Peace is the path to peace.

It was briefly fashionable to admit that interest rates were too low for too long, leading to a boom built on expansionist monetary policy. Unfortunately (related link my own):

Economic theory has demonstrated in an irrefutable way that a prosperity created by an expansionist monetary and credit policy is illusory and must end in a slump, an economic crisis. It has happened again and again in the past, and it will happen in the future, too.

If one wants to avoid the recurrence of periods of economic depression, one must start by preventing the emergence of artificial booms. One must prevent the governments from embarking upon a policy of cheap interest rates, deficit spending, and borrowing from the commercial banks.

This is, of course, a very difficult task. Governments are in this regard very obstinate. They long for the popularity that booming business conditions seldom fail to win for the party in power. The unavoidable crash, they think, will appear only later; then the other party will be in power and will have to account to the voters for the evils which their predecessors have sown.

Thus there is no doubt that we shall one day have to face again an economic recession, although it is impossible to determine the date of its outbreak and the degree of its severity. It will be bad indeed. But worse than the crisis itself could prove the psychological and ideological consequences of an erroneous interpretation of its causes.

For those consequences, please read the rest of the article: Inflation Must End in a Slump – Mises Institute.

Many remain reluctant to believe in the laws of social cooperation, which are as immutable as the laws of physics, if less susceptible to mathematical analysis. Like gravity, those laws believe in us and they will win eventually.

A good place to start reading into those laws is here.

With the debate over the federal government’s budget as the hot topic of the day, the proponents of big spending have gone into overdrive with their mantra that Herbert Hoover was a small-government liquidationist. As often as this myth is repeated, it’s important to show that it is wrong: Herbert Hoover was a big-government man who did not trust the free market. Ironically, I can use the evidence provided by some of these progressive writers themselves to demonstrate this point.

via Is Budget Austerity Modern-Day Hooverism? – Robert P. Murphy – Mises Daily.

A favourite brought forward.

Thinking about the pressures on capitalism — or rather, on the interventionism that passes for capitalism today — and on the alternative which was most comprehensively implemented, I discovered this recipe for chaos and failure from Bukharin:

Under communism people receive a many-sided culture, and find themselves at home in various branches of production: today I work in an administrative capacity, I reckon up how many felt boots or how many French rolls must be produced in the following month; tomorrow I shall be working in a soap factory, next month perhaps in a steam-laundry, and the month after in an electric power station. This will be possible when all the members of society have been suitably educated.

via Nikolai Bukharin and Evgenii Preobrazhensky: The ABC of Communism – Chapter III : Communism and the Dictatorship of the Proletariat.

As one who has not long studied Marxism, it is frankly amazing that Bukharin was hailed by Lenin as “a most valuable and major theorist of the Party” when he wrote such impractical nonsense. Here’s another taste of his particular madness, expounding on what we know as “from each according to his ability to each according to his work” and “from each according to his ability to each according to his needs”:

The communist method of production presupposes in addition that production is not for the market, but for use. Under communism, it is no longer the individual manufacturer or the individual peasant who produces; the work of production is effected by the gigantic cooperative as a whole. In consequence of this change, we no longer have commodities, but only products. These products are not exchanged one for another; they are neither bought nor sold. They are simply stored in the communal warehouses, and are subsequently delivered to those who need them. In such conditions, money will no longer be required. ‘How can that be?’ some of you will ask. ‘In that case one person will get too much and another too little. What sense is there in such a method of distribution?’ The answer is as follows. At first, doubtless, and perhaps for twenty or thirty years, it will be necessary to have various regulations. Maybe certain products will only be supplied to those persons who have a special entry in their work-book or on their work-card. Subsequently, when communist society has been consolidated and fully developed, no such regulations will be needed. There will be an ample quantity of all products, our present wounds will long since have been healed, and everyone will be able to get just as much as he needs. ‘But will not people find it to their interest to take more than they need?’ Certainly not. Today, for example, no one thinks it worth while when he wants one seat in a tram, to take three tickets and keep two places empty. It will be just the same in the case of all products. A person will take from the communal storehouse precisely as much as he needs, no more. No one will have any interest in taking more than he wants in order to sell the surplus to others, since all these others can satisfy their needs whenever they please. Money will then have no value. Our meaning is that at the outset, in the first days of communist society, products will probably be distributed in accordance with the amount of work done by the applicant; at a later stage, however, they will simply be supplied according to the needs of the comrades.

Where to begin a critique? “The applicant” for products? I think perhaps we should bear in mind the madness of this system when we lament our present circumstances.  We should remember that even in Bukharin’s peculiar dreams, repression was essential:

For a long time yet, the working class will have to fight against, all its enemies, and in especial against the relics of the past, such as sloth, slackness, criminality, pride. All these will have to be stamped out. Two or three generations of persons will have to grow up under the new conditions before the need will pass for laws and punishments and for the use of repressive measures by the workers’ State.

I met today with the excellent think tank OpenEurope, along with other MPs of various parties:

Open Europe is an independent think tank, with offices in London and Brussels, set up by some of the UK’s leading business people to contribute bold new thinking to the debate about the direction of the EU.

While we are committed to European co-operation, Open Europe believes that the EU has reached a critical moment in its development. ‘Ever closer union’, espoused by Jean Monnet and propelled forwards by successive generations of political and bureaucratic elites, has failed.

The EU’s over-loaded institutions, held in low regard by Europe’s citizens, are ill-equipped to adapt to the pressing challenges of weak economic growth, rising global competition, insecurity and a looming demographic crisis.

Open Europe believes that the EU must now embrace radical reform based on economic liberalisation, a looser and more flexible structure, and greater transparency and accountability if it is to overcome these challenges, and succeed in the twenty first century.

The best way forward for the EU is an urgent programme of radical change driven by a consensus between member states. In pursuit of this consensus, Open Europe will seek to involve like-minded individuals, political parties and organisations across Europe in our thinking and activities, and disseminate our ideas widely across the EU and the rest of the world.

It was all very encouraging. Through The Cobden Centre, I advocate free trade and peace in addition to our work on honest money, so naturally I am keen to promote a more open and dynamic Europe which is actually accountable to  the people, instead of trampling their democratic rights whilst issuing ever more regulations, raising nationalism to the continental level.

Apparently the EU is now ripe for radical reform. Good.

Via the Institute for Economic Affairs, we discover the state devouring the economy – ie, the cooperative actions of free people – for over a century:

See also The Times Online, ‘Soviet’ Britain swells amid the recession:

The state now looms far larger in many parts of Britain than it did in former Soviet satellite states such as Hungary and Slovakia as they emerged from communism in the 1990s, when state spending accounted for about 60% of their economies.

And Mises in Planning for Freedom:

The middle-of-the-road policy is not an economic system that can last. It is a method for the realization of socialism by installments.

And so it is coming to pass: a pity socialism means despotism and ruin, not utopia. There is another way.

See also

• Banks, economic interventionism and the cause of the credit crisis
• Ofwat, Water UK, the Consumer Council for Water and The Managerial Revolution
• The Pretence of Knowledge