In this excerpt from WichitaLiberty.TV, I introduce the video “I, Pencil” and then show the movie as created by Competitive Enterprise Institute. More about this movie may be found at ipencilmovie.org. View below, or click here to view at YouTube.
In this episode of WichitaLiberty.TV: Andrew Bernstein is a proponent of Ayn Rand’s Objectivism, an author, and a professor of philosophy. We talk about capitalism and other subjects. View below, or click here to view at YouTube. Episode 62, broadcast October 12, 2014.
“The spontaneous configuration of creative human energies, of millions of people, with their various skills and talents, organizing voluntarily in response to human necessity and desire — as if led by an invisible hand to promote an end which was no part of the intention.”
Lawrence W. Reed, President of Foundation for Economic Education says about this movie: “For more than half a century, Leonard Read’s classic story has opened eyes and changed minds by the hundreds of thousands. It humbles even the high and mighty as it reveals the wondrous achievements of individuals whose contributions are coordinated by nothing more than incentives and market prices. This film guarantees that the insights of Read’s humble pencil will continue to work their magic for many years to come!”
A companion website I, Pencil, a film series from CEI has video of additional commentary, curriculum, educational resources, and many other items of interest in learning about how free markets work to bring us not only the things we need, but the things we want that make life better.
Kansas computer security. This month the Kansas Legislative Division of Post Audit released an audit looking at how well five Kansas state government agencies kept their computers up-to-date. The audit found: “Three of the five agencies had significant vulnerabilities because of inadequate workstation patching processes, and all five could make some minor improvements to their patching process.” Patching refers to the process of keeping software updated. The most important updates, or patches, concern security vulnerabilities that have been discovered and fixed. Some of these vulnerabilities are serious and can lead to computers and networks being compromised. The report is at State Agency Information Systems: Reviewing Selected Systems Operation Controls in State Agencies.
KPERS. Wichita financial planner Richard Stumpf contributes a piece to the Wichita Eagle on the problems with Kansas Public Employee Retirement System (KPERS). He paints a bleak picture of the plan’s finances and proposes a tax increase, writing: “I am recommending that Brownback propose a 25 percent tax increase to fund employees’ retirement plans. The commission wouldn’t cut spending. I refuse to recommend taking more money from classrooms to pay this bill. The only remaining option is a tax increase.” … As bleak as is this picture, it’s not as dark as it should be: Stumpf says the debt in KPERS is “nearly $9 billion.” More realistic analysis puts the figure much higher. Adjusting for unreported investment losses and using a realistic assumed rate of return of six percent, Kansas Policy Institute says the shortfall would be $14.1 billion. More shocking is an evaluation of state pension funds conducted by the American Enterprise Institute which uses market valuation methods. This evaluation puts the shortfall for Kansas at $21.8 billion. … Stumpf notes this: “So far this year, the stock market is up about 1.3 percent. Since KPERS is based upon an 8 percent assumed rate of return, earning 1.3 percent this year is equivalent to losing 6.7 percent.” The full editorial is at Richard Stumpf: Unions, Legislature lack guts to fix KPERS.
Kansas Treasurer makes grand circuit. One of the jobs of Kansas Treasurer Ron Estes is to safeguard unclaimed property and seek to return it to its owners. Estes and his staff have now visited all 105 Kansas counties, holding unclaimed property return events in each. The office says that in 2011, 65,913 claims totaling $14,433,929 have been returned to Kansans. The office is holding $230 million in unclaimed property.
Huelskamp considered objecting. The payroll tax measure passed last week in the U.S. House of Representatives was passed using “unanimous consent.” This means that there was no voice or roll call vote taken, and members did not need to be present. But if even one member had been present and had voiced an objection, the measure would have failed. Appearing on CNN, U.S. Representative Tim Huelskamp, who is in his first term representing the Kansas first district, said he considered making such an objection, but could not get to Washington from Kansas in time: “Actually, I did. Problem was by the time we were notified that the unanimous consent agreement would be offered, where I come from in Kansas, I can’t get to Washington quick enough on this short notice. So that was an option, we did think about that, but there’s no way to fly in on time to make that happen. Back on the pledge to America, we talked about 72 hours where big things like this would give us an opportunity to reel read the deal, actually read the bill. And in this case they decided to not follow that rule as well.” … Huelskamp said he was disappointed with the House leadership team, noting Congress has not cut spending, did not stand up to the president on the budget ceiling debate, and did not pass a balanced budget amendment. Noting the lack of delivery after the election of a conservative majority to the House, Huelskamp wondered “what difference did it make?” He described the payroll tax measure as one of numerous losses this year.
Obama’s regulation. Wall Street Journal Review & Outlook: “To answer the most basic question — has regulation increased? — we’ll focus on what the government defines as ‘economically significant’ regulations. Those are rules that impose more than $100 million in annual costs on the economy, though there are hundreds if not thousands of new rules every year that fall well short of that. According to an analysis of the Federal Register by George Mason University’s Mercatus Center, the Cabinet departments and agencies finalized 84 such regulations annually on average in President Obama’s first two years. The annual average under President Bush was 62 and under President Clinton 56.” The Journal notes the deception used by the Obama Administration as it tries to portray itself as not regulation-hungry: “Cass Sunstein, the director of the White House Office of Information and Regulatory Affairs, has been shopping around lower numbers that selectively compare Mr. Obama’s first two years favorably with Mr. Bush’s last two. Administrations are typically most active on the way out, and in any case the Bush regulatory record is nothing to crow about. But Mr. Sunstein’s numbers are even more misleading because they only include the rules that his office reviews while excluding the prolific ‘independent’ agencies such as the Federal Communications Commission. This means that if Congress tells, say, the Securities and Exchange Commission to write a new rule, it doesn’t enter Mr. Sunstein’s tally. So it omits, for example, some 259 rules mandated by the Dodd-Frank financial reregulation law along with its 188 other rule suggestions. It also presumes that Mr. Obama is a bystander with no influence over his own appointees who now dominate the likes of the National Labor Relations Board.” … After presenting more evidence of the growth of costly regulation under Obama, the Journal concludes: “The evidence is overwhelming that the Obama regulatory surge is one reason the current economic recovery has been so lackluster by historical standards. Rather than nurture an economy trying to rebuild confidence after a financial heart attack, the Administration pushed through its now-famous blitz of liberal policies on health care, financial services, energy, housing, education and student loans, telecom, labor relations, transportation and probably some other industries we’ve forgotten. Anyone who thinks this has only minimal impact on business has never been in business. … Mr. Obama can claim he is the progressive second coming of Teddy Roosevelt as he did in Kansas last week, or he can claim to be a regulatory minimalist, but not both. The facts show he’s the former.” The full article is Regulation for Dummies: The White House says its rule-making isn’t costly or unusual. The evidence shows otherwise.
