Left and Right: The Prospects for Liberty

Left and Right: The Prospects for Liberty

[Originally appeared in Left and Right, Spring 1965, pp. 4-22.]

The Conservative has long been marked, whether he knows it or not, by long-run pessimism: by the belief that the long-run trend, and therefore Time itself, is against him, and hence the inevitable trend runs toward left-wing statism at home and Communism abroad. It is this long-run despair that accounts for the Conservative’s rather bizarre short-run optimism; for since the long run is given up as hopeless, the Conservative feels that his only hope of success rests in the current moment. In foreign affairs, this point of view leads the Conservative to call for desperate showdowns with Communism, for he feels that the longer he waits the worse things will ineluctably become; at home, it leads him to total concentration on the very next election, where he is always hoping for victory and never achieving it. The quintessence of the Practical Man, and beset by long-run despair, the Conservative refuses to think or plan beyond the election of the day.

Pessimism, however, both short-run and long-run, is precisely what the prognosis of Conservatism deserves; for Conservatism is a dying remnant of the ancien régime of the preindustrial era, and, as such, it has no future. In its contemporary American form, the recent Conservative Revival embodied the death throes of an ineluctably moribund, Fundamentalist, rural, small-town, white Anglo-Saxon America. What, however, of the prospects for liberty? For too many libertarians mistakenly link the prognosis for liberty with that of the seemingly stronger and supposedly allied Conservative movement; this linkage makes the characteristic long-run pessimism of the modern libertarian easy to understand. But this paper contends that, while the short-run prospects for liberty at home and abroad may seem dim, the proper attitude for the libertarian to take is that of unquenchable long-run optimism.

The case for this assertion rests on a certain view of history: which holds, first, that before the 18th century in Western Europe there existed (and still continues to exist outside the West) an identifiable Old Order. Whether the Old Order took the form of feudalism or Oriental despotism, it was marked by tyranny, exploitation, stagnation, fixed caste, and hopelessness and starvation for the bulk of the population. In sum, life was “nasty, brutish, and short”; here was Maine’s “society of status” and Spencer’s “military society.” The ruling classes, or castes, governed by conquest and by getting the masses to believe in the alleged divine imprimatur to their rule.

The Old Order was, and still remains, the great and mighty enemy of liberty; and it was particularly mighty in the past because there was then no inevitability about its overthrow. When we consider that basically the Old Order had existed since the dawn of history, in all civilizations, we can appreciate even more the glory and the magnitude of the triumph of the liberal revolution of and around the 18th century.

Part of the dimensions of this struggle has been obscured by a great myth of the history of Western Europe implanted by antiliberal German historians of the late 19th century. The myth held that the growth of absolute monarchies and of mercantilism in the early modern era was necessary for the development of capitalism, since these served to liberate the merchants and the people from local feudal restrictions. In actuality, this was not at all the case; the King and his nation-State served rather as a superfeudal overlord re-imposing and reinforcing feudalism just as it was being dissolved by the peaceful growth of the market economy. The King superimposed his own restrictions and monopoly privileges onto those of the feudal regime. The absolute monarchs were the Old Order writ large and made even more despotic than before. Capitalism, indeed, flourished earliest and most actively precisely in those areas where the central State was weak or non-existent: the Italian cities, the Hanseatic League, the confederation of 17th century Holland. Finally, the old order was overthrown or severely shaken in its grip in two ways. One was by industry and the market expanding through the interstices of the feudal order (e.g., industry in England developing in the countryside beyond the grip of feudal, State, and guild restrictions.) More important was a series of cataclysmic revolutions that blasted loose the Old Order and the old ruling classes: the English Revolutions of the 17th century, the American Revolution, and the French Revolution, all of which were necessary to the ushering in of the Industrial Revolution and of at least partial victories for individual liberty, laissez-faire separation of church-and-state, and international peace. The society of status gave way, at least partially, to the “society of contract”; the military society gave way partially to the “industrial society.” The mass of the population now achieved a mobility of labor and place, and accelerating expansion of their living standards, for which they had scarcely dared to hope. Liberalism had indeed brought to the Western world not only liberty, the prospect of peace, and the rising living standards of an industrial society, but above all perhaps, it brought hope, a hope in ever-greater progress that lifted the mass of mankind out of its age-old sink of stagnation and despair.

Soon there developed in Western Europe two great political ideologies, centered around this new revolutionary phenomenon: the one was Liberalism, the party of hope, of radicalism, of liberty, of the Industrial Revolution, of progress, of humanity; the other was Conservatism, the party of reaction, the party that longed to restore the hierarchy, statism, theocracy, serfdom, and class exploitation of the old order. Since liberalism admittedly had reason on its side, the Conservatives darkened the ideological atmosphere with obscurantist calls for romanticism, tradition, theocracy, and irrationalism. Political ideologies were polarized, with Liberalism on the extreme “Left,” and Conservatism on the extreme “Right,” of the ideological spectrum. That genuine Liberalism was essentially radical and revolutionary was brilliantly perceived, in the twilight of its impact, by the great Lord Acton (one of the few figures in the history of thought who, charmingly, grew more radical as he grew older). Acton wrote that “Liberalism wishes for what ought to be, irrespective of what is.” In working out this view, incidentally, it was Acton, not Trotsky, who first arrived at the concept of the “permanent revolution.” As Gertrude Himmelfarb wrote, in her excellent study of Acton:

his philosophy develop(ed) to the point where the future was seen as the avowed enemy of the past, and where the past was allowed no authority except as it happened to conform to morality. To take seriously this Liberal theory of history, to give precedence to “what ought to be” over “what is,” was, he admitted, virtually to install a “revolution in permanence.”

The “revolution in permanence,” as Acton hinted in the inaugural lecture and admitted frankly in his notes, was the culmination of his philosophy of history and theory of politics… This idea of conscience, that men carry about with them the knowledge of good and evil, is the very root of revolution, for it destroys the sanctity of the past… “Liberalism is essentially revolutionary,” Acton observed. “Facts must yield to ideas. Peaceably and patiently if possible. Violently if not.”1Gertrude Himmelfarb, Lord Acton (Chicago: University of Chicago Press, 1962), pp. 204-205.

The Liberal, wrote Acton, far surpassed the Whig:

The Whig governed by compromise. The Liberal begins the reign of ideas… One is practical, gradual, ready for compromise. The other works out a principle philosophically. One is a policy aiming at a philosophy. The other is a philosophy seeking a policy.2Ibid., p. 209.

What happened to Liberalism? Why then did it decline during the nineteenth century? This question has been pondered many times, but perhaps the basic reason was an inner rot within the vitals of Liberalism itself. For, with the partial success of the Liberal Revolution in the West, the Liberals increasingly abandoned their radical fervor, and therefore their liberal goals, to rest content with a mere defense of the uninspiring and defective status quo. Two philosophical roots of this decay may be discerned: First, the abandonment of natural rights and “higher law” theory for utilitarianism. For only forms of natural or higher law theory can provide a radical base outside the existing system from which to challenge the status quo; and only such theory furnishes a sense of necessary immediacy to the libertarian struggle, by focussing on the necessity of bringing existing criminal rulers to the bar of justice. Utilitarians, on the other hand, in abandoning justice for expediency, also abandon immediacy for quiet stagnation and inevitably end up as objective apologists for the existing order.

The second great philosophical influence on the decline of Liberalism was evolutionism, or Social Darwinism, which put the finishing touches to Liberalism as a radical force in society. For the Social Darwinist erroneously saw history and society through the peaceful, rose-colored glasses of infinitely slow, infinitely gradual social evolution. Ignoring the prime fact that no ruling caste in history has ever voluntarily surrendered its power, and that therefore Liberalism had to break through by means of a series of revolutions, the Social Darwinists looked forward peacefully and cheerfully to thousands of years of infinitely gradual evolution to the next supposedly inevitable stage of individualism.

An interesting illustration of a thinker who embodies within himself the decline of Liberalism in the nineteenth century is Herbert Spencer. Spencer began as a magnificently radical liberal, indeed virtually a pure libertarian. But, as the virus of sociology and Social Darwinism took over in his soul, Spencer abandoned libertarianism as a dynamic historical movement, although at first without abandoning it in pure theory. In short, while looking forward to an eventual ideal of pure liberty, Spencer began to see its victory as inevitable, but only after millennia of gradual evolution, and thus, in actual fact, Spencer abandoned Liberalism as a fighting, radical creed; and confined his Liberalism in practice to a weary, rear-guard action against the growing collectivism of the late nineteenth-century. Interestingly enough, Spencer’s tired shift “rightward” in strategy soon became a shift rightward in theory as well; so that Spencer abandoned pure liberty even in theory e.g., in repudiating his famous chapter in Social Statics, “The Right to Ignore the State.”

In England, the classical liberals began their shift from radicalism to quasi-conservatism in the early nineteenth century; a touchstone of this shift was the general British liberal attitude toward the national liberation struggle in Ireland. This struggle was twofold: against British political imperialism, and against feudal landlordism which had been imposed by that imperialism. By their Tory blindness toward the Irish drive for national independence, and especially for peasant property against feudal oppression, the British liberals (including Spencer) symbolized their effective abandonment of genuine Liberalism, which had been virtually born in a struggle against the feudal land system. Only in the United States, the great home of radical liberalism (where feudalism had never been able to take root outside the South), did natural rights and higher law theory, and consequent radical liberal movements, continue in prominence until the mid-nineteenth century. In their different ways, the Jacksonian and Abolitionist movements were the last powerful radical libertarian movements in American life.3Cf. Carl Becker, The Declaration of Independence (New York: Vintage Books ed., 1958), Chapter VI.

Thus, with Liberalism abandoned from within, there was no longer a party of Hope in the Western world, no longer a “Left” movement to lead a struggle against the State and against the unbreached remainder of the Old Order. Into this gap, into this void created by the drying up of radical liberalism, there stepped a new movement: Socialism. Libertarians of the present day are accustomed to think of socialism as the polar opposite of the libertarian creed. But this is a grave mistake, responsible for a severe ideological disorientation of libertarians in the present world. As we have seen, Conservatism was the polar opposite of liberty; and socialism, while to the “left” of conservatism, was essentially a confused, middle-of-the road movement. It was, and still is, middle-of-the road because it tries to achieve Liberal ends by the use of Conservative means.

In short, Russell Kirk, who claims that Socialism was the heir of classical liberalism, and Ronald Hamowy, who sees Socialism as the heir of Conservatism, are both right; for the question is on what aspect of this confused centrist movement we happen to be focussing. Socialism, like Liberalism and against Conservatism, accepted the industrial system and the liberal goals of freedom, reason, mobility, progress, higher living standards the masses, and an end to theocracy and war; but it tried to achieve these ends by the use of incompatible, Conservative means: statism, central planning, communitarianism, etc. Or rather, to be more precise, there were from the beginning two different strands within Socialism: one was the Right-wing, authoritarian strand, from Saint-Simon down, which glorified statism, hierarchy, and collectivism and which was thus a projection of Conservatism trying to accept and dominate the new industrial civilization. The other was the Left-wing, relatively libertarian strand, exemplified in their different ways by Marx and Bakunin, revolutionary and far more interested in achieving the libertarian goals of liberalism and socialism: but especially the smashing of the State apparatus to achieve the “withering away of the State” and the “end of the exploitation of man by man.” Interestingly enough, the very Marxian phrase, the “replacement of the government of men by the administration of things,” can be traced, by a circuitous route, from the great French radical laissez-faire liberals of the early nineteenth century, Charles Comte (no relation to Auguste Comte) and Charles Dunoyer. And so, too, may the concept of the “class struggle”; except that for Dunoyer and Comte the inherently antithetical classes were not businessmen vs. workers, but the producers in society (including free businessmen, workers, peasants, etc.) versus the exploiting classes constituting, and privileged by, the State apparatus.4The information about Comte and Dunoyer, as well indeed as the entire analysis of the ideological spectrum, I owe to Mr. Leonard P. Liggio. For an emphasis on the positive and dynamic aspect of the Utopian drive, much traduced in our time, see Alan Milchman, “The Social and Political Philosophy of Jean-Jacques Rousseau: Utopia and Ideology,” The November Review (November, 1964), pp. 3-10. Also cf., Jurgen Ruhle, “The Philosopher of Hope: Ernst Bloch,” in Leopold Labedz, ed., Revisionism (New York: Praeger, 1962), pp. 166-178. Saint-Simon, at one time in his confused and chaotic life, was close to Comte and Dunoyer and picked up his class analysis from them, in the process characteristically getting the whole thing balled up and converting businessmen on the market, as well as feudal landlords and others of the State privileged, into “exploiters.” Marx and Bakunin picked this up from the Saint-Simonians, and the result gravely misled the whole Left Socialist movement; for, then, in addition to smashing the repressive State, it became supposedly necessary to smash private capitalist ownership of the means of production. Rejecting private property, especially of capital, the Left Socialists were then trapped in a crucial inner contradiction: if the State is to disappear after the Revolution (immediately for Bakunin, gradually “withering” for Marx), then how is the “collective” to run its property without becoming an enormous State itself in fact even if not in name? This was a contradiction which neither the Marxists nor the Bakuninists were ever able to resolve.

Having replaced radical liberalism as the party of the “Left,” Socialism, by the turn of the twentieth century, fell prey to this inner contradiction. Most Socialists (Fabians, Lassalleans, even Marxists) turned sharply rightward, completely abandoned the old libertarian goals and ideals of revolution and the withering away of the State, and became cozy Conservatives permanently reconciled to the State, the status quo, and the whole apparatus of neo-mercantilism, State monopoly capitalism, imperialism and war that was rapidly being established and riveted on European society at the turn of the twentieth century. For Conservatism, too, had re-formed and regrouped to try to cope with a modern industrial system, and had become a refurbished mercantilism, a regime of statism marked by State monopoly privilege, in direct and indirect forms, to favored capitalists and to quasi-feudal landlords. The affinity between Right Socialism and the new Conservatism became very close, the former advocating similar policies but with a demagogic populist veneer: thus, the other side of the coin of imperialism was “social imperialism,” which Joseph Schumpeter trenchantly defined as “an imperialism in which the entrepreneurs and other elements woo the workers by means of social welfare concessions which appear to depend on the success of export monopolism…”5Joseph A. Schumpeter, Imperialism and Social Classes (New York: Meridian Books, 1955), p. 175. Schumpeter, incidentally, realized that, far from being an inherent stage of capitalism, modern imperialism was a throwback to the pre-capitalist imperialism of earlier ages, but with a minority of privileged capitalists now joined to the feudal and military castes in promoting imperialist aggression.

Historians have long recognized the affinity, and the welding together, of Right-wing socialism with Conservatism in Italy and Germany, where the fusion was embodied first in Bismarckism and then in Fascism and National Socialism: the latter fulfilling the Conservative program of nationalism, imperialism, militarism, theocracy, and a right-wing collectivism that retained and even cemented the rule of the old privileged classes. But only recently have historians begun to realize that a similar pattern occurred in England and the United States. Thus, Bernard Semmel, in his brilliant history of the social-imperialist movement in England at the turn of the twentieth century, shows how the Fabian Society welcomed the rise of the Imperialists in England.6Bernard Semmel, Imperialism and Social Reform: English Social-Imperial Thought, 1895-1914 (Cambridge: Harvard University press, 1960).  When, in the mid-1890’s, the Liberal Party in England split into the Radicals on the left and the Liberal-Imperialists on the right, Beatrice Webb, co-leader of the Fabians, denounced the Radicals as “laisser faire and anti-imperialist” while hailing the latter as “collectivists and imperialists.” An official Fabian manifesto, Fabianism and the Empire (1900), drawn up by George Bernard Shaw (who was later, with perfect consistency, to praise the domestic policies of Stalin and Mussolini and Sir Oswald Mosley), lauded Imperialism and attacked the Radicals, who “still cling to the fixed frontier ideals of individualist republicanism (and) non-interference.” In contrast, “a Great Power …must govern (a world empire) in the interests of civilization as a whole.” After this, the Fabians collaborated closely with Tories and Liberal-Imperialists. Indeed, in late 1902, Sidney and Beatrice Webb established a small, secret group of brain-trusters called The Coefficients; as one of the leading members of this club, the Tory imperialist, Leopold S. Amery, revealingly wrote: “Sidney and Beatrice Webb were much more concerned with getting their ideas of the welfare state put into practice by any one who might be prepared to help, even on the most modest scale, than with the early triumph of an avowedly Socialist Party…There was, after all, nothing so very unnatural, as (Joseph) Chamberlain’s own career had shown, in a combination of Imperialism in external affairs with municipal socialism or semi-socialism at home.”7Leopold S. Amery, My Political Life (London, 1953), quoted in Semmel, op. cit., pp. 74-75 & nbsp;Other members of the Coefficients, who, as Amery wrote, were to function as a “Brains Trust or General Staff” for the movement, were: the Liberal-Imperialist Richard B. Haldane; the geo-politician Halford J. Mackinder; the Imperialist and Germanophobe Leopold Maxse, publisher of the National Review; the Tory socialist and imperialist Viscount Milner; the naval imperialist Carlyon Bellairs; the famous journalist J. L. Garvin; Bernard Shaw; Sir Clinton Dawkins, partner of the Morgan bank; and Sir Edward Grey, who, at a meeting of the club first adumbrated the policy of Entente with France and Russia that was to eventuate in the First World War.8The point, of course, is not that these men were products of some “Fabian conspiracy”; but, on the contrary, that Fabianism, by the turn of the century, was Socialism so conservatized as to be closely aligned with the other dominant neo-Conservative trends in British political life.

The famous betrayal, during World War I, of the old ideals of revolutionary pacifism by the European Socialists, and even by the Marxists, should have come as no surprise; that each Socialist Party supported its “own” national government in the war (with the honorable exception of Eugene Victor Debs’ Socialist Party in the United States) was the final embodiment of the collapse of the classic Socialist Left. From then on, socialists and quasi-socialists joined Conservatives in a basic amalgam, accepting the State and the Mixed Economy (=neo-Mercantilism=the Welfare State-Interventionism=State Monopoly Capitalism, merely synonyms for the same essential reality). It was in reaction to this collapse that Lenin broke out of the Second International, to re-establish classic revolutionary Marxism in a revival of Left Socialism.

In fact, Lenin, almost without knowing it, accomplished more than this. It is common knowledge that “purifying” movements, eager to return to a classic purity shorn of recent corruptions, generally purify further than what had held true among the original classic sources. There were, indeed, marked “conservative” strains in the writings of Marx and Engels themselves which often justified the State, Western imperialism and aggressive nationalism, and it was these motifs, in the ambivalent views of the Masters on this subject, that provided the fodder for the later shift of the majority Marxists into the “social imperialist” camp.9Thus, see Horace B. Davis. “Nations, Colonies, and Social Classes: The Position of Marx and Engels,” Science and Society (Winter, 1965), pp. 26-43. Lenin’s camp turned more “left” than had Marx and Engels themselves. Lenin had a decidedly more revolutionary stance toward the State, and consistently defended and supported movements of national liberation against imperialism. The Leninist shift was more “leftist” in other important senses as well. For while Marx had centered his attack on market capitalism per se, the major focus of Lenin’s concerns was on what he conceives to be the highest stages of capitalism: imperialism and monopoly. Hence Lenin’s focus, centering as it did in practice on State monopoly and imperialism rather than on laissez-faire capitalism, was in that way far more congenial to the libertarian than that of Karl Marx. In recent years, the splits in the Leninist world have brought to the fore a still more left-wing tendency: that of the Chinese. In their almost exclusive stress on revolution in the undeveloped countries, the Chinese have, in addition to scorning Right-wing Marxist compromises with the State, unerringly centered their hostility on feudal and quasi-feudal landholdings, on monopoly concessions which have enmeshed capital with quasi-feudal land, and on Western imperialism. In this virtual abandonment of the classical Marxist emphasis on the working class, the Maoists have concentrated Leninist efforts more closely on the overthrow of the major bulwarks of the Old Order in the modern world.10The schismatic wing of the Trotskyist movement embodied in the International Committee for the Fourth International is now the only sect within Marxism-Leninism that continues to stress exclusively the industrial working-class.

Fascism and Nazism were the logical culmination in domestic affairs of the modern drift toward right-wing collectivism. It has become customary among libertarians, as indeed among the Establishment of the West, to regard Fascism and Communism as fundamentally identical. But while both systems were indubitably collectivist, they differed greatly in their socio-economic content. For Communism was a genuine revolutionary movement that ruthlessly displaced and overthrew the old ruling élites; while Fascism, on the contrary, cemented into power the old ruling classes. Hence, Fascism was a counter-revolutionary movement that froze a set of monopoly privileges upon society; in short, Fascism was the apotheosis of modern State monopoly capitalism.11Thus, see Rothbard, passim.

For examples of the attractions of Fascist and right-wing collectivist ideas and plans for American big businessmen in this era, see Murray N. Rothbard, America’s Great Depression (Princeton: Van Nostrand, 1963). Also cf. Gaetano Salvemini and George LaPiana, What To Do With Italy (New York: Duell, Sloan, and Pearce, 1943), pp. 65ff.

Of the Fascist economy, Salvemini perceptively wrote: “In actual fact, it is the State, i.e., the taxpayer who has become responsible to private enterprise. In Fascist Italy the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social.” Gaetano Salvemini, Under the Axe of Fascism (London: Victor Gollancz, 1936), p. 416.

See the penetrating article by Alexander J. Groth, “The ‘Isms’ in Totalitarianism,” American Political Science Review (December, 1964), pp. 888-901. Groth writes: “The Communists… have generally undertaken measures directly and indirectly uprooting existing socio-economic élites: the landed nobility, business, large sections of the middle class and the peasantry, as well as the bureaucratic élites, the military, the civil service, the judiciary and the diplomatic corps…Second, in every instance of Communist seizure of power there has been a significant ideological-propagandistic commitment toward a proletarian or workers’ state …(which) has been accompanied by opportunities for upward social mobility for the economically lowest classes, in terms of education and employment, which invariably have considerably exceeded the opportunities available under previous regimes. Finally, in every case the Communists have attempted to change basically the character of the economic systems which fell under their sway, typically from an agrarian to an industrial economy… Fascism (both in the German and Italian versions)…was socio-economically a counter-revolutionary movement… It certainly did not dispossess or annihilate existent socio-economic élites…Quite the contrary. Fascism did not arrest the trend toward monopolistic private concentrations in business but instead augmented this tendency…Undoubtedly, the Fascist economic system was not a free market economy, and hence not ‘capitalist’ if one wishes to restrict the use of this term to a laissez-faire system. But did it not operate…to preserve in being, and maintain the material rewards of, the existing socio-economic élites?” Ibid., pp. 890-891.

Here was the reason that Fascism proved so attractive (which Communism, of course, never did) to big business interests in the West–openly and unabashedly so in the 1920’s and early 1930’s.12Thus, see Rothbard, passim.

We are now in a position to apply our analysis to the American scene. Here we encounter a contrasting myth about recent American history which has been propagated by current conservatives and adopted by most American libertarians. The myth goes approximately as follows: America was, more or less, a haven of laissez-faire until the New Deal; then Roosevelt, influenced by Felix Frankfurter, the Intercollegiate Socialist Society, and other “Fabian” and Communist “conspirators,” engineered a revolution which set America on the path to Socialism, and, further on, beyond the horizon, to Communism. The present-day libertarian who adopts this or a similar view of the American experience, tends to think of himself as an “extreme right-winger”; slightly to the left of him, then, lies the Conservative, to the left of that the middle-of-the road, and then leftward to Socialism and Communism. Hence, the enormous temptation for some libertarians to red-bait; for, since they see America as drifting inexorably leftward to Socialism and therefore to Communism, the great temptation is for them to overlook the intermediary stages and tar all of their opposition with the hated Red brush.

One would think that the “right-wing libertarian” would quickly be able to see some drastic flaws in this conception. For one thing, the income tax amendment, which he deplores as the beginning of socialism in America, was put through Congress in 1909 by an overwhelming majority of both parties. To look at this event as a sharp leftward move toward socialism would require treating president William Howard Taft, who put through the 16th Amendment, as a Leftist, and surely few would have the temerity to do that. Indeed, the New Deal was not a revolution in any sense; its entire collectivist program was anticipated: proximately by Herbert Hoover during the depression, and, beyond that, by the war-collectivism and central planning that governed America during the First World War. Every element in the New Deal program: central planning, creation of a network of compulsory cartels for industry and agriculture, inflation and credit expansion, artificial raising of wage rates and promotion of unions within the overall monopoly structure, government regulation and ownership, all this had been anticipated and adumbrated during the previous two decades.13Thus, see Rothbard, passim. And this program, with its privileging of various big business interests at the top of the collectivist heap, was in no sense reminiscent of socialism or leftism; there was nothing smacking of the egalitarian or the proletarian here. No, the kinship of this burgeoning collectivism was not at all with Socialism-Communism but with Fascism, or Socialism-of-the-Right, a kinship which many big businessmen of the ‘twenties expressed openly in their yearning for abandonment of a quasi-laissez-faire system for a collectivism which they could control. And, surely, William Howard Taft, Woodrow Wilson, and Herbert Clark Hoover make far more recognizable figures as proto-Fascists than they do as crypto-Communists.

The essence of the New Deal was seen, far more clearly than in the conservative mythology, by the Leninist movement in the early 1930’s–that is, until the mid-thirties, when the exigencies of Soviet foreign relations caused a sharp shift of the world Communist line to “Popular Front” approval of the New Deal. Thus, in 1934, the British Leninist theoretician R. Palme Dutt published a brief but scathing analysis of the New Deal as “social fascism”–as the reality of Fascism cloaked with a thin veneer of populist demagogy. No conservative opponent has ever delivered a more vigorous or trenchant denunciation of the New Deal. The Roosevelt policy, wrote Dutt, was to “move to a form of dictatorship of a war-type”; the essential policies were to impose a State monopoly capitalism through the NRA, to subsidize business, banking, and agriculture through inflation and the partial expropriation of the mass of the people through lower real wage rates, and to the regulation and exploitation of labor by means of government-fixed wages and compulsory arbitration. When the New Deal, wrote Dutt, is stripped of its “social-reformist ‘progressive’ camouflage,” “the reality of the new Fascist type of system of concentrated state capitalism and industrial servitude remains, ” including an implicit “advance to war.” Dutt effectively concluded with a quote from an editor of the highly respected Current History Magazine: “The new America (the editor had written in mid-1933) will not be capitalist in the old sense, nor will it be Socialist. If at the moment the trend is towards Fascism, it will be an American Fascism, embodying the experience, the traditions and the hopes of a great middle-class nation.”14R. Palme Dutt, Fascism and Social Revolution (New York: International publishers, 1934), pp. 247-251.

Thus, the New Deal was not a qualitative break from the American past; on the contrary, it was merely a quantitative extension of the web of State privilege that had been proposed and acted upon before: in Hoover’s Administration, in the war collectivism of World War I, and in the Progressive Era. The most thorough exposition of the origins of State monopoly capitalism, or what he calls “political capitalism,” in the U.S. is found in the brilliant work of Dr. Gabriel Kolko. In his Triumph of Conservatism, Kolko traces the origins of political capitalism in the “reforms” of the Progressive Era. Orthodox historians have always treated the Progressive period (roughly 1900-1916) as a time when free-market capitalism was becoming increasingly “monopolistic”; in reaction to this reign of monopoly and big business, so the story runs, altruistic intellectuals and far-seeing politicians turned to intervention by the government to reform and regulate these evils. Kolko’s great work demonstrates that the reality was almost precisely the opposite of this myth. Despite the wave of mergers and trusts formed around the turn of the century, Kolko reveals, the forces of competition on the free market rapidly vitiated and dissolved these attempts at stabilizing and perpetuating the economic power of big business interests. It was precisely in reaction to their impending defeat at the hands of the competitive storms of the market that business turned, increasingly after the 1900’s, to the federal government for aid and protection. In short, the intervention by the federal government was designed, not to curb big business monopoly for the sake of the public weal, but to create monopolies that big business (as well as trade associations smaller business) had not been able to establish amidst the competitive gales of the free market. Both Left and Right have been persistently misled by the notion that intervention by the government is ipso facto leftish and anti-business. Hence the mythology of the New-Fair Deal-as-Red that is endemic on the Right. Both the big businessmen, led by the Morgan interests, and Professor Kolko almost uniquely in the academic world, have realized that monopoly privilege can only be created by the State and not as a result of free market operations.

Thus, Kolko shows that, beginning with Theodore Roosevelt’s New Nationalism and culminating in Wilson’s New Freedom, in industry after industry, e.g., insurance, banking, meat, exports, and business generally, regulations that present-day Rightists think of as “socialistic” were not only uniformly hailed, but conceived and brought about by big businessmen. This was a conscious effort to fasten upon the economy a cement of subsidy, stabilization, and monopoly privilege. A typical view was that of Andrew Carnegie; deeply concerned about competition in the steel industry, which neither the formation of U. S. Steel nor the famous “Gary Dinners” sponsored by that Morgan company could dampen, Carnegie declared in 1908 that “it always comes back to me that Government control, and that alone, will properly solve the problem.” There is nothing alarming about government regulation per se, announced Carnegie, “capital is perfectly safe in the gas company, although it is under court control. So will all capital be, although under Government control…”15See Gabriel Kolko, The Triumph of Conservatism: A Re-interpretation of American History, 1900-1916 (Glencoe, Ill.: The Free Press, 1963), pp. 173 and passim. For an example of the way in which Kolko has already begun to influence American historiography, see David T. Gilchrist and W. David Lewis, eds., Economic Change in the Civil War Era (Greenville, Del.: Eleutherian Mills-Hagley Foundation, 1965), p. 115. Kolko’s complementary and confirmatory work on railroads, Railroads and Regulation, 1877-1916 (Princeton. Princeton University Press, 1965) comes too late to be considered here. A brief treatment of the monopolizing role of the ICC for the railroad industry may be found in Christopher D. Stone, “ICC: Some Reminiscences on the Future of American Transportation,” New Individualist Review (Spring, 1963), pp. 3-15.

The Progressive Party, Kolko shows, was basically a Morgan-created party to re-elect Roosevelt and punish President Taft, who had been over-zealous in prosecuting Morgan enterprises; the leftish social workers often unwittingly provided a demagogic veneer for a conservative-statist movement. Wilson’s New Freedom, culminating in the creation of the Federal Trade Commission, far from being considered dangerously socialistic by big business, was welcomed enthusiastically as putting their long-cherished program of support, privilege, and regulation of competition into effect (and Wilson’s war collectivism was welcomed even more exuberantly.) Edward N. Hurley, Chairman of the Federal Trade Commission and formerly President of the Illinois Manufacturers Association, happily announced, in late 1915, that the Federal Trade Commission was designed “to do for general business” what the ICC had been eagerly doing for the railroads and shippers, what the Federal Reserve was doing for the nation’s bankers, and what the Department of Agriculture was accomplishing for the farmers.16Kolko, Triumph of Conservatism, p. 274.  As would happen more dramatically in European Fascism, each economic interest group was being cartellized and monopolized and fitted into its privileged niche in a hierarchically-ordered socio-economic structure. Particularly influential were the views of Arthur Jerome Eddy, an eminent corporation lawyer who specialized in forming trade associations and who helped to father the Federal Trade Commission. In his magnum opus fiercely denouncing competition in business and calling for governmentally controlled and protected industrial “cooperation,” Eddy trumpeted that “Competition is War, and ‘War is Hell.'”17Arthur Jerome Eddy, The New Competition: An Examination of the Conditions Underlying the Radical Change That Is Taking Place In the Commercial and Industrial World–The Change from A COMPETITIVE TO A COOPERATIVE BASIS (7th Ed., Chicago: A. C. McClurg and Co., 1920).

What of the intellectuals of the Progressive period, damned by the present-day Right as “socialistic”? Socialistic in a sense they were, but what kind of “socialism”? The conservative State Socialism of Bismarck’s Germany, the prototype for so much of modern European–and American–political forms, and under which the bulk of American intellectuals of the late nineteenth century received their higher education. As Kolko puts it:

The conservatism of the contemporary intellectuals,… the idealization of the state by Lester Ward, Richard T. Ely, or Simon N. Patten…was also the result of the peculiar training of many of the American academics of this period. At the end of the nineteenth century the primary influence in American academic social and economic theory was exerted by the universities. The Bismarckian idealization of the state, with its centralized welfare functions… was suitably revised by the thousands of key academics who studied in German universities in the 1880’s and 1890’s…18Kolko, Triumph of Conservatism, p. 214.

The ideal of the leading ultra-conservative German professors, moreover, who were also called “socialists of the chair,” was consciously to form themselves into the “intellectual bodyguard of the House of Hohenzollern”– and that they surely were.

As an exemplar of the Progressive intellectual, Kolko aptly cites Herbert Croly, editor of the Morgan-financed New Republic. Systematizing Theodore Roosevelt’s New Nationalism, Croly hailed this new Hamiltonianism as a system for collectivist federal control and integration of society into a hierarchical structure.

Looking forward from the Progressive Era, Gabriel Kolko concludes that

a synthesis of business and politics on the federal level was created during the war, in various administrative and emergency agencies, that continued throughout the following decade. Indeed, the war period represents the triumph of business in the most emphatic manner possible… big business gained total support from the various regulatory agencies and the Executive. It was during the war that effective, working oligopoly and price and market agreements became operational in the dominant sectors of the American economy. The rapid diffusion of power in the economy and relatively easy entry virtually ceased. Despite the cessation of important new legislative enactments, the unity of business and the federal government continued throughout the 1920’s and thereafter, using the foundations laid in the Progressive Era to stabilize and consolidate conditions within various industries …The principle of utilizing the federal government to stabilize the economy, established in the context of modern industrialism during the Progressive Era, became the basis of political capitalism in its many later ramifications.

In this sense progressivism did not die in the 1920’s, but became a part of the basic fabric of American society.19Ibid., pp. 286-287.

Thus the New Deal. After a bit of leftish wavering in the middle and late ‘thirties, the Roosevelt Administration re-cemented its alliance with big business in the national defense and war contract economy that began in 1940. This was an economy and a polity that has been ruling America ever since, embodied in the permanent war economy, the full-fledged State monopoly capitalism and neo-mercantilism, the military-industrial complex of the present era. The essential features of American society have not changed since it was thoroughly militarized and politicized in World War II–except that the trends intensify, and even in everyday life men have been increasingly moulded into conforming Organization Men serving the State and its military-industrial complex. William H. Whyte, Jr., in his justly famous book, The Organization Man, made clear that this moulding took place amidst the adoption by business of the collectivist views of “enlightened” sociologists and other social engineers. It is also clear that this harmony of views is not simply the result of naiveté by big businessmen–not when such “naiveté” coincides with the requirements of compressing the worker and manager into the mould of willing servitor in the great bureaucracy of the military-industrial machine. And, under the guise of “democracy,” education has become mere mass drilling in the techniques of adjustment to the task of becoming a cog in the vast bureaucratic machine.

Meanwhile, the Republicans and Democrats remain as bipartisan in forming and supporting this Establishment as they were in the first two decades of the twentieth century. “Me-tooism”–bipartisan support of the status quo that underlies the superficial differences between the parties–did not begin in 1940.

