The Free Market 8, no. 1 (January 1990)
The pace of change in the Soviet Union and Eastern Europe is so brisk that it is risky to write anything about it. Nevertheless, the virtual dismantling of the Berlin Wall and the beginning of liberalization in East Germany are exhilarating news, the climax of months of historic developments.
One’s natural reaction is: “Incredible! Unbelievable!” But are these things really unbelievable? Shouldn’t we have expected this all along? According to the Cold War orthodoxy, this was not to be expected. We were told that no communist government would ever voluntarily give up power. It was a law.
So the spontaneous disintegration of the communist world should come as a shock to us all, right? It would not have come as a shock to a group of men who predicted exactly what has happened. This was a varied group of journalists, scholars, and politicians that has become known as the Old Right.
The Old Right, whose activities spanned the 1930’s to the mid-1950’s, was characterized by its immense distrust of concentrated political power. Its members objected to the domestic policies of the New Deal precisely because it concentrated power in the Washington bureaucracy. Just as important, they objected to concentrated power motivated by foreign-policy considerations. For that reason, the Old Right opposed U. S. participation in the Cold War, though they were also bitter enemies of communism.
Among the leading figures of the Old Right were Robert Taft, John T. Flynn, Frank Chodorov, Garet Garrett, Albert Jay Nock, H. L. Mencken, and Felix Morley. Many lesser-known thinkers filled its ranks, qualifying it as a bona fide movement beginning in the interwar period. Looking back at what they counselled for America versus the Soviet Union is instructive and fascinating.
Before examining what the Old Right said about the Cold War, we should be clear on what is happening in the Soviet Union and the Eastern Bloc. In broadest terms, the people there have awoken to what they’ve been missing. Two-thirds of households in the Soviet Union have no running water. Pravda has written that of 276 basic consumer goods, 243 cannot be found in stores. According to Paul Craig Roberts, “Soviet economists speak openly of 40 million people in poverty and on the brink of famine.” The situation is similar in the Soviet Union’s Warsaw Pact allies. These are stagnant economies, more like Third World nations than industrialized countries.
How long could people be expected to live under these conditions if they have an inkling of what people in the West have? Gorbachev seems to understand that big-power status and prestige would be denied a country that cannot grow enough food for its own people. His solution is to begin to integrate the Soviet economy with the world economy. He wants trade and technology, and to get it he must commence, however modestly, market reforms. The people have demanded change, and the rulers could not ignore it.
The Old Right knew this would happen some day. They were skeptical of those who said that the only way to break communism’s hold was a belligerent foreign policy. This, they said, would be expensive and damaging to the U.S. economy, would risk a cataclysmic war, and would fail. Rather than loosen the totalitarian grip, it would probably tighten it.
What could America do, then? The Old Right answered that the best chance the U. S. had to roll back communism and protect its own security was to live up to its ideals and set a good example. American prosperity would make it the envy of the world and cultivate friendships with all nations. Meanwhile, the economic and spiritual shortcomings of communism would create the conditions for internal change. The Old Right grasps intuitively, if not theoretically, Ludwig von Mises’s fatal criticism of socialism as incapable of rational economic activity. A policy that risks war could never have the same results.
As Taft, then-Republican leader in the Senate, put it in 1951, “there are a good many Americans who talk about an American century in which America will dominate the world.”
If “we confine our activities to the field of moral leadership we shall be successful if.our philosophy is sound and appeals to the people of the world. The trouble with those who advocate this policy,” he said, “is that they really do not confine themselves to moral leadership. They are inspired with the same kind of New Deal planned-control ideas abroad as recent Administrations have desired to enforce at home.”
John T. Flynn, the Old Right journalist and America First Committee organizer, said in 1950 that regarding the Cold War, “the course of wisdom for the American people would be to sit tight and put their faith in the immutable laws of human nature.” To do this, he said, Americans would have to “make an end to the cold war.”
Frank Chodorov, another Old Right journalist, agreed. In 1954 he wrote “That our culture-—he body of ideas, habit, and traditions indigenous to America—is under severe attack there is no doubt. But can we save it by killing off or subjugating the communist natives of other lands?”
“Communism is not a person,” he wrote “it is an idea. But you cannot get rid of the idea that has possessed the communist by killing him, because the idea may have spread and you cannot destroy every carrier of it. It is better, therefore, to attack the idea than to attack the natives.”
The Old Rightists were confident that Soviet domination, left to its own devices, would fade as time went on. Free trade, without government assistance, was the prescription. The United States and its allies over the years have followed two opposite courses, both of which has delayed the communist disintegration. Liberals tended to favor subsidies and aid, that is, forced trade; the conservatives tended to favor trade restrictions. Shortly after the Bolshevik revolution, the Western countries tried to topple the Soviet Union by refusing to allow trade (and by invasion). Later, in the 1920s and 1930s, Western governments subsidized trade and loans to the communist bloc. At other times they provided foreign aid.
Although embargoes and subsidies seem like contradictory policies, they had one thing in common: they strengthened the communist regimes. The subsidies and transfers helped them cover up the inevitable failures of communism and prolong its life. Since, as Mises first pointed out in 1920, rational economic calculation is impossible under socialism, countries trying to carry out socialism must fail.
The Bolsheviks admitted failure in 1921 when they switched from War Communism to the New Economic Policy, which was essentially a reestablishment of the market. Later, under Stalin, the Soviet Union ended the NEP, but it never returned to a moneyless, trade-less economy. Instead, it put in place a highly bureaucratized, interventionist state that had a veneer of central planning. It too was doomed to failure. But the infusion of Western wealth through government policy camouflaged the core incompetence of the system. The West, at taxpayer expense, bailed out the East.
