خرید و دانلود نسخه کامل کتاب The Emergence of a Tradition: Essays in Honor of Jesús Huerta de Soto, Volume II Philosophy and Political Economy – Original PDF

55 Henderson later followed up with Stigler, asking him why he gave the speech at all if ideas are not essential and minds cannot be changed. Stigler did not answer. Like Henderson, I pay considerable attention to what is taking place in the realm of ideas. It is my field of work, and I am not immune to bias. Human action is purposeful action, action guided by ideas. However, ideas without action are just ideas and need someone to implement them. That is where leadership comes in: leaders in different walks of life, churches, clubs, businesses, politics, and the academy. But I also pay attention to incentives. Economists sometimes describe the main conclusion of their discipline in just two words: “incentives mat- ter.” For me, the two central institutions that provide incentives favorable to a free society are the family and private property. In the long run, only cultures that respect both have flourished. Finally, there is providence and luck. As I do not have a crystal ball, I incorporate luck only after the fact. But apart from praying and preparing for dangers and opportunities, there is little we can do to push luck. With this framework in mind, I decided to once more study and reflect on the papers presented during the first Mont Pelerin Society meeting I attended. The theme of that meeting was “Constraints on Government.” It had sessions on monetary policy, spending, taxation, regulation, and denation- alization. We also had panels on escaping governments, such as interna- tional migration and the informal economy. On constitutional constraints, the scheduled speakers were Milton Friedman and F.A. Hayek. The ses- sion was planned as a discussion of chapters from their recent books. Thomas Sowell was one of the commentators. F.A. Hayek, unfortunately, was not able to attend, and Milton Friedman decided to speak on another topic. But more on that later. Although Hayek had to cancel his participation, he was going to speak on “The Miscarriage of the Democratic Ideal: A Recapitulation,” a topic he covered in his book Law, Legislation and Liberty (Hayek, 1973). In this chapter, he stressed the perverse incentives that exist in many democratic systems: [A] Parliament or government which becomes a charitable institution thereby becomes exposed to irresistible blackmail. And it soon ceases to be the ‘deserts’ but becomes exclusively the ‘political necessity’ which deter- mines which groups are to be favoured at general expense. This legalized THE POLITICAL-ECONOMIC VIEWS OF MONT PELERIN SOCIETY MEMBERS… 56 corruption is not the fault of the politicians, they cannot avoid it if they are to gain positions in which they can do any good. … But if democratic gov- ernment were really bound to what the masses agree upon there would be little to object to. The cause of complaints is not that the government serve an agreed opinion of the majority, but that they are bound to serve the sev- eral interests of a conglomerate of numerous groups. That first Mont Pelerin Society meeting started so badly for me that I soon thought it would be my only one. The first presentation I heard was by Yoshio Suzuki, adviser at the Bank of Japan’s Special Economic Studies Department. The title of his paper was “Why Is the Performance of the Japanese Economy So Much Better?” 1980 His conclusions to prevent inflationary expectations from spread- ing were: First, speculator inventory investments, which raise prices and induce expec- tation of further increases to come, should be avoided by controlling the money supply appropriately and letting the short-term interest rates rise freely in accordance with market conditions. Second, price rises caused by demand-pull, that is, the swelling of gross profit per unit of output, should be avoided by pursuing appropriate monetary and fiscal policies to control aggregate demand. Third, price rises caused by the supply restrictions based on the coordinated actions of firms, that is, the swelling of gross profit per unit of output, should be avoided by strict implementation of the Anti-trust Act. I studied economics under Dr. Hans F. Sennholz (1922–2007), a dis- ciple of Ludwig von Mises, at Grove City College. Dr. Sennholz was also a Mont Pelerin Society member but did not attend many meetings. As you can imagine, government efforts to control aggregate demand, or stricter enforcement of anti-trust laws, were not my cup of tea. They sounded more like the failed theories I learned at my other alma mater, the Pontifical Catholic University of Argentina, which had a preponderance of Keynesians in its faculty. As I knew some of the older members in attendance, I told them my concern about the Keynesian slant of the presentation and asked a few of them if they liked Suzuki’s paper. They said no! I then went to Milton Friedman and, without revealing my views, asked the same question. Milton told me that he liked Suzuki’s paper very much. I went back to the older members and asked them if they would complain or raise questions. A. CHAFUEN 57 They answered in the negative, with the implication that “it is for you, the young people, to complain.” I was young, so I did. I was very active in the Q & A. Now that I am 67, the age of those older MPS members, I seldom ask questions in public meetings. I let the young and other independent voices question, or complain and pretend they are asking a question. Former Treasury Secretary William E. Simon (1927–2000) wrote a lengthy paper (72-pages long) for that same session. The paper started by describing the economic situation at the time: “chronic double-digit infla- tion, rising unemployment, rapidly deteriorating output approaching disastrous levels in several key sectors of the economy, continued massive trade deficits, and a dollar propped up by historically high interest rates.” I have a copy of the paper, but I do not recall