Like you I found economics "the dismal science" and even took a college course in it. Desultory! But once upon a time, at the bridge at Lo Wu, in a sleepy Guangdong village called Shenzhen, I alighted the Hong Kong train to cross the bridge to get on to the People's Train to take me to Canton, to trade.
On the British side, there where sharp, well-armed and disciplined Chinese police. As we were waiting to be bidden to cross, from the forest above came a rustling sound like a boar rushing through the bushes. It was about a six foot drop to the pavement and a short, dark man in a military uniform, holding a wooden staff, exited the bush, dropped to the pavement on his feet, looked at us, and then disappeared into the brush below. I was astonished, and a British fellow sniffed "One of King Edward VII's own Gurkhas... they patrol the border." With a stick?
As we crossed the bridge to alight the Communist Chinese train, the contrast was night and day. The border guards were unarmed and looked rather disheveled. There was construction on both sides of the border, but it was orderly and progressing versus chaotic and tentative. The train itself was old-school, comfortable enough, with accommodations made for Moslems.
So began my interest in economics. How could Hong Kong with nothing except people (no energy, no water to drink, no food, no raw materials, and no cultural homogeneity, no common language even) be wealthy while China with all a country could hope for be so poor?
As Richard Weaver was to say later, Ideas Have Consequences. I've gone into detail elsewhere on the different ideas that precipitate what results, but to continue the interest in economics, Marxism did not seem to recommend itself in practice. Returning to USA, Nixon had said "We are all Keynesians now...." but I did not want to be in the same club as him. Happily there was a new school of economics called Monetarist or Chicago which had tremendous success in saving Chile from a fate worse than Cuba. If you don't mind military coups, disappearances, murder, torture, and mass arrests.
Then Reagan won with his program of "supply-side" economics, but it was pretty clear his economic success was just the flowering of President Carter's deregulation of phones, trucking, beer, airlines and other liberalizations. No deregulation plus open source code, no computer industry and the internet.
There was the German Historical School (getting closer) that simply reported how economics worked in the past. But it was maybe a decade later when I was studying problems in education, and I was all "pro-voucher" that I read an essay by one Murray Rothbard in which he said the best voucher is a dollar bill. He traced the problem to cost, the cost to interference with supply, and how removing the interference the supply would drop the price to where everyone could afford to buy their own education. Like they do their clothes.
Oh. I hadn't thought of that.
Rothbard was a maven in the Austrian School, one of those epithets that becomes a title. The difference is the school is rational and practical as opposed to all others schools of economics, which are voodoo-based. No magic formulas or esoteric incantations. What recommended Austrian economics to me was clarity and lack of orthodoxy. The top people all have profound arguments with each other. This is good for students, since they can hear both sides, even several sides. To my mind the Austrian School can be reduced to "no force or fraud." All other schools depend on one or the other or both to work.
It took me another decade to make it to their Auburn Alabama week long "university" for young scholars where since I was a college adjunct lecturer I was allowed in as an observer. The proof of Austrian Economics is one can take a week-long full time seminar and find every minute fascinating.
Now I consider myself informed by Austrian economics, but not a follower inasmuch as I reject usury completely, whereas I think "free banking" is otherwise universally accepted in the school. Fractional reserve free banking is hotly contested, but free banking no.
Generally you can jump in on anything Rothbard has written, and the stuff is amazing. Here is a quote from an article worth
your next fifteen minutes...
Communism was the great goal, the vision, the desideratum, the ultimate end that would make the sufferings of mankind throughout history worthwhile. History was the history of suffering, of class struggle, of the exploitation of man by man. In the same way as the return of the Messiah, in Christian theology, will put an end to history and establish a new heaven and a new earth, so the establishment of communism would put an end to human history.
Well, didn't you just KNOW communism came out of millennialism? And here it is. If you ever wanted to wrap your brain around communism, have a read.
