Austrian economics is about prosperity and freedom | Jerm Warfare

0:30Austrian economics is consistent and has been consistent since its inception. That's an interesting word, consistent. I'd say, I'm not sure I would use that word but I don't think it's inaccurate. I would say that Austrian economics has tended to be stick closer to reality than most of the other schools out there. I guess that corresponds in a way to consistency. But I think it's important for when trying to understand the whole situation. It's important to grasp the fact that economists as representatives of the academic world that tasks with explaining to people how the world works.

1:30They have to be careful what they say because most of them are paid by schools. In many cases, it goes back to government money. If you say things that the government doesn't like, you may risk losing your livelihood. In fact, if you look at where economists get their money, particularly 10, 50 years ago, most economists in the West are all in the payroll of direct on the payroll governments, for example, the payroll of either government fund institutions or central banks. So they were not free to speak freely. I think even the Austrian school, which has been more daring than the rest, is still also bound by those restrictions, by those limitations.

2:37I just, on average, they have been less bound, perhaps, because they were already very marginalized for a long time. And as a result, they really didn't have much to lose. They were pretty much excluded from the mainstream of academia for many decades. So historically, they were much more mainstream. And the origins of the Austrians was probably many listeners can guess, goes back to Austria. So in Austria, it was sort of the leading school of economics in the 1900s and the late 1900s. And many of the central concepts that are very mainstream economics today were invented by Kantwerk, first conceived of by the Austrian school. So, for example, time preference, that's probably not something that necessarily all this would understand, but it's basically the idea that, how much I am willing to, how much I'm willing to put off in the future instead of continuing it today.

3:53For example, children have very, very high time preference. They want to have things now that we can have twice as much if I get, if you wait a year, well, that's not going to fly with most kids. But as they get older, then their time preference tends to drop there. They're able to delay gratification. And that's a very central concept in economics. That actually came from the Austrian school. Also, concepts like marginal utility might bring a belt to some of the studies in economics, also as a concept that comes from the Austrian school. So a lot of those things became part of what is now mainstream economics without people realizing it came from the Austrian school. But the Austrian school kind of went underground in, I guess, the 40s or 50s when, let's say, the socialist type of thinking became very dominant in not only in the east, but also in the west. The idea that governments should interfere in markets, that governments should direct things, became very dominant, and that kind of led to Austria.

5:06They led the Austrian schools to be very much marginalized. So much so that by the 1970s and 80s, it was almost completely forgotten. And in fact, if you take my own example, I studied economics in, on the board of Austria, in Germany, in Passau, which is a little city on the board of Austria. One of the leading early thinkers in the national school is, was a man named Eugen von Böhmbarberg, and he was on the Austrian money. He was on the Austrian one-hundred-shilling note. And so I spent a lot of time in Austria and I saw him every day, whenever I looked at those notes, but I had no idea that was he was actually one of the early thinkers that in the Austrian school. And I studied economics, I don't think about it. I didn't hear the word Austrian economics until long after I graduated, which is of course absurd.

6:06Given the fact that I went to a study economics, I don't know what, three kilometers from Vienna, where it comes from. But it just goes to show you how marginalized there was. So I got lost. What was your question again? Remind me. Well, no, I mean, you're actually kind of segueing into what I want to know, and that is what is Austrian economics. So if you, in a general setting, say, Austrian economics, people don't really know what you mean. But you've kind of alluded to the fact that it's based on sort of the basic axiom that we do things with a purpose. We achieve a certain goal. And because we want to do that, we don't, I'm sorry. That's kind of that's the central axiom, yes. How do people go about doing that? Yes. The reality what actually goes on.

7:06And I guess one way of defining the one of the key concepts is the difference between what we call economic and political. And economic and political means to obtain goals. So economic means is defined as doing obtaining benefit through voluntary interaction, voluntary exchange. Through producing things and political, political means to put it cruelly, you could say it was obtaining goods and benefits through alternative means. For example, dealing them. That might be one way. We could also call that taxation, for example. And if I get paid by the government with government grants me some privilege, then I can gain through those so-called political means.

8:07And of course, that is considered sensitive content. So it's not something that is talked about much in universities, for example, or in the media, for understandable reasons. And certainly when I went to school, there was never any hint that we would never told anything about these political means and economic means, for example, for understandable reasons. But if you really look at it, then you see that much of the wealth in society is in fact generated through these political means and not through economic means. And it's in fact, if you look at the recent history of the world in the last 50 years since. To put it exactly in 1971, when the United States went off the gold standard. And the rest of the world been tied to the dollar essentially went off the gold standard with the United States and everyone started printing money.

9:13Fast and fast and fast. And money printing. And that's one of the, I guess, key sensitive insights that the Austin School has continued to. Teach is that that money printing is in a sense, in essence, also kind of theft. You're robbing their entire society through this money printing. And it's going into the pockets of a small group. And once you see that, you realize that that is at the heart of so many of the problems we have in society. And you can say, well, all these good reasons for it. Well, okay, we need the money to put the money to pay welfare or whatever subsidized industry. All these things. But the net result is that you have people like. Often cited Elon Musk. Everyone's favorite. Everyone's favorite example is, oh, look, Elon Musk. He's worth a trillion dollars. And that's so unfair. Well, I don't, I personally don't think that he's unfair that he has worth a trillion dollars.

