Jun

20

Carl Menger (1840-1921)At a time when people are concerned about a global outbreak of swine flu, it is interesting to compare it to the danger from ideological menaces. The ideological menace known as Marxism killed at least 100 million in the 20th century; the only comparable catastrophe from a biological menace was smallpox among the native Americans upon contact with Europeans. And that was a highly unusual situation: an entire population that had never been exposed to a virus in an age prior to modern medicine. The Great Influenza Pandemic of 1918 killed between 20 and 40 million, still before the rise of modern medicine. Today the World Health Organization and the Center for Disease Control carefully monitor the incidence of swine flu, ready to deploy the arsenal of modern medicine and public health techniques to limit the spread of any outbreak.

Meanwhile, the Marxist virus continues to remain active in small pockets around the world, albeit mostly isolated at universities. This month, however, Foreign Policy, an award-winning, high profile public policy journal, published an honest-to-goodness article on the revival of Marxism, by a real live Marxist professor, in its most recent issue. The Globe & Mail followed with a public forum on "Is there a Marxist revival?", giving more space to the same Marxist professor who had published the article in Foreign Policy. Should we treat these small public outbreaks, outside the universities, with the same level of concern that we treat localized outbreaks of swine flu?

Since Locke, Hume, Montesquieu, Smith, and Madison, it has been obvious that progress in the wealth and well-being of a society is based on secure and well-defined property rights, limited government, rule of law, and economic freedom. In the 19th century, through these principles Britain and the U.S. became the first nations in history in which a steadily rising standard of living for the masses became a reality. At no point was there an evidentiary foundation for denying the overall perspective of Adam Smith, and by the 1870s Carl Menger 's work (he was the father of the Austrian school of economics) had put Smithian economics on a far more rigorous intellectual foundation. And yet by the 20th century, most intellectuals, including most professors, were rejecting the classical liberal economic model in favor of Marxism, Fabian socialism, or some related variant.

Marxism is so ridiculous that it is difficult to believe that people ever took it seriously or that they could ever take it seriously again. Why bother to refute absurdities? And yet some of us regard the notion that the U.S. government could run General Motors effectively as equally ridiculous, and yet most of the mainstream media seems to accept this proposition as entirely plausible. Earlier this year, Newsweek ran a cover claiming "We Are All Socialists Now" and a rising chorus of sympathetic voices in the media claim that capitalism as we know it has failed.

Meanwhile, intelligent and sophisticated voices, such as economics Nobel laureate Vernon Smith and his co-author Steven Gjerstad are providing coherent, data-driven explanations showing how the government-sponsored housing bubble led to a broader depression. Steven Horwitz has a less rigorous explanation than that given by Smith and Gjerstad, but generally pointing in a similar direction in his, "Open Letter to My Friends on the Left" in which he shows exactly why it is important for the public to realize that once again, the 2008 Fannie Mae-Freddie Mac crisis is a failure of government, not of markets. The Mercatus Center Financial Markets Working Group has been publishing a long series of cutting-edge research on the crisis. Although there are diverse perspectives on both the causes of the crisis and the best regulatory solutions to the crisis at Mercatus, all of the perspectives are solidly grounded in a superb understanding of the strengths and weaknesses of both markets and governments. No one at Mercatus would claim that "We Are All Socialists Now" nor would they believe that the U.S. government can run GM effectively.

In 1905, A.V. Dicey published his "Lectures on the Relation between Law and Public Opinion during the 19th Century", in which he soberly charted the rise and fall of public sympathy for classical liberal thought. In the second edition, published in 1919, he summarizes his 1905 perspective:

The current of opinion had for between thirty and forty years been gradually running with more and more force in the direction of collectivism, with the natural consequence that by 1900 the doctrine of laissez faire, in spite of the large element of truth which it contains, had more or less lost its hold upon the English people.

And then summarizes the state of affairs in 1919:

The main current of legislative opinion from the beginning of the twentieth century has run vehemently towards collectivism.

The rest, as they say, is history. The Soviet Union became the darling of the intellectuals even as forced collectivizations killed millions. John Dewey, arguably America's leading public intellectual in the first part of the 20th century, compared the ethos of Stalin's Russia to "the moving spirit and force of primitive Christianity." Free markets were in retreat throughout most of the 20th century, until Reagan and Thatcher won their respective elections and then the Soviet Union collapsed. For the past twenty years, it looked as if we had reached "The End of History," and the worst nonsense was gone for good.

Whether or not popular opinion in the U.S. and Europe continues to support crippling deficits and crippling government controls over the economy, India and China are not likely to allow themselves to be crippled by socialism again. China, although nominally still communist, continues to generate stunning rates of economic growth through the Special Economic Zones that more closely approximate the economic freedom of Hong Kong than they do any European nation. Even if current rates of Chinese growth are exaggerated, the Chinese are likely to stick to the proven fundamentals of economic freedom rather than spend another century committed to economic nonsense.

