I am an enthusiast of cats, eating, and long naps on the beach. As such it is somewhat strange for me to publish something on this blog with the word capitalism in the title. It is an extremely loaded word, one which I have almost zero authority to begin a respectable conversation about. Let the record stand that I do not pretend to be any sort of expert on economics or the history of capitalism, neither in real life nor on the internet.
So what is this post all about? In order to protect myself from a conversation i'm not at all prepared to enter, I will say that this post is about nostalgia. In 2011 (during my undergrad) I took a class titled Political Economy Of International Communication. This is how the syllabus described the course:
This course explores the political economy of international communication through the lens of global crisis and contention in the age of communicative capitalism. We examine the tensions and contradictions arising out of neoliberal reform and crisis in shifting local, national and transnational contexts.
I loved that course. It is the only one from my University career that I vividly remember. The essay below (originally titled Why Neoliberalism Is Unconcerned With Free Market Economics) probably represents the best work from my 7 years (sadly, not a typo) as an undergrad. I am still quite proud of it. I really don't want to say too much about it as I don't feel I could do it justice at this point. My mind has not grappled with these ideas in quite some time.
My motivation for posting this is deep-seated. It made me very sad as an undergrad when I put sooo much work into an essay only to have one pair of eyes other than mine read it. Even if no one reads beyond this line, the fact that my essay is now available for public consumption makes me exuberant!
One last thing. The references section at the bottom contains links to all books (my favourite is Debt: The First 5,000 Years) and media cited within. Okay, that's it. Here is a blast from my past.
Old Ideas On Capitalism
There is a common sentiment in both academic literature and some conservative schools of thought that neoliberalism and free markets are synonymous, or at least symbiotic. While it may be true that neoliberalism is based on certain free market theories, it is untrue to state that neoliberalism reflects free market economics as a whole. Each has different ideas as to what economic and political ideas should be pursued, as well as different views on who the ‘winners’ ought to be under capitalism. In an effort to define and describe free markets, the Austrian school of economics will be used. As such, the question this paper aims to address is who benefits from Austrian economics versus neoliberalism? Through a historical as well as contemporary analysis, this paper explores the struggle for meaning which surrounds each term. As this topic has exceptional breadth, as well as depth, several key sections will be explored. The fist section comprises short histories of free market capitalism, Austrian economics, and Neoliberalism. The second section, and main point of discussion for this paper, focuses on how Austrian economics and Neoliberalism view central banks, militarism, and financialization. The final section focuses on the current rise of Austrian economics under the leadership of congressman and presidential candidate Ron Paul, as well the presence of Austrian economic ideas in the Occupy movement.
A Brief History Of Free Market Capitalism
Central to both the Austrian economic and neoliberal ideologies is the belief that free markets are a perennial and natural form of societal organization, “that conviction is supported not only by the more blatant expressions of capitalist ideology but also by some of our most cherished and unquestioned beliefs about history - not just the history of capitalism but history in general” (Wood, 2002, p.2). While they may believe that free markets are everlasting, the argument being that people have always traded goods and services, it is unambiguously true that free market capitalism has only existed for a short period of time. The history of which is rooted in late medieval and early modern Europe.
The history of free markets indicate that capitalism is not necessarily an extension of trade. The way in which social reproduction and material needs of human beings are supplied today is a relatively recent phenomenon (Wood, 2002), before which humans had very different relations, practices, and interactions with nature. Profit-maximization and the constant drive towards producing and expanding capital was not always the primary objective. The basic difference between pre-capitalist societies and capitalist societies hinges on the property relations between producers and appropriators, “only in capitalism is the dominant mode of appropriation based on the complete dispossession of direct producers, who (unlike chattel slaves) are legally free and whose surplus labour is appropriated by purely ‘economic’ means [as opposed to coercive means]” (Wood, 2002, p. 96). To be clear, the exploitation between producers and appropriators, as well as the historical existence of markets is not in question, rather the question lies in how producers and appropriators came to depend on the market for their reproduction?
