The Calamity of Anti-Capitalism: A Brief American History

0:00First of all, thank you all very much for coming, and thanks to Kurt and Laura Doolittle in particular for sponsoring this event. This is my first time ever in Seattle or in Washington State, so I'm very glad to be here, have the chance to visit, and I'm particularly happy that I'm here at an Italian restaurant, Because my wife's one flaw is that she does not like Italian food. Have you ever heard of anyone who doesn't like Italian food? But she is such a good human being, I mean, I in no way deserve this woman, in no way. She is such a perfect person. But yikes, this was still weighing in the balance, you know. Do I marry her or not?

0:47I mean, it couldn't even be grounds for annulment, I heard. So I'm glad to have a chance. And she says to me, she'll prepare Italian food for me. She's happy to go out to a restaurant with me, but it's no fun if she's not enjoying it. Anyway, I don't know. She grew up in Oklahoma. I don't think any Italians live in Oklahoma. She never had a chance to eat Italian food, really. Anyway, look, this is my own cross to bear. I shouldn't be imposing it on you poor folks. Well, when I saw the topic I was to address, because I think it's Jeff Tucker who kind of comes up with the, that's my suspicion anyway, comes up with the titles and then you're sort of left to pick up the pieces. How do I speak on this topic? I thought, you know, about the calamity of anti-capitalism, I thought there's so much one could say in American history.

1:36I mean, we could have several week seminar on the subject. I mean, one could just go on and on. And I'm going to speak of it really as a moral and intellectual calamity and speak perhaps incidentally about the price we pay for ignorance of the market. And it's not just ignorance half the time, it's malice, I think, as well. But where would I even begin, I thought to myself? I thought I could talk about the colonial period of American history when there was interference in the market. I could talk about Alexander Hamilton's economic program. I could take a page out of Tom DiLorenzo, who, by the way, has a book coming out, I think, in October, called Hamilton's Curse, which sounds very interesting. But Hamilton is sometimes thought, Alexander Hamilton, for those of you who don't know, was the first Treasury Secretary in American history, and some people portray him as the capitalist.

2:28See, Jefferson was the Domigrarian, supposedly, according to this thinking, and it was Alexander Hamilton who was the capitalist. And why is that? Well, because he favored protective tariffs. Honestly, historians say this. Because he favored a national bank. It just goes on and on. And I wonder about this. Do they not understand what capitalism is? That's one of the useful things about Tom B. Lorenzo's book, How Capitalism Saved America. He starts off by defining what capitalism is. And historians could stand to benefit from this, because when you think about it, If you think about it, there's no particular reason that support for a national bank or a central bank would be a capitalist position. I think the reason people, historians, just assume this is they think, well, banks have money in them and money has something to do with capitalism, so therefore supporting a central bank is a capitalist thing to do.

3:25And so when poor Tom's book came out, one guy on Amazon reviewed it, obviously not having read it. Can you believe some people review books on Amazon they haven't read? This happens. And the person spent half the review denouncing the World Bank as if Tom DiLorenzo would defend the World Bank. This is not a market institution, for heaven's sake. So likewise, Alexander Hamilton is not a capitalist, per se. I mean, he's not a socialist, but because he favors these interventions, that doesn't make him a capitalist. Every one of these interventions goes counter to the market. But I figure I'll leave this to Tom, he can tackle Hamilton. I thought about some of the utopian communities in the 19th century, some of the utopian reformist ideas that you began to see in the 19th century.

4:13A lot of times, particularly between 1820 and 1860, you would hear reformers arguing that really we were on the verge of achieving perfection in society, but there was just that one obstacle holding us back. So, for instance, Horace Mann, the educational reformer, believed that it was ignorance that was the problem in society and therefore the cure for ignorance would be government schools. And at one point, he actually estimated that 90% of the crimes now committed would vanish if we could have everyone educated in a government school. Little did he know that 90% of the crimes would actually be committed in the government space.

