"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper which should have been gold, are a token of honor -- your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money." ~ Ayn Rand
What If the Sky Falls?
Exclusive to STR
As Alex Knight reminded us a few months ago, there are those who say the present recession will get worse, ending perhaps in a general breakdown of society complete with food riots and martial law; and last week an STR reader poll revealed that as many as 85% of us think that the March stock market bottom was not the bottom at all, that the Dow will go lower yet after what may now be just a "dead cat bounce." So while conservatives like Larry Kudlow are joining the Obamatons in trying to whip up optimism as if wishing everything would be fine will make it so, most of us here are not convinced.
Perhaps that majority is right, about stocks. This site compares the Dow at present to the Dow in the 1930s, and it's clear that the trough then came three years after 1929, at under 25% of the peak; the 2007 peak was at 14,000, so if the present chaos follows the same pattern, we can expect a Dow of less than 3,500 in 2010. I'm not at all sure that it will (I was among the poll respondents who thought March had shown the worst of it), but it might. What, then, if it does; what will happen if the sky does fall and supplies of food and fuel fail?
Chaos will result, of course, and government people will call it "anarchy," but as usual will be dead wrong. Chaos ` Anarchy, and the sooner we get that word out, the better. Chaos describes a situation in which stimuli fail to produce the rationally expected responses; we order pizza but it fails to arrive, we book a flight but it never takes off, we board a train but it fails to run, we stop for gas but have to wait an hour, we exercise basic human rights but they are trampled, we seek justice but it is denied, we earn money but it is stolen, and so on. Chaos comes in degrees; we already experience a substantial amount of chaos because extortion and violence are routinely practiced by government, and if the sky does fall, that chaos will simply get much worse.
Governments create such chaos, as an integral and normal part of their everyday activities; it's what they do, and they do nothing else. Their whole purpose is to over-rule agreements that would otherwise be made freely among people--and if it weren't so, they would have no raison d''tre. It's done every day in every way. You might agree to buy a house, but government prohibits that transaction unless you also agree to pay it an annual tribute. You might choose to exchange your labor for a wage, but government negates that agreement by seizing a portion of the wage. You might offer to buy a table and some plates, from which to eat a meal; but government (in most states) prohibits that exchange unless you pay it a percentage--as in any protection racket. Etc., etc. ad nauseam; distortion intrudes everywhere, and the result is chaos, small or great.
A prominent recent example is that in order to favor those who were unable to qualify for a mortgage (but who could certainly vote, in considerable numbers) government ruled that loans be granted anyway. The lenders had to obey, but they naturally made sure to spread the resulting risk as widely as possible, so that when the defaults kicked in, there would be a systemic failure (which government would have to "rectify" with bailouts) instead of just local failures of a few lenders (which government might ignore or even punish). The result as we all know has been to bring the world to the brink of major chaos; at this writing it's not clear whether the chaos will deepen and be prolonged as it was in the 1930s and early '40s, or whether this time we shall dodge the bullet.
In contrast, "anarchy" is, as we know, the "absence of a ruler." There will be rules in a free society, but they will be set not by some rule-setter and -enforcer, just by agreement between two or more parties. No king, no oligarchy, no republic, no democracy, no dictatorship of the people; no ruler. Zip.
In no case in history was major chaos followed by a dissolution of government, i.e., anarchy.
The contrary is and has always been the case. Currently, whether the looming breakdown is avoided or not, government will have greatly increased its powers; by even more control of money and banking--perhaps by nationalization here as well as in other countries--and by effectively nationalizing the car trade. General Motors, which at one time was synonymous with American efficiency and prosperity, has already been handed over to union control as an enterprise for paying pensions and wages at bloated rates, while incidentally producing a few vehicles. In other historical examples, it's been much worse yet.
Take for example the events in France in the late 18th Century. For the previous several hundred years, government had kept ownership of the only main source of production (land) firmly in the hands of a favored few, and that favored few had spent the resulting loot on baubles with callous disregard for those who labored to produce it. In essence (just change the titles), this is what the US government did in the 1930s and may yet do again in the coming decade--but in 1789, the French system collapsed. Louis XV had tried to print money in a scheme designed by John Law, and then his grandson Louis XVI tried to pretend that all was well by having the Swiss financier Jacques Necker write Compte Rendu to say so, just as Bernanke and friends assure us today that their system is fundamentally sound. So His Majesty gave up, and summoned parliament for the first time in 175 years, to sort out the mess.
