WEBVTT NOTE Our Weapon of Mass Creation 1 00:00:00.000 --> 00:00:05.500 You can learn so much about human nature, the workings of society and the functioning of markets 2 00:00:05.500 --> 00:00:09.500 by looking at the aftermath of a natural disaster. 3 00:00:09.500 --> 00:00:16.500 It's a fascinating laboratory for observing how it is that society functions under the worst conditions. 4 00:00:16.500 --> 00:00:23.000 If you've ever been through a natural disaster and paid attention to how the preparation and cleanup takes place, 5 00:00:23.000 --> 00:00:25.500 you know precisely what I'm referring to. 6 00:00:25.500 --> 00:00:32.500 The splendid, creative power of human energy to cooperate to overcome the most astonishing barriers. 7 00:00:32.500 --> 00:00:36.500 Such settings can teach us so much about politics and economics. 8 00:00:36.500 --> 00:00:42.500 If society can function in these radically abnormal settings, if markets can work well, 9 00:00:42.500 --> 00:00:49.500 we discover much about the power of the same forces and institutions to manage under normal conditions. 10 00:00:49.500 --> 00:00:58.020 Florida, as Mr. Cother knows personally, has been through four hurricanes this year, and 11 00:00:58.020 --> 00:01:03.720 the damage has been overwhelming. And contrary to what you read in various newspapers, this 12 00:01:03.720 --> 00:01:09.980 destruction is not a good thing for the Florida economy. 13 00:01:09.980 --> 00:01:13.280 For people who have read Bastiat's story of the boy with the rock, as told by Henry 14 00:01:13.280 --> 00:01:19.100 Hazlitt in his book, Economics in One Lesson, we marvel at how people still haven't learned 15 00:01:19.100 --> 00:01:24.900 In the midst of destruction, someone will always raise a voice to defend the view that 16 00:01:24.900 --> 00:01:30.220 destruction has a wonderful upside, that rebuilding will stimulate rebuilding. 17 00:01:30.220 --> 00:01:34.020 My favorite example this season comes from USA Today. 18 00:01:34.020 --> 00:01:42.460 The headline read, economic growth from hurricanes could outweigh costs. 19 00:01:42.460 --> 00:01:46.360 Story read as follows, economists, tallowing the numbers, expect the hurricanes will be 20 00:01:46.360 --> 00:02:03.200 The inevitable quotation from a naive economist who pretends to have highly specialized if 21 00:02:03.200 --> 00:02:10.280 counter-intuitive knowledge, quote, It's a perverse thing, said Steve Cochran of Economy.com, 22 00:02:10.280 --> 00:02:15.280 but from an economic point of view, it's a plus. 23 00:02:15.280 --> 00:02:21.000 Tell you what, let's not put Mr. Cochran in charge of national economic policy. We might 24 00:02:21.000 --> 00:02:26.040 find man-made disasters hitting all of our communities in order to help us. Maybe instead 25 00:02:26.040 --> 00:02:32.840 of sending all those bombs overseas, we ought to drop them right here at home to spur a 26 00:02:32.840 --> 00:02:39.840 massive rebuilding boom. It's a perverse thing he might say, but it's for our own good. If 27 00:02:39.840 --> 00:02:44.880 you understand why people believe that, you can understand why there exists something 28 00:02:44.880 --> 00:02:50.000 We call it Keynesian economics, which postulates that everyone can be made better off by letting 29 00:02:50.000 --> 00:02:55.080 the government rob people and give money to bureaucracies to spend. 30 00:02:55.080 --> 00:02:59.880 You can also understand how it is that some people cheer on inflation and taxation as 31 00:02:59.880 --> 00:03:01.760 productive devices. 32 00:03:01.760 --> 00:03:06.480 You can see why so many are still under the impression that war is an economic stimulus 33 00:03:06.480 --> 00:03:10.980 and that Iraq will somehow be better off with billions in reconstruction spending rather 34 00:03:10.980 --> 00:03:20.580 In short, if you can understand why some people celebrate a hurricane's productive power, 35 00:03:20.580 --> 00:03:25.420 then you can understand how it is that people think that Leviathan, as we know it today, 36 00:03:25.420 --> 00:03:30.580 is an institution to celebrate and adore, and why we should build on its marvelous successes 37 00:03:30.580 --> 00:03:38.060 like social security, public schooling, the war on drugs and the war on terror. 38 00:03:38.060 --> 00:03:42.660 These same people should also celebrate other institutions, such as crime waves, for their 39 00:03:42.660 --> 00:03:47.380 productive power. After all, when people have things looted from them, they must go out 40 00:03:47.380 --> 00:03:54.060 and buy more things, which stimulates production and so on. Conversely, if we are to realize 41 00:03:54.060 --> 00:03:58.740 that hurricanes are, after all, not a good thing for Florida or anywhere else, we have 42 00:03:58.740 --> 00:04:03.460 taken the first step towards seeing what is wrong with all forms of what Mises called 43 00:04:03.460 --> 00:04:11.460 Destructivism. This is the ideology that sees some merit in undoing, demolishing, reversing, 44 00:04:11.460 --> 00:04:17.260 or hobbling the march of human enterprise. Who would favor such an ideology? Many of 45 00:04:17.260 --> 00:04:23.460 the same people who think hurricanes and wars are good for us. At first, destructivism 46 00:04:23.460 --> 00:04:30.100 seemed perverse and easy to refute. In fact, destructivism has a hold on the public mind. 47 00:04:30.100 --> 00:04:36.100 It was unleashed especially in the 20th century and continues to play a huge role in public affairs today. 48 00:04:36.100 --> 00:04:48.100 It is the ideology that celebrates confiscatory taxation, punishing regulation, aggressive war, and the daily acts of public administration that destroy wealth. 