The failure of American schools. The Atlantac: “Who better to lead an educational revolution than Joel Klein, the prosecutor who took on the software giant Microsoft? But in his eight years as chancellor of New York City’s school system, the nation’s largest, Klein learned a few painful lessons of his own — about feckless politicians, recalcitrant unions, mediocre teachers, and other enduring obstacles to school reform.” Key takeway idea: “As a result, even when making a lifetime tenure commitment, under New York law you could not consider a teacher’s impact on student learning. That Kafkaesque outcome demonstrates precisely the way the system is run: for the adults. The school system doesn’t want to change, because it serves the needs of the adult stakeholders quite well, both politically and financially.” … Also: “Accountability, in most industries or professions, usually takes two forms. First and foremost, markets impose accountability: if people don’t choose the goods or services you’re offering, you go out of business. Second, high-performing companies develop internal accountability requirements keyed to market-based demands. Public education lacks both kinds of accountability. It is essentially a government-run monopoly. Whether a school does well or poorly, it will get the students it needs to stay in business, because most kids have no other choice. And that, in turn, creates no incentive for better performance, greater efficiency, or more innovation — all things as necessary in public education as they are in any other field.” … Overall, an eye-opening indictment of American public schools.
Markets: exploitation or empowerment? Do markets lead to a centralization of political and economic power, or do markets decentralize and disseminate wealth? In an eight-minute video from LearnLiberty.org, a project of Institute for Humane Studies, Antony Davies presents evidence and concludes that markets and free trade empower individuals rather than exploit them.
At a recent educational meeting I attended, someone asked the question: Why doesn’t everyone believe what we (most of the people attending) believe: that private property and free exchange — capitalism, in other words — are superior to government intervention and control over the economy?
It’s question that I’ve asked at conferences I’ve attended. The most hopeful answer is ignorance. While that may seem a harsh word to use, ignorance is simply a “state of being uninformed.” That can be cured by education. This is the reason for this website. This is the reason why I and others testify in favor of free markets and against government intervention. It is the reason why John Todd gives out hundreds of copies of I, Pencil, purchased at his own expense.
But there is another explanation, and one that is less hopeful. There is an intellectual class in our society that benefits mightily from government. This class also believes that their cause is moral, that they are anointed, as Thomas Sowell explains in The vision of the anointed: self-congratulation as a basis for social policy: “What all these highly disparate crusades have in common is their moral exaltation of the anointed above others, who are to have their very different views nullified and superseded by the views of the anointed, imposed via the power of government.”
Murray N. Rothbard explains further the role of the intellectual class in the first chapter of For a New Liberty: The Libertarian Manifesto, titled “The Libertarian Heritage: The American Revolution and Classical Liberalism.” Since most intellectuals favor government over a market economy and work towards that end, what do the intellectuals get? “In exchange for spreading this message to the public, the new breed of intellectuals was rewarded with jobs and prestige as apologists for the New Order and as planners and regulators of the newly cartelized economy and society.”
Planners and regulators. We have plenty of these at all levels of government, and these are prime examples of the intellectual class.
As Rothbard explains, these intellectuals have cleverly altered the very meaning of words to suit their needs:
One of the ways that the new statist intellectuals did their work was to change the meaning of old labels, and therefore to manipulate in the minds of the public the emotional connotations attached to such labels. For example, the laissez-faire libertarians had long been known as “liberals,” and the purest and most militant of them as “radicals”; they had also been known as “progressives” because they were the ones in tune with industrial progress, the spread of liberty, and the rise in living standards of consumers. The new breed of statist academics and intellectuals appropriated to themselves the words “liberal” and “progressive,” and successfully managed to tar their laissez- faire opponents with the charge of being old-fashioned, “Neanderthal,” and “reactionary.” Even the name “conservative” was pinned on the classical liberals. And, as we have seen, the new statists were able to appropriate the concept of “reason” as well.
We see this at work in Wichita, where those who advocate for capitalism and free markets instead of government intervention are called CAVE people, an acronym for Citizens Against Virtually Everything. Or, in the case of Wichita Mayor Carl Brewer and Wichita Eagle editorial writer Rhonda Holman, “naysayers.”
The sad realization is that as government has extended its reach into so many areas of our lives, to advocate for liberty instead of government intervention is to oppose many things that people have accepted as commonplace or inevitable.
Rothbard further explains the role of intellectuals in promoting what they see as the goodness of expansive government:
Throughout the ages, the emperor has had a series of pseudo-clothes provided for him by the nation’s intellectual caste. In past centuries, the intellectuals informed the public that the State or its rulers were divine, or at least clothed in divine authority, and therefore what might look to the naive and untutored eye as despotism, mass murder, and theft on a grand scale was only the divine working its benign and mysterious ways in the body politic. In recent decades, as the divine sanction has worn a bit threadbare, the emperor’s “court intellectuals” have spun ever more sophisticated apologia: informing the public that what the government does is for the “common good” and the “public welfare,” that the process of taxation-and-spending works through the mysterious process of the “multiplier” to keep the economy on an even keel, and that, in any case, a wide variety of governmental “services” could not possibly be performed by citizens acting voluntarily on the market or in society. All of this the libertarian denies: he sees the various apologia as fraudulent means of obtaining public support for the State’s rule, and he insists that whatever services the government actually performs could be supplied far more efficiently and far more morally by private and cooperative enterprise.
The libertarian therefore considers one of his prime educational tasks is to spread the demystification and desanctification of the State among its hapless subjects. His task is to demonstrate repeatedly and in depth that not only the emperor but even the “democratic” State has no clothes; that all governments subsist by exploitive rule over the public; and that such rule is the reverse of objective necessity. He strives to show that the very existence of taxation and the State necessarily sets up a class division between the exploiting rulers and the exploited ruled. He seeks to show that the task of the court intellectuals who have always supported the State has ever been to weave mystification in order to induce the public to accept State rule, and that these intellectuals obtain, in return, a share in the power and pelf extracted by the rulers from their deluded subjects.
