Speech at Presentation of the Documentary “Neither Social nor Justice: The Pension Crisis”

Rafael del Pino Foundation

(Monday, November 29, 2021, 6:30 pm)

[A literal transcription of the words spoken by]

Jesús Huerta de Soto

My speech today will contain a series of parts: My goal will be to offer a very brief overview of my experience as a media defender of the idea of freedom in Spain and in the world and as a film producer. To this end, I will need to go back more than twenty years to my appointment to the University Chair of Political Economy at the Universidad Rey Juan Carlos in Madrid. At the time, there was a debate going on in the department about who would be responsible for teaching Introduction to Economics, a course which had somehow been included in the study program of students working toward a graduate degree in audiovisual communications. No economics professor seemed to want to teach – for just one semester – the audiovisual communications students, and I stepped forward and said, “I am the department chair, and I will teach those students, but who is being trained in that program?” I was told that the program trained experts in audiovisual communications – future television producers, screenwriters, movie directors, marketing specialists, etc. – and I made a commitment and said, “I am going to teach economics to those students!”

In fact, this may have been one of the most important decisions of my academic life, because that course had a huge impact on the first class of students, and then on the second, and so on… There came a time when my students in the audiovisual communications program even asked, “Professor Huerta de Soto, would you mind if we recorded your lessons? We feel it is important that they be freely accessible, and we know how to make that happen; it is our area of expertise.” At the same time, one of my disciples, Professor Gabriel Calzada, then President of the Juan de Mariana Institute, saw that this project was important and found someone who, with great dedication and effort and the most advanced technological tools then available, recorded in full each and every one of my forty-five ninety-minute lessons beginning in the 2009-2010 school year. That person is Fernando Díaz Villanueva: You do not know how grateful I am for his effort and for becoming my de facto teaching assistant throughout the course. I still remember fondly the many minutes and hours we spent together for the recording of those lessons.

I said before, this has been one of the best decisions I have made in my life. Keep in mind that the lessons do not pose any data-protection problem, since they were recorded from the back of the classroom, and only the backs of students’ heads are visible. (You can see this for yourself if you watch them – they are available on YouTube.) There were around seventy students per year, and from the time we made the course freely accessible on different networks, seven thousand students per year began to follow it. That is one hundred times as many as were physically present at each lesson. But the story does not end there. We must realize how difficult and tedious it is to follow a ninety-minute lesson on a computer screen. For that reason, another of my disciples, a Sevillian astrophysicist named José Manuel González González, made me the following offer: “Professor, I suggest editing your classes and breaking them down into segments of between ten and fifteen minutes each. I will edit them, and whenever you give an example, I will superimpose the main points on the screen. I will edit those short videos, so that, instead of one ninety-minute video, you will have five or six shorter videos for each of your lessons.” Well, I gave it a lot of thought; it was not an easy decision to make. It is one thing to release a continuous, ninety-minute class video, and it is quite another to divide it into small pieces that will then be made public in the media and can be taken out of context – since a viewer does not know what was said before the beginning of each short video, nor what was said afterward. But José Manuel González González presented several proposals to me, and I considered them and finally made my decision and accepted. He then proceeded to edit and break down the forty-five recorded lessons into 270 videos, which are freely accessible both on his website (www.anarcocapitalista.com), where he has organized them according to the course syllabus, and on the different social media networks, mainly YouTube. To my great surprise, this change resulted in an exponential increase in the number of people following my course.  There were no longer only seven thousand followers a year, as there had been when we first made the class videos available, but over seventy thousand – a tenfold increase.

