WEBVTT NOTE Free Markets: An Interview with Walter Block 1 00:00:00.000 --> 00:00:05.000 Good morning and welcome to Free Markets with Dr. Mike Beitler. 2 00:00:05.000 --> 00:00:12.000 You'll be hearing leading thinkers discuss business, economic and political issues from a libertarian free market perspective. 3 00:00:12.000 --> 00:00:19.000 Now, here's your host, Dr. Mike Beitler. 4 00:00:19.000 --> 00:00:23.000 Good morning. Welcome to Free Markets. I'm Mike Beitler, your host. 5 00:00:23.000 --> 00:00:29.000 I believe big government is the problem and a free market is the solution. 6 00:00:29.000 --> 00:00:33.340 I'm gonna jump right in today and introduce my special guest. 7 00:00:33.340 --> 00:00:36.740 My guest today is Professor Walter Block. 8 00:00:36.740 --> 00:00:41.740 Walter is the Harold E. Wirth Eminent Scholar Endowed Chair 9 00:00:42.140 --> 00:00:47.140 in Economics at Loyola University in New Orleans. 10 00:00:47.400 --> 00:00:52.400 Dr. Block is an adjunct scholar at the Mises Institute. 11 00:00:55.240 --> 00:00:56.940 Walter is the author of many books, 12 00:00:56.940 --> 00:01:26.940 Including the Privatization of Roads and Highways in 2006 and Labor Economics from a Free Market Perspective, Employing the Unemployable in 2008, Walter has contributed almost 300 articles and reviews to scholarly refereed journals and has written several thousand op-ed pieces. Walter, welcome to the show. It's a pleasure to be here. Thanks for having me. Oh, it's an honor to have you. Walter, I was going 13 00:01:26.940 --> 00:01:32.380 I'm going to ask you to start off telling my listeners a little bit about Katrina since 14 00:01:32.380 --> 00:01:34.660 you live in New Orleans. 15 00:01:34.660 --> 00:01:39.380 What was the government's involvement and did they make matters better or worse down 16 00:01:39.380 --> 00:01:40.380 there? 17 00:01:40.380 --> 00:01:41.380 I'll give you three guesses. 18 00:01:41.380 --> 00:01:45.020 I think I can get in one guess. 19 00:01:45.020 --> 00:01:46.020 Government is great. 20 00:01:46.020 --> 00:01:48.540 Without them, we would have had a lot of trouble here. 21 00:01:48.540 --> 00:01:49.540 No, I'm kidding. 22 00:01:49.540 --> 00:01:50.540 Of course. 23 00:01:50.540 --> 00:01:51.540 Of course. 24 00:01:51.540 --> 00:01:55.700 I believe that Katrina really did not cause the problem. 25 00:01:55.700 --> 00:02:01.700 Actually, Katrina missed us. It went more to Biloxi, which is, oh, 40, 50 miles to the east of us. 26 00:02:01.700 --> 00:02:13.700 The real problem was two government agencies. One, the Army Corps of Engineers that made levies that didn't last too long or last too well. 27 00:02:13.700 --> 00:02:18.700 One of the bumper stickers here is, make levies not war. Well, yes, I suppose that's good. 28 00:02:18.700 --> 00:02:23.700 They should make levies, but they can't because they're government and therefore they're inept. 29 00:02:23.700 --> 00:02:30.420 The other group that contributed to the deaths, and none of them are in jail now or even being 30 00:02:30.420 --> 00:02:36.260 indicted or anything for criminal behavior, is FEMA. And my favorite bumper sticker there is 31 00:02:36.260 --> 00:02:44.740 FEMA Happen. That's a great bumper sticker. And what happened was the Army Corps of Engineers built 32 00:02:44.740 --> 00:02:51.060 levies that didn't do their job and FEMA prevented private enterprise like Walmart and hundreds of 33 00:02:51.060 --> 00:02:55.060 of Individuals and Groups and Private Organizations 34 00:02:55.060 --> 00:02:56.900 from coming in here and helping. 35 00:02:56.900 --> 00:02:59.900 There were boats with 500 rooms in them 36 00:02:59.900 --> 00:03:03.740 that were willing to put people in them, 37 00:03:03.740 --> 00:03:06.060 but no, this is not allowed by FEMA. 38 00:03:06.060 --> 00:03:10.140 The Walmart brought in truckloads of ice and orange juice 39 00:03:10.140 --> 00:03:12.220 and oranges and milk and things like that, 40 00:03:12.220 --> 00:03:13.940 and they were turned back. 41 00:03:13.940 --> 00:03:16.020 It was just a debacle. 42 00:03:16.980 --> 00:03:20.020 There were hundreds of those yellow school buses, 43 00:03:20.020 --> 00:03:24.020 Halfway up to their steering wheel in water. 44 00:03:24.020 --> 00:03:29.020 Now look, you know, Katrina, we had five days notice for Katrina. 45 00:03:29.020 --> 00:03:31.020 Six days, eight days notice. 46 00:03:31.020 --> 00:03:35.020 It's not like one of these earthquakes that you get two seconds notice. 47 00:03:35.020 --> 00:03:46.020 And Ray Nagin, the mayor, and Blanco, the governor, they were all just very inept and created havoc here. 48 00:03:46.020 --> 00:03:58.020 And if the intelligentsia, or what passes through the intelligentsia, the pundits and editorialists are saying, well, this shows that the government needs more money. 49 00:03:58.020 --> 00:04:07.020 I tell you, if a private enterprise had done half of the bad things that they've done, it would have been the end of them. 50 00:04:07.020 --> 00:04:10.020 They would have been bankrupt. They would have been long gone. 51 00:04:10.020 --> 00:04:17.020 And that's good, because in the market, if you don't provide a service to a consumer, you don't make money. 52 00:04:17.020 --> 00:04:23.020 If you don't make money for a long enough time, you go bankrupt, and you leave the stage for other people who can do a better job. 53 00:04:23.020 --> 00:04:28.020 Whereas with government, when you fail, they just throw more money at you. 54 00:04:28.020 --> 00:04:35.020 I think that's so interesting, Walter, because you're saying something I don't think I've heard people talk about. 55 00:04:35.020 --> 00:04:39.420 I mean, there was problems not just at the federal level, but at the governor's level. 