“Pope calls for global government,” read the headlines in early July. Then, as night follows day, the Pope’s conservative supporters lined up to eviscerate the media for distorting the Pope’s meaning.  Those darn liberals—how dare they twist the Pontiff’s words like that.

This is not exactly the first time such a thing has taken place. The pattern, over the past couple of decades, runs as follows: the media more or less accurately portrays something the Pope said or did, and then his conservative supporters, anxious to explain away these unusual statements and activities, devise convoluted explanations as to what the Pope really meant.

It is worth reproducing the relevant passage of the Pope’s new encyclical, Caritas in Veritate:

In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth. One also senses the urgent need to find innovative ways of implementing the principle of the responsibility to protect and of giving poorer nations an effective voice in shared decision-making. This seems necessary in order to arrive at a political, juridical and economic order which can increase and give direction to international cooperation for the development of all peoples in solidarity. To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years ago. Such an authority would need to be regulated by law, to observe consistently the principles of subsidiarity and solidarity, to seek to establish the common good, and to make a commitment to securing authentic integral human development inspired by the values of charity in truth. Furthermore, such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights. Obviously it would have to have the authority to ensure compliance with its decisions from all parties, and also with the coordinated measures adopted in various international forums. Without this, despite the great progress accomplished in various sectors, international law would risk being conditioned by the balance of power among the strongest nations. The integral development of peoples and international cooperation require the establishment of a greater degree of international ordering, marked by subsidiarity, for the management of globalization. They also require the construction of a social order that at last conforms to the moral order, to the interconnection between moral and social spheres, and to the link between politics and the economic and civil spheres, as envisaged by the Charter of the United Nations. [emphases in original; internal endnotes removed]

Whatever we may say about this passage, was it really so unreasonable for reporters to have interpreted it as they did?

I actually didn’t want to write anything about the Pope’s encyclical.  In 2007, I wrote a book, Sacred Then and Sacred Now: The Return of the Old Latin Mass, in defense of the Pope’s restoration of the traditional Latin liturgy, an area in which Benedict XVI is quite knowledgeable and has much of value to say. I like this Pope. He is smart and serious, not frivolous or vain. He is in many ways a substantial improvement over his predecessor. (I cite as evidence the very fact that the media believes the opposite.) And having been viciously denounced and ridiculed by some pretty despicable people, he certainly has all the right enemies.

I have reluctantly yielded to the urging of quite a few correspondents and typed up a few thoughts. So here goes: Caritas in Veritate strikes me as at best a relatively unremarkable restatement of some familiar themes from previous social encyclicals. At worst, it is bewilderingly naïve, and its policy recommendations, while attracting no one to the Church, are certain to repel.

The response to the encyclical throughout the right-of-center Catholic world was drearily predictable: with few exceptions, it was a performance worthy of the Soviet Politburo, with unrestrained huzzahs everywhere.

It is one thing to receive a statement from the Pope with the respect that is due to the man and his office. It is quite another to treat his every missive as ipso facto brilliant, as if the Catholic faith depended on it. If his supporters are trying to live down to the Left’s portrayal of Catholicism as a billion-person cult, they could hardly do a better job.

My book The Church and the Market: A Catholic Defense of the Free Economymakes a distinction between those aspects of economics that fall within the Pope’s purview as a teacher of faith and morals and those that do not.  I’ll repeat that thesis here as a prelude to my comments.  (Anyone who already gets this can skip this section.) The phenomena that economics touches upon, which include money, banking, exchange, prices, wages, monopoly theory, and many other topics, are replete with moral significance. But the positive, scientific statements about these phenomena that constitute the discipline of economics are necessarily value neutral. (By “scientific” I mean only that they involve causal relationships, not that economics is or should resemble one of the physical sciences.) Describing the workings of fractional-reserve banking is a positive task, not a normative one. Discussing whether such a system is desirable is a normative task, and qualitatively separate from explaining the mechanics of that system. One cannot make an intelligent comment about the former unless he understands the latter, and it is the latter with which economics, properly understood, concerns itself.