10:15I think he is his own accomplishment. And if there weren't all this money printing going on in the background, it would never happen. There's no way he would be worth one trillion dollars if all this money printing were going on in the background. And then the answer that's given by the people that don't grasp the theft that's going on here in the background is to say, oh, well, we, let's just tax. Tax the rich, right? Instead of fixing the root of the problem, which is, which is the money printing. And in taxing, the rich has never worked because the rich are the people that are the best situated to avoid taxation. So we ended up getting taxed the middle class. But this is once again the difference in the reality on the ground and what we're told, right? We're told, oh, we want to tax the rich because it's. There's this discovery of rich and poor and we need the money for those very things. So let's take the rich and it sounds nice, but that's not what actually went on in reality. The rich are not the ones that are paying. And once again, you're trying to fix a problem that was created by money printing.

11:17As long as you don't fix the source of the problem, you're never going to get anywhere. And the other thing, of course, that would happen is if there weren't all this money printing, we wouldn't have all these wars going on. But either because all the money printing is used to finance the wars. Right? Sorry. But yeah, but to get back to the issue of what economics can do for the world and for each individual person. It gives us the framework to understand what's going on. And that's really, I think the most valuable thing about off to technology is it gives its adherence to those who who are studying it's. It's lessons a let's say toolkit for better understanding the world. And, of course, other other branch of economics to the certain extent as well. But because they are inherently less honest due to the fact that they're most of them are bound into the mainstream. It's much harder for them to do that because they're hiding this big problem out there that's causing all these issues.

12:21And that's the money printing. And of course, that's the only problem. But it's in my opinion, the major problem, the number one problem that's causing all these issues. And because of that, if you'd lack that key insight, I'd say it's very hard to figure out what's going on or how to make things better. But now, Scott, you and I both know that Elon isn't a trillion advice on making. Well, okay. What do you want to allow challenge? What do you mean by that? It's probably propped up, but I guess that goes into other discussions. Sure, no, but I mean, but yeah, I mean, he learned how to play the game. Yes. And then he's certain, but he's certainly a very talented person. Yeah. And, you know, he, I don't, I don't think he cheated necessarily within the rules of the game, but the problem is the game is rigged. Right.

13:21Exactly. But, but that's not his fault. He just playing, he just did a good job of playing, playing the game, right? Yeah. It's really fault him for I think they're a little bit off track. It's not he didn't come up with this system, you know, he just played it, right? And sorry. Scott, if you say that the one of the major problems is the money printing, how do you get around that? Well, you can't really trade in pieces of gold and silver. It's just too, it's just too inconvenient. Oh, well, sure. Okay. Well, but that's you're talking about technicality. Sure. We can, we can trade in digital tokens of some form or another. But the problem is that governments have advocated the right for themselves to print and the numbers of these tokens. Uh, and that is, uh, that needs to always into inflation. And it means, but it means that they can, uh, finance things. Otherwise, we're not able to find its life.

14:21Wars, for example, um, that they could not finance if they didn't have that ability. But you have this ever growing gap between rich and poor, or for the richer and the poorer. In pretty much all of the industrialized world. And including China as well. And the reason you have that is because of what's called the pretty word for it is financialization. Right. And that, but what is financialization really just means is more and more hot money floating around pursuing the ever smaller amounts of goods so people. Uh, the, the upper five percent or whatever they're inculid more and more of these of this. Error larger amounts of this, this hot money. Whereas the, the bottom 50% have next to nothing. Uh, and once again, this will all, this would not exist without all that hot money being created.

15:28I've heard some people make the argument that, uh, pinning, pinning the, the printed money to say gold. Like what the gold standard was. Um, doesn't make any difference. Do you think it does? What do you, what does make a difference? Uh, the gold standard, for example. Well, if you get any standard, uh, that, that money, that any hard standard that money were, were tied to be a Bitcoin or goal or silver with a limited, I mean, gold is produced and silver is produced, but in limited quantities. Uh, so yes, that would definitely make a huge difference because they couldn't finance the wars. I'm a, I'd say that's, that's the biggest difference, but there are lots of other things that would be forced to find an equilibrium. And that's, I guess that's particularly if you look, and this is a top work, maybe we'll get to later is that the whole act, this huge economic, this equilibrium in the world right now. Uh, but that equilibrium could not be sustained without this endless printing of various forms of digital tokens.

16:36They call them dollars or yen or euros or whatever. And they're all doing it, right? I mean, it's not, it's, it's, it's in this case, people are about the, you know, the conflict between China and the West or whatever. Or Russia, but they're all doing the same thing, right? Yeah. They're all dependent on the same system, but the none, none of them want to give the system up. We understand, like, of course. Uh, and they're all, and it really, this, this, this wild track wrong right now got started in 2008, even though. You could, the argument started in 1971, but it really got started with the venues in 2008 when all the major central banks of the world got together and it's how all of us, how we can go over this, this crisis, we're going to print a normal amount of money. And that way, if they all print together, then it will be, it will be too obvious to the, to the population because they're, their exchange rates between each other won't change that much because they're all printing a clip of about roughly 10 to 12% for year. It varies from group to group area.