The shift towards market dependence is most apparent during the sixteenth century in England (excluding the British isles). The reason being that England, as opposed to other European states, had landlords, municipal bodies, and corporate entities which were largely autonomous from the state. That is they did not possess “‘extra-economic’ powers or ‘politically constituted property’ to the same degree as their continental counterparts” (Wood, 2002, p. 99). Ultimately, the concentration of landholding, and the triad of landlord, capitalist tenant, and wage laborer (as opposed to peasant-proprietors) lead to market imperatives. While this increased the productivity of agriculture, allowing many people to engage in non-agricultural production, it also caused “an increasing propertyless mass that would constitute both a large wage-labour force and a domestic market for cheap consumer goods - a type of market with no historical precedent” (Wood, 2002, p. 103). In order for this to occur a significant change in the English countryside was required; the enclosure movement. Much more than the fencing in of ‘open-fields’, enclosure signaled the end of the common and customary use rights of land upon which many depended for their livelihood. The lesson from this is that dependence upon markets for the reproduction of life is not an act of free-will, rather through the historical process described above, it was imposed upon the peasant class by the wealthy. For Austrian economists and neoliberals alike the enclosure movement was crucial in the move towards creating property rights, a legal structure which underwrites their respective ideologies.
A Brief History of Austrian Economics
The Austrian school of thought began in the fifteenth century with St. Thomas Aquinas and his followers, they were interested in explaining human action and social organization. These scholastics observed what they saw as economic laws which were similar to laws found in nature. This included laws of supply and demand, causes of inflation, and functioning of foreign exchange rates. These ‘natural laws’ formed their views that taxes, price controls, and government regulation upon enterprise should be curtailed (Rothbard, 1995). Ultimately, they were scholars and moral theologians who felt that government should act against theft and murder, but otherwise remove themselves from private affairs.
In 1730 the Irish economist Richard Cantillon wrote a book called Essay on the Nature of Commerce. In it he explained how “market prices are determined by the bargaining between suppliers and demanders” (Cantillon, 1931, p. 113). Cantillon was followed by French aristocrat and finance minister Anne Robert Jacques Turgot who in 1769 wrote the paper Value and Money, in which he described the origins of money, and the nature of economic choice. Turgot wrote that money “is a type of language, differing among different peoples in everything that is arbitrary and conventional, but of which the forms are brought closer and made identical... by their relation to a common term or standard” (Turgot, 2011, p. 163). Turgot highlights the intense scholarship Austrian economists have devoted to studying what money is, what it does, and how it is created. In addition, he described the law of diminishing returns, and recommended a repeal of special privileges for government-connected industries (Turgot, 2011). This idea is certainly a prominent one for Austrian economists today, especially in the context of the U.S. military industrial complex.
Following the work of Turgot came a line of French economists during the eighteenth and nineteenth centuries, the most prominent ones being Jean Baptiste Say and Claude-Frederic Bastiat. Say described how the division of labour increased capital, stating that “the division of employments being one of the principal means of increasing the productive power of labour... it is production, not exchange, which remunerates labour and capital” (Say, 2000, p. 207). Bastiat’s major contribution was to dispel the broken-window fallacy in 1850 by arguing that the money spent to recover from destruction is not a net-benefit to society; if you come to the conclusion “that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, ‘Stop there!’...” (Bastiat, 2010, p.2). Today, Bastiat’s broken window fallacy exemplifies aversion to the neoliberal experiment which engages in war and destruction for economic stimulus.
In 1871 Carl Menger published the Principles of Economics, a book which described the subjective basis of economic value, and the theory of marginal utility (the more units of a good an individual possesses, the less value he will place on any given unit). He also argued that money is created in a free market in order to facilitate the trading of goods (Menger, 1976). Of particular historical importance is Menger’s follower Eugen von Böhm-Bawerk, who engaged in a prolonged battle of ideas with the Marxists over the exploitation of capital, arguing that capital and the division of labour enhanced personal freedom rather than diminished it (Böhm-Bawerk, 1890). Menger’s largest contribution to Austrian economics was the formal establishment of the Austrian School of Economics.
