First it was Tony Blankley, comparing Obama’s dilemma in Afghanistan to LBJ’s in Vietnam, calling both wars unwinnable and suggesting that Obama take a path different from LBJ and pull out while we’re behind. Now George Will believes it’s time to withdraw ground forces from Afghanistan, while maintaining limited drone strikes and the like.

On rightwing radio, I have heard Michael Savage and several others recently asking, Why are we still in Afghanistan? Is it to make the world safe for opium? What’s going on?

Ironically, many rightwing doves on Afghanistan are still hawks on Iraq. Meanwhile, many on the left believe withdrawal from Iraq should happen soon but think Afghanistan is the good war that must be maintained.

This is a very interesting realignment taking place. The war party is being fractured. It is no longer a binary issue, if it ever was. As Obama’s occupation of Afghanistan increases in size and scope, and, perhaps for partisan reasons, this project’s supporters and opponents begin to shift around, we can see the U.S. warfare state’s vulnerability in a new way.

It would be nice to see the realignment continue, where some generally favor more foreign intervention and others favor less. It would be all the better if this corresponded to general views toward government power, as in Japan, where the party calling for lower taxes and freer markets has recently won a groundbreaking election against those favoring a continued presence in Afghanistan, as well as big-government solutions for the economy.

Update: I see that Randy Holcombe‘s analysis of Japan complicated my own. Although some say the DPJ is more pro-free market and anti-centralism than the Democrats they defeated, they appear to be a mixed bag at best in the domestic arena.

Update 2: Mark Levin, writing at National Review, disapproves of George Will’s call for withdrawal. Levin, author of Liberty and Tyranny, should learn that war has always been, as James Madison suggested, the most dreadful threat to liberty. To see how war has always been the enemy of liberty and the engine of tyranny, reading Bob Higgs is a good starting point.

In particular, Levin believes that withdrawing from Afghanistan after the Soviet invaders were ousted led to 9/11. Well, the first thing to recognize is that the U.S. did not intervene in response to Soviet aggression; rather, U.S. intervention was undertaken with the purpose of inciting Soviet aggression. Jimmy Carter’s national security adviser Zbigniew Brzezinski revealed, with apparent pride, in 1998:

According to the official version of history, CIA aid to the Mujahadeen began during 1980, that is to say, after the Soviet army invaded Afghanistan, 24 Dec 1979. But the reality, secretly guarded until now, is completely otherwise Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention.

It was U.S. intervention in the first place that helped to aggravate that conflict, bring an invading totalitarian army into Afghanistan, and bolster the fundamentalist Islamist “freedom-fighters” who eventually developed into the Taliban and al Qaeda. Had the U.S. never intervened in Afghanistan in the first place, the nation may have never come under the grips of the Taliban regime and 9/11 would have likely never happened. But this was one of the few Cold-War “successes”—the overstretch hurt the Soviet system, demonstrating that the “containment” strategy had been flawed all along. If we should learn anything from what happened back then, it is that intervening in Afghanistan causes blowback and invading and occupying it can bring down your empire.

Levin also opines, “As for nation-building, there are times to be for it and times to be against it. The Marshall Plan was all about nation-building, but not in the abstract.” For a critical look at the grossly overrated Marshall Plan, see James Payne.

If conservatives truly want to champion liberty and oppose tyranny, they must oppose war and empire. On such issues, they should follow the lead of George Will over Mark Levin or, better yet, read The American Conservative, which was at the forefront of opposing neoconservative warmongering since before the Iraq war, and which has continued its coverage of Afghanistan by recently publishing a great article by the heroic Andrew Bacevich.

The new head of the Federal Emergency Management Agency, former Florida firefighter and state disaster coordinator Craig Fugate, says he hopes to steer his organization in a different direction. According to Amanda Ripley’s dispatch in the September issue of The Atlantic, Fugate wants FEMA’s role to be less paternalistic and more modest and collaborative:

“We need to change behavior in this country,” he told about 400 emergency-management instructors at a conference in June, lambasting the “government-centric” approach to disasters. He learned a perverse lesson in Florida: the more the federal government does in routine emergencies, the greater the odds of catastrophic failure in a big disaster. “It’s like a Chinese finger trap,” he told me last spring, as a hailstorm fittingly raged outside his office. If the feds do more, the public, along with state and local officials, do less.

