I first heard of Steven Johnson’s 2006 book The Ghost Map from a George Will piece called “Survival of the Sudsiest.” The book’s full title is The Ghost Map: The Story of London’s Most Terrifying Epidemic — and How It Changed Science, Cities, and the Modern World. Will describes it as "a great scientific detective story about how a horrific cholera outbreak was traced to a particular neighborhood pump for drinking water.”

In the "The Books of Summer" (Liberty, July 2007), Bruce Ramsey also recommends it:

It tells the tale of the deadly outbreak of cholera in London in 1854, and how two men, a doctor and a preacher, proved how it was spread.… In parallel to the detective story is a revolting description of London in the early industrial age. The industrial revolution made London the earth’s largest city with the earth’s largest waste problem. Libertarians will note that market mechanisms did arise to handle this, though they were, in the author’s estimation, not so good. They will note that the first solution imposed by government made matters worse — but that the second one was better. The book also shows how the provision of sewers and a clean water supply ended cholera epidemics by the last quarter of the 19th century.

I’m finally getting around to reading The Ghost Map, and while it is compelling and enjoyable from the first page, it is also an excellent example of why it helps to have some economic literacy to be able to read popular history critically.

Both Johnson’s masterly prose and his questionable economics are evident from the first. Here’s his opening:

IT IS AUGUST 1854, AND LONDON IS A CITY OF SCAVENGERS. Just the names alone read now like some kind of exotic zoological catalogue: bone-pickers, rag-gatherers, pure-finders, dredgermen, mud-larks, sewer-hunters, dustmen, night-soil men, bunters, toshers, shoremen. These were the London underclasses, at least a hundred thousand strong. So immense were their numbers that had the scavengers broken off and formed their own city, it would have been the fifth-largest in all of England. But the diversity and precision of their routines were more remarkable than their sheer number. Early risers strolling along the Thames would see the toshers wading through the muck of low tide, dressed almost comically in flowing velveteen coats, their oversized pockets filled with stray bits of copper recovered from the water’s edge. The toshers walked with a lantern strapped to their chest to help them see in the predawn gloom, and carried an eight-foot-long pole that they used to test the ground in front of them, and to pull themselves out when they stumbled into a quagmire. The pole and the eerie glow of the lantern through the robes gave them the look of ragged wizards, scouring the foul river’s edge for magic coins. Beside them fluttered the mud-larks, often children, dressed in tatters and content to scavenge all the waste that the toshers rejected as below their standards: lumps of coal, old wood, scraps of rope.

Above the river, in the streets of the city, the pure-finders eked out a living by collecting dog shit (colloquially called “pure”) while the bone-pickers foraged for carcasses of any stripe. Below ground, in the cramped but growing network of tunnels beneath London’s streets, the sewer-hunters slogged through the flowing waste of the metropolis. Every few months, an unusually dense pocket of methane gas would be ignited by one of their kerosene lamps and the hapless soul would be incinerated twenty feet below ground, in a river of raw sewage.

The scavengers, in other words, lived in a world of excrement and death.

And here’s his assessment of why we don’t see scavengers today:

The homeless continue to haunt today’s postindustrial cities, but they rarely display the professional clarity of the bone-picker’s impromptu trade, for two primary reasons. First, minimum wages and government assistance are now substantial enough that it no longer makes economic sense to eke out a living as a scavenger. (Where wages remain depressed, scavenging remains a vital occupation; witness the pependadores of Mexico City.)

His second reason is "because most modern cities possess elaborate systems for managing the waste generated by their inhabitants."

But notice what he implies in his first reason: minimum-wage laws have made the American working poor too well off to stoop to scavenging — in contrast to Mexico, where the laws presumably fail to do enough to raise the pependadores’ wages.

Anyone reading this blog already knows that the minimum wage is a price floor, and price floors can’t raise prices; they can only create a glut of the overpriced goods. Rather than increasing incomes, minimum-wage laws create a larger army of potential scavengers: the unemployed. The substantial government assistance that Johnson mentions may play a role in keeping the unemployed from turning to scavenging, as do today’s elaborate waste-management systems and the culture and legal mandates of recycling. But the most powerful cause — the one that has to come before all the others — gets no mention at all: greater wealth.

Mexico doesn’t have more scavengers because its laws are inadequately progressive. Mexico is poorer. And the reason it’s poorer is because of greater, not less, government interference. Historically, the United States has had more secure private-property rights and offered a more secure political and economic environment for investment. A more productive economy raises the wealth and well-being of even the poorest within the economy. Greater relative wealth means higher opportunity costs, which means that even the poorest Americans are less and less willing to do the most menial tasks even within the "legitimate" economy. This is why we so typically see people from less wealthy countries immigrating to the more wealthy countries to perform the most menial labor.

This influx of the foreign poor to do the jobs we won’t deign to do seems to many like a great social injustice. Rather than seeing it as the key to greater general well-being, the proponents of "social justice" see a violation of egalitarian ethics.

In a similar vein, Johnson writes,

We’re naturally inclined to consider these scavengers tragic figures, and to fulminate against a system that allowed so many thousands to eke out a living by foraging through human waste.

And "in many ways," he adds, "this is the correct response." I’ll return to this point.

But in addition to the "correct response" of fulmination, Johnson advocates "wonder and respect" for London’s 19th-century scavengers:

[W]ithout any central planner coordinating their actions, without any education at all, this itinerant underclass managed to conjure up an entire system for processing and sorting the waste generated by two million people.

(If his political reflexes weren’t already evident, he gives away his worldview in expressing wonder that spontaneously complex and efficient order can emerge among the scavengers "without any central planner coordinating their actions.")

But the respect Johnson feels for the people does not extend to the "system that allowed so many thousands to eke out a living by foraging through human waste."

Why not? Repulsion to scavenging is an understandable esthetic reflex, but is it a rational reaction to the dirtiest edges of the division of labor?

Harvard economist Edward Glaeser, who is far from libertarian, explains in The Triumph of the City that urban poverty — even and especially the shantytowns at the margins of cities and the unofficial jobs at the margins of the economy — can be a sign of the promise and success of a city: as poverty-reduction machines, market-rich cities attract more and more of the rural poor into the ranks of the urban poor. Over lifetimes and generations, the urban poor become the urban (and then often suburban) middle class.

In a free society with a healthy economy, we would see more scavengers, not fewer. As one generation raised itself from the refuse, and became less willing to take on the dirty work, another from elsewhere would step in to take its place. But they would not resemble the Dickensian muck-covered wretches of 19th-century London any more than modern laborers look like the factory workers of the Industrial Revolution. And we have the Industrial Revolution and those factory workers and owners and investors to thank for the greater prosperity that allows the developed world to look so different from the developing world. That was not achieved by labor unions or minimum-wage laws or a larger welfare state, by more regulations or social-justice campaigns. It was achieved despite these wealth-destroying developments.

I’m not saying that popular historians must embrace laissez-faire to make any contribution to our understanding of the past. But more often than not, they do not even show an awareness of the relevant issues or how the substantive arguments affect economic history.

The cause and effect they assume, and the social and political judgments that accompany them, are presented unquestioned. Even the most basic economic theory can give us the necessary tools to question them.

Last month, I mentioned America’s first individualist anarchist, Anne Hutchinson. She’s a hero of mine, for obvious reasons, despite my not sharing her religious beliefs.

One of the several reasons I’m enjoying Sarah Vowell’s The Wordy Shipmates is that I’m learning more about Hutchinson. For example, I love this detail:

The daughter of a persecuted Puritan minister who helped her cobble together the best education possible for female children (who were denied university attendance), Anne Hutchinson is one of the brainiest English-women of the seventeenth century. Yet she is no stranger to the goopy fluids of female biology. Besides birthing her own litter [of 15 children, by the way!], she works as a midwife, delivering babies and no doubt serving the brew imbibed before and after labor, the wonderfully named “groaning beer.”

Here’s my favorite detail within the detail:

By aiding Boston’s new mothers, Hutchinson quickly befriends a lot of women. She starts leading the women in a regular Bible study in her large, fine home.

These Bible-study group became the seedbed of antinomianism: a new religious individualism (and heresy) within New England Puritanism. It also became the basis of political and philosophical individualism more generally, thus Murray Rothbard’s description of Hutchinson in Conceived in Liberty as America’s first individualist anarchist.

She preached the necessity for an inner light to come to any individual chosen as one of God’s elect. Such talk marked her as far more of a religious individualist than the Massachusetts leaders. Salvation came only through a covenant of grace emerging from the inner light, and was not at all revealed in a covenant of works, the essence of which is good works on earth. This meant that the fanatically ascetic sanctification imposed by the Puritans was no evidence whatever that one was of the elect. Furthermore, Anne Hutchinson made it plain that she regarded many Puritan leaders as not of the elect.

The Massachusetts powers that be understood that Hutchinson’s Bible-study sessions were central to the dissemination of her religious and political heresies and so, as Sarah Vowell relates,

In September of 1637 … [t]hey resolve, writes Winthrop, “That though women might meet (some few together) to pray and edify one another,” assemblies of “sixty or more” as were then taking place in Boston at the home of “one woman” who had had the gall to go about “resolving questions of doctrine and expounding scripture” are not allowed.

"The Bill of Rights," Vowell comments, "with its allowance for freedom of assembly, is a long way off."

Rothbard again:

Winthrop then called for a vote that Mrs. Hutchinson “is unfit for our society — and … that she shall be banished out of our liberties and imprisoned till she be sent away.…” Only two members voted against her banishment.

When Winthrop pronounced the sentence of banishment Anne Hutchinson courageously asked: “I desire to know wherefore I am banished.”

