Coronacrisis and Leviathan | Peter G. Klein

well good morning everyone uh it's a great pleasure to be back at jekyll island uh some of you know that uh my wife and i met at a mises institute conference here at jekyll island almost 30 years ago so thank you so you singles out there look around uh you might uh you might you might find someone my uh uh my children have have begged us to come up with a better story a more exciting story for how we met you know on a ski vacation at the alps or something like that but but really what could be more exciting than uh thinking about uh the leviathan state and how we might if not completely stop it at least to slow it down so uh so i want to talk about uh leviathan and how it relates to the corona virus situation that we find ourselves in um you know when all of this uh when things begin to hit in in europe in the u.s uh in march and we began to see travel restrictions and shelter in place orders and mass requirements and so forth you know there was a lot of talk at the time uh that well don't worry about these things these are these are temporary emergency measures they're required for this extraordinary set of circumstances in which we find ourselves but don't worry it won't last you know pretty soon things will go back to normal but even at the time i remember thinking you know if we look at how government has grown in the past it's almost always in these temporary emergency situations so called that we get new government policies new measures new restrictions on our liberties that quickly become part of the permanent a permanent part of the landscape i was thinking in particular of the great book by robert higgs called crisis and leviathan about more about which i'll see in just a moment and uh decided to write about this i noticed that this uh i published a piece on mises.org back in on march 13th so i was pretty much ahead of the curve in figuring this out i have to confess that the title for this article corona crisis and leviathan came from ryan mcmakin and not from me i wish i thought of that but but i did have the idea to apply higgs's theory to the to the current health situation um let's think more generally about how government grows so ludwig von mises made a very important contribution a number of important contributions to the study of government growth uh one of his most important works in the 1920s was a collection of essays on government intervention published as in english as interventionism uh joe salerno has pointed out that while this book came out in 1929 mises theory of intervention didn't really take full form until it was uh described in human action in 1949 at least in in the german language predecessor to human action but mises offered a very specific theory of how government expands and it has to do with the challenges of operating what mises would call a mixed economy so mises of course provided one of the best uh descriptions or and analyses of how a market economy works mises also also produced his devastating analysis and critique of why a socialist economy cannot allocate resources to their highest valued uses but mises also explained how sort of a middle system a so-called third way system that was partly capitalist and partly socialist was also not feasible mises pointed out the logical contradictions of this so-called intermediate state or interventionist economy in particular showing how government interventions are not able to achieve their stated ends their stated goals moreover these interventions create secondary effects secondary problems which call for yet further rounds of government intervention to alleviate those problems which then create additional problems calling for more government intervention and so forth so you can't have a stable kind of mixed economy logically such an economy is inevitably drawn in one direction or another either the restrictions will be repealed and you go to a market economy or we are led down a path towards ever increasing government intervention um higgs's book is offers a slightly different version of this thesis higgs points out that if you look at how governments have grown over time what we don't see we don't see a steady consistent increase in the size or scope or extent of intervention of government rather we see these kind of discontinuous jumps higgs uses the metaphor of the ratchet he calls it the ratchet effect government grows through the ratchet effect right you know what a ratchet is that's a tool you know it only goes one way you turn it this way and the screw turns when you release the ratchet the screw stays in place so you can only tighten the screw or only loosen the screw depending on which way your ratchet is is set and higgs said what happens the way government grows is there's some kind of crisis real or imagined right which calls forth a new set of government policies interventions which are designed to alleviate the the crisis real or imagined once the crisis is over are those new policies and new interventions relaxed no they stay in place just sort of sitting around either becoming a permanent part of the landscape or sort of lurking in the background waiting for the next crisis to emerge higgs illustrates his thesis with a number of historical examples in particular he looks at how uh franklin roosevelt's new deal interventions new deal agencies were all sort of thinly disguised versions of world war one era predecessors right outside of you know this this room outside of our circles world war one doesn't uh does not get as much attention as it deserves as an explanation for the growth of the leviathan state most people who consider themselves pro-market or conservative or whatever will lash out at fdr in the new deal for causing this huge growth in the state without recognizing that the new deal is kind of a logical extension of world war one according to higgs in in this sense that you know to deal with various supposedly temporary wartime emergencies like you know food we need to make sure that the right kind of food is being produced so that our you know soldiers in the field have adequate food supplies and so people working in factories producing munitions can have the right kind of food so we set up this brand new federal bureaucracy the food administration to control agriculture in the united states for the war well we need to make sure that industrial production is being channeled into making bullets and aviation and tanks and so forth so the government creates the war industries board