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Austrian Economics Looks East

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[This article contains excerpts from a presentation given at the 70th anniversary of the publication of Human Action, in Vienna, at the Palais Coburg, November 23, 2019.  Mises surely would be pleased by the thought of this gathering today, to know that his Vienna still has a heartbeat in Europe, even as its politicians and bankers and academics all go in the wrong direction. He certainly would be pleased and amazed to know his work would become available across the world, in many languages, free and instantly online. Most of all he would be thrilled to know his name is better known today, and his work more widely read, than during his lifetime. What more could any intellectual or writer want? This alone is a huge achievement.

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[This article contains excerpts from a presentation given at the 70th anniversary of the publication of Human Action, in Vienna, at the Palais Coburg, November 23, 2019. 

Mises surely would be pleased by the thought of this gathering today, to know that his Vienna still has a heartbeat in Europe, even as its politicians and bankers and academics all go in the wrong direction. He certainly would be pleased and amazed to know his work would become available across the world, in many languages, free and instantly online. Most of all he would be thrilled to know his name is better known today, and his work more widely read, than during his lifetime. What more could any intellectual or writer want? This alone is a huge achievement.

Yet while even Mises’s harshest critics now acknowledge his influence, they do not read him much or understand him at all. A cursory search of the name “Mises” in the New York Times or Washington Post produces dozens of mentions in recent years, nearly always in the context of some nefarious takeover of government by free market radicals. Who knew Mises was an avatar of neoliberalism, something nobody quite defines but everybody knows is bad? The leftwing New Republic even asserts neoliberalism “emerged from the ruins of the Austro-Hungarian Empire in the early twentieth century.” And The Marginal Revolutionaries, a new book by Professor Janek Wasserman from the University of Alabama, just a few hours from Auburn, claims Mises and his movement “not only transformed economics and social theory, but changed our world.”

When the Left creates a caricature of you, you know you have arrived.

For most of the last 70 years, Austrian economics, or at least Austrian economists, always looked West. This is why, since about the middle of the twentieth century, Austrian economics grew and flourished in the US, while it slowly atrophied in Vienna. It is why Janek Wasserman and others use the term “American Austrians,” with some derision. The Viennese Austrians all seemed to go West.

Consider young Carl Menger, born in what is now the Polish city of Nowy Sącz. His schooling, in Krakow, Prague, and Vienna, took him westward both geographically and intellectually. His position at the University of Vienna must have felt like a cosmopolitan western outpost to a Galician, and his travels as tutor to Archduke Rudolph von Habsburg took him West, through continental Europe and the British Isles.

Mises of course moved westward throughout his life, from Lemberg to Vienna, then Geneva, and finally New York. Hayek too, from Vienna to the London School of Economics, then to the University of Chicago, and even a stint at the University of Arkansas(!) before retiring to the University of Freiberg in West Germany. Murray Rothbard moved from his beloved New York City (where he had been a protégé at Mises’s seminar) to Las Vegas and the University of Nevada somewhat late in life. Even our special guest today, Dr. Hans-Hermann Hoppe, seems to have had a westward orientation. From his birthplace in Peine, Lower Saxony, he headed at least a little West to university in Saarbruken, detoured slightly back to the East for graduate studies in Frankfurt, but then moved decisively West to New York, and then to Las Vegas to join Rothbard. Maybe Las Vegas in the 1980s and 90s was the high water mark, the westernmost reach of Mises’s Vienna.

Now Dr. Hoppe has moved East, even beyond his native Germany to Istanbul. Maybe this is a metaphor for all of us who consider ourselves “Western.” Have we become so accustomed to our conception of the West we fail to fully accept how truly illiberal and intellectually decadent it has become. After all, West always meant “new” and East always meant “old.” West meant capitalism and East meant collectivism or mysticism.

But is that still true today? And is the Austrian school of economics ultimately geographic, theoretical, or sociological? In fact it is all three. We should consider whether, at least metaphorically, Austrian economics now finds itself looking back toward the East.