And so the alliance between state and intellectual is formed. The intellectuals are usually rewarded quite handsomely by the state for their subservience, writes Rothbard:
The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.
The “material security,” measured in dollars, can be pretty good, as shown by these examples: The Wichita city manager is paid $185,000, the Sedgwick county manager is paid $175,095, and the superintendent of the Wichita school district is paid $224,910.
Wichita City Council. Tomorrow the Wichita City Council considers these items: First, the council will have a do-over of a public hearing it held on September 21st. The need for this arises from a mistake regarding proper notification. Mistakes like this are not uncommon at Wichita city hall. … Then the council considers revising the development agreement for the Ken-Mar TIF district. More about that at Ken-Mar TIF district, the bailouts. … The council will be asked to approve an agreement with Service Employees International Union (SEIU) Local 513 providing for pay raises of 2.5 percent per year for the next two years. … As always, the agenda packet is available at Wichita city council agendas.
What if the NFL Played by Teachers’ Rules? Writing in the Wall Street Journal, former NFL quarterback Fran Tarkenton explains the harm of teachers unions (What if the NFL Played by Teachers’ Rules? Imagine a league where players who make it through three seasons could never be cut from the roster.): “Teachers’ salaries have no relation to whether teachers are actually good at their job — excellence isn’t rewarded, and neither is extra effort. Pay is almost solely determined by how many years they’ve been teaching. That’s it. After a teacher earns tenure, which is often essentially automatic, firing him or her becomes almost impossible, no matter how bad the performance might be. And if you criticize the system, you’re demonized for hating teachers and not believing in our nation’s children. … Perhaps no other sector of American society so demonstrates the failure of government spending and interference. We’ve destroyed individual initiative, individual innovation and personal achievement, and marginalized anyone willing to point it out.”
Do-nothing Hoover? A new briefing paper from the Cato Institute (Herbert Hoover: Father of the New Deal) challenges the commonly-held view of President Herbert Hoover as doing nothing to prevent or fix the Great Depression. “Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation — all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt’s advisers knew that Hoover had started the New Deal. One of them wrote, ‘When we all burst into Washington … we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself.’ Hoover’s big-spending, interventionist policies prolonged the Great Depression, and similar policies today could do similar damage. Dismantling the mythical presentation of Hoover as a ‘do-nothing’ president is crucial if we wish to have a proper understanding of what did and did not work in the Great Depression so that we do not repeat Hoover’s mistakes today.” … Well worth reading.
Kansas school cash. “A new report this month shows that cash reserves in Kansas’ 286 school districts grew 9 percent during the year ending June 30, even as schools statewide made plans to trim staff and cut programs because of reductions in basic state aid to education. The cash reserve increase is the sixth in as many years.” See Kansas Reporter, “Lawmakers question Kansas schools’ stashes of cash.”
John Locke to appear in Wichita. This week’s meeting (October 7th) of the Wichita Pachyderm Club presents John Locke — reincarnated through the miracle of modern technology — speaking on “Life, Liberty, and Property.” This promises to be informative and entertaining. The public is welcome and encouraged to attend Wichita Pachyderm meetings. For more information click on Wichita Pachyderm Club … Upcoming speakers: On October 14th, Lieutenant Governor Jeff Colyer, M.D. Speaking on “An update on the Brownback Administration’s ‘Roadmap for Kansas’ — Medicaid Reform” … On October 21st, N. Trip Shawver, Attorney/Mediator, on “The magic of mediation, its uses and benefits.” … On October 28th, U.S. Representative Tim Huelskamp, who is in his first term representing the Kansas first district, speaking on “Spending battles in Washington, D.C.”
The Foundation for Economic Education has released an audio version of the booklet I, Pencil. Written by FEE’s founder Leonard E. Read and first published in 1958, its message proclaiming the importance of economic freedom has not diminished with the passage of time.
This audio recording, which you can listen to on your computer or mp3 player, is just short of 15 minutes in length. But it this short span it makes a compelling case for economic freedom instead of government control and planning.
In Wichita, we have a mayor, city council, and business leaders that are steering us down the path of government control instead of freedom. We locally — and in Topeka and Washington too — need to heed the lesson of I, Pencil on the impossibility of government planning to control and regulate our economy:
I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies — millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.
The above is what I meant when writing, “If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing.” For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand — that is, in the absence of governmental or any other coercive master-minding — then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.
In presenting the plan for the revitalization of downtown Wichita, Wichita’s planners routinely make no distinction between government planning and private planning. In their presentations, they will draw analogies between the wisdom of individuals or businesses creating and following a plan and government doing the same.
An example is Wichita Downtown Development Corporation President Jeff Fluhr, who told the Wichita Pachyderm Club that the development of downtown is like the planning of an automobile trip, so that we don’t make major investments that we later regret.
But government and the private sector are very different, facing greatly different constraints, motivations, and access to information. As a result, the two planning processes are entirely different and not compatible.
In the following excerpt from Planning for Freedom: Let the Market System Work. A Collection of Essays and Addresses, Ludwig von Mises addresses this issue. As Mises writes, the choice is not between planning or no planning. The choice is who is to plan.
“Conscious Planning” versus “Automatic Forces”
As the self-styled “progressives” see things, the alternative is: “automatic forces” or “conscious planning.” It is obvious, they go on saying, that to rely upon automatic processes is sheer stupidity. No reasonable man can seriously recommend doing nothing and letting things go without any interference through purposive action. A plan, by the very fact that it is a display of conscious action, is incomparably superior to the absence of any planning. Laissez faire means: let evils last and do not try to improve the lot of mankind by reasonable action.
This is utterly fallacious and deceptive talk. The argument advanced for planning is derived entirely from an inadmissable interpretation of a metaphor. It has no foundation other than the connotations implied in the term “automatic,” which is customarily applied in a metaphorical sense to describe the market process. Automatic, says the Concise Oxford Dictionary, means “unconscious, unintelligent, merely mechanical.” Automatic, says Webster’s Collegiate Dictionary, means “not subject to the control of the will . . . performed without active thought and without conscious intention or direction.” What a triumph for the champion of planning to play this trump-card!
