WEBVTT NOTE What is Exploitation? Who Exploits Whom? 1 00:00:00.000 --> 00:00:16.500 I will say a little bit about democracy and monarchy in the course of my talk, too, but the subject is exploitation, or slightly differently formulated, who exploits who, and how. 2 00:00:16.500 --> 00:00:29.500 And we start out with Marx's theory of exploitation to show what is right and what is wrong about that theory and then offer an alternative view on exploitation. 3 00:00:29.500 --> 00:00:43.100 You are basically familiar with the Marxian theory, Marx tells us that mankind goes through 4 00:00:43.100 --> 00:00:53.260 various stages, necessarily so slavery, then feudalism, then capitalism and then socialism 5 00:00:53.260 --> 00:00:58.580 and he claims that three of these stages are characterized by the existence of exploitation 6 00:00:58.580 --> 00:01:03.700 and Exploitation disappears in socialism. 7 00:01:03.700 --> 00:01:09.900 As far as the first two stages are concerned, that is slavery, we do not have to argue whether 8 00:01:09.900 --> 00:01:16.660 Marx's description is correct, that's probably incorrect also as a description of the course 9 00:01:16.660 --> 00:01:17.660 of history. 10 00:01:17.660 --> 00:01:25.180 But nonetheless, it is certainly correct to say that slavery is a system where exploitation 11 00:01:25.180 --> 00:01:53.180 The second stage is feudalism and there he argues that serfs that are tied to the soil and cannot run away from the Lord who oversees them, that that is characterized by exploitation also. 12 00:01:53.180 --> 00:02:03.380 Again, classical liberals agree with Marx as far as these two stages are concerned. 13 00:02:03.380 --> 00:02:10.460 Not again as far as descriptions of history are concerned but with respect to the characterization 14 00:02:10.460 --> 00:02:14.580 that these stages are characterized by exploitation. 15 00:02:14.580 --> 00:02:22.220 Now comes the stage of capitalism and Marx argues that despite the fact that laborers 16 00:02:22.220 --> 00:02:31.060 The laborers are pre-laborers. Namely, they can work or not work for some employer. Capitalism 17 00:02:31.060 --> 00:02:38.680 is also characterized by exploitation. Now, what is his argument for the existence of exploitation 18 00:02:38.680 --> 00:02:47.100 under a system where laborers can or decide not to work for somebody else? His argument 19 00:02:47.100 --> 00:02:55.180 Ludwig is correct as far as it goes. He points out the following thing. Let's assume we have 20 00:02:55.180 --> 00:03:02.420 a worker who works in an Apple workshop or so, and his payment is also in the form of 21 00:03:02.420 --> 00:03:12.860 apples. So he produces, let's say, 100 apples per week, and his wage payment consists only 22 00:03:12.860 --> 00:03:21.180 of 80 Apples that he receives. And then Marx points out this difference, 80 apples he receives 23 00:03:21.180 --> 00:03:29.820 as wage payment and 100 apples he produces, this difference of 20 apples is a surplus 24 00:03:29.820 --> 00:03:42.140 value that the capitalist exploits, extracts from the labor. Now it is correct, the observation 25 00:03:42.140 --> 00:03:49.340 that the wage earner is paid less than the value of the product that he produces is certainly 26 00:03:49.340 --> 00:03:51.100 a correct observation. 27 00:03:51.100 --> 00:03:56.060 The question is whether this constitutes exploitation or not. 28 00:03:56.060 --> 00:04:03.260 And the answer is it does not constitute exploitation for the following reason. 29 00:04:03.260 --> 00:04:11.180 We have to ask to be the question, why did the laborer agree to such a deal? 30 00:04:11.180 --> 00:04:18.340 And the answer is the laborer agreed to this deal despite the fact that he knows I can 31 00:04:18.340 --> 00:04:27.740 also get 100 apples paid provided that I am the owner of the apple orchard. 32 00:04:27.740 --> 00:04:35.780 I have planted the trees and then if I plant the trees and am the owner of the apple orchard 33 00:04:35.780 --> 00:04:43.780 Then, of course, my remuneration would be the full 100 apples that will be produced in the course of a week. 34 00:04:43.780 --> 00:04:48.540 So why didn't he do this? Why didn't he insist I get 100? 35 00:04:48.540 --> 00:04:53.540 The answer is he would have had to wait longer to get 100. 36 00:04:53.540 --> 00:05:00.540 Namely, it would have taken longer to build the apple orchard in order to get the 100 apples. 37 00:05:00.540 --> 00:05:03.380 Instead, he doesn't have to wait that long. 38 00:05:03.380 --> 00:05:15.380 In order to get quicker to my result, to my wages, I only accept 80 and sacrifice 20. 39 00:05:15.380 --> 00:05:18.380 This is a phenomenon of time preference. 40 00:05:18.380 --> 00:05:29.380 Present goods, well, goods in the immediate future are more valuable than future goods, goods in the far distance. 41 00:05:29.380 --> 00:05:50.380 So what the labor demonstrates is simply the preference of 80 apples in the immediate present over 100 apples in the distant future that he could have received if he had become a capitalist owner of an apple orchard and so forth himself. 42 00:05:50.380 --> 00:05:55.380 So because of that, there is no exploitation whatsoever. 43 00:05:55.380 --> 00:06:04.700 Now, I want to present an alternative theory of exploitation, the libertarian theory or 44 00:06:04.700 --> 00:06:13.580 the liberal theory of exploitation, as I indicated, as far as slavery and serfdom is concerned 45 00:06:13.580 --> 00:06:21.780 they agree, but they say capitalism is not characterized by exploitation, the surplus 46 00:06:21.780 --> 00:06:29.020 Last value is a result of time preference, preferring present goods over future goods. 47 00:06:29.020 --> 00:06:39.340 But libertarians still think that in systems that we refer to as capitalism, there does 48 00:06:39.340 --> 00:06:50.400 exist exploitation also, except not exploitation by employers of employees, but exploitation 49 00:06:50.400 --> 00:06:58.280 by the state and the agents of the state. These are the people who live outside of the 50 00:06:58.280 --> 00:07:09.160 state, who are not members of the state apparatus. In order to explain this, let me first explain 51 00:07:09.160 --> 00:07:21.260 The difference between productive activities and unproductive activities. 52 00:07:21.260 --> 00:07:29.000 Productive activities are all those activities that benefit at least one individual without 53 00:07:29.000 --> 00:07:37.280 making anyone else worse off as a result of this activity. 54 00:07:37.280 --> 00:07:46.280 Productive activities are activities that benefit one individual at least at the expense 55 00:07:46.280 --> 00:07:49.440 of someone else. 56 00:07:49.440 --> 00:07:57.360 Now a description of what activities are productive activities and what activities are unproductive 57 00:07:57.360 --> 00:08:00.680 activities. 58 00:08:00.680 --> 00:08:09.320 The first form of productive activities is what we call original appropriation, the activity 59 00:08:09.320 --> 00:08:13.600 that Locke spoke about, of homesteading something. 60 00:08:13.600 --> 00:08:20.200 A person for the very first time takes into possession something that was previously unowned 61 00:08:20.200 --> 00:08:23.680 by anyone. 62 00:08:23.680 --> 00:08:25.160 Why does he do this? 63 00:08:25.160 --> 00:08:30.320 Because he thinks by appropriating something that was nobody's property before, that was 64 00:08:30.320 --> 00:08:38.600 unknown, I am better off. Does he take anything away from other individuals by doing this? 65 00:08:38.600 --> 00:08:43.040 Does he do this at the expense of someone else? He answers, no, he doesn't do that at the 66 00:08:43.040 --> 00:08:52.540 expense of someone else. Everyone else had the possibility of appropriating these resources 67 00:08:52.540 --> 00:08:58.180 too. They didn't do it. They demonstrated through their actions that they did not attach 68 00:08:58.180 --> 00:09:03.460 any value to this object that was appropriated by me for the first time. 69 00:09:03.460 --> 00:09:07.300 I did not take anything away from them. 70 00:09:07.300 --> 00:09:10.700 Everything else is still available to them just as before. 71 00:09:10.700 --> 00:09:13.220 So one person is better off. 72 00:09:13.220 --> 00:09:20.540 No one else is made worse off because nothing is taken away from anyone else. 73 00:09:20.540 --> 00:09:27.180 The second form of productive activity is now I use my originally appropriated resources 74 00:09:27.180 --> 00:09:34.280 and produce something with the help of these things, with my labor and mix my labor with 75 00:09:34.280 --> 00:09:37.460 originally appropriated things. 76 00:09:37.460 --> 00:09:45.200 If I do not physically damage the production process, the property of someone else, then 77 00:09:45.200 --> 00:09:53.060 I am made better off because people only produce because they think that whatever they produce 78 00:09:53.060 --> 00:09:58.620 This is more valuable than the input that goes into the production process. 79 00:09:58.620 --> 00:10:05.300 One person is better off was anything taken away from anybody else and the answer is no. 80 00:10:05.300 --> 00:10:10.180 Everybody owns precisely the same goods that they owned before. 81 00:10:10.180 --> 00:10:14.180 Their supply of goods is exactly the same as before. 82 00:10:14.180 --> 00:10:19.740 One person is made better off because something more valuable was brought about as a result 83 00:10:19.740 --> 00:10:28.300 And the third productive activity is the voluntary exchange. 