Crisis and Liberty: Lecture 2

0:00Good afternoon, ladies and gentlemen. I am not sure that my voice will hold out for another hour and a half, so we may have to have an hour and a quarter for question and answer this session, but I'll do my best. The topic for this session is ideology. I mentioned in this morning's talk that many scholars of the growth of government have to some extent dealt with the role of ideology in the growth of government.

0:50It's clear that every government has a kind of intellectual bodyguard, as I believe the German professors of the late 19th century were said to be for the royal family of the The German Empire at the time, and regardless of the status of government, whether it's monarchy or empire or democracy, all governments realize that they need some intellectual cover for what they do. And there are always some people who are willing to serve as intellectual bodyguards.

1:42Some, I suppose, actually believe in what they're doing. They're not coerced or they're not even getting paid to propound arguments that justify the actions of government and the growth of government. So I don't take a completely cynical view of the people who argue along those lines as some of them believe in what they say. Others obviously are prostitutes and hope to gain either income or social standing or in some cases simply to enjoy proximity to the Seats of Power. I like to think of people such as Arthur Schlesinger Jr. as the archetype of the court historian, the intellectual who not only is willing to serve in an administration, but who's willing to spend a good deal of his time and energy thereafter writing laudatory accounts of what was done by presidents or other officers of the government.

3:09So every government needs legitimacy. I mentioned this morning observers as far back as 1550, when we have the arguments that Etienne de la Boutouille have recognized, as Machiavelli himself did, that one needs to tell a good tale. Nowadays there's more than cottage industry, there's a major industry devoted to propagating ideas that will assist the government in establishing its legitimacy and providing rationales for expansions of its powers.

4:10Now, it's no shocking statement to say that ideas have some importance in social action. Mises himself once wrote that people do not act to promote their interests, as many social scientists claim. People act to promote what they believe their interests are, and there's a considerable difference. Not only because they may be mistaken about how certain events or actions or programs will affect them and their well-being, But because in fact everything that human beings do is based on belief, on ideas, it's ideas that move us to engage in human action, it's the thought we have that we can imagine an alternative state of affairs that we would prefer to the existing state of affairs and from that idea we're moved to take some action to realize that imagined superior state of affairs.

5:32So very often we find in social science a kind of assumption about the immediacy of interest, particularly in public choice and political science. The analysts often suppose that, say, in the United States, a black person must favor government redistributive schemes because, well, black people would stand to gain from taxing high-income persons and redistributing the income to relatively low-income persons, blacks being predominantly in the relatively low-income group, so ipso facto promotes their interest. Sometimes those kinds of assumptions are arguably fairly sound, but often they're not sound. We just assume that because we know something about where people stand in society or something about their age or sex or location that from that we know what is is in their interests, but people always have to conceive of how something is in their interest, and it's from those conceptions that they're moved to ever do anything.

6:57Now, to say that ideas matter is an elementary kind of proposition, but when we talk about ideology, we're talking about something somewhat more complicated and just ideas because an ideology is not simply any old body of beliefs, it's a particular kind of belief system and scholars have devoted a lot of attention to the study of ideology. Such of this literature, I'm sorry to say, is not worth your time, and it probably wasn't worth mine when I read it myself, or a good deal of it myself.

7:51But some of it is worthwhile, and it's good to know that people have been thinking about Ideology and its place in society for at least the past two centuries. Conceptions of ideology vary quite a lot among scholars and that complicates one's reading and absorbing of any real understanding from what has been written and there are different conceptions of what is meant by ideology and where it comes from and what consequences it has, but at least there's a fairly general understanding that it's not trivial, that it is a significant aspect of the operation of society, and if we want to understand how society operates, we need to understand the role of ideology.

8:51Now, economists lavished a lot of attention in the past 40 years to the question of collective action. And I want to talk about that for a few minutes because collective action clearly has been an important mechanism for bringing about the growth of government and the issue that It was raised early on, particularly by Mansur Olson, who has had a huge following among social scientists in this country, had to do with the rationality of collective action.

9:37Olson raised the question whether it made sense for people to even engage in this kind of Action, and suggested that, at least in many cases, it didn't make sense. So he created a kind of puzzle, a conundrum. Why are people doing these things, particularly when they're the kinds of things that have serious consequences? And one of them is promoting the growth of and Bigger Government. So, let's start by saying what do social scientists mean by collective good? I touched on this matter this morning under the heading of public good. They're the same idea, just two different names used by social scientists.

10:28A collective good or a public good is one that has the attribute of non-rivalry and consumption. If it's created at all for at least for a domain of beneficiaries then it's created for everybody in that domain. If for example we show a film in a theater then once it's being shown anyone in that theater can benefit from it whether There is no additional cost to showing the film, so we have a zero marginal cost of use, at least up to the point where in this example we filled up the theater.

11:25Now that's why I said collective goods are always relative to a domain of users. We might conceive of a collective good that has a huge domain. This morning I suggested that deterrence of atomic attack against the United States might conceivably be a good that benefited all the people in this huge nation state, which is is a very different order of magnitude than filling up a theater. So when we talk about this kind of good, we always have to have in mind what the domain is or is claimed to be, at least. But within the domain, the collective good has no marginal cost of additional use.

12:13And furthermore, it's often stipulated that no one can be excluded from enjoying the use of the good once it's created at all, so that if, for example, deterrence from atomic attack is provided for the United States, then there's no way to say, well, Brad, you don't want We want this, so we'll let you opt out here. You cannot opt out. We can't exclude him, even if, for example, he says, I won't help to pay. I don't want it. I'm not interested. He's still going to get this benefit, nonetheless.

13:03So, non-rivalry and consumption and non-exclusivity are the defining characteristics of a collective good. Now, very often when we talk about policies, we're talking about actions that bring into being some state of affairs that has at least approximately the character of a collective good. If, for example, we talk about an agricultural program that the government might undertake to restrict the supply of wheat, the objective being to cause the market price of wheat to be higher than it otherwise would have been.

