This column is adapted from a speech delivered at the Mises
Institute’s History of Liberty Conference on January 29 in Auburn,

The memoirs of the indefatigable economist Ludwig von Mises, written
from his exile in Geneva in 1940, contain this moving, even tragic,

    Occasionally I entertained the hope that my writings would bear
    practical fruit and show the way for policy. Constantly I have been
    looking for evidence of a change in ideology. But … I have come to
    realize that my theories explain the degeneration of a great
    civilization; they do not prevent it. I set out to be a reformer, but
    only became the historian of decline.

Reading the whole of Mises’ works, it is clear what he means by
decline: the deliberate wrecking of civilization itself through the rise
of the total state.

In our own time, I believe we are watching the opposite occur: the
slow, systematic, intermittent, but relentless and glorious decline of
the state, which is an essential condition for the restoration of

These trends, either in Mises’ time or our own, are not determined
by historical forces beyond the control of the intellectuals who help
shape the social order. There is no such thing as historical
inevitability. The direction history takes in the next hundred years
will be decided — as it has always been — by the ideas people hold
about themselves and the choices they make.

A fighter to the end

Mises knew this truth, and in 1940, he wrote those words conceding
that he had been defeated in the first half of his scholarly life.

His masterpiece, “Nationalökonomie,” had been printed in Geneva, but
sank without a trace. It is not clear how many, if any, copies made it
to America. Europe was already consumed by war. The so-called wise men
from the U.S., Britain and Russia — would-be world planners now in
their element — would soon be at the height of their power. The
political ideology and economic theory to which Mises had devoted his
life was fast becoming the stuff of historical interest only.

As for his personal life, the Mises family was in deadly danger for
much of the four weeks they traveled to the U.S. When they arrived, they
had neither family to greet them nor any of their belongings, which had
been shipped separately. They moved from one small hotel to another,
with only savings to live on, and no teaching position.

He had already completed his masterworks — “The Theory of Money and
Credit”; “Nation, State, and Economy”; “Socialism”; “Epistemological
Problems”; “Liberalism”; and “Nationalökonomie” — but they were known
mostly in a Europe that no longer existed in 1940. Two had been
translated into English, but circulated mainly in British academic

Most tellingly, the intellectual tide had turned against him, with
the rise of socialism in Europe and Keynesian-style New Deal planning in
the US.

Mises’ realization that he had been a historian of decline comes
two-thirds into his book, after he has told of case after case of a
danger that presented itself, his warning, and the final result —
usually contrary to his recommendation.

Crucially, Mises did recognize that he had played an important role
in preventing the communization of Austria and in ending the Austrian
inflation before it reached Weimar proportions.

But he had no illusions about the limits of his own power to change
the direction of history. No intellectual, working alone, can guarantee
a certain path. Ideas can sway history, but there is no certainty that
good ideas will prevail over bad ones. No matter where you looked in
1940, bad ideas were triumphant, while good ones were seemingly
discredited, and crushed by the force of events.

Hope and despair

Mises also understood that he was a member of the second generation
of European liberals to be faced with events so ghastly that no 18th
century liberal would have ever predicted them. Boundless hope was
integral to the classical liberal worldview, and it was carried over in
the mindset of the Vienna economists, including to Carl Menger in his

But when the classical liberals faced the massacres and vast statism
of World War I, many despaired. Mises noted that pessimism had broken
the strength of Menger, who retired very early, robbing us of the
further insights of the most brilliant economist of his age. Despair
colored his last two decades and crippled him intellectually.

One senses that Mises, in his youth, might have been troubled by the
example of Menger. Perhaps all was lost, Mises might have thought, but
sitting and stewing about it accomplishes nothing. Engaging in the
intellectual battle for truth comes with no guarantee that truth will
triumph. But apart from such engagement, there is no hope at all.

As Mises puts it in an inspiring paragraph:


    It is a matter of temperament how we shape our lives in the
    knowledge of an inescapable catastrophe. In high school, I had chosen a
    verse by Virgil as my motto: Tu ne cede malis sed contra audentior
    . (Do not give in to evil, but proceed ever more boldly against
    it.) In the darkest hours of the war, I recalled this dictum. … I
    would not lose courage even now. I would do everything an economist
    could do. I would not tire in professing what I knew to be right.


A matter of temperament

“It is a matter of temperament” was Mises’ theory on why some give up
and others continue to fight. And we can only marvel at the fact that
the second half of Mises’ life, even in the face of astonishing
personal, intellectual, and political calamity, was as productive as the
first. Had he given up, there would have been no “Human Action,” no
“Omnipotent Government” — a critique of national socialism even more
devastating than Hayek’s “Road to Serfdom” — and no “Bureaucracy” and
“Theory” and “History,” most of them written during years when the state
controlled all prices and production in most parts of the world, and
killed some 56 million people in the world’s bloodiest war. But Mises
did not give in. He fought with the most powerful weapon of all.