In 1912, one of the most famous and influential economists of the Austrian school, Ludwig von Mises, published The Theory Of Money and Credit. His most significant contribution was his theory on the business cycle, where he argued that booms are created by an expansion of credit which first lead to malinvestment, and then to a bust (Mises, 2010). During the 1920s and 1930s, Mises collaborated extensively with Friedrich August Hayek. Their work further analyzed the business cycle, and the dangers associated with credit expansion. In 1974 Hayek received the Nobel Prize for economics based on his work during this time. Hayek was a vocal opponent to Keynsian economics and Roosevelt’s new deal, and was instrumental in drawing attention to Austrian economics with his 1944 book Road to Serfdom.
While the Austrian school is completely committed and focused on free markets, they do at times acknowledge the problems of a market based system, a clear contrast to current neoliberal thought. For instance, Hayek highlights an interesting consideration that Austrian economists make towards those in need. He wrote there is no “reason why the state should not assist individuals [with some minimum of food, shelter, and clothing] in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision” (Hayek, 1944, p. 124-125). In 1984, British political philosopher John Gray described Hayek as being “no antiseptic defender of property rights and low taxes... a Viennese voice that had more in common with Sigmund Freud and Ludwig Wittgenstein than with Milton Friedman or Robert Nozick” (Corey, 2011, p. 115). This was not just hyperbole, as Hayek himself described Gray as being one of the first people to understand his work and continue where he left off (Corey, 2011). In addition to this admission of the need for some type of social provision, Austrian economists are entirely against the idea of nation building and vast defense projects. In the context of the U.S., where most of their scholarship takes place today, they argue that “there exists no greater danger to our life, property, and prosperity than the U.S. government, and the U.S. president in particular is the world’s single most threatening and armed danger, capable of ruining everyone who opposes him and destroying the entire globe” (Hoppe, 1999, p. 32). Austrian economists dislike the military industrial complex for two reasons. The first reason is that it is extremely fiscally irresponsible. Secondly, Austrian economists take a moral and philosophical stance against war as they understand that aggression begets aggression. This is a crucial difference between Austrian economics and Neoliberalism.
Currently, the most visible advocate for the Austrian school of economics is congressman and presidential candidate Ron Paul. In the dedication section of his book End The Fed, Paul states that “without my great teachers in Austrian economics--Ludwig von Mises, Murray N. Rothbard, F. A. Hayek, Henry Hazlitt, and Hans F. Sennholz--this book would not exist” (Paul, 2009, dedication). Ron Paul and Austrian economics today will be discussed in the last section.
A Brief History of Neoliberalism
Neoliberalism is generally understood to be a market driven approach to economic and social policy, which underscores the efficiency of private enterprise to determine political and economic policies (Peck, 2010). While it is often described under the guise of free market principles, free markets are but only a starting place for neoliberalism, and do not entirely constitute neoliberalism. As Peck describes in his book Constructions of Neoliberal Reason, Hayek “may have established some of the critical ideational preconditions of the program for neoliberalization, but the realization of this program would not only depart from, but repeatedly rewrite the playbook [Road to Serfdom]" (Peck, 2010, p. XIV). Thus, while neoliberalism is often described as a free market revolution similar to that outlined in The Road To Serfdom, the actual policies of the neoliberal project are in contradiction to Hayek’s and the Austrian School's description of a free market economy.
The neoliberal experiment began on August 15th, 1971 when “Richard Nixon announced that foreign-held U.S. dollars would no longer be convertible into gold-thus stripping away the last vestige of the international gold standard” (Graeber, 2011, p. 361). As will be explained in the following section on Central Banks, Militarism & Financialization, it was this action which made neoliberalism financially viable. However, it was the years leading up to 1971 which had a profound change on conservative thought, and ultimately lead to the neoliberal ideology.
