11/18/11 – Robert P. Murphy – The Scott Horton Show

Alright y'all, welcome back to the show.
It's Anti-War Radio.
I'm Scott Horton and our first guest on the show today is Robert P. Murphy.
He's a fellow at the Ludwig von Mises Institute and he's the author of the Politically Incorrect Guides to Capitalism and the New Deal, nope, the Great Depression and the New Deal.
Welcome back to the show, Bob, how are you doing?
I'm doing good, Scott, thanks for having me.
Well, I'm very happy to have you here and I was really happy to see this article this morning, The Economics of War.
What are the economics of war, in a nutshell?
Well that article, what that is, is an excerpt from the study guide that I wrote for Ludwig von Mises, Human Action, so this is, here I'm just summarizing his views on the economics of war.
And he basically says that war is incompatible with the market economy and with modern civilization that we rely on, the division of labor and so on, you know, to have our modern standards of living and all the things that we associate with the term civilization, it requires that people all over the world cooperate in this giant production process, you know, getting resources from different countries and different areas, you know, the workers are better at making certain things than we just, we all make a bunch of stuff of what we're good at and then we trade with each other.
And so that gets disrupted during war and he says, the other main point he makes in that section is that it's not a coincidence that Nazi Germany, for example, was very aggressive, that it wasn't just a coincidence that they had to be like that because of their economic system, because they rejected classical liberalism and they wanted to be self-sufficient and you know, have everything planned by the central state, then you know, they looked covetously on their neighbors and their resources and that's why they had to expand to make sure that, you know, the motherland had enough, or the fatherland, I guess they'd call it, had enough resources.
He said, but under classical liberalism, if the government's all, you know, had free markets and free trade and free mobility of labor, then that takes away all the reason, there's no point in going to war anymore, the people are just hurt by it.
And so that, you know, that takes away the incentives for war.
So those are the main points that he was making.
Well, but now, the Marxists say that imperialism and capitalism are the exact same thing as each other.
What about that?
Yeah, and it's, I mean, there too, it may be, you know, Mises may have agreed with them in the sense of, if what they're picturing as being capitalism is actually, you know, the modern interventionist state.
And so it is true that if you do have big corporations that are in league with various governments, then that can lead to, you know, incentives for them to start wars and so on.
But Mises' point was, the way you fix that is not to have an ever-stronger government to regulate those big, bad corporations.
The way you try to remove those incentives for war and conquest is to have a true market economy, a laissez-faire market economy.
And so in that case, there is, you know, in other words, if you're a big corporation and you want to sell to foreigners or you want to buy their resources and use them in your production plant, if you had genuine free trade with the free mobility of capital and labor, you don't have to start bombing the other country to do that.
If you want to set up a factory over there, you can.
You know what I mean?
And if you want to hire their, or if you want to buy their oil, you just pay the market price for it.
The reason there's these aggressive things is whatever that foreign government says, oh no, foreigners aren't allowed in here.
You know, we won't have companies coming in here, we're going to nationalize our resources, and you know, and they implement socialism, well then now all of a sudden you have conflict because now it matters who the government is of that country if you want to do business with them.
So Mita's point again was just, if all the countries have free trade and limited government, then there's no reason for anybody to need to go to war with each other.
Well, and I guess, you know, as long as we kind of break things down into little pieces, the truth always gets lost in the generalities, I think.
And so like with that typical left-wing view, you look at all the corruption of the big business, the oil men, and the arms industrialists and whatever in the George Bush administration, and it'd be pretty easy to conclude that whatever's the opposite of that, if the opposite of that is socialism, then that must be what I'm for, that kind of thing.
But really, if you look at the opposite of Halliburton and Blackwater and Northrop Grumman and Raytheon and all that, even though they've made these killer profits off the wars this whole time, or not even though, but look at them making these killer profits off the wars these whole times, but I bet you if you look at the balance sheet over at Levi Strauss, that their exports of American blue jeans have fallen by better than 50% or something.
