Misesian for Life

The welfare state is immoral…inflation is theft…and Europe is a prescription for chaos and bureaucracy. If ever we needed to study the work of Hans Sennholz, itundefineds now.

Hans F. Sennholz is one of a handful of economists who dared defend free markets and sound money during the dark years before the Misesian revival, and did so with eloquence, precision, and brilliance. From his post at Grove City College, and his lectures around the world, he has produced untold numbers of students who look to him as the formative influence in their lives. He has been a leading public voice for freedom in times when such voices have been exceedingly rare.

This much is well known about him. But there are other aspects to his life and career you may not know. Sennholz was the first student in the United States to write a dissertation and receive a PhD under the guidance of Ludwig von Mises. Mises had only recently completed "Human Action". Imagine how having such an outstanding student, and a native German speaker no less, must have affected Mises’s life…how it must have encouraged him to know that his work could continue through outstanding thinkers such as this.

When Mises arrived in New York, determined to make a new life for himself after having first fled Austria and then sensing the need to leave Geneva too, he had no academic position waiting for him. He had no students and no prospects for students. But then came Sennholz. Here was living proof that ideas know no national boundaries, that even in the darkest hour there was hope for a new generation of economic scientists who cherished freedom, and were not fooled by the promise of government planning.

Hans Sennholz: A New Face

And think of the crucial time in which he entered the Austrian picture. Mises was by now carrying the school by himself. Most of his students had moved on to other things, whether Keynesian economics or social theory. For the Austrian School to survive in a profession now fully dominated by interventionists, it needed economists. The School desperately needed the new life that only new faces, names, books, and ideas provide.

When Sennholz began studying with Mises, it would still be another twelve years before Rothbard’s "Man, Economy, and State" would appear, and nearly a quarter century before Kirzner’s "Competition and Entrepreneurship" would be published. Sennholz provided exactly what was needed: that crucial bridge from the prewar School to the postwar School in America, where the Austrian School would now make its home.

His dissertation became the book "How Can Europe Survive," published in 1955. It remains the best and most complete critique of European political union ever written. Sennholz demonstrated – some fifty years before others even cared – that political union under the interventionist-welfare state was only a prescription for chaos and bureaucratic rule. True union, he demonstrated, comes from free trade and decentralized states that do not attempt to plan their economies.

Europe today has a burgeoning movement of intellectuals who realize this same thing, and are working to curb the power of Brussels even as they attempt to preserve the free-trade zone. But we must remember that Sennholz anticipated this critique and agenda by nearly five decades. By taking a detailed look at all the programs for unification that were then being batted around, he saw precisely what was ahead for Europe: not prosperity and peace, but stagnation and conflict. So it is and will continue to be, so long as Sennholz’s final chapters – which present a blueprint for authentic unity – are not followed.

Sennholz followed up this treatise, which included an account of the Great Depression and the onset of war, with a long string of trenchant writings on monetary theory and history, on employment, on fiscal policy, and even on the moral basis of freedom. Truly he followed in Mises’s footsteps, and, like Mises, he refused to let the ideological hostility of his age and ours deter him from speaking truth to power, using every means at his disposal.

Hans Sennholz: Carrying the Torch

Let me provide one example of just how he carries the torch. During the 1980s, much like today, there were two camps on fiscal policy: the left, which wanted more spending and no tax cuts, and the supply-siders who wanted tax cuts plus spending increases. Sennholz became the voice for sanity: in Misesian terms, he called for tax cuts to be matched by spending cuts.

In doing so, he dismissed the magic fiscal dust called "dynamic scoring" as well as the socialist demand for bigger government, while warning against the dangers of inflationary finance. Here was a hero of fiscal conservatism! During the early eighties, too, he wrote an extended Austrian critique of supply side that anticipated all future trends of the decade.

At Margit von Mises’s request, Sennholz was the translator of Mises’s "Notes and Recollections," which is the closest thing we have to an autobiography. It has been this book, above all else, that has shaped the way the generations that never had the chance to meet Mises have come to know the way an economist thinks about science and life amidst personal tragedy. Sennholz and his wife Mary produced the first "Mises Festschrift," presented to Mises on February 20, 1956, long before Mises’s fame in the United States would grow. Sennholz alone took the initiative to do Mises this honor.

Sennholz acquired Mises’s paper for Grove City College, where they have been guarded as the treasures they are. He made Grove City stand out among American colleges as one of the few places where economic sense was taught during the heyday of Keynesian orthodoxy.

