Archive for December 16, 2009

Future Prospects for Economic Liberty

December 16, 2009 by pu3106.

Walter Williams
Professor of Economics, George Mason University

WALTER WILLIAMS is the John M. Olin distinguished professor of economics at George Mason University. He holds a B.A. from California State University at Los Angeles and an M.A. and a Ph.D. in economics from UCLA. He has received numerous fellowships and awards, including a Hoover Institution National Fellowship and the Valley Forge Freedoms Foundation George Washington Medal of Honor. A nationally syndicated columnist, his articles and essays have appeared in publications such as Economic Inquiry, American Economic Review, National Review, Reader’s Digest, Policy Review and Newsweek. Dr. Williams has authored six books, including The State Against Blacks (later made into a PBS documentary entitled Good Intentions) and Liberty Versus the Tyranny of Socialism.

The following is adapted from a lecture delivered on August 2, 2009, during a Hillsdale College cruise from Venice to Athens aboard the Crystal Serenity.

One of the justifications for the massive growth of government in the 20th and now the 21st centuries, far beyond the narrow limits envisioned by the founders of our nation, is the need to promote what the government defines as fair and just. But this begs the prior and more fundamental question: What is the legitimate role of government in a free society? To understand how America’s Founders answered this question, we have only to look at the rule book they gave us—the Constitution. Most of what they understood as legitimate powers of the federal government are enumerated in Article 1, Section 8. Congress is authorized there to do 21 things, and as much as three-quarters of what Congress taxes us and spends our money for today is nowhere to be found on that list. To cite just a few examples, there is no constitutional authority for Congress to subsidize farms, bail out banks, or manage car companies. In this sense, I think we can safely say that America has departed from the constitutional principle of limited government that made us great and prosperous.

On the other side of the coin from limited government is individual liberty. The Founders understood private property as the bulwark of freedom for all Americans, rich and poor alike. But following a series of successful attacks on private property and free enterprise—beginning in the early 20th century and picking up steam during the New Deal, the Great Society, and then again recently—the government designed by our Founders and outlined in the Constitution has all but disappeared. Thomas Jefferson anticipated this when he said, “The natural progress of things is for liberty to yield and government to gain ground.”

To see the extent to which liberty is yielding and government is gaining ground, one need simply look at what has happened to taxes and spending. A tax, of course, represents a government claim on private property. Every tax confiscates private property that could otherwise be freely spent or freely invested. At the same time, every additional dollar of government spending demands another tax dollar, whether now or in the future. With this in mind, consider that the average American now works from January 1 until May 5 to pay the federal, state, and local taxes required for current government spending levels. Thus the fruits of more than one third of our labor are used in ways decided upon by others. The Founders favored the free market because it maximizes the freedom of all citizens and teaches respect for the rights of others. Expansive government, by contrast, contracts individual freedom and teaches disrespect for the rights of others. Thus clearly we are on what Friedrich Hayek called the road to serfdom, or what I prefer to call the road to tyranny.

As I said, the Constitution restricts the federal government to certain functions. What are they? The most fundamental one is the protection of citizens’ lives. Therefore, the first legitimate function of the government is to provide for national defense against foreign enemies and for protection against criminals here at home. These and other legitimate public goods (as we economists call them) obviously require that each citizen pay his share in taxes. But along with people’s lives, it is a vital function of the government to protect people’s liberty as well—including economic liberty or property rights. So while I am not saying that we should pay no taxes, I am saying that they should be much lower—as they would be, if the government abided by the Constitution and allowed the free market system to flourish.

And it is important to remember what makes the free market work. Is it a desire we all have to do good for others? Do people in New York enjoy fresh steak for dinner at their favorite restaurant because cattle ranchers in Texas love to make New Yorkers happy? Of course not. It is in the interest of Texas ranchers to provide the steak. They benefit themselves and their families by doing so. This is the kind of enlightened self-interest discussed by Adam Smith in his Wealth of Nations, in which he argues that the social good is best served by pursuing private interests. The same principle explains why I take better care of my property than the government would. It explains as well why a large transfer or estate tax weakens the incentive a property owner has to care for his property and pass it along to his children in the best possible condition. It explains, in general, why free enterprise leads to prosperity.

Ironically, the free market system is threatened today not because of its failure, but because of its success. Capitalism has done so well in eliminating the traditional problems of mankind—disease, pestilence, gross hunger, and poverty—that other human problems seem to us unacceptable. So in the name of equalizing income, achieving sex and race balance, guaranteeing housing and medical care, protecting consumers, and conserving energy—just to name a few prominent causes of liberal government these days—individual liberty has become of secondary or tertiary concern.