Winthrop refused to answer: “Say no more. The court knows wherefore, and is satisfied.” It was apparently enough for the court to be satisfied; no justification before the bar of reason, natural justice, or the public was deemed necessary.

As good as Rothbard’s account is, I find Vowell’s even better:

“What law have I broken?” she asks.

“Why the fifth commandment,” answers Winthrop. This is of course the favorite commandment of all ministers and magistrates, the one demanding a person should honor his father and mother, which for Winthrop includes all authority figures. Wheelwright’s sermon was an affront to the fathers of the church and the fathers of the commonwealth.…

When she presses him once again to point out the Scripture that contradicts the Scripture she has quoted calling for elders to mentor younger women, Winthrop, flustered, barks, “We are your judges, and not you ours.”

Winthrop really is no match for Hutchinson’s logic. Most of his answers to her challenges boil down to “Because I said so.”

In fact, before this trial started, the colony’s elders had agreed to raise four hundred pounds to build a college but hadn’t gotten around to doing anything about it. After Hutchinson’s trial, they got cracking immediately and founded Harvard so as to prevent random, home-schooled female maniacs from outwitting magistrates in open court and seducing colonists, even male ones, into strange opinions. Thanks in part to Hutchinson, the young men of Massachusetts will receive a proper, orthodox theological education grounded in the rigorous study of Hebrew and Greek.

The US attorney general recently announced that homeschooling is not a fundamental right, thereby denying asylum to a German family that had fled their home country, where the 1938 Nazi-introduced ban on home education is still enforced. The American homeschooling community is understandably outraged at the current presidential administration’s position on the question, but we shouldn’t be at all surprised. Why would any government willingly relinquish the authority to indoctrinate? The need to prevent random, homeschooled maniacs from outwitting political leaders and seducing citizens into strange opinions — such as individual freedom and responsibility — is essential to the health of the state. And if we question too vociferously the logic of their decision, they may well reply in essence that they are our judges and not we theirs.

I have a fondness for Enoch Powell that I never could manage for Margaret Thatcher. Perhaps that’s because I was indoctrinated to hate Thatcher and had never heard of Powell before last Saturday, when Wikipedia noted the 45th anniversary of the so-called Rivers of Blood speech for which he is infamous.

Both Thatcher and Powell were British politicians. Both were Conservatives. (Powell eventually left the Conservative party, claiming that while he was a life-long Tory, there were good Tories in the Labour Party. I guess I don’t really understand Toryism.) Both Thatcher and Powell are targets of left-wing hatred and smeared as proto-fascists. (See Lawrence Reed on the recent anti-Thatcher hatefest in the UK.) And I suspect the British Left would have a hard time distinguishing either of them politically from libertarians. We’re all ultra right wing, radically free market, and anti progress, aren’t we?

Powell rose to political stardom at the same time he fell from political power. On April 20, 1968, he gave a speech criticizing the British government’s existing immigration laws and its proposed anti-discrimination legislation. Everywhere I’ve looked for information on this speech and the speechmaker, these two issues have been conflated, and yet to a libertarian they could not be more different.

Two issues:

1. Immigration
2. Discrimination

On one of these, Powell seems to be in accord with us. On the other, not so much.

Immigration

Calls for the state to control or limit immigration are antithetical to the libertarian goal of limiting or eliminating the state itself.

(Unplanned plug: at Invisible Order we just completed our second ebook for Reason magazine, and it happens to be apropos: Pro-Growth and Humane: A Reason Guide to Immigration Reform.)

Discrimination

On the other hand, any law that prohibits individuals from discriminating on any basis they choose is a violation of the fundamental rights of free association and free thought. This line from Powell’s speech, which one detractor called an “explosion of bigotry,” could not be more in accord with libertarian thinking:

The third element of the Conservative Party’s policy is that all who are in this country as citizens should be equal before the law and that there shall be no discrimination or difference made between them by public authority. As Mr. Heath has put it, we will have no “first-class citizens” and “second-class citizens”. This does not mean that the immigrant and his descendants should be elevated into a privileged or special class or that the citizen should be denied his right to discriminate in the management of his own affairs between one fellow citizen and another or that he should be subjected to inquisition as to his reasons and motives for behaving in one lawful manner rather than another.

What is not at all in accord with liberty is Powell’s suggestion that the British taxpayer provide “generous grants and assistance” to help immigrants leave the UK. (Paul McCartney apparently considered some Enoch-specific lyrics in the Beatles song “Get Back (to Where You Once Belonged)” but they didn’t make it into the final release.)

If Margaret Thatcher was the British Ronald Reagan (or vice versa), perhaps Enoch Powell was the British Pat Buchanan (or vice versa). Like Buchanan, Powell was an ultra-nationalist. Like Buchanan, he consistently took positions in opposition to the main party line of his country’s conservatives. Powell supported gay rights and opposed nuclear weapons, at least within Britain. He advocated the dismantling of the British Empire.

Unlike Buchanan, Powell often advocated for free-market positions, although he seems, like Buchanan, to have had a soft spot for economic nationalism (which consistently takes the form of protecting the nation’s producers at the expense of the nation’s consumers).

While writing this post, I thought I should double-check to see if Murray Rothbard had had anything to say about Enoch Powell back in the day. Here’s the Libertarian Forum on the British elections of 1974:

Decades of horrific British policies have created a rigid, stratified, and cartellized economy, a set of frozen power blocs integrated with Big Government: namely, Big Business and Big Labor. Even the most cautious and gradualist of English libertarians now admit that only a radical political change can save England. Enoch Powell is the only man on the horizon who could be the sparkplug for such a change. It is true, of course, that for libertarians Enoch Powell has many deficiencies. For one thing he is an admitted High Tory who believes in the divine right of kings; for another, his immigration policy is the reverse of libertarian. But on the critical issues in these parlous times: on checking the inflationary rise in the money supply, and on scuttling the disastrous price and wage controls, Powell is by far the soundest politician in Britain. A sweep of Enoch Powell into power would hardly be ideal, but it offers the best existing hope for British freedom and survival. (Libertarian Forum, March 1974)

And 8 months later:

Amidst this turmoil, the most heartening sign is the rapid growth of libertarians and anarcho-capitalists in a country that only a few years ago had virtually no one even as "extreme" as Milton Friedman. The major libertarian group is centered around Pauline Russell, and includes businessmen, journalists, economists, and others ranging from anarcho-capitalists to neo-Randians to the Selsdon Group, the free-market ginger group within the Conservative Party. Most of this group is friendly with the notable Enoch Powell, who of all the politicians in England is the only one with both the knowledge and the will to stop the monetary inflation and to put through a free market program and an end to wage and price controls. Powell, himself, despite his Tory devotion to the monarchy (which is seconded even by many of the English anarcho-capitalists), has grown increasingly libertarian. The Powell forces were working on a gusty strategy for the then forthcoming October elections: voting Labour in order to smash the statist leadership of Edward Heath. (Libertarian Forum, November 1974)

(Cross-posted at bkmarcus.com.)

The relationship between war and libertarianism has interested me since 9/11. In the aftermath of those terrorist attacks, I witnessed in grim fascination many libertarians make excuses for government in the realm of national security. The proper libertarian position on war has become a matter of controversy, although I believe it shouldn’t be. “War is the health of the state,” as Randolph Bourne said, as well as being “mass murder,” in the words of Murray Rothbard.

The following essay presents some of the most relevant materials and readings on this controversy. It is unapologetically tilted toward the antiwar position, although it includes some references to pro-interventionist writings. It is idiosyncratic and not comprehensive, and its omissions are not always deliberate. I am always interested in reading suggestions. As for the citations, I include publishing information for books but generally leave it out for articles written for or available on the web, so as to avoid extraneous clutter. Please follow the links to learn more.

Among the founders of modern libertarianism, Rothbard most consistently urged an antiwar position. In “War, Peace and the State,” he identified opposition to all state wars as well as to nuclear weapons as the libertarian’s core commitments. For more on Rothbard’s views on these questions, I recommend “Murray N. Rothbard: Against War and the State” by Stephen W. Carson and “Murray N. Rothbard on States, War and Peace, Part I” and “Part II” by Joseph Stromberg.

In terms of comprehensiveness and clarity, the best modern treatment is “Why Libertarians Oppose War,” chapter nine in Jacob Huebert’s fantastic Libertarianism Today (Praeger: 2010), which is probably my favorite introduction to libertarianism. Huebert covers all the bases, touching on the relevant economics, U.S. history, and moral principles, and delivers radical conclusions. The chapter is perfectly balanced in terms of scope and emphasis. In November 2012 he eloquently summed up his thesis at a Students for Liberty conference in a talk titled “Why Libertarians Must Oppose War.”

Other decent libertarian introductions feature strong summary discussions of foreign policy. Chapter fourteen, “War and Foreign Policy,” in Rothbard’s For a New Liberty still stands the test of time, and provides a nice refresher on Cold War revisionism. Harry Browne’s two campaign books, Why Government Doesn’t Work and The Great Libertarian Offer, both gave the issue serious attention, and he published a moving excerpt from the first book as an article, “What Is War?”  Mary Ruwart’s Healing Our World in An Age of Aggression (Sunstar Press: 2003) has a solid discussion of foreign policy, an earlier version of which is available online. Gary Chartier gives the topic due attention in Conscience of an Anarchist: Why It’s Time to Say Good-Bye to the State and Build a Free Society (Cobden Press: 2011). On multiple occasions Chartier has spoken on the centrality of peace under the eminently quotable topic title, “There’s War, and There’s Everything Else.”