13:48Well, the increase in the price of the product is something that will benefit every seller of wheat. So every farmer, every middleman or whoever has wheat to sell is going to be in a better position if this policy is adopted. So the collective good aspect of policy applies to many different proposals that are made for what government ought to be doing doing to help some subset of people or in some cases to ostensibly help everybody.

14:34Now what Mancer Olson said is that if we have a large group of potential beneficiaries of a collective good then it won't make any sense for anybody to help to pay to bring that policy Policy into effect, because the costs that would be borne are positive, some sacrifice must be incurred, and yet, if it's a large group situation, my contribution, whether I make it or not, is not going to be decisive for whether the policy is actually created and put into effect.

15:20So I can treat the policy's realization the way I deal with the weather. I don't know if it's going to rain, not rain. It's just something that happens or doesn't. It's pointless for me to take some action to try to affect whether it's going to rain this afternoon. It'll be what it'll be. So Olson said in a large group situation, potential beneficiaries view policy implementation as a state of nature. If it happens, good. If it's something that happens and creates a benefit for them, wonderful. But if it doesn't happen, well, too bad. At least I didn't throw away my money trying to bring it about. So he said it's irrational for people to bear any cost whatsoever in a large group situation to bring about the realization of a policy that creates collective good type benefits but if nobody's willing to incur any cost nobody does anything and you never do the politics and the lobbying and the paying off legislatures and whatever else is required to bring this

16:39This program ended up being for anybody. So the conclusion is that nothing happens. People never engage in collective action in these large group settings. Now Olson said if it's a small group situation, if for example the automobile sellers in the United States would If you would like to have a program that puts a quota on the importation of automobiles from other countries, well, there are only three or four big car companies, and it'll pay them, any one of them, actually, to bear a lot of costs in order to get this quota put into effect, so the problem is different in the small group setting, Furthermore, you can't cheat easily. If we had a whole bunch of farmers, in fact, this was tried many times in the 19th century. The southerners down here used to have a convention of cotton growers almost every year, and they would get a bunch of plantation owners and farmers together and they'd say, this situation is terrible. Cotton is selling for six cents

18:02We're all going broke. We all understand that if we just cut back, let's say we only put half as much cotton on the market next year, we're going to cut the American supply down, and it's going to drive that price up, because even at that time they kind of understood that the demand was inelastic, and so they knew if they managed to restrict the quantity supplied on the American market substantially, they'd get a more more than a proportionate increase in the market price, because all we got to do is agree. So they would agree, they'd all pat one another on the back and have another couple of bourbons, and they would agree that they were going to plant only half as much cotton next year, so that they could improve their dire situation. And every year without fail, they'd all go Go back and plant even more than they had the previous year because you're not expecting that somebody might cut back and raise the price. They'd make more money by having more

19:08cotton to sell. So, of course, these schemes to cartelize this massive industry with tens of thousands or hundreds of thousands of suppliers was hopeless because people cheated on these These agreements, there was no way to monitor them adequately or to compel them to pay some penalty in the event that they didn't comply with their promise. And that's a general problem whenever you have large groups of people agreeing to take some action that can't be enforced or monitored. But in a small group situation, it's pretty easy to see if the car manufacturers are taking a particular action or not.

19:56Any one just watches two others, and that's a fairly easy endeavor. So small groups can manage things that big groups can't, and Olson said that also sometimes you can get things done by using what he calls selective incentives. The best one of course was coercion, and that often required that you get government involved straight away to make sure that whatever it was that the interest group was lobbying for, they could get government assistance behind the enforcement of their efforts. This was something, for example, that eventually the farmers did manage to do pretty successfully after 1933 to get the force of law behind some of their supply restriction schemes and that made them work the way they were supposed to work to the great detriment of the public, but for the benefit of the farmers involved in them.

21:05So, we do have these ways to get around these free rider problems, they came to be called. Nobody wants to bear the cost when he can get the benefit without bearing cost. And the problem is that in the large group case, these techniques of using coercion or taking advantage of small group monitoring are not available. So what do we do about those cases in which we have a collective action involving lots of potential beneficiaries in which people with complete disregard for neoclassical economics insist on going ahead and engaging in collective action?

21:55If, for example, you've got a lot of people, as you do, particularly in Europe, who oppose nuclear power, not just nuclear weapons, nuclear power generation, they oppose anything nuclear, the anti-nukes are against. And these people are a pretty big interest group in Germany and some of the other European countries. So what do they do? They hold massive demonstrations. They organize meetings. They support candidates for public office. They do all kinds of things. And if you look at any given person involved in this activity, it looks like a perfect refutation of Mansur Olson's argument.

22:42So I'm Gunnar here in Bremen and I can go to this street demonstration against nuclear power or not. If I go, I have to use my time at least, and if they want me to make a contribution to the protest group Group, or to help pay for leaflets or television programs or something else, I have to sacrifice whatever I could have purchased with that contribution money. So there are costs of involving myself, but do I really believe that whether I participate or not is going to determine the success of the anti-nuke movement? It's absurd to imagine anybody What are you thinking that? Curiously, actually, Carl Dieter Opp, who is a very interesting sociologist in Germany, did a number of studies of the anti-nukes, and he found, among other things, that some of them actually claim that they will make a difference. If you ask them, Do you think it will make a difference in the success of your movement, whether you personally participate or not? And they say yes. Now that's hard to swallow, but people believe

24:14odd things and perhaps some of them actually believe that. But Hoppe actually has some much better explanations of their participation along the lines I'll come to in a minute.

24:31Well, suppose there were a way that people could get benefits from participating and seeking large group collective action and furthermore that if they don't participate, they'll lose those benefits. You see, the way analysts have normally construed the benefit of participating in seeking collective good is that unless you realize the objective of your mission, unless, say, we get the government to forbid nuclear power generation in Germany, then we don't get anything. We never bring Well, if you think of it that way, then yeah, the Olsen argument seems pretty strong, particularly if you're looking at people engaged in what would appear to be hopeless kinds of missions.