56 00:04:39.420 --> 00:04:44.700 The mayor and city council obviously must have known there was a potential problem. 57 00:04:44.700 --> 00:04:45.700 Yeah. 58 00:04:45.700 --> 00:04:52.100 There was this one young black kid who stole a city, one of those yellow school buses, 59 00:04:52.100 --> 00:04:56.900 and he went around to the, they used to call it the Superdome, but I sort of refer to it 60 00:04:56.900 --> 00:04:57.900 as the Sewer Dome. 61 00:04:57.900 --> 00:05:03.780 He went there and he got people just standing on the sidewalk, said, come on in, I'll take 62 00:05:03.780 --> 00:05:04.780 you to Baton Rouge. 63 00:05:04.780 --> 00:05:11.780 He was like a local hero because he, quote, stole a bus, although my favorite novel, of 64 00:05:11.780 --> 00:05:18.660 course, is Ayn Rand's Atlas Shrug, and Ragnar Danischkold, one of my favorite heroes in 65 00:05:18.660 --> 00:05:25.660 that book, stole, in quotes, government property that they never should have had in the first 66 00:05:25.660 --> 00:05:26.660 place. 67 00:05:26.660 --> 00:05:33.020 Well, this kid really was a hero, and if he could do it, why couldn't the city government 68 00:06:03.020 --> 00:06:29.020 I gave him a copy of Capitalism, the Unknown Ideal and I said this is by Ayn Rand and he looked at the book and he said, oh there's something here by Alan Greenspan, was he a follower of Ayn Rand? 69 00:06:29.020 --> 00:06:37.020 I hardly knew what to say because, yes, obviously at one point he was, but then he goes on to become a central planner. 70 00:06:37.020 --> 00:06:41.020 Yes. Isn't that horrible? I mean, it really is. 71 00:06:41.020 --> 00:06:48.020 I mean, it's sort of okay when a socialist stays a socialist. I don't really mean it's okay, but you can sort of understand it. 72 00:06:48.020 --> 00:06:51.020 It's maybe in the blood or in the genes or somewhere. 73 00:06:51.020 --> 00:06:56.780 But when a guy like Alan Greenspan, who was not only just a follower, but maybe Chief 74 00:06:56.780 --> 00:07:02.260 Luke Kennet, or certainly in her inner circle, and who did good work on the gold standard 75 00:07:02.260 --> 00:07:11.460 and free enterprise and the money system, and then he, I don't know what, turns code 76 00:07:11.460 --> 00:07:19.780 or becomes a trader to freedom and becomes a central planner and denigrates the gold 77 00:07:19.780 --> 00:07:49.780 Standard, Free Enterprise Money, Dr. Robert Stadler, Dr. Robert Stadler, Dr. Robert Stadler, 78 00:07:49.780 --> 00:08:19.660 Walter, and when you think about Greenspan created just trillions of dollars in a V.I. 79 00:08:19.660 --> 00:08:34.380 Free Enterprise Money is that which becomes money in a competitive free market setting. 80 00:08:34.380 --> 00:08:40.300 And gold didn't always win, it won most of the time, but silver was used and copper and 81 00:08:40.300 --> 00:08:45.660 sometimes bronze and heck, cigarettes are sometimes used as money. 82 00:08:45.660 --> 00:08:51.580 The point is that when a commodity arises in the market setting and people start using 83 00:08:51.580 --> 00:08:55.660 it to facilitate trades, well, that's what money is. 84 00:08:55.660 --> 00:09:02.780 And this fiat currency and the fractional reserve banking and all the mess that Greenstein 85 00:09:02.780 --> 00:09:08.780 and his buddy Bernanke have created, that's why we have the economic crisis that we now 86 00:09:08.780 --> 00:09:09.780 have. 87 00:09:09.780 --> 00:09:13.780 And guess who we're relying upon to get us out of the economic crisis? 88 00:09:13.780 --> 00:09:43.700 I've told my listeners before, I was a CFO in banking and I'm amazed at what I'm seeing 89 00:10:13.700 --> 00:10:14.700 Closer to Capitalism 90 00:10:14.700 --> 00:10:17.700 Okay, which I appreciate. 91 00:10:17.700 --> 00:10:24.700 Okay, so as we're getting close here to our first break, you're listening to Free Markets. 92 00:10:24.700 --> 00:10:29.700 I'm Mike Beitler, your host, and my guest today is Professor Walter Block. 93 00:10:29.700 --> 00:10:33.700 We're going to take a couple of minutes here for a break, but stay with us. 94 00:10:33.700 --> 00:10:37.700 We've got some really interesting discussion coming up, and we'll be right back. 95 00:10:37.700 --> 00:11:07.700 Welcome back to the second segment of Free Market. I'm Mike Feitner, your host. My special guest today is Professor Walter Block. And right before the break, I mentioned this whole debacle about TARP funds and Wall Street banking bailout and so forth. And as you listeners know, I've already told my stories before about the government coming in and telling us we have to make loans. 96 00:11:07.700 --> 00:11:26.700 And I was going to ask Walter to jump in here and tell us Walter, what do you think about 97 00:11:26.700 --> 00:11:34.100 the, I guess we're on TARP 2 at this point or TARP 3 and is this the answer to the banking 98 00:11:34.100 --> 00:11:35.100 crisis? 99 00:11:35.100 --> 00:11:38.100 No, I don't think that this is the answer to the banking crisis. 100 00:11:38.100 --> 00:11:42.600 It's sort of like taking water out of the deep end of the pool and putting it into the 101 00:11:42.600 --> 00:11:46.600 shallow end of the pool in an attempt to make the shallow end of the pool deeper. 102 00:11:46.600 --> 00:11:47.600 It's just silly. 103 00:11:47.600 --> 00:11:52.100 I mean, if you take money from Peter and give it to Paul, well, Paul looks pretty good, 104 00:11:52.100 --> 00:11:56.600 but Peter doesn't look that good and it's hard to see how you can lift yourself up by 105 00:11:56.600 --> 00:12:03.100 the bootstraps and just by taking money from victims and giving it to recipients that you 106 00:12:03.100 --> 00:12:11.620 No, there's a cost to the transfer, so you're making everyone worse off. 107 00:12:11.620 --> 00:12:17.020 The whole thing started, though, with, again, the Fed, our favorite institution here. 108 00:12:17.020 --> 00:12:23.820 The Boston Fed, there are 12 of them, in 1992, I think it was, started in with the banks 109 00:12:23.820 --> 00:12:24.820 and saying that they were racist. 