Hayek and Pinochet: Endless Love!

Someone left a link to this interesting article about Hayek’s praise of Pinochet on my last post:

Corey Robin, “Hayek von Pinochet,” Coreyrobin.com, 8 July 2012.

I was particularly struck by this remark of Hayek which, I understand, he gave in an interview to a Chilean newspaper:

“[A]s long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.”

So there we have it: when the chips are down, Hayek presumably preferred dictatorship to a state with the rule of law and a social democratic or democratic socialist economics.

One wonders whether, if in his day when pressed, he would have expressed preference for Pinochet’s Chile (where people where regularly “disappeared”) to social democratic Sweden?

By contrast, a fair point that Hayek makes is that a dictator can pursue “liberal” or laissez faire policies. This is perfectly true: Mussolini originally pursued standard free market, neoclassical policies:

“From 1922 to 1925, Mussolini’s regime pursued a laissez-faire economic policy under the liberal finance minister Alberto De Stefani. De Stefani reduced taxes, regulations, and trade restrictions and allowed businesses to compete with one another. But his opposition to protectionism and business subsidies alienated some industrial leaders, and De Stefani was eventually forced to resign.”
Sheldon Richman, “Fascism,” Concise Encyclopedia of Economics
http://www.econlib.org/library/Enc1/Fascism.html

It is perhaps with this in mind that we must view the remark by Mises on Mussolini’s fascism:

“It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”
Mises, 1978 [1927]. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 51.

All in all, you don’t see the Austrians commenting much on these disgraceful remarks by either Hayek and Mises.

Fascism and Keynesianism?

There is a tired and ignorant rhetorical trick of libertarians: to conflate Keynesianism with fascism, or the economics of fascism. There are two responses to this.

(1) First, the sleight of hand involved invoking fascism as a general system in this way is that (1) fascism is simply not the same thing as (2) a government with macroeconomic interventions. Fascism in general had these common characteristics, though not all regimes at all times:

(1) Authoritarianism and abolition of democracy;
(2) Use of violence and terror against perceived enemies in ways violating the rule of law;
(3) Extreme nationalism;
(4) Racism and racist oppression of certain minorities;
(5) Militarism.
(6) Sometimes (though not always) a higher degree of economic intervention than the regimes that preceded them.

The mixed economies after WWII have had “a higher degree of economic intervention than the regimes that preceded them,” but the belief that mixed economies are therefore “fascist” is lazy, unsound fallacious reasoning.

Libertarians rob the word “fascism” of meaning, insulting its victims, and failing to take account of the authoritarian, violent, militaristic nature of fascism and its history of war crimes and mass murder.

Calling for macroeconomic interventions to stabilise an economy is in no sense calling for fascism, nor can one claim that a modern Keynesian state is “fascist” merely on account of one trait: some degree of state intervention in the economy.

The fallacy involved here is arguably an insidious form of the fallacy of composition and hasty generalization, and it is easily illustrated. Augusto Pinochet would have called himself a supporter of the “free market” – and indeed he implemented a Friedmanite neoliberal program. Yet he ran Chile as a right wing military dictatorship. By using the same general type of contemptibly stupid libertarian illogic, we can now declare the following

(1) A communist state has nationalised industry;
(2) Augusto Pinochet’s Chile (1973–1990) had a nationalised industry called CODELCO (National Copper Corporation of Chile);
(3) Therefore Augusto Pinochet’s dictatorship was communist.

The error here is that something that is true of a part is not necessarily true of the whole: there is similarity between communism and Augusto Pinochet’s dictatorship in that both had at least one nationalized industry; but just because Augusto Pinochet’s regime had a nationalised copper company does not mean it was communist.

The charge that Keynesianism must be fascist, merely because both a Keynesian system and fascism have some degree of government economic intervention is just as illogical and unsound.

