Taking Offence and Denying Defence

The late Sir Roger Scruton had much to say about the difference between “giving offence” and “taking offence.”  In an interview with Douglas Murray for The Spectator about a half a year before his death, for example, he said:

 

Remember though, that there’s this great distinction between giving offence and taking offence and we’re living in a culture where people become experts in taking offence even when it hasn’t been given.  And that’s what is taught in gender studies. It teaches young women to take offence at every remark a man might make or even his being there, you know. It’s a wonderful theatrical thing to take offence but it doesn’t lead to any lasting relationships. (1)

 

The importance of this distinction has to do with more than just gender.  Every form of “identity politics” majors in taking offence.  Identity politics is informed and underlain by the contemporary “morality” that has supplanted traditional moralities, including both the older traditional morality informed by classical ethics and Christian moral theology and the more recent morality of classical liberalism, in the civilization formerly known as Christendom in the post-World War II era.  This is one of the key distinguishing feature between the contemporary “morality” and traditional moralities.  Traditional morality taught you to moderate your speech and behaviour so as to avoid giving offence.  Contemporary morality teaches you to take offence and to moderate your speech and behaviour so as to minimize the likelihood of others taking offence.

 

The distinction is quite simple.  Allow me to illustrate.  If I were to go up to you and say something to the effect of “You dirty rotten so-and-so, you are ugly and stupid, a bum and a loser, and the biggest jerk who ever lived.  Now listen to me you miserable punk, you dress like a clown and smell like a skunk, your mother is a whore and your father is a drunk” then I would be giving offence.  If, on the other hand, I were to say to you “I listened to your lecture on this-or-that historical event and I don’t like your take on what happened because I think it portrays such-and-such a group in a poor light, bolstering unfair stereotypes, and although I am not a member of that group per se, I am deeply offended by your micro-aggression and think you need to be cancelled” or some such blithering nonsense, I would be taking offence.

 

Ordinarily, when someone gives offence the offence is intentional, he is deliberately trying to hurt the feelings of the person to whom he is speaking.  To the person who takes offence, however, the intentions of the person from whom he takes offence are irrelevant. 

 

With regards to the importance of intent it is worth observing that the cultural shift from the traditional morality of avoiding giving offence to the contemporary morality of taking offence, occurred simultaneously with the rise of technocratic managers in both government and private business. (2) Traditionally, in the Westminster system, the laws by which we are governed are subject to King-in-Parliament acting through legislation.  While the form remains in Canada, in the post-World War II era, the Prime Minister and Cabinet have increasingly by-passed the constraints the traditional system placed on their ability to impose new rules on Canadians, by relying more-and-more on civil service agencies acting through regulation instead.  The counterpart to this in the private sector is the increased control of middle level managers operating through Human Resource departments.

 

The reason this is worth pointing out here is because the traditional Westminster system of legislating by King-in-Parliament was closely allied with the Common Law tradition which includes the principle with regards to criminal culpability that actus reus non facit reum nisi mens sit rea (a guilty act does not make guilty unless the mind is guilty), that is to say, there needs to be criminal intent for there to be criminal culpability.  HR departments, by contrast, seldom if ever regard intent as an essential component of any of the myriad of made-up offences in the rule books through which they micromanage their employees.  While the parallel is not perfect it is notable.

 

The other factor that distinguishes giving offence from taking offence is objectivity.  If you give offence to someone by, for example, calling him a horse’s patoot, the offence is objective because it is reasonable to assume that anyone called this would be offended by it.  When someone takes offence that has not been given, however, the offence is largely if not entirely, subjective.  In Biblical hermeneutics, we distinguish between exegesis and eisegesis.  In both of these words the basic verb means to guide or to lead.  Exegesis adds the prefix for “out” and means to bring out of the text the meaning that is already there in it.  This, of course, is the approved hermeneutical method.  The other one, eisegesis, substitutes the prefix for “in” and means to read into the text the meaning you wish to find there.   Taking offence that has not been given is similar to eisegesis in this regards.

 

In this, as in so many other areas, contemporary morality is a poor substitute for traditional morality.  Morality informs law and when an inferior morality replaces a superior morality the result will be the introduction and multiplication of bad laws. 