Now my beef with Austrianism is usury. And I am encouraged I am right by reading Rothbard. For example,
Rothbard says:
Indeed, the scholastics were sophisticated thinkers and social economists who favored trade and capitalism, and advocated the common market price as the just price, with the exception of the problem of usury.
Sloppy: he says "capitalism" which is an anachronism. You cannot say capitalism without assuming usury, so the paragraph suffers internal contradiction. When Rothbard errs, I am encouraged. He continues:
Instead of stressing the barrenness of money as a major argument against usury, Aquinas seized on the term "measure" and stressed that since money, in terms of money, of course, has a fixed legal face value, this means that the formal nature of money must be to remain fixed. The purchasing power of money can fluctuate due to changes in the supply of goods; that is legitimate and natural. But when the holder of money sets out to produce variations in its value by charging interest, he violates the nature of money and is therefore sinful and mindless of the natural law.
Is that clear? No? Because it is mixed up again. Under the narrow rubric of money with a "fixed legal face value" there are some consequences. Money only has a "fixed legal face value" when there is an entity like a kingdom or a state to force a "fixed legal face value." When you combine force and money, plus usury, you get a aggregation of power unto a minority, who eventually, literally gets to call the shots. And technically, when it has a "fixed legal face value" it is no longer money, it is just golden tallies.
Now tallies is important in the discussion of money, for the reason that most objections to money, narrowly defined, can be answered by "tallies." Aristotle was observing in a time when, like today, almost no one used money. Almost all trade was done on credit, and tallies were kept to see who owed what to whom. Tallies were opened and extinguished. Money is an end-of-the-line event. Something you'd see in Urumchi when Arab traders paid gold to Chinese traders who they may never see again. To demand payment in money was tantamount to excusing yourself from the responsibilities of participating in society. This is nothing new. Ask your boss to pay you in gold. You'll be treated like a nut, anti-social. You settle for tallies, which are kept on computers, not on clay tabs, but on silicon hosting a magnetic notation of a zero or a one.
Money is hated by the powers that be because it is untraceable. By having all transactions in tallies, it is easy to track and tax. A "fixed legal face value" just means that money was forced to be a tally, then money was substituted with warehouse receipts, which were substituted with fractional reserve warehouse receipts (credit) and then loaning of credit at usury, or force and fraud on steroids.
In the face of "fixed legal face value" of money, Aquinas is defending the right of people to still make money.
Instead of ownership going with the use of a consumable item, then, Aquinas now advanced the idea of ownership going with incidence of risk. The investor risks his capital; therefore, he retains ownership of his investment
That is not "now," that always was. A loan is a charitable act, only. If you are not repaid, you've become more charitable. In life, there is another use of money, and that is investment. With investing, you share the risk. Business is not charity, so no loans in business. Charity is not a business, so no investments by charity. Businesses do not make loans, charities do not share risk. Rothbard is mixing up the two, where Aquinas keeps them straight.
And then there is the attendant issue of property:
Finally, Aquinas was a firm believer in the superiority of private to communal property and resource ownership. Private ownership becomes a necessary feature of man's earthly state. It is the best guarantee of a peaceful and orderly society, and it provides maximum incentive for the care and efficient use of property. Thus, in the Summa, St. Thomas keenly writes: "every man is more careful to procure what is for himself alone than that which is common to many or to all since each one would shirk the labor and leave to another that which concerns the community, as happens where there are a great number of servants."
Just so. But limited to your capacity to mix what labor you have to resources. Otherwise, use it or lose it.
So where Rothbard is almost always brilliant and unassailable, he flounders in a critical discussion of usury. Encouraging. Capitalism is not the free market. Usury would not gain traction in a free market. No usury, no aggregation of power through force and fraud.
If all you read in economics was Rothbard, you'd be busy and doing well. He isn't 100% right, but the Austrian school allows for argument.
***John Spiers will be offering an all-day seminar on small business international trade start up at Orange Coast College, Los Angeles Area, June 29, 2013. Full info here...***
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