In fact, a few of the videos have received many more views still. For instance, the one on the economic effects of “Maximum Prices” has been viewed by 305,931 people to date,* and the number rises daily. There is a video titled “The Fall (Destruction) of the Roman Empire,” in which I explain that the Roman Empire did not fall because the barbarians arrived. Instead, it rotted from within, and the barbarians, who had always put pressure on the borders of the empire, simply occupied its remains and were even received with open arms by many of the citizens, who were fed up with state interventionism, the regulatory boot of oppression applied by the centralist government in Rome, and – especially – the tax burden it imposed on them. As of yesterday, my video on the fall of the Roman Empire had been viewed by 596,424 people – over half a million, which is enough to fill the Camp Nou soccer stadium almost six times. Other lesson videos include: “Criticism of the Exploitation Theory,” with 132,979 views; “The Great Lie of ‘Social Gains,’” with 144,000 views; and “Why Do Intellectuals Hate Capitalism?” with 236,000 views, in which I rely mainly on Bertrand de Jouvenel’s classic essay. There is also the extracurricular, final lesson, “Ten Pieces of Advice on How to Be Successful in Life,” with 409,510 views to date. (It is very interesting, and I encourage you to watch it on YouTube, because when I talk about the movie Saving Private Ryan, the dramatic scene of the Normandy landing is superimposed.)

This Internet course, which follows my syllabus and which I have taught each year for over twenty years at the Universidad Rey Juan Carlos, called for the publication of a study guide. With the help of José Manuel González González, we published this guide (through Unión Editorial). It is available both online and on paper and serves as a handbook for following the course. Frankly, I never thought an economics course taught in the classrooms of the Universidad Rey Juan Carlos would arouse such interest.

My goal is not to wear myself out giving lectures: I prefer to have people study my papers and books. However, I have been accepting, on average, one or two lecture invitations a year. What I have done is to extrapolate to this area my experience with the class videos and insist that the lectures be recorded to make them freely accessible to everyone. I will now touch on the impact a few have had, since I have delivered fifty or sixty lectures around the world, and they have all been recorded and, thanks to new technologies, are available to the public. I will begin with a talk I remember very fondly. I gave it in the main auditorium of the San Pablo CEU Foundation (now the San Pablo CEU University Foundation), and my topic was the crisis and criticism of socialism. I remember that the auditorium was completely full. In the front rows sat the entire leadership of the Popular Party, and I began to criticize them as the embodiment of the most lukewarm social democracy. This video has already been watched by 145,000 people, and the views increase daily. There is also the lecture given at the Rafael del Pino Foundation and titled “Financial Crisis, Banking Reform, and the Future of Capitalism.” The talk was extremely relevant at the time, because we had just suffered the consequences of the severe stagflation that affected all the western economies starting in 2008. A few weeks later, I gave it in English when the London School of Economics invited me to deliver the “Hayek Memorial Lecture,” and it has been viewed over 200,000 times to date.

Moreover, below each video, there is a comment section with hundreds or thousands of remarks from the people who view the classes or lectures. It would be humanly impossible for me to read all of these comments, but I will touch on one of the most popular ones: the call to appoint me finance minister in Venezuela, because what I say in the lesson on maximum prices describes exactly what people are suffering in that country. Of course, the last thing I would ever do in my life, for obvious reasons, would be to accept the position of finance minister anywhere (especially Venezuela). I could also mention the more recent lecture titled “Anti-Deflationist Paranoia,” with 82,452 views, in which I strongly criticize Mario Draghi, the European Central Bank, and all the pundits who are for inflation and against “austericide” (the term they have coined to attack people with principles). All that has been achieved by totally lax monetary policies, zero or negative interest rates, and the excessive purchase of sovereign and even corporate debt is to paralyze all the reforms the European Union desperately needed, Japanize our economies, and lay the foundation for an inflationary shock  which even now we are beginning to feel. Just this morning, it has been made public that inflation in Spain has actually risen to 6.5 percent and will continue to rise. My lecture on “The Japanization of the European Union” has been viewed by 59,859 people to date.

