An Interview with George Reisman

0:00I'm sitting with George Reisman, a professor emeritus at Pepperdine University. Welcome, Dr. Reisman. Hi, Jeff. Glad to be here. So glad to have you on this podcast, but also especially to have you at the Mises University. It's wonderful for all of the students to be around brilliant academic superstars. Oh, thank you. It's very flattering. How many years have you been teaching now at the Mises University? Well, I think the first time was 2001 and then two and three and five and now, so five times I think. That's tremendous. Have you noticed a change in the students or do you have any general observations about the students? Well, I think perhaps there are somewhat more of them and they seem to be coming from further afield.

0:48I was sitting with a young lady from Peru and a gentleman from Spain and another from Ecuador, so it's really quite a selection. And they're familiar with your writings too, aren't they, before they get here? Well, many of them are, yes. That's great. And some of the topics you're dealing with this week, I want to ask you about environmentalism in particular because, Well, this is a huge and ubiquitous ideology of new vintage in some ways, or is it? Or is it just an old view applied in new ways? Well, in some respects it's old. There are very primitive religious aspects to it, worship of the earth.

1:37I think the American Indians, or some of them, had that sort of religion. I think very, very primitive religion in general may be of that character.

1:51It's just amazing to me how it can be so influential and have the influence it does. You mentioned the religious aspects, and there clearly are those. But there's also just economic fallacy behind it, isn't there? Well, there's a lot of economic fallacy and utter economic ignorance, but I personally believe that the movement is fueled by profound hatred of human beings. To an important extent, this is implied in the doctrine that the movement holds and which The Theory of Money and Credit

3:00If the hillside is intrinsically valuable and you flatten the top to construct houses, you're destroying an intrinsic value. Everything we do is destroying some intrinsic value. Our science and technology and capital equipment makes us wholesale destroyers of intrinsic values. because we do it on such a larger scale thanks to the science and technology and equipment. And so I think whoever holds the intrinsic value doctrine is implicitly led to hate, science, technology and reason because they destroy these alleged intrinsic values. Yeah.

3:46So there really is no economically productive activity that doesn't impact to some extent on the environment, right? Yeah, but now you see the amazing thing, and I was lecturing on this subject this morning. If you adopt a human standard, if you consider human beings as the source of value, then you come to the conclusion that productive and economic activity by their very nature improve the environment because one of the things to realize is that the whole world from a physical chemical point of view consists of nothing but solidly packed chemical elements.

4:31We don't add to them and we don't subtract from them, but all we do is change their combinations and locations. That's what all production does. The overriding purpose is to make the same chemical elements stand in a superior relationship to human life and well-being. So we start with a chemical element, iron, buried in the ground in the Masabi Range, and then thanks to our activity, it's transformed into automobile fenders, the sides of refrigerators, girders and bridges and skyscrapers, and the same chemical element, iron, is then of immensely

5:39because their starting point is an opposite standard of value. They confuse improvement with destruction. Yeah, because they're looking at it from an anti-human perspective. You've been teaching since what year? My first full-time teaching job was 1961-1962. 1962. Do you recall a time when environmentalist ideology, as we see it now, was not part of the public culture? At the very beginning, I remember one of the first things I did, I was teaching at a place in Vermont, and early in the fall they still had drive-in movie theaters, and I saw a movie There was a story there, and one of them was about these people who were finding pollution in a stream, and I thought, wow, quaint this is.

6:38No one has been concerned with this since 1912 or something, and I even mentioned it to my class, and then it was like five years later that environmentalism came on us like a flood. 1967 or so. I remember I was spending the summer of 1967. I was in San Francisco and I was reading a newspaper and there was a column by a then prominent TV journalist named Eric Severide who was identifying environmentalism as the coming issue of the future. And I thought, this is ridiculous. It's such a stupid point of view. It's not going to have any influence at all. Boy, was I wrong.

7:32Do you think there's anything to the idea that being an environmentalist or purchasing environmentalist ideology is something that's a kind of a luxury of a well-developed society, economically advanced? I think that that's probably true, but more than that, people who seem to have no knowledge of history, no common sense, no understanding of the importance of wealth, I mean people who are thoroughly divorced from reality. This is an irony. I wonder if you agree with this. There's so many products now that you can buy at the store and so many businesses that that are preying in some sense on the environmental historian to the consumer. Isn't that interesting?

