At first glance, many people would’ve thought it incongruous: a group of libertarians holding a seminar in New York City, where I have lived most of my adult life. But the interactions I witnessed (and to which I was, to some degree, a party) during the seminar and an encounter I had just after the event showed me that the Mises Institute was in the right place at the right time.
Inside the University Club (upon seeing it for the first time, Le Courbusier exclaimed, "Now I understand why someone would want to be a Beaux Arts architect!") speakers described the nature of money and how its debasement goes hand-in-hand with a spiraling military/corporate-welfare complex.
After Burton Blumert‘s greetings and opening comments, Professor Walter Block of Loyola University gave a brief history of how money came to be. His talk underscored the importance of basing a currency on something that is durable and valuable, like gold. However, he emphasized, "We are not merely gold fetishists," as some people portray libertarians. Rather, he said, gold has served as the best basis of a medium of exchange because of its compactness, transportability, and near-indestructibility: qualities that are all but unmatched by any other earthly substance. Also, he pointed out, gold may be the only substance that can be divided or reshaped without losing value. Thus, few other materials (if any) can match its appeal as a basis for exchange.
As he spoke, I thought about the "bursting" of the real-estate "bubble" that’s occurred throughout the United States. While it has yet to affect New York in any significant way (Indeed, the prices of houses, co-ops and condominiums, as well as rentals, are still increasing.), the day of reckoning is probably near. Probably more people and organizations trust and depend upon real estate as a basis for their economic well-being in this city than in any other part of the United States.
Many analysts and laypeople argue that buying real estate is a win-win proposition, at least in the long run. It probably is a sounder investment than, say, high-tech stocks or tulips. However, its perceived value still depends on any number of external factors, some of which have to do with government policies and other changes in the economy. How valuable will downtown Manhattan real estate be if brokerage houses move their headquarters out of the city, or if banks fail? How much can a company that’s downsizing (or someone who’s been downsized) divide a building or a parcel of land before it becomes worthless?
Indeed, as Block demonstrated, the value of gold — hence its value as a means of exchange — is not affected by such phenomena. And, because there is only so much gold in the world, tying money to it would limit the amount of currency a government could issue. This, in turn, limits what governments can spend, and thus limits its ability to wage war. To illustrate his point, Block mentioned that during the century from 1815 to 1914, most of the world’s major currencies were tied to the gold standard. It was also a time of relative peace in comparison to what’s followed.
One way in which most New Yorkers could be described as libertarians manqus is in their opposition to the current follies in Iraq, and to most wars. While they may not be aware of the monetary underpinnings described by Block and Professor Joseph Salerno, who succeeded Block on the podium, they understand that armed conflicts detract from their quality of life better than most people. It’s not merely a matter of their city being the likely first target of any would-be aggressor, although residents of Gotham rightly worry about that. Rather, New Yorkers, perhaps more than other Americans, have seen their real wages, which is to say their standard of living, decrease through this Administration’s misadventure, as it did during every war, cold or otherwise, in its history.
Professor Salerno, who teaches at Pace University (only three miles from the seminar and steps away from Wall Street) explained some of the reasons for what New Yorkers, and others, have experienced. Wars, he said, are financed in three ways: taxation, borrowing or the printing of new money. Half of the tab for Vietnam, and 40% of the cost of World War II, came from taxation, while only a quarter of the cost of both wars was paid through new money creation. On the other hand, the President’s boast that he hasn’t had to increase taxes in order to finance the world’s deadliest goose chase meant that 43% of it has been financed by printing new money and the rest has come from borrowing, much of it from foreign sources. One result is that this nation is now $802 billion in debt to other countries as a result of the Iraqi misadventure.
Whatever is loaned for the war effort is not available to finance the purchase of homes or to start businesses that would benefit consumers. As Professor Salerno declared, "The war economy is cannibalistic." Whatever resources are allocated to a war effort aren’t available for making everything from clothing to condominiums for consumers. The scarcity of these goods leads to price increases, which, more often than not, outpace whatever (if any), increases in wages the consumer gains. This process has been acutely visible in New York, where in spite of stagnant employment and wages that are barely rising, the price of housing as well as other things people need continues to soar.