Fugate seems to have at least one ally within the professional disaster-preparedness community. In The Journal of Homeland Security and Emergency Management, former FEMA Regional Director John R. Powers, currently associated with the disaster consulting firm FirTH Alliance, proposes reforms that would complement a reduction of federal disaster paternalism. Among other things, Powers proposes an end to the practice of bailing out homeowners who chose not to insure their property or those who chose not to move out of a designated high-risk area. Writes Powers:

The point of this approach is to force individuals, municipalities and states to stop doing dumb things and accept responsibility for their decisions. The benefits to the tax payers who are subsidizing these bad decisions would be huge.

One wonders how much Fugate and Powers would wager on the prospects for the meaningful decentralization of disaster preparedness and recovery. On the plus side, a growing number of scholars (see, for example, here and here) are learning more about how weak incentives and an ignorance of local conditions and priorities create huge obstacles for public disaster managers, especially at the federal level. In addition, the image of FEMA incompetence before and after Hurricane Katrina still lingers in the public’s consciousness.

But are these ideas and images strong enough to overcome the forces of inertia and opportunism that support federal disaster paternalism?

Fugate might have been told he had plenty of support for reforming FEMA, but it’s hard to see how he could undo the moral hazard caused by previous federal disaster-paternalism. The federal genie is out of the bottle. It would take virtually unimaginable doses of restraint for the President and Congress to resist bailing out future disaster survivors, something that appears very, very unlikely, especially given their recent spree of financial and corporate bailouts. But unless they exercised enormous restraint—and somehow convinced everyone else that they would do so—Fugate’s call for the feds to play a less prominent role in disaster management would lack credibility.

The only realistic hope, I think, is that people will continue to recognize FEMA’s limitations and, as a result, decide to take more responsibility for preparing for and managing disasters.

Fugate, by the way, is invited to speak in at “Out of the Storm ’09: Making Reform Work”—a conference on property insurance reform co-sponsored by the Independent Institute and the Competitive Enterprise Institute, in cooperation with the Louisiana and South Carolina Departments of Insurance, in New Orleans, from September 30 to October 2.

Japan’s historic election Sunday gave the Democratic Party an overwhelming victory over the Liberal Democrats that have dominated Japan’s government for 55 years.  The Liberal Democrats oversaw Japan’s industrial policy that supported Japan’s dominant firms during Japan’s rise as a major economic power during the 1960s, 70s, and 80s.  Indeed, many American economists argued the U.S. should do more to emulate Japanese industrial policy and have the government actively involved in supporting dominant corporations to enhance their international competitiveness.

American support for industrial policy, where the government actively picks the winners in economic competition, died off in the 1990s when the Japanese economy began stagnating.  It appears that Japanese support has now died off too.

The Democratic party, now in the majority, favors worker-friendly policies, including raising the minimum wage, providing income support for farmers, giving job training to those out of work, and providing free high schools.  Economic democracy is the alternative to industrial policy.

This struck me because two weeks ago I was in Seoul, Korea, for a conference on “Institutions and Global Competitiveness.”  The Koreans there were free-market oriented, but also were supportive of the Korean industrial policy that has in many ways emulated Japan’s industrial policy.  In both cases the government identified those companies they viewed as potentially successful in global competition and supported them.  The rise of Samsung and Hyundai in the global marketplace are examples they would give of the successes of Korean industrial policy.

In Korea, as in Japan, the alternative to industrial policy is viewed as economic democracy; maybe even more in Korea.  Article 119 of the Korean Constitution, added in 1987, explicitly says the government should regulate the economy to prevent monopoly power and the abuse of economic power, and to achieve economic democracy.  While not explicitly defining economic democracy, that provision has been a matter of strong debate.

Should government promote industrial policy, or economic democracy?

Looking at Asian economic policy from the other side of the globe, what is interesting (and a bit disheartening) is that economic liberalism and economic freedom are not considered as alternatives.  Their question is: Should government support big business, or should it support workers?  Little thought is given to the idea that the appropriate role of government is to protect people’s rights and allow the invisible hand of the market to guide economic outcomes.

When I discussed this with the Koreans at the conference I attended, all expressed support for free-market principles, but all also expressed their belief that it was Korean industrial policy that was responsible for Korea’s substantial economic growth.