Marc Guttman’s edited compilation Why Peace? is a masterful 636-page collection featuring dozens of authors, mostly libertarians, explaining how they came upon their staunch antiwar and pro-civil liberties convictions. It belongs on the bookshelves of all libertarians who prioritize war and peace issues. One powerful contribution is Bretnige Shaffer’s “Mere Anarchy Loosed Upon the World.”

In an excellent and succinct discussion of the war controversy, Robert Higgs draws a line in the sand with “Are Questions of War and Peace Merely One Issue among Many for Libertarians?” Higgs’s highly regarded scholarly stature and his general ecumenical stance on other issues make this piece very special. “In sum,” Higgs concludes, “the issue of war and peace does serve as a litmus test for libertarians. Warmongering libertarians are ipso facto not libertarians.”

More than a few have argued not only that libertarians should oppose war, but that they must oppose war to properly be called libertarians.  Walter Block has a couple of pieces on why pro-war libertarianism is a contradiction in terms, “Bloodthirsty ‘Libertarians’” and “Libertarian Warmongers.”

Homing in on the non-aggression principle, Wendy McElroy explains why virtually every war fails the libertarian test in “Libertarian Just War Theory.” Roderick Long’s 2006 article “The Justice and Prudence of War: Toward a Libertarian Analysis” presents a strong and somewhat novel argument against strict pacifism while adhering to a very hardcore antiwar position. As for the broader meaning of pacifism as opposition to all wars, Bryan Caplan has written one of the most compelling libertarian arguments for pacifism in a series of blogs, starting with “The Common-Sense Case for Pacifism.”

I have personally contributed a number of writings on libertarianism and war, the most extended of which was based on my talk “Warmongering Is the Health of Statism,” given at a LewRockwell.com conference in November 2005. For one of my most theoretical pieces that relate, see “Collateral Damage as a Euphemism for Mass Murder.” My most recent piece along these lines, “Noninterventionism: Cornerstone of a Free Society,” focused on American history. More of my writings are mentioned further down.

Standing Athwart History, Demanding Peace

Political issues come and go but war has always been with us. Those of the classical liberal tradition have tended toward the pro-peace position, although there have always been heretics. The major wars throughout history faced libertarian opposition and today libertarians disparage them retrospectively.

Ralph Raico’s 2007 talk “Classical Liberalism on War and Peace” sums up the historical liberal abhorrence of war. In a sense, Adam Smith’s Wealth of Nations was itself an antiwar tract, as Don Boudreaux notes in “Adam Smith on war.” In nineteenth-century Britain, the Manchester School, personified by Richard Cobden and John Bright, was firmly on the side of peace, as Jim Powell explains in “Richard Cobden’s Triumphant Crusade for Peace and Free Trade.” Herbert Spencer’s “Patriotism” from Facts and Comments (1902) remains one of the most radical discussions of moral responsibility falling on the soldier. Stromberg’s “John Stuart Mill and Liberal Imperialism” addresses one of the most prominent classical liberal hawks.

Arthur A. Ekirch’s book The Civilian and the Military: A History of the American Antimilitarist Tradition (The Independent Institute: 2010) surveys the historical relationship between U.S. liberalism and opposition to war. Stromberg discusses the current of anti-imperialist American liberalism in “Imperialism, Noninterventionism, and Revolution: Opponents of the Modern American Empire.”

For a discussion of libertarian attitudes about foreign policy throughout U.S. history, see Christopher Preble’s lecture, “Libertarianism and War.” Preble himself favors a mostly but not radically non-interventionist foreign policy, and emphasizes his antiwar side here: “libertarians. . . see war as the largest and most far-reaching of all socialist enterprises.”

Unsurprisingly, the most celebrated wars in U.S. history have become the most contentious among libertarians. At Bleeding Heart Libertarians, Fernando Teson has etched out his theory of defensible “libertarian wars” and elaborated on it in “More on Libertarians and War.” Gary Chartier’s “Violence, Wars, and States” at the same forum stakes out the antiwar position.

Even more radically antiwar libertarians like Rothbard have defended the colonists’ cause in the American Revolution. But there exist libertarian critiques of even the most seemingly defensible wars. Stephan Kinsella’s “Thumbs Down on the Fourth of July” compiles some of the most recent libertarian critiques of the American Revolution, including a contribution by me.

Multiple controversies surround the American Civil War. Radical abolitionist Lysander Spooner, a libertarian anarchist writing at the time, strongly opposed attacking the South. Since then, classical liberals from Lord Acton to H.L. Mencken have criticized Lincoln. Ludwig von Mises, on the other hand, favored the Union cause.

Today, some libertarians to varying degrees favor the Union, others the Confederacy, and still others oppose both sides. In April 2011, Reason Magazine commemorated the 150^th anniversary of hostilities by publishing a handful of perspectives ranging from anti-war but not pro-South all the way to pro-Union. Sheldon Richman, editor of  the Freeman, dedicated that month’s issue to libertarian revisionist perspectives, including by Jeffrey Rogers Hummel, author of the definitive libertarian history of the Civil War—and one of the best history books on any war or by any libertarian—Emancipating Slaves, Enslaving Free Men. Hummel also has an unpublished book manuscript elaborating at length on one of his key contributions: the thesis that the government, including the national government, subsidized slavery, making it profitable for slaveholders despite its macro inefficiency, with the implication that secession was a viable anti-slavery, peaceful alternative to war: “Deadweight Loss and the American Civil War: The Political Economy of Slavery, Secession, and Emancipation.”

For a series of pro-Union critical responses to the Freeman symposium, see Timothy Sandefur’s “Springtime for Jeff Davis and the Confederacy.” Over the years, lots of writing at LewRockwell.com, particularly by Thomas DiLorenzo, has critiqued the Civil War, and especially the Union’s conduct. Pushing back against a perceived pro-Confederacy bias, Charles Johnson has written multiple pieces criticizing the Southern warfare state.

The first major Progressive War, the Spanish-American War, united most classical liberals in opposition. They were key figures in the Anti-Imperialist League, headed by Mark Twain.

World War I was more divisive, as many precursors to the modern libertarian movement, from individualist anarchist Benjamin Tucker to Old Right giant Garet Garrett, favored the war, which enjoys few defenders among libertarians today. Indeed, one of the most compelling critiques of the war, particularly emphasizing the effects on the United States, is Ralph Raico’s terrific “World-War I: The Turning Point,” included in the author’s recent and entirely relevant collection, Great Wars & Great Leaders: A Libertarian Rebuttal, which also includes fantastic revisionist essays on Harry Truman, Winston Churchill, Trotsky, and other topics. A most stirring critique that explores some neglected wartime effects on domestic statism is Rothbard’s “World War I as Fulfillment: Power and Intellectuals.”  Jim Powell’s Wilson’s War: How Woodrow Wilson’s Great Blunder Led to Hitler, Lenin, Stalin, and World War II makes the argument, not uncommon among libertarians, that U.S. entry paved the way to many of the centuries worst cataclysms. Libertarian historian Hunt Tooley’s The Western Front: Battleground and Home Front in the First World War is one of the best and most moving general accounts of the European War in all the literature.

World War II is a more controversial matter. Old Right giant John Flynn’s 1944 book As We Go Marching was a devastating liberal critique of World War II’s impact on American statism. The same year, Ludwig von Mises explained the National Socialist warfare state in Omnipotent Government: The Rise of the Total War and Total State. Rothbard’s article, “World War II: The Nadir of the Old Right,” explains the key significance of the world’s largest ever battle in shaping the principal precursor to the modern libertarian movement.

The Rothbardian tradition has opposed U.S. entry into World War II, demonstrated by a sample of critical writings from Higgs, who has focused on its domestic consequences in Depression, War, and Cold War, among many other academic and popular writings, including a nice revisionist piece, “World War II: An Unspeakable Horror Now Encrusted in Myths.” Jacob Hornberger has over the years run dozens of articles criticizing everything from U.S. diplomacy before Pearl Harbor and U.S. cooperation with Stalin to Roosevelt’s refusal of Jewish refugees and the decision to bomb Hiroshima and Nagasaki—many of these articles wound up in the great FFF collection, The Failure of America’s Foreign Wars. Hornberger’s series on repatriation remains one of the few available popular writings on this episode. For his publications I have written reviews critical of World War II. Raimondo has written multiple pieces keeping the Old Right opposition to war alive, and his book Reclaiming the American Right puts the issue front and center.

Many libertarians today continue to defend U.S. entry into World War II, and some look upon the opponents incredulously. Eric Dondero had trouble believing Harry Browne, who on his radio show said he opposed U.S. entry. Cathy Young’s review of Tom Woods’s Politically Incorrect Guide to American History takes for granted that American entry into the war was a positive thing. On the other hand, many modern libertarians take it just as much for granted that Franklin Roosevelt’s warmongering was indefensible. As Antiwar.com’s Angela Keaton said in an interview with Motorhome Diaries: “I get this question from time to time, especially from new libertarians: ‘Aren’t some wars necessary—like World War II?’ No. No. There’s your answer to that.’”

The Cold War, from its hot conflicts to its domestic political culture, occasioned the birth of modern libertarianism, by distinguishing it unmistakably from the right. The reflective “Conscience on the Battlefield” by Foundation of Economics Education president Leonard Read in 1951 marked a definite break from the Korean War hawks, although FEE did not focus much on foreign policy generally. In 1963, Rothbard’s “War, Peace, and the State” took specific aim at conservatives as it fashioned a radical libertarian theory against war, and his “Confessions of a Rightwing Liberal” and other writings served to emphasize peace as a core element of libertarianism.

