The 2nd Zimbabwean Hyperinflation

by Serban V.C. Enache

Zimbabwe is once again facing rampant inflation, a rate of almost 100 percent recorded in the month of May.

I felt the need to investigate its macros. As usual, the graphs are based on info from tradingeconomcis. An important development is that last month, the Government removed the legal tender status of foreign currencies and made the new Zimbabwean Dollar [RTGS] the sole legal tender.

The country dropped its national currency back in 2009, and replaced it with a multi [foreign] currency system in efforts to combat hyperinflation at the time. The recent reverse measure, taken by Emmerson Mnangagwa’s administration, comes in response to dire commodity shortages across the country. Mnangagwa replaced Robert Mugabe as president two years ago in a coup. However, without sufficient US dollars to pay for imports, the country’s fuel stations have frequently run out and gasoline prices more than doubled between the months of January and April.

Fuel going up, coupled with the currency’s depreciation, made the cost of food, transportation, and housing utilities to soar. Due to the lack of confidence, as expected, more and more vendors set prices in US dollars.

In a milestone deal with the IMF last month, the Government agreed to cease net money creation [deficit spending] in order to pay its bills, which was a root cause of the sudden hyperinflation. The IMF is monitoring economic reforms for a year under a mutually agreed program. Debt relief was promised at the end of this year, provided the Government respects the deal. Companies are meant to trade RTGS dollars on an official market, but there were few takers. Analysts said that the Government’s gamble to force greater adoption of the RTGS might very well backfire, pushing transactions in foreign currencies underground.

With all these developments in mind, let’s see Zimbabwe’s flow of funds, and later on we’ll look at other indicators. The country has been a net exporter of Aggregate Demand and a net importer of goods for ten years straight. The Domestic Private sector [composed of domestic firms and households] has been going severely into debt for those same ten years. Only in the last two years was it able to net save financial assets, when the Government seriously expanded fiscal deficit spending.

We also see how the country’s money supply shot up, especially in 2018 and 2019. The M2 measurement [which includes cash and checking deposits + savings deposits, money market securities, mutual funds, and other time deposits] reached an all time high of 10.55 billion US dollars last March.

The unemployment figure has remained stable throughout years, but I don’t put much faith in the accuracy of this data, simply because of how the State defines being unemployed. For example, people like subsistence farmers, who consume all of their own output, are categorized as employed. And more to the point, the graph below is based on the “strict unemployed” definition [one who has been without work, is available for work and is actively seeking work]. The broader definition doesn’t require the latter condition.

Those working in the grey [informal] economy include people who do unpaid labor for a family business or paid employees who are not entitled to sick leave or paid holidays. In Zimbabwe, there are a great many who work in these circumstances. If we count as employed those workers on a payroll with taxes deducted at source and pension coverage, then the unemployment estimate is huge.

On to trade. South Africa owns the largest share of Zimbabwe’s exports. In my opinion, the country is far too dependent on its southern neighbor for commerce, and South Africa’s socio-political stability looks bleak these days. It would be better to seek out markets in different countries, in order to minimize risk and better handle potential negative demand shocks [for Zimbabwean exports] and negative supply shocks [for Zimbabwean imports].

The graph below shows Zimbabwe’s exports by countries of destination.

The graph below shows Zimbabwe’s imports by countries of source.

According to the World Bank, Zimbabwe’s exports sector as percentage of GDP last year was 22.9 percent and its imports sector 25.5 percent.

It’s safe to say that strategic bilateral relations cannot be formed, so long as Zimbabwe’s political class doesn’t compromise on a certain vector the country needs to maintain long term. Foreign investors [state and private agents] won’t be willing to come in, if they believe their investments will be at risk at the next election cycle, or if the chances for political instability and social upheaval are high. In recent years, Russia has been paying more attention to Africa, the northern states in particular, investing mostly in oil rigs and nuclear power plant deals. That’s one potential partner state with which the Mnangagwa administration should seek to do business.

Going back to Zimbabwe’s main trade partner, South Africa… that country is experiencing serious problems in rising criminality, and Ramaphosa’s land reform [confiscation without compensation] is bound to fail. In South Africa, since 1994, 21 percent of farms were put into Black African ownership. But more than 80 percent of those farms failed to remain economically active. If you ask Black farmers the reason for that miserable success rate, they blame the Government, and that’s absolutely true. That’s how you know it was a simulation of reform and not a legit effort behind it; because a singular reform, in and of itself, can’t be successful when everything else remains the same. In order to be a commercial success, an agribusiness requires access to infrastructure, to financial and physical capital, crop insurance, skilled labor, competent management, and access to markets capable of absorbing its output at a price which covers operation costs plus the markup.

South Africa [and Zimbabwe] needs a holistic approach to its national problems, and that means a combination of measures. Changing ownership doesn’t fix anything. The goal should be to decommodify land, which can be done via nationalization or [my personal preference] through site value taxation. Complementary measures should include: community land trusts, community banking, a national infrastructure investment plan, a national health care and education service, a national trade strategy, and last but not least, asset-side reform of the financial sector.

Reducing bureaucracy should be a priority as well. Currently, Zimbabwe is ranked 155th in 190 countries in the category of ‘ease of doing business.’ The more complex the laws and regulations are, the more wasteful and corrupt the system is. The State-dirigist method and Single Tax philosophy don’t require more time spent between citizen and bureaucrat, quite the opposite!

After Mugabe’s land reform, Zimbabwe isn’t out of the woods, and its population is growing too.

Using the printing press without any regard to budgetary rules, without any clear goal in mind, will only make the situation worse. The Zimbabwean Dollar [RTGS], in order to appreciate in value, requires a combination of tighter supply and higher demand for it. The Government’s specialists need to determine the country’s potential output vis-a-vis actual output and adjust fiscal policy in consequence. A negative output gap occurs when actual output is less than what the economy can produce at full capacity – while a positive output gap is the reverse and is inflationary.