110 00:12:24.820 --> 00:12:25.820 Why are they racist? 111 00:12:25.820 --> 00:12:31.820 Because black people are getting disproportionately fewer mortgages than white people. 112 00:12:31.820 --> 00:12:32.820 And why is this? 113 00:12:32.820 --> 00:12:39.020 When you go into a bank and you want to get a mortgage for your house, they want 20% down. 114 00:12:39.020 --> 00:12:43.620 They want to ask you if you have a job, if you have a credit rating, have you paid your 115 00:12:43.620 --> 00:12:50.500 debts in the past, if you have a fixed address, if you have assets, things like that. 116 00:12:50.500 --> 00:12:59.660 And for various reasons, black people and other minority groups had lower credit ratings 117 00:12:59.660 --> 00:13:01.900 than white people. 118 00:13:01.900 --> 00:13:07.980 And also there was a bit of redlining, that is, the banks would draw a red line or a red 119 00:13:07.980 --> 00:13:15.300 circle around a neighborhood because they had had trouble collecting mortgage payments 120 00:13:15.300 --> 00:13:21.660 from people who lived there and it just so happened that those red lines were in predominantly 121 00:13:21.660 --> 00:13:26.420 black areas so black people weren't getting as many loans and this the Boston Fed was 122 00:13:26.420 --> 00:13:33.180 due to racism, not due to proper business practices of making sure that the money entrusted 123 00:13:33.180 --> 00:13:38.620 to you by your depositors will be repaid by the people you ended out to in mortgages, 124 00:13:38.620 --> 00:13:44.220 but based on racism or something like that. 125 00:13:44.220 --> 00:13:48.740 What they did, and banking is a very, very heavily regulated industry, so if you don't 126 00:13:48.740 --> 00:13:53.140 listen to the regulators, you can't merge, you can't buy this, you can't sell that, 127 00:13:53.140 --> 00:14:22.140 So what they would do is they would start making loans to people, sometimes called ninja loans, N-I-N-J-A-A, ninja loans, no income, no job, no assets, no address, and this just encouraged people to buy bigger housing and more housing than they otherwise would have been justified in doing. 128 00:14:22.140 --> 00:14:29.140 and putting people into housing who didn't have the ability to pay off mortgages. 129 00:14:29.140 --> 00:14:33.140 And then what happened is that there was a secondary market in mortgages. 130 00:14:33.140 --> 00:14:37.140 Lots of times, you know, you'll get a mortgage on your house with Bank A, 131 00:14:37.140 --> 00:14:40.140 and then Bank A will send you a letter three months later saying, 132 00:14:40.140 --> 00:14:45.140 from now on, send your mortgage money to Bank B because we've sold the mortgage to Bank B, 133 00:14:45.140 --> 00:14:48.140 and then, you know, Bank B will then transfer it to Bank C. 134 00:14:48.140 --> 00:15:18.140 and what they'll do is they'll combine these mortgages into commercial paper and this is all well and good. There's nothing wrong with secondary markets. I mean, if you didn't have a used car market, then the new car market wouldn't be as good as it is because half the value or part of the value of buying a new car is the knowledge that you can sell it whenever you want. So part of the benefit of a bank having a mortgage property, if you will, is that they can sell it. But the point is that 135 00:15:18.140 --> 00:15:28.140 These were non-performing loans, or toxic loans, as it is now called, and I'm not sure who to blame, probably everybody. 136 00:15:28.140 --> 00:15:33.140 On the one hand, the banks were forced into it. On the other hand, they didn't resist all that much. 137 00:15:33.140 --> 00:15:46.140 And now we're talking about bailing them out, taking these toxic loans off their books and getting the government to, in effect, nationalize or take a property interest in these banks 138 00:15:46.140 --> 00:15:50.140 and Return for relieving them of these ill-gotten loans. 139 00:15:50.140 --> 00:15:59.140 Well, this is just socialism when the government takes ownership stakes in private industry 140 00:15:59.140 --> 00:16:03.140 and it stashes them when the government controls economies through regulation. 141 00:16:03.140 --> 00:16:05.140 And I'm not sure which is which. 142 00:16:05.140 --> 00:16:07.140 Well, I guess each is worse than the other. 143 00:16:07.140 --> 00:16:09.140 So I'm not a big fan of talk. 144 00:16:09.140 --> 00:16:14.140 I forget what T-A-R-P means, something to do with bailing out companies. 145 00:16:14.140 --> 00:16:24.140 Well, one of the benefits of a bankruptcy is that it takes out of the market people who are non-performers. 146 00:16:24.140 --> 00:16:32.140 But if you take a Chrysler or a General Motors or a Ford, we used to call them the big three, 147 00:16:32.140 --> 00:16:36.140 but I guess we should now call them the medium three or the mediocre three, 148 00:16:36.140 --> 00:16:43.140 and we give them vast amounts of money that the car buyers are unwilling to give them on a voluntary basis, 149 00:16:43.140 --> 00:16:52.140 We undermine the whole ethos of the free enterprise system and no longer can we expect what we 150 00:16:52.140 --> 00:16:59.140 expect from capitalism, namely good productivity, because we're now supporting people who are 151 00:16:59.140 --> 00:17:02.140 non-productive or companies that are non-productive. 