Likewise, economic policy may possess a moral dimension, but not a single proposition of economic theory involves a moral claim. For example, Frank Knight conceived of capital as a homogeneous unit whose individual processes occurred synchronously, and therefore could be understood without introducing time into capital theory. F.A. Hayek, as well as the Austrian School of economics to which Hayek belonged, conceives of capital as a series of time-consuming stages of higher and lower order, with the highest-order stages the ones most remote from consumers (mining and raw materials, for instance) and the lowest-order stage immediately preceding the sale of the finished product.

Nothing in the Deposit of Faith even comes close to deciding this and countless other important economic questions one way or the other. Not even the most uncomprehending or exaggerated rendering of papal infallibility would have the Pope adjudicating such disputes as these. Yet misunderstandings or ignorance regarding such seemingly abstruse points are so often at the heart of the policy recommendations that bishops’ conferences propose and papal encyclicals can seem to imply.

It is obviously not “dissent” merely to observe that the cause-and-effect relationships that constitute the theoretical edifice of economics are not a matter of faith and morals. They simply do not fall within the range of subjects on which a Catholic prelate is endowed with special insight or authority. Catholic laity cannot head up petition drives against them. They are facts of life. Facts cannot be protested, defied, or lectured to; they can only be learned and acted upon. There is no use in shaking our fists at the fact that price controls lead to shortages. All we can do is understand the phenomenon, and be sure to bear it and other economic truths in mind if we want to make statements about the economy that are rational and useful.

Moreover, those who posture as defenders of Catholic social teaching by and large do not acknowledge that the proposals they implicitly or explicitly advance could have anything but favorable consequences for all. No trade-offs (between higher wages and unemployment, for example) are considered. Naturally, no room for objections can exist when the very possibility of objection is foreclosed by the way the argument is framed: for example, if we want higher wages, we simply demand them. Anyone who does not join in this demand must not want higher wages. This begs the question, of course, since whether high wages can be produced by man’s ipse dixit, rather than through capital accumulation, is precisely the matter at issue.

For instance, the idea of a “living wage” for heads of households is an example of a policy I would institute only if, (1) I did not understand what factors lead real wages to rise on their own, without the use or threat of violence; or (2) I wanted to hurt people by making them less employable. (Why not offer a living wage of $10,000,000 per hour, if it’s so easy to raise wages by fiat?) I lack the space to defend this claim here, so I refer interested readers to my chapter on the subject in a book called Catholic Social Teaching and the Market Economy, published by London’s Institute of Economic Affairs in 2007 and available for free download.

It is certainly possible, though very unlikely, for a Catholic to reply this way: the Church insists that the living wage and whatever else must be instituted because justice demands them, even though they will make people, particularly those they were designed to help, materially worse off. However, no ecclesiastical document I have ever seen has taken this position. These documents carry the assumption that their suggestions will accomplish their stated ends and increase people’s well-being. That assumption, in turn, implies that the only thing standing between today and a more prosperous future is sufficient political will rather than constraints imposed by the very nature of things. And that merely assumes the very thing that needs to be proven.

It begs the question yet again to declare that authority has spoken and the matter is closed—the very matter at issue is whether these subjects are of a qualitative nature to be susceptible of ecclesiastical resolution in the first place. If the law of returns, for instance, is an objective fact of nature (which it is), then the Pope himself cannot declare it to be false, or expect success from policy prescriptions that ignore it, any more than he can fashion a square circle. It is no insult to papal authority to exclude the possibility of square circles. (As a matter of fact, leaving aside the famous and oft-misunderstood dissent of St. Peter Damian, the consensus among the Scholastics before the triumph of nominalism was that God himself could not violate the law of non-contradiction—by, say, creating a square circle.)

It is one thing, for example, to identify the well-being of the family as an important ingredient of a healthy society. It is quite another to propose specific policy measures designed to help families, since whether these policies will have their intended effect involves causal analysis, which, it should be unnecessary to point out, is analytically separate from faith and morals. Surely some matters are to be left to the laity to discuss and determine among themselves.