The Government should aim for a near zero fiscal deficit; should temporarily ban the importation of luxury items, at least for a few years if not several years; should prioritize the importation of vital commodities – fuel, water, pharmaceuticals, grain, milk, and the like. The Central Bank should be ordered to run permanent zero interest rate policy. Reduced interest payments into the economy means a smaller supply of Zimbabwean currency. And the Government should only accept RTGS in payment of its exports, and it should only guarantee bank deposits denominated in RTGS. This combo would be sufficient to halt inflation, bring price stability and political confidence in state institutions and fuel hope for a better tomorrow.

Dangerous Libertarianism

When one hears the word ‘diversity’, it is at the expense of unity? Then there is inclusion, but only inclusion when you agree with a certain political thought and worldview. And of course we can’t forget about identity politics. If you disagree, then you are called a dog whistle. How did we get here? Peter Lavelle talks with Joe Concha, David Swanson, and Arvin Vohra.

My comment: While I agree with the perverse effects caused by political correctness, such as censorship, echo chambers, and tribalism… I staunchly disagree with the aim of “destroying the welfare state.” Ironically, the libertarian guest suggested it first, and unsurprisingly, the same libertarian guest expressed his support for open borders. That’s what market libertarians are all about in the US, they want an ever growing pool of labor and no social safety net, no full employment policy, in order to promote the race to the bottom among workers. From this race to the bottom, in which workers compete for the smallest wages, only the ‘vested interests‘ profit [a term coined by Thorstein Veblen to describe the forces of rentierism, high finance, and cartels].

After WW1, a perverse blight was introduced to the economics profession. The Neo-classical movement came about, funded by these ‘vested interests.’ Instead of funding real economic growth, Wall Street was entrenching itself as the protector of privilege, plotted and executed scams of all types, distorting economies away from passing on the fruits of technology to populations – benefits such as rising living standards, falling costs of living, and lower business costs. The new economics was that of John Bates Clark and his colleagues who rejected the classical concept of economic rent [economic rent = income without any labor, without any enterprise, without any cost of production]. These neoclassical economists insisted that any type of revenue stream and wealth/ownership position was fair game. Classical and neoclassical economics are nothing alike! The latter is a wholly bastardized, corrupt version of the former. Mainstream economics today shares the same affliction, or should we call it propaganda, its use of mental gymnastics, adulteration of history, and use of refined mathematical equations… to conflate the Natural Commons with Capital [the product of spent Labor], to conflate wealth creation with wealth extraction, to conflate IOUs with commodities. I invite the reader to check out two of my older posts, Milton Friedman, the Liar and Thomas Edison explains modern money in 1921.

Mainstream economists conflate value with price, or tow the line that value is derived from prices. In other words, if in a particular time window, condemning people to poverty and unemployment is monetarily profitable, the value of those humans [workers] and production units [buildings and equipment] should drop to reflect the price. It’s insanity, and in their madness they successfully manage to determine the price of everything and the value of nothing. Instead, the goal is or ought to be to decommodify land, and turn society into a sane and equitable one, in which price follows value. That’s what the classical economists were all about, the labor theory of value + the rent theory of pricing. They understood that Labor is the creator of Capital, and that Land is completely unique and distinct to the aforementioned two. Because of the peculiarity of Land, the classical economists argued for a special tax on it.

Back when socialists and national strategists were expecting the Industrial Revolution to be a strong enough force to turn parasitic financial systems into useful avenues, and subordinate them toward the imperatives of technological and societal development, Thorstein Veblen warned of Wall Street’s crooked agenda to derail the entire phenomenon. Veblen could only look back to the time when economics sought to guide government policy, not oppose it. This sane tradition in Western economic thought can be traced to the 13th century scholars of the Just Price theory, to the physiocrats, all the way to the classical, historical, and socialist schools [both in the marxist and non-marxist traditions]. Veblen’s post-mercantilist and proto-socialist analysis, warning that finance capitalism was derailing industrial capitalism, was expunged from the mainstream curriculum.

The same goes for Henry George; his type of laissez-faire [in its full true meaning] would “open the way to a realization of the noble dreams of socialism.” George understood that the labor and investments of both the private and public sectors increased site values, and if these values remained uncaptured by the Government, they were free to be appropriated by landlords and money lenders in the form of rent and interest [unearned incomes]. George was also against patents, another form of rent extraction. But unlike those socialists who wanted full collectivization, George was of the opinion that property should remain in private ownership, that labor, buildings, sales, and enterprise should go tax-free, while the State captured land values.

“I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.”

In a letter to James Madison dated October 28th, 1785, Thomas Jefferson wrote, “[…] As soon as I had got clear of the town I fell in with a poor woman walking at the same rate with myself and going the same course. Wishing to know the condition of the laboring poor I entered into conversation with her, which I began by enquiries for the path which would lead me into the mountain: and thence proceeded to enquiries into her vocation, condition and circumstances. She told me she was a day laborer at 8 sous or 4d. sterling the day: that she had two children to maintain, and to pay a rent of 30 livres for her house (which would consume the hire of 75 days), that often she could no employment and of course was without bread. As we had walked together near a mile and she had so far served me as a guide, I gave her, on parting, 24 sous. She burst into tears of a gratitude which I could perceive was unfeigned because she was unable to utter a word. She had probably never before received so great an aid. This little attendrissement (emotion), with the solitude of my walk, led me into a train of reflections on that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe.