Sennholz did not only work to promote the Misesian school. He has been a great benefactor to all economists and scholars by being the translator and promoter of the work of Mises’s teacher, Eugen von Boehm-Bawerk. This was an act of great intellectual piety, since the market was not exactly clamoring for hundred-year old books on interest- rate theory. And he did it all on the urging of Mises.

Hans Sennholz: Timing the Business Cycle

And though an outstanding theoretician, Sennholz placed a strong emphasis on the application of Austrian theory to the timing of the business cycle, and to explaining the current state of affairs. This is, by itself, highly unusual in the economics profession. If you know anything about academic economists, you know that they are the last people you want to ask about the state of the economy. But Sennholz made it his job to explain the world around him, a trait which drew many to his thought.

The Mises Institute, for which he serves as an adjunct scholar, is grateful to Professor Sennholz for his early support of our work. He wrote a wonderful paper on Carl Menger, later published in a volume on the gold standard, in which he showed that Menger was not just a theorist, but an activist in the cause of sound money. That paper changed the way we viewed Menger. We came to see him more clearly for what he was: an old-world liberal concerned about the fate of his country in difficult times – much like Sennholz himself.

Finally, I must add that Sennholz has never been shy about insisting on the centrality of ethics in the study of economics. He has decried the welfare state as confiscatory and immoral. He has called inflation a form of theft. He has identified government intervention as coercion contrary to the true spirit of cooperation. He did this at a time when saying such things was taboo in the profession. Here again, he was keeping alive the spirit of Mises, and the spirit of truth.

Nobody can ever gauge the full impact of a great intellectual in the development of culture. His influence spreads like waves in a lake; by the time the waves hit the shore, few are in a position to remember the source. But this much I’m sure of. We are in Hans Sennholz’s debt far more than we know.


Lew Rockwell,
for The Daily Reckoning
July 28, 2004

Editorundefineds Note: Llewellyn H. Rockwell, Jr. is the founder and president of the Mises Institute in Auburn, Alabama, and vice president of the Center for Libertarian Studies in Burlingame, California. A student and colleague of Murray N. Rothbard’s, Mr Rockwell is the editor of six books, including, most recently, "The Irrepressible Rothbard" and "Speaking of Liberty". He is also the editor of:


You can e-mail him atmailtrockwell@mises.org

All its frauds, excesses and self-aggrandizing delusions are on display at the Democratic National Convention in Boston. Speaker after speaker rises to the immense, illuminated pulpit and hammers away as if he were desperately trying to break down a barroom door on a Sunday. Meanwhile, a crowd of onlookers – fat and foolish – clap and cheer, and rise to its feet when the lock gives way.

Never did a politician draw breath except to exhale a lie; and thousands of them were breathing heavily last night. The great circus carried on. Clown after clown rose to the platform: "Public service…" "Service to the nation…" "Serving this great country…" – every one of them claimed to be devoting his life to the sole purpose of helping his neighbors. Thus did every speech begin with a lie and end with a call to mischief. Vote for Kerry, listeners were told, and he will restore the integrity of the federal government…and also pick rich peoples’ pockets on their behalf.

But, in the interests of fairness and balance, we remind readers that in less than 2 years, the incumbent president, George Bush, shuffled out so much loot, he turned a modest surplus into an extravagant deficit…a turnaround of $9 trillion dollars! He doubled the rate of government growth – so that Federal expenditures are getting dealt out 4 times faster than the GDP growth rate. And he’s managed to issue so much new debt that the Congressional Budget office projects a national debt of $14 trillion in 10 years…with interest alone of nearly $1 trillion annually.

And he’s done all this while lowering taxes. Here again, we admire the blinding, polished gleam of it. For now the burden of supporting the U.S. government’s projects falls neither on the rich nor on the poor…but on the honest simpletons all over the world who were attracted by the shine of the world’s most dynamic economy…and naive enough to believe its promises.

Our head spins.

More on the nation’s ugly fraudulent elections below…

In the meantime, the news from Tom Dyson…


Tom Dyson, from London’s Golden Balls building…

– We found ourselves on the Piccadilly line of the London Underground yesterday evening, when we noticed an unusual exchange between two passengers.

– A man, whom we came to assume was from India, was eating poppodums from a paper bag. When he had finished his snack, he screwed the paper bag into a ball, and tried to surreptitiously discard it on the little shelf that runs behind the seats on the ailing, decrepit Tube.

– There was a lady sitting next to him. She was reading furiously, with a face like a bag of wrenches and a scowling expression. She could have been a headmistress. Alerted both by the man’s hand – which was now just behind her left ear – and the scratching sound of his paper ball, the old battleaxe turned to him and inquired loudly: "Why don’t you take your rubbish home with you?"

