Tuesday, January 17, 2017

Ralph Raico, RIP*

Ralph Raico died on Dec. 13, 2016.

I first met Ralph Raico in 1952, when we were both 15 years old and students at The Bronx High School of Science. The occasion was the school’s mock political convention for that presidential election year. I was the speaker for Sen. Robert Taft, the most prominent conservative politician of the time, who was seeking the Republican nomination for President in competition with General Dwight Eisenhower, who later that year won the nomination and then went on to become President.

It was a few minutes before the start of the proceedings and I was seated on the stage. A thin young teenager approached me, wearing a pull-down woolen cap. At that time, in the Bronx and the rest of New York City, Taft supporters were met with even greater hostility and contempt than Trump supporters are today in those places. Thus as soon as I saw that he was about to say something to me, I took for granted that it would be some kind of hostile comment, and so I reflexively delivered a pre-emptive such comment of my own: “What’s on your small mind, I asked?” “I wanted to know if your arguments are well-prepared,” he replied.

After briefly assuring him that they were, and satisfying myself that he was not an enemy but a genuine Taft supporter himself, we agreed to meet after school.

When we met, I learned that he was already actively campaigning for Taft, along with several other, older teenagers who were affiliated with Taft’s campaign headquarters in Manhattan. I also learned that it had been he who had glued a Taft campaign sticker to the wall of a stairwell in the school. A sticker that in the circumstances had seemed to me to be the equivalent of a sign of life on an otherwise dead planet.

Ralph and I agreed to meet on the next Saturday afternoon, across 42nd St. from the main branch of the New York Public Library. I think we had gotten a literature table and supply of handouts from the Taft headquarters. Our table was set up a couple of hundred feet west of 5th Ave. Before we knew it, we were surrounded by a small crowd of onlookers, and were both engaged in vigorous intellectual arguments with various members of the crowd.

To my considerable surprise and pleasure, Ralph showed himself to be a keen student of Henry Hazlitt’s Economics In One Lesson, arguments from which easily rolled off his tongue in the back and forth between himself and members of the crowd. After our first experience of this kind, I learned that Ralph, as was I, was also an avid reader of The Freeman, a magazine that in those days, 1950-1954, when Henry Hazlitt played a major role in its operations, was a really serious and outstanding publication.

I don’t know how many more such intellectual encounters we had, but there were at least several. I know that we soon reached the point where if one of us stopped speaking for a moment, the other was capable of stepping in and completing his thought and the rest of his argument. I felt that Ralph was truly my intellectual brother. And I believe that he felt the same.

Our intellectual comradeship resulted on one occasion in our winning a formal debate at our far-left school in favor of Senator Joseph McCarthy, a man for whom the intellectuals and the media of the time had nothing but seething hatred. The result of our victory had to be announced to the school assembly. And thus one morning, one heard that at the debate club it had been “Resolved: Senator Joseph McCarthy Is a Great American” (or at least words to that effect). 

On another occasion, our intellectual comradeship and support for McCarthy, led us to organize a group of students to go and picket on behalf of McCarthy at a Federal Courthouse in lower Manhattan, where relevant hearings of some kind were scheduled to be held. Our group included not only students from Bronx Science, but also students from Stuyvesant High School in lower Manhattan, and elsewhere. If my memory of events of sixty-five years ago serves me correctly, among them were Bob Hessen, Leonard Liggio, Sam Greenberg, Bill Schultz, George Stryker, Fred Preisinger, Dan Hodes, and others.

When we arrived at the Courthouse, we learned that the hearings had been cancelled. Since we had all the necessary makings for picket signs, however, we decided to use the opportunity to picket the UN instead, which was not more than 2-3 miles away. Ralph called the various local newspapers to let them know of our picketing. Despite the fact that our signs were as provocative as possible, for example, “US out of UN, UN out of US” and “One in Three [UN workers] a Spy,” we got zero press coverage. We hadn’t realized that a requirement for press coverage is that one’s cause be among the same far-left causes as those of the press itself.

I think it was on this day that, after the failure of our picketing attempt, all of us decided to march over to the office of The Freeman, which was then located within walking distance from the UN, at 240 Madison Avenue.

The Freeman’s staff in attendance included two of its top editors, John Chamberlain and Suzanne LaFollette. We subsequently learned that they and every other staff member in attendance were both shocked and delighted to learn that their magazine had produced such a cadre of serious young men dedicated to upholding the cause for which the magazine fought.

Ralph and I were both ardent admirers of the writings of Prof. Ludwig von Mises, the man whom I consider to be the leading advocate of capitalism in the history of economic thought. In fact, at around the very same time that I spoke before the previously mentioned mock political convention, I was in process of completing reading Mises’s great classic Socialism. We both wanted very much to meet him. Our intellectual comradeship, combined with our young age, led in this instance to our committing an embarrassing juvenile act.