There is another possibility, which is that the entrepreneurial actions of some Korean businessmen enabled them to build world-class companies that could succeed in global competition.  At Samsung, company founder Byung-Chull Lee is held in reverence—and should be—for his entrepreneurship that enabled a small company to become a major global competitor.  As the company grew the Korean government supported it, but was the company’s growth mainly due to the government’s industrial policy, or due to the entrepreneurial activities of its management?  A good case can be made that the answer is the latter.

If I am right, the industrial policy that supported the big Japanese and Korean firms toward global competitiveness will also undermine those nations’ economies by stifling any emerging competitors.  That may offer a partial explanation for Japan’s stagnation, and could foretell a similar outcome in Korea.

Imagine if, in the 1960s and 1970s, the U.S. had a similar industrial policy of supporting dominant global competitors like IBM.  Would new companies like Microsoft and Apple have been able to emerge, or would they have been subsumed under a dominant IBM, which would have lost market share to foreign competitors rather than American start-ups?

To see the alternatives as either industrial policy that supports big business or economic democracy that supports workers creates a false dichotomy.  In fact, a policy of economic freedom that protects rights and has minimal tax and regulatory interference in economic activity is what produces prosperity.

I can understand why the Japanese, at this time, would hope for change, but it does not appear that the economic democracy proposed by their newly-victorious Democratic Party will provide the kind of change that is needed to reignite Japan’s economic growth.

In a recent article in the Wall Street Journal, “Inglourious Basterds and the Problem of Revenge,” Jordana Horn incisively examines the theme of Quentin Tarantino’s new, fictional, revenge film, Inglourious Basterds, in which German soldiers and others in World War II are targeted by an elite Jewish-American commando unit to be killed, scalped, tortured, beaten alive, burned alive, and cruelly disfigured. While some applaud revenge and cruelty as only fair because “the end justifies the means”:

There is a not uncommon belief that the Torah sanctions revenge. But the precept of “an eye for an eye” is usually cited incorrectly, according to Rabbi Joel Roth, a professor at the Jewish Theological Seminary in New York. It is actually meant to refer to monetary compensation rather than bloodletting. And Leviticus 19:18 says, “Thou shalt not take vengeance, nor bear any grudge against the children of thy people.”

Rabbi Roth notes that Jews are prohibited from taking “the law into your own hands as a matter of legal punishment.” The scaffolding of legality—a fair trial and conviction—is paramount under Jewish law. Eichmann was the one person to ever receive a death sentence in an Israeli court, and not without much hand-wringing from Jews world-wide.

For Tarantino however, “If you’re dealing with people like the Nazis . . . well, you either eat the wolf or the wolf eats you.”

The first problem is that most men in the German army were conscripts (i.e., slaves) and not members of the Nazi Party. In his film Tarantino cares little for this distinction as he tosses car drivers, cigarette girls, children, and common soldiers into the same collective pile of “swine” for barbaric eradication along with the mass murdering Hitler and Goebbels. The barbaric actions of the Nazis in the Holocaust and the bombing of London and other cities, the Soviet mass murders and the Gulag, and the Allies’ fire bombing of Dresden and Tokyo as well as the atomic bombings of Hiroshima and Nagasaki were all “justified” by such ethically challenged arguments.

In a very insightful and revealing Pajamas Media article by John Rosenthal, “Inglourious Basterds: A German Fantasy, Not a ‘Jewish’ One,” we learn that the film was curiously produced with major German government funding from the German Film Fund (attached to the German Ministry of Culture and Media), Media-Board of Berlin-Brandenburg, and the Middle German Film Fund.

Moreover, the German contribution to Inglourious Basterds appears to have been far more than just financial. Of course, there are the numerous German actors in the cast and the many technical contributions of Babelsberg Studio, where much of the film was shot. But there is even more than that. Although Tarantino himself, as befits a celebrated “auteur,” is the sole writer credited for the script, Tarantino’s German collaborators appear to have also made a very considerable contribution to the story and dialogue. A large part of the dialogue, after all, is in German. Some is also in French. The French dialogue, however, is invariably trite and almost entirely lacking in local cultural references. It could readily be the product of simple translation and appears to be just that.

The same cannot be said for the German dialogue. The German dialogue displays the linguistic robustness of the real German spoken by real German speakers. Moreover, the scenes in German abound with cultural references that only a native German or an expert in German studies would even get.

. . . .