8:21I saw at the grocery store this morning some very slickly marketed one-ply toilet paper. Now it seems to be obvious that one-ply toilet paper is primitive and inferior to more advanced forms of toilet paper. And yet it was beautifully marketed and you buy it and you feel like In some sense, you're combining being sort of hip with, you know, a certain social consciousness or something like that. Well, I don't want to make any connections to recycling here.

8:52But it says it's pervasive. I mean, you can go out and purchase all these goods that claim to be environmentally... Yeah, because there are so many people who think they're doing something of value. Do you think credit is due in any sense to the capitalists who have managed to turn this ideology into a marketable product? Well, they're doing what businessmen do. There's lots of rock and roll music that I can't stand. So there are records shops and CD places that cater to that, so I think it's the same thing. There are pornographers, so they're just making a living offering people what some segment of the market wants.

9:47In some senses, of course, it's ridiculous. I was thinking about this Fair Trade Coffee. Do you have these? Fair Trade Coffee? This is something I haven't come across. Yeah, very high-priced coffee. The idea is that you buy it and thereby help the ranchers that are paying high, the coffee plantations that are paying high wages, fair wages, in certain countries. But of course, I mean, if you wanted to help the poor, wouldn't you want to buy coffee from the smaller plantations that can't afford higher wages? This way, to the extent that it's like boycotting the soccer balls from Bangladesh or wherever. If you don't buy the products of these people, then they have no jobs and earn nothing instead of whatever they were earning.

10:36So it's totally perverse. Well, and here's another issue that seems to be completely misunderstood today, is development economics. Have you considered writing more on this subject? On Development Economics? No, not Development Economics. I've just finished a draft on globalization, which relates to Development Economics. Yes, very much so. Right. Will you send that to, is that a plan for Mises Org, you think? Well, possibly. I'd like to lobby for it, yeah. It's quite long, it's 56 double-spaced type pages at this point. So I don't know what the best outlet is for it, if there's any outlet.

11:27What are some of the main points that you make in there? Well, I deal with the fears people have of competition with the presently low-wage countries Globalization is a long-run big picture. One of the key points is I show where the world is now. Countries with a population of about a billion, mainly the U.S. and the European Union and in Japan, account presently for about 80% of the world's output, and countries of the population of over 5 billion account for the remaining 20%, and then I go into what could happen if, let's say, over the course of the next 100 years, the 80% of the population became as productive as the 20 percent, just what this would mean. They'd have to increase their productivity on the order of 20-fold to catch up. And I developed the analysis initially on the assumption there was just a fixed quantity of money, a fixed volume of spending. There'd be a huge decline in money income in the advanced countries. But

13:00Then I start to show that, in fact I developed this as a demonstrable proposition, that to whatever extent one group of producers loses money income because of the greater production of others, there's necessarily an equivalent fall in prices. So there is no real loss, plus the advantage of globalization would be that the division of labor would be carried further than it's ever been. and in particular in all the branches of science, technology and business. At present, we essentially just have one sixth of the world's population fully participating in the global division of labor.

13:46If the whole population of the world did, we'd have vastly more people discovering and applying new knowledge, so it should bring about a major acceleration of the rate of of Economic Progress, and if international equality were achieved, it would be at a vastly higher level for everybody. There'd be more rapid economic progress in the present first world. The equalization would be achieved through a higher rate of progress here and a still more rapid rate in the presently backward countries, assuming they became capitalistic sufficiently. and of course even with a full gold standard the quantity of money would grow and all the different countries would end up having not only a vastly higher physical output but even a monetary output too and everyone would be tremendously better off for it.

14:48And you see this as an important model to lay out because you partially see this as our future. This is where things are headed. Yeah, hopefully it'll go this way. It doesn't have to. It could go the opposite way, too. You know, if there are wars that break out or major terrorist activity, then that undercuts the division of labor. in the US, but everywhere, I guess, and I don't deal with the fears in the third world, but there's apparently a lot of opposition there, too, for different reasons.

15:42I guess they don't want to give up growing their own crops for subsistence farming and get absorbed into producing for the world market. Well, I guess they don't have to, right? They can always refuse to take higher wages at the factory. What kind of impact did your trip to China have on the way you look at these issues? Well, I was astonished when we went to China. Before we went to China, we were in Seoul, Korea, and I was more or less dreading spending time in China, because I had the vision of it as being utterly backward and primitive. And so in Seoul, I stocked up on a supply of Snickers bars, thinking that that's what I would need to survive on in China.

