10 Aug 2009

Anarchy and Iraq: Murphy Responds to Gonzalez

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In a recent article on Free Advice, Iraq vet Edward Gonzalez explained how his experience with “anarchy” in Iraq made him doubt the armchair theorizing from people like Murray Rothbard and me. Obviously, I have been running Gonzalez’s articles because he is quite possibly the only human on Earth who:
(a) Saw combat in Iraq,
(b) Is conversant with Austrian and libertarian theory,
(c) Is willing to blog about it.

Below I give my quick response to Gonzalez. –RPM


Anarchy and Iraq: Murphy Responds to Gonzalez
By Robert P. Murphy

When I talk about “market anarchy,” that is shorthand for a society in which most people respect each other’s property rights. There are still robberies, rapes, and homicides, of course, but they are relatively rare. Most Americans would say, “So we’re currently living in market anarchy?” No, we’re not, because the typical FBI crime statistics don’t include taxes as part of how much is stolen every year in America. I am also pretty sure a city’s homicide rate doesn’t include people who were killed by police officers. For example, imagine what Waco’s crime stats would look like, if a private gang had surrounded a building and burned everyone inside alive. I haven’t actually verified this, but I’m betting if you get your hands on the crime statistics for Texas, you won’t see a big spike in 1993.

So anyway, that’s why our society today is actually infested with crime, and the respect for property rights in America (and all other “civilized” countries) is actually paper thin and lukewarm. People tell their kids “Don’t steal,” but to avoid hypocrisy they need to add “…unless you’re at least 18 and you can convince 50% of those who turn out on election day to agree with you that stealing is OK under certain conditions.”

A society existing in market anarchy would be one in which people really meant it when they told their kids, “We live in a civilized society where there are rules. We don’t get to break those rules, even in an emergency. In fact, the rules are there precisely for those emergencies, when we otherwise might lose our heads and do something foolish.”

Now obviously, the academic proponents of market anarchy aren’t predicting that such a hypothetical society will spontaneously come into existence so long as people have brains. If that were our prediction, we would obviously be completely contradicted by almost all of recorded history.

No no, what I tried to do in this pamphlet [.pdf] was show that a society committed to true respect for property rights–if it were big enough–would be sustainable. And in fact, the requirements necessary for such a society to survive, would be much less than the comparable requirements for a group of people who were statists.

So yes, a group of 15 Rothbardians who declare themselves “free men” on a yacht are not going to repel the US Navy. But by the same token, 15 democrats on a yacht who vote in a president and a bicameral legislature, who then levy income taxes on the remaining 2 guys in the yacht’s private sector, will also not be able to repel the US Navy. Surely I have not just proved the impracticality of both market anarchism and democracy.

So what I’m saying is that as you make the contest fairer and fairer, then the free people (of comparable population, wealth, technology, etc.) will be able to repel the US military much earlier than their equivalent statist counterparts.

And as far as domestic affairs go, the same holds: It’s true that no matter the institutional arrangements, a society composed of cannibals, and imbued with a fear of machinery, is not going places. Even a society of Rothbardians would not do well by any objective measure, if those Rothbardians all just so happened to be cannibals and Luddites. But again, a group of Trotskyites who were similar in all other respects, would die off almost overnight.

Now as far as Iraq goes, it’s not clear to me that it has relevance to the claims I’m making above. What follows will be a very simplistic summary, and I hope Gonzalez will correct any misconceptions I have. But here is my understanding of what happened in Iraq:

First, there was a functioning government in the Nation-State sense of the term. The population grew up with government-provided legal and police services. The people would naturally think this was a government function, and obviously no one would have any experience in running a private competitor.

The US military comes in and literally destroys all government institutions. With US soldiers patrolling the streets, any Iraqi male walking around with a weapon could legitimately fear being shot on sight.

