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A

FREEMAN

Ideas On CIdeas On Liberty]

September 1998 Vol. 48, No. 9

FEATURES

518 Leonard E. Read: A Portrait by Edmund A. Opitz
A biographical sketch of FEE’s founder.

522 Leonard E. Read, Crusader by Bettina Bien Greaves
One man’s prodigious efforts to further the ideal of freedom.

527 The Essence of Americanism by Leonard E. Read
Lessons from the “real American revolution.”

$535 An Environment of Freedom by Jo Kwong
Preserving our natural environment and our individual liberty.

540 Nightmare in Green by Jarret B. Wollstein
The authoritarian environmentalist war on property.

545 Sustainable Development: Common Sense or Nonsense on Stilts?
by Jerry Taylor
Beware of green central planners and their policy prescriptions.
553 The Mythology of Roosevelt and the New Deal by Robert Higgs

The dubious legacy of the most significant political figure of
twentieth-century America.

560 Smuggled Cigarettes, Unteachable Politicians by John Attarian
The unsurprising consequences of Michigan’s higher cigarette tax.

COLUMNS

Center NOTES from FEE—Lessons from Homeschooling by Donald J. Boudreaux

533 IDEAS and CONSEQUENCES—If Rates of Return Matter, Social Security Is a Goner
by Lawrence W. Reed

551 POTOMAC PRINCIPLES—Is Anyone Still for Limited Government? by Doug Bandow
558 PERIPATETICS—It’s an Economy, Not a Machine by Sheldon Richman

$564 ECONOMIC NOTIONS—Markets and Freedom by Dwight R. Lee
567 ECONOMICS on TRIAL—A Golden Comeback, Part I by Mark Skousen

¥575 THE PURSUIT of HAPPINESS—Plenty of Room at the Inn by Sigfredo A. Cabrera

DEPARTMENTS

514 Perspective—Leonard Read: Light Giver by Sheldon Richman
516 It Just Ain’t So! by Donald J. Boudreaux and Burton W. Folsom
570 Book Reviews

Islam and the Discovery of Freedom by Rose Wilder Lane, with introduction and commentary by
Imad-ad-Dean Ahmad, reviewed by George C. Leef; Risk and Business Cycles: New and Old
Austrian Perspectives by Tyler Cowen, reviewed by Leland B. Yeager; Global Taxes for World
Government by Cliff Kincaid, reviewed by Laurence M. Vance.


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FE Ee

REEMAN PERSPECTIVE

(teas On Liberty J Leonard Read: Light Giver
Published by
The Foundation for Economic Education September 26 marks the centenary of the
Irvington-on-Hudson, NY 10533 birth of Leonard E. Read. Read’ life is proof

Phone (914) 591-7230 FAX (914) 591-8910 that one person can change things. In 1946 the

E-mail: freeman@fee.org ts for individual lib vat
FEE Home Page: http://www.fee.org prospec ee Individual 11 oy oh © prop-
President: Donald J. Boudreaux erty, and ee markets were bleak. The Great
Editor: Sheldon Richman Depression and World War II had fostered an
) interventionist mentality in the United States.

Managing Editor: Beth A. Hoffman The unhampered market order, perhaps appro-
Editor Emeritus

Paul L. Poirot priate in an earlier day, was regarded as obso-
Book Review Editor lete. Society was too complex, the business
George C. Leef cycle was too severe, people were too self-
Editorial Assistant ish—whatever the excuse, one thing was
Mary Ann Murphy clear: the era of government direction of eco-
Columnists Baird nomic affairs—indeed, of nearly all aspects of
Doug Bandow life—had arrived.
Dwight R. Lee The Depression-era and wartime regulatory
Lawrence W. Reed agencies by 1946 were fixtures of American
Mark Skousen life. To believe that the economy could regu-
Walter Williams late itself was to subject oneself to ridicule if
Contributing Editors not accusations of villainy. The deck was
Peter J. Boettke

stacked against any re-emergence of a move-

Clarence B. Carson RT
ment for freedom and capitalism.

Thomas J. DiLorenzo

Burton W. Folsom, Jr. Into that darkness stepped Leonard Read,
Joseph S. Fulda trademark candle in hand. He lit that candle
Bettina Bien Greaves and fanned the flame until the light of true lib-
Robert Higgs eralism flowed in all directions. Thanks to
John Hospers Read and FEE, the scattered and isolated
Raymond J. Keating lovers of liberty had a place to draw intellec-
Daniel B. Klein tual sustenance and moral support. They could
Wendy McElroy

be assured that they were not alone. I recall

Tibor R. Mach . .
. ud g - an hearing the late Murray Rothbard, the prolific
onald Nas . . .
Edmund A. Opitz libertarian writer, tell how as a young man he
James L Payne happened on a FEE pamphlet debunking
: 1 1: 3)
William H. Peterson rent control, Roofs or Ceilings?, by two
Jane S. Shaw young economists, Milton Friedman and
Richard H. Timberlake George Stigler. As a result, Rothbard contact-
Lawrence H. White ed FEE and began a long association with
The Freeman is the monthly publication of The Foundation for Eco- Read and Ludwig von Mises.
nomic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, 1 11 1 }
established in 1946 by Leonard E. Read, is a non-political, educational A later generation was similarly influenced
champion of private property, the free market, and limited government. When I was a college freshman, an acquain-
FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. : 1 d f : : fr
Copyright © 1998 by The Foundation for Economic Education. Per- tance, having carned o my interest In cc
mission is granted to reprint any article in this issue, provided credit is
given and two copies of the reprinted material are sent to FEE. markets, urged me to contact FEE and to read
_ The costs of Foundation projects and services are met through dona- The Freeman. There 1 encountered the names
tions, which are invited in any amount. Donors of $30.00 or more . . .
receive a subscription to The Freeman. For foreign delivery, a donation Mises, Henry Hazlitt, Israel Kirzner, and so
of $45.00 a year is suggested to cover mailing costs. Student subscrip- . .
tions are $10.00 for the nine-month academic year; $5.00 per semester. many others. It was the beginning of a rela-
Additional copies of this issue of The Freeman are $3.00 each. 3 1
Bound volumes of The Freeman are available from The Foundation tionship that has spanned more than 25 years.
for calendar years 1972 to date. The Freeman is available in microform Many libertarians my age tell the same story.

from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106.

Cover: from an original oil painting by George Augusta. 514


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Pr——_—_eee———

Leonard Read, whom we honor with this incoherent, not to mention bizarre, ideas are
issue of The Freeman, left a legacy the high- shrouded by the cozy words.
light of which is the new appreciation of lib- Last month Lawrence Reed looked at the
erty that we can see all around us. The second economics of the Great Depression and the
half of the twentieth century would have been New Deal. This month Robert Higgs exam-

a far less inspiring time without him. ines Franklin Roosevelt and the politics of the
most interventionist administration in Ameri-
* * x can history. Those who see FDR as a national
hero may have to rethink their position.
We begin our observance of the 100th How many times will governments raise

anniversary of Leonard Read’s birth with a excise taxes before they learn that the main
biographical sketch by long-time FEE staff outcomes are increased smuggling and vio-
member Edmund Opitz, which follows Read lent crime? Many more times, apparently,
from his days as a New Dealer to the start of according to John Attarian, who relates the
his career as one of the most effective spokes- experience of Michigan and its cigarette tax.
men for the freedom philosophy. In our columns this month, Donald

Next come reflections on Read’s achieve- Boudreaux and Burton Folsom dissect a Wall
ments and influence by Bettina Bien Greaves, Street Journal article comparing Microsoft to
who joined the FEE staff in 1951. She takes the old Standard Oil Company, which the fed-
us back to the early days of the Foundation to eral government broke up using antitrust laws
give us a glimpse of the young, dynamic in 1911. To the assertion that both companies
Leonard Read in action. can be described as monopolies without com-

Our reprint this month from Leonard petition, Boudreaux and Folsom proclaim, “It
Read’s collection of writings is “The Essence Just Ain’t So.”
of Americanism,” perhaps his favorite topic Lawrence Reed anticipates that when peo-
and one of his standard presentations during ple discover how poorly the return on Social
the long history of FEE seminars. It truly Security compares to the return from private
rates the description “classic.” investment, they will clamor for privatization.

In the first of three articles on environmen- Doug Bandow wonders whatever happened to
talism, Jo Kwong illustrates how individual conservatives who believe in limited govern-
rights and well-being are expected to give way ment and small budgets. Dwight Lee
to any and all environmental claims. Even describes the interdependency between free-
bankrupting the elderly is not too high a price. dom and markets. Mark Skousen points out

As if the interventionist legislation passed that after years of disparagement, gold is win-

by Congress and local governments werent ning new praise as a basis for the monetary
bad enough, American citizens, writes Jarret system.
Wollstein, are increasingly subject to United And in “The Pursuit of Happiness,” guest
Nations treaties aimed at restricting and even columnist Sigfredo Cabrera tells the story of
reversing development in the name of protect- two French immigrants who mistakenly
ing nature. A pitched battled between bureau- thought that in America you could run your
crats and property owners is brewing. hotel the way you liked.

Environmental laws and treaties are usually Venturing out into the jungle of new books,
said to foster “sustainable development,” our reviewers evaluate volumes on Islam and
which sounds like something no reasonable liberty, the United Nations and the power to
person would oppose. But what does that term tax, and the business cycle.
really mean? Jerry Taylor shows that some —SHELDON RICHMAN

515


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FREEMAN

deas On Libert

LS | up another” And Rockefeller never engaged
It Just Ain t So . in predatory price-cutting, as economist John
McGee has persuasively shown, because
doing so would have hurt in the long run.
Of course, refiners who sold expensive oil
Te government’s harassment of Microsoft often went broke. But even some of them
has uncorked a gusher of silly journalism. were happy to be bought out by Rockefeller in
On May 19, even the Wall Street Journal return for rapidly appreciating stock in Stan-
joined the flow. Alan Murray’s front-page dard Oil. One of the unhappy refiners was Ida
essay, “Reading Rockefeller and Busting Up Tarbell’s father, who went out of business
Trusts,” is a soup of errors and strained logic. when customers stopped buying his high-
Murray is horrified by accounts of Standard priced oil. Ida Tarbell scathingly criticized
Oil’s large size and Rockefeller’s “obsession Rockefeller in her history of Standard Oil,
for precision, tidiness and order.” It’s true that which sold widely and seems to have influ-
Rockefeller once controlled 90 percent of the enced the antitrust division.
oil-refining business. And he believed that What if Rockefeller had been less efficient?
several large oil companies would better serve That might have kept Mr. Tarbell in business,
producers and consumers than would hun- but only temporarily. By the mid-1880s, the
dreds of small companies. Russians had discovered deep, rich, and plen-
But then Murray says, “Rockefeller was tiful oil deposits at Baku. They then sold oil
driven not to compete, but to crush competi- throughout Europe and elsewhere at prices so
tion. Only after the government busted the low that Rockefeller himself strained to sur-
Standard Oil trust [in 1911] did anything like vive. Only the most efficient could win the
free-market competition return.” Murray is kerosene dollars of picky customers in this
wrong on several counts. new world market. Rockefeller’s innovative
First, Rockefeller didn’t crush competition. abilities ensured a competitive American oil
Most of his competitors crushed themselves. industry.
Sure, they extracted kerosene from their oil, In light of that stiff Russian competition,
but they did not imagine that the byproducts Murray is especially foolish when he talks
had value. Rockefeller’s rival refiners dumped about free-market competition returning
gasoline into the Cuyahoga River and threw “only after the government busted the Stan-
out other byproducts such as naphtha and dard Oil trust” The free market worked well
benzol. The key to Rockefeller’s success was for consumers all over the world; oil prices
finding uses for all of the elements in a barrel steadily fell before 1911.
of oil—and then giving customers the best Even inside America, the free market, not
service at the lowest price. government, was increasing competition in
Contrary to Murray’s implication, Rocke- the early 1900s. Oil was discovered in Texas
feller never had a monopoly. Dozens of other in 1901, but Standard Oil decided to drill else-
oil companies constantly competed with where. Companies throughout Texas then
him—which was perfectly fine with Rocke- formed to sell the newly discovered oil.
feller. “Competitors we must have, we must While the government prosecuted and con-
have,” said Rockefeller’s partner Charles victed Standard Oil for allegedly restraining
Pratt. “If we absorb them, be sure it will bring trade, one of Standard’s new competitors,

516


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517

Gulf Oil, built pipelines from Texas to Okla- single imaginative individual with a creative
homa, experimented with offshore drilling, idea to make an established industry obsolete.
and developed the corner service station. Of course, for anyone to bet on such visions
“Thus even before the breakup of the combi- requires not only personal gumption, but the
nation,” historians Ralph and Muriel Hidy potential for a big payoff. We celebrate today
observe, “the process of whittling Standard the entrepreneurs whose visions proved suc-
Oil down to reasonable size within the indus- cessful. But we don’t celebrate, or even know
try was already far advanced.” of, the much larger group of entrepreneurs
There’s a general lesson here: the ability of whose visions failed. There’s no shame in
people to exchange private-property rights these failures. Indeed, each performed a ser-
within free markets is an effective anti- vice by warning others of what consumers
monopoly policy. But despite the inability of really didn’t want, or of what methods of pro-
economic historians to uncover much evi- duction really wouldn’t work.
dence that antitrust legislation has ever helped Like it or not, too few sane people will
consumers, most of today’s journalists share invest their wealth—mnot to mention their
Murray’s intuition that active antitrust enforce- hearts and souls—in revolutionary new prod-
ment 1s necessary to prevent monopoly. ucts or production processes without the pos-
The reason for this flawed intuition is easi- sibility of handsome payoffs. Fortunately,
ly identified: each journalist is, well, a jour- America remains a country that permits entre-
nalist. Because the typical journalist (like the preneurs to reap (most of) the fruits of their
typical politician, bureaucrat, and judge) isn’t successes.
an entrepreneur, he cannot imagine the com- The market’s “process of creative destruc-
mercial and industrial world being much dif- tion” (as economist Joseph Schumpeter called
ferent from what it is today. So the typical it) replaced the horse and buggy with the
journalist sees Microsoft’s large market share automobile—just as it replaced chamber pots
today in operating-system software and and outhouses with indoor plumbing, type-
unimaginatively laments, “Oh, dear! The only writers with personal computers, telegraphs
hope is for government to mandate that with telephones, passenger rail travel with air
Microsoft stand aside and make room for its travel, and iron-lung machines with an effec-
rivals. Otherwise, Microsoft will remain for- tive vaccine against polio. It isn’t even con-
ever dominant.” ceivable that salaried bureaucrats could have
Imagining how a new product or new firm envisioned these and the millions of other
can successfully challenge Microsoft is innovations that make modern life possible.
indeed difficult—in the same way that all As James DeLong wrote in the May 20 Los
entrepreneurial activity is difficult. Only one Angeles Times, “Gates is worth decabillions in
or a handful of people ever “sees” the promise part because he had a few big visions . . . but
of any particular commercial or industrial equally important has been his embrace of the
advance. If this weren’t true—if, instead, the fluidity of the future and an awesome ability
ability to envision and implement market- to react to surprises. This is the opposite of
improving changes were widespread—then the bureaucratic mind, which cannot stand
Rockefeller, Henry Ford, Ted Turner, Bill uncertainty and fluidity and so makes the
Gates, and the other entrepreneurs who over future predictable by stifling it.”
the years have created market-improving Microsoft will eventually be replaced by a
changes would never have become household rival that better meets consumer demands.
names. And they certainly wouldn’t have But the only sure way we’ll know when this
earned much more wealth than the rest of us. rival has arrived is by leaving the decision up
The essence of a competitive market econo- to consumers. Alan Murray's belief that
my is that it encourages each person with a bureaucrats and judges can outguess the
vision of how consumers can be better served to competitive market process just ain’t so. []
act on that vision, even though literally no one —DONALD J. BOUDREAUX AND
else in the world might share it. All it takes is a BURTON W. FOLSOM


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FREEMAN

deas On Libert

Leonard E. Read: A Portrait

by Edmund A. Opitz

I coma started out as a farm boy in the
small town of Hubbardston, Michigan.
There are always chores on a farm, and
Leonard learned early on that time was not to
be wasted. Leonard’s father died when the boy
was ten. From then on Leonard shouldered
the role of a responsible adult. In addition to
farm chores, Leonard also clerked in the local
store. As he remembered those days, Leonard
remarked that his was a 102-hour work week!

There was a one-room schoolhouse in Hub-
bardston and, of course, church on Sunday and
Bible school. Meager resources, these, but
they did feed Leonard’s lust for knowledge and
gave him the basic tools of learning: the three
R’s—reading, ’riting, and ’rithmetic. His high-
school years were spent at nearby Ferris Insti-
tute, where he earned his way by keeping the
building in shape, looking after the furnace,
and grooming the grounds. He had a room and
cooked his own meals. He graduated from Fer-
ris and joined the Air Corps.

During World War I, his troopship, the Tus-
cania, was sunk off the coast of Scotland.
Leonard was among the survivors and went to ness in Ann Arbor. Before dawn he drove to
an airbase in England. After the war, Leonard the Detroit wholesale market and back to Ann
was sent to Germany to serve for another year Arbor to sell his commodities to grocery
in the army of occupation. He was about 20 stores, fruit stands, and the like. It was back-
years of age when he returned to his home breaking, heartbreaking work, but he stuck to
state and opened a wholesale produce busi- it till he realized that the market was trying to
tell him that peddling groceries was a misuse

Leonard E. Read as a young man.

The Reverend Mr. Opitz, a contributing editor of The

of his unique talents.
Freeman, was a senior staff member of the Founda- Soh q ked his wife and tw into hi
tion for Economic Education until his retirement in 0 he packed his wile an © sons 1nto his

1992. He was book review editor of The Freeman for ~ car and drove to California. He eventually was
many years. able to get a job with the tiny Burlingame

518


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519

Chamber of Commerce outside of San Fran- the U.S. Chamber of Commerce, which
cisco, where he did well enough to be invited extended its jurisdiction over the huge wedge
to head the much more active Palo Alto of territory in our Northwest. From there
Chamber. He was now on the first rung of his Leonard moved back to San Francisco as
remarkable career. Destiny, it seems, had manager of the Western Division, a portent
tapped him on the right shoulder. perhaps, of even bigger things to come.
Leonard was now in his mid-twenties; California is a state of mind, or a mental
handsome, strongly built, articulate, suave, state—take your pick. There was—especially
well-groomed, energetic, and well-spoken. in southern California—a mixed bag of share-
The total package was attractive to men and the-wealth enthusiasts: Marxists, socialists,
women alike, especially so because one social creditors, Townsendites, technocrats,
sensed that this man had ordered his soul followers of Upton Sinclair, and the like. The
aright and had his priorities straightened out. New Deal, with its myriad alphabet agencies,
His dedication was palpable, which made him was sending its tentacles in every direction.
all the more persuasive. The Chamber of Commerce would have noth-
Mr. Herbert Hoover lived near Palo Alto ing to do with the communists or socialists,
and was already acknowledged to be the like- but Chamber policy tended to favor national
ly Republican candidate in the 1928 race for recovery programs, which seemed to be lend-
office of President of the United States. He ing a helping hand to some sectors of busi-
won, which fact gave Leonard an impossible ness, as well as offering aid to farmers. And
dream: why not hire a train to take a crowd of Chamber policies were, for young Read,
people from California to Washington to par- gospel truth. If the Chamber favored some
ticipate in the inaugural ceremonies? Could New Deal policies, so did Read!
be a flop, of course; but when Leonard
evolved a strong belief in something, a myste- Me eting Bill Mullendore
rious alchemy would somehow transform his
vision into reality. It may be presumed that But there was in the Los Angeles area a
Leonard sounded out some of his friends and small cadre of businessmen who were critical
acquaintances, got some positive responses, of all New Deal policies. The most articulate
and decided to go for broke; the whole pack- man in this group was W.C. Mullendore, an
age included a luxury Pullman with 16 cars, executive with Southern California Edison.
quality service and gourmet meals, nurse and Leonard journeyed to Los Angeles to meet
doctor aboard, and a daily mimeographed bul- with this man Mullendore and straighten him
letin, which Leonard edited. Once in the out. As Leonard tells this story, he spent ten
nation’s capital there would be special rates in minutes explaining Chamber policies, and the
first-class hotels, tickets for the parade, reser- next few minutes trying to rationalize them.
vations for the Inaugural Ball . . . and who And began to stumble! His sound instincts
knows what else? It caught the eyes of the began to send up warning signals. At which
nation’s press, and the young man from Palo point Mr. Mullendore took over, ripped the
Alto was praised for his innovative mind and Chamber’s position to shreds, and went on to
the sagacity he displayed in the execution of demonstrate that the New Deal was riddled
his plans. with fallacies and fantasies. Money is unjust-
Mr. Hoover conveyed his best thanks to ly taxed away from those who earn it and
Leonard, and the two saw each other occasion- unjustly given to those who lobby for it. And
ally until the death of the ex-president in 1964. in effecting these transfers government itself
Theres a story that Mr. Hoover submitted becomes rich and powerful while the country
(decreed?) an article for publication in The at large suffers a drop in productivity, as well
Freeman—which Leonard turned down. Mr. as an impairment of personal freedom.
Hoover accepted the rejection slip gracefully! Whatever the words uttered by Mr. Mullen-
Leonards next move was to Seattle as dore, they had an overwhelming effect on
assistant manager of the Western Division of Read; they changed his life by altering his


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520 THE FREEMAN e SEPTEMBER 1998

thinking. He began to study and then wrote a market economy during the ’20s and ’30s,
book in order to clarify his philosophy. The had retired to southern California. Carver
result was The Romance of Reality, published attended a luncheon at which Leonard was the
in 1937 by Dodd, Mead Company. speaker. After the talk Carver approached
Under the prodding of Mr. Mullendore and Leonard and said, “Mr. Read, you sound like
others of like mind, Chamber policy began to Frederic Bastiat.” “Who is Bastiat?” inquired
shift away from campaigns that touted the cli- Leonard. Carver responded and promised to
mate, the oranges, the movies, and such, to mail Bastiat’s booklet titled “Communism
serious efforts to change the climate of opin- versus Free Trade.” Leonard loved it and soon
ion by means of the written and the spoken issued it under the imprint of Pamphleteers,
word. The man to guide the Los Angeles Inc., a small group of friends of liberty with-
Chamber in its new orientation was to be, of in the Chamber orbit who, in their “ninth-
course, Leonard Read, who became general floor underground,” occasionally chipped in
manager of the nation’s largest Chamber in to print short works that otherwise might be
1939, when he was 41 years old. He was the neglected, like Rose Wilder Lane’s Give Me
right man, at the right time, in a strategic post. Liberty and Ayn Rand’s Anthem. Not long
It was important that the Los Angeles Times after this, Mr. Hoiles reprinted three of Basti-
was what we might call a conservative paper, at’s books in the English translation of about
which gave Read a fairly friendly press. The 130 years ago. Several years after founding
Register of Orange County was outspokenly FEE, Leonard published Dean Russell’s
libertarian; its publisher, R.C. Hoiles, was a robust translation of Bastiat’s The Law. Well
dynamo. He and Read must have become over 500,000 copies have been circulated.
allies early on. The public (or government) schools of
And Leonard’s pastor, Reverend James W. Leonard’s boyhood offered a fairly sound cur-
Fifield, minister of the 4,000-member First riculum; students were exposed to the basic
Congregational Church of Los Angeles, with public documents of this nation. The Declara-
a Saturday evening radio hour heard from San tion of Independence was Leonard’s favorite.
Francisco to San Diego, was a foe of the New Permit me to quote from Read’s interpretation
Deal and critical of the “Social Gospel” trend of a portion of one sentence. “. . . in the frac-
in the churches. To counter the “Social tion of one sentence written into the Declara-
Gospel” Fifield sent a black minister, the Rev- tion of Independence,” Read declared, “was
erend Irving Merchant of his staff, around the stated the real American Revolution, the new
country to meet with ministerial associations idea, and it was this: ‘that all men are created
and explain its errors. Pastor Merchant col- equal; that they are endowed by their Creator
lected some 17,000 signed cards of endorse- with certain unalienable Rights; that among
ment from ministers affirming their allegiance these are Life, Liberty, and the Pursuit of
to a resistance movement (I’ve seen the Happiness.’ That was it. This is the essence of
cards!), which came to be called “Mobiliza- Americanism. This is the rock upon which the
tion for Spiritual Ideals.” In short, the vine- whole ‘American miracle’ was founded.
yard in southern California had reached a “This revolutionary concept was at once a
stage where a man like Leonard could make spiritual, a political, and an economic concept.
optimum use of his talents with support It was spiritual in that the writers of the Dec-
offered by the business and ecclesiastical laration recognized and publicly proclaimed
communities. Leonard served on the board of that the Creator was the endower of man’s