Had he not done so, there would be no Austrian economic movement
today, and we could not be hopeful about the prospects for liberty.
Mises fought until the end, even though nothing happened between 1940
and 1973, the year of his death, to give him a secure hope that liberty
would prevail. In those years, the redistributive state in the U.S.
exploded in growth, the gold standard was finally destroyed, the U.S.
became a world military empire, the regulatory state intruded into the
lives of average people more than ever before in history, and the Soviet
Union, which claimed to practice the socialism that Mises said was
impossible, seemed to most naive observers to be secure, stable, and
statistically prosperous.

Why did Mises persevere? We might say that he knew the truth when
others did not. Sadly, while that may be a necessary reason, it is not
sufficient. The other ingredients, besides being educated and knowing
the truth, are courage and tenacity, qualities that are just as rare.

A person must be judged by his actions. It is a great thing when a
person holds the right views, when a politician favors freedom, when
academics have an affection for truth. But it is only valuable to
society when these same people are willing to follow through on their
ideas with actions.

The right Ideas

We’ve heard for years that ideas have consequences. But Richard
Weaver did not mean that ideas have consequences whether or not they are
acted upon. They must be advanced in public life, lived, and defended to
make a difference, and even when there is no promise that doing so will
make a difference, we must act anyway.

And here is where Mises excelled over all of his contemporaries, many
of whom regretted the passing of freedom but were all too willing to
ride the wave of statism to further their careers. Now, moral theology
has never required heroism from anyone, as versus ordinary virtue; but
that doesn’t mean we shouldn’t recognize and praise heroism when it does
occur. And Mises was a hero.

It is all the more noteworthy that Mises persevered despite
witnessing little but civilizational decline. As Ralph Raico has argued,
the times were far more bleak for Mises — with the rise of all the
monstrous forms of socialism in Europe — than any of us recognize

So, if we are to follow Mises’ example, it should not matter to us
whether we see our world as still thundering down the statist path, or
whether we can find evidence that we are actually living in a new dawn
of liberty. I will try to convince you of the latter, but, as Henry
Hazlitt used to emphasize, the case for principled intellectual activism
does not depend on having realistic hopes for victory in our lifetimes.

The contrast with Schumpeter

Despite all evidence, then, Mises had hope for the future of liberty,
and it was this hope that kept him engaged in the battle. Consider the
contrast with Joseph Schumpeter, a classical liberal who won the hearts
of the Marxists at Harvard by forecasting the death of capitalism. In
Schumpeter’s view, four trends would lead to the permanent triumph of a
fascistic-style of socialism in America.

First, he said, the business class would shrink with the rise of the
heavily bureaucratized corporation. And yet, since his time, we have
seen a virtual revolution occur in the Fortune 500, with old established
firms being wiped out by younger, smaller, more aggressive upstarts. The
business class has swelled to become the more prestigious and most
active sector of American society.

Second, Schumpeter predicted that a bureaucratized capitalism would
lead to a loss of respect for private property. And while it is true
that property in America is fully private in name only, and that
Americans are far too lax in its defense, and that we live under the
rule of the largest government in the history of man, dogged attachment
to property has increased in recent years. For many in the former
socialist world, the blessings of extensive property ownership are being
discovered for the first time.

The tax revolt would not have become a permanent fixture of American
politics, bureaucrats would not find themselves fearing for their lives
when attempting to enforce wetlands regulations, and people’s attachment
to their stock portfolios would not have recently driven them to turn to
the business section before the sports section of the newspaper every
day. If anything, attachment to private property, or what remains of it,
is more intense than in any period since the war.

Third, Schumpeter predicted that the intellectual class would become
fully socialist. But he didn’t predict that this intellectual class
would undermine itself by burying its socialist moral system in
deconstructivist relativism, thereby inadvertently encouraging students
to be just as dismissive of socialist orthodoxy as any other. And
neither did Schumpeter anticipate the rise of an alternative
intellectual class that organizes itself around the principles of the
Austrian and classical liberal tradition. If you want to see this class
at work, come to the annual meetings of the Austrian Scholars

Finally, Schumpeter predicted that the American public would
increasingly accommodate itself to a political environment that exalts
social security, egalitarianism, and economic planning. What he
underestimated was the propensity of so many to resent the heck out of
having their money stolen by equality-promoting racketeers with a social
and economic record of unrelenting calamity.

But Schumpeter’s greatest error was in having dismissed Ludwig von
Mises’ argument that socialism is impossible. Schumpeter opposed
socialism but believed that with some effort, it could be made to work.
Mises, in contrast, argued that socialism could never be realized
economically, and that even halfway attempts could not achieve what it
promised to achieve. This was one of the reasons that Mises had
confidence and hope in the future of liberty. He didn’t live to see the
Berlin Wall come down or the Soviet Union fall apart, or the Western
regulatory and welfare states begin to crack, but we have been
privileged to live in just such times.