How did the corporal’s guard of remaining libertarians react to these shifts of the ideological spectrum in America? An instructive answer may be found by looking at the career of one of the great libertarians of twentieth-century America: Albert Jay Nock. In the 1920’s, when Nock had formulated his radical libertarian philosophy, he was universally regarded as a member of the extreme left, and he so regarded himself as well. It is always the tendency, in ideological and political life, to center one’s attentions on the main enemy of the day, and the main enemy of that day was the conservative statism of the Coolidge-Hoover Administration; it was natural, therefore, for Nock, his friend and fellow libertarian Mencken, and other radicals to join quasi-socialists in battle against the common foe. When the New Deal succeeded Hoover, on the other hand, the milk-and-water socialists and vaguely leftish interventionists hopped on the New Deal bandwagon; on the Left, only the libertarians such as Nock and Mencken, and the Leninists (before the Popular Front period) realized that Roosevelt was only a continuation of Hoover in other rhetoric. It was perfectly natural for the radicals to form a united front against FDR with the older Hoover and Al Smith conservatives who either believed Roosevelt had gone too far or disliked his flamboyant populistic rhetoric. But the problem was that Nock and his fellow radicals, at first properly scornful of their new-found allies, soon began to accept them and even don cheerfully the formerly despised label of “conservative.” With the rank-and-file radicals, this shift took place, as have so many transformations of ideology in history, unwittingly and in default of proper ideological leadership; for Nock, and to some extent for Mencken, on the other hand, the problem cut far deeper.

For there had always been one grave flaw in the brilliant and finely-honed libertarian doctrine hammered out in their very different ways by Nock and Mencken; both had long adopted the great error of pessimism. Both saw no hope for the human race ever adopting the system of liberty; despairing of the radical doctrine of liberty ever being applied in practice, each in his own personal way retreated from the responsibility of ideological leadership, Mencken joyously and hedonically, Nock haughtily and secretively. Despite the massive contribution of both men to the cause of liberty, therefore, neither could ever become the conscious leader of a libertarian movement: for neither could ever envision the party of liberty as the party of hope, the party of revolution, or a fortiori, the party of secular messianism. The error of pessimism is first step down the slippery slope that leads to Conservatism; and hence it was all too easy for the pessimistic radical Nock, even though still basically a libertarian, to accept the conservative label and even come to croak the old platitude that there is an a priori presumption against any social change.

It is fascinating that Albert Jay Nock thus followed the ideological path of his beloved spiritual ancestor Herbert Spencer; both began as pure radical libertarians, both quickly abandoned radical or revolutionary tactics as embodied in the will to put their theories into practice through mass action, and both eventually glided from Tory tactics to at least a partial Toryism of content.

And so the libertarians, especially in their sense of where they stood in the ideological spectrum, fused with the older conservatives who were forced to adopt libertarian phraseology (but with no real libertarian content) in opposing a Roosevelt Administration that had become too collectivistic for them, either in content or in rhetoric. World War II reinforced and cemented this alliance; for, in contrast to all the previous American wars of the century, the pro-peace and “isolationist” forces were all identified, by their enemies and subsequently by themselves, as men of the “Right.” By the end of World War II, it was second nature for libertarians to consider themselves at an “extreme right-wing” pole with the conservatives immediately to the left of them; and hence the great error of the spectrum that persists to this day. In particular, the modern libertarians forgot or never realized that opposition to war and militarism had always been a “left-wing” tradition which had included libertarians; and hence when the historical aberration of the New Deal period corrected itself and the “Right-wing” was once again the great partisan of total war, the libertarians were unprepared to understand what was happening and tailed along in the wake of their supposed conservative “allies.” The liberals had completely lost their old ideological markings and guidelines.

Given a proper reorientation of the ideological spectrum, what then would be the prospects for liberty? It is no wonder that the contemporary libertarian, seeing the world going socialist and Communist, and believing himself virtually isolated and cut off from any prospect of united mass action, tends to be steeped in long-run pessimism. But the scene immediately brightens when we realize that that indispensable requisite of modern civilization: the overthrow of the Old Order, was accomplished by mass libertarian action erupting in such great revolutions of the West as the French and American Revolutions, and bringing about the glories of the Industrial Revolution and the advances of liberty, mobility, and rising living standards that we still retain today. Despite the reactionary swings backward to statism, the modern world stands towering above the world of the past. When we consider also that, in one form or another, the Old Order of despotism, feudalism, theocracy and militarism dominated every human civilization until the West of the 18th century, optimism over what man has and can achieve must mount still higher.

It might be retorted, however, that this bleak historical record of despotism and stagnation only reinforces one’s pessimism, for it shows the persistence and durability of the Old Order and the seeming frailty and evanescence of the New–especially in view of the retrogression of the past century. But such superficial analysis neglects the great change that occurred with the Revolution of the New Order, a change that is clearly irreversible. For the Old Order was able to persist in its slave system for centuries precisely because it awoke no expectations and no hopes in the minds of the submerged masses; their lot was to live and eke out their brutish subsistence in slavery while obeying unquestioningly the commands of their divinely appointed rulers. But the liberal Revolution implanted indelibly in the minds of the masses–not only in the West but in the still feudally-dominated undeveloped world–the burning desire for liberty, for land to the peasantry, for peace between the nations, and, perhaps above all, for the mobility and rising standards of living that can only be brought to them by an industrial civilization. The masses will never again accept the mindless serfdom of the Old Order; and given these demands that have been awakened by liberalism and the Industrial Revolution, long-run victory for liberty is inevitable.

For only liberty, only a free market, can organize and maintain an industrial system, and the more that population expands and explodes, the more necessary is the unfettered working of such an industrial economy. Laissez-faire and the free market become more and more evidently necessary as an industrial system develops; radical deviations cause breakdowns and economic crises. This crisis of statism becomes particularly dramatic and acute in a fully socialist society; and hence the inevitable breakdown of statism has first become strikingly apparent in the countries of the socialist (i.e., Communist) camp. For socialism confronts its inner contradiction most starkly. Desperately, it tries to fulfill its proclaimed goals of industrial growth, higher standards of living for the masses, and eventual withering away of the State, and is increasingly unable to do so with its collectivist means. Hence the inevitable breakdown of socialism. This progressive breakdown of socialist planning was at first partially obscured. For, in every instance the Leninists took power not in a developed capitalist country as Marx had wrongly predicted, but in a country suffering from the oppression of feudalism. Secondly, the Communists did not attempt to impose socialism upon the economy for many years after taking power: in Soviet Russia until Stalin’s forced collectivization of the early 1930’s reversed the wisdom of Lenin’s New Economic Policy, which Lenin’s favorite theoretician Bukharin would have extended onward towards a free market. Even the supposedly rabid Communist leaders of China did not impose a socialist economy on that country until the late 1950’s. In every case, growing industrialization has imposed a series of economic breakdowns so severe that the Communist countries, against their ideological principles, have had to retreat step by step from central planning and return to various degrees and forms of a free market. The Liberman Plan for the Soviet Union has gained a great deal of publicity; but the inevitable process of de-socialization has proceeded much further in Poland, Hungary, and Czechoslovakia. Most advanced of all is Yugoslavia, which, freed from Stalinist rigidity earlier than its fellows, in only a dozen years has desocialized so fast and so far that its economy is now hardly more socialistic than that of France. The fact that people calling themselves “Communists” are still governing the country is irrelevant to the basic social and economic facts. Central planning in Yugoslavia has virtually disappeared; the private sector not only predominates in agriculture but is even strong in industry, and the public sector itself has been so radically decentralized and placed under free pricing, profit-and-loss tests, and a cooperative worker ownership of each plant that true socialism hardly exists any longer. Only the final step of converting workers’ syndical control to individual shares of ownership remains on the path toward outright capitalism. Communist China and the able Marxist theoreticians of Monthly Review have clearly discerned the situation and have raised the alarm that Yugoslavia is no longer a socialist country.

One would think that free-market economists would hail the confirmation and increasing relevance of the notable insight of Professor Ludwig von Mises a half-century ago: that socialist States, being necessarily devoid of a genuine price system could not calculate economically and therefore could not plan their economy with any success. Indeed, one follower of Mises in effect predicted this process of de-socialization in a novel some years ago. Yet neither this author nor other free-market economists have given the slightest indication of even recognizing, let alone saluting this process in the Communist countries–perhaps because their almost hysterical view of the alleged threat of Communism prevents them from acknowledging any dissolution in the supposed monolith of menace.20One happy exception is William D. Grampp, “New Directions in the Communist Economies,” Business Horizons (Fall, 1963), pp. 29-36. Grampp writes; “Hayek said that centralized planning will lead to serfdom. It follows that a decrease in the economic authority of the State should lead away from serfdom. The Communist countries may show that to be true. It would be a withering away of the state the Marxists have not counted on nor has it been anticipated by those who agree with Hayek.” Ibid., p. 35. The novel in question is Henry Hazlitt, The Great Idea (New York: Appleton-Century-Crofts, 1951.)

Communist countries, therefore, are increasingly and ineradicably forced to de-socialize, and will therefore eventually reach the free market. The state of the undeveloped countries is also cause for sustained libertarian optimism. For all over the world, the peoples of the undeveloped nations are engaged in revolution to throw off their feudal Old Order. It is true that the United States is doing its mightiest to suppress the very revolutionary process that once brought it and Western Europe out of the shackles of the Old Order; but it is increasingly clear that even overwhelming armed might cannot suppress the desire of the masses to break through into the modern world.

We are left with the United States and the countries of Western Europe. Here, the case for optimism is less clear, for the quasi-collectivist system does not present as stark a crisis of self-contradiction as does socialism. And yet, here too economic crisis looms in the future and gnaws away at the complacency of the Keynesian economic managers: creeping inflation, reflected in the aggravating balance-of-payments breakdown of the once almighty dollar; creeping secular unemployment brought about by minimum wage scales; and the deeper and long-run accumulation of the uneconomic distortions of the permanent war economy. Moreover, potential crises in the United States are not merely economic; there is a burgeoning and inspiring moral ferment among the youth of America against the fetters of centralized bureaucracy, of mass education in uniformity, and of brutality and oppression exercised by the minions of the State.

Furthermore, the maintenance of a substantial degree of free speech and democratic forms facilitates, at least in the short-run, the possible growth of a libertarian movement. The United States is also fortunate in possessing, even if half-forgotten beneath the statist and tyrannical overlay of the last half-century, a great tradition of libertarian thought and action. The very fact that much of this heritage is still reflected in popular rhetoric, even though stripped of its significance in practice, provides a substantial ideological groundwork for a future party of liberty.

What the Marxists would call the “objective conditions” for the triumph of liberty exist, then, everywhere in the world, and more so than in any past age; for everywhere the masses have opted for higher living standards and the promise of freedom and everywhere the various regimes of statism and collectivism cannot fulfill these goals. What is needed, then, is simply the “subjective conditions” for victory, i.e., a growing body of informed libertarians who will spread the message to the peoples of the world that liberty and the purely free market provide the way out of their problems and crises. Liberty cannot be fully achieved unless libertarians exist in number to guide the peopled to the proper path. But perhaps the greatest stumbling-block to the creation of such a movement is the despair and pessimism typical of the libertarian in today’s world. Much of that pessimism is due to his misreading of history and his thinking of himself and his handful of confreres as irredeemably isolated from the masses and therefore from the winds of history. Hence he becomes a lone critic of historical events rather than a person who considers himself as part of a potential movement which can and will make history. The modern libertarian has forgotten that the liberal of the 17th and 18th centuries faced odds much more overwhelming than faces the liberal of today; for in that era before the Industrial Revolution, the victory of liberalism was far from inevitable. And yet the liberalism of that day was not-content to remain a gloomy little sect; instead, it unified theory and action. Liberalism grew and developed as an ideology and, leading and guiding the masses, made the Revolution which changed the fate of the world; by its monumental breakthrough, this Revolution of the 18th century transformed history from a chronicle of stagnation and despotism to an ongoing movement advancing toward a veritable secular Utopia of liberty and rationality and abundance. The Old Order is dead or moribund; and the reactionary attempts to run a modern society and economy by various throwbacks to the Old Order are doomed to total failure. The liberals of the past have left to modern libertarians a glorious heritage, not only of ideology but of victories against far more devastating odds. The liberals of the past have also left a heritage of the proper strategy and tactics for libertarians to follow: not only by leading rather than remaining aloof from the masses; but also by not falling prey to short-run optimism. For short-run optimism, being unrealistic, leads straightway to disillusion and then to long-run pessimism; just as, on the other side of the coin, long-run pessimism leads to exclusive and self-defeating concentration on immediate and short-run issues. Short-run optimism stems, for one thing, from a naive and simplistic view of strategy: that liberty will win merely by educating more intellectuals, who in turn will educate opinion-moulders, who in turn will convince the masses, after which the State will somehow fold its tent and silently steal away. Matters are not that easy; for libertarians face not only a problem of education but also a problem of power; and it is a law of history that a ruling caste has never voluntarily given up its power.

But the problem of power is, certainly in the United States, far in the future. For the libertarian, the main task of the present epoch is to cast off his needless and debilitating pessimism, to set his sights on long-run victory and to set about the road to its attainment. To do this, he must, perhaps first of all, drastically realign his mistaken view of the ideological spectrum; he must discover who his friends and natural allies are, and above all perhaps, who his enemies are. Armed with this knowledge, let him proceed in the spirit of radical long-run optimism that one of the great figures in the history of libertarian thought, Randolph Bourne, correctly identified as the spirit of youth. Let Bourne’s stirring words serve also as the guidepost for the spirit of liberty:

youth is the incarnation of reason pitted against the rigidity of tradition. Youth puts the remorseless questions to everything that is old and established-Why? What is this thing good for? And when it gets the mumbled, evasive answers of the defenders it applies its own fresh, clean spirit of reason to institutions, customs, and ideas, and finding them stupid, inane, or poisonous, turns instinctively to overthrow them and build in their place the things with which its visions teem. . .

Youth is the leaven that keeps all these questioning, testing attitudes fermenting in the world. If it were not for this troublesome activity of youth, with its hatred of sophisms and glosses, its insistence on things as they are, society would die from sheer decay. It is the policy of the older generation as it gets adjusted to the world to hide away the unpleasant things where it can, or preserve a conspiracy of silence and an elaborate pretense that they do not exist. But meanwhile the sores go on festering, just the same. Youth is the drastic antiseptic… It drags skeletons from closets and insists that they be explained. No wonder the older generation fears and distrusts the younger. Youth is the avenging Nemesis on its trail…

Our elders are always optimistic in their views of the present, pessimistic in their views of the future; youth is pessimistic toward the present and gloriously hopeful for the future. And it is this hope which is the lever of progress–one might say, the only lever of progress…

The secret of life is then that this fine youthful spirit shall never be lost. Out of the turbulence of youth should come this fine precipitate–a sane, strong, aggressive spirit of daring and doing. It must be a flexible, growing spirit, with a hospitality to new ideas, and a keen insight into experience. To keep one’s reactions warm and true is to have found the secret of perpetual youth, and perpetual youth is salvation.21Randolph Bourne, “Youth,” The Atlantic Monthly (April, 1912); reprinted in Lillian Schlissel, ed., The World of Randolph Bourne (New York: E. P. Dutton and Co., 1965), pp. 9-11, 15.

How the Fed Rules and Inflates

How the Fed Rules and Inflates

[From chapter 23 of The Case Against the Fed.]

Having examined the nature of fractional reserve and of central banking, and having seen how the questionable blessings of Central Banking were fastened upon America, it is time to see precisely how the Fed, as presently constituted, carries out its systemic inflation and its control of the American monetary system.

Pursuant to its essence as a post-Peel Act Central Bank, the Federal Reserve enjoys a monopoly of the issue of all bank notes. The U. S. Treasury, which issued paper money as Greenbacks during the Civil War, continued to issue one-dollar “Silver Certificates” redeemable in silver bullion or coin at the Treasury until August 16, 1968. The Treasury has now abandoned any note issue, leaving all the country’s paper notes, or “cash,” to be emitted by the Federal Reserve. Not only that; since the U.S. abandonment of the gold standard in 1933, Federal Reserve Notes have been legal tender for all monetary debts, public or private.

Federal Reserve Notes, the legal monopoly of cash or “standard,” money, now serves as the base of two inverted pyramids determining the supply of money in the country. More precisely, the assets of the Federal Reserve Banks consist largely of two central items. One is the gold originally confiscated from the public and later amassed by the Fed. Interestingly enough, while Fed liabilities are no longer redeemable in gold, the Fed safeguards its gold by depositing it in the Treasury, which issues “gold certificates” guaranteed to be backed by no less than 100 percent in gold bullion buried in Fort Knox and other Treasury depositories. It is surely fitting that the only honest warehousing left in the monetary system is between two different agencies of the federal government: the Fed makes sure that its receipts at the Treasury are backed 100 percent in the Treasury vaults, whereas the Fed does not accord any of its creditors that high privilege.

The other major asset possessed by the Fed is the total of U.S. government securities it has purchased and amassed over the decades. On the liability side, there are also two major figures: Demand deposits held by the commercial banks, which constitute the reserves of those banks; and Federal Reserve Notes, cash emitted by the Fed. The Fed is in the rare and enviable position of having its liabilities in the form of Federal Reserve Notes constitute the legal tender of the country. In short, its liabilities — Federal Reserve Notes — are standard money. Moreover, its other form of liability — demand deposits — are redeemable by deposit-holders (i.e., banks, who constitute the depositors, or “customers,” of the Fed) in these Notes, which, of course, the Fed can print at will. Unlike the days of the gold standard, it is impossible for the Federal Reserve to go bankrupt; it holds the legal monopoly of counterfeiting (of creating money out of thin air) in the entire country.

The American banking system now comprises two sets of inverted pyramids, the commercial banks pyramiding loans and deposits on top of the base of reserves, which are mainly their demand deposits at the Federal Reserve. The Federal Reserve itself determines its own liabilities very simply: by buying or selling assets, which in turn increases or decreases bank reserves by the same amount.

At the base of the Fed pyramid, and therefore of the bank system’s creation of “money” in the sense of deposits, is the Fed’s power to print legal tender money. But the Fed tries its best not to print cash but rather to “print” or create demand deposits, checking deposits, out of thin air, since its demand deposits constitute the reserves on top of which the commercial banks can pyramid a multiple creation of bank deposits, or “checkbook money.”

Let us see how this process typically works. Suppose that the “money multiplier” — the multiple that commercial banks can pyramid on top of reserves, is 10:1. That multiple is the inverse of the Fed’s legally imposed minimum reserve requirement on different types of banks, a minimum which now approximates 10 percent. Almost always, if banks can expand 10:1 on top of their reserves, they will do so, since that is how they make their money. The counterfeiter, after all, will strongly tend to counterfeit as much as he can legally get away with. Suppose that the Fed decides it wishes to expand the nation’s total money supply by $10 billion. If the money multiplier is 10, then the Fed will choose to purchase $1 billion of assets, generally U.S. government securities, on the open market.

Figure 10 and 11 below demonstrates this process, which occurs in two steps. In the first step, the Fed directs its Open Market Agent in New York City to purchase $1 billion of U.S. government bonds. To purchase those securities, the Fed writes out a check for $1 billion on itself, the Federal Reserve Bank of New York. It then transfers that check to a government bond dealer, say Goldman, Sachs, in exchange for $1 billion of U.S. government bonds. Goldman, Sachs goes to its commercial bank — say Chase Manhattan — deposits the check on the Fed, and in exchange increases its demand deposits at the Chase by $1 billion.

fed1

Where did the Fed get the money to pay for the bonds? It created the money out of thin air, by simply writing out a check on itself. Neat trick if you can get away with it!

Chase Manhattan, delighted to get a check on the Fed, rushes down to the Fed’s New York branch and deposits it in its account, increasing its reserves by $1 billion. Figure 10 shows what has happened at the end of this Step One.

The nation’s total money supply at any one time is the total standard money (Federal Reserve Notes) plus deposits in the hands of the public. Note that the immediate result of the Fed’s purchase of a $1 billion government bond in the open market is to increase the nation’s total money supply by $1 billion.

But this is only the first, immediate step. Because we live under a system of fractional-reserve banking, other consequences quickly ensue. There are now $1 billion more in reserves in the banking system, and as a result, the banking system expands its money and credit, the expansion beginning with Chase and quickly spreading out to other banks in the financial system. In a brief period of time, about a couple of weeks, the entire banking system will have expanded credit and the money supply another $9 billion, up to an increased money stock of $10 billion. Hence, the leveraged, or “multiple,” effect of changes in bank reserves, and of the Fed’s purchases or sales of assets which determine those reserves. Figure 11, then, shows the consequences of the Fed purchase of $1 billion of government bonds after a few weeks.

Note that the Federal Reserve balance sheet after a few weeks is unchanged in the aggregate (even though the specific banks owning the bank deposits will change as individual banks expand credit, and reserves shift to other banks who then join in the common expansion.) The change in totals has taken place among the commercial banks, who have pyramided credits and deposits on top of their initial burst of reserves, to increase the nation’s total money supply by $10 billion.

fed2

It should be easy to see why the Fed pays for its assets with a check on itself rather than by printing Federal Reserve Notes. Only by using checks can it expand the money supply by ten-fold; it is the Fed’s demand deposits that serve as the base of the pyramiding by the commercial banks. The power to print money, on the other hand, is the essential base in which the Fed pledges to redeem its deposits. The Fed only issues paper money (Federal Reserve Notes) if the public demands cash for its bank accounts and the commercial banks then have to go to the Fed to draw down their deposits. The Fed wants people to use checks rather than cash as far as possible, so that it can generate bank credit inflation at a pace that it can control.

If the Fed purchases any asset, therefore, it will increase the nation’s money supply immediately by that amount; and, in a few weeks, by whatever multiple of that amount the banks are allowed to pyramid on top of their new reserves. f I it sells any asset (again, generally U.S. government bonds), the sale will have the symmetrically reverse effect. At first, the nation’s money supply will decrease by the precise amount of the sale of bonds; and in a few weeks, it will decline by a multiple, say ten times, that amount.

Thus, the major control instrument that the Fed exercises over the banks is “open market operations,” purchases or sale of assets, generally U.S. government bonds. Another powerful control instrument is the changing of legal reserve minima. If the banks have to keep no less than 10 percent of their deposits in the form of reserves, and then the Fed suddenly lowers that ratio to 5 percent, the nation’s money supply, that is of bank deposits, will suddenly and very rapidly double. And vice versa if the minimum ratio were suddenly raised to 20 percent; the nation’s money supply will be quickly cut in half. Ever since the Fed, after having expanded bank reserves in the 1930s, panicked at the inflationary potential and doubled the minimum reserve requirements to 20 percent in 1938, sending the economy into a tailspin of credit liquidation, the Fed has been very cautious about the degree of its changes in bank reserve requirements. The Fed, ever since that period, has changed bank reserve requirements fairly often, but in very small steps, by fractions of one percent. It should come as no surprise that the trend of the Fed’s change has been downward: ever lowering bank reserve requirements, and thereby increasing the multiples of bank credit inflation. Thus, before 1980, the average minimum reserve requirement was about 14 percent, then it was lowered to 10 percent and less, and the Fed now has the power to lower it to zero if it so wishes.

Thus, the Fed has the well-nigh absolute power to determine the money supply if it so wishes.1 Over the years, the thrust of its operations has been consistently inflationary. For not only has the trend of its reserve requirements on the banks been getting ever lower, but the amount of its amassed U.S. government bonds has consistently increased over the years, thereby imparting a continuing inflationary impetus to the economic system. Thus, the Federal Reserve, beginning with zero government bonds, had acquired about $400 million worth by 1921, and $2.4 billion by 1934. By the end of 1981 the Federal Reserve had amassed no less than $140 billion of U.S. government securities; by the middle of 1992, the total had reached $280 billion. There is no clearer portrayal of the inflationary impetus that the Federal Reserve has consistently given, and continues to give, to our economy.

    • 1. Traditionally, money and banking textbooks list three forms of Fed control over the reserves, and hence the credit, of the commercial banks: in addition to reserve requirements and open market operations, there is the Fed’s “discount” rate, interest rate charged on its loans to the banks. Always of far more symbolic than substantive importance, this control instrument has become trivial, now that banks almost never borrow from the Fed. Instead, they borrow reserves from each other in the overnight “federal funds” market.

Reprinted From Mises.org.

Sabra and Shatila

Sabra and Shatila

Originally published at “The Massacre” in The Libertarian Forum, October 1982.

All other news, all other concerns, fade into insignificance beside the enormous horror of the massacre in Beirut. All humanity is outraged at the wanton slaughter of hundreds of men (mainly elderly), women, and children in the Palestinian refugee camps of Sabra and Shatila. The days of the massacre— September 16 to 18—shall truly live in infamy.

There is one ray of hope in this bloodbath: the world-wide outrage demonstrates that mankind’s sensibilities have not, as some have feared, been blunted by the butcheries of the twentieth century or by watching repeated carnage on television. Mankind is still capable of reacting to evident atrocities that are wreaked upon other human beings: be they thousands of miles away or members of a different or even alien religion, culture, or ethnic group. When hundreds of manifest innocents are brutally and systematically slaughtered, all of us who are still fully human cry out in profound protest.

The outrage and protest must be compounded of several elements. First, of course, we must mourn for the poor downtrodden people of Lebanon, especially the Palestinians, who were driven out in 1948 to a reluctant exile from their homes and land. We must mourn for the slaughtered and their remaining families. And for the hundreds of thousands in Lebanon and in Beirut who have been killed, wounded, bombed out, and rendered homeless wanderers by the aggression of the State of Israel.

But mourning and compassion are not enough. As in any mass murder, the responsibility and the guilt for the crime must be pinpointed. For the sake of justice and to try to make sure that such a holocaust—for holocaust it has been—may never happen again.

Who, then, is guilty? On the most immediate and direct level, of course, the uniformed thugs and murderers who committed the slaughter. They consist of two groups of Christian Lebanese, working their will on innocent Muslims: the Christian Lebanese Forces of Major Saad Haddad, and the Christian Phalange, headed by the Gemayel family, now installed in the presidency of Lebanon.

But equally responsible, equally guilty, are the aiders and abettors, the string-pullers, the masters of West Beirut where the slaughter took place: the State of Israel. When the PLO was evacuated from West Beirut, to the fanfare of an international accord and international armed force supervision, the State of Israel saw its way clear to the conquest of Muslim West Beirut. Its protectors gone, the international forces cleared out, the poor huddled people of West Beirut had to put up with the conquest of the Israeli aggressors, who marched in on September 16. It was the deliberate decision of the Israeli government to usher the Phalange and the Lebanese forces into camps, to have them, in Israel’s words, “purify” the camps and rid them of PLO members who might be lurking therein—masquerading, no doubt as babies and children. Israeli tanks guarded the perimeter of Sabra and Shatila to permit the Christians unlimited control of the camps, and Israeli army observation posts on rooftops supervised the scene less than 100 yards from the slaughter.

On Friday, on the scene, Reuters correspondent Paul Eedle spoke to an Israeli colonel who explained about the operation: it was designed to “purify” the area without the direct participation of the Israeli army. This policy is of course all too reminiscent of the Nazi policy on the Eastern front, when the German soldiers stood by and benignly allowed the Ukrainian and other non-German SS to massacre Jews and other natives of Russia.

Also on Friday, it is particularly edifying to know that the Phalangists came to Israeli positions on the perimeter of the camps to relax, eat and drink, read and listen to music, and in general “rest up” before returning to butcher the few people still remaining. A Phalangist officer, a gold crucifix dangling from his neck, later told a reporter that there was still shooting going on in the camps, “otherwise what would I be doing here?”

Writing from the scene of the crime in evident horror, New York Times reporter, Thomas L. Friedman (Sept. 20) wrote that from the Israeli observation posts “it would not have been difficult to ascertain the slaughter not only by sight but from the sounds of gunfire and the screams coining from the camp. In addition to providing some provisions for the Christian militiamen, the Israelis had tanks stationed on the hilltop, apparently to provide cover for them if the militiamen encountered fiercer resistance than had been anticipated.”

We know now that by Thursday night the Israeli army and government knew about the massacre, and that yet they did absolutely nothing for 36 hours, until Saturday morning, when, the bloodbath completed, they gently waved the Christian murderers out of the camps. All was secured.

As a grisly finale to Israel’s blood crime, even after the world outrage, the Israeli army turned over a huge number of captured weapons to the Lebanese Forces—the Haddad army which Israel has trained and armed for seven years, which has held and occupied the southern Lebanese border for many months on behalf of Israel, and who, as the New York Times put it, are “virtually integrated into the Israeli army and operate entirely under its command.”

One of the most heartening aspects of the response to the massacre has been the firestorm of protest within Israel itself, even from the ordinarily pro-Begin press. Thus, Eitan Haber, military correspondent of the ordinarily pro-Begin Yediot Ahronot, wrote in shock:

“Government ministers and senior commanders already knew during the hours of Thursday night and Friday morning that a terrible massacre was taking place in the refugee camps of Sabra and Shatila, and despite the fact that they knew this for sure, they did not lift a finger and did nothing to prevent the massacre until Saturday morning. For 36 additional hours, the Phalangists continued to run rampant in the refugee camps and to kill anyone who fell in their path.”

An editor of the Beginite daily paper, Maariv, appearing on ABC-TV Nightline, was evidently shaken and pinned full responsibility for the holocaust on the Begin government, and clearly called for its resignation.

Unfortunately, the response of American Jews was not nearly as outraged as that from Israel itself. It is well known that the lockstep and knee-jerk support by American Jews for any and all acts of the State of Israel is scarcely replicated within Israel itself. But even here the ranks were broken or at the very least confused. Even William Safire, always ardent in support of Israel, attacked its “blunder”—a strong word coming from Safire. Only the “professional Jews,” head of the leading Jewish organizations in America, continued to alibi and excuse. For a few days, they fell back on the view that “we can’t judge until we know the facts,” but even this lame alibi fell apart when Begin arrogantly refused any impartial judicial inquiry and pushed his view through the Knesset. Among the American Jewish leaders only Rabbi Balfour Brickner and the highly intelligent Professor Arthur Hertzberg—who have always been unafraid to speak their mind—lashed into the responsibility of the state of Israel.

An illuminating scene occurred on ABC’s Nightline, when Rabbi Schindler and Howard Squadron, two top “professional” American Jews, were asked their views of the Israeli action. It was squirmsville. One particularly sharp question was asked by Nightline: How is it that American Jewish protest has been so muted compared to that within Israel itself? Rabbi Schindler’s response was one for the books. In essence he said: “Within Israel there are political parties which can be critical of the government’s action. But our role as American Jews is to support the State of Israel regardless of its specific actions.” A chilling admission indeed!

And so American Jewish leaders consider it their role to support the State of Israel come hell or high water. How many deaths would it take? How many murders? How much slaughter of the innocent? Are there any conceivable acts that would turn off the American Jewish leadership, that would cause these people to stop their eternal apologetics for the State of Israel? Any acts at all?

After this statement of his role, the rather startled Nightline interviewer asked Rabbi Schindler, “but what about support for right and wrong? Doesn’t that count?” Having marched to the edge of the abyss and perhaps revealed too much, Rabbi Schindler rallied, and muttered something about “of course, we’re interested in right and wrong; but we can only judge after we know the facts.” Since Begin had just vetoed a fact-finding board of inquiry, this line fell pretty flat.

In American politics, the magic attraction of the State of Israel has at last lost some of its power. Even Scoop Jackson, even Senator Alan Cranston (D., Calif.) have become critical of Israel. The leading all-out supporter of Israel in the Reagan Cabinet—Al Haig—has been booted out, perhaps partially on that issue. But these are only small, fitful steps toward de-Israelizing American foreign policy.

One bizarre aspect of this affair has been the American perception—at least until the massacre—of the Gemayel family and its Phalange. It has now been revealed that the Israeli intelligence services—notoriously savvy people—had warned Begin and Defense Minister Sharon in advance that the Phalangists were likely to commit a massacre if the camps were turned over to them. To say that these warnings were “ignored” by Begin, Sharon & Co. is putting matters very, very kindly.

Well, what are the Gemayels and the Phalange like? Perhaps it is best to contrast reality with the Alice-in-Wonderland comments of the Reagan Administration upon the assassination of Phalangist leader and near-president of Lebanon Bashir Gemayel on September 15. “A tragedy for Lebanese democracy,” opined the Reagan Administration, while Ronnie himself spoke of Bashir as a brilliant, rising young democratic politician. The U.S. and Israel both spoke of their hope that Bashir could impose a “strong, centralized government” to unify anarchic Lebanon.

Since the Massacre, we should now have a better idea of the sort of “unity” that the Gemayels propose to bring to Lebanon: the “unity” of the charnel house and the cemetery. Perhaps the name of the political and military organization known as the Phalange should give a clue. For Bashir’s father, Pierre, founded the Phalange after an enthusiastic visit to Hitler’s Germany. The Phalange (named after Franco’s Falange) are fascists, pure and simple, in goals and in method.

But let us concentrate on the rising young politician and see if we should shed any tears for Bashir. Bashir is distinguished from other leading Lebanese politicians in that he is himself a mass murderer. I mean personally. The Gemayels had two sets of powerful rivals among the fascistic Maronite Christian community. “Pro-Western” and “Pro-Israeli” a little less fanatically than the Phalange, these were the followers of elderly ex-Presidents Camille Chamoun and Suleiman Franjieh.

Here is the way that young democrat, Begin and Reagan’s Man in Beirut, dealt with dissent within the Maronite community. Five years ago, the then 29-year-old Bashir Gemayel led a commando raid on Franjieh’s mountain stronghold in northern Lebanon. Bashir made Franjieh’s oldest son Tony watch while he and his gang tortured and killed Tony’s wife and two-year-old daughter. Bashir then murdered Tony and 29 followers, calling the massacre a “social revolt against feudalism.” Two years later, Bashir took care of the Chamouns. In May, 1980, Bashir and his men, in a lightning strike, massacred 450 of Chamoun’s followers at a beach resort near the city of Junei. Over 250 were murdered on the beach or while swimming. The wife and daughter of Camille Chamoun’s son Dany were both raped. Less than a month later, Bashir and his men invaded Chamoun’s headquarters in east Beirut, and savagely killed over 500 of Chamoun’s followers as well as bystanders. Many of the victims were castrated by Bashir’s thugs, and one captured Chamounite was blown apart with a stick of dynamite shoved down his throat.

Who assassinated Bashir? It could almost have been anyone in Lebanon.

The fascist savagery and the willingness to be a catspaw of Israel may be partly explained by demographic factors. Lebanese political rule is set by quota system, in which dominance— including the Presidency—is assured the Maronite Christian community. Unfortunately, the census on which the quotas are based is that of the early 1930’s, when the Christians were a majority in Lebanon. The early 1930’s census still rules, even though it is now conceded by everyone that Muslims are about 55% of the Lebanese population, to the Christian 45%. This means that freezing Maronite Christian rule over a majority of Muslims—the Begin-and-Reagan solution to the Lebanese problem—in addition to being profoundly immoral, in the long run will not work. The Muslims are out-producing the Christians in future population, no matter how many Muslim babies the Phalangists are proposing to kill.

Unfortunately, no matter the anguish and the outcry within Israel, there is little hope that the Israeli opposition will be able to do much to correct the fundamental problem. For while individual voices are raised on the massacre, politically there is almost no opposition to the fundamental Zionist axiom within Israel. The chief opposition Labor Party, the Founding Fathers and Mothers of Israel, paved the way for Begin in their commitment to the Zionist ideal and to the consequent expulsion of 1 million Palestinian Arabs from their homes and their lands. Only a few minor parties in Israel, such as those of Uri Davis and Shulamith Aloni, can be considered to have broken with the Zionist paradigm, and these are only on the fringe of Israeli politics.

