lunes, septiembre 16, 2019
Economíainternacionalopinión

Decentralization, secession and federalism are the way forward.

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An interview with Jeff Deist.

By: Gerardo Garibay Camarena*

Gerardo Garibay: Hi! Jeff. Thanks for accepting this interview with Wellington.mx and welcome to Mexico. We are sure that all the events will be a success and will be instrumental in planting the seeds of academic curiosity and action in many Mexicans. By being here, you also follow in the steps of Mises himself, who gave a series of talks here in Mexico City, back in 1942.

Gerardo Garibay: I’d like to begin this interview by asking about the article you published a month ago about the Federal Reserve. There you wrote about “The fundamental corrections that must take place”, like “bankruptcy, liquidation and restructuring of firms to clear out bad debt; higher interest rates to encourage capital formation and discourage more malinvestment; an end to direct bailouts by Congress and roundabout bailouts by the Fed; and a serious program of spending and debt reduction in Washington that spares neither entitlements nor defense.” Could you elaborate a little bit more about this? How can a country turn back the engine of seemingly perpetual debt and government spending, which has trapped The U.S. and many other countries, such as Mexico?

Jeff Deist: It’s interesting. It really goes back to a fundamental disagreement and what I would argue is a fundamental error in economics. Is economy driven by production or consumption? And of course those of us who have read the Austrian tradition and are familiar with Joan Baptiste Say, Say’s law states that you have to produce first, before you can sell that, and of course production precedes consumption and so debt is a means of consuming, but if debt becomes the entire driver of an economy there you’re in big trouble and what we’ve seen across the west, and I include Latin America an México, but also the United States and Europe and Canada, what we’ve seen across the west since the crisis of 2008 is that debt has exploded.

The recession of 2008 didn’t cause what most recessions cause, which is bankruptcy and insolvency and liquidations and restructuring of debt and creditors taking “haircuts” and management being fired and new owners coming in and buying all the assets on the cheap. None of these things happened.

What happened instead was that both the United States Federal Reserve and the European Central Bank went into basically an orgy of money creation and credit creation, and as a result of this the whole world has more debt today than it did in 2008. I’m talking at the governmental level: sovereign debt, corporate debt, household debt, student loans, credit cards, mortgages, you name it. The entire world has more debt than it did in 2008. So, who can we say on that basis that we’re better off? I don’t think we can and I think what we’re realizing is we live in an are were people believe that through fiscal or monetary tinkering, through technical application of statistical modeling or thinks like these, that we can create prosperity, without actually doing the hard work that it takes.

By hard work I mean, you have to make an economy that’s more productive, and to be more productive people have to be engaged in money-making things, so they make a profit, that profit accumulates over time and becomes capital and then that capital is invested into the economy, hopefully in ways that make it more productive, and there’s no trick to get around that, there’s no way to avoid that if we want to create a real economy with a real foundation for future growth.

So, what we did in 2008, instead of allowing the painful correction to happen, maybe that would have been a year or two years. They call it ripping off the band-aid. Instead we just re-inflated these bubbles that were all across the various sectors of the economy in 2008 in the West: housing, auto, student loans, etcetera. So, we haven’t fixed it yet, but we’ve just kicked the can down the road and in fact we’ve made it far worse, because we have more debt than ever.

So, that’s very frightening to me, and is not just that we have a fiscal or monetary policy problem. We have an intellectual, an ideological problem. We’ve come to believe in something for nothing. We imagine these brilliant people: they go to Harvard, they’re well-meaning, they’re very intelligent people that they can somehow just tinker with thing and apply technical techniques to make us all more wealthy, but we know that creating new money doesn’t bring new products or services into the economy, I mean it just brings more money. If everyone on earth just had a couple of zeroes added to their bank accounts today, it wouldn’t make any difference, prices would simply adjust and we’d be exactly where we were before.

