Richard Ebeling on Austrian Economics, Economic Freedom and the Trends of the Future
By Anthony Wile - February 16, 2014

Introduction: Dr. Richard Ebeling is a senior fellow at the American Institute for Economic Research in Great Barrington, Massachusetts and professor of economics at Northwood University in Midland, Michigan. He has been a visiting professor at Trinity College in Hartford, Connecticut (2008-2009), served as the president of the Foundation for Economic Education (FEE) from 2003 to 2008 and was the Ludwig von Mises Professor of Economics at Hillsdale College, in Michigan (1988-2003). Dr. Ebeling is the author of Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition (Routledge, 2010), Austrian Economics and the Political Economy of Freedom (Elgar, 2003) and is also the editor of the Selected Writings of Ludwig von Mises (Liberty Fund), based on the "lost papers" of Ludwig von Mises, which he recovered from a formerly secret KGB archive in Moscow, Russia. The last of this three-volume set was published in April 2012. Dr. Ebeling is also the co-author and co-editor of the multi-volume work, In Defense of Capitalism (Northwood University, 2010-2013). In the early 1990s, Ebeling consulted on market reform and privatization with the emerging new democratic government in Lithuania when it was still part of the Soviet Union and witnessed the violent, attempted Soviet crackdown on the Lithuanian freedom movement in January 1991. He also was with Russian defenders of freedom in Moscow during the failed hardline coup in August 1991. Dr. Ebeling earned his Ph.D. in economics from Middlesex University in London, England.

Daily Bell: Tell us about the fourth volume of In Defense of Capitalism and the upcoming fifth volume. Your articles are a large part of the collection. Give us some background on what they address.

Richard Ebeling: I am a professor of economics at Northwood University in Midland, Michigan. The university is an institution of higher learning devoted to offering a higher quality education in the various areas of business. But underpinning Northwood is a dedication to an explicit philosophy of individual freedom, free markets and constitutionally limited government.

As part of sharing with a wider audience these ideas of liberty, for the last four years I have collaborated with the president of the university, Dr. Keith Pretty, and vice-president, Timothy Nash, in preparing and editing an annual collection of essays with the general title, In Defense of Capitalism. I have written about 25-30 percent of the essays in each volume.

In the last, volume 4, which was published in August 2013, my contributions focused on the principles and history of liberty, and the dangers from modern collectivist trends. I also challenged the assumption that America needs a central bank for a sound monetary system and warned of the consequences from price inflation in undermining the social and economic order.

Volume 5 of In Defense of Capitalism should be published in August 2014, and some of my contributions will be on ObamaCare, monetary mismanagement by the Federal Reserve and the means and methods for restoring a freer society in America.

All four volumes offer what I consider to be highly useful "intellectual ammunition" in our battle for free-market capitalism against the interventionist-welfare state and its political paternalistic premises.

Daily Bell: Recently, Routledge publishers issued a less expensive paperback edition of your last book, Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition. How has that been received? It seems as timely as ever.

Richard Ebeling: Yes, this volume of mine offers a clearly written and detailed discussion and defense of the "Austrian School of Economics" approach to freedom and the free market. I do this in the context of explaining the life, ideas and insightful contributions of Ludwig von Mises, the most original and significant member of the Austrian School in the 20th century.

I explain Mises's theoretical and policy arguments as to why there is no workable alternative to a laissez-faire free market order and why neither socialism nor government interventionism can ever be a substitute for capitalism.

Mises was not only a "grand theorist," but a practical policy analyst and advocate, as well. In the Austria in which he lived in the years between the two World Wars, he made his living as a senior policy analyst for the Vienna Chamber of Commerce. He dealt with the daily issues of government taxing, spending and regulation of the Austrian economy at a time of hyperinflation, economic instability and disorder and then the Great Depression.

If anyone has wondered, "Well, how exactly do you apply 'Austrian Economics' to the 'real world,'?" I try to explain how Mises did so every day in dealing with the practical policy problems of his native Austria.

I also devote several chapters in the book to an exposition of the Austrian theory of money and business cycle. In a lengthy chapter, for example, I present a detailed exposition of Austrian monetary theory as developed by Mises and Friedrich A. Hayek in the context of their analysis of the causes and cures for the Great Depression; this is then contrasted with John Maynard Keynes's alternative analysis and pro-government interventionist approach. I dissect and critically evaluate the assumptions and logic of Keynesian theory.