5:04We then had temperance reformers, too, who argued that it was alcoholic drink that was the source of it. And again, if you read their literature, they'll say this is the one thing. Alcoholic drink is the source, the proximate cause of so many of our problems, and if we could only get rid of this. this and incidentally a number of times when people couldn't manage to get complete prohibition passed in their locality they would try to pass laws requiring you to purchase alcohol in gigantic quantities so you might think well you know this is people just get drunker but of course the idea was they won't be able to afford the giant quantities but you know drinkers are very In New York, there was a community that argued that the one problem holding us from perfection really was the institution of monogamous marriage. That was John Humphrey Noyes, a former state legislator who argued that marriage, it encouraged exclusivity and jealousy, you know, my wife is prettier than yours and that sort of thing or only I can have

6:25intimate relations with my wife and this kind of selfishness really undermines the cooperative spirit we want in society. So he established a community whereby, to To quote his words, It will be like a Thanksgiving feast at which every dish is free to every guest. I'm not going to go any further with this. But again, we get rid of marriage and we have no more problems. But also there were communities, and here's my point, that argued that it wasn't marriage, it wasn't alcohol, it wasn't ignorance, it was private property, because that really encourages covetousness and so on and on. So we need to have communities in which everything is owned in common. And some of these were actually established, particularly in Pennsylvania.

7:13Not one of them lasted more than two years. But they're premised on the idea that private property is something wicked that needs to be eliminated. And if we do it one community at a time, we can illustrate to the country what the results would be and then everyone will want to adopt it. Well, when they saw what the results were, everybody decided they did not want to adopt it. But one could go on. We could talk about the antitrust laws and the economic fallacies behind them. We could talk about the 1890s, some of the utopian literature that was written, like Edward Bellamy's book, Looking Backward, in which he looks ahead to the 1980s, and he estimates, he tries to imagine what life is like. He describes a society in which everyone enjoys great abundance and people work very little and everybody shares and it's a common pool that everybody contributes to and the incentive comes from the desire to contribute to the common pool and receive

8:09back your equal share. That's where the incentive to produce comes from. Now Bellamy's books sold 300,000 copies in two years which is an astonishing feat for any book, much less one in the 1890s. There were nationalist clubs founded around the country to try to put Bellamy's program into practice but there There are other books too. Ignatius Donnelly's book, Caesar's Column, is an extremely disturbing book in which at the end about a quarter million of the exploiters of the people are not only murdered but then they're covered over with cement and they build a big monument on behalf of the oppressed to show what will happen to oppressors. Yikes, this is going on in the United States. Books like this are being published. Again, premised on the idea that and the free economy is something that's predatory and exploitative.

9:03Well, I take rather a different view. Walter always tells me before my talks, you know, quit your socialist claptrap this time. Try and take the free enterprise line for once. So I'm trying to do that this time. Well, let's start with one major calamity, and that is that when you look at World War I, You know, you're inclined to think, and I point, I talk about this in my 33 Questions book, you're inclined to think, you know, that it's people on the political right who are pro-war, and people on the left, you know, they just want to skip around in the meadow. But actually, the left was overwhelmingly in favor of World War I. It's very hard to find, I mean, you know, there are a few socialists who were against it.

9:50Poor Eugene Debs, you know, he was against it and he spoke out against it and went to jail. got a million votes by the way for president in 1920 while he was in jail and there was a campaign button that said for president convict number 0204 but by and large the left went along with the war and in fact Murray Rothbard has an extremely important and useful article on this from the Journal of Libertarian Studies that was later published I think in the cost of war on the The Left and World War I, and one of the reasons The Left was so enthusiastic about the war was that they believed that wartime conditions would be particularly ideal for bringing about a planned economy, because in a war, of course, you have a single-minded focus, namely to win the war and prosecute it effectively, so therefore the government will need to take control of all the resources in society and direct them and determine their prices and

10:52the conditions of production and so on and so forth. So this was very exciting for the left. This would be a great opportunity finally to put that old-fashioned private property economy behind us forever. So one historian said, because war demanded paramount commitment to the national interest and necessitated an unprecedented degree of government planning and economic regulation in that interest, John Dewey saw the prospect of permanent socialization, permanent replacement of private and possessive interest by public and social interests both within and among nations. Dewey exalted just a few months after US entry into the war that quote, this war may easily be the beginning of the end of business. And he said that we are beginning to produce for use, not for sale.

