04/02/13 – Robert Higgs – The Scott Horton Show

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All right, y'all.
Welcome back to the show.
I'm Scott Wharton, and our first guest today is the great Robert Higgs.
He is Senior Fellow at the Independent Institute, and he's the author of this new book.
It's a great collection of essays, actually, Delusions of Power, New Explorations of the State, War, and Economy.
And he's got a great new piece at the blog at Independent.org, 1913, The Final Days of the Old Regime in the United States.
Welcome back to the show, Bob.
How are you doing?
I'm doing very well, Scott.
Thank you.
Well, good.
I'm very happy to have you here.
And I'll go ahead and mention here, I was explaining to the audience earlier in the show, but I want to make sure for the people who hear just the interview later that they know that you wrote many great books besides this one, including A Crisis in Leviathan, Against Leviathan, Depression War and Cold War, Resurgence of the Warfare State, and those are just the ones off the top of my head, many more.
All of them, well, especially, of course, A Crisis in Leviathan and Depression War and Cold War being monumental, groundbreaking, earth-changing-type situations there.
So I want to make sure everybody understands that.
All right, so 100 years ago, the world got turned upside down.
That's what I think, too, but I don't explain it nearly as good as you do.
Why don't you give us a start here?
Well, Scott, my view of the period before World War I in the United States is that it was, despite everything we could say critically about it, and there is a great deal, we might say, it had many evils and shortcomings, but despite all of that, it was in many ways the most buoyant, the most hopeful, the most promising, the most genuinely progressive period in the economic history of the United States ever.
The rate of economic growth was greater than ever before or afterward, and that is both in terms of the growth of total output and the growth of output per capita.
Practically all groups in the country, all regions of the country, participated to some extent in this progress, and it was just a remarkable, epic technological progress, was bursting in all directions, all kinds of innovations that completely remade the world in terms of transportation, communication, manufacturing, you name it, agriculture included, were happening at that time, and I don't think it's just a coincidence that that was also a period when all things considered, the United States was probably as free as it was at any other time in national history.
So to me this was a glorious time, even though the historians tend to paint it as horrible, as a time of oppression and grinding poverty and whatnot, but they, it seems to me, are forgetting what the situation had been beforehand, and grinding poverty was nothing new to this period.
There had been even more of it before, and what this period had that previous ones did not have was a very rapid progress for the masses of people.
And now, it's always seemed to me, although I don't really know, but I guess from reading Gabriel Kolko and a couple others, that it was really this success of freedom in the years leading up, say maybe the 20 years or whatever you want to call it, leading up to the 1913 time, or really maybe throughout that kind of era, that the success of freedom was the cause of the rise of the popularity, the trendiness of authoritarian ideas, because instead of, like for example, you had all kinds of tremendous new amounts of wealth being created all across the United States, in ways where the old northeastern industrial interests were losing their grip, were losing their monopolies, were losing their ability to cartelize banking, for example, etc.
And so that was what really made, I don't know how soft you want to call it, some kind of fascism, regulatory centralized control in Washington, D.C., such a trendy idea.
It wasn't the poor downtrodden people who were pushing for it, it was the old rich who were finding themselves out-competed by the new.
Well, there's certainly an element of that involved in the story, Scott.
To my mind, it's a complex story because of the way the country was developing.
When you have rapid economic growth like that, you have both as an effect and as a cause a number of structural transformations in the economy, so that we were having a relative decline of agriculture, not an absolute decline, but a relative decline of agriculture and some agricultural areas periodically in considerable distress.
We were having some industries or lines of work or occupation that were losing out because of the way that innovative industries and new technologies were displacing them.
And so a lot of things were going on.
It was a jumble, and one of the aspects of this jumble was that the old Anglo-American elite was becoming very anxious about its grip on controlling the society.
This group had a pretty firm grip, along with, if you go back even farther in our history, the Virginia elite.
Those two had pretty much been the top dogs in American society throughout the 18th and 19th centuries, and particularly with the growth of big cities in the late 19th century, which was very rapid, millions of immigrants pouring in year after year, the rise of immigrant participation in politics, bosses in the cities, political machines, all of this looked very threatening to the established elite.