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Pope Paul VI’s Populorum Progressio (1967), for example, went beyond the moral observations one might make about Third World development to actually offering policy prescriptions, thereby putting Catholics in the unfair position of appearing to “dissent” from the Pope when proposing alternatives. Peter Bauer, the prophetic development economist who warned for decades about the harmful effects that Western aid programs would have, noted that there was nothing particularly Catholic or even Christian about the document, and that it merely repeated, with some religious overtones, the conventional wisdom.

We now know how disastrous Populorum’s advice was: the aid entrenched the worst regimes and indefinitely delayed necessary reforms, and it tore a dozen countries apart as various ethnic and racial groups descended into violence as they tried to grab hold of a share of the grant money. The very idea of foreign aid introduced perverse incentives into these societies; it now made less sense to create things that please your fellow man and more sense to devote unproductive effort to campaigns to get aid money for yourself. (I review the subject in more detail in The Church and the Market and cover the literature in 33 Questions About American History You’re Not Supposed to Ask.) Hong Kong, Chile, and South Korea, on the other hand, became prosperous after aid was discontinued and they were forced to adopt sensible and sane economic policies.

Paul VI also adopted the fashionable Prebisch/Singer thesis that a secular deterioration in the terms of trade between the developed and the developing world, to the disadvantage of the latter, was bound to emerge in light of the supposed tendency of manufactured goods to rise in price while the prices of commodities (in which developing countries tended to concentrate) fell. In fact, the alleged deterioration in the terms of trade never occurred, as Gottfried Haberler was already arguing ten years before Populorum Progressio, if anyone was bothering to listen. Yet it was on these faulty grounds that Paul VI then proceeded to discourage free trade as a path to prosperity for the developing world. (I realize some readers of this site may oppose free trade, but the conservative argument against it is that it allegedly hurts the rich country and benefits the poor country—surely we concede that someone benefits from free trade, right?) Countries that have followed that advice have lagged far behind those that have integrated themselves into the international division of labor. There is no denying this.

Was it “dissent” to have observed that the Pope’s factual error about the terms of trade was indeed a factual error? Was it “dissent” to have pointed out that these recommendations would not have their intended effect? Were we to believe that the Pope’s authority over faith and morals extended also to cause-and-effect analysis applied to international development aid. These questions should answer themselves.

By the 1980s and 1990s, the consensus among observers of all kinds was that Bauer had been vindicated, and that these programs had indeed done more harm than good. Even the most intractable opponents of common sense, like the New York Times and the International Monetary Fund, were forced to this conclusion. And yet we read, in 2009, in Pope Benedict XVI’s Caritas in Veritate:

In the search for solutions to the current economic crisis, development aid for poor countries must be considered a valid means of creating wealth for all. What aid programme is there that can hold out such significant growth prospects—even from the point of view of the world economy—as the support of populations that are still in the initial or early phases of economic development? From this perspective, more economically developed nations should do all they can to allocate larger portions of their gross domestic product to development aid, thus respecting the obligations that the international community has undertaken in this regard. [emphasis in original]

All right, I’ll say it: this is wrong in every respect. However well intentioned it may be, it is absolutely wrong. We can express our unhappiness with statements like this as respectfully and non-flippantly as possible, but to remain silent about them leaves the false impression to potential converts that they would be committed to obviously debatable propositions like these should they choose to enter the fold.

In the wake of the new encyclical’s release I came across a few disparaging references by conservative Catholics to Paul VI and Populorum Progressio, against which these critics (rather implausibly, in my view) wished to contrast the more sober and sensible Caritas in Veritate.  What’s interesting about this is that I don’t recall any of these critics, some of whom were alive during Paul’s pontificate, offering such remarks at that time. But if Populorum’s advice is ill considered to the point of having been refuted by experience by 2009, then it was at least open to discussion in 1967. Where was that discussion? Why is Populorum being critically examined only now, after the damage has been done?