The truth is that the choice is not between a dead mechanism and a rigid automatism on the one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is: whose planning? Should each member of society plan for himself or should the paternal government alone plan for all? The issue is not automatism versus conscious action; it is spontaneous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.
Laissez faire does not mean: let soulless mechanical forces operate. It means: let individuals choose how they want to cooperate in the social division of labor and let them determine what the entrepreneurs should produce. Planning means: let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.
Under laissez faire, says the planner, the goods produced are not those which people “really” need, but those goods from the sale of which the highest returns are expected. It is the objective of planning to direct production toward the satisfaction of “true” needs. But who should decide what “true” needs are?
The various planners agree only with regard to their rejection of laissez faire, i.e., the individual’s discretion to choose and to act. They disagree entirely on the choice of the unique plan to be adopted. To every exposure of the manifest and incontestable defects of interventionist policies the champions of interventionism always react in the same way. These faults, they say, were the sins of spurious interventionism; what we are advocating is good interventionism. And, of course, good interventionism is the professor’s own brand only.
Plans for the Kansas Republican Party to make Kansas government more friendly to business run the risk of creating false, or crony capitalism instead of an environment of genuine growth opportunity for all business.
An example is the almost universally-praised deal to keep Hawker Beechcraft in Kansas. This deal follows the template of several other deals Kansas struck over the past few years, and outgoing Governor Mark Parkinson is proud of them. Incoming Governor Sam Brownback approved of the Hawker deal, and probably would have approved of the others.
Locally, the City of Wichita uses heavy-handed intervention in the economy as its primary economic development tool, with several leaders complaining that we don’t have enough “tools in the toolbox” to intervene in even stronger ways.
The problem is that these deals, along with many of the economic development initiatives at the state and local level in Kansas, create an environment where the benefits of free market capitalism, as well as the discipline of a market-based profit-and-loss system, no longer apply as strongly as they have. John Stossel explains:
The word “capitalism” is used in two contradictory ways. Sometimes it’s used to mean the free market, or laissez faire. Other times it’s used to mean today’s government-guided economy. Logically, “capitalism” can’t be both things. Either markets are free or government controls them. We can’t have it both ways.
The truth is that we don’t have a free market — government regulation and management are pervasive — so it’s misleading to say that “capitalism” caused today’s problems. The free market is innocent.
But it’s fair to say that crony capitalism created the economic mess.
But wait, you may say: Isn’t business and free-market capitalism the same thing? Here’s what Milton Friedman had to say: “There’s a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favor of free markets and being in favor of whatever business does.” (emphasis added.)
Friedman also knew very well of the discipline of free markets and how business will try to avoid it: “The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.”
The danger of Kansas government having a friendly relationship with Kansas business leaders is that these relationships will be used to circumvent free markets and promote crony, or false, capitalism in Kansas. It’s something that we need to be on the watch for, as the relationship between business and government is often not healthy. Appearing on an episode of Stossel Denis Calabrese, who served as Chief of Staff for Majority Leader of the U.S. House of Representatives Congressman Richard Armey, spoke about crony capitalism and its dangers:
“The American public, I guess, thinks that Congress goes and deliberates serious issues all day and works on major philosophical problems. Really a typical day in Congress is people from the private sector coming and pleading their cases for help. It may be help for a specific company like the [window manufacturing company] example, it may be help for an entire industry, it may be help for United States companies vs. overseas companies.”
He went on to explain that it is wrong — corrupt, he said — for Congress to pick winners and losers in the free enterprise system. Congress wants us to believe that free enterprise will be more successful when government gets involved, but the reverse is true. Then, the failures are used as a basis for criticism of capitalism. “This is an unholy alliance,” he said, and the losers are taxpayers, voters, and stockholders of companies.
Later in the show Tim Carney said that “A good connection to government is the best asset a company can have, increasingly as government plays a larger role in the economy.”
Host John Stossel challenged Calabrese, wondering if he was part of the problem — the revolving door between government, lobbyists, and business. Calabrese said that “Every time you see a victim of crony capitalism you’re looking at a potential client of mine, because there’s somebody on the other side of all these abuses. When Congress tries to pick a winner, there are losers, and losers need representation to go tell their story.” He added that he lobbies the American people by telling them the truth, hoping that they apply pressure on Congress to do the right thing.
He also added that it is nearly impossible to find a single area of the free enterprise system that Congress is not involved in picking winners and losers.
While the speakers were referring to the U.S. federal government, the same thing happens in statehouses, county courthouses, and city halls across the country — wherever there are politicians and bureaucrats chasing economic development with government as the tool.
It is difficult to blame businessmen for seeking subsidy and other forms of government largesse. They see their competitors do it. They have a responsibility to shareholders. As Stossel noted in the show, many companies have to hire lobbyists to protect them from harm by the government — defensive lobbying. But as Carney noted, once started, they see how lobbying can be used to their advantage by gaining favors from government.
The danger that Kansas faces is that under the cover of a conservative governor and legislature, crony capitalism will continue to thrive — even expand — and the people will not notice. The benefits of a dynamic Kansas economy as shown by Dr. Art Hall in his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy may never be achieved unless Kansas government — at all levels — commits to the principles of free market capitalism.
Speaking to an audience in Wichita last Thursday, author and scholar C. Bradley Thompson delivered a lecture that explained the foundation of the greatness of America, and cautioned that this greatness is, and has been, under attack.
Thompson’s lecture was sponsored by the Bill of Rights Institute and underwritten by the Fred C. and Mary R. Koch Foundation. Thompson is the BB&T Research Professor at Clemson University and the Executive Director of the Clemson Institute for the Study of Capitalism. He has also been a visiting fellow at Princeton and Harvard Universities and at the University of London.
In his lecture, Thompson explained the “two Americas,” which he said are “two radically different moral and political visions for America.” These are two different perspectives on the meaning of the word “liberalism.”
America, Thompson said, is and always has been a liberal nation. The question to ask, he said, is: Which liberalism? Thompson drew a distinction between what he called the old liberalism of America’s revolutionary founding fathers, and the new liberalism associated with “the ‘Republicratic’ party of George W. Bush and Barack Obama.”