25:38If you want to say vegetarians are campaigning of the government, outlaw the consumption Well, you know, I don't think that's in the cards. Yet some people put their time and effort and energy and money into what seem to be very hopeless causes. What drives them? What drives them? Well, I think we can understand why they take such actions, actions which turn out to be And we can understand why they act in that way without imputing any irrationality to their action and without even getting tied up in this question of do they really think they're going to determine the success of the campaign by their personal involvement or lack thereof?

26:39And that's where we have to go back to ideology to get a grip on this kind of action. So let's step back now from the collective action problem for a moment and talk about what ideology is. As I said before, it's not just any old idea. It's a belief system, a more or less coherent, more or less comprehensive belief system about social relations. So we've already ruled out a lot of ideas. We're not talking about the hard sciences or the life sciences. We're not talking about whether people believe that the law of gravity applies or whether your DNA determines something about the kind of being you'll grow up to be, we're talking about social relationships which embraces economics and politics and the usual suspects.

27:48Ideology is not the same as religion, although sometimes they have similarities and it's It's easy to see certain people driven by religious beliefs in much the same way that an adherent of an ideology might be driven, but ideologies don't have to take any position on supreme beings or our ultimate place in the universe or what's going to happen to us after we die or questions such as that. They're not just worldviews, sometimes people talk about Weltenscheung, worldview, and they're talking about some kind of outlook people have toward what's happening around them.

28:37Ideologies are more complex than that, more detailed, more spelled out, not exactly the These are the same as social philosophy or even political philosophy because these philosophies don't have all the same elements and consequences that ideology has. It's not just social theory, although it involves social theory. These belief systems that we properly call ideological have always at least four dimensions, at least as I conceive of them.

29:28The first dimension is cognitive, which is to say we use the ideologies to help us understand or make sense of what's going on in the world around us. You might say, well, it's obvious what people are doing, but if anything, it's far from obvious. We are all people who have absorbed many, many years of teaching and interpretation of the world. And we see a particular event. If we see someone here at the Mises Institute preparing lunch food for us out here, what could we make of that?

30:15You know, this is like a bee, a bee that is driven to go get nectar and then deposit the honey in the hive. Are these people who are driven to get food and bring it to the Mises Institute? That'd be one way to make sense of what's going on here, a bad way. But there are any number of ways we could make sense of the simple observation that people are bringing food to the Mises Institute. We might, if we were hardcore old-fashioned socialists, we would look at this person perhaps and say it's a wage slave of Lew Rockwell's. This is a person who will die if she doesn't agree to these onerous terms of employment, under which she's subjected to Lew's speed-up, and she has to hurry to bring food when Lew orders her to bring food.

31:22Otherwise, she won't get her pittance of pay, which is not even sufficient to maintain life. And Lew doesn't care because if she dies, the reserve army of the unemployed will provide the next wage slave that will come on board and do exactly the same thing until that worker expires. So that's another way to make sense of what we see going on. not the best way, in my judgment, or if we had the ideology not of old-fashioned socialism, but the ideology of, say, classical liberalism, we would say, A person that has agreed to employment at the Mises Institute has agreed that in exchange for certain definite pay and other benefits a person will perform reasonable services according to the instructions of supervisors appointed by the employer.

32:30Well, that says it. We're looking here at a labor market phenomenon. There's no exploitation. Everybody's acting in a way that is voluntary. And to me, that's a good way to make sense when I see somebody bringing food to serve for lunch at the Mises Institute. But as you can see, depending on On the ideological lens you use to view reality, it's possible to impose very different understandings on observations. And all observations of social life have that quality. They're subject to alternative interpretation.

33:15So function number one of ideology is cognitive. Function number two, affective, means that ideologies don't just tell us what's happening, but they also categorize events as good, bad, or neutral. Function number two, affective, means that ideologies don't just tell us what's happening, but they also categorize events as good, bad, or neutral, as virtuous, vicious, or neutral. I already suggested this with my example. When the Marxian looks at someone bringing lunch, they say not only is this exploitation of labor, but this is a bad thing.

34:14This shouldn't be happening. We long for the day when the wheel of history turns and we grind the exploiters underneath it and no longer will anyone have to endure wage slavery. The appropriator will be appropriated. On the other hand, I look at this event and I say, well, that's good. Lew wants to hire somebody to provide food service. These people want to sell their services for doing that kind of work. So both parties have been able to come into an agreement that puts them in a better position than they would have been without the agreement.

35:02Agreement, and that's good. We like to see people achieving their ends through voluntary cooperation. That's nice. So for a classical liberal, the affect is positive of this kind of event. A third element is programmatic, and this is It's where politics comes into ideologies, because they all give people a position on what would be politically desirable and undesirable. If, for example, the old-fashioned socialist looks at the food service worker, he imagines is, ah, revolution. Someday, we'll overthrow this kind of vile wage slavery. The workers will rise up, whereas if I look at it through the eyes of a classical liberal, I say I just hope to God that they don't raise the minimum wage so that Lew might decide, hell, he'll So once again, where you stand about political proposals derives from your ideological views.

36:40So ideologies give rise to political programs. And finally, and this is critical, all ideologies have a solitary dimension. Ideologies as it were are the membership cards in a community of belief. So those of us who share a particular ideology are, as it were, comrades, where we're together on something that we view as important. Because among other things, it concerns politics, it concerns what the government ought to do and the employment of its coercive power or its withholding the exercise of its coercive power.