Unraveling of the statist consensus

Today, Leviathan has been delivered a number of setbacks relative to
both the ambitions of the ruling elites to devour private life entirely,
and to the reach of the state as it existed in past decades. Murray
Rothbard said that decay of the statist consensus really took hold in
the early 1970s, with Watergate in particular. The scandal exposed the
reality of the central state to the American people, who had been
conditioned since the first world war to believe that their leaders were
benevolent, public-spirited, intellectually superior men of courage —
politicians of greatness who embodied the general will in the
Rousseauian tradition.

As Vietnam discredited U.S. foreign policy, Watergate was a serious
blow to the administrative state on a domestic level. In the 1950s, it
was considered nearly scandalous when Bob Hope poked fun at Eisenhower’s
golf game; now the jokes against the president are so ruthless
(deservedly so) that you have to ask the children to leave the room.

I can recall when it was not uncommon for American homes to sport a
picture of the great leader. Now, if the same picture is in an American
home, it is in the form of a dart board.

I remember when a Christmas card from the White House was a treasure;
now it is considered junk mail and a waste of tax dollars.

Rothbard saw that Watergate — however partisan and petty —
represented a sea change in American politics. Instead of moral men
looking out after the public, the political class was revealed as
foul-mouthed, corrupt, conniving and lying. From Watergate until the
present, the trend has been relentlessly downward. No president since
JFK — the now discredited JFK — has enjoyed immunity from widespread
public antipathy. Even the great Reagan was caught in a scandal — now
forgotten — that had him working with the CIA and supposed
international terrorists in Iran to pay off would-be juntas in Latin

Collapse of the Cold War empire

And yet the trend toward a decline in the moral, intellectual, and
cultural credibility of government has dramatically accelerated since
the end of the Cold War. Consider the long view of our century. As
Robert Higgs has emphasized, it has been a period of crisis, from world
wars to depressions to inflationary recessions, all of which conspired
to instill a sense of dependency and loyalty to the central state.

For forty years during the Cold War, the state kept us in constant
fear of a nuclear holocaust. The only thing that stood between the
people and total annihilation was the government.

We were told that our political leaders were protecting us from
Russia. Whatever you want to say about that assertion, it is undeniably
the case that it benefited D.C. at the expense of our liberties. I
recall noticing a distinct lack of jubilance on the part of the ruling
class when it woke up one day to find that its reliable enemy had ceased
to exist.

Since then, the ruling class has attempted to find some effective
substitute for the Soviets, a new enemy so formidable that it would
suppress the libertarian impulse and inspires the old civic loyalties.
But no matter what they have dreamed up — and how many Hitlers has
Washington invented in the last ten years? — nothing works like it used

Several wars have been prevented by the sheer force of public
opinion. Washington no longer has a blank check. Public support for the
attack on Serbia never rose beyond one third. This represents a huge
shift. The Cold War veneer of the central state continues to wear away.
I believe we are going to look back ten years from now and fully realize
just to what extent the Cold War protected the government from critical

Madeleine Albright said to a reporter, in response to Jesse Helms’
negative comment about the UN: “Only the president and the executive
branch can speak for the United States.” Interesting that she felt she
had to say this; but does anyone really believe that anymore?

End of the nation-state

Since the end of the Cold War, there is an emerging literature that
addresses the astonishing decline of the state. Generally, it divides
into two camps. The first is represented by those who cannot imagine
social organization taking shape apart from some type of government, and
thereby support the formation of ever-more institutions of government,
especially globally.

Among these thinkers, we can point to Stephen Krasner, whose new
book, “Sovereignty: Organized Hypocrisy,” takes the position that the
future rests with agencies such as the IMF, the World Bank, the WTO,
NAFTA, the EC, and the like, which will come to replace the nation-state
as the source of primary citizen allegiance. He is partially backed up
in this by Henry Grunwald, whose article in the Millennium Edition of
the Wall Street Journal forecast the wreckage of the state as we know
it, and its replacement by universal institutions, not excluding those
of world government.

There are several reasons why these writers are not ultimately
correct. First, the idea of world government is hardly new; It has been
a dream of socialist writers and despotic rulers for centuries. It was
never closer to becoming a reality than after World War II, when the
Bretton Woods institutions were established with relatively little
controversy. But today, every attempt to increase the power of the
international bureaucracy is met with widespread hostility.

The WTO meetings in Seattle were wrecked, most conspicuously by the
protesters outside, but more substantively by the delegates from
developing nations who resented attempts by the U.S. to impose
prosperity-crippling labor and environmental regulations. Clinton has
been stymied in his attempt to bolster the power and authority of
international institutions and his own personal power to represent the
interests of the U.S. to them. That, and not the fall of “free trade,”
was the real story behind the defeat of his fast-track trade authority.

The power of the EC continues to be the most important political
issue in Europe. Meanwhile, its North American counterpart , NAFTA, has
been discredited throughout the hemisphere. When was the last time any
politician in Canada, Mexico, or the U.S. publicly claimed credit for
NAFTA? The silence is revealing.

