01/23/14 – Robert P. Murphy – The Scott Horton Show

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Welcome back to the show.
I'm Scott Horton and this is my show, The Scott Horton Show.
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And now to our first guest, Robert P. Murphy, author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to the Great Depression and the New Deal.
He keeps a blog at consultingbyrpm.com, consultingbyrpm.com, and of course he's a senior fellow or something or other like that at the Ludwig von Mises Institute at mises.org, M-I-S-E-S, mises.org.
Welcome back to the show, Bob.
Thanks for having me, Scott.
Well, you're welcome.
Very happy to have you here.
Now, I think you may have seen this news story that the world's richest 85 people own as much wealth as the bottom half of the population of the planet Earth, which would be 3.5 billion people.
And then the number is 1.7 trillion, these 85 people own, the 85 richest people.
And that's according to Oxfam.
And so I was wondering, I mean, I really am a libertarian, individualist, anarchist type and not much of a commie, but it did occur to me that if 85 humans own as much as the bottom half of the population of the planet in terms of wealth, then maybe it would be okay to hunt them down and eat them.
What right do they have to hoard so much from while so many people are so desperate?
I mean, does that really make me a Leninist to say that or what?
No, it doesn't make you a Leninist.
And it's the difficulty with all this stuff, Scott, is that we don't know the exact circumstances under which this outcome was generated.
And so if it really were just the result of purely voluntary transactions, and it was just, for example, Bill Gates is obviously one of those 85 people, and it's not as if his creation of Microsoft and everything that he's done took food out of the mouths of people in Africa.
He basically created a lot of value, if you will, or wealth, just de novo out of his creativity.
And so now Earth is richer because of what he did.
And if you see all of that, and it's not his net worth, it's not as if he's just swimming around in gold coins, or he has just a bunch of limousines and pizzas and caviar.
It's largely his shares of his company.
And so really his wealth consists ultimately of the assets of his company, including the humans who he's hired and trained in that network that he developed.
And so it's not as if you could even break that apart and give it away to people.
It's not like there's a pile of medical services and food and housing that Bill Gates is hoarding, and if you just took it from him and gave it to everybody else, then you could spread it around.
So there are things we've got to realize in that nature.
But on the other hand, it's also true that I bet a lot of those people got their wealth through devious means, and that it is true that there are people you can point to in the world who have been made worse off because this particular guy became a billionaire through means that you and I would think are immoral.
Well, yeah, I mean, in fact, the McClatchy story about this has a picture of Gates standing next to Carlos Slim, who is the phone baron of Mexico.
And my best understanding thumbnail sketch is that they used to have, you know, a Ma Bel Cami type government telephone system in Mexico, and then they just gave it to this guy.
And so now he's the world's richest man.
But that doesn't seem right, really.
I mean, if it was the people of Mexico who owned the telecom business, shouldn't they all have gotten an equal share when they privatized it, instead of handing it all over to this gangster?
Yeah, and I should confess that I'm not, I mean, I know the guy's name, and I'm bigly familiar with his background, but I don't know enough about it to say whether, oh yeah, this is clearly one way or the other.
But it's certainly true.
I mean, I can say that when certain state-run enterprises that were from the former Soviet Union were privatized in quotation marks, that certainly there was a lot of corruption there, and they were basically just handing the reins over to the former party officials and so forth.
And so it was, it was a scam, and that really it was just the same old system, but just under a new framework.
So by all means, I am very sympathetic when leftists are very critical of privatization and they smell a rat.
That's certainly true.
But again, I realize I'm trying to have it both ways here, it might sound like, but nonetheless, the sort of naive libertarian free market people are correct when they say that the way to help poor people is not to grab stuff from achievers and give it to them, but rather to open up opportunities.
The reasons there are so many billions of people around the world near starvation levels of existence is not because there's 85 really rich people walking around.
It's because their governments put obstacles in the path and don't enforce property rights and have all sorts of other mechanisms in place that prevent them from lifting themselves out of poverty through what we would call the market economy.
So that's the reason you have worldwide poverty.