The property of this country is absolutely concentrated in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics, not laboring. They employ also a great number of manufacturers and tradesmen, and lastly the class of laboring husbandmen. But after all there comes the most numerous of all classes, that is, the poor who cannot find work. I asked myself what could be the reason so many should be permitted to beg who are willing to work, in a country where there is a very considerable proportion of uncultivated lands? These lands are undisturbed only for the sake of game. It should seem then that it must be because of the enormous wealth of the proprietors which places them above attention to the increase of their revenues by permitting these lands to be labored. I am conscious that an equal division of property is impracticable, but the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise. Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labor and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not, the fundamental right to labor the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment, but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state. […]”

Before any type of meaningful debate can be had on [different] ways to achieve the same end, we should all start from the same premise – otherwise the debate is going to be pointless. In the 13th century, Thomas Aquians developed a most solid case against usury and price gouging – that the lender was receiving income for nothing, since nothing was actually lent, rather the money was exchanged. A unit of money could only be fairly exchanged for another unit of money, so asking for more was unfair. Aquinas later opposed any unfair earnings made in trade, basing the argument on the rule that a Christian should treat others as he himself would like to be treated – which means the Christian should trade value for value. Aquinas believed it particularly immoral to raise prices because a certain buyer had an urgent need for what was being sold and could be persuaded to pay a higher price because of local conditions. “If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price; because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition.” Aquinas would therefore condemn practices such as raising the price of building supplies in the wake of a natural disaster. Increased demand caused by the destruction of existing buildings [negative supply shock] does not add to a seller’s costs, so to take advantage of the increased willingness of buyers to pay constituted a type of fraud in Aquinas’s view.

Land is the 1st factor of production, made by Nature, not man. The Natural Commons extends to the broadcast spectrum too. In 2017, at the Union of Theological Seminary at Columbia, historian and economist Michael Hudson gave a speech called “The Land Belongs to God,” in which he explained what Jesus’ first sermon was all about.

At first Jesus said: “Good to be back in Nazareth, let me read to you about Isaiah.” In Luke 4 says it that this was all very good, and they liked him. But then he began talking about debt cancellation, and they tried to push him off a cliff. So basically you have the whole origin of Christianity as a last gasp, a last fight, to try to reimpose this idea of the economic renewal – of a Clean Slate – that goes back at least to the 3rd millennium BC and probably all the way to the Neolithic. So you have this last attempt to try to get a Clean Slate, and we know what happened to Jesus. His followers were not able to bring it about. So by the 1st and 2nd centuries of our era, what could the Christians do? You’re never going to get the Roman Empire to announce a Clean Slate
[this debt jubilee includes not just financial debts, but restoration of property confiscated by creditors]. As a matter of fact, when the kings of Sparta, at the end of the 3rd millennium BC, tried to cancel the debts, the oligarchs of Greece called in Rome. Rome went to war against Agis, Cleomenes and then Nabis and destroyed Sparta. They were going to fight against anyone who wanted to cancel the debts. Mithridates in Asia Minor in the 1st millennium fought against Rome, canceled the debts, and also killed about 30,000 Romans in the ancient Near East. It was a long bloody fight, and they all lost.

So all the Christians could do was have charity. Well, the problem with charity is that you have to be rich in order to lend to somebody. […] You can buy the debt and pay somebody else’s debt and give money away, but that doesn’t really fix the system. The result was, it really was the end times. The choice was: either you’re going to have economic renewal and restore people’s ability to support themselves; or you’re going to have feudalism.
That basically is how the Roman historians described Rome as falling. The debtors were enslaved, not only the debtors but just about everybody was enslaved […] Finally, you needed to have a population, so you let people marry and you gave them land rights – and you had slavery develop into serfdom. Well we’re going into a similar situation today, where I think we’re going into a kind of neo-feudalism. The strain of today’s society is as much a debt strain as it was back then
.

When the market libertarians of today speak of freedom, they speak of the feudal class’ freedom to do what it wants with YOU and not be accountable! The type of unearned income that they hate isn’t income derived from privatized land rents, from usury, arbitrage, from cartelized markups, or from patents – no, not at all – their hatred is reserved for food stamps and welfare checks, money that actually ends up in the pockets of sellers of goods and services and workers, money that circulates in the economy, and doesn’t sit idle on poor people’s balance sheets, like it does on the balance sheets of the rich and ultra-rich.

Besides, the welfare system is a Federal Program. Welfare dues aren’t “unfunded liabilities,” as the pathetic deficit hawks like to claim, nor are they under threat in case of lower tax collections, as the dumb deficit doves insist. Federal Government programs are financed from Federal Government fiscal debits, not tax revenue. The purpose of Government money taxation is threefold. 1-To create a permanent demand for the Government’s currency, giving it thus extrinsic value. 2-To drain income out of the economy [a tool to regulate levels of Aggregate Demand and thus control inflation]. 3-To incentivize and or penalize various socio-economic activities. I encourage the reader to see a paper from 1946 by Beardsley Ruml, then Chairman of the NY Fed, called Taxes For Revenue Are Obsolete.

Can the traditional welfare system be reformed? Yes. Should it be reformed? Absolutely! A Job Guarantee program and or a Basic Income would be much better than the means-tested welfare system, which comes with bureaucratic overhead and, worst of all, the perverse effect of “trapping” people in it, because if a person gets a job and the employer decides to fire him or her immediately after, that person has to go through the bureaucratic gauntlet again, so it deters them from actively seeking work. We should also regard the employment figures in a circumspect manner. The assessment of unemployment has changed during the years – if you work a couple of hours a week, the State statisticians catalog you as “employed.” If people have lost hope of finding jobs, and no longer register at the local offices, the State statisticians label these people as “voluntarily” without a job, so they don’t count them in the actual unemployment figures. Labor force participation has been going down in the USA.

And would it matter if the participation rate rose, while wealth extraction grew at pace with wages and profits or outgrew them? Theoretically, we could have full employment tomorrow if everyone agreed to work for peanuts, but that society would be categorically worse off in net terms!