These libertarians ideas finally animated a political and social movement amidst escalation of the Vietnam War, police state crackdowns on antiwar protesters, and draft card burnings and marchings. Brian Doherty’s Radicals for Capitalism (New York: PublicAffairs, 2008) conveys much of the history of this agitation, and is especially good on such event as the famous split at the Young Americans for Freedom and the 1950s and 1960s Cold War libertarian counterculture. Focus on war issues helped give rise to the New Left, which featured an affinity between anti-authoritarian leftism and libertarianism, especially in its scholarship. Rothbard’s journal Left and Right epitomized this fusion, as did his title essay, “Left and Right: The Prospects for Liberty.”

Yet there were Cold Warrior libertarian fellow travelers. Even the early Libertarian Party was divided on immediate draft amnesty. In 1991, some libertarians defended the first Gulf War under George H.W. Bush. A smaller faction defended Clinton’s war with Serbia in 1999.

Jeff Riggenbach’s great introduction to historical revisionism, Why American History Is Not What They Say, explores libertarian, left-, and right-wing war historiography in some depth. Tom Woods’s book We Who Dared Say No to War, co-edited with Murray Polner, at least implicitly serves as a libertarian endorsement of antiwar perspectives throughout American history, with classic essays criticizing the War of 1812, the Mexican War, The Civil War (including from a Southern anti-Confederacy perspective), the Spanish-American War, World War I, World War II, the Cold War, and the War on Terror.

Jeff Hummel’s unfinished book manuscript,  “War is the Health of the State: The Impact of Military Defense on the History of the United States” has excellent chapters on America’s major wars from the Revolution through World War II, focusing on the relationship between conflict and government growth. Each chapter is followed by an outstanding bibliographical essay. Also worth mentioning are Bruce Porter’s War and the Rise of the State (Simon and Schuster, 2002); John Denson’s edited volume, The Costs of War: America’s Pyrrhic Victories, Rothbard’s Wall Street, Banks, and American Foreign Policy, a powerful tract on American wars and the coporate state; Higgs’s Crisis and Leviathan, the classic tome on war and the growth of the U.S. government, Joseph Stromberg’s bibliography on war, peace, and the state, David Gordon’s bibliography “On War,” and the Independent Institute’s bibliographies at OnPower.org.

From a war’s most primary policies—killing and conquest—all the way down to the taxation, intrusions into the economy, censorship, violations of civil liberties—libertarians should have more to hate about war than anyone else, as war fuels state power and collectivism in a thousand ways at once. Accordingly, libertarians have produced some of the most comprehensive critiques of war, especially its effect on wide range of government policies. Moreover, the libertarian critique often comes from all angles, so that libertarian economists, legal theorists, historians, and other social scientists will all have something bad to say about a war.

Nevertheless, in the libertarian community remains a faction that defends a wide range of state activities in the name of national security. This faction appeared to grow or become more vocal in the wake of the 9/11 attacks.

War and Libertarianism after 9/11

The 9/11 attacks, the U.S. response, and particularly the Iraq war, have served to illustrate the deep divide in principle among self-described libertarians and questions of war and peace. Each event was a testing ground for principled libertarian opposition to the warfare state. Joseph Stromberg contributed a series of pieces, reflecting on the returning trend of pro-war libertarianism, which had declined a bit after the end of the Cold War. Coining the term “liberventionist,” Stromberg analyzed the unfortunate reemergence in “Liberventionism Rides Again,” critiqued general liberventionist intellectual error in “Liberventionism II: The Flight from Theory,” and discussed the liberventionist tendency to whitewash the history of U.S. intervention and even advocate total war on civilians in “Liberventionism III: The Flight from History.”

Many libertarians and some libertarian groups came out firmly on the side of peace after 9/11. Among the institutions were LewRockwell.com, Antiwar.com, The Libertarian Enterprise, Strike the Root, the Mises Institute, The Independent Institute, and the Future of Freedom Foundation. Many of these groups not only took a pro-peace position early, but have held peace as a high priority in their publications and programs consistently since 9/11.

Harry Browne, the recent Libertarian presidential candidate, published a bold antiwar article within a day of the terrorist attacks, “When Will We Learn?” stirring up controversy among LP members. The Libertarian Party establishment itself seemed to favor the U.S. invasion of Afghanistan. Lew Rockwell critiqued this ambiguous LP press release in his article “Does the LP Support THIS War?”

Reflecting on the sad divide in the libertarian movement over the war, the Future of Freedom Foundation’s Jacob Hornberger explained in “Libertarian Splits in the War on Terrorism” why freedom is impossible so long as there is perpetual war. David J. Theroux, president of the Independent Institute, and Karen DeCoster warned about the assaults on American liberty that would come with the burgeoning warfare state, and the impossibility of using aggression and central planning to bring about security, in “The New U.S. War on Liberty.” Hans-Hermann Hoppe explained why libertarian principles mean the rejection of aggressive war and why libertarian class theory should lead one to distrust the warfare state in an interview, “Hans-Hermann Hoppe on War, Terrorism and the World State.”

Standing against the criticism of libertarian dovishness early after 9/11, Justin Raimondo defended the antiwar libertarians in “Who’s Afraid of Virginia Postrel?” and L. Neil Smith did so as well, while expounding on the non-aggression principle as it relates to war, in “War of the Weenies.”

Raimondo explained how there was more hope for libertarians than many might think in his article, “Long Live Libertarianism!“—an inspiration for anyone at the time who was worrying about the death of rationality and principle in this movement of ours. In his speech “War and Freedom,” Lew Rockwell reflected on the disappointing performance of mainstream libertarians, and the horrible bloodthirstiness of conservatives and the Bush administration.

When some libertarians went beyond supporting the Afghanistan War to advocating war on Iraq, it became clear that liberventionism was not going away and was not only an understandable, if disappointing, visceral reaction in the immediate wake of 9/11.

After Justin Raimondo challenged the Libertarian Party to take a firm antiwar position in his speech, “Libertarianism in the Age of Empire,” activist and writer Thomas Knapp chimed in with “The Party and War,” explaining why the Libertarian Party could not afford to be soft on the issue. Shortly after Gulf War II began, Robert Higgs addressed the demented mindset of liberventionism in “Are Pro-War Libertarians Right?” Harry Browne reflected on the many ways libertarians had to violate their own principles in “Libertarians and War.” Gene Healy from the Cato Institute took libertarian Iraq hawks to task in a September 2003 blogpost “Libertarians and the War.” Daniel McCarthy reiterated the major reasons why we must oppose warfare aggression in “Liberventionism for Fun and Profit.” Don Boudreaux found himself explaining his position in a 2005 piece called “An Open Letter to My Libertarian Friends Who Don’t Understand My Opposition to the War in Iraq.”

In 2005, R.J. Rummel, great scholar of governmental mass murder, coined the term “freedomist” to describe an interventionist libertarianism rooted largely in the logic of the democratic peace theory. I criticized this theory in “Making the World Safe for Imperialist Democracy.”

Other conspicuous liberventionists writing from 9/11 to the end of the Bush administration included Tim Starr, Timothy Sandefur, J. Neil Schulman, Max Borders, Glenn Reynolds, John Hospers, Ron Bailey, Tyler Cowen, Neal Boortz, Randy Barnett, and Larry Elder—although some of these people have changed their tune since. Underground “mainstream libertarian” Eric Dondero made a lot of noise criticizing antiwar libertarians and calling for their purge, characterizing antiwar libertarians as pro-Islamist or “leftwing libertarians.”
The most vociferously pro-war voices in the broader libertarian movement have belonged to Objectivists. The Ayn Rand Institute called for nuclear war after 9/11. Raimondo explained how Objectivism related to warmongering within the libertarian movement in his speech, “The Objectivist Death Cult.” To be fair, there have been efforts by Objectivists to expose the folly of Randian warmongering, including a wonderful article by Chris Matthew Sciabarra, “Understanding the Global Crisis: Reclaiming Rand’s Radical Legacy,” as well as a thoughtful piece by Chip Gibbons, “Ayn Rand: The Roots of War.”

The Vindication of Libertarian Non-Interventionism

As the Iraq war became increasingly unpopular, Gary North expressed optimism that liberventionism was on its way out in “The Self-Castration of Libertarian Hawks.” In 2006, Milton Friedman passed away, and his publicized characterization of the Iraq war as “aggression” gave new mainstream credence to the antiwar libertarian view. The Volokh Conspiracy responded with a blog putting Friedman’s disagreement with his wife in the context of a longstanding controversy among libertarians.

In 2005, Matt Welch at Reason Magazine had an interesting pro-war libertarian quiz as he appeared to be working out these issues himself challenging interventionists to define the boundaries of their position. “An Open Letter to Libertarians Who Support the War on Terror” by Marc Joffe is diplomatic and conciliatory article standing firm on the side of peace. Justin Raimondo addressed the issue again in “Libertarianism and the War,” inspired by the release of Brian Doherty’s Radicals for Capitalism. Jacob Hornberger, in early 2007, addressed “The Critical Dilemma Facing Pro-War Libertarians,” concluding that we must stand with the warfare state or with liberty. In June 2007, John Walsh, a leftist at Counterpunch, credited the Future of Freedom Foundation for its three-day conference on peace and civil liberties: “Libertarian Conference on Peace and Liberty: Shaming the Official Antiwar Movement.” In late 2007 Bryan Caplan asked, “Why Did So Many Libertarians Support the War?”