 

The news media recently learned that the Liberal government led by Prime Minister Blofeld has come to an agreement with the Lower Canadian separatists. (3)   The separatists agreed to support the Liberal Bill C-9, a proposed series of amendments to the section of the Criminal Code pertaining to “hate.”  Over the past couple of years, Canadians have become increasingly disturbed and disgusted at a particular type of “protest” that has been popping up all over our country and the wider civilization.  Ostensibly about the Israel-Palestine conflict in the Middle East, these protests openly embrace not merely the cause of the Palestinians but the organization Hamas, glorify its worst actions, and are filled with violent, revolutionary, rhetoric directed not only against Israel but against our country and Western Civilization as a whole.  Bill C-9 is the Liberals’ proposed “solution” to this problem.  It is typical of the “solutions” put forward by politicians, especially Liberals, to problems that are largely of their own creation, in that it creates new statutory offences and laws where the already existing laws are more than sufficient to handle the situation if they would only be followed and enforced.  Bill C-9 would make preventing access to a place of worship or community centre by means of intimidation – which already violates more than one law – into a distinct “hate” offence.  It would also criminalize the public display of certain symbols.  To gain the support of the separatists, the Liberals agreed to include a further amendment in the bill that would remove the existing provision in Section 319 of the Criminal Code that exempts speech that expresses what the speaker holds in “good faith” based on “a belief in a religious text” from criminal culpability.

 

To do this would be to make a bad law worse.  What I said about bill C-9’s making of new statutory offences in the previous paragraph applies to all laws about “hate speech.”  Anything prohibited by “hate speech” laws that warrants being prohibited by law was already prohibited by law before there were any “hate” laws.  The most defensible limitation on speech in “hate speech” legislation is the prohibition of incitement.  Incitement is the urging or encouraging of others to commit a criminal act.  If the other person(s) actually commit the criminal act, the person who did the inciting shares in their responsibility and therefore criminal culpability for the act.  It is reasonable, therefore, that criminal incitement be prohibited by law, at least if the incitement is acted on.  Criminal incitement, however, was already against the law before “hate speech” laws were thought up. All “hate speech” laws did was single out a specific type of incitement, as if telling people to commit a crime against person X was much worse than telling people to commit the same crime against person Y, if when telling them to commit the crime against person X, you give the person’s race, sex, religion, whatever, as part of the reason. 

 

Worse, they expanded the prohibited speech beyond actual incitement.  Actual incitement is explicit.  It involves someone saying, in so many words, that such-and-such a criminal act should be committed.  The concept of “hate speech”, however, treats as the equivalent of actual incitement, speech that portrays groups that supporters of “hate speech” laws think should be protected in such a negative light that someone might be inspired to act criminally against that group.   It is interesting, isn’t it, how the progressive supporters of these kind of laws think that in the case of groups to which they think the law should extend special protection, negative portrayals will inspire people to commit crimes who were not already inclined to do so, whereas in the case of groups they do not think should be specially protected by the law – Christians, rather than Jews or Muslims, whites rather than any other race, men rather than women, heterosexuals rather than homosexuals, actual men and women rather than transsexuals – the non-stop stream of negative rhetoric on the part of progressives themselves, usually far more full of expressions of hate in the literal sense of the word than that which they seek to ban, will have no such effect.  Basically, “hate speech” laws in effect protect groups that progressives feel are entitled to special protection from having their feelings hurt.  Here, the thinking of the contemporary morality with regards to taking offence finds its legal manifestation.

 

The old laws against actual incitement were justifiable limitations on freedom of speech because they were not there to prevent the circulation of ideas but rather to prevent the encouraging of criminal acts.  “Hate speech” laws are not similarly justifiable.  Narrowing the range of ideas that can be circulated is precisely what those who introduce such legislation have in mind.  Moreover, good laws are few in number, clear and easy to understand, protect people and their property from objective, quantifiable, harm and not from subjective hurt feelings and extend this protection to everyone in the realm and not just to certain groups that progressive political parties think need special protection.  “Hate speech” laws do not meet any of those qualifications but are rather the opposite.  They are the textbook example of bad laws.