There is another factor that suggests that world government
institutions are not a viable replacement for the nation-state. The
world government itself is a parasite on the nation-state: it has
state-like qualities but is not itself a governing unit with autonomous
power. For example, there is no sharp distinction between the power of
the U.S. government and the power of NATO or the World Bank. When you
hear about threats to U.S. sovereignty from the world government,
remember that the U.S. is the hand in the glove of the global state. The
good news about the prospect for world government is that when the host
is wrecked, so is the parasite.

Far more compelling opponents of the nation-state, like Murray
Rothbard, Hans Hoppe, Guido Huelsmann, and Martin van Creveld, as well
as strains of Ralph Raico’s beloved German classical liberal tradition,
argue that the state needs no replacement. The international market
economy is self ordering, and political systems are best when they
reflect the preferences and unique qualities of the people most affected
by them. Combine the insights of the Austrian economists with the
ancient moral imperative of subsidiarity, and you end up with Murray
Rothbard’s dictum: universal rights, locally enforced. This is where we
should be heading, and not toward world government, in this period of
nation-state decay.

The state and Its paranoia

Just how intense is the present anti-government feeling? It is
interesting to note that not even at the height of the Cold War did
Washington feel the need to become the complete fortress that it is
today. We’re told that this is to protect our leaders from attacks by
foreigners, but the truth is that the fortress is designed to protect
the government from retaliation by the governed — a situation that the
Scholastic political thinkers said was a priori evidence of tyrannical

Two years ago, Daniel Patrick Moynihan was asked what can be done to
restore the people’s faith in government. He responded, “I’ve given up
trying to restore faith in government. I’m just trying to get through
the day.”

Indeed, not since the Whisky Rebellion has the political class been
so paranoid and fearful of the public. The defining events here are, of
course, the massacres at Waco and Ruby Ridge, and the later bombing of
the Oklahoma federal building. These events brought back the Cold War in
a different form. Now it is not between the U.S. government and some
foreign enemy, but between the entrenched ruling class and the rest of
the population.

Think of what it means that a man like Eric Rudolph, accused of
setting off bombs at a Birmingham abortion clinic and an Olympic rap
concert, would be protected by the public in rural areas of the
Carolinas. He is protected not because of what he allegedly did, but
because of who is after him — an unthinkable situation twenty or thirty
years ago.

During the Clinton scandals, people on the right expressed
astonishment that Clinton did not suffer at the hands of public opinion
more than he did. But this observation assumes a preexisting public
expectation that the presidency should be free of scandal and
corruption. If expectations are rock bottom to begin with, revelations
about corruption in the White House do not cause shifts in public
opinion so much as confirm people’s already low opinion of the ruling

Where’s the outrage?, the neoconservatives kept asking. But they
didn’t mean where is the outrage against government itself; in fact, it
is they who have been most vocal in condemning the persistent outrage
against government in our time, which they decry as dangerous
anti-government cynicism.

What they desired was outrage against Clinton personally: and there
seems to be fully a third of the public that truly hates the man. But
far more important than this is that two-thirds or more expect
politicians to act exactly as Clinton acts. And this isn’t
anti-government cynicism; it is simple realism.

Evidence of decline

This goes a long way toward explaining other events that have shocked
mavens of the political system. Voting is down to historic lows, not
because of indifference, but because of the perception that the system
is wholly owned by the New Left used to fulminate against the democratic
illusion, but hardly anyone believed that this critique would become
mainstream in the next century.

In the current system, not voting is a form of protest — using the
freedom not to vote to express disapproval of the current system.
Already we are seeing public interest groups demand that the government
institute an incentive system to increase voting, or even require voting
as many other governments do. Never underestimate the desire for the
state for symbolic evidence of citizen support. Never forget the insight
of de la Boettie, Hume, Mises, Rothbard, and others that government
ultimately rules not by force but by achieving something of a public
consensus. Voting totals are one way to browbeat people into granting

Another interesting indicator is the election check-off system on the
tax forms. The system was adopted in the early 1970s and inspired nearly
universal participation. But no longer. The figures for 1998 tax returns
show that only 11.3 percent of filers checked the box. This is a strong
vote of no confidence in the political system — not just the
politicians who want to use the money, but also the apparatus of
government they inhabit. Give the people an ever-so-slight window of
opportunity to secede and they will take it. Currently 41 states have
spending check-offs on their tax forms, most of them instituted with the
hope of demonstrating the public’s support for a range of liberal
causes. The result is an average participation rate of 1 percent.

Neither is the perception that politics is one big racket restricted
to the U.S. Even in Germany, where libertarian ideas have had a very
difficult time gaining a foothold, public respect for the state is at a
postwar low. Helmut Kohl now stands discredited, but so do most other
potential leaders of the German state.

Commentators at the New York Times are already warning that the new
political climate could end up uprooting an entire generation of German
political leaders. In Britain, where Tony Blair gave up socialist
ideology, not because he wanted to but because the prospects of
nationalized industry no longer inspired voter interest.

