific demand.
However, the pressure from both higher oil prices and higher grain consumption in emergent economies pales in comparison with the recent increase of industrial demand for grain in the production of various types of biofuels that occurred during recent years.
Thus, almost all additional US corn production between 2004 and 2007, for instance, has been diverted to the production of ethanol, while the European ethanol production more than tripled during the same period. The increased use of grains for ethanol production has led to a fall in the supply of grains relative to overall demand during the last seven years (with the exception of 2006, which was compensated by the use of grain stocks, now at the lowest level globally in a quarter century). This situation is not, however, a natural market phenomenon, but the direct result of various government programs — usually in the world's most developed economies, although developing countries are catching up — that aim to promote more environmentally friendly energy technology or energy self-sufficiency by subsidizing and mandating the diversion of a growing percentage of agricultural commodities such as corn, sugar cane, wheat, and so on, to the production of bioethanol and biodiesel.
$29 $22
The increased production of biofuels in the United States, Brazil, Europe, and elsewhere is thus effectively obtained at the expense of food production — or, as it turns out, potentially at the cost of the lives of millions of the world's poorest inhabitants who are now priced out of the market for food.
Contemplating the grotesque potential side effects of bioethanol subsidies in the world's most developed economies is almost unbearable. While everyone is affected by higher food prices, for some people they mean only giving up a new pair of shoes or a night out. For others, however, the more costly food puts their very subsistence into question. No doubt, the politicians who came up with the idea of subsidizing the diversion of grain to the production of bioethanol did not intend to starve the world's poorest people; but the fact that the consequences were unintended does not absolve them of responsibility.
Bogdan C. Enache is an associated researcher with CADI, a free market–oriented think tank in Bucharest, Romania. Send him mail. Comment on the blog.
You can receive the Mises Daily Article in your inbox. Go here to subscribe or unsubscribe.
World food prices have increased dramatically, by almost 60 percent on average since March of last year, according to the index compiled by the World Food and Agricultural Organization, and there's no sign yet that they're going to substantially fall back in the near future. With record prices on the Chicago Board of Trade for futures contracts on agricultural commodities, it seems very likely that the high food prices are here to stay for the next few years.
Naturally, governments all over the world now feel compelled to rectify the situation and are busy enacting or preparing to enact various measures that they believe will help ease the rise of food prices. In general, however, they only succeed in making things worse.
In some places, like Argentina, Egypt, India, Kazakhstan, or Indonesia, for example, local governments have imposed new export tariffs in order to protect the domestic food market from rising international price pressures, thus setting the stage for endemic shortages. In other places, like Russia or China, things have gone much further, and export tariffs have been coupled with price controls on basic foods such as bread, milk, and eggs.
The Mexican government, on the other hand, has reacted by mixing one bad idea — namely, price controls for food — with a good idea rather a little too late: lowering import tariffs for various agricultural products. Governments in several other countries from Latin America, Europe, Africa, and Asia, including the European Union — despite protests from the French minister of agriculture — have lowered or even suspended import tariffs for various agricultural commodities coming from certain trading partners. While this is far from the ideal of an immediate abolition of all tariffs — and it's as distortionary as politically managed trade can be, even in time of crisis — it is certainly a small step in the right direction and might help ensure a smoother supply of food in some places.
All in all however, there seems to be little that can be done in the short term for the world's poorest people. The hundreds of millions of people who live on the border of poverty, who spend almost all their income on food, are now faced with the threat of starvation. Already, in more than seventeen countries around the world, from Mexico to Indonesia, from Argentina to Mongolia, and from Mozambique to Morocco, the hungry poor have sparked riots and civil unrest in the wake of higher food prices that they cannot afford. The anger felt by these rough but fragile people, the fruit of desperation born out of the usual mixture of poverty and oppression that characterizes the underdeveloped parts of the world, can sometimes be misguided; but in its most fundamental expression, it is just, courageous, and even commendable.
But how did this happen? With hundreds of billions of dollars spent each year on development aid and various antipoverty programs in the so-called third world, with an array of governmental and intergovernmental agencies designed to lift the planet's poorest out of earthly misery, and with no notable natural disaster affecting crops and agricultural production, how can a food crisis that threatens millions with starvation have come about?
Undoubtedly, rising prices for oil and oil-derived fertilizers did have an impact on food prices, but oil prices cannot entirely account for the soaring food prices observed. It is certainly true that increased demand from emerging markets, such as China and India, has also put pressure on prices. Moreover, the increased demand for meat and dairy emanating from these countries — a result of diets moving away from more traditional vegetarian foods, in favor of more western-style meals — must have triggered a process of adjustment along the capital structure that necessitates some time before it is capable of supplying the additional specific demand.
However, the pressure from both higher oil prices and higher grain consumption in emergent economies pales in comparison with the recent increase of industrial demand for grain in the production of various types of biofuels that occurred during recent years.
Thus, almost all additional US corn production between 2004 and 2007, for instance, has been diverted to the production of ethanol, while the European ethanol production more than tripled during the same period. The increased use of grains for ethanol production has led to a fall in the supply of grains relative to overall demand during the last seven years (with the exception of 2006, which was compensated by the use of grain stocks, now at the lowest level globally in a quarter century). This situation is not, however, a natural market phenomenon, but the direct result of various government programs — usually in the world's most developed economies, although developing countries are catching up — that aim to promote more environmentally friendly energy technology or energy self-sufficiency by subsidizing and mandating the diversion of a growing percentage of agricultural commodities such as corn, sugar cane, wheat, and so on, to the production of bioethanol and biodiesel.
$29 $22
The increased production of biofuels in the United States, Brazil, Europe, and elsewhere is thus effectively obtained at the expense of food production — or, as it turns out, potentially at the cost of the lives of millions of the world's poorest inhabitants who are now priced out of the market for food.
Contemplating the grotesque potential side effects of bioethanol subsidies in the world's most developed economies is almost unbearable. While everyone is affected by higher food prices, for some people they mean only giving up a new pair of shoes or a night out. For others, however, the more costly food puts their very subsistence into question. No doubt, the politicians who came up with the idea of subsidizing the diversion of grain to the production of bioethanol did not intend to starve the world's poorest people; but the fact that the consequences were unintended does not absolve them of responsibility.
Bogdan C. Enache is an associated researcher with CADI, a free market–oriented think tank in Bucharest, Romania. Send him mail. Comment on the blog.
You can receive the Mises Daily Article in your inbox. Go here to subscribe or unsubscribe.
Tuesday, May 20, 2008
At least 100,000 said executed by US's Korean ally in 1950 summer of terror
http://wiredispatch.com/news/?id=174859
AP IMPACT: Thousands killed by US's Korean ally
AP IMPACT: At least 100,000 said executed by US's Korean ally in 1950 summer of terror
CHARLES J. HANLEY and JAE-SOON CHANGAP News
May 18, 2008 12:17 EST
Grave by mass grave, South Korea is unearthing the skeletons and buried truths of a cold-blooded slaughter from early in the Korean War, when this nation's U.S.-backed regime killed untold thousands of leftists and hapless peasants in a summer of terror in 1950.
With U.S. military officers sometimes present, and as North Korean invaders pushed down the peninsula, the southern army and police emptied South Korean prisons, lined up detainees and shot them in the head, dumping the bodies into hastily dug trenches. Others were thrown into abandoned mines or into the sea. Women and children were among those killed. Many victims never faced charges or trial.
The mass executions — intended to keep possible southern leftists from reinforcing the northerners — were carried out over mere weeks and were largely hidden from history for a half-century. They were "the most tragic and brutal chapter of the Korean War," said historian Kim Dong-choon, a member of a 2-year-old government commission investigating the killings.
Hundreds of sets of remains have been uncovered so far, but researchers say they are only a tiny fraction of the deaths. The commission estimates at least 100,000 people were executed, in a South Korean population of 20 million.