From an American perspective, rooted in our history as Anglo colonies, Vienna is the East. Even Germany is “Eastern” in a very important sense, because most Americans think “Western Civilization” is synonymous with Western Europe — which downplays Germany’s influence and virtually ignores the Eastern Bloc and its geographic overlap with the former Habsburg Empire. Our great friend and philosopher David Gordon points out historian Jonathan Clark’s book titled Our Shadowed Present, which examines the relationship between Britain and Europe. Clark contends, and David agrees, that Cold War intellectuals purposely used “the West” to shift focus away from the central role of Germany in European history.

But today the concept of East and West are metaphoric as much as geographic.

Maybe we need to turn back toward Vienna, toward the Balkans, the Baltics, the former Eastern Bloc, and even toward Asia to find people interested in what makes a free and prosperous society. We cannot ignore how sad, tired, and addled the West has become. We cannot ignore how many in the West simply no longer care about what makes us rich, or even worse imagine wealth will continue to manifest itself all around us regardless of incentives or state depredations. This is why we see the rise of candidates like Elizabeth Warren and growing support for socialism among the young across America and Europe.

Many in the West simply have given up.

The great investor and fan of Austrian economics Jimmy Rogers says that young people seeking their fortune in 1900 moved West to America, while young people seeking their fortune in 2000 moved East to Asia — which is why he raises his children in Singapore. Of course recent events in Hong Kong show the terrible reality of Chinese state authoritarianism, but the people of the East in the twenty-first century want to get rich, to build wealth, to enjoy all the material comforts of the West — while the West is reduced to socialist schemes for redistribution of already existing wealth. The West consumes capital created by our grandparents, the East builds capital for their grandchildren.

As an aide, China is perhaps the fastest growing market for interest in Austrian economics. We constantly receive requests for materials from Chinese professors who teach at universities we have never heard of, in cities of five or ten million people which are scarcely known in the West.

Consider these questions about people in the East and people in the West: who saves and invests more of their income? Who buys more gold? (in fact the Chinese, Turks, Russians, Indians). Who seeks meaningful and rigorous education for their children, not hyphenated-studies? Who is clear-eyed about human nature, and who is starry-eyed? Who puts more emphasis on family, or even wants children? Who is building, with long time horizons, and who is merely consuming?

Where does Mises’s vision resonate most strongly today?

It has been 70 years since Human Action, but 100 years since Nation, State, and Economy and nearly that long since Liberalism. In those two relatively short texts Mises almost  literally laid out a blueprint for Western governments to enjoy prosperity and peace in the aftermath of the Great War.

Dr. Joe Salerno describes Mises’s program as “liberal nationalism,” a recognition of nation states but rooted in property and rigorous self-determination at home — even to the point of allowing secession for political, linguistic, or ethnic minorities. Misesian liberal nationalism requires laissez-faire at home, robust free trade with neighbors to avoid the tendency toward autarky, and non-interventionist foreign policy to avoid the tendency toward war and empire.

We can only imagine what the West might look like today if those books had been read and absorbed at the time. If western governments had been even somewhat reasonable over the past century: consuming, say, only 10 or 15 percent of private wealth in taxes; maintaining reasonable currencies backed by gold; mostly staying out of education, banking, and medicine; and most of all avoiding supra-national wars and military entanglements, we might still live in a gilded age like pre-war Vienna — but with the unimaginable benefits of today’s technology and material advances.

But liberalism didn’t hold. It didn’t hold in the West, or anywhere else. It never took root in the full Misesian sense anywhere, and never took root anywhere for long. That’s why all of us are here today. If the world had listened to Mises, even somewhat — if western states had committed to his prescription of sound money, markets, and peace, libertarian and anarcho-capitalist theory might have been unnecessary. We might merely grumble about the state, instead of seeing it as an existential threat to civilization.

The flaw in the Misesian liberal program was democratic voting, something obvious to us in hindsight but hardly obvious a century ago in a Europe just emerging from monarchy. From Mises’s perspective, democracy held the promise of liberation from aristocracy. He saw democracy as the mechanism for peaceful transfers of political power, and while this has proven somewhat true, it certainly has not been uniformly true since the interwar years in which he wrote. Democracy did not prevent Franco or Hitler or Tito, and we need only look at Brexit and Trump to see the limits of democratic wrong guy consensus or wrong cause wins. Turns out “we” don’t really believe in democracy after all.