And I already know that across the Middle East, they're all drinking local Middle Eastern produced sodas now, and exports of Coca-Cola, and Coca-Cola used to be the symbol of, wow, what a nice thing it is to be an American, you can sit around drinking sugar water all day, we never heard of such a thing over here where life is nasty, brutish, and short.
And those kind of sales, that kind of business has been severely hurt by this decade of war.
It's really Halliburton warring against these regular capitalist businesses.
Well, yeah, you make a good point, and it's true that, I mean, that's one of the reasons I was glad that John McCain lost, for example, because I didn't want his foreign policy views to be linked in people's minds with laissez-faire free market capitalism, and that's what he would have been campaigning on.
And so the same thing with George Bush is that I think one of the, among all the other bad legacies he left us with is that people tend to think that he's a free market kind of guy, because that's the rhetoric he used, and that those were the voters that he was trying to appeal to.
And so, yeah, it is understandable somebody who is coming from a sort of progressive background would naturally, would understandably think that, oh, yeah, the free market capitalism, the Republicans who say they're for low taxes on the rich, and job creation, and blah, blah, blah, they're also the same guys who want to blow everybody up.
And so I could see why that would be linked to people's minds, but when you get a genuine classical liberal like Mises, who was very much anti-war, and was just pointing out that that's the antithesis of the market economy, is that the market economy is based on voluntary trade and peace.
If you want somebody's labor, you can't just enslave them.
That's not the market economy.
You have to offer them wages that they find acceptable.
So in international relations, it's a similar thing.
If you want some other nation's resources, you can't just go in and take it, or install some public government and take it.
You have to offer prices conducive to getting them to sell it to you.
Well, you know, I'm reminded of Jim Powell's book, Wilson's War.
I just interviewed him about it again a couple of weeks ago.
I guess I interview him every Armistice Day or something like that.
But his book starts out about the prelude to World War I had Europe divided into these trade zones, where you basically had two free trade zones working against each other.
And the way he portrays it, which seemed pretty solid to me, was that these free trade zones ended up becoming the allies and the central powers at war against each other.
And that if only they had got it through their heads, that they didn't need to compete, even as these kind of super state conglomerate trade groups that they had become, but that they could all drop their tariffs and, I don't know, just wage war on the Southern Hemisphere or something.
But that they didn't have to fight each other, that they could just buy and sell whatever resources they need across these borders.
The war really could have been avoided.
It was sort of, they understood how valuable it was to have free trade zones such as they had them, but they couldn't get it through their thick skulls, that these two competing super blocs didn't need really to compete as blocs.
Yeah, and it is funny the way people, you know, I mean, with Americans, when I was a college professor, I would try to teach kids the virtues of free trade.
And it's really tough because you do get this us-versus-them mentality, like, oh, you know, when I was growing up, it was the Japanese were the big threat, now it's more China.
And in terms of, you know, oh my gosh, they're trying to take over, they're going to, you know.
And I would just say to people, wait a minute, if you think there should be a tariff against Chinese imports, and that will help American jobs and keep us richer, and screw those Chinese because who cares about them, well then, you know, we were in Michigan at the time, so well, why don't we have a tariff against, you know, exports from Georgia or from Florida?
And that will help Michigan business, right?
That'll make us richer, and who cares about And, you know, and so part of it was, well, they felt better, or they felt worse about hurting Floridians or people who live in Georgia, the state.
But it was also because they kind of realized, well, no, we're all better off if we have internal free trade in the U.S.
And so when you try to get them to see that, then you say, okay, so then why aren't we in China better off if we have free trade with each other?
Well, and you think about all the power mongers in the United States, we only had one big civil war.
That's pretty good.
It seems like the whole free trade agreement that is the Constitution has worked pretty well.
Anyway, hold it right there, y'all.
