Afterword: Wall Street, Banks, and American Foreign Policy


Richard Moore

Part 4 of 4 – Afterword

Wall Street, Banks, and American Foreign Policy

by Murray N. Rothbard
by Murray N. Rothba

This first appeared in World Market Perspective (1984) and later as a monograph published by the Center for libertarian Studies (1995). Afterword By Justin Raimondo.

Afterword By Justin Raimondo

Murray Rothbard’s 1984 analysis of modern American history as a great power struggle between economic elites, between the House of Morgan and the Rockefeller interests, culminates in the following conclusion: “the financial power elite can sleep well at night regardless of who wins in 1984.” By the time you get there, the conclusion seems understated indeed, for what we have here is a sweeping and compressed history of 20th century politics from a power elite point of view. It represents a small and highly specialized sample of Rothbard’s vast historical knowledge coming together with a lifetime devoted to methodological individualism in the social sciences. It appeared first in 1984, in the thick of the Reagan years, in a small financial publication called World Market Perspective. It was printed for a larger audience by the Center for Libertarian Studies in 1995, and appears in 2005 online for the first time.

Theoreticians Left and Right are constantly referring to abstract “forces” when they examine and attempt to explain historical patterns. Applying the principle of methodological individualism – which attributes all human action to individual actors – and the economic principles of the Austrian School, Rothbard formulated a trenchant overview of the American elite and the history of the modern era.

Rothbard’s analysis flows, first, from the basic principles of Austrian economics, particularly the Misesian analysis of banking and the origin of the business cycle. This issue is also discussed and elaborated on in one of his last books, The Case Against the Fed (Mises Institute, 1995). Here, the author relates the history of how the Federal Reserve System came to be foisted on the unsuspecting American people by a high-powered alliance of banking interests. Rothbard’s economic analysis is clear, concise, and wide-ranging, covering the nature of money, the genesis of government paper money, the inherent instability (and essential fraudulence) of fractional reserve banking, and the true causes of the business cycle.

As Rothbard explains in his economic writings, the key is in understanding that money is a commodity, like any other, and thus subject to the laws of the market. A government-granted monopoly in this, the very lifeblood of the economic system, is a recipe for inflation, a debased currency – and the creation of a permanent plutocracy whose power is virtually unlimited.

In the present essay, as in The Case Against the Fed, it is in the section on the history of the movement to establish the Federal Reserve System that the Rothbardian power elite analysis comes into full and fascinating play. What is striking about this piece is the plethora of details. Rothbard’s argument is so jam-packed with facts detailing the social, economic, and familial connections of the burgeoning Money Power, that we need to step back and look at it in the light of Rothbardian theory, specifically Rothbard’s theory of class analysis.

Rothbard eagerly reclaimed the concept of class analysis from the Marxists, who expropriated it from the French theorists of laissez-faire. Marx authored a plagiarized, distorted, and vulgarized version of the theory based on the Ricardian labor theory of value. Given this premise, he came up with a class analysis pitting workers against owners.

One of Rothbard’s many great contributions to the cause of liberty was to restore the original theory, which pitted the people against the State. In the Rothbardian theory of class struggle, the government, including its clients and enforcers, exploits and enslaves the productive classes through taxation, regulation, and perpetual war. Government is an incubus, a parasite, incapable of producing anything in its own right, and instead feeds off the vital energies and productive ability of the producers.

This is the first step of a fully-developed libertarian class analysis. Unfortunately, this is where the thought processes of all too many alleged libertarians come to a grinding halt. It is enough, for them, to know the State is the Enemy, as if it were an irreducible primary.

As William Pitt put it in 1770, “There is something behind the throne greater than the king himself.” Blind to the real forces at work on account of their methodological error, Left-libertarians are content to live in a world of science fiction and utopian schemes, in which they are no threat to the powers that be, and are thus tolerated and at times even encouraged.

The Left-libertarian failure to take the analytical process one step further is, in many cases, a failure of nerve. For it is clear, given libertarian theory and the economic insights of the Austrian School, where the next step leads. No empirical evidence is necessary, at this point (although that will come later, and in spades); the truth can be deduced from pure theory, specifically the Austrian theory of the nature of money and banking, and the Misesian analysis of the origin of the business cycle.

This deduction was brilliantly and colorfully made in the first issue of The Journal of Libertarian Studies (Winter 1977), by two students of Rothbard, Walter E. Grinder and John Hagel III, in “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure.”

While a pure free market would necessarily prevent the development of a banking monopoly, “however, the market system does concentrate entrepreneurial activity and decision-making within the capital market because of the considerable benefits which are rendered by a certain degree of specialization.”