17:37There is the eurozone, China, US, but let's say roughly there are most of around 10% a year, right? These days China is about 15%. So it's getting worse and worse, but, but it's the same thing that's going on everywhere. And none of them want to give it up. But the disequilibrium, the imbalances are getting larger and larger and larger at some point. Something's got to give here. So, I mean, if your currency is pegged to something like gold, right, which is stable because it's literally being dug out the ground and you can, you can weigh it and account. Well, you can dig up a certain amount every year, but it's limited, right? And you can't, if the government wants to, if some government wants to go to war and let's say you're on, well, how they're going to pay, how they're going to pay those bills, right? Well, they need dig faster, start digging. Of course, of course, now it happens. But what happens now is that it's now regulated by policy so they can just adjust the policy.

18:39No, they just tell their central bank to turn the switch and print up some more dollars. But they could, if it were pinned to gold or to Bitcoin or they couldn't do that. But of course, that's not going to happen. They're not going to pin it to gold, not going to pin it to Bitcoin. They're going to keep those as reserve currencies so they can deviate their paper currencies against, which is what's going on right now. Which is also, which is also why they do so in South Africa, we do something called inflation targeting. No, yeah, I don't know, I don't know the streets, I don't know, tell me. Well, what they do is they adjust inflation first and then everything follows that. Well, yeah, it sounds like what they had in Brazil for a long time. It's crawling paid, which was a disaster from what I know. Yeah, you're essentially, I mean, and you're also, I mean, there's so many examples. But let's just start with who pays, who comes, who has the, what's the word?

19:41How do you say it in English? The short end of the stick. Who ends up losing? And this is one thing that the retirees, they lose out most of them, because most of them are, say, are holding their savings in some sort of form that's not being adjusted for inflation. Or maybe they're, and particularly until a couple of years ago, they had the zero interest rate policy. They were getting, you know, 1%, 0% or 1% or nothing on their savings. And meanwhile, the money supply was being blown up by 10% every year. So they are losing 10%. So large numbers of retirees all across the West have all ended up in poverty, because their savings are worth anything. I mean, it's pretty evil, right? But it's the inevitable was all because the only way to protect yourself against the inflation is to essentially play the asset markets. And you can do it, but it takes effort and time and skill.

20:43And most people don't have, they don't have all those. And so they end up losing out. It's a very unfair setup. I mean, it's nice for the people who want to do it. I know I want to do it. Nice for me. But not nice for the most of the world. Another interesting Austrian economics characteristic is its opposition to artificially low interest rates, if I'm correct. South Africa's interest rate at the moment, I think is around 9 or 10, 11% somewhere there. I think the US, it's pretty much close to zero, same as Canada. No, no, no, the US now, they've decreased the bits now, what, three or four percent? But those are still artificially low. Sure, well, it's artificially, we should define that what artificially means there is it's less than the growth of the money supply. And so when they, if you're like here in China right now, they're growing the money supply about 15% a year.

21:44And we have an interest rates of, I don't know, two or three percent. So, so you see that those, those, those interest rates are whoever is borrowing money at those rates, including us. We're also, we're also, we've also got a nice big batter. We got so big fat lunch from the banks recently. And we're paying how much we paying? Three percent, two and a half. Something like that. Wait. It's really. Why is it bad though? Why is it bad? Well, because only certain members of society get that you, most people don't get that. Or they get only a very small amounts. If you're Amazon, for example, you can borrow unlimited amounts of money at the official interest rate. And if the, if in, if the real inflation rate is 10%, essentially you're getting a subsidy. Because if you do, if you only, if you only break even essentially and you grow with the money supply.

22:45Then you'll, you'll get 10% and you're only paying five. So you're getting five percent. And you're getting it off of the back of the rest of society. It's not, it's not evenly, it's not evenly distributed. Who gets the, who gets to benefit from those interest rates. I mean, it sounds nice. But in reality, it just contributes to making the gap between the, the rich and the poor ever larger. It contributes to impoverishing the retirees. It impoverishes everybody who has savings unless they're able to play this game. With a good counter example out there right now, and that is Russia. So Russia is running a substantial deficit. Because of the war, they have to finance the war. But they're actually doing it. I would argue the right way. So they have said, OK, we can't do anything about the deficit. But what we can do is we can keep the interest rates high. So they basically, they've been honest, relatively honest interest rate regime to reflect the reality.