(2) Moreover, it is not even true that fascism had one, consistent universal economic system. There was diversity within fascist economics and at least two fascist states were essentially laissez faire on economics, as follows:

(1) Mussolini originally pursued standard neoclassical laissez faire policies:

“From 1922 to 1925, Mussolini’s regime pursued a laissez-faire economic policy under the liberal finance minister Alberto De Stefani. De Stefani reduced taxes, regulations, and trade restrictions and allowed businesses to compete with one another. But his opposition to protectionism and business subsidies alienated some industrial leaders, and De Stefani was eventually forced to resign.”
Sheldon Richman, “Fascism,” Concise Encyclopedia of Economics
http://www.econlib.org/library/Enc1/Fascism.html

(2) The Austro-fascism party of the Dollfuss and Schuschnigg regime in Austria pursued deflationary, neoclassical policies to a considerable extent:

“In tackling the economic crisis the Dollfuss-Schuschnigg dictatorship pursued harsh deflationary policies designed to balance the budget and stabilize the currency. The government’s program featured severe spending cuts, high interest rates, and frozen wages. ... In a sense the Christian Corporative regime demonstrated the viability of the Austrian state, but it did so at the cost of alienating a majority of the Austrian people. On the eve of Anschluss a third of the population was still out of work, while those fortunate enough to have jobs were bringing home paychecks considerably smaller than before the Great War.” (Bukey 2000: 17).

The laissez faire traits of Austro-fascism should came as no surprise when we realise that none other than Ludwig von Mises was an economic adviser of the Austro-fascist dictators.

Engelbert Dollfuss had been a member of the Austrian Christian Social Party, and became Chancellor of Austrian in 1932. In March 1933, Dollfuss took advantage of the political turmoil in the Austrian parliament, effectively abolished democracy, and established an authoritarian regime. While Dollfuss was an opponent of the Austrian branch of the Nazi party (the Austrian National Socialists or DNSAP), he banned other political parties and established his own peculiar fascist political alliance called the “Patriotic Front” (Vaterländische Front), which included the Christian Social Party and other nationalists and conservatives. Dollfuss was assassinated in July 25, 1934 by Austrian Nazis, but was succeeded by Kurt Schuschnigg, who was Chancellor from July 1934 to the Anschluss in March 1938.

Around March 1934, Mises moved to Geneva, Switzerland, where he taught at the Graduate Institute of International Studies. However, he continued to visit Austria in subsequent years, and still worked part time for the Vienna Chamber of Commerce (Hülsmann 2007: 684). Before 1934 Mises had become an adviser to Dollfuss (see Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997).

Even as late as autumn 1937 Mises considered returning to Austria to work for the Austrian Chamber of Commerce full time (Hülsmann 2007: 723), and only finally fled Austria permanently on one of his regular visits in March 1938 before the Nazi takeover. Hans-Hermann Hoppe, one of the Austrian apologists for Mises, tells us, quite shamelessly, that Mises was a close adviser of Dollfuss:

“Engelbert Dollfuss, the Austrian Chancellor who tried to prevent the Nazis from taking over Austria. During this period Mises was chief economist for the Austrian Chamber of Commerce. Before Dollfuss was murdered for his politics, Mises was one of his closest advisers.”
Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997
http://mises.org/freemarket_detail.aspx?control=137

Can you imagine what Austrians would say if Keynes had been “one of [the] ... closest advisers” of some fascist dictator?

But I will leave open the question of to what extent Mises was advising Dolfuss to undertake the actual polices he implemented.

But we can also quote from J. G. Hülsmann’s biography of Mises:

“Mises later said that it was the growing power of the Nazi party in Austria that prompted him to leave the country. With this remark, he did not refer to the government of Engelbert Dollfuss, which had reintroduced authoritarian corporatism into Austrian politics to resist the socialism of both the Marxist and the Nazi variety. Mises meant the Austrian branch of the National Socialist German Workers Party, which enjoyed strong backing from Berlin and fought a daily battle to conquer the streets of Vienna. Dollfuss’s authoritarian policies were in his view only a quick fix to safeguard Austria’s independence—unsuitable in the long run, especially if the general political mentality did not change” (Hülsmann 2007: 683–684).

Now if you think that fascism is a “quick fix” for your country, despite opposing it on other occasions and later in life, it is clear your attitude is ambiguous, at say the least.

If correct, then Mises saw Dollfuss’s fascism in much the same way as Mussolini’s fascism: as an “emergency makeshift.” This is completely consistent with Mises’s praise of Mussolini’s fascist regime in 1927 and fascism as a general movement in
Liberalism: A Socio-Economic Exposition (2nd edn; 1978 [1927] trans. R. Raico):

“So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error” (Mises 1978: 51).

