08/27/10 – Robert Higgs – The Scott Horton Show

I'll tell you what, those people listening to the Liberty Radio Network feed, you people must really love this show to be willing to sit through that Fox News at the top of the hour like that.
I can't stand it.
I think I'll take a walk around the block or something, come back, hear my Beastie Boys playing.
Goodness gracious.
All right.
Well, hey, guess what?
Robert Higgs from the Independent Institute is the author of The Crusader State.
Oh, no, Opposing the Crusader State, Resurgence of the Warfare State, Depression War, and Cold War, Neither Liberty Nor Safety, The Challenge of Liberty, Crisis and Leviathan, and Against Leviathan.
Many of those belong, well, I got to say, at the very least, Crisis and Leviathan and Depression War and Cold War belong at the very top of your list of books to get and read soon.
Welcome back to the show, Bob.
How are you?
I'm a little under the weather today, Scott, but I appreciate the opportunity to talk to you.
Well, I appreciate you joining us on the show.
I saw this article at military.com.
I guess it's actually a, it refers us over to this USA Today article, and I immediately thought of you, Bob.
It says here that the military and military towns are becoming the most affluent parts of America, and that the average service member is making a hefty six figures, and that while the rest of us are standing in line at the unemployment office trying to figure out how we're going to get by, the Army, which I always thought of, you know, I think of like Clinger peeling potatoes on mash or something, and all these guys always complaining about how underpaid they are, but that's part of it, you know?
But now it seems like the cops, the soldiers, the state in general, they all make way more than the rest of us make.
I wonder how long that can last, really.
Is that an equation for bankruptcy right there?
The data do seem to show that all kinds of public employees, including military employees, make substantially more than people you would consider their counterparts, in some sense, in private employment, and the gap has widened substantially in recent years, so that it almost looks as if the predator is desperately trying to consume the prey as quickly as possible, and obviously that sort of thing can't go on forever, in the sense that it can't keep increasing like that forever, but I really don't know how long people are going to put up with being ripped off by the minions of the state.
That's always the number one question, Scott, surrounding any of the issues we talk about, is how long are people going to take this?
And when are they going to wake up and discover that this state that they've been led to believe is their protector and their savior is actually nothing but a gigantic predator, which is keeping them relatively impoverished.
I want to read a little bit of this here.
It says, soldiers, this is from USA Today, soldiers, sailors, and marines received average compensation of $122,263 per person in 2009, up from $58,545 in 2000.
Military compensation, an average of $70,168 in pay and $52,095 in benefits, includes the value of housing, medical care, pensions, hazardous duty, incentives, enlistment bonuses, and combat pay in war zones.
More than 300 U.S. servicemembers have died this year in Iraq and Afghanistan.
That's a funny place for that sentence to go.
And then, but here's this quote, you have to have a good compensation package if you want to recruit and retain the best people, says Pentagon spokeswoman Eileen Lynez.
And I think that was the one that really hit me, was just how obvious and run-of-the-mill this is.
Well, you know, of course, this is beyond question, that, hey, if you've got to pay people $122,000 a year to get them to go be your mercenaries, then that's the go-and-rape.
Shrug.
That's the end of the conversation.
Well, that's what they like to make it, is the end of the conversation.
And of course, for the past decade, almost, these increases in military compensation and pay and benefits have just sailed through Congress with no real debate at all.
I don't know of anybody that's seriously tried to oppose these increases.
And at the same time, of course, the increase in private compensation for privately employed people over the past decade, given the two recessions that have been included in that period, amounts to very little, so that the gap, as I said, has just grown much wider than it was before.
Well, now, don't tell me that there's some causation to that correlation, huh?
Well, I think what's happened is, as usual, or in my view, at least, it's usual, a national emergency has been used as a carnival of opportunism by the state and by people who have insinuated themselves into the state in one way or another.
And the military, of course, is the preeminent state enterprise.
It is the state, I would say.
Without the military, the state wouldn't last 24 hours.
Well, yeah, it's funny, because more and more I think of the state as just a front for the military.
You know, they're just there to make it look like there's a civilian control going on at all.
Well, of course, the state is much bigger than the military, but the military is an essential part of it, because what the state does has to be defended, and that's what the military is there to do, is to hold down the empire.
Of course, when I say military, I would think of all these armed people that the state employs, including all the police all over the country, federal, state, and local.
And, of course, the state and local people have the job of knocking down the ordinary citizenry when it threatens to get out of line with any of the countless hundreds of thousands of laws that are vastly beyond what anyone can even be aware of, much less comply with.