84 00:10:28.300 --> 00:10:34.660 A voluntary exchange of property only takes place if both individuals, both exchange partners 85 00:10:34.660 --> 00:10:37.380 expect to be better off. 86 00:10:37.380 --> 00:10:43.740 The goods go from the hands of those who value them less into the hands of those who value 87 00:10:43.740 --> 00:10:44.740 them more. 88 00:10:44.740 --> 00:10:56.740 The two individuals are made better off, but as a result of the trade between the two individuals, everybody else in the world has exactly the same possessions as they had before. 89 00:10:56.740 --> 00:11:08.740 No one is made worse off, two individuals gain. So those are the productive ways of earning a living, making yourself better off. 90 00:11:08.740 --> 00:11:11.620 What are the unproductive ways? 91 00:11:11.620 --> 00:11:18.420 You can recall unproductive activities are those activities where one individual benefits, 92 00:11:18.420 --> 00:11:23.300 but at the expense of damaging someone else. 93 00:11:23.300 --> 00:11:31.500 If I take away from someone an object that he has originally appropriated against his 94 00:11:31.500 --> 00:11:34.300 will, then of course I am better off. 95 00:11:34.300 --> 00:11:40.340 But the person who has originally appropriated this object is made worse off. 96 00:11:40.340 --> 00:11:43.500 So this is an unproductive activity. 97 00:11:43.500 --> 00:11:51.220 If I take away what somebody else has produced, then of course I, who takes it away, am better 98 00:11:51.220 --> 00:11:56.780 off, but the producer of the product is made worse off. 99 00:11:56.780 --> 00:12:03.980 And of course every coercive exchange, in contrast to voluntary exchanges, is also characterized 100 00:12:03.980 --> 00:12:14.940 by the fact that one person is made better off and the other person is made worse off. 101 00:12:14.940 --> 00:12:23.720 So unproductive activities then are the expropriation of original appropriators, the expropriation 102 00:12:23.720 --> 00:12:32.180 of producers, it can be the full expropriation or it can be the partial expropriation, and 103 00:12:32.180 --> 00:12:38.320 Any type of coercive exchange. 104 00:12:38.320 --> 00:12:43.060 What is the general effect of exploitation defined like this? 105 00:12:43.060 --> 00:12:49.380 That is, exploitation as unproductive activities. 106 00:12:49.380 --> 00:12:56.220 The general effect is, the more exploitation there is, the more expropriation of original 107 00:12:56.220 --> 00:13:17.380 When we look now at what type of people engage in unproductive activities, in exploitative 108 00:13:17.380 --> 00:13:24.220 activities that reduce the level of productive activities, then we can distinguish between 109 00:13:24.220 --> 00:13:39.220 There have been two classes of individuals. On the one hand, of course, plain criminals who hit other people on the head, rob them, rape them, and so forth, that is under no dispute. 110 00:13:39.220 --> 00:13:49.220 Practically everybody agrees that these people engage in exploitative activities, in unproductive activities, and thereby exploit others. 111 00:13:49.220 --> 00:14:00.220 The second group is the group that makes up the state apparatus. 112 00:14:00.220 --> 00:14:12.220 Now people will object that there is a tremendous difference between playing criminals, stealing goods from others, 113 00:14:12.220 --> 00:14:19.780 from others and governments or states taking goods from other individuals in the form of 114 00:14:19.780 --> 00:14:25.980 taxes for instance, and there are other forms as well that I come to a little bit later. 115 00:14:25.980 --> 00:14:29.540 But the first one is of course the form of taxes. 116 00:14:29.540 --> 00:14:37.500 Now there is of course some truth in the statement that there is a difference between criminals 117 00:14:37.500 --> 00:14:45.660 and States, but the difference is actually one that makes states look even worse than 118 00:14:45.660 --> 00:14:46.660 plain criminals. 119 00:14:46.660 --> 00:14:55.260 Let me just give you an example that was first presented by Lysander Stuner, an American 120 00:14:55.260 --> 00:15:04.460 libertarian in the 19th century, who told the following story, imagine that you are 121 00:15:04.460 --> 00:15:21.460 When you are traveling along the road and somebody jumps from behind the bushes and stops you and says your money or your life and then you hand him your money and what does the criminal then do? 122 00:15:21.460 --> 00:15:32.460 The criminal then disappears. He runs away to the woodworks and as far as you are concerned, you are happy that he does this. 123 00:15:32.460 --> 00:15:47.460 and you have the possibility of preparing yourself the next time for attacks such as this and possibly defending you the next time. 124 00:15:47.460 --> 00:15:56.460 Now imagine the same scenario, you drive along and somebody comes and stops you and demands your money 125 00:15:56.460 --> 00:16:07.460 and once he is done stealing your money, then he does not disappear into the woodworks but 126 00:16:07.460 --> 00:16:16.900 he says next week we will see each other again or next month or next year and so forth when 127 00:16:16.900 --> 00:16:21.120 the next income declaration has to occur and so forth. 128 00:16:21.120 --> 00:16:30.800 So he is not doing what you would like him to do, disappear, but he becomes an institutionalized 129 00:16:30.800 --> 00:16:33.800 robber. 130 00:16:33.800 --> 00:16:37.840 Who would you prefer to meet on the road? 131 00:16:37.840 --> 00:16:42.960 Someone that you can defend yourself against in the future or someone that you know you 132 00:16:42.960 --> 00:16:46.080 will come again and again and again. 133 00:16:46.080 --> 00:16:52.200 This is indeed an important difference between a state on the one hand and a plain criminal 134 00:16:52.200 --> 00:16:58.080 on the other hand, but it is certainly not a difference that lets a state look particularly 135 00:16:58.080 --> 00:17:02.520 good. 136 00:17:02.520 --> 00:17:11.760 The second point I want to make is, people frequently then argue, but you have to recognize 137 00:17:11.760 --> 00:17:19.320 As I said, a state is not, one state is not like any other state, states are different. 138 00:17:19.320 --> 00:17:26.800 And of course we can admit that also, just as there are bad robbers and good robbers, 139 00:17:26.800 --> 00:17:33.080 so there can also be comparatively good states and comparatively bad states. 140 00:17:33.080 --> 00:17:57.080 Again, an example. A friend of mine went to an ATM machine, and once he had his money out, somebody standing behind him with a knife and asked him to hand over his 300 euros that he had received out of the ATM machine. 141 00:17:57.080 --> 00:18:24.080 And my friend then started to argue with him, so he gave him the $300 and said that it was late at night, I had planned to go out and have a few beers afterwards and now there's no possibility that I can get any beer and the mugger then agreed to give him $20 or 20 euros back of his own money. 142 00:18:24.080 --> 00:18:38.080 Now my friend was of course very happy in this situation. I guess I would have been happy also. This is a good state. 143 00:18:38.080 --> 00:18:52.080 It can also happen of course that you start negotiating in this way and instead of giving you a small proportion of your money, of your own money, 144 00:18:52.080 --> 00:18:57.080 that he will kick your teeth out or do something even worse to you. 145 00:18:57.080 --> 00:19:01.680 This is obviously a not so good state. 146 00:19:01.680 --> 00:19:09.480 That might be the difference between, let's say, something like the United States or Great Britain or Germany, 147 00:19:09.480 --> 00:19:13.880 the good states, so to speak, that give part of the money back to you, 148 00:19:13.880 --> 00:19:18.680 and something like the former Soviet Union or East Germany, 149 00:19:18.680 --> 00:19:36.080 Okay, now to the question, how do these institutions like states come into existence? 150 00:19:36.080 --> 00:19:45.680 How can people get away with institutionalized robbery? 151 00:19:45.680 --> 00:19:53.840 Well, in one way, the answer is, well, why are there states? 152 00:19:53.840 --> 00:20:01.400 In some sense, the answer is very easy, and people have given very complicated explanations 153 00:20:01.400 --> 00:20:08.000 why states come into existence, but fundamentally the answer is very easy. 154 00:20:08.000 --> 00:20:15.880 It is very interesting, very lucrative, very nice if you can live at other people's expense. 155 00:20:15.880 --> 00:20:24.680 It is not difficult to imagine that there might be people out there who would love to 156 00:20:24.680 --> 00:20:33.120 institutionalize, to engage in institutionalized robbery of other people and live off them. 157 00:20:33.120 --> 00:20:36.200 You could ask the same question, why is there slavery? 158 00:20:36.200 --> 00:20:40.840 Again, people have given very complicated explanations for why it's their slavery. 159 00:20:40.840 --> 00:20:49.480 The answer is, if I'm the slave master and you are the slave, there's a very simple explanation. 160 00:20:49.480 --> 00:20:52.000 Nice for me to be the slave master and you are the slave. 161 00:20:52.000 --> 00:20:59.280 I live on your expense. 