Imagine what would happen if I wrote a letter to Congress and informed its members that, because I am fully capable of taking care of my own retirement needs, I respectfully request that they stop taking money out of my paycheck for Social Security. Such a letter would be greeted with contempt. But is there any difference between being forced to save for retirement and being forced to save for housing or for my child’s education or for any other perceived good? None whatsoever. Yet for government to force us to do such things is to treat us as children rather than as rational citizens in possession of equal and inalienable natural rights.

We do not yet live under a tyranny, of course. Nor is one imminent. But a series of steps, whether small or large, tending toward a certain destination will eventually take us there. The philosopher David Hume observed that liberty is seldom lost all at once, but rather bit by bit. Or as my late colleague Leonard Read used to put it, taking liberty from Americans is like cooking a frog: It can’t be done quickly because the frog will feel the heat and escape. But put a frog in cold water and heat it slowly, and by the time the frog grasps the danger, it’s too late.

Again, the primary justification for increasing the size and scale of government at the expense of liberty is that government can achieve what it perceives as good. But government has no resources of its own with which to do so. Congressmen and senators don’t reach into their own pockets to pay for a government program. They reach into yours and mine. Absent Santa Claus or the tooth fairy, the only way government can give one American a dollar in the name of this or that good thing is by taking it from some other American by force. If a private person did the same thing, no matter how admirable the motive, he would be arrested and tried as a thief. That is why I like to call what Congress does, more often than not, “legal theft.” The question we have to ask ourselves is whether there is a moral basis for forcibly taking the rightful property of one person and giving it to another to whom it does not belong. I cannot think of one. Charity is noble and good when it involves reaching into your own pocket. But reaching into someone else’s pocket is wrong.

In a free society, we want the great majority, if not all, of our relationships to be voluntary. I like to explain a voluntary exchange as a kind of non-amorous seduction. Both parties to the exchange feel good in an economic sense. Economists call this a positive sum gain. For example, if I offer my local grocer three dollars for a gallon of milk, implicit in the offer is that we will both be winners. The grocer is better off because he values the three dollars more than the milk, and I am better off because I value the milk more than the three dollars. That is a positive sum gain. Involuntary exchange, by contrast, means that one party gains and the other loses. If I use a gun to steal a gallon of milk, I win and the grocer loses. Economists call this a zero sum gain. And we are like that grocer in most of what Congress does these days.

Some will respond that big government is what the majority of voters want, and that in a democracy the majority rules. But America’s Founders didn’t found a democracy, they founded a republic. The authors of The Federalist Papers, arguing for ratification of the Constitution, showed how pure democracy has led historically to tyranny. Instead, they set up a limited government, with checks and balances, to help ensure that the reason of the people, rather than the selfish passions of a majority, would hold sway. Unaware of the distinction between a democracy and a republic, many today believe that a majority consensus establishes morality. Nothing could be further from the truth.

Another common argument is that we need big government to protect the little guy from corporate giants. But a corporation can’t pick a consumer’s pocket. The consumer must voluntarily pay money for the corporation’s product. It is big government, not corporations, that have the power to take our money by force. I should also point out that private business can force us to pay them by employing government. To see this happening, just look at the automobile industry or at most corporate farmers today. If General Motors or a corporate farm is having trouble, they can ask me for help, and I may or may not choose to help. But if they ask government to help and an IRS agent shows up at my door demanding money, I have no choice but to hand it over. It is big government that the little guy needs protection against, not big business. And the only protection available is in the Constitution and the ballot box.

Speaking of the ballot box, we can blame politicians to some extent for the trampling of our liberty. But the bulk of the blame lies with us voters, because politicians are often doing what we elect them to do. The sad truth is that we elect them for the specific purpose of taking the property of other Americans and giving it to us. Many manufacturers think that the government owes them a protective tariff to keep out foreign goods, resulting in artificially higher prices for consumers. Many farmers think the government owes them a crop subsidy, which raises the price of food. Organized labor thinks government should protect their jobs from non-union competition. And so on. We could even consider many college professors, who love to secure government grants to study poverty and then meet at hotels in Miami during the winter to talk about poor people. All of these—and hundreds of other similar demands on government that I could cite—represent involuntary exchanges and diminish our freedom.

This reminds me of a lunch I had a number of years ago with my friend Jesse Helms, the late Senator from North Carolina. He knew that I was critical of farm subsidies, and he said he agreed with me 100 percent. But he wondered how a Senator from North Carolina could possibly vote against them. If he did so, his fellow North Carolinians would dump him and elect somebody worse in his place. And I remember wondering at the time if it is reasonable to ask a politician to commit political suicide for the sake of principle. The fact is that it’s unreasonable of us to expect even principled politicians to vote against things like crop subsidies and stand up for the Constitution. This presents us with a challenge. It’s up to us to ensure that it’s in our representatives’ interest to stand up for constitutional government.