While the following argument is certainly contentious, it is based on the idea that neoliberalism spawned out of conservative thought, beginning in the 1940s. In 1943 and 1957 Ayn Rand published two incredibly influential novels which contained strong individualistic and political messages: The Fountainhead and Atlas Shrugged. While both novels were and are extremely popular, Atlas Shrugged carries the distinction of being the most influential book in the United States, second only to the Bible (Robin, 2011). As a result, Rand has been frequently cited as a decisive influence upon a “new generation of Republican leaders; Burns calls her the ‘the ultimate gateway drug to life on the right’” (Corey, 2011, p. 94). Today, actors Angelina Jolie, Brad Pitt, Christina Ricci, and Eva Mendes have all expressed their appreciation of Rand’s work (Robin, 2011). In addition to her influence over hollywood celebrities and a vast readership, she was also closely tied to many architects of the Neoliberal experiment. “Rand worked in that quintessential American proving ground - alongside the likes of Richard Nixon, Ronald Reagan, and Glenn Beck” (Corey, 2011, p. 96). She was also very close friends with ex-chairman of the Federal Reserve and Neoliberal figurehead Alan Greenspan, who as part of Rand’s inner circle read drafts of the Atlas Shrugged manuscript (Corey, 2011). The reason she connected so well with Nixon, Reagan and Greenspan is because she felt, like them, that government basically gets in the way (Kirk, 2009). While this sounds similar to the Austrian school, the idea ultimately became neoliberal as it shifted from the view of no-government intervention, to view that government should exist in order to protect business interests via subsidies, easy credit, and bailouts. In other words, no government intervention that reduces profit.
The connection between Rand, conservatism, and neoliberalism stem from the ideas presented in her literature. She is famous for stating that “if civilization is to survive, it is the altruist morality that men have to reject” (Corey, 2011, p. 77). Rand, like neoliberalism, is very interested in inequality, from the perspective that it is a natural phenomenon for the strong, intelligent, and resourced individuals to reap rewards while others remain with little. In Atlas Shrugged, the protagonist John Galt states that "The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all their brains. Such is the nature of the ‘competition’ between the strong and the weak of the intellect. Such is the pattern of ‘exploitation’ for which you have damned the strong" (Corey, 2011, p. 88-89).
Rand was also fascinated with the idea of the violent criminal as moral hero (Corey, 2011), a theme seen repeatedly with neoliberal expansion. Philosophically, Rand and neoliberalism alike feel that the spreading of ‘economic freedom’ is for the betterment of all, even if it requires committing violent crimes against marginalized peoples in order to reap the rewards of economic expansion. Examples of the Chilean dictator Pinochet, or Jeffrey Sachs work to break Poland from communism are certainly in alignment with her ideology.
Central Banks, Militarism & Financialization
The most visible differences between the Austrian school and neoliberalism are their perspectives on central banks, militarism, and financialization. Austrian economics argues that central banks are the linchpin which enable militarism and financialization, policies which they are wholly against. As stated in the section on Neoliberalism above, Nixon ended the Gold Standard in 1971 in order to pay for the increasingly expensive Vietnam war (Graeber, 2011). In doing so the Bretton Woods agreement was terminated, thus making the U.S. dollar a free floating fiat currency, backed only by a promissory note from the U.S. Federal Reserve (the U.S. Federal Reserve, also known as the Fed, is the U.S. central bank). This change in monetary policy had tremendous implications not just in the U.S., but around the world as many currencies were (and still are) tied to the U.S. dollar. With that said, ending the gold standard did much more than just pay for the Vietnam war. It opened the financial floodgates to pay for nearly any project, no matter how outlandish, militarily or otherwise.