152 00:17:02.140 --> 00:17:07.140 Yes, yes, Barack Obama will not give money to companies where the CEO makes more than 153 00:17:07.140 --> 00:17:10.140 what is it, 400,000 or 500,000 a year? 154 00:17:10.140 --> 00:17:12.140 Yeah, they went to 500,000. 155 00:17:12.140 --> 00:17:17.140 I went up to $500,000, but there are grave problems with that as well. 156 00:17:17.140 --> 00:17:24.140 First of all, if you expect people to fix these companies, you've got to get talented people. 157 00:17:24.140 --> 00:17:30.140 Well, talented people can command much higher salaries than $500,000. 158 00:17:30.140 --> 00:17:35.140 Heck, even professors make that much money sometimes at the top of the list. 159 00:17:35.140 --> 00:17:42.020 So what you're really doing is misallocating very good corporate talent and telling them 160 00:17:42.020 --> 00:17:45.620 don't go to companies that are in trouble. Stay in companies that are safe. Well, then 161 00:17:45.620 --> 00:17:51.140 how are you going to get the market to fix this? The other thing is that the capital 162 00:17:51.140 --> 00:17:59.140 system has within it the ability to make sure that CEOs don't get inordinately high salaries. 163 00:17:59.140 --> 00:18:03.900 So you might ask, well why then are they getting such inordinately high salaries? Why are these 164 00:18:03.900 --> 00:18:22.900 The Market has a mechanism that is able to deal with the out-of-control CEO's salaries. 165 00:18:22.900 --> 00:18:26.900 For want of a better word, I'll call it the Michael Milken effect. 166 00:18:26.900 --> 00:18:32.020 You might remember Michael Milken. What he would do is he would go to companies where 167 00:18:32.020 --> 00:18:37.620 he thought the CEO was hogging up the money, getting too high a salary, because if the 168 00:18:37.620 --> 00:18:43.620 CEO is diverting funds to himself that shouldn't be going to him, what happens to the value 169 00:18:43.620 --> 00:18:47.620 of the stock of the company? Well, the value of the stock of the company gets depreciated. 170 00:18:47.620 --> 00:18:54.180 It's lower. So Michael Milken would buy up these companies with junk bonds and when he 171 00:18:54.180 --> 00:19:08.180 He had enough control. He would kick out these, I don't want to use the word, greedy CEOs because I'm in favor of greed, but these CEOs who are grabbing off more money than the marketplace would support. 172 00:19:08.180 --> 00:19:20.180 And he would kick them out and put in a new board and he would make a vast amount of money. But guess what happened to Michael Milken? These politicians threw him in jail. 173 00:19:20.180 --> 00:19:26.340 So, if the government takes away the market mechanism that enables the market to solve 174 00:19:26.340 --> 00:19:30.540 a problem, then the market can't solve the problem because the market isn't allowed 175 00:19:30.540 --> 00:19:31.540 to operate. 176 00:19:31.540 --> 00:19:36.020 And then they say, aha, you see, the market is failing, the government has to step in 177 00:19:36.020 --> 00:19:42.620 to rationalize things, but this is just silly, but that's the world we have. 178 00:19:42.620 --> 00:19:47.820 Actually, Walter, let me jump in here and everything you said I would say amen to, and 179 00:19:47.820 --> 00:19:53.460 And I would just add one thing, from my own experience in banking, like you were saying, 180 00:19:53.460 --> 00:20:03.060 we were forced to make these bad loans to special interest groups for the politicians. 181 00:20:03.060 --> 00:20:09.660 And I remember a meeting I had with our senior team with the regulators, and they basically 182 00:20:09.660 --> 00:20:14.460 told us if you don't make these loans, and they had a stack of loan files there that 183 00:20:14.460 --> 00:20:19.260 We were about to reject and said, if you don't make these loans, we'll take the eagle off 184 00:20:19.260 --> 00:20:20.260 the door. 185 00:20:20.260 --> 00:20:26.220 Basically saying you won't have FDIC insurance or a charter, you'll be out of business. 186 00:20:26.220 --> 00:20:32.060 And the thing I would add, Walter, is I remember our executive team looking at each other about 187 00:20:32.060 --> 00:20:39.060 this is just bad business practice and the regulators said, well, you should originate 188 00:20:39.060 --> 00:20:43.980 the loans and then just sell them off to Freddie Mac and Fannie Mae. 189 00:20:43.980 --> 00:20:49.740 So, you know, going back to your point about what the bankers didn't resist, well, yeah, 190 00:20:49.740 --> 00:20:55.780 because we could shift that risk over to ultimately the taxpayers. 191 00:20:55.780 --> 00:21:01.020 Well, you know, it's a very interesting subject that you're raising. 192 00:21:01.020 --> 00:21:02.020 Arne Rand wrote this essay. 193 00:21:02.020 --> 00:21:03.020 What was it? 194 00:21:03.020 --> 00:21:10.020 Something to the effect, maybe you'll correct me if I don't have the exact title. 195 00:21:10.020 --> 00:21:13.020 America's Big Businessmen, America's Most Persecuted Minority. 196 00:21:13.020 --> 00:21:20.020 The Persecuted Minority, right. That's it. I think that's only half the tale. I think 197 00:21:20.380 --> 00:21:27.380 that that is true, that America's businessmen are a persecuted minority. Only one evidence, 198 00:21:29.020 --> 00:21:35.860 nowadays it's very difficult on TV or shows to have the villain be a Jew or a woman or 199 00:21:35.860 --> 00:21:41.860 a black person or a minority group or a gay person. It seems that the only fair game to 200 00:21:41.860 --> 00:21:48.860 As the villain is a white business man, so yes, there is a lot of persecuting of business. 201 00:21:48.860 --> 00:22:00.860 On the other hand, people like Murray Rothbard and Gabriel Coco and other historians have shown definitively that business is not all that innocent. 