Well, you know, one thing that just trips me out in this article, Bob, is that they say here that, I guess, per capita income and all this, that Killeen, Texas now is a more affluent city than Austin.
And, you know, Killeen is the town, the civilian town adjacent there to Fort Hood, which is, of course, the biggest military base in America.
No surprise why it's 100 miles up the road from the capital of Texas.
But Austin is my home.
And Austin is a place where there's IBM and Dell and AMD.
And plus, it's the center of all the tax receipts in Texas.
I mean, this is the capital city, the University of Texas, which is the biggest university campus in America, where all those guys are, you know, government union employee members and make a killing.
Austin, Texas, is a very affluent city, Bob.
And to think that Killeen is more affluent than Austin means that something has gone out into the twilight zone here in the year and a half since I left there.
Well, think about the greater San Antonio, Scott.
You want to think about a place that's dominated by U.S. military money.
Oh, yeah.
They just got a brand new NSA facility there the size of the Alamo Dome.
And that's big.
I saw the Black Sabbath reunion tour there.
It's humongous.
Anyway, so, yeah.
Wow.
So it really is, I think you said the predator completely devouring the prey.
But the thing is, I mean, government is supposed to be an effective parasite.
It's not supposed to kill the host, right?
They're supposed to follow the pattern of the most effective viruses, not like Ebola or something.
That just wipes everybody out and then dies itself.
Well, if they had one mind, Scott, I think they would be better calculators of what is optimal for the state to snatch.
But the state is not that simple.
It doesn't have one single mind and one planner alone.
It has this conglomeration of competing claimants.
It's the tragedy of the commons.
Wait, wait, wait.
Hold it right there.
Everybody, it's Bob Higgs from the Independent Institute.
Crisis in Leviathan is the book.
Go get it.
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All right, y'all.
Welcome back to the show.
It's Antiwar Radio.
I'm Scott Worden, and I'm talking with Bob Higgs from the Independent Institute.
He's the editor of the Independent Review and the author of Depression War and Cold War.
And when we were so rudely interrupted by the hard commercial break there, Bob, you were talking about how if – geez, I guess if there really was – if the Trilateral Commission really did have final say on what the policy always was, they would probably not overdo it this bad.
But because it's such a free-for-all and there's so many different factions in the imperial court, they're basically just devouring this country to the bones.
I really think that's an extremely important point, Scott, because a lot of people who are, in general, opposed to the state and its predation do not understand, particularly people who haven't spent a lot of time studying esoteric things like public choice theory, tend to think that the state is this one big giant evildoer, and it's out to basically destroy the world.
And that is, in general, a very bad assumption, because destroying the world would be self-destructive for the predator.
If the prey don't create anymore, there's nothing for the predators to take.
So obviously, in some sense, they don't want to destroy the world.
In fact, as Mancer Olson developed in some of his writings, there's a kind of rule of optimality about what not only do they not want to take away, but what they actually want to give back to try to enhance the productivity of their victims.
Because if the victims become more productive, there's more for them to rip off.
So in general, if the state had one mind, it would calculate very carefully the optimal way to exploit the prey.
As much as a sheep farmer decides how much to invest in warding off wolves and protecting the sheep from the weather and so forth, his interest is not in the happiness of the sheep, his interest is in the optimal rate of return on sheep farming.
And it pays him to not just kill them all one day, and it also pays him to invest a certain amount in protecting them.
And the state is like that.
However, as we were saying, the state does not have one mind.
It consists of, nowadays, an enormous collection of rivalrous predators.
And there is definitely a tragedy of the commons issue that goes on there, because any one of them basically is in the same position as somebody out in the ocean catching fish.
He knows that if he doesn't catch that fish, somebody else will.
So if the predator going to Washington D.C. doesn't get that billion dollars, it's not that it's going to revert to the public.
Some other predator in Washington D.C. is going to snatch it.
So there's a tremendous rivalry, and people could care less about optimal conduct of government exploitation.
What they want is to get what they can while the getting's good.
And this is a kind of tragedy, as it were, of the ultimate development of the interventionist democratic state, where all these rival interests are given an open door to come in and surround the trough and slurp at it simultaneously.
So when they do that, what they do is ultimately they go too far.
They cut into the ability of the exploited population to be productive.
And the more they do that, the more they jeopardize themselves.
And it is quite possible for states to go too far and to ruin the whole scheme.