11:41and the capitalist is not a capitalist in the face of the war. There is no reason to believe that the old principle will ever be resumed. Private property has already lost its sanctity, industrial democracy is on the way. The New Republic magazine, which is that consistent opponent of the Old Republic, said that the substitution of national and social and organic forces for the more or less mechanical private forces operative in peace was something to welcome. And although war and social reform had different purposes, quote, they are both purposes. And luckily for mankind, a social organization which is efficient is as useful for the one as for the other.

12:26So once we finish waging the war, we will turn these warlike energies toward the solving of, you know, The Municipal Garbage Problem or whatever, because if we can, this was the early version of we can put a man on the moon. If we can send a million men to fight World War I, then surely we can make sure that the garbage is collected. Now as the United States was on the verge of entering the war, again the New Republic predicted that the war would bring immense gains in national efficiency and happiness. Why should not the war serve as a pretext to be used to foist innovations upon the country, the war said? And this way, the war could lead the way toward abolishing, quote, the typical evils of the sprawling half-educated competitive capitalism.

13:21Well, I wouldn't throw that word half-educated around too much if I worked for the New Republic. Now, we have this common fallacy though, not just in World War I, that war is good for the economy is another another major anti-capitalist view because it betrays a complete misunderstanding of capitalism economics freedom I mean one one hardly knows where to begin and yet you still see this repeated Paul Krugman repeat this all the time yeah well you know it's really terrible that millions of people die but a lot of people went to work because of this I guess he must have liked the Great Plague the Black Plague Today, you know, in the 14th century, I mean, you know, a third of the European population perished, but, you know, hey, somebody's got to clean it up and bury the corpses. I mean, this is really not a normal person way of responding to a natural disaster, which really is what war is. And in my 33 Questions book, I actually have a whole chapter on why this

14:18is not true, why war, even World War II, was actually not good for the economy. But beyond We even have the argument that preparation for war, that is large military budgets, are good for the economy. And that if we were to reduce the military budget, I hate to say defense budget, by the way, for reasons that Walter pointed out. There's nothing defensive about this. I mean, if we had to establish a Department of Homeland Security in 2002, well, what was the Department of Defense doing all these years then? So we will just say that reducing the military budget, we are often told, by left and right Keynesians alike, will lead to terrible depression conditions, you know, because aggregate demand will be decreased, you know. What would people spend their money on if it weren't siphoned away from them to be spent on the military industrial complex?

15:07What would they do? You know, they just all sit there, confused what to do with this extra money. we should remember that when Frederick Bastiat wrote his essay on what is seen and what is not seen we all remember the broken window fallacy the kid throws the ball through the window window breaks the economist says no no this isn't a bad thing it's good because the repair of the window will put the window repair guy to work and so it helps the economy and so we all heard that we all know the fallacy behind that obviously if you didn't have to expend resources on Repairing the Window, you could have expended those on something else, so there's a net loss of wealth to society. But we often neglect, I think, an equally useful example, a military example that Bastiat gives later in the essay.

15:52He discusses the demobilization of 100,000 soldiers from the French army, and this is a prospect that many entertain with dread, because what will these men do for a living if they're not in the French army? Because certainly all our wants in society have been satisfied already, so what could they possibly do and so and what about the the stimulus that these men used to provide you know when they used to spend their money on wine or clothes or weapons that used to provide a stimulus what's going to happen when these people are demobilized well of course as Bastiat says they're focusing they're focusing on what is seen rather than what is not seen what about the possibility that the money that had previously been confiscated from the tax payers in order to support the soldiers will now be available for other purposes including expenditures on goods that these demobilized soldiers can now be employed to produce.