49 00:04:48.100 --> 00:04:55.100 Natural disasters are something human society has to cope with and the market has found brilliant ways of doing so. 50 00:04:55.100 --> 00:05:00.260 Government, on the other hand, is a man-made disaster that is sustained only by the ideological 51 00:05:00.260 --> 00:05:05.500 ignorance of the population that somehow believes that because destruction is officially sponsored 52 00:05:05.500 --> 00:05:10.540 by the law and the legislators or otherwise endorsed by the democratic process, that it 53 00:05:10.540 --> 00:05:14.700 yields great good or forestalls great evil. 54 00:05:14.700 --> 00:05:19.040 In the same way that society has learned to deal with natural disasters, and this is part 55 00:05:19.040 --> 00:05:23.580 of the miracle of human creativity I will address, we've also learned how to deal with 56 00:05:23.580 --> 00:05:34.500 Let us begin with the time before the natural disaster to see how the market handles these 57 00:05:34.500 --> 00:05:40.860 settings. Long before the storm appears in the high seas, the market institution of insurance 58 00:05:40.860 --> 00:05:46.880 has assessed the risk and offered to bear that risk for a price. Homeowners with a mortgage 59 00:05:46.880 --> 00:05:51.820 are required to insure their houses, and insurance companies must make assessment of the risk 60 00:05:51.820 --> 00:05:55.740 Associated with the Location and the Likelihood of Disaster. 61 00:05:55.740 --> 00:06:01.340 If the risk is high, the premiums are high too, and so most people will not build a self-disciplined 62 00:06:01.340 --> 00:06:05.580 information aid in the price and he responds accordingly. 63 00:06:05.580 --> 00:06:10.340 Of course, the presence of government-provided insurance foils this market system and ends 64 00:06:10.340 --> 00:06:16.140 up creating hazards, which is exactly what Federal Flood Insurance created in 1968 does. 65 00:06:16.140 --> 00:06:21.460 And I just might mention there was only one opponent of Federal Flood Insurance in Washington, 66 00:06:21.460 --> 00:06:26.220 Even though his own district has many people who benefit from it and it's one of the aspects 67 00:06:26.220 --> 00:06:31.420 of the heroism of Ron Paul that during his whole career he's the only one in Washington 68 00:06:31.420 --> 00:06:36.900 to oppose federal flood insurance. 69 00:06:36.900 --> 00:06:41.820 Federal flood insurance, however, as Ron points out, subverts the market process, encourages 70 00:06:41.820 --> 00:06:43.980 irrational decision making. 71 00:06:43.980 --> 00:06:48.460 This is the only reason that people in large numbers build in floodplains and on islands 72 00:06:48.460 --> 00:06:51.300 that are ripe targets for hurricanes. 73 00:06:51.300 --> 00:06:58.300 Nonetheless, the operation of the private insurance market does the bulk of the work to guide rational building patterns. 74 00:06:58.300 --> 00:07:04.300 When the news appears that a hurricane is coming, the first reaction of the population is a stock-up on provisions. 75 00:07:04.300 --> 00:07:09.300 And who is there to provide but private enterprise? Indeed, we take it for granted. 76 00:07:09.300 --> 00:07:19.300 It is not government or bureaucracies that make available many days in advance these items as dry goods, canned goods, batteries, flashlights, water, generators and all the rest. 77 00:07:19.300 --> 00:07:23.980 The free market. And yes, these firms make money in the process by providing a service 78 00:07:23.980 --> 00:07:29.420 people want. So plentiful were bottled water and canned tuna and batteries in Auburn the 79 00:07:29.420 --> 00:07:35.220 week before Ivan that panic buying subsided very rapidly. It dawned on people that a dozen 80 00:07:35.220 --> 00:07:40.620 stores were going to have plenty available for everyone. Order came about because consumer 81 00:07:40.620 --> 00:07:46.660 expectations fell in line with resource supply. People were calm, not because government told 82 00:07:46.660 --> 00:08:02.180 When the hurricane actually hit, government offices were closed immediately, but Wal-Mart 83 00:08:02.180 --> 00:08:09.740 and Lowe's and Kroger were made open throughout, with vast quantities of provisions on hand. 84 00:08:09.740 --> 00:08:13.460 When it became clear the hurricane had passed, restaurants opened within minutes, tree-cutting 85 00:08:13.460 --> 00:08:25.460 The main concern of everyone is electricity. Service provided not by private enterprise, but by a monopoly under the supervision of government. 86 00:08:25.460 --> 00:08:34.460 For some reason, everyone knows power goes out in a storm. The provider knows it, the consumers know it, so does the press. Everyone lives with it. 87 00:08:34.460 --> 00:08:39.460 No one questions it. The wind blows, the rains come, the lights go out. 88 00:08:39.460 --> 00:08:43.460 and we wait until regulators deign to turn us back on. 89 00:08:43.460 --> 00:08:46.460 Imagine such a service provided by private enterprise. 90 00:08:46.460 --> 00:08:50.460 Surely the first order of business would be to create an energy flow 91 00:08:50.460 --> 00:08:53.460 that managed to stay on during an emergency. 92 00:08:56.460 --> 00:08:59.460 Entrepreneurs and capitalists would overcome this problem 93 00:08:59.460 --> 00:09:02.460 chiefly because the consumer is king. 94 00:09:02.460 --> 00:09:05.460 With electricity, however, we all just accept the fact 95 00:09:05.460 --> 00:09:08.460 that it goes down in a storm and we must wait for the bureaucracy 96 00:09:08.460 --> 00:09:18.020 When private enterprise fails, we don't hesitate to complain, demand and even sue. But when 97 00:09:18.020 --> 00:09:22.460 government fails at its most essential duty of keeping the lights on, most people don't 98 00:09:22.460 --> 00:09:27.340 even bother to complain. I should add that this is a very serious matter involving, as 99 00:09:27.340 --> 00:09:31.820 it did in Florida recently, matters of life and death. 