A final point: there is absolutely no contradiction in saying that

(1) Mises in other places and later in life opposed fascism and
(2) here in Liberalism: A Socio-Economic Exposition (2nd edn; 1978 [1927] trans. R. Raico) heaped the most vile praise on Mussolini’s fascism.

And Mises wrote this in 1927, years after Mussolini took power in 1922, when the dictator had been using violence and coercion to maintain his rule, long after any threat from communism (real or imagined) had been dealt with.


MY POSTS ON MISES AND FASCISM

For further reading, see here:

“Mises on Fascism in 1927: An Embarrassment,” October 27, 2010.

“Keynes’s Opinion of Communism and Marxism,” August 22, 2011.

“Mises the Hypocrite: When Reality Trumps Praxeology,” March 8, 2011.

“Keynes’s Remarks in the German Edition of the General Theory,” June 7, 2011.

APPENDIX: FASCISM IN EUROPE
These are the major fascist regimes in Europe in the 1920s and 1930s:

(1) Italy under Mussolini from 1922.

(2) Austria under Dollfuss (who began ruling by decree in 1933).

(3) Spain under the Falange (formed in 1933), began fighting in 1936;

(4) Portugal under Antonio Salazar from 1933.

(5) Germany under the Nazi party. Hitler became Chancellor in 1933.

(6) Hungary under the Scythe Cross (formed 1931): in 1932 Gyula Gombos, a fascist, became Prime minister.

A full understanding of the economics of fascism would require a careful examination of the economics of all these fascist nations. As we have seen, at least two of them pursued laissez faire: Austria and Italy (at least in the early part of the regime).

BIBLIOGRAPHY

Bukey, Evan Burr. 2000. Hitler’s Austria: Popular Sentiment in the Nazi Era, 1938-1945, University of North Carolina Press.

Hoppe, Hans Hermann. 1997. “The Meaning of the Mises Papers,” Mises.org, April.
http://mises.org/freemarket_detail.aspx?control=137

Hülsmann, J. G. 2007. Mises: The Last Knight of Liberalism, Ludwig von Mises Institute, Auburn, Ala.

Mises, L. von, 1927. Liberalismus, G. Fischer, Jena.

Mises, L. von, 1978. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas.

Keynes’s Remarks in the German Edition of the General Theory

Rothbard accused Keynes of having a “strong fascist bent” (Rothbard, “Keynes, the Man”), but the only evidence for this consists in a passage he cites written in the introduction to the General Theory for German audiences in 1936. This passage in the foreword to the German edition of the General Theory has provoked hordes of rubbish about Keynes. Here is what Keynes actually said:

“The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions. Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced. For the theory of psychological laws which bring consumption and saving into relationship with each other, the influence of loan expenditures on prices, and real wages, the role played by the rate of interest—all these basic ideas also remain under such conditions necessary parts of our plan of thought.”

This is in no sense (1) an endorsement of fascism, (2) support for fascism or (3) praise for fascism.

The real meaning of the passage is described by L. Wattel:

“In this statement Keynes does not say that his theory is more applicable to a totalitarian state than to a democratic state. What Keynes says is that his macroeconomic theory of output as a whole is more easily adapted to a totalitarian state than is classical microeconomic theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire. The distinction is an important one. Keynes is comparing the usefulness of micro and macro theory in a totalitarian state. He is not comparing the usefulness of his macro theory in a totalitarian state with its usefulness in a democratic state.”
Harold L. Wattel, The Policy Consequences of John Maynard Keynes, p. 119.

And, of course, Keynes did not support totalitarian regimes, but rejected fascism and supported democracy and liberal political values.

Daniel Kuehn also debunks the myths abut the passage here:

Daniel Kuehn, “Keynes’s Foreword to the German Edition of the General Theory,” July 2, 2010.

But suppose, for the sake of argument, that Keynes did praise fascism (even though he never did any such thing), that is still irrelevant to the question whether his economic theory in the General Theory is right, and it would be nothing but an ad hominem argument to dismiss the General Theory because of some remark or personal view of Keynes that was immoral.

In contrast, here is Mises actually praising fascism:

“It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”
Mises, 1978 [1927]. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 51.

