My Question for the Doomsters: Then What?
I will admit, however, that some of my friends seem mightily inclined toward such doomsaying. It’s almost as if they can’t wait for the catastrophe to arrive – perhaps because it will demonstrate beyond cavil that the existing order is too corrupt, irrational, and evil to maintain itself. Some people who write or speak along such lines, though, clearly have a vested interest: they are selling something — often precious metals, investment advice, “survival” goods, or “bearish” publications — that they expect to sell more readily to consumers who have acquired a heightened fear of impending economic doom.
Other doomsayers, especially those in the Austro-libertarian camp, may have absorbed their dire expectation from an expression Ludwig von Mises used, “the crack-up boom.” By this term, Mises refers to the penultimate stage of hyperinflation, when each acceleration of the money supply only drives the velocity of expenditure higher as people try to exchange any money they hold for real goods as quickly as possible. The culmination occurs when, as Mises writes in Human Action (p. 427), “The monetary system breaks down; all transactions in the money concerned cease; a panic makes its purchasing power vanish altogether.” Mises was not simply imagining or theorizing about this sort of development, however; he had seen it with his own eyes in Austria and Germany after World War I. And similar crack-ups have occurred in many other places at various times, including the Confederate States of America during the final year or so of the War Between the States.
Austro-libertarians should note, however, that Mises did not argue that a crack-up boom destroys all economic life. Instead, as he immediately explained, “People return either to barter or to the use of another kind of money.” Indeed. Austria, Germany, and the U.S. South did not disappear as a result of their currency’s ruin. Although their people suffered grievously from the destructive effects of hyperinflation, most people found a way to survive, and life went on. Eventually, economic life resumed on a new basis after the adoption of a “reformed” or foreign medium of exchange not subject to such rapid increases in supply. Indeed, some people survived even the recent hyperinflation in Zimbabwe, notwithstanding the Mugabe government’s best efforts to starve most of them.
Not every forecast of economic catastrophe involves hyperinflation, of course. Some breakdowns are expected to grow out of runaway government spending, growing taxation, oppressive regulation, food shortages, fuel shortages, or natural disasters, such as deadly pandemics or lethal changes in the world’s climate. I have yet to encounter a claim that we are all doomed because of an impending beer shortage, but I am a patient man, and I am confident that sooner or later such a scenario will be bruited about.
One aspect that virtually all tales of impending mega-woe have in common is that they end with the catastrophe itself. Bam, crunch, rip, smash, crash: the day of reckoning finally arrives, the dreaded event occurs, and the story ends. Alles ist kaput. Maybe somewhere out there in the woods a few cruelly smirking survivalists remain alive, clutching their beloved firearms and muttering, “I told you so.” If life continues at all, however, it does so only under conditions that leave the survivors solitary, poor, nasty, brutish, and short of all decent goods and services.
I’m not saying that this sort of thing is impossible. We are talking about human beings and their social interrelations, and from such screwball raw materials, virtually any outcome might conceivably be produced. But such scenarios are dreadfully far-fetched. After all, during the time of the Black Death in the fourteenth century, 30-60 percent of the entire population of Europe died, and hundreds of towns simply disappeared after their inhabitants perished or abandoned them in a futile flight from the incomprehensible killer (inadvertently spreading the disease everywhere they went). Yet Europeans did not die out, and indeed European civilization continued to make slow progress over the long haul, even though the disease became endemic (and episodically epidemic) for centuries.
So, supposing that I accept a horrifying forecast as a point of departure for discussion, my general question for the doomsayers of whatever stripe is: Then what? Do they really believe that when the government can’t pay all the pensions and medical bills that it has promised to pay, life will come to an end? Do they believe that when the government defaults on its debt, the economy will cease to function? Do they believe that when the U.S. dollar loses all of its purchasing power, people will not find a new and better medium of exchange for their transactions? And so forth.
One needs to have – and in saying so I feel almost as if I’m having an out-of-body experience – a modicum of faith in people’s common sense, creativity, and will to survive and prosper, even in the face of great difficulties and obstacles. If people could keep society running in the aftermath of the Black Death, they surely can keep it running after the U.S. government defaults on its debt. I am not saying that no suffering will occur. Vast socio-economic adjustments are painful even in the best of circumstances. But people will find a way, life will go on, and eventually some progress will be attained – before governments once again strangle freedom so severely that another calamity occurs. (After all, I cannot imagine that the people who are building the latest Tower of Babel will ever succeed in reaching heaven.)
Years ago, when I lived in Seattle, I sometimes encountered people who seemed terribly worried that because the Northwest’s old-growth trees were being cut, the so-called Northern Spotted Owl (a bird genetically indistinguishable from the abundant spotted owls in the Rockies, yet somehow imbued with a sacred status) was sure to perish. Try as I might, I could not resist the urge to say to them. “Look, suppose you were a Northern Spotted Owl, and the loggers came along and cut down the tree you were occupying. Would you fall down and die, or would you simply fly to the nearest not-so-old-growth tree and go on living as usual?”
I would be pleased if today’s doomsayers felt an obligation to answer a similar question in regard to their own forecasts.
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Andrew D. Todd - 1/25/2010
The citation should be:
Dorothy and Thomas Hoobler, _The Trenches: Fighting on the Western Front in World War I_, 1978, pp. 176-77
Andrew D. Todd - 1/25/2010
The driving force behind the 1920's hyperinflations was the casualties of the First World War, and the dispute about who was to pay the pension costs. Ten million men died, and another ten million were crippled. As one veteran observed:
"More than anything, I hated to see war-crippled men standing in the gutter selling matches. We had been promised a land fit for heroes; it took a hero to live in it. I'd never fight for my country again." (*)
This was an Englishman-- one of the fortunate. The aftermath of war was far worse in Germany and Eastern Europe. Something had to give. The immediate event setting off the German hyperinflation was that the French occupied Germany's industrial belt, the Ruhr, and the German government, with its resources at nil, called a general strike, paying strike wages in yet more paper currency. The over-riding fact was that the French government was going to go out and take anything it wanted, and that resistance was futile, and that there wasn't likely to be anything left for anyone else.
The hyperinflation was in essence the economic component of a mutiny.
(*) Dorothy and Thomas Hoobler, Trenches: Fighting on the Western Front in World War I, 1978, pp. 176-77
John A deLaubenfels - 1/25/2010
Yet another excellent column, Mr. Higgs! I'd like to hear more about how your encounters with spotted owl huggers played out...
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