Once it was clear that Saddam’s rule was finished, and that the US forces were unstoppable, everyone with any lick of sense in the entire country knew that the Americans would install a friendly regime. That was the whole point of the invasion, after all. Had it even occurred to a single Iraqi in the entire country to try to start up a business selling defense services, he quickly would have scrapped the plan when he realized, “If nothing else, the American tanks would come up to my business office and demolish it.”

So I really don’t see why the lack of Rothbardian entrepreneurs constitutes even a challenge to the intellectual arguments for market anarchy.

People at libertarian events will say stuff like, “If you could press a button and eliminate government, would you do it?” The idea is to see how hardcore the other guy is. Like, only a wuss who drinks Bud Light would say, “Nah, I think we should first put in the Fair Tax and pay off holders of US Treasurys.”

But I think that’s a goofy question, like saying, “I’m not going to tell you what it does, but would you press a green button if I presented it to you–and you knew it was real?”

For example, if the button gets rid of the government by having Martians show up and disintegrate them, then no freaking way would I push it. The people running the political parties–who aren’t actually politicians, so presumably they’d be spared the zapping–would organize emergency elections, that were rigged to install the people they wanted running the country. They’d then use the aliens as an excuse to declare martial law and seize 50% of everyone’s wealth to fund the Giant Laser.

On the other hand, if the button somehow gets everyone to voluntarily agree that Rothbard was right, then heck yes I would press it. Except, I don’t think such a button is possible; I don’t know what it would mean to make someone truly agree with my case if I got the consent via pushing a button.

In closing, let me ask you to imagine “anarchy” breaking out because of a natural disaster. Let’s say for example that during a police parade there is an earthquake, and everyone in the city realizes the next day that 99% of the police got wiped out, and that the rockslides will prevent the National Guard from getting in for days.

Now if this happened in Austin, those people would be fine. If it happened in the Bronx, maybe not. I think people in Northern big cities can’t imagine market anarchy working, because their populations have been conditioned by the distortions from their interventionist governments. In the South, in contrast, people can definitely trust that their neighbors won’t suddenly pull up with shotguns just because the sheriff died.

Robert P. Murphy holds a Ph.D. in economics from New York University. He is the author of The Politically Incorrect Guide to the Great Depression and the New Deal (Regnery, 2009), and is the editor of the blog Free Advice.

10 Aug 2009

Krugman vs. Murphy on the Economy: Two Men Enter, One Man Leaves

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Back at the end of May, I was really excited when Paul Krugman wrote that inflation wasn’t going to be a problem anytime soon. Up until then, Krugman and my forecasts had been basically the same; I thought the huge deficits, power grabs, and monetary injections were going to wreck the economy, whereas Krugman had been saying the timid deficits, insufficient power grabs, and wussy monetary injections were not enough to save the economy from the reckless Bush policies. In other words, even if my predictions (prior to Krugman’s May 29th article) came true, Krugman could have justifiably claimed vindication as well. So that’s why his unambiguous “the people who are calling for inflation are liars or stupid” column was so pleasing to me.

In a similar vein, I am happy that yesterday Krugman came out and officially predicted that we are not in the beginning of the Great Depression II. Since I think we definitely are, this is yet another way to separate the economist from the ideological hack. (And oh oh oh I hope I end up being the economist. If I’m the sellout I’m not nearly as famous and rich as I should be.)

10 Aug 2009

News Anchors Heart Big Government

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I liked this line:

“The mainstream media talks about government like Patriots fans talk about Tom Brady or Colts fans talk about Peyton Manning.”

10 Aug 2009

My Interview With Q1 Publishing on…the Great Depression

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This interview was taped over the phone, and then they typed it up. So that’s why my answers are so conversational…

10 Aug 2009

Murphy vs. Madrick: A One-Night Pay Per View Extravaganza

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The issue is the New Deal. We go two rounds. I haven’t even read Jeff Madrick’s final response yet; for all I know he wins by KO.

I’ll let you guess the sides of the debate. (Here’s a hint: Madrick has a book titled, The Case for Big Government.)

If you want to grab a folding chair and join the fun, here is a forum for further comments on the debate.

