WEBVTT

NOTE The Polish Disease

1
00:00:00.000 --> 00:00:07.000
I just got to show how the libertarian free market network is expensive and a little pervasive.

2
00:00:07.000 --> 00:00:21.000
When I got to Fred's house today and I came in from my plane rides, I was handed a letter from somebody at Stanford who had just seen a newspaper article on Polish economy and wanted me to have it as I spoke.

3
00:00:21.000 --> 00:00:29.000
I mean, that's really terrific. With a budget of $2, the libertarian movement is doing pretty well.

4
00:00:29.000 --> 00:00:41.000
Socialism is now, I think intellectually, and even as reputation in general, is dead from the neck up.

5
00:00:41.000 --> 00:00:47.000
Socialism used to be defined, I would still define it if you wanted to define socialism,

6
00:00:47.000 --> 00:00:52.000
as government ownership of the means of production, or at least control of the means of production.

7
00:00:52.000 --> 00:01:21.000
And the interesting thing about the socialist system, since half the world is now socialist in this sense, the interesting thing about socialism is that as one after the other country went socialist, the socialist in the United States said, that's not socialism, that's not what I meant by it, I meant something much more humanistic and lovable.

8
00:01:21.000 --> 00:01:28.000
And so each socialism, each record, each empirical record of socialism has been repudiated in turn.

9
00:01:28.000 --> 00:01:36.000
So that we have a very peculiar situation where the socialists in the western world keep saying that's not socialism.

10
00:01:36.000 --> 00:01:45.000
If you keep, you know, go down the record, okay, let's see what Cambodia did, for example, under Pol Pot, killing one third of the population, etc., etc.

11
00:01:45.000 --> 00:01:52.000
That's not social. That's not what we meant by social. What we meant by social is something where people sit around and read Play-Doh.

12
00:01:52.000 --> 00:02:01.000
So, they keep denying the responsibility for the consequences of their own position.

13
00:02:01.000 --> 00:02:04.000
Socialism, I don't think, has a very good reputation anymore.

14
00:02:04.000 --> 00:02:09.000
And certainly in the Eastern European countries, I'll get to that in a second, in a minute,

15
00:02:09.000 --> 00:02:15.000
doesn't have a very good reputation either, probably a less good reputation than it does here.

16
00:02:15.000 --> 00:02:22.000
The article I was sent was from the Los Angeles Times for December 26th, which deals with, says,

17
00:02:22.000 --> 00:02:26.000
rules bent to work Poland's crazy quill economy.

18
00:02:26.000 --> 00:02:30.000
And it's a dateline from Warsaw, Los Angeles Times.

19
00:02:30.000 --> 00:02:38.000
It starts off by saying that the manager of a coal mine on Silesia won official praise and bonuses for the mine's impressive production.

20
00:02:38.000 --> 00:02:43.240
But, that was before the authorities discovered he had ordered his workers to mix rock with

21
00:02:43.240 --> 00:02:48.040
a coal out of the mine to boost production figures.

22
00:02:48.040 --> 00:02:51.640
And this sort of sums things up.

23
00:02:51.640 --> 00:02:56.560
In a socialist country you don't have a real price system, I'll get to that a little later

24
00:02:56.560 --> 00:02:57.560
too.

25
00:02:57.560 --> 00:03:01.240
You don't have a price system, you can't, no profit and loss test.

26
00:03:01.240 --> 00:03:06.660
And so almost inevitably the socialist managers decide on quantitative figures, you must produce,

27
00:03:06.660 --> 00:03:13.260
Do you produce, you know, X million board feet of lumber, or of coal in this case?

28
00:03:13.260 --> 00:03:19.300
Well, okay, if the managers are quite intelligent, they know that their brownie points, if they

29
00:03:19.300 --> 00:03:23.400
get, if they produce a lot of board feet of lumber or a lot of coal, they get promoted

30
00:03:23.400 --> 00:03:24.400
or get raises.

31
00:03:24.400 --> 00:03:31.260
If they produce less, they get demoted or maybe sometimes go to the rock pile.

32
00:03:31.260 --> 00:03:35.380
So they do their best, and the incentive, the economic incentive they have is to boost

33
00:03:35.380 --> 00:03:37.440
quantitative figures

34
00:03:37.440 --> 00:03:40.360
even if half the people sort of break their leg in the attempt

35
00:03:40.360 --> 00:03:44.860
in the case of coal, if you mix rock with coal, you obviously can get more coal per unit effort

36
00:03:44.860 --> 00:03:46.660
that's what they did

37
00:03:46.660 --> 00:03:48.720
in the case of the soviet union

38
00:03:48.720 --> 00:03:52.100
years ago they measured by board feet, you must produce

39
00:03:52.100 --> 00:03:55.820
you produce x million board feet of lumber, they produced x million board feet

40
00:03:55.820 --> 00:03:59.720
except they were very very narrow pieces of lumber

41
00:03:59.720 --> 00:04:03.220
so uh...

42
00:04:03.220 --> 00:04:08.220
You don't have a power, they produce nails, and the nails buckle every time you try to hammer the nail.

43
00:04:08.220 --> 00:04:13.220
So you have a situation where, if you go by quantitative figures, you always get messed up.

44
00:04:13.220 --> 00:04:16.220
In the sense of the Polish disease.

45
00:04:16.220 --> 00:04:21.220
And they go on to say, it's kind of cute, as one Westerner in Warsaw put it,

46
00:04:21.220 --> 00:04:27.220
about Poland, about the crazy quote, economic regulations,

47
00:04:27.220 --> 00:04:32.220
everybody's ripping off everybody else, and since government agencies are the biggest and most tempting targets,

48
00:04:32.220 --> 00:04:43.220
They are being ripped off more than anyone else and they had done this by pure, you know, by mineral quantitative coal production and all that and so this is what happened.

49
00:04:43.220 --> 00:04:50.220
So this is just one indication, one small microcosm of what happens in socialist countries in general.

50
00:04:50.220 --> 00:04:59.220
The managers take over, indeed there's nobody else to take over, the managers, there's no price system, there's no rational economic allocation.

51
00:04:59.220 --> 00:05:03.920
And so the managers take over and run things on the basis of what the central planners,

52
00:05:03.920 --> 00:05:10.220
what rules the central planners lay down, whether it's board feed or funds of coal or whatever.

53
00:05:10.220 --> 00:05:16.220
One interesting thing is, and one of my least favorite economists, John Kenneth Galbraith,

54
00:05:16.220 --> 00:05:22.820
claims that in the United States the managers have taken over, they're really running things.

55
00:05:22.820 --> 00:05:28.420
The stockholders don't matter, the managers are operating the corporations for their own purposes.

56
00:05:28.420 --> 00:05:58.420
I think it's a lot of baloney, but the point is, there is an area of the economy both in the United States and the rest of the world where this happens, the managers have taken over, which somehow Galbraith never mentions, namely government, government agencies, government bureaus, the post office, all of Poland, all of Russia, everything else, these are, this is the managerial revolution, managers have taken over, they've messed everything up, quite clearly. I remember, by the way, when I was growing up, there used to be radio debate,

57
00:05:58.420 --> 00:06:04.580
and about Socialism versus Capitalism, and they usually have a Socialist, with Socialists

58
00:06:04.580 --> 00:06:09.700
usually Norman Thomas who ran, seems like 20 times for president, nothing less than that,

59
00:06:09.700 --> 00:06:14.100
I mean it seems like it, perennial Socialist Party candidate for president, and a Capitalist

60
00:06:14.100 --> 00:06:19.620
was always some, well I guess I shouldn't say dumb, but less than articulate congressman

61
00:06:19.620 --> 00:06:26.140
somewhere, right, Republican congressman, and these were, this would be, this would

62
00:06:26.140 --> 00:06:30.140
This would be the opposition, and the socialists, Norman Thomas or whoever, would say the following,

63
00:06:30.140 --> 00:06:35.140
Look, we don't want to threaten anybody. All we want is a world run like a post office.

64
00:06:39.140 --> 00:06:43.140
Government has to run a post office right, right. Of course, the Republican congressman would always say,

65
00:06:43.140 --> 00:06:48.140
Of course, the government has to run a post office. And then Norman Thomas or whoever would always win the debate.

66
00:06:48.140 --> 00:06:53.140
Of course, nobody would ever say that now. The post office is so messed up that no socialists would dare to say,

67
00:07:23.140 --> 00:07:37.140
The quality is always going down, so the quality of service, I'm old enough to remember, one of the few advantages of being older is you can still remember what happened 40 years ago.

68
00:07:37.140 --> 00:07:47.140
I can remember quite clearly that they used to pick up the mail and deliver the mail twice a day in your apartment, twice a day, once at 9 a.m. and once at 1 p.m.

69
00:07:47.140 --> 00:07:58.140
Now, of course, that's all shot, and Saturday mail is next to go, of course, and so the constant decline in service along with, of course, the mail takes longer to get there.

70
00:07:58.140 --> 00:08:02.140
Friends of mine in Canada are tearing their hair out, and the postal service is even worse than here.

71
00:08:02.140 --> 00:08:08.140
Also, of course, socialized postal service, where it literally takes three weeks to get a letter from here to Canada.

72
00:08:08.140 --> 00:08:15.140
I'm not talking about out on the tundra or the Eskimo, I'm talking about in the cities.

73
00:08:15.140 --> 00:08:25.140
All right, at any rate, that's another thing, since I'm on Galbraith, I'm tangential, I admit it's a tangent.

74
00:08:25.140 --> 00:08:31.140
That's one of my favorite topics. Galbraith in the affluent society is always attacking advertising, the evils of advertising.

75
00:08:31.140 --> 00:08:38.140
People get sucked into buying products because they see pretty girls using diet Pepsi.

76
00:08:38.140 --> 00:08:46.140
And so they rush out to buy Diapesti, because they think they can win all these pretty girls and keep drinking it.

77
00:08:46.140 --> 00:08:53.140
The real... I don't know anybody who buys Diapesti for that reason, but anyway, let's set that aside.

78
00:08:53.140 --> 00:08:56.140
The really fraudulent advertising is government advertising.

79
00:08:56.140 --> 00:09:00.140
Politicians who claim they're going to cure this, that and the other thing never do it.

80
00:09:00.140 --> 00:09:03.140
And all the rest of it, and Galbraith never mentions that, never.

81
00:09:03.140 --> 00:09:07.140
Never in his book does he talk about government advertising, which is a real fraudulent area,

82
00:09:07.140 --> 00:09:09.900
Because that's the area where the consumers have no check.

83
00:09:09.900 --> 00:09:14.780
See, if somebody holds up Diet Pepsi and says, boy, that's good,

84
00:09:14.780 --> 00:09:17.580
and you rush out and say, boy, if this pretty girl likes it,

85
00:09:17.580 --> 00:09:21.060
or a too tall Jones likes it, you rush out and buy it,

86
00:09:21.060 --> 00:09:22.220
because they like it.

87
00:09:22.220 --> 00:09:25.660
If you have your very own moral, maybe you'll think that way.

88
00:09:25.660 --> 00:09:27.220
And you rush out and drink it.

89
00:09:27.220 --> 00:09:30.500
If you don't like it, that's the last Diet Pepsi you'll ever drink.

90
00:09:30.500 --> 00:09:33.740
OK, in other words, there's a market test for Diet Pepsi.

91
00:09:33.740 --> 00:09:36.060
If it works in your sense, then you'll keep buying it.

92
00:09:36.060 --> 00:09:51.060
If it doesn't work, you won't buy it. There's no market test for government. It's all very cloudy. Every four years, you elect somebody who's about the same as somebody else, and then four years later, you've forgotten what he said, because it's all one big four-year package deal.

93
00:09:51.060 --> 00:10:03.060
The consumer, in other words, the voter, has no chance to vote on specific issues. So there's the real fraud. There's the real advertising problem, and Galbraith never mentions it. Never, ever, ever. Not only Galbraith, but all the other Galbraithians.

94
00:10:03.060 --> 00:10:09.060
Okay, that's the end of my Galbraith lecture for today.

95
00:10:09.060 --> 00:10:18.060
Okay, the basic, in socialism, getting to the more theoretical aspects of socialism in general,

96
00:10:18.060 --> 00:10:21.060
the socialists have always realized that they have a problem.

97
00:10:21.060 --> 00:10:26.060
They've always realized, I'm talking about Pol Pot and embarrassing things like that.

98
00:10:26.060 --> 00:10:30.060
They've always realized for many years they have a basic economic problem.

99
00:10:30.060 --> 00:10:36.060
And namely, it used to be summed up when I was growing up, who's going to take out the garbage?

100
00:10:36.060 --> 00:10:46.060
The social society. If everybody gets equal income, et cetera, et cetera, everybody does what he wants to do, whatever it is, who's going to take out the garbage?

101
00:10:46.060 --> 00:10:52.060
That's an interesting question. It's a very profound question. It's essentially the incentive problem.

102
00:10:52.060 --> 00:10:59.060
Who will have the incentive to go out there and shovel garbage eight hours a day, or ten hours a day, or whatever?

103
00:10:59.060 --> 00:11:05.060
And this is, I'd say this has been recognized by the socialists.

104
00:11:05.060 --> 00:11:09.060
The basic socialists' view is, the basic really gut socialists' view is,

105
00:11:09.060 --> 00:11:12.060
summed up in the famous Marxian slogan,

106
00:11:12.060 --> 00:11:15.060
from each according to his ability to each according to his needs.

107
00:11:15.060 --> 00:11:18.060
Now we have to add her ability, her needs to this.

108
00:11:18.060 --> 00:11:21.060
So everybody contributes sort of like a common heap.

109
00:11:21.060 --> 00:11:24.060
Everybody works, works very hard for the collective

110
00:11:24.060 --> 00:11:28.060
and contributes his or her production of a common heap, whatever the production is.

111
00:11:28.060 --> 00:11:33.060
as fast as he can because he's working for the collective, and then he takes out whatever he needs, okay?

112
00:11:33.060 --> 00:11:38.060
Sounds terrific maybe, it doesn't sound terrific to me, but maybe to some people it sounds terrific.

113
00:11:38.060 --> 00:11:45.060
At any rate, the more sophisticated socialists immediately recognize they had a problem here.

114
00:11:45.060 --> 00:11:49.060
Problem? There's kind of a negative incentive here.

115
00:11:49.060 --> 00:11:55.060
In other words, if you're a member of a huge collective that's going out and working hard and contributing in a heap,

116
00:11:55.060 --> 00:12:03.060
The incentive is not to work very hard, to sort of goof off and snooze behind the tree and then zip in and get in and inquire your needs, okay?

