For those readers who are unfamiliar with Henry Hazlitt, he was a leading interpreter of economic issues from the point of view of American conservatism and libertarianism. He was one of the main opponents to the economics of Maynard Keynes, who argued that government spending stimulated the economy, and now represents one of the key figures in what we might call the “alternate right” in the policies of for eg Ron Paul. Unlike many conservatives nowadays who seem concerned only with their own wealth and status, regardless of the cost to others, Hazlitt represents one of those “old school” thinkers who still has a genuine concern and interest in the fate of humanity. In reading his criticisms of socialism, for example, one must keep in mind that he, like his predecessor Ludwig Von Mises, is speaking against a communist state that has fallen far from its original ideal. His writing has a clear and easy style and seems to contain a great deal of common sense. Speaking of the adverse effects of short term selfish policies that benefit one group as opposed to long term policies that would benefit everybody, he states:

Yet when we enter the field of public economics, these elementary truths are ignored. There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

“Why not live it up today? Who cares about the damage we cause because we’ll all be dead tomorrow”. Is this not the cry of the modern conservative? No doubt, if alive today Hazlitt would be horrified at the selfish hedonism of the wall street traders or the use of taxpayers money to bail out banking practices which inevitably failed because they put profit over public interest. In short, because they adopted ‘Keynesian’ style economics which tries to fix any long-term problem by increasing government spending. In his own words;

…the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that ‘policy not merely for one group but for all groups.

Needless to say, many conservatives today have been reduced to such levels of stupidity that they would claim such an aim to be ‘socialist’ (as if this were an evil unto itself) and even dismiss Hazlitt himself as one. In any normal society we could and should rightfully ignore this level of narrow mindedness, but the combination of an ‘MTV Ejukation’ and democracy is making this increasingly difficult. Here’s what Hazlitt says on the issue:

It is often sadly remarked that the bad economists present their errors to the public better than the good economists present their truths…But the basic reason for this ought not to be mysterious. The reason is that the demagogues and bad economists are presenting half-truths. They are speaking only of the immediate effect of a proposed policy or its effect upon a single group.

The “demagogue” he might have been predicting was not a socialist as he suspected but a member of his own ranks. Ronald Reagan who, having been put into power by banking magnates like Don Regan, merely used Hazlettesque warnings against over government spending as a pretext to cut off the rich paying taxes almost entirely! And this half-truth, that the rich not paying tax somehow miraculously reduces the need for government expenditure, is one of the central ‘policies’ of the so-called conservatives to this day. Absolute madness.

It has been shown that when faced with the reasonable arguments from even ‘one of their own’ that the modern American right doesn’t hold an ounce of water. But let us forget them and turn our attention to Hazlitt himself, who is actually worthy of attention.

Referring back to his statement against preferential treatment, what Hazlitt perhaps did not foresee was that this “single group” was to be, ironically, the economists themselves. After Perestroika, modern ‘economists’ were in an ideal position to insinuate themselves into all aspects of industry and government. Whereas CEOs of histories gone by at least had a genuine interest in the product they were making, today all we see is a bunch of accountants playing musical chairs between empty brand name conglomerates. One minute they are the head of an airline company and the next they are selling deodorant to China. Wherever the profits take them. And having gained control of the media, they begin to announce that economics is the be all and end all of all human endeavour. They speak of “laissez faire economic determinism” without the slightest suspicion that it is a complete self contradiction (It is either free and unpredictable or it is determined). They speak of “economic growth” not realising that unnecessary over consumption is the very antithesis of economics, that for eg mining just to ‘keep people employed’ is unsustainable and stupid. They speak of austerity while they themselves accrue billions, of increasing employment while sacking thousands because it increases their bottom line. They refer to resources when they wish to back up the illusion of money, and money when they wish to dumbfound a critic. And so on, one logical nightmare after another. In short, they want to have their cake and eat it, which is always the sign of arrogant power. Philosophers call this a hegemonic discourse, which means a discussion which is deliberately fixed in its scope and terms to favour the ruling elite.

It might initially seem that the conservatives have lost their way not because of external socialist pressure but because they did not stick to their very own principles. Many like Ron Paul would argue, for instance, that the 2008 bailouts were not caused by socialism at all but by Keynesian style government spending. However, casting a glance back at Hazlitt’s paper, we can begin to see certain contradictions in the initial philosophy. Chapter 1 begins:

ECONOMICS is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough

in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine—the special pleading of selfish interests.

The special pleading of selfish interests. Yet didn’t he state that “The art of economics … consists in tracing the consequences of that policy not merely for one group but for all groups”? If so then it would seem that all other groups occupy their time by the pleading of selfish interests but the economist has somehow raised himself above this dog eat dog status, acting as some type of accountancy puppet master or mediator. This is the classic mistake of the classical scientist, the belief that they can analyse a system without influencing or being a part of it (Recall Heisenberg’s Uncertainty Principle). What Hazlitt did not take into account was the part that economists would play in any future economy. With hindsight, we can now direct the criticism that he himself was, albeit unconsciously, setting up economics to replace all other human thought, usurping philosophy from its rightful place and substituting it with a world of loans and interest rates. This same criticism has been levelled against Marx, that he too places to much focus on economics. Be that as it may, at least Marx was fully aware of the problem.