 

After the news was leaked about the deal between the Grits and the Bloc, the apologists for removing the exemption came crawling out of the woodworks.  Unsurprisingly, foremost among them was Marc Miller, (4) whom Blofeld just named Minister of Canadian Identity and Culture, replacing Steven Guilbeault who resigned from Cabinet last weekend over Blofeld’s pipeline deal with Alberta.  It was difficult, prior to last weekend, to imagine that replacing eco-extremist Guilbeault could be anything but an improvement, but lo and behold, Blofeld managed the unthinkable.  Miller, a childhood friend of Captain Airhead, belongs to the former prime minister’s innermost circle.  If Blofeld really wants to move his party and the government he leads away from the blighted legacy of his predecessor, replacing one Trudeau-insider with another is not the way to go about it.  To the point at hand, however, Miller has been shooting his mouth off for months about how he considers certain Biblical texts “hateful” and wants to see the religious text exemption for “hate speech” eliminated. (5) 

 

In a meeting of the House of Commons’ Standing Committee on Justice and Human Rights, of which he was at the time the chair, just prior to All Hallows, Miller said “In Leviticus, Deuteronomy, Romans — there’s other passages — there’s clear hatred towards, for example, homosexuals.”  This is a nonsensical statement.  The Bible identifies many different acts as sins.  This is not ordinarily interpreted as “hatred”, clear or otherwise, towards those who commit such acts, the late Fred Phelps notwithstanding.  When the Ten Commandments say “thou shalt not commit adultery”, which act carried the penalty of death under the Mosaic Law, do we understand this to be hatred against adulterers? When the Ten Commandments say “thou shalt not bear false witness against thy neighbour”, do we interpret this to be hatred against perjurers?    If identifying someone’s behaviour as sinful is expressing “hatred” against that person, then the Bible could be interpreted as expressing hatred against all mankind when it says “For all have sinned and come short of the glory of God.”  That it would be absurd to interpret it this way, however, is generally understood because the text, St. Paul’s epistle to the Romans, goes immediately on to say “Being justified freely by his grace through the redemption that is in Christ Jesus.”  Far from an expression of hatred towards those who sin, the Scriptures are a message of God’s redeeming love to sinners.  The thought contained in the verse from St. Paul just quoted is also expressed in what is undoubtedly the best-known verse in the Bible “For God so loved the world that he gave his only-begotten Son that whosoever believeth in him should not perish but have everlasting life.’

 

When his words were immediately understood by several commentators, members of His Majesty’s Loyal Opposition, and provincial ministers as calling for these Scriptural texts, their being read as Scripture lessons in church, and preached on from the pulpit, to be criminalized, Mr. Miller took offence.  All he intended, he maintained, was to say that these texts should not be allowed as defences, in cases of public incitement.  This is how he is now defending the proposed removal of the religious exemption from Section 319.  Note, however, the sleight-of-hand that is at play.  He hopes that those whose suspicions he wishes to allay will understand the public incitement, to which he says sincere belief in these Scriptural texts should not be a defence, to mean someone telling other people that they should commit some kind of violent crime.  If, however, interpreting these Scriptural texts in accordance with traditional Christian orthodoxy as identifying same-sex sexual activity as sinful is itself regarded as an expression of hate, then removing the religious exemption from Section 319 would have precisely the effect that Miller’s opponents say it would have, of opening the door for criminal prosecutions of Christian ministers who faithfully preach on these portions of Scripture.

 

All one has to do is look at the track record of the Liberal Party since Miller’s lifelong intimate friend Captain Airhead took over as leader in 2013 to realize that Miller should not be trusted to mean merely that the religious defence should be removed from cases of actual, explicit, incitement to violent crime.  One of the first things that Captain Airhead did upon becoming Liberal leader was to ban anyone who held the orthodox Christian view of abortion from running for a seat in the House as a member of the Liberal party.  During Captain Airhead’s premiership, the Liberal government made a lot of noise about combatting Islamophobia and anti-Semitism at the same time that a wave of arson and other vandalism directed against Christian churches was underway.  Arguably, the Liberal government itself had a hand in inciting that wave.   One of Miller’s Liberal colleagues, John-Paul Danko described the factual reporting of the over 120 churches so attacked as a “conspiracy theory.”  Repeatedly, over the course of the Airhead premiership, the Liberal government promoted as “Canadian values” ideas that were contrary to orthodox Christian moral theology – and, as they discovered to their discomfort, contrary to the traditional morality of other religions as well – and sought through various measures to coerce Christian churches into changing their moral theology to align with progressive values.

 

So no, we should not believe Mr. Miller that the removal of the religious defence will not lead to a wave of litigation and even criminal charges against churches unwilling to change their orthodox moral theology or to muzzle themselves.

