Linguistic Perversions

While the whole world is waiting with bated breath whether the bureaucrats running the Federal Reserve will alter, remove or retain a single adjective in their monetary policy statement today, it occurred to us to think a bit about the use of language in the context of economics and financial markets.

Many a word has seen its true meaning altered in our Orwellian age. One example we frequently cite in these pages is the term “inflation”. It once used to mean only one thing: An increase in the supply of money. It is the only way in which the term actually makes logical sense. And yet, in modern times its meaning has been altered to designate what is in fact only one of the many possible consequences of inflation, namely rising prices of consumer goods.

As Ludwig von Mises pointed out, this means that we actually no longer have a single word to describe what the term “inflation” once used to describe. By calling rising prices “inflation”, sight is lost of the root cause of rising prices. This is of course deliberate, as the instigators of inflation are now no longer seen for what they truly are. As a result of this it has become fashionable to call central banks “inflation fighters”. This is akin to calling an armed robber a saint, or calling an arsonist a firefighter.


ecb1Police are erecting barbed wire fences around the ECB’s new headquarter in Frankfurt.

Photo credit: Kai Pfaffenbach / Reuters


Capitalism is another term that has been under siege for quite some time. Once upon a time, it was the term used to describe the free market economy. Nowadays, one has to add descriptive adjectives to ensure that one is not misunderstood when talking about capitalism. If one wants to use the term in its original sense, one has to amend it by saying “free market capitalism”. How else can one be certain that people realize one isn’t talking about the “state capitalism” or “crony capitalism” which prevails today? Ironically, the latter two probably have more in common with socialism than capitalism, so one should e.g. really speak of “crony socialism”.

Contrary to popular wisdom, central banks are definitely not “pillars of the capitalist system”. They are socialist institutions engaged in central economic planning. Not a single aspect of these institutions has anything to do with free markets or capitalism. In fact, as a result of the linguistic confusion about the term capitalism, they are actively contributing to giving capitalism a bad name with their interventionist policies. Whenever the artificial booms their interventions create turn to busts, the media will blame the free market instead of putting blame where it belongs. We have last seen this quite starkly in 2008. As George Reismann pointed out at the time:


“The news media are in the process of creating a great new historical myth. This is the myth that our present financial crisis is the result of economic freedom and laissez-faire capitalism.


Recent articles in The New York Times provide further confirmation. Thus, one article declares, “The United States has a culture that celebrates laissez-faire capitalism as the economic ideal….” Another article tells us, “For 30 years, the nation’s political system has been tilted in favor of business deregulation and against new rules.” In a third article, a pair of reporters assert, “Since 1997, Mr. Brown [the British Prime Minister] has been a powerful voice behind the Labor Party’s embrace of an American-style economic philosophy that was light on regulation. The laissez-faire approach encouraged the country’s banks to expand internationally and chase returns in areas far afield of their core mission of attracting deposits.” Thus even Great Britain is described as having a “laissez-faire approach.”

The mentality displayed in these statements is so completely and utterly at odds with the actual meaning of laissez faire that it would be capable of describing the economic policy of the old Soviet Union as one of laissez faire in its last decades. By its logic, that is how it would have to describe the policy of Brezhnev and his successors of allowing workers on collective farms to cultivate plots of land of up to one acre in size on their own account and sell the produce in farmers’ markets in Soviet cities. According to the logic of the media, that too would be “laissez faire” — at least compared to the time of Stalin.

Laissez-faire capitalism has a definite meaning, which is totally ignored, contradicted, and downright defiled by such statements as those quoted above. Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force. This protection applies to the initiation of physical force by other private individuals, by foreign governments, and, most importantly, by the individual’s own government. This last is accomplished by such means as a written constitution, a system of division of powers and checks and balances, an explicit bill of rights, and eternal vigilance on the part of a citizenry with the right to keep and bear arms. Under laissez-faire capitalism, the state consists essentially just of a police force, law courts, and a national defense establishment, which deter and combat those who initiate the use of physical force. And nothing more.”


(emphasis added)

This is why it is important to always stress that there is a vast difference between an unhampered free market system and the system that is in place today. While the system retains many aspects of a market economy, it is a severely hampered market economy. It should definitely not be called a “laissez faire” system. It is light years away from being one.


The De-Civilization Religion and Central Banks

The free market has a great many enemies arrayed against it. Ironically, they are organizing their fight against the market by using the very tools the market economy provides (such as e.g. smart phones and social media platforms). It does remind one a bit of Lenin’s quote about the rope he would use to hang the capitalists with (as mentioned by Bill Bonner earlier). We all know the limousine socialists who are sitting in five star hotel lobbies slurping caviar and champagne, occasionally scanning their smart phone or tablet screens, while holding forth on the evils of the free market. Lenin referred to such people as “useful idiots”.