We see the decline of the state reflected in a hilarious turn of
events in the polling industry. I have seen only a few articles on this
subject — the polling industry understandably wants to keep it under
wraps — but it turns out that pollsters are able to gain the
cooperation of only one out of three people they try to talk to. Most
people approached for their political opinions simply refuse to
participate — a fact that makes a mockery out of their
pseudo-scientific, so-called margin of error. So taboo have some
political opinions become that even those who answer the polls do not
always tell the truth. Only this explains why every election season of
the last three have featured huge political upsets, and why we should
not believe polls, for example, claiming that South Carolinians believe
they should take down the flag.

Lying to the pollsters is one form of rebellion, but we are
surrounded by many others. When the state says it is going to impose new
restrictions on gun ownership, sales boom. When it announces that it
will regulate home offices, it is forced to back down in one day. When
the state says we shouldn’t smoke, especially not teens, smoking soars
among teens.

When the state says we shouldn’t eat fast food, and sic what Tom
DiLorezno call the Food and Drink Police after us, the stocks of Burger
King and McDonalds take off. When the state says to vote, people stay
home. We can only hope that the government never undertakes an
advertising campaign on behalf of Austrian economics.

Brain drain from government

The prevalence of anti-government cynicism is fast becoming like the
weather: everyone complains about it, but no one does anything about it.
Because no one can. Government is having serious trouble recruiting
people into its ranks. As Martin van Creveld has pointed out, the rise
of the state was in part dependent on the perception that the state
offered its employees the greatest financial prospects of any industry,
along with a secure path to social advancement.

This is no longer true. Even with the government’s inflated salaries,
it cannot compete with the private sector. The word bureaucrat,
originating as a term of prestige, is now a swear word. The bureaucracy
is no longer what Hegel praised as the “objective class” or what Max
Weber said was the embodiment of “goal-oriented rationality.”

When Clinton bragged that he has reduced the government to the
smallest size in thirty years, he was referring to the number of people
on the government’s civilian payroll. But it was a trick; he came up
with these numbers by deleting the numbers of unfilled positions from
the payroll. What his number meant, then, is that the government is
having a hard time recruiting and retaining employees — not exactly a
flattering statistic when presented in that light.

A recent study of graduates from the Kennedy School at Harvard, set
up to promote “public service,” showed that only a third of its
graduates enter the public sector. And no wonder; parents used to want
their kids to grow up to become president, but now that seems like
psychological abuse.

According to a survey of 270 executives of the best performing public
companies today, four out of five say they would never consider running
for public office. More than half said they will decrease their
financial support for political parties and individual candidates. And
more than two thirds say they would have voted to impeach Clinton. As
Suzanne Garment angrily reported in the Wall Street Journal, “For many
men and women today, government has ceased to be a natural stop on a
professional life’s journey.”

Technology and taxes

What about taxes? Yes, they are higher then ever and tax collection
the most intrusive in history. But the technological revolution has
raised the possibility of increased competition between tax
jurisdictions. We don’t have to go as far as David Laband to predict
that Web commerce will drive sales taxes to zero, but the possibilities
are there that increased competition between political units impose
serious downward pressure. And I think it is clear — and it has been
clear for some time — that the public’s tolerance of tax increases
stands at exactly zero. Liberal media commentators like to point out
that politicians promising to cut taxes experience no great boost as a
result. But this isn’t because the public demand isn’t there; it is
because, more radically, no one believes them anymore.

The tax state will be dealt a mortal blow if the time ever comes when
money and banking are taken out of the monopoly hands of the state and
become the domain of market economies, too. Certainly, the prospects for
genuine tax reduction coming via legislation seem low indeed. The best
case scenario for tax reduction involves an increase in the present
practice pioneered by the very rich: sheltering their money in financial
forms that avoid extreme tax penalties, or even banking in places that
guarantee privacy.

Richard Rahn, in his book, “The End of Money,” has argued that the
demand for bank privacy is far more widespread than is traditionally
known — a case in point being the public outrage over Clinton’s
proposed and defeated “know your customer” regulations. In Rahn’s view,
online technologies will eventually come to meet the demand for bank
privacy, making it very difficult for the nation-state to collect what
it believes it is owed. Certainly, the tax state, like the antique post
office, is closely tied to brick and mortar, and could eventually find
itself outrun by digital means of avoidance.

Such a system requires secure communications, from criminals private
and public. So the Clinton administration proposed a spying “clipper
chip” in every phone, fax, and modem, with keys to every form of private
encryption held at the Fed, as allegedly trustworthy! They wanted to
outlaw so-called strong encryption, encryption the National Security
Agency can’t read. That’s another battle they lost.

The gold standard represents the ideal monetary arrangement, and the
only one that erects a wall of separation between the means of exchange
and the nation-state. Guido Hülsmann and Walter Block have argued that a
truly free monetary arrangement — one free of legal tender laws, taxes
on gold, and free entry and exit — would result in a de facto gold
standard. Further, Joseph Salerno has made the argument that the rise of
nonbank banks represents a viable replacement for traditional banking
services, one which is far more sound because these institutions keep
100 percent reserves and are therefore not subject to banking panics or
the contagion effect.