16:28That's reasonable, yeah. And well, we stopped, it was a cruise ship, and they stopped briefly like for half a day in Shanghai, and Shanghai has an incredibly impressive skyline. I had been familiar with Hong Kong, I always thought very highly of Hong Kong, and I knew that I was comparable to Manhattan, but Shanghai I think even surpassed Hong Kong, and we had I had lunch at a five-star hotel, so my fears were totally groundless there. And then at the end of the trip, we disembarked in Tianjin, and I saw that it had a fair number of high-rise buildings, and there was a modern four-lane highway from Tianjin to Beijing, which is roughly, I think, 100 miles away.

17:22And Beijing was just incredible. It's filled with 40- and 50-story buildings, maybe some more, extremely ultra-modern super highways in the middle of the city, making the highways in Los Angeles look a few generations behind, and they have quite a few five-star hotels there, and it was just incredible. And along the same lines, backing up a bit, when we left Shanghai, the ship had to go along I guess the end of the Pearl River, and it was just mile after mile after mile of power plants and factories and wharves and cranes, front loading ships, and every so often I drive past the port of Los Angeles in San Pedro, and it looks, I'm sorry to I think the world will probably discover China next, or the year after next, when the Olympics are there, then the television cameras will be panning all over Beijing and probably the rest of China.

18:34So it's absolutely incredible to me. These pictures are not well known. I think most Americans feel or think that it was the same thing you thought, I guess. Well, it's just shocking. We were there four years ago. So, by now, they could be 25% more than they were then, at the rate that they're going. What does it tell you about capitalism as an engine of human progress? Well, it's unbelievable. They don't have full capitalism, but they have a significant degree. I don't think property rights are as secure there as here, but secure enough so that a great deal of investment has paid and it's just transformed their world.

19:27If they really cement property rights, then there would be no limit to how far they can go. In your studies of, or I'm not sure how much studies you've done on the reform, is all of this progress, was it something that was a state policy or did it come about because the state stepped away and just sort of permitted it to happen, just by de facto? Well, I think it was a state policy to step away, that's my understanding of it. Apparently, they picked a few key provinces and more or less decided to step back. Now, one of the things that impressed me in our tour of Beijing, the guide pointed to a McDonald's.

20:21They have all kinds of American fast food places, and this was something that connected with a story I had read some time earlier in The Times that the mayor of Beijing decided that he wanted to give the location occupied by McDonald's to someone else, just arbitrarily change it. And McDonald's fought that decision in their legal structure and won, and the mayor of Beijing ended up being fired. And this was apparently a key decision, because it showed that they would honor contracts. So they have to have given enough security of this kind, I think, for people to commit to invest vast sums of money there.

21:08I suppose the reform towards capitalism is going to be different in every country and every economy, but what do you suppose prompted the reforms in China? Was it just that socialism had just so completely bankrupted? Well, on the one hand, socialism was bankrupted, but I think on the other hand, they had the example of the tremendous relative success of Singapore and Taiwan, and also Hong Kong, of course, and they could see, well, these are fellow Chinese, and they're doing vastly better than we are, and they put that together with some common-sense knowledge about incentives And the real concern that I would have is do they intend to stay with it or do they regard it as some kind of move for one or two generations and then to be eliminated.

22:11At some point the private sector gets so large that it really is. I'm sorry. At some point, the private sector gets so large and the economy becomes so prosperous that you can't control it anymore. You look at something like the Internet in the US, or really, I guess, the world. I mean, how can the state really regulate something that vast and that fast-moving? They can destroy it. I mean, there's no doubt they could destroy it. I mean, the state could destroy the Internet or anything. When you look back at what Mises wrote about, when Mises was writing about socialism, he was really attacking the idea that socialism was capable of creating anything like a productive economy or an economy at all.

23:01The socialist at one time believed that they had a better system in mind for the progress of humanity, didn't they? They believe that, yeah, but I think it should not have taken all that long for them to realize that they were mistaken, and the bankruptcy of socialism would have been seen much, much sooner, generations earlier, if they had not been bailed out again and again by Western and Loan Guarantees. Their economy is chronically chaotic. If you're missing any one of hundreds of different things, I suppose you've got everything required to construct houses, except you don't have nails or screws or whatever.