100 00:09:31.820 --> 00:09:36.600 Electricity is a common example of what used to be considered a public good, one that private 101 00:09:36.600 --> 00:09:42.440 Private enterprise, it was said, could not provide or for which competition was wasteful. 102 00:09:42.440 --> 00:09:44.560 Of course, we now know this claim to be ridiculous. 103 00:09:44.560 --> 00:09:49.360 Just look at what private enterprise has done with cell and wireless technology and that 104 00:09:49.360 --> 00:09:54.480 the main barrier to reliable energy provision are the government monopolies that keep private 105 00:09:54.480 --> 00:09:55.840 enterprise out. 106 00:09:55.840 --> 00:10:00.460 Nonetheless, private enterprise has done its best to get around the restrictions. 107 00:10:00.460 --> 00:10:04.960 Large stores like Home Depot are fully prepared with enough private generators to power their 108 00:10:04.960 --> 00:10:09.280 and Home Generators are ever more common. 109 00:10:09.280 --> 00:10:13.640 As a side note, it is certainly true that the post office will do everything possible 110 00:10:13.640 --> 00:10:18.360 to deliver your mail in a storm, or at least we've developed a general expectation that 111 00:10:18.360 --> 00:10:23.360 the service will not be dramatically worse in a storm than it is while the sun is shining. 112 00:10:23.360 --> 00:10:28.560 Perhaps that's not saying much, but I'm sure you're all relieved to know that no matter 113 00:10:28.560 --> 00:10:34.520 what the weather, the government can get to you to deliver a message. 114 00:10:34.520 --> 00:10:38.800 You will notice that natural disasters tend to be far less deadly in wealthy capitalist 115 00:10:38.800 --> 00:10:44.720 countries than in poor socialist ones. The press invariably attributes this to building 116 00:10:44.720 --> 00:10:51.440 codes. Nothing strikes me as more absurd than the assumption that only government cares 117 00:10:51.440 --> 00:10:56.720 if your own house can withstand an earthquake or a tornado or a hurricane. The people who 118 00:10:56.720 --> 00:11:02.200 live there, the banks, the insurers, the builders, none of them have any interest in solid construction, 119 00:11:02.200 --> 00:11:07.040 And so the regulators have to be involved. That's the theory anyway, and of course it's 120 00:11:07.040 --> 00:11:10.120 ridiculous. Moving on on the parade of fall, let me say 121 00:11:10.120 --> 00:11:15.780 a few words about price gouging. Nowadays, every state and most towns have a strict rule 122 00:11:15.780 --> 00:11:22.140 against raising prices to too great an extent during an emergency. This shuts down an important 123 00:11:22.140 --> 00:11:27.000 rationing mechanism when it is needed most, and also prevents the market economy from 124 00:11:27.000 --> 00:11:33.640 Signaling Consumers concerning dramatic shifts in the relative value of available resources 125 00:11:33.640 --> 00:11:34.640 and services. 126 00:11:34.640 --> 00:11:38.960 Now in saying this, I have no doubt that there are inscrupulous people out there waiting 127 00:11:38.960 --> 00:11:43.140 to exploit a human emergency to make vast sums of money. 128 00:11:43.140 --> 00:11:48.200 And yet, this is a far better option than what is the actual choice. 129 00:11:48.200 --> 00:11:51.600 Not cheap for service, but no service at all. 130 00:11:51.600 --> 00:11:56.400 I assume that everyone would prefer the option of a high price, whether or not you buy, to 131 00:11:56.400 --> 00:12:02.040 to no good or service at all. A temporarily high price also serves the function of signaling 132 00:12:02.040 --> 00:12:06.760 other entrepreneurs and capitalists about market disequilibria. It permits a faster 133 00:12:06.760 --> 00:12:13.760 market clearing. There are few things as disgusting as persecutions of price gouging cases. The 134 00:12:14.000 --> 00:12:19.040 owner of a gas station, believing he might be able to sell gas for $5 a gallon for however 135 00:12:19.040 --> 00:12:24.400 brief a period, will risk life and limb to get to his shop to open it for travelers. 136 00:12:24.400 --> 00:12:30.120 This is his passion and his vocation. Take him to jail for engaging in voluntary exchange 137 00:12:30.120 --> 00:12:34.480 and you have violated human right. Tell that same person that he is not permitted to sell 138 00:12:34.480 --> 00:12:39.720 at a higher price and there will be no gas available. That is our choice, what some people 139 00:12:39.720 --> 00:12:46.000 call gouging or no goods and services. Government, as we know from the case of electricity, prefers 140 00:12:46.000 --> 00:12:51.320 the latter. Another way in which government prevents people from responding rationally 141 00:12:51.320 --> 00:12:54.960 into a Crisis is through mandatory evacuation orders, 142 00:12:54.960 --> 00:12:56.880 premised on the idea that government officials know 143 00:12:56.880 --> 00:13:00.000 what is better for you than you know yourself. 144 00:13:00.000 --> 00:13:01.280 In the aftermath of these orders, 145 00:13:01.280 --> 00:13:03.360 the newspapers were always shocked to see 146 00:13:03.360 --> 00:13:05.120 that some people might have taken advantage 147 00:13:05.120 --> 00:13:07.460 of the evacuation, stayed behind, 148 00:13:07.460 --> 00:13:10.600 and helped themselves to the property of others. 149 00:13:10.600 --> 00:13:12.320 I suppose nobody in government had really thought 150 00:13:12.320 --> 00:13:15.280 about the message that a mandatory and forced evacuation 151 00:13:15.280 --> 00:13:16.680 sends to criminals. 