Tarantino’s Inglourious Basterds is, in short, a very German film. But, it will be asked, what could possibly be German about a film that has been described as a “Jewish revenge fantasy,” in which Brad Pitt’s “Aldo Raine” and his band of Jewish “basterds” brutally kill and mutilate evil Nazis, cutting off their scalps as trophies? Hasn’t every Jew dreamt of bashing in the heads of Germans with a baseball bat à la Eli Roth’s “Sgt. Donny Donowitz”?

Well . . . no. And by the way: Who could possibly think such a thing? The answer is not hard to find. The “avenging Jew” is indeed a kind of stock character of the German political imagination. It has been at least ever since a certain Dr. Joseph Goebbels announced to the German public in 1944 that “the Jew Morgenthau”—otherwise known as the American Secretary of the Treasury Henry Morgenthau—was planning to turn Germany into “one big potato farm” in the event of an Allied victory over the German Reich.

The allusion was to the so-called Morgenthau Plan for restricting German industry following occupation. The Völkischer Beobachter (September 26, 1944) had a different name for the plan: “The Jew’s Murder Plan” [Judas Mordplan]. According to the Nazi party paper, it would cost the lives of some 40 million Germans.

But, it will be objected, the Germans who are mutilated and murdered by the Jewish-American “Basterds” are Nazis, after all. Shouldn’t we all rejoice in seeing them get their just deserts in Quentin Tarantino’s signature blood-splattering detail? Well, I suppose it can be left to everyone’s individual conscience whether they enjoy seeing anyone have his head smashed in with a baseball bat or a swastika carved on his forehead with a hunting knife. But the fact of the matter is that most of the victims of the Basterds’ brutality and sadism are precisely not Nazis. They are members of the Wehrmacht: the regular German armed forces. [emphasis added]

The point is even highlighted in the film. Thus, “Sgt. Donny Donowitz” notices a medal on the uniform of a Wehrmacht officer and asks him, “Get that for killing Jews?” “No,” the man coolly replies, “bravery.” Donowitz proceeds then to smash the officer’s head in. Many of the other Germans who are slaughtered and/or maimed by the “Basterds” are simple enlisted men. What possible satisfaction could be taken in that?

Moreover, the depiction of the German characters in the film does nothing to render such savagery any more understandable.

. . . .

The nuance of the German characters has been appreciatively noted in the German reviews of Inglourious Basterds. What has as a rule not been noted is the utter superficiality and one-dimensionality of the Jewish-American “Basterds.” Indeed, though Inglourious Basterds is ostensibly about them, they are in fact barely more than extras in the film. When they are not slicing and dicing their German victims, they are only rarely on screen and they have hardly any dialogue—especially when compared to the German-language gab fests. Only Eli Roth’s skull-crushing “Donowitz” plays a marginally more substantial role.

. . . .

There is even one major “joke” on America itself. Thus, in the film’s concluding sequence, Raine and two of his “Basterds” arrive at a Parisian cinema in order to carry out “Operation Kino.” Hitler, Goebbels, and various other Nazi dignitaries will be attending a film premiere and the plan is to use the occasion to kill them. A comic book-like special effect reveals that under their cloths the two “Basterds” are strapped with explosives à la Hamas or al-Qaeda. The “Basterds” will subsequently detach their explosives, but as far as we know they are still in the cinema when the subsequent conflagration takes place. The Jewish-American plot to bring down the Third Reich is, in effect, a suicide attack.

The cinema scene gives Tarantino a chance to send up the films made under the auspices of the Propaganda Ministry of Dr. Goebbels. But perhaps (were it but possible) Tarantino should not be so smug. His own film, after all, is based on an idea that comes from none other than . . . Dr. Goebbels—and it was made with millions of euros in support from the contemporary German “Ministry of Culture and Media” no less! But surely the hip, post-modern “auteur” could not be suspected of making propaganda. Could he?

As Horn correctly notes:

[N]one of that excuses the pleasure that the film’s characters seem to take in bloodletting. Historian and former United States Holocaust Museum Director Michael Berenbaum concludes that the issue is: “How do you combat evil without being reduced to that level?”

Exactly, because the end never justifies the means. The solution to hate is not hate, and the solution to Nazi ethics is not Nazi ethics. The solution is to respect human worth and dignity through love. As Mahatma Gandhi stated, “An eye for an eye makes the whole world blind”, and as Jesus noted in the Sermon on the Mount, “You have heard that it was said, ‘Love your neighbor and hate your enemy.’ But I tell you: Love your enemies and pray for those who persecute you, that you may be sons of your Father in heaven. He causes his sun to rise on the evil and the good, and sends rain on the righteous and the unrighteous. If you love those who love you, what reward will you get? Are not even the tax collectors doing that? And if you greet only your brothers, what are you doing more than others? Do not even pagans do that? Be perfect, therefore, as your heavenly Father is perfect.”