The unexpected change in monetary affairs in the last decade has been
the startling effect that financial deregulation and
internationalization have had on the ability of the Federal Reserve to
monitor and control money. The Fed is no longer sure which monetary
aggregate to watch, and it cannot be sure of the market’s response to
its actions, in either the value of the dollar on international exchange
or on the shape of the yield curve. The Fed is flying blind — exactly
the opposite of the all-knowing, all-seeing central bank it has
pretended to be.

The middle-class welfare state

The problem of money and banking may be the most intractable problem
we face in the future, and in this area, we can chronicle nothing but
decline — and Jeffrey Herbener has done so — and will probably
continue to do so for some time, barring some amazing digital
breakthrough. This is not so with Social Security, FDR’s tax racket that
hooked generations into dependence on Leviathan.

The liabilities of the system are huge and growing — far too vast to
allow some easy Chile-style privatization to cure all woes. Fortunately,
the unexpected has happened with the rise of 401(k)s and other forms of
retirement accounts, created by Congress as a concessionary measure in
the wake of relentless tax increases.

Young people today do not believe they will see a dime of Social
Security, a perception that has caused tens of millions to secede
mentally from the system. Today, people are socking away money in these
private accounts on the expectation that the government will fail.
Social Security is not an investment program, but a transfer system. But
the fact that the government continues to advertise it as an investment
program only serves to discredit the state as a pension fund manager.
Whereas people once were grateful to FDR for caring for them in their
old age, young people today are wildly angry at Social Security for
looting their earnings, and this growing anger explains why some in
Congress are actually beginning to discuss this previously taboo topic.

Withdrawing consent

Secession is taking a variety of forms, not just financial. Nation
states have multiplied since 1900, and secession remains an important
political force in most every one of the 200 nations in the world, even
the U.S., which sports active secession movements in every region.

We should realize the implications of this. The more states there
are, the more difficult they are to manage, which is why the
establishment is always sounding the alarm that it is a dangerous world.
It is indeed dangerous for those who believe the world economy, and
people’s lives, need top-down control.

It would have been unthinkable 15 years ago, but today loyalty to the
existing central states — most of them the product of arbitrary
mappings and political conquest — is not stable. Moreover, technology
and the vibrancy of international trade make it possible for even the
smallest territory to be a viable country. Just exactly what are the
supposed benefits of being connected to a central state?

In the old days, the answer was readily at hand. Government gave us
security. It delivered the mail. It protected us from foreign invaders.
It provided courts of law.

First, what has become of the state’s security? As Bruce Benson has
pointed out, the drop in crime in recent years coincides with
proliferation of gated communities, huge expenditures on home security
systems, a boom in private security guards, and the vast increase in
individual gun ownership.

Contra Hobbes, our security is due to our own efforts, not those of
the state. And it is not only personal security at issue, but also
financial security, which the state also purported to provide. But in
the present economic environment, it is the state, with its constantly
shifting rules on welfare provision and regulatory arbitrariness in
general, which has become the major source of insecurity.

As for the government’s mail, is there anything the feds do that is
more laughably anachronistic? AOL’s Instant Messaging program delivers
half again as many communications every day as the post office, and with
online banking becoming easier, bill paying will no longer be a post
office monopoly. In the end, the post office may find itself in business
only to deliver Christmas cards, as the postmaster general fears. (His
solution, incidentally, is to copy E-Bay and have an online auction
service. Maybe he could start with the post office’s horde of

What about defense? Just as the U.S. government has failed to protect
its own borders from relentless invasion, its foreign military
adventures constitute defense in name only. I’ll leave aside the crazy
and murderous crusades from the 19th century through the end of the Cold
War — so thoroughly chronicled in John Denson’s book, “The Costs of
War” — and only cite a few outrageous recent cases.

It turns out that U.S. soldiers are being investigated for raping
Serbian women during the Kosovo war — the exact charge the U.S. made
against Serbian soldiers. As the news continues to trickle out about,
for example, the U.S. soldier who sexually assaulted and then killed an
11-year-old girl, we can only expect the outrage to continue.

This is to say nothing about the war crimes that continue to be
committed against the Iraqi and Serbian peoples, not least by the
so-called depleted uranium shells that spawn leukemia for decades
afterwards, the terror bombing of a pharmaceutical factory in the Sudan,
the killing of a gondola full of skiers in the Italian Alps, and the
spreading of debauchery and prostitution anywhere in the world that is
unlucky enough to host a U.S. military base.

The U.S. military itself has been devastated by drastic changes in
its management over the last ten years. Inside reports indicate that it
is now organizationally far more concerned with affirmative action,
speech codes, and political correctness in general than military
expertise. Promotions take place according to political standards having
less and less to do with merit. This has demoralized the competent
members of the officer corps, who find themselves in entrenched
opposition to the politics and priorities of their civilian masters.