In two other chapters, I contrast the Austrian theory of money and the business cycle with that of Joseph Schumpeter and what was known as the Swedish School of Economics.

I believe that one will finish the book with a good grasp of the Austrian approach and the valuable insights it has given to our economic understanding of the world.

All the policy issues that Austrians like Mises and Hayek dealt with in earlier decades of the last one hundred years are very much still with us. This, I like to think, makes the ideas explained in my book as relevant for our own time as when they first formulated them in an earlier period.

Daily Bell: You are just starting to prepare and edit what will be one of the volumes in the Collected Writings of F.A. Hayek, which are being published by University of Chicago Press. Any teasers? Why has Hayek lasted? What is pertinent about his writings for today?

Richard Ebeling: There can be little doubt that Friedrich A. Hayek was one of the most profound and important economists of the 20th century. In my humble opinion, I consider Mises and Hayek to be the two greatest economists of our time.

Whether as a monetary and business cycle theorist (and the leading opponent of Keynes in the English-speaking world in the 1930s), or an analyst of the dynamic workings of a competitive economy based on the idea of decentralized knowledge in society that no central planner could ever hope to master, or as a grand political philosopher who demonstrated the essential foundations of a free society if both liberty and prosperity are to be possible, Hayek's contributions stand head-and-shoulders above the vast majority of his contemporaries.

He was most worthy of the Nobel Prize in Economics that he was awarded in 1974.

Why and how is Hayek still relevant for our own time? Just think of the current controversy in the United States over national health care in the form of ObamaCare. Hayek spoke of the "pretense of knowledge" on the part of policy-makers and politicians who arrogantly presumed to possess enough knowledge of everyday, changing life to micro-manage the economic activities of multitudes of millions.

What greater arrogance can be seen today than on the part of a president of the United States and those in his administration who demonstrate the hubris of claiming to know enough to determine and decide what health care every single American should receive, what type of insurance policies they should have in terms of coverage, premiums and deductibles and, therefore, what the pattern and structure of medical treatment should be for over 310 million people?

Those in Washington, DC show the arbitrary arrogance of bygone kings and princes who asserted the right to change the rules at any time and in any way as they deemed fit. One of the themes in Hayek's works on political philosophy is the importance of the Rule of Law that gives security and certainty to people in their person and property. What of either one can be said to exist in our society today, when the government asserts the right to make and change the "rules of the game" as it sees fit?

In this sense, we live in a "lawless" society. And Hayek's works explain to us why this so dangerous in threatening a "road to serfdom," as he entitled one of his most famous books.

Daily Bell: Let's address some issues pertaining to your last interview with us. You seemed to believe that gold and silver were not subject to specific manipulations last time we spoke to you. Is that accurate? Have you changed your mind?

Richard Ebeling: I am not exactly sure by what you mean by the idea that gold and silver are not subject to government manipulation. Tragically, virtually everything in our society and time is subject to manipulation and abuse. The US government, after all, took the country off a gold standard in 1933 and made it a crime to hold and hoard gold in any monetary form for decades.

But what I think you are referring to is the idea emphasized by many free-market economists, including Ludwig von Mises, for instance, that the advantage of a monetary system based on a commodity like gold is that it makes it more difficult for a government to arbitrarily change the quantity and therefore the value of the money used within a country.

A gold standard works on the "rule" that any currency outstanding is meant to be a circulating substitute and claim to a quantity of gold deposited in a bank or other financial institution for safekeeping.

Any additions to the paper currency in circulation (or other bank deposits representing that currency in exchange) are only supposed to come about as a result of net additional deposits of gold into the banks of that country. And any net withdrawals of gold deposits are to be accompanied by a decrease in the number of currency notes in circulation.

Money substitutes in the form of checking and other similar banking accounts are to expand and contract only as a parallel reflection of changes in the quantity of gold (or silver) money kept in the banking system.

This, in principle, precludes the government from just arbitrarily changing the quantity of paper money in circulation to serve its own political policy purposes.

But a gold standard only works for as long as the government and the members of the society desire and respect such a monetary system. When they don't, well, we see what our monetary system has been like since FDR's New Deal days in the 1930s.

One final point: The old gold standard, even in its heyday before the First World War, was still a government managed monetary system, through a series of national central banks.

Real monetary and banking reform that advocates of freedom should desire as their long-run goal is the end to central banking, and the privatization and the depoliticization of money and the monetary system on the basis of fully private competitive banking.

