Sunday, February 1, 2026

FAKE SCIENCE: Keywords: scientific method, scientificism, Marx-Engels, errors of Marxism, Manhattan Project, Cold War, American communism.


Alchemists made many discoveries over thousands of years. Most of them were to disprove their original ideas and errors. They also made a few useful discoveries. Still goes on, but now they all pretend to be backed by science. Beware of False Prophets. 


Both the man of science and the man of action live

 always at the edge of mystery, surrounded by it.”

 

J. Robert Oppenheimer

 

X

THE MYSTERIES OF THE MARKET


A meditation about forgotten lessons of American Exceptionalism

By Xuan Quen Santos

THE TENTH MYSTERY

FAKE SCIENCE


                In the old days before the XVIII century, science meant knowledge which we associate with truth. After the emergence of the ideas of Galileo, Descartes and Bacon on methodology, science became a system of inquiry, what we know as “the scientific method”. It starts by not taking anything for granted until it is proven. A common definition states that science is “the systematic study of the structure and behaviour of the physical and natural world through observation, experimentation, and the testing of theories against the evidence obtained”. Knowledge is expected to be advanced by truth. But the scientific method is limited to what it can do. It finds it easier to disprove than to prove. This conclusion is relatively recent after many costly errors of science.

* Scientificism: the pretense of scientific, masked by “science base”, “data-driven”, and “research-based” labels for fake science.

Galileo made many experiments as tests of hypothesis. When a truth is found, it can be confirmed by repeating the same testing many times. After nearly 200 years of testing, and 75 countries in failure, "scientific socialism" can be trashed. 
                     
                      BETWEEN SCIENCE AND SCIENTIFICISM

                The XVIII and XIX centuries, the first two centuries of scientific development, saw the label of “scientific” added for credibility and prestige to any new proposition. It became a “brand” for promoting snake oil. It is still around in the phrases currently used of data-driven, fact-based, or research-base. Distinguishing between valid scientific conclusions and snake oil -scientificism- is now a challenge. This is particularly evident in what now are called the “social sciences”, the new name given in this period to what had been called the “humanities”. They are the many disciplines that focus on studying our human behavior. These include sociology, political science, history, psychology, pedagogy (education), and economics, among others. Are these not the areas of knowledge in disarray? Are they not in constant disputes and radical disagreements? Politics? Economics? Education? The paths of scientificism have muddled the search for truth. Failure in politics leads to violence and war. Failure in economics leads to poverty and conflict. Failure in education leads to the self-destruction of society, an involution in our development as humanity.

Rene Descartes, mathematician and philosopher. Required the proof to back any
belief. He used reason and logic, backed by testing when possible. He did not abandon reason and logic.


                It is undeniable that much of the new knowledge unveiled by the scientific method has had a positive impact never before seen on the quality of life. But scientists did not do that. The application of new knowledge to solve the problems of everyday life did it. That was done by tinkerers, inventors, technicians, engineers and enterprising industrialists that operate in the market and are motivated by opportunity.

Francis Bacon published the first handbook to systematize the experimental method 

            

            Progress is made possible by the technology developed to apply new knowledge. Only useful knowledge and the technology that turns it into goods and services increases the quality of life. In economics it receives the name of “capital” in two of its forms: human capital and capital goods. Consumers -the market- decided what was useful or not, what was worth having and keeping, and what to discard. With the successes of science came fame and influence for the scientists, but seldom fortune.  Beware of scientists that are seeking fame and fortune. A real scientist is humble because he knows his results will be contested and may be flawed. He also knows that in due time, a better answer to his initial question may be found. He also knows that whatever door he may have opened will make new doors appear behind. Arrogance and the search for fame and fortune is a clear warning of scientificism.

              The scale and speed of change caused during the XIX century by the use of the new knowledge provoked panic and uncertainty. The ancient artisan and trade guilds were disintegrating and smokestacks from noisy machines were multiplying. Many old physical labor jobs were substituted by mechanical inventions. Hand looms were changed for steam powered textile mills. In 1942, the Austrian-American economist Joseph Schumpeter called this a characteristic of the market economy with the unfortunate phrase “creative destruction”. Change involves the substitution of old for new, better, or cheaper, or for all three atributes. I would have called it destructive innovation. Those forced to change make way for progress and they don’t like it. The rest, the many, the consumers welcome it. Chemistry changed agriculture with knowledge about soils and fertilizers, the latter were soon produced in labs. Food production increased. The scare of the famines caused by population growth never came. The positive changes did not receive much attention. Only history in search of explanations have uncovered the transformative processes that produced the modern era three centuries ago.

                A PERIOD OF VIOLENCE

                The same period of the XVIII and XIX centuries that saw the Scientific Revolution and the Industrial Revolution, also witnessed real destruction, wars and revolts. Violence was in many ways the background  noise of that period. The endless mercantilist imperial wars were interfered by the American War for Independence (American Revolution) and the French Revolts (French Revolution). The Napoleonic Wars followed, inciting the many wars of independence in Latin America (More revolts labeled revolutions). In Europe, the German wars of unification changed the maps. By 1848, a new source of violence became institutionalized and many old monarchies dissapeared, but stronger autocratic states spread their power. The frequent wars saw the young generations conscripted into new armies. The urban mobs affected by the frequent hyperinflations caused by the financing of the wars were also facing crowding  by the emigration from the rural areas. The mobs spread from the communes of Paris like a disease to the capitals of Europe. It was announced that the new wave of violence was justified and explained by science.