Ron Paul spent most of his political career focusing on the evils of U.S. intervention abroad, as his collection of speeches and writings, A Foreign Policy of Freedom well demonstrates. Paul ran for president in 2008 and 2012, each time putting focus on the war issue. In response to his first presidential campaign, Randy Barnett wrote an article in the Wall Street Journal asserting that one could be a libertarian and support the war in Iraq. This incited an avalanche of responses, many of which are included in Stephan Kinsella’s “An Overview of Criticisms of Randy Barnett on Iraq and War.” In addition, Robert Higgs wrote a letter to the editor, part of which was published in the WSJ, which added his expertise to the issue. Walter Block penned a piece “Randy Barnett: Pro-War Libertarian,” as well as an excellent and more substantive critique in “A Libertarian War in Afghanistan?”. My own response to Barnett was a column, “The Effects of War on Liberty,” that focused mostly on the relationship between war and statism.

The Ron Paul Revolution of 2007–2012 hardened the association of libertarianism with non-interventionism. I celebrated this in my own article in late 2007, “Ron Paul and the Defeat of the Liberventionists.” Five years later, Less Antman credited Paul for emphasizing peace and declared at the 2012 Libertarian Party convention in his stirring nomination speech for R. Lee Wrights that “Anti-war Is the Health of the Anti-state Movement.”

After eleven straight years of war, antiwar and anti-interventionism have seemingly arisen as the dominant position among libertarians. But new issues—another terrorist attack, another alleged genocide abroad—could always bring the controversy back. In late 2012, the sticky bundle of issues surrounding the Israel-Palestine conflict animated libertarian debate, much of it aired on Bleeding Heart Libertarians. Steve Horwitz took a nuanced position in “‘Anti-State’ or ‘Pro-Liberty’? Some Thoughts on Israel.” John Glaser of Antiwar.com responded with an antiwar critique of Israel in “Libertarianism, Israel, and Palestine – A Different View.” Peter Lewin largely took a pro-Israel position in “Let’s Talk Fundamentals: Israel is Not The Problem and Israel Does Not Have The Solution” Matt Zwoliski in “Libertarianism, Self-Defense, and Innocent Shields” and Chartier in “Some Principles,” attempted to bring the issue back to basic fundamentals to guide debate. My own article, “Gaza and America,” attempted to show that the Israeli state’s attacks on Palestinian are as unlibertarian as is Hamas’s terrorism, and why Americans in particular should care.

On the tenth year anniversary of the beginning of the Second Gulf War, Reason Magazine published a forum of reflections from various libertarian writers: “The Iraq War: 10 Years Later.” Ron Bailey admitted he was wrong about Iraq, most others reiterated their position of opposition, and Ilya Somin argued for a nuanced approach, ultimately concluding the war was good for both America and Iraq on balance.

Libertarians Against War

It would be impossible to list every valuable critique of war written by libertarians, but some that are particularly libertarian in their method and approach are worth including. David Henderson’s very good column Wartime Economist at Antiwar.com is worth noting. Laurie Calhoun’s “Just War, Moral Soldiers?” hones in on the individual ethic of fighting in a war. Sheldon Richman’s “War as a Government Program” demystifies warmaking and shows it is as political and problematic as any state activity. Lew Rockwell’s “War and Inflation” draws the connection between these two key state activities. Joe Salerno’s “Imperialism and the Logic of Warmaking” brings praxeological insights to bear. My own “War and the Common Good” sees war as the epitome of collectivism.

Other libertarian scholars and writers whose primary issue is war or foreign policy, and who thus stand as walking examples of libertarian war opposition, deserve mention for their wonderful contributions. The Independent Institute’s Charles Peña has written many critical pieces and Ivan Eland, author of The Empire Has No Clothes, has written thousands of articles. The Cato Institute’s Doug Bandow, Ted Galen Carpenter, and Malou Innocent are also worth following.  Eric Garris, founder of Antiwar.com with Justin Raimondo, has done as much to promote peace as any living libertarian. See his interview in the Daily Bell. Scott Horton the libertarian radio host has done over a thousand interviews with experts, most of them on foreign policy. Arthur Silber is a quasi Objectivists whose Once Upon a Time blog usually features very hard-hitting focus on the war issue.

I’ve written other assorted pieces relevant to the discussion of war and libertarianism. In “Only War Will Prevent War” I mock what I saw as a crude utilitarianism in pro-war libertarian reasoning and in “Would Pro-War ‘Libertarians’ Have Supported the New Deal” I pose the question of what degree of statism they would endorse. “A Compromise for the Libertarian Hawks” is mostly a polemic piece arguing that there is no such thing as pro-war libertarians; such people are merely a species of conservative. The pro-war anarchist faces scrutiny in “Anarcho-Statism.” I make a general plea that libertarians stand front and center on the issue in “Libertarians and the Warfare State” and I identify what I take to be a theoretical problem in “Liberventionists: The Nationalist Internationalists.” Parts of this essay are adapted from my 2005 article, “Life, Liberty, and the Pursuit of World War.”

There is no issue more fundamental to liberty than peace. The essence of liberty is peace, and nothing expands the state and gives cover for rights violations better than war.  

* I will update this in the next week or so with more links I’ve been sent.

I delivered this speech in September 2012 for the 2012 Annual Meeting of the Property and Freedom Society in Bodrum, Turkey. The audio of my speech was corrupted due to a technical error, so I re-recorded a version of the speech (available for streaming and download below). For others, see the links in the Program, or the PFS Vimeo channel.

The talk was largely based on two previous papers:

• “Legislation and the Discovery of Law in a Free Society,” Journal of Libertarian Studies 11 (Summer 1995), p. 132.
• Condensed version: Legislation and Law in a Free Society,” Mises Daily (Feb. 25, 2010)

Update: see also Is English Common Law Libertarian?

(Powerpoint; PDF)

[PFS; SK]

There are certain books in life that upon reading them you think to yourself “I feel not only smarter but this is exactly the book I would like to have written.”

And that is in summation what Animal Spirits with Chinese Characteristics embodies.  It is written by nine-year China veteran Mark DeWeaver, now the hedge fund manager of Quantrarian Capital Management in Washington DC.  In addition to having worked as a broker and financial analyst in Guangdong (the most populous province on the mainland) and Hong Kong, DeWeaver received his PhD in economics from the University of Hawaii.  The title alludes to the ‘animal spirits’ invoked seventy-five years ago by John Maynard Keynes to describe how emotions influence human behaviors.  The other part of the title comes from Deng Xiaoping’s “reform and opening up” (改革开放) liberalization process that began in 1978 – what Deng called “socialism with Chinese characteristics.”

One of the shortcomings of many China-related non-fiction books today is that they generally try to discuss something that is impossible to penetrate: how and why the Standing Committee makes decisions.  Volumes have been and will continue to be written about the purported inner workings of Zhongnanhai (中南海), the Party headquarters in Beijing, yet this amounts to little more than the modern-day equivalent of Kremlinology.  Or as the popular and fitting English expression germanely (sic) describes this seemingly futile divination activity: trying to read the tea leaves in China (tasseography).

Animal Spirits is nothing like these quickly outdated books and will arguably be timeless in part because of its methodological approach.  While he uses dozens of empirical examples to illustrate the boom-bust cycle within China, DeWeaver’s epistemology is unique in that it utilizes the deductive strength of the a priorism of the Austrian School.  The Austrian School is perhaps best known by one of its thought-leaders, Ludwig von Mises who wrote Economic Calculation in the Socialist Commonwealth nearly a century ago.  In it, Mises explains that central planners, within a closed economy cannot rationally calculate or allocate resources in an efficient manner; that without organic prices an economy will stall and even deindustrialize.  And since prices only arise from market interaction between participants (entrepreneurs, investors, suppliers) we as observers can a priori reject central planner claims to theoretical success without having to actually implement them to see if they could indeed work.  That is to say, central planning a priori cannot work because of the calculation problem.   Consequently, dozens of books have been written about how and why both the Eastern Bloc and Soviet Union collapsed largely due to this inability to rationally calculate, yet very little has ever been written about the Chinese experiment especially from the 1949-1979 time period.

The sole focus of the book is an analysis of both the economic and financial systems within mainland China since the founding of the PRC in 1949.  And despite the aforementioned Sino-centric tomes being published at a steady clip, surprisingly very little has been written about this financial area; and that is our loss.  In fact, the English-based scholarly corpus regarding the Chinese business cycle is almost non-existent.  The reason is simple: you need to be a trained economist, fluent in Chinese and capable of rigorous analysis.  Just as there were only a handful of potential scholars capable of writing The Last Knight of Liberalism (e.g., need to be German-speaking, trained economist, familiar with historical documents) so too are there few capable of pouring through both the modern Chinese financial press but also to look through the historical record.

And that is where Animal Spirits shines.

For example, one of the assumptions is that nationally developed central plans promoted in Beijing – Five Year Plans (中国五年计划) – are followed and executed in a classical top-down fashion.  That there is a monolithic entity capable of devising and controlling cogs and chess pieces down to the county level.  Yet, in Chapter 2 DeWeaver notes that “[i]n the Chinese case, central planning has not even been carried out consistently.”

Specifically,

In China the problems with central planning were exacerbated by the devolution of investment decision making authority to lower levels of government.  This made economic coordination even more difficult and produced powerful incentives for overinvestment.  Ironically, some of the very instabilities the revolution was supposed to eliminate became more extreme.  Transferring ownership of the means of production to the state resulted not in a new age of rational resource allocation, but rather in an exaggerated version of the capitalist cycle.