117
00:12:03.060 --> 00:12:08.060
Because whatever you do doesn't contribute much to the common heap, contributes maybe one one millionth.

118
00:12:08.060 --> 00:12:13.060
If you work very hard, you contribute one one millionth more to the common heap. It's nothing.

119
00:12:13.060 --> 00:12:19.060
Peanuts, on the other hand, you can grab from the common heap, you know, it's 100% your own consumption.

120
00:12:19.060 --> 00:12:24.060
That's a real problem, it's an obvious problem. Who's going to take out the garbage in social society?

121
00:12:24.060 --> 00:12:30.460
Society. There's a couple of little examples of this I can mention, sort of interesting.

122
00:12:30.460 --> 00:12:36.500
When the United States was founded, when America, North America was founded, the first two colonies

123
00:12:36.500 --> 00:12:41.740
were Plymouth Rock in Massachusetts and the Jamestown colony in Virginia. Both of them

124
00:12:41.740 --> 00:12:47.940
engaged immediately in communism. I'm using communism in a small C, in other words, a

125
00:12:47.940 --> 00:12:49.940
in a philosophical sense.

126
00:12:49.940 --> 00:12:53.940
In other words, they both had a communal, they were run by a corporation from England,

127
00:12:53.940 --> 00:12:57.940
and everybody, there was no private property, everybody was supposed to contribute to the common heap,

128
00:12:57.940 --> 00:13:01.940
whatever grain he grew and all that sort of stuff, and then take whatever he needed from the common store.

129
00:13:01.940 --> 00:13:04.940
They engaged in a pure communist system.

130
00:13:04.940 --> 00:13:08.940
Not only did it work, but everybody was starving, as a result.

131
00:13:08.940 --> 00:13:11.940
And the thing is, it didn't work even though everybody knew they were starving.

132
00:13:11.940 --> 00:13:16.940
First of all, there weren't 200 million people in James Downer, there were only a couple of thousand.

133
00:13:16.940 --> 00:13:20.180
it still didn't work, even though everybody knew in their gut

134
00:13:20.180 --> 00:13:22.380
they didn't produce more wheat, they'd starve

135
00:13:22.380 --> 00:13:24.320
everybody knew in his heart

136
00:13:24.320 --> 00:13:26.480
despite all the exhortations by the

137
00:13:26.480 --> 00:13:28.140
head of a colony

138
00:13:28.140 --> 00:13:31.320
all the moral injunctions, they knew what each person knew in their heart

139
00:13:31.320 --> 00:13:33.060
I mean, if I could work

140
00:13:33.060 --> 00:13:35.780
twenty hours a day, it's not going to contribute much to the common heap

141
00:13:35.780 --> 00:13:37.180
so what the hell with it

142
00:13:37.180 --> 00:13:40.580
but if I grab from the common heap, it'll contribute a lot to me, so the result is

143
00:13:40.580 --> 00:13:45.300
nobody worked much and everybody grabbed, the result, no more wheat left

144
00:13:45.300 --> 00:13:50.160
So we have a fundamental situation when both in Jamestown and in Plymouth Rock

145
00:13:50.160 --> 00:13:52.280
the colony almost died out from starvation

146
00:13:52.280 --> 00:13:55.200
finally driven to the in extremis

147
00:13:55.200 --> 00:13:58.500
even though it went against their ideological preconceptions

148
00:13:58.500 --> 00:14:03.360
the heads of the governors of Plymouth Colony and Virginia said

149
00:14:03.360 --> 00:14:07.240
Virginia, I'm sorry folks, they used a much more elegant 17th century language

150
00:14:07.240 --> 00:14:10.540
I'm sorry folks, I guess we have to have private property

151
00:14:10.540 --> 00:14:14.580
and we now have every person having 30 acres or whatever it is

152
00:14:14.580 --> 00:14:21.380
Each person will get whatever he grows, and bingo, presto, chango, a colony flourished,

153
00:14:21.380 --> 00:14:23.980
salvation was over and everybody was prosperous.

154
00:14:23.980 --> 00:14:29.660
This made a tremendous impact, sort of a practical impact on the American colonists, because

155
00:14:29.660 --> 00:14:33.060
they saw it right away, communism leads to salvation, private property leads to prosperity.

156
00:14:33.060 --> 00:14:39.380
It was a very simple sort of controlled experiment in a sense.

157
00:14:39.380 --> 00:14:41.900
That's one point I will mention.

158
00:14:41.900 --> 00:14:46.100
A very interesting point, which is truly fictional, but it's kind of interesting anyway.

159
00:14:46.100 --> 00:14:50.760
A beautiful, very, very funny novel appeared a couple of years ago by Sarah McFadden called

160
00:14:50.760 --> 00:14:56.380
Serial about Marin County and the crazies who infest it in California.

161
00:14:56.380 --> 00:15:02.900
And she went to an urban commune, in other words, lived in a house with 20, 10 people

162
00:15:02.900 --> 00:15:07.300
or something, none of whom knew each other, but they were all supposed to be communal.

163
00:15:07.300 --> 00:15:11.180
And she noticed very quickly that there's one guy there who never washed his own dishes.

164
00:15:11.180 --> 00:15:16.020
Well, he left the rest of the commune to wash his dishes.

165
00:15:16.020 --> 00:15:19.180
And when she challenged him on that, he said, I'm not into dishes.

166
00:15:19.180 --> 00:15:24.780
I don't know anybody who is into dishes.

167
00:15:24.780 --> 00:15:29.100
But anyway, that commune collapsed pretty quickly too.

168
00:15:29.100 --> 00:15:34.260
And this is only like 10 people, it's not even like several hundred.

169
00:15:34.260 --> 00:15:40.300
The incentive then is negative, and socialists, I think, have realized for a long time they

170
00:15:40.300 --> 00:15:41.300
have an incentive problem.

171
00:15:41.300 --> 00:15:43.300
What then to do about it?

172
00:15:43.300 --> 00:15:45.820
Well, there are several ways of handling it.

173
00:15:45.820 --> 00:15:50.620
In the New Left period, it was quite common to say, well, it's true, everybody should

174
00:15:50.620 --> 00:15:53.140
get according to his needs, but we scale down the needs.

175
00:15:53.140 --> 00:15:57.820
I don't know who's the we here, and it gets kind of fuzzy.

176
00:15:57.820 --> 00:15:59.020
Everybody should have very little needs.

177
00:15:59.020 --> 00:16:17.020
See, if everybody was willing to subsist on only yogurt and dried nuts and whatever, and electronic guitars, of course, then we wouldn't need much, and then the whole problem would be sort of eliminated.

178
00:16:17.020 --> 00:16:20.020
I don't think that's going to get very far either.

179
00:16:20.020 --> 00:16:25.020
The one problem with that is, you see, who determines who needs what?

180
00:16:25.020 --> 00:16:34.020
I was arguing with a socialist one time. He said, we will have a computer. We established a socialist Commonwealth.

181
00:16:34.020 --> 00:16:38.020
A computer will figure out what plug-in everybody needs and we assign the needs to everybody.

182
00:16:38.020 --> 00:16:41.020
It's very simple. We don't need any prices or private property.

183
00:16:41.020 --> 00:16:51.020
I said, yeah, but I need a lot of things, baby. I need yachts and I need 10,000 books and big stereo sets.

184
00:16:51.020 --> 00:16:55.020
And how about that? He said, well, of course, needs have to be reasonable.

185
00:16:55.020 --> 00:17:01.020
The other question is, who defines the other person's reasonable needs?

186
00:17:01.020 --> 00:17:07.020
Obviously, some damn collective at some committee or whatever is going to define you need such-and-such.

187
00:17:07.020 --> 00:17:10.020
Well, I think this guy, he doesn't need to go with such-and-such.

188
00:17:10.020 --> 00:17:14.020
And you wind up with a totalitarian system.

189
00:17:14.020 --> 00:17:21.220
Okay, but even if you do that, so what about the supply problem?

190
00:17:21.220 --> 00:17:26.320
How do you get people to work hard if they know they themselves are not going to benefit much?

191
00:17:26.320 --> 00:17:30.020
It's all going to go to the collective.

192
00:17:30.020 --> 00:17:34.720
And so the basic socialist answer to that is quite, well, it's simple in theory, it's not so simple in practice.

193
00:17:34.720 --> 00:17:41.020
The basic socialist answer to that, the way we overcome the incentive problem is by creating and transforming human nature.

194
00:17:41.020 --> 00:17:46.020
Create the New Socialist Man, Capital N, Capital S, Capital M, or New Socialist Woman.

195
00:17:46.020 --> 00:17:56.020
The New Socialist Man will be different. He or she won't be acquisitive, won't be interested in, won't be worried about the fact that if he works 20 more hours, he'll get only one peanut.

196
00:17:56.020 --> 00:18:03.020
He will be happy and proud and honored to work for the collective, work his guts out for the collective.

197
00:18:03.020 --> 00:18:10.020
And that's the sort of man we have to transform. This is, I think, the basic reason why Soviet Russia and China, etc., Cambodia, whatever,

198
00:18:10.020 --> 00:18:14.420
or whatever, tried, when they got in, they tried using every sort of coercive method,

199
00:18:14.420 --> 00:18:18.420
because obviously it has to be coercive, how else are you going to do it?

200
00:18:18.420 --> 00:18:22.500
They tried to use all sorts of brainwashing torture methods to try to transform human

201
00:18:22.500 --> 00:18:23.500
nature fast.

202
00:18:23.500 --> 00:18:27.860
They tried to shape everybody up to become, to make, to have this mold of a new altruist

203
00:18:27.860 --> 00:18:31.220
man who will then work hard for the collective.

204
00:18:31.220 --> 00:18:35.620
I remember, fortunately for us, even that didn't work.

205
00:18:35.620 --> 00:18:41.660
I remember I saw a fellow traveling movie about China about 10, 15 years ago where everybody

206
00:18:41.660 --> 00:18:47.300
was a chilling series of interviews by the interviewer with a supposed to be a typical

207
00:18:47.300 --> 00:18:51.100
Chinese family and they said, well, what do you want your children to be when they grow

208
00:18:51.100 --> 00:18:56.260
up? And they said, we want them to work hard for the collective. The question is, did they

209
00:18:56.260 --> 00:19:05.260
really mean it? Were they really brainwashed to that extent? Was the human spirit so deteriorated

210
00:19:05.260 --> 00:19:08.260
and Smash, were they really thought this way, were they really robots?

211
00:19:08.260 --> 00:19:15.260
Well, fortunately, my friend or acquaintance, Gordon Pollock, who some of you may know as a distinguished economist,

212
00:19:15.260 --> 00:19:20.260
he started off his life as a Chinese expert. He was a China hand in the State Department.

213
00:19:20.260 --> 00:19:25.260
And he was then prisoner of Chinese Communists when he took over in 1949.

214
00:19:25.260 --> 00:19:29.260
Anyway, so I asked him, well, you're a Chinese expert, are these the Chinese really?

215
00:19:29.260 --> 00:19:32.260
The 600 million Chinese that really love the State now, now forget it.

216
00:19:32.260 --> 00:19:39.260
He says, in ancient Chinese tradition, they always tell the boss, you know, somebody coming from Peking or Nanking, they always tell him what he wants to hear.

217
00:19:39.260 --> 00:19:44.260
On a local level, I think it's all baloney. Of course, it turns out he was right, in other words.

218
00:19:44.260 --> 00:19:53.260
It turns out, after 20, 30 years of brainwashing, the free market is making an enormous, remarkable comeback in China.

219
00:19:53.260 --> 00:20:03.260
The guy's responsible for the so-called transformation of the socialist man now in jail and being locked up and being in prison or whatever.

220
00:20:03.260 --> 00:20:11.260
So this comes right in. If you're supposed to be working hard not to get...

221
00:20:11.260 --> 00:20:17.260
In the socialist world, this is the so-called argument between material incentives and moral incentives.

222
00:20:17.260 --> 00:20:24.260
The new socialist man will not be interested in mere material income. He or she will work his guts out for moral incentives.

223
00:20:24.260 --> 00:20:31.260
What does moral incentives mean? Well, it means like a medal. Hero of the Hanobite labor, or hero of the Chinese revolution.

224
00:20:31.260 --> 00:20:40.260
Well, fortunately, it didn't seem to work. And the moral incentives have always collapsed.

225
00:20:40.260 --> 00:20:44.260
This was a big debate in Cuba between Castro and Che Guevara.

226
00:20:44.260 --> 00:20:49.260
Che Guevara being in favor of moral incentives and finally they have to get sort of sent them off to Bolivia to get shot

227
00:20:49.260 --> 00:20:59.260
and shift over to material incentives. So it seems pretty clear then that the new socialist man hasn't worked. There is no new socialism.

228
00:20:59.260 --> 00:21:03.260
There's just a bunch of people who are looking for material incentives and trying hard to get it.

229
00:21:03.260 --> 00:21:09.260
Friends of mine who were Russian experts who visited Russia recently said that nobody believes in this junk anymore.

230
00:21:09.260 --> 00:21:20.260
Nobody is a Marxist in Russia anymore, they don't believe in the government, they're all purely cynical, they're just caught in this bureaucratic thing and they're trying to do the best they can within this maze.

231
00:21:20.260 --> 00:21:27.260
Which I think links up to all the other information we were getting out of there.

232
00:21:27.260 --> 00:21:38.260
At any rate, this New Socialist Man solution, which turns out to be faulty to say the least,

233
00:21:38.260 --> 00:21:41.260
is really the origin of the old theory, which you don't hear so much anymore,

234
00:21:41.260 --> 00:21:46.260
but I heard when I was growing up, socialism is beautiful in theory, but can't work in practice.

235
00:21:46.260 --> 00:21:54.260
Socialism is the moral position, and it's beautiful in moral, but somehow doesn't work in practical.

236
00:21:54.260 --> 00:22:01.660
I mean, after Pol Pot, and Stalin, and Mao and so forth, it doesn't seem so beautiful anymore, or even so moral.

237
00:22:01.660 --> 00:22:06.960
But, so you don't hear that much anymore, but this is the origin of that, because the idea is,

238
00:22:06.960 --> 00:22:10.760
we're trying to transform human nature, we're trying to get everybody that works at Gutt's out for the collectives,

239
00:22:10.760 --> 00:22:17.760
and if we fail, it's because human nature is recalculated for it, and it doesn't seem to work.