Nor should we forget that before 1934 Mises had become an economic adviser to the Austrian fascist Engelbert Dollfuss, even a close adviser, according to Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997.

If anyone is a candidate for having (in Rothbard’s words) a “strong fascist bent,” then it would be Mises, not Keynes.

Moreover, is Mises’s praxeology and economics discredited because of his disgraceful views on fascism? Actually, no, his praxeological arguments will stand and fall on their own merits, irrespective of Mises’s idiotic views on fascism. The same can be said of Keynes’s General Theory, but the foreword of Keynes, contrary to Austrian polemic, is no endorsement of fascism at all.


BIBLIOGRAPHY

Dillard, D. 1985. “The Influence of Keynesian Thought on German Economic Policy,” in H. L. Wattel (ed.), The Policy Consequences of John Maynard Keynes, M.E. Sharpe, Armonk, N.Y. 116–

Rothbard, M. 1992. “Keynes, the Man,” in M. Skousen (ed.), Dissent on Keynes: A Critical Appraisal of Keynesian Economics, Praeger, New York and London. 171–198.

Schefold, B. 1983. “The General Theory for a Totalitarian State? A Note on Keynes’s Preface to the German Edition of 1936,” in J. C. Wood (ed.), John Maynard Keynes: Critical Assessments (vol. 3), Croom Helm, London.

Wattel, H. L. 1985. Policy Consequences of John Maynard Keynes, M.E. Sharpe, Armonk, N.Y.

Mises on Fascism in 1927: An Embarrassment

Ludwig von Mises was a lifelong advocate of Classical liberalism, and he opposed socialism, Marxism and other totalitarian systems. It is perfectly clear that Mises was a strong opponent of authoritarian regimes, and never directly supported such systems. It is necessary to stress this fact.

But in 1927 Mises published a book in German called Liberalismus (Gustav Fischer Verlag, Jena). I quote from the 1978 edition called Liberalism: A Socio-Economic Exposition (Mission, Kansas, 1978). In this book, Mises gives a negative and critical summary of the characteristics of 1920s European fascism (and, to be fair, this was before the horrors of 1930s Nazism). Mises principally has in mind the Italian fascism of Benito Mussolini, who had become Prime Minister of Italy in 1922.

Mises notes the violent and murderous nature of revolutionary socialism in the Third International (pp. 47–49), and contends that fascism arose as a response to these tactics. Yet for Mises, “the great danger threatening domestic policy from the side of fascism lies in its complete faith in the decisive power of violence” (p. 50). Mises even notes that ideas are more important weapons than violence, and that classical liberalism is the “only one idea that can be effectively opposed to socialism” (pp. 50–51).

How surprising it is, then, to read this conclusion to Mises’ section on fascism (I include the original German):

“Soviel über die innerpolitische Stellung des Faszismus. Daß er außenpolitisch durch das Bekenntnis zum Gewaltprinzip im Verhältnis von Volk zu Volk eine endlose Reihe von Kriegen hervorrufen muß, die die ganze moderne Gesittung vernichten müssen, bedarf keiner weiteren Ausführung. Der Fortbestand und die Fortentwicklung der wirtschaftlichen Kultur der Gegenwart verlangen Sicherung des Friedens zwischen den Völkern. Die Völker aber können sich nicht vertragen, wenn sie von einer Ideologie beherrscht werden, die glaubt, durch Gewalt allein die Stellung des eigenen Volkes im Kreise der Völker sichern zu können.

Es kann nicht geleugnet werden, daß der Faszismus und alle ähnlichen Diktaturbestrebungen voll von den besten Absichten sind und daß ihr Eingreifen für den Augenblick die europäische Gesittung gerettet hat. Das Verdienst, das sich der Faszismus damit erworben hat, wird in der Geschichte ewig fortleben. Doch die Politik, die im Augenblick Rettung gebracht hat, ist nicht von der Art, daß das dauernde Festhalten an ihr Erfolg versprechen könnte. Der Faszismus war ein Notbehelf des Augenblicks; ihn als mehr anzusehen, wäre ein verhängnisvoller Irrtum” (Mises 1927: 45).

“So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error” (Mises 1978: 51).

For all of his denunciation of, and opposition to, Fascism both here and elsewhere, and his correct prediction that fascist aggression would lead to war, Mises still wrote that “fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.”