Daily Bell: You also spoke to us a great deal about the Fed's loose money policies and their distortive effects. Is the Fed going to tighten under Yellen?

Richard Ebeling: Well, it all depends upon what one means by "tightening." For practically all of last year the Federal Reserve was increasing the quantity of bank reserves at a rate of $85 billion per month, for a total of over $1 trillion for the year.

Then the Fed announced that it would "only" increase bank reserves at $75 billion per month. And the most recent Federal Reserve declaration now says they will "tighten" that to a "mere" $65 billion per month. Suppose they were to follow that policy for the next year. Well, if bank reserves grow at that "trifling" monthly amount, then at the end of a year the money supply will have increased "only" around $800 billion.

That would be an amount not that much smaller than all the net interest income and rental income earned in the United States in 2013, according to the government's Gross Domestic Product accounts. It would also be larger than the projected federal government's budget deficit for fiscal year 2014. So the Fed will have increased money in the banking system enough to fund all of the government's borrowing dollar-for-dollar, and have additional new paper money left over to cover other inflationary spending.

Daily Bell: We recently wrote about American exceptionalism and how opponents of liberty were trying to redefine freedom as "conservatism" in "Conservatism Is Not Freedom." Your comments?

Richard Ebeling: Let me put it this way. There is a meaning to the notion of "American Exceptionalism," if rightly understood. America was exceptional in its founding and its practical existence for a long time because it was based on a series of principles not practiced anywhere before in the world in the same way.

Before "America," virtually all societies were founded on conquest and plunder. The conquering chieftains and their descendants asserted the authority and legitimacy to absolutely and arbitrarily rule over those under their political control.

In some places such as Great Britain there had been long battles over centuries between the kings and some segments of his subjects concerning defined limits on monarchical power. The achievements of the British in this regard were part of the premise upon which the Declaration of Independence was proclaimed and the Constitution promulgated a handful of years later.

But nowhere else than in America was there such a conscious and explicit claim that kings and their governments were not the giver and taker of "rights" belonging to the people.

In America it was stated that all men are endowed with certain unalienable rights, which included each individual's right to his life, liberty and pursuit of happiness. These rights preceded government, and a government's only legitimacy was in protecting the people's individual rights, not violating them.

And far more than in any other part of the world, this idea and ideal was preached and practiced. Were there governmental abuses and interventionist corruptions? Yes. Did the government act in aggressive and plundering ways at various times at some people's expense? No doubt.

But in comparison to the thousands of years before, America was a living reality of a society based on and respecting the individual's right to be free, and not the manipulated pawn in the hands of arbitrary monarchs or democratic majorities.

This was the essence of "American Exceptionalism." In America, society was made up of uniquely self-governing and sovereign individuals.

Daily Bell: Tell us about the sovereign individual.

Richard Ebeling: The American was not only self-governing and sovereign in the political sense. That is, that the individual participated in the political process to assure his partial consent in the election of those who held political office and in the policies undertaken by the government under which he lived.

This was considered an important element in being a free person in a free society. But far more important was a deeper understanding and meaning of the self-governing and sovereign individual.

In this exceptional American experience, government was limited to a relatively small number of explicitly enumerated functions and responsibilities. Outside of protecting each in his individual rights, every individual was self-governing and sovereign in guiding and directing his own life.

His life was his own to plan and implement. The government did not control, order, or plan his life for him. He chose his own career; he earned his own way; he was responsible for caring for himself and his family; all of his associations and relationships with others, both inside and outside of the commercial arena of trade and exchange, were based on his voluntary agreement in mutual consent with others.

There was no welfare state; there were, in general, no government guarantees or "bailouts"; there were some special interest subsidies and various foreign trade protections at times in that earlier period of American history. But in comparison to the world before and the world since, the market place was practically left alone.

Each individual "ruled" over himself, his own "sovereign," as long as he respected and did not violate the equal rights of all others to their lives, liberty and honestly acquired property.

This made America a most "exceptional" country and society!

Unfortunately, there have been few modern philosophical defenses of this understanding of American Exceptionalism except Ayn Rand. In her novels, The Fountainhead and Atlas Shrugged, and in her non-fiction writings, especially, The Virtue of Selfishness and Capitalism: The Unknown Ideal she formulated and articulated a philosophy of individualism based on the idea of the individual's right to his own life, and to live for himself. That is, he is not the slave or sacrificial lamb for arbitrary monarchs or voting majorities.