It's not because there are rich people holding them down, except insofar as rich people are connected to governments and they're partially responsible for these bad policies.
Right.
I mean, I'm not one to argue that, oh, well, this is all the wealth of the laborers all expropriated by the bosses or whatever kind of thing.
I mean, you're right when you talk about all of the new wealth that's been created by Gates and his company.
And yeah, he got to write up the contracts that said how much of that was his share.
But so that's all right, because that's what he did.
He did it.
But so he created all of that.
But now and then even again, Microsoft, of course, has sweet deals with governments all around the world for providing the software for their computers and who knows what kind of thing.
So it's not like he's a completely free market company, but at least it did start out as a real entrepreneurial thing, Microsoft.
But now, so when you read that 85 people, I mean, are they mostly Gates's or are they mostly people like this guy Slim, who just was basically the crook that ended up on top or who are these guys, 500 year old banking families or what?
Again, it's not that I've analyzed carefully the biographies of all of these people.
My guess would be that I'm just asking for your ballpark estimate.
I mean, who do you think they're referring to, like the king of Spain or what?
I think 43 of them are good guys, Scott, and 12 are really bad and the rest are just OK.
That's what you want.
My guess would be that you're right, that it's largely people that are oil interest banking and compute some computer moguls, obviously, things like that.
Sounds chic.
Yeah.
And also, the other thing, too, is it's kind of, I don't know, catch-22, there's some kind of phrase I want to use.
I'm not sure what exactly is applicable here, but consider Bill Gates.
My broad strokes on him, I think that you're right.
He started out and wanted to be just a free market guy and he was just a computer nerd and it took off and all of a sudden he was a multimillionaire and then a billionaire.
And then if you remember, the U.S. government was going to crack down on him.
They were going to break up his company.
So we don't know what happened behind closed doors, but now, of course, Gates is doing all this kind of one-world stuff that all the other people, I'm sure you and I get emails from saying, you know, Bill Gates is for population control and all this stuff.
In fact, I remember in the 90s where he had never had a lobbying firm before, but it was once they brought the antitrust stuff against him, he went and hired the best lobbying firm the money can buy, because he's got two now.
Right.
I'm not making excuses for anybody, but I'm just saying, if you get to become a billionaire in today's world, you have a bullseye on you and the major players who run things, they're going to go have a talk with you and let you know you're going to join their system or they're going to take you out.
I mean, look what happened in Russia.
There was a rich guy there.
They were having the Lehman Brothers.
Right.
So I'm just saying, because obviously if you're truly a billionaire that is completely liberty minded and are going to do everything in your power to oppose the government and the system, they're not going to let you get away with that.
So well, thankfully, there's not too many like that.
I mean, most I think, well, I don't know, but it's got to be that that the supermajority of these guys, these billionaires made their money off of public welfare one way or the other, you know, either banking bailouts or contracts for fighter jets that don't work or whatever crap, you know, it's got to be.
Yeah, I mean, I mean, just if you do it in terms of the way the system is right now, I mean, it's kind of like saying, you know, when somebody is elected president, I don't even need to know who the person is.
I'm pretty sure it's not a good guy or they wouldn't let him anywhere near it in the first place.
Right.
Just because I know the system and the kind of constraints there are.
And I mean, I guess you could have like maybe a video game entrepreneur who like, you know, but even then, no army contracts for a lot of video game industry, big time in there, you know, so it's all corrupt.
It is Hollywood to all of that.
Right.
And that's when what I was trying to get at with the Gates example is even if you somehow did quickly just create something totally new that just took everyone by surprise.
And, you know, you were an overnight billionaire, so they didn't have time to stop you and groom you.
They could still just walk up to you and give you 19 different ways they could shut you down and put you in prison tomorrow.
I mean, the government has all kinds of laws that you probably broke.
Right.
You know what I mean?
If you have a company of that magnitude, I'm sure you did all kinds of insider trading and 19 other federal offenses without even knowing it, just because there are so many thousands of rules.
And so they could easily threaten you and your family and so on.
But that's the thing, too.