162 00:20:59.280 --> 00:21:04.280 But how can they get away with this? 163 00:21:04.280 --> 00:21:11.080 Not because, this is the standard line, not because states are necessary in order to create 164 00:21:11.080 --> 00:21:12.080 peace. 165 00:21:12.080 --> 00:21:20.080 Quite to the contrary, as I will explain in a second, states actually are institutions 166 00:21:20.080 --> 00:21:27.680 that create conflicts and then present themselves as a solution to a problem that they themselves 167 00:21:27.680 --> 00:21:30.480 have created in the first place. 168 00:21:30.480 --> 00:21:40.480 Again, a small story might be useful in order to illustrate this point. 169 00:21:40.480 --> 00:21:50.480 Let's say we have a group of people who want to start an extortion racket. 170 00:21:50.480 --> 00:21:57.480 They go to the store owners and tell the store owners, 171 00:21:57.480 --> 00:22:06.480 You need protection. I know life is dangerous in this world and I'm here to protect you. 172 00:22:06.480 --> 00:22:16.480 And then the store owner might say, I feel quite safe, nothing much has happened and if something 173 00:22:16.480 --> 00:22:25.480 happens I'm prepared to defend myself. And the people disappear. The next day the store owner comes 174 00:22:25.480 --> 00:22:33.480 When he comes to his store and sees that all his windows are smashed, the store is vandalized and so forth. 175 00:22:33.480 --> 00:22:42.480 And a few hours later, the same people reappear on the scene and ask the store owner the same question, 176 00:22:42.480 --> 00:22:48.040 Do you need protection? 177 00:22:48.040 --> 00:22:56.680 And now the store owner gradually begins to get the idea what is going on. 178 00:22:56.680 --> 00:23:05.120 And he says, oh I see the point, yes of course I am willing to pay you something so that 179 00:23:05.120 --> 00:23:11.280 you will give me protection, meaning that you will not smash my windows and vandalize 180 00:23:11.280 --> 00:23:23.520 is my store tomorrow. Now what would we expect this protection racket that has begun its 181 00:23:23.520 --> 00:23:33.200 work like this to do in order to stay in business? They must offer something of value to the 182 00:23:33.200 --> 00:23:39.080 the person that they protect and who pays taxes to them. 183 00:23:39.080 --> 00:23:41.800 What do they offer them in return? 184 00:23:41.800 --> 00:23:49.600 Now obviously in every territory there can be only one institutionalized protection racket. 185 00:23:49.600 --> 00:23:53.480 You cannot have competition in the field of protection rackets. 186 00:23:53.480 --> 00:23:59.660 If there would be dozens of protection rackets operating in the same territory, there's simply 187 00:23:59.660 --> 00:24:05.060 and so forth. 188 00:24:05.060 --> 00:24:11.780 So every protection racket has, of course, an immediate interest to be a monopolist protection 189 00:24:11.780 --> 00:24:15.460 racket in a particular area. 190 00:24:15.460 --> 00:24:23.260 And this implies, of course, that the protection racket will protect the store owner from other 191 00:24:23.260 --> 00:24:29.620 potential protection rackets, from other plain criminals that come along. 192 00:24:29.620 --> 00:24:37.820 They do deliver indeed some sort of service, but we can also see that they have an incentive 193 00:24:37.820 --> 00:24:45.540 of course not to be too good in combating crime committed by other individuals. 194 00:24:45.540 --> 00:24:51.580 As a matter of fact, their interest would be, there should be a stable level of criminal 195 00:24:51.580 --> 00:24:59.300 activities going on because only if there is a stable level of criminality going on, 196 00:24:59.300 --> 00:25:06.860 Do the people have the feeling we do need this protection racket in order to keep this 197 00:25:06.860 --> 00:25:11.600 menace in check? 198 00:25:11.600 --> 00:25:21.820 So there is some sort of service delivered on the part of the protection racket. 199 00:25:21.820 --> 00:25:31.860 The second thing, all states emerge somehow like this and go now by and large to the same 200 00:25:31.860 --> 00:25:34.180 sequence of steps. 201 00:25:34.180 --> 00:25:43.660 Obviously, the next thing that the protection racket must do is they must also not only 202 00:25:43.660 --> 00:25:55.160 They must not only monopolize violence, they must monopolize also judgeships, they must 203 00:25:55.160 --> 00:25:59.620 monopolize the judicial system. 204 00:25:59.620 --> 00:26:06.940 Imagine in this protected area there are still different judges operating, then it would become 205 00:26:06.940 --> 00:26:15.340 It has become very quickly apparent that what the protection racket does will be condemned 206 00:26:15.340 --> 00:26:23.440 by various judges, by various arbitrators as something that is illegitimate. 207 00:26:23.440 --> 00:26:32.820 So what you must do is eliminate all possible alternative judges in your territory. 208 00:26:32.820 --> 00:26:40.780 All judges must become part of the protection racket itself and then of course they will 209 00:26:40.780 --> 00:26:46.980 find that whatever the protection racket does, whenever they collect their taxes and so forth, 210 00:26:46.980 --> 00:26:54.180 that that is perfectly legitimate, is only the just compensation for the wonderful protection 211 00:26:54.180 --> 00:27:00.460 that they receive from this institution and so forth. 212 00:27:00.460 --> 00:27:10.660 So, monopolization of the judicial system is the next step. 213 00:27:10.660 --> 00:27:21.780 The next step is to monopolize traffic and communication systems. 214 00:27:21.780 --> 00:27:30.180 You see, the protection rackets, the agents of the protection rackets who come and want 215 00:27:30.180 --> 00:27:38.700 want to collect their money, still must move on roads and paths that are owned by other 216 00:27:38.700 --> 00:27:39.700 people. 217 00:27:39.700 --> 00:27:50.140 They must get the entrance to the premises where they begin their looting activities. 218 00:27:50.140 --> 00:27:55.940 In order to make sure, however, that they can enter every house, every premise without 219 00:27:55.940 --> 00:28:03.220 Without any difficulty whatsoever it is necessary that streets which initially were privately 220 00:28:03.220 --> 00:28:12.680 owned must become public property, must become the property owned and controlled by the protection 221 00:28:12.680 --> 00:28:14.880 racket itself. 222 00:28:14.880 --> 00:28:21.920 Then the employees, the agents of the protection racket can enter any premise without any difficulty 223 00:28:21.920 --> 00:28:22.920 whatsoever. 224 00:28:22.920 --> 00:28:40.040 Next point in order to gain legitimacy for the protection racket is to monopolize the 225 00:28:40.040 --> 00:28:45.040 educational system. 226 00:28:45.040 --> 00:28:52.560 Initially of course education was nothing that was in the hands of the state, that was 227 00:28:52.560 --> 00:29:09.640 What the state needs, however, is the correct training of the people. 228 00:29:09.640 --> 00:29:19.200 We emphasize how important a favorable public opinion is. 229 00:29:19.200 --> 00:29:25.560 The protection racket consists only of a relatively small number of people and those people who 230 00:29:25.560 --> 00:29:32.080 are exploited by them are the huge majority of people. 231 00:29:32.080 --> 00:29:44.880 How can you for a long period of time oppress a large majority even though you yourself 232 00:29:44.880 --> 00:29:47.840 are only a small minority? 233 00:29:47.840 --> 00:29:54.480 And the answer to this has been given hundreds of years ago by David Yu, many people before, 234 00:29:54.480 --> 00:30:04.760 Etienne de la Boitie, only by opinion, that is, only if you get some sort of cooperation 235 00:30:04.760 --> 00:30:14.000 on the part of the exploited so that they do not resist the attempts to continuously 236 00:30:14.000 --> 00:30:16.800 rob you and exploit you. 237 00:30:16.800 --> 00:30:21.080 And how can you create this favorable public opinion? 238 00:30:21.080 --> 00:30:28.100 That is, how can you get the idea across that somehow what the protection racket does is 239 00:30:28.100 --> 00:30:31.800 necessary and beneficial to you? 240 00:30:31.800 --> 00:30:37.200 And the answer is by education. 241 00:30:37.200 --> 00:30:45.000 You must monopolize the schooling, first elementary schooling, then of course also university 242 00:30:45.000 --> 00:30:53.760 Education, all institutions must be at least licensed, so that the right doctrines are 243 00:30:53.760 --> 00:31:01.720 instilled in the people, doctrines such as, you all know this, without the state there 244 00:31:01.720 --> 00:31:09.880 would be only chaos, nobody would be able to produce anything the state is necessary 245 00:31:09.880 --> 00:31:20.600 in order to create peace among mankind, the Hobbesian scenario and only if he has a state 246 00:31:20.600 --> 00:31:29.640 who does the war against everyone else come to an end. 247 00:31:29.640 --> 00:31:46.600 Martin Luther in Germany was a major figure in persuading the rulers how important it 248 00:31:46.600 --> 00:31:56.200 was to also have full control over the educational system, to nationalize, to socialize, so to 249 00:31:56.200 --> 00:32:02.000 with the Educational Institutions, and he used the argument just as the state needs 250 00:32:02.000 --> 00:32:11.600 to train its soldiers with physical training, so everybody needs good mental training in 251 00:32:11.600 --> 00:32:19.320 order to become obedient citizens. 