We had learned Mises’s address, and decided that we would meet him simply by going to his apartment, ringing his door bell, and claiming to be selling subscriptions to The Freeman, hoping thereby to engage him in conversation, which in turn would tell him enough about us that the beginnings of a relationship might be established. Mises opened the door dressed in formal attire, lacking only his tuxedo jacket. When we announced that we were selling subscriptions to The Freeman, he responded, in a heavy German accent that “I haff ze Freeman,” and proceeded to close the door. I felt as though I had suddenly lost all but a few inches of my height. I knew that Ralph felt terrible as well.

But, of course, that was not the end of the story. Not many months later, Ralph wrote to The Foundation for Economic Education, then located in Irvington-On-Hudson, New York, just a few miles north of the city. He arranged an invitation for us to visit the Foundation.

We spent most of the visit in serious conversation with Ivan Bierly and Baldy Harper, two of the Senior staff members of the Foundation, and thanks to their good offices and the favorable impression we had made, they arranged for us to meet Prof. Mises at his apartment not long afterward. The date of that meeting was February 23, 1953, a date inscribed by Mises, along with his signature, in my copy of Human Action.

After several hours of discussion of such matters as the significance or possible lack of significance of the national debt and of our ability as students to argue with faculty members, Mises was sufficiently impressed with us as to invite us to attend his graduate seminar at NYU, an invitation we immediately and enthusiastically accepted. The one condition he imposed, in view of our extreme youth, was that we “not make noise.” Thus while still in high school we were vaulted into the highest reaches of pro-capitalist scholarship, an event which played an enormous role in our lives thereafter.

We both began attending the seminar, a few weeks later. It was located in the main conference room of NYU’s Graduate School of Business at 90 Trinity Place, which was practically next door to the American Stock Exchange and a matter of yards from Trinity Church and its small cemetery.

Already present as members of the seminar were, among others, Hans Sennholz and his wife Mary, Percy Greaves and his wife Bettina Bien, William Peterson and his wife Mary, George Koether, and Murray Rothbard.

In very little time, Ralph and I established a friendship with Murray, which greatly intensified in the following fall and endured for the next five years.

Early on, the “Cobden Club,” named after the great 19th-Century free trader Richard Cobden, and comprised of Ralph and myself and some members of the group of high school students I described earlier, became the “Circle Bastiat,” led by Rothbard. In this period, largely thanks to Rothbard, Ralph and I both received grants from the William Volker Fund to translate works of Mises. I translated Epistemological Problems of Economics in the summer of 1955 and Ralph translated Liberalism in the summer of 1956.

In 1954, Rothbard introduced the Circle Bastiat to the subject of Ayn Rand and her writings. He had seen a portion of the manuscript of the novel she was then working on, namely, Atlas Shrugged. All of us were excited by what Rothbard told us and urged him to arrange a meeting with Miss Rand.

It turned out that there were two meetings, lasting from about 8 in the evening until 5 in the following morning, on the weekends of July 10/11 and July 17/18.

I did not see Ayn Rand again until September of 1957, following the publication of Atlas Shrugged. However, in this period, Ralph remained in touch with at least one of her leading followers: he and Bob Hessen were the audience for Leonard Peikoff’s delivery of some of his early lectures on philosophy.

Following the publication of Atlas Shrugged, everyone in the Circle Bastiat was an enthusiastic admirer of Ayn Rand. This lasted for not quite a year, until July of 1958, when a blowup occurred between Ayn Rand and Rothbard, which also had the effect of tearing apart the Circle Bastiat, leaving myself and Bob Hessen on one side, supporting Ayn Rand, and Ralph and most of the other members supporting Rothbard.

At that point, my relationship with Ralph ended. And although, years later, we were able to meet and speak cordially to one another, our friendship could not be reestablished.

Over the years Ralph’s ideas had changed on some important subjects. For example, he gave up his support of Senator McCarthy, describing some of McCarthy’s claims as “over the top.” More significantly, in a lecture at the Ludwig von Mises Institute, he described the Confederate Army of Northern Virginia as defending freedom, a statement that in my judgment was equivalent to the claim in the novel 1984 that “freedom is slavery.”

I deeply regret the passing of Ralph Raico. In his youth, he was my brother.

 * George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics and the author of Capitalism: A Treatise on Economics. His website is www.capitalism.net. Follow him on Twitter at @GGReisman. See his Amazon.com author’s page at http://www.amazon.com/-/e/B001KCWY0Q


Thursday, March 03, 2016

China et al. Are Not “Killing Us”

The current Republican front-runner, Donald Trump, has repeatedly claimed that China, and many other countries, such as Mexico and Vietnam, are “killing us” in foreign trade. The basis of his claim is the fact that U.S. imports from those countries substantially exceed U.S. exports to those countries. In 2015, for example, the overall, total difference between U.S. imports and exports, known as “the balance of trade,” was in excess of $500 billion, with trade with China accounting for about 70 percent of that sum.