202 00:22:00.860 --> 00:22:06.860 There's a lot of initiation of the regulations of business by business. 203 00:22:06.860 --> 00:22:28.860 For example, the FDA and the Meat Inspection Act, railroads and regulation, a lot of these companies, what happened in the 19th century is that they were being outcompeted by small arrivals, and rather than allow the market to rationalize things to their expenses, they would have been driven into bankruptcy. 204 00:22:28.860 --> 00:22:33.860 Oh Walter, let me jump in here. I hear the second break creeping up on us. 205 00:22:33.860 --> 00:22:39.860 I think what you're getting into there is cronyism, and I think we ought to talk about that a little bit after the break. 206 00:22:39.860 --> 00:22:40.860 Sounds good. 207 00:22:40.860 --> 00:22:47.860 You're listening to Free Markets. I'm Mike Feitler with Professor Walter Block. We're going to take a short break. Stay with us. 208 00:22:51.860 --> 00:22:59.860 Welcome back to the third segment of Free Markets. I'm Mike Feitler, your host. I'm speaking today with Professor Walter Block. 209 00:22:59.860 --> 00:23:07.860 And Walter's agreed to stay with us for the full hour, so if you have an email question form, go ahead and shoot that over here to me. 210 00:23:07.860 --> 00:23:19.860 Before the break, Walter, we were talking a little bit about what I would call cronyism. I know people call it crony capitalism, but I hate to hear capitalism and cronyism in the same sentence. 211 00:23:19.860 --> 00:23:28.060 Let's talk a little bit more about that, so I guess, like you Walter, I'm anti-big government, 212 00:23:28.060 --> 00:23:33.700 but business being in bed with government, should we be concerned about that also? 213 00:23:33.700 --> 00:23:34.700 Oh, absolutely. 214 00:23:34.700 --> 00:23:40.900 Big businesses, yes, in some sense they are a persecuted minority, but in another sense 215 00:23:40.900 --> 00:23:47.220 they're bringing it on themselves and they're not persecuting, they're persecuted, they're 216 00:23:47.220 --> 00:24:17.220 The Theory of Money and Credit The Theory of Money and Credit 217 00:24:17.220 --> 00:24:24.380 There are businesses giving money to, to the demo publicans and the republicans or whatever. 218 00:24:24.380 --> 00:24:29.940 They don't give money to the libertarians who favor the free enterprise system. 219 00:24:29.940 --> 00:24:35.300 So yes, I think Ayn Rand is very good on half the story, but she's less good on this crony 220 00:24:35.300 --> 00:24:39.700 capitalism as far as I read her. 221 00:24:39.700 --> 00:24:45.300 I would never write an essay myself saying, big business, America's most persecuted minority. 222 00:24:45.300 --> 00:24:47.060 I would say it's a complicated thing. 223 00:24:47.060 --> 00:24:53.460 They're both persecuting and persecute ed, and I'm not a real big fan of business. 224 00:24:53.460 --> 00:25:01.140 I mean, look at what Bill Gates is doing now, he's, you know, and Soros and these other 225 00:25:01.140 --> 00:25:02.140 people. 226 00:25:02.140 --> 00:25:10.980 They're just very socialist and fascistic kinds of people, and they represent big business. 227 00:25:10.980 --> 00:25:15.900 I think that the situation is a lot more complicated than just saying that they're a persecuted 228 00:25:15.900 --> 00:25:16.900 minority. 229 00:25:16.900 --> 00:25:30.380 I guess my concerns be about that, Walter. 230 00:25:30.380 --> 00:25:36.020 I've been in the business world over 30 years, so I've been proud to be in the business world. 231 00:25:36.020 --> 00:25:42.580 I used to work in Washington, D.C., and when I go back now, K Street's nothing but lobbyists. 232 00:25:42.580 --> 00:25:49.580 Many of these are just business lobbies trying to, like you said, get legislation that favors 233 00:25:49.580 --> 00:25:55.380 their firm and they're trying to get subsidies and everything else that are just coming out 234 00:25:55.380 --> 00:25:56.380 of the taxpayers' pockets. 235 00:25:56.380 --> 00:26:00.780 Well, I guess we have to distinguish between offensive and defensive lobbying. 236 00:26:00.780 --> 00:26:11.340 If it's defensive lobbying, what their lobbying is all about is against government incursions. 237 00:26:11.340 --> 00:26:15.420 But if it's offense of lobbying, then they're lobbying in favor of government interventions 238 00:26:15.420 --> 00:26:18.020 which they think will benefit them. 239 00:26:18.020 --> 00:26:22.500 So it's a very complicated thing, the relationship between business and liberty. 240 00:26:22.500 --> 00:26:26.660 You'd think that businessmen would all favor free enterprise because free enterprise is 241 00:26:26.660 --> 00:26:31.980 what allows them to be business people in the first place, but sadly that's not the 242 00:26:31.980 --> 00:26:32.980 case. 243 00:26:32.980 --> 00:26:37.820 It's a great point when you think that to stay in business you almost have to have a 244 00:26:37.820 --> 00:26:39.820 lobbyist just to protect you. 245 00:26:39.820 --> 00:26:47.660 Yeah, I mean, to get back to Atlas Shrugged, that magnificent book, Hank Reardon hired 246 00:26:47.660 --> 00:26:51.460 Wesley Mouch before Wesley Mouch or Mooch, I'm not sure how to pronounce it. 247 00:26:51.460 --> 00:26:52.460 Oh yes, right. 248 00:26:52.460 --> 00:26:53.460 Is it Mooch or Mouch? 249 00:26:53.460 --> 00:26:54.460 Do you know? 250 00:26:54.460 --> 00:27:02.580 I thought it was Mouch, but I'm joking, Mooch might come up with a way to pronounce it. 251 00:27:02.580 --> 00:27:07.580 Hank Reardon didn't really know Washington, all he knew was Pittsburgh and steel and Reardon 252 00:27:07.580 --> 00:27:13.620 and Metal and stuff like that, and he hired this guy, Wesley Mootsch, and he was his 253 00:27:13.620 --> 00:27:20.620 supposed link in Washington, who later turned traitor against him and became one of the 254 00:27:20.620 --> 00:27:21.620 regulators. 