Lastly, because they are very dear to me, I am going to mention the series of lectures I delivered in an attempt to explain that classical liberalism as a project is finished.  Liberals, or rather, lovers of liberty, cannot go on saying the same things as 150 years ago. Classical liberalism has failed in its objectives and is doomed to be absorbed by the only position consistent with human nature: private-property anarchy, libertarian capitalism, or anarchocapitalism. I have developed this argument in three lectures:  “Classical Liberalism versus Anarchocapitalism,” delivered in a main auditorium as well and organized by Students for Liberty; “Liberty, Politics, and Anarchy in Twenty-First Century Spain,” delivered at the Rafael del Pino Foundation; and the most recent one, which is perhaps the most groundbreaking, “Anarchy, God, and Pope Francis,” which, moreover, has been the object of all sorts of debates in Rome. These three lectures have been viewed by over 300,000 people, and if any of you are interested in watching them, I recommend you begin with “Anarchy, God, and Pope Francis,” if only because, in it, I mention the great Spanish anarchist Melchor Rodríguez Almagro, the famous “Red Angel.”

This brings us to my baptism of fire as a film producer and the beginning of my long and very fruitful collaboration with Juan José Mercado. I took my first step with a short film that aims to explain the Austrian theory of economic cycles in a way that is visual, attractive, and understandable. Over 91,000 people have watched the film. Then, we decided to produce two more films, this time using much more professional methods, with a budget of several tens of thousands of euros each, and we would invite experts to get to the heart of the fundamental issues we wished to raise. Our goal was for these films to be freely accessible and an educational tool for university students and also that the films be shown on the different television channels and on platforms like Amazon, Netflix, Movistar, etc. And thus, we finished our first big production, a film titled Fraud: The Reason behind the Great Recession in collaboration with the Juan de Mariana Institute. The film lasts over an hour, but we made a slightly shorter, forty-five-minute version that was shown on the tv station Telemadrid and has been viewed on YouTube by more than 90,000 people. The following year, I proposed the project of another script to Juan José Mercado, and, under his direction, we completed the film In Defense of the Euro, in which we defend the German euro, the true euro as it was created based on the Maastricht Treaty, and not the euro that has been corrupted, adulterated, and ruined from Draghi to the present. All of these productions have, of course, been made under the Amagifilms label (amagi means “liberty” in Chaldean) and under the direction and screenplay of myself and Juan José Mercado.

Now we come to 2019, the year before the pandemic, when I started thinking about a new film project. I began to see the need to produce a docuseries, a set of documentaries aimed at providing a critique of the welfare state. I wanted to present easily comprehensible arguments, clearly show the grave situation we are in, and propose feasible solutions for escaping from our current predicament. This is rather unprecedented. The closest precedent might perhaps be the series Free to Choose, which was made in the 1980s and shown on many television stations around the world. The series was presented by a unique personality: Milton Friedman, the leading representative of the very misguided Chicago School. I would like to give the new documentary series some distinguishing features with respect to the forty-year-old Free to Choose. First, rather than defend capitalism, which was Milton Friedman’s objective, I believe the best defense is a good atack. Instead of defending capitalism, I want to attack the welfare state; that is the first characteristic I wish to bring to the new series of documentaries I am going to produce. What are the contradictions inherent in the welfare state? Why is it unsustainable? What harm is it doing to society? I want to attack the welfare state. The second distinguishing feature I wish to give my film series is the following: Rather than have it revolve around a single figure acting as presenter, we are going to invite renowned experts on each of the topics. The third characteristic is that we do not intend the series to be merely critical or destructive. We want to give it a constructive focus; we want to end each film with an optimistic message and to always provide a road map out of the current predicament, so that the population will see the necessary reforms as feasible and exciting.