152 00:13:16.680 --> 00:13:19.640 Something along the line of come and get it. 153 00:13:19.640 --> 00:13:26.160 A regulation that Murray Rothbard found to be particularly egregious is one which prevents 154 00:13:26.160 --> 00:13:31.080 people from returning to their homes after an actual disaster. It's particularly cruel 155 00:13:31.080 --> 00:13:35.440 because immediately following the storm is when the real wonders of human cooperation 156 00:13:35.440 --> 00:13:40.520 come into play. Every resident, from the smallest renter to the owner of the largest landed 157 00:13:40.520 --> 00:13:45.800 estate, examines the space outside his or her door and assesses what needs to be done. 158 00:13:45.800 --> 00:14:11.800 There is no expectation that someone else should be responsible for it. The locus of control and responsibility is clearly defined. Mother Nature acted, but it is property owners who must respond. And so they do, starting with what is theirs. But it does not stop there. We also help our neighbors. Anyone with a chainsaw gets busy, starting again with his own property and extending services out to his neighbors. 159 00:14:11.800 --> 00:14:17.400 Heroic efforts take place all across the community, the town, the county, the state. Private enterprise 160 00:14:17.400 --> 00:14:22.320 is there too, with building materials, tree cutting services, plumbers and repair services 161 00:14:22.320 --> 00:14:28.420 of all sorts. If it is something you need or want, it is available. One by one, hour 162 00:14:28.420 --> 00:14:34.040 by hour, the damaged area is cleaned up, at least that part of it that is privately owned. 163 00:14:34.040 --> 00:14:39.400 If you have gone through this in the past, it is truly a marvel to behold the power and 164 00:14:39.400 --> 00:14:50.240 In my own observation, it seems to take less than a day to do more than half the cleanup. 165 00:14:50.240 --> 00:14:55.640 What we observe in these cases is not just the free market at work, but the whole workings 166 00:14:55.640 --> 00:15:01.640 of human society, people cooperating commercially and charitably towards their mutual betterment. 167 00:15:01.640 --> 00:15:06.800 What we see in this case is something that nearly all the social science literature claims 168 00:15:06.800 --> 00:15:08.720 cannot happen. 169 00:15:08.720 --> 00:15:13.280 The economists doubt that wages and prices can respond quickly enough to re-equilibrate 170 00:15:13.280 --> 00:15:16.240 supply and demand according to new conditions. 171 00:15:16.240 --> 00:15:20.880 Not only do we see this happening in real life, we actually observe private enterprise 172 00:15:20.880 --> 00:15:26.680 attempting to anticipate the change that is coming and being prepared before it happens. 173 00:15:26.680 --> 00:15:30.680 And keep in mind that this is true during times of emergency and crisis, not just normal 174 00:15:30.680 --> 00:15:32.080 times. 175 00:15:32.080 --> 00:15:36.520 Contrary to the claims of social democrats from time immemorial, the markets are fine 176 00:15:36.520 --> 00:15:43.520 We see this in American cities with areas so violent that most people would try desperately to avoid even driving through them, but the merchant class sees a chance for providing a service and so risks life and limb. 177 00:16:06.520 --> 00:16:11.800 All over the world, whether risks are high and the barriers seemingly insurmountable, 178 00:16:11.800 --> 00:16:15.560 we see private enterprise providing and serving others. 179 00:16:15.560 --> 00:16:21.040 This is true of the smallest peasant money-changer to the largest multinational corporation. 180 00:16:21.040 --> 00:16:26.920 Commerce does what others are unwilling to do, and yet it hardly is ever given credit. 181 00:16:26.920 --> 00:16:31.000 But maybe we should not single out commerce as a special case within society. 182 00:16:31.000 --> 00:16:34.760 It is the conviction of the liberal intellectual tradition dating back to at least the Middle 183 00:16:34.760 --> 00:16:35.760 Ages. 184 00:16:35.760 --> 00:16:41.840 Society contains within itself the capacity for internal self-management. This is in contrast 185 00:16:41.840 --> 00:16:46.200 to the claims of the sociology literature, which posits that human society is riddled 186 00:16:46.200 --> 00:16:52.360 with conflict between groups, races, ages, ethnicities, abilities. The sociologists have 187 00:16:52.360 --> 00:16:56.620 sliced and diced the human population to such an extent that it would seem impossible for 188 00:16:56.620 --> 00:17:02.600 anyone to get along at all, and certainly not in times of emergency. But a natural disaster 189 00:17:02.600 --> 00:17:31.360 Let's return to the scene of the hurricane. Within a week after a natural disaster, we 190 00:17:31.360 --> 00:17:37.480 We find that most places have restored normalcy and order and even beauty. All that is left 191 00:17:37.480 --> 00:17:42.480 involves plantings and more fundamental building projects of various sorts, but the settings 192 00:17:42.480 --> 00:17:47.640 have been fully prepared. This is the great surprise that greets us in the aftermath of 193 00:17:47.640 --> 00:17:53.480 the storm. People love to brag and talk about all the horrors created by natural disasters, 194 00:17:53.480 --> 00:17:58.480 but the truly marvelous and newsworthy thing is not the disaster, but the wonderful manner 195 00:17:58.480 --> 00:18:05.220 in which it is repaired by voluntary human effort. The public parks, the school grounds, 196 00:18:05.220 --> 00:18:10.780 the land claimed by the state is usually cleaned up in far longer time. But these days this 197 00:18:10.780 --> 00:18:15.320 is for a reason that goes beyond the usual bureaucratic incompetence. Every community 198 00:18:15.320 --> 00:18:20.100 seeks disaster assistance, money that usually ends up in the hands of local government where 199 00:18:20.100 --> 00:18:25.180 officials pass it out to their friends. The newspapers cooperate in this creation of phony 200 00:18:25.180 --> 00:18:29.900 Disasters in the hope of getting big bucks from the likes of the Federal Emergency Management 201 00:18:29.900 --> 00:18:31.300 Agency. 