How wrong Mises was. Having correctly noted that fascism’s foreign policy was based on the “avowed principle of force in international relations” and that this would cause disastrous wars, Mises still declares that fascism was “full of the best intentions.” How often have Marxists made this sort of defence of communism despite all the evils of the Soviet Union?

In another passage, Mises contended that the violence and authoritarianism of fascism had been provoked by the equally violent and brutal nature of revolutionary socialism:

“The deeds of the Fascists and of other parties corresponding to them were emotional reflex actions evoked by indignation at the deeds of the Bolsheviks and Communists. As soon as the first flush of anger had passed, their policy took a more moderate course and will probably become even more so with the passage of time” (Mises 1978: 49).

Mises was ridiculously wrong about fascism moderating “with the passage of time.” On the issue of fascism in these passages, he was a hypocrite, and, at best, naïve. At worst, what was he? Well, I will leave that up to readers to decide.

While this certainly does not mean that Mises directly supported fascism and fascist ideology (and please note that I am not saying this), his astonishingly positive remarks about fascism in the 1920s cannot be wished away. Frankly, these comments are an utter embarrassment and disgrace to Mises.

Now does all this prove that Mises’s extreme free market economics are wrong, merely on the basis of his contemptibly stupid views on fascism? Of course not. To argue so would be an unsound ad hominem argument, as invalid as the lazy Austrian ad hominem attacks on Keynes (Rothbard’s “Keynes the Man” stands out as a particularly egregious example). But it certainly does not reflect well on Mises’s personal opinions and the morality and consistency of his political views.

MISES AND THE AUSTRO-FASCISM OF DOLLFUSS
An interesting addendum to the post above is Mises’ attitude to the fascist regime that took over Austria in 1933.

Engelbert Dollfuss had been a member of the Austrian Christian Social Party, and became Chancellor of Austria in 1932. In March 1933, Dollfuss took advantage of the political turmoil in the Austrian parliament, effectively abolished democracy, and established an authoritarian regime. While Dollfuss was an opponent of the Austrian branch of the Nazi party (the Austrian National Socialists or DNSAP), he banned other political parties and established his own peculiar fascist political alliance called the “Patriotic Front” (Vaterländische Front), which included the Christian Social Party and other nationalists and conservatives. Dollfuss was assassinated in July 25, 1934 by Austrian Nazis, but was succeeded by Kurt Schuschnigg, who was Chancellor from July 1934 to the Anschluss in March 1938.

Around March 1934, Mises moved to Geneva, Switzerland, where he taught at the Graduate Institute of International Studies. However, he continued to visit Austria in subsequent years, and still worked part time for the Vienna Chamber of Commerce (Hülsmann 2007: 684). It is claimed that before 1934 Mises had become an adviser to Dollfuss (see Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997). Even as late as autumn 1937 Mises considered returning to Austria to work for the Austrian Chamber of Commerce full time (Hülsmann 2007: 723), and only finally fled Austria permanently on one of his regular visits in March 1938 before the Nazi takeover. I quote from J. G. Hülsmann’s biography of Mises:

“Mises later said that it was the growing power of the Nazi party in Austria that prompted him to leave the country. With this remark, he did not refer to the government of Engelbert Dollfuss, which had reintroduced authoritarian corporatism into Austrian politics to resist the socialism of both the Marxist and the Nazi variety. Mises meant the Austrian branch of the National Socialist German Workers Party, which enjoyed strong backing from Berlin and fought a daily battle to conquer the streets of Vienna. Dollfuss’s authoritarian policies were in his view only a quick fix to safeguard Austria’s independence—unsuitable in the long run, especially if the general political mentality did not change” (Hülsmann 2007: 683–684).

If correct, then Mises saw Dollfuss’s fascism in much the same way as Mussolini’s fascism: as an “emergency makeshift.”

BIBLIOGRAPHY
Hülsmann, J. G. 2007. Mises: The Last Knight of Liberalism. Ludwig von Mises Institute, Auburn, Ala.

Mises, L. von, 1927. Liberalismus. G. Fischer, Jena.

Mises, L. von, 1978. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico). Sheed Andrews and McMeel, Mission, Kansas.