As Mises in 1952 wrote that “the United States is subsidizing all over the world the worst failure of history: socialism. But for these lavish subsidies the continuation of the socialist schemes would have become long since unfeasible.”
The policy of trade restriction fared no better. The rationale was that if trade were forbidden, the East would sink lower into poverty, prompting the people to rise up and overthrow the communist regimes. For several reasons, it didn’t work. First, the deprivation caused by the West made good propaganda for the regimes. They could tell their people that a hostile world wishes them ill and only support for the government could assure their security.
Another reason the strategy did not work is that, as Alexis de Tocqueville pointed out, revolutions do not occur when people are ground into despair. Radical change occurs, rather, when people glimpse what is possible to them from rising expectations. Merely depriving the people subjected to communism of consumer products could not be expected to impel them to overthrow their governments.
V. Orval Watts, an Old Right educator, debunked the embargo strategy. He wrote that government restrictions on private trade with communist countries strengthen the Iron Curtain because embargoing trade also embargoes ideas. In a 1955 article he wrote that “An American, for example, cannot walk down a Moscow street without conveying to passersby certain truths about the outside world—through the quality of his shoes, the cut of his clothes, his unafraid bearing and peaceable manner. Everywhere he goes, and in every contact, he does or says things which teach the meaning of freedom and expose the lies on which the Soviet rulers depend for inculcating fear and hatred of capitalism and of the peoples practicing it.”
We should “work for a revolution behind the Iron Curtain. But for this, we need carriers of revolutionary ideas. In selecting the best means of accomplishing this revolution in Russia, let us not arbitrarily and emotionally reject the effective means of peaceful traders and travelers.”
The meaning of these criticisms, in light of today’s events, is staggering: U.S. policy has prolonged communist rule and delayed the crack-up.
Those who reply that what is happening now is the result of U. S. containment policy and military spending, which forced the communists to spend resources on arms rather than consumer products, miss the point of Mises’s calculation argument. Given the inherent incompetence of bureaucratic economies, it would not have mattered if the Soviets spent no resources on arms. The consumer economy would still have been starkly inferior to the West’s.
There is another point implicit in this analysis that is contrary to the Cold War orthodoxy. It is a fallacy to believe that public opinion plays no role in communist countries because the regimes rule by brute force. Totalitarian regimes always spend immense resources on propaganda and the promotion of an ideology, which is nothing less than a moral rationalization of the regime. They must do this, as Etienne Ie Boetie wrote in The Politics of Obedience, because the people always outnumber the rulers. Without the people’s acquiescence and cooperation, the regime could not last.
The Old Right view is really the traditional U. S. foreign policy view. It was what George Washington meant when he warned against “political connection” with foreign countries and “entangling alliances.” John Quincy Adams put it most eloquently: ‘’America does not go abroad in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own.”
As to be expected, many American political leaders and commentators want the U. S. to pour taxpayer money into Eastern Europe and even the Soviet Union in the view that without our help, their attempts at reform will fail. This is mistaken. To the extent the U. S. government transfers the taxpayers’ wealth there, those countries will have less incentive to really reform.
A government transfer is always a give-away of wealth that shields the recipient of its folly. In contrast, a private investor will expect something concrete in return or he will not invest. This is a surer way to encourage true liberalization. If they want Western capital, they will have to do what is necessary to make investment attractive.
As Mises wrote: “Prosperity is not simply a matter of capital investment. It is an ideological issue. What the underdeveloped countries need first is the ideology of economic freedom,” which the United States should send them.
But that means that we ourselves should be clear about what is desirable politically. Until we are, we are not likely to be a good example to those who are groping for solutions in the communist world. If the reform economists there call for anti-trust laws and taxes on “excess profits,” it doesn’t take much imagination to see what they are using for a model.
Most of the talk about reform has been associated with democracy, but democracy in itself will not improve the condition of the subjects of communism. Democracy is a method for selecting rulers. But the problem in these countries is that economic decisions are made by politicians and bureaucrats—not how they got into office. Popular election of commissars would not make the Soviet economy better able to serve consumers. What would change the economy is individual rights, private property, sound money, and the rule of law—in other words, libertarian capitalism. That should be our banner, not democracy.
I do not wish to deprecate the Soviet or East German’s attraction to “popular rule.” When distant rulers have been telling you what to do with your life, it is natural to want a say in one’s governance. I only want to point out that if the reform ends’ with democracy, it will not have been worth the candle. There is but a small difference between having no say in one’s own affairs and in having one vote out of millions. How the rulers are chosen is far less important than what the rules are. The civility of a democratic country should be measured in how much of life is beyond the reach of the democratic process.
Finally, a related point: Implicit in much discussion about recent events is the belief that East and West are converging toward a system that is neither communist nor capitalist. Advocates of convergence usually believe that this middle position is a good thing, avoiding the extremes.
In fact, as Mises taught, the middle of the road is an unstable mixture that must eventually move toward more or less freedom. There is no need to seek a mixture of freedom and slavery because slavery adds nothing of value to the mix.
We will have missed the point of the East’s revolution if we remain complacent about our own situation. Contrary to Francis Fukuyama (author of the acclaimed article “The End of History?”), now that Marxism is dead, we must get on with the main debate, the one between freedom and statism of any form. The objective in this debate is to bring to America a fully free market and voluntary social order.