We'll be right back after this with Bob Murphy from the Ludwig von Mises Institute after this.
All right, y'all, welcome back to the show.
It's anti-war radio.
We're talking about free trade and the lack of it.
When goods do not cross borders, armies will, said Frederic Bastiat, the old French guy, a long time ago.
And so the current warfare state in America, as we were talking about before the break there, Bob, is, you know, if you ask Michael Moore, that's capitalism.
Whatever our system is now is capitalism.
And there's no point in trying to break apart the different parts.
What's wrong with it?
But it sure does look like and maybe I'm missing something, but it sure does look like all the expense of the foreign empire doesn't really profit the country in terms of getting our hands on oil priced artificially low or kicking down doors, you know, with gunboats in order to make sure that local governments will have their people work for our companies at extremely cheap wages, these kinds of things that couldn't possibly make up for the trillions and trillions and trillions of dollars America has spent militarizing the planet Earth in the last 10, 15, 20 years.
Oh, yeah.
I mean, I certainly agree with that.
I mean, it's it's not so much I mean, when you have a sort of mixed economy, it's still true that going to war is bad in general.
I mean, you know, besides the moral issues, but just, you know, for the economically for the country.
I think what what Mises point was is that if I mean, if you imagined a bunch of countries that were all socialist and then, you know, so they are all internally planning, you know, and so they were just this with a few people in charge of the key government officials who were then planning all the use of all the resources.
I mean, they could just decide they don't want to trade with their neighbor.
And so then the neighbor, you know, if they were really dependent on coal or oil, whatever, for that region, you know, they would be upset.
And then it might make sense for them to try to invade and to enlarge their their sphere of influence so that they could now, you know, their central planners would have access to all those resources.
So I think that was the the broader point when that when contrasting socialism versus capitalism is a grand system.
But even here, it's still the case.
I mean, if we had a genuine classical liberal society, we didn't have all these giant corporations that were getting huge spending programs from the government, then you know, there would they wouldn't be lobbying the government and they wouldn't be benefiting from going into it.
Let me give you an example.
So the US government goes over Iraq, you know, put installed a new government and then hands out plush contracts for reconstruction efforts.
But I mean, in a genuine free market, even if you if you conceded the invasion, you would the government, it wouldn't be the government's job to then rebuild a city and then take tax dollars and hand it out to companies to come at you.
I'm saying that was all be private efforts.
And so even like right there, you know, when you say which particular companies are benefiting from the invasion, it's only because we have this interventionist mentality.
And you think that, oh, it's the US government's job to rebuild this place.
You know, where it was, if there were like a natural disaster, you know, a libertarian like me would say, Well, that's not the government's job to be rebuilding stuff.
They shouldn't be taking tax dollars and paying people.
That's just, you know, private things do that.
So that sounds, you know, to some people, oh, that's so heartless.
How come you don't want the government to help?
But the point is, well, because now if the government is in charge of helping, if you're a big company that can get those contracts, you're going to have the incentive to cause the disaster in the first place.
In the case of war, you're going to be lobbying the government behind the scenes to go ahead and invade because you know, you're going to get all the billions of dollars of reconstruction contracts.
Well, and now so what about that contention?
I wish you could really maybe would make a case for us that no, really, if we didn't have this giant world Navy, we could still buy all the oil we wanted.
We don't, we don't need to prop up a single dictator to make sure we can fill up our truck at the tank.
How can you reassure me of that?
I'm pretty sure I need the Marines to make sure that I can fill up my truck.
Well, it's funny.
I mean, when you stop and think about it, the alleged need to go around invading countries to maintain the free flow of oil, you know, at market prices, I think that's how Rush Limbaugh defended the first Gulf War, I think.
I mean, that's really one of the weakest cases.
I mean, with oil, my point is that with oil, that's one of the hardest cases to make because oil is fungible, you know, that you don't need to get it from Saudi Arabia, you can get it from other countries.