For instance, in areas like steel, cement, coal and other commodities, there are state-owned enterprises that are championed by local governments.  In the case of steel production, as part of the Great Leap Forward, each county and locality was encouraged to smelt ore and scrap ingots to produce metals based on mandated quotas at a variety of administrative levels.  The end result was denuded forests (for use as a smelting energy source) and what is now termed as ‘oversupply.’  Since all localities were smelting irrespective of profit or loss, enormous output took place and continues to take place – China currently produces and consumes about half of the world’s steel.

 And after decades of championing these local steel mills, despite decisions at a national level to consolidate or in some cases to allow market forces to bankrupt inefficient mills, local policy makers continue subsidizing them due largely to the perceived integral role the mill has in the community (e.g., jobs).  While allowing them to close and consolidate would bring volume efficiencies in terms of economies of scale, from a local policy maker point-of-view there are a number of consequences and side effects that they would rather not deal with.  As a result, provincialism is rampant across the country – there is no unified harmonized market like there is in most of Europe or North America, making it prohibitively costly and time consuming for both foreign and domestic businesses to expand operations across the country.

 Or as DeWeaver aptly notes:

 The emphasis on regional self sufficiency led inevitably to local protectionism.  Local governments came to be evaluated on the extent to which they could independently produce various categories of products or even generate surpluses for “export to other localities” (Donnithorne, 1972, 610).  Protecting markets for local light industry was also desirable because high retail prices were often necessary in order to subsidize inefficient small-scale heavy industry (616).  Thus, in 1970 the Changchun Number One Department Store “exclusively” sold “light industry products” made in Jilin Province (Changchun being the provincial capital).  Shanghai and Tianjin “claimed record shipments of their own products to other parts of the country” (611).  Hubei Province even had a program to grow all its own sugar (609).

Thus, China developed into a “customs union but not a common market,” with “a common barrier against the outside world” but without “free trade within its national boundaries” (618-619).  In the absence of either markets or effective central planning, the economy fragmented into “a myriad of small discrete units” (605) while the ideology of self-sufficiency became an excuse for local-level mercantilism.

And as noted above, some of much of this provincialism continues today in markets such as tobacco, Chinese wine (baijiu) and even in areas of skilled human labor.  For example, nearly every semester a number of my students will travel outside of the college or school to attend job fairs in neighboring regions.  There is always at least one or two that come back frustrated and focused because they have been told that the job fair is only open for people from that province.  In fact, one of my expat friends has a wife from Anhui who traveled to Nanjing to attend a fair and was told “no outsiders.”  And when I lived in Guangdong (Canton) a number of Chinese friends from other regions of the mainland explained that they faced various levels of discrimination due to being an “outsider” (e.g., speaking Putonghua instead of Cantonese).

Booms and busts

Another epistemological strength of the Austrian School is its inherent deductive capability to predict and asses the consequences of certain economic policies.  In particular the boom-bust cycle (or business cycle) describes the relative scarcity of credit in a financial system.  For example, if credit – which is typically managed by central banks and central planners – is loosened and made “cheaper” (e.g., subsidized), activities that were previously cost prohibitive now become relatively easier to finance.  Yet when the credit tap is proverbially tightened, many of these same unsustainable and unprofitable ventures go bankrupt as part of the market purge known as a “bust.”

And in China, economic laws are as immutable as in the rest of the world, as DeWeaver explains:

Central planning never worked as advertised in any of the countries where it was tried.  Even under ideal conditions it would never have been possible for central planners to identify optimal allocations of scarce resources.  It is unlikely that any such allocations could be realized in any case.  With decision makers’ incentives skewed by expansion drive and soft budget constraints, it is probably inevitable that socialist economic management is driven primarily by political considerations.  Investment booms and busts have been the result.

In the Chinese case, these problems were compounded during the command economy era by attempts to limit the role of central planning itself.  With Chairman Mao’s great principle of self reliance as the watchword, lower-level authorities enjoyed a degree of autonomy that made it practically impossible for the central government to coordinate economic development.  Even the Third Front, where many of the projects were national priorities, was not immune.  The result was a pattern of decentralized boom followed by centrally imposed bust.

In an inversion of Keynes’ assertion, the Chinese experience shows that “the duty of ordering the current volume of investment” cannot safely be left solely in public hands.  Government entities are, if anything, even more at risk of possession by animal spirits than private-sector companies.  They almost invariably tend to prioritize ideological or political considerations over cost-benefit calculations.

Yet as any China-watcher can attest, while these boom-bust cycles still continue, they have changed in nature.  Instead of having wild swings in agricultural productivity (due to credit to specific farms or agricultural segments), as China has developed over the past three decades, the booms occur in other areas.

For example, large portions of the manufacturing sector (e.g., textiles) that focus on exports receive perks and subsidies from nearly all levels of government, creating an unsurprising boom in production:

In each case, the booms were driven primarily by local governments while the busts, as had generally been the case ever since 1949, were brought about by central government policy.  At the same time, as product markets were introduced and the economy gradually became internationalized, inflation and trade deficits began to replace agricultural shortfalls as the primary constraints on investment.  These problems became less severe as high rates of accumulation along with productivity growth resulting from the economic reforms led to excess capacity.  This in turn generated both disinflation and a steady improvement in the balance of trade.

This is not to say that private companies are not guilty of waste, inefficiencies or miscalculation.  For example, in the US 56% of all start-ups fail within the first 4 years.  Each week the business press highlights both successes and poor investments made by entrepreneurs.  Three notable misallocation examples that come to mind are the Itanium project by Intel which was supposed to replace the x86 line of CPUs ten years ago, yet despite billions in investment it has gained negligible traction or marketshare.  In April 1999 Mark Cuban (now owner of the Dallas Mavericks) sold his internet company, Broadcast.com to Yahoo for $5.7 billion in stock.  The site fizzled and no longer exists.  And in November 2012 HP took a $8.8 billion write-down on the value of a company (Autonomy) that it had purchased in 2011 due to overstated revenue by Autonomy’s management team.

Yet as DeWeaver explains in Chapter 8, under a market-based economy one of the advantages is that ‘creative destruction’ (originally described by another Austrian, Joseph Schumpeter) the process of purging unproductive or misallocated assets can not only take place, but also take place at a faster pace than it would in a command economy of perpetual bailouts.  For example, at the turn of the 20^th century, the horse-and-buggy industry employed tens of thousands of laborers in the West.  In 1900, the US industry alone employed 109,000 carriage and harness makers.  And with the advent of the automobile these workers were effectively handed a collective pink slip, yet many of these laborers were reabsorbed back into the overall economy remaining a footnote in history books.  Yet in China, bankruptcy is warded off through the aid of patronage networks:

 This state of affairs is unlikely to be preferable to the “creative destruction” that takes place in a private enterprise economy.  Political competition in China is not normally rooted in economic issues.  While power struggles like the one that followed the Sixteenth Party Congress put many investors out of business, the threat of bankruptcy creates much stronger incentives to avoid overinvestment.  When the CCDI is the disciplining force, staying on the right side in factional struggles will be more important than optimizing resource use.  Investors with the strongest patrons will not necessarily be those with the best projects from a social welfare point of view.

Economic domination

Despite three decades of reform and privatization, an estimated 110-150,000 state-owned enterprises still exist in China contributing to roughly 62% of the GDP.  And at one point prior to Deng’s reforms that number was in the 90th percentile, in fact in 1995 there were 1.2 million SOEs.  Yet arguably a level of 100% never occurred even during the height of the Great Leap Forward as it would have meant every economic producing activity including human action itself would be owned by the state (e.g., slavery), something that has not legally occurred since just before the Qing dynasty collapsed (e.g., as Marx defined in Das Kapital, in a socialist system the means of production are in the hands of the state).  Consequently, these reforms illustrate the productive power of market forces and coordination, as the GDP of China increased from $10 billion in 1978 to over $7 trillion in 2012.

Yet because much of the economy is still dominated and controlled by the state, most decisions are left to local officials and policy makers (e.g., the vast majority of SOEs are owned and operated at the  local level).  However, any person in this artificial position – irrespective of culture, education or locality, will be left with little more knowledge to rationally calculate than the next.  The reason why is what DeWeaver weaves throughout the book, it is a case of the Hayekian “local knowledge problem.”  (Frederick Hayek was another Austrian economist and contemporary of Schumpeter and Mises.)  What this means is that because all information is currently distributed among individuals spread across any superficially defined region, there will always be some information and data missing from the datasets collected by central planners (Leonard Read illustrates this in “I, Pencil”).  The only conceivable solution to this knowledge problem and one that planners have been trying for a century to accomplish is to create an omniscient computer system capable of total awareness of all information at all times, simultaneously.

However even in the event of having this knowledge, assuming that such a machine could be built, planners still are left with the calculation problem: they may have every datum imaginable, yet they still do not know what actions are profitable or which activities may end in bankruptcy.  And thus any action they decide to make, while seemingly educated and ‘scientific’ is in fact arbitrary.  In contrast, the only planners per se of market-based economies are entrepreneurs who fundamentally only need to collect a single data point: prices (e.g., once a price is known and discovered rational economic coordination can take place).  In doing so they can rationally allocate resources and conduct business transactions or after doing market research decide simply not consume capital at all; preferring to forgo capital consumption today by investing in higher-order goods (e.g., factories) that require long-term periods of illiquidity (yet offer higher returns on investment).  This last point is called capital ‘roundaboutness’ (e.g., the time preference usage of capital) and originally comes from another Austrian economist, Eugene Böhm-Bawerk, the instructor of Mises and Schumpter (Hayek studied under Friedrich von Wieser the brother-in-law of Böhm-Bawerk).