252 00:32:19.320 --> 00:32:31.520 It is easy in a way for the state to accomplish this takeover of the educational system because 253 00:32:31.520 --> 00:32:40.760 intellectuals, the teachers in these institutions are people who have a very precarious existence. 254 00:32:40.760 --> 00:32:50.960 The demand for educational services is very unstable. 255 00:32:50.960 --> 00:32:59.720 And what the state can do, of course, is offer intellectuals safe employment. 256 00:32:59.720 --> 00:33:07.960 And in return for the safe employment that intellectuals get, they then deliver the goods, 257 00:33:07.960 --> 00:33:16.900 namely the appropriate propaganda, how important the state is. 258 00:33:16.900 --> 00:33:25.560 I come back to intellectuals a little bit later again. 259 00:33:25.560 --> 00:33:39.280 The next step that all states went through brings a huge advance in the degree of exploitation 260 00:33:39.280 --> 00:33:52.160 that comes with the monopolization of money and banking. 261 00:33:52.160 --> 00:34:02.040 This had basically two sources of income nowadays. One is taxation and the other one is printing 262 00:34:02.040 --> 00:34:12.880 up money. That is engaging in the same activity that a counterfeiter engages in. You can create 263 00:34:12.880 --> 00:34:20.000 money out of thin air basically. It costs almost nothing to print it, so to speak. And 264 00:34:20.000 --> 00:34:26.800 And then you can turn around and buy yourself some real assets with it. 265 00:34:26.800 --> 00:34:33.840 Imagine you would have this power, you would be, and you realize that every state has reached 266 00:34:33.840 --> 00:34:34.840 this power. 267 00:34:34.840 --> 00:34:42.160 We have not a single state where it is not the case that they have a bank, a central 268 00:34:42.160 --> 00:34:47.800 bank, that has a monopoly of issuing money. 269 00:34:47.800 --> 00:34:53.800 Nobody else can print money except they can do it. Everybody else is a criminal who does it. 270 00:34:53.800 --> 00:35:03.800 Imagine I would make you the sole printer of British towns. Nobody else can do it. What would you do? 271 00:35:03.800 --> 00:35:09.800 And the answer is of course you will start printing immediately. It costs you nothing. 272 00:35:09.800 --> 00:35:13.800 You can turn around, buy yourself a Mercedes and all the rest of it. 273 00:35:13.800 --> 00:35:19.200 But only then you will also realize that you have far more friends than you ever imagined 274 00:35:19.200 --> 00:35:26.840 who also come to you and say, look, you seem to have some magic wand, Mercedes for me would 275 00:35:26.840 --> 00:35:33.160 be nice too, or BMW would need a bigger house than the one that I'm living in right now, 276 00:35:33.160 --> 00:35:37.720 so please help me. 277 00:35:37.720 --> 00:35:45.140 The central banks in every western country are the biggest employers, for instance, of 278 00:35:45.140 --> 00:35:54.780 economists. Universities, but central banks employ even more economists than any other 279 00:35:54.780 --> 00:36:04.240 institution. These economists, of course, now are used as propagandists in order to 280 00:36:04.240 --> 00:36:11.240 explain to you how useful this activity of the state is to be able to print money out 281 00:36:11.240 --> 00:36:12.240 of nothing. 282 00:36:12.240 --> 00:36:16.800 And of course they have a very selfish reason, imagine they would not explain this, then 283 00:36:16.800 --> 00:36:19.600 they would be out of the job very quickly. 284 00:36:19.600 --> 00:36:26.840 So it is easy to see why they would cooperate in a scheme such as this. 285 00:36:26.840 --> 00:36:35.680 Let me digress for a moment and briefly address the question, does the current financial crisis 286 00:36:35.680 --> 00:36:45.360 indicate a failure of capitalism or is it not a failure of the state again? 287 00:36:45.360 --> 00:36:56.560 Now look at it this way, when you ask normal people how banks can give loans, most people 288 00:36:56.560 --> 00:37:09.560 It's like you can only extend a loan to somebody if you have previously somebody who has saved up the money. 289 00:37:09.560 --> 00:37:15.560 Somebody must save it and then these saved funds can be given to somebody else. 290 00:37:15.560 --> 00:37:21.560 No risky loans can be given away like this. 291 00:37:21.560 --> 00:37:31.560 You will be very careful to whom you loan the money because you need the savings in order to do it. 292 00:37:31.560 --> 00:37:46.560 And deposit banks, if you have deposit accounts, deposit accounts most people think are accounts where you put your money in the bank and you remain the owner of the money that you put in the bank. 293 00:37:46.560 --> 00:37:51.520 That's what a deposit account is. If you have a savings account, then you know, of course, 294 00:37:51.520 --> 00:37:57.040 I have saved, I cannot immediately get it back. This will be loaned out. Because it is loaned out, 295 00:37:57.040 --> 00:38:07.760 I will earn interest on it. Now, you can, however, as a banker, be tempted to do this. 296 00:38:07.760 --> 00:38:20.360 This, you can be tempted to simply issue tickets, if you deposit money in the bank, you get 297 00:38:20.360 --> 00:38:27.560 a deposit ticket and these deposit tickets people accept in exchange if they have absolutely 298 00:38:27.560 --> 00:38:37.720 no doubt that they can be redeemed into the real thing sitting in the bank. 299 00:38:37.720 --> 00:38:44.760 What banks can do is they can issue fake tickets or they can loan out, so to speak, the deposits 300 00:38:44.760 --> 00:38:52.880 that you made, so that people think, I own my deposit that I have in my deposit bank and 301 00:38:52.880 --> 00:38:59.680 at the same time the money is actually loaned out and the bank earns interest. 302 00:38:59.680 --> 00:39:07.440 You realize what the danger is in this situation if the owner of the deposit would come and 303 00:39:07.440 --> 00:39:17.440 If a person does not want to get his money back and the money is loaned out and has not been returned, then the bank is bankrupt. It cannot work. 304 00:39:17.440 --> 00:39:24.440 Now, as long as you have competing private banks that do this sort of stuff, that engage in fractional reserve banking, 305 00:39:24.440 --> 00:39:31.440 that is to say, they do not have as much money in the bank as they say that they do, 306 00:39:31.440 --> 00:40:01.440 They cannot even buzzy mitrises, it is a very dangerous thing to do, because any note, any fake note, any uncovered note that comes into the hands of someone who banks with a different bank, will deposit this note in his bank, and then the process of course is called adverse clearing, that is his bank will then go to the bank that issued these fake notes, ask for redemption, and the bank 307 00:40:01.440 --> 00:40:09.760 will have a liquidity crisis. So under a system of so-called free banking, we have no central 308 00:40:09.760 --> 00:40:14.680 bank, we have competing banks, but they engage in fractional reserve banking. It is very 309 00:40:14.680 --> 00:40:26.600 difficult to do this. So all bankers basically lobbied to institute a central bank which 310 00:40:26.600 --> 00:40:38.040 would allow them to engage in coordinated inflation, in coordinated expansion of the money supply. 311 00:40:38.040 --> 00:40:43.780 This central bank, I mentioned that all states have this, this central bank is then the only 312 00:40:43.780 --> 00:40:49.080 one that can bail out the banks that get into liquidity crisis. 313 00:40:49.080 --> 00:40:55.960 But only because you know there is a central bank in existence, will banks then expand 314 00:40:55.960 --> 00:41:06.240 riskier and riskier and riskier loans because they know if the crisis comes, that is, if 315 00:41:06.240 --> 00:41:11.560 the depositors appear want to have their money back, the money is not there, it is loaned 316 00:41:11.560 --> 00:41:16.520 out, will not be paid back by those people who have received the loans because bad loans 317 00:41:16.520 --> 00:41:17.520 have been given. 318 00:41:17.520 --> 00:41:21.680 There is always a central bank that bails me out. 319 00:41:21.680 --> 00:41:30.120 So the crisis that we have right now is precisely caused by the existence of a central bank 320 00:41:30.120 --> 00:41:36.760 and even more strictly speaking by the existence of something like fractional reserve banking. 321 00:41:36.760 --> 00:41:44.600 We use a slightly different approach to explain what the problem with fractional reserve banking 322 00:41:44.600 --> 00:41:45.600 is. 323 00:41:45.600 --> 00:41:56.600 The fractional reserve banking allows, so to speak, the practice of printing up more property titles than there is property. 324 00:41:56.600 --> 00:42:04.600 Look, you can have a car and you don't take possession of the car. 325 00:42:04.600 --> 00:42:12.600 So you have a title to a car, but the car is somehow standing in the car lot. 326 00:42:12.600 --> 00:42:26.600 The owner of the car lot can rent out this car, even though you are the owner of the car, and collects fees for renting out the car. 327 00:42:26.600 --> 00:42:34.600 If I come, however, and want to take possession of my car to which I have a title, then the car is not there. 328 00:42:34.600 --> 00:42:41.600 More titles to property are brought into existence than property exists. 329 00:42:41.600 --> 00:42:48.600 In no other area, except in the field of money, is this considered to be a legitimate practice. 