Marx and Engels, young agitators arrived from Paris, prepare the Manifesto for the
Communist League of labor unions in London, 1848.

                THE DISMAL SCIENCE

                Economics is called by many “the dismal science”. To better understand this label, let’s travel back in time to England in the 1840’s when it first appeared. It was meant in derogatory terms, it was an insult.

                What was happening at the time? What was the situation that led the eccentric Scottish philosopher Thomas Carlyle to pronounce in 1849 his acusation against the science that had not even begun to agree on the basics.  

                The high-pressure, piston steam engines had made their impact and the Industrial Revolution had just taken off. Think of all the bad things you have been taught about overcrowded cities, carbon pollution, dislocation of rural populations, disease, railroads, smokestacks, etc. Malthus had earlier predicted famine, death and the return of the plagues because of “the population explosion ”. Most facts are true but they don’t tell the whole story. It was just the beginning of one of the most significant periods of human progress.

                Innovations in technology were displacing the craft guilds and threatening all the ancient arts and crafts with mass products. The production of iron and steel transformed tools, machinery and construction. Nails or pins no longer were made by hand. Manufacturing (made by hand) gave up its place to fabricating (in factories). Workers were rebelling against machines and throwing their “sabots” (wooden shoes, or shoes with wooden soles) into the fragile machines of the textile mills. Sabotage and Luddites are terms born out of the first organized opposition to progress made by labor organizations. Boycott had its origins in the XIX century Irish Land War originating in tenants’ protests. The slave trade from Africa had become an embarrasment and slavery was abolished, leading to disruptions in the wage structures of the colonies, revolts and great capital losses to the absentee plantation owners.

                A THREAT TO THE ESTABLISHMENT

                Free trade was becoming a threat to the royal charter monopolies and their wealthy investors. The ideas of an open economy as proposed by the Physiocrats and Adam Smith, had received support by some of the first philosophers called “economists”, such as Jean Baptiste Say and John Stuart Mill. Free trade entrepreneurs like Josiah Wedgwood, James Watt, Richard Cobden and John Bright, few belonging to the landed upper classes, were getting rich “without lineage”.

One of the Steam Engines by James Watt, used to pump water from the coal mines

                The socialist ideas of many of the French intellectuals and the violence produced by the French Revolts had given birth to the organized urban mobs for political purposes. Paris became the training grounds for anarchists and revolutionaries from all over Europe. The first labor unions were organized, even across borders. They needed someone to write their grievances and some phrases for the banners and posters.

                Two young German agitators from universities in Germany, but trained in the revolts of France, Karl Marx and Friedrich Engels declared that “doom’s day” was coming for the rich.  Sponsored by the English labor unions to write a Manifesto” for their convention, they announced the death of capitalism as predicted by their newly minted “science” of history. With the infamous phrase “Workers of the world unite” they called for the mobs to destroy capitalism. 1848 was the year of violent riots and revolts throughout the main cities of western Europe. Since then, they re-appear as a well oiled political tool of the undercurrents of communism.

                The fact it was proposed as “scientific socialism”, a political model, and justified by the advances of economic science -scientificism- when it was just a hypothesis of how the basic material needs of the masses are what moves history , should have been a warning. It was not history and not a new political model, just a re-branded idea of socialism masked with bad philosophy and scientificism. At that moment, economic science was not advanced enough to be credible and the predictions resulting from the hypothesis about history were not confirmed by events; quite the contrary, after nearly 200 years, not one came true.

                EMERGENT SCIENCE

                Economics did not bear good news then! No wonder Carlyle was incredulous and dismissive. Carlyle thought the pronouncements by economists of the time were pessimistic and he preferred the beauty of poetry!

                The turn of the century into the XIX century marks the emergence of economic science as a discipline with its own identity, but with ill defined object of study and method.

                Rather than producing an abstract general theory of economic behavior, the focus of the early economists was “normative economics” and “political economy”, meaning what governments should do to manage the economy. They were looking in the wrong direction and asking the wrong questions. The ongoing mercantilism was a series of competing national economies centrally managed by autocratic governments.

                The term “political economy” was first introduced in 1615 in France by Antoine de Montchrétien in his work "Traité de l'economie politique", greatly defending mercantilist ideas. He supported his view with the arguments of the famous Medieval scholar Jean Bodin over the errors introduced by Aristotle. He stressed the importance of the use of productive labor and the acquisition of land and minerals to promote wealth, added to the confusion about the nature of prices. He was not a scholar, but a mixture of soldier of fortune, dramatist and public official. He got involved in the first wars of religion, was ambushed, and killed. Still, the judges put his cadaver on trial, sentenced his bones to be smashed with iron, his corpse burnt and his ashes scattered. His now forgotten contribution is the phrase “political economy” that was initially used to identify the new focus on the human activity of commerce (production and exchange).

                THE CLASSIC ECONOMISTS

                The term political economy was later popularized by Adam Smith, David Ricardo, John Stuart Mill, François Quesnay and Jean Baptiste Say. These, and others, are called “classic economists”, not exactly in praise. The “political” adjective began to reflect its Greek root “polis” in reference to the city, a large market with an active commerce, and not in reference to the city-state type of government. This introduced the distinction between the original oikonomia that referred to household management (home economics), and the broader term of economic science or just economics referring to how human communities create wealth by producing and exchanging in the market.