202 00:18:31.300 --> 00:18:34.620 The morning after Ivan, our local paper, headlined a massive type devastation. 203 00:18:34.620 --> 00:18:40.820 He showed a man carrying some sticks across his lawn, an awning from a burger joint flipped 204 00:18:40.820 --> 00:18:43.940 up due to wind, and a tree that it tipped over on someone's porch. 205 00:18:43.940 --> 00:18:47.620 It's not exactly the kind of devastation that would take hundreds of millions of taxpayer 206 00:18:47.620 --> 00:18:49.380 dollars to fix. 207 00:18:49.380 --> 00:18:53.440 But everyone knows that after a storm, all official institutions have to play up damage 208 00:18:53.440 --> 00:18:58.440 as much as possible in order to gain the attention of federal authorities. 209 00:18:58.440 --> 00:19:03.040 The whole enterprise of disaster aid has become one of the great rackets of modern government. 210 00:19:03.040 --> 00:19:07.600 Today we have the disgusting spectacle of senators and presidents coming to visit weather-injured 211 00:19:07.600 --> 00:19:13.240 places as if they have within their capacity the ability to size up damage and make provisions 212 00:19:13.240 --> 00:19:15.280 for making it all correct. 213 00:19:15.280 --> 00:19:18.760 We are supposed to believe that they know more about the proper course of action than 214 00:19:18.760 --> 00:19:21.320 insurance adjusters and property owners. 215 00:19:21.320 --> 00:19:25.560 If we had honest politicians there, I would say, of course, I'm sorry about what happened 216 00:19:25.560 --> 00:19:30.240 in Florida, but my presence there would only distract from the essential work being done 217 00:19:30.240 --> 00:19:34.800 by owners and their insurers. I don't know anything about the topic, and even if I did, 218 00:19:34.800 --> 00:19:41.200 I would not want to steal from some to give to others to realize my political priorities. 219 00:19:41.200 --> 00:19:46.240 I'm reminded of the classic story of how Congressman Davy Crockett was denounced by a constituent 220 00:19:46.240 --> 00:19:51.200 for Having Voted to Pay for the Rebuilding of Georgetown After a Fire. 221 00:19:51.200 --> 00:19:55.480 These days I suppose we would be grateful for such a modest response by Congress. Glad 222 00:19:55.480 --> 00:20:01.200 the entire apparatus of the Federal Leviathan had not begun a global war on arson and arrested 223 00:20:01.200 --> 00:20:08.200 anyone with matches. Like dictators and shrews, politicians always come to the scene of a 224 00:20:08.200 --> 00:20:15.320 natural disaster carrying a wad of cash. William Anderson, another one of our students 225 00:20:15.320 --> 00:20:21.280 Documents of this scam really took off during the Clinton presidency. 226 00:20:21.280 --> 00:20:25.080 These days, government sits through every natural disaster with bated breath, hoping 227 00:20:25.080 --> 00:20:30.520 for a chance to do what it does best, grab power and hand out other people's money to 228 00:20:30.520 --> 00:20:32.080 friends of the state. 229 00:20:32.080 --> 00:20:37.160 As for the actual rebuilding, it is done by private enterprise in a timely and efficient 230 00:20:37.160 --> 00:20:38.240 manner. 231 00:20:38.240 --> 00:20:43.120 It is the social means, to use Oppenheimer's phrase, that rebuilds and restores, not the 232 00:20:43.120 --> 00:20:44.120 state. 233 00:20:44.120 --> 00:20:56.120 I have taken you through all this in order to illustrate a larger point about how private enterprise and the social means respond to every manner of exogenous shock that attempts to derail the path of progress. 234 00:20:56.120 --> 00:21:06.120 The biggest barrier of all, something far more costly than all the natural disasters combined and even such great criminal acts as occurred on 9-11, is government itself. 235 00:21:06.120 --> 00:21:15.120 It daily interferes with the path of progress through its taxes, regulations, distortions such as subsidies and price controls and its wars and trade barriers. 236 00:21:15.120 --> 00:21:23.120 It is helpful to think of the way free enterprise responds to government. It's the way society responds to a natural disaster. 237 00:21:23.120 --> 00:21:29.120 Yes, some people get rich off government. But taken as a whole, it is a disastrous cost on society. 238 00:21:29.120 --> 00:21:35.480 Government is not productive. It is not creative. It does not bring blessings. Government spending 239 00:21:35.480 --> 00:21:40.120 drains resources from society, taking those from those in whose hands it has the highest 240 00:21:40.120 --> 00:21:45.840 value and putting it into the hands of people who serve the state. Regulation for stalls 241 00:21:45.840 --> 00:21:53.040 choice. Taxation loots from people the reward of work and productive endeavor. Most destructive 242 00:21:53.040 --> 00:22:00.520 of all is war, and yet it is war that people are likely to credit as bringing prosperity. 243 00:22:00.520 --> 00:22:05.240 But as Mises says, quote, war prosperity is like the prosperity that an earthquake or 244 00:22:05.240 --> 00:22:10.080 a plague brings. The earthquake means good business for construction workers, and cholera 245 00:22:10.080 --> 00:22:15.140 improves the business of physicians, pharmacists and undertakers. But no one for that reason 246 00:22:15.140 --> 00:22:20.280 is yet sought to celebrate earthquakes and cholera as stimulators of the productive forces 247 00:22:20.280 --> 00:22:21.280 in the General Interest." 