if Simon presented it to the meeting or, like Hayek, could not attend. Simon’s concerns about corporate culture are similar to the concerns many of us have about today’s large businesses: Throughout the last century, the commitment of business and labor leaders to the free enterprise system that has provided them with so many benefits has weakened dramatically as they have discovered that they could demand— and receive—short-range advantages from the government. Much of the coercive regulation we now have in place has actually been invited by the private sector to avoid the risks and penalties that exist in competitive mar- kets … their negative role should be carefully identified and publicized rather than simply blaming the government officials who respond to them. (Simon, 1980, p. 71) The U ndergroUnd or Informal economy Continuing with another topic that was discussed at that MPS meeting, analysis of the underground economy has seen substantial advances since 1980. One of the papers The Underground Economy was by Max Thurn (1910–1991), the then-secretary of the MPS. In a history of the MPS, Thurn was aptly described as “tall, aristocratic, calm, and urbane” (A History of the Mont Pelerin Society, 1995, Hartwell, p. 159). Thurn, with whom I had a chance to spend quality time at meetings, was married to an Argentine from a family well known to mine. His awareness of how busi- ness is conducted in countries with a weak rule of law conduct expanded his practical knowledge of the impact of over-regulated economies. THE POLITICAL-ECONOMIC VIEWS OF MONT PELERIN SOCIETY MEMBERS… 58 This paragraph is a good example: In Punta del Este, a resort place in Uruguay with a boom in construc- tion such as Latin America has not seen before, two Argentine business- men, guests at a dinner party condemned underground transactions. “Now let us be frank,” said another guest, also a businessman from Argentina. “We all built our houses here with black money, did we not?” Nobody said a word. A similar conversation could be taking place today in the same city. Little has changed. Thurn provided detailed examples of how quasi- corruption (my term) took place whenever there were significant differ- ences between the official price of foreign exchange and the black-market or free price. Some libertarians might quibble with my use of the word corruption: Why is it corrupt to take advantage of current legislation? If there were under-the-table payments to a regulator by those who made the transaction, those actions would fit the definition of corruption. But if all importers had access to artificially low-priced foreign currency, then we could speak of “corporate welfare.” If this cheap currency only went to friends, with no pre-established quid pro quo, then we would be speaking of cronyism. These distinctions between corruption, quasi-corruption, and cronyism did not appear in the discussions of the MPS. Efforts to measure corrup- tion were undertaken much later by Transparency International (TI), founded in 1993 in Germany. TI released the first version of its Corruption Perceptions Index in 1995. Ludwig von Mises had written in his Human Action that an “analysis of interventionism would be incomplete if it were not to refer to the phenomenon of corruption” (Mises, [1949] 1966, p. 734). However, few members of the MPS focused on analyzing corrup- tion. Perhaps a few were also avoiding the topic following Mises’s argu- ment that “corruption is a regular effect of interventionism. It may be left to the historians and to the lawyers to deal with the problems involved” (Mises, 1966, p. 736). I still do not understand why it is a topic for histo- rians and lawyers and not economists and moralists. I regard most econo- metric studies as exercises in recent history. Therefore, as soon as I had some measurements on corruption and interventionism, I started to do correlations and publish papers and articles about them. My first co- authored paper was published by the Centro de Estúdios Públicos in Chile (Chafuen & Antonio-Guzmán, 1997). A shorter version, reaching similar conclusions about how economic interventionism creates incentives for A. CHAFUEN 59 corruption, was published as a chapter in the Heritage Foundation-Wall Street Journal Index of Economic Freedom (Chafuen, 2000). Thurn wrote his presentation before Hernando de Soto began to pub- lish his detailed studies about the Peruvian informal economy. Thurn dis- cussed several terms to describe the underground economy: black-market, parallel, and informal. In subsequent decades Hernando de Soto began to use the term “extra-legal.” Although Thurn’s paper is primarily a defense of this economic sector, he lists ten disadvantages. In his words, the disadvantages were allocation of resources more in accordance with opportunity than with productivity; distortion of the economy through misdirection of effort; less specializa- tion; limited choice of partners; no internal controls; only very general tracking of business success; no accident or old-age insurance; corrupting influence (gradual loss of respect for the law); and false statistics. This paper is not the place to analyze each of these negative aspects. We should note, however, that missing from Thurn’s list is the disadvantage highlighted in Hernando de Soto’s second best-seller, The Mystery of Capital (2000), where he shows, with ample evidence, how being extra- legal prevents those in this sector of the economy from leveraging their assets and being able to grow. Their lack of clear property titles to their assets, including potential intellectual property rights, puts them at a sig- nificant disadvantage. For Thurn, transactions in the extra-legal economy “can only be justi- fied under special conditions, namely marginal rates of taxation of income and other government regulations that penalize work in the surface economy.” Thanks to the first book by de Soto, El otro sendero (The Other Path, 1987), the World Bank expanded its focus on