That estimate is based on projections from local surveys and is "very conservative," said Kim. The true toll may be twice that or more, he told The Associated Press.
In addition, thousands of South Koreans who allegedly collaborated with the communist occupation were slain by southern forces later in 1950, and the invaders staged their own executions of rightists.
Through the postwar decades of South Korean right-wing dictatorships, victims' fearful families kept silent about that blood-soaked summer. American military reports of the South Korean slaughter were stamped "secret" and filed away in Washington. Communist accounts were dismissed as lies.
Only since the 1990s, and South Korea's democratization, has the truth begun to seep out.
In 2002, a typhoon's fury uncovered one mass grave. Another was found by a television news team that broke into a sealed mine. Further corroboration comes from a trickle of declassified U.S. military documents, including U.S. Army photographs of a mass killing outside this central South Korean city.
Now Kim's Truth and Reconciliation Commission has added government authority to the work of scattered researchers, family members and journalists trying to peel away the long-running cover-up. The commissioners have the help of a handful of remorseful old men.
"Even now, I feel guilty that I pulled the trigger," said Lee Joon-young, 83, one of the executioners in a secluded valley near Daejeon in early July 1950.
The retired prison guard told the AP he knew that many of those shot and buried en masse were ordinary convicts or illiterate peasants wrongly ensnared in roundups of supposed communist sympathizers. They didn't deserve to die, he said. They "knew nothing about communism."
The 17 investigators of the commission's subcommittee on "mass civilian sacrifice," led by Kim, have been dealing with petitions from more than 7,000 South Koreans, involving some 1,200 alleged incidents — not just mass planned executions, but also 215 cases in which the U.S. military is accused of the indiscriminate killing of South Korean civilians in 1950-51, usually in air attacks.
The commission last year excavated sites at four of an estimated 150 mass graves around the country, recovering remains of more than 400 people. Working deliberately, matching documents to eyewitness and survivor testimony, it has officially confirmed two large-scale executions — at a warehouse in the central South Korean county of Cheongwon, and at Ulsan on the southeast coast.
In January, then-President Roh Moo-hyun, under whose liberal leadership the commission was established, formally apologized for the more than 870 deaths confirmed at Ulsan, calling them "illegal acts the then-state authority committed."
The commission, with no power to compel testimony or prosecute, faces daunting tasks both in verifying events and identifying victims, and in tracing a chain of responsibility. Under Roh's conservative successor, Lee Myung-bak, whose party is seen as democratic heir to the old autocratic right wing, the commission may find less budgetary and political support.
The roots of the summer 1950 bloodbath lie in the U.S.-Soviet division of Japan's former Korea colony in 1945, which precipitated north-south turmoil and eventual war.
In the late 1940s, President Syngman Rhee's U.S.-installed rightist regime crushed leftist political activity in South Korea, including a guerrilla uprising inspired by the communists ruling the north. By 1950, southern jails were packed with up to 30,000 political prisoners.
The southern government, meanwhile, also created the National Guidance League, a "re-education" organization for recanting leftists and others suspected of communist leanings. Historians say officials met membership quotas by pressuring peasants into signing up with promises of rice rations or other benefits. By 1950, more than 300,000 people were on the league's rolls, organizers said.
North Korean invaders seized Seoul, the southern capital, in late June 1950 and freed thousands of prisoners, who rallied to the northern cause. Southern authorities, in full retreat with their U.S. military advisers, ordered National Guidance League members in areas they controlled to report to the police, who detained them. Soon after, commission researchers say, the organized mass executions of people regarded as potential collaborators began — "bad security risks," as a police official described the detainees at the time.
The declassified record of U.S. documents shows an ambivalent American attitude toward the killings. American diplomats that summer urged restraint on southern officials — to no obvious effect — but a State Department cable that fall said overall commander Gen. Douglas MacArthur viewed the executions as a Korean "internal matter," even though he controlled South Korea's military.
Ninety miles south of Seoul, here in the narrow, peaceful valley of Sannae, truckloads of prisoners were brought in from Daejeon Prison and elsewhere day after day in July 1950, as the North Koreans bore down on the city.
The American photos, taken by an Army major and kept classified for a half-century, show the macabre sequence of events.
White-clad detainees — bent, submissive, with hands bound — were thrown down prone, jammed side by side, on the edge of a long trench. South Korean military and national policemen then stepped up behind, pointed their rifles at the backs of their heads and fired. The bodies were tipped into the trench.
Trembling policemen — "they hadn't shot anyone before" — were sometimes off-target, leaving men wounded but alive, Lee said. He and others were ordered to check for wounded and finish them off.
Evidence indicates South Korean executioners killed between 3,000 and 7,000 here, said commissioner Kim. A half-dozen trenches, each up to 150 yards long and full of bodies, extended over an area almost a mile long, said Kim Chong-hyun, 70, chairman of a group of bereaved families campaigning for disclosure and compensation for the Daejeon killings. His father, accused but never convicted of militant leftist activity, was one victim.
Another was Yeo Tae-ku's father, whose wife and mother searched for him afterward.
"Bodies were just piled upon each other," said Yeo, 59, remembering his mother's description. "Arms would come off when they turned them over." The desperate women never found him, and the mass graves were quickly covered over, as were others in isolated spots up and down this mountainous peninsula, to be officially "forgotten."
When British communist journalist Alan Winnington entered Daejeon that summer with North Korean troops and visited the site, writing of "waxy dead hands and feet (that) stick through the soil," his reports in the Daily Worker were denounced as "fabrication" by the U.S. Embassy in London. American military accounts focused instead on North Korean reprisal killings that followed in Daejeon.
But CIA and U.S. military intelligence documents circulating even before the Winnington report, classified "secret" and since declassified, told of the executions by the South Koreans. Lt. Col. Bob Edwards, U.S. Embassy military attache in South Korea, wrote in conveying the Daejeon photos to Army intelligence in Washington that he believed nationwide "thousands of political prisoners were executed within (a) few weeks" by the South Koreans.
Another glimpse of the carnage appeared in an unofficial U.S. source, an obscure memoir self-published in 1981 by the late Donald Nichols, a U.S. Air Force intelligence officer, who told of witnessing "the unforgettable massacre of approximately 1,800 at Suwon," 20 miles south of Seoul.
Such reports lend credibility to a captured North Korean document from Aug. 2, 1950, eventually declassified by Washington, which spoke of mass executions in 12 South Korean cities, including 1,000 killed in Suwon and 4,000 in Daejeon.
That early, incomplete North Korean report couldn't include those executed in territory still held by the southerners. Up to 10,000 were killed in the city of Busan alone, a South Korean lawmaker, Park Chan-hyun, estimated in 1960.
His investigation came during a 12-month democratic interlude between the overthrow of Rhee and a government takeover by Maj. Gen. Park Chung-hee's authoritarian military, which quickly arrested many then probing for the hidden story of 1950.
Kim said his projection of at least 100,000 dead is based in part on extrapolating from a survey by non-governmental organizations in one province, Busan's South Gyeongsang, which estimated 25,000 killed there. And initial evidence suggests most of the National Guidance League's 300,000 members were killed, he said.
Commission investigators agree with the late Lt. Col. Edwards' note to Washington in 1950, that "orders for execution undoubtedly came from the top," that is, President Rhee, who died in 1965.
But any documentary proof of that may have been destroyed, just as the facts of the mass killings themselves were buried. In 1953, after the war ended in stalemate, after the deaths of at least 2 million people, half or more of them civilians, a U.S. Army war crimes report attributed all summary executions here in Daejeon to the "murderous barbarism" of North Koreans.
Such myths survived a half-century, in part because those who knew the truth were cowed into silence.
"My mother destroyed all pictures of my father, for fear the family would get an image as leftists," said Koh Chung-ryol, 57, who is convinced her 29-year-old father was innocent of wrongdoing when picked up in a broad police sweep here, to die in Sannae valley.