248 00:22:21.280 --> 00:22:27.480 Of course, he wrote that in 1919, today I'm sure we would have no problem finding people 249 00:22:27.480 --> 00:22:31.120 who would say such preposterous things. 250 00:22:31.120 --> 00:22:35.240 Austrians are unique in having great clarity about the damage caused by government, and 251 00:22:35.240 --> 00:22:39.800 yet sometimes even Austrians have a tendency to underestimate the power of free enterprise, 252 00:22:39.800 --> 00:22:45.560 to overcome obstacles, to serve the world and bring prosperity to the multitudes. 253 00:22:45.560 --> 00:22:49.520 I doubt that even the most ardent fan of free markets would have imagined that red China 254 00:22:49.520 --> 00:22:53.520 could be transformed in such a short period of time, that Eastern Europe would undergo 255 00:22:53.520 --> 00:22:58.420 a total upheaval towards prosperity in a mere ten years, that New York should so quickly 256 00:22:58.420 --> 00:23:05.240 bounce back after 9-11 that the recovery from the dot-com bust would be so rapid. 257 00:23:05.240 --> 00:23:09.280 Alone among schools of economics, Austrians understand the danger of credit expansion 258 00:23:09.280 --> 00:23:15.760 of all sorts, of how even small interventions can cause terrible dislocations, how the downside 259 00:23:15.760 --> 00:23:45.760 To explain and articulate the downside is our comparative advantage. This is one reason the Austrians tend to be better at anticipating the bust than seeing the boom. To explain the fact of ongoing destruction is not the same as having perfect predictive power concerning the creative response by producers and entrepreneurs. Austrians have our fair share of gloom and doomers among financial economists, and they've been right more times than we realize. 260 00:23:45.760 --> 00:23:49.480 Gordon has a new study out that examines what economists were saying during the height of 261 00:23:49.480 --> 00:23:50.480 the dot-com boom. 262 00:23:50.480 --> 00:23:54.680 He found that Austrians were just about the only ones who saw that it had to come to an 263 00:23:54.680 --> 00:23:57.860 end, and many called the timing exactly right. 264 00:23:57.860 --> 00:24:02.040 This was at a time when everyone else saw nothing but endless price increases in securities 265 00:24:02.040 --> 00:24:04.520 for the future. 266 00:24:04.520 --> 00:24:08.580 Being able to see the downside should not make us blind to observing the astonishing 267 00:24:08.580 --> 00:24:13.480 ways in which private enterprise is able to adjust itself so well in the presence of government 268 00:24:13.480 --> 00:24:14.960 intervention. 269 00:24:14.960 --> 00:24:19.600 Despite living with the largest governments ever created in the history of mankind, the 270 00:24:19.600 --> 00:24:23.440 free market has been able to work around them to be a source, for example, of the second 271 00:24:23.440 --> 00:24:28.040 greatest technological revolution of the last 500 years, namely that which has taken place 272 00:24:28.040 --> 00:24:33.360 between the invention of the microchip and the commercialization of wireless technology. 273 00:24:33.360 --> 00:24:37.400 We live today with technology that would have been unimaginable even five years ago. 274 00:24:37.400 --> 00:24:39.720 Let me give you an example of this. 275 00:24:39.720 --> 00:24:44.040 It is within the power of any of us in this room to have it delivered to a family member, 276 00:24:44.040 --> 00:24:48.760 Living anywhere in this country just about any CD, book, clothing or food item that 277 00:24:48.760 --> 00:24:53.840 they may desire by express to their door by noon tomorrow merely by clicking on a few 278 00:24:53.840 --> 00:24:58.620 buttons on any one of the laptops located in this room and to track that package on 279 00:24:58.620 --> 00:25:01.800 its way to delivery through live websites. 280 00:25:01.800 --> 00:25:04.920 All this takes place within the framework of the market matrix. 281 00:25:04.920 --> 00:25:09.340 If you take a trip to your local wireless dealer or office supply store and have a look 282 00:25:09.340 --> 00:25:20.340 The technology is there these days. You observe an amazing array of astonishing gizmos that have been created, perfected, marketed and employed outside the radar screen of government. 283 00:25:20.340 --> 00:25:28.340 There was a time when something like the Food and Drug Administration or the Consumer Product Safety Commission could claim to keep up with all the products we use. 284 00:25:28.340 --> 00:25:34.340 But today the consumer markets are moving so fast and with such power that government can't possibly keep up. 285 00:25:34.340 --> 00:25:39.620 When it gets involved in an antitrust suit involving technology, we can only marvel at 286 00:25:39.620 --> 00:25:44.620 the unbelievable ignorance with which government regulators and judges approach these topics. 287 00:25:44.620 --> 00:25:49.580 Truly, government is living decades behind the rest of the world on its belief that the 288 00:25:49.580 --> 00:25:54.740 old-fashioned methods of coercion and propaganda can competently deal with the digital world 289 00:25:54.740 --> 00:25:58.460 of wireless and instant everything. 290 00:25:58.460 --> 00:26:01.580 Communication technology is the most obvious example. 291 00:26:01.580 --> 00:26:05.260 Government once aspired to control all the command posts in society, among which was 292 00:26:05.260 --> 00:26:10.700 the technology that permitted people to talk to each other and pass on information. 