– The woman glared at him with a look of such ferocity, even the Great Mogambo Guru would have wilted. But not only that, the man was now the focus of an entire Tube-carriage- load of snickering rush-hour commuters. "Uh, I was going to," replied the man, squirming in his seat. He quickly grabbed the offending item.

– The confrontation quickly evaporated, as the woman returned to her book and the commuters to their newspapers. Your editor, however, dwelled on the subject. We are interested in trash, you see, dear reader, because garbage is the very definition of a contrarian asset. Everyone thinks it worthless and totally undesirable. But in the markets, that kind of negative sentiment usually precedes a rally.

– Not that we’re about to go out and begin hoarding London’s refuse…but we suspect rubbish may be more valuable than people think.

– Gold is another asset thatundefineds more valuable than most people think…and, unlike trash, we really do like to hoard it. This morning, gold is even better value. Yesterday, the strange yellow metal fell almost $3 at the Comex, to end the session at $387. Gold has now lost over $21 since its recent peak of $408.55 reached on July 12.

– Why has gold wobbled? We think it may have something to do with the dollar, which, yesterday, surged to a new multi-week high, gaining over 1% against the pound and 0.7% against the euro. By close of trading, a pound was worth $1.82, and a euro bought $1.20. The press attributed the dollar’s leap to a strong reading on the University of Michigan’s consumer sentiment index…

– U.S. consumer confidence shot up in July – with Americans convinced they face a bright future of endlessly secure jobs, accompanied by a self-sustaining recovery. In other words, they swallowed Sir Alan of Greenspan’s assertion that poor economic data in June was nothing but a glitch in the tape.

– "This proves that Greenspan was right and that the soft spot in the June data was temporary," said ECU’s Neil Mackinnon. "It’s looking very positive for the dollar to establish the beginnings of a new primary uptrend," he said.

– Consumer confidence proves the economic outlook is sound? We’re not convinced. The dollar may continue to rally for a while yet, certainly. But here at the Daily Reckoning, we doubt the staying power of this recovery.

– America’s massive tax cuts came to an end only last month. The result? Rosy forecasts for the economy will slowly start to peter out as the impact of these cuts diminish. Moreover, higher bond yields are already reducing mortgage refinancing – a key indicator of consumption. Add that to a 60% slump in mortgage applications in the year to mid-June, and it looks like the Fed has a problem. When investors notice – well, stocks may get dumped.

– The lumps couldnundefinedt see the garbage piled up on Wall Street yesterday though. The Dow fought its way back above 10,000, adding 123 points and closing at 10,085. The S&P added 1%, or 11 points, to reach 1,095 by the bell. The Nasdaq added 1.6% to 1,869.

– But while stock investors were making hay, Treasury holders got trashed. The Ten-year note gained 13 basis points, to yield 4.61%, their biggest drop since May 7. "Ten-year yields have risen almost a quarter-point in the past week, after Greenspan said in congressional testimony last week that an economic slowdown in June should prove short-lived," comments Bloomberg.

– As for the litterbug on the Tube here in London, well, as soon as the lady alighted from the train at Green Park, he stuffed that paper bag down between the seat cushions.

– "Excuse me, sir…!"


Bill Bonner, back in Baltimore…

*** It is an unflattering moment for America.

A national election is unbecoming at any time. But this year seems to bring out the worst in the American character. Americans are as susceptible to fraud and illusion as any people, but more ready to give into self- adulation than most. A long run of very good luck has made fools of them. They fly the flag from every lamppost and TV antenna and congratulate each other on what a fine country they’ve put together. But it is a Republic of happy morons – going deeper and deeper into debt with no clue how ever to get out; meanwhile, they sell houses to one another and believe they are getting rich. It is a Democracy of dolts, ready to believe that the world’s most powerful nation is in a life or death struggle against a handful of Muslim fanatics; every speaker in Boston reminds us of what a patriotic soldier John Kerry was and how he will make such a good leader in the great battle ahead.

When times are really good, government is an inevitable but amusing flim-flam. In small, annoying ways, government bosses around its citizens, pretending to do so for their own good – that is, as a ‘public service.’ When times are bad, government murders people – either its own citizens or those of some other government – again, for the good of those who are left living.

"Government," said George Washington, "is not reason. It is not eloquence. It is force."

The Democrat’s national convention might just as well be a huge group of Kiwanis members…or a Moose get-together. Attendees wear funny hats and have some vague intention of doing good for their fellow men…while also having a good time for themselves. What sets this reunion in Boston apart is that it is part of the process of government, which means that ultimately, should they prevail in the November elections, whatever these clowns want could become the law of the land.

The Daily Reckoning