But here’s the thing: The new money and credit doesn’t just apply to everyone universally, at the same time. It enters the economy at different points over time, and some people do in fact become enriched by the new money, especially people who are involved in investment and commercial banking, for example, who are closer to the FED and so the avail themselves at this new, inexpensive money, earlier. People who are close to government benefit, because government is allowed to operate with huge deficits and sort of paper those over by selling U.S. Treasury debt, so because government can spend more and more, and engage in what are now almost twenty years-old wars in the middle east for example, the defense contractors and government employees and other people who are close to the State actually do benefit from that new money earlier, before it spreads itself throughout the entire economy.

So, not only do we kick the can down the road. Not only do we create a situation that could be more severe and more dangerous than 2008, we create sort of an underserving class of wealthy people, specially in the banking and government sector. It’s a huge problem.

What we need to do is what the great automaker Henry Ford said more than a hundred years ago: we need to liquidate bad debt, and unfortunately, we’re going in the opposite way. So is our job, those of us who have read Austrian literature, those of us who believe in markets, those of us who just believe in human flourishing, and want people to be successful and do well; we have to get back to a sober and sane monetary policy, and until we do that, it doesn’t matter what we do politically or fiscally or socially or culturally. Without sound money in the economy we’re in big trouble and so that’s one of our biggest jobs: to educate people about money and credit and their purposes.

Gerardo Garibay: I had the chance to attend Mises University in 2017. There you gave the closing speech, which was very good by the way, and You talked at length about how libertarians risk irrelevance when we ignore concepts, such as God and nation, that entice a profound response in the individuals. So my question here is, how can we libertarians walk that complex gray area of group identity within our social environment without falling into the collectivist traps on both the left and the right? How do we balance this understanding of the shared identities with the message of individual liberty and individual choice?

Jeff Deist: Well, it’s difficult, and those of us who are liberty minded we tend to be individualistic, we don’t think of ourselves in groups. In fact, we don’t like group identity because, as we know from history, group identity -tribalism- can turn very nasty, it can lead to wars and it can lead to all kinds of bad things.

That said, the focus of my talk was that, if libertarianism is to gain ground, I think it needs to be presented and understood as a philosophy that comports with human nature. Human beings like to believe in something. So, as society becomes increasingly secular, atheist, agnostic, which a lot of libertarians are, as more and more people choose or simply don’t have the financial ability to marry and have children, as people get away from older traditional societies. In the United States, for example, we used to have a lot of vibrant societies, like the Elks and the Chamber of Commerce, and a lot of these things are falling by the wayside. As the writer Robert Putnam wrote on a book called “Bowling Alone” we don’t have bowling leagues and softball leagues. We’ve reached this point, especially in the west, where a lot of individuals feel alienated -to use a Marxist term.

So, if we say to people: “we’re not going to believe in God, we’re not going to believe in family, we’re not going to believe in marriage and children, we’re not going to believe in culture and we’re not going to believe in philosophy” we reach the point when we say: “what do people believe in?”.

People want to have a purpose in life, a higher purpose than just their own day to day existence and I’m afraid that as these other things -that we used to call civil society- are swept aside, that the State is going to become the new religion, and I think we’re seeing that in the United States, where we have what really is a demagogue, someone like Bernie Sanders, he seems like a sweet old man but if you listen to things he says, he’s a demagogue. We have younger politicians, like Alexandra Ocasio-Cortez.

People like the idea of believing in something, of being part of something. Look at the Obama revolution, when people would go out and follow him and wear the “hope & change” t-shirts. There was a certain segment of America that got swept in the Trump phenomenon; they too want to be part of something and they feel like “we’re fighting back against these blue states that looked down on us”.

I think is very dangerous to present libertarianism as an ideology, or philosophy or theory of law for hyper-individualistic, super-rational society. I think we need to accept humans the way they are, meet them where they are, which sometimes they’re stubborn or irrational, or they have allegiances to family or culture or religion or God or whatever, that supersedes maybe their political perspectives.

The point of the speech was really to offer up a kind of liberty that’s just strictly a political perspective, but otherwise allows an individual to have all kinds of other things in his or her life that give them meaning, that we don’t have to have libertarianism as our be all end all on life.