First Church. rights, and thus the Creator is sovereign.
“It was political in implicitly denying that
Enter Bastiat the state is the endower of man’s rights, thus
declaring that the state is not sovereign.
And now Bastiat enters the picture. Thomas “It was economic in the sense that if an

Nixon Carver, distinguished professor of eco- individual has a right to his life, it follows that
nomics at Harvard who championed the free- he has a right to sustain his life—the suste-


===== PAGE 9 =====

LEONARD E. READ: A PORTRAIT 521

nance of life being nothing more nor less than said that the unique stance of FEE was
the fruits of one’s own labor.” inspired by reading this essay by Nock. The

These words are lifted from Leonard’s lec- first contact between the two men may have
ture “The Essence of Americanism,” his open- been in 1935 or 1936. Leonard told me that he
ing speech at virtually every one of our sever- read Nock’s Our Enemy, the State shortly

al hundred seminars (see page 527). after it came out and wrote a letter to Mr.
Nock: “I’ve just read your Our Enemy, the
Lib erty Cannot Be Sold State. 1t is a perfectly splendid book. But how

can a brilliant man like you advocate the Sin-

During Leonards five years as general gle Tax?” Back came a letter from AJN: “Dear
manager of the Los Angeles Chamber, his Mr. Read: I do not advocate the Single Tax: I
mind sharpened and deepened; he grew and merely believe in it.” Yours very truly, Albert
he outgrew. New insights developed as he Jay Nock. Leonard was, from then on, free
pondered the question of how the freedom from the distemper of mere advocacy.
philosophy could best be advanced. In his ear- The ice once broken, the relationship
lier professional positions he had become between the two men strengthened. Whenever
well acquainted with advertising and promo- Leonard came to New York he tried to arrange
tional techniques. But the idea of individual to have dinner with AJN. Nock published his
liberty cannot be “sold” as if it were a cake of magnificent Memoirs of a Superfluous Man in
soap; it has to be explained—and explained in 1943. He sent a copy to Leonard inscribed, “If
such a manner that the reader or hearer gains this book is good enough for Leonard E.
an intimate insight into the plain truth of the Read, it’s good enough for me.” Signed,
matter. The idea of “freedom” is more caught Albert Jay Nock. FEE is now the central
than taught; it’s analogous to a benign conta- source for Nock’s books; and there is a Nock-
gion spreading from person to person, until a ian Society at 42 Leathers Road, Fort
few begin to say: “By George, I think I've got Mitchell, Kentucky 41017.
it!” Leonard finally came to the conclusion that

It was some years later that Leonard came the institution he envisioned as a proper vehi-
across a confirmation of his own thoughts in cle to advance the freedom philosophy could
a few words from Albert Schweitzer’s great not operate as a facet of another type of insti-
1923 book, Civilization and Ethics: “Civi- tution... it had to be autonomous.
lization can only revive when there shall The bout with Bill Mullendore started it all.
come into being in a number of individuals a Leonard continued his own search for wis-
new tone of mind independent of the one dom, reaching for new ideas and better ways
prevalent among the crowd and in opposition to present them. He firmly grasped the pro-
to it. A new public opinion must be created found truth that the advancement of human
privately and unobtrusively. The existing one liberty is a learning process and not a selling
is maintained by the press, by propaganda, by problem.
organization, and by financial and other influ- What the freedom philosophy needed was
ences at its disposal. . . . This unnatural way “a local habitation and a name.” Fifty-two
of spreading ideas must be opposed by the years ago, in 1946, it found both in Irvington,
natural one, which goes from person to per- New York. FEE has been a wellspring of ideas
son and relies solely on the truth of the of liberty since its inception—and the tradi-
thoughts and the hearer’s receptiveness for tion continues.
new truth.” Postscript: A fine, full-scale biography of

Albert Jay Nock’s widely circulated essay, Leonard Read written by Mary Sennholz, his
“Isaiah’s Job,” conveyed much the same mes- secretary in the early days of FEE, is available
sage as the words of Schweitzer. Leonard has from the Foundation. Highly recommended. []


===== PAGE 10 =====

FREEMAN

deas On Libert

Leonard E. Read, Crusader

by Bettina Bien Greaves

f you had known Leonard E. Read in the wage legislation all restricted the freedom of

1930s, you would probably not have picked individuals and hampered economic recovery.
him as a future crusader for the freedom phi- He was aghast at the violations of private
losophy. Charismatic, energetic, debonair, he property he saw around him. He embraced
was a businessman, an organization man, a enthusiastically the freedom philosophy Mul-
Chamber of Commerce man. In 1932, in the lendore had expounded, became convinced it
depth of the Depression, he became manager held the answer to the country’s economic
of the Western Division of the U.S. Chamber depression, and began to look for ways to
of Commerce, headquartered in San Francis- share his newly found philosophy with others.
co. Some Chamber members were alarmed at In the process he became a crusader.

the direction government was taking. But not Read could not spread his pro-freedom ideas
Read and not the U.S. Chamber, which adopt- to the extent he wished within the Chamber. So
ed a policy of going along to get along. he started an outside publishing venture, Pam-

Then Read called on a prominent Califor- phleteers, Inc., through which he released pam-
nia businessman who had been criticizing the phlet versions of several pro-freedom works—
Chambers position, William C. Mullendore, Frederic Bastiat’s The Law, Rose Wilder Lane’s
executive vice president of Southern Califor- Give Me Liberty, Andrew Dickson White's Fiat
nia Edison. Read left Mullendore’s office a Money Inflation in France, Ayn Rand’s
changed man, “liberated,” as he would phrase Anthem, and Virgil Jordan’s Freedom in Amer-
it later, from accepting blindly the popular ica. But Read felt frustrated. He realized he
worldview. He started to consider and ponder was trying to serve two masters—his employer
ideas that had never concerned him before. and his freedom philosophy.

(See Edmund Opitz’s account on page 519 of Just before the war ended in Europe, Read
this issue.) resigned as general manager of the L.A.
Chamber to take a position in New York City
as vice president with the National Industrial
Conference Board (NICB). His job was to

As Read examined the world through his raise funds for its educational program,
newly acquired “freedom-tinted” glasses, he through which he hoped to promote the free-
realized that the New Deal’s spending and dom philosophy. But the NICB’s idea of “edu-
inflation, its economic distribution programs, cation” was not Read’. It wanted to present
and its pro-union Wagner Act and minimum- “both sides” of every issue. In a world where

“the other side” was already being presented

Bettina Greaves, resident scholar at FEE, joined the ~€vVe€rywhere, in newspapers, radio, films,
Foundation staff in 1951. schools, universities, and books, “the freedom

522

Freedom-Tinted Glasses


===== PAGE 11 =====

523

side” would receive short shrift. Disappointed goal. Read turned first to V. Orval Watts, who

once more, Read resigned. had been with him at the L.A. Chamber and
had written some of its most effective anti-
The Founding of FEE big-government tracts. Then, from Cornell

University, he hired FA. Harper, WM. Cur-
By that time, Read, through his work with tiss, Paul L. Poirot, and Ivan R. Bierly. I came
the Chamber of Commerce and the NICB, to FEE in 1951 and Edmund A. Opitz arrived
had many contacts who shared his faith in four years later. Other staffers came and went
freedom and his belief in the importance of over the years. When they left FEE, many
finding some way to counteract the New Deal continued to promote the freedom philosophy
thinking. By 1946, Franklin Roosevelt’s inter- in one way or another, in business, in colleges
ventionist ideas had been further entrenched and universities, and through other free-mar-
by price, wage, and rent controls and other ket think tanks.
wartime emergency legislation. So, with the Read was a moral philosopher, not an econ-
backing and support of some of his friends, omist, though his principles made him a pret-
Read decided to set up his own organization. ty good free-market economist. He reasoned
That spring Read established the Foundation that if it is moral to respect the life and prop-
for Economic Education (FEE). erty of individuals, then it is immoral to vio-
It is one thing to believe in, and to dream late their rights to life and property; if it is
of, promoting the freedom philosophy; it is moral to deal peacefully with others, then it is
quite another thing to actually do so. Without immoral to use force, fraud, or threat of force
an organization to put outreach schemes into to impose one’s wishes on others; if voluntary
practice, there could be no promotion of the transactions among private-property owners
freedom philosophy, except in a very limited are moral, then to hinder or prevent voluntary
way through personal contacts. It takes an transactions among willing traders is immoral.
organization to publish books, briefs, and No one, neither private individual nor public
pamphlets, to hire speakers, to schedule lec- agency, should take property by force or coer-
tures, and to arrange seminars. This is what cion from one person for the benefit of anoth-
Read had in mind for his foundation. And he er. These principles led Read logically to
was well-prepared for the task. He was a rare believe in the morality of private-property
mix of crusader, businessman, administrator, rights, a free-market economy, and free trade,
and money-raiser. As crusader, the sincerity and to the conviction that government inter-
of Read’s belief in moral principles infected vention that violates private property, hampers
others. His zeal and enthusiasm for the free- free markets, and interferes with free trade is
dom philosophy persuaded listeners to sup- immoral. His proverbial answer when asked
port his cause. As businessman, Read realized how to solve any economic problem was: “Get
that if an organization is to succeed its income the government out of it.”
must exceed its outgo. Establishing and main- For Leonard Read, the difference between
taining an organization also required Read’s what was permissible and what was imper-
talents for money-raising and administration.  missible was simple. Anything Thats Peaceful
As there had been controls on rents and (the title of one of his many books) was per-
practically no construction during the war, missible. Read was always ready to point out
office space in New York City was scarce or that the voluntary way was not only right but
non-existent. When a real estate agent sug- beneficial. Obviously, it benefited those
gested that Read look at suburban property, he directly concerned. But eventually it helped
found and purchased a large private estate, everyone through increased cooperation, pro-
still FEE’s home, which had been vacated by duction, and well-being. On the other hand,
the owner during the war because of the diffi- the use of force to coerce others against their
culty of getting help. will was wrong, immoral. Moreover, while
To staff the Foundation, Read sought to the use of force might help some, it inevitably
assemble a group of persons who shared his hurt others.


===== PAGE 12 =====

524 THE FREEMAN e« SEPTEMBER 1998

Read’s goal was to counteract, through have prevented others from sharing his enthu-
FEE, the anti-freedom, pro-socialist, New siasm. So he set Dean Russell, a journalism
Deal philosophy of post-World War Il Ameri- graduate student recently mustered out of the
ca. The problem was to reawaken in the peo- Army Air Corps, to translating it into modern
ple a belief in the morality of freedom. Since English prose. Russell’s translation, published
people cannot be forced to be moral, their in 1950, just a century after the book first
ideas must be changed—through education. appeared in French, introduced Bastiat’s writ-
Read’s whole life became devoted to this task, ings on freedom to new generations of read-
to free-market education in the broadest sense ers. It has since sold a half million copies and
of the word. is still one of FEE’s best sellers. FEE has also
published newly translated versions of Basti-
at’s other books, Economic Sophisms, a col-
lection of short pieces on free trade (most

One of the ways Read engaged in free-mar- notably “The Candlemakers’ Petition,” a satir-
ket education was through the distribution of ical attack on tariffs), Economic Harmonies,
the works of Bastiat. It was “love at first and Selected Essays in Political Economy.
sight,” or should I say “love at first reading,” Bastiat’s valuable and readable works might
when Read first encountered Bastiat during have been forgotten were it not for Read.
his Chamber of Commerce days. Bastiat
(1801-1850), economist, journalist, and . .
member of the French Chamber of Deputies, Spreading the Word of Mises
had fought long and hard against the socialist When Read needed economic advice, he
ideas of his day. Bastiat’s moral approach to relied on others, especially Austrian-born
freedom appealed to Read. And his anti- economist Ludwig von Mises, who had joined
socialist arguments were relevant to Reads FEE in the very beginning. Mises, a refugee
struggle against Roosevelt’s New Deal. from war-torn Europe, had arrived in the

As noted, Read, while still in California, United States in 1940, jobless and practically
reprinted the English translation of one of broke. Mises had been well known and well
Bastiat’s small books, The Law. Bastiat had established in Europe, but in this country
proclaimed that life—physical, intellectual, where Keynesian big-government, big-spend-
and moral—was a gift from God, not govern- ing ideas reigned supreme, his free-market
ment. “Each of us has a natural right—from ideas were considered old-fashioned. One of
God—to defend his person, his liberty, and FEE’s founding trustees, economic journalist
his property. . . . If every person has the right Henry Hazlitt, urged Read to take Mises on as
to defend—even by force—his person, his economic adviser.
liberty, and his property, then it follows that a The Hazlitt-brokered relationship benefited
group of men have the right to organize and all concerned: Read, FEE, and Mises. Mises
support a common force to protect these lent advice and prestige to the Foundation.
rights constantly.” However, according to Bas- Through the years, the Foundation spread
tiat, that common force, government, had Mises’s teachings by providing a platform for
been used to destroy the rights of individuals him to speak at seminars and to write for its
and to take the property of some for the ben- magazine, The Freeman. FEE also helped
efit of others. This would be considered with Mises’s 800-plus-page economic opus,
“plunder” if done by gangsters or thieves. Human Action. A FEE secretary finished typ-
When done in the name of government, it was ing the manuscript and staffers prepared it for
still “plunder”—Bastiat called it “legal plun- publication by Yale University Press, which
der” His book cited many examples of occurred in 1949. Once it was published, FEE
government-sanctioned “legal plunder.” helped to place it in libraries. The Foundation

Read had been disappointed by the recep- itself has also published some of Mises’s
tion accorded The Law. He decided the rather books—the first was Planned Chaos (1947)—
archaic British prose of the translation must and assisted in the publication of others.

Promoting Bastiat


===== PAGE 13 =====

LEONARD E. READ, CRUSADER 525

The FEE Seminars

Read felt that one of the most effective
ways to bring the freedom philosophy to peo-
ple was through personal contact. The give-
and-take of discussions, with the opportunity
to ask questions, sparks interest. So in the
1950s, FEE began holding seminars, some-
times at its headquarters in Irvington, but fre-
quently off-site around the country through
arrangements made by local supporters of the
freedom philosophy. Most were held on week-
ends—Friday evening to Sunday noon—with
a three-man team of speakers—Leonard Read
plus two others, perhaps Ed Opitz of FEE’s
staff; Dean Russell; Jim Rogers, a dynamic
spokesman for freedom; Ben Rogge, Wabash
College professor; Hans Sennholz of Grove
City College and later FEE’s president from
1992 to 1997; Percy Greaves, freelance econ-
omist and historian; George C. Roche III,
FEE seminar director and now Hillsdale Col-
lege president; or Bob Anderson, for many almost anything if left alone. He saw the
years FEE’s executive secretary. “Miracle of the Market” (an article title) as

Many seminars were aimed at the general the outcome of the actions and ideas of count-
public, but others have been intended to reach less individuals.
various special groups—high-school or col- As a boss, Read left his staff pretty much
lege teachers, college undergraduates, minis- alone, counting on their self-motivation to
ters, students of journalism, and so on. Semi- contribute, each in his or her own way, to the
nars have played an important part in FEE’s freedom philosophy. But he insisted on sever-
activities and, thanks to them, freedom has al points. FEE should present a favorable
made friends all over the world. impression to the public. All publications

Read lived, breathed, and thought the free- should be attractive. And anyone who wrote
dom philosophy. Wherever he went, he looked to FEE should receive a serious and courteous
for, or made, opportunities to present his answer.
ideas. When he flew—and he did a lot of fly-
ing back and forth across the country to fulfill The Read Touch
speaking engagements and to meet potential
supporters—he would tantalize his seatmate One day the mail brought a vicious three-
with hints of where he had been, what he had page diatribe from a labor-union organizer
done, and persons he had met. Out of curiosi- who attacked Read’s position, expressed in an
ty, his seatmate would ask, “What do you do, article about a recent airline dispute, that
Mr. Read?” And that opened the door for there was no moral right for workers to strike,
Read to talk about FEE and the freedom idea. that is, to forcibly prevent willing workers

For Read, variety was the spice of life; he from occupying vacated jobs. Read took no
considered individual diversity “a blessing.” notice of the correspondent’s ill temper, but
Everyone should be free to try anything, so used a “turn-the-other-cheek approach”; he
long as he didn’t interfere with the equal sent a serious and courteous reply with two
rights of others. That way lay progress and small books. Some weeks later the union man,
economic development! Read had profound “Whitey,” wrote authorizing Read “to become
confidence that individuals could accomplish my director of reading. Send me anything

Leonard Reed, 1965


===== PAGE 14 =====

526 THE FREEMAN e SEPTEMBER 1998

which in your judgment will help my think- small electric candle. The eyes of everyone in
ing, and with invoice.” Whitey changed his the audience would be riveted to that small
occupation and eventually the two men met in flame. “No amount of darkness,” he said, “can
Seattle when Whitey drove Read to the airport extinguish that tiny light” Then gradually
after a lecture. Read reminded Whitey of his Read would turn up the intensity of the candle
first letter. Read wrote later that Whitey felt until the whole room was flooded with light.
“crushed to think he had written in such a “A good idea,” Read said, “is similar. Once
vein to one who reacted as [Read] had.” abroad in the world it lives; it cannot be extin-
“Suppose 1 had replied in kind?” Read guished or put back in a bottle. And an idea
recalled asking. “Would you and I be riding whose time has come can spread in time to
together?” encompass the entire world.” And so it would
“I’ll say we wouldn’t!” be, Read believed, with the freedom idea. In
“Whitey, let me explain what I did to you.” spite of the refusal of the general public to
Holding his plane ticket against the wind- accept the freedom philosophy, Read
shield, Read asked, “What holds it there?” remained eternally optimistic, convinced that
“The tension of your finger.” freedom would win in the end.
“You are right, Whitey. It is known as the
aw of polarity or the tension of the opposites. Leonard Read’s Influence
ow observe what happens when the tension
is removed.” The ticket fell to the floor. “Well, Read died in 1983. But FEE has endured. It
that’s precisely what I did to you. I removed celebrated its 50th anniversary in 1996. And it
the tension; I gave you nothing to scratch continues along the path down which Read
against.” Read then quoted an old Arab pointed. Thanks in part to Read and to FEE,
proverb, “He who strikes the second blow the freedom philosophy and free markets are
starts the fight.” “When I didn’t strike back,” now more widely discussed and more
Read said, “there was no fight; you and I respectable than they were in the years imme-
could become friends.” diately following World War II. The founders
This story has a sequel. “Perhaps two years of many recently established free-market
later, there came a period of three months think tanks give credit to Read and to FEE for
with no word from Whitey—most unusual. having helped to inspire them. Some New
Finally, a letter arrived, explaining that he had Deal and World War II interventions, FEE’s
been in a head-on auto collision. He was still targets in the early years, have expired or been
in the hospital after 90 days. And then this: repealed. But others remain, and new inter-
‘but, Mr. Read, you should see the interest my ventions are proposed daily. Government reg-
three doctors are showing in our philosophy.’” ulations and controls go on and on. The strug-
gle against the welfare-state philosophy is by
What We Do Not Know no means won. Co
Until people understand economic princi-
Read had an immense respect for what we ples clearly enough to realize that government
do not know. “The Wisdom in Knowing I should not intervene in the private affairs of
Know Not” and “The Importance of Awe” peaceful persons, and that government’s role
were titles of two articles. He considered should be limited to protecting life, property,
ideas all-important. He advocated self- and voluntary social cooperation, and adjudi-
education, urged everyone to do his “home- cating disputes, Read’s work will not be done.
work,” to strive to become the best that he Until that day arrives, there will be plenty of
could, and to live up to his potential. work for FEE’s staff and other free-market-
Read was not above a little showmanship. minded thinkers, writers, and teachers. The
When he wound up a lecture he often had the freedom philosophy remains a dream, an
lecture room darkened. Then he would light a ideal, but one well worth striving for. [1]


===== PAGE 15 =====

Anything That's
Peaceful

The Essence of Americanism

by Leonard E. Read

Qomeone once said: It isn’t that Christian- Pilgrim colony were starving and dying. As a
ity has been tried and found wanting; it rule, that type of experience causes people to
has been tried and found difficult—and stop and think about it!
abandoned. Perhaps the same thing might be Anyway, they did stop and think about it.
said about freedom. The American people During the third winter Governor Bradford
are becoming more and more afraid of, and got together with the remaining members of
are running away from, their own revolu- the colony and said to them, in effect: “This
tion. I think that statement takes a bit of coming spring we are going to try a new idea.
documentation. We are going to drop the practice of ‘from
I would like to go back, a little over three each according to ability, to each according to
centuries in our history, to the year 1620, need.’ We are going to try the idea of ‘to each
which was the occasion of the landing of our according to merit’” And when Governor
Pilgrim Fathers at Plymouth Rock. That little Bradford said that, he enunciated the private
colony began its career in a condition of pure property principle as clearly and succinctly as
and unadulterated communism. For it made any economist ever had. That principle is
no difference how much or how little any nothing more nor less than each individual
member of that colony produced; all the pro- having a right to the fruits of his own labor.
duce went into a common warehouse under Next spring came, and it was observed that
authority, and the proceeds of the warehouse not only was father in the field but mother and
were doled out in accordance with the author- the children were there also. Governor Brad-
ity’s idea of need. In short, the Pilgrims began ford . records that “Any generall wante or
the practice of a principle held up by Karl famine hath not been amongst them since to
Marx two centuries later as the ideal of the this day.”

Communist Party: from each according to It was by reason of the practice of this pri-
ability, to each according to need—and by vate property principle that there began in this
force! country an era of growth and development

There was a good reason why these com- which sooner or later had to lead to revolu-
munalistic or communistic practices were dis- tionary political ideas. And it did lead to what
continued. It was because the members of the I refer to as the real American revolution.