And so part of their reaction to it was to attempt to impose new political controls, which they could still define and manage for themselves in the event they got them created, and to try to steer economic and social development in the direction they preferred.
So this was one of the group's struggles, but there were many others.
For example, the butchers of America were put at a great disadvantage by the development of new meatpacking industries, which used refrigerated railway cars to distribute meat from central locations such as Chicago, Omaha, all over the country at lower prices than local butchers were selling their meat.
So this was a major force behind the passage of the first antitrust legislation, was that butchers were being out-competed all over the country.
And this is just one example of a multitude of similar occurrences going on at that time, in which people looked around and said, my goodness, what's going on here?
We're losing our grip either socially, politically, or economically.
How can we keep it?
And in order to do so, they turned to the state, and literally they turned usually first to the state in the U.S. sense.
And when that didn't work, they would go on and turn to the national government to try to get something that would work despite the competition among the states.
All right, now I have this clip.
I'm not sure if you're familiar.
Well, I guess maybe I should ask you first before I go down this trail.
Have you ever heard of a guy named Norman Dodd, investigator for the Reese Committee in the 1950s?
I don't know if I've heard of him or not.
The name is vaguely familiar, Scott.
I don't know anything about him.
Well, this comes from kind of my old conspiracy file stuff.
I think this is from a John Birch Society video, but it's a very short clip I want to play for you here.
It's him talking about minutes from the founding of the Carnegie Endowment for International Peace.
And I hope it's worth your while.
Give it just a sec here.
Is there any means known more effective than war, assuming you wish to alter the life of an entire people?
And then, well, that's how he sums up the phrase, the question that the Carnegie Endowment was founded on.
And he said that he went through all the records.
This is sort of one of the first House Un-American Activities Committees, I think, under Carroll Reese.
And he said they went through all the records of the Carnegie Endowment.
And what had happened was they spent a year studying the question.
And they decided that all these professors and intellectuals and whatever around the country were paid to study this.
And they came back and they said, no, there is no means more effective than war, assuming you wish to alter the life of an entire people.
So our next question is, how do we get America into a war?
There was a lot about America that this Northeastern establishment really thought was back asswards.
And they were sick and tired of waiting for it to catch up.
And so they wanted to basically grab the country by its handle and shake the hell out of it and homogenize it.
Well, I agree that there's nothing that does more to alter the course of free market development and of spontaneous development in society than war.
Because those developments in wartime are displaced by political controls and forces.
But I would not right now agree that the Carnegie Endowment was an instrument for or attempted to steer the country into war.
The Carnegie Endowment for Peace was one of the post-World War I creations, along with a number of others that conspiracy theorists look back on and view as part of the prototype of the New World Order.
This was where these elites attempted to create organizations and international powers that would sort of allow them to control not just individual countries, but the development of the whole advanced world.
And that is not an interpretation that I would accept in its raw form, obviously.
Well, I appreciate that debunking.
I think the claim is that it was founded back in 1908 or 1909 in the source where I got that clip anyway.
Well, perhaps in that organization's instance, I am mistaken about the founding.
There were other organizations, such as the Council on Foreign Relations, that grew directly out of the war and the peace process afterwards, which our old friend Colonel House was so instrumental in.
And in that case and in others, such as the creation of the Bureau of the Budget and a number of other cases, the attempt was, first of all, to study war, to find out what had happened, how the war had begun, what brought it about, how it might be prevented in the future.
And particularly those things, but related things as well.
So I give these people some credence in that I accept at least that they wanted, to some extent, to understand war better in order to prevent it in the future.
Now, obviously, whenever you have a lot of things going on, there may be elite figures which decide that war will serve their purposes.
Obviously, that was the case in 1914, 15, 16 in the United States when a number of people wanted the U.S. in the war, and they worked very hard.
Again, Colonel House being a spearhead because he had the President's ear in their finagling to get the U.S. directly involved in the war.
But to go from there to saying that these people had some kind of a long-term plan to just create war in order to seize power would take more evidence than I've seen.
Yeah, I guess it sounds like they had gone forward in their DeLorean and read Crisis and Leviathan and then gone back and said, we can use this as our blueprint.