Now I repeat: only the most uncomprehending or superstitious Catholic would think the Pope’s authority over faith and morals granted him some kind of magical insight into the best model to pursue for Third World development. Were that true, then economics in general and development economics in particular should be abandoned immediately, since simple inquiries with the Pope would yield all the answers we might need.

This is why Pope Leo XIII once declared,

If I were to pronounce on any single matter of a prevailing economic problem, I should be interfering with the freedom of men to work out their own affairs. Certain cases must be solved in the domain of facts, case by case as they occur…. [M]en must realize in deeds those things, the principles of which have been placed beyond dispute…. [T]hese things one must leave to the solution of time and experience.

In addition to some of its more unfortunate statements, Caritas in Veritate is also a gigantic missed opportunity. There are legitimate moral concerns to be raised about the structure of the world’s monetary systems, but Benedict XVI does not discuss them.

If those moral concerns interest you, I suggest Jörg Guido Hülsmann’s brilliant work The Ethics of Money Production, or my The Church and the Market. (The former title was greeted with great enthusiasm in The Wanderer by Paul Likoudis, a good man whom I would classify as a third-way distributist of some sort, so its appeal extends well beyond the usual Misesian circles.) Hülsmann shows that within Catholic tradition there is ample testimony to the wickedness of monetary debasement, fractional-reserve banking, and numerous other institutional commonplaces we hardly give a second thought. As Hülsmann argues, there is no moral or economic case for the monetary system under which we are forced to live—a system that has never been introduced voluntarily but has always been enforced by violence, with the police empowered to suppress alternatives. The insidious nature of the government’s monopoly on money becomes even clearer when a currency degenerates into hyperinflation, all known examples of which have occurred under monopoly fiat-money systems. Short of a completely state-run system, it is as far from a free market as one can imagine.

The system we have now involves a government-privileged central bank with a monopoly on the creation of legal-tender money, charged with watching over a cartel of ostensibly private but also state-privileged commercial banks.  Its debasement of money makes it very difficult for people to save for the future without having to become speculators of one kind or another. A hard-money system, on the other hand, permitted the average person to save for the future simply by accumulating precious-metal coins, which, back in the days when they served as money, held or increased their value over time. Who today would save for the future by piling up Federal Reserve Notes? Society’s most vulnerable now must enter the stock market or take other kinds of risks just to hold on to their wealth. Is this not a moral issue?

The present system gives rise to the business cycle when it attempts to push interest rates below their free-market level. The resulting discoördination within the structure of production puts the economy on a path it cannot follow indefinitely. The bust then throws countless households into turmoil, and inevitably encourages the most despicable, predatory behavior on the part of firms seeking bailouts.

The monopoly central bank institutionalizes the problem of moral hazard. There is no physical limitation on the creation of additional paper money. For that reason, major market actors know there is no physical constraint on bailing them out in emergencies. The only obstacle, easily conquered, is one of political will. It should be obvious enough how a system like this both promotes an artificially elevated level of risk tolerance and benefits the already privileged at the expense of the average person. All of these arguments and others besides are developed in more detail in Hülsmann’s book and in my own Meltdown and The Church and the Market. The encyclical unfortunately neglects these moral problems in favor of what strike me as platitudinous warnings about materialism and greed that I might encounter in secular form in any mainstream publication you care to name. Had the Pope instead raised the serious moral concerns I have outlined here, he would have lent his prestige to jump-starting a long-overdue examination of financial practices we have long taken for granted. Instead, although Benedict XVI surely would not think of it this way, the encyclical by and large told the Powers That Be what they wanted to hear: materialism and greed need to be kept in check by economic planners and stabilizers. (Quis custodiet ipsos custodes? one wonders.) In other words, the regrettably conventional recommendation of Caritas in Veritate appears to be closer regulation of the existing system.

Because these institutional factors are neglected, moreover, the encyclical lacks any systematic comprehension of business cycles, which by clear implication the reader is left to believe are caused by the aggregate sum of individual acts of wickedness. The interesting question—namely, why these acts of wickedness should occur in sudden, cyclical clusters—is not raised.