240
00:22:17.760 --> 00:22:23.760
Okay, without going into the moral critique of Pol Pot,

241
00:22:23.760 --> 00:22:30.760
I'm here as an economist rather than a moralist.

242
00:22:30.760 --> 00:22:39.760
So I will press on to saying this, that the real problem socialism hasn't even been touched yet.

243
00:22:39.760 --> 00:22:43.760
Because the real interesting thing here is, from an economic point of view,

244
00:22:43.760 --> 00:22:49.760
even if you transform socialism, even if you created a whole bunch of 200 million robots in Russia,

245
00:22:49.760 --> 00:22:55.260
500 million, 800 million robots in China, and all that, and they're all out gung-ho to work for the collective.

246
00:22:55.260 --> 00:23:01.460
They didn't care to let their throats be cut as long as the collective, as long as the sugar crop increased by 2%.

247
00:23:01.460 --> 00:23:04.460
Even there, what are they going to do?

248
00:23:04.460 --> 00:23:10.060
Even if you got them, even if you transformed them, even if you solved the incentive problem,

249
00:23:10.060 --> 00:23:15.860
these poor people, who were 2 billion people at the time, they wouldn't know what to do.

250
00:23:15.860 --> 00:23:18.960
How are they going to work for the collective? What are they going to do?

251
00:23:18.960 --> 00:23:24.760
Should they grow sugar? Should they grow wheat? Should they make machines of some sort? Should

252
00:23:24.760 --> 00:23:29.200
they grow copper? I mean, mine copper? Who's going to tell them what to do? How do they

253
00:23:29.200 --> 00:23:31.400
know what to do? They don't know the damn thing about it. All they know is they should

254
00:23:31.400 --> 00:23:35.280
work hard. Don't say they're going to absorb that, right? Well, work hard. What are they

255
00:23:35.280 --> 00:23:40.880
going to work hard at? Blank up. Nobody knows. And the problem, the economic problem with

256
00:23:40.880 --> 00:23:45.160
socialism is the government doesn't know either. There's no rational way of figuring out what

257
00:23:45.160 --> 00:23:57.160
and how these people should be doing. After you've finally brainwashed them and transformed their nature, supposedly, they don't know what to do. They're gung-ho. They, you know, tell me, point me to something. Nobody knows what to tell them to do.

258
00:23:57.160 --> 00:24:11.160
Because there's no price system, there's no private ownership of the means of production, there's therefore no price system, there's therefore no way that any government planner can tell what's scarce and what isn't scarce.

259
00:24:11.160 --> 00:24:16.600
Care. For example, supposing the United States, supposing the world was collectivist, we're

260
00:24:16.600 --> 00:24:20.840
in a world communist state, there's no market anywhere, black markets have been stamped

261
00:24:20.840 --> 00:24:26.000
out. Actually, the only reason why Russia exists right now is because they have a vast

262
00:24:26.000 --> 00:24:32.120
black market. Anyway, it's a name on the side. And the planners in Washington are trying

263
00:24:32.120 --> 00:24:36.160
to decide what to do. What do we do? What do we allocate resources? And somebody says,

264
00:24:36.160 --> 00:24:40.040
I think it'd be a great idea if we built a platinum and gold lined tunnel from New York

265
00:24:40.040 --> 00:24:48.560
in San Francisco. Why not? Well, so what's the problem with that? Well, you might say

266
00:24:48.560 --> 00:24:51.440
it's too costly. What do you mean too costly? I don't know what the costs are. Nobody knows

267
00:24:51.440 --> 00:24:54.960
what the costs are. Nobody knows what the cost of platinum would be or gold or anything

268
00:24:54.960 --> 00:24:58.920
else. I mean, no way of comparing. I mean, let's assume it's technologically feasible

269
00:24:58.920 --> 00:25:03.880
to do it. There's no way of deciding whether that's better or whether you should build

270
00:25:03.880 --> 00:25:08.520
a couple of steel plants somewhere or strip mine something. Nobody knows anything because

271
00:25:08.520 --> 00:25:14.920
Because it's all a vast sea and a fog of pure chaos.

272
00:25:14.920 --> 00:25:21.240
This insight was first provided to the world by my mentor, Ludwig von Mises, in his article

273
00:25:21.240 --> 00:25:32.960
in 1920, and it set the socialists on their ear in Europe, and they had all sorts of very

274
00:25:32.960 --> 00:25:35.280
complex solutions on how to try to solve this problem.

275
00:25:35.280 --> 00:25:39.240
We'll create a kind of a market, we'll pretend it's a market, we'll tell everybody it's

276
00:25:39.240 --> 00:25:40.240
a plain market.

277
00:25:40.240 --> 00:25:44.080
This is what I really amounts to, this is the Longa, famous Longa solution.

278
00:25:44.080 --> 00:25:47.240
We order the managers, we tell the socialist managers, go out there and pretend you're

279
00:25:47.240 --> 00:25:52.920
only your corporation and play market, right, and then you'll have an exchange and all that

280
00:25:52.920 --> 00:25:53.920
sort of stuff.

281
00:25:53.920 --> 00:25:57.280
Obviously playing market is sort of like playing monopoly or something, it's really pointless,

282
00:25:57.280 --> 00:25:58.280
ridiculous.

283
00:25:58.280 --> 00:26:02.640
The market only exists if you're really committing your resources, if you're willing to sacrifice

284
00:26:02.640 --> 00:26:04.400
some resources to get something else.

285
00:26:04.400 --> 00:26:07.640
If I'm willing to shell out 25 cents for the New York Times, that's a market.

286
00:26:07.640 --> 00:26:11.960
If I'm willing to pay $10,000 for some machine, that's a market.

287
00:26:11.960 --> 00:26:14.040
Plain money doesn't make it, because anybody can do that.

288
00:26:14.040 --> 00:26:18.160
I mean, I can be a whiz that, I can invest $2 million in plain money in the stock market.

289
00:26:18.160 --> 00:26:20.160
I don't care what happens.

290
00:26:20.160 --> 00:26:28.280
Okay, so this is, and the longer solution, the longer learner these people are trying

291
00:26:28.280 --> 00:26:36.280
The so-called economic market argument for socialism really stuck the consumer good.

292
00:26:36.280 --> 00:26:43.280
They kept saying, well, there's no real problem. You produce a certain number of pieces of bubblegum.

293
00:26:43.280 --> 00:26:47.280
Then you have a stock of bubblegum. If you wonder what the price is, you raise the price.

294
00:26:47.280 --> 00:26:50.280
And if you find out there's too much bubblegum around, you lower the price.

295
00:26:50.280 --> 00:26:54.280
And if you find out there's too much that's going too fast, you raise the price.

296
00:26:54.280 --> 00:26:57.280
You sort of adjust the price on the basis of inventory.

297
00:26:57.280 --> 00:27:01.280
So that's, you know, no problem. What are you bellyaching about?

298
00:27:01.280 --> 00:27:06.280
Well, this is fine, provided you've already produced a bubblegum. In other words, on a consumer good level, you can do it.

299
00:27:06.280 --> 00:27:11.280
You can produce a certain amount of bubblegum, a certain amount of year shifts in Wonder Bread and whatever,

300
00:27:11.280 --> 00:27:17.280
and then you can adjust the consumer price on the basis of whether the inventory is being cleared or not.

301
00:27:17.280 --> 00:27:19.280
But how do you know how much to produce in the first place?

302
00:27:19.280 --> 00:27:22.280
How do you know how much bubblegum to produce or Wonder Bread to produce to begin with?

303
00:27:22.280 --> 00:27:24.280
You don't know. That's the whole point.

304
00:27:24.280 --> 00:27:29.280
There's no producer's goods market. There's no market for capital goods, for raw materials.

305
00:27:29.280 --> 00:27:34.280
Everything is chaos until you get to the consumer goods market.

306
00:27:34.280 --> 00:27:43.280
So this insight of Mises was never really answered by the socialists.

307
00:27:43.280 --> 00:27:50.280
But at one point it always struck me also, and I read the Long Island Learner and these people were trying to say that socialism can calculate.

308
00:27:50.280 --> 00:27:56.280
One point that struck me was, if they're so long, I kept saying, well, look, we can duplicate the market, we can make it in such a way it's separate.

309
00:27:56.280 --> 00:28:04.280
And this thing that struck me when I was reading it in college, well, if you're so anxious to duplicate the market, why not have the market begin with, and forget about all the socialism junk?

310
00:28:04.280 --> 00:28:12.280
So, it seems simpler to do it that way, and the very best.

311
00:28:12.280 --> 00:28:20.280
So, supposing, for example, to make it concrete, let's take allocation of labor under socialism.

312
00:28:20.280 --> 00:28:27.280
I've talked about allocation of consumer goods. Let's take labor, because we've talked about that already, working gung-ho for the state.

313
00:28:27.280 --> 00:28:37.280
Supposing I come around and the committee, because some committee is going to allocate my labor, right?

314
00:28:37.280 --> 00:28:44.280
The Socialist Planning Committee is going to find out what my needs are and where I should best serve society and the collective and the state.

315
00:28:44.280 --> 00:28:50.280
I come and say, look, well, gee, fellas, I really love to shovel garbage for the glory of the collective.

316
00:28:50.280 --> 00:28:54.280
I mean, there's nothing I won't do for the collective.

317
00:28:54.280 --> 00:29:03.280
But I really think I can serve the collective better by banging the drums, by blowing the kazoo,

318
00:29:03.280 --> 00:29:15.340
to do, you know, by acting, by imitating the collective president, whoever it is, right?

319
00:29:15.340 --> 00:29:16.340
That's my area of expertise.

320
00:29:16.340 --> 00:29:21.060
That's my area in which I can serve the collective best.

321
00:29:21.060 --> 00:29:22.840
And so it's not that I don't want to show the garbage.

322
00:29:22.840 --> 00:29:27.320
I love to show the garbage, but I really think I'm serving it.

323
00:29:27.320 --> 00:29:30.240
What criteria will these guys have to say that I'm wrong or right?

324
00:29:30.240 --> 00:29:35.600
How do they know whether I serve the collective the best by putting on a performance, imitating

325
00:29:35.600 --> 00:29:41.600
the collective chairman and vice-chairman, or by blowing the kazoo, or whatever.

326
00:29:41.600 --> 00:29:45.120
There's no criterion, there's no real criterion to figure out anything here.

327
00:29:45.120 --> 00:29:47.080
And so the whole, whatever decision they make is going to be arbitrary.

328
00:29:47.080 --> 00:29:50.680
If they don't like me, they'll say, okay, Rothbard, go and blow the kazoo.

329
00:29:50.680 --> 00:29:56.440
If they don't like me, they'll send me on the garbage shoveling detail, okay?

330
00:29:56.440 --> 00:30:00.760
So we get, in other words, to the point, since there's no rational criterion, there's no

331
00:30:00.760 --> 00:30:05.000
rational criterion in economic calculation, such as we have in the free market under a

332
00:30:05.000 --> 00:30:08.480
price system and a profit and loss test, the criterion is all arbitrary.

333
00:30:08.480 --> 00:30:10.880
All right, go out there and we don't like you and you're a couple...

334
00:30:10.880 --> 00:30:13.680
Who are they going to send, for example, to Siberia or to...

335
00:30:13.680 --> 00:30:18.480
Let's see, put them in Siberia here, I don't want to irritate anybody.

336
00:30:18.480 --> 00:30:19.480
Montana?

337
00:30:19.480 --> 00:30:20.480
Anyway.

338
00:30:20.480 --> 00:30:31.700
Anyway, Northern Alaska, okay? Who are we going to send to Alaska? We have to send somebody

339
00:30:31.700 --> 00:30:34.440
to Alaska, we want to have a pipeline. Who are we going to send? Who are you going to

340
00:30:34.440 --> 00:30:38.760
send to go build a pipeline in Alaska? Well, who are they going to send there? They're

341
00:30:38.760 --> 00:30:43.040
going to send, well, a comrade, someone, he's a troublemaker, he's been belly-aching about

342
00:30:43.040 --> 00:30:48.800
the collective recently, let's toughen him up by sending him to Northern Alaska. So in

343
00:30:48.800 --> 00:30:53.300
In other words, when you get a system of centralized planning, you almost inevitably have a Siberian solution.

344
00:30:53.300 --> 00:31:05.800
In other words, Lenin and Stalin start shipping their opponents to Siberia, which is a non-preferred residential area.

345
00:31:05.800 --> 00:31:12.800
Because, see, somebody's got to be sent to Siberia. Who are you going to send there? You'll send the guys you want to get rid of.

346
00:31:12.800 --> 00:31:17.800
In other words, all bets are off in a socialist system. It's all who you know, who you don't know,

347
00:31:17.800 --> 00:31:22.800
who hates you, who doesn't like you, all of life has politicized, which is really ultimate horror, I'm concerned.

348
00:31:22.800 --> 00:31:26.800
All of life becomes, everything becomes a political decision.

349
00:31:26.800 --> 00:31:37.800
So, the, I've got one example I remember the, about how labor is allocated under socialism.

350
00:31:37.800 --> 00:31:43.800
The Cuba, I don't know if you remember, but I guess about slightly less than 20 years ago, Castro decided

351
00:31:43.800 --> 00:31:47.800
We have to produce 10 million tons of sugar in Cuba, for some obscure reason.

352
00:31:47.800 --> 00:31:51.800
10 million tons is it? He puts on a big 10 million tons campaign.

353
00:31:51.800 --> 00:31:56.800
The world will collapse if we have the rest of 10 million tons. The world will be saved, or Cuba will be saved, with 10 million.

354
00:31:56.800 --> 00:32:05.800
And so all these, all the Americans left us, rushed down to Cuba, the so-called Venter Ramos Brigade, to cut cane.

355
00:32:05.800 --> 00:32:10.800
And they were, they were ardently in favor of the Cuban collective, they were going to cut cane.

356
00:32:10.800 --> 00:32:16.600
I knew a couple of these people. What happened was they didn't know a damn thing about cane cutting, obviously.

357
00:32:16.600 --> 00:32:23.300
They spent all their lives in New York City. Not exactly a sugar-growing area.

358
00:32:23.300 --> 00:32:27.800
They were chopping each other in the back with machetes.

359
00:32:27.800 --> 00:32:35.300
If anything, they were counterproductive. Less sugar was being grown from their efforts than more.

360
00:32:35.300 --> 00:32:45.300
Or you have the, in my West China, you have the kill a starling month, everybody go out there and kill a starling month.