And one of the best examples of this insight is how it inspired the stunning achievement under Nobel Peace Prize laureate Archbishop Desmond Tutu with the Truth and Reconciliation Commission he chaired in South Africa in the aftermath of Apartheid, in which hate, revenge. and bloodletting were replaced by the natural law principles of truth, justice and mercy.

HT: Paul Theroux

President Obama announced that he will reappoint Ben Bernanke as Chairman of the Board of Governors of the Federal Reserve Bank (Fed), and I’m more than OK with the president’s decision.  Bernanke’s policies over the past year and a half have put the Fed in a precarious position, but Bernanke says he has an “exit strategy” and it’s just as well that he’s staying to try to implement it.  If he was replaced now, his successor could, with some justification, blame the Fed’s difficult situation on Bernanke, and Bernanke could counter that he had an exit strategy his successor should have implemented.  Now it will be Bernanke’s responsibility.

Perhaps the biggest legacy of Bernanke’s tenure as Fed chair, regardless of how long he stays, is his expansion of the Fed’s toolbox for dealing with economic downturns.  Prior to Bernanke’s tenure, the Fed’s primary activity was controlling the quantity of money through open market operations, which was undertaken by buying and selling Treasury securities.  Bernanke greatly expanded the Fed’s asset portfolio by purchasing securities from private and semi-private issuers.  It bought from money market funds, and still owns a substantial amount of securities issued by Fannie Mae and Freddy Mac.  This goes well beyond the Fed’s policy pre-Bernanke.  Also prior to Bernanke’s tenure, the Fed made “discount” loans to banks that were members of the Federal Reserve System.  Bernanke expanded the use of discount loans, making them available to financial institutions that not only were not Fed members but weren’t even commercial banks.  Again, this goes well beyond the Fed’s pre-Bernanke policy.  And, the Fed stepped in to rescue AIG as it was collapsing, also unprecedented.

This is all history now, and would be Bernanke’s legacy whether he stayed or was replaced.  This expansion in the activities of the Fed sets a precedent—I think, a bad one—for future Fed action in the face of economic downturns.  Essentially, the Fed was engaging in industrial policy as it was propping up the financial system, deciding that some firms would survive (Goldman Sachs), some would go under (Lehman Brothers), and some would be taken over by other institutions (Bear Sterns, Merrill Lynch).  It’s worth a remark, and probably even more extensive discussion than I’ve given here, because with all the attention focused on the Fed’s expansion of the monetary base, I’ve seen little written about the discretionary policy the Fed followed as it expanded its set of policy tools to deal with the downturn.  For this reason, I’m not a Bernanke fan.

Now, with the Fed holding a massive amount of excess bank reserves, the Fed must keep those reserves from being lent and entering the money supply, or inflation will skyrocket.  Bernanke knows this, and his exit strategy, not explained in detail, would mop up these reserves to hold inflation in check.  The problem is, any method of mopping up these reserves would cause interest rates to rise, and as long as the recovery is fragile, Bernanke will be reluctant to do this.  There is the real risk that Bernanke won’t want to see higher interest rates until inflation starts to appear, and that by then it will be too late to stop a more substantial inflation.

This problem is a result of Bernanke’s policies, and I support leaving Bernanke in charge of the Fed to deal with the problem.  To put someone else in at this point would allow the new Fed chairman to put the blame on Bernanke; to leave Bernanke in charge clearly locates all the responsibility with him.  He says he has an exit strategy, and while I hope it works, I’m concerned enough to think that it won’t.  Bernanke is a smart guy, and very knowledgeable, so I have no complaint with him on those grounds.  I do believe, however, that he is overly ambitious in his view of the Fed’s agenda.  Keeping inflation in check should be the Fed’s first priority, and Bernanke’s more expansive view of the Fed’s role is likely to distract him from that primary goal.