If we compare welfare and health insurance conditions in the US to the leading countries in Europe, we see that the US is actually closer to 2nd world states, than to the 1st world states. The average libertarian in the US bears little difference to the so-called libtard, I call them libertardians. They want open borders, no regulations, endless rent-seeking, and oppose hawkish foreign policy only because the State is engaged in it; they’d prefer private companies [mercenaries] to do the killing, the bombing, and the invading.

Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations. These are not paternalistic measures to restrain the citizens’ activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured. Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state. The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts.” That’s a quote from the founder of the Austrian School of Economics, Carl Menger, whose basic tenets the contemporary Austrian adepts utterly reject and rabidly loathe. In fact, the modern deficit hawks today [the libertardians and the cuntservatives] would label the classical economists as dangerous, evil statists, and communists, if they were inclined to actually read their work. That’s how hopelessly indoctrinated they are. Two different quotes more and I’m done – and the authors are Adolf Hitler and Kenneth Boulding.

The Globalists of Left & Right

by Serban V.C. Enache

In a previous article of mine [The Neo-Malthusian New Deal], I linked to Wolfgang Streeck’s review essay on ‘Globalists: The End of Empire and the Birth of Neoliberalism’ by Quinn Slobodian. By condensing and summarizing the arguments of these two scholars, and giving my own thoughts on these grave matters, I hope to make the reader understand who contributed the bricks & mortar for the scheme known as globalization and how the left and right strive to achieve the same thing, the Feudal Dominion of International Shareholders.

From the very beginning, the ideological ambition was global and universal; the distinct, the particular, the unique, like customs, nationhood, and sovereign states, was and still is considered a threat to the grand design of a Weltwirtschaft [world economy] without borders, which was expected to restore the golden age of unfettered 19th century liberalism. The empires of free trade fell in 1918 and were replaced by a host of sovereign and potentially democratic nation states, which carried the prospect of ‘economic nationalism,’ a dangerous virus in the eyes of the globalists. After 1945 decolonization started and the introduction of majority voting in the UN General Assembly was introduced; these two anti-liberal political architectures, together with the Keynesian gospel of national self-sufficiency, threatened not just economic progress but the ‘open society, human freedom, and dignity,’ so it was claimed…

The new culture in which the globalists planted their seeds of ambition was called neoliberalism. This ideology was both opposed to nation states, and, at the same time, dependent on them for its very existence. It opposed the sovereign nation state as a vehicle for change, for such a vehicle has inherent tendencies to contain and or distort markets [the market being a creation of the state, though they would never admit it openly]. On the other hand, neoliberalism is dependent on the sovereign’s capacity to fend off and suppress the public’s demand for social security, which would de-liberalize the economy. I can think of no better example of such ideological thinking than Alex Jones. When referring to the New Zealand shooter’s “responsible markets” demand in his manifesto, Jones equated the adjective “responsible” with “controlled,” in his attempt to paint the criminal as a socialist, a left-winger. Going back to neoliberalism, its purpose was and is to weaken the nation state as an instrument of mass, popular will, while strengthening it as a bulwark against the ‘illiberal dispositions’ of the public – in other words, to paraphrase James Madison, the state’s role is to protect the opulent few [the rent-seekers] from the rest of humanity, from the well-organized majority to be more precise.

Democracy spreads the expectation of a more or less egalitarian outcome, some sort of real socio-economic gains for the many [likely in detriment to the ultra rich minority] – therefore, democracy had to be implemented in such a way as to prevent its entry into the realm of the economy. The state was to only patrol and enforce the institutional limits. Beyond those limits, democracy couldn’t enter – otherwise no chance for a free market; and of course, their free market idea was a bastardized version of Adam Smith’s, because Smith was referring to “free” as in free from rent-seeking. In the same spirit of sophistry, what’s commonly referred today as Keynesianism is actually the bastardized version of Keynes’ theory, popularized by Paul Samuelson and his ilk.

Friedrich Hayek cooked up constitutional designs for a democracy that couldn’t touch the economy. Mayhaps ridiculed at the time, Hayek’s institutional views of [pseudo] free markets and castrated nation states prevailed. Today, we hear the old, liberal rhetoric of the centrist-globalist factions alongside their mass media outlets, which rails against the evils of populism [ideas that resonate with ordinary people] – evil populism that will subvert the neoliberal market and the ‘freedoms’ which come with it. These freedoms are: 1) the free flow of goods, 2) the free flow of services, 3) the free flow of [financial] capital, 4) the free flow of labor. John Maynard Keynes maintained that the unrestricted [unregulated] flow of international capital endangers the self-governing experiment we call democracy. This the globalists knew and schemed for…

The globalists always knew that capitalism with democracy would result in state intervention, a majority of the population desiring to point the economy in a certain direction. They understood that democracy, inevitably national, can coexist with capitalism so long as democratic politics is restricted to the realm of traditional beliefs and customs, not accompanied by clear-cut interests of class or country. Cultural warfare was fine and desirable, as long as free trade and private property remained sacred. Neoliberalism didn’t mean disconnecting the state from the market, but, as Slobodian observed, “encasing” capitalism in state-policed institutions, where democracy had no access. In other words, an ideological and institutional bubble was created, a perpendicular realm erected on top of a society powerless to act or react to this realm.

Slobodian describes the history of neoliberalism, of its doctrine and politics, as that of a group of extraordinary people — the globalists, thoroughly ‘networked’ in an era in which networking had not yet been invented. Renewing itself over three generations, the group held together from the end of WW1 (1918) to the creation of the World Trade Organization (WTO) in the 1990s, the new peak or return of the former zenith of international capitalism.