The philosophy of the old liberalism, Thompson said, is summed up in the words of the Declaration of Independence: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
The philosophy of the new liberalism, however, is this: “From each according to his ability, to each according to his needs.” These are the words of Karl Marx and the political philosophy of socialism.
Thompson said that these two competing moral philosophies have dominated American culture for the last 100 years. He asked: which of these is the most dominate in American life and culture today? The answer, he said, is clear, holding up a copy of Newsweek magazine from last year whose cover claimed “We are all socialists now.”
In examining the two forms of liberalism, Thompson started with the old liberalism. This insisted that men have the right to be free and to pursue their happiness without interference from others. Politically, government should be strictly limited through a separation of church and state, school and state, economy and state, and culture and state. Economically, individuals should be free to produce and exchange their goods and services free from government control, and government should not take wealth.
Socially, Thompson said that the founder’s liberalism is best expressed by “rugged individualism.” This is distinctly American — there is no French version of this, he told the audience.
This is a “principled commitment to freedom” in which individuals are morally sovereign.
Liberalism embodied itself in America’s founders a distrust of political power. The question at the time of the founding was “How can the grasping power of government be tamed and harnessed in a way that would serve the legitimate functions of government?” The solution was to subordinate the government to the Constitution. Written constitutions, then, are the fundamental law.
Initially, the night watchman state advocated by Thomas Jefferson was strictly limited with a “tightwad budget.” Government asked only that citizens respect the rights of others, live self-starting, self-reliant, virtuous lives, and that citizens deal with each other through persuasion and voluntary trade. In exchange, the state promised protection from domestic and foreign criminals and to govern by the rule of law.
But the “land of the free,” Thompson said, would not, and could not, last.
Turning to the new liberalism of Franklin Delano Roosevelt, Richard Nixon, Hillary Clinton, George W. Bush, and Barack Obama, Thompson said these are its principles: Morally, he repeated the Marxian slogan: “From each according to his ability, to each according to his needs.” This, he said, is the moral philosophy of altruism: Selfishness is the ultimate form of evil, and that selflessness is the highest moral good. “Man’s greatest moral duty is to sacrifice one’s self to needs of others,” he told the audience. President Obama has called for such sacrifices, he said.
In practice, Thompson said that altruism means the hard-working must be sacrificed for the lazy. The best is sacrificed to the lowest common denominator. In practice, he said it punishes ability and virtue, rewards incompetence and vice, destroying incentive, responsibility, integrity, and honesty in the process.
Egalitarianism is at the center of the new liberalism, he said. New liberalism says that individuals have positive rights and positive freedom. It means that everyone — regardless of ability and productivity — should be made equal. Freedom from fear and want become basic human rights.
“The modern welfare state is morally corrupting and fundamentally evil on all levels. It teaches one man that he has the right to live off the work of another man.” The impact on the moral character of Americans is that presently 61 million Americans are dependent on the government for their daily housing, food, and health care. This has grown by 31 percent in the last nine years, Thompson said.
Politically, new liberalism says that the common good trumps individual rights. Individual self-interest must be always be sacrificed to the general welfare. Since this “public interest” is undefinable and non-objective, the coercive power of the government must be too: undefinable and non-objective. “Unlimited ends requires unlimited means,” Thompson said.
While liberal socialism speaks of grand ideals such as social responsibility, what it really wants is more basic: power. “There is a direct and causal relationship between the morality of sacrifice, and force, and the violation of rights.”
Examples of the violations of rights and freedoms include Social Security, which violates the rights of younger Americans by forcing them to fund the retirements of senior citizens. Medicare, Medicaid, and Obamacare force taxpayers to fund the health care of anyone who claims to need it. The Community Reinvestment Act of 1977 violates the rights of bankers by forcing them to make risky mortgage loans to people that they wouldn’t have otherwise lent to. The ARRA (the federal stimulus bill of 2009) forces taxpayers to pay for all sorts of programs.
Underlying all these programs is altruism, the moral philosophy which says we must serve others, whether we want to or not.
Thompson went on to explain how altruism affects our lives day-to-day. The tax and regulatory system means that workers must work (on average) until April 9th to pay their taxes. This means, Thompson said, that for almost three and one-half months we are all enslaved to someone else.
Thompson said that we are dying a slow death by regulatory strangulation. Endless commands by government bureaucrats regulate nearly all aspects of our lives. “We live in a world today — believe it or not — more heavily regulated than was Nazi Germany during the 1940s or Communist China is today.” Besides federal regulation, state and local governments add to the regulatory burden.
The regulations have a much more insidious effect, Thompson said: “Each and every new entitlement or regulation passed by government seduces and tranquilizes the American people to become ever more reliant on politicians and bureaucrats for their daily sustenance and for their daily decision making and actions.”
Thompson continued: “A moral culture of radical independence has become a moral culture of slouching dependence.” The last 80 years have seen the greatest expansion of political power, and the greatest loss of freedom, in our history. The untold story of our national history of the last century is “how the American people sold their freedom and sold their souls to the nanny state.”
There are two questions confronting Americans today. First, have we reached a “tipping point” where government is on an unstoppable downward cycle?
Second, and more important: Have we reached a point of no return on the road to serfdom?
There is also another way to divide the two Americas, Thompson said: the rulers and the ruled. The ruling class is all the politicians of both major parties, along with bureaucrats at all levels, college professors, journalists of the mainstream media, think tank policy wonks, community organizers, and corrupt businessmen who support corporate welfare. This class presumes it is intellectually and morally superior to those it rules over.
This ruling class, Thompson said, seeks to manage and regulate two classes of Americans: those who work and pay taxes, and those who don’t. By redistributing over one-fourth of what Americans produce, the ruling class rules over the country. The rule of law is replaced by the rule of men.
And what does the ruling class want, Thompson asked? It wants us simply to obey. The country is drifting slowly and steadily to soft despotism.
The two Americas are irreconcilable, Thompson told the audience. We can’t have both, he said — we must have one or the other.
Concluding, Thompson said that “Americanism created a sphere of freedom unprecedented in world history.” The freedom philosophy of Americanism has liberated the creative and productive power of millions of ordinary Americans, listing the many impressive contributions of America to the world. The principles of individualism, limited government, and laissez-faire capitalism have revolutionized human life and improved it immensely.
This American, “old liberalism” philosophy that has liberated ordinary men and women to pursue their own values and greatness is under attack, and we must fight to keep it alive.