"My mother tried hard to get rid of anything about her husband," she said. "She suffered unspeakable pain."
Even educated South Koreans remained ignorant of their country's past. As a young researcher in the late 1980s, Yonsei University's Park Myung-lim, today a leading Korean War historian, was deeply shaken as he sought out confidential accounts of those days from ordinary Koreans.
"I cried," he said. "I felt, 'Oh, my goodness. Oh, Jesus. This was my country? It was true?'"
The Truth and Reconciliation Commission can recommend but not award compensation for lost and ruined lives, nor can it bring surviving perpetrators to justice. "Our investigative power is so meager," commission President Ahn Byung-ook told the AP.
His immediate concern is resources. "The current government isn't friendly toward us, and so we're concerned that the budget may be cut next year," he said.
South Korean conservatives complain the "truth" campaign will only reopen old wounds from a time when, even at the village level, leftists and rightists carried out bloody reprisals against each other.
The life of the commission — with a staff of 240 and annual budget of $19 million — is guaranteed by law until at least 2010, when it will issue a final, comprehensive report.
Later this spring and summer its teams will resume digging at mass grave sites. Thus far, it has verified 16 incidents of 1950-51 — not just large-scale detainee killings, but also such events as a South Korean battalion's cold-blooded killing of 187 men, women and children at Kochang village, supposed sympathizers with leftist guerrillas.
By exposing the truth of such episodes, "we hope to heal the trauma and pain of the bereaved families," the commission says. It also wants to educate people, "not just in Korea, but throughout the international community," to the reality of that long-ago conflict, to "prevent such a tragic war from reoccurring in the future."
___
Associated Press investigative researcher Randy Herschaft in New York contributed to this report.
Source: AP News
AP IMPACT: Thousands killed by US's Korean ally
AP IMPACT: At least 100,000 said executed by US's Korean ally in 1950 summer of terror
CHARLES J. HANLEY and JAE-SOON CHANGAP News
May 18, 2008 12:17 EST
Grave by mass grave, South Korea is unearthing the skeletons and buried truths of a cold-blooded slaughter from early in the Korean War, when this nation's U.S.-backed regime killed untold thousands of leftists and hapless peasants in a summer of terror in 1950.
With U.S. military officers sometimes present, and as North Korean invaders pushed down the peninsula, the southern army and police emptied South Korean prisons, lined up detainees and shot them in the head, dumping the bodies into hastily dug trenches. Others were thrown into abandoned mines or into the sea. Women and children were among those killed. Many victims never faced charges or trial.
The mass executions — intended to keep possible southern leftists from reinforcing the northerners — were carried out over mere weeks and were largely hidden from history for a half-century. They were "the most tragic and brutal chapter of the Korean War," said historian Kim Dong-choon, a member of a 2-year-old government commission investigating the killings.
Hundreds of sets of remains have been uncovered so far, but researchers say they are only a tiny fraction of the deaths. The commission estimates at least 100,000 people were executed, in a South Korean population of 20 million.
That estimate is based on projections from local surveys and is "very conservative," said Kim. The true toll may be twice that or more, he told The Associated Press.
In addition, thousands of South Koreans who allegedly collaborated with the communist occupation were slain by southern forces later in 1950, and the invaders staged their own executions of rightists.
Through the postwar decades of South Korean right-wing dictatorships, victims' fearful families kept silent about that blood-soaked summer. American military reports of the South Korean slaughter were stamped "secret" and filed away in Washington. Communist accounts were dismissed as lies.
Only since the 1990s, and South Korea's democratization, has the truth begun to seep out.
In 2002, a typhoon's fury uncovered one mass grave. Another was found by a television news team that broke into a sealed mine. Further corroboration comes from a trickle of declassified U.S. military documents, including U.S. Army photographs of a mass killing outside this central South Korean city.
Now Kim's Truth and Reconciliation Commission has added government authority to the work of scattered researchers, family members and journalists trying to peel away the long-running cover-up. The commissioners have the help of a handful of remorseful old men.
"Even now, I feel guilty that I pulled the trigger," said Lee Joon-young, 83, one of the executioners in a secluded valley near Daejeon in early July 1950.
The retired prison guard told the AP he knew that many of those shot and buried en masse were ordinary convicts or illiterate peasants wrongly ensnared in roundups of supposed communist sympathizers. They didn't deserve to die, he said. They "knew nothing about communism."
The 17 investigators of the commission's subcommittee on "mass civilian sacrifice," led by Kim, have been dealing with petitions from more than 7,000 South Koreans, involving some 1,200 alleged incidents — not just mass planned executions, but also 215 cases in which the U.S. military is accused of the indiscriminate killing of South Korean civilians in 1950-51, usually in air attacks.
The commission last year excavated sites at four of an estimated 150 mass graves around the country, recovering remains of more than 400 people. Working deliberately, matching documents to eyewitness and survivor testimony, it has officially confirmed two large-scale executions — at a warehouse in the central South Korean county of Cheongwon, and at Ulsan on the southeast coast.
In January, then-President Roh Moo-hyun, under whose liberal leadership the commission was established, formally apologized for the more than 870 deaths confirmed at Ulsan, calling them "illegal acts the then-state authority committed."
The commission, with no power to compel testimony or prosecute, faces daunting tasks both in verifying events and identifying victims, and in tracing a chain of responsibility. Under Roh's conservative successor, Lee Myung-bak, whose party is seen as democratic heir to the old autocratic right wing, the commission may find less budgetary and political support.
The roots of the summer 1950 bloodbath lie in the U.S.-Soviet division of Japan's former Korea colony in 1945, which precipitated north-south turmoil and eventual war.
In the late 1940s, President Syngman Rhee's U.S.-installed rightist regime crushed leftist political activity in South Korea, including a guerrilla uprising inspired by the communists ruling the north. By 1950, southern jails were packed with up to 30,000 political prisoners.
The southern government, meanwhile, also created the National Guidance League, a "re-education" organization for recanting leftists and others suspected of communist leanings. Historians say officials met membership quotas by pressuring peasants into signing up with promises of rice rations or other benefits. By 1950, more than 300,000 people were on the league's rolls, organizers said.
North Korean invaders seized Seoul, the southern capital, in late June 1950 and freed thousands of prisoners, who rallied to the northern cause. Southern authorities, in full retreat with their U.S. military advisers, ordered National Guidance League members in areas they controlled to report to the police, who detained them. Soon after, commission researchers say, the organized mass executions of people regarded as potential collaborators began — "bad security risks," as a police official described the detainees at the time.
The declassified record of U.S. documents shows an ambivalent American attitude toward the killings. American diplomats that summer urged restraint on southern officials — to no obvious effect — but a State Department cable that fall said overall commander Gen. Douglas MacArthur viewed the executions as a Korean "internal matter," even though he controlled South Korea's military.
Ninety miles south of Seoul, here in the narrow, peaceful valley of Sannae, truckloads of prisoners were brought in from Daejeon Prison and elsewhere day after day in July 1950, as the North Koreans bore down on the city.
The American photos, taken by an Army major and kept classified for a half-century, show the macabre sequence of events.
White-clad detainees — bent, submissive, with hands bound — were thrown down prone, jammed side by side, on the edge of a long trench. South Korean military and national policemen then stepped up behind, pointed their rifles at the backs of their heads and fired. The bodies were tipped into the trench.
Trembling policemen — "they hadn't shot anyone before" — were sometimes off-target, leaving men wounded but alive, Lee said. He and others were ordered to check for wounded and finish them off.
Evidence indicates South Korean executioners killed between 3,000 and 7,000 here, said commissioner Kim. A half-dozen trenches, each up to 150 yards long and full of bodies, extended over an area almost a mile long, said Kim Chong-hyun, 70, chairman of a group of bereaved families campaigning for disclosure and compensation for the Daejeon killings. His father, accused but never convicted of militant leftist activity, was one victim.
Another was Yeo Tae-ku's father, whose wife and mother searched for him afterward.