The fundamental problem, the Zionist paradigm, is simply this: The establishment of the State of Israel was accomplished by the expropriation of the Palestinians from the overwhelming bulk of the land of the “original” 1948 Israel. Over a million Palestinian Arabs fled outside the borders of Israel, and the remaining Arabs have been systematically treated as second-class citizens, kept down by the fact that only Jews are allowed to own land within Israel that once falls into Jewish hands. (And more is doing so all the time.) In 1967, Israel aggressed against and conquered the West Bank, Gaza, and the Golan Heights of Syria, which it is in the process of annexing. Palestinian Arabs in the occupied territories are, again, treated as second-class citizens, and Zionist settlements are planted amongst them.

Israel and its American apologists are wont to blame everything on the dread bogeyman, the PLO, and to excuse all Israeli crimes as necessary to defend the security of the Israeli state from PLO “terrorism.” And yet it is conveniently forgotten that there was no PLO at all until after the shame of the 1967 war, when the Palestinians realized that they had to stop relying on the faithless Arab states and could only try themselves to win back their homes and their possessions. Since there was no “PLO terror” until 1968, how come that Israel aggressed against and terrorized the Palestinian Arabs for two decades previously?

The answer lies in the Zionist paradigm. Zionism was a nineteenth-century creation of European (not Middle Eastern) Jews, and was sold to Great Britain as a conscious colonial settlerstate, a junior partner to British imperialism in the Middle East. After World War I, when the British and French dismembered the Ottoman Empire, they betrayed their promises to give the Arabs their independence, and they established mandates or puppet states across the Middle East. We are still living with the legacy of that final outcropping of British imperialism.

How did the early Zionists sell their scheme to Western public opinion? The favorite Zionist slogan of the day rings peculiarly hollow now: “A land without people [Palestine] for a people without land [the Jews].” A land without people; there are no Palestinian Arabs, the Zionists assured everyone, and so a million and a half people, many of them productive farmers, citrus growers, businessmen,—people “who made the desert bloom” first—were at a stroke written out of existence. And before the PLO launched its fight-back, Israeli leaders stoutly continued to deny reality, Golda Meir repeatedly maintaining that “there are no Palestinians.” Say it often enough and maybe they go away. Maybe.

Libertarians are opposed to every State. But the State of Israel is uniquely pernicious, because its entire existence rests and continues to rest on a massive expropriation of property and expulsion from the land. Libertarians in the United States often complain about the radical libertarian adherence to “land reform,” i.e. the giving back of stolen land to the victims. In the case of expropriations centuries ago, who gets what is often fuzzy, and conservative libertarians can raise an important point. But in the case of Palestine, the victims and their children—the true owners of the land—are right there, beyond the borders, in refugee camps, in hovels, dreaming about a return to their own. There is nothing fuzzy here. Justice will only be served, and true peace in the devastated area will only come, when a miracle happens and Israel allows the Palestinians to stream back in and repossess their rightful property. Until then, so long as the Palestinians continue to live and no matter how far back they are pushed, they will always be there, and they will continue to press for their dream of justice. No matter how many square miles and how many cities Israel conquers (shall it be Damascus next?), the Palestinians will be there, in addition to all the other Arab refugees newly created by the Israeli policy of blood and iron. But allowing justice, allowing the return of the expropriated, would mean that Israel would have to give up its exclusivist Zionist ideal. For recognizing Palestinians as human beings with full human rights is the negation of Zionism; it is the recognition that the land was never “empty.”

A just Israeli state (insofar as any state can be just), then, would necessarily be a de-Zionized state, and this no Israeli political party in the foreseeable future would have the slightest desire to do. And so the slaughter and the horror will go on.

Reprinted from LewRockwell.com.

The Crisis of American Foreign Policy

The Crisis of American Foreign Policy

“War is even worse than OSHA and price controls.” –Murray Rothbard

Chris Sciabarra: In September 1980, I extended an invitation to Murray to be among the speakers featured in a nearly week-long “Libertython” sponsored by the NYU chapter of Students for a Libertarian Society—dedicated to exploring the politics, economics, and philosophy of freedom. On September 23, 1980, he gave the second of six scheduled lectures that day. His lecture focused on “The Crisis of American Foreign Policy,” wherein I introduced him to a slightly smaller audience than the event sponsored by the History Department. The size of the audience didn’t matter; for Rothbard, there was nothing more important than the issue of war and peace. As he put it, libertarians were usually quite good in opposing the regulations of OSHA or criticizing the destructive effects of price controls. But when faced with the role of the warfare state as the single most important factor in the expansion of government power: “Blank out”—a turn of phrase he used, giving credit to Ayn Rand—was the typical response he’d witnessed from far too many libertarians. By not focusing enough attention on the role of “war and peace,” all the other issues concerning price control, free will and determinism, and so forth, become “pointless … if we’re all washed away” as a species.

With a bit of gallows humor, he couldn’t resist criticizing the U.S. military’s plan that would whisk away politicians to safety as nuclear warfare becomes imminent such that the “goddamn government” will go on in bomb shelters, while the rest of us perish. As the antidote to war, he cited W. C. Fields, who, when asked by the Saturday Evening Post how to end World War II, remarked: “Take the leaders of both sides or all sides, in the Hollywood Bowl, and let them fight it out with sackfuls of guns.” The Post didn’t publish the comment, Rothbard says, but he yearns for a world that gets back to jousting between the leaders of warring governments, rather than a policy of what Charles Beard once called “perpetual war for perpetual peace,” in which twentieth-century technology had made possible mass murder on an unimaginable scale.

Some will have difficulty accepting Rothbard’s argument that in any clash between “democratic” and “dictatorial” countries, the latter is not necessarily the source of contemporary conflict. In fact, Rothbard argues, the foreign policy of the “democratic” United States has been at the root of many of the global conflicts in the post-World War II era.

During the Q&A session, folks who are familiar with the voice of Don Lavoie will recognize him instantly. Included here as well are several self-acknowledged “digs” that Rothbard takes at the Libertarian Party’s 1980 Presidential candidate, Ed Clark, with some surprising comments on subjects such as immigration policy.

Reprinted with permission from The Mises Institute.

War, Peace, and the State

War, Peace, and the State

The libertarian movement has been chided by William F. Buckley, Jr., for failing to use its “strategic intelligence” in facing the major problems of our time. We have, indeed, been too often prone to “pursue our busy little seminars on whether or not to demunicipalize the garbage collectors” (as Buckley has contemptuously written), while ignoring and failing to apply libertarian theory to the most vital problem of our time: war and peace. There is a sense in which libertarians have been utopian rather than strategic in their thinking, with a tendency to divorce the ideal system which we envisage from the realities of the world in which we live. In short, too many of us have divorced theory from practice, and have then been content to hold the pure libertarian society as an abstract ideal for some remotely future time, while in the concrete world of today we follow unthinkingly the orthodox “conservative” line. To live liberty, to begin the hard but essential strategic struggle of changing the unsatisfactory world of today in the direction of our ideals, we must realize and demonstrate to the world that libertarian theory can be brought sharply to bear upon all of the world’s crucial problems. By coming to grips with these problems, we can demonstrate that libertarianism is not just a beautiful ideal somewhere on Cloud Nine, but a tough-minded body of truths that enables us to take our stand and to cope with the whole host of issues of our day.

Let us then, by all means, use our strategic intelligence. Although, when he sees the result, Mr. Buckley might well wish that we had stayed in the realm of garbage collection. Let us construct a libertarian theory of war and peace.

The fundamental axiom of libertarian theory is that no one may threaten or commit violence (“aggress”) against another man’s person or property. Violence may be employed only against the man who commits such violence; that is, only defensively against the aggressive violence of another.1

In short, no violence may be employed against a non-aggressor. Here is the fundamental rule from which can be deduced the entire corpus of libertarian theory.2

Let us set aside the more complex problem of the State for awhile and consider simply relations between “private” individuals. Jones finds that he or his property is being invaded, aggressed against, by Smith. It is legitimate for Jones, as we have seen, to repel this invasion by defensive violence of his own. But now we come to a more knotty question: is it within the right of Jones to commit violence against innocent third parties as a corollary to his legitimate defense against Smith? To the libertarian, the answer must be clearly, no. Remember that the rule prohibiting violence against the persons or property of innocent men is absolute: it holds regardless of the subjective motives for the aggression. It is wrong and criminal to violate the property or person of another, even if one is a Robin Hood, or starving, or is doing it to save one’s relatives, or is defending oneself against a third man’s attack. We may understand and sympathize with the motives in many of these cases and extreme situations. We may later mitigate the guilt if the criminal comes to trial for punishment, but we cannot evade the judgment that this aggression is still a criminal act, and one which the victim has every right to repel, by violence if necessary. In short, A aggresses against B because C is threatening, or aggressing against, A. We may understand C’s “higher” culpability in this whole procedure; but we must still label this aggression as a criminal act which B has the right to repel by violence.

To be more concrete, if Jones finds that his property is being stolen by Smith, he has the right to repel him and try to catch him; but he has no right to repel him by bombing a building and murdering innocent people or to catch him by spraying machine gun fire into an innocent crowd. If he does this, he is as much (or more of) a criminal aggressor as Smith is.

The application to problems of war and peace is already becoming evident. For while war in the narrower sense is a conflict between States, in the broader sense we may define it as the outbreak of open violence between people or groups of people. If Smith and a group of his henchmen aggress against Jones and Jones and his bodyguards pursue the Smith gang to their lair, we may cheer Jones on in his endeavor; and we, and others in society interested in repelling aggression, may contribute financially or personally to Jones’s cause. But Jones has no right, any more than does Smith, to aggress against anyone else in the course of his “just war”: to steal others’ property in order to finance his pursuit, to conscript others into his posse by use of violence, or to kill others in the course of his struggle to capture the Smith forces. If Jones should do any of these things, he becomes a criminal as fully as Smith, and he too becomes subject to whatever sanctions are meted out against criminality. In fact, if Smith’s crime was theft, and Jones should use conscription to catch him, or should kill others in the pursuit, Jones becomes more of a criminal than Smith, for such crimes against another person as enslavement and murder are surely far worse than theft. (For while theft injures the extension of another’s personality, enslavement injures, and murder obliterates, that personality itself.)

Suppose that Jones, in the course of his “just war” against the ravages of Smith, should kill a few innocent people, and suppose that he should declaim, in defense of this murder, that he was simply acting on the slogan, “Give me liberty or give me death.” The absurdity of this “defense” should be evident at once, for the issue is not whether Jones was willing to risk death personally in his defensive struggle against Smith; the issue is whether he was willing to kill other people in pursuit of his legitimate end. For Jones was in truth acting on the completely indefensible slogan: “Give me liberty or give them death” surely a far less noble battle cry.3

The libertarian’s basic attitude toward war must then be: it is legitimate to use violence against criminals in defense of one’s rights of person and property; it is completely impermissible to violate the rights of otherinnocent people. War, then, is only proper when the exercise of violence is rigorously limited to the individual criminals. We may judge for ourselves how many wars or conflicts in history have met this criterion.

It has often been maintained, and especially by conservatives, that the development of the horrendous modern weapons of mass murder (nuclear weapons, rockets, germ warfare, etc.) is only a difference of degreerather than kind from the simpler weapons of an earlier era. Of course, one answer to this is that when the degree is the number of human lives, the difference is a very big one.4 But another answer that the libertarian is particularly equipped to give is that while the bow and arrow and even the rifle can be pinpointed, if the will be there, against actual criminals, modern nuclear weapons cannot. Here is a crucial difference in kind. Of course, the bow and arrow could be used for aggressive purposes, but it could also be pinpointed to use only against aggressors. Nuclear weapons, even “conventional” aerial bombs, cannot be. These weapons are ipso factoengines of indiscriminate mass destruction. (The only exception would be the extremely rare case where a mass of people who were all criminals inhabited a vast geographical area.) We must, therefore, conclude that the use of nuclear or similar weapons, or the threat thereof, is a sin and a crime against humanity for which there can be no justification.

This is why the old cliché no longer holds that it is not the arms but the will to use them that is significant in judging matters of war and peace. For it is precisely the characteristic of modern weapons that they cannot be used selectively, cannot be used in a libertarian manner. Therefore, their very existence must be condemned, and nuclear disarmament becomes a good to be pursued for its own sake. And if we will indeed use our strategic intelligence, we will see that such disarmament is not only a good, but the highest political good that we can pursue in the modern world. For just as murder is a more heinous crime against another man than larceny, so mass murder—indeed murder so widespread as to threaten human civilization and human survival itself—is the worst crime that any man could possibly commit. And that crime is now imminent. And the forestalling of massive annihilation is far more important, in truth, than the demunicipalization of garbage disposal, as worthwhile as that may be. Or are libertarians going to wax properly indignant about price control or the income tax, and yet shrug their shoulders at or even positively advocate the ultimate crime of mass murder?

If nuclear warfare is totally illegitimate even for individuals defending themselves against criminal assault, how much more so is nuclear or even “conventional” warfare between States!

It is time now to bring the State into our discussion. The State is a group of people who have managed to acquire a virtual monopoly of the use of violence throughout a given territorial area. In particular, it has acquired a monopoly of aggressive violence, for States generally recognize the right of individuals to use violence (though not against States, of course) in self-defense.5 The State then uses this monopoly to wield power over the inhabitants of the area and to enjoy the material fruits of that power. The State, then, is the only organization in society that regularly and openly obtains its monetary revenues by the use of aggressiveviolence; all other individuals and organizations (except if delegated that right by the State) can obtain wealth only by peaceful production and by voluntary exchange of their respective products. This use of violence to obtain its revenue (called “taxation”) is the keystone of State power. Upon this base the State erects a further structure of power over the individuals in its territory, regulating them, penalizing critics, subsidizing favorites, etc. The State also takes care to arrogate to itself the compulsory monopoly of various critical services needed by society, thus keeping the people in dependence upon the State for key services, keeping control of the vital command posts in society and also fostering among the public the myth that only the State can supply these goods and services. Thus the State is careful to monopolize police and judicial service, the ownership of roads and streets, the supply of money, and the postal service, and effectively to monopolize or control education, public utilities, transportation, and radio and television.

Now, since the State arrogates to itself the monopoly of violence over a territorial area, so long as its depredations and extortions go unresisted, there is said to be “peace” in the area, since the only violence is one-way, directed by the State downward against the people. Open conflict within the area only breaks out in the case of “revolutions” in which people resist the use of State power against them. Both the quiet case of the State unresisted and the case of open revolution may be termed “vertical violence”: violence of the State against its public or vice versa.

In the modern world, each land area is ruled over by a State organization, but there are a number of States scattered over the earth, each with a monopoly of violence over its own territory. No super-State exists with a monopoly of violence over the entire world; and so a state of “anarchy” exists between the several States. (It has always been a source of wonder, incidentally, to this writer how the same conservatives who denounce as lunatic any proposal for eliminating a monopoly of violence over a given territory and thus leaving private individuals without an overlord, should be equally insistent upon leaving States without an overlord to settle disputes between them. The former is always denounced as “crackpot anarchism”; the latter is hailed as preserving independence and “national sovereignty” from “world government.”) And so, except for revolutions, which occur only sporadically, the open violence and two-sided conflict in the world takes place between two or more States, that is, in what is called “international war” (or “horizontal violence”).

Now there are crucial and vital differences between inter-State warfare on the one hand and revolutions against the State or conflicts between private individuals on the other. One vital difference is the shift in geography. In a revolution, the conflict takes place within the same geographical area: both the minions of the State and the revolutionaries inhabit the same territory. Inter-State warfare, on the other hand, takes place between two groups, each having a monopoly over its own geographical area; that is, it takes place between inhabitants of different territories. From this difference flow several important consequences: (1) in inter-State war the scope for the use of modern weapons of destruction is far greater. For if the “escalation” of weaponry in an intra-territorial conflict becomes too great, each side will blow itself up with the weapons directed against the other. Neither a revolutionary group nor a State combating revolution, for example, can use nuclear weapons against the other. But, on the other hand, when the warring parties inhabit different territorial areas, the scope for modern weaponry becomes enormous, and the entire arsenal of mass devastation can come into play. A second consequence (2) is that while it is possible for revolutionaries to pinpoint their targets and confine them to their State enemies, and thus avoid aggressing against innocent people, pinpointing is far less possible in an inter-State war.6 This is true even with older weapons; and, of course, with modern weapons there can be no pinpointing whatever. Furthermore, (3) since each State can mobilize all the people and resources in its territory, the other State comes to regard all the citizens of the opposing country as at least temporarily its enemies and to treat them accordingly by extending the war to them. Thus, all of the consequences of inter-territorial war make it almost inevitable that inter-State war will involve aggression by each side against the innocent civilians—the private individuals—of the other. This inevitability becomes absolute with modern weapons of mass destruction.

If one distinct attribute of inter-State war is inter-territoriality, another unique attribute stems from the fact that each State lives by taxation over its subjects. Any war against another State, therefore, involves the increase and extension of taxation-aggression over its own people.7 Conflicts between private individuals can be, and usually are, voluntarily waged and financed by the parties concerned. Revolutions can be, and often are, financed and fought by voluntary contributions of the public. But State wars can only be waged through aggression against the taxpayer.

All State wars, therefore, involve increased aggression against the State’s own taxpayers, and almost all State wars (all, in modern warfare) involve the maximum aggression (murder) against the innocent civilians ruled by the enemy State. On the other hand, revolutions are generally financed voluntarily and may pinpoint their violence to the State rulers, and private conflicts may confine their violence to the actual criminals. The libertarian must, therefore, conclude that, while some revolutions and some private conflicts may be legitimate, State wars are always to be condemned.

Many libertarians object as follows: “While we too deplore the use of taxation for warfare, and the State’s monopoly of defense service, we have to recognize that these conditions exist, and while they do, we must support the State in just wars of defense.” The reply to this would go as follows: “Yes, as you say, unfortunately States exist, each having a monopoly of violence over its territorial area.” What then should be the attitude of the libertarian toward conflicts between these States? The libertarian should say, in effect, to the State: “All right, you exist, but as long as you exist at least confine your activities to the area which you monopolize.” In short, the libertarian is interested in reducing as much as possible the area of State aggression against all private individuals. The only way to do this, in international affairs, is for the people of each country to pressure their own State to confine its activities to the area which it monopolizes and not to aggress against other State-monopolists. In short, the objective of the libertarian is to confine any existing State to as small a degree of invasion of person and property as possible. And this means the total avoidance of war. The people under each State should pressure “their” respective States not to attack one another, and, if a conflict should break out, to negotiate a peace or declare a cease-fire as quickly as physically possible.

Suppose further that we have that rarity—an unusually clear-cut case in which the State is actually trying to defend the property of one of its citizens. A citizen of country A travels or invests in country B, and then State B aggresses against his person or confiscates his property. Surely, our libertarian critic would argue, here is a clear-cut case where State A should threaten or commit war against State B in order to defend the property of “its” citizen. Since, the argument runs, the State has taken upon itself the monopoly of defense of its citizens, it then has the obligation to go to war on behalf of any citizen, and libertarians have an obligation to support this war as a just one.

But the point again is that each State has a monopoly of violence and, therefore, of defense only over its territorial area. It has no such monopoly; in fact, it has no power at all, over any other geographical area. Therefore, if an inhabitant of country A should move to or invest in country B, the libertarian must argue that he thereby takes his chances with the State-monopolist of country B, and it would be immoral and criminal for State A to tax people in country A and kill numerous innocents in country B in order to defend the property of the traveler or investor.8

It should also be pointed out that there is no defense against nuclear weapons (the only current “defense” is the threat of mutual annihilation) and, therefore, that the State cannot fulfill any sort of defense function so long as these weapons exist.

The libertarian objective, then, should be, regardless of the specific causes of any conflict, to pressure States not to launch wars against other States and, should a war break out, to pressure them to sue for peace and negotiate a cease-fire and peace treaty as quickly as physically possible. This objective, incidentally, is enshrined in the international law of the eighteenth and nineteenth centuries, that is, the ideal that no State could aggress against the territory of another—in short, the “peaceful coexistence” of States.9

Suppose, however, that despite libertarian opposition, war has begun and the warring States are not negotiating a peace. What, then, should be the libertarian position? Clearly, to reduce the scope of assault of innocent civilians as much as possible. Old-fashioned international law had two excellent devices for this: the “laws of war,” and the “laws of neutrality” or “neutrals’ rights.” The laws of neutrality are designed to keep any war that breaks out confined to the warring States themselves, without aggression against the States or particularly the peoples of the other nations. Hence the importance of such ancient and now forgotten American principles as “freedom of the seas” or severe limitations upon the rights of warring States to blockade neutral trade with the enemy country. In short, the libertarian tries to induce neutral States to remain neutral in any inter-State conflict and to induce the warring States to observe fully the rights of neutral citizens. The “laws of war” were designed to limit as much as possible the invasion by warring States of the rights of the civilians of the respective warring countries. As the British jurist F.J.P. Veale put it:

The fundamental principle of this code was that hostilities between civilized peoples must be limited to the armed forces actually engaged…. It drew a distinction between combatants and noncombatants by laying down that the sole business of the combatants is to fight each other and, consequently, that noncombatants must be excluded from the scope of military operations.10

In the modified form of prohibiting the bombardment of all cities not in the front line, this rule held in Western European wars in recent centuries until Britain launched the strategic bombing of civilians in World War II. Now, of course, the entire concept is scarcely remembered, the very nature of nuclear war resting on the annihilation of civilians.

In condemning all wars, regardless of motive, the libertarian knows that there may well be varying degrees of guilt among States for any specific war. But the overriding consideration for the libertarian is the condemnation of any State participation in war. Hence his policy is that of exerting pressure on all States not to start a war, to stop one that has begun and to reduce the scope of any persisting war in injuring civilians of either side or no side.

A neglected corollary to the libertarian policy of peaceful coexistence of States is the rigorous abstention from any foreign aid; that is, a policy of nonintervention between States (= “isolationism” = “neutralism”). For any aid given by State A to State B (1) increases tax aggression against the people of country A and (2) aggravates the suppression by State B of its own people. If there are any revolutionary groups in country B, then foreign aid intensifies this suppression all the more. Even foreign aid to a revolutionary group in B—more defensible because directed to a voluntary group opposing a State rather than a State oppressing the people—must be condemned as (at the very least) aggravating tax aggression at home.

Let us see how libertarian theory applies to the problem of imperialism, which may be defined as the aggression by State A over the people of country B, and the subsequent maintenance of this foreign rule. Revolution by the B people against the imperial rule of A is certainly legitimate, provided again that revolutionary fire be directed only against the rulers. It has often been maintained—even by libertarians—that Western imperialism over undeveloped countries should be supported as more watchful of property rights than any successor native government would be. The first reply is that judging what might follow the status quois purely speculative, whereas existing imperialist rule is all too real and culpable. Moreover, the libertarian here begins his focus at the wrong end—at the alleged benefit of imperialism to the native. He should, on the contrary, concentrate first on the Western taxpayer, who is mulcted and burdened to pay for the wars of conquest, and then for the maintenance of the imperial bureaucracy. On this ground alone, the libertarian must condemn imperialism.11

Does opposition to all war mean that the libertarian can never countenance change—that he is consigning the world to a permanent freezing of unjust regimes? Certainly not. Suppose, for example, that the hypothetical state of “Waldavia” has attacked “Ruritania” and annexed the western part of the country. The Western Ruritanians now long to be reunited with their Ruritanian brethren. How is this to be achieved? There is, of course, the route of peaceful negotiation between the two powers, but suppose that the Waldavian imperialists prove adamant. Or, libertarian Waldavians can put pressure on their government to abandon its conquest in the name of justice. But suppose that this, too, does not work. What then? We must still maintain the illegitimacy of Ruritania’s mounting a war against Waldavia. The legitimate routes are (1) revolutionary uprisings by the oppressed Western Ruritanian people, and (2) aid by private Ruritanian groups (or, for that matter, by friends of the Ruritanian cause in other countries) to the Western rebels—either in the form of equipment or of volunteer personnel.12

We have seen throughout our discussion the crucial importance, in any present-day libertarian peace program, of the elimination of modern methods of mass annihilation. These weapons, against which there can be no defense, assure maximum aggression against civilians in any conflict with the clear prospect of the destruction of civilization and even of the human race itself. Highest priority on any libertarian agenda, therefore, must be pressure on all States to agree to general and complete disarmament down to police levels, with particular stress on nuclear disarmament. In short, if we are to use our strategic intelligence, we must conclude that the dismantling of the greatest menace that has ever confronted the life and liberty of the human race is indeed far more important than demunicipalizing the garbage service.

We cannot leave our topic without saying at least a word about the domestic tyranny that is the inevitable accompaniment of war. The great Randolph Bourne realized that “war is the health of the State.”13 It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society. Society becomes a herd, seeking to kill its alleged enemies, rooting out and suppressing all dissent from the official war effort, happily betraying truth for the supposed public interest. Society becomes an armed camp, with the values and the morale—as Albert Jay Nock once phrased it—of an “army on the march.”

The root myth that enables the State to wax fat off war is the canard that war is a defense by the State of its subjects. The facts, of course, are precisely the reverse. For if war is the health of the State, it is also its greatest danger. A State can only “die” by defeat in war or by revolution. In war, therefore, the State frantically mobilizes the people to fight for it against another State, under the pretext that it is fighting for them. But all this should occasion no surprise; we see it in other walks of life. For which categories of crime does the State pursue and punish most intensely—those against private citizens or those against itself? The gravest crimes in the State’s lexicon are almost invariably not invasions of person and property, but dangers to its own contentment: for example, treason, desertion of a soldier to the enemy, failure to register for the draft, conspiracy to overthrow the government. Murder is pursued haphazardly unless the victim be a policeman, or Gott soll hüten, an assassinated Chief of State; failure to pay a private debt is, if anything, almost encouraged, but income tax evasion is punished with utmost severity; counterfeiting the State’s money is pursued far more relentlessly than forging private checks, etc. All this evidence demonstrates that the State is far more interested in preserving its own power than in defending the rights of private citizens.

A final word about conscription: of all the ways in which war aggrandizes the State, this is perhaps the most flagrant and most despotic. But the most striking fact about conscription is the absurdity of the arguments put forward on its behalf. A man must be conscripted to defend his (or someone else’s?) liberty against an evil State beyond the borders. Defend his liberty? How? By being coerced into an army whose very raison d’être is the expunging of liberty, the trampling on all the liberties of the person, the calculated and brutal dehumanization of the soldier and his transformation into an efficient engine of murder at the whim of his “commanding officer”?14 Can any conceivable foreign State do anything worse to him than what “his” army is now doing for his alleged benefit? Who is there, O Lord, to defend him against his “defenders”?

  • 1.There are some libertarians who would go even further and say that no one should employ violence even in defending himself against violence. However, even such Tolstoyans, or “absolute pacifists,” would concede the defender’s right to employ defensive violence and would merely urge him not to exercise that right. They, therefore, do not disagree with our proposition. In the same way, a libertarian temperance advocate would not challenge a man’s right to drink liquor, only his wisdom in exercising that right.
  • 2.We shall not attempt to justify this axiom here. Most libertarians and even conservatives are familiar with the rule and even defend it; the problem is not so much in arriving at the rule as in fearlessly and consistently pursuing its numerous and often astounding implications.
  • 3.Or, to bring up another famous antipacifist slogan, the question is not whether “we would be willing to use force to prevent the rape of our sister,” but whether, to prevent that rape, we are willing to kill innocent people and perhaps even the sister herself.
  • 4.William Buckley and other conservatives have propounded the curious moral doctrine that it is no worse to kill millions than it is to kill one man. The man who does either is, to be sure, a murderer; but surely it makes a huge difference how many people he kills. We may see this by phrasing the problem thus: after a man has already killed one person, does it make any difference whether he stops killing now or goes on a further rampage and kills many dozen more people? Obviously, it does.
  • 5.Professor Robert L. Cunningham has defined the State as the institution with “a monopoly on initiating open physical coercion.” Or, as Albert Jay Nock put it similarly if more caustically, “The State claims and exercises the monopoly of crime…. It forbids private murder, but itself organizes murder on a colossal scale. It punishes private theft, but itself lays unscrupulous hands on anything it wants.”
  • 6.An outstanding example of pinpointing by revolutionaries was the invariable practice of the Irish Republican Army, in its later years, of making sure that only British troops and British government property were attacked and that no innocent Irish civilians were injured. A guerrilla revolution not supported by the bulk of the people, of course, is far more likely to aggress against civilians.
  • 7.If it be objected that a war could theoretically be financed solely by a State’s lowering of nonwar expenditures, then the reply still holds that taxation remains greater than it could be without the war effect. Moreover, the purport of this article is that libertarians should be opposed to government expenditures whatever the field, war or nonwar.
  • 8.There is another consideration which applies rather to “domestic” defense within a State’s territory: the less the State can successfully defend the inhabitants of its area against attack by criminals, the more these inhabitants may come to learn the inefficiency of state operations, and the more they will turn to non-State methods of defense. Failure by the State to defend, therefore, has educative value for the public.
  • 9.The international law mentioned in this paper is the old-fashioned libertarian law as had voluntarily emerged in previous centuries and has nothing to do with the modern statist accretion of “collective security.” Collective security forces a maximum escalation of every local war into a worldwide war—the precise reversal of the libertarian objective of reducing the scope of any war as much as possible.
  • 10.F.J.P. Veale, Advance to Barbarism (Appleton, Wis.: C.C. Nelson, 1953), p. 58.
  • 11.Two other points about Western imperialism: first, its rule is not nearly so liberal or benevolent as many libertarians like to believe. The only property rights respected are those of the Europeans; the natives find their best lands stolen from them by the imperialists and their labor coerced by violence into working the vast landed estates acquired by this theft. Second, another myth holds that the “gunboat diplomacy” of the turn of the century was a heroic libertarian action in defense of the property rights of Western investors in backward countries. Aside from our above strictures against going beyond any State’s monopolized land area, it is overlooked that the bulk of gunboat moves were in defense, not of private investments, but of Western holders of government bonds. The Western powers coerced the smaller governments into increasing tax aggression on their own people, in order to pay off foreign bondholders. By no stretch of the imagination was this an action on behalf of private property—quite the contrary.
  • 12.The Tolstoyan wing of the libertarian movement could urge the Western Ruritaniansto engage in nonviolent revolution, for example, tax strikes, boycotts, mass refusal to obey government orders or a general strike—especially in arms factories. Cf. the work of the revolutionary Tolstoyan, Bartelemy De Ligt, The Conquest of Violence: An Essay On War and Revolution (New York: Dutton, 1938).
  • 13.See Randolph Bourne, “Unfinished Fragment on the State,” in Untimely Papers (New York: B.W: Huebsch, 1919).
  • 14.To the old militarist taunt hurled against the pacifist: “Would you use force to prevent the rape of your sister?” the proper retort is: “Would you rape your sister if ordered to do so by your commanding officer?”
Our Anti-Imperialist Heritage

Our Anti-Imperialist Heritage

Murray N. Rothbard on War

These edited extracts, from an interview in the February 1973 issue of Reason magazine, first ran in the June 1999 issue of The Rothbard-Rockwell Report, published by the Center for Libertarian Studies. The introduction is taken from “Murray N. Rothbard: A Legacy of Liberty,” by Llewellyn H. Rockwell, Jr.

Introduction

Murray N. Rothbard (1926-1995) was just one man with a typewriter, but he inspired a world-wide renewal in the scholarship of liberty. During 45 years of research and writing, in 25 books and thousands of articles, he battled every destructive trend in this century socialism, statism, relativism, and scientism – and awakened a passion for freedom in thousands of scholars, journalists, and activists.

Teaching in New York, Las Vegas, Auburn, and at conferences around the world, Rothbard led the renaissance of the Austrian School of economics. He galvanized an academic and popular fight for liberty and property, against the omnipotent state and its court intellectuals.

Volumes one and two of his magisterial history of economic thought appeared just after his death, published by Edward Elgar. Whereas other texts pretend to an uninterrupted march toward higher levels of truth, Rothbard illuminated a history of unknown geniuses and lost knowledge, of respected charlatans and honored fallacies.

A large collection of Rothbard’s best scholarly articles appears later this year in the publisher’s “Economists of the Century” series. In addition, there are unpublished manuscripts, articles, and letters to fill many more volumes.

Like his beloved teacher, Ludwig von Mises, Rothbard wrote for the public as well as professionals. “Civilization and human existence are at stake, and to preserve and expand it, high theory and scholarship, though important, are not enough,” he wrote in 1993. “Especially in an age of galloping statism, the classical liberal, the advocate of the free market, has an obligation to carry the struggle to all levels of society.”

Rothbard’s theory was his practice. He was involved in nearly every political and social development of his time, from Robert Taft’s presidential campaign to the 1994 elections. His last article, appearing in the Washington Post, warned that Newt Gingrich is more likely to betray the revolution than lead it.

Q: Why, in your view, is isolationism an essential tenet of libertarian foreign policy?

A: The libertarian position, generally, is to minimize State power as much as possible, down to zero, and isolationism is the full expression in foreign affairs of the domestic objective of whittling down State power. In other words, interventionism is the opposite of isolationism, and of course it goes on up to war, as the aggrandizement of State power crosses national boundaries into other States, pushing other people around etc. So this is the foreign counterpart of the domestic aggression against the internal population. I see the two as united.

The responsibility of trying to limit or abolish foreign intervention is avoided by many conservative libertarians in that they are very, very concerned with things like price control – of course I agree with them. They are very, very concerned about eliminating taxes, licensing, and so forth – with which I agree – but somehow when it comes to foreign policy there’s a black out. The libertarian position against the State, the hostility toward expanding government intervention and so forth, goes by the board – all of a sudden you hear those same people who are worried about government intervention in the steel industry cheering every American act of mass murder in Vietnam or bombing or pushing around people all over the world.

This shows, for one thing, that the powers of the State apparatus to bamboozle the public work better in foreign affairs than in domestic. In foreign affairs you still have this mystique that the nation-State is protecting you from a bogeyman on the other side of the mountain. There are “bad” guys out there out trying to conquer the world and “our” guys are in there trying to protect us. So not only is isolationism the logical corollary of libertarianism, which many libertarians don’t put into practice; in addition, as Randolph Bourne says, “war is the health of the State.”

The State thrives on war – unless, of course, it is defeated and crushed – expands on it, glories in it. For one thing, when one State attacks another State, it is able through this intellectual bamboozlement of the public to convince them that they must rush to the defense of the State because they think the State is defending them.

In other words, if let’s say, Paraguay and Brazil are going to get into a war, each State – the Paraguayan government and the Brazilian government – is able to convince their own subjects that the other government is out to get them and loot them and murder them in their beds and so forth, so they are able to induce their own hapless subjects to fight against the other State, whereas in actual practice, of course, it is the States that have the quarrel, not the people. The people are outside the quarrels of the State and yet the State is able to generate this patriotic mass war hysteria and to call everybody up to the colors physically and spiritually and economically and therefore, of course, aggrandize State power permanently.

Most conservatives and libertarians are very familiar with – and deplore – the increase in State power in the American government in the last 50 or 70 years, but what they don’t seem to realize is that most of these increases took place in giant leaps during wartime. It was wartime that provided the crisis situation – the spark – which enabled the States to put on so-called “emergency” measures, which of course never got lifted, or rarely got lifted.

Even the war of 1812 – seemingly a harmless little escapade—was evil, and also in the domestic sense, in that it ruined the Jeffersonian Party for a long time to come, it established Federalism which means monopoly State-capitalism in essence, it imposed a central bank, it imposed high tariffs, it imposed domestic federal taxation, which never existed before, internal taxation, and it took a long time to get rid of it, and we never really did get back to the pre-War of 1812 level of minimal State power.