In Wichita this Monday, Robert L. Bradley, Jr. explained the state of capitalism in America today, using his experience working in a high-level position at the failed energy conglomerate Enron as a backdrop.
Bradley asked: What happened to business prudence? What has happened to capitalism? The answer is that what we have today is not free market capitalism. Rather, it’s a very different type of capitalism: political capitalism.
A common question today is has capitalism failed? Problems are automatically blamed on greed, self-interest, and profit maximization — in other words capitalism.
Historically, robber barons have been condemned as examples of capitalism out of control. But many “robber barons” such as Rockefeller made money through voluntary transactions with their customers, Some, however, lived off special government favor such as tariffs. That’s political capitalism.
Then during the Great Depression capitalism was blamed again. At that time, however, the Federal Reserve Bank was already in control, and this era saw the rise of other forms of government interventionism.
Today our problems are commonly blamed on self-interest and capitalism rather than government.
What is real capitalism vs. American-style political capitalism — the mixed economy where government intervenes heavily in business and the economy?
Enron is still the premier example of political capitalism. But not many knew the full extent of Enron’s activities, or they though it was okay: “Enron was everyone’s favorite company.”
But the company that everyone thought was the best turned out to be the worst.
Bradley said the moral of Enron is deeper. There was a systemic failure surrounding Enron. All the gatekeepers — regulators, auditors, legal counsel, the business press, credit rating agencies, business professors — all failed at the same time.
Many critics said that Enron refutes all that is good about free markets. Bradley quoted one business ethics professor: “The Enron value set was an extreme laissez faire ideology of absolutely free unregulated markets.”
Bradley disagrees with this assessment, however. Enron was all about Ken Lay, “a master political capitalist.” Lay was a PhD. economist with a lot of Washington experience. His business model for Enron was regulatory change. If Enron could direct the change, it could gain the “first mover” advantage.
Bradlet quoted a definition of political capitalism as “The utilization of political outlets to obtain conditions of stability, predictability, and security to allow corporations to make reasonable profits over the long run.”
Socialists, he said, believe that when there is private property, its owners will be in bed with politicians in order to gain special favors.
Enron’s profit centers had to do with regulatory change. Enron was the first major United States company to proclaim that the climate was in crisis and that government intervention was needed to reduce greenhouse gases.
But it was a self-interested position. Enron rescued the domestic wind power industry by purchasing a company in that industry, and getting a mandate from the Texas legislature for renewable power mandate.
Today, the Obama energy plan has a lot to do with Enron’s public policy thrust.
Enron also gamed regulatory systems. By manipulating accounting rules, Enron could show accounting profits where there were no true economic profits.
In the tax department, Enron used boutique accounting and legal firms to find niches in the tax code that could be exploited.
The lesson is that these regulations may not be providing investors useful information and protection, although there may be an illusion created. A corporate report from the 1930s of just three pages gave investors more useful information, and held the firm more accountable, than did Enron’s last corporate report of 56 pages. The lesson, Bradley said, is “simple rules for a complex world.”
So how did someone like Ken Lay get to the top of the business world? How did he fool everyone and bring down all the gatekeepers with him? Bradley said the government side of the mixed economy was the factor that created an environment that could be exploited.
The lesson is that the rise and fall of Enron discredits the mixed economy and political capitalism.
A question was asked: What should we do? Bradley said we should support public policies that are market-oriented, instead of supporting government intervention. But given the mixed economy, we need to watch out for artificial incentives.
Afterwards, I asked Bradley about government intervention at a local level, such as in Wichita. Specifically, what about TIF districts and tax abatements? Are these examples of political capitalism? Bradley said yes, these are. A side effect is that a tax abatement does leave money in the private sector instead of the government public sector. But a special favor means an artificial stimulus that encourages malinvestment.
I asked if we need more regulation to protect us, or is our current regulatory regime sufficient? Bradley mentioned that in the Bernie Madoff scandal, the defrauded investors are as mad, or more mad at the Securities and Exchange Commission, that they are at Madoff himself. Many figured that the SEC, with its thousands of regulators, had done their homework for them, and that Madoff’s company was safe. This represents a major unintended consequence of regulation.
Much more information about this topic can be found at Bradley’s website Political Capitalism. His recent book is Capitalism at Work: Business, Government and Energy.
In 1994, George Reisman wrote a pamphlet explaining the problems with America’s health care system. He criticized the Clinton plan for reform, and offered an alternative based on freedom and markets rather than government interventionism. It is a brilliant work, and still relevant today: “I wrote this essay to help defeat the Clinton plan for socialized medicine. In all essentials it’s as valid today as it was then. It’s a demonstration that government intervention inspired by the philosophy of collectivism is the cause of America’s medical crisis and that a free market in medical care is the solution for the crisis. I urge everyone who wants to help defeat the essentially similar Obama scheme to read it.”
You can read the pamphlet by clicking on The real right to medical care versus socialized medicine. It’s lengthy, at about 22,000 words. It takes a while to read. Part of what accounts for its length is Reisman’s explanation of every point he makes, which is very helpful.
Reisman calls for more than simply defeating the Clinton plan, as we who oppose the Obama plan should be doing too. He calls for reform — radical reform — of America’s health care, and presents a plan.
By way of introduction, Reisman writes
… while the philosophy of Marx and Engels is dying, the philosophy of Locke and Jefferson, and Adam Smith, that is, the philosophy of individual freedom and capitalism underlying the American Revolution — the philosophy which, ironically enough, was the original meaning of the word liberalism — has been reborn. It has been reborn first and foremost at the hands of Ayn Rand in political philosophy and of Ludwig von Mises in economic theory, both of whom have enormously strengthened it. This philosophy of individual freedom, of the inviolability of individual rights, of the benevolent functioning of an economic system based on private ownership of the means of production and the profit motive — of capitalism — calls for a radically new political agenda. It calls for a political agenda that progressively rolls back the interference of the state and progressively enlarges the freedom of the individual. This is now what political philosophy and economic theory at their highest levels of development recognize to be the essential means of solving social and economic problems. Movement in this direction — in the direction of individual freedom from government interference — is henceforth to be regarded as the standard of what is to be considered progress in the realm of political action.