I do not think of the real American revolu-
—_— tion as the armed conflict we had with King
Leonard E. Read established F EE in 1 946 and served George IIL. That was a reasonably minor fracas
as its president until his death in 1983. “The Essence .
of Americanism,” first delivered as a speech in 1961, as such fracases go! The real American Tevo-
was Mr. Read's traditional opening address at lution was a novel concept or idea which broke

dozens of FEE seminars. with the whole political history of the world.
527


===== PAGE 16 =====

528 THE FREEMAN e SEPTEMBER 1998

Up until 1776 men had been contesting Number one, there wasn’t a single person
with each other, killing each other by the mil- who turned to the government for security,
lions, over the age-old question of which of welfare, or prosperity because government
the numerous forms of authoritarianism—that was so limited that it had nothing on hand to
1s, man-made authority—should preside as dispense, nor did it then have the power to
sovereign over man. And then, in 1776, in the take from some that it might give to others. To
fraction of one sentence written into the Dec- what or to whom do people turn if they can-
laration of Independence was stated the real not turn to government for security, welfare,
American Revolution, the new idea, and it or prosperity? They turn where they should
was this: “that all men are created equal; that turn—to themselves.
they are endowed by their Creator with certain As a result of this discipline founded on the
unalienable Rights; that among these are Life, concept that the Creator, not the state, is the
Liberty, and the Pursuit of Happiness.” That endower of man’s rights, we developed in this
was it. This is the essence of Americanism. country on an unprecedented scale a quality of
This is the rock upon which the whole “Amer- character that Emerson referred to as “self-

ican miracle” was founded. reliance.” All over the world the American peo-
This revolutionary concept was at once a ple gained the reputation of being self-reliant.
spiritual, a political, and an economic con- There was another benefit that flowed from

cept. It was spiritual in that the writers of this severe limitation of government. When
the Declaration recognized and publicly government is limited to the inhibition of the
proclaimed that the Creator was the endow- destructive actions of men—that is, when it is
er of man’s rights, and thus the Creator is limited to inhibiting fraud and depredation,
sovereign. violence and misrepresentation, when it is
It was political in implicitly denying that limited to invoking a common justice—then
the state is the endower of man’s rights, thus there is no organized force standing against
declaring that the state is not sovereign. the productive or creative actions of citizens.
It was economic in the sense that if an indi- As a consequence of this limitation on gov-
vidual has a right to his life, it follows that he ernment, there occurred a freeing, a releasing,
has a right to sustain his life—the sustenance of creative human energy, on an unprecedent-
of life being nothing more nor less than the ed scale.
fruits of one’s own labor. This was the combination mainly responsi-
It is one thing to state such a revolutionary ble for the “American miracle,” founded on
concept as this; it’s quite another thing to the belief that the Creator, not the state, is the
implement it—to put it into practice. To endower of man’s rights.
accomplish this, our Founding Fathers added This manifested itself among the people as
two political instruments—the Constitution individual freedom of choice. People had
and the Bill of Rights. These two instruments freedom of choice as to how they employed
were essentially a set of prohibitions; prohibi- themselves. They had freedom of choice as to
tions not against the people but against the what they did with the fruits of their own
thing the people, from their Old World expe- labor.
rience, had learned to fear, namely, over- But something happened to this remarkable
extended government. idea of ours, this revolutionary concept. It
seems that the people we placed in govern-
ment office as our agents made a discovery.
Having acquisitive instincts for affluence and
The Constitution and the Bill of Rights power over others—as indeed some of us do—
more severely limited government than gov- they discovered that the force which inheres in
ernment had ever before been limited in the government, which the people had delegated
history of the world. And there were benefits to them in order to inhibit the destructive
that flowed from this severe limitation of the actions of man, this monopoly of force could
state. be used to invade the productive and creative

Benefits of Limited Government


===== PAGE 17 =====

THE ESSENCE OF AMERICANISM 529

areas in society—one of which is the business then resort to inflation as a means of financing
sector. And they also found that if they their ventures. This is happening to us now!
incurred any deficits by their interventions, the By “inflation” I mean increasing the volume
same government force could be used to col- of money by the national government's fiscal
lect the wherewithal to pay the bills. policy. Governments resort to inflation with
I would like to suggest to you that the popular support because the people apparent-
extent to which government in America has ly are naive enough to believe that they can
departed from the original design of inhibit- have their cake and eat it, too. Many people
ing the destructive actions of man and invok- do not realize that they cannot continue to
ing a common justice; the extent to which enjoy so-called “benefits” from government
government has invaded the productive and without having to pay for them. They do not
creative areas; the extent to which the govern- appreciate the fact that inflation is probably
ment in this country has assumed the respon- the most unjust and most cruel tax of all.
sibility for the security, welfare, and prosperi- Inflation is the fiscal concomitant of social-
ty of our people is a measure of the extent to ism or the welfare state or state intervention-
which socialism and communism have devel- ism—call it what you will. Inflation is a polit-

oped here in this land of ours. ical weapon. There are no other means of
financing the welfare state except by inflation.
The L ength ening Shadow So, if you don’t like inflation, there is only

one thing you can do: assist in returning our

Can we measure this development? Not government to its original principles.
precisely, but we can get a fair idea of it by One of my hobbies is cooking and, there-
referring to something I said a moment ago fore, | am familiar with the gadgets around
about one of our early characteristics as a the kitchen. One of the things with which I am
nation—individual freedom of choice as to familiar is a sponge. A sponge in some
the use of the fruits of one’s own labor. If you respects resembles a good economy. A sponge
will measure the loss in freedom of choice in will sop up an awful lot of mess; but when the
this matter, you will get an idea of what is sponge is saturated, the sponge itself is a
going on. mess, and the only way you can make it use-

There was a time, about 120 years ago, ful again is to wring the mess out of it. I hope
when the average citizen had somewhere my analogy is clear.
between 95 and 98 percent freedom of choice Inflation in the United States has ever so
with each of his income dollars. That was many more catastrophic potentials than has
because the tax take of the government—fed- ever been the case in any other country in his-
eral, state, and local—was between 2 and 5 tory. We here are the most advanced division-
percent of the earned income of the people. of-labor society that has ever existed. That is,
But, as the emphasis shifted from this earlier we are more specialized than any other people
design, as government began to move in to has ever been; we are further removed from
invade the productive and creative areas and self-subsistence.
to assume the responsibility for the security, Indeed, we are so specialized today that
welfare, and prosperity of the people, the per- every one of us—everybody in this room, in
centage of the take of the people’s earned the nation, even the farmer—is absolutely
income increased. The percentage of the take dependent upon a free, uninhibited exchange
kept going up and up and up until today it’s of our numerous specialties. That is a self-
not 2 to 5 percent. It is now [1961] over 35 evident fact.
percent.

Whenever the take of the people’s earned Destroying the Circulatory
income by government reaches a certain Syst em
level —20 or 25 percent—it is no longer polit-
ically expedient to pay for the costs of gov- In any highly specialized economy you do
ernment by direct tax levies. Governments not effect specialized exchanges by barter.


===== PAGE 18 =====

530 THE FREEMAN e SEPTEMBER 1998

You never observe a man going into a gaso- stood the principle of freedom of exchange.
line station saying, “Here is a goose; give me Over in France, there was a politician by the
a gallon of gas.” That’s not the way to do it in name of Chevalier, and an economist named
a specialized economy. You use an economic Frederic Bastiat.
circulatory system, which is money, the medi- Incidentally, if any of you have not read the
um of exchange. little book by Bastiat entitled The Law, I com-
This economic circulatory system, in some mend it as the finest thing that I have ever read
respects, can be likened to the circulatory sys- on the principles one ought to keep in mind
tem of the body, which is the blood stream. when trying to judge for oneself what the
The circulatory system of the body picks scope of government should be.
up oxygen in the lungs and ingested food in Bastiat was feeding his brilliant ideas to
the midsection and distributes these special- Cobden and Bright, and these men were
ties to the 30 trillion cells of the body. At preaching the merits of freedom of exchange.
those points it picks up carbon dioxide and Members of Parliament listened and, as a con-
waste matter and carries them off. I could put sequence, there began the greatest reform
a hypodermic needle into one of your veins movement in British history.
and thin your blood stream to the point where Parliament repealed the Corn Laws, which
it would no longer make these exchanges, and here would be like repealing subsidies to
when 1 reached that point, we could refer to farmers. They repealed the Poor Laws, which
you quite accurately in the past tense. here would be like repealing Social Security.
By the same token, you can thin your eco- And fortunately for them they had a
nomic circulatory system, your medium of monarch—her name was Victoria—who
exchange, to the point where it will no longer relaxed the authority that the English people
circulate the products and services of eco- themselves believed to be implicit in her
nomic specialization. office. She gave them freedom in the sense
Those of you who are interested in doing that a prisoner on parole has freedom, a per-
something about this have a right to ask your- missive kind of freedom but with lots of lati-
selves a perfectly logical question: Has there tude. Englishmen, as a result, roamed all over
ever been an instance, historically, when a the world achieving unparalleled prosperity
country has been on this toboggan and suc- and building an enlightened empire.
ceeded in reversing itself? There have been This development continued until just
some minor instances. I will not attempt to before World War I. Then the same old politi-
enumerate them. The only significant one cal disease set in again. What precisely is this
took place in England after the Napoleonic disease that causes inflation and all these

Wars. other troubles? It has many popular names,
some of which I have mentioned, such as

. socialism, communism, state interventionism,

How England Did It and welfare statism. It has other names such

England’s debt, in relation to her resources, as fascism and Nazism. It has some local
was larger than ours is now; her taxation was names like New Deal, Fair Deal, New Repub-
confiscatory; restrictions on the exchanges of licanism, New Frontier, and the like.
goods and services were numerous, and there
were strong controls on production and
prices. Had it not been for the smugglers,
many people would have starved! If you will take a careful look at these so-

Something happened in that situation, and called “progressive ideologies,” you will dis-
we ought to take cognizance of it. What hap- cover that each of them has a characteristic
pened there might be emulated here even common to all the rest. This common charac-
though our problem is on a much larger scale. teristic is a cell in the body politic which has
There were in England such men as John a cancer-like capacity for inordinate growth.
Bright and Richard Cobden, men who under- This characteristic takes the form of a belief.

A Dwindling Faith in Freedom


===== PAGE 19 =====

THE ESSENCE OF AMERICANISM 531

It is a rapidly growing belief in the use of Millions of people, aware that something is
organized force-——government—not to carry wrong, look around for someone to blame.
out its original function of inhibiting the They dislike socialism and communism and
destructive actions of men and invoking a give lip service to their dislike. They sputter
common justice, but to control the productive about the New Frontier and Modern Republi-
and creative activity of citizens in society. canism. But, among the millions who say
That is all it is. Check any one of these ide- they don’t like these ideologies, you cannot
ologies and see if this is not its essential find one in ten thousand whom you yourself
characteristic. will designate as a skilled, accomplished
Here 1s an example of what I mean: I can expositor of socialism’s opposite—the free
remember the time when, if we wanted a market, private property, limited government
house or housing, we relied on private enter- philosophy with its moral and spiritual
prise. First, we relied on the person who want- antecedents. How many people do you know
ed a house. Second, we relied on the persons who are knowledgeable in this matter? Very
who wanted to compete in the building. And few, I dare say.
third, we relied on those who thought they saw
some advantage to themselves in loaning the
money for the tools, material, and labor.
Under that system of free enterprise, Ameri- No wonder we are losing the battle! The
cans built more square feet of housing per problem then—the real problem—is develop-
person than any other country on the face of ing a leadership for this philosophy, persons
the earth. Despite that remarkable accom- from different walks of life who understand
plishment, more and more people are coming and can explain this philosophy.
to believe that the only way we can have ade- This leadership functions at three levels.
quate housing is to use government to take the The first level requires that an individual
earnings from some and give these earnings, achieve that degree of understanding which
in the form of housing, to others. In other makes it utterly impossible for him to have
words, we are right back where the Pilgrim any hand in supporting or giving any encour-
Fathers were in 1620-23 and Karl Marx was agement to any socialistic activities. Leader-
in 1847—from each according to ability, to ship at this level doesn’t demand any creative
each according to need, and by the use of writing, thinking, and talking, but it does
force. require an understanding of what things are
As this belief in the use of force as a means really socialistic, however disguised. People
of creative accomplishment increases, the reject socialism in name, but once any social-
belief in free men—that is, men acting freely, istic activity has been Americanized, nearly
competitively, cooperatively, voluntarily— everybody thinks it’s all right. So you have to
correspondingly diminishes. Increase com- take the definition of socialism—state owner-
pulsion and freedom declines. Therefore, the ship and control of the means of production—
solution to this problem, if there be one, must and check our current practices against this
take a positive form, namely, the restoration definition.
of a faith in what free men can accomplish. As a matter of fact, you should read the ten
The American people, by and large, have lost points of the Communist Manifesto and see
track of the spiritual antecedent of the Ameri- how close we have come to achieving them
can miracle. You are given a choice: either right here in America. It’s amazing.
you accept the idea of the Creator as the The second level of leadership is reached
endower of man’s rights, or you submit to the when you achieve that degree of understand-
idea that the state is the endower of man’s ing and exposition which makes it possible to
rights. I double-dare any of you to offer expose the fallacies of socialism and set forth
a third alternative. We have forgotten the some of the principles of freedom to those
real source of our rights and are suffering the who come within your own personal orbit.
consequences. Now, this takes a lot more doing.

Developing Leadership


===== PAGE 20 =====

532 THE FREEMAN e SEPTEMBER 1998

One of the things you have to do to achieve If you want to be helpful to the cause of
this second level of leadership is some study- freedom in this country, seek to become a
ing. Most people have to, at any rate, and one skilled expositor. If you have worked at the
of the reasons the Foundation for Economic philosophy of freedom and an audience isn’t
Education exists is to help such people. Atthe forming, don’t write and ask what the matter
Foundation we are trying to understand the is. Just go back and do more of your home-
freedom philosophy better ourselves, and we work.
seek ways of explaining it with greater clarity. Actually, when you get into this third level
The results appear in single-page releases, in of leadership, you have to use methods that
a monthly journal, in books and pamphlets, in are consonant with your objective. Suppose,
lectures, seminars, and the like. Our journal, for instance, that my objective were your
The Freeman, for instance, is available to stu- demise. I could use some fairly low-grade
dents and libraries on request. methods, couldn’t 1? But now, suppose my

The third level of leadership is to achieve objective to be the making of a great poet out
that excellence in understanding and exposi- of you. What could I do about that? Not a
tion which will cause other persons to seek thing—unless by some miracle I first learned
you out as a tutor. That is the highest you can to distinguish good poetry from bad, and then
go, but there is no limit as to how far you can learned to impart this knowledge to you.
go in becoming a good tutor. The philosophy of freedom is at the very

When you operate at this highest level of pinnacle of the hierarchy of values; and if you
leadership, you must rely only on the power of wish to further the cause of freedom, you
attraction. Let me explain what I mean by this. must use methods that are consonant with

On April 22 we had St. Andrew’s Day at my your objective. This means relying on the
golf club. About 150 of us were present, power of attraction.
including yours truly. When I arrived at the Let me conclude with a final thought. This
club, the other 149 did not say, “Leonard, business of freedom is an ore that lies much
won’t you please play with me? Won’t you deeper than most of us realize. Too many of us
please show me the proper stance, the proper are prospecting wastefully on the surface.
grip, the proper swing?” They didn’t do it. You Freedom isn’t something to be bought cheap-
know why? Because by now those fellows are ly. A great effort is required to dig up this ore
aware of my incompetence as a golfer. But if that will save America. And where are we to
you were to wave a magic wand and make of find the miners?
me, all of a sudden, a Sam Snead, a Ben I think we will find these miners of the
Hogan, an Arnold Palmer, or the like, watch freedom ore among those who love this coun-
the picture change! Every member of that try. I think we will probably find them in this
club would sit at my feet hoping to learn from room. And if you were to ask me who, in my
me how to improve his own game. This is the opinion, has the greatest responsibility as a
power of attraction. You cannot do well at any miner, I would suggest that it is the attractive
subject without an audience automatically individual occupying the seat you are sitting
forming around you. Trust me on that. in. 0

For a selection of Leonard Read’s
books at special sale prices, please
see this month’s Notes from FEE.



===== PAGE 21 =====

Ideas and Consequences by Lawrence W. Reed

If Rates of Return Matter,
Social Security Is a Goner

hen President Clinton called for “a When Social Security started, 30 Americans
national conversation” on Social Secu- supported each beneficiary. Today, that ratio is
rity a few months ago, he probably didn’t just three to one, and in barely another gener-
expect that privatizing the whole thing would ation, there will be just two payers for every
quickly become the talk of the country. But recipient. This intergenerational Ponzi scheme
that’s exactly what has happened. The new will collapse before then in an actuarial night-
national willingness to explore options that mare, harming all Americans, unless Congress
previously were politically untouchable now acts soon to return control of retirement deci-
seems so promising that privatization of the sions to citizens instead of politicians.
federal government’s biggest welfare program Social Security has probably reached the
may actually happen before the turn of the end of the line as far as the public’s tolerance
millennium. For Americans to embrace the of further payroll tax hikes is concerned. An
most sweeping reform since Social Security Associated Press poll taken in March found
was enacted in 1935, however, advocates of nearly 76 percent of all Americans opposed to
privatization will have to convince them that raising taxes to fund the system. And nearly
they’ll be better off financially trusting their 90 percent of younger workers—those “Gen-
retirement savings to private investment. eration X” citizens between ages 18 and 34—
On the face of it, that shouldn’t be a difficult want to shift at least some of their Social
task. In just 15 years, Social Security will start Security tax payments into private investment
running deficits as baby boomers retire in large accounts. President Clinton himself has ruled
numbers and benefits begin to outstrip rev- out any further tax increases to solve the prob-
enues. Lest anyone think that there are billions lem. Thus, the risk of depending on Social
of dollars waiting in a trust fund for the system Security would seem to be very high, indeed.
to tap, forget it. The Social Security Trust Fund Those who still say we're safer if we put our
consists of four brown file folders in Parkers- eggs in the government’s basket had better
burg, West Virginia, containing receipts for start coming up with better arguments.
$650 billion in U.S. Treasury bonds. The trust No wonder 90 percent of Generation X’ers
fund has been spent. It is nothing more than an oppose any more tax hikes for Social Securi-
accounting gimmick, and redeeming the bonds ty. According to economists Laurence Kot-
to pay benefits after 2012 will require a huge likoff and Willi Leibfritz in a recent paper for
tax increase on young workers. the National Bureau of Economic Research, a
25-year-old worker can expect to pay

Lawrence Reed is president of the Mackinac Center $175,000 more in Social Security taxes over
Jor Public Policy, a free-market research and educa- hi lif time than h tt ive 1
tional organization in Midland, Michigan (www. 15 1ietime than he can expect fo receive in

mackinac.org). He is chairman of FEE's Board of Social Security benefits. Even today’s 55-
Trustees. year-olds will end up, on average, paying in

533


===== PAGE 22 =====

534 THE FREEMAN ee SEPTEMBER 1998

$4,000 more than they’ll ever get back. Only tered plan. Chilean workers have earned an
people in their late 50s and older can hope for astounding average annual rate of return, after
a positive return—if they don’t die before inflation, of 12 percent during the past 15
reaching average life expectancy. years. Great Britain and Australia have joined
William W. Beach and Gareth G. Davis, in the privatization bandwagon, as have Argenti-
a January 1998 document from the Heritage na, Peru, Hungary, Romania, Croatia, and
Foundation called “Social Security’s Rate of even Russia and several other nations. If they
Return,” argue that it isn’t enough to contrast can do it, why can’t America?
what workers will pay in with what they’ll How risky would it be for American citi-
take out. Beach and Davis say the most mean- zens to invest their own retirement savings in
ingful analysis would compare what workers the stock market? An analysis of the historical
will get from Social Security with what that performance of stocks from the prestigious
same amount of money could earn in private Wharton School in Pennsylvania shows that
investment. When younger workers examine while there certainly have been single-year
those numbers, they will be horrified by the periods and even five-year periods in which
raw deal that this New Deal government pro- the stock market averaged a negative return,
gram really is: the longer stocks are held, the less the risk.
Never in American history did stocks produce
A single male earning what the Social a loss—in real terms—over a 20-year period.
Security Trustees call “an average income” The very best return on stocks in any 20-year
(or $25,723 in 1996) is particularly hard- period was 12.6 percent; the very worst—I
hit by Social Security’s low returns. A 21- percent—was still much better than today’s
year-old single male making an average younger workers can expect from the Social
income throughout his lifetime can expect Security system!
to lose $309,400 in potential retirement As it is, six million Americans already do
income by staying in Social Security when not participate in Social Security. More than a
compared with what he would earn if he dozen states exempt from 20 percent to all of
invested his payroll taxes in a safe, conser- their public workers from it. And nearly three-
vative private retirement fund made up of quarters of the nation’s police and firemen are
50 percent equities and 50 percent govern- not in the system.
ment bonds. Paul Farago, a senior adviser to the Oregon-
based Cascade Policy Institute, notes that the
Beach and Davis show convincingly that original Social Security act allowed municipal
for almost every type of worker and family, governments to go on their own. As recently
retirement under the current Social Security as 1981, employees of Galveston County,
system means “receiving fewer dollars in old Texas, voted by a margin of 78 percent to 22
age and passing on less wealth to the next percent to leave the federal program for a pri-
generation than they could if allowed to place vate alternative. Two other nearby counties
their current Social Security tax dollars in pri- soon followed. Congress eliminated the opt-
vate retirement investments.” out provision in 1983. But today, Farago
Partial or total privatization of retirement points out, the thousands of Texas county
systems is a trend that is sweeping the world workers who opted for the private plan, and
for the same reason it’s now being seriously who paid about the same in contributions as
considered here: government programs with they would have with Social Security, are get-
their low rates of return for younger workers ting several times the return.
were inherently too expensive and headed for Social Security advocates have long but-
insolvency. Chile was the first country in this tressed their case for continuation of the pro-
hemisphere to adopt a national, government- gram with phony claims that workers could
sponsored social security program (in 1924) count on safety and a decent return on their
and the first in the world (in 1981) to end itby money. Now that the truth is known, privati-
substituting a privately funded and adminis- zation ought to be a no-brainer. OJ


===== PAGE 23 =====

@ current Issues

FREEMAN

(ideas On Liberty)

An Environment of Freedom

by Jo Kwong

or 16 years, Wirthlin Worldwide has pub- environment.” Environmentalism has come to

lished monthly survey results to track mean anything and everything that any social
public opinion about environmental policy. advocate wants it to be. And that, I contend, is
Commenting on recent results that show ever- dangerous to the ideal of freedom. If we con-
higher support for continuing environmental tinue to embrace a way of thinking that allows
improvements, regardless of cost, the report environmental values to trump all, we stand to
noted that “environmentalism has become lose many other values, such as liberty, that
deeply rooted in the U.S. national psyche. are also vital to human flourishing.
Since its extremist beginnings 30 years ago, What is at stake if we fail to clarify our
environmentalism has matured, gaining popu- vision of an environment of freedom? A look
lar support and becoming a part of the main- at a few current stories will give us some
stream. In the process it has gained a great idea.
deal of momentum.”!

Indeed, environmentalism has gained a
tremendous amount of momentum, well
beyond what most people could have imag- In 1989, John Shuler, a Montana rancher
ined 30 years ago. And that momentum has who had been losing sheep from wildlife
important consequences, particularly for attacks, heard the sounds of grizzly bears in
those who value a free society. Thanks to the his yard. He grabbed his rifie and ran out near
seemingly harmless and universal appeal of the pens, where he saw three bears within
environmental preservation, the issue offers range. Shuler fired some shots in the air and
an opening to areas with only tenuous links to scared them off. As he turned to go back in
true environmentalism. There are indeed seri- the house, he was confronted by another
ous environmental issues and each of these grizzly that rose on its hind feet, spread its
should be dealt with in the light of good sci- paws, and roared. Shuler did what most clear-
ence and the inevitability of tradeoffs. But we thinking folks would do in that situation. He
also need to recognize the seriousness of free- shot and fatally wounded the bear.
dom as an ideal. Thinking he did nothing wrong, he notified

I am speaking about the insidious nature the U.S. Fish and Wildlife Service. It prompt-
and the amorphous shape of what we call “the ly charged him with violating the Endangered

Species Act (ESA), which makes it a federal
—_— : offense to harm officially “endangered” plants
Jo Kwong is environmental research associate with . .
the Atlas Economic Research Foundation. This arti- and animals, and fined him $7,000 ($5,000

cle is adapted from a speech delivered at a meeting of ~ for the value of the bear—even though the
the Philadelphia Society in April 1998. Fish and Wildlife Service admitted that it

535

Environmentalism Trumps All


===== PAGE 24 =====

536 THE FREEMAN e SEPTEMBER 1998

would kill the bear if it killed livestock barn and called for help. When Unser
again—and $2,000 for the federal govern- approached the Forest Service for his snow-
ment’s cost of investigating the incident). Ata mobiles, it cited him for use of a motorized
hearing, an administrative law judge from the vehicle in a wilderness area, a violation of
U.S. Department of the Interior accepted federal law.
Shuler’s argument that his life was in danger, At a trial in Denver, Unser was found guilty
but nonetheless declared that Shuler could not and fined $75. According to the Mountain
claim self-defense under the ESA because he States Legal Foundation (MSLF), the judge,
had purposely “introduced himself into the alone in his chambers, used a piece of picture-
zone of imminent danger.” He fined Shuler hanger wire and a topographical map to
$4,000. This fine was upped to $5,000 by an “measure” the distance that the snowmobiles
ad hoc appeals board employed by Interior traveled, based on odometer readings. He con-
Secretary Bruce Babbitt, which rejected the cluded that Unser was indeed inside the
self-defense claim because Shuler’s dog, by wilderness area. What’s interesting from a
alerting Shuler to the bear’s presence, had rights-based perspective is that it made no dif-
“provoked the bear.” ference to the judge whether Unser entered

Seven years after the attack, Shuler was the area accidentally in an emergency. As
able to file a lawsuit against Babbitt charging the foundation points out, this ignores a
that the previous holdings conflicted with centuries-old fundamental principle—that a
well-settled principles of law—self-defense crime requires criminal intent. Incredibly, the
and the right to carry weapons on one’s own government attorneys argued that the use of a
property and use them when one’s life is in motorized vehicle there is a “public welfare
danger. offense,” not requiring criminal intent,

Fortunately, this story ends in victory. With because it affects people’s “primitive enjoy-
help of the Mountain States Legal Founda- ment of wilderness areas.” The MSLF has
tion, in March 1998, the U.S. District Court in asked for oral arguments in this case, so stay
Montana ruled for Shuler, vacating both his tuned.
conviction and fine. But consider the costs in While these kinds of stories are often dis-
terms both of money and anguish. To protect missed as right-wing jabbering, it’s encourag-
his basic right of self-defense, John Shuler ing to see that they are appearing more fre-
had to endure nine years of battle with the quently in the mainstream press. The follow-
federal government. The story deserves to be ing story appeared recently in Newsweek
told over and over again, for it illustrates how magazine.
environmental laws are whittling away our
most basic rights.

