Remnant Review
In the year 1750, the greatest philosopher in the world was the Scotsman, David Hume.
Toward the end of the century, the philosopher who replaced him as the greatest philosopher in the world was Immanuel Kant. Yet, Kant wrote the following: “I freely admit that it was the remembrance of David Hume which, many years ago, first interrupted my dogmatic slumber and gave my investigations in the field of speculative philosophy a completely different direction.” David Hume was the heavy hitter, philosophy wise, in the middle of the 18th century.
In 1752, Hume wrote an essay defending free trade: “On Commerce.” A quarter of a century later, his close friend Adam Smith wrote The Wealth of Nations, which was basically an 800-page extension of David Hume’s original essay.
Most economists today favor free trade. There are a few exceptions, and there have always been exceptions. In contrast, in their judicial capacity as voters, the general public has never been persuaded of the free trade position. Even among the voters who claim to be defenders of the free market, when push comes to shove, they are still mercantilists. They still hold the economic position defended by the early economists of the late 17th century, against whom David Hume and Adam Smith directed their intellectual firepower.
We get back to the bedrock reality of human thought, namely, that most people cannot follow long chains of reasoning. Only a relatively small group have this ability, and only within their specialties. Even they get sidetracked when it is in their economic self-interest to stop following a particular chain of reasoning.
FREE TRADE AND FREE MEN
The touchstone of whether a person really believes in the free market is his attitude on free trade. This has certainly been true since 1776, when Smith wrote his book. The basic arguments in favor of free trade have not changed since 1776, or even 1752. The basic arguments for mercantilism have not changed since about 1670. We can find defenders of both positions among professional economists.
American manufacturers are almost instinctively mercantilists. They don’t want competition from abroad, and they scrounge around in search of any kind of argument to defend the imposition of federal sales taxes on imports, which is what all tariffs are. It has nothing to do with logic. It has everything to do with pocketbooks.
We find that there are few defenders of free trade among American textile manufacturers. We find that special interest groups in the manufacturing sector hire professional economists to defend the special interest group’s call for tariffs, import quotas, and other restrictions on competition from outside the borders of the United States. They always find economists who are willing to abandon their commitment to free market principles for the sake of a high salary. These economists journey to Washington to testify before congressional committees, and they present graphs, arguments, and even equations in favor of government restrictions on imports.
Beginning before World War II, the Rockefeller Foundation began sponsoring conferences in favor of free trade. This was part of a global effort to create an international trading community. Large-scale American manufacturers that were involved in international trade wanted lower tariffs. It was clear that these large manufacturing organizations could compete successfully, so their senior managers favored free trade. The internationalists, of which the Rockefeller interests were the most notable agents, favored free trade as a means of extending international trade, international finance, and international law. So, the interests of the Rockefeller Foundation and large American corporations — today called multinationals — were unified.
The Rockefeller Foundation began holding conferences of professional economists. Free market economists, such as F. A. Hayek, Wilhelm Roepke, and Ludwig von Mises, were paid to participate in these conferences and to write books. These free market economists were internationalists in the area of economic trade, so the Rockefeller Foundation put up the money to help promote their ideas on trade. Other economists fell in line because in the history of economics, ever since the time of Adam Smith, free trade has been the dominant position.
But there was an exception to the internationalism of the Rockefeller Foundation and large American corporations. They did not like the international gold coin standard. That was because they did not like it domestically. The gold coin standard placed limits on the manipulation of the domestic economy by central banks. The internationalists have always been great promoters of national central banks. This goes back to the creation of the Bank of England in 1694. So, when it comes to internationalism, the internationalists do not favor the single institution which has done more than any other to promote international trade: the international gold coin standard. They opposed it throughout the 20th century.
Professional economists virtually all fell into line. You cannot find a college-level economics textbook that does not promote central banking. You also cannot find one that openly favors the international gold coin standard. Always, the textbook writers, in the name of free enterprise, promote central banking, yet the economics of central banking is exactly the same as the economics of every other cartel. The government creates a cartel to favor a special interest group within the economy. The textbooks all go into detail regarding the nature of this special arrangement, and how cartels reduce customer satisfaction and consumer wealth. But, when it comes to the chapter on central banking, the authors are careful to separate this chapter from the chapter on cartels. The economics are identical, but the chapters are separated. This is not random. This is self-conscious.
Throughout the 20th century, the Rockefeller Foundation and the Federal Reserve system put economists on the payroll, or granted financial aid to economists who would promote the interests of central banking. The entire economics profession in the United States got the message, with the exception of the Austrian school. This is why the overwhelming majority of professional economists are persuaded that the best possible way to run an economy is by means of a central bank. They may not favor central planning in any other area, but they do with respect to the central institution of all economies, namely, money and banking. Here, they favor government regulation. Here, they favor committees of expert economists who will guide the economy by means of manipulating the money supply.
In other words, economists are true to their real commitment, which is their confession of faith: self-interest is supreme. Money talks. People follow their own self-interest in making decisions, and then they create justifications for these decisions.
This was Marx’s line of reasoning. He said that the mode of production is fundamental to society, and philosophy and ethics are simply justifications for the prevailing mode of production. The mode of production is the substructure, and philosophy is the superstructure. What matters is the mode of production. This was Marx’s view, and when push comes to shove, this is also the view of most free market economists. They really do believe in self-interest as the motivating factor of most people, or even all people, most of the time, or even all of the time.