Jean Baptiste Say, author of the first school/college textbook on the new science of Economics

                Jean-Baptiste Say (1767–1832) represents the state of the science of economics at the time Marx and Engels were students, not of economics, but of philosophy and history. He is recognized as an advocate of free trade and competition. He is best known for Say's Law, also called “The Fundamental Law of Markets” which simply states that to participate in the market and receive its benefits, one only has to offer others something they are willing to trade for. Say translated Adam Smith’s writings to French and founded the first business school. He later taught political economy at the Collège de France for which he wrote the first textbooks.

                Adam Smith was the trailblazer and his many insights remain as the structure upon which all others have built. But, he was unable to advance beyond  Aristotle’s idea of use-value and exchange-value. Exchange-value had already been identified as prices, and prices were a matter of the market in competition, not a government function. The agenda for the basics was open for further inquiry.

                The nature of prices was still confused with costs and there was no explanation as to how they emerge in the market. Costs were thought of as originating in the chains of the cost of labor as illustrated by the Economic Table of Quesnay. Others, included costs related to possessing land for the soil and its minerals. Additionally, the erroneous idea of the “zero-sum” caused also by accountants identifying money-profit was still mysterious. Use-value was set aside and forgotten.

                Perhaps the most important original contribution by Say was identifying the “entrepreneur”. The English language could not find an existing word for it and the French word became the term used since then. The term used at the time was “capitalist”, really defining the owner of the business. This distinction allowed Say to break the error of “costs” as price, and also invited further inquiry into the role of the entrepreneur, as different from the owner or the manager or administrator of a business. The entrepreneurial function as a specific role in economics was a key to understanding the economic process.

                The entrepreneur that deals with prices for everything he decides knows that defining prices as the sum of costs is a reasoning error. It is called circular logic that basically starts with what you want to define, and your conclusion brings you back to your definition. In our case it goes like this. Prices are the sum of costs, but costs are also the prices of previous transactions, so it follows that prices are the sum of prices. Thus, prices have not been defined. The accountant thinks that the price is determined by the businessperson by adding his costs and topping it with his profit. The entrepreneur knows that the prices are already there in the market and he has to find them; to make a profit, he has to produce at costs lower than the price. If all businesspeople had to do was add a profit to his costs, there would never be losses. A theory of profits must also be the same theory of losses.

                BLINDED BY OBSESSION

                The following fragments written in 1848 about the transformation that was taking place is one of the most vivid descriptions and amazing historical notes.

                 “The feudal system of industry, under which industrial production was monopolized by closed guilds, now no longer sufficed for the growing wants of the new markets. The industrial system took its place. The guild-masters, craftsmen and artisans were pushed on one side by the manufacturing middle class; the limited division of labor between the different corporate guilds vanished in the face of an extensive division of labor in each single workshop and factory.”

                “Meantime the  markets kept ever growing, the demand ever rising. Hand labor and tools no longer sufficed. Thereupon, steam and machinery revolutionized industrial production. The place of workshops was taken by the giant, modern factory; the place of the laboring working merchant  class was taken by industrial millionaires, leaders of whole industrial armies: the modern urban businessmen and entrepreneurs.”

                “Modern industry has established the world-market, for which the discovery of America paved the way. This market has given an immense development to commerce, to navigation, to communication by land. This development has, in its time, reacted on the extension of industry; and in proportion as industry, commerce, navigation, railways extended, in the same proportion the business class developed, increased its capital, and pushed into the background every social and economic rigid class handed down from the Middle Ages.”

                The author had studied history and was witnessing the transformation that free trade, and new technologies were making on the ancient Medieval system of rigid class structures. The political systems of the times were in  question and under attack. New ideas for the organization of future governments were spreading. But one thing is clear. The author was in awe of the transformation he was witnessing.

                Unfortunately, he did not stop to explain one extraordinary phenomenon he mentions several times: “…growing wants of the new markets…” “…the markets kept ever growing, the demand ever rising…” “…industry has established the world-market”.

                Had the author stopped to think about what was causing the extraordinary growth of the markets, he would have changed the course of his life. But he did not. He was already fixated on his own ideas and predictions about what would be the calamitous end of the process of transformation he was witnessing.

                The markets were new and growing; this can only mean that more people had more purchasing power to buy more. It also means there were more people employed and making better wages than their previous options. It also means prices were dropping and products were new. The consumer class, which is the same as the working class, was improving their lot; it was growing, not starving to death. Most people were improving their lot. The extraordinary improvements in the quality of life in the world connected to a freer market economy in the last two centuries are the indubitable evidence of what actually happened. It was not doom’s day nor the death of capitalism.

                This passage is part of the introduction of Karl Marx’s “The Communist Manifesto” (1848). The rest of the document can be divided into three topics. A few more paragraphs about the marvels he was witnessing, gradually they turn into his dark visions of the future led into by his ignorance of economics, and finally, his proposals to destroy what he called capitalism.

                He never understood the nature of voluntary free exchanges, of entrepreneurship, the formation of capital, or the productivity of labor. For his dark forecast he combined the errors or deficiencies of the Classic Economists at that moment with the flaws of his own philosophic vision he labeled “Dialectic Materialism”. In plain words, the big changes of history are the result of violent confrontations between the oppressed (the many) and the oppressors (the elite).