I envision four episodes. Logically, each of three would center on one of the essential components of the welfare state, which absorb over 90 percent of its budget: pensions, education, and health care. To these three episodes, I add a fourth devoted to a very topical subject at the moment: climate change. The film about pensions is already complete, and today, November 29, 2021, it will be publicly shown for the first time. At present, we are working on the second episode, which will deal with climate change. Of course, this will not be a denialist film. We are relying on scientists: Climate change is, indeed, occurring, though a very significant part of it stems from natural causes. And though human beings undoubtedly have an influence, it is much more modest than some would have us believe. In any case, widespread and excessively costly manipulation is certainly taking place, and that is what we want to expose in the film. Our society has reached a dead end, much like it has with pensions, and this film will offer possible solutions. Naturally, the main solution is the market. If anything characterizes the market and the capitalist system, it is their great flexibility in adapting to change, and the future will be ours if we allow the market economy to adapt, rather than expecting the state to intervene, as always, via coercion, violence, the Official State Gazette, taxes, subsidies, etc. This is our current project. The goal is to make a film each year. Hopefully, God willing, at the end of 2022, we will be presenting the film about climate change. And in 2023, the plan is to focus on education: the harm the state does to education; to explain why all the different administrations fight to gain control over education. The reason is obvious: to impose their slogans on society and brainwash the citizens. The only way out is to return the responsibility for education to civil society, parents, and families.

I have decided to leave for last the film devoted to health care, for an obvious reason: I wish to let as much time pass as possible following the current crisis of the pandemic, since it would inevitably bias any analysis in this area. However, we can easily discern the content. We must remember that two and a half million Spanish people have the option of choosing between public and private health care. I am talking about civil servants (of whom I am one), and each year, over 80 percent choose private health care. (There must be something to that!) Why not extend this free choice to all Spanish citizens? That is all I will say for now about the major issue that will be covered in detail in the series’s final episode, which will deal with health care.

Finally, I am going to talk a little about the film we are presenting today, which is devoted to the crisis of the pension system. This topic is very dear to me. Remember that in 1983, I was presented with the King Juan Carlos Prize in Economics by His Majesty the King precisely for my work on the crisis of social security and the role of private pension plans in its reform. That is when I first came into contact with José Antonio Herce, and to tell the truth, events have unfolded exactly as in our script; everything has happened just as we predicted forty years ago. I have explained it year after year in my class at the university. In addition, in September of 2018, I was invited to the Summer University at El Escorial, at the Universidad Reina Cristina, to give a lecture recapping the crisis of social security and the role of pension plans in its reform, and in this talk, you will find an up-to-date summary of all of my ideas. It is titled “Ni justicia, ni social: La crisis del sistema de pensiones [Neither Social, nor Justice: The Crisis of the Pension System]” and is available on YouTube, where it has been viewed by over 66,000 people to date. We made a literal transcription of my words in this lecture, and, in embryonic form, it became the script for the film about pensions which we are going to present today. Juan José Mercado used this transcription as a basis for the attractive final screenplay he prepared for our film today.

Although I am willing to individually finance the cost of each of these films, I always look to see if there are people or institutions interested in participating in the project, and I must thank Francisco García Paramés (the so called Spanish Warren Buffet) for deciding to cover, through his institution Value School, 50 percent of the cost of the film about pensions. Furthermore, we are going to produce a version in English, so it can be viewed worldwide. Again, I thank those at Value School for their participation and for collaborating by organizing events to increase the impact of the film, and I encourage them to participate in the upcoming projects as well.