23:47And they're paying 18, 18% interest. Which is substantially more than everyday inflation. And it's even more than the money supplies being increased. So there's actually a huge incentive for conversions to say. Which is the way it should be, right? So, and, of course, some Russians entrepreneurs come as complain. So we can't, we don't mind to invest because the interest rates do high. Well, you have a competition. Who, who can be the most productive? And who, if you want to get, you know, rules in Russia, you need to be able to pay at least 18%. You get that, that's like your minimum threshold of productivity. But I, or your return, you have to have at least 18% of mine and plus something on top to make it worth your while. Otherwise, you know, forget about it. So, so it narrows down the field. And it ends up, you, the economy ends up supporting the people that have the higher returns. So that, that, that, that breeds efficiency. Whereas you have the opposite going on in the US,

24:47and particularly in the US, where there's a lot of easy money around, and effectively negative interest rates and negative real interest rates. And the people that have access to it, the particularly like these days, the people that are financing all these AI product projects, they're spending billions and tens hundreds of billions of dollars on these things that's coming down like magic from the sky. And they don't have to, they don't have, they, if they can, if they can do, you know, 4% return, if that, then, then it's worthwhile. And it's because there's not enough competition, whereas it's just thinking enough in China, although we have very, we have, we have very relatively low interest rates here. I mentioned, I think it's like three, three, three percent, which is really especially real negative, negative interest rates. It has led to a lot of capital flight. So people basically look elsewhere to invest in it,

25:47because the returns are so bad here in China. And it's had the ironic effect, because so much of the money has gone to the Wall Street casino, that inside China, it's hard to get money to invest your money. So Chinese investors, particularly people like in the AI area, are forced to be much more efficient, like they have to really good, because they're not getting the money. They have to find a way of doing it very efficiently. So actually, being pushed towards efficiency in China one way, in Russia another way, is a good thing. And you look at DeepSeek as the best example of that, for listeners of the man I know, DeepSeek is a Chinese AI venture that was kind of made out of the main lot of headlines about a year ago, with their breakthrough model. And it was all financed by a private hedge funds. It got no save says, no extra investment. And they, their breakthrough was really they were 10, 20,

26:49some say a hundred times more efficient than what Chattanooga was doing. And now they did it because they had, they were bootstrapping it. So basically, the answer to your question is, what low interest rates do tendentially is they don't, they don't breed efficiency. They breed laziness. But we get the money. However, as a counter to that, here in South Africa during apartheid, particularly in the 1980s, which was the height of apartheid, interest rates peaked at around 24%. I mean, that's not sustainable. Well, I guess it depends what you're, what was the money supply growing at then? Oh, I don't know, that's a good question. But I mean, that was largely to do with sanctions and all kinds of other restrictions. Yeah, I mean, that's, I mean, that's difficult.

27:49I mean, if you buy a property, you have to then you end up paying a quarter of that property's price eventually on top of what you paid. Well, there must have been a lot of money printing going on at the time. I can't believe that it was happening without the money printing background. So yeah, but the money printing makes everything very complicated. Without money printing, that could not have happened. There's no way you could have a 24% interest rate without having money printing going on. It just knows deciding to produce that result without, without basically the money being devided constantly. I mean, maybe 2,000 years ago, they say, I think in early Rome, some say the interest rate was 12%. And it's reflecting much higher time preferences than we have today. And that was an era of relatively hard money. But 12% is, by modern standards,

28:49in terms of real interest rates, it's very high. But that was, this was 2000 years ago. These days, it had a real interest rate of 2,12% unheard of. I have to see unheard of. So without knowing the details, I would guess the root of the problem in South Africa, of course, sanctions, whatever, there were all these reasons why we had to print the money, right? And you can argue that here. You may say, well, we had no other choice. Okay, well, maybe, but regardless of what the reason was, the results will be inevitable if you print the money. And that is one of those central insights. I think of Austrian economics that we've, that the school has always stuck with, is insisting upon that. That doesn't matter what your excuse is. I mean, maybe it's a good excuse. Maybe it's a bad excuse. But the results are a logical upshot of what, you know, garbage in garbage that you put this in, then you're going to get something, you're going to get that out. Well, yes, your answer. While you were talking, I quickly looked it up.

29:50During 1980s, South Africa experienced substantially higher growth in broad money supply compared to its trading partners. The success of monetary expansion was a key factor in keeping South African inflation persistently high throughout most of the 1980s, even as other countries were successfully bringing the inflation rates down. So there you go. It's exactly what you said. Right. And of course, that's what the US did in the early 80s. They finally stopped their inflationary policies of the 70s and they introduced high interest rates. And they did pretty much what Russia did two years ago. And they got the ship back on track. It was, there was some tough years there where the interest rates were 12 from 50 percent. But things, they got, well, then a couple of years, things got back on track and the economy settled down and then started growing again. When you're trying to deal with the results of massive money printing,

30:54the shock is painful, it's true initially. But then interest rates come down. So, like I said, you can talk about it from a normative perspective what's better and what's worse. But you can't alter the fact that these have clear effects. And when you choose. And the ultimate example of the most extreme example that we know is the so-called zero interest rate policy, the ZERP, which was followed by Europe and the United States from was a 2010 roughly until 2022, roughly 12 years. And that was just disastrous. It was just huge. And one of the obvious, most obvious results of that disaster was this enormous gap between rich and poor in Europe and in the United States. And in China, we didn't have that problem as much until recently, there was only a couple of years ago

31:54that they dropped interest rates this low. Typically, period Chinese industries were around 6 percent roughly. So, the government was printing 10 percent a year, 11 percent a year, interest rates were at 6. So, they were 5 negative. Whereas in the West, it was 10 negative. So, the West was considerably worse, at least in China that interest rates weren't that far below, that they were not that negative. And in the West, it was extremely negative. And that just skewed everything to know it. Whereas now, in China, actually, now they're following the example of the West and now they're skewing it even more. And we're, of course, getting the same bad results here. Another important vector of the Austrian School of Economics is its opposition to centralization. It prefers decentralized models.