the war finance corporation is set up to nationalize the financial the financial sector the war labor board is created to mobilize labor and make sure that labor is allocated to the most important uses according to wartime aims and so on you get the point as higgs demonstrates once the war was over the officials the bureaucrats who were running these organizations they didn't just all go back to their previous lives they they hung around in dc they stuck around sort of waiting for the next crisis to emerge to which they could direct their talents uh in a very illuminating section of the book higgs goes through the the documents the charters that created the various new deal agencies like the agricultural adjustment administration the national recovery administration and so on and shows that these charters were literally copied and pasted from the documents that had created the world war one predecessors right the nra did not just spring forth you know uh from the brow of zeus the nra was just a rewritten version of the war industries board uh in terms of structure and mission and purpose and so forth right so once the crisis is over we don't go back to the old we don't go back to what we had before the temporary measures allegedly temporary measures designed to alleviate the crisis typically become permanent you know why else does government only grow but never shrink well i mean you know sometimes you have a phenomenon where the government government officials have already achieved some objective at least by their own uh uh or maybe by their own standards they've achieved the objective do they pack up their bags and go home no they just stick around and goof off right they they consume as as bill niskanen famously put it they consume bureaucratic slack they just sit around and goof off during the day on the taxpayer dime because there isn't anything for them to do or even worse they find new things to do right so-called mission creep i've written a little bit about this myself like you know these private military companies right so so private military companies were tasked with various objectives you know during the uh afghanistan and iraqi adventures right so once once those particular uh the initial military objectives have been met uh you know do all these paramilitary do the private military companies shut down and go home no they they not only stick they stick around but not just to goof off they want to find new activities you know that for which they can use their talents so they lobby policymakers in this case to to intervene in other places around the world hey we've got this capability we have this now latent capability to go in and perform assassinations and extraordinary renditions and and drone killings and so forth we're not just going to let it sit idle let's find a way to use it right so government policy becomes endogenous to these capabilities that were developed to to address some other concern and that that can be even worse than consuming bureaucratic slack but these are reasons why government only grows and never shrinks easy to find historical examples examples from recent history right think about 911 think about all of the policy measures that were put in place you know to to protect us from the next 9 11 style attack well of course we got the patriot act and we have uh you know warrantless wiretapping and indefinite detention without trial and extraordinary rendition and all kinds of other violations of our liberties that judge napolitano and others have written about very eloquently were those measures repealed were those measures scaled back you know once osama bin laden was captured of course not right the nsa has continued to grow in its capabilities and certainly in its budget we still have you know the tsa right the tsa is here to stay those of you thinking that one day you will once again be allowed to bring your larger than three ounce bottles of shampoo on the plane through the x-men machine i'm sorry but that is never gonna happen right uh all of the changes that were supposedly to alleviate this emergency to deal with the emergency they quickly became part of the landscape and now of course we have a whole generation of people around the world who have grown up in this environment and don't know anything different than that you know what you don't have to take off your shoes to get on a plane or remember the old days old-timers like me when you could actually go to the gate to greet an incoming traveler without a ticket right i don't see us ever going back to that kind of a world think about the financial crisis right remember the dark days of 2007 2008 when markets collapsed large financial institutions were breached you know teetering on the brink of uh insolvency and we were told well the financial system is so fragile uh you know we're going to bail out aig you know some other companies like big companies like bear stearns we're not so sure about right yes we recognize that using taxpayer funds to bail out a giant for-profit financial institution seems to go against you know our standard model of how a free market should work but we have no choice because if we let one or two of these big banks fail the entire global financial system will collapse okay some of us might be wishing for that day okay but so what did we get as a result well we got a whole bunch of things you know we have we had we had a lot of implicit too big to fail guarantees now we have explicit ones uh we had you know different kinds of bailout programs and now of course the fed buys all kinds of assets as well as uh treasury bills and so forth uh we've got you know qe and other so-called extraordinary financial interventions well they're not extraordinary anymore now they're ordinary right you know zero interest rates or negative nominal interest rates um you know not only are these things now considered you know part of the fed's tool kit i hate that term right but now these are just standard elements of the toolkit to be deployed whenever they're needed people have become desensitized to them right we just sort of expect that yes well of course the treasury the federal reserve system congress the president should do whatever is necessary to maintain the stability of the financial system forgetting that when some of these measures were introduced during the financial crisis they were wildly controversial and many people not just people in this room but many people said well no that's not consistent with the the charter of the