Well, you know, it's funny because that really is thinking like a rich person.
How can you just buy off a congressman and make money for free the rest of your life and that kind of thing, or at least get back more than what you put in?
And the thing is, the entire American population pretty much, I think, has internalized that way of thinking.
Maybe it's everybody's way of thinking in the first place, you know, just try to get what you can.
But, you know, just growing up, having that conversation with people all the time about, you know, public and private and this and that, a lot of people's attitude, it seems like to me, is, hey, that's the game, man.
They tax me all day.
It's my job to get more from them than they take from me.
So if that means a subsidy for my company or earned income tax credit, which is a nice way of saying a giant welfare payment or government education or whatever it is, everybody's in on that same game.
I always like to pick on the billionaires because they're the ones who are the best at it and steal the most and kill the most people.
But really, it's all of us basically think that way.
A government is that fiction by which we all live at the expense of each other or whatever, right?
Well, it certainly becomes that.
You know, there's always this latent incentive built into a system in which many interest groups have access to the state's power of exploitation.
But the difference nowadays from, say, 100 years ago is that, for some time at least, this country and some others had institutions that put checks on the state's plunder.
They were either checks of constitutional restraints or checks of government structure built into the Constitution, or they were, most important in my view, ideological checks.
There was a time when masses of people believed that the government properly had only a limited mission.
And if it started to do things beyond that mission, people would squawk.
Editors would write editorials in opposition, and people would get stirred up.
And sometimes they would get stirred up to the point of forming resistance groups and competing political parties and so forth.
But what has happened, Scott, in the 20th century in this country and to some extent in other advanced economies as well, is that those old checks have crumbled.
The ideological check is not dead, but it's on its last legs and has been for decades.
The constitutional check is completely gone and has been in this country since the 1930s.
So the only thing that checks the state's plunder now is just this internal competition.
It's one interest group tending to some extent to block another's attempt to take it all.
And that does slow the machine down a little bit, and that's what we call normal politics.
But if you don't have any more fundamental check on the state's exploitation, then it's always vulnerable to getting out of control.
And it gets out of control, especially during periods of national emergency, particularly business depressions or wars, when people can be led to lay down their resistance for the sake of the state's pretending to protect them or restore lost security in some way.
And when that happens, the state grows enormously, and it never goes back to the previous condition.
Okay, now, I know you're not feeling that well, but is it okay if I keep you one more segment?
Okay, Scott, I'll stay one more.
Yeah, you can't end with bringing up the ratchet effect and then we have to go.
We've got to talk all about the ratchet effect and the resurgence of the warfare state, the economics of the imperial court.
Great fun.
Hang tight, everybody.
We'll be back.
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Alright, y'all, welcome back to the show.
It's Anti-War Radio.
Saying that faster and faster, words start blurring together there.
Still own my Texas drawl.
Alright, so it's Anti-War Radio and I'm talking with the great Robert Higgs.
He's the author of Resurgence of the Warfare State and Crisis and Leviathan, among many others.
And one of the central tenets of Crisis and Leviathan is the ratchet effect.
That, I guess to paraphrase James Madison, right, every time you have a war, especially or any other major crisis, you empower, especially the executive, but the central state in general.
And then when the crisis is over, the power never goes back to the way it was before, even if a little bit of it's repealed, which is usually not even that.
As we just talked about with the ACLU guy, establishing the new normal, the Bush revolution, is now the way things are from here on out.
The Department of Homeland Security will exist from now on, for example, that kind of thing.
Isn't that right, Bob?
Absolutely, Scott.
Not too long ago, we had Vice President Cheney telling us, back in 2001, I believe it was, that we're going to have the new normal, which was the war on terror.
And of course, since the war on terror is intrinsically the kind of war that can never be demonstrably won, it must therefore go on forever, and better yet, if it goes on, at increasing cost.
All right, now do me this favor, because for some reason, these issues are completely disconnected in so many people's minds.
Well, I guess we know why.
It's the central myth that you debunk in your book, Depression War and Cold War, and that is that World War II was a public works project big enough to really finally kick the economy into gear.
In fact, I just heard on the radio this morning, when I went to get coffee, someone was paraphrasing what George Bush told the President of Argentina, is that what we know, the one thing I know, is that war is good for the economy.
The American economy needs a war, he said.
Well, that's one of those myths that can't be killed, Scott.
I actually started attempting to rebut that myth back in the 1970s in my classes in economic history, and I've been working on it ever since.