16:49Likewise, the money that the military used to spend on wine and clothes and well let's just say other things that the military sometimes spends money on, Walter mentioned one of them, can now be spent on other things. So here again, economic activity is none the worse for the soldiers' demobilization. But throughout the Cold War, you had politicians and intellectuals left, right and center warning of the catastrophic economic consequences of substantial reductions in military spending. It may be surprising to hear, but the radical left in particular, as part of its critique of American State Capitalism, which they mistakenly associated with, thought was laissez-faire. It was the radical left that really lent support to that position. For example, in their book, Monopoly Capital, Paul Baran and Paul Sweezy warned as follows, if military spending were reduced once again to second World War proportions, the nation's economy would return to a state of profound depression, characterized by unemployment rates of 15% and up, such as prevailed during in the 1930s. So the radical left is giving intellectual cover for this type of larceny

18:02of the American people. By the way, they had time to write this book, Monopoly Capital, in between writing articles about how wonderful it must be to live in Castro's Cuba, advice they themselves never actually took. Now it is during time of war, because war is in some ways the very opposite of the market. It's the opposite of cooperation. It's the opposite of Harmonies Existing Between Peoples. It typically does involve massive state planning and control of resources. Not surprisingly, war tends to lead to socialistic type reforms in the wake of the war. Robert Nisbet reminds us that it is in time of war that many of the reforms first advocated by socialists have been accepted by capitalist governments and made parts of the structures of their societies. Equalization of wealth, progressive of Taxation, Nationalization of Industries, the Raising of Wages and Improvements in Working Conditions, Worker Management Councils, Housing Ventures, Debt Taxes, Unemployment Insurance Plans, Pension Systems, and the enfranchisement of formerly voteless elements of the population

19:11have all been, in one country or another, achieved or advanced under the impress of war. Incidentally, it was during World War II that, by executive order, President Franklin Roosevelt managed to, albeit briefly, manage to get past a cap on all salaries in the United States above $25,000 a year. So you cannot, every dollar after that will be confiscated. The Congress eventually intervened and overturned that executive order, largely on the grounds that it would undermine the war effort. Obviously, we want people to produce and be rich so we don't want to take their money away, it might undermine the war effort. Now wartime planning, as I said, inspires peacetime planning.

19:58So when it came time for the New Deal programs of the Great Depression in the 1930s, what were the precedents that people looked to? They looked to World War I. In fact, wartime precedents existed for the Agricultural Adjustment Act, the Civilian Conservation Corps, the Tennessee Valley Association, housing programs, credit agencies, labor laws, and even the National Industrial Recovery Act. Sometimes the very same people who had staffed the World War I versions of these institutions came back to staff the peacetime versions in the 1930s. The rallying cry was we planned in war, so now therefore we shall plan in peace. War symbolism was ubiquitous in the imagery that was adopted by Franklin Roosevelt's New Deal and as Robert Nisbet says, in terms of frequency of use of such symbols by the National Government, not even Hitler's Germany outdid our propagandists.

20:55Now in the 1930s, as I'll get back to in a minute, there was an obsession with central planning. The thinking was that the free economies had failed because the diagnosis was that we were stuck with this rotten economy that was caused by freedom. So the free economy failed. So what we need is some kind of coordination. We need some kind of national coordination of the economy. We cannot leave this in private hands and the kind of haphazard activities that we see in the private sector. We need this kind of national planning. But we already saw that in the 1920s, believe it or not. You already start to see in the 1920s various business firms, and in fact you see major business magazines all echoing this type of rhetoric, arguing that, you know, the age of laissez-faire is really behind us.

21:44We need a cooperative age now. We need the various industries to get together and kind of regulate themselves so we don't have cutthroat competition among us. Now we hear this and we immediately understand that what are these people all about in the 1920s calling for things like this? They're looters. I mean, they're basically people who don't like to see new businesses come into the industry that will undersell them. So therefore, let's make it impossible for anybody to undersell anybody. Now, I was on the plane, I was actually reading Atlas Shrut that I hadn't read in 15 years and I thought, I have to force myself to do some pleasure reading once in a while, like all I ever do is read books for review. I want to read something I want to read just for enjoyment. So I was reading this and I totally, I realized I'd totally forgotten this whole book.