It is on the basis of this newly resurgent, radically different political philosophy and economic theory — this philosophy and theory of individual rights and capitalism — that I explain the causes of the present crisis in medical care, criticize the Clinton plan, and present the appropriate solution and how to achieve it.
The fundamental problem is this: “… the perverted notion of the need-based right to medical care — that is, an alleged right to medical care that entails a claim on other people’s wealth or labor, which must be met with or without their consent — is what underlies both the collectivization of medical costs and the concomitant loss of the individual’s personal financial responsibility. In this way, it is a perverted notion of the right to medical care that is fundamentally responsible for the rising cost of medical care.”
Reisman goes on to explain, in detail, how the present system of purchasing health care leads to a variety of problems, such as “the potential for a limitless rise in the price of medical services” and “irrational medical malpractice awards and the practice of defensive medicine.” Most people seem to agree that these problems are present. He also explains how the present system is “perverting technological progress into a source of higher costs rather than lower costs,” how it is responsible for high drug prices, and how hospitals waste money buying costly equipment that is not needed.
He also explains “bureaucratic interference with medicine and the rise in administrative costs,” characteristics of private health insurance companies that those who support government takeover rail against.
Reisman then criticizes the details of the Clinton plan. These apply equally to the Obama plan.
Then, Reisman proposes his solution. It’s not more government, which is what Obama offers. It’s less government and restoration of individual rights:
The actual solution to the problem of runaway medical costs lies in the precise opposite of the direction chosen by the Clinton plan. It is not the final destruction of the individual’s rational right to medical care, which is what the Clinton plan would achieve, but the restoration and full implementation of that right — that is, the removal of all government interference that stands between buyers and sellers of medical care or in any way causes medical care to be more expensive than it otherwise would be.
The best way to accomplish reform, Reisman writes, is: “The simplest, most obvious method of achieving a free market in medical care would be at one stroke to abolish all government intervention that violates a free market in medical care.”
Recognizing that this is not likely to happen, Reisman proposes some steps to take.
The first is a change in the tax laws that would have the effect of “[having] employees realize that they were responsible for the cost of their own medical care, even if the employer continued to pay insurance premiums on their behalf. This is because the individual employee would know that he could have his share of the money his employer paid on his behalf, in his own pocket if he wished.” In other words, dissolve many peoples’ notion that their health care is free (or very low cost) just because they get it as part of their job.
Next, end the idea that Medicare is a free resource: “… unless they can demonstrate a lack of means, individuals covered by Medicare be required to pay a substantial deductible before their coverage under the program begins and then to make a continuing copayment of a significant percentage of all costs beyond some maximum limit. ”
To increase the supply of health care, “it is certainly reasonable to ask that medical licensing laws be liberalized — nothing so extreme, mind you, as their outright abolition, but merely their significant liberalization.”
To control hospital costs, a radical reduction in the regulation hospitals face is required.
Block lays blame for the current mess squarely on the Federal Reserve System.
“Hoover was no free-enterpriser,” Block says. Neither was George W. Bush, or Ronald Reagan, for that matter.
But it doesn’t stop them.
Over at the Kansas Jackass blog, it appears there’s been a discussion about libertarianism and how it doesn’t work. I think however, that the Jackass and some of his sycophants are misinformed about a few things.
Here’s something the Jackass wrote: “The Libertarian views the world like nature. If a lion eats a zebra, we shouldn’t interfere because that’s the way of nature.”
This illustrates the Jackass’s lack of knowledge about being a libertarian, for one of the most important things about libertarianism is the nonaggression axiom. Quoting from Rothbard in chapter 2 of For a New Liberty: The Libertarian Manifesto
The libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else. This may be called the “nonaggression axiom.” “Aggression” is defined as the initiation of the use or threat of physical violence against the person or property of anyone else.
I would suggest that a lion eating a zebra is an act of aggression. Libertarians are opposed to violence like this.
The Jackass also said, referring to libertarians, that he’s concerned about “the human affects of their philosophy.” But what is less human than government? As Rothbard says, from the same chapter:
While opposing any and all private or group aggression against the rights of person and property, the libertarian sees that throughout history and into the present day, there has been one central, dominant, and overriding aggressor upon all of these rights: the State. In contrast to all other thinkers, left, right, or in-between, the libertarian refuses to give the State the moral sanction to commit actions that almost everyone agrees would be immoral, illegal, and criminal if committed by any person or group in society. The libertarian, in short, insists on applying the general moral law to everyone, and makes no special exemptions for any person or group.
For good measure, the Jackass throws in the “we’re in this together” argument. He asks “What affect would the application of my theory have on the average person?”
The answer is we wouldn’t be suffering under an oppressive government using paternalistic arguments to maintain its sense of necessity. Rothbard again:
In recent decades, as the divine sanction has worn a bit threadbare, the emperor’s “court intellectuals” have spun ever more sophisticated apologia: informing the public that what the government does is for the “common good” and the “public welfare,” that the process of taxation-and-spending works through the mysterious process of the “multiplier” to keep the economy on an even keel, and that, in any case, a wide variety of governmental “services” could not possibly be performed by citizens acting voluntarily on the market or in society. All of this the libertarian denies: he sees the various apologia as fraudulent means of obtaining public support for the State’s rule, and he insists that whatever services the government actually performs could be supplied far more efficiently and far more morally by private and cooperative enterprise.
How, may I ask, is reliance on the coercive force of government “human?”
Did the “excesses” of capitalism cause the current financial crisis? First, we really don’t have capitalism in the United States, at least not any reasonable semblance of laissez faire capitalism, as explained in my post The Myth that Laissez Faire Is Responsible for Our Present Crisis, based on the work of Professor George Reisman.
The Wall Street Journal article How Government Created the Financial Crisis: Research shows the failure to rescue Lehman did not trigger the fall panic explains more in these excerpts:
Many are calling for a 9/11-type commission to investigate the financial crisis. Any such investigation should not rule out government itself as a major culprit. My research shows that government actions and interventions — not any inherent failure or instability of the private economy — caused, prolonged and dramatically worsened the crisis. … The realization by the public that the government’s intervention plan had not been fully thought through, and the official story that the economy was tanking, likely led to the panic seen in the next few weeks. And this was likely amplified by the ad hoc decisions to support some financial institutions and not others and unclear, seemingly fear-based explanations of programs to address the crisis. What was the rationale for intervening with Bear Stearns, then not with Lehman, and then again with AIG? What would guide the operations of the TARP? … Massive responses with little explanation will probably make things worse. That is the lesson from this crisis so far.