And I won't say I've had no progress at all, because a few people have come around to realizing that war is the exact opposite of what most people think it is.
They think it's the source of prosperity, and of course that myth goes back overwhelmingly to a misinterpretation of what happened during World War II.
But inevitably, the great mistake that government thrives on is the one that Bastiat called our attention to, the ability of what is seen to overwhelm what is unseen.
And so if the government goes out in a war or in a depression and spends a lot of money to hire people, that's seen, that looks like prosperity.
Well, people have a job now, they're earning income.
What could be plainer than that?
And indeed it is plain, but what is not seen, of course, is what would have happened if the government had not taken that action.
And that takes a little more thought, that takes a little more preparation and education than most people get, because not only are they not being assigned Bastiat, they are being assigned or hearing on television or otherwise encountering this fallacious counter-argument that government creates prosperity by spending money.
And indeed we're in the thick of it again right now with the current business bust that is lingering and lingering, and already the government has spent a tremendous amount of money supposedly to stimulate the economy.
It's not been stimulated, it's puttering along down near the bottom that it hit a year ago, and now what are people talking about?
Should the government spend another humongous amount of money to stimulate the economy?
And a Nobel Prize winner like Paul Krugman tells them, the only problem is the government hasn't spent enough, which was something we heard for decades from the Keynesians, that the only reason the New Deal didn't get us out of the Great Depression was that the government didn't spend enough money.
And that was still being taught when I was in school, and I'm sure it's still being taught today for that matter in many classrooms.
So it's difficult for people to appreciate the unseen, Scott, when they're overwhelmed by fallacious arguments and pseudo-information teaching them entirely the wrong thing.
All right, now obviously we don't have time to do the whole business cycle theory.
Everybody go and read Bob Higgs, read America's Great Depression by Murray Rothbard if you don't have time to get through all the human action by Ludwig von Mises.
But for people who are somewhat familiar anyway with the theory and trying to take into account where in the cycle we are now, what I wonder about is if they adopted Austrian theory as the basis for their policies, which I think would mean go ahead and let all the bad debts liquidate.
Deflate as much as needs to be deflated.
Let prices get to where they're supposed to be, and then we can start investing and saving and building again and be prosperous and all that.
You know, the counter-argument is, but if we really – oops.
We inflated all the prices and distorted all the prices so badly that if we really did that, it would cause such a deflationary spiral that it would bring down everything.
And so we've got to keep stimulating at least some to keep it from getting too much worse than this.
Otherwise, we're talking about the kinds of unemployment rates that can turn very quickly into violence in the streets and things like that.
Well, we're always given these scenarios of impending doom unless the government comes in to save the day, Scott.
And in my view, these are simply false.
These are forecasts of doom that would not happen if the government credibly left the scene and people knew that they had to make adjustments without looking to the state to come in and bail them out at someone else's expense.
They would make quick adjustments because it would be in their interest to do so.
People wouldn't sit on their houses.
People wouldn't try to maintain businesses and banks that are insolvent waiting for some bailout or getting some bailout to keep them going for the time being.
Instead, they would make adjustments.
They would move themselves and any property they have and investment or resources to areas that hold more promise.
They might have to make all kinds of adjustments.
They might have to move to different places to live or invest.
They might have to retrain themselves for different jobs.
But the point is they would make those adjustments because it would be in their interest to do so.
They wouldn't just sit there and die the way this kind of Keynesian thinking would have us believe they would.
That is not the nature of human rationality.
And when people's very livelihood is at stake, they can be quite rational.
So I think it behooves us to treat with the utmost skepticism these stories of impending doom unless the government comes in and preserves this twisted, distorted, unsustainable economic structure that its policies caused to come into being in the first place during the boom.
That was false prosperity.
It was prosperity that could not be sustained because the shape of it was not sustainable.
In modern macroeconomics, the economy has no shape.
It's just a giant blob.
So you can't speak to a Keynesian about malinvestment.
To him, investment is investment.
It's all equally good or bad.
But because the economy is not a blob, an economy is an intricate, complex arrangement of different parts, of different kinds of production, of people doing different jobs, it can be twisted into unsustainable forms.
And that's what happens when the government distorts the price system.
And when that has been done, the only way to get back to a sustainable prosperity is by allowing readjustment to occur.
All right, everybody.
That is the heroic Robert Higgs from the Independent Institute, editor of the Independent Review, author of Crisis and Leviathan.
Thanks, Bob.
You're welcome, Scott.