37:41So there's a lot of potential creation and destruction at stake here, and those of us who have a position on how those powers ought to be used and their abuses prevented and and so forth, know that we're not just, I say, members of a garden club, although maybe some members of garden clubs take that very seriously too. They don't, at least at this one, have to worry too much about the government sending, you know, deviants in the garden club to Guantanamo. So, whereas those of us who are classical liberals in the United States I have to worry about this because people are being sent to Guantanamo, people who are being sent there not withstanding the Constitution's guarantee of due process of law to everybody in this country and not just citizens, by the way, everybody.

38:40So, solidarity is something that the Marxists made much of and if you're old enough to remember all those great demonstrations from the 60s and early 70s against the war and forced civil rights, you'll remember that the call that would go out from people in the crowd, they'd say, join us!

39:10And that didn't just mean fall in with the crowd, that meant become one of us, share our beliefs, and furthermore, by acting on your beliefs that we share, you demonstrate that you're the real thing, that's critical. If you just stand there with your arms folded, as the demonstrators go by, marching toward the police who have drawn themselves up down the street, getting ready to crack some heads, well, they might think that was okay that you sympathized with them, but it's a very different thing than if you got in there with them and put your head at risk too.

40:04They'll never accord you the same esteem and respect standing on the side saying, good luck, as they will if you join them and go to the barricades. And by going to the barricades, by doing whatever it is, whether it's street demonstrations, actually giving your money to the cause, Putting your time into sending out letters, whatever is part of a movement's collective action enterprise, when you demonstrate to others in the movement that you're making sacrifices to promote that cause, you establish your bona fides as a member of that community.

40:57When you get the benefit of their regard for you, unless we're psychopaths, we all want the good regard of others we care about. So this is not nothing. And in fact, despite what some neoclassical economists might seem to think, kind of dismissing This is probably a lot more important than the movie tickets and trips to the beach that they think are so god-awful fundamental. Where people think they stand with others who share important beliefs with them is a far more critical thing in their self-esteem The Solidary Element is a very important aspect of ideology because it links utility maximizing behavior of individuals to their actions in joining in attempts to create collective goods even in large groups.

42:14So when we see people doing things like not only participating in movements, but voting, there was another one of those unexplained things, why do people bother to vote? You think your vote is going to sway the election? What a fool. Well, your voting is an act of expression. It's a way that you say to the world, look, here's the kind of person I am. I'm the kind of guy who votes for George Bush, you know, the defender of the faith, the emperor of the world. I can stand up and be counted, and you know, when you go down to Rotary, that's worth something.

43:00So that is one reason you'd vote. I've often proposed the idea that if you want to find out why people vote, imagine this kind of Mental Experiment. People can vote if they want to or not, but they can never talk to anybody later about whether they voted or how they voted. Imagine that. Do you think anybody would still vote? I think damn near nobody would. Because all the benefit of voting comes from the pronouncements you make to other people. I'm going to vote for Joe Blow.

43:45I'm that kind of guy. Or, I voted, you know, I didn't vote for Al Gore. You know, kind of a creep would vote for Al Gore. And you can be somebody with the people whose opinion matters to you. So, it's important that you situate people's actions socially, in communities of some kind, communities that they care about. And once you start to think about collective action, these terms, as expressive and as solidarity, then it starts to make perfectly good sense to you. People do all kinds of apparently self-sacrificing things, but there's something in it for them.

44:32There's something in it for them. Maybe even people who behave suicidally in a particular cause for those last few minutes feel such a gigantic sense of self-esteem about what they're doing that it makes it worthwhile. Not irrational. Not irrational. It doesn't have to be irrational just because Mansour Olson thought it was irrational. So I think this way of thinking about collective action and ideology is very helpful, at least I have found it helpful. I find it broadly applicable to many different apparently anomalous forms of political participation in the world.

45:25If you try it, I think it will work for you too. Now, I want to just give a real quick and dirty kind of a look back, because the purpose here is mainly historical, at least for my lectures this week. And so, I want to take this notion of ideology that I've just been belaboring, and look back at some of the specific forms that ideological commitments have taken in American history and we'll be returning to some of these themes quite a bit in the next four days. For now I want to just use a broad brush to paint some of the major contours.

46:21The people who settled the British North American colonies brought an ideology with them. And after they got here and began to reproduce themselves over the generations, they developed their ideologies somewhat. Ideologies by their very nature tend to change fairly slowly, that is, they never just turn on a Dime like that, partly because people can't shift mental gears quite that easily, and partly because they rarely encounter any experience that leads them to want to shift mental gears. They're able to accommodate things that happen within the limits of their and their old ideology. But ideologies do change, even if slowly, and I think on occasion they make discrete jumps, at least in short periods of maybe a few years, so that they're noticeable.

47:32The Englishmen that came to North America and most of the people who settled were from the British Isles. Of course, there were Dutch and French and Spanish and a smattering of people from various parts of Europe, but most of them were Englishmen and that's the culture and the ideology they brought and it was the germ that they developed thereafter. They had conceptions, which had a history of centuries and centuries in the past, of something they call the rights of Englishmen. That sounds like just kind of something I made up, the rights of Englishmen, but that's a term of art.

48:17It's actually what they called it, and it meant something pretty definite to them. It meant the sorts of due process that we associate to some extent with our Bill of Rights in the Constitution of the United States. It meant that a person who was accused of a crime should have a jury trial with a jury of his peers, that he should have the right to respond to his accusers and question them, that the legal authorities should not have the power to simply arrest people and imprison them without bringing in charges before an impartial judge and so on.

49:10So the rights of Englishmen had developed from far in the past and they were well understood and much valued by the people who came to North America. Fortunately for them, I think, even though they were part of the British Empire, they were far away and the British government left them alone to a great extent. So, some historians refer to benign neglect. Britain was an empire. It was an empire that imposed all kinds of mercantilistic rules and laws and procedures that granted monopolies to trading companies in various parts of the world, and it gave monopoly franchises to for People Who Sold Particular Kinds of Goods in Britain, and so on and so on.