The Daily Telegraph has an excellent realist article on China's perspective on climate change :

Here is what Li Gao, China's chief climate change negotiator has to say on the subject:

"Developed countries have neither enough active responses to proposals from developing countries about emission-cut target by 2020, nor interests in providing funds and technologies to help developing countries adapt to climate change."

This is diplomatic hardball speak for: "If you in the West wish us to play your silly carbon emissions cutting game, you must not only bribe us with large sums of money but you must also place your industries at an even greater competitive disadvantage by crippling them with CO2 legislation from which we, in developing countries like China, Brazil and India, shall remain happily exempt."

Whatever ideological viruses that might undermine the economic health of Europe and the developed world, the Chinese will not retreat opportunity to regain the sense of glory they've felt for thousands of centuries.

It is possible to have a strong, healthy, growing economy while still ensuring environmental sustainability. Hayek's insight that free economies that allow for the possibility of countless acts of value creation by countless unknown innovators and entrepreneurs, remains as valid as it was when the Soviet Union collapsed. In the 1980s, while I was a graduate student at the University of Chicago, a computer science professor there noted that any decent university in the U.S. had more computing power than did the entire Soviet Union. This is an apt symbol of the power differential between massively parallel creative possibilities available through freedom, on the one hand, and constrained attempts to innovate through centralized control, on the other.

Most businessmen and investors are busy and content to stay focused on their work day in, day out, leaving the world of ideas to professors, on the one hand, and what Hayek called " the second-hand dealers of ideas, " on the other - the journalists, textbook writers, editorialists, activists, etc. And yet not only is there evidence that most professors lean left, but some professors regard their views as the natural outcome of honest research by more intelligent people:

One possibility is that if a lot of smart, well-educated and conscientious people tend to form left-wing views, then perhaps those views are justified. When a majority of skilled and informed academics converge on a particular theory or set of ideas, we ordinarily tend to respect their authority.

There is a remarkable level of complacency and self-satisfaction among those academics who form left-wing views and who believe they are justified.

Just as academics believe that they are "smart, well-educated, and conscientious," so too might one argue that successful investors are smart, well-educated, and conscientious people who have trained themselves to see reality objectively, because if they do not see reality objectively, they are more likely to lose money. With a few peculiar exceptions (Armand Hammer, George Soros, Warren Buffet), most investors tend to favor capitalism. I would also argue that the challenge of predicting the future, a challenge faced by all investors every day, is a far more rigorous training for seeing reality objectively than is a lifetime spent in academic research and debate. By contrast, in academia a professor such as the Marxist Bertell Ollman can not only publish nonsense in leading academic journals, such as this absurd 1991 prediction made even as the Soviet Union was falling apart,

"Paradoxically enough, the objective conditions for socialism in the USSR are now largely present, but because of the unhappy experience with a regime that called itself 'socialist' the subjective conditions are absent . . . on the other hand . . . the Soviet Union might be saved by a socialist revolution in the West as our capitalist economy goes into a tailspin."

But later win lifetime achievement awards for a lifetime of spouting such nonsense (in 2001 the American Political Science Association gave Ollman a lifetime achievement award for a lifetime of writing about dialectical materialism).

In an ideal world, investors would not make philanthropic investments in universities that harbor anti-capitalist ideological viruses. More realisticaly, they give to their alma maters because of nostalgia, a love of college sports, and due to sophisticated fund-raising through alumni networks. Conversely, they should pro-actively invest in pro-capitalist antibodies that might prevent another outbreak of ideological anti-capitalism. And yet unlike a donation to a mainstream charity, philanthropic donations to pro-market organizations are rarely recognized for the benefit they provide to the public.

It is unthinkable that smart, well-intentioned people would deliberately pay to disseminate swine flu at our universities, and yet each year philanthropists donate tens of billions to universities, most of which is unrestricted. And at present there is a relatively small pool of philanthropists supporting the antibodies to the anti-capitalist virus. At present, it seems unrealistic to believe that Marxism could break out amongst us again, and those who worry about academic Marxism do come off as right-wing cranks.

But in 1999 who would have imagined that ten years later mainstream publications such as Foreign Policy and the Globe and Mail would give space to Marxism in 2009. And who would have imagined in 1909 the nightmare that was the 20th century.

Michael Strong is the co-founder of FLOW, Inc., an organization devoted to "Liberating the Entrepreneurial Spirit for Good," and is the author of Be the Solution : How Entrepreneurs and Conscious Capitalists Can Solve All the World's Problems.

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