I got a little bit of a mixed response from that talk. I’ll be honest with you, but I think, for instance, here in Mexico you’re still a more culturally catholic country than the United States. I think there’s some people who can understand that.

Gerardo Garibay: The Berlin Wall fell thirty years ago. Back then, it seemed that socialism and communism, in particular, were politically and rationally defeated. However, a mere generation later we see this resurgence not only of the ideas but even the names and symbols of that disastrous socialist utopia. Even in America, people like those you mentioned earlier: Bernie Sanders or Alexandra Ocasio-Cortez, have become darlings of the mainstream media, while the infamous 2016 poll by Gallup proclaimed that most young people (over 55% of those aged 18-29) have a positive view of socialism. How can we improve our efforts to make people remember the heinous tragedy of socialism in the 20th Century? What are some steps we can give to present a more compelling argument about it, so that we may prevent history from repeating itself over the next decades?

Jeff Deist: Well, it’s very frightening that it seems that socialism just won’t go away. The support for socialism keeps cropping up, and I think a big part of it is that in our culture and society, we just don’t read. We don’t read history. Of course, people don’t read great books, like Mises’ Socialism, which he wrote in the 1920’s and was actually translated into Spanish not long after he was here in the 1940s.

In that book Mises says that there’s basically two reasons why socialism has an allure for people: the first is that it takes the ethical high ground, it pretends -despite all historical evidence to the contrary- that it is a caring ideology and that people who advocate socialism, regardless of their workability of it they’re actually operating on a higher ethical plain, so that attracts people. The second thing that attracts people to socialism -in Mises’ view- was this idea that socialism is inevitable, and socialism has been very good at sort of characterizing it as this “progressive next step for mankind and that we’re going to get there eventually and so people who oppose socialism are simply against progress, because it’s inevitable”.

Of course, neither of these things are true. Socialism isn’t ethical and it’s certainly not inevitable, but none the less I think, almost a hundred years now since he wrote that book, I think most of those things still ring true. So, it’s really our job to educate people about socialism, because the theoretical case against it has been made absolutely in a bulletproof way. If we look back to some of the great works of Mises on socialist calculation, just the impossibility of socialism to provide what it claims to provide. And then, of course, we have infinite historical models. Now, there’s variants of socialism, collectivism. We could call communism a variant of socialism, we could call social-democracy a variant of socialism. We have plenty of history in the 20th century and, of course, many millions of people killed, that make the empirical case against socialism.

We got the theoretical and empirical case. What we’re not doing -at least well enough- is getting it out to the masses, who increasingly don’t want to read more philosophical and denser texts, and that’s a real problem with our education system and the dumbing down of people. So, we shouldn’t treat Bernie and Alexandra Ocasio-Cortez as a lark. I think all of us who are liberty minded should be very concerned that we’re still fighting this old fight against socialism. We thought – in the late 1980s, when the Soviet Union finally collapsed & the Berlin wall came down- that this conversation was over. Francis Fukuyama wrote his famous book “The End of History” in the early 1990s to say that “well, now that socialism and communism don’t work, we’re going to have this future that’s going to be this ‘final ideology’, this third way between hyper-capitalism, which is awfully cruel, and hyper-socialism, which also leads to bad results. We’re going to have this third way down the middle. It’s going to be the end of history”.

And, of course, we’ve seen that it isn’t true; that collectivism and variants of socialism still keep cropping up, so our work is not done, and perhaps is just part of human nature that we have to fight this as long as human have an impulse towards the so-called ‘allure’ of socialism.

Gerardo Garibay: The first time I saw you speak was back in 2015, on the Mises Circle in Dallas-Fort Worth. There you said something that has really stuck with me since then, specifically about how Political Correctness is not about being nice, or about politeness or respect, but about changing the way in which people speak and think, in order to advance a progressive agenda. Three years later, after the victory of a decidedly non-P.C. President in America and the almost permanent rage on social media about presumed infractions against political correctness -some of them based on blatant lies, as we saw last week with the unfair media lynching of the Covington boys, what’s your diagnosis of the P.C. battle in America and the western world? What can we do, under the present circumstances, to push back against this tyrannical enforcement of language and opinions?