Another story concerns wilderness areas, Superfund
but it’s not the typical battle over whether Although no adverse health effects have
mountain bikes, horses, or snowmobiles are ever been traced to a Superfund waste-dump
trampling the wilderness cathedral. In site, 84-year-old Mrs. Scott of Oregon
December 1996, Bobby Unser, three-time nonetheless received a certified letter from the
winner of the Indianapolis 500, lost his way in authorities informing her that a little building
a blizzard while snowmobiling. He was she bought soon after her husband’s death 46
charged with violating the Wilderness Act of years earlier was potentially responsible for
1964. Although it was sunny at the start of the contaminating the city’s groundwater.
trip, a howling wind and blizzard engulfed The building opened in 1952 with a chil-
Unser and a companion. They became disori- dren’s clothing store on one side and a dry
ented and lost, and eventually may have cleaners on the other. The stores operated for
strayed into the San Juan Wilderness Area. 25 years until the owners retired and were
For a day and a half they wandered, surviving later replaced by a flower shop. All along,
only by resourceful use of a snow cave and Mrs. Scott felt secure that this building would
other techniques. Eventually they found a provide retirement income. And this it did


===== PAGE 25 =====

AN ENVIRONMENT OF FREEDOM 537

until that letter came from the state. Although U.S. Army Corps of Engineers approval
the dry cleaner had ceased operations 20 forms, contained runoff designs, and wetlands
years ago, the state claimed that it was a like- protection covenants—all of which must be
ly source of water contamination. prepared and approved by local, state, and
With an appraised value of $70,000, Mrs. national agencies. As usual, the regulations
Scott’s building, plus her home and savings, are not just a complex nuisance, they add mil-
could not come close to covering the lions of dollars to the cost of development.
$200,000-plus that state examiners warned Even then, there are no guarantees. When
her it would cost for testing and cleanup. Peter Dye built the Ocean Course at Kiawah
Given Superfund’s joint-and-several-liability Island, South Carolina, for the 1991 Ryder
provisions, she was advised to take action Cup matches, he carefully constructed several
against the dry cleaner and seek payment hundred acres of “new” wetlands areas. Yet
from companies that supplied his chemicals. two years later the owners faced a court case
She could also attempt to identify the insurers in which environmental groups alleged that
of the building before environmental hazards the course harmed wildlife along the Carolina
were written out of liability coverage. But she shore.
had to pay the costs regardless of what action When John Naumann decided to build a
she took. Her daughter writes of the incident: golf course on Sanibel Island, Florida, he
“The crippling realization that she could at knew he would face an uphill battle. He care-
any time be stripped of the means to support fully routed his holes on the bay side of the
herself financially seems to have invaded her island, avoiding a gopher-tortoise site. But the
very cells. Her legs ache. Some days now, she worst wildlife situation imaginable occurred:
leans on a chrome walker, unable to carry her a family of bald eagles set up home in the
own weight for the first time in her adult life. middle of the golf course. All kinds of agen-
Surely this was not what we intended when cies descended to prohibit construction dur-
we assessed the environmental transgressions ing the winter breeding. Bulldozers worked
of our past and set out to clean up the errors double shifts to try to get some fairways com-
we made as a society on our way to the Amer- pleted before breeding. The city of Sanibel
ican Dream.” assigned a full-time nature policeman to
If there’s any sympathy at all for Mrs. Scott, spend his days on the construction site watch-
it’s likely because she’s a little old lady, or ing every move.
because she’s a lone human being. Substitute Construction, originally budgeted for one
Wal-Mart or any other symbol of corporate year with $1 million for permitting, turned
America, and preconceived notions of capital- into a three-year, $3.5 million permit proj-
ism rise to obscure the basic situation: a sys- ect. Naumann had to fight over zoning den-
tem of perverse incentives with little value in sities and agree to build a new $2 million
individual rights. sewage-treatment plant for the city. He also
pledged to set aside a permanent eagle
boundary that cost $7.5 million in devel-
Greens on the Green opable land and to donate 200 acres of
On a trip a while back, I leafed through the waterfront land for a federally managed
airlines magazine Hemispheres. It carried preserve.

another article about one person’s shock at Some developers see such handovers as
how environmental regulations interfere with nothing short of extortion. One developer
the right to build golf courses. decided to check a hunch. He set up a sting

Golf-course developers are familiar with operation for environmental groups protesting
the battery of environmental requirements his plans to build a course in Purchase, New
dealing with wildlife habitats, wetlands York. When the “enviros” promised to help a
preservations, water resources and runoffs, fictitious investment group obtain the proper-
and chemical usage and storage: environmen- ty, in return for hefty donations, to deny it to
tal impact statements, water catchment plans, the developer, he sued. The enviros went


===== PAGE 26 =====

538 THE FREEMAN ee SEPTEMBER 1998

away. Good intentions or just plain blackmail? Environmentalism Justice
Such stories led to the title of the Hemi-
spheres article, “How Green Are the Moving a bit higher on the outrageous
Greens?”—a growing question among people scale, let’s take a look at the freedom current-
looking for solutions to real environmental ly being tested under the claim of environ-
problems and who find themselves blocked at mental justice. How are everyday choices of
every step of the way by environmental advo- supposedly free men and women being inter-
cacy groups.’ fered with?
Some black residents of Convent,
Reli gi ous Freedom Louisiana, are reportedly irate at the Environ-
mental Protection Agency for delaying
Religion plays a growing role in the envi- approval of a proposed plastics plant. In 1997
ronmental movement as more and more EPA, acting on a Clean Air Act petition, pro-
church leaders preach about the benefits of hibited construction of Shintech’s PVC facili-
recycling or the need to boycott industry. A ty. It was the EPA first ruling based on
brochure displayed in my church narthex, President Clinton’s 1994 executive order chal-
written by an author of books on religious and  lenging “environmental injustice,” or “envi-
ethical aspects of environmental responsibili- ronmental racism”—the notion that polluting
ty, advised parishioners to “Become an advo- industries locate in minority areas because the
cate for the earth.” She continued, “I hope to residents are powerless to stop them.
be a gentle advocate every day for the earth. 1 The $700-million manufacturing facility
don’t want to be nasty or preachy, but neither would have hired 35 percent of its work force,
am I willing to stand silently by and say noth- 165 people, from the predominantly black
ing to merchants who use Styrofoam packag- surrounding population at $12 to $16 dollars
ing or local manufacturing firms that burn an hour. The local NAACP chapter conducted
toxic wastes in their incinerators.” She also a poll and found that 73 percent of the people
advises that “If you interact with children, in the communities near the proposed plant
take seriously the responsibility to raise anew favored it. All the town’s councilmen voted
generation of concerned caretakers of the for the plant.’ Findings about safety and job
earth.” creation have been disputed by Greenpeace
Last year, our litany for Independence Day and other environmental groups which argue
asked God’s forgiveness for pollution. We that the facility threatens the people and local
were to say, “O God, forgive our mindless environment through its production of vinyl
exploitation of this bountiful land. Forgive us chloride. Complaints also include the facili-
for fouling our air, contaminating our water, ty’s high energy requirements, the potential
disfiguring our landscape. And grant us vision for leaks, and high rates of worker-related ill-
and courage to right these wrongs.”* nesses. But beyond the technical issues
An insert in another church bulletin asked, regarding pollutants and toxics, the environ-
“Where on Earth Are We Going?” and urged mental-justice claims open up an entirely new
the congregation to attend programs on can of worms. Again, stay tuned to see if
“Environmental Politics and Justice” and loosely defined community rights to justice
“Sustainable Agriculture, Population, and the trumps everything else.
Environment” hosted by the Worldwatch
Institute. Sponsors, by the way, of the pro- .
grams, included the Community Ministry of It Takes a Village
Fairfax County, Virginia, the North American Hillary Clinton’s favorite phrase, “It takes a
Coalition on Religion and Ecology, the Green village,” is catching on, though not quite the
Coalition, the Sierra Club, and Help Others way she means it. The Alliance for America’s
Protect the Environment—a rather descriptive newsletter reports that since November 1997,
call-it-as-it-is name for the local environmen- over a dozen “They’re Taking Our Village”
tal club. meetings have been held throughout western


===== PAGE 27 =====

AN ENVIRONMENT OF FREEDOM 539

Montana to discuss the impact of federal land laws that they deem worthy of respect. . . .
management on the social and economic People who feel compelled to judge laws on a
well-being of the rural resources-dependent case-by-case basis have attached provisos to
culture. These meetings, hosted by county one of their most basic civil loyalties.”?
commissioners, local businesses, chambers of Those who value individual liberty and a
commerce, and other grassroots groups, have free society have reason to keep an eye on
drawn hundreds of people united with a pas- environmental regulation. Fortunately, clas-
sion. As the Alliances Bruce Vincent writes, sical liberal principles offer a clear vision of
“The policies of this Administration are not proper environmentalism, but it’s a tough
only ripping apart our current village eco- message to communicate. Nonetheless, it’s a
nomic and cultural fabric; they are disempow- vision of environmental freedom that entails
ering local self-determination as we gallantly the freedom to protect, preserve, and
attempt to piece together the economic and enhance the environment in ways that reflect
cultural jigsaw puzzle of our future.Ӣ human innovation and stewardship. Hopeful-
The umbrella of environmental issues is ly through this commitment, we can make a
certainly providing a growing pretext for cur- difference in the environment, while at the
tailing our freedoms. Charles Murray recently same time preserving freedom and all its
wrote about some potential consequences. As virtues. 0
more and more regulations are imposed, he
observed, just about everyone is in constant Group, MeL es yn Report” August/September 1997, The Wirthlin
danger of violating laws. We’ve seen it with 2. Carolyn Scott Kortge, “Taken to the Cleaners,” Newsweek,
Shuler, Unser, and the people who care for their a olla i. “How Green Are the Greens?” Hemispheres,
land in violation of wetlands and endangered- April 1994, pp. 55-60.

: : 3 ian. 4, “Litany for Independence Day,” Lord of Life Lutheran
species regulations. One result is the alien Church, Fairfax, Va., July 5, 1997.

ation of citizens from their government. Mur- 5. Henry Payne (Scripps Howard News Service), “Environmen-
ray write s, “Because SO many regulations are by Justice Kills Jobs for the Poor,” Wall Street Journal, September
so unconnected to anything resembling right 6. “With Road Moratorium, ‘They're Taking Our Village,”

: A; Trumpet Call, Alliance for America, March/April, 1998.
Or wrong, peop le who want to be law abiding 7 Charles Murray, “Three Broken Comparts,” American Enter-

find themselves picking and choosing the prise institute for Public Policy Research, March 1998.

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===== PAGE 28 =====

FREEMAN

deas On Libert

Nightmare in Green

by Jarret B. Wollstein

“The threat of an environmental crisis will be the ‘international

disaster key’ that will unlock the New World Order.”!
—MIKHAIL GORBACHEV, Moscow, 1991

I Colton, California, a fly has brought eco- and ranchers who are struggling to preserve
nomic development to a screeching halt. their property, freedom, and way of life. On
This San Bernardino County town of 45,000 the other side are environmental bureaucrats
was already in bad shape from the closing of who are issuing increasingly draconian regu-
a military base. The foreclosure rate is among lations and orders.

the highest in the state, and the city council is
considering putting up the civic center as col-
lateral to raise funds.

Unfortunately for its human residents, In the early 1970s, the environment became
Colton is also home to the Delhi sand fly, the focus of enormous media attention. At
which is listed by the Environmental Protec- least some of the problems were real, if often
tion Agency as an endangered species. To pro- exaggerated. Untreated sewage was being dis-
tect the fly, state authorities have blocked con- charged into coastal estuaries. Toxic runoff
struction of a new hospital and industrial park from farms and factories was killing fish and
that would have brought in over $171 million birds. Like many Americans, 1 was con-
in investment and thousands of new jobs. In cerned. During the mid-1980s, I even worked
fact, any major development is impossible briefly for the Natural Resources Defense

The Environmental Elite

because of the fly.2 Council—a private environmental advocacy
The incident in Colton is just one example organization.
of the increasingly acrimonious conflict Today, the political climate has changed

between property owners and environmental radically. Environmental groups—including
bureaucrats. It could even turn out to be the the Sierra Club, Audubon Society, Nature
opening shot of an all-out environmental war. Conservancy, Greenpeace, and Worldwatch
On one side are ordinary citizens, farmers, Institute—have become extremely influential
-_ and powerful. Greenpeace alone boasts some
Jarret Wollstein is a founder and director of the SIX million members. The Sierra Club and
International Society for Individual Liberty, a global Worldwatch Institute have “adviser” status

libertarian organization with members in over 70 ) } . i
countries. Je also the author of eight books with the United Nations. These environmental

including Lethal Compassion: Why Government groups have become the most powerful lobby
Medicine Is the Cure that Kills (with Mary Ruwart). in Washington, D.C., and at the U.N.

540


===== PAGE 29 =====

541

The result: authoritarian environmental gests, “Until such time as Homo Sapiens
political agendas—not science—are increas- should decide to rejoin nature, some of us can
ingly determining policy. There has also been only hope for the right virus to come along.”’
a frightening change within the environmen- Many extreme environmentalists are deter-
tal movement. For many, the goal is no longer mined to end industrial civilization, one way
clean air and water, and a safe environment or another.
for human beings. Instead, for many environ-
mentalists, the goal is to protect “sacred The Rio Summit and
Mother Earth —meaning every bug, rat, fern, Green Marxism
and species other than man.

Extreme environmentalists are not shy In June 1992 over 20,000 people from
about admitting their goals. As Reed Noss around the world gathered in Rio de Janeiro
states in his article “Rewilding America,” “the for the United Nations Conference on Envi-
collective needs of non-human species must ronment and Development (UNCED). The
take precedence over the needs and desires of working session of the conference was the
humans.”3 Indeed, for many, man is the “Earth Summit,” attended by representatives
enemy. from 178 nations and hundreds of U.N. non-

This attitude was made crystal clear by government organizations (NGOs).

Maurice Strong, secretary general of the 1992 The chairman of the Earth Summit was
UN. Earth Summit held in Rio de Janeiro. Norway’s Prime Minister Gro Harlem Brundt-
Just the year before, Strong had declared: “It land, who was also vice president of the Inter-
is clear that current lifestyles and consump- national Socialist Party? Brundtland readily
tion patterns of the affluent middle class— admitted that the Earth Summit agenda was
involving high meat intake, consumption of based on the party’s platform. True to form,
large amounts of frozen and convenience an endless parade of socialists, extreme envi-
foods, use of fossil fuels, ownership of motor ronmentalists, and representatives of authori-
vehicles and small electrical appliances, tarian regimes chastised the United States for
home and workplace air-conditioning, and “consuming too much” and exploiting the
suburban housing are not sustainable.” Third World. Their solution: redistribution of

Some extreme environmentalists want to our wealth through global taxes and outright
take us back to the Middle Ages. E.F. Schu- expropriation. The enforcement mechanism: a
macher, author of Small Is Beautiful, says the beefed up United Nations with new powers to
world was much better in medieval times, jail “environmental criminals” and seize their
when people rarely traveled beyond the vil- property without trial.
lage in which they were born. Rudolf Bahro, This authoritarian program was spelled out
founder of the German green movement, in the conferences Rio Declaration, Earth
wants us all to live in small communities and Charter, and Agenda 21—an 800-page agree-
to eliminate our cars, airplanes, computers, ment with 115 specific proposals. According
and most other modern devices. to the late Dixy Lee Ray, Agenda 21 seeks to

Other authoritarian “defenders of the earth” establish a mechanism for transferring wealth
would like to reduce the human population to from the citizens of the United States to the
prehistoric levels. Warren Hern says “the Third World. “Fear of environmental crises”
human species has become a malignancy, an would be used to create a world government
‘ecotumor’ that is growing out of control.”> and U.N. central direction.’

David Foreman, co-founder of Earth First!, Henry Lamb, in his article “The Year of
agrees. “We are a cancer on nature,” he Decision,” writes that Americans fail to real-
declares. Earth First!’s motto proudly ize that their enemy is the “hoards of NGOs
declares its ultimate goal: “Back to the Pleis- [who are] cheering the proposals pushed by
tocene.” international statesmen at world conferences

How do they propose we get there? Nation- designed to achieve with verbosity what could

al Park Services biologist David Graber sug- not be accomplished with bombs.”10


===== PAGE 30 =====

542 THE FREEMAN e SEPTEMBER 1998

Implementing the World In the United States, 47 designated “bio-

' . sphere reserves” are now under partial or
Environmental Regime complete control of UNESCO and the U.N.

The primary mechanism for implementing World Heritage Committee. “Protected sites”
Agenda 21 and the other extreme environ- include the Statue of Liberty, the Everglades
mental goals of the Earth Summit are interna- National Park, Grand Canyon, Yosemite
tional treaties. The U.N. has passed over 300 National Park, and Yellowstone Park.!2

environmental treaties, and many have been _ EXisting and proposed biosphere reserves
ratified by the United States. in the United States now include millions of

Under the U.S. Constitution, once a treaty acres. The Yellowstone Bioreserve alone has

is ratified by the Senate, its provisions super- over 22 million acres. But even that pales in
sede all other laws—federal, state, and local, comparison to the proposed Ozarks High-
Article VI, Section 2 of the Constitution lands Biosphere, which will include 54,000
clearly states that “all treaties made, or which Square miles.

shall be made, under the authority of the Unit- The total US. area currently under UN.

ed States, shall be the supreme law of the “protection” constitutes over 200 million
land.” ’ acres, nearly twice the area of the state of

Idaho.

Human use of U.S. land in and around U.N.
Biosphere Reserves is being severely limited
or banned entirely. Following the designation
of the Yellowstone Bioreserve, the New World
Gold Mine—located five miles outside of Yel-
lowstone—was forced by the EPA to suspend
all operations. In and around the Adirondacks
State Park in New York—part of the North
Bioregion—landowners have been told by
environmental authorities that they can’t
make any additions to their homes and have
been forced to abandon farming practices
they’ve used for generations.

A treaty that gives a foreign power control
over U.S. territory is obviously a very serious
matter. At the least, you would expect exten-
sive media coverage and thoughtful debate.
But in reality, these treaties have been virtual-
ly ignored by the mainstream press and often
rubber-stamped by congressmen who have
never read them. As a result, few Americans
have even heard of the World Heritage Treaty
or the Biodiversity Treaty, or dozens of less
ambitious treaties. Yet these treaties are about
to have a profound effect on every aspect of
your life; from where you live and work, to
what you eat, to whether you will be allowed

10 On 4 car. Here ars two examples: The Biodiversity Treaty. This treaty makes

violating U.N. environmental decrees a crimi-

The World Heritage Treaty. This treaty nal offense, punishable by prison and confis-
imposes a total ban on human use of protect- cation of assets without trial.14 It was signed
ed areas. It was signed in 1973 by President by President Clinton in 1993, but never rati-
Nixon and subsequently ratified by the U.S. fied by the Senate. Clinton says ratifying it is
Senate. It creates the UNESCO World Her- his “top foreign policy objective.”
itage Committee, charged with “protecting” Under the treaty, NGOs would work with
any building or land designated by the com- U.S. agencies like the EPA to ensure “sustain-
mittee as a World Heritage Site.!! No subse- able development’—which in practice means
quent U.S. approval is required, and a recent no development, and certainly none that hasn’t
attempt in the Senate to require congressional been approved by U.S. and U.N. environmental
approval was defeated. bureaucrats.

Typically, U.N. “protection” of land means a Although the Biodiversity Treaty is still
total ban on virtually any human use other unratified, it is nevertheless rapidly being
than limited tourism. Banned activities include implemented throughout the country by exec-
mining, logging, farming, and permanent utive order. A critical step took place in Janu-
human habitation. The EPA and its state coun- ary 1996, when President Clinton signed
terparts are the lead enforcement agencies. Executive Order 12986 giving the Interna-


===== PAGE 31 =====

NIGHTMARE IN GREEN 543

tional Union for Conservation of Nature and Sustainable Development
Natural Resources immunity from lawsuits in

the United States. If you search under the keyword “sustain-
The IUCN is the major administrative ability” on the Internet you will find hundreds
agency for the UN.’s global environmental of thousands of listings, including sites for
agenda. It includes representatives from over dozens of local sustainability councils. Mau-
800 state and federal government agencies rice Strong’s “Earth Council” is the global
and nongovernment organizations in 133 coordinator for sustainability.! Many local
countries. The IUCN’ master plan for the governments are acting as if Biodiversity
United States is the Wildlands Program, Treaty and its plan for a “sustainable” U.S.
which is presented in U.N. Global Biodiversi- economy were the law of land.
ty Assessment (Section 10.4.2.2.3). The goal For example, in October 1996 Mayor Willie
of this incredible program is to turn 50 per- Brown announced his new “Sustainability
cent of the United States—including thou- Plan” for San Francisco, which calls for even-
sands of existing towns and communities— tual elimination of all cars and trucks from the
into an “eco-park” in which most human use city. The plan states that “Ultimately, in a sus-
is prohibited. According to Science magazine, tainable San Francisco, almost all trips to and
the Wildlands Project calls for “23.4% of the within the City will be on public transit, foot
land [in the United States] to be returned to or bicycle as will a good part of trips in the
wilderness, and another 26.2% to be severely larger Bay Region. Walking through streets
restricted in terms of human use. Most roads designed for pedestrians and bicycles will be
would be closed; some would be ripped out of more pleasant than walking through those
the landscape.”15 As Marilyn Brannan, associ- designed for the automobile. . . . Old, obsolete
ate editor of Monetary & Economic Review, highway segments of the automobile era will
commented, “It cannot be too strongly be demolished... . Only through the cooper-
emphasized that this is a radical agenda ation of an enlightened San Franciscans
designed to control not just the land, but all [sic] will the City become a leading global
human activity as well.”16 citizen.”20
Section 10.5 of the Global Biological Brown’s plan doesn’t explain how people
Assessment states that in 20 to 50 years, all are expected to get to the city without cars. It
citizens living within reserves will be “relo- doesn’t explain how the 900,000 people living
cated.” Tens of millions of people would be in San Francisco will be supplied with food
involved in this relocation.!” and other merchandise without trucks. It
John Davis, editor of the Wildlands Project doesn’t explain how anyone will even be able
journal, Wild Earth, explains the ultimate to move a sofa or refrigerator from one house
objective: “Wilderness recovery must start to another (by oxcart?). And San Francisco is
now but continue indefinitely—expanding just one of 40 U.S. cities that now plan to
wilderness until the matrix, not just the nexus, eliminate cars and trucks in the name of
is wild. . . . Does [this] mean that Wild Earth sustainability.
and the Wildlands Project advocate the end of Many biodiversity councils have been
industrial civilization? Most assuredly. Every- established. For instance, the Chicago Region
thing civilized must go.”18 Biodiversity Council is a coalition of 34 fed-
Fortunately the Biodiversity Treaty faces eral agencies, cultural organizations, and
strong opposition. But that doesn’t mean environmental groups, which the Chicago Tri-
we can relax. As noted, Clinton (like other bune calls “an ambitious and unprecedented
presidents) has been circumventing Con- effort to restore what nature created, not
gress by enforcing his policies through piece-by-piece, but on a regional scale. . . .
executive order, regulation, and by strong- The idea is to create a network of native nat-
arming local governments. That’s what’s ural areas not just in [Illinois] forest preserves
happening now with the Biodiversity Treaty but in city and suburban neighborhoods and
and Agenda 21. on corporate campuses. Lawns and parkways


===== PAGE 32 =====

544 THE FREEMAN ee SEPTEMBER 1998

could be replaced by fields of prairies, wild- cies in the name of “saving the earth,” mil-
flowers, and boring detention ponds could be lions of Americans applaud.
replaced by living wetlands.”?! Once the American people are aware of the

Of course, the lawns they are planning on full dimensions of the authoritarian environ-
eliminating are those of people like you and ment agenda to take away their cars, air con-
me. And the parkways they want to turn into  ditioners, factories, and homes, they will
flowers are our major means of transportation. surely reject this totalitarian environmental
Earth First! could hardly ask for more. agenda and return to sanity.

The shocking reality is that without most We can have both a safe, livable environ-
of us even being aware of its existence, a ment and freedom and prosperity, but only if
deadly alliance of authoritarian environmen- we expose and reject the environmental
talists and utopian city planners has been authoritarian movement to destroy industrial
moving full speed ahead to roll back industri- civilization. J
al civilization.