32:54And it also has a strong emphasis on property rights. Now, I remember when I was in Shanghai and I met up with you and I asked you, what is it that turned China around in the last 30 years and your answer without even blinking was property rights? Yeah, because that was, I think, that was the number one thing that changed when they basically gave up on socialism around 1980. And when Deng Xiaoping essentially came to power, he was faced with a pile of unusual leftover with the word. I think in the word shreds of capital, but that's not the right word. Remnants of the, basically, they used up all the capital. It was all gone. And so he decided we got to rebuild and how do we do that? Well, we have to encourage people to accumulate capital. And how do you do that?

33:55Well, it's by respecting property rights. You don't respect property rights. People are not going to accumulate capital. And that goes the whole of the whole. That's got another discussion about what is capitalism. But I always say that this court is actually a really important word because one essential tenant of capitalism that's often overlooked is the need to accumulate capital. And by capital, we're not about money. We're talking about productive hardware that enables you to produce things in a more efficient way and make your society wealthy by using these means of production. That's capital. Also the capital in people's minds. Know how? It's all capital. Right. And we have to accumulate capital. And how do you make capital? It looks by respecting people's ownership of it. And if you respect the ownership of it, people are going to waste it and destroy it. And that's, of course, that happened in all the socialist countries in China as well. So that was the number one thing they did. And there was even today, even though it's eroded a bit from the Deng Xiaoping ideal. Still even today, you can see in China,

34:56I have one near where I live. You can see houses on the side of the road that are where the road has been built around the house. Why? Because in China, there's no expropriation law. I think the US is called eminent domain where they can basically government can come and say, well, you know, we want your land. You have to sell this. Well, China doesn't have that law. So if they want to build a road or a motorway through some area and if somebody has houses in the middle, the government can't just say we have to leave. They have to buy them out. And if they don't sell, well, they have to build the road around them. So that's just an example. Unfortunately, there it has been a declining respect for progress in some areas in China. I won't go into that. But generally speaking, the respect of property rights is higher than it's early in the US. The US is one of the more extreme examples on the other side

35:56where you have the... What's that called? What they call the US? Where they can basically take your money without even having due process. What's that called? They say they catch you carrying $1,000. They say, well, we think that might be drug money. So let's take it first. And then you can ask for it back. If you can prove where you got it from. They can get a number of states in the US. But that's... US is one of the only countries in the world you could do without due process in the industrialized world. So that's kind of the exact... The very opposite of what goes on in China. The other... But the other thing that they changed was... They went from centralization to decentralization. And they decentralize their... Governments is making as much as possible. Push it down to the local level and to the provincial level and let them decide on their policies as much as possible. And that created competition between the provinces and the states, the provinces and the localities

36:56to offer the best conditions for entrepreneurs and also for their citizens. And that was a very positive thing. So when you talk about centralization versus decentralization on the higher, more abstract level we're talking about essentially central planning versus decentralized planning. And decentralized planning means... If you take them to the very best small suit, it means individual families, individual companies letting them make the decisions. And if you go all the way back to get the real total centralized plan and the national government, the big capital with its army of bureaucrats, then deciding. And for good 20 years, let's say between 1990 and 2010, for the most part, that's what was going on in China. Basically the government said, you know, do your own thing and figure out how to kind of finance it and make up your own decisions about what to produce. And that worked your role. And that's in fact, I would argue is what made China,

37:56the second most important actor which made China a rich. Unfortunately, as we've discussed before, many just that doesn't state the same and as the Chinese become richer, the government has decided that well, they have all this wealth now, so maybe we can do a little more planning. And they've come back to to dallying with central planning. And they started to massively subsidize certain industries, like for example the EV industry. And the results have been as any Austrian economy would be able to predict. And that is terrible. So yes, they do dominate the EV industry worldwide because their cost reduction, their scale, their what they were, not cost reduction, their economy to scale are so low or so high. Sorry.

38:56But they're able to produce much more cheaply than anyone else. But almost I think with one exception, all the EV companies are all losing money. So it's it's not sustainable. And the government is also losing money. So the government's investing all this money, various groups of local governments or provincial governments have essentially through their investment funds have invested in these companies. And they're all competing each other's debt. So it's kind of in a way that sort of typical China, lots of competition. But there wouldn't be others from competition or government subsidizing them. Anyway, so. All I say, nothing, nothing good lasts forever. And what may China rich is now, unfortunately, in part being, I wouldn't say forgot them, but being ignored. And those factors are declining. But this is actually something that's well to be unappreciated in the well, appreciated in the West,

39:56where you tend to get more sort of the opposite storyline, namely that China is a state capitalist. And the China does all this wonderful planning. And or as we've discussed before, because they're quote-unquote comedists, because they call themselves the county's party, they're, they're these wonderful planners and they're beating the West because there's such wonderful planners. Well, I thought I would say that. If that were, if that were the case, then why weren't they beating the West 40 years ago, right? Why were all these peasants starving when Mao was running the show here? Then the scavenger was planning everything. It was a complete disaster. Well, no, of course, the central government doesn't work, and never has worked. And to the extent that they're trying to do that again here in China, it's not working. And so, when people in the West say, oh, yes, we need to learn from China. Let's do more planning. That's like completely the opposite of a reality, right?