"Bodies were just piled upon each other," said Yeo, 59, remembering his mother's description. "Arms would come off when they turned them over." The desperate women never found him, and the mass graves were quickly covered over, as were others in isolated spots up and down this mountainous peninsula, to be officially "forgotten."
When British communist journalist Alan Winnington entered Daejeon that summer with North Korean troops and visited the site, writing of "waxy dead hands and feet (that) stick through the soil," his reports in the Daily Worker were denounced as "fabrication" by the U.S. Embassy in London. American military accounts focused instead on North Korean reprisal killings that followed in Daejeon.
But CIA and U.S. military intelligence documents circulating even before the Winnington report, classified "secret" and since declassified, told of the executions by the South Koreans. Lt. Col. Bob Edwards, U.S. Embassy military attache in South Korea, wrote in conveying the Daejeon photos to Army intelligence in Washington that he believed nationwide "thousands of political prisoners were executed within (a) few weeks" by the South Koreans.
Another glimpse of the carnage appeared in an unofficial U.S. source, an obscure memoir self-published in 1981 by the late Donald Nichols, a U.S. Air Force intelligence officer, who told of witnessing "the unforgettable massacre of approximately 1,800 at Suwon," 20 miles south of Seoul.
Such reports lend credibility to a captured North Korean document from Aug. 2, 1950, eventually declassified by Washington, which spoke of mass executions in 12 South Korean cities, including 1,000 killed in Suwon and 4,000 in Daejeon.
That early, incomplete North Korean report couldn't include those executed in territory still held by the southerners. Up to 10,000 were killed in the city of Busan alone, a South Korean lawmaker, Park Chan-hyun, estimated in 1960.
His investigation came during a 12-month democratic interlude between the overthrow of Rhee and a government takeover by Maj. Gen. Park Chung-hee's authoritarian military, which quickly arrested many then probing for the hidden story of 1950.
Kim said his projection of at least 100,000 dead is based in part on extrapolating from a survey by non-governmental organizations in one province, Busan's South Gyeongsang, which estimated 25,000 killed there. And initial evidence suggests most of the National Guidance League's 300,000 members were killed, he said.
Commission investigators agree with the late Lt. Col. Edwards' note to Washington in 1950, that "orders for execution undoubtedly came from the top," that is, President Rhee, who died in 1965.
But any documentary proof of that may have been destroyed, just as the facts of the mass killings themselves were buried. In 1953, after the war ended in stalemate, after the deaths of at least 2 million people, half or more of them civilians, a U.S. Army war crimes report attributed all summary executions here in Daejeon to the "murderous barbarism" of North Koreans.
Such myths survived a half-century, in part because those who knew the truth were cowed into silence.
"My mother destroyed all pictures of my father, for fear the family would get an image as leftists," said Koh Chung-ryol, 57, who is convinced her 29-year-old father was innocent of wrongdoing when picked up in a broad police sweep here, to die in Sannae valley.
"My mother tried hard to get rid of anything about her husband," she said. "She suffered unspeakable pain."
Even educated South Koreans remained ignorant of their country's past. As a young researcher in the late 1980s, Yonsei University's Park Myung-lim, today a leading Korean War historian, was deeply shaken as he sought out confidential accounts of those days from ordinary Koreans.
"I cried," he said. "I felt, 'Oh, my goodness. Oh, Jesus. This was my country? It was true?'"
The Truth and Reconciliation Commission can recommend but not award compensation for lost and ruined lives, nor can it bring surviving perpetrators to justice. "Our investigative power is so meager," commission President Ahn Byung-ook told the AP.
His immediate concern is resources. "The current government isn't friendly toward us, and so we're concerned that the budget may be cut next year," he said.
South Korean conservatives complain the "truth" campaign will only reopen old wounds from a time when, even at the village level, leftists and rightists carried out bloody reprisals against each other.
The life of the commission — with a staff of 240 and annual budget of $19 million — is guaranteed by law until at least 2010, when it will issue a final, comprehensive report.
Later this spring and summer its teams will resume digging at mass grave sites. Thus far, it has verified 16 incidents of 1950-51 — not just large-scale detainee killings, but also such events as a South Korean battalion's cold-blooded killing of 187 men, women and children at Kochang village, supposed sympathizers with leftist guerrillas.
By exposing the truth of such episodes, "we hope to heal the trauma and pain of the bereaved families," the commission says. It also wants to educate people, "not just in Korea, but throughout the international community," to the reality of that long-ago conflict, to "prevent such a tragic war from reoccurring in the future."
___
Associated Press investigative researcher Randy Herschaft in New York contributed to this report.
Source: AP News
Thursday, May 15, 2008
Economic Causes of War
Economic Causes of War
http://mises.org/story/2949
Daily Article Posted on 5/14/2008 by Ludwig von Mises
[This is the major part of a lecture delivered in Orange County, California, in October 1944. It was published by the Foundation for Economic Education in 2004.]
War is a primitive human institution. From time immemorial, men were eager to fight, to kill, and to rob one another. However, the acknowledgment of this fact does not lead to the conclusion that war is an indispensable form of interpersonal relations and that the endeavors to abolish war are against nature and therefore doomed to failure.
We may, for the sake of argument, admit the militarist thesis that man is endowed with an innate instinct to fight and to destroy. However, it is not these instincts and primitive impulses that are the characteristic features of man. Man's eminence lies in his reason and in the power to think, which distinguishes him from all other living creatures. And man's reason teaches him that peaceful cooperation and collaboration under the division of labor is a more beneficial way to live than violent strife.
I do not want to dwell on the history of warfare. It is enough to mention that in the 18th century, on the eve of modern capitalism, the nature of war was very different from what it had been in the age of barbarism. People no longer fought one another with the aim of exterminating or enslaving the defeated. Wars were a tool of the political rulers and were fought with comparatively small armies of professional soldiers, mostly made up of mercenaries. The objective of warfare was to determine which dynasty should rule a country or a province. The greatest European wars of the 18th century were wars of royal succession, for example, the wars of the Spanish, Polish, Austrian, and finally the Bavarian successions. Ordinary people were more or less indifferent about the outcomes of these conflicts. They were not much concerned about the question of whether their ruling prince was a Habsburg or a Bourbon.
Nevertheless, these continuous struggles placed a heavy burden upon mankind. They were a serious obstacle to the attempts to bring about greater prosperity. As a result, the philosophers and economists of the time turned their attention to the study of the causes of war. The result of their investigation was the following:
Under a system of private ownership of the means of production and free enterprise, with the only function of government being to protect individuals against violent or fraudulent attacks on their lives, health, or property, it is immaterial for the citizens of any nation where the frontiers of their country are drawn. It is of no concern for anyone whether his country is big or small, and whether it conquers a province or not. The individual citizens do not derive any profit from the conquest of a territory.
It is different with the princes or ruling aristocracies. They can increase their power and their tax revenues by expanding the size of their realms. They can profit from conquest. They are bellicose, while the citizenry is peace loving.
Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government. Wars would become obsolete because the causes for war would disappear. Since these 18th- and 19th-century classical liberals were fully convinced that nothing could stop the movement toward economic freedom and political democracy, they were certain that mankind was on the eve of an age of undisturbed peace.
What was needed to make the world safe for peace, they argued, was to implement economic freedom, free trade and goodwill among the nations, and popular government. I want to stress the importance of both of these requirements: free trade at home and in international relations, and democracy. The fateful error of our age has consisted in the fact that it dropped the first of these requirements, namely free trade, and emphasized only the second one, political democracy. In doing so, people ignored the fact that democracy cannot be permanently maintained when free enterprise, free trade, and economic freedom do not exist.
President Woodrow Wilson was fully convinced that what was needed to make the world safe for peace was to make it safe for democracy. During the First World War it was believed that if only the German royal house of the Hohenzollern and the privileged German landed aristocracy, the Junkers, could be removed from power, a durable peace could be achieved. What President Wilson did not see was that within a world of growing government omnipotence this would not be enough. In such a world of growing government power, there exist economic causes of war.