What, then, is a Catholic to do? There is no need to provide chapter and verse to the effect that the Pope is not (and was never thought of as) an absolute monarch whose every utterance is to be greeted with obsequious flattery. Any educated Catholic knows this. Throughout the vast bulk of Church history, the cult of personality—let’s call it what it was—that surrounded Pope John Paul II would have struck Catholics as downright bizarre.

St. Thomas Aquinas contended that a layman may rebuke his prelate, even publicly, if the latter is giving scandal. Under the heading “Whether a man is bound to correct his prelate,” St. Thomas writes: “It must be observed, however, that if the faith were endangered, a subject ought to rebuke his prelate even publicly. Hence Paul, who was Peter’s subject, rebuked him in public, on account of the imminent danger of scandal concerning faith.”

Now again, I like Benedict XVI, and I believe he has made important changes for the better in the life of the Church. But certain key passages of Caritas in Veritate, in addition to being unhelpful or ill considered, erect gratuitous obstacles to conversion on the part of countless Protestants and other non-Catholics. If St. Thomas’ counsel does not apply in this case, where would it apply?

After eight years of watching conservatives blow trillions of dollars and comport themselves like anti-intellectual, jingoistic blockheads, I found myself ashamed to admit that the Left seemed to have all the genuine intellectuals—people who seemed to possess real curiosity, who refused to accept whatever official line the government was shelling out, and who sought genuine understanding instead of name-calling and pointless vitriol.

With the Left now in power, though, they’ve by and large reverted to form.  The very same people who just a year ago prided themselves on evaluating every Pentagon press release with an air of suspicion and hostility now accept without cavil whatever the Federal Reserve chairman or the Treasury secretary tell them.  They’ll believe whatever economic superstition, no matter how transparently ludicrous, that happens to be in fashion. Whatever happened to “Question Authority”?

Air America host Thom Hartmann is a perfect example.  His article on the economic crisis posted at the Huffington Post gets pretty much everything dead wrong, and yet his point of view is by and large the conventional wisdom.

Let’s start with the economists whose ideas, according to Hartmann, led us to the current crisis.  Why, they’re “Ludwig Von Mises, Freidrich [sic] Von Hayeck [sic], Milton Friedman, Alan Greenspan, Tom Freidman [sic], Robert Rubin, Larry Summers, and Ayn Rand.”

Now I’m sporting enough to look past the fact that Hartmann makes two spelling errors in a single economist’s name.  Still, color me skeptical that Hartmann knows a blessed thing about the work of F.A. Hayek.  (I assume he thinks these people are more or less interchangeable, that Mises = Friedman = Summers = Rubin, that Mises wouldn’t have denounced at least several of these figures, and that the differences between them are probably just trivial and not worth mentioning.)

Quiz time, Thom!  Name one book on economic theory (so The Road to Serfdom, if you happen to have heard of it, doesn’t count) Hayek wrote that you’ve read, flipped through, held in your hand, or even heard of.  Stumped?  How about one article?  Stumped again?  Then why not do the decent and honorable thing and shut up until you can speak from authority rather than prejudice and ignorance?  Sound fair?

Actually, Thom, I’ll be even more sporting. You can start condemning them again once you can at least competently summarize what someone who has read them tells you they say. How’s that?

Hilariously, then, Hartmann lumps Mises and Hayek in with Alan Greenspan, the so-called free-marketeer who thinks we need a Soviet commissar (namely himself) to plan money and interest rates. Um, Thom, Mises and Hayek opposed central banking altogether, arguing that it was not only a superfluous intervention into the market economy but also that it was destabilizing and the source of the boom-bust cycle. These men are supposed to be similar to Greenspan how, exactly?  Can I take a wild guess that you’re out of your depth here, Thom, and therefore simply making things up?