Then, of course, the Mexican war had consequences of slave expansion and so forth. But the Civil War was, of course, much worse – the Civil War was really the great turning point, one of the great turning points in the increase of State power, because with the Civil War you now have the total introduction of things like railroad land grants, subsidies of big business, permanent high tariffs, which the Jacksonians had been able to whittle away before the Civil War, and a total revolution in the monetary system so that the old pure gold standard was replaced first by greenback paper, and then by the National Banking Act – a controlled banking system. And for the first time we had the imposition in the United States of an income tax and federal conscription. The income tax was reluctantly eliminated after the Civil War as was conscription: all the other things – such as high excise taxes—continued on as a permanent accretion of State power over the American public.

The third huge increase of power came out of World War I. World War I set both the foreign and the domestic policies for the twentieth century. Woodrow Wilson set the entire pattern for foreign policy from 1917 to the present. There is a total continuity between Wilson, Hoover, Roosevelt, Truman, Johnson and Nixon – the same thing all the way down the line.

Q: You’d include Kennedy in that?

A: Yes Kennedy, right. I don’t want to miss anybody. Every president has been inspired by Woodrow Wilson. It was reported that Richard Nixon’s first act when he came into the White House was to hang a picture of Woodrow Wilson in front of his desk. The same influence has held on domestic affairs. As a matter of fact if I had to single out – this is one of my favorites pastimes – the biggest SOB in American history in the sense of evil impact – I think Woodrow Wilson is way, way at the head of the list for many reasons. The permanent direction which Woodrow Wilson set for foreign policy included the permanent collective security concept, which means America has some sort of God-given role to push everybody around everywhere and set up little democratic governments all over the world, and to suppress any kind of revolution against the status quo – that means any kind of change in the status quo either domestic or foreign. In the domestic sphere the corollary was the shift from a relatively laissez-faire economy – corrupted as it was by the Civil War subsidies it was still and all a relatively laissez-faire capitalism – a deliberate shift to in essence a so-called corporate state, what openly became a Corporate State in Mussolini’s Italy and Nazi Germany.

Q: As of what time?

A: Well, the Progressive period begins around 1900 with Teddy Roosevelt and so forth. Woodrow Wilson cements it with his so-called reforms which totally subject the banking system to federal power and with the Federal Trade Commission, which did for business what the Interstate Commerce Commission did for the railroads. In other words, he imposed a system of monopoly capitalism, or corporate state monopoly, which we now call the partnership of the government and of big business and industry, which means essentially a corporate state, or we can call it economic Fascism. It culminated in World War I economic planning, for the war consisted of a totally collectivized economy headed by the sainted and revered Bernard Mannes Baruch, head of the War Industries Board.

The economy had a central board and each industry was governed by a committee from the industry – say the iron and steel industry was governed by the Iron and Steel Board, the heads of the board were deliberately selected from the biggest firms in that particular industry and they would negotiate with committees of industry set up by the government, and the government would encourage trade associations in the industries to set up committees and negotiate with these boards.

So what you have is the so-called commodity sections – the government boards selected from the biggest businessmen in the industry and they fixed prices and production and priority and everything else with other committees set up by the same big firm, and everyone loved it. Big businesses loved it, the government loved it and the Progressive intellectuals – as they were called then – said, this is a magnificent third way, a “middle way” as they called it – to battle the old laissez-faire capitalism on the one hand, and the new Proletarian Marxian socialism on the other.

They didn’t like the idea of Marxian socialism because it was messy, emphasized class struggle, and led to a revolution perhaps. What they saw here was a new order – and this was a vision held by Baruch and Hoover and all sorts of Progressive intellectuals from the universities and so forth – they saw a beautiful new order with big government controlling the economy, regulating it, subsidizing it, largely staffed by big businessmen in collaboration with unions, which were deliberately encouraged as disciplinary agents for the labor force, and which were practically created by the war labor system. All this of course was staffed and apologized for by the Progressive intellectuals, who acquired prestige, power, and a great sense of accomplishment pushing people around in their government bureaus.

So we have, then, this unholy partnership of big government, big business, big unions, and intellectuals, and it was developed so much in World War I planning that the business leaders and the government leaders who pushed the thing were very reluctant to see it end. They saw in it not just a wartime measure; this was the model they wanted for the permanent peacetime economy. They wanted to end all messy competition. As one big business writer said, “As General Sherman said ‘war is Hell, competition is war, and therefore competition is Hell.’” They wanted to eliminate competition, and to establish a system of industrial “cooperation” monopolies. And they were very sorry to see the War Industries Board scrapped when the war was over.

As a matter of fact, it almost wasn’t scrapped. Wilson finally decided to scrap it, but it was touch and go. Then afterwards the same people – Hoover, Franklin Roosevelt, Bernard Baruch, all the people who had earned their stripes in World War I mobilization planning – for the rest of their lives tried and then succeeded in reestablishing World War I planning – it was known as war collectivism – as a permanent peacetime set up. Herbert Hoover during the 1920s was trying to use the power of the government to encourage and support trade association cartel agreements, and Franklin Roosevelt also. When Roosevelt and the New Deal got in, they used not only the same agencies as World War I collectivism, but the same people.

In case after case the people were brought back to do for the economy what had been done in war, to treat the depression in a military manner, and then World War II, of course, finishes it. In World War II, we have another big quantum leap – enormous government spending and military-industrial pump priming, and the permanent cold war, and so we then have the plans for a permanent peacetime welfare-warfare state – a corporate state – pushed through of course by partnership of these powerful forces plus intellectuals, done by means of wartime crisis.

Q: The notion of collective security is something that many Americans today take for granted as desirable and essential.

A: Well I think the concept of collective security is (1) a disaster and (2) anti-libertarian. Viet Nam again brings this thing to the fore, in the sense of masking imperial interventionist policy on the part of the American government in the rhetoric of the cloak of righteousness and moralistic pieties. Let’s take two hypothetical states—this is the technique von Mises used to use, I think, with good effect—take the hypothetical states of Ruritania and Waldavia, somewhere off in the Balkans or whatever. The Ruritanian State invades the Waldavian State. The collective-security view is that this constitutes aggression, it’s evil per se – an evil State attacking a victim State, the Ruritanian State being the aggressor in this case, and then it becomes the duty of every other State in the whole wide world – the United States being somehow the divinely appointed chief and almost sole pourer out of resources in this effort – to step in to defend the so-called victim, and crush the aggressor.

Now this has very many important consequences. One is that every crummy little interstate conflict anywhere in the world becomes escalated and maximized into world wide global conflict. With this kind of policy it means that no dispute anywhere, however trivial, can ever be kept trivial or kept isolated to the parties of the dispute, as they become globalized and bring everybody else into the holocaust. The second problem is that the whole idea of the aggressor State and the victim State is based on the phony analogy of the individual citizen – individual person – suffering an aggression against him.

You remember the big argument President Truman used about Korea—he said, “We are not engaged in a war, we are engaged in a police action, a UN police action against the North Korean aggressor.” Now when he said that he was not just using peculiar and phony rhetoric. The rhetoric came out of the Wilsonian collective security ideology, which was: if you see armies crossing frontiers somewhere, this constitutes aggression. It means that in the same sense as if he sees Jones beating up Smith on the street, the policeman on the block rushes to his defense, and so therefore the United States and the United Nations become the policemen rushing to defend the victim.

Now there are several problems in this. One is that even in the case of Jones and Smith, the presumption is if you see Jones beating up Smith that you should rush to Smith’s defense. However, there might be certain mitigating circumstances. Smith might have just beaten up Jones’s kid, and Jones might be retaliating; in other words, Smith might have started the fight – you don’t know that without historical investigation so to speak of the Smith-Jones relationship.

In the case of States, you have a completely different situation because this ideology assumes that the Waldavian State and Ruritanian State are somehow the rightful owners of all their territory, just as Jones owns his watch and Smith does, too, and then Smith beats Jones up or takes his watch away from him, this is aggression. The analogy then becomes, if Ruritania invades Waldavia, this means that Waldavian territory, Waldavian property, rightful property, has been taken away from them by the Ruritanian aggressor.

Now the point is for the libertarian that none of these States have any rightful property, that the Ruritanian government does not properly and justly own the entire land area of the country – the property should be owned by individual citizens, the State apparatus has then no title, no just claim. So if the Ruritanian State crosses the frontier and fights the Waldavian State, this does not make the Ruritanian State any more of an aggressor than the original Waldavian State. Both of them are aggressors over their subject populations. Considering that and the whole idea that every other government should rush in and defend Waldavia means that not only is every small conflict escalated to a global scale – it also means that every small aggression is maximized in the global scale.

In other words, since all governments aggress against their citizens through taxes, through conscription, through mass murder called war, the more governments that enter into the picture – the more the United States, Britain, or whatever rushes in to defend Waldavia – the more innocent civilians get killed, the more innocent people are forced to pay taxes, the more innocent people are conscripted. So the way to minimize aggression when you are dealing with States is to agitate and press for nobody to enter into any conflict at all – hopefully for no government to go to war with any other government – and if any government does go to war, for the third, fourth, and fifth party to stay the blazes out.

Apart from all this, the boundaries of each State – Waldavian, Ruritanian, American, French, British – since they are not justly owned by any sort of process of capital investment or homesteading or anything else, since all State boundaries have always been the result of previous conquests—so in many cases the so-called aggressor state has a better claim than the so-called victim state.

For example, suppose that Ruritania is “aggressing” and declares war on Waldavia and starts seizing the Northwestern part of Waldavia. Well, it’s very possible that the Northwestern part of Waldavia is ethnically Ruritanian, had Ruritanian customs, and that 100 years ago, the Waldavian State had conquered it and now the Ruritanians were taking it back. This is a perfectly legitimate claim, so the point is, then, that all interstate wars intensify aggression – maximize it – and that some wars are even more unjust than others. In other words, all government wars are unjust, although some governments have less unjust claims in the sense that they might have. Well, let’s put it this way, in the case of the Ruritanian-Waldavian thing, when the Ruritanians are simply taking back ethnically Ruritanian territory and the Ruritanian masses were yearning to rejoin their homeland – then libertarians, it seems to me, would say that war would then be just if the following conditions were satisfied: (1) There were no taxes imposed; (2) No innocent civilians got killed; (3) Nobody got conscripted – in other words, it was a purely voluntary fight. Obviously to meet these conditions, it would be almost impossible but there are different gradations – you know, real life wars, approaching this. A “just war” would be for all these conditions to be met.

Q: What is your view of the applicability of the concept of collective security to, say, a situation involving a private nongovernmental band of pirates?

A: Well I wouldn’t call it collective security. First of all, I don’t like the word “collective.” Collective implies some sort of nonexistent collectivity that acts – has a being and acts; only individuals exist, only individuals act. So that if private people get aggressed against by pirates I would certainly be in favor of and certainly support the right of these individual victims to defend themselves against piracy by banding together, or by hiring other agencies to defend themselves. I don’t like to call that collective, because collective implies some sort of coercive totality.

Q: Let’s assume, then, you have some type of mutual defense pact entered into by private individuals to defend themselves against a band of private nongovernmental pirate. Let’s say that it would be probable that there would be innocent victims of the tactics that were most appropriate in defending private interests. What would be your view on the propriety of such tactics?

A: I think – first, one of the points that I should have mentioned about wars, why I am opposed to all of them – is that in modern times the scale of weaponry that’s used is escalated so that it’s almost impossible not to murder innocent civilians. Part of the reason for this is not only the march of technology, the fact that if you use a bow and arrow you can pinpoint it against the enemy army, you can pinpoint it at the retinue of a king. If you use H bombs or B-29s or whatever, of course, you can’t pinpoint the warring soldiers and officers – you have to start the mass murdering of civilians.

There’s another reason for this: the State apparatus gathers to itself the entire population of its territory. If you happen to live in France you as a French citizen, even though you might hate the war that France is conducting against Portugal, you are committed to it by the very nature of the state system. So that if the French government goes to war with the Portuguese government, the Portuguese government would undoubtedly bomb, if it could, the French civilian population. So, in other words, the very nature of interstate war puts innocent civilians into great jeopardy, especially with modern technology.

However, if you didn’t have State war, if States were eliminated or if you are only talking about private marauders versus private defenders, then the situation completely changes. Then you don’t only have one state and one geographical area secure in its home base, and the other state somewhere else in its geographical area on its home base. In other words, to put it bluntly, you are not going to have either the marauders or the defenders bombing each other because they are only perhaps five blocks apart. So the result of this is that you only use H bomb and mass murder – commit genocide against an enemy – if they are way out there somewhere and you can’t see them. The beauty of nonstate – interprivate, if you want to put it that way, warfare is that it has to be pinpointed—it has to be, in order not to commit suicide in the process—and so that the scale of weaponry has to be reduced to, say, machine-gun level.

In that situation, I don’t see why civilians have to be injured at all. After all, look at private crime now: suppose somebody beats somebody over the head and steals his pocketbook and runs down the street. The police right now do not spray machine-gun fire on the entire crowd in order to shoot down the criminal. The principle is that no innocent person can get killed, and if the criminal escapes, it’s tough luck, because the most important principle for the libertarian and among the domestic police is not to use force against noncriminals. There’s an ancient maxim that it’s more important to let a hundred criminals escape than to injure one innocent person, so (1) I would be totally opposed to injuring any non-criminals and (2) if you shift from State war – interstate warfare – down to private warfare, the likelihood of doing that, of pursuing this kind of libertarian non-injuring of civilians, will be greatly increased.

Q: Do you care to comment on the view that the only war in which the United States has been involved which could be justified is the Revolutionary War?

A: Yes, I agree 100% with that! The difference between the Revolutionary War and an interstate war is that, in the first place, an interstate war is a war of one government against another – it’s a war that aggresses against the innocent civilians of the opposite government, it’s a war that increases taxes at home, and conscription usually, to pay for it. Revolutionary war is a war against the state apparatus, a war from below by the armed public. It doesn’t have to injure innocent civilians, and it usually doesn’t. It often does not involve taxes or conscription – if it does, it does so on a very small scale.

The American revolutionary effort didn’t have any taxation even on a state level for the first few years of the Revolutionary war. In other words, put it this way – when you have a revolutionary war against the existing state apparatus – say the American people against the British Crown and their collaborationists at home, the guerrilla revolutionary effort can pinpoint their attacks against the State apparatus. They do the pinpointing, and they have to do the pinpointing. They can do it and they have to do it – in other words, they don’t spray innocent people with machine guns, they don’t H-bomb if they have the H bomb, their object is to zap the forces of the existing government of the Crown – the Crown officers and so forth.

On the other hand, the reason why they don’t injure civilians is usually not just from moral reasons, but from basic strategic ones – that is, that no revolutionary, no people’s war can succeed unless it has the broad support of the mass of the population. Mao tse Tung and Che Guevara, of course, enunciated this – as “The guerrillas are to the people as fish are to water.” But actually Charles Lee saw this much earlier – he was the brilliant Revolutionary theorist who was the second in command to George Washington for the first few years of the American Revolution. He was a British soldier of fortune and libertarian and wandered all over the world picking up military insights. As soon as the American Revolution broke out, Lee rushed to the United States to help out in the war effort, and was made second in command.

Lee set the pattern for the American victory, not Washington – well, I won’t go into that, but Lee set the pattern by pointing out that the American Revolution could only succeed as a people’s war from below – a guerrilla struggle, it you will – against the superior fire power of the British government. The government’s lacking the essential popular support, the guerrillas therefore become the people, and people became the guerrillas in the old battle grounds of Lexington and Concord, which victories were the first great American guerrilla action. The British, just as the Americans now in Vietnam, had very great difficulty distinguishing between the peasants and the guerrillas. They say they all look alike – well, they are alike, they are them. In other words, peasants in the daytime pick up the guns at night and pop the British soldiers.

Joey Rothbard: Not the British soldiers.

A: Well, in the American Revolution, it was the British soldiers, in the Viet Nam war, it is the American soldiers, but the principle is the same. The interesting thing is that on the other hand, the counterrevolutionary forces, in other words, the Government battling against the Revolution, has to do just the opposite: they have superior fire power for various reasons, they have the official army, but they don’t have the support of the population – so in their kind of warfare, they have to amass genocidal terror against the civilian population, they try to break the morale of the civilians, try to cut their support off from the guerrillas and so forth. The Americans have done this with the infamous strategic hamlet policy in Viet Nam, herding the peasants into hamlets so that they couldn’t support the guerrillas; the British did it in the Boer War in the early 20th century; the American government did it in the Philippines in the early part of the 20th century; and I think the British would have done it in the Revolutionary war if they had had the resources to do so. The British actually did some of this, you know, though they had not carried counterrevolutionary warfare to its present height. But the principle is there so that if you have a revolution against the State apparatus, the revolutionary warfare—apart from the goals of the revolution or the counterrevolution – is almost necessarily libertarian and the counterrevolutionary warfare is almost necessarily genocidal or anti-libertarian.

Q: What are the basic elements of a proper libertarian foreign policy?

A: Well, the basic elements of any libertarian foreign policy is to pressure the government to do nothing abroad, just to pack up shop and go home. General Smeadly Butler, one of my great heroes, formerly of the Marine Corps, in the late 1930s proposed a constitutional amendment in The Woman’s Home Companion. His article was a sensation for awhile but of course the amendment never was adopted and has now been forgotten. But it was kind of a charming constitutional amendment – I recommend that everybody read it. In essence it says something like this: no American soldier, plane, or ship shall be sent any place outside America. In other words, complete abstinence from any kind of American military intervention and political and economic intervention.

Q: You would be referring to American government planes, I assume – what about commercial flights?

A: Oh yes, you know, abstinence from government intervention. It was the idea of isolationism. The sneer against isolationism always was that isolationists were parochial, narrow-minded characters who don’t know that there is a world out there and want to hide their heads in the sand. In fact it’s the opposite – the true principle of isolationism is that the government should be isolated, the government should do nothing abroad and people who trade, interchange, and engage in voluntary travel, migration, and so forth should be allowed to peacefully do so. The idea is to isolate the government, not to isolate the country.

There’s another aspect, of course; this would apply to any government, but the thing is there is also an extra aspect – empirically it so happens that the American government since the days of Woodrow Wilson has been the main threat to the peace of the world, the main imperialist, the main embarker on a policy of meddling in every conceivable country every place in the world to make sure their government shapes up properly. So that the policy of American isolationism is more important for libertarian principle than any other country’s isolationism.

Reprinted from Antiwar.com.

Wall Street, Banks, and American Foreign Policy

Wall Street, Banks, and American Foreign Policy

Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.

Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.

Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs.

In the early years of the 19th century, the organized capital market in the United States was largely confined to government bonds (then called “stocks”), along with canal companies and banks themselves. Whatever investment banking existed was therefore concentrated in government debt. From the Civil War until the 1890s, there were virtually no manufacturing corporations; manufacturing and other businesses were partnerships and had not yet reached the size where they needed to adopt the corporate form. The only exception was railroads, the biggest industry in the United States. The first investment banks, therefore, were concentrated in railroad securities and government bonds.

“There is something behind the throne greater than the king himself.”

– William Pitt, 1770

The first major investment banking house in the United States was a creature of government privilege. Jay Cooke, an Ohio-born business promoter living in Philadelphia, and his brother Henry, editor of the leading Republican newspaper in Ohio, were close friends of Ohio US Senator Salmon P. Chase. When the new Lincoln administration took over in 1861, the Cookes lobbied hard to secure Chase the appointment of secretary of the treasury. That lobbying, plus the then enormous sum of $100,000 that Jay Cooke poured into Chase’s political coffers, induced Chase to return the favor by granting Cooke, newly set up as an investment banker, an enormously lucrative monopoly in underwriting the entire federal debt.

Cooke and Chase then managed to use the virtual Republican monopoly in Congress during the war to transform the American commercial banking system from a relatively free market to a national banking system centralized by the federal government under Wall Street control. A crucial aspect of that system was that national banks could only expand credit in proportion to the federal bonds they owned — bonds they were forced to buy from Jay Cooke.

Jay Cooke & Co. proved enormously influential in the postwar Republican administrations, which continued their monopoly in underwriting government bonds. The House of Cooke met its well-deserved fate by going bankrupt in the Panic of 1874, a failure helped along by its great rival, the then-Philadelphia-based Drexel, Morgan & Co.

J.P. Morgan After 1873, Drexel, Morgan and its dominant figure J.P. Morgan became by far the leading investment firm in the United States. If Cooke had been a “Republican” bank, Morgan, while prudently well connected in both parties, was chiefly influential among the Democrats. The other great financial interest powerful in the Democratic Party was the mighty European investment banking house of the Rothschilds, whose agent, August Belmont, was treasurer of the national Democratic party for many years.

The enormous influence of the Morgans on the Democratic administrations of Grover Cleveland (1884–88, 1892–96), may be seen by simply glancing at their leading personnel. Grover Cleveland himself spent virtually all his life in the Morgan ambit. He grew up in Buffalo as a railroad lawyer, one of his major clients being the Morgan-dominated New York Central Railroad. In between administrations, he became a partner of the powerful New York City law firm of Bangs, Stetson, Tracey, and MacVeagh. This firm, by the late 1880s, had become the chief legal firm of the House of Morgan, largely because senior partner Charles B. Tracey was J.P. Morgan’s brother-in-law. After Tracey died in 1887, Francis Lynde Stetson, an old and close friend of Cleveland’s, became the firm’s dominant partner, as well as the personal attorney for J.P. Morgan. (This is now the Wall Street firm of Davis, Polk, and Wardwell.) Grover Cleveland’s cabinets were honeycombed with Morgan men, with an occasional bow to other bankers. Considering those officials most concerned with foreign policy, his first secretary of state, Thomas F. Bayard, was a close ally and disciple of August Belmont; indeed, Belmont’s son, Perry, had lived with and worked for Bayard in Congress as his top aide. The dominant secretary of state in the second Cleveland administration was the powerful Richard Olney, a leading lawyer for Boston financial interests, who have always been tied in with the Morgans, and in particular was on the board of the Morgan-run Boston and Maine Railroad, and would later help Morgan organize the General Electric Company.

The War and Navy departments under Cleveland were equally banker dominated. Boston Brahmin Secretary of War William C. Endicott had married into the wealthy Peabody family. Endicott’s wife’s uncle, George Peabody, had established a banking firm that included J.P. Morgan’s father as a senior partner; and a Peabody had been best man at J.P.’s wedding. Secretary of the navy was leading New York City financier William C. Whitney, a close friend and top political advisor of Cleveland’s. Whitney was closely allied with the Morgans in running the New York Central Railroad.

Secretary of war in the second Cleveland administration was an old friend and aide of Cleveland’s, Daniel S. Lamont, previously an employee and protégé of William C. Whitney. Finally, the second secretary of the navy was an Alabama congressman, Hilary A. Herbert, an attorney for and very close friend of Mayer Lehman, a founding partner of the New York mercantile firm of Lehman Brothers, soon to move heavily into investment banking. Indeed, Mayer’s son, Herbert, later to be governor of New York during the New Deal, was named after Hilary Herbert.

“Businessmen can either make their way on the free market or seek special government favors and privileges. But bankers are inherently inclined toward statism.”

The great turning point of American foreign policy came in the early 1890s, during the second Cleveland administration. It was then that the United States turned sharply and permanently from a foreign policy of peace and nonintervention to an aggressive program of economic and political expansion abroad. At the heart of the new policy were America’s leading bankers, eager to use the country’s growing economic strength to subsidize and force-feed export markets and investment outlets that they would finance, as well as to guarantee Third World government bonds. The major focus of aggressive expansion in the 1890s was Latin America, and the principal enemy to be dislodged was Great Britain, which had dominated foreign investments in that vast region.

In a notable series of articles in 1894, Bankers’ Magazine set the agenda for the remainder of the decade. Its conclusion: if “we could wrest the South American markets from Germany and England and permanently hold them, this would be indeed a conquest worth perhaps a heavy sacrifice.”

Long-time Morgan associate Richard Olney heeded the call, as secretary of state from 1895 to 1897, setting the United States on the road to empire. After leaving the State Department, he publicly summarized the policy he had pursued. The old isolationism heralded by George Washington’s Farewell Address is over, he thundered. The time has now arrived, Olney declared, when “it behooves us to accept the commanding position … among the powers of the earth.” And, “the present crying need of our commercial interests,” he added, “is more markets and larger markets” for American products, especially in Latin America.

Good as their word, Cleveland and Olney proceeded belligerently to use US might to push Great Britain out of its markets and footholds in Latin America. In 1894, the US Navy illegally used force to break the blockade of Rio de Janeiro by a British-backed rebellion aiming to restore the Brazilian monarchy. To insure that the rebellion was broken, the US Navy stationed warships in Rio harbor for several months.

During the same period, the US government faced a complicated situation in Nicaragua, where it was planning to guarantee the bonds of the American Maritime Canal Company, to build a canal across the country. The new regime of General Zelaya was threatening to revoke this canal concession; at the same time, an independent reservation, of Mosquito Indians, protected for decades by Great Britain, sat athwart the eastern end of the proposed canal. In a series of deft maneuvers, using the navy and landing the marines, the United States managed to bring Zelaya to heel and to oust the British and take over the Mosquito territory.

In Santo Domingo (now the Dominican Republic) France was the recipient of the American big stick. In the Santo Domingo Improvement Company, in 1893, a consortium of New York bankers purchased the entire debt of Santo Domingo from a Dutch company, receiving the right to collect all Dominican customs revenues in payment of the debt. The French became edgy the following year when a French citizen was murdered in that country, and the French government threatened to use force to obtain reparations. Its target for reparations was the Dominican customs revenue, at which point the United States sent a warship to the area to intimidate the French.

But the most alarming crisis of this period took place in 1895–96, when the United States was at a hair’s breadth from actual war with Great Britain over a territorial dispute between Venzuela and British Guiana. This boundary dispute had been raging for forty years, but Venezuela shrewdly attracted American interest by granting concessions to Americans in gold fields in the disputed area.

Apparently, Cleveland had had enough of the “British threat” and he moved quickly toward war. His close friend Don Dickinson, head of the Michigan Democratic Party, delivered a bellicose speech in May 1895 as a surrogate for the president. Wars are inevitable, Dickinson declared, for they arise out of commercial competition between nations. The United States faces the danger of numerous conflicts, and clearly the enemy was Great Britain. After reviewing the history of the alleged British threat, Dickinson thundered that “we need and must have open markets throughout the world to maintain and increase our prosperity.”

“At the heart of the new policy were America’s leading bankers, eager to use the country’s growing economic strength to subsidize and force-feed export markets and investment outlets…”

In July, Secretary of State Olney sent the British an insulting and tub-thumping note, declaring that “the United States is practically sovereign on this continent, and its fiat is law upon the subjects to which it confines its interposition.” President Cleveland, angry at the British rejection of the note, delivered a virtual war message to Congress in December, but Britain, newly occupied in problems with the Boers in South Africa, decided to yield and agree to a compromise boundary settlement. Insultingly, the Venezuelans received not a single seat on the agreed-upon arbitration commission.

In effect, the British, occupied elsewhere, had ceded dominance to the United States in Latin America. It was time for the United States to find more enemies to challenge.

The next, and greatest, Latin American intervention was of course in Cuba, where a Republican administration entered the war goaded by its jingo wing closely allied to the Morgan interests, led by young Assistant Secretary of the Navy Theodore Roosevelt and by his powerful Boston Brahmin mentor, Senator Henry Cabot Lodge. But American intervention in Cuba had begun in the Cleveland-Olney regime.

In February 1895, a rebellion for Cuban independence broke out against Spain. The original US response was to try to end the threat of revolutionary war to American property interests by siding with Spanish rule modified by autonomy to the Cubans to pacify their desires for independence. Here was the harbinger of US foreign policy ever since: to try to maneuver in Third World countries to sponsor “third force” or “moderate” interests which do not really exist. The great proponent of this policy was the millionaire sugar grower in Cuba, Edwin F. Atkins, a close friend of fellow Bostonian Richard Olney, and a partner of J.P. Morgan and Company.

By the fall of 1895, Olney concluded that Spain could not win, and that, in view of the “large and important commerce between the two countries” and the “large amounts of American capital” in Cuba, the United States should execute a 180-degree shift and back the rebels, even unto recognizing Cuban independence. The fact that such recognition would certainly lead to war with Spain did not seem worth noting. The road to war with Spain had begun, a road that would reach its logical conclusion three years later.

Ardently backing the prowar course was Edwin F. Atkins, and August Belmont, on behalf of the Rothschild banking interests. The House of Rothschild, which had been long-time financiers to Spain, refused to extend any further credit to Spain, and instead underwrote Cuban revolutionary bond issues, and even assumed full obligation for the unsubscribed balance.

During the conquest of Cuba in the Spanish-American War, the United States also took the occasion to expand its power greatly in Asia, seizing first the port of Manila and then all of the Philippines, after which it spent several years crushing the revolutionary forces of the Philippine independence movement.

 

An Aggressive Asian Policy

The late 1890s also saw a new turn in the US attitude toward the Far East. Expanding rapidly into the Pacific in pursuit of economic and financial gain, the US government saw that Russia, Germany, and France had been carving up increasing territorial and economic concessions in the near corpse of the Chinese imperial dynasty. Coming late in the imperial game of Asia, and not willing to risk large-scale expenditure of troops, the United States, led by Olney and continued by the Republicans, decided to link up with Great Britain. The two countries would then use the Japanese to provide the shock troops that would roll back Russia and Germany and parcel out imperial benefits to both of her faraway allies, in a division of spoils known euphemistically as the “Open Door.” With Britain leaving the field free to the United States in Latin America, the United States could afford to link arms in friendly fashion with Britain in the Far East.

A major impetus toward a more aggressive policy in Asia was provided by the lure of railroad concessions. Lobbying heavily for railroad concessions was the American China Development Company (ACDC), organized in 1895, and consisting of a consortium of the top financial interests in the United States, including James Stillman of the then-Rockefeller-controlled National City Bank; Charles Coster, railroad expert of J.P. Morgan and Co.; Jacob Schiff, head of the New York investment bank of Kuhn, Loeb and Co.; and Edward H. Harriman, railroad magnate. Olney and the State Department pressed China hard for concessions to the ACDC for a Peking-Hankow Railway and for a railway across Manchuria, but in both cases the American syndicate was blocked. Russia pressured China successfully to grant that country the right to build a Manchurian railway; and a Belgian syndicate, backed by France and Russia, won the Peking-Hankow concession from China.

The US decided to link up with Britain in a division of spoils known euphemistically as the “Open Door.”

It was time for sterner measures. The attorney for the ACDC set up the Committee on American Interests in China, which soon transformed itself into the American Asiatic Association, dedicated to a more aggressive American policy on behalf of economic interests in China. After helping the European powers suppress the nationalist Boxer Rebellion in China in 1900, the United States also helped push Russian troops out of Manchuria. Finally, in 1904, President Theodore Roosevelt egged Japan on to attack Russia, and Japan succeeded in driving Russia out of Manchuria and ending Russia’s economic concessions. Roosevelt readily acceded to Japan’s resulting dominance in Korea and Manchuria, hoping that Japan would also protect American economic interests in the area.

Theodore Roosevelt had been a Morgan man from the beginning of his career. His father and uncle were both Wall Street bankers, both of them closely associated with various Morgan-dominated railroads. Roosevelt’s first cousin and major financial adviser, W. Emlen Roosevelt, was on the board of several New York banks, including the Astor National Bank, the president of which was George F. Baker, close friend and ally of J.P. Morgan and head of Morgan’s flagship commercial bank, the First National Bank of New York. At Harvard, furthermore, young Theodore married Alice Lee, daughter of George Cabot Lee, and related to the top Boston Brahmin families. Kinsman Henry Cabot Lodge soon became T.R.’s long-time political mentor.

Throughout the 19th century, the Republicans had been mainly a high-tariff, inflationist party, while the Democrats had been the party of free trade and hard money, i.e., the gold standard. In 1896, however, the radical inflationist forces headed by William Jennings Bryan captured the Democratic presidential nomination, and so the Morgans, previously dominant in the Democratic Party, sent a message to the Republican nominee, William McKinley, through Henry Cabot Lodge. Lodge stated that the Morgan interests would back McKinley provided that the Republicans would support the gold standard. The deal was struck.

William McKinley reflected the dominance of the Republican Party by the Rockefeller/Standard Oil interests. Standard Oil was originally headquartered at Rockefeller’s home in Cleveland, and the oil magnate had long had a commanding influence in Ohio Republican politics. In the early 1890s, Marcus Hanna, industrialist and high school chum of John D. Rockefeller, banded together with Rockefeller and other financiers to save McKinley from bankruptcy, and Hanna became McKinley’s top political adviser and chairman of the Republican National Committee. As a consolation prize to the Morgan interests for McKinley’s capture of the Republican nomination, Morgan man Garret A. Hobart, director of various Morgan companies, including the Liberty National Bank of New York City, became vice president.

The death of Hobart in 1899 left a “Morgan vacancy” in the vice-presidential spot, as McKinley walked into the nomination. McKinley and Hanna were both hostile to Roosevelt, considering him “erratic” and a “madman,” but after several Morgan men turned down the nomination, and after the intensive lobbying of Morgan partner George W. Perkins, Teddy Roosevelt at last received the vice-presidential nomination. It is not surprising that virtually Teddy’s first act after the election of 1900 was to throw a lavish dinner in honor of J.P. Morgan.

Teddy Roosevelt and the “Lone Nut”

The sudden appearance of one of the “lone nuts” so common in American political history led to the assassination of McKinley, and suddenly Morgan man Theodore Roosevelt was president. John Hay, expansionist secretary of state whom Roosevelt inherited from McKinley, had the good fortune of having his daughter marry the son of William C. Whitney of the great Morgan-connected family. TR’s next secretary of state and former secretary of war was his old friend Elihu Root, personal attorney for J.P. Morgan. Root appointed as his assistant secretary a close friend of TR’s, Robert Bacon, a Morgan partner, and in due course Bacon became TR’s secretary of state. TR’s first appointed secretary of the navy was Paul Morton, vice president of the Morgan-controlled Atchison, Topeka, and Santa Fe Railroad, and his assistant secretary was Herbert L. Satterlee, who had the distinction of being J.P. Morgan’s son-in-law.

“It is well known that Roosevelt engineered a phony revolution in Columbia in 1903, creating the new state of Panama and handing the Canal Zone to the United States.”

Theodore Roosevelt’s greatest direct boost to the Morgan interests is little known. It is well known that Roosevelt engineered a phony revolution in Columbia in 1903, creating the new state of Panama and handing the Canal Zone to the United States. What has not been fully disclosed is who benefited from the $40 million that the US government paid, as part of the Panama settlement, to the owners of the old bankrupt Panama Canal Company, a French company which had previously been granted a Colombian concession to dig a Panama canal.

The Panama Canal Company’s lobbyist, Morgan-connected New York attorney William Nelson Cromwell, literally sat in the White House directing the “revolution” and organizing the final settlement. We now know that, in 1900, the shares of the old French Panama Canal Company were purchased by an American financial syndicate, headed by J.P. Morgan & Co., and put together by Morgan’s top attorney, Francis Lynde Stetson. The syndicate also included members of the Rockefeller, Seligman, and Kuhn-Loeb financial groups, as well as Perkins and Saterlee.

The syndicate did well from the Panama revolution, purchasing the shares at two-thirds of par and selling them, after the revolution, for double the price. One member of the syndicate was especially fortunate: Teddy Roosevelt’s brother-in-law, Douglas E. Robinson, a director of Morgan’s Astor National Bank. For William Cromwell was named the fiscal agent of the new Republic of Panama, and Cromwell promptly put $6 million of the $10 million payoff the United States made to the Panamian revolutionaries into New York City mortgages via the real estate firm of the same Douglas E. Robinson.