293 00:26:10.700 --> 00:26:15.740 Government still attempts this with its ridiculous post office, public utility monopolies, but 294 00:26:15.740 --> 00:26:18.380 the private sector has moved way beyond this. 295 00:26:18.380 --> 00:26:23.260 We have email, cell phones, instant messaging, Google, and amazing technologies that combine 296 00:26:23.260 --> 00:26:31.020 all of these to produce alternative communications infrastructure that lives and thrives outside 297 00:26:31.020 --> 00:26:39.020 Hillary Clinton complained famously that the web lacked much-needed gatekeepers. 298 00:26:39.020 --> 00:26:46.020 Well, that was years ago. The would-be gatekeepers are still nowhere to be seen, and we are none the worse off. 299 00:26:46.020 --> 00:26:56.020 We should never forget, in the midst of all our warnings about government power, that government is deeply incompetent, that government is laughably incompetent. 300 00:26:56.020 --> 00:27:02.420 Consider the attempts by the World Trade Organization to presume to manage global trade. The WTO 301 00:27:02.420 --> 00:27:08.660 was created in 1995 as a follow-up to the failed attempt in 1948 to create a Keynesian-style 302 00:27:08.660 --> 00:27:14.340 command center for the management of the world economy. Today, the WTO serves a little more 303 00:27:14.340 --> 00:27:20.220 than a dispute resolution panel, a service that would otherwise be provided by the market. 304 00:27:20.220 --> 00:27:25.020 The idea that it serves as some sort of planning board for the world economy is also laughable, 305 00:27:25.020 --> 00:27:31.020 Not because the WTO would not relish that role, but because it would be impossible for it to do so. 306 00:27:31.020 --> 00:27:39.020 The WTO came about in 1995, about the period when world trade began blossoming as it had not in a hundred years. 307 00:27:39.020 --> 00:27:45.020 China was solidly on the path towards its present renaissance. East Asia was becoming a hugely viable market. 308 00:27:45.020 --> 00:27:53.020 Latin America was entering into a new path of integration, most importantly of all Eastern Europe and Russia have opened up. 309 00:27:53.020 --> 00:27:58.220 The economy is definitely global now, and there's no going back. 310 00:27:58.220 --> 00:28:03.500 The division of labor has vastly increased, and all of the world's population is involved 311 00:28:03.500 --> 00:28:08.300 in the great task of creating and producing to meet human needs. 312 00:28:08.300 --> 00:28:10.160 Where does this leave government? 313 00:28:10.160 --> 00:28:15.820 Doing what it has always done, looting people, starting wars, generally being a pain in the 314 00:28:15.820 --> 00:28:16.820 neck. 315 00:28:16.820 --> 00:28:21.360 It continues to grow like a tumor on the world, but private enterprises consistently outrun 316 00:28:21.360 --> 00:28:24.200 and the ability of government to chase it and tackle it. 317 00:28:24.200 --> 00:28:28.960 It is the market, the very institution based on human liberty that we are so dedicated 318 00:28:28.960 --> 00:28:32.360 to defending, that is our main weapon against the state. 319 00:28:32.360 --> 00:28:36.360 I'm not arguing that technology can somehow make government irrelevant. 320 00:28:36.360 --> 00:28:42.400 I'm sorry to report that many governments in the world retain weapons of mass destruction. 321 00:28:42.400 --> 00:28:46.040 The biggest government of all has the most weapons, and this government in question is 322 00:28:46.040 --> 00:28:49.920 the only one that has ever actually employed a nuclear weapon against civilians. 323 00:28:49.920 --> 00:28:56.920 Instead of naming that government, let's call it Government X. 324 00:28:58.080 --> 00:29:02.480 Government X has decided that it should be the world's only superpower, that it should 325 00:29:02.480 --> 00:29:07.240 stand in judgment over all countries in the world. It has decided that it alone is the 326 00:29:07.240 --> 00:29:12.760 right model of culture and politics, and that it is a snap to make carbon copies of itself 327 00:29:12.760 --> 00:29:17.200 in far-flung places through a few well-placed bombs. 328 00:29:17.200 --> 00:29:23.000 At least this was the view of the regime in charge of government X only a year and a half 329 00:29:23.000 --> 00:29:30.000 ago. It reflected a kind of hubris and even insanity. Had that regime been successful 330 00:29:30.000 --> 00:29:35.120 in its wars against two other governments, let's call them Y and Z, we might have caused 331 00:29:35.120 --> 00:29:39.640 to be greatly pessimistic about the future as government X marched through the entire 332 00:29:39.640 --> 00:29:45.800 alphabet of countries and changed their regimes to become copies of the high-tax social democratic 333 00:29:45.800 --> 00:29:57.040 Military History has few failures as colossal as the wars of government X against government 334 00:29:57.040 --> 00:30:03.640 Y and Z. While we are right and we must feel great sadness for the terrible source of life 335 00:30:03.640 --> 00:30:09.600 on all sides, we should not regret that the empire was denied success. These wars are 336 00:30:09.600 --> 00:30:14.320 nothing but government interventions gone terribly wrong, unnatural disasters visited 337 00:30:14.320 --> 00:30:20.800 on the populations of all the countries involved. And yet we overcome. World trade proceeds 338 00:30:20.800 --> 00:30:25.880 at pace. Production continues, not because of the order brought to the world by government, 339 00:30:25.880 --> 00:30:29.860 but in spite of the disorder brought to the world by government. The market has not only 340 00:30:29.860 --> 00:30:34.720 taken on the burden of confronting nature itself, which erects so many obstacles to 341 00:30:34.720 --> 00:30:39.640 the well-being of the human population, but government as well, which is the largest obstacle 342 00:30:39.640 --> 00:30:48.400 One reason natural disasters alarm it is that there seems very little that we can do to 343 00:30:48.400 --> 00:30:54.180 alter their course. Anti-hurricane intellectuals can do very little about changing the course 344 00:30:54.180 --> 00:31:01.140 of Ivan or Jean. However, intellectuals can alter the course of unnatural disasters such 345 00:31:01.140 --> 00:31:06.560 as government. Governments themselves are the products of ideas, mostly bad ones, and they 346 00:31:06.560 --> 00:31:10.740 They can be curbed and dismantled by other ideas. 