Americans have never done the wrong thing for a long time, but if we’re not going to go down the tubes as a great nation, we must get about changing things while we still have the liberty to do so.

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Education, Economics and Self-Government

December 16, 2009 by pu3106.

by Larry P. Arnn

 the twelfth president of Hillsdale College, received his B.A. from Arkansas State University and his M.A. and Ph.D. in government from the Claremont Graduate School. From 1977 to 1980, he also studied at the London School of Economics and at Worcester College, Oxford .

I HAVE BEEN ASKED TO talk today about education and economic development. The standard thing to say on this topic is that the former is vital to the latter. We live in the modern world, so we all have to be highly informed and highly skilled and understand the power of modern science. It is a task of the very first importance to train a workforce that will be able to compete in the global marketplace. That is the standard thing to say, and we hear it said often by education bureaucrats from the federal level on down. And of course it is perfectly true, as far as it goes. But there is more to be said.

The practical point of this standard thing to say is that America needs more technical education—more scientists and mathematicians. And of course we do need scientists and mathematicians. But I like to remind people when they say this that the word “technical” comes from the Greek word “techne,” which means “art.” And Aristotle points out that art is about making, and that the question of what one should make is always superior, in point of order and logic, to the question of how to make it.

What does this mean? Consider one of the greatest scientific achievements of the last century—the development of the atomic bomb. The question of whether to build an atomic bomb, and then the question of whether to drop it on Hiroshima and Nagasaki in order to end World War II without the need of invading and conquering the Japanese mainland, were more important questions—superior in order and logic—to the question of how to make the bomb. The brilliant physicists who accomplished the latter had immense technical training, but that training gave them no special knowledge about those more important questions. Or to put the point in a slightly different and more general way, a technical education can make a person wealthy and famous, but it does not teach that person what is best to do with wealth and fame.

So the first point I would make about education and economics is the importance of liberal arts education, which is the kind of education offered at Hillsdale College. Many think of liberal arts education as a broad education, but in fact it is a high education. We understand things to be arranged in a hierarchy. Hillsdale College has plenty of science and math majors, and our students go on to the very best graduate and professional schools. But whatever their majors, they learn the distinction I just made about questions of greater and lesser significance, and they study how to think about the very greatest ones.

The second point I want to make has to do with politics and education. The greatest example of economic development in human history was in the United States during the 19th century. At the beginning of that century, we were about five million people huddled along the East Coast. By the end of it we had grown at a rate of about 25 percent—much faster than China is growing today—and had settled an entire continent, largely without the help of modern science. To the question of how it was done, I think the short answer is the Homestead Act—the greatest piece of legislation I know. Signed by President Lincoln in 1862, the Homestead Act is short and beautiful—two qualities good legislation should have, and two qualities in which legislation today is utterly lacking.

What the Homestead Act did was to take the western land of the United States—surely one of the greatest assets ever held by any government in history—and give 160-acre plots to anyone with the backbone to live on them and work them. These plots of land were granted regardless of who someone was and with the certainty that no one settling on them could ever vote for this congressman or that. It is one of the greatest impartial acts of legislation in all of human history. It, and things like it, built America and the character of the people who spread across it.

How does this connect to my first point? It connects because the spirit of the Homestead Act, which led to unprecedented economic growth, could not be more different from the spirit of our legislation today. And the key to this difference is the difference between the education our leaders today have had, and the education students get at Hillsdale.

The principle that justified the Homestead Act has two parts, and both are found in the first 15 lines of the Declaration of Independence. The first is the idea of human equality—the idea that it does not matter what race or what family you come from, it only matters what you do—which has been the source of our greatest struggles in an attempt to live up to it. The second is the idea of the “Laws of Nature and of Nature’s God.” At Hillsdale College, we study the Declaration of Independence as the greatest thing of its kind. The signers of the Declaration were risking their lives. There is a beautiful passage at the end of it where they write, “we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.” But the document begins in an opposite mood, because the cause they are willing to die for is not specifically about them at all: “When in the course of human events”—that means not our time, but any time—”it becomes necessary for one people”—that means not our people, but any people—and then this sentence goes on to speak of the “Laws of Nature and of Nature’s God,” laws true always and everywhere.