361
00:32:50.300 --> 00:32:53.300
It's a monstrous system. I'd say it's the only way you can handle it.

362
00:32:53.300 --> 00:32:56.300
I mean, how do you allocate labor if you can't have a free wage system?

363
00:32:56.300 --> 00:33:04.300
In other words, if some company wants to build a pipeline now in Alaska, which they did, who decides who goes up to Alaska?

364
00:33:04.300 --> 00:33:10.300
And the way they did it, of course, they pay very high wages. You make a fortune. You don't want to go schlep up to Alaska and work on a pipeline.

365
00:33:10.300 --> 00:33:17.300
And a lot of people did it, okay? And since there's nothing to spend on in Alaska, you save it all up, all right?

366
00:33:17.300 --> 00:33:29.300
That was the free choice of people to go up to Alaska. But in a socialist system or communist system where a free wage market is not allowed, where everything is supposed to be done by moral incentives,

367
00:33:29.300 --> 00:33:36.300
Aside from one or two nuts who might really love to go to Alaska and work for the collective, they're shipped out by coercion.

368
00:33:36.300 --> 00:33:40.300
In other words, the dissenters, the troublemakers, the guys who are looking cross-eyed at you,

369
00:33:40.300 --> 00:33:45.300
you might boot to get you in the next cell meeting, you get shipped out of Alaska.

370
00:33:45.300 --> 00:34:10.300
All right. The calculation problem begins in Russia. When the communists took over in Russia in 1917, what are they supposed to do? They're supposed to inaugurate communism. That was the whole point, right?

371
00:34:10.300 --> 00:34:20.300
The first thing they did was they tried to abolish money, abolish the market, and have everybody contribute to the common heap, which is what they were advocating for the previous 75 years or so.

372
00:34:20.300 --> 00:34:26.300
This was called War Communism, as Paul Craig Roberts points out in his excellent book, which I recommend everybody.

373
00:34:26.300 --> 00:34:36.300
The War Communism, which lasted from about 1917 to 1921, was not just a war situation, it was a dedicated, ideological thing.

374
00:34:36.300 --> 00:34:48.300
The communists get in, they finally achieve power. What are they supposed to do? They're supposed to put into effect their goals, namely, smash the market, smash commodity production and money. Everybody will then contribute to the common heap.

375
00:34:48.300 --> 00:34:57.300
The whole thing fell apart. Peasants weren't getting money, so they didn't contribute anything to the common heap. They had to start killing peasants and the whole thing just broke down. Nobody ate any food.

376
00:34:57.300 --> 00:35:26.300
So, what then happened was that Lenin, being a very shrewd pragmatist, finally decided that either communist ideology or else we'd all get shot, and so he just gave up, totally retreated and went back to the so-called New Economic Policy, and that really re-established capitalism or semi-capitalism for about most of the 1920s, and so people started eating again, and Russia was saved.

377
00:35:26.300 --> 00:35:32.940
So this was an ideological attempt, which didn't work. Same thing happened in Pol Pot in Cambodia.

378
00:35:32.940 --> 00:35:38.140
The difference in Cambodia... First thing, the Cambodian people there, the Cambodians were an interesting group.

379
00:35:38.140 --> 00:35:44.380
They were... First of all, they were all about 14 years old.

380
00:35:44.380 --> 00:35:48.380
Second of all, they had just come out of the jungle after about 10, 15 years of fighting in the jungle.

381
00:35:48.380 --> 00:35:51.180
They were sort of isolated from all other influences.

382
00:35:51.180 --> 00:35:56.060
And third of all, they all studied in France, which is always a bad thing to begin with.

383
00:35:56.060 --> 00:36:04.500
and they study under French, Marxist, Maoist, whatever, Marcusean, wherever they are there,

384
00:36:04.500 --> 00:36:09.580
Althusserians, and so they decided to crush, not only crush all money, but they abolished

385
00:36:09.580 --> 00:36:10.580
money, okay?

386
00:36:10.580 --> 00:36:15.220
Now you might think this is only, so a lot of money is abolished, after all, just materialism,

387
00:36:15.220 --> 00:36:16.220
why should we be so concerned?

388
00:36:16.220 --> 00:36:17.220
Why are we pro-money?

389
00:36:17.220 --> 00:36:20.300
Economists, free market economists have always been accused of being materialistic and being

390
00:36:20.300 --> 00:36:21.300
pro-money.

391
00:36:21.300 --> 00:36:24.340
I'm pro-money mostly because I don't have any.

392
00:36:24.340 --> 00:36:30.340
The point about the money thing is that there's a direct correlation between money and freedom.

393
00:36:30.340 --> 00:36:34.340
If you earn money, in other words, if you get $10,000 a year, let's say, from your employer or whoever,

394
00:36:34.340 --> 00:36:37.340
then you go out and you spend it on whatever you want.

395
00:36:37.340 --> 00:36:40.340
You can buy things, you can not buy things, you can save.

396
00:36:40.340 --> 00:36:43.340
You have your freedom to allocate your income.

397
00:36:43.340 --> 00:36:48.340
But if there's no money, it means you eat or you get whatever is handed out to you by the government authorities,

398
00:36:48.340 --> 00:36:51.340
by your cell group or committee or whatever it is.

399
00:36:51.340 --> 00:36:54.380
Okay, comrade, three bowls of rice and that's it.

400
00:36:54.380 --> 00:36:55.420
There's no way to get around this.

401
00:36:55.420 --> 00:36:57.420
You can't buy anything because money's been abolished.

402
00:36:57.420 --> 00:36:58.580
It's a diabolic thing.

403
00:36:58.580 --> 00:37:01.260
I mean, the total, it's probably the worst thing,

404
00:37:01.260 --> 00:37:03.020
single thing that can happen to anybody's freedom

405
00:37:03.020 --> 00:37:05.140
for money to be abolished, because that's it.

406
00:37:05.140 --> 00:37:06.580
Because then you accept whatever you can get

407
00:37:06.580 --> 00:37:09.940
from the comrades, who are usually pretty short anyway,

408
00:37:09.940 --> 00:37:11.420
and if they don't like the cut of your jib

409
00:37:11.420 --> 00:37:13.580
or if you look too intellectual to them,

410
00:37:13.580 --> 00:37:17.340
you get only half a grain of rice per day, right?

411
00:37:17.340 --> 00:37:20.780
So, again, you have a forced labor system

412
00:37:20.780 --> 00:37:29.780
The difference between Cambodia and the regular Marxist-Leninist thing is that the Cambodians would absorb Rousseau somewhere along the way in France.

413
00:37:29.780 --> 00:37:40.780
So you've got a weird combination of Lenin and Rousseau, but the idea that cities are evil has to be stamped out immediately.

414
00:37:40.780 --> 00:37:44.380
Right? So they crushed the city before everybody started starving very, very quickly.

415
00:37:44.380 --> 00:37:49.660
It's the back, it's sort of like, actually put it, it's sort of like a, like a back to,

416
00:37:49.660 --> 00:37:54.620
the American back to the land movement going completely berserk, right? It's as if the,

417
00:37:54.620 --> 00:37:58.620
the back of that people suddenly appeared with arms and machine guns and bazookas and ordered

418
00:37:58.620 --> 00:38:06.700
everybody out of Denver and San Francisco and said, go, go far somewhere. So anyway, I mean,

419
00:38:06.700 --> 00:38:10.140
one thing you have to say about Marx, he did not love the land particularly. So it's one,

420
00:38:10.780 --> 00:38:12.780
One thing in his favor.

421
00:38:12.780 --> 00:38:20.780
At any rate, on the economic calculation problem, by the way, one interesting parallel that comes.

422
00:38:20.780 --> 00:38:23.780
If you live long enough, things will go full circle or whatever.

423
00:38:23.780 --> 00:38:26.780
Interesting parallel convolutions come up.

424
00:38:26.780 --> 00:38:29.780
Norman Brown was one of the most popular writers in the 1960s.

425
00:38:29.780 --> 00:38:32.780
I don't know if anybody's ever heard of him here.

426
00:38:32.780 --> 00:38:38.780
He wrote a lunatic book called Love Against Death,

427
00:38:38.780 --> 00:39:05.300
Mises and Hayek challenged socialism, they pointed out that socialism can't calculate,

428
00:39:05.300 --> 00:39:07.180
can't engage in rational economic calculation.

429
00:39:07.180 --> 00:39:11.500
The trouble with socialism in the 20th century is that the longer learning these people took

430
00:39:11.500 --> 00:39:14.460
them at their word and they tried to show that socialism can calculate, and that's where

431
00:39:14.460 --> 00:39:16.780
socialism went off, went bad.

432
00:39:16.780 --> 00:39:23.620
The glory of socialism is it shouldn't calculate, should be totally irrational, and shouldn't

433
00:39:23.620 --> 00:39:31.260
worry about calculation, you know, so that's, interestingly enough, fortunately nobody's

434
00:39:31.260 --> 00:39:36.620
heard of Brown recently, so I think that's, you know, the world works in wondrous ways.

435
00:39:36.620 --> 00:39:40.620
We now have a sort of a slightly reprise of this, a very highly tatted book by George

436
00:39:40.620 --> 00:39:45.060
Gilder, who's a right winger, contrast to Brown being an ultra-leftist.

437
00:39:45.060 --> 00:39:52.300
Gilder in his new book, Wealth and Poverty, says that the great thing about the free market

438
00:39:52.300 --> 00:39:57.420
is, in contrast to government, is the free market is irrational.

439
00:39:57.420 --> 00:40:02.340
And free market can't calculate, and it's free, spontaneous giving and all that stuff.

440
00:40:02.340 --> 00:40:13.340
So I would say, one of the interesting things about history is you learn that the same error keeps popping up over decades and centuries, to give you an interesting perspective.

441
00:40:13.340 --> 00:40:32.140
The, what's happening in the, I should wind up this thing by talking about what's happening

442
00:40:32.140 --> 00:40:39.740
in the thing, favorable, interesting favorable thing in Eastern Europe, the, what, my thing

443
00:40:39.740 --> 00:40:43.220
is quite phenomenal about how many Yugoslavia, I don't think a current Yugoslav system in

444
00:40:43.220 --> 00:40:49.220
of Granny Great Shakes. If you look at what Yugoslavia is now compared to what it was in 1952, it's almost phenomenal.

445
00:40:49.220 --> 00:40:55.220
PEDO, as we all know, broke with Stalin in 48. That in itself is not that significant from an economic point of view.

446
00:40:55.220 --> 00:41:01.220
But in 1952, largely on the guidance of I think of Milamand Yilas, who later broke with PEDO and so forth,

447
00:41:01.220 --> 00:41:06.220
they suddenly came to the conclusion that central planning isn't working. There's something wrong with it.

448
00:41:06.220 --> 00:41:12.220
And they started moving right rapidly toward the market, which is really phenomenal.

449
00:41:12.220 --> 00:41:42.220
And they've gotten to the point at this point, I wouldn't say they have a free market. They've gotten to the point, however, where there's very strong elements of free market economy here. The workers really own the plant. It's truly owned in a producer's co-op manner. The individual worker can't sell his share, which is a big defect. The plants are all owned like a producer's co-op by the workers. They exchange products freely and on a free-price system. The tax rate is pretty low. It's only about 20%, which is a lot lower than American taxes.

450
00:41:42.220 --> 00:41:47.220
This change came about in the mid-60s, it was previously like 80 or 90 percent.

451
00:41:47.220 --> 00:41:54.220
So we have a situation now where, and along with this came a change of attitude among the Yugoslav communists.

452
00:41:54.220 --> 00:42:04.220
So they started saying, well, you have things like this, especially by the way in Croatia and Slovenia,

453
00:42:04.220 --> 00:42:09.220
where the communist economists are almost free market oriented, compared to the rest of Yugoslavia.

454
00:42:09.220 --> 00:42:19.220
They say things like this, why should we productive, thrifty, hard-working people in Croatia be taxed, support lazy Slavs and Montenegro?

455
00:42:19.220 --> 00:42:31.220
Or why should we keep subsidizing inefficient factories in Albania and the Pusovo region, Albania-type region?

456
00:42:31.220 --> 00:43:01.220
And also they think in terms of the Yugoslav mindset, the American mindset or at least has been for recently, something like this, if there's a problem, there's a social problem, there's lots of social problems, I can find millions of social problems, such as too many redheaded people have hangnails, I mean we could spend $10 million on an NEH grant or NSF grant, find out how many old people have hangnails, redheaded old people have hangnails,

457
00:43:01.220 --> 00:43:07.220
They have hangnails. We've got to do something. There's a hangnail gap. There's a hangnail problem. We need a crash program.

458
00:43:07.220 --> 00:43:12.220
Ten billion dollars in federal aid. Eliminate hangnails from the face of the earth.

459
00:43:20.220 --> 00:43:27.220
That's the typical Western American mindset. If there's a problem, pass a law. Get a federal grant.

460
00:43:27.220 --> 00:43:32.220
If a law creates new problems, such as if you have price inflow, you have shortages, what do you do then?

461
00:43:32.220 --> 00:43:36.220
Well, you create a Gestapo to root out the hoarded oil or whatever it is.

462
00:43:36.220 --> 00:43:40.220
In other words, you create new laws, new bureaucracies on top of it.

463
00:43:40.220 --> 00:43:43.220
The Yugoslav mindset got to be at a point like this.

464
00:43:43.220 --> 00:43:48.220
Well, if they ran out of problems, they did and still do, what government intervention can we repeal?

465
00:43:48.220 --> 00:43:51.220
Where can we introduce the market to fix this up?

466
00:43:51.220 --> 00:43:53.220
This is the kind of mindset I'd like to see us develop.

467
00:44:23.220 --> 00:44:26.100
But each individual worker can own his share.

468
00:44:26.100 --> 00:44:32.100
Isn't it unfortunate if a worker retires at the age of 65 or something, why should he be able to keep voting?

469
00:44:32.100 --> 00:44:35.260
Why should he be able to pass his share on to his children?

470
00:44:35.260 --> 00:44:38.180
And they started talking in terms of a stock market.

471
00:44:38.180 --> 00:44:44.020
If they ever get a stock market, we can say that the millennium has arrived, free market.

472
00:44:44.020 --> 00:44:47.380
They started talking in terms of a stock market, which of course would send any true Marxist

473
00:44:47.380 --> 00:44:49.960
spinning in his grave or cutting his throat.