 

Instead of doing what the Liberals and the Bloc are planning on doing, I propose that the government do the right thing instead.  It should strike Section 319 from the Criminal Code in its entirety and abandon its plans on reintroducing legislation similar to the notorious Section 13 of the Canadian Human Rights Act, the bill repealing which had gone into effect the year after it received royal assent and the year before the Liberals resumed government.  It is the right thing to do because “hate speech” legislation is by its very nature, fundamentally bad law.  (6) 

 

Since morality informs law, we will also need to repeal the contemporary new morality that encourages people to take offence over every perceived slight to their identity, real or self-chosen, and reinstate the traditional morality that merely encourages people not to give offence.  This will be more difficult to do because it cannot be accomplished simply by passing or repealing a bill, but it is here at the cultural level rather than at the political and legislative, that the real battle must be waged.

 

 

 (1)   https://www.spectator.co.uk/article/ full-transcript-douglas-murray-in-conversation-with-roger-scruton/

(2)   Today, due to decades of speculative fiction and the current state of AI development, “technocratic”, probably suggests to most people the idea of machines taking over.  That is not how I am using it here.  I am referring to the fact that the professional managers – government bureaucrats and HR types in the corporate world – considered as a class, are distinguished by the use of language that is “technical” in the sense employed by Michael Oakeshott in the title essay of his Rationalism in Politics and Other Essays (London: Methuen, 1962) in which he distinguishes “technical” from “traditional” knowledge.

(3)   https://nationalpost.com/news/politics/liberals-bloc-hate-speech-laws-religious-exemptions

(4)   https://nationalpost.com/news/politics/religion-is-no-excuse-for-hate-carneys-newest-minister-says-of-proposed-removal-of-hate-speech-defence

(5)   https://www.lifesitenews.com/news/canadian-mp-reciting-hateful-bible-verses-about-homosexuality-in-public-should-be-illegal/

(6)    Earlier this week, paleo-libertarian editor Lew Rockwell published an article entitled “Why Banning Hate Speech is Evil.” I agree with the premise entirely although I would employ a different line of reasoning to argue for it.  Bans on “hate speech” are attempts to legislate what is in the human heart.  The civil government that attempts to do this, however, exceeds its own jurisdiction and intrudes into that which belongs to God alone.  This is the root of the evil the ancients called tyranny and that is often called totalitarianism in our own day. https://www.lewrockwell.com/ 2025/12/lew-rockwell/why-banning-hate-speech-is-evil/ 

 

May They Rest in Peace

The last couple of years have seen the passing of several individuals whose thought has been influential on my own. In May of last year, the Hungarian born historian, John Lukacs passed away from congestive heart failure. I have had cause over the last month to recall Lukacs’ definition of history as “the remembered past” more than once. The past itself, of course, is beyond the reach of the mad iconoclasts, but history, through which we learn from the past, is under siege. It was from Lukacs, especially his first volume of memoir Confessions of an Original Sinner (1990), rather than from Mencius Moldbug, that I learned to embrace the label “reactionary.” He was an Anglophile and a Roman Catholic, who had fled to the United States after his native country was taken over first by the Nazis and then by the Communists, preferring America’s liberal republicanism over either of the rival twentieth century totalitarianisms, but whose sympathies in many ways lay with the pre-modern, pre-liberal, order of civilization. He warned against the dangers of populism and nationalism, but was also the author of a pamphlet that argued strongly against the kind of immigration that populists and nationalists generally oppose. He was also wise enough to see that the Modern Age was over, without turning that into a weird pretext for separating language from reality.

The following month came the news that Justin Raimondo had passed away from lung cancer. Raimondo was a very interesting character. He was raised in the state of New York and lived most of his adult life in California, two rather left-leaning states. He was the founder and editor of Antiwar.com, a website opposed to American military interventionism and adventurism. Raised Roman Catholic, he lost his faith, and was openly homosexual. While that may sound like the resume of an ultra-progressive, he supported arch-conservative Pat Buchanan all three times Buchanan ran for the presidency of the United States, to the point of actually working for the campaign. The last time Buchanan ran it was as the Reform candidate in 2000. Raimondo had addressed that party’s national convention urging them to nominate Buchanan, obviously successfully. More recently, and right up until his death, Raimondo had been a strong supporter of Donald J. Trump. His politics were, in fact, right-libertarian, and more specifically the kind of right-libertarian that is called “paleo-libertarian.” Think Ron Paul, Lew Rockwell, and Hans-Herman Hoppe. Indeed, Raimondo was the author of the biography, An Enemy of the State (2000) of the father of paleo-libertarianism, Murry N. Rothbard. He was also the author of a history of the American “Old Right”, i.e., the American Right of the 1930s and 1940s that preceded William F. Buckley Jr., National Review, and the American Conservative movement. This Right began as opposition to the expansion of the American government in the Depression under FDR, and also on non-interventionist grounds opposed American entry into World War II prior to Pearl Harbour. Raimondo’s history was entitled Reclaiming the American Right: Reclaiming the Legacy of the Conservative Movement (1993). Buchanan wrote the foreword. I have read both of these books, as well as his The Terror Enigma: 9/11 and the Israeli Connection (2003), although it was the monthly column he wrote for Chronicles in the last few years of his life that I appreciated the most out of all his writings.