347 00:31:10.740 --> 00:31:15.460 As lovers of liberty, it is essential that we constantly warn about the dangers presented 348 00:31:15.460 --> 00:31:17.100 by the State. 349 00:31:17.100 --> 00:31:21.780 But it is also our job to constantly say, in as many ways as we can, that it does not 350 00:31:21.780 --> 00:31:23.780 have to be this way. 351 00:31:23.780 --> 00:31:26.200 The State is not the foundation of society. 352 00:31:26.200 --> 00:31:28.240 It is not the source of our security. 353 00:31:28.240 --> 00:31:30.200 It does not bring about prosperity. 354 00:31:30.200 --> 00:31:32.580 It does not protect us. 355 00:31:32.580 --> 00:31:37.760 and instead stands outside of society and lives off its proceeds and does so for its 356 00:31:37.760 --> 00:31:43.720 own benefit and not that of society. To understand this and impart this message to the current 357 00:31:43.720 --> 00:31:49.220 generation of students who benefit so enormously from the blessings wrought by the market is 358 00:31:49.220 --> 00:31:54.680 surely a task worthy of all our efforts. This afternoon I've spoken at length about crisis 359 00:31:54.680 --> 00:31:59.660 and destruction in the response. I've done so because of something I've noted from the 360 00:31:59.660 --> 00:32:10.820 The events of 9-11 have shaped the current generation of students. These students do 361 00:32:10.820 --> 00:32:15.660 not remember the ideological wars that we older folks grew up with which pitted communism 362 00:32:15.660 --> 00:32:20.500 against capitalism. Today the essential question is whether government or the market is the 363 00:32:20.500 --> 00:32:25.580 essential source of our security and justice. To those students who have accepted the claims 364 00:32:25.580 --> 00:32:30.740 of the State. The justice comes through war. The state must abolish all that came before 365 00:32:30.740 --> 00:32:35.520 in the name of providing future protection. To these students, the state is the heroic 366 00:32:35.520 --> 00:32:42.520 institution of our time. It has become for them, tragically, the source of social salvation. 367 00:32:42.800 --> 00:32:47.960 On the other hand, the event also raised up a new generation of very thoughtful, analytically 368 00:32:47.960 --> 00:32:53.280 rigorous students who have seen through the propaganda. They have seen how the state so 369 00:32:53.280 --> 00:33:07.920 and how this response has made us less safe and wrought vast destruction. 370 00:33:07.920 --> 00:33:13.760 That dreadful day forced a choice on an entire generation to follow the path of power wherever 371 00:33:13.760 --> 00:33:18.640 it leads or to rethink all the assumptions that dominate the intellectual climate of 372 00:33:18.640 --> 00:33:19.640 our time. 373 00:33:19.640 --> 00:33:24.920 For those of us in the Misesian tradition of thought are very fond of intellectual combat 374 00:33:24.920 --> 00:33:29.280 and delineating the differences between our way of thinking and that of our adversaries, 375 00:33:29.280 --> 00:33:33.760 whether they are on the right or the left or somewhere in between. 376 00:33:33.760 --> 00:33:38.120 At the very core of the difference is one of views of the viability of human cooperation 377 00:33:38.120 --> 00:33:40.360 apart from state intervention. 378 00:33:40.360 --> 00:33:44.400 If you can understand how a small community can recover from a hurricane without the aid 379 00:33:44.400 --> 00:33:49.160 of government, or if you can understand how a magnificently productive global economy 380 00:33:49.160 --> 00:33:54.440 Society can grow and thrive and provide for billions without the aid of a global state. 381 00:33:54.440 --> 00:34:00.600 Then you understand a very critical point, and it is this, society and all its works 382 00:34:00.600 --> 00:34:06.120 can thrive without central management by a coercive apparatus. If people have liberty, 383 00:34:06.120 --> 00:34:11.120 property and law, they have the basis of what it takes to make a civilization. Anything 384 00:34:11.120 --> 00:34:17.280 that compromises those institutions is a force for de-civilization. After a natural disaster 385 00:34:17.280 --> 00:34:32.280 Let us open our doors and look without flinching at the terrible mess the state has made of 386 00:34:32.280 --> 00:34:33.280 our world. 387 00:34:33.280 --> 00:34:39.880 To those who say this is beautiful and productive, let us explain why it is not so. 388 00:34:39.880 --> 00:34:47.080 Let us point to wars and poverty, mass disease and starvation, and explain their cause. 389 00:34:47.080 --> 00:34:51.400 Let us stand up to those who would celebrate destruction and show that it is unnecessary 390 00:34:51.400 --> 00:34:52.400 and terribly tragic. 391 00:34:52.400 --> 00:34:57.600 And let us not despair when we see a world torn asunder by the state, but rather see 392 00:34:57.600 --> 00:35:03.200 the evidence of invention and creativity which surrounds us and look for every opportunity 393 00:35:03.200 --> 00:35:03.840 for rebuilding.