Few have understood that her premises offer a rational foundation for what the Founding Fathers were attempting to explain on the basis of their understanding of an individual's "natural right" to his life, liberty and honestly acquired property.

Daily Bell: Can a "nation" be sovereign by printing "sovereign" (fiat) money, as some have suggested? Is it true that a monetarily sovereign nation can never be bankrupt because it can simply print all the money it wants?

Richard Ebeling: In the way it is spoken about nowadays, a nation's "sovereign money" means a government's monopoly money. That is, only the government has a right to issue money, only government claims the right to determine its value in society and only government shall regulate and determine the actions and rules that banks and other financial institutions follow in the jurisdiction of that "sovereign state."

That is why governments get nervous and clamp down as any attempt by people to offer others in society an alternative medium of exchange outside of the government's controlling and manipulating hand.

The German free-market economist, Gustav Stolper, in his book, This Age of Fable (1942), pointed out:

"Hardly ever do the advocates of free capitalism realize how utterly their ideal was frustrated at the moment the state assumed control of the monetary system . . . A 'free' capitalism with governmental responsibility for money and credit has lost its innocence. From that point on it is no longer a matter of principle but one of expediency how far one wishes or permits governmental interference to go. Money control is the supreme and most comprehensive of all government controls short of expropriation."

And yes, governments can and have gone bankrupt. They can repudiate their debts by refusing to pay part or all that that government owes its creditors. Or a government can repudiate all or part of that debt by paying it back through issuances of paper money that results in the creditors receiving what they are owed in units of money of decreasing value. But such a method not only robs the creditors of all or part of what they are owed. It destroys part of the value of every unit of money held in the pockets of all of that country's citizens. Thus, that government defrauds not only its creditors, but also everyone in society.

Daily Bell: Did Keynes believe this?

Richard Ebeling: Keynes believed that it was the duty and responsibility of governments, advised by "wise" economists like himself, to control and manipulate the monetary system in an attempt to influence and determine not only the value of money in society but the levels of employment, investment and output within a country.

Daily Bell: You recently wrote about Keynes in "J.M. Keynes: The Damage Still Done By a Defunct Economist." Tell us more about your views on him. Was Keynes a government man? Did he set out purposefully to justify government spending?

Richard Ebeling: In his later years, Keynes wrote that as a young man at Cambridge University around the beginning of the 20th century, he was part of a generation that was consciously determined to revolt against and turn its back on the existing "Victorian" values of that time.


What were usually considered such "Victorian" values? Individual responsibility for one's actions, respect for the rights of others, the sanctity of private property and the respectability of participation in the world of commerce and industry as honorable callings within which to earn a living and leave one's mark on the world. These values also included an emphasis on savings, hard work and forgoing some pleasures of the present to plan for and undertake investments for a better tomorrow.

Keynes and his friends declared that they rejected a society based on such a system of values. Keynes said that the future was too uncertain and unpredictable to sacrifice the present for unknown possibilities ahead of us. This is the basis of his developing and defending a view of life and public policy that discounted the long run, and placed primary importance on actions in the short-run. Hence, his statement, "In the long run we are all dead."

But as many have pointed out, Keynes is certainly dead, yet we are alive and living through many of the longer-run consequences of his short-run policies.

Daily Bell: Why don't people mention that Keynes begins his analysis AFTER a depression and thus does not have to deal with causation? Isn't this an important point, that he never defines in detail what causes a depression?

Richard Ebeling: Keynes's analysis starts with the assumption that a market economy is inherently unstable and open to large swings of investor optimism and pessimism – what he called the "animal spirits" of the market place. During those seemingly uncaused and "irrational" bouts of investor pessimism, the economy falls into a prolonged period of idle resources, high unemployment and less than full potential output.

Furthermore, according to Keynes, the market economy had no "self-correcting mechanism" to get out of this economic trough. Hence, his conclusion that there needed to be an outside force that could "stimulate" aggregate demand to create profits that would get businessmen "optimistic" again, leading to rehiring and greater production.

It was precisely the Austrian economists, such as Ludwig von Mises and Friedrich A. Hayek, who argued that economic depressions do not just "happen" due to some inherent irrationality in investor psychology.

The competitive free market has self-correcting features in the face of change that assure a constant tendency toward coordination in the market place, a matching of supplies and demands, savings with investment, full employment of labor and other resources.