The globalizers were both academics and business men, but academics who understood that a theory can become historically true only if it is connected to the commanding heights of politics and the economy. In Mont Pelerin, Hayek assembled his sponsors and followers for his battle against Keynesianism and social democracy. Slobodian refers to these men as the ‘Geneva School,’ who sought to infiltrate the ranks of institutional power, mass media, and public awareness in their quest to make the world liberal again. The globalists took the long view and didn’t break when they faced ridicule, opposition, or failures. They were a peculiar group, slowly turning into a church of so-called organic intellectuals. During the ’70s, international capitalism began dismantling the post WW2 economic architecture. This architecture – ugly to the globalists due to things like government buffer stock policies, government owned public utilities, jobs programs, and a regulated financial system – produced the following results in the United States, as noted by Marriner Eccles in 1951.

“Unlike some countries that I could name, where the rich have been getting richer and the poor have been poorer, our own development during the past two decades has been just the opposite. […] We have gone far toward bringing about a more equitable distribution, than was the case 20 years ago, of the goods and services which we as a nation can produce. […] In 1929 the highest 5 percent of all income recipients obtained 34 percent of the total national income, while, at the present time, they received but 18 percent of the total. […] Meanwhile, the share of total income received by those in the lower income classes has increased proportionately. […] This means that we have in the years since 1929 accomplished one of the great social revolutions of history, a revolution that has developed gradually and has been, and will continue to be of great benefit to our entire nation.”

The globalist sect organized on all levels: seminars, meetings, university departments, collective publications, gave prizes for the young, made connections with sponsors while themselves bankrolling whoever might at some point prove worthy of recruitment. Dissent on theory was allowed, so long as such divergence didn’t imply differences in practice, and their theories were made flexible. With careful and sustained efforts, the Geneva globalists steered a huge number of institutions across the entire Western world — like the Rockefeller Foundation in New York, to the GATT [The General Agreement on Tariffs & Trade] in Geneva. Through these outlets, the globalists waged their war on the nation state [democratic or otherwise], which still threatened their influence over the economy.

Early on, the Right understood the full implications of the fundamental conflict between capitalism and democracy while parts of the Left were still dreaming of an international capitalism with a social dimension or human face to it. West Germany’s ordoliberals, like Franz Bohm and Wilhelm Ropke, were a major force on the international, globalist stage. They were tenacious neoliberals, contributors to the rise of anti-New Deal currents in the United States as early as the 1950s. In fact, Ludwig von Mises, one of the great theoretical economists of his age, was heavily involved in the concoction of the neoliberal blight. Hypocritically, the staunch market-liberal Mises died of old age in ’73, in New York, in the same rent-controlled apartment on the Upper West Side he had lived in for decades.

The globalists saw the European Union, in its successive incorporations, as a model of how to tame the democratic nation state through a legally enshrined supranational market, one with guaranteed property rights and an anti-interventionist competition law. Combining isonomy [equality of political rights] and supra-national law, the model was to be enforced by an international court, thereby circumventing national legal and political institutions, rendering them impotent. All these efforts were very much in line with the Hayekian federation project of the 1930s and 1940s. Slobodian clearly explains how extensive and future-orientated the neoliberal project was from the late ’30s. When German ordoliberals went to Brussels to help design the legal and institutional architecture of an integrated Europe, they were able to bring with them carefully thought-out institutional blueprints, incomprehensible in scope and consequence to many of those outside this refined cabal.

One case in point, among many, is the astonishing continuity and inner coherence of the life’s work of a true polymath like Friedrich Hayek. He was involved in the Viennese debates of the 1920s on socialist planning and its limits. Joseph Schumpeter and Karl Polanyi also participated in those debates. They continued in the ’30s, on the eve of World War II, as Hayek wrote about international federations that were to secure world peace and safely enshrine a liberal economy – albeit this latter aspect would be disguised as a byproduct of the integration. Shortly before this, Hayek had dissociated himself from Konjunkturforschung (the econometric and mathematical study of the business cycle), which he found too akin to Keynesian ambitions to ‘steer’ the economy. By doing this, he gave a clear message that Keynes was clueless about economics. Sadly for Hayek, as empirical analysis shows, it was the other way around.

As Slobodian writes, Hayek himself declared the capitalist market economy to be ‘sublime’ and beyond human comprehension, something to be left to itself – and if one interfered with it, many evils could be unleashed upon the world. This type of mysticism is not new in the history of Mankind. The early Islamic economists argued the same, in order to keep the Sultan from meddling in the affairs of the bazaar. Like Paul Samuelson confesses in this very short clip, which I encourage the reader to watch, it’s all about the establishment’s use of superstitions to control the narrative. Hayek developed wide-ranging, utopian ideas about the right kind of political institutions for [neo]liberal political economies, institutions designed to keep politics away from markets and protect the unknowable economy from the intervention of the uneducated and under-educated masses who wanted a better social contract than that offered by the establishment.

We’ll go back to Hayek in a moment, but to better understand the difference in means and the equality of ends, I must contrast the Geneva globalist approach to that of the bolsheviks. I will cite from the book/Manifesto, Der Geist des Militarismus, Stuttgart 1915, by Nahum Goldmann [a leading Zionist and founder of the World Jewish Congress], from the English translation housed in the collection of the Leo Baeck Institute, p.37 – 38.

“The historical mission of our world revolution is to rearrange a new culture of humanity to replace the previous social system. This conversion and reorganization of global society requires two essential steps, firstly the destruction of the old established order, secondly, the design and imposition of the new order, the first stage requires elimination of all frontier borders, nationhood and culture, public policy, ethical barriers and social definitions. Only then, the destroyed old system elements can be replaced by the imposed system elements of our new order.

The first task of our world revolution is destruction. All social strata and social formations created by traditional society must be annihilated. Individual men and women must be uprooted from their ancestral environment, torn out of their native milieus, no tradition of any type shall be permitted to remain as sacrosanct. Traditional social norms must also be viewed only as a disease to be eradicated. The ruling dictum of the new order is, nothing is good so everything must be criticized and abolished. Everything that was must be gone.