Unless Doc Brown really went back, I don't know.
It's, I think, too easy for people to go back and see grand plans.
If the world were so simple that grand plans could ever succeed, that would have more plausibility.
Sure, and you can still have evil conspirators, but that doesn't mean that they win all the time.
Exactly.
It's a little bit like the Pentagon official back in the 1960s who tried to debunk the idea of a military-industrial complex by saying it's not a complex.
It's a whole bunch of little complexes all fighting each other for the loot.
And I think that, to some extent, is always the case in politics as open as the American political process has been, at least for the last century and a half or so.
It's not just that there are powerful people and they have a plan.
There are lots of powerful people, and some of them hate each other, and each group has a kind of plan it would prefer.
So how this is going to shake out is by no means predetermined.
Right.
And, of course, those who are determined to use the state and advance the power of the state for their own separate interests, like what Rothbard used to call the Rockefeller world empire, that kind of thing, they end up creating such a gigantic thing, the biggest empire in the history of the world, that they can't wield it at all.
They're not in charge of what it does on a day-to-day basis anyway.
Their ambitions outrun their capacities, and this is a constant refrain in American foreign policy for the last hundred years.
There are always some insiders that want to gain control of perhaps the whole international scene or some region of the world or some aspect of international relations, but the people on the receiving end are not cooperative.
And so pretty soon you've just got wars that don't go the way you want them to.
You've got rebellions.
You've got disputes.
You've got alliances breaking down.
You've got all these things that simply lie beyond the control of any given country or certainly any faction within a country's political affairs.
Well, you know, it's funny.
Is this just the economics of politics?
You know, this is just democracy, right?
Like Alexis de Tocqueville said that, oh, this thing is going to blow itself up as soon as people realize that they can just vote themselves other people's money.
And I guess he was probably thinking more in terms of the masses voting themselves the property of the rich, but you could go for Lockheed lobbyists competing with Pfizer lobbyists too, right?
Same difference.
Well, it's not exactly democracy.
Democracy kind of muddies the water here because with more democratic participation, the politicians have to at least publicly sing a little different song.
But it's just the fact that there's no single centralized source of political power in our system.
And I think to a greater extent than people understand, that's true in every system.
Even if you went back to a highly centralized setup like the old Soviet Union, you still had factions and scheming circles and people out to get one another.
And it simply was not possible for the dictator, even one as ruthless and powerful as Stalin, to simply give orders and everybody carried them out the way he wanted.
That was not the way these human beings worked.
They had their own ambitions, their own preferences, plans, loyalties, and so things tend to be a mess.
Now, in that case, it was actually a godsend for the system because had it not been for the mess of the black market being developed along with the central planning, the system would have broken down much sooner than it did.
But nonetheless, the point is that no one, no single group can control a huge social and economic apparatus.
It's simply not possible.
Yeah.
All right.
Now, jeez, I called you late, and I'm going to want to keep you a little bit late.
Is that going to be okay, you think?
Well, a few minutes, Scott.
I can do that.
Okay, great, because there's so much I want to talk with you about.
Let's see.
First of all, I guess – well, yeah, let's go back to Colonel House.
Can you explain to the people who was Colonel Edward Mandel House, and why would I have thought he was so important that 10 years ago that was my pseudonym on pirate radio?
Edward House, usually known as Colonel, which was an honorific title given to him by one of the Texas governors he helped to elect, was a political mover and shaker, first in Texas in the late 19th century, where he helped to elect four different governors.
And he never held an elective office.
He never held an appointive office in the government, but he was a very important man.
He's kind of an extreme example of these gray eminences that lurk around in our political system and in many other political systems who aren't very visible.
The public may not be aware of them at all, but nonetheless, they wield a lot of influence because, basically, they're good at schmoozing.
They know all the right people.
They constantly gravitate around within elite circles.
They attach themselves to ambitious politicians.
They make these people beholden to them for their advice and assistance.
And in House's case, he eventually became so potent that he was known as the assistant president, even though he had no formal title in the government at all.
And I think that was an apt way to characterize him, because he did have tremendous influence.
Even Wilson himself said at one point, quite famously, he said, you know, my thoughts are House's thoughts.