Does the Citizen Profit from Conquest?
The eminent British pacifist, Sir Norman Angell, repeats again and again that the individual citizen cannot derive any profit from the conquest of a province by his own nation. No German citizen, says Sir Norman, profited through his nation's annexation of Alsace-Lorraine as a result of the Franco-Prussian War of 1870–1871. This is quite correct. But that was in the days of classical liberalism and free enterprise. It is another thing in our day of government interference with business.
Let us take an example. The governments of the rubber-producing countries have entered into a cartel arrangement in order to monopolize the market for natural rubber. They have forced the planters to restrict production in order to raise the price of rubber far above the level it would have attained on a free market. This is not an exceptional case. Many vital and essential foodstuffs and raw materials have been subject to similar policies implemented by governments around the world. They have imposed compulsory cartelization on numerous industries, as a result of which their control was shifted away from private entrepreneurs to the hands of government. Some of these schemes, it is true, have failed. But the governments concerned have not abandoned their plans. They are eager to improve the methods applied and are confident that they will be more successful after the present Second World War.
The individual citizens do not derive any profit from the conquest of a territory. … Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government.
There is a lot of talk nowadays about the necessity for international planning. However, no planning, whether it be national or international, is required to make planters grow rubber, coffee, and any other commodity. They embark upon the production of these commodities because it is the most advantageous way for them to make a living. Planning in this connection always means government actions for the restraint of output and the establishment of monopoly prices.
Under such conditions it is no longer true that a nation may not appear to derive a tangible profit from a victorious war. If the nations dependent on the importation of rubber, coffee, tin, cocoa, and other commodities could force the governments of the producing countries to abandon their monopolistic practices, they would improve the economic welfare of their citizens.
To mention this state of affairs does not imply a justification for aggression and conquest. It only demonstrates how utterly mistaken are pacifists like Sir Norman Angell, who base their arguments in favor of peace on the unstated assumption that all nations are still committed to the principles of free enterprise.
Sir Norman Angell is a member of the British Labour Party. This party stands for the outright socialization of business. But the members of the Labour Party are too dull to realize what must be the economic and political consequences of the socialization of business.
The Case of Germany
I want to explain these consequences by referring, first of all, to the situation in Germany.
Like all other European nations, Germany is poor in natural resources. It can neither feed nor clothe its population out of its own available domestic resources. Germans must import huge quantities of raw materials and foodstuffs, and must pay for these badly needed imports by exporting manufactures, most of which are produced out of those imported raw materials. Under free enterprise, Germany brilliantly adjusted itself to this circumstance. Sixty or seventy years ago, in the 1870s and 1880s, Germany was one of the world's most prosperous nations. Its entrepreneurs succeeded extremely well in building up very efficient manufacturing plants. Germany's industry was foremost on the European continent. Its products triumphantly swept the world market. The Germans — all classes of the German population — became more prosperous from year to year. There was no reason to alter the structure of German business.
But most of the German ideologists and political writers, the government-appointed professors and the socialist party leaders, as well as the government bureaucrats, did not like the free-market system. They disparaged it as capitalist, plutocratic, bourgeois, and as Western and Jewish. They lamented the fact that the free-enterprise system had incorporated Germany into the international division of labor.
All these groups and political parties wanted to substitute government management of business for free enterprise. They wanted to do away with the profit motive. They wanted to nationalize business and to subordinate it to the commands of the government. This is a comparatively simple thing in a country that by and large can live in economic self-sufficiency. Russia, occupying one-sixth of the earth's surface, can do without almost any imports from abroad. But it is different with Germany. Germany cannot eschew imports and consequently must export manufactures. This is precisely what a government bureaucracy can never achieve. Bureaucrats are only able to flourish in sheltered domestic markets. They are not fit to compete on foreign markets.
Most people in Nazi Germany today want the government to control business. But the fact is that government control of business and foreign trade are incompatible. A socialist commonwealth must aim at autarky. This is where aggressive nationalism — once referred to as Pan-Germanism, and today called National Socialism — comes into the picture. We are a powerful nation, the National Socialists say; we are strong enough to crush all other nations. We must conquer all those countries whose resources are essential for our own economic well-being. We need autarky and therefore we must fight. We need Lebensraum (living space) and Nahrungs freiheit (freedom from a scarcity of food).
"A socialist commonwealth must aim at autarky. This is where aggressive nationalism comes into the picture."
Both terms mean the same thing, the conquest of a territory so large and rich in natural resources that the Germans could live without any foreign trade at a standard of living not lower than that of any other nation. The term Lebensraum is fairly well known abroad. But the term Nahrungs freiheit is not. Freiheit means freedom; Nahrungs freiheit means freedom from a state of affairs under which Germany must import foodstuffs. It is the only "freedom" that matters in the eyes of the Nazis.
Both the Communists and the Nazis agree that the essence of what they mean by democracy, liberty, and popular government lies in the establishment of full government control of business. Whether one calls this system socialism or communism or planning is immaterial. Regardless of what it is called, this system requires economic self-sufficiency. But while Russia can, by and large, live in economic self-sufficiency, Germany cannot. Therefore a socialist Germany is committed to a policy of Lebensraum or Nahrungs freiheit, that is, to a policy of aggression.
The pursuit of a program of government control of business must finally result in a rejection of the international division of labor. From the viewpoint of Nazi philosophy, the only proper mode of international relations is war. Their most eminent men take pride in referring to a dictum of Tacitus. This Roman historian, almost two thousand years ago, said that the Germans consider it shameful to acquire by hard work what could be acquired by bloodshed. It was not a slip of the tongue when Kaiser Wilhelm II, in 1900, raised the Huns as a model for his soldiers. It was the encapsulation of a conscious policy.
Dependent on Imports
Germany is not the only European country depending on foreign imports. Europe — excluding Russia — has a population of about 400 million people, more than three times the population of the continental United States. But Europe does not produce cotton, rubber, copra, coffee, tea, jute, and many essential metals. And it has a quite insufficient production of wool, fodder, cattle, meat, hides, and of many cereals.
In 1937, Europe produced only fifty-six million barrels of crude petroleum, as compared with the US production of 1,279 million barrels. Besides, almost all of Europe's petroleum production is located in Romania and in eastern Poland. But as a result of the present war, these areas will come under the control of Russia. Manufacturing and exporting manufactures are the essentials of Europe's economic life. However, exporting manufactures is almost impossible under government control of business.
Such is the stark reality which no socialist rhetoric can conjure away. If the Europeans want to live they must cling to the well-tried methods of free enterprise. The alternative is war and conquest. The Germans have tried it twice and failed both times.
"The British want to defeat Hitler, but they are eager to adopt his economic methods for their own country.
However, the politically most influential groups in Europe are far from realizing the indispensability of economic freedom. In Great Britain and France, in Italy and in some smaller countries there is a powerful agitation for full government control of business. The case for economic freedom is almost a hopeless cause with the governments of these countries. The British Labour Party and those British politicians who wrongly still call their party the Liberal Party look upon this war not only as a fight for their nation's independence, but no less as a revolution for the establishment of government control of business. The third British party, the Conservative Party, by and large sympathizes with these endeavors. The British want to defeat Hitler, but they are eager to adopt his economic methods for their own country. They do not suspect that state socialism in Great Britain spells the doom of the British masses. Britain must export manufactures in order to buy raw materials and foodstuffs from abroad. Any drop in British exports lowers the standard of living of the British masses.
Conditions in France and Italy and in most other European countries are similar to those in Great Britain.