Another problem I see with Bernanke’s tenure is the close relationship that has developed between the Fed and the Treasury.  Bernanke is helping the Treasury finance it’s huge deficit, and that too will prove inflationary if it keeps up.  To keep inflation in check, Bernanke should reestablish the Fed’s independence from the Treasury and make it clear that as the recovery progresses, the Fed will design monetary policy to prevent inflation, and the Treasury will be on its own to finance the deficit.  Bernanke is in the best position to do this, because he can say that his actions of the past two years were designed to deal with an extraordinary situation, and with the recovery underway the Fed will be turning its attention back to price level stability, which should be its first priority.  A new Fed chairman could be accused of turning his back on the “successful” Bernanke policies if he were to try to reassert the Fed’s independence.

While I’m not a Bernanke fan, I do think he is in a better position than any other plausible candidate to steer the Fed on the right course, and if he fails to do so, it will be easier to identify who’s to blame than if someone else stepped in at this point.

And according to Rasmussen, the number who “strongly disapprove” of the president’s performance has more than doubled since the inauguration. This can’t be pure partisanship or, as some mantain, “racism” at play, since such factors haven’t changed since January. All that’s changed is Obama’s had time to be president. Obama is losing support left, right and center. Some of it has to do with his antiwar supporters souring on the war, but I believe most of this growing discontent is focused on something else: As the Clinton machine said in 1992, “It’s the economy, stupid.”

In the midst of the health care debate, many on the left have dismissed arguments about the Democrats’ health care plan as hysterical paranoia, even dangerous hysterical paranoia. Not trusting the federal government has become so passé with the election of Obama and the focus on domestic policy. But I recall not one year ago, the left was warning that we could not trust the federal government. In particular:

We heard that Bush was breaking the law with his war on terror policies. Now that Obama has continued most of those policies, does this not render his government just as lawless? And why would you want a government that has waged unjust wars, is in the middle of two undeclared military occupations, and has committed torture and violated habeas corpus to handle American medicine? If a government would dare to wage war on false pretenses, why is it irresponsible to generally distrust everything about it?

We heard people questioning the legitimacy of Bush’s election. Whatever the merits of the arguments, it was respectable to raise such questions. When people question the legitimacy of Obama’s election, the left now claims that any one who would wonder if the president legally rose to power must be insane, even a threat to American security.

We heard that it was patriotic to dissent, and not assume that politicians had the best of intentions. Now it is seen as paranoid and lunatic simply to suggest that politicians don’t have our best interests in mind as it concerns health care.

In antiwar protests, people donned t-shirts calling Bush an “international terrorist” and held signs likening Bush to Hitler. Even I, a staunch opponent of the entire U.S. reaction to 9/11, thought that some of this imagery was counterproductive and over the top — but as the right warned about the “hate-Bush” crowd wanting to see America fail, I agreed with most on the left that these incendiary protesters were certainly no real threat to anyone, much less the American way of life. Why is it all of a sudden evil and anti-American to compare the federal government’s ambitions to those of the Nazis or extremists, when virtually everything that Bush built up has been left in place and expanded upon by Obama?

Liberals, now that their guy is in power, will generally respond to the health care debate with a dismissive reaction at best, rolling their eyes and patronizing the tens of millions of Americans suspicious of the president’s health care agenda. At worst, they warn that opposition to Obama’s plan is a threat to America. Almost all of them seem to think it’s ridiculous to assume that Obama wants a “government takeover of medicine.”

It is true that some opponents of Obamacare have raised poor arguments, just as there were poor arguments raised in opposition to the Iraq war and much else under Bush. But don’t pretend there’s only one civil side of the debate. Many of us have raised serious constitutional, moral and economic arguments against giving the government more power over American health care. Simply dismissing them out of hand on the basis that we should trust our leaders in power to do what is right, or at least what they think is right, is not just a poor argument; it’s totally inconsistent with what the left was saying for eight years under Bush.

When American students learn about World War II, they are usually taught that it began on September 1, 1939, when the Germans invaded Poland. They do not get much instruction about the Treaty of Non-Aggression between the Third German Reich and the Union of Soviet Socialist Republics, better known as the Molotov-Ribbentrop Pact (after the foreign ministers of the two countries), signed early on August 24, 1939, but dated August 23.  By this agreement, each side promised to remain neutral in the event that the other were attacked by a third party.

A key feature of the agreeement, however, was the secret protocols that accompanied it, by which the USSR and Germany divided eastern and central Europe into “spheres of influence” and provided that each side might occupy its sphere should “territorial and political rearrangements” be made in these areas.  In other words, they agreed on a plan for carving up the entire area between the USSR and Germany as their borders existed at that time.