The forces preserving traditional society are “free market capitalism” in the social economic realm, and “democracy” in the mental political realm. The capitalist free market does not fight against the old economic order, nor does democracy lead a fierce hot battle against the forces of reaction which oppose the new order, therefore our transformative work will be imposed through the unifying principle of the militaristic spirit, the negative task of destroying the old established order will be completely solved and finished only when all the human masses are all forcibly collectivized as uniformed soldiers under imposed mass-conformity of new order culturing.

After destruction of the old order, construction of the new order is a larger and more difficult task […] We will have torn out the old limbs from their ancient roots in deep layers, social norms will be lying disorganized and anarchic so they must be blocked against new cultural forms and social categories naturally re-emerging. The general masses will have been first persuaded to join as equals in the first task of destroying their own traditional society and economic culture, but then the new order must be forcibly established through people again being divided and differentiated only in accordance with the new pyramidal hierarchical system of our imposed global monolithic new world order.

With the above paragraph in mind, let’s return to Hayek. The man arrived at his theory of ‘complexity’, drawing on neuropsychology and general systems theory. As far as he was concerned, this delivered the ultimate proof of the levity and uselessness of any collective human attempt to intervene in the course of history, economic or otherwise, with the exception, obviously, of himself and his Mont Pelerin Society comrades. Complexity theory, as understood by Hayek, defended an aristocratic social order, those at the top being the only ones that mattered. While Hayekianism has long become the working hypothesis of neoliberalized capitalism, Slobodian’s great merit is that he helps us see the connection between the admirable scholarship, and the sinister political plot behind it. Hayek’s theory of complexity was conceived to frustrate the adepts of state interventionism [be they marxists or non-marxists] and ensure that the world continued to operate according to the market principle of cumulative advantage, as summed up in the bible of all places, “For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.” (Matthew 25: 29). This, Hayek believed, and the neoliberals dutifully took from him, was still far better than social-democratic tampering with the mysteries of a hyper-complex global capitalism. The founder of the Austrian School of Economics, Carl Menger, didn’t have such ridiculous and esoteric beliefs regarding society. In fact, Menger was infinitely more sensible when it came to the state’s role in the economy. His view is summarized below…

Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations. These are not paternalistic measures to restrain the citizens’ activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured. Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they constitute major prerequisites for the prosperity of a modern state. The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts.” Carl Menger’s Lectures to Crown Prince Rudolf of Austria (ed. by Erich W. Streissler and Monika Streissler; trans. Monika Streissler and David F. Good), E. Elgar, Aldershot.

As we can see, the Mont Pelerin method of destroying sovereignty, democracy, and nationhood is far more tactful, suave, and intellectual compared to the brutal ways of the bolsheviks. And less we forget, the opposite of feudalism is nationalism, which is why, in the beginning of the article, I described the phenomenon as the Feudal Dominion of International Shareholders.

The beauty, I think, of the so-called free market [free for rent-seekers, usurers, and private cartels] is that it’s so fantastical, it ignores history and even double-entry bookkeeping. The religion of the free market is based on three core lies. They conflated land with capital. They conflated money [records of debits and credits] with commodities [like gold, grain, wool etc]. They conflated the government/state with any other household or corporation, claiming it has the same financial limits. These myths have been thoroughly debunked by many people across time and across the political spectrum [here’s one example] – but they are called zombie myths for a reason, because they refuse to die… It’s because we are indoctrinated with these false ideas from early childhood, 24/7, which makes it very difficult for the individual to unlearn these lies and replace them with the truth or something closer to the truth. When people become aware that their entire belief system is based on lies [shattered assumptions], most simply refuse to uninstall the faulty OS from their brain and just close themselves off to anything remotely heterodox in nature.

The Left rallies behind a ‘no border’ program it believes to be anti-capitalist, unaware or unwilling to recognize that the abolition of the nation state is a dream that their political counterparts held long before them. The overriding goal of the globalists was to abolish, if not the nation state completely, then its political capacity to govern itself, by exposing it to a competitive world economy with safely enshrined property rights, rights more akin to privileges, due to the deliberate conflation of Land [the Natural Commons] with Capital [the product of spent Labor], creating in effect a system of cartelized, rentier markets and an ideology of neo-feudalism. Anything that could provoke popular opposition to this had to take second place. If immigration on a large scale threatened to wake up sleeping dogs [mass movements], the globalists didn’t push it. This restraint had pragmatic reasons behind it, in the logic that competition in global markets for goods, services, and capital sufficed to do the trick and reduce nation states to mere regions in which some colorful flags with national inscriptions are waved. Failing this, immigration across open borders as a universal human right under international law was kept in reserve as another tool to soften up national solidarity by importing the international market for labor into the national political economy.

When it came down to the capitalist basics, the practical men from the MPS [Mont Pelerin Society] not only abandoned ‘racist’ objections to ‘multiculturalism’ and the like, but denounced them with much the same rhetoric as their apparent opponents on the radical Left. It’s important to note that the Mont Pelerin Society, the Frankfurt School, Post-Modernism, and other groups/currents like them [on the right and left] were heavily funded by Western oligarchs and Western Secret Services. Frances Stoner Saunders makes it abundantly clear in his book, The Cultural Cold War: The CIA and the World of Arts and Letters. The goals were fairly simple – substitute class interests and class antagonism with cultural, racial, gender, and sexuality issues, preach false solutions, and demoralize the population [the working class in particular].

Wolfgang Streeck ponders the following… Can the freedom of movement of labor [the fourth of the four trans-national freedoms of the neoliberal utopia] still be pushed while the other three are being pulled back into the confines of democratic, national politics? This also raises the issue of whether socially and economically mixed countries exposed to unfettered immigration [and migration] can muster the political will to fight internal inequality by protecting their societies from the vagaries of global markets. Is a country able to re-establish the national economic system without having control over its own immigration policy?