In supplying the domestic consumer with various necessities a socialist government is sovereign. The citizen must take what the government gives him. But it is different with any export trade. The foreign consumer buys only if both the quality and the price of the commodity offered for sale are attractive to him. In this international arena of serving foreign consumers, capitalism has shown its greater efficiency and adaptability. The high level of prewar Europe's economic well-being and civilization was not the outcome of the activities of government bureaus and agencies. It was an achievement of free enterprise. Those German cameras and chemicals, those British textiles, those Paris dresses, hats, and perfumes, those Swiss watches, and Vienna leather fancy goods were not the product of government-controlled factories. They were the products of entrepreneurs indefatigably intent upon improving the quality and lowering the price of their merchandise. Nobody is bold enough to assume that a government agency could successfully replace the private entrepreneurs in this function.
Privately conducted foreign trade is the private affair between private firms of various countries. If some disagreements result, they are the conflicts between private firms. They do not create conflicts in the political relations between nations. They concern a Mr. Meier and a Mr. Smith. But if foreign trade is a matter of government, such conflicts are transformed into political issues.
Suppose the Dutch government prefers to buy coal from Great Britain rather than from the German Ruhr. Then the German nationalists may think, Why tolerate such behavior on the part of a small nation? It took the Third Reich precisely four days to smash the armed forces of the Netherlands in 1940. Let us try it again! Then we will enjoy all the products of the Netherlands, but without having to pay for them.
"Fair" Distribution of Resources
Let us analyze the frequently expressed demand of the Nazi and Fascist aggressors for a new and fair distribution of the natural resources around the globe. In a world of free enterprise, a man who wants to drink coffee and is not himself a coffee planter must pay for it. Whether it is a German or an Italian or a citizen of the Republic of Colombia, he must render some services to his fellow men, earn a money income and spend part of it on the coffee he desires. In the case of a country that does not produce coffee within its own borders, this means exporting goods or resources to pay for the coffee that is imported. But Messrs. Hitler and Mussolini do not imagine such a solution to the problem. What they would want is to annex a coffee-producing country. But since the citizens of Colombia or Brazil are not enthusiastic about becoming the slaves of either the German Nazis or the Italian Fascists, this means war.
Another striking example is provided by the case of the cotton industry. For more than a hundred years, one of the main industries of all European countries was the spinning of cotton and the manufacture of cotton goods. Europe does not grow any cotton. Its climate is unfavorable. But the supply was always sufficient, with the only exception being the years during the American Civil War in the 1860s, when the conflict interrupted the supply of cotton from the Southern states. The European industrial countries acquired enough cotton not only for the needs of their own domestic consumption, but no less for undertaking a considerable export trade in cotton goods.
"The high level of prewar Europe's economic well-being and civilization was not the outcome of the activities of government bureaus and agencies. It was an achievement of free enterprise."
But in the years just preceding the start of the Second World War, conditions changed. There was still an ample supply of raw cotton on the world market. But the system of foreign exchange controls that was adopted by most European countries prevented private businessmen from buying all the cotton they needed for their production processes. Hitler's contribution to the decline of the German cotton-goods industry consisted in restricting their production and making them discharge a large part of their workforce. Hitler did not worry much about the fate of these discharged workers. He sent them to work, instead, in the munitions factories.
As I already point out, there are no economic causes for armed aggression within a world of free trade and free enterprise. In such a world, no individual citizen can possibly derive any advantage from the conquest of a province or a colony. But in a world of totalitarian states, many citizens may come to believe in an improvement of their material well-being from the annexation of a territory rich in resources. The wars of the 20th century have been, to be sure, economic wars. But they have not been caused by capitalism, as the socialists would have us believe. They are wars caused by governments aiming at complete political and economic omnipotence, and have been supported by the misguided masses of these countries.
The three main aggressor nations in this war — Nazi Germany, Fascist Italy, and Imperial Japan — will not attain their ends. They have been defeated, and they know it already. But they may try it again at a later date, because their counterfeit philosophy — their totalitarian creed — does not know of any other method of trying to improve the material conditions of the people other than war. For the totalitarian, conquest is the only viable political means to attain their economic ends.
Economic Mentality
I do not say that all wars of all nations and in all ages were motivated by economic considerations, that is, by the desire to make the aggressors rich at the expense of the defeated. There is no need for us to investigate the root causes of the crusades or the religious wars of the 16th and 17th centuries. What I want to say is that, in our age, the great wars have been the outcome of a specific economic mentality.
The Second World War is certainly not a war between the white and the colored races. No racial differences separate the British, Dutch, and the Norwegians from the Germans, or the French from the Italians, or the Chinese from the Japanese. It is not a war between Catholics and Protestants. After all, there are Catholics and Protestants in both belligerent camps. It is not a war between democracy and dictatorship. The claim of several of the United Nations (Soviet Russia in particular) to the appellation "democratic" is rather questionable. On the other hand, Finland (which is allied with Nazi Germany) is a country with a democratically elected government.
My argument that recent wars have been motivated by economic considerations is not meant to be a justification of the aggressor's policies. Viewed as an economic means for the attainment of certain economic benefits, the policy of aggression and conquest is self-defeating. Even if technically successful in the short run, it would never attain in the long run the ends at which the aggressors are aiming. Under the conditions of modern industrialism, there cannot be any question of a social system such as the Nazis plan under the name of a "New Order." Slavery is not a method for industrial societies. If the Nazis had conquered their adversaries, they would have destroyed civilization and brought back barbarism. They would certainly not have erected a thousand-year New Order, as Hitler promised.
$32 $26
"There are no economic causes for armed aggression within a world of free trade and free enterprise."
Thus, the main problem is how to avoid new wars. The answer is not to be found in setting up a better League of Nations; neither is it a question of the establishment of a better World Court, nor even in the implementation of a World Police Force. The real issue is to make all nations — or at least the most populous nations of the world — peace loving. This can be achieved only by going back to free enterprise.
If we want to abolish war, we must remove the causes of war.
The great idol of our time is the State. The State is a necessary social institution, but it should not be deified. It is not a god; it is a device of mortal men. If we make it an idol, we must sacrifice to it the flower of our youth in coming wars.
What is needed to make a lasting peace is much more than new offices and a new court for the League of Nations in Geneva, or even a new international police force. What is needed is a change in political ideologies and a return to a sound free-market economic system.
Ludwig von Mises (1881–1973) was dean of the Austrian School. See his daily articles. Comment on the blog.
This is the major part of a lecture delivered in Orange County, California, in October 1944. It was published by the Foundation for Economic Education in 2004.
http://mises.org/story/2949
Daily Article Posted on 5/14/2008 by Ludwig von Mises
[This is the major part of a lecture delivered in Orange County, California, in October 1944. It was published by the Foundation for Economic Education in 2004.]
War is a primitive human institution. From time immemorial, men were eager to fight, to kill, and to rob one another. However, the acknowledgment of this fact does not lead to the conclusion that war is an indispensable form of interpersonal relations and that the endeavors to abolish war are against nature and therefore doomed to failure.
We may, for the sake of argument, admit the militarist thesis that man is endowed with an innate instinct to fight and to destroy. However, it is not these instincts and primitive impulses that are the characteristic features of man. Man's eminence lies in his reason and in the power to think, which distinguishes him from all other living creatures. And man's reason teaches him that peaceful cooperation and collaboration under the division of labor is a more beneficial way to live than violent strife.
I do not want to dwell on the history of warfare. It is enough to mention that in the 18th century, on the eve of modern capitalism, the nature of war was very different from what it had been in the age of barbarism. People no longer fought one another with the aim of exterminating or enslaving the defeated. Wars were a tool of the political rulers and were fought with comparatively small armies of professional soldiers, mostly made up of mercenaries. The objective of warfare was to determine which dynasty should rule a country or a province. The greatest European wars of the 18th century were wars of royal succession, for example, the wars of the Spanish, Polish, Austrian, and finally the Bavarian successions. Ordinary people were more or less indifferent about the outcomes of these conflicts. They were not much concerned about the question of whether their ruling prince was a Habsburg or a Bourbon.