Earlier this year, in a single week we lost both Sir Roger Scruton and Christopher Tolkien. Tolkien, who was the youngest member of the 1930s-40s Oxford literary club, the Inklings, will be remembered not as a primary author, but as the editor who took the supplementary writings to The Hobbit and The Lord of the Rings that his father, J. R. R. Tolkien, had left behind, edited them for publication.

Sir Roger Scruton, on the other hand, has left behind a vast corpus of writing on pretty much every subject imaginable. While primarily a philosopher who specialized in aesthetics – the branch of philosophy that deals with art and beauty – he was a true polymath. I have written reviews of two of his books – The Meaning of Conservatism (1980) and How to Think Seriously About The Planet: The Case for an Environmental Conservatism (2012). The first was written at the beginning of the premiership of Margaret Thatcher and the presidency of Ronald Reagan to show that true conservatism was not an ideological argument for freedom and capitalism, per se, but a reflexive defence of the good things which make up a civilized order, which are “easily destroyed, but not easily created.” The second examined the conservative roots of environmentalism to make the case for the responsible preservation of the beauty of our surroundings and our natural resources while avoiding the pitfalls of extremism that the environmentalism movement is noted for falling into. Many other of his books, including but not limited to his memoir Gentle Regrets, his short introduction to Beauty, his books on the aesthetics of music, his history of the Anglican Church, his takedown of the thought of the leading intellectuals of the Postmodern and Critical Theory influenced New Left, and his defence of Western Civilization against those who would attack it from without and within, The West and the Rest, have been of tremendous benefit to me. Countless of his insights, such as into the difference between “giving offence” and “taking offence”, as well as his countering the left-wing charge of “xenophobia” with that of “oikophobia”, a term borrowed from the Lake Poet Robert Southey, are particularly relevant to this moment in time. So, for that matter is his personal experience. As related in Gentle Regrets and elsewhere in his writings, it was when he witnessed student radicals in the late 1960s behaving basically the way BLM and Antifa are acting today, with nothing but Marxist gibberish to back up their actions, that he realized his fundamental opposition to this sort of thing and became a conservative. Let us hope that many today will experience something similar, in reaction against the revolting, in both senses of the word, “woke.”

Alan Clark used to refer to Enoch Powell, the Tory statesman who delivered a famous speech warning against immigration and the consequences of the Race Relations Bill to Birmingham in 1968, as “the prophet.” The same appellation could be applied to French author and explorer Jean Raspail, who died earlier this month at the age of 94. He travelled the world in his early life, exploring, and doing what could have been preparatory field work for a career as an anthropologist. His earliest writings were travel memoirs, later he turned to writing novels, incorporating his experiences of the world while globetrotting into his fiction. It was these which won him critical acclaim. His religious and political views – he was a traditionalist Roman Catholic, a royalist who longed for the restoration of a legitimate, Catholic, French monarchy, and someone who deplored most if not all modern ideas, trends, and movements – also found their way into his books. The most well-known of his novels, however, which appeared in French in 1973 and in English translation by Norman Shapiro in 1975, was The Camp of the Saints.