Wilfully neutered academics have engaged in mental gymnastics and fancy equations to come up with things like multi-level government, global governance, public choice, complexity, subsidiarity etc, taking them seriously on their face value and turning them into fashionable intellectual toys of a shallow social science, entirely unperturbed by its political irrelevance. Here there was a clear vision, a desire to make history through domesticated academics, simultaneously free and cut off from political and social responsibility. Compared to Slobodian’s globalists, the army of political scientists that specialized, mostly with funding from Brussels, in debating things like inter-governmentalism vs neo-functionalism, must appear hopelessly out of touch with the real world. But the globalists of Geneva and the Mont Pelerin Society and their audience understood what they were talking about, so well in fact they didn’t always have to be explicit about it, whereas their academic mouthpieces had no idea from which source their daily bread came. Taken out of context, however, these concepts became entirely arbitrary; they could mean whatever meaning one attributed to them. To avoid suspicion and criticism, euphemistic jargon was employed to wash out any association with capitalism – things like ‘integration’ and ‘social dimension’…

A better life for all, now or later, was enshrined in the so-called four freedoms: 1) the free flow of goods, 2) the free flow of services, 3) the free flow of [financial] capital, 4) the free flow of labor. The ‘no-borders’ Left wants to suspend the first three and keep the fourth. The economic nationalists wish to suspend all four. The liberal-dems wish to keep the first three and suspend the fourth. While the neoliberals want to keep all four. I wrote a while back on the fourth element in an article called Historical and Socialist Views on Immigration.

Capitalism was for the [mainstream] economists a sublime realm of esoteric mathematics. In contrast, the globalists had long given up on such mysticism, using the economic profession simply as a tool for propaganda to convince the dirty masses of what their ‘true needs’ were; the dictums were simple – tighten your belt if you wish to prosper – privatizing profits and socializing losses is good for the economy – usury and rent-seeking are “normal” economic activity… But the globalists had moved on to the realm of laws and political institutions, engineering the supreme instruments with which to castrate politics. Sovereign, democratic states were dangerous for them, because through these vehicles the mass of humanity would command greater bargaining power, to the detriment of the opulent minority. As such, the globalists had to turn the state vehicle into the great protector of [rentier] capitalism.

Yet hope remains and it comes from the East… I will end with this statement from April made by Russia’s Foreign Minister Sergey Lavrov: “The Western liberal model of development, which particularly stipulates a partial loss of national sovereignty – this is what our Western colleagues aimed at when they invented what they called globalizationis losing its attractiveness and is no more viewed as a perfect model for all. Moreover, many people in the very Western countries are skeptical about it.”

How the Allies guaranteed a 2nd World War

by Serban V.C. Enache

John Maynard Keynes, as a young adviser to the UK Treasury, successfully predicted another great conflict in Europe after what transpired at the so-called peace of Versailles. In preparation for the conference, Keynes argued that it would be better for Germany to owe no reparations, or a maximum of 2 million pound sterling at the most. He was in favor of a general forgiveness of war debts, including for Britain. Lastly, he wanted the US Government to begin a large credit program to quickly restore Europe to prosperity. But the Allies argued differently, and here is what they insisted on in Article 231 of the Versailles treaty on war debt (1919).

“The Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies.”

Let’s compare the cold sentiments of Versailles to the peace of Westphalia from 1648, which put an end to the Thirty Years’ War.

Article I: “[…] And this Peace must be so honest and seriously guarded and nourished that each part furthers the advantage, honor, and benefit of the other… A faithful neighborhood should be renewed and flourish for peace and friendship, and flourish again.”

Article II: “On both sides, all should be forever forgotten and forgiven. What has from the beginning of the unrest, no matter how or where, from one side or the other, happened in terms of hostility, so that neither because of that, nor because of any other reason or pretext, should commit, or allow to happen, any hostility, unfriendliness, difficulty, or obstacle in respect to persons, the status, goods, or security himself, or through others, secretly or openly, directly or indirectly, under the pretense of the authority of the law, or by the way of violence within the Kingdom, or anywhere outside of it, and any earlier contradictory treaties should not stand against this. Instead, all and every, from here as well as from there, both before as well as during the war, committed insults, violent acts, hostilities, damages, and costs, without regard of the person or the issue, should be completely put aside, so that everything, whatever the one could demand from the other under his name, will be forgotten in eternity.”

Keynes described the Versailles conference as a clash of values and world views among the principal leaders, “the cynical traditions of European power politics [vs] the promise of a more enlightened order.” Keynes held Woodrow Wilson as the game maker. “When President Wilson left Washington he enjoyed a prestige and a moral influence throughout the world unequalled in history. […] The enemy peoples trusted him to carry out the compact he had made with them; and the Allied peoples acknowledged him not as a victor only but almost as a prophet. In addition to this moral influence the realities of power were in his hands.”

In 1919, Keynes wrote The Economic Consequences of the Peace in which he criticized the Versailles treaty and its authors, while accurately predicting its grave socio-economic and political effects: high inflation, stagnation, and revanchism. He had two main points: that the treaty made it economically impossible for Europe to revive itself, and that the Allies had betrayed the tenets of the Armistice, in which they pledged to the defeated side a degree of fairness with regard to territorial and economic impositions. He judged these violations as a stain on the honor of the Allies and a primary cause for a future conflict. His prediction, that another war would begin in the next twenty years, was surgically precise.

Keynes wrote:

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. […] Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. […] Economic privation proceeds by easy stages, and so long as men suffer it patiently the outside world cares very little. Physical efficiency and resistance to disease slowly diminish, but life proceeds somehow, until the limit of human endurance is reached at last and counsels of despair and madness stir the sufferers from the lethargy which precedes the crisis. The man shakes himself, and the bonds of custom are loosed. The power of ideas is sovereign, and he listens to whatever instruction of hope, illusion, or revenge is carried to them in the air. […] But who can say how much is endurable, or in what direction men will seek at last to escape from their misfortunes?”