Nevertheless, these continuous struggles placed a heavy burden upon mankind. They were a serious obstacle to the attempts to bring about greater prosperity. As a result, the philosophers and economists of the time turned their attention to the study of the causes of war. The result of their investigation was the following:
Under a system of private ownership of the means of production and free enterprise, with the only function of government being to protect individuals against violent or fraudulent attacks on their lives, health, or property, it is immaterial for the citizens of any nation where the frontiers of their country are drawn. It is of no concern for anyone whether his country is big or small, and whether it conquers a province or not. The individual citizens do not derive any profit from the conquest of a territory.
It is different with the princes or ruling aristocracies. They can increase their power and their tax revenues by expanding the size of their realms. They can profit from conquest. They are bellicose, while the citizenry is peace loving.
Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government. Wars would become obsolete because the causes for war would disappear. Since these 18th- and 19th-century classical liberals were fully convinced that nothing could stop the movement toward economic freedom and political democracy, they were certain that mankind was on the eve of an age of undisturbed peace.
What was needed to make the world safe for peace, they argued, was to implement economic freedom, free trade and goodwill among the nations, and popular government. I want to stress the importance of both of these requirements: free trade at home and in international relations, and democracy. The fateful error of our age has consisted in the fact that it dropped the first of these requirements, namely free trade, and emphasized only the second one, political democracy. In doing so, people ignored the fact that democracy cannot be permanently maintained when free enterprise, free trade, and economic freedom do not exist.
President Woodrow Wilson was fully convinced that what was needed to make the world safe for peace was to make it safe for democracy. During the First World War it was believed that if only the German royal house of the Hohenzollern and the privileged German landed aristocracy, the Junkers, could be removed from power, a durable peace could be achieved. What President Wilson did not see was that within a world of growing government omnipotence this would not be enough. In such a world of growing government power, there exist economic causes of war.
Does the Citizen Profit from Conquest?
The eminent British pacifist, Sir Norman Angell, repeats again and again that the individual citizen cannot derive any profit from the conquest of a province by his own nation. No German citizen, says Sir Norman, profited through his nation's annexation of Alsace-Lorraine as a result of the Franco-Prussian War of 1870–1871. This is quite correct. But that was in the days of classical liberalism and free enterprise. It is another thing in our day of government interference with business.
Let us take an example. The governments of the rubber-producing countries have entered into a cartel arrangement in order to monopolize the market for natural rubber. They have forced the planters to restrict production in order to raise the price of rubber far above the level it would have attained on a free market. This is not an exceptional case. Many vital and essential foodstuffs and raw materials have been subject to similar policies implemented by governments around the world. They have imposed compulsory cartelization on numerous industries, as a result of which their control was shifted away from private entrepreneurs to the hands of government. Some of these schemes, it is true, have failed. But the governments concerned have not abandoned their plans. They are eager to improve the methods applied and are confident that they will be more successful after the present Second World War.
The individual citizens do not derive any profit from the conquest of a territory. … Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government.
There is a lot of talk nowadays about the necessity for international planning. However, no planning, whether it be national or international, is required to make planters grow rubber, coffee, and any other commodity. They embark upon the production of these commodities because it is the most advantageous way for them to make a living. Planning in this connection always means government actions for the restraint of output and the establishment of monopoly prices.
Under such conditions it is no longer true that a nation may not appear to derive a tangible profit from a victorious war. If the nations dependent on the importation of rubber, coffee, tin, cocoa, and other commodities could force the governments of the producing countries to abandon their monopolistic practices, they would improve the economic welfare of their citizens.
To mention this state of affairs does not imply a justification for aggression and conquest. It only demonstrates how utterly mistaken are pacifists like Sir Norman Angell, who base their arguments in favor of peace on the unstated assumption that all nations are still committed to the principles of free enterprise.
Sir Norman Angell is a member of the British Labour Party. This party stands for the outright socialization of business. But the members of the Labour Party are too dull to realize what must be the economic and political consequences of the socialization of business.
The Case of Germany
I want to explain these consequences by referring, first of all, to the situation in Germany.
Like all other European nations, Germany is poor in natural resources. It can neither feed nor clothe its population out of its own available domestic resources. Germans must import huge quantities of raw materials and foodstuffs, and must pay for these badly needed imports by exporting manufactures, most of which are produced out of those imported raw materials. Under free enterprise, Germany brilliantly adjusted itself to this circumstance. Sixty or seventy years ago, in the 1870s and 1880s, Germany was one of the world's most prosperous nations. Its entrepreneurs succeeded extremely well in building up very efficient manufacturing plants. Germany's industry was foremost on the European continent. Its products triumphantly swept the world market. The Germans — all classes of the German population — became more prosperous from year to year. There was no reason to alter the structure of German business.
But most of the German ideologists and political writers, the government-appointed professors and the socialist party leaders, as well as the government bureaucrats, did not like the free-market system. They disparaged it as capitalist, plutocratic, bourgeois, and as Western and Jewish. They lamented the fact that the free-enterprise system had incorporated Germany into the international division of labor.
All these groups and political parties wanted to substitute government management of business for free enterprise. They wanted to do away with the profit motive. They wanted to nationalize business and to subordinate it to the commands of the government. This is a comparatively simple thing in a country that by and large can live in economic self-sufficiency. Russia, occupying one-sixth of the earth's surface, can do without almost any imports from abroad. But it is different with Germany. Germany cannot eschew imports and consequently must export manufactures. This is precisely what a government bureaucracy can never achieve. Bureaucrats are only able to flourish in sheltered domestic markets. They are not fit to compete on foreign markets.
Most people in Nazi Germany today want the government to control business. But the fact is that government control of business and foreign trade are incompatible. A socialist commonwealth must aim at autarky. This is where aggressive nationalism — once referred to as Pan-Germanism, and today called National Socialism — comes into the picture. We are a powerful nation, the National Socialists say; we are strong enough to crush all other nations. We must conquer all those countries whose resources are essential for our own economic well-being. We need autarky and therefore we must fight. We need Lebensraum (living space) and Nahrungs freiheit (freedom from a scarcity of food).
"A socialist commonwealth must aim at autarky. This is where aggressive nationalism comes into the picture."
Both terms mean the same thing, the conquest of a territory so large and rich in natural resources that the Germans could live without any foreign trade at a standard of living not lower than that of any other nation. The term Lebensraum is fairly well known abroad. But the term Nahrungs freiheit is not. Freiheit means freedom; Nahrungs freiheit means freedom from a state of affairs under which Germany must import foodstuffs. It is the only "freedom" that matters in the eyes of the Nazis.
Both the Communists and the Nazis agree that the essence of what they mean by democracy, liberty, and popular government lies in the establishment of full government control of business. Whether one calls this system socialism or communism or planning is immaterial. Regardless of what it is called, this system requires economic self-sufficiency. But while Russia can, by and large, live in economic self-sufficiency, Germany cannot. Therefore a socialist Germany is committed to a policy of Lebensraum or Nahrungs freiheit, that is, to a policy of aggression.
The pursuit of a program of government control of business must finally result in a rejection of the international division of labor. From the viewpoint of Nazi philosophy, the only proper mode of international relations is war. Their most eminent men take pride in referring to a dictum of Tacitus. This Roman historian, almost two thousand years ago, said that the Germans consider it shameful to acquire by hard work what could be acquired by bloodshed. It was not a slip of the tongue when Kaiser Wilhelm II, in 1900, raised the Huns as a model for his soldiers. It was the encapsulation of a conscious policy.
Dependent on Imports
Germany is not the only European country depending on foreign imports. Europe — excluding Russia — has a population of about 400 million people, more than three times the population of the continental United States. But Europe does not produce cotton, rubber, copra, coffee, tea, jute, and many essential metals. And it has a quite insufficient production of wool, fodder, cattle, meat, hides, and of many cereals.