It doesn't even have to be legal.
Right.
Given what we know, these people are capable of.
I mean, again, it's not that I have proof of this and that Bill Gates grabbed me in a bar one time and told me what happened.
But I'm just saying, yeah, it's if they're all these rich people walk out of a process of selection, if they're allowed to be that wealthy, then, yeah, my hunch is they probably are playing ball with the government behind the scenes to be able to continue walking around like that.
So but again, when you see that outcome, the answer is not, well, let's give more power to governments to seize half of these people's wealth and give it to poor people.
That's not really what what the solution is.
Yep.
And then there's Doug Casey.
But other than that, they're pretty much all got to be in on it somehow.
Right.
That guy, he stands out for sure.
All right.
Now we're about to have to take a break here.
But when we get back, I want to ask you about something else about Bill Gates, something he said the other day that I think by 2050, there will be no more poor nations in the world.
That that's just the beauty of compound interest and new technology and whatever it is, I guess.
And so when we get back, I'm gonna ask you a little bit about that.
And, you know, maybe get a little bit of good news about the world economy, if there is any.
It's Robert P. Murphy from the Ludwig von Mises Institute at Mises dot org.
They're the libertarian Austrian anarchist.
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All right, you guys, welcome back to the show here.
I'm Scott Horton, it's my show, The Scott Horton Show.
I'm talking with Bob Murphy from the Ludwig von Mises Institute, author of the Politically Incorrect Guide to Capitalism and the Politically Incorrect Guide to the Great Depression and the New Deal, both of which are really great.
And especially, you know, if you're a liberal and you like challenging your own views about how things are, I really recommend that you read the Politically Incorrect Guide to Capitalism because it's very thoughtful.
I mean, you might think, oh, yeah, that's a series of right wing books I don't like or some kind of thing like that.
It's actually.
Well, of course, it's Bob.
It's very thoughtful.
He thought of every objection that you were thinking of and he answered that one, too.
It's really in there and maybe you won't love all of it, but I think that you really learn a lot if you read the Politically Incorrect Guide to Capitalism.
And so anyway, Bob, I wanted to ask you about a couple of things right at the turn of the new year.
There were stories in, let's see, the Center for American Progress, you know, the Democrats, basically the Think Progress blog.
And then there was some maybe it was the Wall Street Journal or somebody.
I forget.
But whatever.
Somewhere else on the spectrum came out another report and they were all saying they were polite and didn't mention that America's wars and and jihadi revolutions and whatever around the world are the exception.
But otherwise, the world is at peace and the people of the world are more prosperous than ever before.
And the lowest of peasants in deepest, darkest Africa have, you know, more access to medicine and drinking water and education and technology and tools for improving their lives than people have any idea.
In fact, I failed a test at one of the newspapers.
Blogs had a test about how good I think maybe that was the Center for American Progress.
It was a test of how good you think the rest of the world is doing.
And the standard of living is higher than you think all over the place, they said.
And and so then Bill Gates, I saw the other day was saying there won't be such thing as a poor nation.
He didn't say there will be no poor people.
He said there will be no poor nations.
And he left out war and revolution, I guess there, too.
But there will be no poor nations left in the world by 2050 because capitalism.
Simple as that.
We think that.
Well, I mean, certainly I think the trends are there that you do see a rise in the absolute standard of living among a lot of the world's poor people.
I mean, some of the greatest progress is being made in in China and certain African regions where they had been wrecked by awful wars and you may be coming, winding down or in China, just certainly liberalizing there.
So it's it is ironic, I suppose, that I think we tend to have a U.S. centric look or Europe centric perspective.
And clearly here our freedoms are going the other way.
But many parts of the world where they suffered horrible ravages of unbridled state power a few decades ago, they're going the opposite direction.
So those people are on an upward trend.
So I have no reason to doubt those general trends.
And the issue was just, OK, that's great.
But, you know, certainly that doesn't excuse the sort of things that the U.S. government's been doing, obviously.
Yeah.
Well, and there's just a ton of gangsterism going on in all of this, too.