                Marx was a self-absorbed, frustrated and obsessed college agitator that had closed his intellect and failed to understand what was really happening all around him. I devoted my previous book “Illusions, Half Truths and Masks” (2025) to the new rise of communism in America with a full explanation.

                I have to confess that the text I presented is not the usual translation. I have made minor changes in punctuation as per modern usage, I omitted and substituted the toxic term “bourgeoisie” that Marx used as an insult to businesspeople and entrepreneurs, and I modified his references to class. If you are not familiar with “The Communist Manifesto” and its ten points of how to destroy capitalism, I suggest you search for it. It is available everywhere, to my dismay. It is in the classrooms and most college syllabi on any of the social studies programs, not in China or Russia, but right here, near your home.

                Several decades went by between the call to revolution and any attempt to explain how the new system they proposed would work. It was Friedrich Engels who edited with great input the first three manuscript volumes of “Das Kapital”. He may have actually written the last volume from notes and incomplete drafts left by Marx, with a lot of personal input. The final volume appeared in 1867. By then, the revolts starting at university campuses had become a regular event. The lack of substance did not matter. Only the narrative of oppressed against oppressors did. By 1894, Eugen Bohm-Bawerk, of the Austrian School of Economics, a major exponent then of what now is the essence of mainstream economic science, had completely debunked Marxism-Engelism as economics, much less as “scientific”.

Bohm-Bawerk, one the founders of the Austrian School of
 Economics demolished the intellectual construct of Marx-Engels since 1894
  
                IT NEVER HAPPENED!

                Young Marx’s awesome description of the changes he was witnessing originated in what he called the new era of the businessmen and entrepreneurs (Which he called the bourgeoisie). He expressed his admiration for the new markets and products that were driving the reorganization of industry and labor. But his limited understanding of the economic process, his mental condition, his conflicted religious background and personal hatreds were a blind that prevented him to see the whole truth: wages and salaries were increasing; standards of living were improving. Life was better, particularly for the underclasses. As times have gone by, the truth is evident.

                It is unquestionable that the Marx-Engels intellectual construct stated categorically that spontaneously: 1) Capitalism was collapsing by its own internal contradictions. 2) Because of the inevitable and constantly increasing exploitation of the proletariat with ever lowering wages, a violent revolt would take place. 3) The change would take the form of a new socio-political order called socialism. And 4) A new classless, egalitarian society called communism would eventually be established to guarantee everyone  what they needed, from the cradle  to the grave. None of the predictions ever happened. A quality of any scientific theory is its predictability. Marxism does not have any.

Just two decades after Marx’s call for the workers uprising, he was confronted with factual information about higher wages, salaries and productivity. His  answer: The capitalists are conspiring to stop the revolution by paying the workers more. I have actually heard the same from union leaders in more recent times. In the words of Alexander Solzhenitsyn, “Socialism is defended with a passionate lack of reason” (1975).

DEFECTIVE DATA

The data that supports the conclusion of any real theory must be sufficient, accurate, representative, and valid. The social sciences face the problem that experimenting with humanity (society),particularly over long periods of time (history), is not possible. This means that turning history into a science attempting to use “the method” becomes an interpretive narrative of previously collected unreliable information and described out of any control by the current interpreter. The conditions described and analyzed by Marx and Engels were mostly from what was happening in Great Britain, France and Germany. The first decades of the XIX were the period during which the failures of mercantilism had merged with the conditions of war, inflation and revolts described in previous pages. Two errors are evident. The first was ignoring the changes in a different direction taking place in the United States of America. The second was a common error that plagues the sciences: linear projections into the future. This can be illustrated by someone recording the changes of temperature from midnight to noon, and considering it sufficient data, making the projection that at the same pace, the planet will be in flames in a few hours.

The difference between studying human behavior, such as what is recorded in history or what happens in the market, and studying the planets or the ants is that humans can modify their behavior in search for better conditions. Unforeseen change, innovation, taking high risks when facing the unknown, out of the box…human behavior is never totally predictable. Again, something to do with entrepreneurship.

The projections about the young country developing across the ocean were not based on following the same patterns of the past, but on developing a new pattern of behavior. Adam Smith was right in his forecast, not based on projecting the past based on erroneous ideas, but simply trusting the ability of Americans to follow their natural liberty and common sense.

AMERICAN EXCEPTIONALISM

The young American free enterprise system was not the decaying European capitalism in 1848, but neither Marx nor Engels saw the differences. Between 1776 and 1789, a new model of political organization in America stumbled upon the matching principles of a free market economy based on the rights of all individuals to exercise their personal choices respecting the laws applicable to all, whether it was by selecting a candidate for public office, or by selecting a type of tea or rum. The American mega-market began by erasing the economic effects of the barriers to free trade implied by the colonial (state) borders. It protected for a limited time the rights of inventors and innovators to profit by benefiting others. Multiple UK, French and German expatriate entrepreneurs succeeded in America, not in the old country. America expanded and protected the ownership of property to the common European immigrant, a right denied to most of them in the old continent.