Seventeen days after the German invasion of Poland, the Russians invaded from the other side and quickly occupied the Polish territories identified as the Soviet sphere of influence in the Molotov-Ribbentrop Pact. Afterward, the two sides cooperated economically and militarily in subduing the Poles and in supplying one another with various raw materials and manufactured goods, including military arms and equipment, as well as plans for weapons.

The pact, which came as a great surprise to almost everyone, created a potentially huge embarrassment for the many Soviet sympathizers in the West, including those in the United States, who had worked tirelessly for years to move public opinion against the fascists in general and Germany in particular. But, like the mindless marionettes they were, they missed not a beat, switching virtually overnight to praise for Stalin’s efforts to promote world peace and opposing war against Hitler.

Further potential for embarrassment arose in June 1941, when, notwithstanding the Molotov-Ribbentrop Pact, the Germans invaded the Soviet Union. Disdaining embarrassment, the Roosevelt administration immediately embraced the mass murderers in Moscow and maintained them in a tight embrace for the balance of the war. Strange bedfellows, indeed.

I recently read a book titled Banking and the Business Cycle: A Study of the Great Depression in the United States, by C. A. Phillips, T. F. McManus, and R. W. Nelson.  It was originally published by Macmillan in March 1937, later became a hard-to-find, almost-forgotten book, and in 2007 was reissued by the Mises Institute in an inexpensive paperback edition.

No one ever assigned or recommended this book to me when I was a student. Indeed, no one ever mentioned it. Only a few years ago did I become aware of it, when I encountered favorable mentions of it by economists whose views I greatly respect. Several years ago, Larry White kindly photocopied the book and sent me a copy, but until recently, I had read only a few parts of it.

Now, having read it from cover to cover, I am willing to say that I know of no better book on the economic dynamics of the 1920s boom and early 1930s bust in the United States. I know about several other excellent books that every student of economics and economic history should read on the same topics, but if I could recommend only a single book to an aspiring economist, or even to an interested lay reader, this is the one I would recommend.

It is tempting to characterize its theoretical framework as Austrian, as indeed it is in many respects (Mises and Hayek are cited favorably, along with many other sound economists, many of them now forgotten), yet Phillips, McManus, and Nelson’s framework is broader and more eclectic than a strictly Austrian analysis would be. Moreover, besides being packed with excellent economic analysis in a great variety of applications, the book contains a wealth of quantitative evidence, which the authors handle with admirable caution and good sense. They present many tables and charts, but not a single equation.  For modern mainstream economists, who can scarcely move a muscle without writing a raft of equations, this book stands as a brilliant reproach.

To give you a taste of these authors’ views and to whet your appetite for reading their book, I present here a few passages, drawn from various sections in more or less random fashion.

• [T]he recent depression will be seen to have been directly connected with the efforts at reconstruction that followed after the dislocations caused by war. The ultimate causes of the depression are traceable to the War; just as the late war was the Great War, the recent depression was the Great Depression. But the more immediate causes of the depression grew out of the post-War inflation of bank credit in this country. (p. 4)

• An investment deflation, or a deflation of capital values and capital assets, is a much more prolonged process than a commodity, or commercial credit, deflation. (p. 161)

• The execution of the [Federal Reserve] Board’s control operations [in the 1920s] involved inflationistic action if stabilization of the price level was to be achieved, in the sense that it artificially maintained that level and forestalled the inevitable and natural decline which otherwise would have accompanied the post-War expansion of production, and hence explains the bank credit inflation which resulted. (p. 184)

• There is nothing inherently bad in a falling price level (in fact, there is much to commend it . . . ), provided the rate of decline is gradual. (p. 186)

• If all prices [including asset prices] are considered, then, it is clear that an inflationary price rise actually did occur in the period following 1922, despite the fact that wholesale commodity prices were relatively stable. (p. 191)

• The shrinking of business failures to a minimum at the same time that prices are rising is usually a storm signal for the economic system in the not-so-distant future. And the government is almost always, in the subsequent depression, importuned to “take care of” those rash adventurers who (with more credit than sense at their disposal) rushed into those industries where soberer business judgment indicated the treading was not good. (p. 207)

•[Commenting on the government’s measures to reverse or moderate the depression] Foolhardy procedures which are divorced from economic realities, or whose economic implications are not understood by their promoters, do not perforce become sanctified and wise merely by designating them as “action”; tilting at windmills does not draw water. (p. 212)