This “specialized capital market, by the very nature of its integrative role within the market system, will emerge as a strategic locus of ultimate decision-making.” Given that some individuals will choose the political means over the economic, some of these great fortunes will utilize their tremendous resources to cartelize the market and insulate themselves against risk. The temptation for bankers in particular to wield the power of the State to their benefit is very great because it permits banks to inflate their asset base systematically. The creation of assets made possible by these measures to a great extent frees the banking institutions from the constraints imposed by the passive form of ultimate decision-making exercised by their depositors. It thereby considerably strengthens the ultimate decision-making authority held by banks vis-à-vis their depositors. The inflationary trends resulting from the creation of assets tend to increase the ratio of external financing to internal financing in large corporations and, as a consequence, the ultimate decision-making power of banking institutions increase over the activities of industrial corporations.

The Austrian insight focuses on the key role played by the central banks in generating the distortion of market signals that leads to periodic booms and busts, the dreaded business cycle which is always blamed on the inherent contradictions of unfettered capitalism.

But in fact this capitalism is anything but unfettered. (Try starting your own private bank.) The last thing American bankers want is an unfettered banking system. Rothbard not only traces the original market distortion that gives rise to the business cycle, but also identifies the source (and chief beneficiaries) of this distortion. It was Mises who pointed out that government intervention in the economy invariably leads to yet more intervention in order to “fix” the havoc wreaked – and there is a certain logic in the fact that it was the original culprits who decided to “fix” the distortions and disruptions caused by their policies with further assaults on the market mechanism. As Grinder and Hagel put it:

In the U.S., this intervention initially involved sporadic measures, both at the federal and state level, which generated inflationary distortion in the monetary supply and cyclical disruptions of economic activity. The disruptions which accompanied the business cycle were a major factor in the transformation of the dominant ideology in the U.S. from a general adherence to laissez-faire doctrines to an ideology of political capitalism which viewed the state as a necessary instrument for the rationalization and stabilization of an inherently unstable economic order.

Capitalists as Enemies of Capitalism

This explains the strange historical fact, recounted at length and in detail by Rothbard, that the biggest capitalists have been the deadliest enemies of true capitalism. For virtually all of the alleged social “reforms” of the past fifty years were pushed not only by “idealistic” Leftists, but by the very corporate combines caricatured as the top-hatted, pot-bellied “economic royalists” of Wall Street.

The neoconservative Right depicts the battle against Big Government as a two-sided Manichean struggle between the forces of light (that is, of capitalism) and the remnants of largely discredited Leftist elites. But Rothbard’s historical analysis reveals a much richer, more complex pattern: instead of being two-sided, the struggle for liberty pits at least three sides, each against the other. For the capitalists, as John T. Flynn, Albert Jay Nock, and Frank Chodorov all pointed out, were never for capitalism. As Nock put it:

It is one of the few amusing things in our rather stodgy world that those who today are behaving most tremendously about collectivism and the Red menace are the very ones who have cajoled, bribed, flattered and bedeviled the State into taking each and every one of the successive steps that lead straight to collectivism. [“Impostor Terms,” Atlantic Monthly, February 1936.]

The New Deal economic policy was, as Rothbard demonstrated, prefigured by Herbert Hoover, champion of big business, and foreshadowed in the reforms of the Progressive era. As the revisionist economic historians, such as Gabriel Kolko, have shown, those who regulated the great industries in the name of progressive “reform” were recruited from the very cartels and trusts they were created to tame.

And of course the monopolists didn’t mind being tamed, so long as their competitors were tamed (if not eliminated). Every giant leap forward of economic planning and centralization – central banking, the welfare state, “civil rights,” and affirmative action – was supported if not initiated by the biggest and most politically powerful business interests in the country. The House of Morgan, the Rockefellers, and the Kuhn-Loebs must take their place alongside the First, Second, and Third Internationals as the historic enemies of liberty.

Giant multinational corporations, and their economic satellites, in alliance with governments and the big banks, are in the process of extending their influence on a global scale: they dream of a world central bank, global planning, and an international welfare state, with American troops policing the world to guarantee their profit margins.

After the long battle to create a central bank in the U.S., the high priests of high finance finally seized and consolidated control of domestic economic policy. It only remained for them to extend their dominance internationally, and for this purpose they created the Council on Foreign Relations, and, later, the Trilateral Commission.

These two groups have been seized upon by the new populist Right as the virtual embodiments of the Power Elite, and rightly so. It is only by reading Rothbard, however, that this insight is placed in its proper historical perspective. For the fact of the matter is that, as Rothbard shows, the CFR/ Trilateralist network is merely the latest incarnation of a trend deeply rooted in modern American history. Long before the founding of the CFR or the Trilateral Commission, there was a power elite in this country; that elite will likely endure long after those organizations are gone or transmuted into something else. Rothbard’s unmasking of the historical and economic roots of this trend is vital in understanding that this is not a “conspiracy” centered in the CFR and the Trilateralist groups, as such, but an ideological trend traditionally centered in the Northeast, among the upper classes, and deeply rooted in American history.