1. Quoted in “Behind the Green Curtain: The Globalist Radical
Environmental Agenda,” McAlvany Intelligence Advisor, October

. . 1997, p. 7.
Fighting Back 2. “Endangered Fly Frustrates Town Eager for Business,” Contra
i Costa Times, June 6, 1997, p. A-10.
As awareness grows of the power grab in 3. Reed Noss, “Rewilding America,” Eco-Logic Magazine (Envi-
the name of the environment resistance is ronmental Conservation Organization) November/December 1995,
bl

; , p. 20.
mounting. In 40 states, nearly 100 bills have 4. Earth in Focus, No. 2, UNCED, p. 2.

: : : 5. Ramon G. McLeon, “Humans are ‘Planetary Malignancy,’
been introduced to curtail environmental Scientist Says,” San Francisco Chronicle, August 1, 1994, p. A-3.
overregulation. In the last five years, 23 states 6. Quoted in “Only Man’s Presence Can Save Nature” (unsigned

: article), Harper's, April 1990, p. 48.
have passed laws strengthening prop erty 7. Dave M. Graber, “Mother Nature as a Hothouse Flower,” Los

rights. The U.S. Supreme Court has ruled that angeles Times Book Review, October 22, 1989, p. 9.

: : : 8. Dixy Lee Ray with Lou Guzzo, Environmental Overkill:

if environmental regu lations destroy the value Whatever Happened to Common Sense? (Washington, D.C.: Reg-

of a person’s property, it is a “taking” under nery Gateway, 1993), p. 5.

ifth Am 9. Ibid., p. 10.
the Fifth endment and the owner must be 10. Henry Lamb, “The Year of Decision,” Eco-Logic Magazine
compensated.22 And pending before Con- (Environmental Conservation Organization), January/February
: _ 199.

gress, the Property Rights Act would compen 11. Convention Concerning the Protection of the World Cultural

sate property owners who lose 35 percent Or and Natural Heritage, adopted by the General Conference of
3 UNESCO, 1972, and signed by 150 countries. Additional informa-

more of the value of their property because of tion may be obtained from the website: http://www.unesco.

government regulations. A variety of organi-  org/whe/intro-en.htm.

: : : : _ 12. A complete listing appears on the UNESCO Website.
zations 15 fighting the global, environmental 13. Tom Uhlenbrock, “Residents Fear Huge U.S./U.N. Land
ist power grab. While, admittedly, compensa- Grab,” Wake Up Call America, July/August 1997.

: 14. McAlvany.
tion would come from the taxpayers, the real 15. “The High Cost of Biodiversity” (unsigned article), Science,
import of these measures is that government June 25, 1993, p. 1868.

: : 16. Marilyn Brannan, “The Wildlands Project Unleashes Its War
takings would be constrained. on Mankind,” Special Report by the Monetary and Economic

The authoritarian environmental movement Review, March 1996, p. 6.

: : 17. See United Nations Convention on Biological Diversity, Arti-
is global, p owerful, and well organized. Many oo S500 Cations Global Biodiversity Assessment. Section
Americans are being required to surrender 10.4.2.2.3; U.S. Man and the Biosphere Strategic Plan (1994 draft);

SL 2 In 2 ss U.S. Heritage Corridors Program; “The Wildlands Project,” Wild
their liberty in the name of “the enVIIONMeNt™ 0, hy ember 1992; and “The High Cost of Biodiversity” (sce
without a shot being fired. If a crazed foreign endnote 15).

: : 18. Quoted in William Norman Grigg, “Battle for Sustainable
despot tried to force the American people to Freedom. The New American, April 20, 1996, p. 5.
give up their cars, homes, businesses, stan- 19. Brannan.

Co : 20. “Sustainability Plan for San Francisco,” Office of the Mayor,
dard of living, and freedom in the name Of Go Francisco, October 1996,
socialism and the glory of the state, he'd be 21. Quoted in “Insider Report,” The New American, May 13,

. 1996, p. 11.

hanged. But when the new environmental 22. Lucas v. South Carolina Coastal Council, 505 U.S.C. 111
totalitarians demand precisely the same poli- set. 2886, 1992.


===== PAGE 33 =====

The Foundation for Economic Education
Irvington-on-Hudson, New York 10533
Tel. (914) 591-7230

Fax (914) 591-8910

E-mail: freeman@fee.org

September 1998

Lessons from Homeschooling

he June 28, 1998, New York Times While some parents find intrinsic merit
| reported that 56 percent of Massa- in schooling their children at home, there
chusetts” up-and-coming teachers can be little doubt that homeschooling
failed their basic test in reading and writ- wouldn't be on the rise if government
ing. This result means that well over half schools truly educated children. Adam
of Massachusetts’ freshly minted college Smith explained why in his discussion of
graduates with degrees in education can- the causes of the wealth of nations.
not competently read and write. Smith understood that we would be
Can you guess the response of the Mass- wretchedly poor if we were each self-suffi-
achusetts State School Board? They re-graded cient: if we each built our own house, grew
the tests on a curve so that no more than 44 per- | our own food, and wove our own cloth.

cent would fail! In short, they cheated. They So, Smith correctly taught that prosperity
dishonestly, and for totally self-serving rea- springs from specialization guided by

sons, rigged their system so that its own market prices (which, in turn, arise when
abject failures would be better masked. But consumers are free to choose how to spend
camouflaging a beast that grows larger and their money and entrepreneurs are free to
uglier by the day is difficult. explore different means of better serving
As shown by the furor that this episode consumers).
caused in Massachusetts, Americans are The dynamic of a market economy is
increasingly aware that government edu- that specialization creates prosperity, and
cation specialists in charge of K-12 govern- | freedom encourages entrepreneurs to dis-
ment schools are lousy educators. This cover ever-newer avenues for specializa-
awareness is prompting parents to act tion, thus increasing prosperity even more.
rationally in a way that provides the best Consider, for example, that today we
evidence yet that education bureaucrats spend less time than we did just a few
cannot educate—namely, more and more years ago preparing our own meals (we
parents are homeschooling their children. eat out more often), changing the oil in our
In 1980 only 10,000 children were schooled | cars (Jiffy Lube and Pep Boys change it for
at home. Today that figure stands at about us), and washing our own dishes (electric
one million. This means that fully 2 per- dishwashers made by specialist producers
cent of all children are now homeschooled. do more of this humdrum chore). A sure
And this number continues to grow, even sign of a healthy economy is its increasing

though public education is “free.” specialization of productive activities. But



===== PAGE 34 =====

in K-12 education, the rise in homeschool- fessional haircutting is government-oper-

ing means that specialization is retreat- ated hair-care salons that are funded exclu-
ing—something that would not happen if sively with tax dollars doled out directly to
the education market worked. the bureaucrats in charge of each salon.
Sending kids to school enjoys at least Imagine also that each citizen can use a
two potential advantages over home- salon free of charge, but is assigned exclu-
schooling. First, by not homeschooling, sively to the salon nearest to his or her
both parents can work at jobs for which home. If this were how professional hair-
they possess special skills. Such employ- care specialists were organized and com-
ment raises household income. Second, pensated, these specialists’ salaries would
and more importantly, parents naturally be determined not by competition and con-
want their kids to be educated by those sumer choice, but by politicians. Hair-styl-
who do the best job of it. Those who are ists” workloads and incomes would then
specially trained to educate children . | depend only upon their skills at political
should be able to teach children many sub- | lobbying and uttering clever sound bites
jects more effectively than can typical par- for the news media. No premium would
ents. Parents will naturally seek such spe- attach to quality hair-styling skills. Hair
cialists for their children’s education just stylists inevitably would lose much of their
as these parents seek competent health- ability to cut and style hair as they focus
care specialists for their children’s health. their energies increasingly on protecting
But parents today increasingly avoid and expanding their special political pre-
“education specialists” because these rogatives. More and more people would
alleged specialists are so bad that non- cut and style their own hair at home.
specialist parents outperform them at the As silly as the above scenario for hair
task of education. The average home- care sounds, it describes today’s method of
schooled child scores in the 85th percentile | providing K-12 education. To eliminate
on standardized achievement tests—a full competition among suppliers of K-12 edu-
35 points higher than the score registered cation, government erects costly barriers
by the average public-school student. preventing parents from moving their chil-
These homeschooling results are dren from bad to better schools. In
remarkable. In most industries, specialists response, increasing numbers of parents
are immensely better than non-specialists who cannot afford private education do
at performing their specialties. Intel is not the job themselves. Unlike wealthy parents
just a bit better than I am at designing (who can afford private-school tuition
computer chips; it’s much better. Dentists even after being bilked for the taxes neces-
are not just marginally better than I am at sary to support government schools),
removing wisdom teeth; they are much poorer parents are denied the fruits of spe-
better. For me to resort to designing my cialization in education.
own microchips or pulling my own teeth Only by dissolving the bonds between
would require that specialists in these school and state will K-12 education
fields become so grossly ineffectual that it achieve its maximum potential. The result-
would abuse the language to continue call- | ing increase in parental choice will elimi-
ing them specialists. nate the rewards for those who specialize
Let me be clear: it isn’t the case that K- in lobbying, and multiply the rewards for
12 education bureaucrats have no special- those who effectively specialize in teach-
ized skills. Indeed, they are exquisitely ing. Teachers who truly teach, rather than
specialized. The problem is that their spe- lecture to captive audiences or lobby for
cialty isn’t education; it’s political lobby- political favors, will again be trusted to
ing. The education elite are superbly educate America’s children.

skilled at extracting from legislatures spe-

cial favors such as restraints on parental
choice and ever-more-generous budget : / ) 75) / 7
allotments from the public till.

Ironically, these special political favors a

keep educators from specializing in educa- Donald J. Boudreaux
tion. Imagine that the only source of pro- President



===== PAGE 35 =====

Fall Trustees Dinner

Celebrating the 100th
Anniversary of the Birth of
FEE Founder
Leonard E. Read

An Evening at Lyndhurst—
Sunday, October 18, 1998
5:30 p.m.
featured speaker: Edward H. Crane
President of the Cato Institute

Join the Trustees and staff of FEE for a wonderful evening at Lyndhurst,
the Gothic mansion that was once the home of financier Jay Gould. Includes a
private tour of the house and grounds, cocktails, and dinner.

Special guests will include Edmund A. Opitz, Bettina Bien Greaves, and
Roger Ream (former colleagues of Leonard Read) and historian Burton W.
Folsom, Jr., who will offer insights into Jay Gould and the “robber baron” era.

Lyndhurst, situated on 67 picturesque acres overlooking the Hudson
River, is located a mile and a half north of FEE’s Irvington headquarters.

$75 per person/$140 per couple
For reservations, please contact Janette Brown at FEE: (800) 452-3518.

An Evening at FEE with Dr. Lawrence W. Parks

A U.S. Monetary Collapse?
Saturday, September 12, 1998

All over the world fiat currencies are evaporating: in Malaysia, Russia,
Mexico, Singapore, the Philippines, South Korea, and elsewhere, currencies are
collapsing, savings are being decimated, workers are losing their jobs, and
economies are imploding. Is the U.S. dollar in danger as well, or are we
somehow insulated from a currency meltdown? Dr. Parks, executive director of
FAME (the Foundation for the Advancement of Monetary Education), will
make the case that despite our booming stock market, low unemployment rate,
and low interest rates, there is a problem. A big problem.

Don’t miss this stimulating roundtable at The Foundation for Economic
Education, 30 South Broadway, Irvington-on-Hudson, New York. This informal
get-together starts at 5 p.m. with a reception and dinner, followed by a lively
discussion on the implications of creating money out of nothing. Price is $35
per person ($25 per person with a paid reservation for the October 18 FEE
dinner at Lyndhurst).

For reservations, call Janette Brown at (800) 452-3518.



===== PAGE 36 =====

Leonard E. Read
100th Anniversary Sale

his month marks the 100th anniversary of the

birth of our founder, Leonard Read. Celebrate the
life of one of liberty’s best friends — and read the
words that have changed the lives of countless
individuals.

Anything That's Peaceful — Subtitled “The Case for the Free
Market,” this 1964 classic (reprinted 1992) is a powerful statement
of Read’s Freedom Philosophy. Read battles against the destructive faith in collectivism,
arguing instead that invididuals should be free — free to do anything that’s peaceful.

Here's an excerpt: “By my title, Anything That's Peaceful, I mean let anyone do
anything he please that’s peaceful or creative; let there be no organized restraint against
anything but fraud, violence, misrepresentation, predation; let anyone deliver mail or educate
or preach his religion or whatever, so long as it’s peaceful; limit society’s agency of organized
force — government — to juridical and policing functions . . . let government do this and leave
all else to the free, unfettered market!”

253 pages, paperback $585 Sale: $2.95

Government—An Ideal Concept — Reprinted by the Foundation in 1997, this short work is
Read’s defense of a strictly limited government, one with a few very basic functions. The
“ideal” government, Read argues, would not be one that “rules” its citizens; instead,
“Government has only the limited function of serving the sovereign people as a defensive
agent! The people shall be their own rulers in a creative sense.” Among the many issues
addressed are calls for decentralized government power, separating school and state, stopping
government aggression in its many forms, and getting government out of the money-printing
business. Read stresses government as Servant, not Aggressor.

149 pages, paperback $6956 Sale $2.95

Having My Way — We all want our own way, don’t we? Read ponders what steps he can take
to increase the likelihood of his having his way. His answer: practice self-control; be humble.
Not the answers you might expect. In the 29 essays in this book, Read addresses such
important topics as “The Fear of Freedom,” “The Glory of Work,” and “Harmony
Understood” — why the ideal of a free and peaceful society is a necessary guiding light for
people.

188 pages, paperback $395 Sale $1.95

To Free or Freeze — A collection of essays that includes discussions of the role of general rules
for a civil society, why we all gain from free-market exchanges, and the importance of
faithfully bearing witness to our beliefs. An inspirational work by an inspiring man.

221 pages, cloth $695 Sale $3.95

* *
Mary Sennholz, Leonard E. Read: Philosopher of Freedom — A biography of FEE’s founder,
written by the wife of FEE's past president. This work charts Read’s personal and intellectual
development. It tells the story of his transition from farm boy to defender of free markets and

free men. Illustrated. This work also contains memorials to Read from Perry Gresham, Ezra
Taft Benson, Edmund Opitz, and Hans Sennholz.

207 pages, cloth $3495 Sale $8.95 paperback $995 Sale $5.95

Postage and Handling: Please add $3.00 per order of $25.00 or less; $4.00 per order of $25.00 to $50.00; $5.00
per order of more than $50.00. Send your order, with a check or money order to FEE, 30 South Broadway,
Irvington-on-Hudson, NY 10533. Credit card orders (Visa and Mastercard only — minimum $10) or fax
orders are welcomed.



===== PAGE 37 =====

FREEMAN

Sustainable Development:
Common Sense or
Nonsense on Stilts?

by Jerry Taylor

he mantra of “sustainable development” The debate surrounding sustainable devel-
is constantly on the lips of the interna- opment is important because it advertises
tional agencies and nongovernmental organi- itself as a comprehensive governing philoso-
zations helping lesser-developed countries. phy for the 21st century. Indeed, Vice Presi-
The concept seems innocuous enough; after dent Al Gore has called the need for environ-
all, who would favor “unsustainable develop- mental protection the best “central organizing
ment”? But the fundamental premise of the principle” of the modern state. This is heavy
idea—that economic growth, if left uncon- stuff. It puts sustainable development in the
strained and unmanaged by the state, threat- pantheon of other “central organizing princi-
ens unnecessary harm to the environment and ples” proposed for the state over the years—
may prove economically ephemeral-—is dubi- such as rule by class or race and absolute rule
ous. Indeed, the policy prescriptions that are by majority. While environmental protection
generally endorsed by those concerned about is certainly important, making it the govern-
sustainable development are inimical to our ment’s chief principle would concentrate
best environmental and economic interests. tremendous power in the hands of those who
This is so for three reasons: believe only they can best direct human
affairs. The results of such experiments have
* If economic growth were to be slowed or been less than spectacular and usually coun-
stopped, it would be impossible to improve terproductive, to say the least.
environmental conditions.

» The bias for command-and-control regula- What Is Sustainable

ti nt 0 i

ions on he part of those endorsing the concept Devel opm ent?

of sustainable development will only serve to

make environmental protection more expen- Despite its institutionalization, sustainable
sive; hence, we have to “purchase” less of it. development is rather difficult to define

e Strict pursuit of sustainable development, coherently. The United Nations Commission
as many environmentalists mean it, would only on Economic Development (UNCED), in its
do violence to the welfare of future generations. landmark 1987 report, Our Common Future,

defines it as that which “meets the needs of

Jerry Taylor is director of natural resource studies at the present without compromising the ability
the Cato Institute and senior editor of Regulation Of future generations to meet their own
magazine. needs”! But that definition is hopelessly

545


===== PAGE 38 =====

546 THE FREEMAN e SEPTEMBER 1998

problematic. How can we be reasonably narrower the definition, the easier it is to pin
expected to know, for instance, what the needs down, but the less satisfactory the concept.
of people in 2100 might be? Moreover, one That does not, however, reduce the concept’s
way people typically “meet their own needs” utility as (in the description of the Competi-
is by spending money on food, shelter, educa- tive Enterprise Institute’s James Sheehan) “an
tion, and whatever else they deem necessary overarching political philosophy merging the
or important. Is sustainable development, twin goals of conservation and controlled
then, simply a euphemism for the creation of economic development.”s
wealth (which, after all, is handed down to our
children for their subsequent use)? True, there
are human needs—such as peace, freedom, The Pitfalls of “Strong”
and individual contentment—that cannot be Sustainability
met simply by material means, but sustainable-
development advocates seldom dwell on the What is “the natural-resource base” we are
importance of those nonmaterial, non- directed not to draw down? Resources are
“resource-based” psychological needs when simply those assets that can be used profitably
discussing the concept. for human benefit. “Natural” resources, then,
Thus, sophisticated proponents of sustain- are a subset of the organic and inorganic
able development are forced to discard as material we think of as constituting the bio-
functionally meaningless the UNCED defini- logical “environment,” since not all of that
tion. Otherwise, the UNCED definition can be material can be used profitably.
read as a call for society to maximize human What can be used productively by man
welfare over time. An entire profession has changes with time, technology, and material
grown up around that proposition. It is known demand. Waves, for example, are not har-
as economics, and maximizing human wel- nessed for human benefit today and thus can-
fare is known not as “sustainable develop- not really be thought of as a “natural
ment” but as “optimality.” Can it really be that resource.” But the technology to harness the
Adam Smith’s The Wealth of Nations was the movement of waves to generate energy cer-
world’s first call for sustainable development? tainly exists, and the day when the cost of
Economists David Pearce and Jeremy War- doing so is lower than the cost of alternative
ford, two of the world’s more serious thinkers energy sources is the day when waves become
about sustainable development, disclose that a “natural resource.” Uranium, to cite another
by sustainable development, many advocates example, would not have been considered a
mean “a process in which the natural-resource resource a century ago, but is most certainly
base is not allowed to deteriorate.” This is thought of as such today. Petroleum was not
generally known as the “strong” definition of an important resource 100 years ago, but
sustainability. The “weak” definition allows today is thought of as perhaps the most impor-
the natural-resource base to deteriorate as tant one to modern society.
long as biological resources are maintained at Thus, what is and is not part of any soci-
a minimum critical level and the wealth gen- ety’s “natural-resource base” changes. Con-
erated by the exploitation of natural resources serving today’s base does not ensure that
is preserved for future generations, which is tomorrow’ is secure, and drawing down
otherwise “robbed” of their rightful inheri- today’s does not necessarily mean that tomor-
tance. Weak sustainability, then, can be row’ is in jeopardy.

thought of as “the amount of consumption Moreover, the relative abundance of a soci-
that can be sustained indefinitely without ety’s natural resources can change dramati-
degrading capital stocks.” cally with technological advance. For exam-

Unfortunately, both “strong” and “weak” ple, there are 6,784 trillion fewer barrels of
definitions of sustainable development pose oil in the ground today than there were in
problems as well. As Robert Hahn of the 1981, the year in which relative oil scarcity
American Enterprise Institute points out, the was greatest.6 At first glance, then, one might


===== PAGE 39 =====

COMMON SENSE OR NONSENSE ON STILTS? 547

think that the natural-resource base has dete- counterintuitive betray a fundamental misun-
riorated. Yet oil is more abundant today than derstanding of the genesis of resources. Nat-
it was 17 years ago. After adjusting for infla- ural resources do not exist independent of
tion, the price of a barrel of Saudi crude has man and are not materials we simply find and
declined by 62 percent and U.S. crude by 64 then exploit like buried treasure. On the con-
percent since 1980.7 The reasons for this trary, they are created by mankind. As
increased oil abundance are several-fold. resource economist Thomas De Gregori
First, new technologies have emerged that points out, “humans are the active agent, hav-
make oil discovery and production far more ing ideas that they use to transform the envi-
efficient and thus less costly. Second, greater ronment for human purposes. . . . Resources
efficiency in using resources (a reaction to are not fixed and finite because they are not
previous run-ups in petroleum prices as well natural. They are a product of human ingenu-
as ongoing technological advances) has ity resulting from the creation of technology
helped reduce the amount of oil necessary to and science.”’10

produce a unit of goods or services and, The late David Osterfeld thus concluded
hence, the relative abundance of the energy- that “since resources are a function of human
resource base. Indeed, according to the U.S. knowledge and our stock of knowledge has
Energy Department’s Energy Information increased over time, it should come as no sur-
Administration, the amount of petroleum and prise that the stock of physical resources has
natural gas necessary to produce a dollar's also been expanding.”!! Obsessing on con-
worth of GDP has declined by 29 percent serving present resources is akin to a farmer
since 1980. The story is not unique to petro- obsessing over conserving eggs rather than
leum; all resources have become far more the chickens that lay them.

abundant—not more scarce—throughout the The sustainable-development imperative
twentieth century (and indeed, throughout betrays an ill-considered bias for natural as
recorded history).8 opposed to man-made capital. In truth, the

If sustainable development, then, is under- wealth created by exploiting resources is
stood as an admonition that the aggregate size often more beneficial than the wealth pre-
of the natural-resource base (absent any con- served by “banking” those resources for
sideration of demand) should “not be allowed future use. Daniel Boggs has criticized the
to deteriorate,” then it is not particularly “rhetoric [that] says we didn’t inherit from
helpful. It posits wrongly that absolute (as our parents, we are borrowing from our
opposed to relative) scarcity is the primary children.”
threat to the economy and human society at Argues Boggs: “This is usually designed to
large. And the theory is oblivious to the ongo- make us ashamed to use anything. Logically,
ing process of resource creation. As econo- it should also make us hate our parents for
mists Harold Barnett and Chandler Morse using up some of ‘our’ oil, or iron, or whatev-
explained in their classic work, Scarcity and er. Yet, our parents did build this world for
Growth, as resources become more scarce, us.” He went on to point out that previous
people will anticipate future scarcities, prices generations “created the resources that far
will be bid up, incentives will be created for more than replaced, in truth, what they used.
developing new technologies and substitutes, And I am confident that we can do the same

and the resource base will be renewed.’ for our children. I would certainly rather have

medicines and satellites and other technology

S13 stn? than a few more billion tons of some rock or
Wild-Eyed Optimism? another”

Is Barnett and Morse’s optimism regarding It comes down to free choice, Boggs said.
“just in time” delivery of new technologies “We each can set our own economic time
and resource subsidies justified? Well, histor- horizons. If we really think our grandchildren
ical experience would certainly seem to justi- will be better off with shut-in oil wells than
fy their optimism. Those who find the theory shares of IBM, we can buy them up and shut


===== PAGE 40 =====

548 THE FREEMAN ee SEPTEMBER 1998

them in. But others should be free to make that the issue of natural capital necessarily

their own decisions.”12 involves people’s preferences. Without that
dimension, Harte says, “economists cannot
Doubt from Within claim that any one ecological state is superi-

or to another because their recommendations
There is growing doubt within the ecologi- are not clearly supported by ecological theo-
cal community about whether stocks of natur- ry and practice.”!5 For Harte that means the
al capital are naturally constant at all. “contribution to human well-being” should
“Strong” sustainability assumes that ecosys- be given weight at least equal to environ-
tems naturally evolve towards some equilibri- mental considerations in decisions about
um and eventually stabilize. But within the development.
academic community, the lack of empirical The “strong” variant of sustainable devel-
evidence supporting that assumption has led opment is thus built on an erroneous theoreti-
to a wholesale questioning of the equilibrium cal foundation that cripples its usefulness to
paradigm. !3 The consequences are significant. policy analysts.
And finally, while sustainability can be an
* If ecosystems do not tend toward stabi- important consideration for certain economic
lization, then policies intended to promote or social arrangements, it does not necessari-
“sustainable” capital are unnatural and with- ly follow, as economist Wilfred Beckerman
out ecological merit. notes, that sustainability should be the over-
* If resource stocks are not functionally and riding criterion for public policy. After all,
structurally complete, then “sustainable man- there are innumerable human undertakings
agement” of those stocks will prove subopti- that are highly desirable—even necessary—
mal, and but unfortunately not indefinitely sustainable.
* If ecosystems do not tend toward stability, We must distinguish between sustainability as
then calculations about the economic or eco- a purely technical concept and optimality,
logical value of natural capital are impossible which is a normative concept. Many econom-
on a macro level. ic activities that are unsustainable may be per-
fectly optimal and many that are sustainable
Uncertainties surrounding the nature of may not be desirable, let alone optimal.l6
ecosystem evolution and the means by which [.M.D. Little and J. A. Mirrlees observed
resource stocks can best be maintained have rightly that “Whether a project is sustainable
two main implications for policy analysts. (forever?—or just a long time?) has nothing
First, conclusions about whether or not cer- to do with whether it is desirable. If unsus-
tain economic activities are “sustainable” is tainability were really regarded as a reason for
more problematic than some would like to rejecting a project, there would be no mining,
think. As sustainable-development theorists and no industry. The world would be a very
Robert Costanza and Bernard Patten concede, primitive place.”!?
“A system can only be known to be sustain- Nobel-prize-winning economist FA.
able after there has been time to observe if the Hayek concurred, pointing out that we have
prediction holds true. Usually there is so only sustained development as a society by
much uncertainty in estimating natural rates refusing to embrace the policy prescriptions
of renewal, and observing and regulating har- of “sustainable development” advocates.

vest rates, that a simple prediction . . . is “Industrial development would have been
always highly suspect, especially if it is erro- greatly retarded,” Hayek wrote, “if sixty or
neously thought of as a definition.”!4 eighty years ago the warning of the conserva-

A second implication is that preserving tionists about the threatened exhaustion of the
indefinitely certain ecological states is less a supply of coal had been heeded; and the inter-
matter of ecological necessity than social nal combustion engine would never have rev-
preference. Geographer M.J. Harte of the olutionized transport if its use had been limit-
University of Waikato, New Zealand, notes ed to the known supplies of 0il.”18


===== PAGE 41 =====

COMMON SENSE OR NONSENSE ON STILTS? 549

The Incoherence of (out of hundreds or even thousands) has the

Intergenerational Equity right to deplete resources, how is that “inter-
generational equity”?