330 00:42:48.600 --> 00:43:00.600 In the field of warehousing, corn or wheat or whatever, this type of practice is considered to be illegal. 331 00:43:00.600 --> 00:43:08.600 In the practice, in the field of banking of money, it is considered to be a legal activity. 332 00:43:08.600 --> 00:43:18.280 So this, this explains also why they are exploited, so to speak, outside of the state apparatus. 333 00:43:18.280 --> 00:43:27.120 The big bankers themselves are in cahoots with the state, are standing behind the institution 334 00:43:27.120 --> 00:43:34.240 of the central bank because they realize this allows them a coordinated inflation which 335 00:43:34.240 --> 00:43:41.720 which enriches them brings about the danger of bank runs, but they know that the bank 336 00:43:41.720 --> 00:43:47.960 runs, at least under paper money standard, can be mastered, so to speak, by printing 337 00:43:47.960 --> 00:43:53.960 up the unlimited liquidity once a crisis breaks out. 338 00:43:53.960 --> 00:44:13.960 Now, I want to say a few words about the difference between monarchical states and democratic states. 339 00:44:13.960 --> 00:44:27.720 So all states are exploitative, but democratic states are even more exploitative than monarchical, 340 00:44:27.720 --> 00:44:34.560 classical monarchical states are, for several reasons. 341 00:44:34.560 --> 00:44:46.320 One reason is, as long as you have just one king being in charge of this protection racket, 342 00:44:46.320 --> 00:44:56.840 so to speak, everybody knows he is the king, we are his subjects, I cannot become king, 343 00:44:56.840 --> 00:45:03.520 and I resist of course every attempt on the part of the king to increase his level of exploitation. 344 00:45:03.520 --> 00:45:10.680 There is resistance against it because, you know, he is different. I cannot become him. 345 00:45:10.680 --> 00:45:18.920 On the other hand, under a democracy, everybody can now become so to speak, King. Everybody 346 00:45:18.920 --> 00:45:29.320 can become Prime Minister. There is open entry into this position of being the head of state. 347 00:45:29.320 --> 00:45:35.400 So you still might not like the fact that you are exploited, that you are taxed to the hilt, 348 00:45:35.400 --> 00:45:41.520 but you realize I might actually be on the receiving end instead of being always the 349 00:45:41.520 --> 00:45:50.300 one who pays and that consoles you to a certain extent over the fact that you have to do something 350 00:45:50.300 --> 00:46:00.220 that you might not like to do because you might also benefit from. 351 00:46:00.220 --> 00:46:10.380 The second, so resistance is higher under monarchy against increased exploitation and 352 00:46:10.380 --> 00:46:17.340 lower under democratic conditions. 353 00:46:17.340 --> 00:46:35.340 The second difference, important difference is once you have democracy in place, one man, one vote, the demands for income redistribution will become far greater than they were under monarchical conditions. 354 00:46:35.340 --> 00:46:41.340 There are two little stories that indicate this. 355 00:46:41.340 --> 00:46:46.340 Imagine, for instance, we would have a world democracy. 356 00:46:46.340 --> 00:46:50.340 One man, one vote, one woman, one vote on a worldwide scale. 357 00:46:50.340 --> 00:46:52.340 We have a world state. 358 00:46:52.340 --> 00:46:58.340 Then what you can predict is we will get some sort of Indian-Chinese coalition government 359 00:46:58.340 --> 00:47:02.340 simply by virtue of the number of people. 360 00:47:02.340 --> 00:47:09.840 What will this democratically elected government do in order to be re-elected? 361 00:47:09.840 --> 00:47:18.840 They will, of course, decide that a massive income redistribution from the Western world to the developing world is necessary. 362 00:47:18.840 --> 00:47:26.840 After all, they have almost nothing and we have plenty of stuff, so a huge income redistribution will be set in motion. 363 00:47:26.840 --> 00:47:37.840 Precisely the same thing has taken place within all individual states in the course of the 19th century as the franchise was gradually expanded. 364 00:47:37.840 --> 00:47:46.840 Initially the franchise was restricted to property owners, actually to major property owners, and the age restrictions were quite high. 365 00:47:46.840 --> 00:47:51.840 Because people had an idea of what would happen if everybody can vote. 366 00:47:51.840 --> 00:48:06.040 This is precisely what happened in England, what happened in Germany, what happened in 367 00:48:06.040 --> 00:48:08.800 the United States and so forth. 368 00:48:08.800 --> 00:48:15.040 That is, classical liberal parties which were initially at the beginning of up to the mid-nineteenth 369 00:48:15.040 --> 00:48:41.040 The dominant political force became increasingly less important and socialist parties or social democratic parties became more important and even the problem of the classical liberal parties gradually changed to social liberal parties as more and more people were allowed to participate in the voting. 370 00:48:45.040 --> 00:49:02.040 Another important difference that I should point out is that under democratic regimes the rulers become more short-sighted. 371 00:49:02.040 --> 00:49:10.040 They are interested more in short-term exploitation as compared to monarchical regimes. 372 00:49:10.040 --> 00:49:34.040 for the following reasons. Imagine the king considers the country, so to speak, as his private property, whereas a democratic politician is a temporary caretaker of the country, and that has profound different, profound implications as far as his behavior is concerned. 373 00:49:34.040 --> 00:49:49.040 Imagine in one situation I would make you the owner of a house. That is to say you can sell the house in the market and realize what price you would get for the house. You can determine who inherits your house and so forth. 374 00:49:49.040 --> 00:49:59.040 And in the other case you have an identical house. I say you are for four years the caretaker of this house. You can take advantage of this house. 375 00:49:59.040 --> 00:50:08.040 But you cannot pass it on to future generations, nor can you sell it in the market. 376 00:50:08.040 --> 00:50:12.040 It is public property. You are just care-taking. 377 00:50:12.040 --> 00:50:17.040 Would your behavior be different? And the answer is yes, of course it will be. 378 00:50:17.040 --> 00:50:27.040 The owner, whatever he does with the house, will always be interested in what will be the repercussions of what I do right now with the house 379 00:50:27.040 --> 00:50:31.840 as far as the capital value of the house is concerned. 380 00:50:31.840 --> 00:50:34.680 What would be the consequences for the price 381 00:50:34.680 --> 00:50:39.000 that I can get if I were to sell the house in the market? 382 00:50:39.000 --> 00:50:42.720 He will not want to engage in capital consumption, 383 00:50:42.720 --> 00:50:44.120 so to speak. 384 00:50:44.120 --> 00:50:46.960 He wants to preserve the value of the house 385 00:50:46.960 --> 00:50:50.120 because he can capture the value 386 00:50:50.120 --> 00:50:52.640 in the form of a higher price, 387 00:50:52.640 --> 00:50:55.120 or he can pass it on as an intact piece 388 00:50:55.120 --> 00:50:57.580 of Property of the Next Generation. 389 00:50:57.580 --> 00:51:02.880 But if you for four years are in charge of the house, you don't own it, what is your 390 00:51:02.880 --> 00:51:04.320 interest then? 391 00:51:04.320 --> 00:51:10.560 Then your interest is you want to maximize your current income at the expense of capital 392 00:51:10.560 --> 00:51:11.560 value. 393 00:51:11.560 --> 00:51:17.280 It doesn't matter whether the value of the house falls dramatically in the market because 394 00:51:17.280 --> 00:51:22.280 after all you cannot sell it in the market, it isn't yours, but you can increase of course 395 00:51:22.280 --> 00:51:23.280 your current income. 396 00:51:23.280 --> 00:51:31.840 Look, I could put 20 people in the house as renters and collect more rent from them, with 397 00:51:31.840 --> 00:51:37.920 the consequence that maybe after a year or two the house is in ruins. 398 00:51:37.920 --> 00:51:45.400 On the other hand, if I just take one nice married couple and rent the house out to them, 399 00:51:45.400 --> 00:51:55.160 Then my rental income will be significantly lower, but the capital value will remain intact. 400 00:51:55.160 --> 00:52:04.080 The owner behaves like this, the caretaker behaves like I have to exploit what I am taking 401 00:52:04.080 --> 00:52:14.600 care of in as fast a time as possible because who knows what will happen in the future. 402 00:52:14.600 --> 00:52:23.880 In addition, democracy has the effect of bringing the worst people to the top. 403 00:52:23.880 --> 00:52:33.720 Look, a king becomes king by accident of course. 404 00:52:33.720 --> 00:52:41.360 Because it is an accident that makes him the king, does not exclude or does not make it 405 00:52:41.360 --> 00:52:46.360 It is impossible that this guy might be an evil person, many things for evil people. 406 00:52:46.360 --> 00:52:53.360 After all, we are talking here about two evil systems, two exploitative systems. 