A brief explanation is in order to explain how this mechanism works. When a currency is tied to a hard asset such as gold or silver, it can only increase or decrease in supply by nominal increments. While the most obvious function of this is that it controls both deflation and inflation, it also limits the amount of spending a government can engage in. Thus, with a gold standard, trillion dollar wars are nearly impossible as they can not be paid for. When a currency is untied from a hard asset it can then be created at the whim of a central bank. This allows the government to fund huge projects, such as the military industrial complex, as they can essentially ‘print money’. One of the consequences of this is inflation, however it can be controlled in the short term by the central bank via mechanisms such as setting a low interest rate, making large amounts of credit available, and selling bonds. Given a longer timeline, ‘printing money’ will wreak havoc over the entire economic and political system. As David Graeber eloquently states, “the ability of banks to ‘create money out of nothing’ - and even more, to prevent anyone else from doing so - has always been the bugaboo of market populists, since it directly contradicts the idea that markets are a simple expression of democratic equality” (Graeber, 2011, p. 363). Thus, if the ability of the central bank to ‘create money out of nothing’ is economically and politically unsound, as is certainly argued by both Graeber (who is an anthropologist) and the Austrian school, then why does this policy continue? With that said, the real question is why does neoliberalism exist? The most intuitive reason is because it provides exceptional benefit to both war profiteers and financiers. Ron Paul writes that "following the creation of the Fed, the government would discover other uses for an elastic money supply aside from keeping the banking system from defaulting on its obligations. It would prove useful in funding war. It is no coincidence that the century of total war coincided with the century of central banking. When governments had to fund their own wars without a paper money machine to rely upon, they economized on resources. They found diplomatic solutions to prevent war, and after they started a war they ended it as soon as possible" (Paul, 2009, p. 63). Considering the above, Austrian economists feel that the Federal Reserve is the main protagonist in enabling the U.S. government to ‘destroy the entire globe’, something which they want no part of.
The commonly agreed upon event which lead to the creation of the Federal reserve was the Panic of 1907, the symptoms (the cause is discussed later) of which were economic recession and a run on the banks. In order to shore up the banking system, financier J. P. Morgan as well as other New York bankers used their own funds to inject liquidity back into the market (Bruner & Carr, 2007). As this was largely successful, it illustrated the importance of financial liquidity in order to respond to financial crisis. In response, Congress created the National Monetary Commission in 1908 to address the idea of banking reform, which concluded that the United States should adopt a central banking system similar to those found in Europe (Paul, 2009). Then, on December 23, 1913, congress passed the Federal Reserve Act which created the Federal Reserve, giving it legal authority to issue Federal Reserve Notes (U.S. dollars) as legal tender (Paul, 2009).
Over the years the Federal Reserve's size and structure has changed, however it primarily serves to regulate United States monetary policy by determining interest rates, and injecting liquidity when needed. This is particularly the case during recessions and depressions, or as Austrian economists describe it, when there is a bust in the business cycle. Perhaps the best historical example of injecting liquidity is Franklin Roosevelt’s response to the Great Depression with The New Deal. The New Deal was a government project from 1933-1936 which funded massive public works projects such as the Civilian Conservation Corps (CCC) and the Public Works Administration (PWA), these projects boosted aggregate demand by creating millions of jobs and benefited the United States in innumerable ways; such as the CCC’s massive revamping of National Parks. Interestingly, Roosevelt dissolved the Gold Standard in 1934 via the Gold Reserve Act in order to finance the New Deal (Paul, 2009); as an aside, the Gold Standard was reinstated in 1944 as part of the Bretton Woods system. If the Federal Reserve had not existed, and if the dollar remained tied to the gold standard, then the Roosevelt administration would not have been able to pay for the New Deal.
The story of the New Deal described above is the epitome of Keynesianism; the idea being that when the business cycle dips, the federal reserve should increase the supply of money in order to boost aggregate demand by paying for massive public works projects. Indeed, the New Deal is seen by many historians as one of the greatest policies of any president, and has historically been a source of historical support for the federal reserve (Paul, 2009).
The Austrian School, however, argues that central banks pose a grave danger and should not exist. Their reasoning is that while central banks can increase the money supply and lower interest rates in order to boost spending, they ultimately disrupt market forces. Unlike Keynesians (and neoliberals), Austrian economists fear the ‘boom’ part of the business cycle. The reason being that they see booms as being artificially created, and not having any relation to the ‘real economy’. When central banks lower interest rates and inject liquidity, this encourages spending and malinvestment. Essentially, peoples incentive to save is eliminated, and incentive to consume using borrowed money is encouraged. Thus, the economy quickly grows until that growth is unsustainable and the market collapses (Hayek, 1944). Key examples of this being the roaring 20’s which ended with the great depression, and the years leading up to the 2008 financial crisis; both events occurred under similar actions from the Federal Reserve. The beneficiaries of this system are obvious, financiers and large banks who believe in “privatized profits and socialized looses” (Paul, 2009, p.14). This highlights the central point of consternation for Austrian economists against Neoliberalism (as well as Keynesianism to a certain extent). That if central banks are to exist, they ought to be in service of the people, not in the service of the military industrial complex and financiers.