They demonstrated that the depression has its origin in a preceding inflationary boom that was set off by government and central bank manipulation of the money supply and interest rates. This set off a chain of events in which investment was thrown out of balance with savings, resources were misdirected and capital mal-invested.

It is the prior manipulation of money and credit and below market-based interest rates that create the distortions and imbalances that finally result in a "break" in the economy followed by the economic downturn, the depression or recession.

What is needed in such a downturn is for the government and its central bank to let the market rebalance and readjust itself to the realities of post-boom supply and demand conditions. However, this is something governments tend not to do.

Daily Bell: With all we know about economics, why do those in government continue to pursue tax and spend and inflationary policies that won't work and prove disastrous? Don't they understand what is going to happen?

Richard Ebeling: The branch of economics known as Public Choice Theory explains the economics of the political process. In a nutshell, it shows how and why politicians, bureaucrats and special interest groups interact in the way they do, with the result that the entire focus of government policy-making is in the short-run benefits to get politicians reelected, for bureaucrats to have larger budgets and more administrative and regulatory authority, and for special interests to use the power of the State to get other people's money through taxes and other means.

This is the logic of the political game in modern democracies. Since governments have the power to redistribute wealth and regulate market activities, it is inevitable that those who hope to gain from this process will try to eat at the trough of government spending and control.

Daily Bell: The world is obviously on the edge of a continuous and escalating inflation but some continue to argue for deflation. Isn't deflation of sorts part of the inflationary process?

Richard Ebeling: When the inflationary boom phase of the business cycle ends, it is inevitable that some if not many prices may have to fall "back down to Earth." That is, price may have to correct to that post-boom reality of actual non-inflationary supply and demand conditions. Thus, when the housing bubble burst, many housing prices inescapably went bust.

This, too, should be understood as part of any healthy self-correcting market rebalancing and readjustment. Thus, a degree of price "deflation" is always likely to be part of the recovery period of the business cycle.

But there is also another meaning of price deflation about which there is often an unjustifiable fear. In a growing economy, with increasing production and improved productivity, the prices of many goods will, other things held given, tend to decrease. That is, the market economy may experience secular price deflation.

But there is nothing inherently destabilizing or "depressionary" in such a falling price trend. Businesses introduce improved production methods to make more goods at lower costs precisely so as to be able to sell more output at competitively attractive lower prices, and still – hopefully – make profits.

Think of an entire economy experiencing the type of falling prices (and quality improvements) that we have seen over recent years with cell phones, flat-screen TVs and computers. Each of us could have a rising standard of living through our money incomes now able to buy more goods and services at generally lower prices over time. Such price deflation should be considered a "good" and not a "bad."

Daily Bell: What about usury? It is fashionable to say usury is a problem today, though usury is never defined. What is usury? Is it a historical monetary problem?

Richard Ebeling: Usury is the taking of interest on money lent. Governments have imposed usury laws under the presumption that lending money above some acceptable rate of interest is immoral and unjust.

The attack on taking interest on a loan has a long history dating back, in fact, to Aristotle in Ancient Greece. He argued that money is nothing but a medium of exchange that facilitates the transfer of one good for another. As such, money is in itself "unproductive." It is not food that can be eaten, nor a tool that can be used in making a horseshoe. Money merely facilitates the transfer of the food grown by the farmer to the blacksmith who gives, in turn, the horseshoe that the farmer desires to acquire.

How can that which does not "breed" (is not productive), said Aristotle, bear "offspring" (interest on a loan)? Aristotle's condemnation of the taking of interest on a loan was taken over by St. Thomas Aquinas in the Middle Ages and influenced the Catholic Church banning the taking of interest as a sin. (Only Jews were allowed to earn interest on money lent; after all, the Church said, for not accepting Jesus they were going to hell anyway, so what other punishment could fall upon them for sinfully earning interest income?)

In the late 18th century Jeremy Bentham, the father of Utilitarian philosophy, defended the paying of interest on a loan as the rightful freedom of any man to enter into a voluntary agreement and exchange on any basis he found acceptable with another.

Finally, in the late 19th century, the Austrian economist, Eugen von Boehm-Bawerk explained that the true origin of interest was in the differing time valuations among men. Some men value more highly the use of goods in the present than in the future, and are willing to pay a premium (interest) in the future for access to a great quantity of goods now than their own income enables them to command, while others are willing to forego uses of goods which they could command today in exchange for a premium (interest) over the principle at some point in the future when the borrowed sum will be returned to him by the borrower.