regulations. Its Doing Business Index grew out of De Soto’s path-breaking work. Unfortunately, during recent years it has become apparent that politicized manipulation was present in the compiling of the Doing Business Index. The World Bank recently announced that they were discontinuing it. moneTary debaTes Concern about inflation was very high during the 1980 meeting. There were, however, significant differences in monetary views. The debates were mainly between Friedmanite types and “Austrians,” champions of gold or the denationalization of money. Hayek had proposed competing THE POLITICAL-ECONOMIC VIEWS OF MONT PELERIN SOCIETY MEMBERS… 60 currencies a few years earlier in The Denationalization of Money (Hayek, 1976). The monetary authorities of several countries represented at the meet- ing were already reducing the money supply’s rate of growth. One of the papers noted that Japan’s rate went from 15% during 1971–1972 to 8% in 1979. During the seventies, the yearly rate of increase of its money supply in Switzerland went from 7.5% to 1%, although it climbed back to 7% in 1979. Germany reduced its rate of money supply growth from 16% to 8% in 1979 and the UK from 28% to 12%. Although few advocates of the gold standard spoke at that MPS meet- ing, many were very active during the question-and-answer sessions. Several blamed the economy’s ills on paper money. Milton Friedman started the final session by stating that he was not going to speak on the panel’s topic, which focused on the importance of constitutions to con- strain the government. He correctly noted that many countries had good constitutions, as was the case in Argentina, but if people do not believe in the constitution, it will be useless. But that he wanted to take on the “gold bugs.” He went on to chastise these “gold bugs” that, despite favoring free prices, they were willing to “fix the value of gold.” Despite favoring economic efficiency, they kept a valuable metal stored in government vaults instead of using it productively. He made other critical points which I, as a disciple of “gold bug” Hans Sennholz, was quick to try to counter from the floor. I started by questioning the term “gold bug” as used in an academic setting such as the MPS: “If you use the term ‘gold bugs,’ they could use the term ‘paper worm’ to describe those who favor paper money.” I went on, “defining the dollar in terms of gold weight is like defining a meter or a yard as a rod of a certain length.” Nothing totalitarian. I like to think I also refuted Friedman’s other points; I received good applause from the audience in what I thought were my departing words from MPS. A less expansionary monetary policy in the United States, started by Paul Volcker (1927–2019) during the second half of 1979 and then con- tinued by Alan Greenspan (1926–), changed the political-economic scene during the next two decades. Now, toward the end of 2021, after almost two decades of monetary expansion, several countries are experiencing a scenario similar to that of the pre-Reagan period. A. CHAFUEN 61 The Power of The bUreaUcracy Something that has not changed much during the last four decades is the enormous power of the entrenched bureaucracy. Today many of us use the term “deep state” to refer to it. In his paper, Limits of Taxation: A Case Study with Reference to Switzerland, 1980, Martin Janssen (1948–) of the University of Zürich stated, “For good reasons, the image of a ‘big’ government is closely asso- ciated with bureaucracy. Nevertheless, a ‘big’ government is big not merely for the number of clerks employed in its bureaus, but mainly because of the personnel employed in the elementary and high schools, public universities, public clinics, hospitals, public agencies to assist the individual needy and destitute, public community centers, and so on. Personnel, including the officers in charge, consists of trained doctors, teachers, psychologists and social workers.” Then, as today, these workers “commonly believe that they know and understand better than their tem- porary superiors not only the means employed but also the ends pursued by their respective organizations.” Pascal Salin (1939–) of France, who later served a term as president of MPS, concurred. In his paper Do Conservative Governments Make a Difference: Social and Economic Policies? he wrote that “the problem is not only of ideology, but of privilege and vested interests. To diminish the role of the state, one has to meet opposed and strongly organized civil ser- vants, who are always ready to fight against the ‘destruction of the civil service.’” Michael Walker (1945–), the Canadian economist who grew the Fraser Institute into one of the most respected think tanks in the world, also addressed the power of the bureaucracy on a paper titled Do Conservative Governments Make a Difference? Or Will Success Spoil the Neo-Eclectic Mugwump Movement—A Canadian Perspective. He wrote that “the pol- icy continuity provided by the senior civil servants was noted as a signifi- cant challenge to the designs of the new government, as were the special interest groups created by existing legislation.” Malcolm R. Fisher, on Do Conservative Governments Make a Difference—Social and Economic Policies: The Australian Experience, wrote something similar. “The power of the bureaucrats is exceptionally strong—political change need not disturb the quiet efficient ones—and their mastery of detail could hold at bay all but the more active Ministers.” One of Fisher’s central conclusions was that “Conservative Governments THE POLITICAL-ECONOMIC VIEWS OF MONT PELERIN SOCIETY MEMBERS… 62 at best seem to go easy on some of the restrictions that legislation permits for the control of markets but rarely move to eliminate them. Thus, the battery of control weapons is always there or added to by rival administra- tions, never removed from the statute book.” It is all too easy for those who advocate more government controls “to take up again where it left off and even make up for lost tim