255 00:27:21.620 --> 00:27:27.540 Ayn Rand put her finger on a lot of very important points. 256 00:27:27.540 --> 00:27:28.540 Absolutely. 257 00:27:28.540 --> 00:27:36.780 Let me switch topics a little bit here, Walter, and ask you about, are you starting to see 258 00:27:36.780 --> 00:27:43.180 Do you see a lot of similarities between what's happening now and the FDR administration and 259 00:27:43.180 --> 00:27:44.180 Great Depression? 260 00:27:44.180 --> 00:27:45.180 Oh yes, yes. 261 00:27:45.180 --> 00:27:46.180 The parallels are amazing. 262 00:27:46.180 --> 00:27:51.180 I mean, we might as well call this guy Franklin Delano Obama. 263 00:27:51.180 --> 00:27:59.580 He's just doing, you know, we're all Keynesians now, he's following the pattern of bailouts 264 00:27:59.580 --> 00:28:12.580 FDR had the Smoot-Hawley Tariff, and Obama is talking about ending dependence on foreign 265 00:28:12.580 --> 00:28:15.580 bananas, foreign oil, foreign anything. 266 00:28:15.580 --> 00:28:21.580 We've got to stop free trade internationally, seems to be one of those things. 267 00:28:21.580 --> 00:28:30.820 The FDR had the CCC and the WPA, and the equivalent there is Obama's bailing these guys out and 268 00:28:30.820 --> 00:28:35.900 having a tarp and bailing those guys out. 269 00:28:35.900 --> 00:28:38.420 The parallels are very, very strong. 270 00:28:38.420 --> 00:28:42.260 Murray Rothbard wrote a book, America's Great Depression, and unfortunately he's not with 271 00:28:42.260 --> 00:28:43.260 us anymore. 272 00:28:43.260 --> 00:28:44.260 He died in 1995. 273 00:28:44.260 --> 00:28:50.140 If he were around now, he would be making the case, I'm sure, that there are ominous 274 00:28:50.140 --> 00:29:01.900 Parallels between the 1929 and the 2009 situation. FDR and Hoover, we mustn't forget that Hoover 275 00:29:01.900 --> 00:29:07.380 was also a New Dealer. Somehow he's seen as a free enterprise, which is totally fallacious. 276 00:29:07.380 --> 00:29:13.980 The Hoover-FDR New Deal extended the Great Depression from 1929 all the way to 1946, 277 00:29:13.980 --> 00:29:25.660 If Obama follows this Keynesian FDR-Hoover path, instead of the depression or recession 278 00:29:25.660 --> 00:29:33.660 or whatever it is, panic lasting for a couple of months, it can last for 10, 15, 20 years 279 00:29:33.660 --> 00:29:37.660 and be very much deeper than it otherwise would be. 280 00:29:37.660 --> 00:29:44.660 And it was even more so because we've already discussed the CRA, which was one of the impetuses 281 00:29:47.700 --> 00:29:52.700 of the misallocation of resources. Another one is the fact that in the 1920s, Rothbard's 282 00:29:52.700 --> 00:29:59.700 book, America's Great Depression Shows, what the Fed did then was artificially lower interest 283 00:29:59.700 --> 00:30:06.100 The idea then was artificially lower interest rates, which misallocated resources toward 284 00:30:06.100 --> 00:30:12.500 heavier industry, and that's what Greenspan and Bernanke have been doing low these many 285 00:30:12.500 --> 00:30:13.500 years. 286 00:30:13.500 --> 00:30:15.380 Heck, the interest rate is down near zero. 287 00:30:15.380 --> 00:30:20.260 So in the Austrian view, and by the way, Austrian economics has got nothing to do with the economics 288 00:30:20.260 --> 00:30:24.860 of the country of Austria any more than Chicago's school economics has to do with the city of 289 00:30:24.860 --> 00:30:37.380 What the Austrian view is, to which I subscribe, is that the recession is sort of like a hangover 290 00:30:37.380 --> 00:30:43.380 the next morning and the last thing you want to do is give the drunkard more booms. 291 00:30:43.380 --> 00:30:50.260 That's not the way to cure depression and that's exactly what Obama is doing. 292 00:30:50.260 --> 00:30:53.780 Another parallel is that FDR popped up wages. 293 00:30:53.780 --> 00:31:03.900 Well, Obama is not propping up wages, he's propping down wages with the CEOs, but he's 294 00:31:03.900 --> 00:31:08.900 also propping up companies instead of wages, he's propping up the big three, the Rust Belt 295 00:31:08.900 --> 00:31:09.900 Kings. 296 00:31:09.900 --> 00:31:14.540 So I would say the parallels are ominous, they're all over the place, they're very 297 00:31:14.540 --> 00:31:20.100 powerful and if we learn anything from history it's to not do what they did in the 20s and 298 00:31:20.100 --> 00:31:25.900 in the 1930s, but Obama, I guess, and his advisors haven't read the Austrian libertarian 299 00:31:25.900 --> 00:31:26.900 view on these things. 300 00:31:26.900 --> 00:31:31.660 It definitely looks like they have definitely not read it, that's for sure. 301 00:31:31.660 --> 00:31:38.220 I'm curious, too, Walter, you were talking there about propping up wages and so forth. 302 00:31:38.220 --> 00:31:43.540 Are you all so concerned like I am about, I was listening to, watching CNBC this morning 303 00:31:43.540 --> 00:31:49.860 and they were talking about the problem is real estate prices are, we have to do something 304 00:31:49.860 --> 00:31:51.860 and to hold up real estate prices. 305 00:31:51.860 --> 00:31:53.860 Shouldn't we just let them drop down to the market? 306 00:31:53.860 --> 00:31:56.860 Yes, well, Ben, that's what the magic of the market is. 307 00:31:56.860 --> 00:32:00.860 That's what the beauty of the free enterprise system is, is that we don't know what the 308 00:32:00.860 --> 00:32:03.860 right prices are and nor do the central planners. 