50:06It was, as some authors would say nowadays, it was a rent-seeking society in a big way. And yet, a lot of these mercantilistic rules that were supposed to apply to the British North American colonies didn't get applied very much. The colonists ignored them, didn't pay the taxes they were supposed to pay, smuggled goods in instead of declaring and paying taxes and so forth. So for well over a century, life developed in British North America, not in isolation Exactly from British rule, but with a very loose rein. And they liked it that way. There was a lot of money in smuggling, and a lot of Americans did that kind of work. Some of the great founding fathers were smugglers, and that's good. This country was built on and Smuggling. And by God, it's still running on smuggling today. And as a result of the loose rein the British held the colonists with, they developed de facto self-rule. Now again, I don't want to make this a black and white statement. They were still subject

51:40to British Rule, and in some cases, the king sent royal governors over to be in charge. That was just something else you tried to work around. And yet, despite all the efforts of the imperial government, these people rule themselves for the most part. They all develop For representative institutions, legislatures in their colonies, they had the English common law to use in adjudicating their day-to-day disputes, and they certainly were jealous of the rights of Englishmen. And that's how things went for well over a hundred years.

52:30The ideas of John Locke were quite popular in the 18th century in North America. Cato's letters, which had been written back in the 1720s, I guess, circulated widely in the colonies. These, if you've never read Cato's letters by the two English writers, they're wonderful. Some of them are just beautifully libertarian and rousing and I recommend them highly. The Americans took to this sort of thing. They were feisty and they liked their independence and self-rule.

53:17Later on you had even wild-eyed people like Thomas Paine come onto the scene who was very He was a very libertarian, more so than the founding fathers, although he joined forces with them to stir up the revolution. So you have this kind of atmosphere determining the ideology that was dominant in the colonies by the last quarter of the 18th century. and ultimately, of course, it was one of the things that gave rise to the break from England because what the colonists were afraid of is after the seven years of war ended and the British government decided they were going to make the colonists bear some of the financial costs of defending themselves from the French and the Spanish, which the colonists still didn't want to do.

54:16They started trying to actually collect and then they got involved in disputes with the Collison so they tried to take their guns away from them and one thing led to another and the hell broke loose finally and the revolution occurred. Now after the revolution, people were really stirred up ideologically because the people People who really believed in Tom Paine type doctrine had sort of been loosed and encouraged to come out and fight in the militias against the British and a lot of them had done so. So you had some very kind of wild eyed democrats running around in the woods by 1783 and they They were given to dancing around the maypole and you can't have that in a respectable society.

55:17So the founding fathers who were mostly of the better sort, big landowners, big merchants, became quite apprehensive in the 1780s about the security of their property and their hold on Society. Out in the frontier areas, all the way from Western Massachusetts all the way down, a lot of the people who moved out there decided they really were ruling themselves. And furthermore, they couldn't see a damn thing the United States government was doing for them, so they didn't want to pay any taxes, that was for sure. And they didn't want to I can't obey any laws or anything else that the new government of the United States imposed on them because they were still being attacked by Indians, and they said, you know, why should we pay and submit to this government? It's not doing anything. It's not protecting us. It's not doing anything. It's just these rich guys in Philadelphia trying to screw us. So they got drunk and danced around the maypole. That's true Americanism.

56:30Now, guys like Washington and Adams and even the Virginians, the Jefferson and Madison and the rest of those guys, didn't like the radicalism of this situation at all. And it was their apprehension that led them finally to get together and create the Constitution in the United States, which provided a much stronger central government and gave a definite tax power to that government, which meant that it could get money to pay troops. This is the short lesson in public finance. Governments need money to pay soldiers to kill people who resists their rule. That's a short course in political science.

57:31And so that's what the government of the United States was designed to do. And it did some other things along the way. Of course, there were many people at the time who didn't want this new government, were apprehensive about giving it these powers, and resisted it, and wrote against it and argued against it and politicked against it and what have you and to some extent they were able to gain concessions at the Constitutional Convention in 1787 but nonetheless when all the dust had settled we had a much stronger government but we were We're already, at that point, beginning to see the formation of ideological opponents that we can trace down through the next 200 years as direct descendants of the Federalists and the Anti-Federalists.

58:27Now, again, I don't want to overstate this because the last 200 years of U.S. history are very complicated, and they've involved all sorts of ideas and interest groups and factions. But nonetheless, we can see continuity between these factions, which on the one hand, the faction that supported the U.S. Constitution and then became the Federalist Political Party in the 1790s, those people favored more centralization, more powerful executive, less self-rule by states and local governments they create, more activism on the part of the central government in going out and undertaking projects, Whether it be sponsoring banks or manipulating the money supply, or building transportation improvements, or building up a Navy, whatever it might be, that faction tended to be a more potent, more powerful, more centralized form of government, as opposed to their opponents who tended to favor decentralization, More Home Rule by the states and the local governments, laissez-faire, they oppose the central governments getting involved in these so-called public works, internal improvements, they viewed government's involvement in those and in banking and just about everything else

1:00:09as a boondoggle, more mercantilism, the kind of thing they tried to throw off when they escape from the British Empire, and so you see then the formation of the Jeffersonians party, the Republicans, so called at that time, as being in favor of that set of related policies. And a lot of things can be seen to fit under that general description as we go down through the past 200 years. Now, these people, as it were, kind of had it out in the 1790s, and the Federalists, with their backs against the wall, decided in 1798 that the short way to suppress their opponents was shut them up, and if they wouldn't shut up, put them in jail, and if they were for Foreigners, send them back where they came from, and so the Alien Sedition Acts were passed, and that was a great motivation to the Jeffersonians to strengthen their opposition.

1:01:25This to them was outrage, that they thought John Adams was trying to make himself a king or Executive in Perpetuity and that was too horrible to contemplate and so the states of Kentucky and Virginia passed resolutions basically nullifying the Alien and Sedition Acts and Jefferson and Madison wrote memorable manifestos in support of those resolutions and ultimately Jefferson was elected president in 1800 and the Federalists pretty much dissolved as an organized political party for the next couple of decades or so.

