Honore de Balzac observed in seemingly acidic fashion that “Behind every great fortune there is a crime.” Eventually FDR latched onto Balzac’s nonsensical notion, and now it seems to be gaining currency among neo-Austrians.
Austrian School economist Peter St. Onge is disappointly one of those. In a Twitter post, St. Onge asserted that “Federal spending, open borders, and Jerome’s money printers have built a two-speed economy — luxury at the top, misery at the bottom.” Yes, the rich getting rich on the misery of others. Where have we heard that before?
It’s easier to answer the above question by pointing out from whom such disappointing assertions formerly didn’t come from: Austrian School types. Ludwig von Mises in particular didn’t see things that way. As he noted in the introduction to his classic book, Liberalism, “a social order organized on genuinely liberal principles is so constituted as to leave the entrepreneurs and capitalists only one way to wealth, viz, by better providing their fellow men with what they themselves think they need.”
To which St. Onge would perhaps reply that presently there’s no “social order organized on genuinely liberal principles.” Which is a bit nonsensical. Evidence supporting this claim can be found in St. Onge’s own lament. Indeed, while federal spending is a horrid, economy-sapping tax, governments can only spend insofar as they have access to real production taking place in the private sector by entrepreneurs and capitalists. In short, our federal government in the U.S. is obnoxiously large and can run up lots of debt precisely because it’s backed by the most productive people on earth.
Pivoting to the “open borders” disdained by St. Onge, Mises observed in Liberalism that in a liberal world, “the whole of the earth’s surface forms a single economic territory.” One guesses St. Onge has historically agreed with Mises. Whether he did or does not, it’s useful to point out that human migration is as pure a market signal as there is. That such intensely poor people from South and Central America are risking it all to get to the United States is a flashing sign of the opposite of misery stateside.
What of St. Onge’s assertion that “Jerome’s money printers” are operating nonstop in the production of dollars. Here’s where the Austrian economist underscores his implied belief that markets aren’t just stupid, but ferociously so. Put another way, if the Fed were wildly printing money there would be very little government spending simply because few would accept dollars in return for their production.
After that, just consider federal debt. U.S. Treasuries of varying duration are easily the most owned assets in the world. Without defending federal spending or debt for even a second, securities that pay out dollars wouldn’t be so globally owned at such low interest rates if there were any validity at all to St. Onge’s lament about “Jerome’s money printers.”
Still, there’s the question of the “two-speed economy.” No such thing. Mises knew why. The path to wealth is a consequence of entrepreneurs and capitalists “providing their fellow men with what they themselves think they need.” Which is what they’re doing. They’re getting rich by democratizing access to former luxuries. Or in the words of Mises, “Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone.”
While St. Onge laments Ferrari shares doubling, he ignores that Ferrari’s fortunes are a beautiful consequence of newly created wealth borne of the enterprising turning yesterday’s luxuries into common goods. Nowadays rich and poor communicate with the world for next to nothing on devices that fit in their pockets, and that can only reasonably be described as supercomputers. Those same people more often than not own multiple automobiles with features that the richest of the rich long ago could never have imagined, all while dressed in clothes formerly only owned by those with access to tailors.
So, while no country economy will ever achieve pure “liberal social order” status, the desire of the world’s poorest to bring their talents to the United States is a certain sign that far from a miserable place, the U.S. booms. And it booms precisely because the rich are getting rich for the same reason they nearly always do: turning luxuries into necessities.
Keep this in mind with St. Onge’s comment about Ferrari shares top of mind. Mises once observed that “The conception of luxury is historical.” He was so right. That he was means the days of Ferrari-like performance in cars that cost a fraction of what Ferrari’s fetch can’t be too far off.