40:56That's what's, that's, that's, to the extent that things are not going well in China, that's what's causing the problems in China today, is this too much central planning. But if you want to study and learn from China well, then do what China did well, which was, seem any competition, having respect for property rights, and decentralizing decisions out there. And but, of course, those lessons are not being propagated in the West. So, you know, learning from China, in the work by that, by that measure. So, okay. So, what you're saying to me, then, is that, weirdly enough, in the last 30 years or so, China followed more of an Austrian school of economics way than say the US. But, yes, definitely. But they also, because of their situation, they were in a way forced to, because they needed to accumulate capital. They were very limited access to capital. So, they had to find some way to do it.

41:56And they did get a lot of investment from the West. But they needed it too, because they started from such a low starting point. But at the end of the day, the investment from the West was only one factor. It really, it was the internal competitive environment. The low time preference of the Chinese people, in general, they're willing to save large percentage of their income. But also, for example, in tandem with that, the lack of a welfare state in China. In China, never had a welfare state. At least not since the well. Under socialism, it didn't theory. But in reality, of course, that meant everyone was equally, bitterly, bitterly poor. Now, China has a little bit more welfare state than it did, but still, the amounts are pretty low. So, you know, if you want to live off a government, it's not easy. It's certainly, you know, compared with what types of offerings

42:56you have in Europe or even in the United States, it's very minimal. So people say, oh, you know, China's communist or whatever, well, some people say that. But it doesn't have much of a welfare system. Everybody's working out there, right? So that's a big, big difference. Okay, so would you say that? China is fairly decentralized. I certainly was 10 years, 15 years ago. It's less so now than it was then. So certainly the government, the central government has. In, attempted to enforce more uniformity, it's introduced more national systems than were around 15 years ago. I mean, 15 years ago, basically none of the provincial systems communicated with each other at all. Every probably I said a drone system. And even during COVID, for example, you know, there's lots of

43:56or willing and discussions in the west about Chinese systems, but actually, in China, we had, there was this concept of this health code. But each province had its own health code. And in fact, in many cases, they had several different iterations of health goes and the national government had its own health code. And none of them were compatible with each other. So it was just a complete chaos. But that was kind of typical of China, right? Not, you know, not not really coordinating things very well. Everybody's been doing their own thing. And there were a lot of loopholes as a result, which is so I'd say probably good thing. But anyway, that was kind of, that was in a way, and reverted back to the old standard of having everybody province doing its own thing. This is old saying in China that the mountains are high and the amperes far away. Well, there's some truth to that. But that's a good thing. I think all in all that provinces have been able to do their own thing. And to, to come up with unique solutions.

44:57And to facilitate competition between them. Less so now than before, but it's still there. And if you compare it to, let's say, the level of centralization of systems in the US, I'd say probably China is still more decentralized than the US. But every country is unique, of course. And you can't really say across the board, because there's so many different aspects of that. But certainly decentralization has been a central tenant of Chinese governance in the last 40 years since, since 1985. About 15 years ago or so, I started coming across individuals like Milton Friedman and Thomas Soel. And I often argue that Milton Friedman was sort of my gateway into Austrian economics thinking. I understand he came from, I think, the Chicago School of Economics or something like that effect. Whatever.

45:57I found his way of thinking pretty great. And then I stumbled across people like Ludwig von Mises and Murray Rothbard and Adam Smith. And there was another one now whose name escapes me. But I read a lot of their work. And it was very easy to follow. It wasn't this high level complicated economics. It was about down to earth reality and logic. And it was focused on prosperity and freedom and liberty. Why on earth are these ideas so frowned upon by so many, do you think? That's really a deep question. I really found them on by so many. I would say that people are misguided. Many people are misguided. Because they, people need explanations about the world around them.

46:59And the real, the truth is inconvenient for the powerful. The powerful are the ones that control the schools and the media. So people have lack access to these, to much of reality. And because they lack that access, they are misled, I would say, to promote, to have faith in ideas like socialism, like we should redistribute the wealth, right? Or we should steal from Peter to pay Paul. How are they going to say it goes? Instead of looking at the real source of the problem, which is the ongoing massive theft, to go back to where they started with, all the time through this money printing, which is, I wouldn't argue, the real source of the problem, but we can't talk about it. They have never heard this in their life

48:01when they think it's some technicality, right? Which is not involved. It's not involved in, instead of realizing that's really at the heart of all these things they don't like, the loss of freedom. They're the rising gap between the liberation poor that I mentioned before. And they look for other explanations. But do they really reject these ideas of freedom? I don't think so. I think they know that things are not, as they have a gut feeling that things could be much better. And they lack the context and the information to explain those things. And it's because of that they grasp of straws, I would say. And then, of course, the powers will be, the powerful give them these straws. They give them these, they say, look, here, I have an explanation for you. If you just agree to tax everybody's death