It is fashionable in certain intellectual cir- Furthermore, the notion of resource rights

cles to argue, as does Edith Weiss, professor for future generations is premised on the
of international law at Georgetown Universi- argument that one has a “right” to forcibly
ty, that future generations have as much right take property from someone else in order to
to today’s environmental resources as we do, satisfy a personal need. Although that is an
and that we have no right to decide whether or argument best left unexplored here, suffice it
not they should inherit their share of those to say that such a claim is so expansive and
rights. 19 fraught with peril that few philosophers have
Yet the idea that those not yet even con- taken it seriously.20
ceived have tangible rights to resources is

dubious to say the least. First, it is philosoph- The Meaninglessness of
ically inconsistent. Those disembodied beings  «¢ ss . oo.
are said to have rights, yet the moment they Weak Sustainability

are conceived, they are legally held to have no What if we embrace the “weak” definition
rights whatsoever. Leaving aside the ethics of of sustainable development—allowing natural
abortion, to be consistent, those who defend resources to be depleted as long as they are
the rights of future generations must by the maintained at a “minimum critical level” and
same logic oppose abortion (a position few that the proceeds of their use be preserved for
environmentalist activists hold, given their future generations? Weak sustainability is cer-
allegiance to population control). Once indi- tainly a more reasonable proposition, but
viduals are conceived, we do not maintain that that’s largely because it is functionally indis-
they have a right to all the resources of their tinguishable from the economists’ concern
parents. If, for example, a retired couple with maximizing human welfare. As econo-
spends $50,000 on a trip around the world, we mist David Pearce—a strong proponent of
do not argue that the couple has violated the “weak” sustainability—concedes, sustainable
resource rights of their children. Thus, indi- development “implies something about main-
viduals are said to have absolute resource taining the level of human well being so that
rights before conception, no resource rights it might improve but at least never declines
(indeed, not even the right to life) from con- (or, not more than temporarily, anyway).”2!
ception to birth, and then only limited The two apparent qualifications of “weak”
resource rights until death. If the theory of sustainability are really no qualifications at
intergenerational equity is to be taken serious- all. If we understand “minimum critical level”
ly, this obvious lurching arbitrariness will as the natural-resource base necessary to sus-
need to be expunged. tain human life, then one certainly does not
The concept of intergenerational equity, maximize human welfare by consuming
moreover, is hopelessly incoherent. If the resources beyond that point. If, on the other
choice to draw down resources is held exclu- hand, it means that each and every natural
sively by future generations, then are we not resource—regardless of its utility to
some previous generation’s “future” genera- mankind—be preserved at some “minimal
tion? Why is the present generation bereft of critical level,” then, without reference to costs
that right? If the answer is that no generation and benefits, the concept is simply anti-
has the right to deplete resources as long as human and inimical to the interests of future
another generation is on the horizon, then the generations.
logical implication is that no generation (save As a thought experiment, assume that the
for the very last generation before the extinc- only way we could have preserved the Ameri-
tion of the species) will ever have a right to can bison at a “minimum critical level” was to
deplete any resource, no matter how urgent leave the Great Plains largely untouched by
present needs may be. If only one generation agriculture. Would the sacrifice of what was


===== PAGE 42 =====

550 THE FREEMAN e¢ SEPTEMBER 1998

to become the world’s most productive crop- 1. World Commission on Environment and Development, Our

land in order to protect the great buffalo herds Common Future (Oxford: Oxford University Press, 1987), p. 8.
. 0 p 0 g ca . . 2. David Pearce and Jeremy Warford, World Without End: Eco-
have been in either the economic or social nomics, Environment, and Sustainable Development (New York:

interest of future generations? A policy para- Oxford University Press, 1993), p. 8.
. ere g . pP YP 3. Robert Costanza, “Ecological Economics: A Research Agen-
digm that refuses to consider the costs or ben- 4a” in Structural Change Economics, vol. 2, pp. 335-42; cited in

. Ecological Economics, vol. 15, 1995, p. 158.
a moral argument about the interests of future 4. Robert Hahn, “Toward a New Environmental Paradigm,” Yale

human) generations. But to include cost and Law Journal, May 1993, p. 1750.
( ) gene at lon . 0 . . 5. James Sheehan, “Sustainable Development: The Green Road
benefit calculations in such decisions brings  Serfdom?” Competitive Enterprise Institute, manuscript, March

us right k the nomic concept of 199.p. 1
2 back to econo °p 6. Annual Energy Review, U.S. Department of Energy, Energy

“maximizing welfare.” Information Administration, http://tonto.cia.doe.gov/aer.
The admonition that the proceeds of such 7. Energy Information Administration.

. . 8. Julian Simon, ed., The State of Humanity (Cambridge: Black-
tradeoffs be preserved for our children is wen publishers, 1995), pp. 279-442.

. . . Economics of Natural Resource Availability (Baltimore: Johns Hop-
inherited by future generations, there would kins ress, 1963).

1 { - 10. Thomas De Gregori, “Resources Are Not; They Become: An
app ear to be no ration ale for a SP Scial state Institutional Theory,” Journal of Economic Issues, September 1987,
supervised “account” to be established for p 1243, 1247.
their benefit. 11. David Osterfeld, Prosperity versus Planning (New York:
Oxford University Press, 1992), p. 99.
12. Daniel Boggs, Presentation at Global Issues Seminar, Har-
vard University Center for International Affairs, October 7, 1986,

Sustainable Development: An p. 14.
13. See for example, J.J. Kay, “The Concept of Ecological
Intellectual Rorschach Test? Integrity, Alternative Theories of Ecology and Implications for Deci-
sion-Support Indicators,” in Economic, Ecological, and Decision
PR : Theories: Indicators of Ecological Sustainable Development, ed.
In sum, it is hard to overemphasize the ps Victor, 1. Kay, and H.J. Ruitenback (Ottawa: Canadian Envi.
wrong-headedness of sustainable develop- ronmental Advisory Council, 1991), pp. 23-58.
: : 14. Robert Costanza and Bernard Patten, “Defining and Predict-
ment as a useful Pp olicy construct. As two dis- ing Sustainability,” Ecological Economics, vol. 15, 1995, p. 194,
tinguished scholars of the economic develop- 15. Harte, p. 162.

16. Wilfred Beckerman, Through Green-Colored Glasses: Envi-
ment—Partha Dasgupta and Karl-Goran ronmentalism Reconsidered (Washington, D.C.: Cato Institute,
Maler—point out, “most writings on sustain- 1996), p. 145.

17. LM.D. Little and J.A. Mirlees, “Project Appraisal and Plan-
able develop ment start from scratch and some ning 20 Years On,” Proceedings of the World Bank Annual Confer-.
proceed to get things hopelessly wrong. It ence on Development Economics (World Bank, 1990) p. 365, cited

: in Beckerman, p. 146.
would be difficult to find another field of 18. F.A. Hayek, The Constitution of Liberty (Chicago: Universi-
research endeavor in the social sciences that ty of Chicago Press, 1960), pp. 369-370.
2 : 999 19. Edith Weiss, In Fairness to Future Generations (Dobbs
displays such intellectual TCEIESS. Ferry, N.Y.: Transnational Publishers, 1989). For a summary and
If sustainable development is the answer, sympathetic critique of Weiss, see Paul Barresi, “Beyond Fairness to
: fan? . Future Generations: An Intragenerational Alternative to Intergenera-
what 18 the question: Society has managed to tional Equity in the International Environmental Arena,” Tulane
“sustain” development now for approximately Environmental Law Journal, Winter 1997, pp. 59-88.
s : 20. See Gerald MacCallum, Jr., “Negative and Positive Free-
3 ,000 years without the guidance of green dom,” Philosophical Review, July 1967, pp. 312-34; Roger Pilon,
state planners. The result is not only a society “Ordering Rights Consistently: Or What We Do And Do Not Have
that is both healthier and wealthier than any [Si 3 Ee C20 Em vo oe ar.
other in history, but a society with more nat- fare State (Washington, D.C.: Cato Institute, 1998), forthcoming.
ural resources at its disposal than ever before. 1D? vid Pearce, Roo 45 mea the Natural an
One could reasonably argue that the best way 22. Partha Dasgupta and Karl-Goran Maler, “Poverty, Institu-
. so tions, and the Environmental-Resource Base,” World Bank Paper no.
to sustain develop ment—or to maximize 9 (Washington, D.C., 1994); cited in Beckerman, p. 143.
human welfare—is to protect economic liber- 23. See generally Osterfeld as well as David Landes, The Wealth
. : and Poverty of Nations: Why Some Are So Rich and Some Are So
ty and confine state authority to protecting pj, (New York: W.W. Norton, 1998); Nathan Rosenberg and LE.
life, liberty, and property.23 That is, the best  Birdzell, Jr, How the West Grew Rich: The Transformation of the
se : : Industrial World (New York: Basic Books, 1986); and James A.
way of sustaining develop ment 1S to Ie) ect Dorn, Steve H. Hanke, and Alan A. Walters, eds., The Revolution in
“sustainable development.” [J Development Economics (Washington, D.C.: Cato Institute, 1998).


===== PAGE 43 =====

Potomac Principles by Doug Bandow

Is Anyone Still
for Limited Government?

he collapse of the supposed Republican engage in the normal things of life—family,
Revolution has demonstrated the truth of career, hobbies, and more—government
George Wallace’s taunt three long decades needs to direct their attention elsewhere. They
ago: there ain’t a dime’s worth of difference must be conscripted into some grand crusade
between the major parties. Today both by their betters, those far-seeing politicos who
Democrats and Republicans offer higher really know what greatness is.

spending, new social programs, increased tax What is this but twentieth-century “liberal-
collections, and a more complex tax code. ism”? The Democratic presidents Franklin
But the demise of the conservative revolu- Delano Roosevelt, Harry Truman, John
tion extends far beyond the usual suspects. Kennedy, Lyndon Johnson, and Jimmy Carter
Republican lawmakers can at least plead all demanded that Americans join in one cru-
political necessity. More bizarre is the end of sade or another. And the pitch was always
any pretense of commitment to limited gov- national greatness—alphabet-soup agencies to
ernment among many supposed conservative regulate the economy; expansive and expen-
intellectuals. sive programs to clothe, feed, and nurture the
Last year Republicans boosted the budget, population; massive militaries to make global
created a new health-care entitlement that will war; internal crusades to end poverty and
only grow over time, added funds for the usual achieve energy independence. Bill Clinton
job training programs that have never worked, attempted to follow suit with his proposal to

and passed a tax bill that legislates envy. This nationalize the health-care system.
year they approved a bloated transportation Kristol and Brooks formally recoil from
bill stuffed with an unprecedented amount of left-wing statism, but Roosevelt’s call to over-
pork. come the Depression, Johnson’s attempt to
So far they’ve been expanding government end poverty, and even Bill Clinton’s initiative
only haphazardly, without any intellectual to provide universal health care all obviously
framework. But William Kristol and David reflected “a national goal,” in Brooks’s words.
Brooks of the Weekly Standard are working to How does “national greatness” conservatism
provide such a foundation. They argue that differ? Writes Washington Post columnist E.J.
government needs to promote national great- Dionne: “Kristol and Brooks have to explain
ness. It is at base a profoundly statist notion. where they differ from Democrats, who also
While those silly Americans might want to favor ‘limited but energetic’ government.
Using government on behalf of ‘national

— reatness’ could get you right back to the New
Doug Bandow, a nationally syndicated columnist, is g gety ght ba

a senior fellow at the Cato Institute and the author Deal’
and editor of several books, including Tripwire: Kristol and Brooks seek to avoid the prob-

Korea and U.S. Foreign Policy in a Changed World. lem by offering few specifics. But David
551


===== PAGE 44 =====

552 THE FREEMAN ee SEPTEMBER 1998

Brooks has cited the Library of Congress, self-interest, of their commercial activities”?
national parks, and antitrust enforcement as The questions should be asked, but Kristol
examples of “grand American projects.” Uh, and Brooks are looking for answers in the
right. A rousing call to recharge Justice wrong place. Democracy is usually mediocre,
Department enforcement of the Sherman if not nihilistic. There was certainly nothing
Antitrust Act would help avoid democracy’s particularly virtuous about American politics
tendency to, in his words, “slide into nihilistic a century ago, at the time when Congress
mediocrity.” decided to build Brooks’s beloved Library of
The basic problem is that advocates of Congress. Venality was hardly unknown even
“national greatness” have an impossible at the nation’s founding. National goals do
dream. They denounce “the complacent medi- arise, but they generally reflect exogenous
ocrity and petty meddling of the nanny state,” crises, not contrived campaigns.
urging instead what Brooks terms a “limited Moreover, most political questions are
but energetic government.” Alas, the Ameri- decided on the narrow self-interest of voters,
can (and, indeed, human) experience suggests especially those who have a great enough
that no such government is possible: the state financial interest to organize. American poli-
1s the ultimate imperialist. If it can conscript tics has never been free of self-interest. Today
money and manpower for grand national cru- pork-barrel projects persist and Social Securi-
sades, it cannot be limited. ty survives because those who benefit res-
Kristol told Dionne: “Are we willing to say  olutely support “their” programs. Overcoming
that the country is worse off because of FDR such selfishness requires a far more funda-
or JFK or LBJ? I’m not willing to say that.” mental transformation, a regeneration of the
So much for limited government. National soul. And that is more likely to occur when
greatness obviously trumps liberty. One must, one has a realistic assessment of government,
in fact, wonder why Kristol opposed Clinton- particularly the recognition that it is not an
care. effective means to national greatness.
Incredibly, Kristol and Brooks, like Clin- Nevertheless, Kristol and Brooks want gov-
ton, go on to ask: How is it possible for peo- ernment to inform its citizens’ hopes rather
ple to “love their nation if they hate its gov- than organize their resentments. Fair enough.
ernment?” They apparently see no difference But that can be best achieved by leaving peo-
between society and state. ple alone. “It almost doesn’t matter what great
But what better reaction than contempt is task government sets for itself, as long as it
there to a system that loots the taxpaying does some tangible thing with energy and
public for any project supported by an inter- effectiveness,” writes Brooks. But of course it
est group with a letterhead listing more than matters. People want genuine meaning for
three people? Real patriots should loathe their lives. Such meaning is not provided by
agencies that brutalize and even kill people government projects, no matter how much
simply desiring to be left alone. Disgust is the some intellectuals may think they promote
only appropriate reaction to politicians who national greatness.
preach freedom while delivering higher In the end, most people want simple things:
spending, more complex taxes, and more to provide for their families, succeed at work,
intrusive regulation. This government enjoy their hobbies and friends, and fulfill
deserves criticism precisely because it falls their responsibilities to their neighbors. They
so far short of the greatness of the country it should be left alone to pursue their own
purports to represent. hopes, not drafted to support the latest fad
What of Brooks’s concern that “democracy endorsed by an ephemeral congressional
has a tendency to slide into nihilistic medioc- majority. It is people acting together, in com-
rity if its citizens are not inspired by some munity with one another, pursuing shared
larger national goal”? And that people lose “a goals that makes America great. Not some
sense of grand aspiration and noble purpose” program pushed by government social engi-
when “they think of nothing but their narrow neers, whether of the left or right. OJ


===== PAGE 45 =====

FREEMAN

deas On Libert

The Mythology of Roosevelt
and the New Deal

by Robert Higgs

he Great Depression was a watershed in Roosevelt, it is said repeatedly, restored hope

American history. Soon after Herbert to the American people when they had fallen
Hoover assumed the presidency in 1929, the into despair because of the seemingly endless
economy began to decline, and between 1930 depression, and his policies “saved capital-
and 1933 the contraction assumed catastroph- ism” by mitigating its intrinsic cruelties and
ic proportions never experienced before or inequalities.
since in the United States. Disgusted by This view of Roosevelt and the New Deal
Hoover's inability to stem the collapse, in amounts to a myth compounded of ideologi-
1932 the voters elected Franklin Delano Roo- cal predisposition and historical misunder-
sevelt, along with a heavily Democratic Con- standing. In a 1936 book called The Menace
gress, and set in motion the radical restructur- of Roosevelt and His Policies, Howard E.
ing of governments role in the economy Kershner came closer to the truth when he

known as the New Deal. wrote that Roosevelt

With few exceptions, historians have taken
a positive view of the New Deal. They have took charge of our government when it was
generally praised such measures as the mas- comparatively simple, and for the most
sive relief programs for the unemployed; the part confined to the essential functions of
expanded federal regulation of agriculture, government, and transformed it into a
industry, finance, and labor relations; the highly complex, bungling agency for throt-
establishment of a legal minimum wage; and tling business and bedeviling the private
the creation of Social Security with its old- lives of free people. It is no exaggeration to
age pensions, unemployment insurance, and say that he took the government when it
income supplements for dependent children was a small racket and made a large racket
in single-parent families, the aged poor, the out of it.!
physically handicapped, and the blind. In the
construction of the American regulatory and As this statement illustrates, not everyone

welfare state, no one looms larger than FDR. admired FDR during the 1930s. Although his-
For this accomplishment, along with his torians have tended to view Roosevelt’s oppo-
wartime leadership, historians and the gener- nents as self-interested reactionaries, the
al public alike rank Franklin D. Roosevelt legions of “Roosevelt haters” actually had a
among the greatest of American presidents. clearer view of the economic consequences of
the New Deal. The nearly 17 million men and

Robert Higgs is senior fellow in political economy at women who, even in Roosevelt's moment of

the Independent Institute and editor of The Indepen-  SUPICME triumph in 1936, voted for Alf Lan-
dent Review. don could not all have been plutocrats.

553


===== PAGE 46 =====

554 THE FREEMAN ee SEPTEMBER 1998

Prolonging the Depression of sheer boondoggle. In the words of the
common-man’s poet, Berton Braley,
The irony is that even if Roosevelt did help

to lift the spirits of the American people in the A dollar for the services

depths of the depression—an uplift for which A true producer renders—

no compelling documentation exists—this (And a dollar for experiments
achievement only led the public to labor under Of Governmental spenders!)

an illusion. After all, the root cause of the pre- A dollar for the earners

vailing malaise was the continuation of the And the savers and the thrifty —
depression. Had the masses understood that (And a dollar for the wasters,

the New Deal was only prolonging the It’s a case of fifty-fifty!).3
depression, they would have had good reason

to reject it and its vaunted leader. Under heavy criticism, FDR himself eventu-

In fact, as many observers claimed at the ally declared that he was “not willing that the
time, the New Deal did prolong the depres- vitality of our people be further sapped by the
sion. Had Roosevelt only kept his inoffensive giving of doles, of market baskets, by a few
campaign promises of 1932—cut federal hours of weekly work cutting grass, raking
spending, balance the budget, maintain a leaves, or picking up papers in the public
sound currency, stop bureaucratic centraliza- parks.” Nevertheless, the dole did continue.
tion in Washington—the depression might
have passed into history before his next cam- .
paign in 1936. But instead, FDR and Con- Buying Votes
gress, especially during the congressional ses- In this madness, the New Dealers had a
sions of 1933 and 1935, embraced interven- method. Despite its economic illogic and
tionist policies on a wide front. With its incoherence, the New Deal served as a mas-
bewildering, incoherent mass of new expendi- sive vote-buying scheme. Coming into power
tures, taxes, subsidies, regulations, and direct at a time of widespread destitution, high
government participation in productive activ- unemployment, and business failures, the
ities, the New Deal created so much confu- Roosevelt administration recognized that the
sion, fear, uncertainty, and hostility among president and his Democratic allies in Con-
businessmen and investors that private invest- gress could appropriate unprecedented sums
ment, and hence overall private economic of money and channel them into the hands of
activity, never recovered enough to restore the recipients who would respond by giving polit-
high levels of production and employment ical support to their benefactors. As John T.
enjoyed in the 1920s. Flynn said of FDR, “it was always easy to

In the face of the interventionist onslaught, interest him in a plan which would confer
the American economy between 1930 and some special benefit upon some special class
1940 failed to add anything to its capital in the population in exchange for their votes,”
stock: net private investment for that eleven- and eventually “no political boss could com-
year period totaled minus $3.1 billion.2 With- pete with him in any county in America in the
out capital accumulation, no economy can distribution of money and jobs.”
grow. Between 1929 and 1939 the economy In buying votes, the relief programs for the
sacrificed an entire decade of normal eco- unemployed, especially the Federal Emer-
nomic growth, which would have increased gency Relief Administration, the Civilian
the national income 30 to 40 percent. Conservation Corps, and the Works Progress

The government’s own greatly enlarged Administration, loomed largest, though many
economic activity did not compensate for the other programs promoted the same end. Farm
private shortfall. Apart from the mere insuffi- subsidies, price supports, credit programs,
ciency of dollars spent, the government’s and related measures won over much of the
spending tended, as contemporary critics rural middle class. The labor provisions of the
aptly noted, to purchase a high proportion National Industrial Recovery Act and later the


===== PAGE 47 =====

THE MYTHOLOGY OF ROOSEVELT AND THE NEW DEAL 555

National Labor Relations Act and the Fair dubbed “economic royalists” and blamed for
Labor Standards Act purchased support from the depression and other social evils.
the burgeoning ranks of the labor unions. Early and late, the presidents advisers
Homeowners supported the New Deal out of shared at least one major opinion: that the
gratitude for the government’s refinancing of federal government should intervene deeply
their mortgages and its provision of home- and widely in economic life; that government
loan guarantees. Even blacks, loyal to the spending, employing, and regulating, all
Republican Party ever since the Civil War, directed by “experts” such as themselves,
abandoned the GOP in exchange for the pit- could repair the various perceived defects of
tances of relief payments and the tag ends of the market system and restore prosperity
employment in the federal work-relief pro- while achieving greater social justice. Even at
grams. Put it all together and you have what the time, many thoughtful onlookers found
political scientists call the New Deal Coali- the overweening arrogance of these deluded
tion—a potent political force that remained policy advisers to be their most distinctive
intact until the 1970s. trait. As James Burnham wrote of them in his
1941 book, The Managerial Revolution, “they
. are, sometimes openly, scornful of capitalists
Inept, Arrogant Advisers and capitalist dons, . They believe that they
Journalists titillated the public with talk of can run things, and they like to run things.”6
Roosevelt’s “Brain Trust”—his coterie of pol- More recently, even a sympathetic left-liberal
icy advisers before and shortly after his elec- historian, Alan Brinkley, wrote that the hard-
tion in 1932, of whom the most prominent core New Dealers embraced government
were the Columbia University professors planning “with almost religious veneration.”’
Raymond Moley, Rexford Guy Tugwell, and
Adolph A. Berle. In retrospect it is obvious . .
that these men’s ideas about the causes and The Misleading Analogy of War
cure of the depression ranged from merely Many of the New Dealers, including FDR
wrongheaded to completely crackpot. himself (as assistant secretary of the navy),
Like most other New Dealers, they viewed had been active in the wartime administration
the collapse of prices as the cause of the of Woodrow Wilson. Ruminating on how to
depression, and therefore they regarded vari- deal with the depression, they seized on an
ous means of raising prices, especially analogy: the war was a national emergency,
cartelization and other measures to restrict and we dealt with it by creating government
market supply, as appropriate in the circum- agencies to control and mobilize the private
stances. Raise farm prices, raise industrial economy; the depression is a national emer-
prices, raise wage rates, raise the price of gency, and therefore we can deal with it by
gold. Only one price should fall, namely, the creating similar agencies. Hence arose a suc-
price (that is, the purchasing power) of cession of government organizations modeled
money. Thus, all favored inflation and, as a on wartime precedents. The Agricultural
means to this end, the abandonment of the Adjustment Administration resembled the
gold standard, which had previously kept Food Administration; the National Recovery
inflation more or less in check. Administration resembled the War Industries
Subsequent advisers, the “happy hot dogs” Board; the Reconstruction Finance Corpora-
(after their mentor and godfather, Harvard law tion (created under Hoover but greatly
professor Felix Frankfurter), such as Tom expanded under Roosevelt) resembled the
Corcoran, Ben Cohen, and James Landis, who War Finance Corporation; the National Labor
rose to prominence during the mid-1930s, had Relations Board resembled the War Labor
no genuine economic expertise. But they con- Board; the Tennessee Valley Authority resem-
tributed mightily to FDR’s swing away from bled the Muscle Shoals project; the Civilian
accommodating business interests and toward Conservation Corps resembled the army
assaulting investors as a class, whom he itself. The list went on and on.