But more importantly, we now understand how democratic voting necessarily and inexorably erodes property rights. Politicians and their electorates benefit from high time preference, from living today at the expense of tomorrow — not only through government spending, debt, and borrowing, but also through artificially low interest rates, all courtesy of central bank policies so crazed not even the prescient Mises would recognize them as banking practices today. Voters and the political class in a liberal democracy have all the wrong incentives, and thus any liberal program conducted through mass democratic voting contains the seeds of its own destruction. Property and laissez-faire cannot survive democracy for long.

So while Mises’s liberalism provided a profound and underappreciated blueprint for the West, it didn’t hold. We have to accept this and grapple with this. Western governments could have chosen to leave people alone, they did not. They could have chosen sound money, they chose political fiat. They could have chosen peace, they chose entanglements. The next time a supposed “classical liberal” — an artificial term, as our friend David Gordon explains — criticizes the excesses of Rothbardian anarcho-capitalist theory, or bemoans breakaway movements like Brexit, or attacks AFD in Germany or Orban in Hungary, or is appalled by Trump and anti-globalist populism — remind them that these developments happened as reactions to the failures of bastardized Western liberalism. Elites in the twentieth century failed us, on every front: war and peace, money and banking, medicine, education. And they have the temerity to wonder why populists gain support?

The West didn’t listen to Mises, so it got Rothbard and Hoppe!

If liberal democracy has failed to defend property, liberty, and peace in the twentieth and now twenty-first centuries, it is entirely justified to consider what should replace it. Of course the Left offers nothing but its program of statism, egalitarianism, positive rights, and identity politics– all totally illiberal in design and practice. Meanwhile the Right offers only a jumbled mix of constitutionalism, “limited government,” and “rule of law,” while largely sharing progressive ends but advocating slightly different means. Both share the neoconservative foreign policy of US hegemony and occupation — also known as democratic nation-building.

Therefore it is up to us to create a vision for the present age. It is up to us to reconsider Misesian liberal nationalism for the twenty-first century. Not an easy task, but we have the benefit of hindsight. We know what civilization and society require, and must avoid, because we have the twentieth century to learn from. We also have the work of Rothbard and Hoppe, post-Mises, to guide us and correct us.

What does a twenty-first century Misesian program look like, as supplemented by Rothbard and Hoppe?

  • First, it recognizes nation is not necessarily state; the former can coalesce organically while the latter is always artificial;
  • It is rooted in property and markets, rejecting the utopian virus of egalitarianism that animates the Left;
  • It advocates for smaller, decentralized entities — entities more like Liechtenstein or Switzerland and less like Germany or the US, with democratic mechanisms strictly limited to local councils and local matters;
  • It permits breakaway entities for any group or minority;
  • Beyond this, it advocates fully private communities along Hoppean lines;
  • In particular, it demands private provision of education, medicine, and retirement pensions;
  • It rejects central banking in favor of private, competitive money and banking — so no monetary hedonism is possible;
  • It is strictly non-interventionist and rejects any standing military; and
  • finally, for its own self-preservation, the twenty-first century Misesian model encourages and nurtures the vital intermediary institutions of society, including faith and family, and rejects libertine culture. It thus recognizes human nature, and acknowledges the need for internal governance to reduce the need for external governance. It encourages real culture over pop culture, intellectualism over anti-intellectualism, truth and beauty over mindless pursuits, and real liberal arts education, including history and classical languages, over modern curricula and dumbed-down hyphenated studies.

In conclusion, ladies and gentlemen, our revolution is paleo, not neo. It takes its cues from Vienna, and finds its origins in a better, older Misesian worldview. It increasingly looks East, not West to the failing and sclerotic thinking of Frankfurt or Brussels or London or New York or Washington DC. It is localist and decentralist, not globalist. And it places property front and center in the liberal program, as Mises did 100 years ago.

Jeff Deist
Jeff Deist is president of the Mises Institute. For many years he was an advisor to Ron Paul and a tax attorney specializing in mergers and acquisitions for private equity clients.

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