Goods in the present are exchanged and traded for goods in the future through the medium of money. The rate of interest is simply the exchange ratio of goods in the present for goods in the future expressed in terms of sums of money, and is as legitimate and essential for a functioning market economy as any other competitively agreed-upon price.

Usury laws distort and throw into imbalance lender and borrower relationships, just as any price control fixed above or below a market-generated price does to the relationship between supply and demand, in general.

Daily Bell: It is fashionable to say these days – among the public banking crowd – that free markets don't exist and are always controlled. Is this so?

Richard Ebeling: Tragically, it is an historical fact that governments have often interfered with the free-market interactions and activities of people. But it is not true that it has always been the case.

The history of the United States from the time of its founding in the late 18th century up to the early decades of the 20th century was a period during which virtually all market activities were free from government regulation, control or manipulation. The Great Britain of the middle and late decades of the 19th century was relatively free of government control as well.

These were the periods that made both countries economic giants, precisely because men were left free to be productive, creative and competitively cooperative with each other without the heavy hand of government stifling the inherent innovative and hardworking nature of man.

In general, two types of people turn to government and ask for and advocate its intervening involvement into other people's affairs. The first type are those who arrogantly believe they know better how other people should live and interact with their fellow men, and who want to manipulate the outcomes of human life more to their own liking. They are the people who wish to play the "social engineers" and remake society according to their own vision of the "good," "fair" and "socially just."

The other type are those who wish to use the power of the state for their own advantage, who are unable to attain the economic status they desire through the open competition of the market place. They want government to place barriers in the way of their competitors or for government to give them subsidies to cover their cost inefficiencies that prevent them from earning the profits they desire. They want the government to redistribute other people's wealth to them, which they are not able or willing to earn on their own in the arena of peaceful, free competition.

Of course, there is also the envy and resentment of those who may have done better than themselves, those who wish to bring down all in society closer to a single material common denominator. Here is the advocate of "economic equality" or "social justice," which are merely the soothing phrases of the political plunderer who wants to take from those who have honestly earned through creative production and industry and coercively redistribute it to others they declare to be more "deserving" and "needy," which includes the proponent of such policies.

Daily Bell: Should we strive for free markets or should we simply give up and appoint a monetary commissar and run our economies via Greenbacks and dirigist management?

Richard Ebeling: I was frequently in the Soviet Union during its last years, doing consulting work on market reform and privatization. I was in Vilnius, Lithuania in January 1991 when the Soviet Army attempted to crack down on the Lithuanian freedom movement, the members of which were determined to regain their country's national independence that had been lost in 1940 when the country was annexed by Stalin as part of his agreement with Hitler to divide up Eastern Europe between Nazi Germany and the Soviet Union.

I witnessed the murder of some of the 13 people who were killed in one night by Soviet forces, as they seized control of government buildings and communications facilities. I was at the Vilnius radio station with a large group of Lithuanians as they faced Soviet soldiers who began to shoot into the crowd.

Lithuania is a small country of only around three million people. The next day one million men, women and children from other parts of the country came to Vilnius and surrounded the Parliament building to protect it from Soviet military forces all around. They were willing to risk death for freedom. Fortunately, the Soviets backed down in the face of such a mass of humanity wishing to breathe free.

In August of 1991, I was in Moscow during the failed hardline communist coup attempt, when the head of the communist party, Mikhail Gorbachev, was kidnapped by the hardliners, and the country was threatened with being taken back to the grimmest days of Soviet tyranny.

My future wife and I spent most of the next three days of the coup-attempt with large crowds of Muscovites who rallied to the Russian Parliament when Boris Yeltsin stood on top of a tank and called on the people of Russia to reclaim their freedom from communism. Surrounding us were Soviet tanks and KGB units, and some lost their lives in the confrontation.

Fortunately, the coup failed and in a few months the Soviet Union ended and disappeared from the political map of the world. But the day after the coup failed that August, a huge celebration was held in a large plaza behind the then Russian Parliament building. At one point, everyone looked up to the top of the building, and watched as the red Soviet flag with the hammer and sickle was taken down and the pre-communist colors of red, white and blue were raised up the flag pole.

Then in unison, from that ocean of Russians came a chant: "Swaboda, Swaboda, Swaboda" – "Freedom, Freedom, Freedom."