An excess of imports over exports is typically described as an “unfavorable balance of trade.” The description of the balance as “unfavorable” derives from the belief that exports are a source both of money coming into a country, in exchange for the goods exported, and of jobs in that country in the production of the exports. Imports, on the other hand, are viewed as taking money out of the country, in the purchase of the imports, and transferring jobs from the domestic economy to the foreign producers of the imports.

It is on this basis that Trump and many others believe that China et al. are “killing us.” The implication of this belief and its intellectual foundations is that the United States needs to adopt a government policy of increasing exports and reducing imports by such means as protective tariffs, import quotas, and export subsidies. (Trump has not yet explicitly enunciated this policy, but it is logically implied in what he does say.)

Now the truth is that in the monetary conditions of the present-day world, an excess of imports over exports does not at all represent a threat to the money supply of a country or the ability of domestic spending to support employment. In the 17th Century, when the doctrine of the balance of trade first came into vogue, the money of the world was gold and silver. In those conditions, the only way that a country without gold or silver mines could increase its money supply was by means of obtaining money from abroad, in exchange for the export of goods. The import of goods could for a time reduce the money supply of a country.

But today, money is irredeemable paper, and every country manufactures its own money supply. Indeed, in these conditions, an outflow of part of the money supply of a country in exchange for imports is positively favorable. This is certainly true in the case of the United States dollar, which to an important extent serves as a global currency. The fact that dollars are in demand globally, but are produced only in the United States, implies that the United States must export a more or less substantial part of its new and additional supply of dollars. Exporting part of the supply of dollars represents getting imports of real goods in exchange for pieces of paper that are virtually costless to produce and replace. At the same time, it limits the rise in prices in the United States by holding down the increase in the supply of money in circulation in the United States. Thus, seen in this light, an excess of imports over exports turns out actually to be highly favorable rather than “unfavorable.”

Far more important than the gain associated with obtaining imports by means of the export of costless paper dollars is the gain associated with obtaining imports by means of the investment of foreign capital. To make this point as clear as possible, think of Saudi Arabia before it had an oil industry but after geologists had confirmed the existence of vast oil deposits there. What was necessary to develop those deposits was flotillas of ships from Europe and America bringing vast imports of drilling equipment, sections of pipe, the materials and equipment required for building oil refineries, and the consumers’ goods required for armies of foreign workers constructing the Saudi oil industry. Indeed, so far from being a source of unemployment in Saudi Arabia, this allegedly unfavorable balance of trade was the foundation not only of Saudi Arabia’s oil industry but at the same time practically all of the worthwhile jobs that exist in Saudi Arabia, which are either in its oil industry or closely connected to its oil industry. Thus, in fact, nothing could be more favorable in reality than what most of today’s economists absurdly describe as an “unfavorable” balance of trade and a cause of unemployment, namely, such an excess of imports over exports.

Today, investment by China and other foreign countries in the U.S. is what enables the American economy to import more than it exports. As in the case of Saudi Arabia, this investment and accompanying excess of imports over exports makes it possible for the United States to have more and better equipped factories and all other types of means of production than would otherwise be the case, and thus to have a larger number of well-paying jobs. Indirectly, even the purchase of U.S. government securities by China et al. has this effect. Foreign purchases of U.S. government securities hold down the diversion of capital funds from U.S. firms into the purchase of government securities. The government securities that foreign investors buy are government securities that U.S. investors do not have to buy, which enables them to have more funds available for the purchase of capital goods and labor in the U.S. To this extent, its effect is the prevention of the drain of capital funds from the purchase of capital goods and labor by business into the financing of government spending.

In addition, foreign investment in U.S. government securities serves to prevent the Federal Reserve from creating still more new and additional money with which to purchase those securities, something which would represent a substantial increase in inflation in the U.S.

American job losses are not the result of freer trade and an excess of imports over exports, but of government policies that prevent capital accumulation in the United States, among them policies that limit imports. An essential part of any economic policy that would truly help to “make America great again” is to avoid preventing imports.


Copyright © 2016. All rights reserved. For permission to reprint, please contact the author at georgereisman@georgereisman.com.

George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics, a member of the FEE Faculty Network, and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996; Kindle Edition, 2012), The Government Against the Economy, and numerous essays and articles. See his Amazon.com author’s page at http://www.amazon.com/-/e/B001KCWY0Q. His website is
www.capitalism.net. His blog is www.georgereismansblog.blogspot.com. Follow him on Twitter at GGReisman.

Monday, February 22, 2016

Washington's Birthday Tweets

Three tweets concerning Washington's birthday, posted Feb. 21, 2016.