09 Aug 2009

Fed Already Monetizing the Debt

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Chris Brunner sends along this sobering report (via Karl Denninger via ZeroHedge). Chris Martenson did some sleuthing with CUSIPs and (apparently) discovered that the Fed just bought 47% of the fresh Treasury debt that was issued the week before!

Good grief! Just last week, when the auction results were announced it was trumpeted to great fanfare that there was “more than sufficient” bid-to-cover, “strong demand” and all the rest.

And now it turns out that 47% (!) of the bonds that were taken by the primary dealers in that auction have been quietly bought by the Fed and permanently secreted to its balance sheet.

They didn’t even wait a full week! A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using “primary dealers” and “POMOs” and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.

The speed of the shell game is accelerating.

This immediate repurchase of newly auction bonds by the Fed tells us that demand for these bonds is not nearly as high as advertised, and that things are not quite as strong as represented.

And guess what? This week the Treasury plans on selling almost $100 billion in new debt. I bet they’ll find some takers…

09 Aug 2009

Peter Schiff Gets Hugs & Kisses on The Ed Show

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People had been complaining about this interview at LRC, but I didn’t realize how bad it was. If you watch, say, the first three minutes, that’s a good sample of the whole thing.

I think that interview will actually help Schiff a lot. It will first of all toughen him up for if/when he debates Dodd. Beyond that, I can’t imagine someone who was convinced to vote against Schiff because of this host’s shenanigans, was actually going to vote for Schiff.

09 Aug 2009

Attacking Anarchy

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My former star pupil Gennady Stolyarov II repays my kindness by criticizing Rothbardian anarcho-capitalism (what I call “market anarchy” [.pdf]). In the below article, guest blogger Edward Gonzalez also takes me to task. I would be nervous, if I weren’t right.–RPM


Questioning Market Anarchy
by Edward Gonzalez

After a seven month tour in Iraq fighting an insurgency, it became obvious to me that much of what I had been taught in school about government, law, and economics was utter nonsense. I returned home with a simple model in my mind and began picking up books, trying to find academics whose theories matched what I had witnessed. It took a while but I eventually found the Austrian School and have been a self taught student this past year. I will admit that I am a novice and do not fully understand all the intricacies of the theories, but so far, everything I have read by Ludwig von Mises holds true to the reality that I witnessed. Much of what Murray Rothbard wrote also holds true, but not all of it. I have recently read Rothbard’s “Anatomy of the State” and For a New Liberty, and Robert Murphy’s Chaos Theory [.pdf]. Here I will point out where I agree with the theory of market anarchy but also where I believe the theory departs from the reality of human nature. I hope to give specific examples of why I believe the theory is flawed and give Dr. Murphy a chance to correct me if I simply do not understand the theory in full.

First, I concede to all the economic theories and arguments. The free market is certainly the most efficient way to provide goods and services to people. However, the utilization of force against human beings is different and to treat it like any other service in the market economy is contrary to human nature.

In “Anatomy of the State,” Murray Rothbard said,

One method of the birth of a State may be illustrated as follows: in the hills of southern “Ruritania,” a bandit group manages to obtain physical control over the territory, and finally the bandit chieftain proclaims himself “King of the sovereign and independent government of South Ruritania”; and, if he and his men have the force to maintain this rule for a while, lo and behold! a new State has joined the “family of nations,” and the former bandit leaders have been transformed into the lawful nobility of the realm.

I can personally attest to the reality of this scenario. In one town I operated in, all doings were under the control of an Iraqi Police Colonel. In the first year of the American invasion, that small city was thrown into chaos. There was a great deal of crime, vendetta killings, etc. A former sergeant from the Saddam era Iraqi Army was the toughest criminal around and, one by one, defeated the other gangs until he controlled the area. He declared himself in charge and saw fit to promote himself several times, and when I met him he was a self declared Colonel and ran the town.