As a result, America became a world power at the same time as the old countries continued to decline. Contrary to the Marxist model, an unpredicted American middle class emerged elevating the standard of living of vast numbers of people. Since then, American ingenuity and innovation have improved the living conditions of the world. Continuing to use the word capitalism instead of a free market economy reinforces the errors of Marx-Engels by using their language which referred to Old England.

                On the parallel side of the new ideas on how communities organize themselves, the United States created a “novus ordo seclorum”, in plain words meaning a new system for the future. Although its system was not linked to any names of the past, its political organization was designed to disperse the power to the people, thus its being confused with a democracy, when it is not. During the Enlightenment, democracy was considered to be the alternative to monarchy. The Founding Fathers clearly rejected the concept as it inevitably leads to the tyranny of the majority, where the rights of any one person can be obliterated, as could the rights of any group smaller than the majority minus one.

The unfinished pyramid in the Great Seal of the United States of America, a project
 for all future generations to add an improvement to the New Order for the Ages
        

                AMERICA – A WORK IN PROGRESS

                Although it has not been formally recognized in  framework legislation, for the American system it follows that to have harmony between its political system and its economic system, its institutions need to recognize the path of “natural liberty” in economics. Americans should ignore the errors that came from the European failed ideas about the economic system. The economics of the free market, the free enterprise system are the theory that explains human progress and the creation of wealth in peace. Remember, wealth used to mean happiness. Isn’t the free market the clearest manifestation of how the people use their economic power in the most dispersed system? Every dollar is a vote as an expression of the freedom of choice. The best definition of “The American Dream” is the right to pursue happiness.

                Americans are still mostly free to choose, while Europeans are still governed by “decorative socialist-monarchies”, communists disguised by several labels, or socialists with masks of moderate scientificism, including English Keynesian or “modern economics”. They all have in common the same essential idea: a small elite in power centrally manages the lives of the many, the very opposite of the dispersed power of the market. The economic system is the lives of the people. If the economic system is not free – the people are not free to choose- there will always be costly frictions between the political system and the economic system.

                As a bloc, the European Union is still trapped in the mercantilist idea of balancing the economies of its state members as it is flooded by the back-flow of immigrants from their underdeveloped colonies they recently “freed”, but only to reduce their losses. The last colony freed from Britain was Brunei in 1984, two hundred years after the United States won its freedom. Algeria won its freedom after an eight year war with France in 1962. Barbados gained it from Holland in 2021. England, France and Holland still control several islands each in the Caribbean.

                THE TUNNEL VIEW OF SCIENCE

                Not all the ideas of “The Enlightenment” survive the scrutiny of time. The search for a better system of government led to violent revolts, wars, and a return to tribalism under the label of self-determination of the fragmented empires. Among the many failed ideas are the sects of disguised socialism that came out of The Enlightenment and The Reign of Terror of the French revolts. They both claimed to be “science-based”. One proclaimed itself as “scientific socialism”, the other one called itself “positivism”. It has to do with how university education changed. The code words of democracy and social became the masks that conceal the nature of many other proposals that seek the same result.

                The rise of science disrupted the old centers of knowledge. A new type of university was promoted as “science-based”. Theology was expelled, philosophy was sent to the basements, and the humanities dissapeared into the new social sciences. Research universities began to take over academia, most under the control of the modern state bureaucracies and organized following the model of instruction of the military academy promoted by Napoleon and established during the middle of the first French revolts.

                King Louis XVI was guillotined in 1793, and the Ecole Polytechnique was established shortly after. No longer a military school,  but a factory of fancy bureaucrats, its current promotional materials state that “The School was founded on March 11, 1794 with the mission of providing its students with a solid scientific education rooted in mathematics, physics and chemistry, and training them for entry into specialized schools of the French state public services.” The first rank (degree) of engineer came out of EP. The resulting “modern” Napoleonic military might came close to conquering most of Europe. The post-Napoleonic Europe learned many lessons. Berlin University (1810), now Humboldt University, followed EP.  The trend came to the United States: the modernization of West Point (1817), the founding of MIT (1861) and shortly after the many A&M-Agricultural and Mechanical, only male and militarized engineering schools that began in 1862.

Student riots in Paris, a national pastime and training grounds for international
urban terrorism since the French revolts that started in 1789

                Why have I inserted this note about the transformation of the medieval scholastic university into the science-based research university that prevails today? Because it not only explains much of humanity’s material progress since then but also explains the failure of Europe and the rise of the United States at a particular time. It also explains the errors made in the developing science of economics that have had lasting negative effects. Marx and his generation of agitator intellectuals were the product of the new university. The universities reorganized not just their systems, but also their purpose. The search for knowledge and truth was substituted by relevance to society led by the state. Universities now take pride in producing men and women of “service and action”.

One of the early entrances to Los Alamos, high security secret laboratory in 1944

                I began this meditation with a quote from the “Father of the Atomic Bomb” J. Robert Oppenheimer: “Both the man of science and the man of action live always at the edge of mystery, surrounded by it.” Although recognized as a scientist, he was really an engineer highly educated in the new area of nuclear physics. The real scientists that had opened the road were people like Dalton, Marie Curie, Max Planck, Nils Bohr, and Albert Einstein, among a few others. Oppenheimer was part of the team of experimental engineers known as The Manhattan Project that developed the technology to build the first Atomic Bombs used to destroy the cities of Hiroshima and Nagasaki in August of 1945. That was their service to the state that ended the last European-centered mercantilist war that had spread to Asia. The United States had managed to stay in the periphery until it was attacked directly. That was the science part at the service of the state.