After the turn of the century, a savage economic and political war developed between the Morgan interests on the one hand, and the allied Harriman-Kuhn-Loeb-Rockefeller interests on the other. Harriman and Kuhn-Loeb grabbed control of the Union Pacific Railroad and the two titanic forces battled to a draw for control of the Northern Pacific. Also, at about the same time, a long-lasting and worldwide financial and political “oil war” broke out between Standard Oil, previously a monopolist in both the crude and export markets outside of the United States, and the burgeoning British Royal Dutch Shell-Rothschild combine.

And since the Morgans and Rothschilds were longtime allies, it is certainly sensible to conclude — though there are no hard facts to prove it — that Teddy Roosevelt launched his savage antitrust assault to break Standard Oil as a Morgan contribution to the worldwide struggle. Furthermore, Mellon-owned Gulf Oil was allied to the Shell combine, and this might well explain the fact that former Morgan-and-Mellon lawyer Philander Knox, TR’s attorney general, was happy to file the suit against Standard Oil.

Roosevelt’s successor, William Howard Taft, being an Ohio Republican, was allied to the Rockefeller camp, and so he proceeded to take vengeance on the Morgans by filing antitrust suits to break up the two leading Morgan trusts, International Harvester and US Steel. It was now all-out war, and so the Morgans in 1912 deliberately created a new party, the Progressive Party, headed by former Morgan partner, George W. Perkins. The successful aim of the Progressive Party was to bring Theodore Roosevelt out of retirement to run for president, in order to break Taft, and to elect, for the first time in a generation, a Democratic president. The new party was liquidated soon after.

Supporters of Roosevelt were studded with financiers in the Morgan ambit, including Judge Elbert Gary, chairman of the board of US Steel; Medill McCormick of the International Harvester family, and Willard Straight, Morgan’s partner. In the same year, Straight and his heiress wife, Dorothy Whitney, founded the weekly magazine of opinion, The New Republic, symbolizing the growing alliance for war and statism between the Morgans and various of the more moderate (i.e., non-Marxist) progressive and socialist intellectuals.

 

Morgan, Wilson, and War

The Morgan-Progressive Party ploy deliberately insured the election of Woodrow Wilson as a Democratic president. Wilson himself, until almost the time of running for president, was for several years on the board of the Morgan-controlled Mutual Life Insurance Company. He was also surrounded by Morgan men. His son-in-law, William Gibbs McAdoo, who became Wilson’s secretary of the treasury, was a failing businessman in New York City when he was bailed out and befriended by J.P. Morgan and his associates. The Morgans then set McAdoo up as president of New York’s Hudson and Manhattan Railroad until his appointment in the Wilson administration. McAdoo was to spend the rest of his financial and political life securely in the Morgan ambit.

The main sponsor of Wilson’s run for the presidency was George W. Harvey, head of Morgan-controlled Harper & Brothers publishers; other major backers included Wall Street financier and Morgan associate Thomas Fortune Ryan, and Wilson’s college classmate and Morgan ally, Cyrus H. McCormick, head of International Harvester. Another close friend and leading political adviser of Wilson was New York City banker George Foster Peabody, son of the Boston Brahmin and a Morgan banker. A particularly fascinating figure in Wilson’s fateful foreign policy was “Colonel” Edward Mandell House, of the wealthy House family of Texas, which was deeply involved in landowning, trade, banking, and railroads. House himself was head for several years of the Trinity and Brazos Valley Railway, financed by the House family in collaboration with Morgan-associated Boston financial interests, particularly of the Old Colony Trust Company. The mysterious House, though never graced with an offical government post, is generally acknowledged to have been Wilson’s all-powerful foreign policy adviser and aide for virtually his entire two terms.

By 1914, the Morgan empire was in increasingly shaky financial shape. The Morgans had long been committed to railroads, and after the turn of the century the highly subsidized and regulated railroads entered their permanent decline. The Morgans had also not been active enough in the new capital market for industrial securities, which had begun in the 1890s, allowing Kuhn-Loeb to beat them in the race for industrial finance. To make matters worse, the $400 million Morgan-run New Haven Railroad went bankrupt in 1914.

At the moment of great financial danger for the Morgans, the advent of World War I came as a godsend. Long connected to British, including Rothschild, financial interests, the Morgans leaped into the fray, quickly securing the appointment, for J.P. Morgan & Co., of fiscal agent for the warring British and French governments, and monopoly underwriter for their war bonds in the United States. J.P. Morgan also became the fiscal agent for the Bank of England, the powerful English central bank. Not only that: the Morgans were heavily involved in financing American munitions and other firms exporting war material to Britain and France. J.P. Morgan & Co., moreover, became the central authority organizing and channeling war purchases for the two Allied nations.

The United States had been in a sharp recession during 1913 and 1914; unemployment was high, and many factories were operating at only 60% of capacity. In November 1914, Andrew Carnegie, closely allied with the Morgans ever since his Carnegie Steel Corporation had merged into the formation of United States Steel, wrote to President Wilson lamenting business conditions but happily expecting a great change for the better from Allied purchases of US exports.

Sure enough, war material exports zoomed. Iron and steel exports quintupled from 1914 to 1917, and the average profit rate of iron and steel firms rose from 7.4% to 28.7% from 1915 until 1917. Explosives exports to the Allies rose over ten-fold during 1915 alone. Overall, from 1915 to 1917, the export department of J.P. Morgan and Co. negotiated more than $3 billion of contracts to Britain and France. By early 1915, Secretary McAdoo was writing to Wilson hailing the “great prosperity” being brought by war exports to the Allies, and a prominent business writer wrote the following year that “War, for Europe, is meaning devastation and death; for America a bumper crop of new millionaires and a hectic hastening of prosperity revival .”

Deep in Allied bonds and export of munitions, the Morgans were doing extraordinarily well; and their great rivals, Kuhn-Loeb, being pro-German, were necessarily left out of the Allied wartime bonanza. But there was one hitch: it became imperative that the Allies win the war. It is not surprising, therefore, that from the beginning of the great conflict, J.P. Morgan and his associates did everything they possibly could to push the supposedly neutral United States into the war on the side of England and France. As Morgan himself put it: “We agreed that we should do all that was lawfully in our power to help the Allies win the war as soon as possible.”

Accordingly, Henry P. Davison, Morgan partner, set up the Aerial Coast Patrol in 1915, to get the public in the mood to search the skies for German planes. Bernard M. Baruch, long-time associate of the extremely wealthy copper magnates, the Guggenheim family, financed the Businessmen’s Training Camp, at Plattsburgh, New York, designed to push for universal military training and preparations for war. Also participating in financing the camp were Morgan partner Willard Straight, and former Morgan partner Robert Bacon. In addition to J.P. Morgan himself, a raft of Morgan-affiliated political leaders whooped it up for immediate entry of the United States into the war on the side of the Allies: including Henry Cabot Lodge, Elihu Root, and Theodore Roosevelt.

In addition, the National Security League was founded in December, 1914, to call for American entry into the war against Germany. The NSL issued warnings against a German invasion of the United States, once England was defeated, and it called all advocates of peace and nonintervention, “pro-German,” “dangerous aliens,” “traitors,” and “spies.”

The NSL also advocated universal military training, conscription, and the US buildup of the largest navy in the world. Prominent in the organization of the National Security League were Frederic R. Coudert, Wall Street attorney for the British, French, and Russian governments; Simon and Daniel Guggenheim; T. Coleman DuPont, of the munitions, family; and a host of prominent Morgan-oriented financiers; including former Morgan partner Robert Bacon; Henry Clay Prick of Carnegie Steel; Judge Gary of US Steel; George W. Perkins, Morgan partner, who has been termed “the secretary of state” for the Morgan interests; former President Theodore Roosevelt; and J.P. Morgan himself.

A particularly interesting founding associate of NSL was a man who has dominated American foreign policy during the 20th century: Henry L. Stimson, secretary of war under William H. Taft and Franklin D. Roosevelt, and secretary of state under Herbert Hoover. Stimson, a Wall Street lawyer in the Morgan ambit, was a protege of Morgan’s personal attorney Elihu Root, and two of his cousins were partners in the Morgan-dominated Wall Street utility stock market and banking firm of Bonbright & Co.

While the Morgans and other financial interests were beating the drums for war, even more influential in pushing the only partially reluctant Wilson into the war were his foreign policy Svengali, Colonel House, and House’s protege, Walter Hines Page, who was appointed Ambassador to Great Britain. Page’s salary in this prestigious influential post was handsomely subsidized through Colonel House by copper magnate Cleveland H. Dodge, a prominent adviser to Wilson, who benefited greatly from munitions sales to the Allies.

Colonel House liked to pose as an abject instrument of President Wilson’s wishes. But before and after US entry into the war, House shamelessly manipulated Wilson, in secret and traitorous collaboration with the British, to push the president first into entering the war and then into following British wishes instead of setting an independent American course.

Thus, in 1916, House wrote to his friend Frank L. Polk, Counselor to the State Department and later counselor to J.P. Morgan, that “the President must be guided” not to be independent of British desires. Advising British Prime Minister Arthur Balfour on how best to handle Wilson, House counselled Balfour to exaggerate British difficulties in order to get more American aid, and warned him never to mention a negotiated peace. Furthermore, Balfour leaked to Colonel House the details of various secret Allied treaties that they both knew the naive Wilson would not accept, and they both agreed to keep the treaties from the president.

Similarly, soon after the United States entered the war, the British sent to the United States as personal liaison between the Prime Minister and the White House the young chief of British military intelligence, Sir William Wiseman. House and Wiseman quickly entered a close collaboration, with House coaching the Englishman on the best way of dealing with the president, such as “tell him only what he wants to hear,” never argue with him, and discover and exploit his weaknesses.

In turn, Britain’s top intelligence agent manipulated House, constantly showering him with flattery, and established a close friendship with the Colonel, getting an apartment in the same building in New York City, and travelling together abroad. Collaborating with House in his plan to manipulate Wilson into pro-British policies was William Phillips, an assistant secretary of state who had married into the Astor family.

Collaborating with House in supplying Wiseman with illegal information and working with the British agent against Wilson were two important American officials. One was Walter Lippman, a young socialist who had been named by Morgan partner Willard Straight as one of the three editors of his New Republic, a magazine which, needless to say, led ‘the parade of progressive and socialist intellectuals in favor of entering the war on the side of the Allies.

Lippmann soon vaulted into important roles in the war effort: assistant to the secretary of war; then secretary of the secret group of historians called The Inquiry, established under Colonel House in late 1917 to plan the peace settlement at the end of the war. Lippmann later left The Inquiry to go overseas for American military intelligence.

Another important collaborator with Wiseman was businessman and scholar George Louis Beer, who was in charge of African and Asian colonial matters for The Inquiry. Wiseman secretly showed British documents on African colonies to Beer, who in turn leaked Inquiry reports to British intelligence.

The plans of Colonel House and his biased young historians of The Inquiry were put into effect at the peace settlement at Versailles. Germany, Austria-Hungary, and Russia were cruelly dismembered, thus insuring that Germany and Russia, once recovered from the devastation of the war, would bend their energies toward getting their territories back. In that way, conditions were virtually set for World War II.

Not only that: the Allies at Versailles took advantage of the temporary power vacuum in Eastern Europe to create new independent states that would function as client states of Britain and France, be part of the Morgan-Rothschild financial network, and help keep Germany and Russia down permanently. It was an impossible task for these new small nations, a task made more difficult by the fact that the young historians managed to rewrite the map of Europe at Versailles to make the Poles, the Czechs, and the Serbs dominant over all the other minority nationalities forcibly incorporated into the new countries. These subjugated peoples — the Germans, Ukrainians, Slovaks, Croats, Slovenes, etc — thus became built-in allies for the revanchist dreams of Germany and Russia.

American entry into World War I in April 1917 prevented negotiated peace between the warring powers, and drove the Allies forward into a peace of unconditional surrender and dismemberment, a peace which, as we have seen, set the stage for World War II. American entry thus cost countless lives on both sides, chaos and disruption throughout central and eastern Europe at war’s end, and the consequent rise of Bolshevism, fascism, and Nazism to power in Europe. In this way, Woodrow Wilson’s decision to enter the war may have been the single most fateful action of the 20th century, causing untold and unending misery and destruction. But Morgan profits were expanded and assured.

 

The Fortuitous Fed

The massive US loans to the Allies, and the subsequent American entry into the war, could not have been financed by the relatively hard-money, gold standard system that existed before 1914. Fortuitously, an institution was established at the end of 1913 that made the loans and war finance possible: the Federal Reserve System. By centralizing reserves, by providing a government-privileged lender of last resort to the banks, the Fed enabled the banking system to inflate money and credit, finance loans to the Allies, and float massive deficits once the United States entered the war. In addition, the seemingly odd Fed policy of creating an acceptance market out of thin air by standing ready to purchase acceptance at a subsidized rate, enabled the Fed to rediscount acceptance on munitions exports.

The Federal Reserve was the outgrowth of five years of planning, amending, and compromising among various politicians and concerned financial groups, led by the major financial interests, including the Morgans, the Rockefellers, and the Kuhn-Loebs, along with their assorted economists and technicians.

Particularly notable among the Rockefeller interests were Senator Nelson W. Aldrich (R.-R.I.), father-in-law of John D. Rockefeller, Jr., and Frank A. Vanderlip, vice-president of Rockefeller’s National City Bank of New York. From the Kuhn-Loebs came the prominent Paul Moritz Warburg, of the German investment banking firm of M.M. Warburg and Company. Warburg emigrated to the United States in 1902 to become a senior partner at Kuhn, Loeb & Co., after which he spent most of his time agitating for a central bank in the United States.

Also igniting the drive for a Federal Reserve System was Jacob H. Schiff, powerful head of Kuhn-Loeb to whom Warburg was related by marriage. Seconding and sponsoring Warburg in academia was the prominent Columbia University economist Edwin R.A. Seligman, of the investment banking family of J. & W. Seligman and Company; Seligman was the brother of Warburg’s brother-in-law.

The Morgans were prominently represented in the planning and agitation for a Central Bank by Henry P. Davison, Morgan partner; Charles D. Norton, president of Morgan’s First National Bank of New York; A. Barton Hepburn, head of Morgan’s Chase National Bank; and Victor Morawetz, attorney and banker in the Morgan ranks and chairman of the executive committee of the Morgan-controlled Atchison, Topeka, and Santa Fe Railroad.

While the establishment of the Federal Reserve System in late 1913 was the result of a coalition of Morgan, Rockefeller, and Kuhn-Loeb interests, there is no question which financial group controlled the personnel and the policies of the Fed once it was established. (While influential in framing policies of the Fed, Federal Reserve Board member Warburg was disqualified from leadership because of his pro-German views.) The first Federal Reserve Board, appointed by President Wilson in 1914, included Warburg; one Rockefeller man, Frederic A. Delano, uncle of Franidin D. Roosevelt, and president of the Rockefeller-controlled Wabash Railway; and an Alabama banker, who had both Morgan and Rockefeller connections.

Overshadowing these three were three definite Morgan men, and a university economist, Professor Adolph C. Miller of Berkeley, whose wife’s family had Morgan connections. The three definite Morgan men were Secretary of the Treasury McAdoo; Comptroller of the Currency John Skelton Williams, a Virginia banker and long-time McAdoo aide on Morgan railroads; and Assistant Secretary of the Treasury Charles S. Hamlin, a Boston attorney who had married into a wealthy Albany family long connected with the Morgan-dominated New York Central Railroad.

But more important than the composition of the Federal Reserve Board was the man who became the first Governor of the New York Federal Reserve Bank and who single-handedly dominated Fed policy from its inception until his death in 1928. This man was Benjamin Strong, who had spent virtually his entire business and personal life in the circle of top associates of J.P. Morgan. A secretary of several trust companies (banks doing trust business) in New York City, Strong became neighbor and close friend of three top Morgan partners, Henry P. Davison, Dwight Morrow, and Thomas W. Lamont. Davison, in particular, became his mentor, and brought him into Morgan’s Bankers Trust company, where he soon succeeded Lamont as vice president, and then finally became president. When Strong was offered the post of Governor of the New York Fed, it was Davison who persuaded him to take the job.

Strong was an enthusiast for American entry into the war, and it was his mentor Davison who had engineered the coup of getting Morgan named as sole underwriter and purchasing agent for Britain and France. Strong worked quickly to formalize collaboration with the Bank of England, collaboration which would continue in force throughout the 1920s. The Federal Reserve Bank of New York became foreign agent for the Bank of England, and vice versa.

The main collaboration throughout the 1920s, much of it kept secret from the Federal Reserve Board in Washington, was between Strong and the man who soon became Governor of the Bank of England, Montagu Collet Norman. Norman and Strong were not only fast friends, but had important investment banking ties, Norman’s uncle having been a partner of the great English banking firm of Baring Brothers, and his grandfather a partner in the international banking house of Brown Shipley & Co., the London branch of the Wall Street banking firm of Brown Brothers. Before coming to the Bank of England, Norman himself had worked at the Wall Street office of Brown Brothers, and then returned to London to become a partner of Brown Shipley.

The major fruit of the Norman-Strong collaboration was Strong’s being pressured to inflate money and credit in the United States throughout the 1920s, in order to keep England from losing gold to the United States from its inflationary policies. Britain’s predicament came from its insistence on going back to the gold standard after the war at the highly overvalued pre-war par for the pound, and then insisting on inflating rather than deflating to make its exports competitively priced in the world market. Hence, Britain needed to induce other countries, particularly the United States, to inflate along with it. The Strong-Norman-Morgan connection did the job, setting the stage for the great financial collapse of 1929-1931.

As World War I drew to a close, influential Britons and Americans decided that intimate postwar collaboration between the two countries required more than just close cooperation between the central banks. Also needed were permanent organizations to promote joint Anglo-American policies to dominate the postwar world.

The Round Table

In England, Cecil Rhodes had launched a secret society in 1891 with the aim of maintaining and expanding the British Empire to re-incorporate the United States. After the turn of the 20th century, the direction, organization, and expansion of the society fell to Rhodes’s friend and executor, Alfred Lord Milner. The Milner Group dominated domestic planning in Britain during World War I, and particularly the planning for post-war foreign and colonial policy. The Milner Group staffed the British delegation of experts to Versailles. To promote the intellectual agitation for such a policy, the Milners had also set up the Round Table Groups in England and abroad in 1910.

The first American to be asked to join the Round Table was George Louis Beer, who came to its attention when his books attacked the American Revolution and praised the British Empire of the 18th century. Such loyalty could not go unrewarded, and so Beer became a member of the Group about 1912 and became the American correspondent of Round Table magazine. We have seen Beer’s pro-British role as colonial expert for The Inquiry. He was also the chief US expert on colonial affairs at Versailles, and afterward the Milner Group made Beer head of the Mandate Department of the League of Nations.

During the war, Beer, Anglophile Yale historian George Burton Adams, and powerful Columbia University historian James T. Shotwell, an important leader of The Inquiry and head of the National Board for Historical Services, which emitted deceptive propaganda for the war effort, formed a secret society to promote Anglo-American collaboration. Finally, led by Beer for the United States and the head of the Round Table group in England, Lionel Curtis, the British and US historical staffs at Versailles took the occasion to found a permanent organization to agitate for an informally, if not formally, reconstituted Anglo-American Empire. The new group, the Institute of International Affairs, was formed at a meeting at the Majestic Hotel in Paris on May 30, 1919. A six-man organizing committee was formed, three Milnerites from Britain, and three Americans: Shotwell; Harvard historian Archibald C. Coolidge, head of the Eastern European desk of the Inquiry, and member of the Morgan-oriented Boston financial family; and James Brown Scott, Morgan lawyer who was to write a biography of Robert Bacon. The British branch, the Royal Institute of International Affairs, set up a committee to supervise writing a multi-volume history of the Versailles Peace Conference; the committee was financed by a gift from Thomas W. Lamont, Morgan partner.

The CFR

The American branch of the new group took a while to get going. Finally, the still inactive American Institute of International Affairs merged with a defunct outfit, begun in 1918, of New York businessmen concerned with the postwar world, and organized as a dinner club to listen to foreign visitors. This organization, the Council on Foreign Relations had as its honorary chairman Morgan lawyer Elihu Root, while Alexander Hemphill, chairman of Morgan’s Guaranty Trust Company, was chairman of its finance committee. In August 1921, the two organizations merged into the new Council on Foreign Relations, Inc., a high-powered organization embracing bankers, lawyers, and intellectuals.

While varied financial interests were represented in the new organization, the CFR was Morgan-dominated, from top to bottom. Honorary president was Elihu Root. President was John W. Davis, Wilson’s Solicitor-General, and now chief counsel for J.P. Morgan & Co. Davis was to become Democratic presidential candidate in 1924. Secretary treasurer of the new CFR was Harvard economic historian Edwin F. Gay, director of planning and statistics for the Shipping Board during the war, and now editor of the New York Evening Post, owned by his mentor, Morgan partner, Thomas W. Lamont.

It was Gay who had the idea of founding Foreign Affairs, the CFR’s quarterly journal, and who suggested both his Harvard colleague Archibald Coolidge as the first editor, and the New York Post reporter Hamilton Fish Armstrong as assistant editor and executive director of the CFR. Other prominent officials in the new CFR were: Frank L. Polk, former undersecretary of state and now lawyer for J.P. Morgan & Co; Paul M. Warburg of Kuhn, Loeb; Otto H. Kahn of Kuhn, Loeb; former undersecretary of state under Wilson, Norman H. Davis, a banking associate of the Morgans; and as vice-president, Paul D. Cravath, senior partner of the Rockefeller-oriented Wall Street law firm of Cravath, Swaine, and Moore.

After World War II, the Council on Foreign Relations became dominated by the Rockefeller rather than by the Morgan interests, a shift of power reflecting a general alteration in financial power in the world at large. After World War II, the rise of oil to prominence brought the Morgans and Rockefellers — once intense rivals — into an Eastern Establishment of which the Rockefellers were the senior, and the Morgans the junior, partners.

 

Rockefeller, Morgan, and War

During the 1930s, the Rockefellers pushed hard for war against Japan, which they saw as competing with them vigorously for oil and rubber resources in Southeast Asia and as endangering the Rockefellers’ cherished dreams of a mass “China market” for petroleum products. On the other hand, the Rockefellers took a noninterventionist position in Europe, where they had close financial ties with German firms such as I.G. Farben and Co., and very few close relations with Britain and France. The Morgans, in contrast, as usual deeply committed to their financial ties with Britain and France, once again plumped early for war with Germany, while their interest in the Far East had become minimal. Indeed, US Ambassador to Japan, Joseph C. Grew, former Morgan partner, was one of the few officials in the Roosevelt administration genuinely interested in peace with Japan.

World War II might therefore be considered, from one point of view, as a coalition war: the Morgans got their war in Europe, the Rockefellers theirs in Asia. Such disgruntled Morgan men as Lewis W. Douglas and Dean G. Acheson (a protégé of Henry Stimson), who had left the early Roosevelt administration in disgust at its soft money policies and economic nationalism, came happily roaring back into government service with the advent of World War II. Nelson A. Rockefeller, for his part, became head of Latin American activities during World War II, and thereby acquired his taste for government service.

After World War II, the united Rockefeller-Morgan-Kuhn-Loeb Eastern Establishment was not allowed to enjoy its financial and political supremacy unchallenged for long. “Cowboy” Sun Belt firms, maverick oil men and construction men from Texas, Florida, and southern California, began to challenge the Eastern Establishment “Yankees” for political power. While both groups favor the Cold War, the Cowboys are more nationalistic, more hawkish, and less inclined to worry about what our European allies are thinking. They are also much less inclined to bail out the now Rockefeller-controlled Chase Manhattan Bank and other Wall Street banks that loaned recklessly to Third World and Communist countries and expect the US taxpayer — through outright taxes or the printing of US dollars — to pick up the tab.

It should be clear that the name of the political party in power is far less important than the particular regime’s financial and banking connections. The foreign policy power for so long of Nelson Rockefeller’s personal foreign affairs adviser, Henry A. Kissinger, a discovery of the extraordinarily powerful Rockefeller-Chase Manhattan Bank elder statesman John J. McCloy, is testimony to the importance of financial power. As is the successful lobbying by Kissinger and Chase Manhattan’s head, David Rockefeller, to induce Jimmy Carter to allow the ailing Shah of Iran into the United States — thus precipitating the humiliating hostage crisis.

Despite differences in nuance, it is clear that Ronald Reagan’s originally proclaimed challenge to Rockefeller-Morgan power in the Council of Foreign Relations and to the Rockefeller-created Trilateral Commission has fizzled, and that the “permanent government” continues to rule regardless of the party nominally in power. As a result, the much-heralded “bipartisan foreign policy” consensus imposed by the Establishment since World War II seems to remain safely in place.

David Rockefeller, chairman of the board of his family’s Chase Manhattan Bank from 1970 until recently, established the Trilateral Commission in 1973 with the financial backing of the CFR and the Rockefeller Foundation. Joseph Kraft, syndicated Washington columnist who himself has the distinction of being both a CFR member and a Trilateralist, has accurately described the CFR as a “school for statesmen,” which “comes close to being an organ of what C. Wright Mills has called the Power Elite — a group of men, similar in interest and outlook, shaping events from invulnerable positions behind the scenes.” The idea of the Trilateral Commission was to internationalize policy formation, the commission consisting of a small group of multinational corporate leaders, politicians, and foreign policy experts from the United States, Western Europe, and Japan, who meet to coordinate economic and foreign policy among their respective nations.

Perhaps the most powerful single figure in foreign policy since World War II, a beloved adviser to all presidents, is the octogenarian John J. McCloy. During World War II, McCloy virtually ran the War Department as Assistant to aging Secretary Stimson; it was McCloy who presided over the decision to round up all Japanese-Americans and place them in concentration camps in World War II, and he is virtually the only American left who still justifies that action.

Before and during the war, McCloy, a disciple of Morgan lawyer Stimson, moved in the Morgan orbit; his brother-in-law, John S. Zinsser, was on the board of directors of J.P. Morgan & Co. during the 1940s. But, reflecting the postwar power shift from Morgan to Rockefeller, McCloy moved quickly into the Rockefeller ambit. He became a partner of the Wall Street corporate law firm of Milbank, Tweed, Hope, Hadley & McCloy, which had long served the Rockefeller family and the Chase Bank as legal counsel.

From there he moved to become Chairman of the Board of the Chase Manhattan Bank, a director of the Rockefeller Foundation, and of Rockefeller Center, Inc., and finally, from 1953 until 1970, chairman of the board of the Council on Foreign Relations. During the Truman administration, McCloy served as president of the World Bank and then US High Commissioner for Germany. He was also a special adviser to President John F. Kennedy on Disarmament, and chairman of Kennedy’s Coordinating Committee on the Cuban Crisis. It was McCloy who “discovered” Professor Henry A. Kissinger for the Rockefeller forces. It is no wonder that John K. Galbraith and Richard Rovere have dubbed McCloy “Mr. Establishment.”

A glance at foreign policy leaders since World War II will reveal the domination of the banker elite. Truman’s first secretary of defense was James V. Forrestal, former president of the investment banking firm of Dillon, Read & Co., closely allied to the Rockefeller financial group. Forrestal had also been a board member of the Chase Securities Corporation, an affiliate of the Chase National Bank.

Another Truman defense secretary was Robert A. Lovett, a partner of the powerful New York investment banking house of Brown Brothers, Harriman. At the same time that he was secretary of defense, Lovett continued to be a trustee of the Rockefeller Foundation. Secretary of the Air Force Thomas K. Finletter was a top Wall Street corporate lawyer and member of the board of the CFR while serving in the cabinet. Ambassador to Soviet Russia, Ambassador to Great Britain, and secretary of commerce in the Truman administration was the powerful multi-millionaire W. Averell Harriman, an often underrated but dominant force with the Democratic Party since the days of FDR. Harriman was a partner of Brown Brothers Harriman.

Also Ambassador to Great Britain under Truman was Lewis W. Douglas, brother-in-law of John J. McCloy, a trustee of the Rockefeller Foundation, and a board member of the Council on Foreign Relations. Following Douglas as Ambassador to the Court of St. James was Walter S. Gifford, chairman of the board of AT&T, and member of the board of trustees of the Rockefeller Foundation for almost two decades. Ambassador to NATO under Truman was William H. Draper, Jr., vice-president of Dillon, Read & Co.

Also influential in helping the Truman administration organize the Cold War was director of the policy planning staff of the State Department, Paul H. Nitze. Nitze, whose wife was a member of the Pratt family, associated with the Rockefeller family since the origins of Standard Oil, had been vice-president of Dillon, Read & Co.

When Truman entered the Korean War, he created an Office of Defense Mobilization to run the domestic economy during the war. The first director was Charles E. (“Electric Charlie”) Wilson, president of the Morgan-controlled General Electric Company, who also served as board member of the Morgans’ Guaranty Trust Company. His two most influential assistants were Sidney J. Weinberg, ubiquitous senior partner in the Wall Street investment banking firm of Goldman Sachs & Co., and former General Lucius D. Clay, chairman of the board of Continental Can Co., and a director of the Lehman Corporation.

Succeeding McCloy as president of the World Bank, and continuing in that post throughout the two terms of Dwight Eisenhower, was Eugene Black. Black had served for fourteen years as vice-president of the Chase National Bank, and was persuaded to take the World Bank post by the bank’s chairman of the board, Winthrop W. Aldrich, brother-in-law of John D. Rockefeller, Jr.

The Eisenhower administration proved to be a field day for the Rockefeller interests. While president of Columbia University, Eisenhower was invited to high-level dinners where he met and was groomed for president by top leaders from the Rockefeller and Morgan ambits, including the chairman of the board of Rockefeller’s Standard Oil of New Jersey, the presidents of six other big oil companies, including Standard of California and Socony Vacuum, and the executive vice-president of J.P. Morgan & Co.

One dinner was hosted by Clarence Dillon, the multi-millionaire retired founder of Dillon, Read & Co., where the guests included Russell B. Leffingwell, chairman of the board of both J.P. Morgan & Co. and the CFR (before McCloy); John M. Schiff, a senior partner of the investment banking house of Kuhn, Loeb & Co.; the financier Jeremiah Milbank, a director of the Chase Manhattan Bank; and John D. Rockefeller, Jr.

Even earlier, during 1949, Eisenhower had been introduced through a special study group to key figures in the CFR. The study group devised a plan to create a new organization called the American Assembly — in essence an expanded CFR study group — whose main function was reputedly to build up Eisenhower’s prospects for the presidency. A leader of the “Citizens for Eisenhower” committee, who later became Ike’s Ambassador to Great Britain, was the multimillionaire John Hay Whitney, scion of several wealthy families, whose granduncle, Oliver H. Payne, had been one of the associates of John D. Rockefeller, Sr. in founding the Standard Oil Company. Whitney was head of his own investment concern, J.H. Whitney & Co., and later became publisher of the New York Herald Tribune.

Running foreign policy during the Eisenhower administration was the Dulles family, led by Secretary of State John Foster Dulles, who had also concluded the US peace treaty with Japan under Harry Truman. Dulles had for three decades been a senior partner of the top Wall Street corporate law firm of Sullivan & Cromwell, whose most important client was Rockefeller’s Standard Oil Company of New Jersey. Dulles had been for fifteen years a member of the board of the Rockefeller Foundation, and before assuming the post of secretary of state was chairman of the board of that institution. Most important is the little-known fact that Dulles’s wife was Janet Pomeroy Avery, a first cousin of John D. Rockefeller, Jr.

Heading the super-secret Central Intelligence Agency during the Eisenhower years was Dulles’s brother, Allen Welsh Dulles, also a partner in Sullivan & Cromwell. Allen Dulles had long been a trustee of the CFR and had served as its president from 1947 to 1951. Their sister, Eleanor Lansing Dulles, was head of the Berlin desk of the State Department during that decade.

Undersecretary of state, and the man who succeeded John Foster Dulles in the spring 1959, was former Massachusetts Governor Christian A. Herter. Herter’s wife, like Nitze’s, was a member of the Pratt family. Indeed, his wife’s uncle, Herbert L. Pratt, had been for many years president or chairman of the board of Standard Oil Company of New York. One of Mrs. Herter’s cousins, Richardson Pratt, had served as assistant treasurer of Standard Oil of New Jersey up to 1945. Furthermore, one of Herter’s own uncles, a physician, had been for many years treasurer of the Rockefeller Institute for Medical Research.

Herter was succeeded as undersecretary of state by Eisenhower’s Ambassador to France, C. Douglas Dillon, son of Clarence, and himself Chairman of the Board of Dillon, Read & Co. Dillon was soon to become a trustee of the Rockefeller Foundation.

Perhaps to provide some balance for his banker-business coalition, Eisenhower appointed as secretary of defense three men in the Morgan rather than the Rockefeller ambit. Charles B. (“Engine Charlie”) Wilson was president of General Motors, member of the board of J.P. Morgan & Co. Wilson’s successor, Neil H. McElroy, was president of Proctor & Gamble Co. His board chairman, R.R. Deupree, was also a director of J.P. Morgan & Co. The third secretary of defense who had been undersecretary and secretary of the navy under Eisenhower, was Thomas S. Gates, Jr., who had been a partner of the Morgan-connected Philadelphia investment banking firm of Drexel & Co. When Gates stepped down as defense secretary, he became president of the newly formed flagship commercial bank for the Morgan interests, the Morgan Guaranty Trust Co.

Serving as secretary of the navy and then deputy secretary of defense (and later secretary of the treasury) under Eisenhower was Texas businessman Robert B. Anderson. After leaving the Defense Department, Anderson became a board member of the Rockefeller-controlled American Overseas Investing Co., and, before becoming secretary of the treasury, he borrowed $84,000 from Nelson A. Rockefeller to buy stock in Nelson’s International Basic Economy Corporation.

Head of the important Atomic Energy Commission during the Eisenhower years was Lewis L. Strauss. For two decades, Strauss had been a partner in the investment banking firm of Kuhn, Loeb & Co. In 1950, Strauss had become financial adviser to the Rockefeller family, soon also becoming a board member of Rockefeller Center, Inc.

A powerful force in deciding foreign policy was the National Security Council, which included on it the Dulles brothers, Strauss, and Wilson. Particularly important is the post of national security adviser to the president. Eisenhower’s first national security adviser was Robert Cutler, president of the Old Colony Trust Co., the largest trust operation outside New York City. The Old Colony was a trust affiliate of the First National Bank of Boston.

After two years in the top national security post, Cutler returned to Boston to become chairman of the board of Old Colony Trust, returning after a while to the national security slot for two more years. In between, Eisenhower had two successive national security advisers. The first was Dillon Anderson, a Houston corporate attorney, who did work for several oil companies. Particularly significant was Anderson’s position as chairman of the board of a small but fascinating Connecticut firm called Electro-Mechanical Research, Inc. Electro-Mechanical was closely associated with certain Rockefeller financiers; thus, one of its directors was Godfrey Rockefeller, a limited partner in the investment banking firm of Clark, Dodge & Co.

After more than a year, Anderson resigned from his national security post and was replaced by William H. Jackson, a partner of the investment firm of J. H. Whitney & Co. Before assuming his powerful position, Dillon Anderson had been one of several men serving as special hush-hush consultants to the National Security Council. Another special adviser was Eugene Holman, president of Rockefeller’s Standard Oil Company of New Jersey.

We may mention two important foreign policy actions of the Eisenhower administration which seem to reflect the striking influence of personnel directly tied to bankers and financial interests. In 1951, the regime of Mohammed Mossadegh in Iran decided to nationalize the British-owned oil holdings of the Anglo-Iranian Oil company. It took no time for the newly established Eisenhower administration to intervene heavily in this situation. CIA director and former Standard Oil lawyer Allen W. Dulles flew to Switzerland to organize the covert overthrow of the Mossadegh regime, the throwing of Mossadegh into prison, and the restoration of the Shah to the throne of Iran.