474
00:44:49.960 --> 00:44:58.960
And they said, well, we know that the old-fashioned Marxists won't like this, the idea of a stock market. Let's call it socialist people capitalism.

475
00:44:58.960 --> 00:45:04.960
So that's the kind of creative thinking, I think, I find of interest in the...

476
00:45:04.960 --> 00:45:14.960
At any rate, there's one joke, by the way, among economists. I don't know if it's still true, but the joke used to be going around in any international economic meeting.

477
00:45:14.960 --> 00:45:22.960
The Eastern economists, the communist country economists, would talk about the glories of the free market and the Western economists talk about the glories of planning.

478
00:45:22.960 --> 00:45:43.960
Well, maybe this is a change at this point. I think one of the things we need in the economics profession,

479
00:45:43.960 --> 00:45:54.960
In the mathematics profession, the Mises-Hayek side of the economic calculation debate is still not very well known for some obscurity, even among free market economists, even among people opposed to socialism.

480
00:45:54.960 --> 00:46:06.960
Their view is that the only problem with socialism, Frank Knight, for example, is an excellent free market economist in many ways. His view was that the only problem with socialism is the moral and the incentive problem, et cetera. There's no problem with calculation.

481
00:46:06.960 --> 00:46:14.960
I think if we realized there was a calculation problem, it would provide a tremendous new insight and new ammunition just on that basis.

482
00:46:14.960 --> 00:46:19.960
And the critique of socialism is pretty clear, aside from the moral aspect, which I don't deny.

483
00:46:19.960 --> 00:46:21.960
I mean, I think moral aspects are very important.

484
00:46:21.960 --> 00:46:25.960
If you also come to the conclusion that socialists can't even calculate what they want to do.

485
00:46:25.960 --> 00:46:31.960
In other words, even if you have a socialist planner, even if you assume that he can override consumer sovereignty,

486
00:46:31.960 --> 00:46:34.960
if they allocate labor anyplace he wants and he still can't do what he wants,

487
00:46:34.960 --> 00:46:52.960
This, I think, is a powerful argument against the socialist position, and it's an argument, which I think has been carried, borne out in practice, in all the socialist countries that we know about, and all those from early Virginia and somewhat from communism to Pol Pot.

488
00:46:52.960 --> 00:46:58.960
It's all been a very similar record, some of course more brutal than others, but a very similar record of total and abject failure.

489
00:46:58.960 --> 00:47:04.960
And I think the failure is systematic. It's not just an accident that every socialist experiment has failed miserably.

490
00:47:04.960 --> 00:47:07.960
It's inherent in the nature of the socialist system.

491
00:47:07.960 --> 00:47:10.960
Okay, I think that's... Thank you. Thank you very much.

492
00:47:17.960 --> 00:47:20.960
Professor Rothbard, I'd be glad to answer any questions.

493
00:47:20.960 --> 00:47:23.960
I think I'll start out with Professor Bolding. You got a question?

494
00:47:24.960 --> 00:47:26.960
Or a comment?

495
00:47:26.960 --> 00:47:35.960
I see you have your Adam Smith tie on, which is very good. There are four Adam Smith ties here tonight. Murray isn't wearing one because they don't make them in bow ties.

496
00:47:35.960 --> 00:48:03.960
The only question I'd like to ask you now, in the context of socialism and capitalism and Ludwig von Mises, what we have is a spectrum of societies, and it's a pure essence whenever there's a riot, and the knowledge of science can exist, unless the market is toughened.

497
00:48:03.960 --> 00:48:24.960
I agree that the hatred of the Marxists, the iraqis, is very useful, very useful work.

498
00:48:24.960 --> 00:48:34.960
It is as difficult as it is too difficult to talk about it, you see, that person is vulnerable, it's hard to get people to love him.

499
00:48:34.960 --> 00:48:37.960
Well, I love it.

500
00:48:43.960 --> 00:48:49.960
I mean, I like it. I like it. I like it. I like it. I like it. I like it. I like it. I like it. I like it. I like it. I like it.

501
00:48:49.960 --> 00:49:00.960
But there is a problem that the social connections of the market system, which permits it to function without the element of knowledge.

502
00:49:00.960 --> 00:49:05.960
And the market has a policy such that it has everything to go wrong.

503
00:49:05.960 --> 00:49:09.960
Well, the Great Depression is a great example of that.

504
00:49:19.960 --> 00:49:25.960
It's a whole lot of time, but that's a, that's a, yeah, that's the, I don't think, uh...

505
00:49:43.960 --> 00:49:48.960
Well, I think, I think there, I agree with you in this sense, there are, obviously, in the real world, there is a whole spectrum of cases,

506
00:49:48.960 --> 00:49:53.840
and you know how you have semi-social, I don't deny that, obviously.

507
00:49:53.840 --> 00:49:59.000
I think pure market economies have existed in the past, but at any rate, and certainly

508
00:49:59.000 --> 00:50:03.840
approximations to them, I just think the more market you have the better it is and the more

509
00:50:03.840 --> 00:50:04.840
government you have the worse.

510
00:50:04.840 --> 00:50:09.720
And so when you get to the point of socialism, obviously you have an extreme position.

511
00:50:09.720 --> 00:50:11.600
I don't see any real market failure though.

512
00:50:11.600 --> 00:50:16.320
I think, I really think that all the economic ills we can think of are caused by government.

513
00:50:16.320 --> 00:50:26.320
Hong Kong with the idea of society, because if you guys don't have a name, it's Ben's government, and that's all we need.

514
00:50:46.320 --> 00:50:55.320
Hong Kong, by the way, it's an interesting point, because Hong Kong, when I was growing up,

515
00:50:55.320 --> 00:51:03.320
the textbooks all said that America is strong and great and prosperous because we have a lot of large natural resources

516
00:51:03.320 --> 00:51:10.320
and a big land area and a lot of wheat and, you know, that sort of thing, agriculture and all that, and warm water, whatever.

517
00:51:10.320 --> 00:51:15.320
Holocaust is practically nothing. It has no resources. It just has a crummy rock.

518
00:51:15.320 --> 00:51:20.320
It doesn't grow anything except a little bit up in the peninsula there.

519
00:51:20.320 --> 00:51:26.320
And there's a huge number of people. So in any criteria you think of, it would be an overpopulated area.

520
00:51:26.320 --> 00:51:31.320
And yet it's first flourishing and standard living is going up, etc. It's all due to freedom.

521
00:51:34.320 --> 00:51:38.320
Somebody should take the... I don't want to use the favoritism.

522
00:51:38.320 --> 00:52:06.320
Do you see any new factors or new grounds that we should be thinking about today, or that might change the situation in the future?

523
00:52:08.320 --> 00:52:19.320
I don't think we have a 1929 situation because there are no longer any checks or limits on the Federal Reserve system money expansion.

524
00:52:19.320 --> 00:52:23.320
In those days there were. There was the gold standard. There were various other checks.

525
00:52:23.320 --> 00:52:27.320
The Federal Reserve itself could have gone bankrupt, for example.

526
00:52:27.320 --> 00:52:35.320
Now we have bank deposit insurance and we have no gold check whatsoever, either domestic or international.

527
00:52:35.320 --> 00:52:43.320
The Federal Reserve can theoretically print unlimited amounts of money, so the sky is now the limit.

528
00:52:43.320 --> 00:52:48.320
So I don't think we'll ever get a 1929-type depression.

529
00:52:48.320 --> 00:52:50.320
Yeah, I think it would be much worse.

530
00:52:50.320 --> 00:52:56.320
I think the eventual prognosis would be hyper-runaway inflation.

531
00:52:56.320 --> 00:52:59.320
I don't think we have to get there if we have the will.

532
00:52:59.320 --> 00:53:03.320
In other words, we rise up and say stop somewhere or another.

533
00:53:33.320 --> 00:53:38.320
For example, in 1923, when the runway inflation was just beginning to take hold in Germany,

534
00:53:38.320 --> 00:53:42.320
what happens is prices begin to go up much faster than the money supply.

535
00:53:42.320 --> 00:53:44.320
The increase in money supply is the major cause.

536
00:53:44.320 --> 00:53:47.320
Again, I can't go into the point out why this is true.

537
00:53:47.320 --> 00:53:50.320
The increase in money supply is the cause of increasing prices.

538
00:53:50.320 --> 00:53:54.320
What happens is after inflation has proceeded for many years,

539
00:53:54.320 --> 00:53:58.320
inflationary expectations then take over and people want to spend money as fast as they can

540
00:53:58.320 --> 00:54:01.320
because they know damn well the prices will be 20% more next week.

541
00:54:01.320 --> 00:54:09.320
And so, at that point, people experience what they call a shortage of money, what we now call a liquidity crunch, or whatever you want to call it.

542
00:54:09.320 --> 00:54:11.320
They haven't got enough money to pay for the high prices.

543
00:54:11.320 --> 00:54:15.320
They then call upon the government, the central bank, to supply them with the money.

544
00:54:15.320 --> 00:54:21.320
In 1923, Rudolf Havnstein, the head of the central Reichsbank, made a famous speech, which he said,

545
00:54:21.320 --> 00:54:25.320
Don't worry, folks. He said, of course, much more pedantic German than I'm saying here.

546
00:54:25.320 --> 00:54:30.320
Don't worry, folks. We realize you're suffering from money shortage. We will print unlimited amounts of money until you can catch up.

547
00:54:30.320 --> 00:54:41.320
Until money supply catches up with prices. Of course the result was history. Bingo. Two trillion marks to buy a stick of bubble gum.

548
00:54:41.320 --> 00:54:49.320
You think this is crazy. When I tell this to my students, they laugh in superior fashion. Of course we never say that now.

549
00:54:49.320 --> 00:54:57.320
In 1973 or 74, I guess it was, when we had our first peacetime double-digit inflation on the Nixon,

550
00:54:57.320 --> 00:55:05.860
Walter Heller, distinguished former chairman of the Council of Economic Advisers, wrote an article in the Federal Reserve Bank of Philadelphia's quarterly review, in which he said as follows,

551
00:55:05.860 --> 00:55:12.260
Money supply can't be the cause of higher prices, because prices are going up faster in the last year or so than money supply.

552
00:55:12.260 --> 00:55:19.860
Therefore, as a matter of fact, the Federal Reserve has a responsibility to keep pumping more money until real cash balances catch up to the status quo,

553
00:55:19.860 --> 00:55:24.360
which means just saying in more sophisticated economic jargon what Chavitch and I said before.

554
00:55:24.360 --> 00:55:29.960
Now, if Heller had been running the economy, we might have the hyperinflation right now.

555
00:55:29.960 --> 00:55:31.860
Fortunately, he wasn't.

556
00:55:31.860 --> 00:55:34.860
Fortunately, he was a harmless professor in the University of Minnesota.

557
00:55:34.860 --> 00:55:41.460
But, I mean, it can get that close, you see, when people start thinking in that kind of terms.

558
00:55:41.460 --> 00:55:44.260
Yeah.

559
00:55:44.260 --> 00:55:51.260
You started out by telling how the post office has gone down and down and down, deteriorating quality.

560
00:55:51.260 --> 00:55:56.260
I think it would be interesting to find out what made the post office work so well in the first place,

561
00:55:56.260 --> 00:55:59.260
with the ones that have been doing it for a long time.

562
00:55:59.260 --> 00:56:01.260
But that's kind of facetious.

563
00:56:01.260 --> 00:56:08.260
But you said that you would think the more capitalism the better,

564
00:56:08.260 --> 00:56:13.260
which you can't literally mean, because if you meant that, that would mean no government law.

565
00:56:13.260 --> 00:56:14.260
That's right.

566
00:56:14.260 --> 00:56:29.480
Yeah, I would make the qualification of what you mean by government, I don't want to be

567
00:56:29.480 --> 00:56:30.480
picky about this.

568
00:56:30.480 --> 00:56:32.580
I have a question to ask if you would just hold out.

569
00:56:32.580 --> 00:56:37.460
No, no, by me, I just want, no, no, by, no, no, I mean by government, I define government

570
00:56:37.460 --> 00:56:44.740
as being a tax authority, which acquires its revenue by means of coercion, by taxes, okay?

571
00:56:44.740 --> 00:56:50.740
I don't, by government, I don't mean police, police agencies, guards, Pinkertons, courts, things like that,

572
00:56:50.740 --> 00:56:54.500
because that, because they can be obviously one and a half million on a private basis.

573
00:56:54.500 --> 00:57:00.020
By government, in other words, I mean a tax-coerced organization, okay?

574
00:57:00.020 --> 00:57:02.740
I just want to be very clear, I'm not, it's not something I'm against.

575
00:57:02.740 --> 00:57:04.300
I don't understand what you're saying.

576
00:57:04.300 --> 00:57:07.300
What government is permissible in your view?

577
00:57:34.300 --> 00:57:47.300
Only the government. The government is the only institution in society. Of all the numerous institutions we have, political, social, whatever, the only institution acquires its revenue by going out there and forcing you to pay up. If you don't pay up, you go to jail.

578
00:57:47.300 --> 00:57:48.300
I think there should be no tax.

579
00:57:48.300 --> 00:57:49.300
That's right.

580
00:57:49.300 --> 00:58:01.300
Okay, so that would be a clear... It's not that I'm opposed, for example, to carrying the mail or fighting fire or all that. I think they can be done much better and more morally on a private market basis. I'm in favor of everything being marketable.

581
00:58:04.300 --> 00:58:19.300
We were in China this summer and we found out that the Marxist philosophy is to call for a stand. That now it's for each party's ability to do each party's work.

582
00:58:19.300 --> 00:58:40.300
They had private plots of land until the late 1950s, which was the great proletariat and what was the Great Leap Forward.

583
00:58:40.300 --> 00:58:45.300
Before that, it was really a semi-socialist economy in a technical sense.

584
00:58:45.300 --> 00:59:13.540
The Great Leap Forward

585
00:59:13.540 --> 00:59:15.900
Now, how much will be, I don't know.

586
00:59:15.900 --> 00:59:19.500
Certainly, their doctrines now are pretty good from that point of view.

587
00:59:19.500 --> 00:59:21.340
In other words, capitalism, that's what happens in capitalism,

588
00:59:21.340 --> 00:59:23.900
from each according to his ability to each according to his ability.

589
00:59:23.900 --> 00:59:25.660
That's what happens on the market.