309 00:32:03.860 --> 00:32:09.860 Ludwig von Mises wrote a book, Human Action and Socialism, and many of his other books 310 00:32:09.860 --> 00:32:15.860 that show that the market is the best planner of an economy. 311 00:32:15.860 --> 00:32:18.860 These people don't know what they're doing. 312 00:32:18.860 --> 00:32:22.860 They don't know what the proper price of housing should be. 313 00:32:22.860 --> 00:32:29.860 The only way to find out what the efficient and low price of housing is, is to allow markets 314 00:32:29.860 --> 00:32:32.860 to decide what the housing prices are. 315 00:32:32.860 --> 00:32:37.860 So if what they're going to do is start bailing out people who bought houses that they couldn't 316 00:32:37.860 --> 00:32:42.860 afford to keep the prices up so that they don't have to sell at a loss, well, that's 317 00:32:42.860 --> 00:32:43.860 a big problem. 318 00:32:43.860 --> 00:32:49.500 problem, we have more housing than the time preference rates or the impatience rates or 319 00:32:49.500 --> 00:32:55.740 the saving investment decisions of the populace would allow us to have and the only way to 320 00:32:55.740 --> 00:32:58.260 rationalize this is to allow prices to drop. 321 00:32:58.260 --> 00:32:59.260 How far? 322 00:32:59.260 --> 00:33:00.260 I don't know. 323 00:33:00.260 --> 00:33:03.260 I'm not a central planner. 324 00:33:03.260 --> 00:33:10.380 It seems to me, I just think about it on a very micro level, that I would consider buying 325 00:33:40.380 --> 00:33:48.420 I'm just using a paraphrase that if an individual tries to save himself, it's very difficult 326 00:33:48.420 --> 00:33:53.540 because there's no knowing of what to do and it's very hard for the individual to save 327 00:33:53.540 --> 00:33:59.500 himself and rather what the individual should try to do is to bring about freedom and bring 328 00:33:59.500 --> 00:34:05.740 about free enterprise and the Mises Institute, which is sort of patterned itself after Mises 329 00:34:05.740 --> 00:34:15.900 Walter, after the break, I'm going to talk a little bit about the Mises Institute with 330 00:34:16.900 --> 00:34:17.900 Okay. 331 00:34:17.900 --> 00:34:20.340 We're coming up on the third and final break here. 332 00:34:20.340 --> 00:34:21.740 You're listening to Free Markets. 333 00:34:21.740 --> 00:34:27.100 I'm Mike Beidler, your host, and my special guest today is Professor Walter Block. 334 00:34:27.100 --> 00:34:28.100 We'll be right back. 335 00:34:28.100 --> 00:34:35.540 Welcome back to the final segment of Free Markets. 336 00:34:35.540 --> 00:35:01.540 I'm Mike Feitler, your host. I'm speaking today with Professor Walter Block and what I'd like to do, Walter, is we've mentioned the Mises Institute a few times and I want to point out to my listeners that you have several videos and audios on Mises.org. Do you want to tell us a little bit about the Mises Institute? 337 00:35:01.540 --> 00:35:10.040 Yes, the Mises Institute was started in 1982 by Lew Rockwell and he wanted to promote Austrian 338 00:35:10.040 --> 00:35:15.580 economics and libertarianism and he wasn't really happy with the Beltway Libertarian Group 339 00:35:15.580 --> 00:35:21.820 and Cato Institute would be one example because he thought that they compromised with principle 340 00:35:21.820 --> 00:35:28.860 too much and Murray Rothbard was a guiding intellectual light in this and I think Mrs. 341 00:35:28.860 --> 00:35:36.540 This is Mises, Ludwig von Mises' widow was on the board of directors initially and they've 342 00:35:36.540 --> 00:35:44.980 been holding conferences and publishing books and I am one of the regular faculty members 343 00:35:44.980 --> 00:35:50.420 of the functions that they have in the summer for students and I give lectures there. 344 00:35:50.420 --> 00:35:55.820 And this is pretty much my own personal favorite institution because I think that they are 345 00:35:55.820 --> 00:36:02.700 are most congruent to my own views, and they are doing yeoman work in promoting liberty 346 00:36:02.700 --> 00:36:05.700 and free enterprise and peace and prosperity. 347 00:36:05.700 --> 00:36:13.700 It's a wonderful website too, I was going to tell my listeners, if they just go to mises.org 348 00:36:13.700 --> 00:36:20.940 and then if you click on media, there's just, there literally must be hundreds of lectures 349 00:36:20.940 --> 00:36:35.500 The way to spell Mises, not everyone is familiar with that, is M as in Mary, I as in Indigo, 350 00:36:35.500 --> 00:36:43.580 S as in Sam, E as in Elephant, S as in Samuel, M-I-S-E-S dot org and also there's a thing 351 00:36:43.580 --> 00:37:04.300 What I wanted to do, Walter, one great contribution I think you've made, Walter, is not just 352 00:37:04.300 --> 00:37:10.380 challenging people on the left and the far right, but also challenging us libertarians. 353 00:37:10.380 --> 00:37:17.380 And what I'm getting at there is I know you've talked about things like privatizing the roads 354 00:37:17.380 --> 00:37:19.380 and even privatizing the oceans. 355 00:37:19.380 --> 00:37:22.380 Would you talk a little bit about that? 356 00:37:22.380 --> 00:37:23.380 Yes. 357 00:37:23.380 --> 00:37:28.380 Actually, one of my books forthcoming from the Mises Institute is a book on privatizing 358 00:37:28.380 --> 00:37:29.380 highways. 359 00:37:29.380 --> 00:37:36.380 One of the two main reasons that I got into this and I've been at it, I think my first 360 00:37:36.380 --> 00:37:42.380 My first article on this, which will now be a chapter in this book was in God in the 70s. 361 00:37:42.380 --> 00:37:50.380 It was in the Journal of Libertarian Studies, which is another initiative of the Mises Institute. 362 00:37:50.380 --> 00:37:53.380 Do you know how many people die on the roads every year? 363 00:37:53.380 --> 00:37:55.380 It's 40,000. 