With that said, the view of Austrian economists that free markets will regulate banking is at first quite abrasive, especially when approached from the point of view that banking regulation under agreements such as Glass-Steagall is a necessary protection. When Glass-Steagall was dissolved in 1999, insurance companies, investment banks, and commercial banks were once again, as they were prior to 1933, able to combine under a single entity. While Glass-Steagall functioned as an excellent safety measure under the central bank and fiat currency system, Austrian economists argue that it would not be necessary under a Gold Standard with no central bank (Paul, 2009). As Ron Paul explains in his book End the Fed, "following the Civil War, American presidents worked to implement and defend the gold standard, which put a brake on the ability of the largest banks to expand credit without limit. The gold standard worked like a regulator in this way. Ultimately, banks had to function like every other business. They could expand and make risky loans up to a point, but when faced bankruptcy, they had nowhere to turn" (Paul, 2009, p. 13). According to the logic of Austrian economists, if the gold standard had been in place prior to the 2008 financial crisis, it would have been very difficult and unwise for banks to leverage themselves at ratios as high as 30:1. The reason being that if they made a mistake, no one would be able to bail them out. A system with the gold standard and no central bank requires much tighter, and more responsible monetary policy as there is no safety net.
In response to this argument made by the Austrian economists, the question which naturally arises is how the 1907 Panic was able to occur under the Gold Standard, especially considering there was no official central bank to set low interest rates and flood the market with liquidity? Was Keynes correct with his idea that central banks are necessary to stem financial emergencies? The argument Austrian economists make over the causes of the 1907 panic center on treasury secretary Leslie Shaw who attempted to make "the U.S. Treasury function like a central bank. In particular, Shaw made open-market purchases [of government bonds from commercial banks] in recessions and violated the Independent Treasury statutes confining Treasury funds to its own vaults, by depositing Treasury funds in favored large national banks" (Rothbard, 1994, p. 106). In other words, it was the U.S. treasury acting as a pseudo-central bank which lead to malinvestment of banks, most notably of the large New York trust company Knickerbocker (Rothbard, 1994). Ultimately, the panic galvanized big New York banks to push for a lender of last resort in order to bail them out of future financial mishaps, the result of which was the creation of the Federal Reserve in 1913. The irony in this, according to the Austrian economist point of view, is that it was actions similar to that of a central bank which caused the panic of 1907, and it was a central bank which was also deemed to be the solution for these types of financial emergencies.
While private banks under the gold standard with no central bank can certainly become insolvent and go bankrupt (Paul, 2009), the problem remains localized. Under the federal reserve, banks are allowed to engage in grossly disproportionate fractional banking, where they are only required to keep a small amount of reserves in relation to the amount of money they lend. While central banks do act as a type of insurance in fractional banking systems, they are also the primary creator of the opportunities and problems banks experience. They are permitted to engage in credit created booms, which inevitably lead to a bust. In response to the New Deal, they contend that the depression would never have occurred in the first place had the federal reserve not existed (Paul, 2009). The argument being that the federal reserve stimulated malinvestment by creating an artificial boom in the years leading up to 1929, similar to what occurred leading up to 2008. As was made clear by the bailouts of 2008, privatized profits and socialized looses are permissible; a philosophy at the core of the Neoliberal experiment. As for the end of the great depression in the U.S., Austrian economists argue that this was the result of WWII, not the New Deal. To be clear, neither were solutions which Austrian economists supported.