49:01and increase the surveillance systems and so on, they really get really better. Or let's, you know, let's attack Iran, and that will resolve the problem or whatever. Or let's blame the immigrants. You know, there are all these different explanations. Instead of getting at the things they don't want to talk about. But do you think that there is a kind of forced dichotomy between the idea of sovereignty which requires a strong state? And the Austrian economic way of thinking which prefers decentralization and less state interference? It's a good question. I think that at the end of the day, the ideal world, of course, would be a world of voluntary interaction,

50:01voluntary exchange. And that goes back to what we talked about in the beginning, which is the difference between the political means and the economic means. So if everyone were happy with using the economic means to live together, this would not be an issue. Then we wouldn't have to worry about the whole sovereignty concept. But if significant members of society or people in power are not satisfied with that, and they wish to live by the political means, meaning to obtain things by theft and force, then that's not going to work. So if, for example, if you want to have a free hand to take things by force, then free trade is not going to work for you. So, you know, we can talk about an ideal world, a realistic world. It's one of which you don't have that issue

51:03because people will all choose to trade freely amongst each other and not rob each other. But that's not the reality we have. We know that we live in a world dominated by force where the power will take what they can. And Meek must put up with what they must, and I'm afraid it's saying like they're all on those lines. And so, yeah, I mean, I think that if you, I mean, it's to be more concrete about it. Really, the crux of the issue is these days is the discussion about the dependency on China. And I think that the people who run the West have come to the conclusion that they are 10-year long campaign to decouple from China is, at this point, hopeless.

52:05They really tried very hard to decouple their industry from China to decrease their dependency on China. This started back under the Obama regime back in 2014. They were already paying subsidies to have manufacturers leave China. Didn't work out at all, really. It was a complete failure. But the intent was clearly there to try and decouple. The problem is it didn't work because, you know, you can give it sort of a very high level. You can say, oh, you know, CEO XYZ, you need to do this. But CEO XYZ also has to survive and produce profits. And so he's ultimately somewhere down the supply chain going to come and go back to the best suppliers. And those are often suppliers from China. So they tried for a long time. And eventually they realized not only is it now work, but their entire military supply chain is completed and then on China.

53:05So if they want to keep making their missiles and munitions and tanks, then they don't have to keep up a open relationship, a reasonably, what's the word? Peaceful relationship with China. So is there any route back to sovereignty for the West? I don't know. I say it's tough because they've had this understanding with the Chinese leadership for 20 or 30 years that allowed China to massively under value its currency and allow the West to overvalue its currency, which is what created these huge imbalances to start with. And of course, that this is only possible because the money printing, right? It's the only cost because China prints out an enormous amount of money every year to buy all those dollars and euros, right? If they were doing that, it wouldn't be possible. This whole imbalance could not be sustained. And the same kind of in the West, they print up theoretical dollars and euros

54:05to pay the China in theory to pay for all this stuff, right? So this whole, this huge imbalance is being sustained by the system, but they're all addicted to it, right? So all this talk about sovereignty, yeah, it makes sense and you can see where it's coming from, but realistically in the medium term, I don't see how they're going to fix that. It looks hopeless to me. On the other hand, at some point, something like I said, I've said often before, something has got to get it. I mean, the imbalances are getting bigger and bigger every year. I think last year, China had a trade surplus of $1.2 trillion, right? And it's going, it's getting bigger every year. I mean, as somebody said, so what if the rest of the world is still everywhere? You know, we all serve each other coffee and China makes all this stuff, right? I mean, this is getting, this is getting, this is getting ludicrous, right? So there's going to, there's something it's got to get here at some point. I don't know what's going to, what will happen, but I know it's not sustainable.

55:05But in any case, this, in a way, it's, I think it's a good thing because this theoretical idea of sovereignty really boils down to the ability to attack each other and make war. That's really what it's all about, right? So if we don't have this sovereignty, then that limits the ability to make wars. And I think that's, I think we can argue that it's a good thing. I, as you know, spend some time on your side of the world last year. And coming from South Africa, in the same 30 year period, we haven't really moved forward. I think we should implement a lot of that sort of decentralized thinking that China implemented over the last three years. I think it would help us a great deal. You know, and it's also, I mean, it's not just that. It's also, you know, with other than we talked about, is the respect for property rights in general. I think that's, that is also on abstract level. It's not individual property rights.

56:05It's not individual property rights, it's only individual property, but it's also company property rights, for example. And when you, when a state, for example, enforces a monopoly with their, when they favor large companies through regulatory regimes, that's essentially impacting the property rights of smaller companies. And that's what you have going on throughout the West, in particular in the United States and Western Europe, where most companies, most of the larger companies are all controlled by BlackRock, State Street and Vanguard, which are essentially the same thing. And as a result, you have very limited competition in very many industries. And that's one of the things we don't have in China. We don't have that, that, that, that we have roughly 25% of the companies under in terms of added value under government control, but that's far less than you have in the West is under the control of BlackRock. And that really limits, limits competition in the West because you ultimately,

57:05the CEOs of Delta and United and Air France, and they probably all, they probably all report, report back to BlackRock. So then they really limits how much real competition can you have under those types of circumstances. So that's, that's really that, if you talk about propagated discernment, yes, but ultimately, what made China which was, was providing for allowing competition to take place in allowing, of course, at the same time, cooperation between companies, and individuals, as they saw fit. But that, that competitive element is really suffering the West in the last 20 or 30 years. You have a level of centralized control that's really only comparable with the Soviet Union. And people don't see that because the difference between the West today and the Soviet Union is that, the Soviet Union, the government tried to control everything. But the West today is an improved version and they realize they, they can't, they're not going to be able to control all the small companies and medium-sized companies. So they just constantly and controlling the big ones. Right?