The events taking place in the financial market offer an illustration of the soundness of the Austrian theory of money, banking, and credit cycles, and Mises.org, which has long warned of precisely the scenario playing itself out today, is your source not only for analysis of these events but also the economic theory that helps explain what is happening and what to do about it. There are many thousands of articles available, and also the full text of thousands of books as well as journal articles.
I’ve written about I, Pencil in the past.
I, Pencil is one of the most important and influential writings that explain the necessity for limited government. A simple object that we may not give much thought to, the story of the pencil illustrates the importance of markets and the impossibility of centralized economic planning.
The size and scope of government, both at the national and local level, has been growing. Now our country is entering a period where the possibility of even larger and more intrusive government, growing faster than it has been, is very real. Those who love liberty must keep principles like those illuminated in I, Pencil at the forefront of debate.
Every widespread economic fallacy embraced by pundits, politicians, editorialists, clergy, academics is given the back of the hand they so richly deserve by this author: that public works promote economic welfare, that unions and union-inspired minimum-wage laws actually raise wages, that free trade creates unemployment, that rent control helps house the poor, that saving hurts the economy, that profits exploit the poverty stricken; the list goes on and on. Exhilarating.
No one who digests this book will ever be the same when it comes to public-policy analysis.
This book is available online at the Foundation for Economic Education, and portions are available in audio format at Economics in One Lesson (Audio) Part 1 and Economics in One Lesson (Audio) Part 2.
Any editorial that starts with “Karl Marx was right about at least one thing …” deserves close examination, especially when it appears in Kansas’ largest newspaper and is written by that newspaper’s former editor. The thrust of Davis Merritt’s article is that the theory of free markets hasn’t worked: “We’re painfully experiencing right now the unraveling of neat free-market theory.” (Pragmatism needs to trump ideology, November 18, 2008 Wichita Eagle)
Here’s the first problem with Mr. Merritt’s argument: what we live in is anything but a free market society. George Reisman details just how far removed we are from anything resembling free markets in The Myth that Laissez Faire Is Responsible for Our Present Crisis.
Then, Mr. Merritt warns that free market theory is doomed to fail because “perfect theories require perfect people.” I don’t know precisely who he refers to as not perfect, but judging from the tone of the article, I think he’s condemning greedy businesspeople who are the cause of the present financial crisis. In particular, investment bankers. Demonizing these people on general grounds doesn’t help. Instead: Did they steal from their shareholders? Did they commit fraud when they issued sub-prime loans? These acts are illegal, and to the extent they were committed, let’s prosecute them.
Greed — human self-interest — is a constant factor. It’s what drives people to expend tremendous effort to accomplish great things for the betterment of mankind. It can also drive people to accept a sub-prime mortgage loan that they can’t repay in order to buy a house they can’t afford — but, greedily, want nonetheless. It works both ways. So we need good rules that prevent people from using theft, force, and fraud to unjustly enrich themselves. These good rules are easier to create and enforce, and more reliable, than a false hope the people will start behaving “good.”
Besides, couldn’t we also say that good government requires good politicians, bureaucrats, and administrators? I’m surprised that an editor of a newspaper — someone who must have experienced the political process close-up — would have such confidence in government instead of people.
Mr. Merritt cites the “hands-off, no-regulation attitude of the current administration” as bad for people and economic welfare. If we had been experiencing a period of reductions in regulation, we might have evidence for this claim. The Heritage Foundation report Red Tape Rising: Regulatory Trends in the Bush Years debunks the myth that regulation has decreased during the presidency of George W. Bush: “Far from shrinking to dangerously low levels, regulation has actually grown substantially during the Bush years. By almost every measure, regulatory burdens are up.”
Mr. Merritt’s editorial, if its advice is taken, will lead us towards more regulation and reliance on government. That’s not what we need.
I’m listening to Joe Scarborough on MSNBC, and he says: “Laissez-faire capitalism is a wonderful thing except in this case …”
I’ve heard stuff like this over and over the past few months: A politician says “I’m a big free-market guy, but …”
What’s sad to realize is that these people think that what we have in American is free markets and laissez-faire capitalism. We don’t have these. See my post The Myth that Laissez Faire Is Responsible for Our Present Crisis.
The sooner that we understand that it is largely government that is the cause of the present crisis, we can realize that relying on government for a cure is dangerous and predetermined to fail.
Professor George Reisman contributes the excellent (and lengthy) article The Myth that Laissez Faire Is Responsible for Our Present Crisis. I’ve had the distinct honor of attending a number of Professor Reisman’s lectures at the Ludwig von Mises Institute, and I’m slowly working my way through his monumental book Capitalism: A Treatise on Economics. Here’s a few excerpts from this article:
“Laissez-faire capitalism is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force.”
Then Professor Reisman lists some of the ways in which our present system is far removed from anything resembling laissez-faire capitalism:
The utter absurdity of statements claiming that the present political-economic environment of the United States in some sense represents laissez-faire capitalism becomes as glaringly obvious as anything can be when one keeps in mind the extremely limited role of government under laissez-faire and then considers the following facts about the present-day United States: 1. Government spending in the United States currently equals more than forty percent of national income … 2. There are presently fifteen federal cabinet departments, nine of which exist for the very purpose of respectively interfering with housing, transportation, healthcare, education, energy, mining, agriculture, labor, and commerce … 3. The economic interference of today’s cabinet departments is reinforced and amplified by more than one hundred federal agencies and commissions … 4. the Federal Register contained fully seventy-three thousand pages of detailed government regulations. This is an increase of more than ten thousand pages since 1978, the very years during which our system, according to one of The New York Times articles quoted above, has been “tilted in favor of business deregulation and against new rules.” 5. And, of course, to all of this must be added the further massive apparatus of laws, departments, agencies, and regulations at the state and local level.
What this brief account has shown is that the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.
Then, under the heading “Government Intervention Actually Responsible for the Crisis:”
Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired.
I could go on for some time with more quotes from this article, but it is well worth reading the entire piece. Please do so at The Myth that Laissez Faire Is Responsible for Our Present Crisis.