As a fighting force, the U.S. military is being gutted by social
engineering. And while I feel bad for the good people who went into the
military to serve their country — and not to serve the special interest
groups now managing the operation — I can’t help but think that a
downgrading of the military’s foreign war preparedness is not a bad sign
for American liberty, which is not compatible with a global empire.

Clinton had an idea in 1992 that he would institute an embryonic
national service program to replenish the ranks of the volunteer
military. But the program has been a bust, not because Congress has
slashed its budget but because of a lack of public interest,
bureaucratic screw ups, and the usual looting by special interests. Not
only has national service not come back, and not only is there no
imminent danger of a reinstitution of the draft, but draft registration
itself has been repealed under public pressure.

As for courts of law, the boon in private arbitration tells us
something about the efficiency and efficacy of government courts. U.S.
corporations are loath even to enter them for fear that they will get a
judge like Thomas Penfield Jackson, a man who had never used a personal
computer but who nonetheless presided over the most important software
trial of our times. Clearly an incompetent and a malcontent, he lords it
over a brilliant, productive company at the behest of less successful
competitors. And he is typical of the judiciary, almost none of whom
inspire any respect.

Educational meltdown

What about schools? Here we have a hopeless case in which the level
of government spending is directly correlated with declining scores and
declining knowledge. Some of this is deliberate, as with the New Math,
come back in the form of Fuzzy Math, also known as
All-Answers-Are-Correct Math, instituted to dumb-down the smart
students, and close the gap with the low achievers.

The public schools have become such a disgrace that school districts
are having to beg people to take positions like superintendent, which
used to be considered high status. In the wake of Columbine, and all the
other school shootings, parents are increasingly concerned for their
children’s physical safety, too. Even if parents send their children to
public schools and pay no attention to their academic decline, the
prospect that their child might be gunned down by a drugged-up maniac
tends to focus the mind.

And hardly anyone wants to talk about the worst effect of the public
schools: what they have done and continue to do the students’ character.
Cramming thousands of kids in a prison-like environment saps their
intellectual energy and puts the strongest in charge by default, exactly
as in a prison. But the encouraging sign is the growth in alternatives,
whether private schools or home-schools, which are increasingly used by
the smartest people. It’s no wonder some members of the power elite have
pushed the idea of government vouchers to hook these islands of genuine
learning into the state nexus before the government loses control

In the business world, too, we are seeing the wonderful results of
what happens when the entrepreneurial class circulates and rotates from
one generation to the next. The entrenched, state-connected elites end
up being replaced by new ones. The new class of technological elites are
the least connected to government of any in our century. In their very
work, they breathe and thrive on the relative freedom of the
technological sector, and are being shaped by a business setting that
the state neither understands nor can come close to competing with.

An article in Vanity Fair last month quotes a member of the
Rockefeller family on their panic that the new millionaire class is
richer and more culturally powerful than what remains of America’s old
families, which too often secured their social and political status by
close proximity to the state. By the way, what a wonderful thing that
the myth of the business school — the idea that academic professionals
can somehow teach market success — is at last being demolished.

The thriving market for employment has devastated the ranks of the
professional political activists. Thomas Sowell points out that any
black with intelligence and drive is in school or in business, which
leaves the ranks of the race hustlers seriously thinned of bandwidth.
The quality of the people on the political front lines has been
drastically diminished in the past 30 years. They may be more
belligerent than ever, but they will be ever easier to outsmart. Nor
should we underestimate the effect that its own affirmative action
programs has had on the state. New levels of incompetence even by
government standards are visible and spreading.

Losing the command centers

I’ve chronicled a whole range of areas in which the state is in
decline, and done so without excessive focus on the effects of the
information revolution. Even though it has become a cliche, we shouldn’t
underestimate the effect of the Net in advancing the revolution. Murray
Rothbard, in his famous essay on the nature of the state, pointed out
that to thrive a state must monopolize the command posts of society.
Primary among them is the communications network. It is no accident that
the government has always worked to build public-private partnerships in
telegraphs, telephones, and the airwaves. The state is inherently
pro-censorship, viewing its best interest as bound up with suppressing
excessively critical judgments against it.

This has all come to an end, much to the shock of the power elite.
You will notice that discussion of the information revolution, and the
political issues it raises, has been largely missing from the campaign
trail this year. The reason is that the political class is hopelessly
behind; each member steers discussion away from the topic for fearing of
making a brazen mistake.

Recall that a few years ago George Bush Sr. was skewered for not
knowing that prices in grocery stores are scanned by bar-code readers.
Today’s politicians are terrified that they will be asked a question
that mentions URLs, ISPs, or packet switching. Their advisers would like
to help, but the political class is generally out of touch. For example,
I know a major campaign manager who still refuses to get email in hopes
that the whole thing will go away.

Threats on the horizon

All of these factors combine to paint a fascinating picture of the
state in decline. We would be foolish not to take heart in the
denunciations of this trend printed in the daily newspapers. Everyone
from Mario Cuomo to Bill Bennett to Garry Wills decries these trends and
promises to reverse them with a newly invigorated public sector. Every
national politician promises to restore the American people’s faith in
government. May they all fail, and miserably.