There are far more dangerous and committed enemies of civilization out there than the limousine socialists though (we regard enemies of the free market as enemies of civilization itself). Think for instance about the so-called “enviro-fascists” like Finnish “philosopher” Petti Linkola, who wants to cull the human race and put the remainder under the control of a fascistic government, complete with “reeducation camps” to put away any remaining dissenters. As we have occasionally mentioned, the environmental movement, which started out as a legitimate resistance movement against the pollution of air and water that had become overwhelming by the 1970s (something that would not happen in an unhampered market economy that strictly enforces property rights), has been heavily infiltrated by former supporters of Marxism who lost their sugar daddy when communist rule in Moscow expired. Not only does it provide them with an income, either forcibly extracted from taxpayers or obtained from naïve donors who fail to see through the agenda, it also gives them an ideal platform to agitate against capitalism and civilization. Their authoritarian roots frequently shine through, which should give everyone pause.

Many citizens in developed nations know that something is fundamentally wrong with today’s world, but as a result of the linguistic confusion discussed above, they unfortunately often tend to direct their ire against the wrong target. We can see this inter alia in the worrisome surge of support for etatiste fringe parties of the extreme left and extreme right in Europe (ranging from Syriza to Golden Dawn to Podemos to the Front National). Ironically, because central banks are nowadays erroneously associated with capitalism, they have also become a target of protests. The most recent example for this has just been provided in Europe, where the ECB has opened its new headquarters amid demonstrations that have turned violent.

There is very good reason to be miffed about the building as such. It will certainly not improve the results of the interventionist labors of the bureaucrats, but it has sure cost a big bundle of money, provided involuntarily by taxpayers. Originally the costs for the new ECB skyscraper were supposed not to exceed €500 million – which is an obscenely large amount already. In the end, the cost exploded to €1.3 billion, more than double the original estimate. The ECB is planning to print up €1 trillion in additional money until September 2016, which is going to do a lot more economic harm than the €800 billion cost overrun for its headquarters, but that doesn’t mean one has to be particularly happy about the latter.


frankfurt2_1Burning police cars in Frankfurt, where protests on occasion of the opening of the new ECB HQ have turned violent.

Photo credit: Kai Pfaffenbach / Reuters


People are quite right to protest against the central bank and its policies, but their motivation is misguided. What do supporters of socialism and enemies of the free market want? Mainly, they want to get things for free. The demonstrators in front of the ECB HQ have made no bones about wanting free stuff, as the following image reveals:


KaviarThe sign reads: “Caviar for Everybody”. The hammer and sickle flags waved in the background are an ironic counterpoint to this demand: wherever communism was established, caviar became the sole preserve of a tiny elite (under communism, the much bemoaned “1%” are usually replaced by the “0.001%”). Caviar is expensive and many people cannot afford it. However, they are free to buy it if they are so inclined; it is after all offered in shops. In the real world of communism, almost nothing was offered in shops, and in the end, one had to queue for hours merely to obtain a piece of rancid meat or moldy bread.

Photo credit: ITAR / TASS


In a way this is great fun, leaving aside the fact that the destruction of property accompanying the protests is quite deplorable. By not making sufficiently clear that they are in fact socialist central planning institutions, central banks have brought the ire of socialists and communists down on themselves. The irony is certainly rich.

The group that has organized the demonstrations is called “Blockupy” and is composed of more than 90 leftist groups supposedly “critical of capitalism”. They don’t seem to realize that by protesting against the ECB (which has become their main target) and the so-called “austerity policies” implemented in Europe (which have little to do with genuine austerity policy, as they consist mainly of trying to squeeze more blood from the dried-up turnip of the private sector, while leaving the growth of the State unchecked), they are not attacking “capitalism”, but are attacking statism and socialism. They also don’t seem to realize that the era when free stuff was obtainable in great quantities by robbing Peter to give to Paul is quickly approaching it definitive end.


war zone 1Turning into a war zone: the area surrounding the new ECB HQ.

Photo credit: Arne Dedert / EPA


war zone 2Masked demonstrators in Frankfurt on Wednesday morning. According to the organizers of the protests, the exercise is meant to “build up democracy and solidarity from below”.

 Photo credit: Arne Dedert / EPA


While it is ironic that a socialist institution is besieged by enemies of capitalism, the confusion about what capitalism actually is and the direction in which the anger of citizens tends to be channeled these days is highly deplorable. A lot of this has to do with the confusion about important issues that has been sown by the Orwellian misuse of language.

Economics is not amenable to explanation in brief soundbites, which is a difficulty supporters of the free market face when trying to clarify their stance (not to mention that the science of economics has been pressed into the service of the State, which creates the additional problem that one needs to spell out the difference between good and bad economics). Nevertheless, the effort needs to be made if we want to preserve civilization.



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2 Responses to “Giving Capitalism a Bad Name”

  • JohnnyZ:

    “By not making sufficiently clear that they are in fact socialist central planning institutions, central banks have brought the ire of socialists and communists down on themselves. The irony is certainly rich.”

    Well it is not exactly true. They are socialist planning institutions, but working only on behalf of the rich and well-connected. One can also call them fascist. And we know that communists and fascists are not fond of each other. We also know that the more you go to the far right and left in the political spectrum, the more likely it is that the two ends meet.

    • No6:

      I agree.

      The Fed is nominally a private organisation owned by the big banks, but is under government control (even though we all know the polys are bought and played for). This makes it a fascist organisation for sure.

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