1:02:15But those interest groups didn't disappear. The same people who had supported the Federalists were still out there and to some extent they They had even embedded themselves in the form of John Marshall getting to become the Chief Justice of the U.S. Supreme Court before the Jeffersonians took power, and so they still had voice, they had voice in Congress and in the legislatures of the states and in the judiciary, particularly, some political scientists look back and they see the American judiciary is our counterpart of the aristocracies in Europe. And there's a grain of truth in that perspective because they're more isolated or insulated from politics as they can't be so easily removed from office, for example, if you don't like their decisions.

1:03:17But as time went by, it turned out that the new ideological contention arose or perhaps I should say the embers that had never died completely from old disputes particularly over slavery began to burst into flame again associated with that was the use of this federal taxing power in the form of the tariff Both the tariff and the slavery issues, of course, came to divide northern and southern states, even though all the states had had slavery at one time.

1:04:04It had never been a terribly important institution in the northern states, and it became a vitally important one in the states, particularly the Deep South. So that became a contentious issue because it was tied up with control of the federal government in general. If new states were created as the great national domain was divided into states according to the Constitution's rules and the Northwest Ordinances, would those be states that permitted slavery or not? and whether they did would then determine what kind of senators showed up in the Senate of the United States and that would determine what kinds of laws could make it through Congress and which ones could not.

1:04:53So a great deal was writing on the slavery expansion dispute including the operation of the tariff system. So this came to dominate American politics and ideological conflict in the 1830s, 40s and 50s and ultimately, of course, was not resolved and the war took place. and with the war we had a rebirth of statism because the Lincoln administration in order to successfully prosecute the war resorted to all sorts of measures that had not been seen in this country ever in some cases and to some extent if they had ever been used before went all the way back to the Federalist era at the beginning of the U.S. Government Many of the new taxes levied during the war, for example, were excise taxes. They even laid an income tax, an inheritance tax. They laid the diabolical stamp tax that the colonists had resented so vastly when the British tried to collect it before the revolution. So statism and of course, whenever you have a big event like that with so many different dimensions,

1:06:26it leaves many legacies. It changes many people's ways of thinking about why things happen as they do, what is desirable politically, what is expedient politically, what we can get away with what we can't. People learned a great deal from the war and on top of it all, the Republican Party, which had come into existence in the 1850s, became the ruling party of this country for more than a half century afterwards. The only time a Republican and wasn't President of the United States, from President Lincoln onward to Wilson, was the two separate terms of Grover Cleveland.

1:07:14Otherwise, they had a lock on the presidency, they had their boondoggles, their land grants, their subsidies to business, their high tariffs, their national banking system, and they had the vast patronage schemes where they were in a position to say who was going to be postmaster of Auburn, Alabama. What an insult, among other things. And they kept this going for a long time, a long time, so that was a very important consequence of the statism they they had put in place on an even vaster scale during the war.

1:07:59Now these things again were not undisputed. We still got the heirs of the Jeffersonians out there. There were those two glorious terms of Grover Cleveland. I'm not one to normally rave about politicos, but in the context you got to rave about Grover Cleveland. He was a country mile ahead of the others. So we had a curious kind of ideological evolution after the Civil War, and in some ways these Civil War programs were abandoned or given up, and say the income tax was terminated in 1872, and the inheritance tax was given up, and a lot of the excises, and they quit making land grants to railroads after the early 1870s, and so forth. So there was a There's a lot of retrenchment and in some ways the 1880s looked like a period that approximates laissez-faire about as closely as we ever came in this country, maybe comparable to the 1840s or so, but nonetheless that was one movement and it was already being countered by a movement of people who were promoting new forms of statism.

1:09:19The Federal's impulse continued to operate, and it took a number of forms. One was that Americans began to import from Europe Socialism, or ideas colored by Socialism, which was a more advanced stage in Europe at that time than in the United States. So Americans, particularly after the 1870s when a lot of young scholars went to Germany to study because the Germans had venerable old universities that gave the Ph.D. degree. And that was unknown in the United States before 1876, when my alma mater, Johns Hopkins, decided to pretend to be a venerable old German university, even though it was a new kid on the block, and they started giving PhD degrees, and then other universities began to follow.

1:10:23For a long time, if you wanted to be a bona fide academic with a Ph.D., you went to Germany and studied and got a Ph.D. there. And when these guys went there, as many people who became very influential in academia in the United States did, they encountered the ideas of German socialism, which were not only floating around in the universities there, but they were actually being, to some extent, So into practice, starting in the 1880s, under Bismarck, the Germans started to build what we would now call the welfare state. Pensions, insurance for sick and people injured on the job, things of that sort, to buy off the working class so they wouldn't oppose the government.

1:11:15And it works every time. Even in Germany, where we had masses of socialists, it was operating as Bismarck intended it to operate. And the real proof of that pudding came in 1914, when you had these legions of German socialists who were supposed to owe allegiance to no nation, but only to the working people of the world. World, and what did they do? They fell into ranks and marched off to the trenches to be cannon fodder by the millions, some socialists. Never trust a socialist when the chips are down. Okay, so we were bringing these ideas, these institutions back over here in the United in the United States and representing them as advanced thinking, these smart guys at Johns Hopkins and Harvard and Columbia, well they said, we're backward, we didn't even have old age pensions, except for all these veterans and their distant relatives, We didn't have insurance when people got sick.

1:12:29The working class had to make do. That's horrible. So they began to write and to speak, to train students, and to produce a cadre of ideological activists for what we would now look back on and call social democracy, soft socialism. They didn't all believe in nationalizing all the means of production, although some of them also believed in that. And we eventually had even regular socialist groups, mainline type, old-fashioned socialists who became fairly influential in some places in this country in the late 19th and early 20th century. In cities like Milwaukee, for example, they always had a socialist municipal administration.