On the other side of the ledger, the list is just as daunting:
government spending is at an all-time high, regulations are ever-more
intrusive, the middle class is ever-more lackadaisical and nonchalant
intellectually, the new generation of teens is lacking in moral
character, and public schooling continues to drain children’s brains and

Democracy itself still remains what it has been since the turn of the
century — a degenerate system whereby organized groups of special
interests are able to exploit the majority of taxpayers for their own
purposes. And no trend can more quickly inspire exasperation and
pessimism than the overwhelming success of some lawyers in using the
government’s laws and courts to their own benefit.

The single most important factor of uncertainty is the business
cycle. Some of these trends owe themselves to the economic growth of
recent years, which is causing private markets to continually outrun the
ability of governments to keep up. It provides no comfort to observe the
Fed’s loose credit policies that began in the first quarter of 1995, so
that rates of growth in 1998 and 1999 have averaged 7.0 percent, with
periodic spikes as high as 15 percent.

What will happen if the business cycle turns and we enter into
another inflationary recession, one caused by the Fed’s reckless
monetary and banking policies? Some of these glorious trends will be
reversed, while others will not. The state will attempt to use the
crisis to bolster its own power, but it will confront a public that is
socialized in a pattern of resistance, and it will be in a much weaker
starting position than it has been in any previous economic crisis since
the 19th century.

If such a downturn occurs, the Austrians will be in the prime position
of explaining events in light of the sure theory of crisis causation as
developed by Mises and elaborated by Hayek and Rothbard. But that is not
all Austrian theory will be useful for in the coming future of liberty.

Only the Austrians have explained how civilization will not only
continue but thrive as never before in the post-nation-state age. Only
the Austrians have developed a viable model for society without the
state, one that is not utopian but rather rests on a realistic
conception of human nature and existing social institutions. Only the
Austrians have laid out an unassailable intellectual groundwork of a
fully private society, one that celebrates individual achievement and
rights, envisions private authority and private law, and recognizes the
merit of world solidarity based on free trade and free cultural

The irrepressibility of liberty

Yuri N. Maltsev, economist and historian of the decline of the Soviet
Union, reminds us that Western media impressions of Gorbachev’s last
years contrasted sharply with the reality inside the country. Far from
freeing the country from oppressive rules, he waged a war on alcohol
consumption that landed tens of thousands of innocent people in jail,
and he undertook a despotic campaign to force factory managers to comply
with the central plan. It was these dramatic increases in state power
that precipitated the final collapse.

There is analogy here with the U.S. We would be wise to remember that
a cornered rat fights very fiercely, and a state desperate to hold onto
power is capable of alarming violations of civil, economic, and
political liberty. For this reason, the task before us requires
resistance to the prevailing regime, a habit that recalls our forebears,
whose history before the U.S. constitution was one long period of
defiance. This is the best part of American history, and it is what is
distinct about American culture. Recall too that history can turn on a
dime, just as it did in the Soviet Union and all over Eastern Europe.
Despotisms can be here today and gone tomorrow.

We must prepare in every way. We must ourselves become historians of
decline — historians of the decline of the state, historians even of
its fall, along with the fall of all its apologists, dependents, and
sycophants. Until they become the mere stuff of history, we must fight
to secure liberty with the strongest possible intellectual foundation,
among this generation of faculty and students, and every one that

To the supporting members of the Mises Institute, I pass on the warm
thanks and appreciation of the thousands who have been educated in our
seminars and the millions who have used Mises Institute publications to
inoculate themselves against error in political and economic theory.

We must prevail, because the future of civilization itself depends on
the triumph of the ideas of liberty. This is what Mises believed, and it
is what kept him going even in our century’s darkest hours. Nine years
after he declared himself a historian of decline, “Human Action”
appeared like a bright light on the intellectual horizon, and 50 years
later, that light grows brighter every day.

There is no way that Mises could have anticipated what the future
held for that masterpiece. The pace of sales of our Scholar’s Edition,
produced on the 50th anniversary of its original publication, comes
close to matching the startling sales rates of the first edition. And
this is for a book that has never gone out of print.

But here is something else. Two weeks ago, we put “Human Action”
online, which permits anyone anywhere in the world, at all hours, day or
night, to have access to a fully searchable and printable version of
this 900-page book. In these two weeks, thousands of people around the
world have spent time reading the book or downloading it, and these are
people who would not otherwise have access to such a book. Moreover, the
online version has not hurt the sales of the hardback but rather the
opposite: it has made it more popular.

Mises would be thrilled. Rothbard would be overjoyed. We should be
too. They would be happy to see you here today and they would remind us
of the privilege of doing the work of liberty in a time when imperial DC
rule over the country and the world is being radically challenged, and
even systematically brought down, by dawning public awareness. If the
process continues long enough, and if we take the right steps, the
immensely cruel welfare-warfare state can be dismantled, and the ideal,
practice, and blessings of liberty restored.

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