And so like, for example, oh, if the Venezuelan government is mad at us, and they want to, you know, not sell oil to US firms, okay, fine, then we would buy it from somebody else.
And then those people would buy it from Venezuela.
You know, I'm saying it really are.
And in DC, people with power seem to really be concerned that, for example, if China cuts all the deals with Uganda, and South Sudan, to get their oil, then that oil will just all go to China, there won't be any left for us, we have to make sure that it's our guys pumping it out of the ground there, even if we got to go to war.
Yeah, well, let me, because I think I get what you're saying, Eric, because you're, you know, someone might say, wait a minute, if you're saying there really is no reason to do this, what do you think all the people in Washington are just stupid?
And no, because it certainly matters.
If you're, you know, if you're a company in the extraction business or the refining business or whatever, I mean, you certainly want to go and get to be the one who gets to dig up the oil and sell it to people.
And so certainly, Washington wants to cater to those groups.
So yeah, that makes a difference in terms of whether it's a Chinese firm or something that is the one sitting on that oil and bringing it up and selling it.
But in terms of if you're an American motorist, and you just want to get refined gasoline from somebody, it doesn't really matter to you whether it's done by an American company or by some foreign company.
And the other thing, I mean, it wasn't anybody could see, as soon as we went to war with Iraq, that's when the price of oil started going up, up, up.
And it wasn't just the money they were printing to pay for the war.
It was the instability in the oil producing region of the world, the major one.
Well, Roy, that's the other thing that's really ironic about all that.
And I sometimes I don't know if that was just a happy coincidence for those guys, or if that was the plan all along, was that when you go over there and start blowing stuff, I mean, it interrupted production.
Yeah, that's what Greg Palast said, that the whole thing that the war was for cheap oil had it all upside down.
It was for expensive oil, that the British had drawn a red line around Kirkuk and the northern oil fields 70 years ago or something.
And this was the worldwide oil cartel agreement that we don't want to develop these oil fields, because we want to keep our prices artificially high.
Right, yeah.
So that's the other thing, too, just to underscore your point, that if you own oil that's not in the Middle East, one way that you enrich yourself is to disrupt their supply lines and stuff over there and interrupt their production so that that makes your oil more valuable.
Well, I guess the problem is a lot of people just can't believe that foreign policy could be such a cynical game as ignoring the national interest in favor of the interests of a particular corporation that happens to want to do the pumping in some other country.
Yeah, I mean, you're right.
And it's hard for me because I fall into that trap, too, where you just it's inconceivable that people would start a war just because, oh, that'd be profitable and these, you know what I mean?
And so and probably in truth, there's all sorts of different coalitions.
You know, I think there probably were a lot of high level people that supported it because they, you know, for geopolitical reasons or something.
And then the oil stuff was just an interval.
But in terms of who getting a bunch of coalitions of groups that are going to make that happen, you know, I think it'd be very naive to overlook the fact that some people were going to make billions of dollars off of it.
Hmm.
All right.
Now, in terms of the the budget, so-called crisis, everybody keeps complaining about does it matter that the national debt is now 15 trillion dollars?
It's all just a bookkeeping trick and the government's in charge of everything and making sure it's OK.
Right.
So what's the big deal?
Yes, it matters.
And no, we're not OK.
The government's not looking out for us.
I mean, it's a little bit with some of this stuff.
It's the real problem with the government spending so much.
It's not the number on the debt per se.
It's that that there's a sort of symbol or representation that look at how much our government is spending.
And so every time the government spends money to build tanks or to do whatever, build a bridge, it's taking resources out of the private sector and devoting it to political ends.
And so, I mean, that's the real cost of the size of our government is the just, you know, the resources that it's diverting out of private hands towards what the politicians want to do.
Well, you know, it seems really strange to me.
I mean, I understand the whole theory, even if, you know, I agree with you that it probably ain't right.