22:31But early on, there is a piece of legislation in that book called the anti-dog-eat-dog law. You know, arguing that competition is too severe, you know, we need to cut back on it. But at least in the book, everybody more or less understood the anti-dog-eat-dog law was started not by the average person, but by the businessman to reduce competition, of course that's what it's for. You know, and they figure that the idiots in the general public will just assume that well, that sounds good, anti-dog-eat-dog, I don't like dog-eat-dog competition, yeah, sure. But actually, it simply benefits certain business firms at the expense of others who lose. So in the 20s, you hear all these laments, things like, our profits are totally unprotected.

23:19Well, yeah, that's a free economy. That's right, you've got to stay on your toes, right? You can't say, hey, you know, I invented the popsicle 50 years ago and I'm going to keep resting on my laurels. No, don't you know we want popsicles with little stripes in them? We want Dora the Explorer popsicles? You've got to stay on your toes here. Now, another fallacy that has caused all kinds of mischief all over the world and particularly in American history is this idea of overproduction. Overproduction, overproduction slash underconsumption was argued to be the cause of the Great Depression and all other terrible calamities.

24:08The idea of overproduction is that the economy, the United States economy is so productive. It can produce so many goods that we would just be flooded with shoes and hats. Like the whole room would be filled with shoes and hats and nobody would know what to do with them. We can't buy all these shoes and hats. We only have two feet, right? What are we going to do with all these shoes? So the argument of the overproduction people is that the country could become so wealthy that we will all be poor. And that's really what the argument boils down to. We've produced too many refrigerators, everybody's going to be out on the street. I mean, that's basically the argument behind it. The argument is that people won't... there are two possible versions of the argument. One is, at some level, people don't want any more wealth.

24:56The other argument is they won't have the ability to buy the things, so that you'll have all these customers out there and they don't have enough money to buy your things. Well, I do want to at least, before proceeding on this line, at least try to answer this fallacy very, very briefly. I actually wrote an article about five years ago called There's No Such Thing as Overproduction. So I can only give like the one one hundredth of a sliver of the answer to this. But one of the arguments would be, suppose productive, and I borrow this from George Reisman, because I think he actually explains this overproduction thing very well. Suppose productive capacity in the United States doubled to the extent that every single industry now produced double what it used to, overnight.

25:45The resulting problem would not be overproduction per se, Rather, it would be overproduction of certain things at the expense of the underproduction of others. So for instance, suppose every single industry can now produce double what it used to. Wouldn't we necessarily want twice the table salt that we used to have? Wouldn't we necessarily say, oh, there's great abundance of tables, now I can really load it on there. I mean, I think most of us sort of feel like we've got all the table salt we need. So, if you have the productive capacity to produce twice the table salt, it would be a huge waste of resources to actually produce twice the table salt. You should instead maybe produce marginally more. I mean, I don't know, there's no non-arbitrary way of knowing. But you should take some of those resources and put them into areas where people would like to have more things.

26:34Like, for example, you know, better, more and better quality clothing. Or there'd be, for example, if you produced twice the macaroni and cheese. Okay, well maybe at that point, people don't want twice the macaroni and cheese, they'd like better quality food, so resources should shift away. So yes, there'd be overproduction over here, but only because other things that people demand more urgently are being correspondingly under-produced. But there are other examples as well. I mean, let's suppose, just a very quick example, suppose you have a barter economy. It's much easier to see this point than a barter economy. People are producing potatoes, apples and oranges. And let's suppose that in the potato industry somehow they're able to produce twice the potatoes. But let's suppose that with twice the potatoes, the price of potatoes drops dramatically to one-third of what it was before.

27:20But you have twice the potatoes, so really you're getting about two-thirds the money you used to get. So what's happening here? Is this a calamitous overproduction that's going to put everybody out on the street because we produce more potatoes? Well, no, because the apple and orange people are now spending only two-thirds of what they used to on potatoes. So what did they spend the other third on? Other things, other than potatoes. Apples and oranges, or whatever else might develop in this primitive economy now. So it's not like this just vanishes. This actually gives them the purchasing power to buy more things. They actually have the ability to buy more things because there are more potatoes. But anyway, one could go on with this. My point is that this idea that the productive capacity of the US was so great that the system was in serious, serious trouble seems to have occupied the minds of almost every politician in the 1890s and even some businessmen, such that the foreign policy goal that was shared by countless people was what became known as the large policy.