Understood comprehensively, the Declaration points us to an unalterable law of God, visible in nature, that man is inferior to God and superior to the beasts, such that it is unjust for one human being to rule any other without his consent. And it is this same understanding of human nature on which Madison rests his case in Federalist 51, in explaining why government is both necessary and must be limited:

 

. . . [W]hat is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

 

This is the understanding that animates legislation like the Homestead Act. And note the humility in it. America’s founders understood themselves to be bound and limited by something higher. And it is precisely this understanding that is missing among our political leadership today. Nearly 20 years ago now, when Clarence Thomas was testifying before the Senate Judiciary Committee during his confirmation hearings, several senators questioned him about the idea of natural law, which seemed to them a foreign and dangerous idea. And why would it seem that way?

These senators have been taught to understand government as a means by which they can do marvelous things, changing society for the better in countless and unlimited ways. And in this light, the old-fashioned idea of natural law—which, as we saw in the passage from Madison, leads to the idea of limited government—becomes simply an impediment to progress.

President Obama is an impressive man, and there is much good to be said about him. But he falls firmly into this newer school of thought. Let me read you a passage from his book, The Audacity of Hope:

 

Implicit in [the Constitution’s] structure, in the very idea of ordered liberty, was a rejection of absolute truth, the infallibility of any idea or ideology or theology or “ism,” any tyrannical consistency that might lock future generations into a single, unalterable course. . . .

 

One can see immediately the practical results of this in the health care debate. Advocates of one of the latest plans are proud to place the cost at only $900 billion—apparently it takes $1 trillion to impress in this day and age! But consider that, in most of the plans that have advanced in the Congress, people making in the range of $30,000 to $80,000 a year will be forced to pay health insurance costs—or fines of about the same amount—that come to between ten and 20 percent of their income. They will be compelled to buy plans that have certain specific features. There will be an allocation of health care resources as part of the plan. And it will not be legal to buy or sell a plan that does not fit the criteria. Compare the spirit of this legislation with the spirit of the Homestead Act. There is a bullying spirit behind it. And that bullying spirit is becoming ever more pervasive.

The means are already in place for the federal government to control what people say in elections. As a recent example of how it tries this between elections, consider that Henry Waxman—a congressman of some power and influence—sent a letter in August to the CEOs of health care companies asking for schedules of all salaries above a certain amount, and of the conferences they had been to, and how much they cost, and who was there. Was it a coincidence that he wanted this information just as a health care debate was starting up? Could it be that he was trying to intimidate and silence potential opposition? One of the many “czars”—isn’t that an ominous word?—in the Obama administration is Cass Sunstein, the czar of regulatory policy. Mr. Sunstein is a very smart man—a law professor, like the president—but he is on record saying that speech rights should be redistributed by government bureaucrats much as wealth is redistributed through post-New Deal tax and entitlement policy. This is not supposed to be a country where there are czars dealing with things like speech. But it is such a country right now.

The economic policies being proposed these days are very bad. But the principles behind them are worse. They represent a return to the idea that the American Revolution repudiated—the idea that some are equipped by nature or training to manage the lives of others without their consent. I have been making the point lately that people are wrong who accuse the Obama administration of being socialist. I take the president at his word when he says that he has no desire to own the automobile companies. Instead, he wants to control them—and the rest of us as well—through a regulatory apparatus overseen by czars and bureaucrats. And again, his intentions are good. What is bad is the view underlying them of what human beings are. Rather than looking on us as equal beings with a set nature—such that none of us should rule another in the way that God rules man or man rules beast—our political leaders today have been taught to see us as material to be shaped and perfected by experts who have the proper technical training.

It has been close to 100 years now that the majority of people teaching in American colleges and universities have agreed with Woodrow Wilson, one of the founders of the Progressive movement and the first to write explicitly that the Declaration of Independence is obsolete, and that we need to liberate the Constitution from the Declaration’s restraints. This liberation leads to the idea of a “living Constitution,” characterized by constant change or progress. Absolute truth, to the extent that ordinary people still believe in it, obstructs change or progress—which is why President Obama refers to it, in the passage I read, as tyrannical. But if change or progress is the rule, who is to determine what version of change or progress is good? And the logical problem here—as any Hillsdale student could tell you—is that once you deny the existence of absolute truth, the definition of “good” becomes subjective and the only standard of behavior is what we want—”we,” in the political sense, meaning the government or bureaucracy. It reduces politics not to right, but to force. That is why there is this bullying spirit about our government today, and why so many Americans are worried.

It is time for that to stop, and there are two conditions for stopping it. The first is for the ordinary folk of the United States to see in this the despotism that it is, and to rise up and repudiate it. The second thing is longer term, but equally vital: It is to replace leaders who have bad educations with leaders who have good educations. This is our work at Hillsdale College. We aim to recover the meaning of the “Laws of Nature and of Nature’s God” and to place that meaning firmly in the minds and hearts of ambitious young men and women who have the courage to do something with that knowledge. And I swear that we shall not stop pursuing that task.

 Larry P. Arnn

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