23:50Or if you've got those, you're missing something else. They were always missing something and again and again they were bailed out by being able to get them in the world market and the only way they could get them in the world market is either we were giving them aid or loans they never had to repay or we created an export capacity for them like the German government guaranteed the investments to construct their Their Oil Pipeline to Western Europe And once they had the oil pipeline, then that gave them a substantial income from exports. So then they could buy in the world market. But suppose the West had not given them the ability to have those exports and wasn't giving them aid, well then they'd have had to deal with all of the chaotic effects of their system and they would have had a series of famines without massive imports of wheat from the in the West, and whatever level of development you have, suppose there's a famine, well that

24:56by itself wipes out a large part of the division of labor, and if there's any danger of a repetition, then people start fleeing to the countryside, and the natural outcome of socialism, I think, is a reversion to feudalism, and that would have started happening probably by 1920 or so if the Western world weren't stepping in to aid them. Yeah, it's a terrible, great tragedy in the untold history of the Cold War, in part, I suppose. Yeah, and the reason we were helping them, I think, is because in the West, the opinion of the intellectuals was that that's the wave of the future. Yeah. And so we need to aid them and let them get off the ground.

25:42Yeah. And now, what's left of that movement is the environmentalists. Who say, well, progress of humanity, forget it, that's the problem. Lew Rockwell had a great statement, I don't know if I can remember it verbatim, but it's as though the socialists learned that their plan leads to poverty, then they decided to call themselves environmentalists and make poverty their goal. After all your observations about China and these other parts of the world that are booming and there's so many, what is your sense of what's happening to Europe today with the vast overgrown welfare states, high unemployment, subsidized political paralysis?

26:32Yeah, well, it's amazing. There are people there who know that the unemployment is due to their intervention and the height of wages and benefits. And they're content with it. They think this is the price of their wonderful benefits. And they don't mind. Now, I think it's entirely possible the European Union will end up breaking up. I don't know when, but I know there's dissatisfaction. And in the nature of the case, there has to be, you know, like if you look within the United States, there are people at any given time who will say the Fed is pursuing too easy a monetary policy or too tight a monetary policy.

27:19Now, in Europe, this gets coupled with nationalism, because then, for example, the people in Germany where they traditionally had a more conservative monetary policy, if they're unhappy with the European policy, which should be easy for them to think, well, it's the fault of the Italians and the Spaniards who are governing the monetary policy, and in Italy and Spain, they take the opposite view. The Germans and the Dutch. Already I think in Italy there's some talk of, or maybe some necessity of, breaking away from the euro because they've been running major deficits in Italy.

28:07I don't know if they have the any power to expand euros on their own, I doubt it, but they're unhappy with their situation in Europe and many people there think they'd be better In so many ways, Dr. Wiesman, you are a living link with Mises. You knew him for how many years? A total of about 20. Isn't that remarkable? It just sounds amazing to us today. So often we think of Mises, especially the students here, Do you ever find yourself reflecting on what Mises would say or what Mises would think about this?

29:01Yeah, sometimes I do. I would have been very interested to know what he would have thought of the development of the Orient. It would have been nice for him to be able to travel to Tokyo and Beijing and Hong Kong. I think he underestimated their development at the time. I think he might even have remarked that they've only superficially adopted capitalism, but maybe he'd have thought differently now. You've translated some of his works into English and you've done other things by Boehm-Bawerk. Do you have any other translations plans in mind? There isn't anything that I feel a special urgency about. There are other projects I have. I wrote a doctoral dissertation many, many years ago that I had to drastically reduce to get it through my committee.

30:10and one of my hopes is to bring that out if in no other way at least as a PDF volume online and the subject is well it's titled is the theory of originary interest and I subsequently changed the originary interest to profit and many of or most of it I guess appears in in capitalism but not all of it and I have and something that predates that called the Consumption Theory of Interest. So those are two main manuscripts I'd like to bring out and I have my MBA thesis which was the Classical Economists and the Austrians on Value and Cost. So those three things I'd certainly like to get on with.

30:57and I gave lectures at Pepperdine for many, many years. I'd like to deliver them for recording, not being sidetracked by various irrelevant questions and so on. So that's another project I have in mind to deliver a set of lectures. It's very impressive how you've used all the new technology to help get the word out. You've You've got a blog, you blog also very frequently on the Mises blog, and you've got all your lectures on MP3, and your book in PDF distributable, and your book selling continues to sell very well.

31:42Capitalism is just continuing to fly out the door, we're always ordering new copies, so it's a book for the ages, you know, and have you been pleased with the continuing reception of it? So many books just come up here and then disappear, but yours, no, it stays. Well, I'm glad to hear that. I welcome anything that'll improve the sale of it. Okay. Well, thank you very much for taking time out of the schedule this week to visit on this podcast. Well, thank you. It's my pleasure.