He would publicly admit that the two were absolutely on the same page.
Now, I think people need to understand that he had been led to that conclusion by House, who was about 100 times smarter than Wilson.
And that meant that House was in a position, because Wilson trusted him so much after he was elected president, and House had been quite helpful in that effort.
But once the president was in office, House was sort of his constant advisor and someone who could speak to him in a way that manipulated him without his realizing he was being manipulated.
So Colonel House was the best example of a kingmaker I can think of in American politics.
There may have been people of comparable stature, but House is the one that springs to my mind.
Yeah, but who was he working for, and what was his game?
I think House was working, first of all, for himself, and I think, to some extent, House was working for ideas he believed in.
I think it's a mistake to take these movers and shakers and make them out as always puppets of somebody holding a bag of money.
House had a lot of money already.
He wasn't J.P. Morgan, but he was a wealthy man.
His father had left him a large estate, and he had managed it well, and so he was a wealthy man.
He moved not only among elite circles in the United States, but in Europe as well, so he had a very good life, and if he wanted to push certain ideas, he was in a position to do so, and I think he did that.
Now, he obviously was a person who enjoyed wielding that kind of power.
He may have imagined in his own mind that he was doing it for the best of purposes.
None of us has access to what was going on in his mind, but for whatever reasons, he did definitely believe in certain ideas, and he tried to get those put into effect in policymaking.
At the same time, whenever people move in certain circles and they are in constant communication with the rich and famous, they tend to absorb the ideas of that milieu, and so no doubt House did that as well.
So if someone who knows J.P. Morgan well enough to call him Jack, we can probably assume that House was not a guy who wanted to establish communism and cut Jack's throat.
So certainly he was a kind of representative of a certain Anglo-American elite of rich and powerful people, but these people too generally had their ideas, and they were in a sense the original generation to try to create what conspiracy theorists like to call the New World Order.
They were people who believed in international controls, international organizations, and certainly believed that experts, people they knew or sometimes they themselves, ought to be running these powerful new organizations.
Well, it's funny because the book Philip Drew is basically an attempt to – it seems like if you read it, it's pretty clumsily written as a novel.
It's not very good, but if you read it, it's basically saying, hey, listen, here's what we believe, everybody.
This is basically the consensus, the agenda that those of us who know best all agree on, right?
Isn't that what the book is trying to say to other rich people?
Well, you can read it that way.
Because it's the blueprint for – it is really the New Deal, isn't it?
I mean he's got the old-age pensions and the League of Nations and progressive income tax and central banking and on and on and on.
He's got the kinds of ideas that had been floating around in the early 20th century among advanced intellectuals, for example.
This was the sort of thing that guys at tea time at Harvard were talking about just the same as people were talking about in the boardrooms of the Morgan firms.
So this was just where the cutting edge of ideology was at the time.
I'm not inclined to worry too much about Philip Drew because it's so speculative when we take what is represented as a novel and try to interpret it as what actually was someone's plan for remaking the world.
Novelists take a lot of liberties, and I'm sure that a novelist as poor as Colonel House took plenty of them himself.
Yeah, that's true.
Okay, so I want to ask you this too.
You've got this ratchet.
I wonder how long the bolt is.
You wrote Crisis and Leviathan and critical episodes in the growth of American government.
And so when you have World War One break out and no small part due to the efforts of American involvement in it, I guess is what I'm trying to emphasize.
Doing no small part to Colonel House's efforts.
That was a great leap forward in terms of federal power in Washington, D.C.
Same thing again in World War Two and the rest of the wars for that matter, obviously in the war on terror, that sort of thing.
But so I wonder back then when Woodrow Wilson, the degree to which he was centralizing power, the presidency, as you were just saying, the presidency in 1913 compared to the relative power of the different state governors and that kind of thing is an entirely different game than what we have now.
And so I just wonder if it was a World War One or a real Great Depression level crisis, World War Two level crisis, that kind of thing, which our government could get us into something like that.
At the next big turn of the ratchet, could we really have just a centralized authoritarian state where the governors, I don't know, become appointed from now on or it doesn't even matter anymore?
A real national police force and no more pretension of the Bill of Rights and just follow the republic and the rise of a new Reich or whatever kind of situation in this country?