After lengthy behind-the-scenes negotiations, the oil industry was put back into action as purchasers and refiners of Iranian oil. But this time the picture was significantly different. Instead of the British getting all of the oil pie, their share was reduced to 40 percent of the new oil consortium, with five top US oil companies (Standard Oil of New Jersey, Socony Vacuum — formerly Standard Oil of N.Y. and now Mobil — Standard Oil of California, Gulf, and Texaco) getting another 40 percent.

It was later disclosed that Secretary of State Dulles placed a sharp upper limit on any participation in the consortium by smaller independent oil companies in the United States. In addition to the rewards to the Rockefeller interests, the CIA’s man-on-the-spot directing the operation, Kermit Roosevelt, received his due by quickly becoming a vice-president of Mellon’s Gulf Oil Corp.

 

The Guatemalan Coup

Fresh from its CIA triumph in Iran, the Eisenhower administration next turned its attention to Guatemala, where the left-liberal regime of Jacob Arbenz Guzman had nationalized 234,000 acres of uncultivated land owned by the nation’s largest landholder, the American-owned United Fruit Company, which imported about 60 percent of all bananas coming into the United States. Arbenz also announced his intention of seizing another 173,000 acres of idle United Fruit land along the Caribbean coast. In late 1953, Eisenhower gave the CIA the assignment of organizing a counter-revolution in Guatemala. With the actual operation directed by former Wall Street corporate lawyer Frank Wisner of the CIA, the agency launched a successful invasion of Guatemala, led by exiled Army Colonel Castilo Armas, which soon overthrew the Arbenz regime and replaced it with a military junta. The Arbenz land program was abolished, and most of its expropriated property was returned to the United Fruit Company.

Allen W. Dulles had financial connections with United Fruit and with various sugar companies which had also suffered land expropriation from the Arbenz regime. For several years, while a partner at Sullivan & Cromwell, he had been a board member of the Rockefeller-controlled J. Henry Schroder Banking Corporation. Members of the board of Schroder during 1953 included Delano Andrews, Sullivan & Cromwell partner who had taken Dulles’s seat on the board; George A. Braga, president of the Manati Sugar Company; Charles W. Gibson, vice-president of the Rockefeller-affiliated Air Reduction Company; and Avery Rockefeller, president of the closely linked banking house of Schroder, Rockefeller, & Co. Members of the board of Manati Sugar, in the meanwhile, included Alfred Jaretski, Jr., another Sullivan & Cromwell partner; Gerald F. Beal, president of J. Henry Schroder and chairman of the board of the International Railways of Central America; and Henry E. Worcester, a recently retired of executive of United Fruit. United Fruit, furthermore, was a controlling shareholder in International Railways, while, as in the case of Beal, the board chairmanship of the railway had long been held by a high official of Schroder. The close ties between United Fruit, Schroder, and International Railways may also be seen by the fact that, in 1959, the board chairman of the railway became James McGovern, general counsel for United Fruit. International Railway, in fact, carried most of United Fruit’s produce from the interior to the port in Guatemala. In addition, Dulles’s close associate and fellow trustee of the Council of Foreign Relations in this period, and former treasurer of the CFR, was Whitney H. Shepardson, formerly vice-president of International Railways.

Not only that: Robert Cutler, national security adviser to the president at the time of the coup against Arbenz, had himself very close ties to United Fruit. Cutler’s boss at Old Colony Trust, chairman of the board T. Jefferson Coolidge, was also, and more importantly, board chairman at United Fruit. Indeed, many members of the board of United Fruit, a Boston-based company, were also on the board of Old Colony or its mother company, the First National Bank of Boston.

Furthermore, during the period of planning the Guatemalan coup, and up till a few months before its success in 1954, the assistant secretary of state for inter-American affairs was John Moors Cabot, a well-known anti-Arbenz hawk. Cabot’s brother Thomas D., was an executive of United Fruit and a member of the board of the First National Bank of Boston.

The Council on Foreign Relations played an important role in the Guatemalan invasion. It began in the fall of 1952, when Spruille Braden, a former assistant secretary of state for inter-American affairs and then consultant for United Fruit, led a CFR study group on political unrest in Latin America. Discussion leader at the first meeting of the CFR-Braden group was John McClintock, an executive of United Fruit. Former leading New Dealer and Assistant Secretary of State Adolf A. Berle, Jr., a participant in the study group, recorded in his diary that the United States should welcome an overthrow of the Arbenz government, and noted that, “I am arranging to see Nelson Rockefeller (himself Assistant Secretary of State for Inter-American Affairs during World War II) who knows the situation and can work a little with General Eisenhower.”

In the actual Guatemalan operation, President Eisenhower himself was a CFR member, as were Allen Dulles, John M. Cabot and Frank Wisner, the man in charge of the coup and the CIA’s deputy director for plans. Of the twelve people in the US government identified as being involved at the top level in the Guatemalan affair, eight were CFR members or would be within a few years. These included, in addition to the above, Henry F. Holland, who succeeded Cabot in the assistant secretary of state slot in 1954; Undersecretary of State Walter Bedell Smith, a former director of the CIA; and Ambassador to the UN Henry Cabot Lodge.

Paving the way for the coup was a public report, issued in December 1953 by the Committee on International Policy of the National Planning Association on the Guatemalan situation. Head of the Committee was Frank Altschul, secretary and vice-president of the CFR and a partner of the international banking house of Lazard Freres, as well as a director of the Chase National Bank and president of the General American Investor Corp., a firm largely controlled by Lehman Brothers. The Altschul report, signed by twenty-two committee members of whom fifteen were CFR members, warned that “Communist infiltration in Guatemala” was a threat to the security of the Western Hemisphere and hinted that drastic action would probably be necessary to deal with this menace.

Of those involved in the drastic action, Secretary of State John Foster Dulles, while at Sullivan & Cromwell, had once represented United Fruit in negotiating a contract with Guatemala. Under-Secretary of State Walter Bedell Smith, after leaving the government, became director of United Fruit, as did Robert D. Hill, who participated in the Guatemala operation as Ambassador to Costa Rica. Furthermore, future president of Guatemala, Miguel Ydigoras Fuentes, noted that his own cooperation in the coup against Arbenz was obtained by Walter Turnbull, a former executive at United Fruit, who came to him along with two CIA agents.

 

JFK and the Establishment

 

When John F. Kennedy assumed the office of president, the first person he turned to for foreign policy advice was Robert A. Lovett, partner of Brown Brothers, Harriman, even though Lovett had backed Richard Nixon. Kennedy asked Lovett to take his pick of any of three top jobs in the Cabinet — State, Defense, and Treasury — but the ill and aging Lovett demurred. It was at Lovett’s urging, however, that Kennedy chose as Secretary of State Dean Rusk, president of the Rockefeller Foundation, a post he had acquired because of the strong backing of John Foster Dulles. Undersecretary of state was Chester Bowles, a trustee of the Rockefeller Foundation; Bowles was soon replaced by corporate lawyer George Bail, who was later to become a senior managing partner at Lehman Brothers.

For secretary of defense Kennedy chose Robert S. McNamara, president of Ford Motor Company. One influential force in the McNamara appointment was the backing of Sidney J. Weinberg, partner of the investment banking firm of Goldman, Sachs, & Co., and powerful fund-raiser for the Democratic Party. Weinberg was a member of the board of Ford Motor Company. Perhaps even more important was the intimate Ford connection with the investment banking house of Lehman Brothers, which had long carried great weight in the party; at that time, five high-ranking Ford executives sat on the board of the One William Street Fund, a mutual fund recently established by Lehman Brothers.

Secretary of the air force was Eugene Zuckert, chairman of the board of the small Pittsburgh firm, the Nuclear Science and Engineering Corp., controlled by the powerful Lehman Brothers. Before going to this firm, Zuckert had been a member of the Atomic Energy Commission; former ABC Commissioner Gordon Dean, who had preceded Zuckert as chairman of the board of Nuclear Science and Engineering, was also a partner of Lehman Brothers.

General counsel of the Defense Department, and soon to become secretary of the army, was Wall Street corporate lawyer Cyrus Vance, later to become secretary of state under Carter. Vance’s law firm — Simpson, Thacher & Bartlett — represented Lehman Brothers and Manufacturers Hanover Trust Co. Moreover, Vance had married into New York’s wealthy W & J Sloane family; his father-in-law, John Sloane, had served as a director of the United States Trust Co.

Secretary of the treasury in the Kennedy cabinet was C. Douglas Dillon, of Dillon, Read and the Rockefeller Foundation. Dillon saw no problem in serving for eight years as Ambassador to France and as a State Department official during the Eisenhower Era, and then segueing to the Democratic Kennedy Cabinet. Like Lovett, he too was chosen even though he had been a big contributor to the Nixon effort of 1960.

In the powerful post of National Security Adviser, Kennedy selected Harvard Dean McGeorge Bundy, who had been part of a high-powered foreign policy team advising Thomas B. Dewey in the 1948 campaign, a virtually all-Rockefeller dominated team headed by John Foster Dulles and including Dulles’s brother Allen, C. Douglas Dillon, and Christian Herter. After that, Bundy worked for the Council on Foreign Relations.

Bundy had been born into the wealthy Boston Brahmm Lowell family, his mother having been a Lowell. His father Harvey H. Bundy, was a partner in Boston’s top law firm of Choate, Hall & Stewart, a high official of the Foreign Bondholders Protective Council, and a director of the Merchants National Bank of Boston. McGeorge’s brother, William, a high CIA offical, was married to the daughter of former Secretary of State Dean Aches on, and his sister Katherine married into the socially prominent Auchinchloss family, the family of Jacqueline Kennedy.

The strong Rockefeller influence on Kennedy foreign policy is best seen in the fact that the new president continued Allen W. Dulles as head of the CIA. It was at the urging of Dulles that Kennedy decided to go ahead with the CIA’s previously planned and disastrous Bay of Pigs invasion of Cuba. Fidel Castro’s regime had recently nationalized a large number of American-owned sugar companies in Cuba. It might be noted that Dulles’s old law firm of Sullivan & Cromwell served as general counsel for two of these large sugar companies, the Francisco Sugar Co. and the Manati Sugar Co., and that one of the board members of these firms was Gerald F. Beal, president of the Rockefeller-oriented J. Henry Schroder Bank, of which Dulles had once been a director.

Not only that. John L. Loeb of the Loeb, Rhoades investment bank, whose wife was a member of the Lehman banking family, owned a large block of stock in the nationalized Compania Azucarera Atlantica del Golfo, a big sugar plantation in Cuba, while one of the directors of the latter company was Harold F. Linder, vice-chairman of the General American Investors Company, dominated by Lehman Brothers and Lazard Freres investment bankers. Linder was appointed head of the Export-Import Bank by President Kennedy.

After the Bay of Pigs fiasco, Dulles was replaced as head of the CIA by West Coast industrialist John A. McCone, who also had the capacity to serve the administrations of either party with equal ease. Undersecretary of the air force under Truman and head of the Atomic Energy Commission under Eisenhower, McCone was president of the Bechtel-McCone Corporation, and represents the first major incursion of the international Bechtel construction interests into American politics. McCone was also a board member of the California Bank of Los Angeles, and of the Rockefeller-dominated Standard Oil Company of California.

The CIA was also heavily involved about this time in the short-lived Katanga secession movement in the old Belgian Congo. One of the largest of the American companies in Katanga, and a major backer of the secession movement, was the Anglo-American Corporation of South Africa, one of whose partners was mining magnate Charles W. Engelhard. Engelhard’s investment banker was Dillon, Read, the family firm of Kennedy’s secretary of the treasury, C. Douglas Dillon.

We have seen that Mr. Establishment, the Rockefeller-oriented John J. McCloy, served as Kennedy’s special adviser on disarmament. When the US Arms Control and Disarmament Agency was created in the fall of 1961, its first head was William C. Foster, former undersecretary of state and defense under Truman. In between, Foster had served as a high official of the Olin Mathieson Chemical Corp., and then board chairman of the Rockefeller-dominated United Nuclear Corp. Foster was also a director of the CFR.

Kennedy continued Rockefeller’s Eugene Black as head of the powerful World Bank. When Black reached retirement age in 1962, he was replaced by George D. Woods, chairman of the board of the prominent investment bank, First Boston Corporation. Woods had many connections with the Rockefeller interests, including being a director of the Chase International Investment Corp., of the Rockefeller Foundation, and of other Rockefeller-dominated concerns.

Two important foreign policy actions of the Kennedy administration were the Cuban Missile Crisis and the escalation of the war in Vietnam. Kennedy was advised during the Cuban missile crisis by an ad hoc group called the Ex Comm, which included, along with his official major foreign policy advisers, Robert A. Lovett and John J. McCloy. In the Vietnam War, Kennedy brought in as Ambassador to South Vietnam the Boston Brahmin and Morgan-oriented Henry Cabot Lodge, who had been Eisenhower’s Ambassador to the United Nations and who had run for vice president on the Nixon ticket in 1960. Virtually the last foreign policy act of John F. Kennedy was to give the green light to Lodge and the CIA to oust, and murder, South Vietnamese President Ngo Dinh Diem.

 

LBJ and the Power Elite

Lyndon Johnson’s foreign policy was dominated by his escalation of the Vietnam conflict into a full-scale (if undeclared) war, and of the increasing splits over the war among the financial power elite. Johnson retained the hawkish Rusk, McNamara, McCone, and Lodge in their posts. As newly minted Vietnam doves were ousted from foreign policy positions, they were replaced by hawks. Thus, William Bundy became Assistant secretary of state for Far Eastern Affairs, at the same time becoming a director of the CFR. On the other hand, the increasingly critical W. Averell Harriman was ousted from his post of undersecretary of state.

Cyrus Vance continued as Johnson’s secretary of the army; when he rose to deputy secretary of defense, he was replaced by Vance’s old friend and roommate at Yale, Stanley R. Resor. Resor was a partner in the major Wall Street law firm of Debevoise, Plimpton, Lyons, & Gates, and was the brother-in-law of economist and banker Gabriel Hauge, president of the Manufacturers Hanover Trust, and treasurer of the CFR.

Resor had married into the Pillsbury flour family of Minneapolis, which had long been connected with the holding company, the Northwest BanCorporation. After Vance retired as deputy secretary of defense to return to law practice, he was replaced by Johnson’s hard-line Secretary of the Navy Paul Nitze, former partner of Dillon, Read, whose wife was a member of the Rockefeller-connected Pratt family.

One important meeting at which it was decided to escalate the Vietnam War was held in July 1965. The meeting consisted of Johnson, his designated foreign policy and military officials, and three key unofficial advisers: Clark M. Clifford, the chairman of the president’s Foreign Intelligence Advisory Board, and an attorney for the duPonts and the Morgan-dominated General Electric Co.; Arthur H. Dean, a partner in Rockefeller-oriented Sullivan & Cromwell and a director of the CFR; and the ubiquitous John J. McCloy.

Shortly after the meeting, a distinguished national committee of power elite figures was formed to back President Johnson’s aggressive policies in Vietnam. Chairman of the committee was Arthur H. Dean; other members were Dean Acheson; Eugene Black, who, after retiring as head of the World Bank, returned to be a director of Chase Manhattan; Gabriel Hauge of Manufacturers’ Trust and the CFR; David Rockefeller, president of the Chase Manhattan Bank and a vice-president of the CFR; and two board members of AT&T, William B. Murphy and James R. Killian, Jr. Indeed, of the 46 members of this pro-Vietnam War committee, 19 were prominent businessmen, bankers or corporate lawyers. Later, when Johnson needed to raise taxes to supply more funds for the war effort, he selected thirteen businessmen to head the lobbying effort.

A fascinating aspect of the Johnson administration was the heavy influence of men connected with the powerful Democratic investment banking house of Lehman Brothers. Johnson’s first undersecretary of state, George Ball, who left because of increasing disillusionment with the Vietnam War, would later become a key partner of Lehman Brothers. Johnson’s most influential unofficial adviser was long-time and personal legal and financial adviser, Edwin L. Weisl, a New York attorney who was a senior law partner to Cyrus Vance at Simpson, Thacher & Bartlett. Not only was this law firm the general counsel to Lehman Brothers, but Weisl himself was dubbed by Fortune magazine as “Lehman’s eighteenth partner.” Weisl had great influence at Lehman and occasionally sat in on partners’ meetings. He was also reputed to be the closest friend of senior partner Robert Lehman, and sat on the board of the Lehman-controlled One William Street Fund.

Another very close and influential Johnson adviser, and a consistent hard-liner on Vietnam, was his old friend Abe Fortas, a Washington lawyer and veteran New Dealer. During the Johnson years, Fortas served as director, vice-president, and general counsel for the Texas-based Greatamerica Corp., a giant holding company controlling several insurance companies, Braniff Airways, and two banks, including the First Western Bank and Trust Co. of California.

During the same period, Fortas was also a director and vice-president of the large Federated Department Stores. Both Federated and Greatamerica had close ties with Lehman Brothers. Fred Lazarus, Jr., a top official of Federated, sat on the board of the Lehman-controlled One William Street Fund, along with Edwin Weisl. And the only two non-Texans on the board of Greatamerica Corp. were William H. Osborn, Jr., of Lehman Brothers, and Gustave L. Levy, a partner in the closely allied Wall Street investment bank of Goldman, Sachs & Co. Goldman, Sachs was the senior banking adviser for the Murchison Texas oil interests, a group with whom Lyndon Johnson was personally allied.

Finally, after Henry Cabot Lodge retired as the hawkish Ambassador to South Vietnam in 1967, he was replaced by Ellsworth Bunker. Bunker, who had been president of the National Sugar Refining Company, served as ambassador to various countries in the Eisenhower administration, and then Ambassador to the Organization of American States under Johnson. Bunker was connected to John L. Loeb, the Lehman kinsman who headed the investment banking firm of Carl M. Loeb, Rhoades & Co. Loeb placed Bunker on the board of Curtis Publishing Co., after he obtained control of that firm for Loeb, Rhoades. Loeb also installed Bunker’s son, John, as president of Curtis. Furthermore, Ellsworth Bunker’s younger brother, Arthur, had served as director of the Lehman Corporation, and of Lehman’s One William Street Fund until his death in 1964.

While Bunker had served Johnson as Ambassador to the OAS, he continued to sit on the board of the National Sugar Refining Company. In late 1965; Bunker played a crucial role in Johnson’s massive US invasion of the Dominican Republic, an intervention into a Dominican civil war to prevent a victory by left-wing forces who would presumably pose a dire threat to American sugar companies in the republic. As President Johnson’s emissary to the Dominican Republic just after the invasion, Bunker played a decisive role in installing the conservative Hector Garcia-Godoy as president.

Increasingly, however, the power elite became divided over the morass of the Vietnam War. Under the blows of the Tet offensive in January 1968, Robert McNamara had become increasingly dovish and was replaced as secretary of defense by hard-liner Clark Clifford, with McNamara moving gracefully to take charge of the World Bank. But, on investigating the situation, Clifford too became critical of the war, and Johnson called a crucial two-day meeting on March 22, 1968, of his highly influential Senior Informal Advisory Group on Vietnam, known as the “Wise Men,” made up of all his key advisors on foreign affairs.

Johnson was stunned to find that only Abe Fortas and General Maxwell Taylor continued in the hard-line position. Arthur Dean, Cabot Lodge, John J. McCloy, and former General Omar Bradley took a confused middle-of-the-road position, while all the other elite figures such as Dean Acheson, George Ball, McGeorge Bundy, C. Douglas Dillon, and Cyrus Vance had swung around to a firm opposition to the war.

As David Halberstam put it in his The Best and the Brightest, these power elite leaders “let him (Johnson) know that the Establishment — yes, Wall Street — had turned on the war … It was hurting the economy, dividing the country, turning the youth against the country’s best traditions.” LBJ knew when he was licked. Only a few days afterward, Johnson announced that he was not going to run for re-election and he ordered what would be the beginnings of US disengagement from Vietnam.

The foreign-policy aims of the Nixon administration had a decided Rockefeller stamp. Secretary of State William P. Rogers was a Wall Street lawyer who had long been active in the liberal Dewey-Rockefeller wing of the New York Republican Party. Indeed, Thomas E. Dewey was the main backer of Rogers for the State Department post.

Dewey’s entire political career was beholden to the Rockefeller interests, as was dramatically shown one election year when, in an incident that received unaccustomed publicity, Winthrop W. Aldrich, Rockefeller kinsman who was president of the Chase National Bank, literally ordered Governor Dewey into his Wall Street offices and commanded him to run for re-election. The governor, who had previously announced his retirement into private practice, meekly obeyed. Furthermore, Roger’s law partner, John A. Wells, had long been one of Nelson Rockefeller’s top political aides and had served as Nelson’s campaign manager for president in 1964.

Second-tier posts in the Nixon State Department went to financial elite figures. Thus, the following men were successively Under Secretaries of State (after 1972, Deputy Secretaries) in the Nixon White House: Elliot L. Richardson, partner of a Boston Brahmin corporate law firm and a director of the New England Trust Co., and a man whose uncle, Henry L. Shattuck, had long been a director of the New England Merchants National Bank and of the Mutual Life Insurance Co. of New York.

John N. Irwin II, partner of a Wall Street law firm (Patterson, Belknap & Webb) long associated with the Rockefeller interests, and whose wife was a sister of the Watson brothers family of IBM.

Kenneth Rush, president of Union Carbide Corp., and a director of the Bankers Trust Co. of New York. Robert S. Ingersoll, chairman of the board of Borg-Warner Corp. and a director of the First National Bank of Chicago.

Also, the deputy undersecretary of state for economic affairs under Nixon was Nathaniel Samuels, a partner in the investment banking house of Kuhn, Loeb & Co., and a director of the Rockefeller-controlled International Basic Economy Corp.

 

Henry A. Kissinger

But of course the dominant foreign policy figure in both the Nixon and Ford administrations was not William Rogers but Henry A. Kissinger, who was named national security adviser and soon became virtually the sole force in foreign policy, officially replacing Rogers as secretary of state in 1973.

Kissinger was virtually “Mr. Rockefeller.” As a Harvard political scientist, Kissinger had been discovered by John J. McCloy, and made director of a CFR group to study the Soviet threat in the nuclear age. He was soon made director of a special foreign policy studies project of the Rockefeller Brothers Fund, and from there became for more than a decade Nelson Rockefeller’s chief personal foreign policy adviser.

Only three days before accepting the Nixon administration post, Rockefeller gave Kissinger $50,000 to ease the fiscal burdens of his official post. Nixon and Kissinger re-escalated the Vietnam War by secretly bombing and then invading Cambodia in 1969 and 1970; they could be sure of compliance from Ellsworth Bunker, whom Nixon retained as Ambassador to South Vietnam until the end of the war.

Apart from the Vietnam War, the Nixon administration’s major foreign policy venture was the CIA-led overthrow of the Marxist Allende regime in Chile. US firms controlled about 80 percent of Chile’s copper production, and copper was by far Chile’s major export. In the 1970 election, the CIA funnelled $1 million into Chile in an unsuccessful attempt to defeat Allende. The new Allende regime then proceeded to nationalize large U.S .-owned firms, including Anaconda and Kennecott Copper and the Chile Telephone Co., a large utility which was a subsidiary of ITT (International Telephone and Telegraph Co.).

Under the advice of Henry Kissinger and of ITT, the CIA funneled $8 million into Chile over the next three years, in an ultimately successful effort to overthrow the Allende regime. Particularly helpful in this effort was John A. McCone, the West Coast industrialist whom Johnson had continued in charge of the CIA. Now a board member of ITT, McCone continued in constant contact by being named a consultant to the CIA on the Chilean question. President Nixon continued Johnson holdover Richard Helms as head of the CIA, and Helm’s outlook may have been influenced by the fact that his grandfather, Gates W. McGarrah, had been the head of the Mechanics and Metals National Bank of New York, director of Bankers Trust, and chairman of the board of the powerful Federal Reserve Bank of New York.

Of the $8 million poured into Chile by the CIA, over $1.5 million was allocated to Chile’s largest opposition newspaper, El Mercurio, published by wealthy businessman Augustin Edwards. Edwards was also, not coincidentally, vice president of Pepsico, a company headed by President Nixon’s close friend Donald M. Kendall. The transaction was arranged at a quiet breakfast meeting in Washington, set up by Kendall, and including Edwards and Henry Kissinger. After the successful overthrow of Allende by a military junta in September 1973, the man who became the first Minister of Economy, Development, and Reconstruction was Fernando Leniz, a high official of El Mercurio who also served on the board of the Chilean subsidiary of the Rockefeller-controlled International Basic Economy Corporation.

Richard Nixon also established, for the first time, diplomatic relations with Communist China. Nixon was urged to take this step by a committee of prominent businessmen and financiers interested in promoting trade with and investments in China. The group included Kendall; Gabriel Hauge, chairman of Manufacturers Hanover Trust Co.; Donald Burnham, head of Westinghouse; and David Rockefeller, chairman of the Chase Manhattan Bank.

The first envoy to China was the veteran elite figure and diplomat, David K.E. Bruce, who had married a Mellon, and who had served in high diplomatic posts in every administration since that of Harry Truman. After Bruce became Ambassador to NATO, he was replaced by George H.W. Bush, a Texas oil man who had served briefly as Ambassador to the United Nations. More important than Bush’s Texas oil connections was the fact that his father, Connecticut Senator Prescott Bush, was a partner at Brown Brothers, Harriman.

 

The Trilateral Commission

In July 1973 a development occurred which was to have a critical impact on US foreign — and domestic — policy. David Rockefeller formed the Trilateral Commission, as a more elite and exclusive organization than the CFR, and containing statesmen, businessmen, and intellectuals from Western Europe and Japan.

The Trilateral Commission not only studied and formulated policy, but began to place its people in top governmental posts. North American secretary and coordinator for the Trilaterals was George S. Franklin, Jr., who had been for many years executive director of the CFR. Franklin had been David Rockefeller’s roommate in college and had married Helena Edgell, a cousin of Rockefeller. Henry Kissinger was of course a key member of the Trilaterals, and its staff director was Columbia University political scientist Zbigniew Brzezinski, who was also a recently selected director of the CFR.

President Ford continued Kissinger as his secretary of state and top foreign policy director. Kissinger’s leading aide during the Ford years was Robert S. Ingersoll, Trilateralist from Borg-Warner Corp. and the First National Bank of Chicago. In 1974, Ingersoll was replaced as deputy secretary of state by Charles W. Robinson, a businessman and Trilateralist.

Ambassador to Great Britain — and then moved to several other posts — was Elliot Richardson, now a Trilateralist and a director of the CFR. George Bush, Trilateralist, was retained as Ambassador to China, and then became director of the CIA. He was replaced as Ambassador by Thomas S. Gates, Jr., head of the Morgans’ flagship bank, Morgan Guaranty Trust Co. Meanwhile, Robert McNamara continued to head the World Bank. Becoming head of the Export-Import Bank in 1875 was Stephen M. DuBrul, Jr., who had had the distinction of being a partner of both Lehman Brothers and Lazard Freres.

James Earl Carter and his administration were virtually complete creatures of the Trilateral Commission. In the early 1970s, the financial elite was looking for a likely liberal Southern governor who might be installed in the White House. They were considering Reubin Askew and Terry Sanford, but they settled on the obscure Georgia governor, Jimmy Carter. They were aided in their decision by the fact that Jimmy came highly recommended.

In the first place, it must be realized that “Atlanta” has for decades meant Coca-Cola, the great multi-billion dollar corporation which has long stood at the center of Atlanta’s politico-economic power elite. Jimmy Carter’s long-time attorney, close personal friend, and political mentor was Charles Kirbo, senior partner at Atlanta’s top corporate law firm of King & Spalding.

King & Spalding had long been the general counsel to Coca-Cola, and also to the mighty financial firm, the Trust Co. of Georgia, long known in Atlanta as “the Coca-Cola bank.” The long-time head and major owner of Coca-Cola was the octogenerian Robert W. Woodruff, who had long been highly influential in Georgia politics. With Kirbo at his elbow, Jimmy Carter soon gained the whole-hearted political backing of the Coca-Cola interests.

Financial contributors to Carter’s race in the 1971 Democratic primary for governor were: John Paul Austin, powerful chairman of the board of Coca-Cola; and three vice-presidents of Coke, including Joseph W. Jones, the personal assistant to Robert Woodruff. If Pepsi was a Republican firm, Coke had long been prominent in the Democratic Party; thus, James A. Farley, long-time head of the Democratic National Committee, was for thirty-five years head of the Coca-Cola Export Company.

In 1971, Carter was introduced to David Rockefeller by the latter’s friend J. Paul Austin, who was to become a founding member of the Trilateral Commission. Austin was long connected with the Morgan interests, and served as a director of the Morgan Guaranty Trust Co., and of Morgan’s General Electric Co. Other early political backers of Jimmy Carter were the Gambrell brothers, David and E. Smyth, of a family which was a major stockholder in Rockefeller-controlled Eastern Air Lines. The Gambrell law firm, indeed, served as the general counsel for Eastern. They, too, aided in forming the Carter-Rockefeller connection.

During the same period, Carter was also introduced to the powerful Hedley Donovan, editor-in-chief of Time magazine, who was also to be a founding Trilateral. Rockefeller and Donovan liked what they saw, and Carter was also recommended to the Trilaterals by the Atlanta Committee of the Council on Foreign Relations.

Jimmy Carter was invited to become a member of the Trilateral Commission shortly after it was formed, and he agreed enthusiastically. Why did the Trilaterals appoint an obscure Georgia governor with admittedly no knowledge of foreign affairs? Ostensibly because they wanted to hear the views of a Southern governor. Far more likely, they were grooming him for the presidency and wanted to instruct him in trilateralism. Carter took instruction well, and he wrote later of the many happy hours he spent sitting at the feet of Trilateral executive director and international relations expert Zbigniew Brzezinski.

What the unknown Carter needed more than even money for his 1975-1976 campaign for president was extensive and favorable media exposure. He received it from the Trilateral-influenced Establishment media, led by Time‘s Hedley Donovan and Trilateral syndicated columnists Joseph Kraft and Carl Rowan.

Major New York Carter backers, who served on the Wall Street Committee for Carter or hosted gatherings on his behalf, included Roger C. Altman, partner of Lehman Brothers, the chairman of which, Peter G. Peterson, was a Trilateral member; banker John Bowles; C. Douglas Dillon, of Dillon, Read, who also served as a member of the international advisory board of the Chase Manhattan Bank; and Cyrus Vance, a Trilateral founder and vice-chairman of the CFR.

Furthermore, of the six national finance directors of Jimmy Carter’s costly pre-convention race for the presidential nomination, three were high officials at Lehman Brothers, one was a vice president of Paine, Webber, another was a vice-president of Kidder, Peabody, and a sixth was the venerable John L. Loeb, senior partner of Loeb, Rhodes, & Co., and a Lehman by marriage. Other prominent business fund-raisers for Carter’s election campaign included Walter Rothschild, who had married a member of the Warburg family of Kuhn, Loeb & Co., and Felix Rohatyn, a partner of Lazard Freres.

The Carter administration proved to be Trilateral through and through, especially in foreign affairs. Trilateral members holding high posts in the Carter administration included:

  • President, James Earl Carter;
  • Vice President Walter, (“Fritz”) Mondale;
  • National Security Adviser, Zbigniew Brzezinski;
  • Secretary of State Cyrus Vance, who was now chairman of the board of the Rockefeller Foundation. Vance’s law firm of Simpson, Thacher & Bartlett had long served as general counsel for Lehman Brothers and Manufacturers Hanover Trust Co. Vance himself served up to 1977 as a director of IBM, the New York Times Co., and Lehman’s One William Street Fund. It perhaps also helped Vance’s cause that Simpson, Thacher & Bartlett was the New York general counsel for Coca-Cola Co.
  • Deputy Secretary of State Warren Christopher. This Los Angeles corporate lawyer had no diplomatic experience whatever for this high post, but his law firm of O’Melveny and Myers was a prominent one, and he acted as the Los Angeles attorney for IBM. More important was the fact that Christopher was the only Trilateral Commission member from the Western half of the United States.
  • Undersecretary of State for Economic Affairs Richard Cooper. This Yale professor was also on the board of the Rockefeller-controlled J. Henry Schroder Banking Corporation.
  • Undersecretary of State for Security Assistance, Science, and Technology Lucy Wilson Benson. Mrs. Benson had been a long time president of the League of Women Votes and highly active in Common Cause; she was also a board member of the Lehman-oriented Federated Department Stores.
  • Assistant Secretary of State for East Asian and Pacific Affairs Richard Holbrooke.
  • Ambassador at Large, Henry D. Owen, of the Brookings institution and the CFR.
  • Ambassador at Large for the Law of the Sea Treaty, Elliot Richardson.
  • Ambassador at Large for Non-Proliferation Matters (nuclear weapons negotiations), Gerald C. Smith, head of the US delegation at the SALT talks under Nixon, Washington attorney at Wilmer, Cutler & Pickering, and North American Chairman of the Trilateral Commission.
  • Ambassador to the United Nations Andrew Young.
  • Chief Disarmament Negotiator, Paul C. Warnke, senior partner of Clark Clifford’s influential Washington law firm.
  • Assistant Secretary of the Treasury for International Affairs C. Fred Bergsten of the Brookings Institution, consultant to the Rockefeller Foundation, and a member of the editorial board of the CFR’s prestigious quarterly journal, Foreign Affairs.
  • Ambassador to Communist China, Leonard Woodcock, formerly head of the United Automobile Workers. It is interesting to note that it was under the Carter-Woodcock aegis that, one week after the first establishment of formal ambassadorial relations with Communist China, China signed an agreement with Coca-Cola giving it exclusive cola sales in that country.
  • Secretary of Defense Harold Brown. This physicist was president of the California Institute of Technology — the only Trilateral college president — and also served on the board of IBM and of Schroders, Ltd., the Rockefeller-controlled British parent company of J. Henry Schroder Bank of New York.
  • Deputy to the Director of the CIA, Harvard Professor Robert R. Bowie.
  • Secretary of the Treasury W. Michael Blumenthal, head of Bendix Corp., a director of the CFR, and a trustee of the Rockefeller Foundation.
  • Chairman of the Federal Reserve Board, Paul A. Volcker. Volcker was named chairman by President Carter at the suggestion of David Rockefeller. Small wonder, since Volcker had been an executive at the Chase Manhattan Bank, and was a director of the CFR and a trustee of the Rockefeller Foundation.
  • And finally, White House Advisor on Domestic and Foreign Policy, Hedley Donovan, formerly editor-in-chief of Time magazine. One of the first important Carter foreign policy actions was the negotiation of the Panama Canal treaty, giving the Canal to Panama, and settling the controversy in such a way that US taxpayers paid millions of dollars to the Panama government so they could repay their very heavy loans to a number of Wall Street banks.

One co-negotiator of the treaty was Ellsworth Bunker, who bad been engaged in fruitless negotiations since 1974. The treaty was not concluded until Carter added as co-negotiator the Trilateralist Sol Linowitz, a senior Washington partner of the Wall Street corporate law firm of Coudert Brothers, and a board member of Pan-Am Airways, the Marine Midland Bank of New York, and Time, Inc.

The Marine Midland Bank itself held part of two bank consortium loans to Panama. Furthermore, no fewer than 32 Trilaterals were on the boards of the 31 banks participating in a $115 million 10-year Eurodollar Panama loan issued in 1972; and 15 Trilaterals were on the boards of fourteen banks participating in the $20 million Panama promissory note issued in the same year.