Another critical component of neoliberalism is the positive depiction of finance. Specifically, that profits from financialization are not only to be desired, but that their success hinges upon liquid markets with no regulation. As is made clear in the article Myths of a Near Past: Envisioning Finance Capitalism anno 2007, todays economic ideology is fully committed to the worship of finance: "the depiction of harmonious social relations is such a key representational strategy of global capital; social relations are thus transformed into objects of fantasy... the images adopted are not too far away from those evoked in wartime propaganda posters - an ideal world with iconic imagery." (De Cock et al., 2009, p. 20). This ‘iconic imagery’ of global capital closely resembles that of an ideal neoliberal world. Austrian economists would likely argue that the ‘worship of finance’ is unhealthy for any economic and social system, as it is not based on real production, but rather credit-fueled booms.
Austrian School Today: Examples of Ron Paul & The Occupy Movement vs. The Federal Reserve, Militarism & Financialization
Today, the most influential proponent of Austrian economics is congressman and presidential candidate Ron Paul. His ideas of eliminating the federal reserve, restoring the gold standard, and ending overseas military occupation have struck a cord not only with youth of the United States (who are his strongest supporters), but people around the world. Interestingly, Paul’s popularity signifies a change in meaning surrounding the term ‘free market’. Supporters of Paul and Austrian economists alike do not see the neoliberal policies of the military industrial complex, or the bailing out of Wall St. as part of the free market. These progressive views over what it means to live under a free market have culminated in a somewhat surprising place: the Occupy Movements. The Occupy Movements have expressed ideas pertaining to a variety of grievances, some of which are the military industrial complex, and financialization. As a result Paul has garnered support from a few protestors, particularly in the New York Occupy Wall St. (OWS) movement. To be fair, OWS is far from being a Ron Paul convention, however support for him and the ideas he represents are certainly present.
YouTube contains a variety of amateur video clips which feature OWS protestors calling for Ron Paul’s election. For instance, a passionate speech uploaded to YouTube on October 19th, 2011 features an OWS protestor state the following: "A whole continent can not control a federal government with a banking system that prints money like its paper. You can’t even call it money anymore. Gold is money. Silver is money. Green dollars are not money. Their using inflation as a hidden tact to fuck people. Prices go up, do your wages go up? No. My wages didn’t go up, but prices went up... And this is all because our government prints too much money, starts too much wars, so they can sell all their guns, all their tanks, all their missiles... End the Federal Reserve. End the fractional banking system... Elect Ron Paul" (Small, 2011). During that same week in October, actor Alec Baldwin visited Zuccotti Park. What is fascinating is not how he responded to protestors, or even his dialogue with them, but the two questions protestors asked him; the first being “Where do you stand on ending the FED,” and the second question by a different protestor, “Alec, can you say anything about Ron Paul”, to which Baldwin bluntly responded “No.” A few minutes later a third protestor, after being questioned by Baldwin as to what he was trying to communicate, stated “I want you to make an endorsement in order to end the Federal Reserve, and I want you to say ‘I support Ron Paul’” (Luke, Matt & Rob, 2011). While the occupy movements certainly do not exist to spread ideals of Austrian Economics, there are nonetheless a group of protestors who have pursued that stance.
Ron Paul personally expressed his opinions of Occupy Wall St. at the Western Republican Presidential Debate on October 18, 2011. A question posed to Ron Paul and Herman Cain asked “how do you explain the Occupy Wall Street movement happening across the country and how does it relate with your message?” (CNN, 2011) In response to Cain’s reply, Paul stated that "I think Mr. Cain has blamed the victims. There are a lot of people that are victims of this business cycle. You can’t blame the victims. I’d go to Washington as well as Wall St., but I’d go over to the Federal reserve. They create the financial bubbles, and you have to understand that... The banks were involved, and the federal reserve was involved. But who got stuck. The middle class got stuck. They lost their jobs, and they lost their houses. If you had to give money out, you should have given it to people loosing their mortgages, not to the banks" (CNN, 2011). The OWS protestors who support Ron Paul and the Austrian economic ideology clearly believe that those who benefit under neoliberalism, and those who benefit under Austrian economics are different entities entirely.
Closing: Who Benefits?