Jeff Deist: Well it’s difficult. People are, in fact, losing their jobs, losing their reputations, losing their careers or their academic standing or their ability to get published, because of saying what is now perceived as non-politically-correct things on social media. So, the social media, the digital, false, fake world is actually starting to come over and affect the real world.

I would just say this: P.C. is real. Is not something that right-wingers have just conjured up as a phobia. There’s an active, concerted effort to change the way we think and speak, and ultimately change the way we act. There’s no question about this and I think we have to fight back against it, for one major reason: all people, regardless of their ideology –but specially libertarians- have an obligation first and foremost, not to libertarian theory, but to truth. Anyone who calls themselves an academic, anyone who calls themselves politically active I think has to ruthlessly seek out truth. I think there’s no other way.

No society can be built on falsehoods, because when you do you get things like socialism and the former Soviet Unión. So, our interest is not libertarianism per se –that’s just a vehicle. Our interest is in truth and human flourishing. Once we accept that we have to realize that people need to be free to discuss different ideas. They need to be free academically to research, or investigate or write about different things. And more importantly, I think we have to understand the left is always telling us that ‘we have a pluralistic, that we need diversity’ well, there’s a price to be paid for that. Part of that is that we all have to kind of toughen up and we have to read and see things –perhaps in social media. If you want to, you don’t have to look at social media, but we all have to read things with which we disagree and that’s just part of living in a society.

I think things are getting very Orwellian on campuses in the United States. I think political correctness is having a very chilling effect on what gets published, what gets funded. We certainly see this in the climate science research. We’ve seen unfortunately, in the past, in research like AIDS and cancer, where anyone who’s got, maybe a theory that it seems a little crazy off the wall, but if some time and effort went into it, might actually yield a tremendous breakthrough. We’re seeing things not being funded because perhaps the people behind them have challenged the orthodoxy in a certain area of science.

This is a very dangerous thing, and it seems to me that there is a poverty to all of this. In America, specially, we have a lot of stuff, we have a lot of wealth, we have a lot of ease in material comfort, but there is a poverty of the mindset in the west.

[There’s] Sort of a deep-rooted unhappiness and this inability to think before one speaks and this need to react and lash out at people on social media or even in real life, when they say something that bothers us. I think this is not a recipe for a healthy society, especially when we have these presidential elections, this sort of ‘winner take all’ system that is very top-down from Washington D.C. So, we get a very embattled minority when they suffer a political loss, and P.C. is part of this, is part of demonizing or other-ing or vanquishing people who are not in the cultural, social or political majority. [Political correctness] is part of something bigger, is very dangerous and we just have to have the courage to fight back with truth, we have no other choice.

Gerardo Garibay: I’d like to ask you about the way forward for liberty. What are the biggest challenges and hopes that you perceive on the horizon? Would you bet on an increased impact of the libertarian message in the 2020 electoral cycle and beyond?

Jeff Deist: I’m not sure about 2020 –and excuse me for speaking so much about America. I’m obviously more familiar with the political landscape in the United States. I think 2020 is going to be about beating Trump. I think the left is not going to accept any third party candidates. They’re just going to say: “no, no, no, we have to defeat Trump, nothing can go forward until then”. And I think that on the Trump side they’re going to say: “no, no, no, we have to reelect Trump, nothing can go forward with you third party guys. I think that, as a political moment, libertarianism had some peaks. I think around the Ron Paul Revolution and his son, Ran Paul, running for Senate, and let’s be honest, I think that from the political perspective, interest in libertarianism has diminished a bit since then. But on ideological and educational side I think is growing, because more and more people are starting to understand what we’re up against. So, when you talk about, hopefully, the future successes of a more libertarian world, I think it’s going to come down to a couple things. First and foremost is the debt, which we discussed earlier in this conversation, and just the inability of western governments to provide all the things they say they’re going to provide. In the U.S. we like to give people social security and Medicare when they get old. The problem is that the number of older people are set to double and the triple over the next thirty years. So, the amount of taxes that we’re likely to bring in versus the cost of these promises we’ve made to people –there’s a difference of like $200 trillion dollars, and there’s no way we’re going to raise $200 trillion dollars in taxes. So, a lot of people are going to be made worse off, because they’re not going to be paid what they thought they were going to be paid in entitlements, at least in terms of inflation adjusted entitlements.