590
00:59:25.660 --> 00:59:28.140
So, I don't know how far they'll get,

591
00:59:28.140 --> 00:59:30.860
because if you allow one separate elite to run everything,

592
00:59:30.860 --> 00:59:33.940
obviously they can go off again, they can decide next year,

593
00:59:33.940 --> 00:59:38.940
well, you know, the other, Menem Chang was really a great, Menem Mao is really great,

594
00:59:38.940 --> 00:59:41.540
Chung Ching is really great, and then she's back again and crushes everybody.

595
00:59:41.540 --> 00:59:43.140
So you can't trust them.

596
00:59:43.140 --> 00:59:47.440
Certainly, the course they're on now is infinitely better than they were two years ago.

597
00:59:47.440 --> 00:59:52.340
It's really sort of a heroic thing, considering Deng Xiaoping, the current chairman,

598
00:59:52.340 --> 00:59:57.840
has totally reversed the Chinese system from a total slave state to an only partial slave state,

599
00:59:57.840 --> 01:00:01.740
with parts of market in there, which is a big change.

600
01:00:01.740 --> 01:00:05.640
You look at an historical process, and it was kind of a heroic act.

601
01:00:05.640 --> 01:00:10.340
It was also a heroic act of Mao to try to crush everything, and it was totally nutty and crazy.

602
01:00:10.340 --> 01:00:17.340
Sometimes heroism sort of slides over into being nuts.

603
01:00:24.180 --> 01:00:31.180
Consumer goods are good.

604
01:00:32.700 --> 01:00:39.740
They wrote an article a couple years ago after Deng Xiaoping came in that

605
01:00:39.740 --> 01:00:47.060
But we really like to have this sort of society, and they spell it out, it sounds like New York in 1970 or something like that.

606
01:00:47.060 --> 01:00:54.620
So in other words, they really change their philosophical orientation tremendously, and obviously the social pattern hasn't changed that much, but

607
01:00:54.620 --> 01:00:59.300
the direction, of course, is much better.

608
01:00:59.300 --> 01:01:06.300
I don't know if Shirley MacLean will go out there and love them again like she loved the Mao people.

609
01:01:09.740 --> 01:01:10.740
And what?

610
01:01:10.740 --> 01:01:15.740
You're paying 45% for public goods and taxes for countries.

611
01:01:15.740 --> 01:01:19.740
This is in part coming from the head of the household.

612
01:01:19.740 --> 01:01:21.740
You know.

613
01:01:21.740 --> 01:01:24.740
A lot of the, I don't know, a lot of the,

614
01:01:24.740 --> 01:01:27.740
in most of these communist countries, there's this enormous black market,

615
01:01:27.740 --> 01:01:31.740
you have to realize, statistics are shaky, because,

616
01:01:31.740 --> 01:01:34.740
I mean, I understand that Russia, for example, would not really operate without a black market.

617
01:01:34.740 --> 01:01:37.740
What happens is the managers have to fill their quotas.

618
01:01:37.740 --> 01:01:41.380
My guy, I haven't filled my quota, I've got 60 days to go, I'm way behind.

619
01:01:41.380 --> 01:01:43.580
A heroic entrepreneur pops up.

620
01:01:43.580 --> 01:01:48.020
Domadish, you want to fulfill your quota, I've got 30 good men here, we'll work, you know,

621
01:01:48.020 --> 01:01:51.180
50 hours a week to fulfill your quota, all you have to do is to pay me

622
01:01:51.180 --> 01:01:53.340
100,000 rubles out of the till.

623
01:01:53.340 --> 01:01:57.100
Thank God, or thanks Brezhnev or whatever, he takes the...

624
01:01:57.100 --> 01:02:00.860
He takes 100,000 out, he pays them and that's it, it's all under the table, it's all very illegal,

625
01:02:00.860 --> 01:02:03.620
but it's done all the time, it's called blot.

626
01:02:03.620 --> 01:02:06.340
Blot, I can't pronounce Russian.

627
01:02:06.340 --> 01:02:14.340
And so the whole system is rife with the black market, and that's the only way they can really accomplish anything, if I can say it like that.

628
01:02:14.340 --> 01:02:24.340
But I mean, in Yugoslavia too, by the way, the philosophic, when they started shifting the economic picture, they started saying philosophically, the individual is more important than the collective.

629
01:02:24.340 --> 01:02:31.340
They say things like that, which is total heresy from the communist point of view. So that's very interesting. I think it's an inspiring development.

630
01:02:31.340 --> 01:02:35.500
development. One of the problems I find with conservatives in general is that when a country

631
01:02:35.500 --> 01:02:39.980
goes communist, they figure that's it. The iron door is closed and it's ruined forever

632
01:02:39.980 --> 01:02:45.340
more and we may as well nuke them. It's all hopeless. It's not true because since socialism

633
01:02:45.340 --> 01:02:50.860
falls apart and doesn't work and since it goes against the human spirit, I'm not very

634
01:02:50.860 --> 01:02:54.900
optimistic that freedom will pop up and I think it has in these countries. The direction

635
01:02:54.900 --> 01:02:56.900
starts changing rapidly again.

636
01:02:56.900 --> 01:03:00.900
How does this come about, the Polish disease?

637
01:03:00.900 --> 01:03:04.900
Well, the Polish disease is a general term for socialist planning.

638
01:03:04.900 --> 01:03:07.900
Failure of socialist planning.

639
01:03:07.900 --> 01:03:09.900
And failure to allocate labor, right?

640
01:03:09.900 --> 01:03:12.900
I mean, what are they going to do with the workers?

641
01:03:12.900 --> 01:03:17.900
The Polish disease is a general problem.

642
01:03:17.900 --> 01:03:19.900
What do you do with unions of government employees?

643
01:03:19.900 --> 01:03:22.900
If you have a union in a private company,

644
01:03:22.900 --> 01:03:24.900
if the union demands a 20% wage increase,

645
01:03:24.900 --> 01:03:28.900
The wage increase, the private companies say, well, gee, we can't do that because it will bankrupt us.

646
01:03:28.900 --> 01:03:32.900
You can only get 10 percent, they agree on 12 or something.

647
01:03:32.900 --> 01:03:37.900
But in the government situation, when a taxpayer pays, how do you know how much to pay a co-worker or whatever?

648
01:03:37.900 --> 01:03:39.900
There's really no criterion.

649
01:03:39.900 --> 01:03:44.900
And so, how do you know how much to pay the Polish miners or whoever?

650
01:03:44.900 --> 01:03:49.900
How do you know how much to pay some clerk in the civil service in Washington?

651
01:03:49.900 --> 01:03:55.900
There's no real, certainly in a socialist country there's no market guide, it's all arbitrary.

652
01:03:55.900 --> 01:04:01.900
So in a sense they have an insoluble problem in Russia. There's no way to combat unionism in a socialist country.

653
01:04:01.900 --> 01:04:06.900
Interestingly enough, even though the company is supposed to be the vanguard of the working class,

654
01:04:06.900 --> 01:04:10.900
the government is supposed to be handling everything and paying out money and getting production.

655
01:04:10.900 --> 01:04:15.900
How do you deal with a union? What's there to bargain about? It's a little thin air, hot air.

656
01:04:15.900 --> 01:04:22.900
There's no profit, there's no loss. You can't say what people lose money. Nobody loses money. It's all very vague.

657
01:04:26.900 --> 01:04:34.900
Well, I don't know. It's a big mess. I'm not really an expert on the Polish economy per se. When I'm met by the Polish disease, it's sort of a general problem of socialism.

658
01:04:34.900 --> 01:04:38.900
So I really have to defer to somebody else in that. Yeah.

659
01:04:45.900 --> 01:04:50.940
I don't want to get into the entire national defense problem now, as you can imagine, it's fairly complex.

660
01:04:50.940 --> 01:04:55.220
But I don't think there are such things as public goods, ever. First place,

661
01:04:55.220 --> 01:04:57.580
supposing I'm a pacifist.

662
01:04:57.580 --> 01:05:00.580
I know some of my best friends are pacifists.

663
01:05:00.580 --> 01:05:07.020
And to a pacifist who thinks all violence is evil, it's not a public good, it's a public bad, it's a public evil.

664
01:05:07.020 --> 01:05:08.860
He's being taxed

665
01:05:08.860 --> 01:05:12.540
to increase what he thinks is evil and destructive and death-dealing.

666
01:05:12.540 --> 01:05:22.540
So, and if you have at least one pacifist in any country, I think we can indicate there's at least one pacifist in the United States, and the whole thing gets shot, and you're out.

667
01:05:25.540 --> 01:05:26.540
Yeah, up there.

668
01:05:33.540 --> 01:05:35.540
No, no, no, I love black markets.

669
01:05:38.540 --> 01:05:40.540
Yeah, yeah, I love black markets.

670
01:05:40.540 --> 01:05:49.540
I'm just using a common term. It's the problem of communication. If I talk about white market, nobody will know what I'm talking about.

671
01:05:49.540 --> 01:06:02.540
I think black markets are great. The black markets are the markets popping up under terrible oppressive conditions. The market pops up again, vanyantly. I think it's great.

672
01:06:02.540 --> 01:06:10.540
What do you think about what was called a few years ago, the energy crisis, Jimmy Carter talked more about it when he was in the war.

673
01:06:15.540 --> 01:06:19.540
What do you think about that and the climate crisis, the government crisis?

674
01:06:32.540 --> 01:07:02.540
government, about 1% are the Arab governments, and it's all government in a bench, there is no energy shortage, it's all nonsense, it's all government, it's total, it's unbelievable mess, I mean just unbelievable, you just go on and on, so like talking about an Alice in Wonderland picture, like a parody of government planning, and so it's yeah, by the way the phrase the moral equivalent of war is pure evil, next time you hear a politician say it, head for the bunker, because when they talk

675
01:07:02.540 --> 01:07:09.540
Welcome. And what they mean, exactly what they say, they mean totalitarian, high taxes, regulations, and all that sort of stuff.

676
01:07:09.540 --> 01:07:13.540
They mean things like, I mean, for example, just by the way, the energy crisis.

677
01:07:13.540 --> 01:07:17.540
I may as well get this off my chest, because not too many people have really belly-eaten about this.

678
01:07:17.540 --> 01:07:20.540
They talk about price control and oil and natural gas.

679
01:07:20.540 --> 01:07:25.540
One of the things that really sets me up the wall, and I'm a great fan of, I hate heat, okay?

680
01:07:25.540 --> 01:07:28.540
I'm a great fan of cool weather.

681
01:07:28.540 --> 01:07:34.540
One of the things that set me off the wall is Jimmy Carter's total smashing of air conditioning in this country.

682
01:07:34.540 --> 01:07:40.540
When he said air conditioning may not go above, may not go below 78 degrees, which is, of course, nothing.

683
01:07:40.540 --> 01:07:43.540
It's like, you know, you may as well not have it at all.

684
01:07:43.540 --> 01:07:50.540
I think he was successful in that. I think he really, when I crossed the country last summer, even in Nevada, even the casinos in Nevada were hot.

685
01:07:50.540 --> 01:07:56.540
I mean, it's really going pretty far. So he was successful in crushing air conditioning.

686
01:07:56.540 --> 01:08:03.540
The idea is to make everybody feel the sacrifice, feel the pain.

687
01:08:03.540 --> 01:08:09.540
By the way, with Jimmy Carter, there was one constant leitmotif in Jimmy Carter's administration

688
01:08:09.540 --> 01:08:14.540
which started in his acceptance speech and continued on through the energy talk you're talking about ever since.

689
01:08:14.540 --> 01:08:16.540
It's one of my favorite topics.

690
01:08:16.540 --> 01:08:24.540
The theme and the leitmotif was, by the way, philosophically incorrect, to say the least, but very kindly.

691
01:08:24.540 --> 01:08:34.540
I feel your pain, I love each and every one of you and I feel your pain.

692
01:08:34.540 --> 01:08:40.540
He said that in his acceptance speech, when he said I was ready to punch this TV screen in.

693
01:08:40.540 --> 01:08:44.540
Obviously he doesn't feel my pain, what is he talking about?

694
01:08:44.540 --> 01:08:48.540
And he kept saying, he said that in the energy speech, and what he really meant was,

695
01:08:48.540 --> 01:08:51.540
I'm glad I got that off my chest. Yeah, back there.

696
01:08:51.540 --> 01:08:56.540
I'm wondering if, you know, you said you were anti-Deaf, but I'm trying to correct you.

697
01:08:56.540 --> 01:08:59.540
Blacks has rejuvenated coercion to the form of taxes.

698
01:08:59.540 --> 01:09:00.540
Right.

699
01:09:00.540 --> 01:09:05.540
But you've also stated that you are still a favor of the government services that they provide, such as police, the buyer.

700
01:09:05.540 --> 01:09:09.540
There's nothing in the paper that pleases the way that you write about the government services.

701
01:09:09.540 --> 01:09:10.540
Right.

702
01:09:10.540 --> 01:09:15.540
But you've also stated that you are still a favor of the government services that they provide, such as police, the buyer.

703
01:09:15.540 --> 01:09:19.540
No one is going to pay the police in the way that you write a ticket to Sweden.

704
01:09:19.540 --> 01:09:21.540
How do you represent us?

705
01:09:21.540 --> 01:09:23.540
No, no, no, hold it. Look, look.

706
01:09:23.540 --> 01:09:30.540
San Francisco has a private police department, or the section, which works very well.

707
01:09:30.540 --> 01:09:32.540
It's paid by private people in the neighborhood, right?

708
01:09:32.540 --> 01:09:36.540
They pay for the route so somebody patrols your neighborhood.

709
01:09:36.540 --> 01:09:40.540
And even in New York, which is demoralized at this point,

710
01:09:40.540 --> 01:09:43.540
there are blocks in New York and Manhattan which hire their own private policemen

711
01:09:43.540 --> 01:09:55.540
I'm talking about a policeman because he's mugging constantly, so they have this private cop there, he doesn't, he's not allowed to carry a gun because of the stupid government regulation, but he's at least there under the booth, and so this reduces crime almost to zero on that street, okay?

712
01:09:55.540 --> 01:10:06.540
So when I'm talking about people who will pay for services, means they will pay to defend themselves. They will not pay to be beaten up because they're carrying pot, okay? That's obviously not going to pay for that.

713
01:10:06.540 --> 01:10:20.540
In the case of traffic, traffic is not a police function. You don't have to have cops running traffic. You can have meter maids and all that.

714
01:10:20.540 --> 01:10:32.540
Traffic regulations are made and have to be made by whoever owns the roads. If you have a government on the roads, you have to have somebody in the government, some traffic officer, making sure there's no tie-up and all that.