The 1949 first soviet atomic explosion that started the Cold War

                Action followed. Somehow, the secrets of the Manhattan Project ended up in soviet labs. The first soviet bomb was exploded in 1949. Several members of the team were investigated, including Oppenheimer. It became known that in the 1930s, and until 1943, he was a Communist sympathizer, and his wife Katherine, his brother Frank and his girlfriend Jean Tatlock were members of the Communist Party of the United States. U.S. Army security officers identified other project members as communists. Klaus Fuchs had passed secrets to the Soviets. A KGB agent, Harry Gold was his courier. David Greenglass, Julius and Ethel Rosenberg had also passed atomic secrets to the Soviets. In 1995, after the collapse of the Soviet Union, the secret archives of the KGB revealed a larger extent of espionage involving additional British and American collaborators in the Manhattan Project.

During the 1950s and 60s, children, older students and office workers did periodic drills in preparation of the atomic bombs. Now they are lockdowns because of terrorist threats.

                Their explanations of their betrayal differ. Some were hardline communist operators; others believed the soviet power was the only one capable of defeating Hitler; a third idea was to save humanity from a nuclear holocaust. By having the soviets attain the same power, a “balance of power” would prevent further use of their creation by the mutually assured destruction. You can be the judge of their reasons and what has taken place since they empowered America’s enemies. 

One of several teams working on the Manhattan Project at Los Alamos. Two university professors and several advanced graduate students in science disciplines
           


                The paradox is that this group of highly educated scientific engineers and technicians, product of the scientific method, fell for the most un-scientific and primitive form of political-economic social organization ever proposed. 


Since the 1949 first soviet Atomic Bomb test, the equilibrium caused by the betrayal of the US scientists has made the world live in a hot crisis under the threat of an atomic holocaust. The secret was passed on to China, North Korea, Pakistan and India. At one time Cuba and Lybia were in the same path. Iran is still working towards that goal. With the exception of Israel that may also be an atomic power, the others are client states of the former Soviet Union, now disguised as the Russian Republic.
Ironically, the hot crisis was labeled "The Cold War" in doublespeak English

Thursday, January 22, 2026

 THE MYSTERY OF THE DARK MARKET: Keywords: Mercantilism, smuggling and bribery, customs corruption, patriot smugglers, John Hancock, free market, tariffs and customs duties, black market.


Colonial riot against customs, contemporary illustration


 “Mystery creates wonder and wonder

is the basis of man’s desire to understand.”

 Neil Armstrong

 

IX

THE MYSTERIES OF THE MARKET


A meditation about forgotten lessons of American Exceptionalism

By Xuan Quen Santos

THE NINTH MYSTERY

THE DARK MARKET


                If people are free to pursue their happiness, wealth will follow. If they are not free, they will try anyway.

                MERCANTILISM AND THE BORDERS

                Mercantilism was criticized by the French Physiocrats and by the Scottish School scholars, pointedly by Adam Smith. But their arguments and ideas were not strong enough to force changes to the status quo of the late XVIII century. The monarchies had become more powerwul and many of the chartered companies had become quasi-governments in the colonies, with their own armies and police.  Mercantilism had militarized the limits and borders between jurisdictions. Armies and navies grew in number and lethality. Fortified ports of entry and hardened borders were expanded with custom houses, tax collectors, and border police. Chartered monopolies of trade suffocated the local initiatives. Prohibitions and persecutions of colonial enterprises were the rule. Cities naturally divided by a river, suddenly became enemies. What they could trade before with a handshake across the border became illegal. Opportunities that made all the economic logic were lost to satisfy the “managed trade” done from the mother countries.

Lord North, Prime Minister of King George III
the power behind the throne and the custom houses

                The ideas and evidence provided by the early economists that favored free trade gave factual support -the evidence that science demands- to stimulate some political leaders to question the system under new light. The currents opened by “natural rights”, “equality under the law”, and “limited power of governments”, suddenly received new attention. For centuries, that type of discussion happened within the spheres of ethics and political systems, far away from involving the common person. Suddenly, economic ideas made those topics relevant to all people in their pockets. These ideas are expressed clearly in the Declaration of Independence of the United States. But the courage found by the Fathers of the Country was not just supported by those ideas. Many were smugglers and all of them were benefitting from an extensive “dark market”.

                SMUGGLING PREVAILS

                What is smuggling? Trading across jurisdictions in violation of legal restrictions.  In the more advanced countries, smuggling is associated today with illicit drugs and human trafficking.  It does not have to be that serious. Just outside some county lines, in the next county but just some feet away from the border that separates them, many gas stations and bars make their business by selling cheaper gasoline, cheaper cigarettes, or hard liquor. Some may even offer you gambling with “gaming” machines or sell lottery tickets.

Smugglers unloading in the stealth of night

                These simple acts of everyday commerce mean that the laws, ordinances, rules, restrictions, or whatever arbitrary disposition of the sheriff in the first county have made illegal or more expensive for their residents an innocuous activity. Gasoline and cigarrette taxes are higher in the first county that is also “dry”, where hard liquor and maybe even lottery ticket sales are prohibited. People from the first county buy them across the line, save some money and take home what they wanted. The border is open to come and go, thus it is not illegal to buy.

