Progress, Trust and the Failure of the West
Western prosperity resulted purely from quasi-libertarian principles embraced under ‘Classical Liberalism’. The state for the first time credibly promised only to steal a fixed and moderate share of wealth creation. Not anymore.
Without money and property rights – in oneself and in one’s justly acquired possessions – it is impossible for individuals to make decisions about what to do (see www.awah.uk post ‘The Impossibility of Socialist Economic Calculation’). Only with a set of costs and prices stemming from bargaining between owners of needed resources can people identify activities that create more value than the resources (labour, capital, land, energy and raw materials) consumed in production.
‘Value’ can be more money. Or it might be more security, comfort or wellbeing (‘psychic income’ in Austrian School terms). Psychic income would include feeling a warm glow from behaving in a charitable manner towards other people. Returns to various activities will often be a combination of material and psychic advantage.
Central Planning cannot work because it precludes private property. Without reliable legal protection of property rights, there can be no voluntary bargaining between owners of resources, including labour. Without such bargaining, there can be no actionable set of agreed prices and costs for every alternative choice of activity. There is then ultimately no yardstick by which to identify and avoid activities which destroy value. Therefore, central planning encourages value-destroying activities. Widespread value destruction leads to impoverishment of the many at the hands of the few. Inevitably there must be an implosion, as in the Soviet Union in 1989-1991.
LIBERTARIANISM AND PROGRESS IN THE WEST
All of this is a roundabout way of explaining how unusual the last three hundred years of Western history have been. Before then in the West, and everywhere else until modern times, societies were trapped in miserable agrarian societies. Most people were peasants scraping near subsistence incomes and a meagre surplus was stolen (taxed) by state sponsored landholders, religious establishments, and aristocratic and royal families, and their various tarts, thugs and other hangers-on (see www.awah.uk post ‘The Misery and Stagnation in the Agrarian State’).
The reason that we can attempt to explain the broad outlines of what future free societies will look like is that from the Glorious Revolution 1688, Britain and America were virtual libertarian societies. This was especially true in commercial terms. Governments were tiny. They consumed 10% or less of total production as opposed to more than half now.
The key is that property rights were sacrosanct. They were protected in Britain by the unreformed (until 1832) House of Commons and House of Lords (until 1911), which were controlled by property owners rather than feckless modern ‘professional’ politicians.
In America the Constitution and popular opinion had the same effect. Over time, other societies in Europe and around the world came to imitate Anglo-Saxon ‘laissez-faire’ (pro-liberty) policies. The Industrial Revolution accordingly spread capital accumulation, innovation and prosperity on the European continent and then went global.
The affluent modern world is the creation of quasi-libertarian revolutions a couple of centuries ago. Unfortunately, few people now understand this, though it was widely understood only a century ago. Without secure property rights it could all go into reverse.
From the start, liberty led to prosperity (see www.awah.uk post ‘Liberty’s Triumph, the Industrial Revolution’). The progress which took us to our undreamt affluence is solely the result of empowering voluntary cooperation within a framework of property rights. The state had nothing to do with it, except in a very limited sense, which is discussed below.
Property rights, including personal rights, were protected in the English-speaking countries by judges who were insulated from state interference. They made decisions largely based on the framework of English Common Law, rather than man-made ‘legislation’.
Common Law is just the English version of the customary law which always arises automatically in any community, unless it is suppressed by state edict. We can be confident that future free, private-law, societies will also be based on customary law systems which focus on helping victims through restitution payments (‘Damages’ in Common Law terms), rather than on state-directed taxpayer-funded punishment of offenders.
We have records of our own societies during their past quasi-libertarian phases. We therefore know that functions which officials and politicians claim can only be performed by the state have been performed in the past on the basis of voluntary co-operation. And performed much better, as one would expect in a world of competing providers.
In particular, the healthcare and welfare sector would probably once again be in the capable hands of organisations akin to the old Friendly Societies and their US equivalents (click here for www.awah.uk post ‘Healthcare in a Libertarian society’). The recent Covid lockdown and vaccination mess could never have happened on their watch. Many of the posts on this site – accessed from ‘All Posts’ on this site’s menu – use examples from Western history to cast light on the likely shape and institutions of future free societies.