I’ve summarized the Mises-Hayek position elsewhere (flip to page 13 here, for instance, or see Meltdown, my recently released book on what caused the crisis and why the free market is not the cause but the solution). In a nutshell, the point is that when the government’s central bank intervenes in the economy to push interest rates lower than the free market would have set them, the result of its tampering is a massive cluster of errors (to use Lionel Robbins’ phrase) on the part of investors and consumers alike. It goes without saying that a government central bank’s intervention into the market to push interest rates lower than the free market would have set them cannot, by definition, be the fault of the free market.  The problems Hartmann identifies in his article, as well as the ones he neglects or doesn’t know about, are mere symptoms of a more fundamental cause, namely the creation of cheap credit by the Fed. Whatever happened to leftists’ interest in “root causes”?

This raises another issue about Hartmann’s piece: not a single word about the Federal Reserve System, as if it played no role at all in the crisis. Not one word! Is Hartmann actually ignorant of the Fed’s role?  Does he, as I suspect, actually defend the Fed?

How I’d love to hear Thom’s defense of the Fed as a progressive institution. That would be rich. Here’s the guy who claims to oppose the transfer of wealth from the poor to the rich, and yet that is precisely what the Cantillon effects of expansionary monetary policy do. It’s also what the Fed’s role as “lender of last resort” does. If Hartmann thinks that power is exercised in defense of the little guy, he is hopeless.  Hopeless with an exponent beside it.

Now I know you’re waiting with bated breath to know about Hartmann’s take on the S&L fiasco of the 1980s. What laser beam of insight might he share with us? Whatever could Thom blame that one on? Who can predict such a thing?

I’m telling you, you’ll need to do some breathing exercises, and perhaps a little quiet meditation, to prepare yourself for the careful nuance and devastating originality of Hartmann’s answer. 

The S&L crisis was caused, he says, by…“deregulation.”  (I’m as speechless as you are.)

Before Ronald Reagan and his crazy deregulation spree, you see, everything worked fine. Then Reagan was elected, and he repealed all the laws. Society practically reverted to barbarism. Everyone grew slightly hairier. Wolves ran free in the streets.

What actually happened was a little less cartoonish. First, so-called deregulation of the S&Ls began under Jimmy Carter, not Reagan. I say “so-called” because, as with most measures trumpeted as “deregulation,” it was nothing of the kind: all throughout the process of alleged deregulation, the S&Ls’ deposits continued to be covered under government deposit insurance. Deregulation means the removal of government involvement and control. Does this sound like the removal of government involvement and control to you? To the contrary, it gave us the worst of both worlds—though, naturally, Hartmann will blame the consequences on “deregulation” and “capitalism,” terms I doubt he could even define.

Under the government-established rules, the S&Ls could charge 6 percent on loans, and could offer depositors a mere 3 percent. Since most depositors had nowhere else to go, they had to content themselves with a miserable 3 percent return.

With the advent of the money-market mutual fund, ordinary people suddenly had the chance to earn higher returns, and began pulling their money out of S&Ls in droves.  Consequently, the S&Ls wanted permission to offer higher interest returns for depositors, so “deregulation” allowed them to do so. Had the original government requirements remained in place, the S&Ls would have gone under then and there.

A consensus began to form that in order to save the S&Ls, their government-established loan and deposit interest-rate requirements, as well as the kind of loans they could make, had to be modified in light of the impossible conditions under which these institutions were forced to operate. The S&Ls needed to be permitted to engage in riskier investments than 30-year mortgages at 6 percent. (Notice: it’s the fault of the free market when the government modifies the government-established rules of a government-established institution, while its deposits continue to be guaranteed by the government. Got it?)

Maybe the S&Ls should have gone under in 1980. Perhaps they really did have an impossible business model. There is no non-arbitrary basis for deciding one way or the other, since the S&Ls were never genuinely subject to a market test. The government husbanded and cartelized the S&Ls, and stood ready to bail them out after that.

Thom Hartmann, meanwhile, looks at this situation and concludes that the problem was too much deregulation and too much capitalism.  I am at a loss as to how to describe a person like this.