Because it seems like the power has already been centralized to a very great degree since 100 years ago.
Well, I think we're largely already to the situation you described, Scott.
I mean, a lot of the forms are still standing from previous times, but their substance in terms of their actual power and discretion has been lost to the center.
Whether it's policing function or economic management or the question of engagement in war, whatever it happens to be, it's almost impossible to find any significant decentralization in the American political economy and policymaking in the last 100 years.
So this is a process that has accelerated during real or perceived emergencies like the world wars and the depression and even in our time in fake emergencies like this so-called war on terror.
And then in emergencies that were the product of government itself like the recession that won't go away.
So all of these things – I'm not saying, by the way, that the government tried to create an endless recession.
I'm just saying that it took a lot of actions and the result is that the recession is very sluggish and dissipating if it's really getting any better at all.
So yeah, every time we have a big real or perceived crisis, we take a leap forward, more centralization, more central power, less discretion in the peripheries and the provinces.
But this has gone on so long and gone so far now that there doesn't need to be much more done.
And I think in a real serious crisis at this point, something like – imagine a couple of atomic weapons exploding in the United States.
That would be, I think, more than enough to shackle this country under complete, in effect, martial law from here on out.
Yeah, yeah, certainly.
And in fact, maybe even a crisis less than a nuke but close, something like that.
Yeah, I mean, I think – See, I've been reading about Weimar Germany lately and so I'm thinking now maybe instead of living in the fascist American Reich that really I'm living in Weimar America now.
These are the last of the good days before the shit really hits the fan.
You know what I mean?
Well, I wish I were the kind of person that thought things were going to get better.
I don't, however, Scott.
So I think it's just a matter of time.
You know, when I wrote Crisis and Leviathan, I received a lot of ridicule for its conclusion because it was published in 1987 and many reviewers said, oh, Higgs is oblivious to the fact that Reaganomics has happened, there's a Reagan revolution, and all the collectivists are now on the run.
And my response was nonsense.
The next real or perceived major emergency will have exactly the same consequences that the preceding ones had ever since the beginning of the progressive era because all the conditions are the same.
All the preconditions ideologically are still in place.
All the conditions of the way the political process operates are still in place.
And so the effects will be the same.
And sure as hell, after this picky ewing kind of crisis of the September 11th attacks, the government parlayed that criminal action into a gigantic response that has made major strides possible for the police state in this country.
And so obviously now we've reached a point at which you don't even need much of a crisis because the government is so astute at leveraging even small ones.
Right.
Like September 11th, I went and found a clip of me from October of 2002 talking about Iraq.
And I said, this is the first time I've ever heard where they just announced in advance that, yeah, we're going to do this because we feel like it.
And they don't even have a Gulf of Tonkin or a Lusitania.
They're basically just stretching.
They have a Lusitania for Afghanistan.
Right.
But they're just going to go ahead and stretch that out for a year and a half and it'll be good enough to get one more bonus war as soon as we have enough tanks in place in Kuwait to go.
Well, that's what they did, Scott.
They just stretched a big umbrella called the war on terror over everything they wanted to do.
And look what they did to Qaddafi.
You know what they did for the Cossus Belli in Libya?
Here is the Cossus Belli in Libya.
If we don't intervene, he's going to kill every man, woman and child in Benghazi, we swear.
That was it.
That was all they had was going to happen.
Maybe a few thousand, less than 10,000 people have been killed at that point.
Well, as you say, when they decide they're going to do something, any plausible story is enough.
And that's because we live in a nation where any plausible story is enough.
People don't yell and scream when the government acts this way.
They swallow it.
They're used to it.
Many of them approve of it and cheer for it.
So you need a country with much different sensibilities about liberty and about the state itself in order to stop this process.
And we're far from having that kind of resistance available here now.
And that's the kind of cheerful message you can find in Delusions of Power.
New Explorations of the State, War and Economy by Robert Hicks.
Hey, thanks a lot.
It's great to talk to you again, Bob.
Okay, thanks for having me, Scott.
Appreciate it very much.
Bye-bye.
All right, the article at independent.org is 1913, the final days of the old regime in the United States.
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