THE STATE AND PROGRESS UNDER CLASSICAL LIBERALISM
Nevertheless, it must be admitted that, although the English-speaking countries were virtually libertarian, they did indeed have states. The political philosophy known as Classical Liberalism was predominant in eighteenth and nineteenth centuries, and influential well into the twentieth. Classical Liberals held that the State was not a mere parasite (which is the libertarian view), but rather the necessary guarantor of personal liberty against outside aggressors – foreign invaders – and internal aggressors or criminals.
A modern Classical Liberal Britain would indeed be more prosperous and successful than our hollowed out and depressed society, created by welfare/warfare state misrule. But the Classical Liberal state also had disadvantages which may be terminal. Its monopoly on ‘defense’ and jurisdiction resulted in a great deal of unnecessary large-scale warfare, and in a lack of access for most people to effective legal redress. More importantly, in the long term it proved impossible to rely on self-interested politicians and officials not to massively expand state activity, and their own importance with it. The statist tumour always regrows.
What the Classical Liberal State did do over the past few centuries, and it was crucial, was to credibly promise not to steal more than a modest and predictable portion of economic gains. Individuals could go about their business knowing that, if they made correct decisions, they would be sure to keep a stated pre-determined portion of their returns on investment. Since government was tiny and money was sound, the government’s take was transparent and generally modest.
Classical Liberal governments in the West were able to credibly promise not to take more than a modest predictable share of incomes. And this engendered trust throughout society. With trust came not only prosperity but also more government credibility. Economic progress occurs automatically when people are allowed to live their lives as they see fit. In statist societies, there must be trust in governments’ good faith.
In contrast, in libertarian societies there will be no government at all, which seems to be a safer bet in the longer term.
LACK OF TRUST OUTSIDE THE WEST
Insecure property rights and unpredictable state predation are enough to explain the poverty and instability of non-western societies, and of western societies before the twin Glorious and Industrial Revolutions in Britain. Much of the ‘developing’ world is poor because its states do not, and perhaps cannot, credibly promise only to steal (‘tax’) a predictable share of the fruits of their people’s labour.
Successful businessmen, investors and savers in many non-Western societies face the threat that officials will confiscate part or all of their businesses or capital. Clearly prosperity will not be possible in such places. As was the case in pre-seventeenth century Britain. One has only to read about Henry VII’s merciless extra-legal shakedowns of merchants and landowners, or remember the Holy Roman Emperor Charles V running from bank to bank in Seville helping himself to depositors’ cash, to understand that insecure property rights were general in the past.
I recently heard about a successful tourism entrepreneur in a third world country. The mayor demanded a big stake in his business, which he refused. He was found shot dead soon afterwards. No redress or protection can be expected from legal systems that corruptly favour such officials and their politically well-connected allies.
The Spanish colonies in America became independent in the early nineteenth century, as much as anything so that local elites would not have to share the ‘profits of justice and corruption’ with officials from Spain. Ever since, Latin America has, not surprisingly, failed to achieve lasting prosperity.
The mainstream media prefers not to discuss the embarrassing fact that underdevelopment is simply caused by the extortion of the indigenous pre-Classical Liberal state. They proffer various fashionable left-wing memes blaming ‘capitalism’, ‘market failure’ etc. for the historical backwardness of non-Western societies. To be fair, exposing official misbehaviour in most countries can be unprofitable and very dangerous for newspapers and journalists. So most people do not realise the truth about what keeps countries poor.
Apart from anything else, where capital is frequently confiscated, very little is available to fund commerce. People seek high short-term rewards on their precarious savings. In the terms of Austrian School Economics, a focus on short term gains means high ‘time preferences’. Lenders require very high rates of return. Insecurity of property rights thus helps explain the extraordinarily high interest rates prevalent in poor societies, past and present. Ultra-high interest rates are inconsistent with funding longer term projects, even if their promotors could be confident that they would not be robbed.