                Several things are clear in this example. The neighboring jurisdictions have different laws and different taxes; that difference has created an opportunity to save money or make some. If you think big, you may buy more beer or cigarettes than what you would personally consume and even buy extra lottery tickets to take home to sell and make more money. If you do that, you will not only be smuggling but also trafficking in illegal goods. What is also evident is that you were denied your freedom of choice and your costs have increased by having to go across the county line. Your freedom to trade in your county has also been denied and criminalized.

                A common phrase used to describe illegal commercial activities is “the black market”. From the example you may agree that describing it as black seems  too exagerated. Even “dark” may not apply to many such activities which often happened in the dark of night. Another term used is “contraband”. There seems to be a difference between re-selling beer, liquor, and cigarettes, and re-selling illicit drugs and smuggling illegal aliens across the international border. In the former cases, the line and the laws are used to interfere in the operation of the economic system. In the latter, the line and the laws are used for reasons of public safety and national security. The instrument is the same, but the purpose is different.

Privilege creates economic opportunity for gain

                   TAX FREE AND LEGAL INDIAN CASINOS

                Think of the proliferation of “Indian Casinos”. The Indian reservations are allowed to make some of their own laws. In states where gambling has been declared illegal and there happens to be a Federally Recognized Indian Tribe, the tribe can now promote and offer gambling within the reservation lands. It is also very common to find that my example of the gas station at the border applies also to the reservations. They profit from the higher costs that exist on the other side of the line. Their customers go for the entertainment that is forbidden at home and buy cheaper gas and cigarettes. Indian Casinos lure visitors with the promise of fun and lower prices that somehow are higher and forbidden on the other side of the line. Different rules lowered the prices on one side and created an opportunity for the customers and the casinos to benefit. It is not contraband because it is legal. In this case, the line and the laws have created an economic advantage for the casino that is denied to people on the other side of the line. This is clearly a “privilege”, which means “a private law”.

A monopoly created by a privilege

                During the XVIII century, by their own accounts, many Indian traders, mainly women of the Iroquois and Mohawk tribes that inhabited the territories of what are the borderlands between today’s Canada (New France) and the United States (New England), chose to trade furs originating on the French side with buyers at the trading posts of the English side. The riverine highway from the Richeliu River to Lake Champlain, to Lake George and to the Hudson River was an active contraband corridor. The Indians preferred the prices and quality of English woolens and other manufactures. Before Europeans began to draw lines and impose their laws, free trade existed on this riverine highway among the tribes.

                This territory was where most of the action of the “French and Indian War” (Seven Years' War, 1754-1763) took place. It involved several Indian tribes in conflicts against each other that would not have happened had there not been conflicts between the European empires. Policing to prevent the trade that had existed among the tribes was one local issue of the war. The trading posts were supplied by the chartered companies. Contraband does not exist until a powerful entity draws a line on a map and enforces a prohibition to trade. For the Indians, those lines did not exist. Commerce along the rivers transmit news and knowledge, creates peaceful  relationships, even family ties and tribal alliances. Managed trade harms or destroys all those common benefits, in addition to adding unnecessary costs.

                MERCANTILISM FOSTERED SMUGGLING

                In order to control the “balance of trade” in favor of the mother country, prohibitions were imposed on what the colonies could manufacture forcing them to import. They were restricted as to whose ships they could use, and also with whom they could trade. British colonies could only buy from British producers and use British ships. All the empires did the same to protect their interests. At times, it was possible for the colonies to import from other authorized sources but they were discouraged by having to pay high duties (import taxes).

                In the case of the British colonies in North America, several circumstances worked to their advantage. They were more distant and less profitable for the king’s treasury than the Caribbean colonies. Historians estimate that it cost the crown four times more for the royal navy to police the Atlantic and the ports of New England than they could collect in duties and tariffs. The English Navigation Acts had existed long before 1765, but had not been effectively enforced. During the previous hundred years, England had undergone major changes in its governance. It went through the English Civil War, the dictatorship of Cromwell, the restoration of the Stuarts, the transfer of the monarchy to a Dutch king, and eventually imposing the German dinasty of the Hanoverians. Parliament and factional politics had become the power of the state. During this time, that historians call of “benign neglect”, the colonies were mostly on their own.

                Much has been written about how this period allowed (better described as “forced”) the colonists to experiment with different schemes of self-governance and military defense. They became free to pursue their happiness, even if it was illegal, and wealth followed. After 1765, the British monarchy began to assert its dominion, but by then, the economy of the colonists had become much less dependent on the “managed trade” imposed by the mother country.

Unloading contraband away from customs control

                The New England colonies that were not suitable for large scale farming, gradually converted to small industry and commerce, with many towns and ports. The North Atlantic fisheries led to ship building. Ships became merchant ships and intercolonial commerce began to compete with the British interests. Colonists ignored the Navigation Acts and their ships transported illegal goods from the French, Dutch and Spanish West Indies. Like the Hudson River, the Mississippi was also a riverine highway for smuggling. All of it was illegal trade under the mercantilist English laws.

                It was inevitable that the other face of smuggling appeared.

                SMUGGLING AND BRIBERY

                Contraband and public corruption go hand in hand. The first one is commerce arbitrarily categorized as illegal. The second one is the result of the economic opportunities that the arbitrary law created.