DeWeaver also touches on a tangential issue, one that Mises and other 20^th century economists wryly explained: that central planners in command economies need to continuously collect reams upon reams of statistical data to accomplish an inherently futile task – productively and efficiently coordinate economic activity as noted above.   There is an old economic joke used during the Cold War noting that the Soviets would absorb and expand to cover the entire globe, except New Zealand.  New Zealand would be left alone so that market activities would create prices, prices which Soviet planners could then input into their models and equations.  A similar story comes from economist Gordon Tullock who visited Gosplan (the top planning administration in the Soviet Union) and discovered that planners were using an old Sears Roebuck catalogue to price their wares.  But the inherent problem with their approach (whether the story is true or not) is that all such prices reflect the local inputs that created them; thus the Sears prices are only relevant to the US and do not reflect the local conditions, the local inputs in the Soviet Union.  Or as Bruce Barton once quipped, “the easiest and most effective way to fight the Cold War would be simply to swamp the USSR in Sears catalogs.”

And Chinese planners, as educated and enlightened as they may be, are fundamentally faced with similar calculation constraints.  Compounding this issue is that local officials are motivated to maximize GDP growth irrespective of sustainability or profitability and also have ‘soft budget constraints.’  ‘Soft budget constraints’ is an economic term coined by János Kornai, a Hungarian economist that DeWeaver cites several times throughout.  Among his other academic contributions Kornai explained that the planners of command economies in the Eastern Bloc had created chronic ‘shortage economies’ through the pricing mechanism.  That in retrospect, the relatively low prices set by planners incentivized increased consumption by consumers and thus vast amounts products – both consumer and producer goods – were continuously in short supply.  In other words, when you intentionally or unintentionally subsidize an activity, demand may eventually outstrip the supply of it (e.g., lower prices send a signal to consume rather than save).  In the case of all the Eastern Bloc, the Soviets and even Chinese experiments with artificially price fixing the end results are long queues that are now immortalized in iconic black-and-white pictures.

Booms and busts

And because each county and each province is actually overinvesting (or malinvesting) in their SOEs, this gives rise to collective investment booms in a variety of market segments.  While the traditional boom-bust cycle scholarship investigates the causality of interest rates relative to monetary and credit expansion (there is also a corresponding component in China), what DeWeaver illustrates in each chapter is how central planners and policy makers at each administrative level spur unsustainable booms based on a plethora of plans including to meet GDP quotas or to fulfill a part of the overall Five Year plan.  For instance, these booms as noted above can take place in what Lenin termed the “Commanding Heights” (e.g., heavy industries) or in other areas such as infrastructure development like high speed railroads, highways, stadiums and airports.  For example, in Chapter 9 DeWeaver cites more than a handful of such projects including:

Consider the city of Fuyang in Northeastern Anhui Province, for example.  Located in a relatively remote location in one of China’s poorer interior provinces, the city originally had only a small landing field for flights to Hefei, the provincial capital.  In the 1990s, the local government decided to “raise the city’s profile” by building an international airport.  The original airport’s 400 meter runway was expanded to 2,400 meters (long enough for commercial flights to most Asian destinations) and a 7,200 square meter terminal and other amenities were built at a total cost of 320 million yuan (Wang, 2002).

In 2004, after being open only a year, the new facility had to be closed because there was not enough traffic to keep it operating.  While it was finally reopened in 2008, as of the beginning of 2011 its website showed only three flights a day.

When I taught in Anhui last year I asked several students from the area if they had ever used the airport.  They said it was more practical to use the large train station because the airport only had flights to just a couple of cities (Beijing and Shanghai) during the day.  While there is potential growth due to the population size (Fuyang itself is either the 1^st or 2^nd largest county in Anhui depending on which areas are included), this represents an unproductive asset that would probably not have been built in this location or time frame if left to market forces.

Is this an isolated incident and just a rare exception?  No.  According to the Financial Times, in 2010, three fourths of all airports in China lost money.  In 2011, of the 180 civil airports in operation, more than 70% lost money.  In fact, based on research from Li Xiaojin, an airport in China needs to handle 1 million passengers a year in order to turn a profit.  Yet according to his estimates, 80% of airports do not hit this mark.  And according to the Civil Aviation Administration of China (CAAC), these losses last year amounted to more than $314 million.

Reimposing economic rationality in China historically requires central government intervention because of the disconnected incentives at the local level (i.e., biting the hand that feeds you), which consequently leads to purges and busts.  Thus the Chinese investment cycle is entirely different from the cycles described in conventional business-cycle theory.  It is not driven by mistakes or miscalculations on the part of private-sector investors because their role is substantially diminutive (representing roughly 1/3 of GDP).  It also does not really have anything to do with money creation by the central bank although this can exacerbate the systemic issues as state mandated lending quotas are excised through state-owned banks.  It is instead essentially a continuation of the same investment cycle China had during the command economy period.

Conclusion

This is not to say that the Chinese growth story is over, that it will collapse and we will have to find a new labor source to make our athletic shoes and smartphones.  Rather if anything DeWeaver’s manuscript illustrates that despite what the market has ‘giveth’ central planning inadvertently (axiomatically) ’taketh’ away.  China will most assuredly endure either way, yet for perhaps the first time the English-speaking world now has a usable corpus to use and later stand on (e.g., nanos gigantum humeris insidentes) in expanding the financial and economic scholarship of the Middle Kingdom.

[Note: Animal Spirits is available starting December 24, 2012]

See also: TLS interview with Mark DeWeaver  and an excerpt from Chapter 1

In the past two weeks, both Paul Cantor and I have released new books on television, literature and film.

My new book, Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre is now available on Amazon. The book examines the relationship between the Western genre and the bourgeois liberalism of nineteenth-century America, and looks how at how post-war Westerns, which appealed to a generation of New Deal-loving, Cold War-enamored nationalists, teach us that capitalism is bad and the nation-state is good. It includes a forward by Paul Cantor.

Also newly available is Paul Cantor’s extensive study of television and film, The Invisible Hand in Popular Culture: Liberty vs. Authority in American Film and TV. If you read Gilligan Unbound: Pop Culture in the Age of Globalization (which I reviewed here.) you’ll remember that Cantor can take pretty much any television show, such as Gilligan’s Island, and dissect it using everything from Homer to Shakespeare to Marshall McLuhan, and entertain you while doing it.

In The Invisible Hand, Cantor provides a section on Westerns, and from there goes on to examine South Park, Mars Attacks! and more.

In a fascinating blogpost, Michael McConkey asks Is English Common Law Libertarian? Many libertarians tend to view the common law as being quasi- or proto-libertarian. McConkey argues, relying largely on Harold Berman’s classic Law and Revolution, II: The Impact of the Protestant Reformations on the Western Legal Tradition (v. 2), that,

in [Sir Edward] Coke’s time  [1552-1634] and far before, England was characterized by what modern libertarians would celebrate as legal polycentricism. There was a wide range of legal and judicial systems at work. In addition to the common law, there was ecclesiastical and canon, manorial, merchant, Roman, martial and Chancery law: not an exhaustive list! These all had their own laws and courts. Furthermore, this diversity of judicial options had exactly the benefits which pro-polycentricist libertarians would anticipate. Anyone who felt they were being abused in one court system could appeal to another for redress. Berman tells of cases where individuals were imprisoned by one court system, but managed to secure release by the authority of another court system.

McConkey argues that this kind of polycentrism is quasi-libertarian, but that Coke and other common-law proponents largely destroyed it by pushing the common law and its central place to the fore:

[polycentrism] is just this kind of mitigation of legal and judicial monopoly that libertarians (certainly voluntarists and libertarian anarchists) aspire to with their opposition to the state. Yet, make no mistake, Coke and his fellow common lawyers were not conspirators in this regard. On the contrary, their rooting of English common law in a mythical antiquity was precisely intended to give it the historical authority not only to triumph over monarchial sovereignty, but over all the other competing courts in England. Coke and crew’s battle with James I was not a battle against legal monopoly, but for it – just the promotion of a different claimant to the throne of legal monopoly.

Further, this was achieved precisely by means of the distinctly common law premise of finding historical sources upon which the common law could claim superior jurisdiction. Legal systems based upon positive or natural law, by definition, did not have the fundamental recourse to historical revisionism (temporal imperialism) that was at the core of the common law tradition. It was uniquely situated to win at this game. And, of course, this project of institutional imperialism has proven remarkably successful: today awareness of a once polycentric English legal order has all but vanished from popular knowledge.

I see two lessons here, one for advocates of common law as libertarian and a second for promoters of Hayekian spontaneous order as a kind of meta-reason that leads inexorably to freedom. From the perspective of libertarian values, not only does the common law tradition have blood on its hands (the blood of legal polycentricism), but it has logically built into its conceptual DNA a will to power. The temporal imperialism of its historical revisionism turns a blind eye to the subjectivity inherent in any interpretation of the past. Coke himself was prone to find “new” precedents when he changed his mind on a legal matter. History provides far too rich a buffet from which the jurist may pick and choose the precedents of preconceptual convenience — including common laws’ own legal supremacy.

Secondly, as valuable has been Hayek’s observation on the nature of the market  as a spontaneous order, emergent rather than planned, the tendency to apply this same lesson to other social domains overlooks the ubiquity of power. Whether or not it is possible in today’s world to have markets free of coercion and struggles for power, it seems unlikely in other domains of society. Certainly no existing order’s historical roots can ever be claimed to be free of such machinations. Common law, both its practice and its ascendance, is without doubt the result of spontaneous order. But neither the seeds nor the fruit of that result can be considered consistent with or beneficial to libertarian aspirations for freedom. The virtues of spontaneous orders for freedom, whether or not they’re always superior to planned ones, cannot be credibly assumed in any given instance.