The title alone, borrowed from the twentieth chapter of St. John’s Apocalypse, suggests the prophetic nature of the novel. The story opens on Easter morning on the French Riviera, where a retired academic from his home near the ocean, watches as masses of liberal lunatics gather on the beach to welcome the arrival of a vast mass of the poorest of Calcutta’s poor, arriving on ninety-nine ships. The novel then goes back a few months in time to explain how they got to that point. The Belgian government had closed down a charitable adoption program when it was swamped with too many applications, after which, a prophet of sorts, “the turd eater”, having been turned away from the Belgian consulate, addresses the multitude with a parable that curiously borrows the lines from Revelation from which the title of the novel is derived, although twisting their meaning to the effect that the thousand years allotted to the God of the Christians was at an end, and now He must surrender His kingdom to Allah, Buddah, and an assortment of Hindu deities. At his encouragement they board the hundred ships – one is lost along the way – and set sail for France. This provokes much discussion in France over what is to be done – but due to the extreme liberal cultural climate, everyone - the politicians, news media and celebrities, clerics, very interestingly headed by a Latin American pope – all give the answer that the migrants must be accepted and welcomed. The armada is dubbed the “Last Chance Armada” as in the “last chance for mankind” and this, along with “We are all from the Ganges now” and other such tripe are the only acceptable way of speaking about the situation. A handful of individuals are brave enough to dissent – we are slowly introduced to them throughout the novel – and these all gather at the aforementioned academic’s house to make one last stand for Western Civilization. When the French president, who knows full well what must be done and had been counting on the only remaining right-wing publisher in France to make the point for him, sends the military to the beach, he cannot find the courage to order them to fire, and leaves it up to their consciences, at which point they defect. France is swamped and shortly thereafter coloured immigrant communities rise up in major cities throughout what was once Western civilization, while Western borders fall as the Chinese swarm into Russia, the Palestinians overwhelm Israel, etc. The narrator, indicates that the bastion from which he is writing, Switzerland is about to fall, bringing white, Christian, Western Civilization to an end forever.

It is almost twenty years since I read this novel for the first time. I have read it many times since and, to compound the thought crime indictment against me, have given copies of it out to others. Over the course of the last decade, it has come more and more to resemble a prophetic description of our own times. Its author lived to see this happen. Let us hope and pray that the story does not end the way he wrote it.

GTN Tory Classics No. 6: Boom and Bust

The following essay, “Boom and Bust”, was the second in the seven-part series on economics I wrote in 2009. The year previously the American subprime mortgage crisis which had been brought on by the bursting of the real estate bubble had escalated into a much larger financial collapse. The American economy had begun to tank and it was dragging the global economy down with it. What caused this? Has it happened before? Is there a way out of this crisis? Can this sort of thing be prevented in the future?

These were the questions that were foremost in people’s minds at the time. In February of 2009, Regnery Publishing released a book by Dr. Thomas E. Woods Jr., a paleolibertarian (1) historian on the faculty of the Ludwig von Mises Institute, entitled Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. I had read this book about a month and a half before writing this essay. I thought – and still think – it was the most sensible thing I had read on the subject. I lent my copy out a number of times and bought another copy as a Christmas gift for a relative later that year.

This essay was written not as a review but as a recommendation of Woods book and of the Austrian School’s explanation of the business cycle. I do not agree with the Austrian School about everything, not being a philosophical liberal (2), but of all the free-market economic schools I find myself agreeing the Austrians most often.

(1) A paleolibertarian is someone who is culturally conservative and politically/economically a classical liberal or anarcho-capitalist.

(2) A philosophical liberal believes that human beings are first and fundamentally individuals and that all social institutions and groups are created by individuals for individuals and should operate on a voluntarily contractual basis. A philosophical conservative believes that society is organic, that the family comes before the individual, that the most important social relationships are permanent rather than voluntary and contractual, and that many if not most social institutions should be modeled after the family rather than the business deal.


Boom and Bust


By Gerry T. Neal
June 2, 2009

Once upon a time, in a land far away, some people discovered the secret to getting rich fast. Their houses, they discovered, had gone up in value since the day they bought them, so they sold them off at a profit, bought a new house, and started the process over again. The idea caught on and pretty soon people had forgotten that the purpose of houses was not to generate money but to provide homes for them and their families.

Not everyone was happy in this land, however. Some people were shut out of the action because they could not afford to buy a house. Furthermore they were not good candidates for bank loans – they had no collateral, worked low-paying jobs at best, and did not have enough for a down payment even if they were granted a mortgage. With the prices of real estate going up, their situation appeared hopeless.

But then someone got the idea that the ruler of their country ought to do something about this. Appointing himself the representative of the poor people he went to the ruler and complained. “Its not fair!” he said. “These people are being discriminated against because they are poor and because of the color of their skin. Everybody has the right to own their own house. You need to make sure these people get their houses – if you don’t I’ll throw a big stink and call you racist. Now what are you going to do about it?”