Where progress is made impossible by official extortion, countries are trapped in a double bind. It is not just that government must sincerely intend only to take a predictable and limited share of economic gains in future. A government’s promise must also be credible in the long term. That is the miracle achieved by the British settlement after the Glorious Revolution, and then the West for over 200 years. It was much harder than it looks.
Imagine you are a brilliant, honest politician who intends to put a poor country on the road to prosperity. You understand that the underlying problem is simply the question of regularizing state extortion by establishing and protecting property rights. You propose to replace informal and unpredictable official predation and extortion with a predictable official tax take. It must be credible that your policy will stay in place over the long term.
However, most politically important interests, depending as they do on incomes from corruption and confiscation, will oppose you. You may explain that progress will mean much higher rewards via a greatly increased tax take, in time. But for people with high time preferences (i.e. a strong focus on the short term) this correct argument will cut little ice.
Investors will conclude that, even if you win power, you will not keep it long enough to honour your promises. In other words, despite the best of intentions, your promises won’t be considered credible. Your country will remain destitute. The political elite will have no choice but to go on extorting what they can from a perennially depressed society.
LACK OF TRUST IN THE WEST
Western societies helped many less developed countries in the nineteenth century by investing their much larger stocks of capital overseas. They used western judicial, monetary and, in some degree, military frameworks to ensure that third world governments could not engage in the customary unpredictable extortion and theft.
But ultimately overseas investment was used by opportunist nationalist politicians to seize power and ‘nationalise’ foreign investments. So their promise not to steal turned out not to be credible. The entirely predictable result was to put many countries in Africa and Latin America back on the slippery slope away from prosperity.
Increasingly, the West’s governments have put themselves on the same slippery slope. Western governments have undermined the credibility of their promises not to steal unpredictably. The legal system has been swamped by new regulatory provisions empowering officials to steal, ‘direct’ or freeze capital and assets.
The rot in the West arguably set in long ago with the introduction of taxation of capital (capital gains and Inheritance taxes), nationalization, and deliberate theft of incomes and savings through steady inflation. But international business remained somewhat resilient during the post war boom caused by American support for pro-trade policies. And some - mainly far-eastern - governments also achieved enough stability to run credible legal and tax systems. As a result, they too transformed into advanced societies almost overnight.
But recently, especially over the last couple of years, there has been a step change for the worse in the willingness and ability of the Western state to override property rights and prevent any kind of due process or legal redress. It is so bad that it puts the economic primacy and prosperity of the West in question.
THE COVID CONFISCATION
Two years ago, as a result of evident coordination of some sort, many states, including most western countries and US states, introduced unprecedented interventionist policies described under the rubric of ‘lockdowns’. The idea was supposedly to counter a bad flu, which was not a significant threat to healthy people, by closing down society.
In many posts, I have discussed the psychological and economic harm caused by this folly, and the motivations, corrupt or sinister, of the public health officials who inflicted so much harm. The scale of the damage to public confidence and well-being will become more obvious over time. Enough of the public understands this to explain why governments have provoked war in the Ukraine to divert public anger from them to Russia.
Here however I focus on the damage done to the crucial Classical Liberal promise to protect property rights, including in one’s person, by limiting exactions to predictable and limited extortion. Suddenly, without any democratic consultation or any possibility of redress, despite having done no wrong, people found they were stripped of the right to operate perfectly legal businesses, or to go out or travel or generally to decide how to live their lives.
Hysteria was induced by the corporate controlled mainstream media. Many members of the public trusted that the measures were intended to have public health benefits. Otherwise, public disquiet about this attack on the people would be greater.
As we look back on the Covid scam, it will be seen to have been the result of a corrupt fusion of corporate and official power (the definition of fascism as explained by its inventor Benito Mussolini). A good example is the way Big Pharma’s profits are protected as vaccine deaths in the West rise into the hundreds of thousands and serious injuries go much higher.