715
01:10:32.540 --> 01:10:37.540
Everybody, you know, crosses it green and red. That's perfectly legitimate. That's part of the road-owning function.

716
01:10:37.540 --> 01:10:41.540
There are places in the United States which have private roads, like shopping centers and things like that,

717
01:10:41.540 --> 01:10:48.540
or private islands, and there you have private guards who run the roads and make sure this happens.

718
01:10:48.540 --> 01:10:53.540
That's part of the road-owning function. Unfortunately, in the United States, most roads are owned by government.

719
01:10:53.540 --> 01:10:56.540
It doesn't have to be that way. When you have private roads or private highways,

720
01:10:56.540 --> 01:11:12.540
Would you like to speak briefly on a few libertarian parties and get involved in what is the role of the libertarian party?

721
01:11:12.540 --> 01:11:13.540
Where's what?

722
01:11:13.540 --> 01:11:14.540
Where is the role of the libertarian party?

723
01:11:14.540 --> 01:11:25.540
I think there's good news and bad news about the libertarian party.

724
01:11:25.540 --> 01:11:30.540
The good news is that we've grown a lot. The ideas are being spread quite a bit.

725
01:11:30.540 --> 01:11:34.540
Ideas such as I've been emitting tonight.

726
01:11:34.540 --> 01:11:37.540
You see them in places you didn't see before.

727
01:11:37.540 --> 01:11:40.540
Thirty years ago, I said these same sort of things.

728
01:11:40.540 --> 01:11:44.540
I was called either a fascist or a neanderthal or crazy, or all three.

729
01:11:44.540 --> 01:11:48.540
And now the usual reaction is, well, gee, I agree with a lot of it, but I don't think it's really practical.

730
01:11:48.540 --> 01:11:52.540
That's a big step forward from the previous reaction.

731
01:11:52.540 --> 01:11:57.340
So, on the other hand, we have certain problems in the party, in the movement of the party.

732
01:11:57.340 --> 01:12:05.940
We have a certain deficiency in knowledge, a certain lack of reading and things like that.

733
01:12:05.940 --> 01:12:10.340
The sort of thing which afflicts the general education system in the United States.

734
01:12:10.340 --> 01:12:16.540
It afflicts the libertarian party, a certain inattention of ideas and books and things like that.

735
01:12:16.540 --> 01:12:19.740
And if you do that, you can easily get off the track.

736
01:12:19.740 --> 01:12:23.340
because that was one powerful person and one powerful state party just said, let's have,

737
01:12:23.340 --> 01:12:27.020
why don't we have temporary rent control?

738
01:12:27.020 --> 01:12:32.100
Now this is, it's that sort of thing, if you don't have a firm grip on the principle,

739
01:12:32.100 --> 01:12:36.620
it's easy to sort of slide off, especially to see the sugar plum fairies of

740
01:12:36.620 --> 01:12:40.820
a lot of votes and a lot of money and things coming in. That's something you have to be guard against.

741
01:12:40.820 --> 01:12:44.220
But as Jefferson said, eternal vigilance is the price of liberty, right?

742
01:12:44.220 --> 01:12:49.220
I'm trying to be eternally vigilant.

743
01:12:49.740 --> 01:12:56.740
I said the major problem was that they were not willing to work for the common good. I don't think they were, but even if they were, it wouldn't solve the problem.

744
01:13:19.740 --> 01:13:24.740
and Socialist Problem, no way of calculating, no way of telling them what to do.

745
01:13:24.740 --> 01:13:29.740
You see, when you're talking about helping the poor, solving a marginal problem, that's something else.

746
01:13:29.740 --> 01:13:35.740
I'm talking now about a general social institution, economic system, where you don't know what to do,

747
01:13:35.740 --> 01:13:39.740
but you're told, go out and work for the collective. How do you know how to work for the collective?

748
01:13:39.740 --> 01:13:43.740
What are you supposed to do about it? Are you supposed to spend all the time helping the blind?

749
01:13:43.740 --> 01:13:46.740
Are you supposed to work on producing steel? What are you supposed to do?

750
01:13:46.740 --> 01:13:50.740
And if the market doesn't tell you what to do, so to speak, then some committee,

751
01:13:50.740 --> 01:13:54.240
some arbitrary totalitarian committee doesn't tell you what to do, and they don't know what to do either.

752
01:13:54.240 --> 01:13:59.240
That's essentially what I said. As far as things like special problems in the market,

753
01:13:59.240 --> 01:14:02.740
the market solves them much more readily than any kind of government.

754
01:14:02.740 --> 01:14:07.240
First place, the market creates a much more productive system. Standard living goes way up.

755
01:14:07.240 --> 01:14:11.240
If you have a generally affluent society, as we basically have in the United States today,

756
01:14:11.240 --> 01:14:14.740
it's much easier to solve problems of poverty or handicap or something.

757
01:14:14.740 --> 01:14:17.140
If you're back in 1500, everybody's starving.

758
01:14:17.140 --> 01:14:22.340
If everybody's starving, there's not much surplus left over to help blind people or anything else.

759
01:14:22.340 --> 01:14:27.340
So the more affluent society is, the much more likely you'll have to have these problems solved.

760
01:14:27.340 --> 01:14:31.540
Also, private groups are much better at this than government, to say the least.

761
01:14:31.540 --> 01:14:35.940
Government welfare is set up on the basis...

762
01:14:35.940 --> 01:14:40.040
First of all, government has unlimited funds. I mean, they get funds from the taxpayer, okay?

763
01:14:40.040 --> 01:14:43.340
So the government social worker's position is

764
01:14:43.340 --> 01:14:55.340
They essentially want to maximize their own income and power, and so they go out there, they want to keep, they want to find clients and keep them there, so they keep their income and power up.

765
01:14:55.340 --> 01:15:07.340
And so you have a situation where welfare people are sort of sucked into the system and kept there in order to give power and income for the social workers, or the anti-poverty workers, whatever you want to call them.

766
01:15:07.340 --> 01:15:11.040
whereas a private charity system tries to get these people to help themselves as quickly as possible,

767
01:15:11.040 --> 01:15:19.040
get them on their feet and out of this thing as quickly as possible, which was the pre-1933 system, basically.

768
01:15:21.040 --> 01:15:25.240
I have a rather thought on this question. I've lived for 17 years in a communist country,

769
01:15:25.240 --> 01:15:30.040
so I must completely agree that 99% of people hate the system.

770
01:15:30.040 --> 01:15:35.240
Now, after that I came to England, I lived there for 10 years, I've been here for 4 years now,

771
01:15:35.240 --> 01:15:40.480
Now, it's actually terrifying how much support I've found for socialists in England and England here.

772
01:15:40.480 --> 01:15:44.760
The question is, why is it that people are attracted to the doctrine?

773
01:15:44.760 --> 01:15:46.760
I think they're stupid, aren't they?

774
01:16:05.240 --> 01:16:10.020
money and power out of it, the ruling class, we call it, and there are the dupes who are

775
01:16:10.020 --> 01:16:14.340
sucked into this, who are fooled into thinking this is really a great system.

776
01:16:14.340 --> 01:16:17.420
And then, of course, there's a minority, a third group of people who know what's going

777
01:16:17.420 --> 01:16:21.840
on, who are too correlated to say anything about it, and so it takes care of most of

778
01:16:21.840 --> 01:16:22.840
the population.

779
01:16:22.840 --> 01:16:27.340
Now, specifically, I'm not sure what motivates them, and who knows what motivates other people,

780
01:16:27.340 --> 01:16:31.140
the very chancy kind of analysis.

781
01:16:31.140 --> 01:16:39.700
But I think some of it, obviously some of it is error and others of it is deliberate.

782
01:16:39.700 --> 01:16:42.700
I can't imagine, for example, let me just give an instance, go back to John Kenneth

783
01:16:42.700 --> 01:16:43.700
Galbraith.

784
01:16:43.700 --> 01:16:49.740
John Kenneth Galbraith has made a literal fortune, millions and millions of dollars,

785
01:16:49.740 --> 01:16:52.180
made a career and a fortune out of denouncing affluence.

786
01:16:52.180 --> 01:17:00.860
The guy has got, it's true, the guy has got mansions in three or four countries.

787
01:17:00.860 --> 01:17:05.860
He skis a Gestag for three months every year, and he's done it out of attacking affluence.

788
01:17:05.860 --> 01:17:08.860
Now I can't believe this is only honest error. I just can't believe it.

789
01:17:08.860 --> 01:17:14.860
So you have, in other words, a conscious ruling class who's raking in the shekel.

790
01:17:14.860 --> 01:17:21.860
One other thing, I'm trying to write a book on the progressive period, which is the origins of statism in this country, basically, 1900 and 1920.

791
01:17:21.860 --> 01:17:26.860
I mean, one of the interesting things about this period, moments of the origins, you sort of see the thing happening in embryo,

792
01:17:26.860 --> 01:17:29.860
all these evil things starting at that point.

793
01:17:29.860 --> 01:17:33.860
One of the interesting things is that the science of public relations hadn't really been invented yet.

794
01:17:33.860 --> 01:17:36.860
These people were pretty out front in what they wanted to do.

795
01:17:36.860 --> 01:17:38.860
They were pretty honest and candid.

796
01:17:38.860 --> 01:17:42.860
For example, somebody would be the president of the American Society of Civil Engineers,

797
01:17:42.860 --> 01:17:47.860
and he'd say, we are civil engineers, this is a complex economy, therefore we should run the society.

798
01:17:47.860 --> 01:17:48.860
We should have power.

799
01:17:48.860 --> 01:17:51.860
And the physicians said that, and psychiatrists said that.

800
01:17:51.860 --> 01:17:55.860
Everybody's out to grab power and wealth, and they were pretty honest about it.

801
01:17:55.860 --> 01:18:01.860
So, nowadays, of course, you don't say things like that because your PR person will say that's a no-no.

802
01:18:01.860 --> 01:18:05.860
But I think that the thing is a lot involved in that.

803
01:18:05.860 --> 01:18:12.860
It was said that Lyndon Johnson's war against poverty, the only poverty he relieved was the poverty of the anti-poverty social workers.

804
01:18:12.860 --> 01:18:19.860
We've got a huge amount of grants and God knows what, jobs, grants and the whole thing flowing into their coffers.

805
01:18:19.860 --> 01:18:27.500
and so I think I think it's pretty clear I'm obviously a lot of misguided

806
01:18:27.500 --> 01:18:31.820
idealists who are taking the wrong path no question about that we shouldn't

807
01:18:31.820 --> 01:18:35.300
overlook one of my criticisms of Hayek for example in his great book The Road to

808
01:18:35.300 --> 01:18:39.700
Serfdom he starts off by saying that he really starts off by saying well

809
01:18:39.700 --> 01:18:44.340
socialists are all just the great people they engage in this error and it's too

810
01:18:44.340 --> 01:18:46.580
bad they have his own he's trying to convert all of them I don't think that's

811
01:18:46.580 --> 01:18:53.580
That's really the whole story, not just pure error. So, I think he now admits that.

812
01:18:53.580 --> 01:19:03.580
I'm confused with that question. I think you just answered it. Isn't it possible that, I guess many Americans who are sympathetic, they don't really understand Marx.

813
01:19:03.580 --> 01:19:11.580
They're caught up in the so-called idealism without knowing what's involved. And very often they're intellectuals.

814
01:19:11.580 --> 01:19:21.580
Within the context of democracy, there is a certain amount of illogic also, of course, involved.

815
01:19:21.580 --> 01:19:29.580
For example, I like to think that both conservatives and liberals want to put people in a cage with different kinds of cages.

816
01:19:29.580 --> 01:19:35.580
In other words, liberals want to outlaw tobacco smoking, conservatives want to outlaw pot smoking.

817
01:19:35.580 --> 01:19:42.580
And that really doesn't make much difference. I mean, there's a whole set of cages that each one wants to put people in.

818
01:19:42.580 --> 01:19:50.580
And really the logical conclusion is that of all this stuff, you have the outlaw eating of sugar and all that sort of stuff.

819
01:19:50.580 --> 01:19:57.580
The real conclusion of all this stuff is everybody should be put in a cage and dole out the proper balanced diet of vitamins and yogurt and whatever.

820
01:19:57.580 --> 01:20:01.580
And whatever each group wants to dole out to them, because that's better for them.

821
01:20:01.580 --> 01:20:10.580
Even if it is better for them, which is a dubious question, people have the right to pursue their own life, run their own life, whether they do well or badly at it.

822
01:20:10.580 --> 01:20:19.580
That's the basic libertarian position. Once you get the idea that you know best, not only know better than the other guy, but also have the right to tell them what to do, then you're in big trouble.

823
01:20:19.580 --> 01:20:41.580
How can you expect the personal market system to take care of somebody that is a poor, socially inadequate or more hard-to-do man?

824
01:20:41.580 --> 01:20:48.580
I understand that government is very impersonal and you've got to move through committees and set up committees.

825
01:20:48.580 --> 01:20:54.080
Well, at least there's been a direct aim, a direct drive for it to get you into that problem.

826
01:20:54.080 --> 01:20:58.080
How can you expect that the commercial market system to take care of that?

827
01:21:18.580 --> 01:21:26.580
The point is that the market provides the affluence and the information to make it much easier to do that.

828
01:21:26.580 --> 01:21:40.580
The point is that the market provides the affluence and the information to make it much easier to do that.

829
01:21:40.580 --> 01:21:45.280
No, no, no, it's not a carrot. I mean, look, the point is, presumably there's a charitable impulse in most people.

830
01:21:45.280 --> 01:21:47.380
Most people express the same sort of sentiment you do.

831
01:21:47.380 --> 01:21:51.880
And it has, and if you look at past history before the New Deal, before government relief came in,

832
01:21:51.880 --> 01:21:54.880
there was lots of private charity and relief, etc.

833
01:21:54.880 --> 01:22:02.380
The point is, as affluence becomes greater under a free market system,

834
01:22:02.380 --> 01:22:05.680
this provides more room for this kind of behavior, for activity.

835
01:22:05.680 --> 01:22:10.080
And also you don't tax away everybody's incomes, they can do that.

836
01:22:10.080 --> 01:22:17.080
So there's no absolute guarantees, but it certainly seems very plausible that would happen.

837
01:22:17.080 --> 01:22:21.080
Because it's always been happening in every other country that can do it.