1:13:21In the state where I was born, Oklahoma, of all places, in the first decade of the 20th century, had the biggest socialist party of any state in America. Go figure. They were what we were more inclined here to call populists. Somehow the socialist party there would not organize these farmers, because they always thought they were being cheated by bankers and Railroads, and so, let's nationalize the banks and the railroads, take care of that. So socialism itself got to be fairly influential, but more importantly was the way that socialist ideas began to penetrate society.

1:14:10When we talk about the importance of ideology, as I've said before, it's often an importance It is felt slowly. It takes decades sometimes for people to absorb the outlooks and the beliefs and the commitments of an ideology. These guys who came back from Germany were the pioneers, I think, of producing what has come to be the dominant ideology of the United States in the 20th century. Now in the early 20th century we had progressivism, which was to some extent an expression of these trends I've been discussing. It had some homegrown elements too. As always we see some conflicting currents, some counter movements going on. Progressivism in the eyes The eyes of some analysts, people like Gabriel Kolko, for example, looks like a conspiracy of big business interests to capture the power of the state, to solidify their cartels.

1:15:19And we can certainly find some evidence that that sort of thing was going on during the progressive era, quite a lot of such evidence, in fact. but at the same time many progressives hated big business and the trusts wanted to break them up, subject them to government control or at one point they even espoused a license, a federal license that every corporation doing business in interstate commerce would have to get from the federal government to do business and then of course the issuer of that license would be able to establish the terms on in which those companies could operate. So that would have been a lever of control over anybody doing an interstate business, all the big businesses. Well, so there were any business and pro-business elements of progressivism. There were also any politics groups, strange to say. What are you doing in politics if you're against politics? Well, they were against corrupt existing type politics, the kind that we saw in all the big cities in America, where

1:16:36we had bosses. All these immigrants were coming here by the millions in the late 19th century and because they didn't have any established position in society, nobody gave a damn about them and they were kicked around right and left by the ruling class. So pretty soon somebody, Political Entrepreneurs say that there's hay to be made. Let's organize these guys, they can vote. We'll organize all these immigrant voters and we'll pay them off with a turkey on Thanksgiving. Or, you know, we'll go down to the police court when they get arrested. And since they speak only Polish, we'll send somebody down there to help them explain to the judge that they didn't mean it. and we'll do something for these guys and they'll be beholding to us and they'll vote for our guys at the election and they did. This system really worked pretty well. So this is another way in which the welfare system came to America through politics. People have always received assistance when they were destitute. They got it from friends, family, churches, lodges, all sorts of voluntary

1:17:47Associations. But now we're using politics. We're using political power because Cleveland is getting the money by taxing people and then these aldermen are turning around and using the money to hire Joe Paluca to stand around on a public construction job and collect his pay. So this system was something that the progressives detested. They really began in the form of the goo-goos. Goo-goo was a term of ridicule that was used for people that wanted good government. Goo-goo. And realists looked at these guys in the 1870s, 1880s, who wanted good government and the suppression of corruption. They said, what a bunch of naive fools. You know, don't they understand politics? They want to get rid of Corruption, and it's part and parcel of politics. But eventually these Gugus who were kind of point men for the respectable class began to get political power of their own or to expand on positions of power they'd enjoyed already. And so when the progressives got truly in flower after about 1900 or so, a lot of the Gugu people now became progressives

1:19:15and they wanted to get rid of old-fashioned style politics, particularly in the states and the cities, and substitute what? Not politics, that's inherently corrupt. They weren't so dumb as to substitute politics. They wanted to substitute decision-making by disinterested experts. Why, who could argue with that? Don't you want the experts to decide things? You want a bunch of amateurs? And you certainly can expect, say, a guy who's been to Columbia to be disinterested. So you basically appoint all your respectable pals to administrative of Positions, whether it's city manager of a town or whether it's a member of a regulatory commission to set utility rates or tell the railroads how much they can charge for hauling different classes of freight, and the experts run things. And they run more and more things because if expert administration is good, then more expert administration is better.

1:20:27So the progressives began to look around and see that there's hardly anything going on in economic life that can't be improved with regulation by disinterested experts, because they're not political. Well, it's hard to say whether they really believed this malarkey. I think some of them did, actually. It was extremely naive, and hard-nosed people never believed it for a minute, and some of them just used it, particularly the business interests who looked around and said, okay, we've got these idiot progressives running amok. And as Samuel Insel said quite explicitly on one occasion, better for businessmen to get involved than to wait and have that involvement thrust upon them.

1:21:21So when they got involved, they made a difference because what they had was a lot of money. And money is a fine thing in politics. I don't care what country you're talking about or what the system is, money does wonders. So a lot of business interests organized and became involved in progressive politics. And that's where we get all these developments that Gabriel Kolko and Weeby and other historians have documented at great length, which involved solidification of business cartels in a number of industries. Well, I'm going to stop there just with the summary statement that by the time we get to progressivism, we've crossed over.

1:22:07We've crossed over from an old regime to the one that has, although flowered and developed in a multitude of ways in the past hundred years. It's basically progressivism. That's what we've endured in this country ever since. The whole idea that government should be involved in this and that and that and that, that we should have regulatory commissions here, there and everywhere, that government can improve on the state of affairs in the unhampered Market, that government officials know what to do to promote the public interest and we can expect that they will do it, the two great fallacies of the mixed economy, all wrapped up in progressivism and that has been the germ, ideological germ of any number of pernicious Did you talk a little bit about the sort of takeover of the Democratic Party in 1996 and how it played into this?

1:23:41and Home Rule by the state and local governments and all those very Jeffersonian type things. Cleveland was the last national democratic leader who espoused that kind of program. And after you had the William Jennings Bryan debacle, the new type Democrats who merged with the populists and progressives became quite different. Now, Woodrow Wilson in some ways looks like an old-fashioned Democrat, at least for a while, that doesn't last long. And then with World War I, that's the end of it.