It will be understood by more and more people that ‘Covid’ was intended by globalists elites to push dangerous gene therapies and accompanying digital ID/vaccine passports on the world’s population for private and political gain. More people will now expect that governments will engage in arbitrary, unpredictable attacks at the next opportunity.
CANADA HELPS ITSELF TO YOUR CASH
It was down to Justin Trudeau, a graduate of the Davos Crowd’s WEF Young Leader course, to demonstrate how wholly uninterested Western states now are in respecting legal protection of property rights. Trudeau pushed mandatory vaccination and an unusually abusive lockdown regime on Canada. This was despite the fact that the much-hyped Covid virus had not resulted in significant excess mortality in Canada. Like governments in EU countries, the elementary legal right to refuse informed consent to a medical procedure, such as vaccination, enshrined in the post war Nuremburg code, was denied.
Eventually, Canadian truckers, upon whom the rest of Canadian society depends, decided to protest. They drove to Ottawa intending to stay there until Trudeau revoked the Covid measures. As the trucker convoy progressed, it was widely cheered by many Canadians despite freezing winter temperatures. Opinion polls, which had suggested passive support for lockdowns, abruptly switched behind the truckers.
Trudeau panicked and fled, rather than talking to his own citizenry. Instead, he assumed he could control the narrative by demonising the truckers. This is after all very much the Western globalist elites’ reaction to any sign of dissent to their privileged power and wealth.
When he came back, he voted himself emergency powers under which he could help himself to the bank accounts of anybody who he deemed suspicious without any legal process of judicial review. All those who had contributed to the truckers would now have their Canadian bank accounts frozen, even though such gifts had not been illegal.
I attach below a link to a discussion between Jordan Peterson and journalist Rex Murphy about the implications of Trudeau’s dictatorial measures:
Canada, at a stroke, became an unpredictable, unreliable, predatory dictatorship. It also became less ‘investable’. The Canadian banks’ internet sites closed down as a bank run got underway. Citizens and businesses were getting their money out as soon as possible. A few days later, probably as a result of the banks’ pressure, the Canadian Senate took the remarkable step of revoking Trudeau’s emergency powers, at least for the time being.
No western government criticized Trudeau’s measures even though it is perfectly plain that the West is close to losing the hard-won credibility of centuries as a haven of the rule of law and predictable property rights. I doubt Trudeau has any clue about what he has done.
LEGAL THEFT IN THE USA
This behaviour in Canada is similar to what has been going on in America. The American government has been introducing increasingly illiberal provisions, supposedly to counter illegal drugs and associated so-called money laundering. Police can seize any asset they believe has been involved in illegal drugs activity (even if the owner could not have been aware of it) and any cash they find in the possession of motorists. Private individuals then have to try to get the courts to return their property.
Recourse to the law in statist societies with monopoly courts and legal professions is unaffordable and risky. It is said that American police forces steal as much every year, under these provisions, as burglars take by house breaking. And none of this involves legal due process. Nobody has to be proven guilty at any stage. There is little proportionality between the assets stolen by the state and the seriousness of the alleged offence.
SANCTIONS AND STEALING CENTRAL BANK ASSETS
President Obama inaugurated the era of arbitrary and unpredictable ‘sanctions’ when he sanctioned Iran from 2008 early in his first term. Sanctions take many forms including import bans and freezing the assets of individuals or companies.
The Americans and their allies attacked and wrecked Iraq, Afghanistan, Syria, the Yemen and Libya over the last twenty years, without any real evidence or justification for their actions. Such attacks killed, maimed and ruined the lives of millions of innocent people.
These invasions were accompanied by more sanctions which were designed to make life harder and more miserable still by shutting down trade. The West arbitrarily froze the assets of overseas individuals and companies and restricted the freedom to travel and trade. By 2014 the West was not only fomenting the coup in the Ukraine but also implementing its plan to bring down the Syrian Assad regime.
Critically, however, the UK Parliament refused to support a declaration of war against Syria in 2014. Can anyone remember why anybody thought there was the faintest reason for such a war? I can’t. However, the Russians took the opportunity to intervene at Syria’s request in 2015. Since then, they have frustrated the Western deep state – or globalist elite – plan to destroy Syria and eliminate its Christian and other religious minorities.