And I think, you know, I highlighted this to you in that email from the McClatchy story where they said here it says the report and this is they're referring to the Oxfam report where they did all these statistics and whatever of the rich getting richer.
And they said and this is just, you know, the most recent history they're covering here.
The report also said that while the recent financial crisis was an enormous burden on the world's poor, it ended up being a huge benefit to the rich elite.
The very wealthiest people on Earth, again, minus Lehman Brothers, collected 95 percent of the post-crisis growth, the report says.
I'm not exactly sure what that means, but it sounds like what it means is that Ben Bernanke just printed money and gave it to the people who are already the wealthiest to prop up their institutions.
And then while everybody else is broke and kicked off the unemployment rolls and everything else, they get to call it a jobless recovery and move on with their lives.
Is that about right?
Yeah.
So if for this particular example, with a much smaller time frame, I think we can be a bit more confident when we say the explanation for these broad sort of snapshot trends that they're documenting is not that, yeah, in the last few years, it just so happens that all these people in major financial firms are delivering a lot of value to the consumer.
And that's why they're seeing they're posting such huge gains.
No, I think you're exactly right that it's because the Fed's bailing them out.
And then if that is to the extent that that is what's going on, that the Fed's buying up all of their mortgage-backed securities and the other toxic assets that they were sitting on that prevents them from going down, then that really is just a direct transfer that the Fed is making the average guy poor by creating new money and giving it to these rich bankers, because obviously the savings of the of the poorer people are now going to be diluted with the creation of that new money.
So I definitely think in this case, I'm more confident than, yeah, that that trend is ominous and that is evidence of how these super rich people are gaming the system and benefiting from their power.
But again, just to repeat myself, it's the solution to that, you know, I'm sure like somebody from the Occupy movement would see that and be outraged and then call for more government intervention into the economy to prevent this sort of outcome.
But the point is, the reason these rich plutocrats can get away with this kind of stuff is because we have a central bank with such unlimited discretion that's not, you know, that's not even tied by the gold standard or any other kind of constraint except what they think is in the interest of the economy.
So, of course, when you create an institution with that kind of power, we shouldn't be shocked that they use it to bail out rich, politically powerful people and then they didn't just start handing out money to homeless people.
Right.
All right.
Now, I'm a crazy radical extremist and I think that they should have not bailed out anyone at all back in 2008, whatever caused all those distortions, and you can talk about that if you like, that Citigroup and Chase Manhattan, JP Morgan Chase now, and all of those guys should have, if they were, you know, destined by the prices to cease to exist and be replaced by someone else in the market someday, then tough.
But then again, you know, people don't usually listen to me about stuff like that and they say things like, no, that would have destroyed the entire economy for everyone forever and it would have been worse than the Great Depression.
And like George Bush said, we had to operate against the principles of the free market in order to save the free market, because I guess there would have been a Bolshevik Revolution if they had just gone ahead and not printed the money and let those big banks fail, Bob.
Well, I think if in 2008, you know, the fall of 2008, when they won Paulson and all these guys, and you're right, it is ironic that it was the Bush administration that administered all the stuff initially, that if some Southern American country's ruler had done that kind of stuff with the bank nationalization, you know, Fox News would have been calling that guy a fascist or a socialist and calling for us to invade the country, or excuse me, called for the US military to invade.
So, if you had told Americans when this stuff all started going down in the fall of 2008, okay, we're going to do this, we're going to bail out all these major financial institutions, and oh, by the way, six years later or five and a half years later, we're still going to have a jobless recovery and people are still going to be biting their nails not knowing how they're going to make ends meet, and it's basically going to be just a bunch of profitable returns to the financial sector, but everybody else is still going to be hurting.
What do you guys think about that?
Oh, and the federal government's going to be trillions of dollars deeper in debt, and the Fed's going to, its balance sheet's going to be quadruple what it is right now.
How do you guys feel about that?
I mean, I think everybody said, heck no, there's no way we wanted to go ahead and give us the little depression you're promising us right now, but at least, you know, we won't corrupt the system the way you're talking about.