Should we give in to the seeming trends towards greater political paternalism and control? Should we allow government dictates to have mastery over more aspects of our lives? I have seen people stand up to real tyranny, and risk their lives and that of their families to be free, and some die to have that freedom.

What these people were attempting to escape from is what collectivist social engineering, political plundering and envy-driven redistribution lead to.

Liberty is too precious to lose without a fight. Because once lost it is even more difficult to get it back. Ask those people who lived their lives under Soviet tyranny.

Daily Bell: Update us generally on the Austrian movement and free-market economics. These have come under attack by "populists" and other advocates of government intervention movements. What's your take?

Richard Ebeling: This year marks the 40th anniversary of the revival of the Austrian School of Economics. By the immediate postwar years of the late 1940s, Keynesian Economics had won the battle of ideas in the halls of academia and among economic policy-makers in the United States and Western Europe.

All competing approaches or alternative "schools of thought" were washed away in the tidal wave of Keynesian victory and euphoria, including the Austrian School.

In June of 1974, the Institute for Humane Studies organized a conference on Austrian Economics that was held in South Royalton, Vermont. About 40 people were brought together interested in the ideas of the Austrian School. They came to hear lectures by three leading proponents of those Austrian ideas: Israel M. Kirzner, Ludwig M. Lachmann and Murray N. Rothbard. Their lectures were published shortly afterward in a book called, The Foundations of Modern Austrian Economics (1976).

I was one of those fortunate 40 people who attended that Austrian Economics conference in South Royalton, Vermont. Many of those young men and women who were there, "at the beginning," have gone on to become leading voices for and contributors to the new Austrian School.

Then later, in October 1974, the Swedish Academy announced that they were awarding the Nobel Prize in Economics that year to the Austrian Economist, Friedrich A. Hayek.

These two events – the South Royalton conference and Hayek's receiving the Nobel Prize – served as the catalyst for the rebirth of the Austrian School of Economics. Today, four decades later, there are university economics departments at which Austrian Economics is taught as a part of the curriculum; George Mason University in Virginia is a leading one in offering a graduate area of study in Austrian Economics. There are institutes and think tanks around the world devoted to developing and applying Austrian ideas to contemporary economic policy problems, such as the Ludwig von Mises Institute in Auburn, Alabama.

There is a professional Society for the Development of Austrian Economics, and at least three scholarly economics journals devoted to the Austrian approach. There are conferences partly or totally held on "Austrian" themes and topics. And there now appear books almost every year written within the Austrian tradition, or which incorporate Austrian ideas in their analyses.

And the Internet has exploded with websites and blogs devoted to some aspect of Austrian Economics.

It is not surprising that the advocates of government intervention and income redistribution focus their intellectual guns on the Austrians, since they offer many of the most insightful and powerful arguments on the workings of a competitive free market, and the inconsistencies, contradictions and negative consequences to be found in the more interventionist and redistributive approaches to economic policy.

I often find that many of those who criticize the Austrian approach do so through the tactics of distortion, misrepresentation, or exaggeration, most especially in the popular press.

Now, in the world of ideas, any approach is "fair game" for challenge and criticism. That's how human understanding advances. But I believe that it is because of the strengths that may be found in the Austrian approach to understanding the working of the competitive market order that its critics find it necessary to make their challenges by first giving a false account of what the Austrians presumably say about government intervention, or central banking, or on how the market works.

The current attacks on Austrian Economics are typical of this "phase" of the intellectual cycle following an economic boom and bust. The interventionists and monetary central planners whose monetary and fiscal policies generated the unsustainable boom that then resulted in the inescapable recession rebalancing and adjustment process now deny that any of their own misguided policies brought about this sequence of events.

No, it is the "Austrians" who are wrong about what causes the business cycle; who are incorrect in wanting to leave markets alone to re-coordinate supplies and demands in the post-boom period; who care nothing for the poor as reflected in their opposition to welfare redistributive policies.

Sure, the interventionists say, we may have made a few mistakes – like that it was their own monetary policies that caused the boom through easy money and artificially low interest rates, or housing policies that misdirected people into buying homes they could not afford at prices they would not be able to pay back – but don't worry, trust us, we'll get it "right" the next time.

Just keep us at the helm of government monetary, fiscal and regulatory policies. Because next time, well, there won't be a next time, since we are steering the ship-of-state to the shores of economic paradise and well-being for all. Trust us at the helm of economic policy; we'll never hit the rocks again. Just ignore those "Austrians" who are constantly criticizing our steering ability of the great ship-of-state.