This has come at the cost of a continual escalation of sanctions on Russia. Over time these sanctions have made Russia much more resilient. They forced Russia to re-industrialise – on the basis of a radically undervalued rouble - to replace imports it can no longer buy.
THE UKRAINE AND PEAK SANCTIONS
The West has been blithely pursuing its dream of unipolar hegemony ever since the fall of the Soviet Union. We are supposedly upholding democracy and the rule of law as part of our ‘Rules Based International Order’. Unfortunately, this is mere hypocrisy and delusion. As with UK politicians partying while we were trapped by pointless lockdowns, it is simply one rule for you and a different rule for me.
Putin told the western elites as represented by the Davos Crowd at the WEF that he is wholly opposed to the Great Reset and its insane New World Order global government a year ago (click here to see www.awah.uk post ‘Putin says No to the Great Reset). Since then, Davos has been encouraging the US and UK Neocon war party to poke Russia into war.
The NATO plan was (almost certainly) for the Ukraine to pre-emptively crush the breakaway Russian speaking Donbass provinces in the Ukraine, Then the West would implement unprecedented sanctions when the Russians attempted to defend their countrymen. The aim is to destroy Russia. Without breaking Russia, they cannot go on to challenge China and establish the global technocratic bio-security state of their unsavoury dreams. But they were outsmarted. What is actually happening to the globalist cause is quite different and will be the subject of my next post.
Here in this post the focus is on the way that the latest round of Western sanctions confirms the end of the West’s centuries-long Classical Liberal promise only to take a predictable and limited share of private economic value creation. The key innovations were to exclude Russia from the SWIFT international payments system, and to seize (‘freeze’) the assets of the Russian Central Bank.
There had been recent practice runs. Two years ago Britain seized Venezuela’s gold reserves, ignoring requests to return them. In the last few months, the Americans seized half of the Afghan central bank assets. But to attack a G20 central bank in this way is unprecedented, especially since Russia is not at war with anyone except the Ukraine.
Russia had over half a trillion dollars of foreign currency and gold reserves. Most central banks keep big reserves of key western currencies, usually the dollar or the Euro. They are held in the form of debt securities issued by the relevant western governments. These foreign currency reserves enable countries to protect or manipulate their currencies’ external value within the Western dominated regime of steadily debased fake (FIAT) money.
Now around $300bn in Russian foreign currency reserves have been frozen. Meanwhile various governments are going around helping themselves to the assets of Russian private citizens located in the West, without any process or redress. The whole apparatus of the so-called rules-based international order stands exposed as a hypocritical sham.
These measures are as dangerous to the West’s financial wellbeing as Trudeau’s attack on Canadian citizens’ bank accounts. And in both cases, nobody consulted the banking sector because the global political elites just don’t listen. The Federal Reserve has confirmed that it was not consulted about the US sanctions and would have strongly advised against them.
The story used to be that the West was the place where first and third worlders alike could be sure that their property rights would be protected by coherent and legal protections which ensured that governments’ take was limited and predictable. On this basis, a lot of economic activity in advanced and backward countries went ahead.
On that basis places like New York and London could thrive on the basis of reputation and predictability. Now this is not reliably the case. As the Russians say about the West, it is no longer ‘agreement capable’, by which they mean you can no longer trust it to stick to any agreements or to protect any legal rights impartially. The west is slipping into bad habits characteristic of corrupt states everywhere before the quasi-libertarian revolutions of the late seventeenth and eighteenth centuries.
It feels as though a three-century cycle of history may be coming to an end. We have achieved unprecedented prosperity, but there is no historical precedent for what happens to wealthy societies when they turn their backs on the principles that enabled their progress.
Will any societies, Western or not, rediscover the magic Classical Liberal formula of credibly protecting individual property rights in return for a predictable, fixed and limited shakedown? Will any societies realise the libertarian vision of eliminating state extortion by eliminating the state?