In 1937, Europe produced only fifty-six million barrels of crude petroleum, as compared with the US production of 1,279 million barrels. Besides, almost all of Europe's petroleum production is located in Romania and in eastern Poland. But as a result of the present war, these areas will come under the control of Russia. Manufacturing and exporting manufactures are the essentials of Europe's economic life. However, exporting manufactures is almost impossible under government control of business.
Such is the stark reality which no socialist rhetoric can conjure away. If the Europeans want to live they must cling to the well-tried methods of free enterprise. The alternative is war and conquest. The Germans have tried it twice and failed both times.
"The British want to defeat Hitler, but they are eager to adopt his economic methods for their own country.
However, the politically most influential groups in Europe are far from realizing the indispensability of economic freedom. In Great Britain and France, in Italy and in some smaller countries there is a powerful agitation for full government control of business. The case for economic freedom is almost a hopeless cause with the governments of these countries. The British Labour Party and those British politicians who wrongly still call their party the Liberal Party look upon this war not only as a fight for their nation's independence, but no less as a revolution for the establishment of government control of business. The third British party, the Conservative Party, by and large sympathizes with these endeavors. The British want to defeat Hitler, but they are eager to adopt his economic methods for their own country. They do not suspect that state socialism in Great Britain spells the doom of the British masses. Britain must export manufactures in order to buy raw materials and foodstuffs from abroad. Any drop in British exports lowers the standard of living of the British masses.
Conditions in France and Italy and in most other European countries are similar to those in Great Britain.
In supplying the domestic consumer with various necessities a socialist government is sovereign. The citizen must take what the government gives him. But it is different with any export trade. The foreign consumer buys only if both the quality and the price of the commodity offered for sale are attractive to him. In this international arena of serving foreign consumers, capitalism has shown its greater efficiency and adaptability. The high level of prewar Europe's economic well-being and civilization was not the outcome of the activities of government bureaus and agencies. It was an achievement of free enterprise. Those German cameras and chemicals, those British textiles, those Paris dresses, hats, and perfumes, those Swiss watches, and Vienna leather fancy goods were not the product of government-controlled factories. They were the products of entrepreneurs indefatigably intent upon improving the quality and lowering the price of their merchandise. Nobody is bold enough to assume that a government agency could successfully replace the private entrepreneurs in this function.
Privately conducted foreign trade is the private affair between private firms of various countries. If some disagreements result, they are the conflicts between private firms. They do not create conflicts in the political relations between nations. They concern a Mr. Meier and a Mr. Smith. But if foreign trade is a matter of government, such conflicts are transformed into political issues.
Suppose the Dutch government prefers to buy coal from Great Britain rather than from the German Ruhr. Then the German nationalists may think, Why tolerate such behavior on the part of a small nation? It took the Third Reich precisely four days to smash the armed forces of the Netherlands in 1940. Let us try it again! Then we will enjoy all the products of the Netherlands, but without having to pay for them.
"Fair" Distribution of Resources
Let us analyze the frequently expressed demand of the Nazi and Fascist aggressors for a new and fair distribution of the natural resources around the globe. In a world of free enterprise, a man who wants to drink coffee and is not himself a coffee planter must pay for it. Whether it is a German or an Italian or a citizen of the Republic of Colombia, he must render some services to his fellow men, earn a money income and spend part of it on the coffee he desires. In the case of a country that does not produce coffee within its own borders, this means exporting goods or resources to pay for the coffee that is imported. But Messrs. Hitler and Mussolini do not imagine such a solution to the problem. What they would want is to annex a coffee-producing country. But since the citizens of Colombia or Brazil are not enthusiastic about becoming the slaves of either the German Nazis or the Italian Fascists, this means war.
Another striking example is provided by the case of the cotton industry. For more than a hundred years, one of the main industries of all European countries was the spinning of cotton and the manufacture of cotton goods. Europe does not grow any cotton. Its climate is unfavorable. But the supply was always sufficient, with the only exception being the years during the American Civil War in the 1860s, when the conflict interrupted the supply of cotton from the Southern states. The European industrial countries acquired enough cotton not only for the needs of their own domestic consumption, but no less for undertaking a considerable export trade in cotton goods.
"The high level of prewar Europe's economic well-being and civilization was not the outcome of the activities of government bureaus and agencies. It was an achievement of free enterprise."
But in the years just preceding the start of the Second World War, conditions changed. There was still an ample supply of raw cotton on the world market. But the system of foreign exchange controls that was adopted by most European countries prevented private businessmen from buying all the cotton they needed for their production processes. Hitler's contribution to the decline of the German cotton-goods industry consisted in restricting their production and making them discharge a large part of their workforce. Hitler did not worry much about the fate of these discharged workers. He sent them to work, instead, in the munitions factories.
As I already point out, there are no economic causes for armed aggression within a world of free trade and free enterprise. In such a world, no individual citizen can possibly derive any advantage from the conquest of a province or a colony. But in a world of totalitarian states, many citizens may come to believe in an improvement of their material well-being from the annexation of a territory rich in resources. The wars of the 20th century have been, to be sure, economic wars. But they have not been caused by capitalism, as the socialists would have us believe. They are wars caused by governments aiming at complete political and economic omnipotence, and have been supported by the misguided masses of these countries.
The three main aggressor nations in this war — Nazi Germany, Fascist Italy, and Imperial Japan — will not attain their ends. They have been defeated, and they know it already. But they may try it again at a later date, because their counterfeit philosophy — their totalitarian creed — does not know of any other method of trying to improve the material conditions of the people other than war. For the totalitarian, conquest is the only viable political means to attain their economic ends.
Economic Mentality
I do not say that all wars of all nations and in all ages were motivated by economic considerations, that is, by the desire to make the aggressors rich at the expense of the defeated. There is no need for us to investigate the root causes of the crusades or the religious wars of the 16th and 17th centuries. What I want to say is that, in our age, the great wars have been the outcome of a specific economic mentality.
The Second World War is certainly not a war between the white and the colored races. No racial differences separate the British, Dutch, and the Norwegians from the Germans, or the French from the Italians, or the Chinese from the Japanese. It is not a war between Catholics and Protestants. After all, there are Catholics and Protestants in both belligerent camps. It is not a war between democracy and dictatorship. The claim of several of the United Nations (Soviet Russia in particular) to the appellation "democratic" is rather questionable. On the other hand, Finland (which is allied with Nazi Germany) is a country with a democratically elected government.
My argument that recent wars have been motivated by economic considerations is not meant to be a justification of the aggressor's policies. Viewed as an economic means for the attainment of certain economic benefits, the policy of aggression and conquest is self-defeating. Even if technically successful in the short run, it would never attain in the long run the ends at which the aggressors are aiming. Under the conditions of modern industrialism, there cannot be any question of a social system such as the Nazis plan under the name of a "New Order." Slavery is not a method for industrial societies. If the Nazis had conquered their adversaries, they would have destroyed civilization and brought back barbarism. They would certainly not have erected a thousand-year New Order, as Hitler promised.
$32 $26
"There are no economic causes for armed aggression within a world of free trade and free enterprise."
Thus, the main problem is how to avoid new wars. The answer is not to be found in setting up a better League of Nations; neither is it a question of the establishment of a better World Court, nor even in the implementation of a World Police Force. The real issue is to make all nations — or at least the most populous nations of the world — peace loving. This can be achieved only by going back to free enterprise.
If we want to abolish war, we must remove the causes of war.
The great idol of our time is the State. The State is a necessary social institution, but it should not be deified. It is not a god; it is a device of mortal men. If we make it an idol, we must sacrifice to it the flower of our youth in coming wars.
What is needed to make a lasting peace is much more than new offices and a new court for the League of Nations in Geneva, or even a new international police force. What is needed is a change in political ideologies and a return to a sound free-market economic system.
Ludwig von Mises (1881–1973) was dean of the Austrian School. See his daily articles. Comment on the blog.
This is the major part of a lecture delivered in Orange County, California, in October 1944. It was published by the Foundation for Economic Education in 2004.
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