I think when things get less comfortable materially in the United States is when people are going to start being more interested in looking at the timeless ideas of people like Menger, Mises and Hayek. Until then, I think that from a strategic and tactical standpoint, libertarians should promote decentralization, federalism, and even secession in the case of places like Catalonia in Spain. Not everyone agrees with that.

There are a lot of libertarians that think: “well, we need not just a universal libertarian ethos, a universal humanity, but we also need a universal or globalist program, and we have to have sort of western liberalism for the world. I thank that is not only incorrect, but I think is also tactically unsound.

In the United States we would need seventy million people to vote for a Rand Paul, who’s only somewhat libertarian for president. That is an awfully tough thing to do. But if we promote federalism, if we promote subsidiarity -much like the model in Switzerland, which I think that if you’re going to believe in democracy, I’d like to see it at the smallest, most local level- we can go a long way towards making the west a more hospitable place.

For example, California –which now has a very left wing governor and a majority left wing legislature- is going to try some big new things, is going to raise taxes is going to try some environmental initiatives that are going to be very expensive, and I think a lot of people are going to leave California as a result. But that’s fine, as long as I don’t necessarily have to pay for that as an ex-Californian. I no longer live there.  

Similarly, on the cultural side, the State of New York recently passed a bill dealing with abortion that allows vey late-term abortions in certain cases when the mother’s health is in jeopardy. I disagree with that law. However, I don’t have to live in New York. If I lived in New York I could leave without having to obtain a passport. So, I think this kind of federalism is the way to go in the short term. I think could have more libertarian states and less libertarian states and let people vote with their feet.

We already see this to an extent. A lower tax state like Texas is currently booming as a lot of people immigrate into it from other states, but I’d like to take that experiment a lot farther, and I’d like to apply it to the world. I was a big fan of Brexit, I’d like to see the Scots secede from the U.K. –even though they would probably be more left wing in Holyrood that they are in Parliament in London. I’d like to see Catalonia going its own way, even if it wants to be more left wing. I’d like to see more U.S. states secede if that’s what they want to do.

I think that –in the short term especially- the goal is not just educational but –when it comes to tactics or strategy- I think decentralization, secession and federalism are the most fertile grounds for getting something done.

Gerardo Garibay: Finally, a message for the Mexican libertarians and the libertarians in Latin America

Jeff Deist: I think that, when we get outside sort of the jaded, tired United States, the jaded, tired western Europe; when we got to places like Latin America, when we go to places like Asia, we actually see a lot of enthusiasm and interest in ideas. And maybe that’s just because America has been rich for so long that has gotten kind of lazy and complacent. In areas like Latin America, we certainly find that there is a huge amount of growing interest, because people want to understand what makes a society rich, what makes us wealthy and what would happen if it all just went away? That’s a very important question, and is not a rhetorical or academic one. It’s a real question for a lot of people.

Any country that wants to be on the upswing, that wants to be alleviating poverty, that wants to be a bigger player on the world scene, that wants to be wealthier, that wants to be technologically more advanced, that wants to attract capital, it think is going to have to be a society that is -at least economically- more libertarian. That would be my message to Mexico or to any country in Latin America: embrace capital and you will see Mexico become more and more prosperous

Gerardo Garibay: Thank you very much for this interview and thank you once again to all the fellows and staff of the Mises Institute for the great job you do in order to promote Austrian economics, freedom and learning for all of us.

Jeff Deist: Thank you very much.

*Gerardo Garibay Camarena is a Mexican writer and political analyst with experience in the private and public sector. He’s editor of Wellington.mx, author of two books – Sin Medias Tintas and López, Carter, Reagan – and a weekly columnist for many online news organizations.

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