I put the word “conspiracy” in quotes because it has become the favorite swearword of the Respectable Right and the “extremist”-baiting Left. If it is conspiracy-mongering to believe that human beings engage in purposeful activity to achieve their economic, political, and personal goals, then rational men and women must necessarily plead guilty. The alternative is to assert that human action is purposeless, random, and inexplicable. History, in this view, is a series of discontinuous accidents.

Yet it would be inaccurate to call the Rothbardian world view a “conspiracy theory.” To say that the House of Morgan was engaged in a “conspiracy” to drag the U.S. into World War I, when indeed it openly used every stratagem, every lever both economic and political, to push us into “the war to end all wars,” seems woefully inadequate. This was not some secret cabal meeting in a soundproof corporate boardroom, but a “conspiracy” of ideas openly and vociferously expressed. (On this point, please note and underscore Rothbard’s analysis of the founding of The New Republic as the literary flagship of “the growing alliance for war and statism” between the Morgan interests and liberal intellectuals – and isn’t it funny how some things never change?)

A conspiracy theory attributes virtually all social problems to a single monolithic agency. Radical feminism, which attributes all the evil in the world to the existence of men, is a classic conspiracy theory; the paranoid views of the ex-Communists in the conservative movement, who were obsessed with destroying their ex-comrades, was another.

But the complexity and subtlety of the Rothbardian analysis, backed up by the sheer mass of rich historical detail, sets Rothbard on an altogether different and higher plane. Here there is no single agency, no omnipotent central committee that issues directives, but a multiplicity of interest groups and factions whose goals are generally congruent.

In this milieu, there are familial, social, and economic connections, as well as ideological complicity, and none is better than Rothbard at ferreting out and unraveling these biographical details. Taken together, the author’s small and studied brushstrokes paint a portrait of a ruling class whose ruthlessness is surpassed only by its brazen disloyalty to the nation.

It is a portrait that remains unchanged, in its essentials, to this day. Wall Street, Banks, and American Foreign Policywas written and published in 1984, during the Reagan years.

Reagan started out by denouncing the power elite and specifically the CFR and the Trilateralists, but wound up with that epitome of the Establishment, Skull-&-Bonesman George Bush as his vice president and successor.

Bush is a longtime CFR director, and Trilateralist; most of his major cabinet officers, including his chairman of the joint chiefs, Colin Powell, were CFR members. The Clinton administration is similarly afflicted, from the President (CFR/Trilateral) on down through Donna Shalala (CFRJ Trilateral) and George Stephanopoulos (CFR), with the CFR honeycombed (as usual) throughout the State Department. In addition to Secretary of State Warren Christopher, other CFR members in the Clinton cabinet include Laura Tyson, chairman of the Council of Economic advisors, Treasury Secretary Robert Rubin; Interior Secretary Bruce Babbitt, HUD honcho Henry Cisneros; and Alice Rivlin, 0MB director.

The other side of the aisle is equally co-opted at the leadership level, as vividly dramatized by Gingrich’s retreat before the power and majesty of Henry Kissinger. One naturally expects cowardice from politicians, but the indictment also includes what passes for the intellectual leaders of the Republican free-market “revolution.”

There is a certain mentality that, no matter how convincing the evidence, would never even consider the argument put forward in Wall Street, Banks, and American Foreign Policy. This attitude stems from a particular kind of cowardice. It is a fear, first of all, of not being listened to, a dread of consigning oneself to the role of Cassandra, the ancient Greek prophetess who was granted the power of foresight by the gods, with but a single limitation: that none would ever heed her warnings. It is far easier, and so much more lucrative, to play the role of court historian.

This is a role the author of this scintillating pamphlet never could have played, even if he had tried. For the truth (or, at least, the search for it) is so much more interesting than the official histories and the conventional wisdom of the moment. The sheer pleasure Rothbard took in unearthing the truth, in carrying out his vocation as a true scholar, is evident not only on every page of the present work but throughout his 28 books and thousands of articles and speeches.

Rothbard was not afraid of sharing Cassandra’s fate because, in the first place, truth is a value in its own right, and ought to be upheld for its own sake. Second, the truth has a way of eventually getting out, in spite of the most strenuous efforts to suppress it.

Justin Raimondo, author of An Enemy of the State: the Life of Murray N. Rothbard and other books, is editor of

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