1:24:30There's no doubt after that that the Democrats are the party of state, Stateism, whereas before the Republicans were the party of stateism, and now both the major parties are the parties of stateism, and that's where we've been ever since, that they just serve slightly different masters, and even then not all that different, because the people with substantial political resources get served no matter which party is in power. It's a fraud that there's a competitive political system. Even Engels wrote that what the United States has is the rotation of two bands of pirates who pretend to compete, but they're both engaged in plundering the public.

1:25:21Questions, comments? Guido? It's symptomatic that until fairly recently, there was a word to describe the phenomenon, because we were always talking about collectivism, socialism, fascism, and so on. All expressions that focused away attention from the main phenomenon, the core, which was statism. Statism by Mises when he wrote Bureaucracy or something, for lack of a better term we could say it's a lot of statolatry or right statism, so there was obviously a word to describe this.

1:26:12Progressivism was a kind of afterthought, it probably shows, originally I hadn't planned to write a chapter on progressivism, but it became increasingly obvious to me as I worked on the book that I needed to give some account of how the dominant ideology of the United States changed because it was that change that made the consequences of crisis different in the 20th century than they had been in the 19th century. So I tried to learn as much as I could about progressivism, and one of the first things I discovered is that, well, it doesn't look as if it's coherent at all. It has all these different types of elements, you know, it's anti-political, it's pro-political, it's pro-business, it's anti-business, it's this, that and the other.

1:27:07It looked as if it was for and against everything simultaneously, and that didn't make any sense. How could it be some kind of a consequential movement? But I ultimately began to see that every one of these progressive positions had one thing in common, and that is they proposed to use the power of government to accomplish something that they could not accomplish otherwise. So, essentially, progressivism was statism. Statism for many different purposes, promoted by many different interest groups and individuals, but statism through and through. It seems like today, if there is anything maybe a little bit brighter than it was then is that now people tend to be sort of cynical when they hear about government's ability to accomplish something. In fact, it seems like what you read from that time, with the exception of a few really bright satirists, people just have this great faith that government's the great...

1:28:10Sometimes I share that impression you have, that I look back and I say, these people were so naive, and I don't even have to go back that far. I go back to the 1940s and I look at what the government used to tell people, and I think, people believe this? I mean, it's so blatant, malarkey, and I know some of them did. But then I look around me today and I decide that people are just as naive, just as easily fooled by the government now as they were a hundred years ago. They believe what they're told, they do what they're told, and indeed I think I am prepared to conclude that they're even more docile now than they were a hundred years ago.

1:29:05Just a short question. Robert Liebman seems to have been the last president we could have any respect for. Where did he come from? Okay, and a short follow-up question. Where was William McKinley shot?

1:29:41Coincidence or conspiracy? Joe? Right. In your journal, which you had an independent review, there was a review a couple of years ago, and it just gave me the name of the author. But it was a book arguing that at the state level, the organized farm interests really pioneered a lot of the progressive bureaucracy by setting up state agriculture departments. I mean, Alabama, I guess, was the biggest fiefdom until education overtook it. Now, that's the biggest fiefdom. Do you have any comment on the organized farmers? Well, the farmers' attempts at organization go way back, and of course they got a commissioner of agriculture at the federal level during the war between the states.

1:30:32So that was the beginning of the federal involvement, and also the Land Grant, the Merrill Act to establish these so-called land grant colleges. If you seek its monument, look across the street. There's one right there. Auburn is the land grant institution in the state of Alabama and every state has one. 1862, early in the war. Obviously this was an idea whose time had come rather suddenly and this was a very early example of this way that the Federal The federal government gets the states roped into doing what somebody wants the federal government to do and makes it look a little more constitutionally legitimate, at least in the beginning.

1:31:30After a while they don't worry about that at all anymore, but the farmers also had these state departments of agriculture in every state. And for the most part, in the 19th century, these government interventions in agriculture were engaged in research and dissemination of information and passing out seeds, and they were really pretty trivial. Not too many of them ever did anything of importance, but occasionally one of them would, and dissertations have actually been written by economic historians to prove that the investment in government agricultural research had a gigantic rate of return just because of two or three innovations that came out of these experiment stations.

1:32:37They devised, I think, in Wisconsin, if my memory serves me, a machine for measuring the milk fat content of milk. And, well, that turned out to be a pretty important instrument in agriculture. And so just the payoff on that one innovation pretty much covered the whole federal expense of agricultural experiment stations for 50 years. It wasn't until World War I that this began to take a nasty turn toward regulation, and of course the government regulated heavily under the Lever Act in World War I, prices of wheat and the prices of a number of agricultural and raw commodities, and other conditions.

1:33:32use this licensing power I mentioned that they had threatened on all corporations, it was exercised under the Lever Act and if you didn't do the government's bidding they withdrew your license and you're out of business. So in order to get all the local farmers regimented for World War I, they sent agents around and they basically invented what's now known as was the Farm Bureau and afterwards it was carried forward and it came to look like a private organization but it was entirely the creation of government agents during the war and from that time on of course having all these well organized state groups the farmers became a more potent lobbying interest group and they managed to get several acts of congress to give them financing during the 1920s and then the Agricultural Marketing Board was created in 1929 to prop up farm prices and then the dam burst totally in 1933 with the Agricultural Adjustment Act and we've had that ever since in its many forms.

1:34:55The most beautiful of all these agricultural interventions to my way of thinking was the great hoax of 1996, that being 1996, when Congress decided to give vast tanker loads of cash to farmers in order to phase out subsidies. And this was called the Freedom to Farm Act, because now they didn't have to obey any rules

1:35:53in all this loot in the service of phasing out federal intervention in the details of farm decision making and when that law expired of course all those interventions were reinstituted along with huge tanker loads of cash to accommodate them to the shock of going back to the old system. We're out of time, Bob. Thank you.