28:26The argument was we produce so many, we're just awash in things, and we produce so many we don't know what to do with them. So what we need to do is find foreign markets so we can get rid of all these extra shoes or whatever. Now it is true, of course, any business would like to be able to sell to more people at the price they're selling at. Of course they would like additional trade, but that's not the same thing as saying that without additional markets the system is bound to collapse. collapse. That's a fallacy. But this fallacy led to the idea that in the 1890s, starting then, the United States needed to acquire overseas colonies, or at the very least, needed to acquire places where you could establish coaling stations and naval bases on the wage of the prized markets in Asia, so that American firms could sell all their extra stuff without which the United States is just going to collapse. And so that, in fact, is one of the motivations

29:21behind the acquisition of the Philippines after the Spanish-American War and the acquisition of Guam and the acquisition of Hawaii. These were not random events. These things would give the United States government a forward position in Asia because if we don't have that, we don't have government involvement in promoting trade, we're just going to be drowning in our productive capacity at home because people are already sated in all their wants. Now this idea that the United States just produces too much, we're just too wealthy for our own good, we can't use all the things we produce, is absolutely everywhere in American economic thinking. Rexford Tugwell, who was one of the brain trusts in Franklin Roosevelt's administration, said that we have moved from the era of economic development to an era which confronts us with the necessity for economic maintenance.

30:12In this period of maintenance, there is no scarcity of production. Must be wonderful to live in that world. No scarcity of production. For today and for tomorrow, our problem is that of our national economic maintenance for the public welfare by, wait for it, governmental intervention. How else? Later on, we get John Kenneth Galbraith warning us the great challenge in the United States and soon in Western Europe is to cope with a threatened overabundance of the staples and amenities and frills of life. Oh my gosh, there are too many things to choose from. How will entrepreneurs ever cope with this? I'm sure they could never forecast demand or any such thing like that. According to Stuart Chase, another proto-New Dealer, the United States had moved beyond a condition of scarcity to one of abundance in the year 1902.

31:06Scarcity was a thing of the past as of 1902. As Stuart Chase said, what threatens to continue, unabated, in good times and bad, is technological unemployment with its three faces, the machine, the merger, the stopwatch. In four years, oil refineries increased output 84% and laid off 5% of their men while doing it. Tobacco manufacturing output climbed 53% in the same period, with 13% fewer men at the end. This is the trend throughout industry. It can mean only one thing. An equivalent tonnage of goods can be produced by a declining number of workers. That's a bad thing, according to Chase. And men must lose their jobs by the thousands, presently by the millions.

31:54Then it seems that we should rip up all the railroad tracks and destroy all the trains and have everybody carry their goods on their backs. Because that way, think of all the jobs that would create. that is he must have been horrified by the development of the railroad but this is this guy is considered to be a respectable economic commentator in the 1930s now I can forgive novelists a little bit more I don't expect novelists to know economics I mean when even economists don't seem to know economics I can hardly blame a novelist for this which is why I have a friend who says that if you were to lay all the economists in the world end to end that That would be fun, except the Austrians.

32:41John Steinbeck in his book, The Grapes of Wrath, also warned that mechanization would throw people out of work, because once we no longer need laborers in agriculture, I guess there's nothing else in the economy for them to do, because we've already produced everything we need. It's interesting to note with regard to The Grapes of Wrath, by the way, that just last Last year, the New York Times observed that when the movie version of The Grapes of Wrath was screened in the Soviet Union in 1940, it was screened there for the purpose of showing Russians, you know, just how rotten it is to live under capitalism. Look at these people and how much they suffer. The Soviet population drew the wrong conclusion from the movie. What impressed them was the fact that these people had a car.