In sum, the people who benefit under Austrian economics, and those who benefit under neoliberalism are distinctly different groups. However, if neither the military industrial complex nor the financial sector benefits under the Austrian definition of free markets, then who does it benefit? The answer from Austrian economics is that regular people benefit. In reading their literature it feels as though they are describing a grass-roots movement which was born out of the idea that every person has the right to liberty and freedom. However, the honest academic answer is that there is insufficient evidence to answer this question. The reason being that Austrian economics has never been implemented in its true form, thus only speculation exists at this point. Without implementation, judgement must be suspended. Some theorists such as Naomi Klein (2007) will undoubtedly argue that it has been implemented around the world via Milton Friedman, and the IMF & World Bank alike. However, these were not principles of free markets, rather of neoliberal megalomaniacs. Hayek himself stated in an influential essay titled Why I Am Not A Conservative that he was never interested in imperialist expansion, rather he wished for his economic policies to be adopted voluntarily, free from coercion. "Though the position I have tried to define is also often described as ‘conservative,’ it is very different from that to which this name has been traditionally attached. There is danger in the confused condition which brings the defenders of liberty and the true conservatives together in common opposition to developments which threaten their ideals... In general, it can probably be said that the conservative does not object to coercion or arbitrary power so long as it is used for what he regards as the right purposes" (Hamowy & Hayek, 1960, p. 519 & 523).
Hayek highlights how changes in what conservatism means has enabled ‘conservative’ policies to garner support; policies that previously would never have been considered conservative, or free market. Here is the underlying difference. Where neoliberalism believes in coercion, Austrian economists believe in ‘freedom’. A concept so ethereal that it may as well be arbitrary, but one which has nonetheless sparked peoples imaginations since the enclosure movement. This is somewhat ironic, as the pursuit of economic freedom which Austrian school economists have embarked upon is underwritten with violence via property rights, and strips peoples freedom by controlling their means of reproduction. As David Graeber writes, there is an “absolutely crucial role of violence in defining the very terms by which we imagine both ‘society' and ‘markets' - in fact, many of our most elementary ideas of freedom” (Graeber, 2009). Clearly, freedom in markets or otherwise is rarely what it appears to be.
author's name links to referenced work
Bastiat, F. (2010). That which is seen and that which is not seen: The unintended consequences of government spending
Böhm-Bawerk, E. v. (1890). Capital and interest - A critical history of economic theory
Bruner, R., & Carr, S. (2007). The panic of 1907: Lessons learned from the market's perfect storm
Cantillon, R. (1931). Essay on the nature of commerce
CNN. (2011). Ron paul defends occupy wall street protesters - herman cain blames them
De Cock, C., Fitchett, J., Volkmann, C. (2009). Myths of a near past: Envisioning finance capitalism anno 2007
Graeber, D. (2009). Debt: The first five thousand years (article)
Graeber, D. (2011). Debt: The first 5,000 years (book)
Hamowy, R., & Hayek, F. (1960). The constitution of liberty
Hayek, F. (1944). The road to serfdom
Hoppe, H. (1999). The private production of defense
Kirk, M., Gilmore, J., & Wiser, M. (Producers), & Kirk, M. (Director). (2009). Frontline: The warning
Klein, N. (2007). The shock doctrine: The rise of disaster capitalism
Luke, Matt & Rob. (2011). Alec baldwin on ending the fed, ron paul, SEC & bank corruption @ #OccupyWallStreet
Menger, C. (1976). Principles of economics
Mises, L. V. (2010). The theory of money and credit
Paul, R. (2009). End the fed
Peck, J. (2010). Constructions of neoliberal reason
Robin, C. (2011). The reactionary mind: Conservatism from edmund burke to sarah palin
Rothbard, M. (1994). The case against the fed
Rothbard, M. (1995). Economic thought before adam smith: An austrian perspective on the history of economic thought
Say, J. (2000). In Kates S., Wood J. C. (Eds.), Jean-baptiste say: Critical assessments of leading economists
Small, P. (2011). Most inspiring video ever - occupy wall street.avi. http://youtu.be/3bulrbZQd_c
Turgot, A. R. J. (2011). In Gordon D. (Ed.), The turgot collection writings, speeches, and letters of anne robert jacques turgot, baron de laune
Wood, E. (2002). The origin of capitalism: A longer view