                All the mercantilist legislation falls under what one of the champions of free trade categorized as “not respectable”. By definition, arbitrary legislation is not respectable. The French economist and politician Frederic Bastiat (1801-1850) was elected to the Constitutional Assembly and later to the Legislative Assembly in the aftermath of the third French revolt of 1848. He had championed the principles of free trade as a journalist and published a summary of his public debates in “The Law”. It is amazing to read it now as it seems that we are debating again what was left behind many generations ago. These are his words about respectable laws: “No society can exist if there is no respect for its laws. But, it must be the case that for the laws to be respected they must be respectable. When the laws and moral principles are in contradiction the citizen is caught in the cruel alternative of choosing between what is right or following the law”. Mercantilist legislation is the concession of arbitrary privileges for the benefit of a few at the expense of the welfare and rights of the many.

Frederic Bastiat - Defender of free trade

                Smuggling or contraband of what normally would have been plain acts of commerce were declared illegal for the benefit of the kings’ business partners, and the manufacturers and merchants of the mother country. When the colonists realized what the scheme was, and found alternatives that could benefit them, they took them. Smuggling, or buying contraband merchandise would increase their wellbeing, cover the costs of avoiding the high duties or tariffs, or the costs of avoiding prosecution. The difference between the arbitrary prices set by the monopolies and the market prices available in the open market allowed for a profit and for PAYING BRIBES.

                If people are free to pursue their happiness, wealth will follow. If they are not free, they will try anyway.

                Mercantilism came with bureaucracy and abuse. British customs officials, like all customs officials of the other colonial empires, earned a modest salary from the Crown. Before the XIX century, it was common for the high and mid-level officials to have bought their post by paying a bribe to some higher up in the mother country. They soon found that they could earn a bonus by looking the other way as the “dark” shipments came in, by counting less number of items for their ledgers, by changing the description of the imported goods, by lowering the “ad valorem” estimate of value… When smugglers were caught, they were often released by sympathetic colonial judges. Smuggling became commonplace.

Replica of a smuggler's ketch, smaller but faster

                The history of colonial America, the whole continent, cannot be fully understood ignoring the roles that smuggling and customs corruption played. The big difference between Hispanic America and the United States is that after independence from the colonial empires, the United States opted for a transition to free trade backed by free enterprise and a government of limited powers to interfere with commerce. The Hispanic American countries kept their colonial “managed trade” with high tariffs and duties, promoting national monopolies, and keeping the corrupt structures of government intact, ready to line the pockets of the new bosses. The privileges of the king were just passed on to the new “status quo of power”, the bureaucratic state.

                SMUGGLING PATRIOTS

                John Hancock, the guy with the large signature in the Declaration of Independence, was also one of the wealthiest men in America. Part of his income was derived from smuggling. On May 10, 1768, the Liberty, a ship owned by him was inspected because the customs officials suspected Hancock of smuggling. The reason was that the ship only had 25 barrels of Madeira wine listed as cargo, but it had the capacity for much more. They alleged that Hancock must have unloaded the rest of the cargo during the night. Two customs guards had been stationed on the ship during the night and they said nothing was unloaded… at first. On June 10, 1768, his ship was finally taken over by the royal navy after the guards told the truth. A riot broke out in Boston and the homes of several customs officials were destroyed, causing them to flee. Hancock’s ships had a history of encounters with customs officials, and his goods were highly appreciated by the public.

A promoter of revolts against customs abuses,
smuggler and patriot


                Hancock was not alone. Other signers of the declaration suffered worse losses once the war begun. George Clymer from Pennsylvania lost more that one hundred of his merchant ships, either destroyed or taken over by the Royal Navy. Carter Braxton from Virginia saw all his merchant ships sunk or captured by the Royal Navy.

                In general, the many ports and harbors of New England, as well as the former pirate havens of the southern states’ coasts had an active “dark commerce” and their shipping entrepreneurs supplied the many non-British imported goods that were cheaper or unavailable from British suppliers. The colonial shipyards managed to create a fleet of merchant ships equivalent to half of the tonnage of the British merchant fleet of the times.

                Once the War for Independence began, it was the supplies and funds provided by smugglers sent by the Spanish Governor of Louisiana, Don Bernardo de Galvez, that allowed the ragtag militia led by George Washington to survive the first period of hostilities. The Spanish had closed the Mississippi River to the British Navy and sent the smugglers up the river into the Ohio. These routes had been well known to the Indian traders. New Orleans had been a center of smuggling entrepreneurs since it was established. Louis Antoine Juchereau de St. Denis founded the trading post on the Red River to smuggle French goods into New Spain, and Spanish cattle into Louisiana destined to New Orleans. It is interesting to note that his partner in the illegal operation was the Spanish Governor of the Texas territory. Later, the Lafitte brothers became the heroes of the War of 1812, and were pardoned for their well known acts of piracy and smuggling. They are the real founders of the Port of Galveston where they would dump their contraband into the Spanish territory of Texas when it was just a sandy island.

St. Denis, French explorer, trader and smuggler on the Red River in Louisiana


                Within the framework of the non-respectable mercantilist laws that ruled the colonies, the line that separates the criminal from the patriot, or the smuggler from the merchant is hardly noticeable.

Jean Lafitte raiding a merchant ship in the Gulf of America