So, they were led to believe that this, they would have gotten through the crisis and things would have been back to normal a few years later, and yeah, they would have had to bail out some rich people who should have gone down, but at least we were getting a healthy economy in exchange for it, but we've gotten the worst of both worlds.
They bailed out the rich people, and then the average guy is still struggling years later.
And then, so, if I'm watching TV, and even on TV, they admit that while there's some discrepancy, some claims are that the unemployment rate is 13% or could be higher, especially if you're talking about among minority groups, it becomes much, much higher, and that kind of thing.
Then, on the other hand, they say, you know what, housing values are doing better than ever before, and all that.
Does that mean that right now it's just 2005 again, and we're about to have another one of these giant crashes?
I don't know it what...
I mean, I don't see why a bunch of unemployed people would be putting a bunch of upward pressure on the price of houses, you know what I mean?
Oh, I know exactly what you mean.
I think that's a great point.
The way I look at it is, look at the stock market.
To me, that's even scarier than the real estate market.
I mean, if you look at a chart of the S&P 500, it, you know, it peaked in the 99-2000, then it crashed, then it went up again in, you know, 2007, it started coming down and so forth, and now we've surpassed that previous peak, but it certainly looks like there's three bubbles in a row, and we're in the middle of the final one, which is now even bigger than the previous two.
And if you say, well, the last few years, what was all the great economic news that would have pushed the S&P much higher than it was in the heady days of the housing bubble years, and certainly it doesn't seem like there's any great economic news to justify such huge valuations in the stock market.
So, to me, I think there's clearly a bubble, and you say, you know, well, when is it gonna pop?
I don't know.
I mean, I can tell you for sure, if the Fed has to start raising interest rates because price inflation is getting out of hand, well, that will certainly pop it.
Right.
But when would that happen?
I don't know.
To be honest, I'm surprised we've gotten this far along, and it could be just because I'm a bad economist, or just could be because we're in a huge bubble, and the dollar itself is in a bubble.
Yeah, I don't know.
I mean, geez, if I had any money to invest, it'd be fun to see if I can put my money where my mouth is and figure things out.
I told you before, I think, I know a guy who had a company building skate parks, and he just read the Wall Street Journal, I mean, for four counties and cities, gigantic concrete, you know, monuments to skateboarding all across the West, and then he just read the Wall Street Journal every morning, and as soon as Ben Bernanke raised the federal funds rate a quarter of a point, he said, that's it.
He put all his bulldozers and everything up for sale, cashed in, and sat back and placed short bets on the housing market and the banks who were invested in him.
And he was just, in fact, I would say he was, you know, halfway versed in Austrianism, right?
Like, he just basically knew about paper money and the bubble and how it works, the Rothbardian explanation.
I don't know if he had read all of Man Economy and State or exactly what, but he knew about Austrianism, and he was placing real bets and was making real money doing good like that.
So, you know, people, keep an eye out for that kind of thing, if that's what they're invested in, the housing market, you know?
Yeah, I mean, I still believe strongly that ten years from now, looking back, people are gonna say, I cannot believe just the mass illusion that Americans fell for again after having lived through the housing bubble.
How could we possibly have thought that Ben Bernanke, creating trillions of dollars of electronic money just through computer digits and bailing out the people who had made horrible investments and loaning money to the US government so it could run trillion dollar deficits, how could we have thought that was the path to prosperity?
And, of course, they just postponed the inevitable and made the crash that much worse.
But when you're living through the midst of what you happen to believe is mass delusion, obviously the other people don't think so.
Otherwise, they wouldn't be deluded.
Yep.
Well, and then, so, I guess, I don't know exactly how these things work because, again, I don't have any money to invest, but it seems like, depending on how far out you can guess, it might be time to start placing those short bets on all these bad stocks.
But keep an eye on that federal funds rate, right?
Yeah, and also I'm watching the excess reserves in the banking system.
When they start getting lent out, that's a signal, too.
All right, there you go.
Bob Murphy, consulting by rpm.com and mises.org.
Thanks very much, Bob.
Thanks for having me, Scott.
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