Our task as advocates of free-market policies on the basis of realistic and sound economic theory is to continue to explain again-and-again why and how it is that those interventionist and redistributive policies are not the path to prosperity and greater freedom. And to do so in logical, reasonable and persuasive ways that influence the trends in society into better directions.

Daily Bell: What does the future hold? Will the 21st century be better than the 20th for freedom and prosperity?

Richard Ebeling: Nobody has a crystal ball to read the shape-of-things-to-come. The reason for this is that nothing is predetermined or foreordained. History is the product of human action, and human action is the result of ideas put into motion.

Successfully change the climate of opinion and the seemingly irreversible trends in society can and will change course. The last hundred years has seen many of such irreversible trends move into different directions.

At the beginning of 1914, most people thought the future would be one of peace and growing freedom and prosperity for all; few imagined that within a matter of months Europe would plunge into the destructive disaster of World War I, and the release of the demons of collectivism – communism, fascism, Nazism – in the wake of that war.

In the interwar period of the 1920s and 1930s, many old free-market liberals were certain that freedom and democracy were in their irreversible twilight in the face of the rise of totalitarianism in the form of Soviet communism, Italian fascism, Germany National Socialism (Nazism).

Then in the decades of the post-World War II period, many feared that the future belonged to Marxism and socialist central planning due to the intellectual appeal and military strength of the Soviet Union. Some friends of freedom even wrote books on How Democracies Perish in the face of communist power – just a few years before the end of the Soviet Union!

With the collapse of the Soviet Union, others now wrote about The End of History, since there was nothing left for mankind to accept other than political democracy and some form of market-oriented economic policies.

Now, supposedly, we are doomed under growing government, mounting government debt, the stranglehold of interventionist policies and the rise of new global alternative paradigms in the form of modern China and the European Union.

Twenty or thirty years from now other people will look back on our time, and see how it all played out. Perhaps the current trends will have continued, with all their destructive consequences. But it is also likely that those future social, political and economic analysts will look back on our time, and understand in a way that we do not see or anticipate just how those trends changed again, and maybe for the better.

That is why we should never "give up" or think there is no hope or chance. Ideas do have consequences – for good or evil. Our responsibility is to be voices of reason and sound thinking in defense of liberty. If we rise to that challenge, we will have done all that can be expected of us, and what we should insist from ourselves.

Daily Bell: Thank you, Dr. Ebeling, for your time and thoughts.

After Thoughts

Another interesting interview from Dr. Ebeling. His insights into Keynes are most valuable and timely so this is what we'll comment on. From this interview we learn something new, that Keynes was determined to overthrow "Victorian values."

In fact, this makes sense within the context of his personality and lifestyle. But for us, this approach reveals an essential nihilism. Keynes wanted to overthrow Victorianism … but what did he want to put in its place? It seems to us that he had no overriding philosophy that he wished to propagate.

Perhaps this is why he fell in with the Fabians who were equally nihilistic – in terms of their reality if not in terms of their philosophy.

As we remarked in a recent feedback (and have mentioned elsewhere), a lost and recently rediscovered stained glass window – now mounted at the London School of Economics – represents the Fabian philosophy. It features a man raising a sledgehammer to violently reshape the world. And, of course, it also depicts the famous wolf-in-sheep's-clothing that was a symbol of the Fabians' purposeful deviousness.

What kind of group adopts a wolf-in-sheep's-clothing as its symbol? Thomas Jefferson and other classical liberals who lived before Keynes's time would never have adopted this wolf/sheep sign, in our view … or signaled their intention to violently reshape the world. It is incredible that their window now hangs in a place of honor at the London School of Economics.

As for Keynes, his General Theory has seemingly been proven wrong on every count. It is true that government interference in the economy can help individuals; but the larger impact of fixing prices (and all legislation provides a price fix) is essentially negative because it distorts economic opportunities and retards prosperity.

Keynes must have known this, for his free-market opponent F.A. Hayek made cogent arguments against Keynes for a number of years. But Keynes continued. He preached government interference relentlessly and became the statists' favorite and most powerful economist as a result.

Even today, those commenting on Keynes and his fables believe the man to be sincere, a great, if occasionally misguided, thinker. In fact, it seems to us that the General Theory was written deliberately to falsely justify government economic activism and to overthrow the sensible arguments of classical liberalism.

It is said that Keynes "won" the argument against Hayek. In fact, he did not – as history will eventually record.

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