===== PAGE 48 =====

556 THE FREEMAN e SEPTEMBER 1998

In his first inaugural speech, Roosevelt savior—as the New York Times editorialized
declared, “we must move as a trained and on June 18, 1933, “the Heaven-sent man of
loyal army willing to sacrifice for the good of the hour.’10
a common discipline.” He warned that should If demagoguery were a powerful means of
Congress fail to act to his satisfaction, he creating prosperity, then FDR might have lift-
would seek “broad executive power to wage a ed the country out of the depression in short
war against the emergency as great as the order. But in 1939, ten years after its onset
power that would be given me if we were in and six years after the commencement of the
fact invaded by a foreign foe.” However stir- New Deal, 9.5 million persons, or 17.2 per-
ring the rhetoric, this approach to dealing cent of the labor force, remained officially
with the depression rested on a complete mis- unemployed (of whom more than 3 million
apprehension. The requisites of successfully were enrolled in emergency government
prosecuting a war had virtually nothing in make-work projects). Roosevelt was a master-
common with the requisites of getting the ful politician, but unfortunately for the Amer-
economy out of a depression. (Moreover, the ican people subjected to his policies, he had
President and his supporters greatly overesti- no idea how to end the depression other than
mated how successful their wartime measures to “try something” and, when that didn’t
had been—the war had ended before the work, to try something else. His ill-conceived,
many defects of those measures became politically shaped experiments so disrupted
widely understood.) the operation of the market economy and so
discouraged the accumulation of capital that
they impeded the full recovery that otherwise
would have occurred. His followers revered

Roosevelt did not trouble himself with seri- him then, and many people revere him still, as
ous thinking. Flynn referred to an aspect of his a great leader. But what does it avail a lost and
character as “the free and easy manner in thirsty man if his leader only wanders about in
which he could confront problems about which the desert?
he knew very little.”8 Nor did he care that he

A Pure Political Opportunist

knew very little; his mind sailed on the surface. Le ga cies
Fundamentally he was without any defi- Although Roosevelt and the New Dealers
nite political or economic philosophy. He failed to end the depression, they succeeded
was not a man to deal in fundamentals. ... in revolutionizing the institutions of Ameri-

The positions he took on political and eco- can political and economic life and changing
nomic questions were not taken in accor- the country’s dominant ideology. Even today,
dance with deeply rooted political beliefs 60 years after the New Deal ran out of steam,
but under the influence of political necessi- its legacies remain, still hampering the suc-
ty. . . . He was in every sense purely an cessful operation of the market economy and
opportunist.? diminishing individual liberties.
One need look no further than an organiza-
An indifferent student and later a wealthy, tion chart of the federal government. There
handsome, and popular young man about one finds such agencies as the Export-Import
town, FDR had distinguished himself mainly Bank, the Farm Credit Administration, the
by his amiable and charming personality. A Rural Development Administration (formerly
born politician—which is to say, he was devi- the Farmers Home Administration), the Fed-
ous, manipulative, and mendacious—Roo- eral Deposit Insurance Corporation, the Fed-
sevelt had a flair for campaigning and for pos- eral Housing Administration, the National
turing before and propagandizing the public. Labor Relations Board, the Rural Utility Ser-
Though millions hated him with a white-hot vice (formerly the Rural Electrification
passion, there is no gainsaying that far more Administration), the Securities and Exchange
loved him, and millions regarded him as a Commission, the Social Security Administra-


===== PAGE 49 =====

THE MYTHOLOGY OF ROOSEVELT AND THE NEW DEAL 557

tion, and the Tennessee Valley Authority—all after the New Deal, Americans overwhelm-
of them the offspring of the New Deal. Each ingly take for granted the expansive, some-
in its own fashion interferes with the effective  thing-for-nothing character of the federal
operation of the free market. By subsidizing, government established by the New Dealers.
financing, insuring, regulating, and thereby For Democrats and Republicans alike,
diverting resources from the uses most valued Franklin Delano Roosevelt looms as the most
by consumers, each renders the economy less significant political figure of the twentieth
productive than it could be—and all in the century.
service of one special interest or another. But however significant his legacies, Roo-
Once the New Deal had burst the dam sevelt deserves no reverence. He was no hero.
between 1933 and 1938, ample precedent had Rather, he was an exceptionally resourceful
been set for virtually any government pro- political opportunist who harnessed the extra-
gram that could gain sufficient political sup- ordinary potential for personal and party
port in Congress. Limited constitutional gov- aggrandizement inherent in a uniquely trou-
ernment, especially after the Supreme Court bled and turbulent period of American histo-
revolution that began in 1937, became little ry. By wheeling and dealing, by taxing and
more than an object of nostalgia for classical spending, by ranting against “economic royal-
liberals. ists” and posturing as the friend of the com-
But in the wake of the New Deal, the ranks mon man, he got himself elected time after
of the classical liberals diminished so greatly time. But for all his undeniable political
that they became an endangered species. The prowess, he prolonged the depression and fas-
legacy of the New Deal was, more than any- tened on the country a bloated, intrusive gov-
thing else, a matter of ideological change. ernment that has been trampling on the peo-
Henceforth, nearly everyone would look to ple’s liberties ever since.
the federal government for solutions to prob-
lems great and small, real and imagined, per- 1. Quoted by Richard M. Ebeling, “Monetary Central Planning

: _ and the State, Part XIV: The New Deal and Its Critics,” Freedom
sonal as well as social. After the 1930s, oppo Daily, February 1998, p. 15.

nents of a proposed federal program might 2. Robert Higgs, “Regime Uncertainty: Why the Great Depres-
object to its structure, its personnel, or its opment Revers Spring 1997, pp S600. ser the Wer”
cost, but hardly anyone objected on the 3. “Even Steven,” in Virtues in Verse: The Best of Berton Braley,
grounds that the program was by its very selected and hair ofr Tania Abrams (Milpitas, Calif:
nature improper to undertake at the federal 4. Quoted in John T. Flynn, The Roosevelt Myth (Garden City,
level of government. NY erp goes 1948), p. 86.

“People in the mass,” wrote H.L. Mencken, 6. Quoted by F.A. Hayek in a review of Burnham's book. See
“soon grow used to anything, including even Choon press. 190m £4 Hayek, vol X (Chicago: University of
being swindled. There comes a time when the 7. Alan Brinkley, The End of Reform: New Deal Liberalism in
patter of the quack becomes as natural and as Re mare War (New York: Knopf, 1995), p. 47.
indubitable to their ears as the texts of Holy 9. Ibid, pp. 77-78.

: : tos _ 10. Quoted in ibid., p. 15.
Writ, and when that time comes it is a dread 11. H.L. Mencken, On Politics: A Carnival of Buncombe (Balti-

ful job debamboozling them.”!! Six decades more: Johns Hopkins University Press, 1996), p. 335.


===== PAGE 50 =====

Peripatetics by Sheldon Richman

It’s an Economy,
Not a Machine

he Dow dropped almost 150 points on a Central planning in the U.S. economy?
single day a few months ago at Where? Leaving aside the Antitrust Division,
indications that the Federal Reserve, the which is intent on centrally planning the com-
nation’s central bank, may raise interest rates puter software industry, and a few other gov-
if the economy doesn’t “slow down.” ernment agencies, the biggest would-be cen-
Concerned officials there had been expecting tral planner in the U.S. economy is the Fed.
a slowdown, but they couldn’t discern the Central banking is the central planning of
hoped-for signs. The Wall Street Journal said money. Isn’t it odd that a country which,
that “Fed officials are beginning to prepare rhetorically at least, condemns economic
markets for a Fed move to brake the planning as socialism engages in monetary
economy—unless it slows on its own soon.” socialism?
This is all perfect buncombe. The government controls the means of pro-
Memo to the Fed: It’s an economy, stupid! duction of money, a rather important element
An economy is not a vehicle speeding in the marketplace. Believing that a few peo-
downhill or a machine overheating. It’s an ple can determine the proper interest rate is
economy, a network of markets. An economy like believing they can determine the proper
is people—human beings planning and act- price for bread or cheese. An interest rate is a
ing to improve their lot. They transform price for the use of someone else’s money.
resources from less useful to more useful Left to the market, it reflects the intensity of
forms and exchange with each other. If they people’s preference for having money now
think they are moving too fast, they will slow versus having it in the future. Since people
themselves down or rest. If they get overheat- prefer having things now, if you want to bor-
ed, they will switch on the air conditioning or row money, you must be prepared to pay a
take a shower. There’s no need for the gov- lender something extra in the future. How
ernment to fret. much more depends on people’s time prefer-
Words like “slow,” “fast,” “brakes,” “over- ences. Supply and demand set an economy-
heating,” and “cooling down” are out of place wide rate of interest.
when we talk about economic matters. Such In a truly free market, no one decrees an
thinking lends support to the central-planning interest rate, because the money supply is not
mentality. Vehicles have drivers. Machines controlled by government. The market itself
have operators. But an economy does not generates money; it might be gold or a com-
have—and cannot have—either a driver or an bination of things that is stable and valued
operator. I'd have thought we'd learned that by generally. We would expect competition

now. among currencies. In the approaching world
of electronic commerce, there will be mone-
Sheldon Richman is editor of The Freeman. tary innovations no one has yet dreamed of.

558


===== PAGE 51 =====

559

The best money is the one the market have spent the money on. Competition among
comes up with, because it will be convenient sellers prods each of them to keep prices
and responsive to people’s preferences. That’s down. Potential competition does the same for
the nature of entrepreneurship. Government those sellers who have no actual competitors
currency is always subject to political manip- at a given time.
ulation, which means disruptive inflation or The upshot 1s that inflation is a creature of
deflation. The Fed over the last several years the state. In a system of free banking, compe-
has largely, but not always, kept the growth of tition would tend to restrain the unjustified
the money supply tight. But we can never rest expansion of currency. We get distracted from
while any political institution controls the the real issue if we go off looking for culprits
printing-press switch. in the private marketplace.

Why the fear that the economy is “moving It’s time the Fed and its advocates dropped
too fast”? The standard reply is that too vig- their pretensions. Central bankers do not
orous an economy will bring inflation, a gen- know what the interest rate should be. Fur-
eral rise in prices. But only the government ther, the bank cannot control economic activ-
causes such inflation. It does so by expanding ity by manipulating the interest rate. Oh, it
the supply of money or credit, as it has done can mess things up if it were to engage in
recently. If the expansion occurs at a faster wild and erratic conduct. But it is wrong to
rate than the increase in goods, prices will think that it can “steer” the economy by
rise. More dollars are chasing a relatively “too changing interest rates. Today’s markets are
small” supply of goods. The price rise is not sophisticated and fast. Information travels at
likely to be uniform. Since the new money the speed of light 24 hours a day, seven days
and credit will enter the marketplace at par- a week. Money watchers, having learned
ticular points, some prices will be bid up from experience, glimpse the signs of policy
sooner or more intensively than others. changes early and translate them quickly, if

The policymakers prefer to blame us, imperfectly, into price adjustments. Capital
instead of themselves, for inflation. They can flee countries as never before. The Fed
think inflation can result from rising con- can’t predict the effects of its policies on peo-
sumer demand, which translates into a higher ple, each of whom alone knows his peculiar
demand for workers and higher wages. But circumstances, needs, and aspirations. As
that can’t lead to a general rise in prices. If economists J.W. Henry Watson and Ida Wal-
there 1s no increase in the amount of money, ters write, the Fed is like a child with a toy
consumers can’t afford to spend more across steering wheel on his car seat. There is an
the board. They will have to cut their purchas- illusion of control “but the steering wheel is
es of some things just to maintain their former not connected to the drive train.”
level of consumption of other things. That Henry David Thoreau wrote that “govern-
will cause some prices to fall. ment has never furthered any enterprise but

Moreover, rising wages wouldn’t perforce by the alacrity with which it got out of the
cause prices to rise because a business’s costs way.” The Fed may have behaved well for
do not determine what it charges at the cash much of the recent past. But it is an intrinsi-
register. A consumer doesn’t care what an cally interventionist creature, and Fed chair-
item costs its manufacturer or retailer. He men come and go. The same Fed that can
cares about only one thing: is the item worth avoid inflation can also set off a great depres-
what he has to give up to obtain it? If $10 is sion. It would be better if our economic well-
asked for necktie, it’s not $10 that a buyer ulti- being were not dependent on a particular per-
mately gives up, but whatever else he would son in a particular office.


===== PAGE 52 =====

FREEMAN

deas On Libert

Smuggled Cigarettes,
Unteachable Politicians

by John Attarian

nly one thing in history is certain: that out paying the tax. As long as the smuggler’s

mankind is unteachable,” Winston price is lower than the legal (tax-augmented)
Churchill told his dinner guests one night in retail price, he’ll have buyers. When the
January 1941.! He was discussing interna- excise tax is small, so is the smuggler’s profit,
tional relations, but it goes for politicians’ and it isn’t worth the effort. But the bigger the
economic blunders, too. Indeed, Churchill’s excise tax, the bigger the price differential
words of wisdom should be carved on the between locations. It follows that the way to
walls of the Michigan State Capitol in stop smuggling is to undo the tax that encour-
Lansing. aged it in the first place.

The state of Michigan is wrestling with a
huge, stubborn cigarette-smuggling problem.
Smuggling and related crimes are bad and
getting worse. That’s all there is to it. One wonders why

The state government has only itself to the engineers of the tax increase didn’t realize
blame. Michigan created its own smuggling it. But what makes Michigan's woes truly
problem in 1994 when it raised its cigarette exasperating is that history has given numer-
tax from 25 cents to 75 cents a pack—an ous warnings of exactly what would happen if
increase of 200 percent.2 The increase was the state put a high excise tax on cigarettes.
intended to make up the revenue lost from a Two centuries ago, Great Britain had no
cut in the state’s property taxes and to dis- income tax. Instead, besides a land tax and
courage smoking. (There is obvious tension protective tariffs, the British levied customs
between those two objectives.) and excise taxes on numerous commodities,

The tax doesn’t even raise the money it was including liquor, wine, beer, boots, building
expected to raise.> But the tax hike did create materials, windows, newspapers, candles,
an incentive to smuggle cigarettes. By leading sugar, salt, soap, tobacco, silk, spices, and
to an increase in the retail price, it made ciga- tea. Contributing heavily to Britons’ cost of
rettes in Michigan more expensive than in living, the taxes were bitterly resented;
states with a lower tax. The bigger the price Samuel Johnson’s famous dictionary defined
differential, the greater the incentive to buy excise as “a hateful tax on commodities.”5 The
where they are cheap, transport them to where need for revenue to finance the Georgian era’s
they are more expensive, and sell them with- frequent wars drove the excise taxes and tar-

iffs higher and higher; the standard rate of tar-
John Attarian is an adjunct scholar with the Midland, iffs, for example, went from 10 percent In
Michigan-based Mackinac Center for Public Policy, 1698 to 25 percent in 1759, with further
and a nonsmoker. increases during the American Revolution.6

560

History’s Warning


===== PAGE 53 =====

561

Unsurprisingly, writes historian T.S. Ash- Prime Minister William Pitt realized that
ton, “high duties gave rise to smuggling. The the only way to end Britain’s rampant tea
profits of the clandestine trade depended on smuggling was to get rid of its tempting prof-
the existence of a marked difference between its, and in 1784 he slashed the tea tax to 12.5
prices in England and those abroad.”” Smug- percent. Legal tea prices plunged accordingly;
gling pervaded Britain; well-organized smug- so did smuggling. A year later legal tea
gling rings operated fleets of boats and imports had more than tripled.!? Soon, tea
wagon trains. The rampant smuggling smuggling was only a memory.
spawned much violence and corruption. Gov- Granted, it’s probably unrealistic to expect
ernment officials connived at smuggling, or state legislators and governors to know much
even participated themselves—including a about British history or spend rainy week-
secretary of the admiralty and a chancellor of ends reading Adam Smith. But just before
the exchequer. Grateful for cheaper goods, the increase in Michigan’s cigarette tax, they
the British people winked at smuggling and had another demonstration, right next door
eagerly bought contraband merchandise. in Canada, that should have taught them
About three million pounds’ worth of contra- something.
band came in every year by the 1780s, versus
about 12 million pounds’ worth of legal
imports.8

Tea smuggling was horrendous. Once To curb smoking, a few years back the
drunk by only a few Britons, tea became the Canadian government tripled its “sin tax” on
national drink in the eighteenth century. Butit cigarettes. In 1994 a carton of ten packs of
had to be imported, and the tax rate on tea was cigarettes sold for $41 Canadian, $33 being
an incredible 119 percent. The combination of attributable to taxes, versus just an average
a huge market and a very high tax made the $16 total in the United States. Canadian ciga-
incentive to smuggle extremely powerful. rettes exported tax-free were cheaper still.
The consequences were disastrous for the Smugglers quickly took advantage of the
British treasury, which lost huge sums, and price differential. They bought up Canadian
for the East India Company, which held a cigarettes in America from wholesalers, ran
government-granted monopoly on legal tea them back into Canada, and peddled them on
imports but was undersold by smugglers and the black market.
almost ruined. In 1784, the company’s Canada tried to crack down—as Adam
accountant estimated that roughly two-thirds Smith might have said, raising the penalty in
of the tea drunk in Britain was contraband.® proportion to the temptation. In 1992 it

Adam Smith recognized the connection increased smuggling penalties from five years
between high duties and smuggling. More- in prison and $25,000 to five years and
over, he pointed out something perverse about $500,000. Canadian customs made 14,500
punishing smugglers: “The law,” he wrote, contraband-cigarette seizures, and about 100
“contrary to all the ordinary principles of jus- people were convicted of smuggling after the
tice, first creates the temptation, and then pun- increase. More money and manpower went to
ishes those who yield to it; and it commonly enforcement, yet the smuggling continued.
enhances the punishment too in proportion to Predictably enough, given the incentives,
the very circumstance which ought certainly smugglers proved imaginative and resource-
to alleviate it, the temptation to commit the ful in finding ways to hide cigarettes in vans
crime.”10 and motor homes. !3

To Smith, the cure was obvious: either Finally, in February 1994, Canada’s federal
remove the temptation to smuggle by lower- government caved in. It cut taxes $5 per car-
ing the tax or increase the difficulty of smug- ton and gave province governments incentives
gling by “establishing that system of adminis- to cut their own taxes up to $10 per carton.
tration which is most proper for preventing Taken together, the cuts would slash the car-
it.’ ton price in half. Quebec and Ontario, where

The Canadian Lesson


===== PAGE 54 =====

562 THE FREEMAN e SEPTEMBER 1998

the bulk of Canadians reside, went along. rettes. There is, then, a strong temptation for
Overnight, prices plummeted from $41 to just both individuals and businesses to become
$18. With the profits gone, Canada’s smug- criminals.
gling problem ended. Many have yielded to it. In December
The same thing happened in neighboring 1994, police seized over 4,000 cartons of con-
Ohio. In 1993, Ohio raised cigarette taxes, traband cigarettes from a drugstore in Sterling
driving the cost of a pack to between $2.20 Heights, and $60,000 worth of cigarettes from
and $2.30. Many smokers bought their ciga- a party store in Lake Orion. Another 5,600
rettes in Michigan, where cigarettes were then cartons (and $4,000 in dynamite) were seized
cheaper. Ohio folded and cut its cigarette tax. from a Metro Detroit man at an Erie weigh
station. In its first ten months of operation, a
ey 9 state police task force created to combat ciga-
They Didn’t Learn rette smuggling confiscated $1.6 million in
Yet despite these illustrations of the likely cigarettes. By October 1995, according to the
consequences, in 1994 Governor John federal Bureau of Alcohol, Tobacco and
Engler’s Proposal A, reforming Michigans Firearms, Michigan was America’s biggest
taxes and school financing, called for tripling market for smuggled cigarettes. Dozens of
the state cigarette tax, and Michigan voters Michigan residents have been arrested in New
approved it. The higher tax went into effect York state near Indian reservations, which
May 1. In short order, all the smuggling- don’t levy cigarette taxes and are major
related problems that plagued Britain and sources for smugglers. In 1997, at least 22
Canada hit Michigan. people and one company were indicted on
No sooner was the boost on the books than smuggling charges, and over 25,000 cartons
Michigan smokers began flocking to Ohio of contraband cigarettes were seized.
and Indiana, where a carton could be bought Smuggling is not the only kind of crime the
for about $11.30, versus about $18 in Michi- tax encourages. By making cigarettes so
gan. One Indiana convenience-store owner expensive, it creates a powerful temptation for
just over the border estimated that his ciga- burglary, which frequently entails violence
rette sales had risen over 40 percent in just the against persons as well as property. One
first three weeks after the tax increase. My holdup ring operating in the greater Detroit
former landlady, a chain smoker, would drive area is suspected of robbing 40 stores selling
an hour to Toledo to buy several cartons. Even cigarettes. In one operation in 1997, a woman
allowing for the cost in gasoline, it was cheap- entered a tobacco store and lured the clerk out
er than buying in Michigan. from behind the counter with a question about
Legal cigarette sales in Michigan suffered cigars. Three men, at least one carrying a pis-
accordingly. The Michigan Coalition Against tol, then entered, tied the clerk up with duct
Crime and Smuggling’s study estimated that tape, and stole about 650 cartons of cigarettes.
nearly 20 percent of cigarettes smoked in As long as there are high profits in contraband
Michigan were contraband. In October 1995, cigarettes, this sort of thing is going to con-
Joseph Sarafa, executive director of the Asso- tinue in Michigan, and sooner or later some-
ciated Food Dealers of Michigan, warned that one is going to get hurt—or worse.
within a year as many as 10 percent of Michi- Given all this, the case for undoing the tax
gan party stores could close, partly due to increase is clear. But so far the state govern-
competition from cheaper contraband ciga- ment is bearing out Churchill’s gloomy obser-
rettes sold at dishonest businesses. vation about human unteachability.
Proliferating crime has been another bitter True to Adam Smith’s observation, Michi-
fruit of the tax increase. The tax makes the gan is punishing people for yielding to the
profit from smuggling cigarettes into Michi- temptation the law created. Store owners face
gan enormous—up to $8,000 on a shipment felony charges if they possess more than $50
of 1,200 cartons—and gives store owners a in contraband cigarettes, with a possible
financial incentive to buy contraband ciga- $10,000 fine and a prison term. Violators can


===== PAGE 55 =====

SMUGGLED CIGARETTES, UNTEACHABLE POLITICIANS 563

also suffer tax penalties from the Michigan ven out by organized crime rings able to do
Attorney General's office of up to $45,000 per so—while the lion’s share of smuggling prob-
100 cartons of cigarettes. Smuggling carriesa ably won't be affected unless police happen to
five-year prison term. raid smoke shops carrying contraband bought
Michigan’s latest response to its smug- from small smugglers.
gling problem has been to plunge deeper into The only way to keep contraband cigarettes
statism by creating a tax stamp, which must out of Michigan would be to create border
be on all cigarette packs shipped after checkpoints to stop and thoroughly search all
December 1, 1997. This will supposedly incoming vehicles—imposing a galling and
reduce fraud by making it easier to detect tyrannical intrusion on motorists, a horren-
black-market cigarettes. dous inefficiency on businesses, and a stag-
Will the tax stamp work? Probably not. gering burden on Michigan police. Yet after
Manufacturers really can’t keep cigarettes the all-too-predictable failure of tax stamps,
away from smugglers. Smuggling rings will that would be the logical next step for an
be tempted to raid warehouses containing unteachable, obstinate government.
stamped cigarettes. Moreover, Rod Stamler, a Michigan’s experience with the higher cig-
former deputy commissioner of the Royal arette tax, then, has been a classic case of déja
Canadian Mounted Police, has argued plausi- vu all over again. The politicians apparently
bly that a revenue stamp may lead to the dom- can’t learn from history, but must find out the
inance of organized crime in smuggling since hard way. The pity of it is, their tuition is
it can counterfeit the stamp. Indeed, Cigarette always paid in other people’s suffering. [J
Smuggling in the United States, a 1995 report

by the Washington-based auditing company 1. Martin Gilbert, Winston S. Churchill, vol. VI: Finest Hour,
: : : 1939-1941 (Boston: Houghton Mifflin Co., 1983), p. 994.