407 00:52:53.360 --> 00:53:07.360 So yes, of course, kings can be bad guys, but if they are bad guys, what typically happens to them is the dynasty becomes worried that if this guy misbehaves like he does, 408 00:53:07.360 --> 00:53:16.360 And if he does, they might lose all the power and they will surround them with people who control the maniacs to a certain extent. 409 00:53:16.360 --> 00:53:24.360 And if even that doesn't help, they might even determine one of their own family to kill the guy off. 410 00:53:24.360 --> 00:53:33.360 On the other hand, because he comes to power by accident of birth, he can also be a nice man. 411 00:53:33.360 --> 00:53:39.360 The generous guy who just might exploit a little bit, but by and large leaves people alone. 412 00:53:39.360 --> 00:53:42.360 We have also examples of this. 413 00:53:42.360 --> 00:53:51.360 Now compare this to democratic conditions. 414 00:53:51.360 --> 00:53:56.360 Competition is not always good. 415 00:53:56.360 --> 00:54:02.360 Competition is always good when it comes to the production of goods. 416 00:54:02.360 --> 00:54:12.160 Then, if we are dealing with the production of goods, then competition has a result of 417 00:54:12.160 --> 00:54:19.440 increasing the quality of products and lowering the cost of production. 418 00:54:19.440 --> 00:54:25.720 But competition is not good when it comes to the production of bads. 419 00:54:25.720 --> 00:54:34.820 There is those things that states produce, we can recall. States live off taxes and off 420 00:54:34.820 --> 00:54:41.400 counterfeiting activities. Those are not goods. So we don't want to have competition in that 421 00:54:41.400 --> 00:54:52.080 area. When it comes to the production of bats, monopoly is good. When it comes to the production 422 00:54:52.080 --> 00:54:58.280 Competition of Bads, Monopoly is good and competition is bad. 423 00:54:58.280 --> 00:55:03.200 You would not want to have competition who is the person who is the best in beating up 424 00:55:03.200 --> 00:55:10.200 other people, or competition who is best, the best commandante of some concentration 425 00:55:10.200 --> 00:55:11.200 camp. 426 00:55:11.200 --> 00:55:18.360 There you would want to have inefficient people, as inefficient as they can possibly be. 427 00:55:18.360 --> 00:55:23.360 Democracy is of course competition in the production of bands. 428 00:55:23.360 --> 00:55:25.360 Who rises to the top? 429 00:55:25.360 --> 00:55:38.360 Smart people who are good at demagoguery, who promises everything under the sun, knowing full well that there's no way that they can possibly keep their promises. 430 00:55:38.360 --> 00:55:46.360 Imagine you would be a politician who would say, I will not take any money from the rich and give it to the poor. 431 00:55:46.360 --> 00:55:50.360 I will not engage in any income redistribution. 432 00:55:50.360 --> 00:55:59.360 Can anyone who just has a campaign with these slogans ever hope to become elected to any high office? 433 00:55:59.360 --> 00:56:02.360 And the answer that is absolutely unsinkable. 434 00:56:02.360 --> 00:56:06.360 That might be something that can happen in a small village. 435 00:56:06.360 --> 00:56:15.360 But because of that, people like Rousseau who were defenders of democracy, of course, saw all this of democracy only in very small units 436 00:56:15.360 --> 00:56:24.360 where everyone knows everyone else and is afraid, is ashamed that they vote themselves the property of others. 437 00:56:24.360 --> 00:56:30.360 But in a society with millions and millions of people where nobody knows from whom you steal, 438 00:56:30.360 --> 00:56:38.360 of course, all moral inhibitions disappear and people are willing to vote themselves the property of everybody else 439 00:56:38.360 --> 00:56:43.360 who they think is better off than they themselves. 440 00:56:43.360 --> 00:56:51.360 So on a democracy you have almost a guarantee that only evil characters will ever rise to the top. 441 00:56:51.360 --> 00:57:06.360 And in addition, the likelihood that those evil characters will be killed off like kings were killed off when they turned out to be evil people is relatively low because people always hope, 442 00:57:06.360 --> 00:57:20.360 Oh, it will be just the next election, into the next election, then finally the good guy will come to power, my guy will come to power instead of the bad guy that is currently running the business. 443 00:57:20.360 --> 00:57:34.880 Okay, now what can we do about all this? What we can do about all this is that people have 444 00:57:34.880 --> 00:57:43.720 to develop some, what we can call, clear class consciousness. We know that Marx of course 445 00:57:43.720 --> 00:57:53.520 had this idea of people have to have a class consciousness as well. His idea was of course 446 00:57:53.520 --> 00:58:02.960 the workers have to feel we are the exploited and the capitalists are the exploiters and 447 00:58:02.960 --> 00:58:13.320 then by uniting in their common consciousness, the class consciousness, you could shake off 448 00:58:13.320 --> 00:58:16.600 The Yoke of the Exploitors. 449 00:58:16.600 --> 00:58:20.360 What we need is, we need also some clear class consciousness. 450 00:58:20.360 --> 00:58:25.280 There do exist exploiters and exploiters. 451 00:58:25.280 --> 00:58:35.080 It has nothing to do with capitalists and workers, it has to do with state agents and 452 00:58:35.080 --> 00:58:40.520 state agents are also sometimes people who operate outside of the realm of the state 453 00:58:40.520 --> 00:58:41.520 apparatus. 454 00:58:41.520 --> 00:58:51.440 is called the banks in particular, and on the other hand people who are the exploiters. 455 00:58:51.440 --> 00:58:57.760 How can we just make that visible to people who belongs to one group and who belongs to 456 00:58:57.760 --> 00:59:01.440 the other group? 457 00:59:01.440 --> 00:59:09.720 By a simple thought experiment, at least that is useful to come to this class consciousness. 458 00:59:09.720 --> 00:59:17.920 The salt experiment is, imagine for a second that taxes would be eliminated. 459 00:59:17.920 --> 00:59:21.640 What would then happen? 460 00:59:21.640 --> 00:59:31.200 Would everybody's income go up from after-tax income to before-tax income, that is from 461 00:59:31.200 --> 00:59:35.080 net income to gross income? 462 00:59:35.080 --> 00:59:38.640 And the answer is, no, of course not. 463 00:59:38.640 --> 00:59:45.400 Some people's income would then go up from net income to gross income, from after-tax 464 00:59:45.400 --> 00:59:47.640 income to before-tax income. 465 00:59:47.640 --> 00:59:56.800 Other people's income would go down from after-tax income to zero or to close to zero. 466 00:59:56.800 --> 01:00:03.480 Obviously, we currently do something with the taxes. 467 01:00:03.480 --> 01:00:14.040 We pay huge amounts of people out of taxes. Teachers do not pay taxes. Teachers are paid 468 01:00:14.040 --> 01:00:22.800 out of taxes. University professors do not pay taxes. They are paid out of taxes. There 469 01:00:22.800 --> 01:00:33.240 is a fiction. The fiction is they get an income statement that looks like everybody else's. 470 01:00:33.240 --> 01:00:37.240 because people are interested in equality before the law. 471 01:00:37.240 --> 01:00:45.240 They also get the pay slip that says before tax income, tax meat minus taxes and then after tax income. 472 01:00:45.240 --> 01:00:52.240 But their entire net income that they receive is of course paid out of taxes in this sense. 473 01:00:52.240 --> 01:00:55.240 They do not pay taxes at all. 474 01:00:55.240 --> 01:01:13.240 Now, who are these people? The entire state sector, all public employees, all teachers, all professors, all members of parliament, all welfare recipients, of course, and so forth. 475 01:01:13.240 --> 01:01:25.960 This, it is important to realize this because that helps you understand certain phenomena 476 01:01:25.960 --> 01:01:29.240 that otherwise make no sense. 477 01:01:29.240 --> 01:01:33.240 You think, why is not everybody against taxes? 478 01:01:33.240 --> 01:01:41.240 After all, aren't taxes forced contributions that you must make? 479 01:01:41.240 --> 01:01:48.240 But we realize, of course, that there are large numbers in the population who are in favor of raising taxes. 480 01:01:48.240 --> 01:01:54.240 University professors are almost always in favor of raising taxes. 481 01:01:54.240 --> 01:01:59.240 School teachers are almost always in favor of raising taxes. 482 01:01:59.240 --> 01:02:09.240 Of course, they present themselves as benevolent people who feel with the people. 483 01:02:09.240 --> 01:02:19.240 They say, I must pay taxes too. But I'm still in favor of raising the taxes because I'm a social person. 484 01:02:19.240 --> 01:02:25.240 Worse, there are other people who are greedy individuals and do not want to pay their taxes. 485 01:02:25.240 --> 01:02:36.240 Once you realize that they don't pay taxes at all, and their advocacy of higher taxes means only they advocate that they should get higher salaries, 486 01:02:36.240 --> 01:02:45.140 Salaries, and you realize what sort of fraud is going on there. So once we have developed 487 01:02:45.140 --> 01:02:54.380 a clear-cut class consciousness, there are people who rip other people off, and you must 488 01:02:54.380 --> 01:03:02.440 realize who these people are and who is being ripped off. Then there might be a chance that 489 01:03:02.440 --> 01:03:17.440 The State can be rolled back. As long as this class consciousness does not exist in the minds of people, clearly, there is absolutely no hope and the power of the State will continue to rise. 490 01:03:17.440 --> 01:03:22.440 Okay, with this I'll stop. Thank you very much. 491 01:03:22.440 --> 01:03:41.400 Gordon Brown in the recent crisis has talked about the need for a new Bretton Woods style 492 01:03:41.400 --> 01:03:42.400 global agreement. 