Members responded by removing his head, and that of every aristo they could lay hands on, in one of the bloodiest revolutions ever; that still (as we could have predicted) did nothing to balance the government's budget or increase the production of useful goods like bread. But eventually they did end the chaos by invading every other country within reach and stealing its produce--the Emperor Napoleon was no less an Emperor than the Royals he had displaced. Such was the chaos that one government produced, and such was the government that the chaos produced; but despite the liberating ideas of the Enlightenment in the half-century preceding 1789, there was never a question of the chaos leading to anarchy, as properly defined above.
The chaos produced by another ignorant Royal ruined Russia in 1917--and even though several prominent members of his society openly called themselves "anarchists," that too led only to more and different government. That particular chaos was one of military defeat. Nicholas II's government not only waged a needless war from 1914, it could not even operate that war by supplying its soldiers with arms and equipment. Total economic collapse resulted, and the Germans would have swept through St. Petersburg as conquerors had they not been so heavily preoccupied on their Western front. In the event, Bolsheviks took advantage of the chaos as we know, and formed a government even more brutal than the Czar's and ran it for seven decades. Thus again: government led to chaos, and chaos led to yet more government, and anarchy never got a foothold.
Military catastrophe overtook Germany too, a year later, and very nearly led to total chaos during the British naval blockade that forced the government to accept the peace terms dictated in Versailles . Arguably, such chaos was postponed until 1923, when government money became worthless and wages were wheeled home in barrows. Arguably too, that chaos led eight years later to a much worse government that eventually triggered WWII, by destroying those who had prudently saved money--the backbone of society and the only source of genuine investment. Once again, government led to chaos that led to more government. Anarchy was never on the menu.
If the present US government should, as quite widely anticipated, produce a breakdown of society here in the coming months or years, so that mobs riot for food and fuel and martial law operates and dollars depreciate to confetti, will it produce anarchy? On the above and all other precedents I can think of, it most surely will not. Instead, the chaos will produce more, and worse, government.
Why? Because in the extreme circumstances of societal chaos, people are desperate for the necessities of life; food, water and, in winter at least, shelter. If the supermarket is closed, they will loot or die; the need to survive is paramount. Further and more significantly, they will not ask for or try to establish an orderly market society through which food, drink and shelter can be produced, sold and bought with an ample and smooth-flowing supply because they will not have any idea that that is what is needed. Being the products of seven generations of government schooling, they will suppose that such basic needs (at least) are magically provided by government from its money tree, and so will loudly demand strong government, to "restore order" (ha!) and to command the economy to produce goods, and to deliver them post haste, using whatever force may be needed. Like Napoleon.
It's therefore a mystery to me why some "The Sky is Falling!" folk, who seem in some ways to oppose the present r'gime of increasing government control of society, should apparently relish the possibility of a collapse of its system of paper money and all it pays for, as if in some way that collapse would increase the degree of freedom we enjoy. All precedent says the exact opposite--that it would augur nothing but an increase in fascism, while removing some of the pleasures that make life enjoyable. I can't explain it, but wonder if a lot of these folk are just air-headed, loudmouth losers who nurture a wish to bring everyone else down to their level of living, instead of liberating everyone to earn whatever style of life they wish.
The degree of chaos government may produce, in the coming few years, is almost irrelevant to our prospects for liberty in the slightly longer term. Yes, it will certainly affect our comforts while we wait; but no, it will neither bring E-Day forward nor push it back, or not by very much. Possibly a prolonged depression will cause more people to wonder, sooner, whether government is as good an idea as they had been taught--but it will also cause others to intensify their demand for more "leadership." Net effect, I'd say: very little.
What does matter is that whether total chaos is imminent or not, everyone in society learn well what is the true source of wealth and harmony, and therefore withdraw their labor from the service of government--in other words, that all undergo a process of radical re-education, or of de-programming from what libertarians used to call "the cult of the omnipotent state." That train has already left the station, and is running on time.