George Washington is the single most important figure in American history. His birthday, February 22, should be a national holiday.

Washington’s birthday and Lincoln’s birthday have been rolled up into “President’s day,” in order to make room for Martin Luther King day

To make room for Washington’s birthday, Martin Luther King day and Lincoln’s birthday should be rolled up into “Black Freedom day.”

Monday, December 28, 2015

Economic Inequality and a Booming Economy

As in my last post, I made the following comments on Amazon.com, in the back and forth of readers' discussions of Piketty's Capital in the Twenty-First Century.

A Piketty supporter asks: "Tell me the time in the [sic] history when the inequality was high but the economy was booming."

Answer: Broadly speaking, throughout the English-speaking world from about 1775 to the present day; the rest of the western world from about 1800 to the present day; Japan from about 1960 to the present day; South Korea from about 1970 to the present day; and China from about 1980 to the present day.

In these years, waves of continuous economic progress began in the areas named, that on the one side created multi-millionaires and billionaires, and on the other side provided growing masses of wage earners with the ability to afford, first, such things as cotton underwear, shoes, new clothes, improving diets, and then railroad and steamship travel, and then electricity, radios, vacuum cleaners, air conditioners, refrigerators, washer/dryers, flush toilets, automobiles, motion pictures, television sets, computers, cell phones, tablets, and, of course, antibiotics and all kinds of other pharmaceuticals as well as all kinds of surgical procedures.

The introduction of the innovations resulted in high profits for the businessmen who introduced them. The profits were heavily saved and reinvested, and served in the expanded and improved production of the very kinds of goods whose production provided the profits. The inequality was/is in the height of the profits and in the consequent wealth invested in producing the goods that the masses buy. That same wealth is the base of the demand for the labor that the masses sell.

This is an answer spanning centuries and many millions of square miles. For elaboration, read my book Capitalism: A Treatise on Economics. For a brief introduction, read my Kindle essay "
How the 1 Percent Provides the Standard of Living of the 99 Percent."

Tuesday, December 15, 2015

The Threefold Disaster that Comes from Imposing Economic Equality

I made the following comments on Amazon.com, in the back and forth of readers' discussions of Piketty's Capital in the Twenty-First Century.
People are unequal in their genetic inheritances, their upbringings and environments, and, above all, in the important choices they make over the course of their lifetimes. An inevitable result is economic inequality.

Imposing economic equality nonetheless has at least three enormously destructive effects:

1. It is tantamount to the destruction of the law of cause and effect in the realm of production. For example, under economic freedom, an individual who produces twice as much, while everyone else continues to produce the same, will be able to enjoy twice as much. But if his doubled production must be shared equally by the the 7 billion-plus inhabitants of the globe, this individual instead of receiving twice as much as the result of his doubled production will receive only one 7-billionth of twice as much, which is to say, for all practical purposes, nothing whatever. Under the freedom of economic inequality, an individual is capable of improving his own and his family’s economic well being dramatically. But when the requirement is that in order to improve his own well-being, he must improve the well being of the whole population of the world to the same extent, then he can accomplish nothing. It is like seeing that an individual’s legs are strong enough to enable him to walk, and then demanding that to walk, his legs must be sufficiently strong as to be able to carry the weight of the whole world’s population.

2. Economic inequality is essential to enable less capable people to outcompete more capable people and thus to be gainfully employed in the economic system. For example, here are two workers, one of whom is twice as productive as the other. What is required to induce an employer to prefer the employment of the less capable worker? The less capable worker must be willing, and legally free, to work for less than half as much as the more capable worker. In that case, he becomes the less expensive worker per unit of output. Imposing economic equality, or any measure in the direction of economic equality, such as minimum wage laws or increases in the minimum wage, prevents less capable workers from competing, and forces them into unemployment and a life of permanent poverty.

3. Imposing economic equality wipes out the enormous gains that the average person derives from the greater wealth of others. In a market economy, the wealth of the rich is not in piles of personal consumers’ goods, but in means of production, in which capacity it produces the goods and services that everyone buys and is the foundation of the demand for the labor that the wage earning masses sell. The greater the wealth of businessmen and capitalists, the greater is the production and supply of goods and services and the greater is the demand for labor, and on this foundation the lower are prices and the higher are wages, and thus the higher is the general standard of living.

For further discussion, see my Kindle essay "How the 1 Percent Provides the Standard of Living of the 99 Percent" and my magnum opus Capitalism: A Treatise on Economics also available in the Kindle store . A complete list of my 16 Kindle publications on free enterprise appears at http://www.amazon.com/-/e/B001KCWY0Q


Wednesday, November 25, 2015

Radio Interview

I was interviewed yesterday by John O’Donnell of Power Trading Radio on the subject of “How the 1% Provides the Standard of Living of the 99%.” The interview can be heard at www.powertradingradio.com.


George Reisman