838
01:22:27.080 --> 01:22:32.080
Any country that has, I mean, the Red Cross and the Community Chest, my God, I mean, go down a whole list.

839
01:22:32.080 --> 01:22:36.080
I mean, American Cancer Society, not that I think they're so great, but the point is there's a whole group.

840
01:22:36.080 --> 01:22:42.080
There's a fantastic number of private welfare agencies in other countries of the England

841
01:22:42.080 --> 01:22:46.280
and Western Europe in particular, and in other countries which are more affluent.

842
01:22:46.280 --> 01:22:50.640
There's not much private welfare agencies going on in Zambia, because in Zambia everybody's

843
01:22:50.640 --> 01:22:53.600
sort of scrambling along trying to survive, okay?

844
01:22:53.600 --> 01:22:58.520
The more affluent of the country, the more it tends to be private welfare agencies.

845
01:22:58.520 --> 01:22:59.520
Yeah?

846
01:22:59.520 --> 01:23:24.520
Okay, they don't have to look at anything. They forget all this. They can just stop buying assets. It's very simple.

847
01:23:24.520 --> 01:23:34.520
Tell the Federal Reserve, give them an absolute commandment, don't buy any more assets. That's it. You don't have to look at anything, you don't have to worry about M1 and M3 and all the rest of it.

848
01:23:34.520 --> 01:23:42.520
Just don't buy any more assets, just get out of our lives. That's all they have to do. I mean, eventually I think they should be abolished.

849
01:23:42.520 --> 01:23:51.520
I mean, as a short-term immediate solution, just tell them, don't pass a law, give them an order, don't buy any more assets, don't buy any more government securities,

850
01:23:51.520 --> 01:23:59.520
Don't buy any more bank advances and loans. Just get out. Shut up and get out and leave and then...

851
01:24:04.520 --> 01:24:09.520
I know you were a little bit unfair to George Gilder, who wants me to burn my tan-stable button.

852
01:24:09.520 --> 01:24:15.520
I wonder if you would give us your critique of supply-side economics in five minutes.

853
01:24:15.520 --> 01:24:28.520
All right. In the first place, supply side economics is a very peculiar rubric. It's sort of a portmanteau term. It's applied to almost anything.

854
01:24:28.520 --> 01:24:33.520
In the very broad sense, supply side economics means being concerned with increasing production,

855
01:24:33.520 --> 01:24:40.520
or being concerned with the supply side of the economy, with production rather than demand or money or fiscal policy.

856
01:24:40.520 --> 01:24:46.120
Well, in that sense, we have a lot of left-wing supply-siders, the income policy types like Mary Bosworth.

857
01:24:46.120 --> 01:24:51.120
Supply-side means we have to have an income policy, have wage price control and foresee people, blah, blah, blah.

858
01:24:51.120 --> 01:24:56.120
There's also the guys that want to have $200 billion subsidies to this industry and that industry.

859
01:24:56.120 --> 01:24:58.120
It's also supply-side.

860
01:24:58.120 --> 01:25:00.120
So these guys, of course, are outside of the pale.

861
01:25:00.120 --> 01:25:03.120
But they're around everywhere. It's very confusing.

862
01:25:03.120 --> 01:25:06.120
The term supply-side covers all these people.

863
01:25:06.120 --> 01:25:09.120
Reindustrialization, we do it by having government subsidies and planning.

864
01:25:09.120 --> 01:25:17.120
We think, we sit here in Washington, we think that the SIMFuel program should go and the other programs shouldn't, and Chrysler shouldn't, you know, the big bailout, whatever it is.

865
01:25:17.120 --> 01:25:21.120
So we ignore that, but I just want to say that's a big thing in the supply side field.

866
01:25:21.120 --> 01:25:25.120
It's sort of a fashionable term now that everybody rushes into it.

867
01:25:25.120 --> 01:25:52.120
Okay, now the narrow supply side, I suppose, is the Laffer curve, a concept that a big tax cut will increase government revenue proportionally, so that, even more, so that, because it will free the economy and increase saving and work and so forth and so on, so that you wind up with even greater total revenue than you have before.

868
01:25:52.120 --> 01:26:01.120
The Laffer Curve is essentially the way out, it was a tan-staffel way out, it was a way by which the Republican candidates last election could square the circle.

869
01:26:01.120 --> 01:26:12.120
The thing that always impressed me was Mary McGrory. I don't watch, I hate to watch politicians ever, but I happen to watch the Iowa debates, if you remember, the eight guys or whatever it is, the Republican candidates.

870
01:26:12.120 --> 01:26:22.120
Mary McRoy gets up and she gives an excellent question. She says, Mr. Bush, or whoever she addressed it to, and to everybody, you're all promising the following things.

871
01:26:22.120 --> 01:26:31.120
A big tax cut, right? A balanced budget, right? And keeping the same level of government services, right? Sounds like a contradiction to me. How are you going to do all of this?

872
01:26:31.120 --> 01:26:40.120
Aha, and they all brought in a Laffer curve. They didn't mention Laffer, of course, but they said, well, you see, if you cut tax rates, the revenues would be so great over in Washington with that.

873
01:26:40.120 --> 01:26:47.120
Now, first place, there's no evidence for this, alright? I mean, I'm not saying it's inconceivable that would happen.

874
01:26:47.120 --> 01:26:54.120
There's no evidence for it whatsoever. I don't think it would really happen. I think, see, so far, some smart leftist economist.

875
01:26:54.120 --> 01:26:58.120
We don't seem to exist anymore, but some smart leftist economist.

876
01:26:58.120 --> 01:27:01.120
You know, the way he or she could rebut the lava curve would be as follows.

877
01:27:01.120 --> 01:27:08.120
Okay, let's test the lava curve, fella. Let's do it the other way around. Let's raise income taxes by 20% and see if revenue falls off.

878
01:27:08.120 --> 01:27:12.120
I'll bet your bottom dollar that wouldn't fall off.

879
01:27:12.120 --> 01:27:16.120
But see, that's the way they could outfox Laffer. They haven't done it yet.

880
01:27:16.120 --> 01:27:20.120
But I don't want to, I shouldn't really publicize because somebody's going to take that away.

881
01:27:20.120 --> 01:27:26.120
That's right. Now I personally am in favor of any tax cut, anytime, anywhere.

882
01:27:26.120 --> 01:27:33.120
I'm in favor of cutting marginal taxes, total taxes, depreciation allowances, anything of any size.

883
01:27:33.120 --> 01:27:36.120
So I'm sympathizing with Laffer people in that respect.

884
01:27:36.120 --> 01:27:39.320
Am I in favor of cutting taxes regardless of what happens to the budget?

885
01:27:39.320 --> 01:27:43.820
On the other hand, because for one thing, even if there's a bigger deficit, which I think there would be,

886
01:27:43.820 --> 01:27:46.120
why should a tax be better than a deficit?

887
01:27:46.120 --> 01:27:49.120
If a tax is pure evil, a deficit is just half evil.

888
01:27:49.120 --> 01:27:55.120
In other words, even if the deficit were inflationary,

889
01:27:55.120 --> 01:28:01.320
at least, even if your Wonder Bread would now cost $2 a loaf instead of $0.70 a loaf because of the deficit,

890
01:28:01.320 --> 01:28:05.320
In other words, at least you're still getting wonder bread. The taxes are getting nothing, except heartache.

891
01:28:05.320 --> 01:28:09.320
So in other words, the tax is the worst possible thing.

892
01:28:09.320 --> 01:28:13.320
On the other hand, I think the Laffer Curve is pure demagogy. I think they know it. I think these people really know it.

893
01:28:13.320 --> 01:28:17.320
I really do. I think it's pure political demagogy.

894
01:28:17.320 --> 01:28:21.320
So, because I've asked Laffer, I met him in Chicago, and I asked him,

895
01:28:21.320 --> 01:28:25.320
well, look, supposing it doesn't work, supposing you're on the other side of the Laffer Curve,

896
01:28:25.320 --> 01:28:29.320
and also, you know, there's no time to mention the Laffer Curve. In other words,

897
01:28:29.320 --> 01:28:36.820
He really says it's instantaneous. You can't gear up and produce twice as much in two weeks.

898
01:28:36.820 --> 01:28:40.820
Maybe you work in five years. No, it's supposed to be instantaneous.

899
01:28:40.820 --> 01:28:44.820
So I asked him that, and this is the position Urban Crystal takes as sort of the guru,

900
01:28:44.820 --> 01:28:48.320
the political philosophy guru of a supply of Laffer people.

901
01:28:48.320 --> 01:28:50.820
And they both have really the same answer. They really say it's all dumb and good.

902
01:28:50.820 --> 01:28:58.820
Laffer really said, look, by the time they get the tax cut, they'll love it so much they wouldn't care about the deficit.

903
01:28:58.820 --> 01:29:03.820
The Revenue and all that. That's really what I'm asking. It's all a shock. It's a scam.

904
01:29:03.820 --> 01:29:09.820
The whole thing is a scam. And even though in a sense I'm sympathetic, and I like to see taxes cut anyway,

905
01:29:09.820 --> 01:29:16.820
it really redounds against you. I don't want to be a cliché preacher here, but some people might remember it.

906
01:29:16.820 --> 01:29:20.820
Public memory might be short. I remember it for six months.

907
01:29:20.820 --> 01:29:26.820
Boy, God, if it didn't work, we'd cut taxes and revenue fell off, and then we're sunk.

908
01:29:26.820 --> 01:29:30.820
So I, that's, yeah.

909
01:29:30.820 --> 01:29:32.820
I want to talk about taxes.

910
01:29:32.820 --> 01:29:37.820
An institution of public education which is supported primarily by local taxes.

911
01:29:37.820 --> 01:29:43.820
What would you propose? I assume what you're saying, you know, no taxes or those taxes are there.

912
01:29:43.820 --> 01:29:47.820
How would we find something like, I would say private education,

913
01:29:47.820 --> 01:29:50.820
but isn't it a long tradition?

914
01:29:50.820 --> 01:29:51.820
What would you propose?

915
01:29:51.820 --> 01:29:53.820
Private? Private is a long tradition.

916
01:29:53.820 --> 01:29:56.820
Private education is a long tradition too, fortunately.

917
01:29:56.820 --> 01:29:59.820
But you would think that this could replace our public education.

918
01:29:59.820 --> 01:30:04.820
Sure, it'd be beautiful. And look, public education, I mean nobody, I don't know how it is here. I come from New York.

919
01:30:04.820 --> 01:30:10.820
I admit it's sort of a skewed sample because in New York nobody says that kids get educated at all.

920
01:30:10.820 --> 01:30:11.820
That's out.

921
01:30:11.820 --> 01:30:12.820
That's something else though.

922
01:30:12.820 --> 01:30:16.820
Well, but I mean it's a multi-billion dollar school system.

923
01:30:16.820 --> 01:30:25.820
I attended an education conference a couple of years ago which included liberals, leftists, right-wingers, a whole spectrum of people.

924
01:30:25.820 --> 01:30:30.820
And they started off by stipulating, they admitted, all of them admitted that public schools don't educate.

925
01:30:30.820 --> 01:30:34.820
They stipulated, okay, we admit they don't educate. However, what was the argument?

926
01:30:34.820 --> 01:30:38.820
The argument of the liberals, the last people left really in favor of the public school system,

927
01:30:38.820 --> 01:30:43.820
the argument they gave in favor of public education was that it was a massive babysitting device.

928
01:30:43.820 --> 01:30:48.820
You get the kids out of your hair for eight hours or whatever, and the taxpayers pay for it.

929
01:30:48.820 --> 01:30:53.820
That's really even an answer to it, but they burn in the public school, they can pick up in three weeks

930
01:30:53.820 --> 01:30:56.820
at burlitz or at some course or whatever.

931
01:30:56.820 --> 01:31:03.820
So, now of course my answer to that is in New York City, where we're on the cutting edge of America,

932
01:31:03.820 --> 01:31:07.820
it's no longer a babysitting function, it's worth your life to enter the public school system in New York.

933
01:31:07.820 --> 01:31:12.820
So anybody who can possibly do it gets their kid out of the public school and gets them into private school,

934
01:31:12.820 --> 01:31:41.820
But that is due because it's tax-supported, that's because something has happened to our teachers, our teachers and staff.

935
01:31:41.820 --> 01:32:11.820
You know, it all fits in. Look, look, if, let's put it this way, supposing if you have, there's all sorts of controversial things about education, I mean, there's a whole bunch of topics which you can go either way, you can have traditional or progressive education, sex education or no sex education, religious education or no religious education, a whole bunch of things, right? Whichever way any public school system decides, somebody's going to be hurt, some large group of parents and children will be hurt because their witches will be overridden. If you have a private school system, anybody would go to any darn school they want.

936
01:32:11.820 --> 01:32:20.820
You have a whole spectrum of schools fulfilling the desires of the various groups of parents and students.

937
01:32:20.820 --> 01:32:26.820
You can't have that public school system however way they decide some large group of people are going to be smashed,

938
01:32:26.820 --> 01:32:29.820
or feel they've been oppressed by the decision.

939
01:32:29.820 --> 01:32:32.820
Even if you have a great public school system, even if everything else is great,

940
01:32:32.820 --> 01:32:37.820
you still have an inherent nature of the public school system that is coercing a whole bunch of people,

941
01:32:37.820 --> 01:32:40.820
either a majority or a large minority of parents and students.

942
01:32:40.820 --> 01:32:47.320
It's as if there's only one bread in the world.

943
01:32:47.320 --> 01:32:50.820
The tradition has always been the government always makes bread.

944
01:32:50.820 --> 01:32:52.820
Everything else is free, but the government has to make bread.

945
01:32:52.820 --> 01:32:54.820
And then the question is what kind of bread do they make?

946
01:32:54.820 --> 01:32:55.820
And there's a big conflict.

947
01:32:55.820 --> 01:32:58.820
There's only one bread for each city or each town.

948
01:32:58.820 --> 01:33:01.820
Should it be Wonder Bread type? Should it be Pepperidge Farm?

949
01:33:01.820 --> 01:33:03.820
Should it be this health crap and all that sort of thing?

950
01:33:03.820 --> 01:33:08.320
And there's a big conflict over this, right?

951
01:33:08.320 --> 01:33:15.320
However, whichever way the government decides, a lot of bread users will be oppressed by this, they won't be able to get the bread they want.

952
01:33:15.320 --> 01:33:20.320
So as soon as you have government, you have a coercive decision almost automatically.

953
01:33:22.320 --> 01:33:23.320
Amen.