None of this is to deny that there is some kind of potential for a market based customary law system to deal with the inevitable gray areas and space of subjective dispute that will arise even amid the most conscientious application of natural law. Its foundation though, unlike common law, should not be in subjective interpretation of history, but the aggregate application of subjective preferences, free from coercion. That may be a tall order, but it’s a picnic compared to getting consensus on the meanings of the past. And it is, indeed, the real lesson of value from Hayek on the virtues of spontaneous order.

See McConkey’s interesting post for elaboration. For related matters, see my posts/articles:

• Legislation and the Discovery of Law in a Free Society,” Journal of Libertarian Studies 11 (Summer 1995), p. 132;
• Legislation and Law in a Free Society,” Mises Daily (Feb. 25, 2010);
• The (State’s) Corruption of (Private) Law, 2012 Annual Meeting, Property and Freedom Society (Sep. 27 to Oct. 2, 2012);
• Property Title Records and Insurance in a Free Society.

“Institutions will try to preserve the problem to which they are the solution.” ~ Clay Shirky

You know the slavery Kool-Aid is working well when those who are oppressed petition their oppressors for more of that which helps keep them oppressed.

For instance, public education is a tool that was designed–specifically and directly–as a means of controlling the hoi polloi.  The educational system of compulsory public education championed by Horace Mann, chock-full of multiple-choice testing perfected by Frederick J. Kelly, feeding into statistical models based upon the work of (eugenicist) Sir Francis Galton, was (and is) designed to fulfill the need for employees who are primed and ready to inhabit factories where efficiency can be measured in ways developed by Frederick Winslow Taylor. (The fact that so few of such factories currently exist in America should also be telling, but that’s a different discussion.) Mann believed “universal public education was the best way to turn the nation’s unruly children into disciplined, judicious republican citizens.” The whole thing was designed to produce a seething throng of people ready to take orders, stand in line, ask few questions, and install bumpers all day–accepting the interminable boredom of such a life–while their over-lords made a ton of money.  Free and compulsory public education was never intended to create inquisitive, risk-taking, leaders. Or entrepreneurs and/or business owners.  Or frankly, owners of anything! Yet, people clamor that “education is a right” and “we need more funding for our schools” despite the inescapable fact that these same crap holes are doing their best at producing children incapable of independent thought and unable to read a book (or a blueprint), solve a simple mathematics problem, or devise a new strategy.  It’s damned sad, really.

A similar conclusion can be drawn regarding government job creation. Throughout the current election season, you’ll hear people clamoring that Obama will do all he can to create jobs while Romney won’t, or some such simplistic foolishness. Any president who claims to create jobs, uses tax dollars and government debt to pay people wages that are too high, for work that otherwise likely would not be done. In other words, the money is wasted on boondoggles. This action has at least two negative side-effects.  One, it takes money from those who produce it and gives it to someone else. (That’s the taxation piece.) That might sound good to the recipient unless he realizes that he is only getting the proverbial fish that feeds him for a day, if that long. Secondly, this stolen–they call it stimulus nowadays–money results in those at the top having more real income than the supposed beneficiaries of those government-created jobs. (That’s the inflation piece.) The people who think they benefit from the government-created-jobs are worse off in the long term, despite all appearances to the contrary in the short term. Ludwig von Mises spoke of this phenomenon in, “On Current Monetary Problems” with:

The advocates of annual increases in the quantity of money never mention the fact that for all those who do not get a share of the newly created additional quantity of money, the government’s action means a drop in their purchasing power which forces them to restrict their consumption. It is ignorance of this fundamental fact that induces various authors of economic books and articles to suggest a yearly increase of money without realizing that such a measure necessarily brings about an undesirable impoverishment of a great part, even the majority, of the population.

An injection of money into the economy by the government generally results in a transfer of wealth towards the top—real income transferred from those who can least afford it to those who already have plenty. (I already noted some time ago that this phenomenon seemed to get rolling in 1980.  The chart below is instructive.) One might even suppose this state-facilitated income transfer is the reason why statists in power so strongly support government control of the money supply, but that’s another discussion. Bottom Line:  Those who clamor for a president who cares about them get the same treatment and results as they would from some random bastard who openly scorned them. (No offense to the random bastard you support!)

And yet, here we are at election time, and the clarion calls continue to go up, from both sides of the ostensible aisle.

Cross-Posted at LRCBlog.

For roughly three years I had the opportunity to live and work at two colleges out here in China.  I could describe any number of observations but one that sticks out at this time is the role the Communist Party plays in curriculum.

While the days of the Little Red Book (Mao zhuxi yulu) and cult of personality may officially be in the past, the Party still maintains control over what is and is not taught in classes.

For example, at both colleges I taught at, each department had both a nominal civilian leader as well as a de facto  Party leader.  While I had little daily interaction with Party leaders (I did meet them several times a semester at faculty dinners and they were actually very friendly to me — gan bei!), this form of governance  results in both direct overt censorship and self-censorship via “chilling effects.”

And because the faculty was limited to the Party approved curriculum, this hampered the instructors ability to inject new, different and simply foreign ideas into the classroom.  Thus you cannot foster creativity in a classroom without first dealing with the elephant in the room — the entity whose presence currently engenders the status quo.

The WSJ recently published a report noting how new Chinese graduates are having a difficult time finding jobs in part because of a skillset mismatch between what they learned in college and what hiring firms currently demand.

Before quoting the paper, I wanted to share one additional anecdote that involves this skillset mismatch.  While it may be hard to believe, but I never once in all of my teaching out here have espoused my personal opinions about libertarianism to the student body.  Not only do I think it is unprofessional to do so but I think it is short sighted (e.g., I would immediately lose my job and be deported) — and would accomplish nothing because there is no legal opposition group to rally around.  Thus martyrdom for laowai (which I do not encourage anyways) is self-defeating.

With that said, each semester there were always a number of students that would for better and for worse share their thoughts about the material they were studying in other classes.  And a handful of students, those with cajones, would even mention the material by name:  Marx and Mao.

You see, like many Western colleges, Chinese students are required to take specific courses each semester — with very few electives being offered (and none sometimes offered at all).  In addition to studying subjects like Chinese and English, all students (at the colleges I taught at and most others on the mainland) require that their students take several courses on the literature and philosophy of Marx and Mao.

And while they may have been sent on a fishing expedition to get their laowai instructor to divulge (my) personal opinions, several students each semester — those with cajones (because you could be publicly reprimanded for it) — would verbally complain about having to study the works of Marx and Mao.  Or in the words of one student I had two years ago, “if it doesn’t work in practice what good is learning an [anachronistic] theory semester after semester?  How will this help us get a job?” [He tried to say anachronistic but it didn't come out that way]

So while the North American blogosphere might complain about the futility and practicality of Underwater Basket Weaving or Virtual Reality Gender Studies, the fact that 6 million Chinese graduated this past year being indoctrinated with Marx and Mao should give First World bloggers a moment of solace and perspective.

Now back to the comment my student said two years ago, how will this help them find a job?  To quote the WSJ, it does not:

“High-end jobs that should have been produced by industrialization, including research, marketing and accounting etc., have been left in the West,” said Chen Yuyu, associate professor at Peking University’s Guanghua School of Management. Referencing the trade name of Hon Hai Precision Industry Co.,the Taiwan-based company that makes gadgets for Apple Inc. and others in Chinese factories, he said, “We only have assembly lines in Foxconns.”

Solving the problem is complex, involving a gradual overhaul of China’s education system as well as efforts to add more service-sector jobs. China’s Ministry of Education in 2010 unveiled new guidelines pressing universities to shift away from their traditional focus on increasing enrollment. It is also experimenting with giving faculty greater say over curriculum and school operations, though universities remain tightly controlled by the Communist Party.

Oops.  By directly and indirectly interfering with curriculum, the Party planners have unintentionally outsource — re-sourced — high skilled jobs to the developed world (see also tangentially labor arbitrage).  This is not to say that there are not opportunities for say software programmers (I personally have about 10 business Chinese students at this time who work for a very large American semiconductor company as chipset and driver programmers in Shanghai) — but this is the exception rather than the rule.

And as the same WSJ article notes those graduates that do find jobs are not making big yuan:

A survey of more than 6,000 new graduates conducted last year by Tsinghua University in Beijing said that entry-level salaries of 69% of college graduates are lower than those of the migrant workers who come from the countryside to man Chinese factories, a figure that government statistics currently put at about 2,200 yuan ($345) a month. Graduates from lower-level universities make an average of only 1,903 yuan a month, it said.

Thus the next time you hear someone from the the Professional Protesting class such as the Occupy Wall Street movement complain about making a mere $10 an hour at Walmart, kindly explain to them that college graduates in the worlds 2nd largest economy make less than $3 an hour despite increasingly higher costs of living — which is another anecdote I can vouch for (seeing as hundreds of my former students have now graduated and began their sobering careers).

One last note

Chinese students wishing to further their education via graduate school on the mainland are required to take another lengthy entrance examination (akin to the original gaokao) in which a students knowledge of Marx and Mao are again tested.  A foreign colleague of mine has a Chinese wife who bitterly complained about having to take those portions of the test simply to apply to a grad program in translation and interpretation.  Several of her other, talented friends opted out and instead used guanxi to get government jobs.

Which brings me to this slight twist of fortunes: do you know what the #1 desirable job is now in China?  According to a recent survey from ChinaHR: working for the government — for the old fashioned Iron Rice bowl (tie fan wan) once again.