364 00:37:55.380 --> 00:37:56.380 40,000? 365 00:37:56.380 --> 00:37:57.380 Oh, gosh. 366 00:37:57.380 --> 00:38:00.380 Not every year exactly 40,000. 367 00:38:00.380 --> 00:38:01.380 Sometimes it's 39. 368 00:38:01.380 --> 00:38:02.380 Sometimes it's 41. 369 00:38:02.380 --> 00:38:05.380 But over the last 10 or 20 years, it's trending around that. 370 00:38:05.380 --> 00:38:07.380 Around that, it's pretty flat at 40,000. 371 00:38:07.380 --> 00:38:13.380 To just put this in perspective, only 1,500 people died in the post-Katrina debacle. 372 00:38:13.380 --> 00:38:23.380 I think it was around 3,000 that died in 9-11 and 4,000, 4,500 servicemen in Iraq now 373 00:38:23.380 --> 00:38:28.380 and maybe 50,000 in Vietnam, that is U.S. soldiers, but that was over that 10 years. 374 00:38:28.380 --> 00:38:30.380 That's only 5,000 a year. 375 00:38:30.380 --> 00:38:36.260 This is a stupendous, gigantic, gargantuan number of people that are slaughtered on our 376 00:38:36.260 --> 00:38:39.980 highways every year and it's just horrible. 377 00:38:39.980 --> 00:38:45.220 People think it's inevitable, sort of like death in taxes, but that's not true. 378 00:38:45.220 --> 00:38:48.220 They say, well, it's not really the government's fault. 379 00:38:48.220 --> 00:38:49.220 I've heard that one before. 380 00:38:49.220 --> 00:38:57.020 It's due to drunken driving and speeding and vehicle malfunction and driver error, but 381 00:38:57.020 --> 00:38:58.020 that's not true either. 382 00:38:58.020 --> 00:38:59.020 Those are just proximate causes. 383 00:38:59.020 --> 00:39:01.540 The ultimate cause is the manager. 384 00:39:01.540 --> 00:39:06.060 The manager doesn't deal with the truck and drivers as the manager should, doesn't deal 385 00:39:06.060 --> 00:39:12.380 with driver error or whatever the other proximate causes of the fatalities are. 386 00:39:12.380 --> 00:39:15.060 And guess who the manager of the highways is? 387 00:39:15.060 --> 00:39:17.500 Well, it's the old government. 388 00:39:17.500 --> 00:39:22.940 And people think, well, you know, the government's got to run roads because if private enterprise 389 00:39:22.940 --> 00:39:24.980 ran roads, they'd be chaos. 390 00:39:24.980 --> 00:39:27.460 But the first roads in this country were all private. 391 00:39:27.460 --> 00:39:32.500 They were turnpike highways, and you would be charged on the number of horses and how 392 00:39:32.500 --> 00:39:35.220 many axles in your wagon. 393 00:39:35.220 --> 00:39:38.060 They would even charge based on the width of the wheel of the wagon. 394 00:39:38.060 --> 00:39:41.700 If it was a wide wheel, think steamroller, they would charge less. 395 00:39:41.700 --> 00:39:46.340 If it was a narrow wheel, think ice skate, which would put ruts in the dirt road, they 396 00:39:46.340 --> 00:39:47.340 would charge more. 397 00:39:47.340 --> 00:39:54.220 It was a perfectly viable industry that could have protected us, but their government nationalized 398 00:39:54.220 --> 00:40:22.220 The National Highway Traffic Safety Administration loses money? Does Obama lose money? No. There is no automatic feedback mechanism producing better rules of the road and better management of the road. That is one of my impetuses for it. The other is the traffic congestion which is just horrible. 399 00:40:22.220 --> 00:40:23.220 Yes. 400 00:40:23.220 --> 00:40:26.680 It's a great point that you're making too, Walter, because as you're saying, we just 401 00:40:26.680 --> 00:40:32.900 naturally assume, even those devout libertarians somehow naturally assume the government should 402 00:40:32.900 --> 00:40:38.980 be doing that, but we should at least be asking ourselves, couldn't private industry be doing 403 00:40:38.980 --> 00:40:39.980 this much better? 404 00:40:39.980 --> 00:40:45.140 I want to throw one thing at you kind of quickly here, too, but just to get you to comment 405 00:40:45.140 --> 00:40:46.140 on it. 406 00:40:46.140 --> 00:40:52.540 You've even talked, Walter, about privatizing the oceans and talking about things like strata 407 00:40:52.540 --> 00:40:56.300 and four levels and using homesteading theory. 408 00:40:56.300 --> 00:41:04.420 I think this is, again, challenging to libertarians to think about how do we go about privatizing 409 00:41:04.420 --> 00:41:05.420 the oceans? 410 00:41:05.420 --> 00:41:13.260 Well, I think the ocean, water is just a fast-moving land and land is slow-moving water and my 411 00:41:13.260 --> 00:41:17.700 My motto is, if it moves, privatize it, and if it doesn't move, privatize it, and everything 412 00:41:17.700 --> 00:41:20.780 either moves or doesn't move, so you privatize everything. 413 00:41:20.780 --> 00:41:28.380 Look, the oceans cover three-quarters of the Earth's surface and contribute maybe two percent 414 00:41:28.380 --> 00:41:33.980 or one percent to the world GDP, whereas the land amounts to one-quarter of the Earth's 415 00:41:33.980 --> 00:41:38.620 surface and contributes 98 percent of the GDP, and what's the difference? 416 00:41:38.620 --> 00:41:43.020 Well, people own land and people don't own oceans, and whenever you don't own things 417 00:41:43.020 --> 00:42:12.580 Walter, we're about out of time here, Walter, but this has been delightful and as I was 418 00:42:12.580 --> 00:42:16.740 Thanks for challenging all of us with your ideas. 419 00:42:16.740 --> 00:42:17.740 It's a pleasure. 420 00:42:17.740 --> 00:42:18.740 Thanks for having me. 421 00:42:18.740 --> 00:42:21.740 Oh, it's been delightful. 422 00:42:21.740 --> 00:42:25.100 Many thanks to my guest today, Professor Walter Block. 423 00:42:25.100 --> 00:42:26.100 I'm Mike Biler. 424 00:42:26.100 --> 00:42:27.180 Talk to you next week.