Current economic events should come as no surprise after hearing Mises Institute senior scholar Thomas Woods, whose lecture followed Salerno’s. The chief difference, at least in monetary terms, is the source of the money borrowed to fight the war: During the American Revolution, much of it came from France. Then there was the vast amount of paper money produced by the Continental Congress, that is, vast inflation. As the "continental" became all but worthless, anyone who refused to accept it at par with gold was deemed an "enemy of the state."
Upon hearing Professor Woods’ account of these events, I couldn’t help but to wonder how today’s New Yorkers would respond to such a situation. We pride ourselves as the world’s best shoppers and for knowing a good deal from the other kind. After lunch, Lew Rockwell posed the rhetorical question we might well ask: "Why is it that we think free markets are OK for shoes, but not for money?" Why, indeed. In any area in which a government-created monopoly has been broken, from telephone service to air travel, New Yorkers have taken to the competition like ducks to water.
People I know who’ve recently bought homes have told me that finding the best way to finance their purchase is even more arduous than finding the right abode. Although there is "competition" among lenders as to who can offer the best terms, none can do better than what the government allows them to do. In other words, they can offer whatever they offer only in the only kind of money (i.e., fiat currency) the government allows them to use. So, all they and their customers can do is to make the best of a bad bargain.
Lew Rockwell, whose speech followed James Fogal’s recommendations for the financial future of the Mises Institute, summed up the cause of the situation: "When I say u2018bad monetary policy," I want to be clear: I mean all monetary policy." The government, he said, should not meddle in the normal business cycle by propping up the supply of money, or manipulating interest rates. The Federal Reserve Bank’s stated goal is stabilizing the nation’s money; citing Mises work, Rockwell showed that goal is unattainable because "fiat currency doesn’t work."
The resulting cycle is depressingly familiar: war, borrowing and taxation, spending, another war, more of the same. New Yorkers are as familiar as anyone in the nation with the consequences, which may be the reason why anti-war sentiment is probably stronger here than in any other part of the United States.
However, being arguably the most regulated people in the country, too many New Yorkers are unable to see solutions in any way other than through legislative means. Like other Americans, too many of us have been conditioned to see that the "nation" — which, as near as I can tell, is a kind of surrogate for "government" — must be worked with and defended in order to achieve any solution to a problem. The result, of course, is spiraling taxation and regulation.
I tried to explain this to someone (not a native New Yorker) with whom I was conversing in front of the University Club. "They’re right, in a way," this man said, referring to the speakers. "But they’re leaving out a lot of things." He explained that we don’t live in an "ideal world"; therefore, "we" have to protect our "vital interests" in the Middle East and other parts of the world. Then he hit me with what I can sum up as the "World Trade Center Question," which he framed as a contemporary version of "The Pearl Harbor Question." In essence, he demanded: They attacked us; are we just going to sit back and take it? Are we just going to let them get away with killing all those innocent people in the towers? he wondered. He summed up his disappointment and frustration thusly: "Everything I heard today, I could’ve heard from the left, from Noam Chomsky or somebody like that."
As someone who came to libertarianism from the left (Indeed, it was the anti-war stance that first attracted me.), I tried to point out his error: While the left has criticized the war, it has done so from a statist perspective. In their view, the direst consequence of the war, aside from the appalling loss of life and mutilation, is the redirection of government funds from programs and services that ostensibly help the poor and the sick. What none of the leftists seem to understand — and I admit I’ve only begun to understand — is that the best way to prevent war is not to give the state the means to wage it. This can be done only through cutting off the state’s power to confiscate and regulate every aspect of its citizens’ lives. Only then can we break out of the box of accepting the "nation" as a surrogate for the government and of believing that it must be defended against real or imagined threats from other states.
The 150 people at the seminar may have been small compared to the population of the city in which it was held. Still, the Mises Institute could hardly have picked a better place for a seminar: New York, the home to so much creativity and enterprise, and people who have better things to do than wage war, has more latent libertarians than most people realize.
Justine Nicholas [send her mail] teaches English at the City University of New York.