493 01:03:42.400 --> 01:03:48.040 I was just wondering what you thought that had the potential to end up in terms of your 494 01:03:48.040 --> 01:03:49.040 analysis of... 495 01:03:49.040 --> 01:03:55.040 Very quick. You see that the Bretton Woods system was characterized by the fact that 496 01:03:55.040 --> 01:04:06.040 gold still played a minor role in the entire system, in so far as foreign central banks 497 01:04:06.040 --> 01:04:18.040 could redeem $35 into an ounce of gold. And the Bretton Woods system collapsed because 498 01:04:18.040 --> 01:04:24.920 The United States inflated continuously the U.S. dollar. 499 01:04:24.920 --> 01:04:32.500 These dollar amounts partially ended up in the hands of foreign central banks and then 500 01:04:32.500 --> 01:04:43.760 induced by economic advisor of Charles de Gauche, the French realized the Americans 501 01:04:43.760 --> 01:04:52.760 do not have enough gold in order to redeem their $35 prongs of gold, and a run set in 502 01:04:52.760 --> 01:04:56.560 on the American Central Bank. 503 01:04:56.560 --> 01:05:10.720 And then under Nixon, the American Central Bank basically declared bankruptcy, they said 504 01:05:10.720 --> 01:05:20.040 We will no longer redeem. You can keep the paper dollars, but the obligation that we 505 01:05:20.040 --> 01:05:27.760 assume under the Bretton Woods Agreement to redeem them 35 per ounce of gold is no longer 506 01:05:27.760 --> 01:05:35.640 kept. Now that made it possible that after 1971, worldwide inflation of course increased 507 01:05:35.640 --> 01:05:43.640 is even more than it had increased before, because before there was always this tie to gold. 508 01:05:43.640 --> 01:05:51.640 Since 1971, there is no tie to anything. So all countries can basically inflate as much as they want. 509 01:05:51.640 --> 01:05:57.640 What they still have to worry about is, however, if I inflate faster than some other country, 510 01:05:57.640 --> 01:06:03.640 then my currency will fall in the currency market against other currencies. 511 01:06:03.640 --> 01:06:10.640 And the way out of this problem is what the European Union tried to do, so to speak. 512 01:06:10.640 --> 01:06:17.640 The German market was always more stable than other currencies in Europe, not because of any virtue of the Germans, 513 01:06:17.640 --> 01:06:21.640 but because of the fact that there was twice hyperinflation in Germany. 514 01:06:21.640 --> 01:06:26.640 The public was a little bit more sensitive towards this type of issue. 515 01:06:26.640 --> 01:06:36.640 and the other European countries wanted to inflate faster, but always with the danger that their currency would be valued. 516 01:06:37.640 --> 01:06:54.640 So the idea was what we have to create is a central European bank that allows that the euro can inflate faster than the least inflating currency that existed previously, the German mark. 517 01:06:54.640 --> 01:07:04.640 The ultimate solution would be to create a world central bank, of course control some of the most devising United States, I guess, 518 01:07:04.640 --> 01:07:12.640 and then because this world currency, world paper currency can by definition not depreciate against any other currency, 519 01:07:12.640 --> 01:07:18.640 we would have inflation like we have never seen it before. 520 01:07:18.640 --> 01:07:28.640 So what Gordon Brown, whatever these people want to set up is not, as far as I can see, a return to some form of gold standard. 521 01:07:28.640 --> 01:07:43.640 Even Bretton Woods was already very diluted gold standard. It was already a long march in the direction of allowing more inflation as compared to genuine gold standards. 522 01:07:43.640 --> 01:08:04.640 So whatever they have in mind is not tying paper currencies to some sort of commodity but probably creating some still more central organizations that allow even more inflation to take place in the future. 523 01:08:04.640 --> 01:08:12.300 So I think he's probably exactly the opposite in mind from having sound money. 524 01:08:12.300 --> 01:08:18.520 He wants to have even less sound money because the entire plans that these Europeans have 525 01:08:18.520 --> 01:08:26.460 in the United States was calling big conferences and setting up a new system. 526 01:08:26.460 --> 01:08:31.820 My fear is that we'll be in a further step in the direction of creating the world paper 527 01:08:31.820 --> 01:08:47.380 . Money has to be taken completely out of the hands of government. The classical liberal 528 01:08:47.380 --> 01:08:53.820 position was not because we are in favor of gold or we love gold or whatever it is. The 529 01:08:53.820 --> 01:08:59.740 idea was it has to be a commodity that cannot be deliberately produced out of nothing. It 530 01:08:59.740 --> 01:09:03.500 It has to be something that is not in the hands of the state. 531 01:09:03.500 --> 01:09:11.220 That is the only guarantee to have sound money, money that does not lose purchasing power 532 01:09:11.220 --> 01:09:12.220 continuously. 533 01:09:12.220 --> 01:09:22.660 Given that the Bank of England before the Second World War was an independent private 534 01:09:22.660 --> 01:09:32.620 institution, and that it ran a central bank, a fractional reserve system, and that it wasn't 535 01:09:32.620 --> 01:09:40.460 any runs on the banking system since the late 19th century, is it not possible then to have 536 01:09:40.460 --> 01:10:03.460 and furthermore given that scenery is a minimal part of most states income that isn't a debauchery of the currency that occurs in the modern financial world. 537 01:10:03.460 --> 01:10:19.460 First of all, I'm not quite sure if that is a minor part, but look, the Bank of England also went off the gold standard in the 1930s, like all central banks did. 538 01:10:19.460 --> 01:10:25.600 Again, I'm not familiar with British banking history, but the United States went off the 539 01:10:25.600 --> 01:10:38.980 gold standard in 1933, and Britain immediately afterwards were about the same, 31, even before. 540 01:10:38.980 --> 01:10:45.340 So that indicates quite clearly that of course there were bank runs also, and in order to 541 01:10:45.340 --> 01:11:07.340 to avert these bank runs, they had to go off the gold standard domestically, and then after World War II, this small remnant of the gold standard was still kept in the Bretton Woods system. 542 01:11:07.340 --> 01:11:15.220 But central banks cannot come into existence such as banks that have a monopoly on the 543 01:11:15.220 --> 01:11:17.780 issue of money. 544 01:11:17.780 --> 01:11:23.020 What you can have is you can have competing banks each issuing, so to speak, their own 545 01:11:23.020 --> 01:11:29.300 notes, but backed by something. 546 01:11:29.300 --> 01:11:35.900 You would have to explain how it is possible that people would ever accept a piece of paper 547 01:11:35.900 --> 01:11:39.820 as payment in the first place. 548 01:11:39.820 --> 01:11:45.460 One of the great insights of Ludwig von Mises was to show that a paper money can never come 549 01:11:45.460 --> 01:11:50.380 into existence at all. 550 01:11:50.380 --> 01:11:56.220 Let's say I offer you a piece of paper, you would not even know what the purchasing power 551 01:11:56.220 --> 01:11:58.440 of it is. 552 01:11:58.440 --> 01:12:04.540 Pieces of paper were only accepted because initially pieces of paper were titles to something 553 01:12:04.540 --> 01:12:05.540 to a commodity. 554 01:12:05.540 --> 01:12:10.540 Only because of that did they gain acceptance. 555 01:12:10.540 --> 01:12:17.540 Once they are widely accepted paper news, then you can cut the tie between gold and 556 01:12:17.540 --> 01:12:20.540 paper and the paper can float on its own. 557 01:12:20.540 --> 01:12:27.540 But you can never introduce from the outset, so to speak, a pure paper currency backed 558 01:12:27.540 --> 01:12:30.540 by nothing except paper. 559 01:12:30.540 --> 01:12:38.540 So, in this sense, the Central Bank of England, the Central Bank of Germany, all of them are non-market institutions. 560 01:12:38.540 --> 01:12:46.540 They are institutions that are the result of the violent crime that was committed, the expropriation of the owners of the gold. 561 01:12:48.540 --> 01:12:53.540 I mean, Roosevelt, I know more about American banking history than I do British, 562 01:12:53.540 --> 01:13:02.940 But what Roosevelt did was simply saying, up until that time, Americans could do what 563 01:13:02.940 --> 01:13:10.500 central banks could do in 1971, that is, present $35 paperbacks, greenbacks, and receive an 564 01:13:10.500 --> 01:13:12.700 ounce of gold. 565 01:13:12.700 --> 01:13:18.140 And then when bank runs started setting in, then they said, okay, we keep all the gold, 566 01:13:18.140 --> 01:13:26.140 Even though the gold was deposited by private clients, and you can keep the money, and people 567 01:13:26.140 --> 01:13:37.260 who still had gold were forced under threat of several years of jail term to hand over 568 01:13:37.260 --> 01:13:42.200 all their gold to the central government. 