Woodrow Wilson’s Fourteen Points [of the Armistice] had been widely disseminated in Germany prior to the end of the war, and were well known by the German public. Sadly, these promises turned out to be nothing but propaganda. The clear gap between this document and the final treaty of Versailles caused great anger in Germany and fueled ultra nationalist sentiments.

There’s a prevalent myth out there, which states that the nazis came to power in Germany due to hyperinflation. It can be easily debunked through the following observations…

Germany did experience hyperinflation in the early 1920s. By October 1922, the mark stood at 130 billion to the dollar. Marks had to be carried in wheelbarrows and life savings were wiped out. Yet the inflationary spiral was brought under control in November 1923 largely through the efforts of Hjalmar Schacht, currency commissioner and president of the Reichsbank and Finance Minister Hans Luther. For an in depth explanation of their policies, see this previous article.

With inflation in check by 1924, Germany entered a time of relative growth. Hitler, while active in German politics, was consigned to the political fringe. Beginning in late 1929, the German economy fell victim to the Great Depression. Industrial production, employment, and sales fell in the early ’30s , while Hitler’s support increased. Price inflation was nonexistent. Rather, by 1933, when Hitler became Chancellor, prices were going down as a result of collapsing demand. Price deflation is good when nominal economic growth is positive, not negative. Tight credit and tremendous unemployment left millions of people with very few marks to spend on anything.

What brought the nazis to power if not hyperinflation? Austerity! During the years of skyrocketing prices, the percentage of the nazis [NSDAP] ranged below 4 percent (see the 1928 elections). The Government imposed harsh austerity measures in the early 1930s [after the hyperinflation had been reined in]; this increased unemployment drastically and it also gave the nazis their first success (18.5 percent in September 1930). Two years later, the ever growing levels of unemployment and poverty drove Hitler to 37.2 percent in the 1932 elections. This graph speaks for itself.

In 5 years time (between ’33 and ’38), the Nazi Government rebuilt the army, built industries and infrastructure, eliminated unemployment, real wage growth was in the double digits – and all of this in a climate of price stability. As such, contrary to popular mythology, the hyperinflation years didn’t bring the nazis to power. What brought them to power was private debt deflation in combination with harsh fiscal austerity. The end of WW1 wasn’t the end of ‘the war to end all wars.’ Sadly, it was the groundwork for a new one, far deadlier than the first.

In an interview with William Buckley, the founder of the British Union of Fascists, Oswald Mosley, explained why Hitler got into power in Germany and why he didn’t in the UK.

“When I began, in the following six years, right until Roosevelt’s doubling of the price of gold and many other things of that sort, unemployment in Britain was halved. Those six years before Hitler came to power, unemployment in Germany was quadrupled. Now, all those things, and your analysis of the English character, simply depend on the economic situation. Neither fascism, communism, nor any new policy, whether decent, humane, or not, will succeed ever, unless you have a grave economic crisis. That’s the only thing which moves people at all.”

Liberals are so terrified of the profound psycho-political impact of economic crises [second only to war itself and similar in some ways], they dare not speak of such phenomena even when they are happening, nor admit that crises, even unmediated, have severe psychological consequences. The liberals practice this fetishistic disavowal. That’s why the status quo [the so-called center left and center right] is so dangerous to public order and peace itself. It’s a paradox, and paradoxes are nature’s way of telling us [observers] that we’re missing something, that something new waits to be discovered. By shunning alternate points of view and trying to silence them outright, the center misses the dialectic and loses the moral legitimacy in the eyes of increasingly larger sections of the population. I personally hold the creditors of the Versailles treaty, Britain, France, and the US, responsible for nurturing what was to become the most devastating conflict in human history.

Edward Harrison wants to spread Georgism

by Serban V.C. Enache

Edward Harrison wrote a short entry on his blog about 19th century economist Henry George and why he wishes to spread the word of Georgism to today’s audience. He shared it on twitter too. I salute Mr. Harrison’s ambition and hope his efforts will be well-received.

I must point out, though, that in his blog post, Mr. Harrison is wrong about George and Georgism focusing only on land-rents and not on patents too. Here’s what George wrote in 1888 on the subject of copyrights and patents. I’ll cite just a paragraph; the reader can see the rest by visiting the cooperative individualism website, linked earlier.

“The patent, on the other hand, prohibits any one from doing a similar thing, and involves, usually for a specified time, an interference with the equal liberty on which the right of ownership rests. The copyright is therefore in accordance with the moral law–it gives to the man who has expended the intangible labor required to write a particular book or paint a picture security against the copying of that identical thing. The patent is in defiance of this natural right. It prohibits others from doing what has been already attempted. Every one has a moral right to think what I think, or to perceive what I perceive, or to do what I do–no matter whether be gets the hint from me or independently of me. Discovery can give no right of ownership, for whatever is discovered must have been already here to be discovered. If a man make a wheelbarrow, or a book, or a picture, he has a moral right to that particular wheelbarrow, or book, or picture, but no right to ask that others be prevented from making similar things. Such a prohibition, though given for the purpose of stimulating discovery and invention, really in the long run operates as a check upon them.”

Clearly patents are just another form of rent-seeking, and nations ought to abolish them… In his blog post, Mr. Harrison quotes a man’s opinion on land-value taxation, albeit it’s beyond me what Tyler Cohen from George Mason University has to bring to the discussion table, since he’s a deficit dove and clearly not an authority on Georgism, given his shallow take on the subject matter, evident in the passages Harrison quoted from him. I think it’s better to cite the wise dead in the aim of popularizing taxation of wealth extraction and untaxing wealth creation, than relying on the psuedo-understanding of contemporary self-seeking economists. Just my two cents. Lots of luck, Mr. Harrison, and welcome to the club.