Another crucial foreign policy action of the Carter regime was the president’s reluctant decision to admit the Shah of Iran into the United States, a decision that led directly to the Iran hostage crisis and the freezing of Iranian assets in the United States. Carter was pressured into this move by the persistent lobbying of David Rockefeller and Henry Kissinger, who might well have realized that a hostage crisis would ensue. As a result, Iran was prevented from pursuing its threat of taking its massive deposits out of Chase Manhattan Bank, which would have caused Chase a great deal of financial difficulty. In politics, one hand washes the other.

Kissinger, by the way, was scarcely put back in the shadows when he left government office in 1977. He quickly became a director of the CFR, a member of the executive committee of the Trilateral Commission, and chairman of the International Advisory Board of the Chase Manhattan Bank.

While Ronald Reagan’s early campaigning included attacks on the Trilateral Commission, the Trilateralists have by now been assured that the Reagan administration is in safe hands. The signal was Reagan’s choice of Trilateralist George Bush, who had also become a director of the First International Bank of London and Houston, as vice president of the United States, and of Reagan’s post-convention reconciliation visit to Washington and to the home of David Rockefeller.

Reagan’s most influential White House aides, like James A. Baker, had been top campaigners for Bush for president in 1980. The most influential corporate firm in the Reagan administration is the California-based Bechtel Corporation. Bechtel vice-president and general counsel Caspar Weinberger, a Trilateralist, is secretary of defense, and fellow top Bechtel executive George Shultz, former board member of Borg-Warner Corp, General American Transportation Corp., and Stein, Roe & Farnham Balanced Fund, is secretary of state.

Trilateralist Arthur F. Burns, former Chairman of the Fed, is ambassador to West Germany, Paul Volcker has been reappointed as head of the Fed, and Henry Kissinger is at least partially back as head of a presidential commission to study the question of Central America.

It is hard to see how the Trilateralists can lose in the 1984 elections. On the Republican ticket they have George Bush, the heir apparent to Ronald Reagan; and in the Democratic race the two front-runners, Walter Mondale and John Glenn, are both Trilateralists, as is Alan Cranston of California. And, as a long shot, John Anderson of the “National Unity Party” is also a Trilateral member. To paraphrase a famous statement by White House aide Jack Valenti about Lyndon Johnson, the Trilateralists and the financial power elite can sleep well at night regardless of who wins in 1984.

Republished from the Mises Institute.

Wall Street, Banks, and American Foreign Policy

Do You Hate the State?

I have been ruminating recently on what are the crucial questions that divide libertarians. Some that have received a lot of attention in the last few years are: anarcho-capitalism vs. limited government, abolitionism vs. gradualism, natural rights vs. utilitarianism, and war vs. peace. But I have concluded that as important as these questions are, they don’t really cut to the nub of the issue, of the crucial dividing line between us.

Let us take, for example, two of the leading anarcho-capitalist works of the last few years: my own For a New Liberty and David Friedman’s Machinery of Freedom. Superficially, the major differences between them are my own stand for natural rights and for a rational libertarian law code, in contrast to Friedman’s amoralist utilitarianism and call for logrolling and trade-offs between nonlibertarian private police agencies. But the difference really cuts far deeper. There runs through For a New Liberty (and most of the rest of my work as well) a deep and pervasive hatred of the State and all of its works, based on the conviction that the State is the enemy of mankind. In contrast, it is evident that David does not hate the State at all; that he has merely arrived at the conviction that anarchism and competing private police forces are a better social and economic system than any other alternative. Or, more fully, that anarchism would be better than laissez-faire, which in turn is better than the current system. Amidst the entire spectrum of political alternatives, David Friedman has decided that anarcho-capitalism is superior. But superior to an existing political structure which is pretty good too. In short, there is no sign that David Friedman in any sense hates the existing American State or the State per se, hates it deep in his belly as a predatory gang of robbers, enslavers, and murderers. No, there is simply the cool conviction that anarchism would be the best of all possible worlds, but that our current set-up is pretty far up with it in desirability. For there is no sense in Friedman that the State — any State — is a predatory gang of criminals.

The same impression shines through the writing, say, of political philosopher Eric Mack. Mack is an anarcho-capitalist who believes in individual rights; but there is no sense in his writings of any passionate hatred of the State, or, a fortiori, of any sense that the State is a plundering and bestial enemy.

Perhaps the word that best defines our distinction is “radical.” Radical in the sense of being in total, root-and-branch opposition to the existing political system and to the State itself. Radical in the sense of having integrated intellectual opposition to the State with a gut hatred of its pervasive and organized system of crime and injustice. Radical in the sense of a deep commitment to the spirit of liberty and antistatism that integrates reason and emotion, heart and soul.

Furthermore, in contrast to what seems to be true nowadays, you don’t have to be an anarchist to be radical in our sense, just as you can be an anarchist while missing the radical spark. I can think of hardly a single limited governmentalist of the present day who is radical — a truly amazing phenomenon, when we think of our classical-liberal forbears who were genuinely radical, who hated statism and the States of their day with a beautifully integrated passion: the Levellers, Patrick Henry, Tom Paine, Joseph Priestley, the Jacksonians, Richard Cobden, and on and on, a veritable roll call of the greats of the past. Tom Paine’s radical hatred of the State and statism was and is far more important to the cause of liberty than the fact that he never crossed the divide between laissez-faire and anarchism.

And closer to our own day, such early influences on me as Albert Jay Nock, H.L. Mencken, and Frank Chodorov were magnificently and superbly radical. Hatred of “Our Enemy, the State” (Nock’s title) and all of its works shone through all of their writings like a beacon star. So what if they never quite made it all the way to explicit anarchism? Far better one Albert Nock than a hundred anarcho-capitalists who are all too comfortable with the existing status quo.

Where are the Paines and Cobdens and Nocks of today? Why are almost all of our laissez-faire limited governmentalists, plonky conservatives, and patriots? If the opposite of “radical” is “conservative,” where are our radical laissez-fairists? If our limited statists were truly radical, there would be virtually no splits between us. What divides the movement now, the true division, is not anarchist vs. minarchist, but radical vs. conservative. Lord, give us radicals, be they anarchists or no.

To carry our analysis further, radical anti-statists are extremely valuable even if they could scarcely be considered libertarians in any comprehensive sense. Thus, many people admire the work of columnists Mike Royko and Nick von Hoffman because they consider these men libertarian sympathizers and fellow-travelers. That they are, but this does not begin to comprehend their true importance. For throughout the writings of Royko and von Hoffman, as inconsistent as they undoubtedly are, there runs an all-pervasive hatred of the State, of all politicians, bureaucrats, and their clients which, in its genuine radicalism, is far truer to the underlying spirit of liberty than someone who will coolly go along with the letter of every syllogism and every lemma down to the “model” of competing courts.

Taking the concept of radical vs. conservative in our new sense, let us analyze the now famous “abolitionism” vs. “gradualism” debate. The latter jab comes in the August issue of Reason (a magazine every fiber of whose being exudes “conservatism”), in which editor Bob Poole asks Milton Friedman where he stands on this debate. Freidman takes the opportunity of denouncing the “intellectual cowardice” of failing to set forth “feasible” methods of getting “from here to there.” Poole and Friedman have between them managed to obfuscate the true issues. There is not a single abolitionist who would not grab a feasible method, or a gradual gain, if it came his way. The difference is that the abolitionist always holds high the banner of his ultimate goal, never hides his basic principles, and wishes to get to his goal as fast as humanly possible. Hence, while the abolitionist will accept a gradual step in the right direction if that is all that he can achieve, he always accepts it grudgingly, as merely a first step toward a goal which he always keeps blazingly clear. The abolitionist is a “button pusher” who would blister his thumb pushing a button that would abolish the State immediately, if such a button existed. But the abolitionist also knows that alas, such a button does not exist, and that he will take a bit of the loaf if necessary — while always preferring the whole loaf if he can achieve it.

It should be noted here that many of Milton’s most famous “gradual” programs such as the voucher plan, the negative income tax, the withholding tax, fiat paper money — are gradual (or even not so gradual) steps in the wrong direction, away from liberty, and hence the militance of much libertarian opposition to these schemes.

His button-pushing position stems from the abolitionist’s deep and abiding hatred of the State and its vast engine of crime and oppression. With such an integrated worldview, the radical libertarian could never dream of confronting either a magic button or any real-life problem with some arid cost-benefit calculation. He knows that the State must be diminished as fast and as completely as possible. Period.

And that is why the radical libertarian is not only an abolitionist, but also refuses to think in such terms as a Four Year Plan for some sort of stately and measured procedure for reducing the State. The radical — whether he be anarchist or laissez-faire — cannot think in such terms as, e.g., “Well, the first year, we’ll cut the income tax by 2 percent, abolish the ICC, and cut the minimum wage; the second year we’ll abolish the minimum wage, cut the income tax by another 2 percent, and reduce welfare payments by 3 percent, etc.” The radical cannot think in such terms, because the radical regards the State as our mortal enemy, which must be hacked away at wherever and whenever we can. To the radical libertarian, we must take any and every opportunity to chop away at the State, whether it’s to reduce or abolish a tax, a budget appropriation, or a regulatory power. And the radical libertarian is insatiable in this appetite until the State has been abolished, or — for minarchists — dwindled down to a tiny, laissez-faire role.

Many people have wondered: Why should there be any important political disputes between anarcho-capitalists and minarchists now? In this world of statism, where there is so much common ground, why can’t the two groups work in complete harmony until we shall have reached a Cobdenite world, after which we can air our disagreements? Why quarrel over courts, etc. now? The answer to this excellent question is that we could and would march hand-in-hand in this way if the minarchists were radicals, as they were from the birth of classical liberalism down to the 1940s. Give us back the antistatist radicals, and harmony would indeed reign triumphant within the movement.

Reprinted from mises.org.

Wall Street, Banks, and American Foreign Policy

How to Look at Tariffs

The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries.
Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each state of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by inefficient, high-priced New York or Rhode Island textile manufacturers who would then be complaining about the “unfair,” “cheap labor” competition from various low-type “foreigners” from Tennessee or North Carolina, or vice versa. Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure ripoff of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by inefficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.
Fortunately, interstate tariffs are unconstitutional. But even with this clear barrier, and even without being able to wrap themselves in the cloak of nationalism, protectionists have been able to impose interstate tariffs in another guise. Part of the drive for continuing increases in the federal minimum wage law is to impose a protectionist device against lower-wage, lower-labor-cost competition from North Carolina and other southern states against their New England and New York competitors.
During the 1966 Congressional battle over a higher federal minimum wage, for example, the late Senator Jacob Javits (R,NY) freely admitted that one of his main reasons for supporting the bill was to cripple the southern competitors of New York textile firms. Since southern wages are generally lower than in the north, the business firms (and the workers struck by unemployment) hardest hit by an increased minimum wage will be located in the south.
Another way in which interstate trade restrictions have been imposed has been in the fashionable name of “safety.” Government-organized state milk cartels in New York, for example, have prevented importation of milk from nearby New Jersey under the patently spurious grounds that the trip across the Hudson would render New Jersey milk “unsafe.” If tariffs and restraints on trade are good for a country, then why not indeed for a state or region? The principle is precisely the same. In America’s first great depression, the Panic of 1819, Detroit was a tiny frontier town of only a few hundred people. Yet protectionist cries arose-fortunately not fulfilled-to prohibit all “imports” from outside of Detroit, and citizens were exhorted to “buy only Detroit.” If this nonsense had been put into effect, general starvation and death would have ended all other economic problems for Detroiters.
So why not restrict and even prohibit trade, i.e. “imports,” into a city, or a neighborhood, or even on a block, or, to boil it down to its logical conclusion, to one family? Why shouldn’t the Jones family issue a decree that from now on, no member of the family can buy any goods or services produced outside the family house? Starvation would quickly wipe out this ludicrous drive for self-sufficiency.
And yet we must realize that this absurdity is inherent in the logic of protectionism. Standard protectionism is just as preposterous, but the rhetoric of nationalism and national boundaries has been able to obscure this vital fact.
The upshot is that protectionism is not only nonsense, but dangerous nonsense, destructive of all economic prosperity. We are not, if we were ever, a world of self-sufficient farmers. The market economy is one vast latticework throughout the world, in which each individual, each region, each country, produces what he or it is best at, most relatively efficient in, and exchanges that product for the goods and services of others. Without the division of labor and the trade based upon that division, the entire world would starve. Coerced restraints on trade-such as protectionism-cripple, hobble, and destroy trade, the source of life and prosperity. Protectionism is simply a plea that consumers, as well as general prosperity, be hurt so as to confer permanent special privilege upon groups of inefficient producers, at the expense of competent firms and of consumers. But it is a peculiarly destructive kind of bailout, because it permanently shackles trade under the cloak of patriotism.

Excerpted from Protectionism and the Destruction of Prosperity, Published in The Free Market Reader
Murray N. Rothbard made major contributions to economics, history, political philosophy, and legal theory. He combined Austrian economics with a fervent commitment to individual liberty.
The Laissez-Faire Radical: A Quest for the Historical Mises

The Laissez-Faire Radical: A Quest for the Historical Mises

That Ludwig von Mises was the outstanding champion of laissez-faire and the free-market economy in this century is well known and needs no documentation. But in the course of refining and codifying his political views, Mises’s followers have unwittingly distorted them and made them seem at one with the modern conservative movement in the United States. Mises is made to appear a sort of National Review intellectual concentrating on the free-market aspects of conservatism. While the image of Mises as an essential conservative is scarcely made up of the whole cloth, it totally overlooks rich strains of Misesian thought that can be described only as “laissez-faire radical.” Unfortunately, these strands of Misesian thought have been all but lost. Perhaps this essay will help to right the balance.

There is no need here to try to define and distinguish laissez-faire “conservatism” from “radicalism.” A setting forth of various radical positions taken by Mises should make the distinction clear enough.

Some anti-conservative aspects of Misesian thought are, again, too well known to require discussion. Thus, for Mises, personal liberty was required by logical consistency; for, if the government began to restrict or suppress one or a few consumption goods, why should they stop at regulating all? As a champion of consumer sovereignty and the consumer society, Mises also had no patience with aristocratic conservatives who scorned mass consumption or the rule of production by consumer demand.

War and Imperialism

Mises stood squarely for the classical liberal policy of a peaceful foreign policy and opposition to aggressive nationalism and imperialism. Thereby he took his stand in opposition to conservatives of his day and ours. Mises saw that internal peace through the division of labor and freedom of enterprise has as its counterpart a devotion to international peace and freedom of trade. He was proud to call himself a “citizen of the world, a cosmopolite,” in contrast to chauvinist nationalism, and he touted classical liberalism “with its unconditional extolment of peace.”1

Mises perceptively saw that the general drive toward war was a reflection of the abandonment of free trade and minimal government at home. If, for example, government is small and abstains from any interference with the economy or society, then it doesn’t matter much which State controls which territory. But if States develop restrictions which exclude goods or citizens of other States, then which State governs matters a great deal.

Mises boldly proclaimed his “pacifism,” but made clear that it was to be distinguished from the older sentimental pacifism. Instead his was the “pacifism of the Enlightenment philosophy of natural law, of economic liberalism, and of political democracy, which has been cultivated since the 18th century.” This kind of pacifism

does not arise from a sentiment that calls on the individual and the state to renounce the pursuit of their earthly interests out of thirst for fame or in hope of reward in the beyond; nor does it stand as a separate postulate without organic connection with other moral demands. Rather, pacifism here follows with logical necessity from the entire system of social life. He who, from the utilitarian standpoint, rejects the rule of some over others and demands the full right of self-determination for individuals and peoples has thereby rejected war also. He who has made the harmony of the rightly understood interests of all strata within a nation and of all nations among each other the basis of his world view can no longer find any rational basis for warfare. He to whom even protective tariffs and occupational prohibitions appear as harmful to everyone can still less understand how one could regard war as anything other than a destroyer and annihilator, in short, as an evil that strikes all, victor as well as vanquished.2,3

Mises also denounced the renewed Western imperialism of the late nineteenth century as the consequence of a turn away from free trade and free markets and a competing drive for exclusive State-controlled trading areas. Mises was unsparing toward the Western imperialist powers, including the relatively less dictatorial English empire, in his indictment:

We may date the beginning of modern imperialism from the late seventies of the last century, when the industrial countries of Europe started to abandon the policy of free trade and to engage in the race for colonial “markets” in Africa and Asia.

It was in reference to England that the term “imperialism” was first employed to characterize the modern policy of territorial expansion … [T]he end that the English imperialists sought to attain in the creation of a customs union embracing the dominions and the mother country was the same as that which the colonial acquisitions of Germany, Italy, France, Belgium, and other European countries were intended to serve, viz., the creation of protected export markets …

In order to attain the goals that imperialism aimed at, it was not enough for the nations of Europe to occupy areas inhabited by savages incapable of resistance. They had to reach out for territories that were in the possession of peoples ready and able to defend themselves …

[E]verywhere we see the imperialist aggressors in retreat or at least already in difficulties.4  If Mises was harsh on the “imperialist aggressors,” he was even harsher in his assessment of the European imperialist and colonialist policies pursued since the fifteenth century. He indicted European colonialism in Asia and Africa for racism, rapine, and genocidal policies of extermination:

The basic idea of colonial policy was to take advantage of the military superiority of the white race over the members of other races. The Europeans set out, equipped with all the weapons and contrivances that their civilization placed at their disposal, to subjugate weaker peoples, to rob them of their property, and to enslave them.5

Mises adds scornfully that “attempts have been made to extenuate and gloss over the true motive of colonial policy with the excuse that its sole object was to make it possible for primitive peoples to share in the blessings of European civilization.” But Mises rebuts that, if European civilization is truly superior, then “it should be able to prove its superiority by inspiring these peoples to adopt it of their own accord.” And he adds the passionate indictment: “Could there be a more doleful proof of the sterility of European civilization than that it can be spread by no other means than fire and sword?”

Mises concludes his radical philippic against Western imperialism:

No chapter of history is steeped further in blood than the history of colonialism. Blood was shed uselessly and senselessly. Flourishing lands were laid waste; whole peoples destroyed and exterminated. All this can in no way be extenuated or justified. The dominion of Europeans in Africa and important parts of Asia is absolute. It stands in the sharpest contrast to all the principles of liberalism and democracy, and there can be no doubt that we must strive for its abolition.6

To the argument that total and immediate withdrawal of European governments from the colonies would lead to conflict and anarchy, Mises replied:

It may be safely taken for granted that up to now the natives have learned only evil ways from the Europeans, and not good ones. This is not the fault of the natives, but rather of their European conquerors, who have taught them nothing but evil. They have brought arms and engines of destruction of all kinds to the colonies; they have sent out their worst and most brutal individuals as officials and officers; at the point of the sword they have set up a colonial rule that in its sanguinary cruelty rivals the despotic system of the Bolsheviks. Europeans must not be surprised if the bad example that they themselves have set in their colonies now bears evil fruit…. Nor would they be justified in maintaining that the natives are not yet mature enough for freedom and that they still need at least several years of further education under the lash of foreign rulers before they are capable of being left on their own. For this “education” itself is at least partly responsible for the terrible conditions that exist today in the colonies, even though its consequences will not make themselves fully apparent until after the eventual withdrawal of European troops and officials.7

As to the argument that the Europeans must remain in the colonial lands in the interests of the natives themselves Mises heaped scorn upon such sham expressions of altruism:

No one has a right to thrust himself into the affairs of others in order to further their interest, and no one ought, when he has his own interests in view, to pretend that he is acting selflessly only in the interest of others.

Self-Determination, National and Individual

If it is radical and not conservative to be bitterly opposed to war and to Western imperialism, it is equally anti-conservative to be devoted to the concept of “national self-determination” In truth, national self-determination is the other side of the coin of anti-imperialism, for it means that the imperial power must be dislodged from its rule over subject nationalities.

Conservatives scorn the right of national self-determination as leading to the Balkanizing and dividing up of Great Powers and hence as inconsistent with power politics. But to Mises, self-determination of nations and nationalities was simply grounded in the rights of individuals. The right of self-determination of nationalities and sub-groups stems from the rights of man. Thus Mises states:

To the princely principle of subjecting just as much land as obtainable to one’s rule, the doctrine of freedom opposes the principle of the right of self-determination of peoples, which follows necessarily from the principle of the rights of man. No people and no part of a people shall be held against its will in a political association that it does not want.8

Mises points out that he starts his analysis with the individual, and that nationalism too is grounded on the individual. In fact, he refers to nationalism as “the national aspect of the individual person.”9 As an individualist, he is not content to leave the concept of self-determination with the national unit. On the contrary, the right of self-determination should be with individuals, the inhabitants of smaller as well as larger territorial areas, who should be able to exercise their will by means of freely-conducted plebiscites. Thus, Mises states:

To call this right of self-determination the “right of self-determination of nations” is to misunderstand it. It is not the right of self-determination of a delimited national unit, but the right of the inhabitants of every territory to decide on the state to which they wish to belong.10

Each local sub-group, to Mises, has then the right to choose what state to belong to, or even to set up its own independent state. Therefore:

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars.11

How far would Mises push the principle of secession, of self-determination? Down to a single village, he states; but would he press beyond even that? He calls the right of self-determination not of nations, “but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit.” But how about self-determination for the ultimate unit, for each individual? Allowing each individual to remain where he lives and yet secede from the State is tantamount to anarchism, and yet Mises comes very close to anarchism, blocked only by practical technical considerations:

If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done. This is impracticable only because of compelling technical considerations, which make it necessary that the right of self-determination be restricted to the will of the majority of the inhabitants of areas large enough to count as territorial units in the administration of the country.12

That Mises, at least in theory, believed in the right of individual secession and therefore came close to anarchism can also be seen in his description of liberalism, that “it forces no one against his will into the structure of the State.”13

The Soviet Threat

If there is anything that characterizes conservative foreign policy in the twentieth century it is a persistent policy of military confrontation with Soviet Russia. No domestic political and economic system could have been more abhorrent to Ludwig von Mises than Bolshevism. Russia’s totalitarian collectivism cut against the grain of all Mises’s ideals of a free market, democracy and minimal government.

Yet Mises consistently pursued a foreign policy of peace and nonintervention even here. First, “Let the Russians be Russians. Let them do what they want in their own country.” There should be free importation of Russian writings: “Neurotics may enjoy them as much as they wish; the healthy will, in any case, eschew them.” The Russians should even be permitted, Mises went on, to spread their propaganda and bribe people throughout the world: “If modern civilization were unable to defend itself against the attacks of hirelings, then it could not, in any case, remain in existence much longer.” Further, Westerners should be permitted to visit Russia if they wish: “Let them view at first hand, at their own risk and on their own responsibility, the land of mass murder and mass misery.” And capitalists should be permitted to grant loans or invest capital in Russia: “If they are foolish enough to believe that they will ever see any part of it again, let them make the venture.”14

But the corollary of a noninterventionist policy of refraining from war or prohibitions is also refraining from artificial subsidy. The Western governments, advised Mises, “must stop promoting Soviet destructionism by paying premiums for exports to Soviet Russia and thereby furthering the Russian Soviet system by financial contributions. Let them stop propagandizing for emigration and the export of capital to Soviet Russia.”

Mises wisely concluded that “Whether or not the Russian people are to discard the Soviet system is for them to settle among themselves…. The only thing that needs to be resisted is any tendency on our part to support or promote the destructionist policy of the Soviets.”15

Writing during World War II, Mises went so far as to look benignly on the prospect of a Communist Germany emerging after the war. For communism would succeed in wrecking Germany’s industrial machine and thereby weaken its potential for making war in the future.

If Germany turns toward communism it cannot be the task of foreign nations to interfere…. The intelligent opponents of communism … will not understand why their nation should essay to prevent the Germans from inflicting harm upon themselves. The shortcomings of communism would paralyze and disintegrate Germany’s industrial apparatus and thereby weaken its military power more effectively than any foreign intervention could ever do.16

Immigration Restrictions

Conservatism is invariably marked by a policy of immigration restrictions, to preserve the homogeneity of the national culture or ethnic character, and to raise the standard of living of national workers by keeping out laborers who would lower wage rates at home. Mises’s laissez-faire radicalism was marked by uncompromising attachment to freedom of immigration. Not only that; so bitter was he at any immigration laws that at times he came close to calling for war against those nations, such as the United States and Australia, who persisted in locking up parts of the earth and keeping out other peoples.

First, Mises pointed out that immigration barriers are creatures of trade unions, who use them as a method of raising domestic wage rates by excluding foreign workers. The result is to keep foreign workers in a permanently less productive situation with lower wage rates, and to lower the productivity of human labor throughout the world. Wage exclusionism, plus racial fears of foreigners, account for the persistence of immigration barriers in the United States and Australia.

In Liberalism, Mises confined himself to pointing out that immigration barriers will only be able to be removed in a classical liberal world. In a world of minimal States, what difference would it make for Americans or Australians which ethnic or racial groups were in a majority in their country?17

At other times, however, Mises was not so gentle. In Nation, State and Economy he called Australia “the imperialistic state par excellence in its immigration legislation,” and linked this policy with its greater closeness to socialism than any of the other Anglo-Saxon states (in 1919).18  What is more, he chastised the League of Nations for not doing something about the U.S./Australian policy of immigration restrictions:

It is still more serious that the League of Nations does not recognize the freedom of movement of the person, that the United States and Australia are still allowed to block themselves off from unwanted immigrants…. Never can Germans, Italians, Czechs, Japanese, Chinese, and others regard it as just that the immeasurable landed wealth of North America, Australia, and East India should remain the exclusive property of the Anglo-Saxon nation and that the French be allowed to hedge in millions of square kilometers of the best land like a private park.19

Perhaps Mises’s most bitter assault upon American and Australian immigration barriers came in an article for a Viennese newspaper at the end of 1935.20 He points out that there are extensive tracts of land which are sparsely settled, notably in the U.S.A. and the British Commonwealth nations. As a result of their relatively scarce population, their productivity, and hence their wage rates, are higher than in Europe. Hence these lands

have been the goals of would-be European immigrants for more than 300 years. However, the descendants of those earlier emigrants now say: There has been enough migration. We do not want other Europeans to do what our forefathers did when they emigrated to improve their situation. We do not want our wages reduced by a new contingent of workers from the homeland of our fathers. We do not want the migration of workers to continue until it brings about the equalization of the height of wages. Kindly stay in your old homeland, you Europeans, and be satisfied with lower wages.21

Mises continues sardonically that the oft-celebrated “miracle’ of the high wages in the United States and Australia may be explained simply by the policy of trying to prevent a new immigration. For decades people have not dared to discuss these things in Europe.”22 But Mises made it clear that here was one European who was not afraid to discuss these issues. In fact, after pointing out that European workers suffer from these immigration barriers, he warns darkly that

it may be that one day they will reach the conclusion that only weapons can change this unsatisfactory situation. Thus, we may face a great coalition of the lands of would-be emigrants standing in opposition to the lands that erect barricades to shut out would-be immigrants.23

Mises concludes that the League of Nations is trying to rectify underlying conditions of conflict in order to avoid war. But he warns that simply rectifying the problem of raw materials or the colonies, or giving back German colonies, would not be enough, for

what the European emigrants seek is land where Europeans can work under climatic conditions that are tolerable for them and where they can earn more than they can in their homeland, which is overpopulated and less well provided for by nature. Under present circumstances this can be offered only in the New World, in America and Australia…. This is a problem of the right of immigration into the largest and most productive lands, the climates of which are suitable for white European workers. Without the reestablishment of freedom of migration throughout the world, there can be no lasting peace. 24

The Theory of Class Conflict

The idea that there are class conflicts in society, and that there is a ruling class or classes which governs and exploits a ruled, would seem to be Marxian concepts alien to classical liberalism. Classical liberals believe in the harmony of long-run interests of everyone in society, so that, it would seem, statist intervention is merely the product of unsound and erroneous ideas rather than the pursuit of common group or class interests at the expense of the rest of society.

It is true that the latter analysis is the dominant strain in Mises’s thought. But there is another motif, which exists in Mises as well as in classical liberalism from Adam Smith onward. This is an attack on “special privilege,” sought by various groups through the State at the expense of everyone else, pursuing what may be their short-run but is still their strongly felt advantage. Subsidies, compulsory cartels, protective tariffs and, as we have seen, immigration restrictions are among the many examples. But in that case common venality takes its place alongside error as a reason for statism.

In the history of thought, classical liberals rather than Marxists pioneered in the concept of the “ruling class”—defined not in the Marxian sense as including the hiring of wage workers on the market, but strictly as that group or groups that gets control of the State apparatus and uses it to benefit itself at the expense of the rest of the society. Perhaps the first “class conflict” theorists were the libertarian writers Charles Comte and Charles Dunoyer, in Reconstruction France after the final defeat of Napoleon.25 The Comte-Dunoyer thesis, influenced by J. B. Say, was that “ruling class” may be defined simply as that class which manages to rule the State, while the ruled are those dominated by the former through the State. Thus, class conflict does not inhere in the free-market economy or society, but is strictly in relation of State. Class harmony exists only on the free market; class conflict is generated by statism and by the relation of classes to the State.

The dilettantish French nobleman, Count Claude Henri de Saint-Simon, was originally a disciple of Comte and Dunoyer, and picked up his own theory of class conflict from them. Unfortunately, as Saint-Simon and particularly his followers (the Saint-Simonians) became socialists, they changed the theory of class conflict to add a fatally inconsistent element. It was this self-contradictory theory of classes that was then picked up by Karl Marx and incorporated into the Marxist structure. Briefly, it held, with Comte and Dunoyer, that the major stages of statism had been, first, Oriental despotism, in which an emperor and his tax-supported bureaucracy constituted the ruling class exploiting and dominating the peasantry; and, second, feudalism, in which landlords dominated the State and used it to expropriate the peasantry and exact rents from them. In both cases, Oriental despotism and feudalism, the ruling classes were those who managed to seize control of the State apparatus, the organized engine of violence in society. But then the Saint-Simonians and Marx added another exploitative “ruling class”: capitalists who hire workers on the market. Before capitalism, in short, conflicting classes are defined as those in different relations to the State. In contrast, capitalists who hire workers engage in a market transaction, have nothing to do with the State, and yet for some reason are supposed to have a common interest. What the socialists overlooked is that capitalists’ hiring workers is a voluntary rather than a coercive transaction; and that capitalists have no class interests in common. On the contrary, capitalists compete with each other, just as workers do. There are no common “capitalist” or worker class interests on the free market.26

Ludwig von Mises, while showing no knowledge of previous classical liberal ruling class theory, arrived at a very similar analysis. He distinguished early between “classes,” which could logically be any grouping of people on the free market and which had no common or conflicting in interests, and “estates” or what he later called “castes.” Castes have common interests conflicting with those of other castes, for their relations to the State differ. In contrast to classes in the market, which have no common interests and therefore do not conflict with each other,

estates were legal institutions, not economically determined facts. Every man was born into an estate and generally remained in it until he died. All through life one possessed estate-membership, the quality of being a member of a certain estate. One was master or serf, freeman or slave, lord of the land or tied to it, patrician or plebeian, not because one occupied a certain position in economic life, but because one belonged to a certain estate.27

Mises goes on to scoff at the later whitewashing of feudalism as being reciprocal and somehow voluntary, as “the higher orders gave the lower protection, sustenance, the use of the land, and so on.” But on the contrary,

such ideas were alien to the institution in its heyday, when the relationship was frankly one of violence, as may be clearly seen in the first essential distinction drawn by estate—the distinction between free and unfree. The reason why the slave looked on slavery as natural, resigning himself to his lot instead of continuing to rebel and run away … was not that he believed slavery to be a just institution, equally advantageous to master and slave, but simply that he did not want to endanger his life by insubordination.28

What estates or castes have in common are their superior or inferior positions before the law. Thus: “In a society divided into estates all members of the estates who lack complete rights before the law have one interest in common with other members: they struggle to improve the legal position of their estate. All who are bound to the soil strive to have the burden of rent lightened; all slaves strive for freedom, that is, for a condition under which they can use their labour for themselves.”29

Mises recognizes explicitly that common class interests are a function of state intervention:

competition is suspended by special interests only when economic liberty is limited in some way…. Liberal theory does not deny that state interference in trade creates special interests, nor that by this means particular groups can extract privileges for themselves. It merely says that such special favours … lead to violent political conflict, to revolts of the nonprivileged many against the privileged few, which by constantly disturbing the peace, hold up social development.30

Perhaps Mises’s clearest exposition of the difference between “class” and “caste” came in an article written in 1945. He points out:

Under a caste system … [s]ociety is divided into rigid castes. Caste membership assigns to each individual certain privileges (privilegia favorabilia) or certain disqualifications (privilegia odiosa). As a rule a man[‘s] … personal fate is inseparably linked with that of his caste. He cannot expect an improvement of his conditions except through an improvement in the conditions of his caste or estate. Thus there prevails a solidarity of interests among all caste members and conflict of interests among the various castes. Each privileged caste aims at the attainment of new privileges and at the preservation of the old ones. Each underprivileged caste aims at the abolition of its disqualifications. Within a caste society there is an irreconcilable antagonism between the interests of the various estates….

In a free-market society … there are neither privileged nor underprivileged. There are no castes and therefore no caste conflicts. There prevails the full harmony of the rightly understood (we say today, of the long-run) interests of all individuals and of all groups.

Our age is full of serious conflicts of economic group interests. But these conflicts are not inherent in the operation of an unhampered capitalist economy. They are the necessary outcome of government policies interfering with the operation of the market. They are not conflicts of Marxian classes. They are brought about by the fact that mankind has gone back to group privileges and thereby to a new caste system.31 32

Christianity and the Social Order

One of the hallmarks of conservatism, in this century as in the last, is devotion to Christianity both as a religion and as the foundation of the social order. Christianity is supposed to be the bulwark of the rights of private property.

In his brief discussion of religion in his magnum opus, Human Action, Ludwig von Mises took a moderate tone. Liberalism, Mises reiterates, is not anti-religion, but combats any theocratic attempt to impose a social order according to alleged divine commands.33  But in his earlier work, Socialism, he set forth a detailed critique of Christianity. Here Mises was far more caustic. Indeed, his chapter “Christianity and Socialism” is a virtual philippic against the social implications of the Christian Gospel.34

While he concedes that the Christian Gospels are formally neutral with respect to any social order, Mises sees several dire implications that necessarily follow from the Gospels. First, he claims that Jesus’ teachings make sense only as admonitions for a Kingdom of God that was supposed to arrive imminently—hence the early voluntary “communism” of the Christians, the injunctions by Jesus to take no heed of work or toil, etc. So that at best, Jesus’ teachings were supposed to apply not to life on earth but only for preparation for the imminent transmutation of the earth into the Kingdom of God. But then, when that Kingdom failed to arrive, the Gospels became disastrous if taken seriously as a social ethic. Furthermore, Jesus’ teachings, for Mises, are filled with hatred and resentment of the rich—relatively harmless if earthly life is to end instantly, but fatal if taken seriously as an ethic for the world and for human society.

Hence, for Mises, the Christian Church, despite continuing attempts to come to terms with the world and to carve out a reasonable social ethic, is stuck because of its necessary groundwork in Jesus’ Gospels, which Mises regards as ranging from silly to downright dangerous.