33:28The poorest people have a car? And then when things go badly for them, they can go somewhere and have some recourse? This is amazing! Well, the economist Simon Patton told us that how do we deal with all this surplus? He said, taxation should be placed not on particular forms of prosperity, but on general prosperity. We've got to tax all this prosperity. The state should not try to hunt up the individual who profits by each of the improvements it makes, makes, but should make taxation a reduction of the general surplus of society. Well, congratulations. We can conceive of the state as a factor in production and hence entitled to a share of the undistributed produce of industry. Oh, oh, good. Because the state has helped to promote general prosperity and therefore can demand a part of the surplus of society along with landlords, employers, capitalists and laborers. Well, the mafia couldn't have said any better. Chase, Stuart Chase and others, all these guys, what's necessary for this?

34:30Again, central planning. And this actually comes into play. We get the unbelievably anti-capitalist National Industrial Recovery Act of 1933 that a number of economists finally are now saying, you know what, maybe the recovery was delayed not in spite of, you know, maybe it was the New Deal programs that actually delayed the recovery. The National Industrial Recovery Act gave all these These intellectuals exactly what they want, reduced production, minimum prices, you can't undersell people, and so on and so on. We actually got this, we actually got this in the U.S., in effect, a kind of fascistic type economy. The administrator put in charge of the National Recovery Administration that was established by that act, Hugh Johnson, described it as, quote, the greatest social advance since the days of Jesus Christ.

35:20Yikes. That's kind of sick religion going on here. It's almost not fair to quote Susan Sontag, but I will anyway. She also was worried about surplus of goods and says that America is a cancerous society with a runaway rate of productivity which inundates the country with increasingly unnecessary commodities. This country has a surplus energy whose predatory overflow must be contained. So, of course, it's the exact opposite of the argument earlier, which was the socialism would produce more and the capitalist economy doesn't produce enough. Now the problem is it produces too much. And today, the variant on that today is it's making us all fat and materialistic and whatever. There's always some argument against it. Now, given that I started five minutes late, I'd like to take my five minutes if I can be excused, because I need to mention this.

36:15We've often heard about the intellectuals who went to the Soviet Union in the 1920s and 30s and came back talking about what a wonderful brave new world they had observed. But this is a far more twisted and perverse phenomenon when you really sit down and think about it than I think we've sometimes realized in the past. These were people who desperately wanted to be duped by the authorities. They wanted to believe that this type of economy would be superior to one in which people were allowed to make their own plans and their own decisions. The great British journalist Malcolm Muggeridge referred to these intellectuals and said, Their delight in all that they saw and were told and the expression they gave to this delight constitute unquestionably one of the wonders of our age.

37:04There were earnest advocates of the humane killing of cattle who looked up at the massive headquarters of the OGPU with tears of gratitude in their eyes. Prize, Ernest Advocates of Proportional Representation, who eagerly assented when the necessity for a dictatorship of the proletariat was explained to them, Ernest Clergymen, who walked reverently through anti-God museums and reverently turned the pages of atheistic literature, Ernest Pacifists, who watched delightedly tanks rattle across the Red Square and bombing planes darken in the Sky, earnest town planning specialists who stood outside overcrowded ramshackle tenements and muttered, if only we had something like this in England. The almost unbelievable credulity of these mostly university-educated tourists astonished even Soviet officials used to handling foreign visitors. William White was an American living in Moscow who A school teacher from Brooklyn was on a tour in one of the newspaper plants.

38:10She saw a machine which did wonders with the paper that was fed to it. Really, that is remarkable, she said. Such an amazing invention could be produced only in a country like yours for one end. I shall write a book about what I have seen. She was a little embarrassed though when she walked to the rear I came here and saw the sign made in Brooklyn, New York. Novelist Theodore Dreiser tells us of his experience, he said, There is no show, no luxury in the Soviet Union. I'm sure that was voluntary. You will see thousands who are comparatively poorly dressed to ten and most a hundred who are well dressed. And yet, generally speaking, a sense of well-being, none of that haunting sense of poverty or complete defeat The feat that so distressed one in Western Europe and America, it is not to be found.