Many from Hazlitt’s school of thought, often referred to as the Austrian school, have criticised socialism on the grounds that it is too “utopian”. A classic example is the criticism that it is counter-factual, meaning that it treats history as a series of “what if’s?” rather than “what was”. Yet in Hazlitt’s theory not only do we find the same type of alternate histories but his entire argument rests upon them. This is not to say that we should disagree with them; on the contrary, it is the beauty of the human mind that it can imagine things other than what they are. Rather, it is meant to be a dig at the tired old cliche that socialism is “utopian” and doesn’t work rather than saying that it has been undermined. Consider for eg Hazlitt’s charming example of a common economic fallacy which he calls “the broken window”:

A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless…This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window.

Hazlitt then extrapolates from this simple example to similar false arguments by governments that wars, for example, create new industry. Rather, all that occurs is that funds, energy etc. are diverted into other industries (say, from housing into arms manufacture). One’s gain is another’s loss. In post-war periods these funds/energies must again be diverted into building new homes that were destroyed. Whereas it might seem in the short-term that the war has created a great deal of employment – a trap for unimaginative minds that can only believe what is in front of them in the “here and now” – in the long term it is merely having to rebuild what had already been built, and consequently diverting time and energy from other industries that might have emerged had the war not taken place.

Everything said thus far seems perfectly reasonable. Indeed, it leaves the arguments of the current right-wing dead in the water. All of us can imagine, for instance, a better world in which Ronald Reagan did not give all of the money to the rich, “letting the bull out of the pen” to use his childish cowboy metaphor, a world where equal work meant equal pay and so forth. Despite the American dream factory that is currently in full swing, all of us are allowed to imagine this better world without being vilified as unpatriotic or unrealistic. However, Hazlitt’s paper then takes a strange turn. For he then goes onto use this foundation to argue against government spending, essentially saying that it diverts business away from private industries that might have been had the government not increased taxes. Certainly he admits that some government spending is required to build and maintain infrastructure, the building of a necessary bridge for instance that would increase industry. Nevertheless, in addition to being somewhat obvious after what has previously been set up, this turn seems strangely non sequitur and biased in favour of private industry. Apparently, he is so bent on being anti-Keynesian that he fails to see that the argument can be given the other way around, or that the socialists might have another take on the matter. Without government, that bridge which ‘needed’ to be built would have to be relegated to a private company. Since no government regulation applies in this private ‘utopia’ then the company could charge whatever it wanted to, pay the workers as little wages as possible, and divert valuable time and energy away from other possible industries that might have been otherwise. Further, it is now wrong to say that the bridge “needed” to be build because this would be wholly a matter of opinion, the question now being “Is it in our (the company’s) interest to build this bridge? If so, how much can we profit from it?”. In other words, like all power it holds the community at ransom.

Now, in Hazlitt’s defence we must keep in mind the contemporaneous America of the 50’s and 60’s as opposed to what it has degenerated into today. Had Hazlitt witnessed the corporatization of America, the wanton destruction of small business and the quality of small business produce which he so obviously defends as opposed to the production-line garbage that is churned out just to keep people minimally ’employed’ and maintain the power of the upper class, he would have been undoubtedly horrified. In this respect, Ron Paul has a solid foundation, as opposed to Mitt Romney who is just another unqualified spoilt lackey of this useless upper class. Still, it begs the question as to whether the seeds of this destruction were unwittingly planted back then, that some small oversight has led us into this horrible alternate reality and that all we need to do is open our eyes to awaken from this American nightmare. Had Hazlitt been privy to this totalitarianism of private industry, he might have even switched sides to adopt a more fair and socialist perspective. For contrary to putative American non-opinion, socialism is neither necessarily “utopian”, at least no more than any other ideal (especially for Ayn Rand’s Capitalism; the Unknown Ideal which is complete CEO fantasy), nor is it synonymous with any form of dictatorship whatsoever since its ideal is diametrically opposed to it, a fact that Stalin, Pol Pot and Kim Jong Il all too conveniently forgot. Nor is there one form of socialism which is agreed by all. From the Wiki:

There are many variations of socialism and as such there is no single definition encapsulating all of socialism. Socialist economies differ in the type of social ownership they advocate, the degree to which they rely on markets versus planning, how management is to be organised within economic enterprises, and the role of the state in constructing socialism. A socialist economic system would consist of an organisation of production to directly satisfy economic demands and human needs, so that goods and services would be produced directly for use instead of for private profit driven by the accumulation of capital, and accounting would be based on physical quantities, a common physical magnitude, or a direct measure of labour-time. Distribution of output would be based on the principle of individual contribution.

So I ask Hazlitt. Has the capitalist economy, with it’s monetary system and profit motive, inevitably diverted all human energies away from more valuable enterprises such as caring for humanity as a whole by delivering it into the hands of bankers who’s only aim is to make fiat profits for themselves? In other words, is this problem due to faulty capitalist practices or because it is what capitalism does when left unchallenged? Be careful how you answer, for you might be charged with being utopian!