Now it is up to you to: first, decide whether we have managed to offer in the film an informative explanation of the crisis of the pension system; second (and this is one of the film’s distinguishing features with respect to Free to Choose), evaluate the different remarks of the chosen experts; and third, assess our proposal for escaping the predicament – giving everyone the liberty to choose either to remain in or to leave the public pension system. That said, it would be clear that, to support current retirees, the system would have to continue paying out a very large portion of the money it now receives in contributions. If we allow Spanish people to freely choose to leave the public system, we do not know if the majority will leave, as has occurred in the countries which have adopted this solution in the past. If this should happen, the transition could be made in one generation – that is, around twenty-five years – until the current retirees have lived out their lives. It is also possible that, at this time, the idea might not be so successful, and if only some people – the youngest – decided to leave the public system, the transition would take two generations. In any case, let us allow citizens to freely take a stand and indicate to what extent they are willing to make the effort which, without a doubt, is our ticket out of this mess. When this option was offered in the United Kingdom, Chile, and other countries, most people chose to contract out: Over 90 percent fled the system, though they were allowed to take out only 10 percent of the contributions they had been paying into the public system (which were equal to 37 percent of wages, almost the same as in Spain, between workers and companies). Twenty-seven percent continued to go into the public system to pay the pensions of current retirees or pensioners, and as one would expect, young people entering the labor market were obliged to enter the capitalization-based system from the beginning. Obviously, as the transition moves forward, 10 percent is not enough savings, and it is necessary to gradually increase the amount saved. Thus, for instance, there is no use in saying that the system has been a failure in Chile because pensions are very low. In Chile, a very grave error has been committed. When Allende was in power, Chileans contributed 40 percent of their wages to pensions, but even once they had completed the transition to the capitalization-based system, they continued paying only 10 percent, and the guaranteed pensions based on that amount of saving have been obviously small. At the very least, they should have gradually raised to 20 or 30 percent of wages the savings devoted to capitalization, in which case, capital-based pensions in Chile would be two, three, or four times what they are now, and no one would have been able to argue that the system had “failed” in Chile. They have saved too little, and then they cry crocodile tears and even consider a return to the pay-as-you-go system from the Allende period, when workers were contributing 40 percent of their wages (instead of the 10 percent they were contributing up to now). Clearly, the message we wish to send with these films is very important, and we have an enormous responsibility to complete this task of raising awareness and educating all citizens.

I need to wrap up with a clarification. As the producer of the film, I have not been able to resist the temptation to draw a connection between two apparently unrelated topics – the pension crisis and the financial crisis – because one of my favorite areas of academic research is that of the financial system. Perhaps my best-known book is Money, Bank Credit, and Economic Cycles (the seventh Spanish-language edition and the fourth English edition published by the Ludwig von Mises Institute have just appeared), which has been translated and published in twenty-one different countries. In this book, I explain that the capitalist system is incompatible with the financial system as we now know it; in other words, with a banking system that operates with a fractional-reserve ratio and that, therefore, is able to create money from nothing and lend it, thus severely distorting the system by which resources are allocated and causing recurrent cycles of boom, bubble, financial crisis, and economic recession. The only way out is to return to the general principles of property rights a healthy capitalist system requires to function, and in the sphere of money, these principles demand that banks maintain a 100-percent reserve ratio with respect to demand deposits and their equivalents. This may be a lot to digest all at once, but it is perfectly explained in Chapter 9 of my book Money, Bank Credit, and Economic Cycles. Incidentally, a bill was presented in the British Parliament (it did not pass before the end of the session) which proposed to restore Peel’s Act and require private banks to maintain a 100-percent reserve, and my work was expressly cited as having inspired the reform.

One of the interesting by-products of implementing this proposal – besides avoiding bubbles, crises, and recurrent recessions and reintroducing stability to the financial system – is that, as a result, a large portion of the assets that currently appear on banks’ balance sheets as collateral for their demand deposits would be freed up. I propose those assets be used to finance the transition from a pay-as-you-go system to one based on capitalization, thus resolving the pension crisis. Note, at the end of the film we are going to see, how I connect two apparently unrelated spheres – financial crisis and the pension system – and that, if the financial reform the market economy needs were carried out, we would have the chance to accomplish, all at once and without cost, the transition from a pay-as-you-go pension system to one based on capitalization.

(Incidentally, if I am ever awarded the Nobel Prize in Economics – I consider it is impossible, because the Nobel Prize in Economics, like most awards, is given only to “safe,” politically correct  candidates, and my most salient characteristic is not precisely political correctness (though nothing is impossible for God). But if they ever gave it to me, I believe it would be for this very proposal, in which I connect the necessary reform of the banking and financial system with the reform of the pension system.)

Finally, I would like to conclude by observing that all of this effort is just another chapter in the endless struggle of human beings to defend their liberty against the oppression, coercion, and servitude imposed on us by the state. We must never falter, but must take up our struggle daily, generation after generation, again and again, with renewed optimism and enthusiasm. Thank you.

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