39:03Yet in Moscow there is poverty, there are beggars in the streets, but Lord, how picturesque! The multicolored and voluminous rags of them! The philosopher Horace Callan said, all, regardless of party, acknowledge that the revolution, the Bolshevik Revolution, has awakened the millions that the government dictatorship has liberated their energies, animated them with an altogether unprecedented sense of personal dignity and inward worth, and opened to them hitherto sealed worlds of science and art and personal advancement. The president of the International Ladies Garment Workers Union said that the Soviet Union's workers appear to be ready to undergo all kinds of misery as a necessary sacrifice for the attainment of the ideal communistic state, which they believe is on the way now.

39:56In 1929, the editor of The Nation wrote, This, I repeat, is the most stupendous governmental feat ever undertaken, the social, moral, political, industrial, economic emancipation of a people and its reorganization upon the basis of service to the society and to the nation with the profit-making motive suddenly removed from the individual. He was sure that the minority which controls the destiny of Russia is on its way with extraordinary and completely unselfish devotion, with the fiercest determination to succeed at any cost. And to the complaint that the people running the Russian government were fanatics, he said, Well, who else but fanatics would have the course for the task or could be relied upon to drive through to the end without essential compromise? And it isn't really so bad, anyway, that it's a dictatorship, because they're all working for the good of the masses of the working people.

40:48And I have other quotations that, unfortunately, I can't get to. We could also talk about people taking trips to China during Mao's unbelievable reign and saying, you know, it's just wonderful here, you know, people are poor, but they're happily poor. One person compared China with Hong Kong and said, Behind me, the aggressive vendors, the gaudy clothes, the Coca-Cola. Ahead, a world which is sterner in its political imperatives, but which in human terms may be a simpler and more relaxed world. Now, again, it's not fair to quote Shirley MacLaine, but I'm going to anyway. Entering China, Shirley MacLaine said, There were no hawkers selling goods, no frenzied bargaining. Nobody was buying and nobody was selling.

41:34There were no billboards screaming out their false promises, no slums. Serene, I said to myself. That is the word. Serene. And it just goes on and on. The people live simply, but their spirit is impressive. Blah, blah, blah. Well, you might think maybe they just didn't know any better, whatever. Eugene Genovese was a former Marxist, and I'll wrap up with this. He was a former Marxist, he was a historian, a very good historian in the United States, and he wrote an article in 1994 in Descent magazine, or a journal, and it was called The Question. And the question was, what did you know and when did you know it? And it was a question he posed to his fellow people on the left. And he said, let's be honest, we all knew what was going on in the Soviet Union, we all knew it.

42:21Now, yes, we thought, you know, to make an omelette you have to break some eggs, but let's not pretend, oh, how could we have known? I know we knew, because I know all you people, we all talked about it. and he named names. You people knew about this. So it's very satisfying to see somebody finally admit he was wrong, that maybe the planned society in which one small sliver of the population, their plans are made to count, individual's plans are not, maybe that's not the ideal organizational society. Genovese had the honesty to admit, we ended a 70-year experiment with socialism with little more to our credit than tens of millions of corpses. Well, ladies and gentlemen, it's almost enough to make you give up on the human race. The evidence is all around us as to how to create a prosperous society.

43:09It's not like, it's not brain surgery. Just look around the world at the prosperous places. Look at the places in the world where the poor are doing the best. It's the same places. And yet we still get the same old ridiculous fallacies over and over again. I sometimes think that as an economist, I'm a historian, but as an economist you must have the most depressing job on earth because just as you're lying there on your deathbed, you hear your bedside nurse saying there was an earthquake today but at least it will put people to work and you think, what was it all for? But that's why we have to work all the harder, because once you do get through to people, once you are able to show them the three steps of logic necessary to understand the market, that the one step that superficially is anti-market is not sufficient, show them those three steps, they're goners forever, they're on board with us.

44:05And that's why I am so honored to be a resident scholar at the Mises Institute and to participate in this ongoing educational enterprise, because, in my mind, there are few things in the world that are more urgently necessary today, so thank you very much.