58:05It is a, it's a much superior model to the old Soviet model which didn't work at all as a disaster. But still, you have that basic problem that these large companies, their level of innovation and competitiveness is limited. So, think, for example, a company like Cisco, Cisco has never added a single job to any, for anything, they just keep buying out companies with all that cheap money that they have access to. But they consume these companies and they stop innovating once they get bought. And they got bought out. No, it's so I got my money and I made, you know, whatever, now I can retire. And their companies sort of limp along as part of this, this, this Cisco blob. But they don't really create any jobs. Of course, same thing we have here in China. State companies don't create any jobs at all. They're, they're, they're a black hole. They're not innovative. They don't create jobs. And it's only the private sector that does that, right? The real private sector. And then in the West, the real private sector is the small and medium-sized enterprises. But because the entire large company sector is all dominated by a black rock, it really hinders the,

59:05the creditors of the economy. And, and that's, I would say that's ultimately the reason why China is so competitive, it's because we have much more competition here than the West. So the West can, you just can't believe it. Yeah, let me give you an example, an anecdote of that, a competitiveness that you are referring to. So I bought a pair of cheap canvas shoes from Timu, which is this, for those who don't know, it's a Chinese app. It's like a huge, shopping app. It arrived after a couple of days, and there was one side is too small. So it was, it was dropped off the end of the afternoon. On the app, I said, the shoes are too small. The next morning, right, the Korea pitches up in my friend door and says, we're collecting the, the Timu purchase. That's great. Wait, it was in five minutes after they had taken the shoes from me, the app sent me notifications

1:00:06saying that I had a full refund. I mean, now, that's better service than what I get here. Well, that's Chinese vision for you, and that's because of the, what's that word? The, what's the additive use with competition, the cultural competition here. That's, that's really what it is. And here, you, essentially, you have all these different apps offering that type of service. You're not satisfied, send it back immediately. We'll come, somebody picks it up, exchange it, whatever. It's, it's all extremely efficient, and that's really, ultimately, goes back to competition. I will sell, however, though, it's, it's, once in a year, we're also suffering from a, lessening of that, because of the government of the university, which makes it, more difficult than it was before to compete, with, you know, the big, platforms that offer these type of services, you know, for new ones to, to, to come to,

1:01:06rise up and compete with them, it gets more, more difficult because of, government be offering. But still, it's still, it's still about much better than the West. So, yeah. That's, that's so many word, where the West could definitely learn from China. Not sure if that's the moral of it, but it's only one of the men. China could learn, China could learn from itself, how things were going on here 10 years ago. You know, one of the interesting point, though, to make here, is that China has actually done a lot with infrastructure, and I, and I, and I will say, a lot of the infrastructure in China is very impressive. And, the government has invested enormous funds in these, infrastructure products in rows and high-speed rail and so on. And at least, it's somewhat useful, right? But it has, of course, it has, it has drowned out, it has sucked away resources from other, the other parts of the economy, and, and so far, to that extent, it's all somewhat of a drain, and it's a result

1:02:07in many of your resources going to other sectors, like mentioned earlier, about lack of investment, you know, those sectors in China, unless the government happens to be subsidizing it. So, happens to be subsidizing it. But ultimately, even though the government has a much larger role now and the Chinese economy than it did 10 years ago, still, let's see, the ways of competition and, let's say, capitalism are very sticky. That's not the right word, but they're very stubborn. So it takes a long time for the government interference to really wear down an economy. You saw that also in the West as well, where you have all these ways in which government interferes in the economy and slows things down. But still, the economy keeps going forward. It takes a long time to wear it down completely. And in China, even though the government is working

1:03:09on wearing it down and interfering with the economy and creating growth, it's still at a lesser level than it is in the West. Significantly. So that's a big difference you see here between what's going on here, what's going on in the West. Even though it's going backwards here, it's still, the gap is still pretty big. And China's still much, much more competitive than the West. And ironically, what I mentioned earlier about the lack of investment is in itself also creating more pressure on companies to be competitive because of the lack of investment inside China. So people have to be super, super efficient. And always come up with a little particular medium. So I've got to always come up with new ideas, be more innovative, have to create new innovative products because the compositionally is so intense. That's the way it should be, right? And everybody has been a benefit from that ultimately. And I think that's certainly one moral of the story that that's the type of prosperity

1:04:12that a wealthy society should be giving to everyone in this society. All right, Scott, your group sub-stack is austrianchina.substack.com, is that correct? Yes, we're not too active on that daily stage, but definitely sign up. And every time we write a useful article in English, so please, by all means.