Hartmann also denounces the dreaded “Reagan tax cuts,” which were largely nullified by the Reagan tax increases and loophole closings. Tax revenues, in fact, rose substantially and consistently during the Reagan years, and you’d never know from Hartmann’s comments that the top 5 percent of earners now pay 60 percent of the costs of government.  That’s not enough for Thom Hartmann, naturally, who never met a problem he didn’t think could be solved with more forced labor, which is what income taxation, stripped of the platitudes and propaganda, really is. (If you favor forced labor for the purpose of filling the coffers of our wise public servants, to be disbursed on behalf of society’s most vulnerable—since that’s our politicians’ number-one concern, don’t you know—then that makes you a “progressive” like ol’ Thom.)

Then comes the inevitable post hoc ergo propter hoc fallacy: the American economy was strong back when the top income tax rate was 90 percent, so therefore high marginal income tax rates are great for the economy! How does Hartmann know that American prosperity didn’t occur in spite of, rather than because of, those high rates?  Without the help of economic theory, which Hartmann seems allergic to, how can we decide which of these possibilities is correct?

I genuinely wonder how someone like Hartmann thinks wealth is created. Nothing I can see indicates he’s given the matter much thought. The average person’s standard of living, he seems certain, occurs because we loot and shackle the wealthy, who are mere parasites on the backs of working people, the real engines of the economy.

Leaving aside the odd view that only manual laborers engage in “work,” all the brawn in the world could never have produced a steam engine or a Pentium processor.  Only when informed by the knowledge of inventors and supplied with the capital saved by capitalists can the average laborer produce the tiniest fraction of what he is today accustomed to producing. The central ingredient in a laborer’s physical productivity is the equipment and machinery at his disposal. There is nothing natural or inevitable about the availability of this productivity-enhancing capital equipment.  It comes from the wicked capitalists’ abstention from consumption, and the allocation of the unconsumed resources in capital investment.  This process is the only way the general standard of living can possibly rise.  Hartmann thinks it’s just swell to tax it. 

The increases in the productivity of labor that additional capital makes possible, by increasing the overall amount of output and thereby increasing the ratio of consumers’ goods to the supply of labor, make prices lower relative to wage rates and thereby raise real wages.  That’s why, in order to earn the money necessary to acquire a wide range of necessities, far fewer labor hours are necessary today than in the past—say, 1950 or 1900. Thanks to capital investment, which is what businesses engage in when their profits aren’t seized from them, our economy is far more physically productive than it used to be, and therefore consumer goods exist in far greater abundance and are correspondingly less dear than before.

American society, in short, would have been far wealthier and the material level of all people would have been dramatically higher had top income tax rates been lower throughout the twentieth century.  Had government not seized so many resources to squander on consumption, those resources would have been available for investment that would have made the economy permanently capable of producing far more wealth than otherwise. Everyone’s standard of living would, as a result, have been far higher.

Hartmann gives no indication that he understands any of this. To the contrary, he seems to think (in addition to the egalitarian rationales he’d surely give for the seizure of some people’s property) the lack of government wealth redistribution yields the boom-bust business cycle!  If wealth disparities caused the boom-bust cycle, we’d experience economic depressions everywhere in the world, constantly.

Hartmann’s argument runs, in effect: “Citizen, you need to be looted in order to stabilize the system [a nonsensical idea Hartmann came across in the popular Keynesianism that forms the entirety of his economic knowledge].  Let us hear no more anti-social talk about your so-called rights. All hail The System!  Wherever would we be without the stabilizing power of violence!”

As for the nonsense about FDR’s New Deal “stabilizing us”—and the perverse argument that our economy will never be stable unless the people are violently expropriated—check out economist Robert P. Murphy’s new book The Politically Incorrect Guide to the Great Depression and the New Deal.  Its playful title notwithstanding, this book mercilessly bludgeons thoughtless clichés like this.

At least the mafia has the decency not to put such transparently phony claims over on you. They’re honest: we’re taking your money because we have power, and you don’t.

What it all boils down to is this: one side of our political spectrum favors the central planning of Iraq, while the other favors the central planning of Americans. We can only hope for the continued growth of a third side, one that rejects as unworthy of a free people all the superstitious nonsense about the magical powers of our overlords, whether that power is exercised at home or abroad.