that's not consistent with the fed's charter and mission nobody says that anymore because the charter and mission have gone out the window the restraints have been forgotten because once the fed is doing these extraordinary things long enough the extraordinary becomes the ordinary well how does this apply to covid i mean we could go through this list of various uh policy interventions that you know have are supposedly alleviating uh the the spread of the virus you know restrictions on movement restrictions on assembly uh so-called npis non-pharmaceutical interventions social distancing rules uh restaurant and bar capacity restrictions school closures um uh masks etc right um you know locking down the entire economy or shutting down particular businesses or as you see in some states right the governor or the legislature or the some top public health official you know choosing which companies and which industries can remain open which ones uh have to be shut uh you know location tracking right for contact uh tracing it wouldn't surprise me if we all have mandatory uh you know there's an app on your phone that will tell the health officials where you've been and who you've talked to we already have that to some extent controls on information you know flagging unpopular opinions on covid19 as fake news etc you know all of these things even just in nine ten months have become a little bit more like the new normal if not quite right i think though bishop had an article on mises.org the other day about so-called medical tyranny right the idea that the you know academic epidemiologists should have the power to make the decisions about our lives and how the economy is run and so forth you know today people are you know people think these are weird but how many years of having these kinds of measures if not in place right away but sort of on the back burner waiting to be deployed before they become just part of the landscape and you know i'm sure you would agree that even in states like florida and georgia that have fewer restrictions uh on movement and masks and so forth right even in those states uh you know if next week the governor or other officials were to announce oh well gosh we're looking at the dashboard here we see a spike of you know so-called positive cases we're gonna we're gonna revert back to capacity restrictions and partial lockdowns and this and that we're gonna close the schools you know people will grumble but but most people are already sort of acclimated they've already come to think as normal the idea that government officials can turn these things on and off oh thank goodness what a great you know in florida for example which i think has done a pretty good job you know thank goodness that we have someone like governor desantis who allows us to live our lives you know closer to normal the idea that it's up to the governor and other officials to tell you what you can and cannot do for health reasons that is now kind of the new normal is becoming the new normal if you go back to mises analysis of the sort of secondary effects of intervention i think we can we can quickly identify things that we've seen even just in the last few months as they relate to covid so think about lockdowns whether complete lockdowns partial lockdown school closures business closures etc right right away these had a number of effects on the economy in society economic effects are most obvious right business failure surge in unemployment crippling effects on economic growth and economic performance what do we get out of that oh well we need a new round of government interventions to solve the problems created by this initial round so we need more bailouts we need we need to write a check to every american we need to give checks to small business we need to write checks to the airlines we need to bail out the banks we need to do more bailouts uh you know we'll punt the the the costs into the future uh so you know all this new round of subsidies is designed to alleviate the problems caused by the initial lockdown orders and of course from that we get a loss of economic freedom we get reductions in productivity and loss of economic growth and you know reductions in overall well-being okay then what about you know uh school school closures right you close the schools well and for public schools that maybe makes education better but in some cases right for private schools we have we have harm to uh our education sector and you know who knows what the long-term effects of that will be less educated workforce be more stressed out workforce probably have a loss in economic performance we have all the health problems associated with shutdowns people can't get their cancer treatments increased rates of depression anxiety and so forth you know what kind of effects will that have well oh gosh well now we need more government intervention to alleviate all these health problems we need socialized medicine whatever all of these things inevitably lead to a bad place okay uh oh the pundits of course have already started their ideological campaign of explaining how kova demonstrates government failure the era of small government is over i don't know what era that was except maybe jacksonian democracy as described by patrick yeah we need to do capitalism differently and of course the root cause of the pandemic has got to be climate change right we've got to work climate change in there somehow so what do we do what do we do about all this well i mean one thing i think is very important we need to remind people that you know sort of wartime propaganda is wartime propaganda okay we need to push back against the idea that all of these new sort of policies and procedures are okay and are necessary to combat this horrible crisis we need to identify it as propaganda and and resist it as as propaganda you know don't let the new normal become normal resist the idea that the way things are now is the way things always have to be and of course we need to keep thinking about it and speaking about it and writing about it and supporting organizations like the mises institute that are working hard to make the world a better place thank you very much

Channel: misesmedia

Views: 3,095

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Keywords: Coronoacrisis, COVID, crisis, pandemic, science, economics, economy, politics, analysis, Austrian School, Peter Klein, Mises, power, Leviathan, ratchet effect, Higgs

Id: cWW8ebR4frs

Length: 21min 16sec (1276 seconds)

Published: Tue Oct 20 2020