The people of the town did not like this man. However, he was a strong man and a dominant leader that most people seemed to accept as a lesser evil than the chaos they had experienced immediately following the war. To use praxeology, the majority of people saw their acceptance of this self appointed Colonel as an improved condition over the constant criminal attacks, murder, and street fighting that accompanied the post war chaos. Obviously, there were many problems with his method of leadership. He dominated local business and extorted money from numerous people. There were several attempts on his life in the few months I was around. I have no doubt that a tougher tyrant will one day replace him.

This brings me to my first question regarding market anarchy: Why didn’t voluntary exchange services of defense arise during this post war chaos? Both Robert Murphy and Murray Rothbard claim that voluntary organizations of defense will emerge in a free market. This state of anarchy certainly provided the opportunity for these services to arise, but they didn’t.

My answer to this question is that like every other form of specialization in a free market, people will naturally seek out what they enjoy and what they are good at. In a total anarchy, the individuals who become the strong men are not only good at using force on other people, but they enjoy doing it and will seek to employ their specialized skill often. A farmer or fishermen has no desire to test his fighting prowess against a professional initiator of force, so they submit to his rule. Hence, if we are to achieve true liberty, services that involve using force on other human beings must be treated differently than all other services provided in a market economy.

I would love Dr. Murphy or any other theorist comments on this topic.

I also spent time in a much smaller farming and fishing village. This village had no local strong man. Al Qaeda insurgent cells did operate in the area, and anyone who had spoken out against them had met with death, and usually the death of whatever family members happened to be in the house with them at the time of the murder. People were scared, kept to themselves, and were not producing much of anything for trade. Again, my question is why didn’t voluntary exchange defense services arise in this environment? The Al Qaeda cells had no permanent presence in the village so an individual looking to start a protection service would have been able to do so.

My answer is that when most libertarians discuss liberty vs. security it is always discussed with only the individual in mind. In practice, people’s children and loved ones are at the forefront of their minds when making decisions regarding liberty, security, and force. Would you start a business whose failure would result in the immediate execution of your children? Would you employ an individual or company whose competitor would murder your family if you gave him your business? Maybe for some the answer is yes, but for most the answer is no. People will give up many things, including individual liberty, if the result is that their children are free from harm. It is human nature to do so.

How does market anarchy address this?

Most importantly, the greatest chink I see in market anarchy would be its inability to deal with revenge killings and blood feuds. My last mission in Iraq, I was required to oversee the security of the Hajj, the religious trek Muslims make to Mecca. The year before religious extremists had removed twenty people on the trek from their bus and executed them. This spurred revenge killings that resulted in mass sectarian violence that claimed over a thousand lives in a matter of weeks. The reason blood feuds are so dangerous is that without a strong judicial authority dealing out punishments, people feel honor bound to exact revenge themselves. Hence, if two young men argue and one kills another, the family members feel honor bound to avenge the young man’s death. In practice, there is a multiplier effect where if a person is killed in your family, usually you go and kill two or three from the other family and back and forth it goes. This may seem surprising to those living in the United States, but revenge killings are something we had to deal with often.

The market anarchy idea of monetary damage as the only method of punishment does not abide by the laws of human nature as I see it. If someone raped and murdered your child, would you be content to a cash settlement and the knowledge that person is off living their life somewhere? For a select few the answer may be yes, but for most the answer is that if someone does not harshly punish the murderer, they will do it themselves.

A strong court and police force can deal with rape, murder and prevent blood feuds. Has this been considered in the theory of market anarchy?

Please do not mistake my arguments for support of our current system. Our system is full of problems that need serious correction. What I am saying is that to treat the use of force like any other service in a market economy would be a mistake. I believe that Ludwig von Mises has the model for government, economy, and law that is most in line with human nature.

There was a village in Iraq that emerged from the chaos of war as a free society, but I will save that and the system they arranged for another essay.

Edward M. Gonzalez is a graduate of New York University and served on active duty in the United States Marines Corps from January 2004 to August of 2008. He is currently a Captain in the reserves and works for a private school in San Jose, CA. The views expressed in this article are not necessarily endorsed by the United States Marine Corps.