But it makes sense from a, you know, internal logic point of view that, you know, if the economy just drops all of a sudden, then the government needs to go into debt to make up for that loss and demand to keep the unemployment rate from getting too high, that kind of thing, like Democrats believe.
But what's what's interesting and surprising to me is that they do all this really fiscal policy from the Fed, but then also they pass this giant stimulus thing.
What was it?
Six, seven hundred billion dollars worth of all the stimulus spending and all these things.
But then those very same Democrats and Republicans turn right around and say that, oh, yeah, we got to get spending under control.
The deficit's way too high and the debt is way too high now and whatever like that.
Did they have they learned that since all the stimulus or did they not see spending that much money, trillions of dollars?
I don't know how much it was.
You tell me.
Did they not see that that was pushing us further up against that wall where they were going to have to now make these drastic cuts just a couple of years later?
Well, I think it's more they they just do whatever is convenient in the short term.
So when they think they can get away with it, yeah, they'll go ahead and appropriate hundreds of billions and give it out to special interest groups.
And now when the public starts freaking out about the debt, then they all of a sudden start telling everybody, oh, yeah, we feel your pain.
We want to get the debt monster under control, too.
Well, I don't think it's that they are Jekyll and Hyde.
I think it's that they just lie.
Yeah.
Oh, there's a lot of that.
But so do you think we're really.
Well, are you concerned that at some point there's just going to be a run on the dollar and American debt all over the world and we're going to be paying 50 bucks for a loaf of bread and all that kind of stuff or what?
Yeah, I'm very concerned about that, just with how much money they've already printed.
That's like already in the chamber, if you will.
Now, the counter argument to that would be that there's like six hundred trillion dollars worth of bad derivatives out there that these fraudsters scammed into existence.
And that to me, it sounds like a black hole in the sky.
So why couldn't or, you know, in the earth?
So why couldn't Ben Bernanke just dump all the trillions he wanted into that black hole?
It will never fill up.
Well, it will be just because when he when they're winning, when the Fed creates money, then there's like this multiple effect if banks are lending it out.
And even if there are losses, that doesn't make the dollars disappear.
In other words, I mean, so there's going to still be that money there and that's going to push up prices eventually.
So even if people on the side are losing money, I mean, that doesn't make the dollars that Bernanke creates disappear.
OK, yeah, I just don't understand this stuff enough to even ask questions.
Right.
I guess I sort of just thought that, you know, if a bank holds all this bad debt, that's worth nothing.
That's worth nothing.
And the Federal Reserve creates money and gives it to them for that debt that basically is just crossing out denominators.
And both cease to exist, the bad debt and the new money that bought it or something.
No.
Well, yeah, but I mean, like banks lent money to people.
So those people had the dollars, right?
And they went and spent it on stuff.
Those dollars are still floating around.
And now the bank thinks, OK, those people owe us a bunch of money.
And now if those people lose their jobs or whatever and can't pay the banks back, you're right.
The Fed could create that amount of new money and hand it over to the banks.
So the banks say, OK, now we're fine.
But now you have twice as much money.
You know what I'm saying?
Like that first money that those people, in other words, when the bank lent the money to people, they didn't go burn it in their fireplace.
They spent it on stuff.
And then they lost their job or, you know, housing prices fell and they said, well, forget this.
I'm not paying this mortgage anymore.
But I mean, it's not like that money disappeared somewhere.
It's just the people that got lent the money lost it.
Right.
All right.
I'm so sorry.
I got to let you go.
We're way over time here.
You know, I could sit here and ask you questions all afternoon.
I've done it to you before, poor guy.
But I really appreciate your time on the show, as always, Bob.
All right.
Thanks for having me, Scott.
Everybody, that's the great Robert P. Murphy.
He's a fellow at the Mises Institute.
That's mises.org.
He's got a piece up there today out of his study guide for human action.
Ludwig von Mises magnum opus.
It's called The Economics of War.
It's at Mises Daily today.