This threat terrified the ruler who promised to do something about it immediately. So he sat down and thought about what he could do. Then he called a press conference and announced that he was starting a program which would enable the poor to own their own homes. He ordered the banks to give mortgages to poor people from “disadvantaged minority groups” without demanding a down payment. To ensure the banks cooperation he asked his friends Fanny and Freddie to help him out.

Fanny and Freddie had an interesting business. They went to the banks and bought out their mortgages, i.e., they paid the banks the equivalent of the money they had loaned out in mortgages so that the mortgage payments would come to them instead of the banks. They then put all these mortgages together into large funds and sold off shares in these funds on the securities market.

Everybody lived happily ever after, right?

Well, not exactly. One day the prices of houses stopped going up. This not only threw a monkey wrench into people’s get rich schemes, it left many of them with mortgages that were worth more than their house. And so the defaults began. It got so bad that Fanny and Freddie went broke and asked their friend the ruler to help them out. The ruler decided that the best way to help them out was to buy their business from them and cover their losses with tax money.

Then several of Fanny and Freddie’s friends in the financial industry asked for the same consideration.

And after the ruler had bailed them out, everyone else came asking for a handout too.

At this point, the people were so fed up with way the ruler was mishandling things they got rid of him and chose a new leader. They chose a young, charismatic, new leader, who promised that he would give them “change”. And when that young man was secure in office he did exactly the same thing as the old ruler.

So what can we learn from this story?

It was the involvement of government that turned this situation into a major fiasco. It would seem then the obvious lesson to take from this is that government “solutions” to economic problems only make the situation worse.

This is exactly what economists of the Austrian School have been telling us for over a century now. These economists saw the not-so-fictional crisis described above coming in advance. They also saw the Great Depression coming. Perhaps its time we paid more attention to what they are saying.

The Austrian School of Economics began at the University of Vienna in the late 19th Century with economics professor Carl Menger. Its most famous representatives, however, would be 20th Century economists Ludwig von Mises and Friedrick August von Hayek. Mises is the author of, among other books, Human Action the most exhaustive treatise on Austrian economic theory available. Hayek is the Nobel Prize winning author of the best selling and much more readable The Road to Serfdom. In North America their theories have been promoted primarily by libertarians like the late Murray N. Rothbard and Lew Rockwell.

Austrian economists consider themselves to be liberals in the classical (19th Century) sense of the term. Their thinking displays both the strengths and the weaknesses of classical liberal thought. Foremost among those weaknesses is their tendency towards the belief that people matter only as individuals, that the interests of families, communities, and any other “groups” should be subservient to the interests of individuals. Foremost among their strengths is their belief in small, limited, government and maximum personal freedom.

The Austrians developed the best theoretical defense of the free market against state economic planning in all of its various forms that we have. This defense is based on the subjective theory of value, the idea that in a market situation the value of a good or service to both seller and buyer, is not something that can be objectively determined based on the intrinsic quality of the good or service but is based entirely on how much the seller and buyer value the good or service in relation to what they are willing to accept/give up in exchange for it.

But the Austrians’ uncanny ability to predict economic crises like the Great Depression and the current situation is due to their theory of the business cycle.

The conventional explanation of the business cycle, in which a boom period of economic expansion is followed by a bust period of economic contraction, is that it is an inevitable product of the free market.

The Austrians say otherwise. The business cycle, they say, is caused by banks, especially government chartered central banks. Banks lend money to investors and entrepreneurs out of the money people place in savings accounts. The interest rate on these loans is supposed to be an indication of how much people are saving as opposed to spending at a given time, giving investors/entrepreneurs an indication of what kind of ventures are likely to succeed. But when a bank starts lending out of its pay-on-demand reserves, what is known as fractional reserve banking takes place. This artificially lowers the interest rate giving the impression that people are saving more than they are, tricking investors into putting their money into projects appropriate for a period of savings. This leads to economic booms in the areas this money is being invested in – booms that must inevitably give way to busts.

Non-Austrian economists, especially Keynesians, scoff at this theory.

But none of them ever saw an economic disaster coming in advance.

For more on this subject I recommend Dr. Thomas E. Woods Jr.’s excellent book Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Regnery Publishing: Washington D.C., 2009). It is a small book, brief and written for the economic layman. It is must reading for anyone wishing to understand what is going on in the current economic crisis.