• [W]e must save our way out of depression, we must increase the real savings that make the creation of real capital possible, instead of spending our way to recovery by cumulating governmental deficits which concentrate attention on consumption as has now been done for five years. (p. 218)

• There is no quarrel [by the authors] regarding the desirability of higher prices for some classes of goods, but there is disagreement with the view which holds that monetary and credit manipulation alone will suffice to cure the unbalances left over from the depression. (p. 241)

• [C]onditions in the investment market are still [early in 1937] such that extensive long-term investment is not being made. (p. 242)

This remarkable book deserved a far, far better fate than to have faded into near-oblivion. Indeed, if it, rather than Keynes’s General Theory, had been the point of departure for subsequent study of macroeconomic fluctuations, the world almost certainly would have been a much, much happier place.

There was a certain horrifying fascination to observe the speed and enthusiasm with which conservatives embraced the unprecedented growth of government power and size under George W. Bush in the aftermath of 9/11. A Crisis and Leviathan case study in the “ratchet-effect” of “crises” — documented brilliantly throughout by Bob Higgs and reprinted as our Resurgence of the Warfare State, it was nonetheless astounding to watch conservatives (admittedly aided and abetted by plenty of liberals and libertarians) almost trip over themselves in handing the Executive vast new, unchecked powers, fueled with a 60% increase in federal spending and a nearly quintupling of the federal debt — much having nothing to do with national security, such as the record-breaking 2002 Farm Bill.

As a Christian, I was particularly chagrined to watch conservatives calling themselves Christians vociferously backing “pre-emptive” war — a complete disavowal of the traditional “just war” theory, which regardless of what one thinks about it as a justification for war, is at least light-years from the idea that the President can omnisciently know who is a danger and should thus be free to act, unilaterally, preemptively. Even assuming such conservatives accepted a contention that the invasions of Afghanistan and Iraq were somehow justified responses to 9/11, the tactics employed are explicitly heretical to the law of equivalency — “an eye for an eye” — a directive to hold response equivalent to, not escalated from, the offense (i.e., NO MORE THAN an eye for an eye). Any bombing campaign assumes and accepts as “necessary” large amounts of “collateral damage;” utilizing grossly misnamed “precision bombs” in a tightly-packed urban area like Baghdad guarantees even higher civilian deaths, while cluster bombs can only have been designed explicitly to kill and horribly maim innocent children coming across the shiny toy-looking bomblets.

Yet when liberals gained power, what changed? Congress turned over first, and promptly re-upped the pork-laden Farm bill. Pelosi defended the action to liberal critics seeking an end to subsidies of big agribusiness in favor of subsidies to organic and other “sustainable” farming by explaining that her new majority included a great many freshmen from districts benefiting from farm pork, and ensuring their reelection was more important than principle. Obama of course campaigned on a platform of “change,” and the biggest change most liberals (claimed) to want was of U.S. foreign policy. Yet, since taking office, Obama has not made a single significant change to the Bush policies of war, torture, renditioning, indefinite detention, wiretapping, and secrecy — and has in fact in several instances, strengthened and established even greater legitimacy for each. And yet, where are the liberal protests that had grown ever-louder after the first thrill of revenge had subsided and they remembered they were against war and for civil liberties; the voices that surely translated into Obama’s presidential win? Unfortunately now as sorely lacking as those of conservatives protesting Bush’s abrogation of the Constitution and gross expansion of government’s powers.

So why do we, as humans, let actions we view as abhorrent when practiced by others, accept them when we’re the ones doing them? C.S. Lewis, when asked about the ethic to “love thy neighbor as thyself,” insightfully responded by asking in turn, “How do you love yourself? When I look into my own mind, I find that I do not love myself by thinking myself a dear old chap or having affectionate feelings.” Rather, we recognize that we do things that we detest, but we nevertheless allow ourselves a great deal of self-justification. Perhaps it’s because we “know” that we “mean well;” or we tell ourselves, “The lofty ends I am seeking justify the terrible means I am ‘forced’ to employ to achieve them.” In sum, C.S. Lewis says, “You dislike what you have done, but you don’t cease to love yourself.”

So, when it comes to seeing others doing things that we detest, ought we similarly allow them the benefit of the doubt that their wretched means will be justified by their noble ends? Or ought we, contrariwise, to recognize that every means is itself an end, and hold ourselves, as well as others, to the higher standard?