569 01:13:42.200 --> 01:13:47.700 So central banks are not normal institutions, they are criminal institutions from the outset, 570 01:13:47.700 --> 01:13:57.700 No central bank has ever come into existence by normal means, without committing a violent act of expropriation. 571 01:14:01.700 --> 01:14:09.700 I've got one larger question, then one very brief question I'd like to ask the authors. 572 01:14:09.700 --> 01:14:25.700 The first question is, you seem to be assuming that capitalism was in some sense prior to the existence of the state and the government. 573 01:14:25.700 --> 01:14:33.700 Surely if you had a world order where the only thing that existed were capitalists, 574 01:14:33.700 --> 01:14:44.700 Then it would be simply inevitable that some kind of violence would come to pass that would actually render that completely impossible. 575 01:14:47.700 --> 01:14:54.700 But, property and law exist before states exist. 576 01:14:56.700 --> 01:15:02.700 States are not institutions that bring about the existence of property and law. 577 01:15:03.700 --> 01:15:10.700 So, how is the system going to be effectively completed without somebody having monopoly? 578 01:15:10.700 --> 01:15:16.700 Ok, look, in the international scenery we have no monopoly currently either, right? 579 01:15:16.700 --> 01:15:18.700 We do not have a world government. 580 01:15:18.700 --> 01:15:25.700 Nonetheless, it does not mean that the relationships between German businessmen and British businessmen 581 01:15:25.700 --> 01:15:30.700 are less peaceful than the relationship between two good British businessmen. 582 01:15:30.700 --> 01:15:33.700 Despite the fact that there's no monopolies. 583 01:15:33.700 --> 01:15:39.700 Look, in Germany we had until 1871 we had 39 states. 584 01:15:39.700 --> 01:15:44.700 And after 1871 we had just one. 585 01:15:44.700 --> 01:15:51.700 There were no more conflicts in Germany before 1871 than after. 586 01:15:51.700 --> 01:15:59.700 As a matter of fact, if you have a monopolist of law and order, 587 01:15:59.700 --> 01:16:08.900 Then you can predict that the price of law and the quality, the price of law will continuously 588 01:16:08.900 --> 01:16:14.700 rise and the quality of law will continuously fall. 589 01:16:14.700 --> 01:16:19.300 Imagine something like this. 590 01:16:19.300 --> 01:16:27.780 I tell you, in every case of conflict, whenever two people have a conflict, they must come 591 01:16:27.780 --> 01:16:33.780 to you to arbitrate who is right and wrong. That includes even conflicts that involve 592 01:16:33.780 --> 01:16:40.780 yourself. That is, if you have a conflict with me, then you decide who is right and 593 01:16:40.780 --> 01:16:46.780 who is wrong. If I have a conflict with him, you also decide who is right and who is wrong. 594 01:16:46.780 --> 01:16:52.780 But if you have a conflict with me, you also decide who is right and who is wrong. So what 595 01:16:52.780 --> 01:16:59.780 In that case, you will actually cause conflicts and then you decide them in your own favor. 596 01:16:59.780 --> 01:17:06.780 You will hit me on the head, then I complain about it, and then you say, I'm the judge. 597 01:17:06.780 --> 01:17:12.780 Of course, I was entirely justified, he looked at me in the wrong way, and that's the law that I laid down, 598 01:17:12.780 --> 01:17:19.780 and now he owes me such and such a sum of money in order for me to make this ridiculous judgment. 599 01:17:19.780 --> 01:17:26.380 This is how states work. If a policeman beats you up and you complain that the policeman 600 01:17:26.380 --> 01:17:31.260 beats you up, who decides who is right and wrong? The judge who is employed by the same 601 01:17:31.260 --> 01:17:39.840 organization as the policeman. So you must have, in this area in particular, you must 602 01:17:39.840 --> 01:17:48.840 have competition. Competition between arbitrators, judges, and so forth. Precisely because this 603 01:17:48.840 --> 01:17:57.320 This is one of the most important goods, law and order, justice, and to have monopolies 604 01:17:57.320 --> 01:18:02.680 there is just a sheer disaster, but again, that it does work, we can see we do not have 605 01:18:02.680 --> 01:18:05.120 a world government. 606 01:18:05.120 --> 01:18:13.440 Are there more conflicts between citizens in Austria and Germany who live in two adjacent 607 01:18:13.440 --> 01:18:14.440 villages? 608 01:18:14.440 --> 01:18:18.800 There might be only a kilometer between the people. 609 01:18:18.800 --> 01:18:23.360 Now there are more conflicts between people who live in one village in Germany and Austria 610 01:18:23.360 --> 01:18:28.320 than between citizens who live in two Austrian villages, neighbouring villages. 611 01:18:28.320 --> 01:18:33.000 And the answer is, I have never heard that there are more conflicts between them. 612 01:18:33.000 --> 01:18:37.200 But that proves that you do not need a monopolist process. 613 01:18:37.200 --> 01:18:42.200 We're slowly running out of time, so maybe just one or two more questions. 614 01:18:42.200 --> 01:18:45.200 I think one more question and that should be it. 615 01:18:45.200 --> 01:18:50.200 I've always had a very simplistic question, I'm sure you've had it many, many times. 616 01:18:50.200 --> 01:18:59.200 You say that there are many benefits that will come out of this, like pre-education and pre-health care, 617 01:18:59.200 --> 01:19:05.200 but a lot of people think that if the goods weren't provided by the government, 618 01:19:05.200 --> 01:19:10.200 First of all, they are not free, right? 619 01:19:10.200 --> 01:19:13.200 It has to be paid out of taxes. 620 01:19:13.200 --> 01:19:14.200 Somebody pays the taxes. 621 01:19:14.200 --> 01:19:18.200 It's not that he wasn't paying taxes, because they didn't have, they weren't high enough. 622 01:19:18.200 --> 01:19:26.200 Somebody who was disabled or somebody who was mentally ill and couldn't work and couldn't pay taxes. 623 01:19:26.200 --> 01:19:32.200 For that sort of stuff, you have societies that are not taxed out, wealthy societies, 624 01:19:32.200 --> 01:19:46.960 Education is nothing that came into existence only because states did it. 625 01:19:46.960 --> 01:19:51.000 Education existed prior to states taking over education. 626 01:19:51.000 --> 01:19:56.240 There existed medical doctors before the British health system was introduced. 627 01:19:56.240 --> 01:20:02.440 There are many countries where private doctors still are allowed to operate and that have 628 01:20:02.440 --> 01:20:06.040 far better health care systems than you have in Britain. 629 01:20:06.040 --> 01:20:15.960 You are famous for having one of the worst systems in the world. 630 01:20:15.960 --> 01:20:24.760 Everything that people want, for which there is a demand, will arise in the market. 631 01:20:24.760 --> 01:20:39.760 Let me emphasize this. Whatever is funded out of taxes will be far more expensive than the same thing would be if it would be provided by a market. 632 01:20:39.760 --> 01:20:49.760 If I built a private school, then I spent my own money on it and I will be frugal with my money. 633 01:20:49.760 --> 01:20:58.760 I'm very much concerned what will happen to my money and I'm concerned if I recoup the money that I invested. 634 01:20:58.760 --> 01:21:04.760 If I'm on the other hand a bureaucrat, I do not spend my own money. 635 01:21:04.760 --> 01:21:08.760 I spend other people's money on something. 636 01:21:08.760 --> 01:21:14.760 If you spend other people's money on something, you tend to be very generous. 637 01:21:14.760 --> 01:21:20.560 Then you think, the school should have this, the school should have that, wouldn't that 638 01:21:20.560 --> 01:21:27.160 be wonderful if there would be nicer carpets, better desks, more computers and all the rest 639 01:21:27.160 --> 01:21:28.160 of it. 640 01:21:28.160 --> 01:21:30.600 After all, it's not my money. 641 01:21:30.600 --> 01:21:36.320 So if you build a street, the same thing, if you build a private street, you will be 642 01:21:36.320 --> 01:21:41.640 very much concerned about the price of the product and the quality of the product. 643 01:21:41.640 --> 01:21:47.200 On the other hand, if you build a public street, you have this perversity in every European 644 01:21:47.200 --> 01:21:48.200 country. 645 01:21:48.200 --> 01:21:51.760 I'm sure that exists in Britain the same. 646 01:21:51.760 --> 01:21:56.880 You order companies to build the street that guarantee that only the highest possible wages 647 01:21:56.880 --> 01:22:02.680 will be paid, that the unions that say, you must pay your worker at least whatever, 20 648 01:22:02.680 --> 01:22:08.040 pounds an hour, otherwise you will not get the contract to build the street. 649 01:22:08.040 --> 01:22:10.040 Imagine this idiocy. 650 01:22:10.040 --> 01:22:15.120 I built a house and then two people come and make me an offer. One says, OK, I built you 651 01:22:15.120 --> 01:22:22.640 the house here for 100,000 pounds. And somebody else says, OK, I will charge you 200,000 pounds, 652 01:22:22.640 --> 01:22:28.840 but I promise you that I pay my workers extra payment. Would you then build the house, the 653 01:22:28.840 --> 01:22:36.840 200,000 pound house, only because you know, oh, but the workers were paid 50 pounds an 654 01:23:06.840 --> 01:23:10.840 I think we should stop now. I'm sorry. 655 01:23:10.840 --> 01:23:14.840 Let everyone join me in thanking Professor Hoppe very much.