The following passage conveys the flavor of Mises’s view of Jesus as nihilist waiting for the imminent arrival of the Kingdom:

“The Time is fulfilled, and the Kingdom of God is at hand: repent ye, and believe the gospel.” These are the words with which in the Gospel of Mark, the Redeemer makes his entry (Mark I, 15). Jesus regards himself as the prophet of the approaching Kingdom of God, the Kingdom which according to ancient prophecy shall bring redemption from all earthly insufficiency, and with it from all economic cares. His followers have nothing to do but to prepare themselves for this Day. The time for worrying about earthly matters is past, for now, in expectation of the Kingdom men must attend to more important things. Jesus offers no rules for earthly action and struggle; his Kingdom is not of this world. Such rules of conduct as he gives his followers are valid only for the short interval of time which has still to be lived while waiting for the great things to come. There the believers will eat and drink at the Lord’s table. (Luke XXII, 30).

It is only in this way that we can understand why, in the Sermon on the Mount, Jesus recommends his own people to take no thought for food, drink, and clothing; why he exhorts them not to sow or reap or gather in barns, not to labour or spin. It is the only explanation, too, of his disciples’ “communism” … The primitive Christians do not produce, labour, or gather anything at all. The newly converted realize their possessions and divide the proceeds with the brethren and sisters. Such a way of living is untenable in the long run. It can be looked upon only as a temporary order which is what it was in fact intended to be. Christ’s disciples lived in daily expectation of Salvation….

The expectation of God’s own reorganization when the time came and the exclusive transfer of all action and thought to the future Kingdom of God, made Jesus’ teaching utterly negative. He rejects everything that exists without offering anything to replace it. He arrives at dissolving all existing social ties…. The motive force behind the purity and power of this complete negation is ecstatic inspiration and enthusiastic hope of a new world. Hence his passionate attack upon everything that exists. Everything may be destroyed because God in His omnipotence will rebuild the future order…. The clearest modern parallel to the attitude of complete negation of primitive Christianity is Bolshevism. The Bolshevists, too, wish to destroy everything that exists because they regard it as hopelessly bad. But they have in mind ideas, indefinite and contradictory though they may be, of the future social order…. Jesus’s teaching in this respect, on the other hand, is merely negation.35

This is not all, however, for in attempting to establish a worldly ethic, the Church finds that the Gospels are filled with attacks on the rich. In fact, for Mises, resentment against the rich is at the heart of Gospel teaching:

One thing of course is clear, and no skilful [sic] interpretation can obscure it. Jesus’s words are full of resentment against the rich, and the Apostles are no meeker in this respect. The Rich Man is condemned because he is rich, the Beggar praised because he is poor…. In God’s Kingdom the poor shall be rich, but the rich shall be made to suffer. Later revisers have tried to soften the words of Christ against the rich … but there is quite enough left to support those who incite the world to hatred of the rich, revenge, murder and arson…. This is a case in which the Redeemer’s words bore evil seed. More harm has been done, and more blood shed, on account of them than by the persecution of heretics and the burning of witches. They have always rendered the Church defenceless against all movements which aim at destroying human society. The church as an organization has certainly always stood on the side of those who tried to ward off communistic attack. But it … was continually disarmed by the words: “Blessed be ye poor; for yours is the Kingdom of God.”36

Mises then goes on to attack the common conservative idea that Christianity forms a vital bulwark “against doctrines inimical to property, and that it makes the masses unreceptive to the poison of social incitement.” But much as the Church might wish to do so, it is stuck with the Gospels, which are “indifferent to all social questions on the one hand, full of resentment against all property and against all owners on the other.” Hence, carried over to the real world, Christian doctrine “can be extremely destructive.” For [n]ever and nowhere can a system of social ethics embracing social cooperation be built up on a doctrine which prohibits any concern for sustenance and work, while it expresses fierce resentment against the rich, preaches hatred of the family, and advocates voluntary castration.37

The notable cultural achievements of the Church over the centuries, according to Mises, were the work of the Church, and not of Christianity. “The Church’s achievement,” asserted Mises, was to “render them [the social ethics of Jesus] harmless,” but it could necessarily do so for only a limited period of time. Therefore, he concludes, rather than the Enlightenment having cleared the way for socialism by undermining religious feeling, it is Christianity that has done so, bearing full fruit in the various forms of Christian Socialism. The Church has been harmful rather than helpful to private property and a free economy: “it is the resistance which the Church has offered to the spread of liberal ideas which has prepared the soil for the destructive resentment of modern socialist thought.” The official Church tried to resist the Christian Socialist movements at first, “but it had to submit in the end, just because it was defenseless against the words of the Scriptures.38

Furthermore, the Christian Church is always striving to dominate society, and hence is trying to suppress individual freedom:

As long as rationalism and the spiritual freedom of the individual are maintained in economic life, the Church will never succeed in fettering thought and shepherding the intellect in the desired direction. To do this it would first have to obtain supremacy over all human activity. Therefore it cannot rest content to live as a free Church in a free state; it must seek to dominate that state.39

Mises concludes, then, by being highly pessimistic about the possibility of reconciling Christianity with a free social order based on private property. “A living Christianity cannot, it seems, exist side by side with Capitalism.” He finds only one slim hope for an opposite conclusion: the thin possibility that the Roman Catholic Church, threatened by chauvinist nationalism and national (Protestant) churches, may abandon nationalism and adopt the true universalism of unconditional private property in the means of production.40

Neither does Mises find any more hope in religions other than Christianity; to the contrary, they are dismissed brusquely and with contempt. Eastern religions are hopelessly anti-capitalist; the Greek Church “has been dead for over a thousand years”; and the “Islamic and Jewish religions are dead.” Islam and Judaism “offer their adherents nothing more than a ritual”; they “suppress the soul, instead of elevating and saving it.” They maintain themselves by “rejecting everything foreign and ‘different’, by traditionalism and conservatism. Only their hatred of everything foreign rouses them to great deeds from time to time.”41

The French Revolution

Conservatism was born in bitter reaction against the French Revolution. From that day to this, all branches of conservatism unite in hostility to that Revolution, which they castigate as the precursor of the Bolshevik Revolution and of the other totalitarian evils of the twentieth century. The American Revolution, in contrast, was the “good” revolution because it was not really a revolution at all, but simply a conservative response to defend the status quo against the encroachments of the British Crown.

Ludwig von Mises, in contrast, was always a consistent admirer of the French Revolution which he perceived as a movement inspired by the American Revolution and its libertarian ideals. He regarded himself as a man of 1789, an heir of the Enlightenment.

Thus, writing after World War I, Mises asserted that “for us and for humanity there is only one salvation: return to the rationalistic liberalism of the ideas of 1789.”42  In contrast, in the “League of Nations of Versailles the ideas of 1914 are in truth triumphing over those of 1789.”44

Conclusion: The Historical Mises

The purpose of this paper, in the light of the recent Mises centennial year, is to rescue the real, “historical” Mises from the image which has been generally formed of him and has been adopted by the bulk of his followers. This is the nonthreatening image of Mises as a quintessential National Review conservative.

But we find that, particularly in the years before his American “exile,” Mises was virtually the diametric opposite of a modern conservative. These views were not stressed during his later American period, but neither were they repudiated. Discussion of them more or less dropped out of Misesian writings. But to ignore the earlier Mises is to ignore a basic theme of his thought, for his thought forms a remarkably consistent whole over the decades of his long and active life.

We find, then, a Mises with the following strongly held political views: a proclaimed pacifist, who trenchantly attacked war and national chauvinism; a bitter critic of Western imperialism and colonialism; a believer in nonintervention with regard to Soviet Russia; a strong proponent of national self-determination, not only for national groups, but for subgroups down to the village level—and in theory, at least, down to the right of individual secession, which approaches anarchism; someone so hostile to immigration restrictions that he almost endorsed war against such countries as the United States and Australia to force them to open up their borders; a believer in the importance of class conflict in relation to the State; a caustic rationalist critic of Christianity and of all religion; and an admirer of the French Revolution.

Whatever these views were, they were most emphatically not conservatism. On the contrary, they were something very different and in age-old conflict with conservatism. Ludwig von Mises was truly and proudly an heir of early-nineteenth-century laissez-faire radicalism, of Bentham, of James Mill, Cobden, and Spencer. He was a rationalist and a libertarian.

  • 1. “The goal of the domestic policy of liberalism is the same as that of its foreign policy: peace. It aims at peaceful cooperation just as much between nations as within each nation…. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind…. Liberal thinking always has the whole of humanity in view and not just parts…. Its thinking is cosmopolitan and ecumenical: it takes in all men and the whole world. Liberalism is, in this sense, humanism; and the liberal, a citizen of the world, a cosmopolite” (Ludwig von Mises, Liberalism: A Socio-Economic Exposition [1927; 2nd ed., Kansas City: Sheed, Andrews and McMeel, 1978], pp. 105—106).
  • 2. Mises, “Nation, State, and Economy: Contributions to the Politics and History of Our Time,” translation by Leland Yeager, of Nation, Staat und Wirtschaft (1919), p. 91, (Humanities Press, forthcoming)
  • 3. Herbert Marcuse, in an attempt to smear classical liberalism with the brush of fascism and advocacy of war, engaged in a shameful distortion of Mises by wrenching a passage of Liberalism out of context in attempting to make Mises seem to be pro-fascist. If the context is examined, Mises engages in a fervent critique of fascism for its anti-liberalism and for its attempt to suppress ideas by violence. As for its foreign policy, fascism’s glorification of force “cannot fail to give rise to an endless series of wars that must destroy all of modern civilization … ” Mises’s one sentence of approval of fascism was for its allegedly saving Italy from Bolshevism after World War I. Also disgraceful is Marcuse’s total neglect of Mises’s later Omnipotent Government, virtually a sustained philippic against Nazism and fascism.
    Marcuse’s besmirching of Mises can be found in his Negations (Boston: Beacon Press, 1968), pp. 9–10. The passage from Mises (not footnoted by Marcuse) can be found in Liberalism, p. 51, and the full context of Mises’s views on fascism in ibid., pp. 47–51. Also see Mises, Omnipotent Government (New Haven, Conn.: Yale University Press, 1944).
  • 4. Mises, Liberalism, pp. 123–24.
  • 5. Ibid., p. 125.
  • 6. Ibid.
  • 7. Ibid., p. 126.
  • 8. Mises, “Nation, State and Economy,” pp. 34–35.
  • 9. Ibid., p. 8
  • 10. Mises, Liberalism, p. 109. Mises adds that it therefore grossly violates true self-determination for one nation-state to try to incorporate citizens of other territories against their consent, and simply because of their ethnic or linguistic ties. In particular, he mentions the demand of the Italian Fascists to incorporate Italian-speaking Swiss cantons into Italy, and the Pan-German wishes to incorporate German Swiss cantons. Ibid.
  • 11. Ibid., p. 109.
  • 12. Ibid., pp. 109–110.
  • 13. Mises, “Nation, State and Economy,” p. 41.
  • 14. Mises, Liberalism, p. 153
  • 15. Ibid., pp. 153–54.
  • 16. Mises, Omnipotent Government, p. 264.
  • 17. Mises, Liberalism, pp. 141–42.
  • 18. Mises, “Nation, State and Economy,” p. 192n.
  • 19. Ibid., p. 97.
  • 20. Mises, “The Freedom to Move as an International Problem,” trans. Bettina Bien Greaves from “Freizügigkeit als internationales Problem” (1935), in The Clash of Group Interests and Other Essays (New York: Center for Libertarian Studies, 1978), pp. 19–22.
  • 21. Ibid., p. 20.
  • 22. Ibid.
  • 23. Ibid., pp. 21–22.
  • 24. Ibid., p. 22.
  • 25. See the notable article by Leonard P. Liggio, “Charles Dunoyer and French Classical Liberalism,” The Journal of Libertarian Studies 1 (Summer 1977): 153–78.
  • 26. The fact that Marxists say that, as a second and further step, the “capitalists” then gain control of the State, which becomes the “executive committee of the ruling class,” is not enough to save their theory. For the capitalists are supposed to be a “ruling class” simply by virtue of being capitalists, and before their alleged takeover of the State, which is only supposed to add an extra dimension to their class rule.
  • 27. Mises, Socialism (1922; 2nd ed., New Haven: Yale University Press, 1951), p. 332. Mises also points out trenchantly that Marx and Engels continually confused the concepts of class and estate, and that Marx broke off the third volume of Capital just when he was finally about to tackle a task he had never accomplished: a precise definition of his much-used concept of “class” (ibid., pp. 328n., 332n., 336–342).
  • 28. Ibid., p. 333.
  • 29. Ibid., pp. 335–36.
  • 30. Ibid., p. 337.
  • 31. Mises, “The Clash of Group Interests” (1945), in Mises, Clash of Group Interests and Other Essays, pp. 2–3, 5. In this essay, for the last time, Mises returned to his immigration theme, pointing out that, say in Australia and New Zealand , immigration laws had “integrated their whole citizenry into a privileged caste.” By such immigration barriers, the workers of these countries “create those tensions which must result in war whenever those injured by such policies expect that they can brush away by violence the measures of foreign governments that are prejudicial to their own well-being” (ibid., pp. 4–6).
  • 32. Mises returned to the theme of caste vs. class in his last major work, Theory and History (New Haven: Yale University Press, 1957), pp. 113–16.
  • 33. “It would … be a serious mistake to conclude that the sciences of human action and the policy derived from their teachings, liberalism, are antitheistic and hostile to religion. They are radically opposed to all systems of theocracy. But they are entirely neutral with regard to religious beliefs which do not pretend to interfere with the conduct of social, political, and economic affairs.” And: “It is a distortion of fact to say, as many champions of religious theocracy do, that liberalism fights religion. Where the principle of church interference with secular issues is in force, the various churches, denominations and sects are fighting one another. By separating church and state, liberalism established peace between the various religious factions and gives to each of them the opportunity to preach its gospel unmolested” (Mises, Human Action, 3rd rev. ed. [Chicago: Henry Regnery, 1966], pp. 155, 157).
  • 34. Mises, Socialism, pp. 409–29.
  • 35. Ibid., pp. 413–16.
  • 36. Ibid., pp. 419–20.
  • 37. Ibid., pp. 420–21.
  • 38. Ibid., p. 420.
  • 39. Ibid., p. 427.
  • 40. Ibid., pp. 428–29. For an excellent discussion of Mises as laissez-faire radical and particularly of Mises on Christianity, see Ralph Raico, “Ludwig von Mises,” The Alternative: An American Spectator (February 1975), pp. 21–23.
  • 41. Mises, Socialism, p. 410. Also see ibid., p. 428.
  • 42. Mises, “Nation, State and Economy,” p. 239.
  • 44. Ibid., p. 238.

Reprinted from the Mises Institute.

Wall Street, Banks, and American Foreign Policy

Generalissimo Washington: How He Crushed the Spirit of Liberty

[This article is excerpted from Conceived in Liberty, Volume IV, chapters 8 and 41.]

Washington Transforms the Army

In June of 1775, George Washington was appointed Major General and elected by Congress to be commander in chief of the American revolutionary forces. Although he took up his tasks energetically, Washington accomplished nothing militarily for the remainder of the year and more, nor did he try. His only campaign in 1775 was internal rather than external; it was directed against the American army as he found it, and was designed to extirpate the spirit of liberty pervading this unusually individualistic and democratic army of militiamen. In short, Washington set out to transform a people’s army, uniquely suited for a libertarian revolution, into another orthodox and despotically ruled statist force after the familiar European model.

His primary aim was to crush the individualistic and democratic spirit of the American forces. For one thing, the officers of the militia were elected by their own men, and the discipline of repeated elections kept the officers from forming an aristocratic ruling caste typical of European armies of the period. The officers often drew little more pay than their men, and there were no hierarchical distinctions of rank imposed between officers and men. As a consequence, officers could not enforce their wills coercively on the soldiery. This New England equality horrified Washington’s conservative and highly aristocratic soul.

To introduce a hierarchy of ruling caste, Washington insisted on distinctive decorations of dress in accordance with minute gradations of rank. As one observer phrased it: “New lords, new laws. … The strictest government is taking place, and great distinction is made between officers and soldier. Everyone is made to know his place and keep it.” Despite the great expense involved, he also tried to stamp out individuality in the army by forcing uniforms upon them; but the scarcity of cloth made this plan unfeasible.

At least as important as distinctions in decoration was the introduction of extensive inequality in pay. Led by Washington and the other aristocratic southern delegates, and over the objections of Massachusetts, the Congress insisted on fixing a pay scale for generals and other officers considerably higher than that of the rank and file.

In addition to imposing a web of hierarchy on the Continental Army, Washington crushed liberty within by replacing individual responsibility by iron despotism and coercion. Severe and brutal punishments were imposed upon those soldiers whose sense of altruism failed to override their instinct for self-preservation. Furloughs were curtailed and girlfriends of soldiers were expelled from camp; above all, lengthy floggings were introduced for all practices that Washington considered esthetically or morally offensive. He even had the temerity to urge Congress to raise the maximum number of strikes of the lash from 39 to the enormous number of 500; fortunately, Congress refused.

In a few short months, Washington had succeeded in extirpating a zealous, happy, individualistic people’s army, and transforming it into yet another statist army, filled with bored, resentful, and even mutinous soldiery. The only thing he could not do was force the troops to continue in camp after their terms of enlistment were up at the end of the year, and by now the soldiers were longing for home. In addition to all other factors, Americans were not geared — nor should they have been — for a lengthy conflict of position and attrition; they were not professional soldiers, and they were needed at their homes and jobs and on their farms. Had they been a frankly guerrilla army, there would have been no conflict between these roles.

As the end of 1775 drew near, then, Washington’s main preoccupation was in forging a new army to replace the 17,000 men whose terms of enlistment were about to expire. His problems were aggravated by Congress’s refusal to pay the bounties for enlistment New Englanders were used to receiving; instead caste distinctions were widened even further by raising officers’ pay, while privates’ pay remained the same. Only 3,500 of the old army agreed to reenlist; for the rest, very short-term enlistments of Massachusetts and New Hampshire men filled the gap until new enlistees finally swelled the total to about 10,000.

As might have been expected, the wealthy and aristocratic Washington, free from money worries, had little understanding of the economic plight of his soldiery. In contrast to the legends about his compassion, Washington railed about the defecting troops as being possessed of a “dirty mercenary spirit” and of “basely deserting the cause of their country.”1

A particularly colorful addition to the New England troops in the Continental Army, during the summer of 1775, was a detachment of nine enlisted companies of expert riflemen from the back-country frontier of Pennsylvania, Maryland, and Virginia, five of them from Pennsylvania. There were over 1,400 of these riflemen in all. The bulk of them were hardy Ulster Scot frontiersmen, wearing hunting outfits bearing the motto Liberty or Death and employing the unique “Kentucky rifle,” invented by Pennsylvania German gunsmiths. This long-barreled rifle was uniquely suited for guerrilla warfare. It shot more accurately and over a far longer range than the shorter musket in general use, but it did not reload rapidly, and hence was not useful for orthodox, open-field, positional or linear volley warfare.

It is not surprising that these backwoodsmen proved even more individualistic and less tolerant of coercion than the New Englanders. When they terrorized British sentries with their sniping, Washington forbade such seemingly disorganized practice which spent ammunition. Whenever a rifleman was imprisoned for infringing one of Washington’s arbitrary but cherished rules, his comrades would break into the prison and set him free. On one occasion, virtually an entire Pennsylvania company mutinied to try to free one of their own, and several regiments were needed to disarm and convict the Pennsylvanians, whose penalty consisted of less than a week’s pay. The riflemen, however, were not so much unfit for any military service as they were “by nature and by experience, totally unfitted for inactive life in camp.” When the opportunity came for action for which they were suited, they were to serve admirably.2

Winter at Valley Forge

In December of 1777, Washington sensibly prepared to take his battered and half-fed men into winter quarters, rather than endure the rigors of another winter campaign as they had done the previous year. He favored quarters at Wilmington, where supplies would be plentiful and the weather mild. Furthermore, Delaware and Maryland could be guarded, and American boats could harass British shipping on the Delaware. The officers favored this plan; but in deference to Pennsylvania’s howls against letting the British army ravage the countryside, and at the suggestion of Wayne, Washington weakly and unfortunately decided to winter on the icy slopes of Valley Forge, to the west of Philadelphia. Few worse locations for obtaining supplies could have been selected than this ravaged area. Generals James Varnum and “Baron” deKalb were particularly vehement at “wintering in this desert.”

On December 19, Washington’s army, short of food and water, poorly sheltered, and terribly short of shoes and other clothing, staggered into the ill-conceived camp at Valley Forge. In these conditions, disease spread like wildfire through the camp. To obtain food, both the American and British forces sent foraging parties to confiscate cattle and other supplies from the hapless citizens. By the spring of 1778, massive desertions had reduced Washington’s army to five or six thousand men. Greene was appointed quartermaster general in the emergency, and he was able to scrape up and confiscate enough provisions to last the army through the winter.

During the campaigns of 1777 a suspicion began to well up among many Americans that Horatio Gates was an excellent general and Washington a miserable one, and that maybe something should be done about it. In Congress, forced to meet in the small town of York, Pennsylvania, it was the men of the American Left that were restive, notably Joseph Lovell and Sam Adams of Massachusetts. Dr. Benjamin Rush, a leading Pennsylvania liberal and chief physician in Washington’s army, urged his replacement by “a Gates, Lee, or Conway,” Thomas Conway being a capable Irish-born French general recently commissioned in the Continental Army. In November 1777, Congress advanced a step toward erecting a professional bureaucracy by creating a five-man Board of War, not composed of members of Congress, to supervise the army. As chairman of the board, Congress appointed the hero Gates, who was then too ill for field command. This apparent attempt to downgrade Washington and elevate Gates never got underway, in fact never reached the stature of an organized campaign. Indeed, no one in Congress ever proposed the replacement of Washington or even the curtailing of his powers.

Two major factors contributed to the crushing of any murmurs of dissent against the commander in chief. One was Washington’s ruthless use of an indiscretion he discovered — a letter critical of him sent by Gates to Conway. Washington and his influential friends immediately conjured up a nonexistent widespread “plot,” the mythical “Conway Cabal,” supposedly designed to scuttle Washington. Both Rush and Conway were soon forced out of the army by the vindictive Washington.

Conway’s fall (and subsequent emigration) and Gates’s decline were also spurred by a madcap plan Gates had for another expedition to invade Canada and possibly take Montreal. This proposed expedition was to be independent of Washington’s command, and was to be headed by the vain young French Catholic volunteer, the Marquis de Lafayette, in a rather farfetched scheme to appeal to the French Canadian masses. But Lafayette, ever worshipful of his patron Washington, refused to be independent of his commander in chief, and bitterly denounced the supposed conspirator Conway as responsible for an intrigue against Washington. When the proposed expedition fell through in March 1778, the failure hastened the demise of all incipient opposition to Washington. The Board of War fell into a decline, and Gates, in virtual disgrace, and subject to Washington’s continuing vengeance, was assigned a tiny and innocuous command on the Hudson highlands.

Thus, history had dealt in high irony with the victors at Saratoga. Gates, after the winter of 1777–78, was relegated out of the action, to a minor command; Arnold, seriously wounded and crippled at Bemis Heights, was never again to bear arms for the United States; and Schuyler, who, for all his faults, had after all harried and delayed Burgoyne in his march from Skenesboro, was in disgrace, suspected — with some justice — of treason. He too was never again to serve in the army; though eventually acquitted at court-martial for his actions at Ticonderoga, he left the army shortly after. Of the main victors over Burgoyne, only Daniel Morgan was to continue in action — and even he was soon to be treated shabbily by George Washington. Meanwhile, Washington, the architect of defeat, surmounted a flurry of opposition and continued more firmly in command than ever.

As if the ragged soldiers at Valley Forge did not have enough troubles, they were to be further plagued by the arrival, in February, of a mendacious Prussian braggart and soldier of fortune calling himself “Baron von Steuben.” Actually, Captain Steuben was neither a baron nor, as he claimed, a Prussian general; but he managed quickly to be elevated to the post of inspector general of the Continental Army. Steuben set about to Prussianize the American army, and so now the hapless soldiery suffered the infliction of the whole structure of petty and meaningless routine designed to stamp out individuality and transform the free and responsible soldier into an automaton subject to the will of his rulers.

Ever since he had embarked on the Philadelphia campaign, Washington had grown ever further away from the guerrilla tactics that had won him victory at Trenton (and had defeated Burgoyne). Washington had no desire to become a guerrilla chieftain; to his aristocratic temper the only path to glory was through open, frontal combat as practiced by the great states of Europe. Washington had tried this formula, and lost dismally at Brandywine and at Germantown, but this experience taught him no real lessons. He was delighted to have Steuben continue the process he himself had begun in the first year of war of imposing petty enslavement upon a body of free men. Until recently, historians have rhapsodized uncritically over the benefits of Steuben’s training, of the enormous difference in the army’s performance. But Washington’s and his army’s performance was equally undistinguished before and after Steuben; any differences were scarcely visible.

In the midst of this Prussianizing of the American army, Charles Lee was released in a prisoner exchange in early April. While Washington and Steuben were taking the army in an ever more European direction, Lee in captivity was moving the other way — pursuing his insights into a fullfledged and elaborated proposal for guerrilla warfare. He presented his plan to Congress, as a “Plan for the Formation of the American Army.”

Bitterly attacking Steuben’s training of the army according to the “European Plan,” Lee charged that fighting British regulars on their own terms was madness and courted crushing defeat: “If the Americans are servilely kept to the European Plan, they will … be laugh’d at as a bad army by their enemy, and defeated in every [encounter]… . [The idea] that a decisive action in fair ground may be risqued is talking nonsense.” Instead, he declared that “a plan of defense, harassing and impeding can alone succeed,” particularly if based on the rough terrain west of the Susquehannah River in Pennsylvania. He also urged the use of cavalry and of light infantry (in the manner of Dan Morgan), both forces highly mobile and eminently suitable for the guerrilla strategy.

This strategic plan was ignored both by Congress and by Washington, all eagerly attuned to the new fashion of Prussianizing and to the attractions of a “real” army. Lee made himself further disliked by expressing yearnings for a negotiated peace, with full autonomy for America within the British Empire. During his year in captivity, it seems he had partially reverted to the position of the English Whigs. He did not realize that the United States was now totally committed to independence, and that peace terms that would have been satisfactory three years earlier would no longer do. Too much should not be made of this, however; General Sullivan, in his earlier term of captivity, had also been temporarily persuaded of similar views.

On reaching camp in late May, Lee soon embittered Washington by scorning Washington’s abilities, and praising Gates’s in a letter to his friend Benjamin Rush. He did succeed, however, in having Steuben’s powers curtailed. He also increased his unpopularity by objecting to — though reluctantly taking — a loyalty oath of allegiance to the United States and repudiating Great Britain, an oath forced upon every officer in the army. The old scourge of the Tories, the coercer of loyalty oaths, seemed to be growing soft.

During the winter of 1777–78, Howe lost his last opportunity to crush Washington’s army. Only twenty miles away, and drilling for open combat, it would have been easy prey. But Howe and his troops remained in Philadelphia: while the Americans froze, starved, and drilled, they reveled and partied, luxuriously enjoying the victuals, wine, and women of Philadelphia.

On May 18, Washington, chafing at the inactivity, sent out a force of 2,200 men — one-third of his army — for a reconnaissance in force against the British. He placed in command of this pointless foray the Marquis de Lafayette, who was apparently being rewarded for his assiduous flattery of the commander in chief. Now he could have his own command and end his pouting; but 2,200 men seems an extravagant price for soothing Washington’s protégé.

Lafayette advanced to Barren Hill, only two miles north of the British lines, and settled down to wait. He did not have to wait long. Howe, about to be replaced by Clinton as commander in chief, was determined to end his term on a triumphal note by capturing the young Frenchman. But Lafayette, nearly surrounded, managed to elude the enemy with his troops and to speed back home without fighting a major battle.

Upon the collapse of Burgoyne, General Howe — joined by his brother — submitted his resignation. After furious objections by Howe’s well-placed friends and relatives, Germain replaced him with General Clinton, who assumed command in mid-May. With the end of Howe’s term, the last chance for a quick crushing of the American forces had gone, for France was entering the war on the American side. For Britain, the character of the war had now unpleasantly changed; from trying to teach a lesson to revolutionaries, Britain now faced an international, trans-Atlantic, even a worldwide conflict.

The first thing to do was end the occupation of Philadelphia, which at best had been a waste of time. Howe had thought of Philadelphia as equivalent to a European capital: the hub and nerve center of administrative, commercial, political, and military life. But in a decentralized people’s war such as the Americans were waging, there was no fixed nerve center; indeed, there was scarcely any central government at all. All this gave the Americans a flexibility and an ability to absorb invading armies in a manner highly statified Europe could not understand.


  • 1.Willard M. Wallace, Appeal to Arms: A Military History of the American Revolution (Chicago: Quadrangle Books, 1951), pp. 54–55.
  • 2.Christopher Ward, The War of the Revolution (New York: Macmillan, 1952), 1:108.

Republished from the Mises Institute

Wall Street, Banks, and American Foreign Policy

The Danger of “Public” Education

The key issue in the entire discussion is simply this: shall the parent or the State be the overseer of the child?

An essential feature of human life is that, for many years, the child is relatively helpless, that his powers of providing for himself mature late. Until these powers are fully developed he cannot act completely for himself as a responsible individual. He must be under tutelage. This tutelage is a complex and difficult task. From an infancy of complete dependence and subjection to adults, the child must grow up gradually to the status of an independent adult. The question is under whose guidance, and virtual “ownership” the child should be: his parents’ or the State’s? There is no third, or middle, ground in this issue. Some party must control, and no one suggests that some individual third party have authority to seize the child and rear it.

It is obvious that the natural state of affairs is for the parents to have charge of the child. The parents are the literal producers of the child, and the child is in the most intimate relationship to them that any people can be to one another. The parents have ties of family affection to the child. The parents are interested in the child as an individual, and are the most likely to be interested and familiar with his requirements and personality. Finally, if one believes at all in a free society, where each one owns himself and his own products, it is obvious that his own child, one of his most precious products, also comes under his charge.

The only logical alternative to parental “ownership” of the child is for the State to seize the infant from the parents and to rear it completely itself. To any believer in freedom this must seem a monstrous step indeed. In the first place, the rights of the parents are completely violated, their own loving product seized from them to be subjected to the will of strangers. In the second place, the rights of the child are violated, for he grows up in subjection to the unloving hands of the State, with little regard for his individual personality. Furthermore — and this is a most important consideration — for each person to be “educated,” to develop his faculties to the fullest, he needs freedom for this development. We have seen above that freedom from violence is essential to the development of a man’s reason and personality. But the State! The State’s very being rests on violence, on compulsion. As a matter of fact, the very feature that distinguishes the State from other individuals and groups is that the State has the only (legal) power to use violence. In contrast to all other individuals and organizations, the State issues decrees which must be obeyed at the risk of suffering prison or the electric chair. The child would have to grow up under the wings of an institution resting on violence and restriction. What sort of peaceful development could take place under such auspices?

Furthermore, it is inevitable that the State would impose uniformity on the teaching of charges. Not only is uniformity more congenial to the bureaucratic temper and easier to enforce; this would be almost inevitable where collectivism has supplanted individualism. With collective State ownership of the children replacing individual ownership and rights, it is clear that the collective principle would be enforced in teaching as well. Above all, what would be taught is the doctrine of obedience to the State itself. For tyranny is not really congenial to the spirit of man, who requires freedom for his full development.

Therefore, techniques of inculcating reverence for despotism and other types of “thought control” are bound to emerge. Instead of spontaneity, diversity, and independent men, there would emerge a race of passive, sheep-like followers of the State. Since they would be only incompletely developed, they would be only half-alive.

It might be said that no one is contemplating such monstrous measures. Even Communist Russia did not go so far as to impose a “communism of children,” even though it did almost everything else to eliminate freedom. The point is, however, that this is the logical goal of the Statists in education. The issue which has been joined in the past and in the present is: shall there be a free society with parental control, or a despotism with State control? We shall see the logical development of the idea of State encroachment and control. America, for example, began, for the most part, with a system of either completely private or with philanthropic schools. Then, in the nineteenth century, the concept of public education changed subtly, until everybody was urged to go to the public school, and private schools were accused of being divisive. Finally, the State imposed compulsory education on the people, either forcing children to go to public schools or else setting up arbitrary standards for private schools. Parental instruction was frowned on. Thus, the State has been warring with parents for control over their children.

Not only has there been a trend toward increased State control, but the effects of this have been worsened by the very system of equality before the law that applies in political life. There has been the growth of a passion for equality in general. The result has been a tendency to regard every child as equal to every other child, as deserving equal treatment, and to impose complete uniformity in the classroom. Formerly, this had tended to be set at the average level of the class; but this being frustrating to the dullest (who, however, must be kept at the same level as the others, in the name of equality and democracy), the teaching tends more and more to be set at the lowest levels.

We shall see that since the State began to control education, its evident tendency has been more and more to act in such a manner as to promote repression and hindrance of education, rather than the true development of the individual. Its tendency has been for compulsion, for enforced equality at the lowest level, for the watering down of the subject and even the abandonment of all formal teaching, for the inculcation of obedience to the State and to the “group,” rather than the development of self-independence, for the deprecation of intellectual subjects. And finally, it is the drive of the State and its minions for power that explains the “modern education” creed of “education of the whole child” and making the school a “slice of life,” where the individual plays, adjusts to the group, etc. The effect of this, as well as all the other measures, is to repress any tendency for the development of reasoning powers and individual independence; to try to usurp in various ways the “educational” function (apart from formal instruction) of the home and friends, and to try to mold the “whole child” in the desired paths. Thus, “modern education” has abandoned the school functions of formal instruction in favor of molding the total personality both to enforce equality of learning at the level of the least educable, and to usurp the general educational role of home and other influences as much as possible. Since no one will accept outright State “communization” of children, even in Communist Russia, it is obvious that State control has to be achieved more silently and subtly.

For anyone who is interested in the dignity of human life, in the progress and development of the individual in a free society, the choice between parental and State control over the children is clear.

Is there, then, to be no State interference whatever in the relations between parent and child? Suppose that the parents aggress upon and mutilate the child? Are we to permit this? If not, where are we to draw the line? The line can be simply drawn. The State can adhere strictly to the function of defending everyone from the aggressive violence of everyone else. This will include children as well as adults, since children are potential adults and future freemen. Simple failure to “educate,” or rather, instruct, is no grounds whatever for interference. The difference between these cases was succinctly put by Herbert Spencer:

No cause for such [state] interposition can be shown until the children’s rights have been violated, and that their rights are not violated by a neglect of their education [actually, instruction]. For … what we call rights are merely arbitrary subdivisions of the general liberty to exercise the faculties; and that only can be called an infringement of rights which actually diminishes this liberty — cuts off a previously existing power to pursue the objects of desire. Now the parent who is careless of a child’s education does not do this. The liberty to exercise faculties is left intact. Omitting instruction in no way takes from a child’s freedom to do whatsoever it wills in the best way it can, and this freedom is all that equity demands. Every aggression, be it remembered — every infraction of rights — is necessarily active; whilst every neglect, carelessness, omission, is as necessarily passive. Consequently, however wrong the non-performance of a parental duty may be … it does not amount to a breach of the law of equal freedom and cannot therefore be taken cognizance of by the state.1

Excerpted from Education: Free and Compulsory


1 Herbert Spencer, Social Statics: The Conditions Essential to Human Happiness Specified, and the First of Them Developed (New York: Robert Schalkenbach Foundation, 1970), p. 294. Or as another writer expressed it, with regard to a parent and other members of the society: “his associates may not compel him to provide for his child, though they may forcibly prevent him from aggressing upon it. They may prevent acts; they may not compel the performance of actions.” Clara Dixon Davidson, “Relations Between Parents and Children,” Liberty, September 3, 1892.

Republished from the Mises Institute

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