Linquist, Avery, McDonald and Baskerville, yc, 50 noi News, May 22, 1994. p. 1D.

says evidence of counterfeit tax stamps 3. “Cigarette Smuggling Costs State, Police Say,” Detroit News,

already exists in California, Illinois, New November 26, 1996,p. 3D.

4. Adam Smith, An Inquiry into the Nature and Causes of the
York, and Texas. Wealth of Nations (New York: G. P. Putnam’s Sons, 1965), p. 86.
: : 5. Will and Ariel Durant, The Story of Civilization, vol. X:
] The crime and violence prompted by the Rousseau and Revolution (New York: Simon & Schuster, 1967), p.
cigarette tax are already bad enough. They 324.

: : 3 : 6. T.S. Ashton, An Economic History of England: The 18th Cen-
will get worse if organized crime becomes tury (London: Methuen and Company Ltd., 1972), pp. 162-163.

prominent in smuggling. The gang violence 7. Ashton, p. 163.
hit p : 8. Paul Johnson, 4 History of the English People (New York:
from Prohibition or today s drug trade grimly Haters & Roe: 1935). pr. 290s 0
indicates what Michigan might experience. 9. Ashton, pp. 160, 165.
Then, too, tax stamps obviously can’t stop 19 To PRs mn.
people living near the state line from crossing 12. Ashton, p. 165; Johnson, p. 248.
it to buy cigarettes Stamler estimates that 13. Information cited throughout the rest of this article comes

X ] . from the following Detroit News accounts: “Butting Out Smug-

about a third of the smuggling is done by glers” February 16, 1994, p. 6B; “Smokers Breathe a Sigh of

_ 3 Tote : Relief,” February 23, 1994, p. 2A; “Ohio Will Be a Draw to State

well organized, sophisticated smuggling Smokers,” March 16, 1994, p. 12A; “Headin’ South” (see endnote

rings, and about two-thirds by small-scale 2); “Millions Lost in Smuggled Smokes,” October 24, 1995, p. 1D;

HIRE LR . “Cigarette Smuggling Costs State, Police Say” (see endnote 3);

smugglers or individuals going to other states po ole tn State's Pocketbook.” July. 14. 1995, p.

to get their own cigarettes. Put another way, 1D; “Cigarette Smuggling Getting Worse, Cop Says,” October 28,

: : 1995, p. 10A; “In Chesterfield Township: Suspected Ringleader

the stamps would only result in the serous Held in Cigar Shop Heists,” November 3, 1997, p. 3C; and “Black
smugglers counterfeiting them, or being dri- Market a Worldwide Growth Industry,” July 14, 1995, p. 1D.


===== PAGE 56 =====

Economic Notions by Dwight R. Lee

¥ Economics

Markets and Freedom

he social cooperation that emerges in free So I shall discuss two separate but related
markets permits the specialization on points in this column. First, the productive
which prosperity depends. We would be much cooperation of the marketplace depends on
poorer without the specialization that is possi- freedom, and second, freedom depends on the
ble only when large numbers of people can productive cooperation of the marketplace.
coordinate production and consumption Economists typically have the unpleasant task
through market exchange. But even more of pointing to the tradeoffs that are the
important than the material wealth we realize inevitable consequence of scarcity. But with
from the marketplace is the benefit of free- wealth and freedom, there is no tradeoff; they
dom. We would soon be deprived of most of reinforce each other in market economies,
our freedom without the accountability and with it generally impossible to have one with-
discipline possible only in market economies. out the other.! Attempts to increase wealth
Freedom is easy to take for granted, espe- with political policies that reduce freedom

cially in the United States where we have invariably end up reducing both.
enjoyed what people in many other countries
can only dream about. Freedom is a lot like
good health: people tend not to appreciate it
until they lose it. Just as healthy people can Markets work their magic by allowing peo-
destroy their health by yielding to short-run ple to communicate the benefits they realize
temptations, free people can destroy their from the efforts of others and the costs of
freedom by opting for short-run political their efforts to benefit others. Ultimately, all
advantages that undermine the conditions on benefits and costs are subjective, depending
which freedom depends. on people’s preferences and circumstances,
Also, as important as wealth is, it is sec- which only they can accurately evaluate. This
ondary to both good health and freedom. is obvious in the case of benefits. Who but the
Wealth is of limited value to those without the person who consumes a good, or avails him-
health or the freedom to enjoy it. Further- self of a service, is in a better position to
more, good health and freedom are important judge the value of the benefits realized? But if
elements in the production of wealth, with benefits are subjective, then so are costs,
freedom being absolutely essential. Sick peo- which are nothing more than the value of for-
ple can be productive, but without freedom gone benefits. And since they are subjective,
the productive cooperation of the marketplace people can accurately communicate costs and
is impossible. benefits to one another only by having the
freedom to enter into, or exit, different mar-

Dwight Lee is Ramsey Professor of Economics and kets as they see fit, and to buy and sell at any
Private Enterprise at the University of Georgia. mutually agreeable price. Government price

564

Markets Require Freedom


===== PAGE 57 =====

565

controls restrict our freedoms as both buyers existed, polluters would have to pay prices
and sellers, and destroy wealth by censoring that reflected the cost their emissions imposed
our communication with one another. on others. Polluters would be accountable to
Central planning fails because people don’t others, and we could tolerate the freedom to
have the freedom to act on the local informa- discharge waste products into the environ-
tion that only they possess. When the central ment. But because we don’t have pollution
direction of political authorities is substituted markets, we accept government restrictions
for the market choices of individual producers on polluting activities that would be unac-
and consumers, economic decisions are nec- ceptable in most areas of our lives.
essarily made in an informational vacuum. A
productive economy requires the use of infor- Our Freedoms Are Vulnerable
mation that is dispersed throughout the popu-
lation, and that information cannot be used Freedoms are seldom taken away all at
without individual freedom. Destroy freedom once. They are typically lost a little at a time,
and you destroy the information flows that are with people seldom noticing the loss. Even
the essence of market economies. when freedom is reduced directly, as when
government imposes occupational licensing
Freedom Requires Markets in the name of protecting consumers, few
people notice, and even if they do, they don’t
The connection between freedom and mar- see the restrictions as affecting them. But as
kets also runs the other way. Just as the market the great Austrian economist F. A. Hayek
depends on freedom, so freedom depends on pointed out, “The benefits I derive from free-
the market. Certainly private property, which dom are . . . largely the result of the uses of
is fundamental to all market economies, pro- freedom by others.”? For example, those who
tects individual freedom. If the state owns all suffer the most when people lose their free-
of the auditoriums and printing presses, how dom to become barbers without having to
much freedom do you have to speak out pass state exams on the chemical composition
against government policy? If the state owns of hair are not aspiring barbers, but people
all the means of production, how much free- who need haircuts.
dom do you have to launch your own busi- Also, there is an insidious dynamic to the
ness? Start eliminating private property, and loss of freedom. Direct restrictions always
undermining the market that depends on it, reduce freedom by more than is apparent
and you start eliminating freedom. because every restriction imperceptibly
But the market also protects freedom by undermines the accountability of the market-
establishing the only setting in which it can be place that makes freedom possible.
tolerated. Freedom without responsibility is Thomas Jefferson was correct when he
mere license, indulgence, and privilege, and said, “Eternal vigilance is the price of liberty.”
will not long be tolerated. Real freedom, and People are more likely to exercise vigilance in
the only freedom that can survive, is exercised protection of their freedom when they under-
in ways accountable to the concerns of all. stand the inextricable connection between it
The only freedom that satisfies this require- and the market. OJ
ment is that which is subject to the discipline

you eliminate the accountability necessary for endowments and has an autocratic political regime, suppressing the
urvi freedoms of its subjects. But even in this case, the lack of freedom
freedom to s ve. . prevents the country from realizing the full benefit from its
For example, pollution problems result resources, and undermines the productivity necessary to expand, or
: : : even maintain, its wealth.
directly from not having markets in the use of 2. See F.A. Hayek, The Constitution of Liberty (Chicago: Uni-
the environment as a dump. If such markets versity of Chicago Press, 1960), p. 32.



===== PAGE 58 =====

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===== PAGE 59 =====

Economics on Trial by Mark Skousen

FREEMAN

Ideas On Libert
SePTEMBER 1998

A Golden Comeback,
Part 1

“A more timeless measure is needed; gold fits the bill perfectly.”
—MARK MOBIUS

hen speaking of the Midas metal, I'm respected as the last resort in times of crisis.

reminded of Mark Twain’s refrain, Asia's history is strewn with fallen currencies.
“The reports of my death are greatly exagger- ... The beauty of gold is that it limits a coun-
ated.” After years of central-bank selling and try’s ability to spend to the amount it can earn
a bear market in precious metals, the Finan- in addition to its gold holdings.”
cial Times recently declared the “Death of
Gold.” But is it dead? .

Following the Asian financial crisis last Not Just Another Commodity
year, Mark Mobius, the famed Templeton Recent studies give support to Mobius’s
manager of emerging markets, advocated the new monetary proposal. According to these
creation of a new regional currency, the asian, studies, gold has three unique features: First,
convertible to gold, including the issuance of gold provides a stable numeraire for the
Asian gold coins. “All their M1 money supply world’s monetary system, one that closely
and foreign reserves would be converted into matches the “monetarist rule.” Second, gold
asians at the current price of gold. Henceforth has had an amazing capacity to maintain its
asians would be issued only upon deposits of purchasing power throughout history, what
gold or foreign-currency equivalents of the late Roy Jastram called “The Golden Con-
gold.”’! Mobius castigated the central banks of stant.” And, third, the yellow metal has a curi-
Southeast Asia for recklessly depreciating ous ability to predict future inflation and
their currencies. As a result, “many business- interest rates.
es and banks throughout the region have Let’s start with gold as a stable monetary
become bankrupt, billions of dollars have system. With most commodities, such as
been lost, and economic development has wheat or oil, the “carryover” stocks vary sig-
been threatened.” Why gold? “Because gold nificantly with annual production. Not so with
has always been a store of value in Asia and is gold. Historical data confirm that the aggre-
gate gold stockpile held by individuals and

Dr. Skousen (mskousen@aol.com) is an economist at central banks always increases and never
Rollins College, Department of Economics, Winter  declines.2 Moreover, the annual increase in
Park, Florida 32789, a Forbes columnist, and editor : :
of Forecasts & Strategies. He is also the author of the world gold stock aypieally varies between
Economics on Trial (Irwin, 1993), a review of the top -J an percent, and se . om excee S J per
ten textbooks in economics. Visit his new Web page: ~ cent. In short, the gradual increase in the stock
www. mskousen.com. of gold closely resembles the “monetary rule”

567


===== PAGE 60 =====

568 THE FREEMAN e SEPTEMBER 1998

cherished by Milton Friedman and the mone- tion can’t keep up with economic growth. In
tarists, where the money stock rises at a steady other words, gold is too much of a hard cur-

rate (see Chart I). rency. As noted, the world gold stock rises at a
Chart I miserly annual growth rate of

The World Stock of Gold and the Share less than 3 percent and often-

Held by Central Banks, 1913-96 times under 2 percent, while

140000 —70% GDP growth usually exceeds 3

or 4 percent and sometimes 7
] or 8 percent in developing
: ; deflation is inevitable under a

80000 [RORY i OF LTT OO TOTO PPPS 40
: pure gold standard. My
&0000- well ee iil Cherie reenter cata nenre aie ae ss ahaa macaressssaiies bec WAG Lamessiioas wos 130 response: Critics are right that
40000 rere oe i SU }20  gold-supply growth is not like-
% held ] ly to keep up with real GDP
20000 + reser ce in central banks ...._230 . . i
(right scale) growth. Only during major
ol ac 1 dg gold discoveries, such as in
1910 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 2000 California and Australia in the
Source: H.C. Wainwright & Co. 1850s or South Africa in the

1890s, did world gold supplies
Compare the stability of the gold supply grow faster than 4 percent a year.3
with the annual changes in the paper money
supply held by central banks. As Chart II indi- Prices Must Be Flexible
cates, the G-7 money-supply index rose as
much as 17 percent in the early 1970s and as Consequently, an economy working under a
little as 3 percent in the 1990s. (Why has pure gold standard will suffer gradual defla-
monetary growth slowed, even under a fiat tion; the price level will probably decline 1 to
money standard? The financial markets, espe- 3 percent a year, depending on gold produc-
cially the bondholders, have demanded fiscal tion and economic growth. But price deflation
restraint of their governments.) Moreover, the isn’t such a bad thing as long as it is gradual
central banks’ monetary policies were far and not excessive. There have been periods of
more volatile than the gold supply. On a strong economic growth accompanying a
worldwide basis, gold proved to be more general price deflation, such as the 1890s,
stable and less inflationary than a fiat money 1920s, and 1950s. But price and wage flexi-
system. bility is essential to make it work.
Critics agree that gold is inherently a “hard” Next month: Update on Jastram’s study The
currency, but complain that new gold produc- Golden Constant, and gold’s amazing ability

Chart II to maintain its purchasing
power over the past 400
- t0- Monthly Data 1131472 - 2/28/98
G-7 Money Supply Index (Year-to-Year Change) years. ]
17 G-7: U.S. Japan, Germany, UK. | 1»

France, Canada, Italy 16 - - -

i 1s 1 Mark Mobius, “Asia Needs a Single Cur-

rency,” Wall Street Journal, February 19,
2 | 1998, p. A22.

vor = 5.95% | 2. See the chart on page 84 of my Econom-

o | ics of a Pure Gold Standard, 3rd ed.

t | (1997), available from FEE. Note how the

world monetary stock of gold never has

[]
s Annual changes in the world gold stock : declined between 1810 and 1933.
4 aR cr RRP ¥, M..' V-4 1 ——— 4 3. Ibid, p- 86.

[" T ym T™ ML Aba I HAMAS LARA MAM ] TTT I ad Med Md | T LARA} [ [iba]

1972 1976 1980 1984 1988 4 992 1996

Courtesy: Dick Davis Digest


===== PAGE 61 =====

Immigration and Freedom

Please join us for our eighth annual seminar
featuring

Donald Boudreaux and Gregory Rehmke

November 14, 1998 4 Wilsonville, Oregon

Donald Boudreaux, president of the Foundation for Economic
Education, earned an M.A. in economics from New York
University, a Ph.D. in economics from Auburn University, and a
J.D. from the University of Virginia School of Law. He has
taught at George Mason University and Clemson University.
Don’s writings have appeared in the Cato Journal, The
Independent Review, The Freeman, the Wall Street Journal,
Reason, and The Free Market. He is an enthusiastic and
knowledgeable speaker with a passion for freedom.

Don Boudreaux
Irvington-on-Hudson, NY

Gregory Rehmke is the Director of Educational Programs for the
Free Enterprise Institute, Houston, Texas. He previously held
positions with The Reason Foundation, The Foundation for
Economic Education, and The Institute for Humane Studies. His
writings have been published in such journals as The Freeman,
PERC Reports, Econ Update, and in several books including The
Case for Free Trade and Open Immigration. Greg is a frequent
speaker and brings a fresh, Northwest perspective to the freedom
movement.

Greg Rehmke
Seattle, WA

tugents: may apply for:irec: admittance;

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===== PAGE 62 =====

570

boards or required curriculum; no degrees
BOOKS were given. They were simply places where
those with knowledge could sell it to those
who desired it. Lane writes, “Men who knew
(or thought they knew) something, and want-
ed to teach it, opened a school to sell their

knowledge. Success depended upon the

Islam and the Discovery of Freedom
by Rose Wilder Lane with introduction

and commentary by demand for the knowledge they had.” She
Imad-ad-Dean Ahmad contrasts the Islamic approach to education
Amana Publications ® 1997 ® 86 pages with the European, writing disparagingly of
® $5.95 paperback the “European belief that minds acquire

- knowledge, not by actively seeking to know,
Reviewed by George C. Leef but by passively being taught whatever

Authority decides that they should know.” If
ention “Islam” to most Americans and you have ever wondered what a true free mar-
they think of Saddam Hussein or the ket in education would be like, this book pro-

Ayatollah Khomeini. It is popularly linked to vides some clues.
violence and terrorism, which is unfortunate. Free of the authoritarianism that prevailed
Far from being synonymous with intolerance in Europe’s Dark Ages, Muslims advanced
and bloodshed, Islam has a history of peace the sciences and applied new technologies.
and respect for individual rights. One famous They developed the vital mathematical con-
exponent of freedom who knew that was Rose cepts of zero and spherical trigonometry, and
Wilder Lane. put them to work in architecture and naviga-
Her original book, The Discovery of Free- tion. While Europeans were blaming disease
dom, contains an abundance of information on demons, the Muslims of the tenth century,
on the golden era of Islamic civilization, par- notes Lane, “were using the entire American
ticularly the role that free markets played in medical pharmacopeia of today.” Ahmad doc-
that remarkably progressive and virtually uments the fact that ninth-century Baghdad
stateless society. Imad-ad-Dean Ahmad, pres- had 60 drugstores. No Food and Drug
ident of the Minaret of Freedom Institute, an Administration stood in the way of medical
Islamic free-market think tank, has in Islam progress. Surgeons unlicensed by any gov-
and the Discovery of Freedom taken Rose ernment performed effective operations with
Wilder Lane’s original text and added scholar- local anesthesia.
ly commentary. One point of disagreement between Lane
For the most part, he documents points she and Ahmad is over the existence of Islamic
makes, but occasionally corrects her writing. law. Lane writes that “the weakness that even-
By placing his commentary in footnotes, tually ended the Saracens’ civilization” was
Ahmad is able to strengthen Lane’s argument that “there was no civil law.” She continues
that Islamic civilization flourished because of that “The only safeguards of property seem to
its emphasis on freedom and the rights of the have been possession of the property, individ-
individual without detracting from her beauti- ual honesty, and public opinion.” Ahmad dis-
ful writing style. agrees, arguing that there was an elaborate
In an era in which many people expect gov- civil jurisprudence and that one of the few
ernment to do everything from caring for tod- things the government did was to enforce
dlers to building highways, it is astounding to property rights. He blames the eventual
learn how little government did in the ancient decline of Islamic civilization on the stagna-
Islamic world. Schools, hospitals, and even tion of the law.
roads were built by private foundations. Lane also argues that the West was exposed
Islamic universities were especially inter- to the ideas of liberty that would in time lead
esting. They were not established or funded to its ascendancy through contacts with Mus-
by the state; there were no accreditation lim traders and scholars. She notes that Span-


===== PAGE 63 =====

BOOKS 571

ish Catholics, while welcoming the Catholic willing to save and thereby free resources for
kings of the reconquista, nonetheless would investment projects. Firms put more resources
not give up the liberty they had enjoyed under into interest-sensitive projects that will take
Islamic rule (which was tolerant of religious relatively long times to ripen into consumer
differences). They demanded and got docu- goods and services. Actually, investable
ments guaranteeing their freedoms. Ahmad resources have not become more abundant
adds that Magna Carta, to which Westerners through voluntary saving. Competition for
trace the beginnings of the idea of limited resources grows more intense among long-
government, resulted from pressure by Eng- term and short-term capital-goods industries
lish nobles who had returned from the Cru- and consumer-goods industries. This becomes
sades, where they had learned that the Muslim especially true as workers employed on the
leader Saladin was bound by the law the same artificially stimulated long-term projects try

as any other citizen. to spend their increased incomes on current
This book is not, however, a “warts and all” consumption.
portrait of Islam, which was quite indifferent Sooner or later, however, the falsified

to the enslavement of Africans and Europeans appearances must bow to reality. Shortages or
and placed non-Muslims on a lower legal increased prices of resources necessary for
plane. For discussion of the dark side of this completing the capital-construction projects
civilization, one must look elsewhere. force abandoning some of them, at least par-

Still, this is a highly readable, well-produced tially wasting the resources they embody. A
book that has much to say to Muslims and tightening of money and credit may play a
non-Muslims alike. It should awaken the part in this return to reality, for continuing to
world’s Muslims to the great principles of expand them would threaten unlimited infla-
freedom that are a vital part of their heritage tion. Cutbacks in long-term investment mean
and from which their modern leaders have laying off workers and canceling some orders
strayed. For non-Muslims, it is a reminder of for machines and materials and some rentals
the universal value of liberty and markets of land and buildings. The downturn is under
unfettered by government meddling. When way.

human minds and energies are free, people Sophisticated Austrians do not claim that
will prosper and progress. That is the message this scenario accounts for all recessions and
of this intriguing book. [0 depressions, but it is the one most often recit-

George Leef, president of Patrick Henry Associates ed in Austrian circles. Though conceivable as
in Michigan, is book review editor of The Freeman. ~~ @ scenario, as a general theory it has long
seemed implausible to me—incomplete yet
unduly specific. However, it suits the Austri-
Risk and Business Cycles: New and Old ans’ methodological and ideological predilec-
Austrian Perspectives tions. The Austrians cite observed facts that
are compatible with their account; but practi-

by Tyler Cowen cally never, to my knowledge, do they present
Routledge ® 1997 ® viii + 173 pages ¢ $75.00 evidence that favorably discriminates between
it and rival theories. (I find the “monetary-
disequilibrium” or “monetarist” theory in bet-
ter accord with standard economic theory and
he Austrian theory of the business cycle with statistical and historical evidence from
describes how expansion of money and many times and places.) The Austrian school
credit can cause recession or depression. Per- has much of value to teach the world, but its
haps under political pressure to cut interest favorite emphasis in business-cycle theory is
rates, the monetary authorities expand bank an embarrassment that it would well be rid of.
reserves. Business firms find credit cheaper Tyler Cowen now joins the attack on this
and more abundant. These signals suggest, “old Austrian perspective,” as he calls it. He
incorrectly, that people have become more finds it strange that business investors, despite

Reviewed by Leland B. Yeager



===== PAGE 64 =====

572 THE FREEMAN e SEPTEMBER 1998

weeding-out and discipline by profit and loss, One style of argument, for which it would
should repeatedly be fooled by artificially and be convenient to have an agreed name, over-
unsustainably low interest rates. His long list whelms the reader with miscellaneous dates,
of further reasons why the Austrian theory is figures, historical details, names, and even
implausible—his protracted flogging of a personality sketches, as if in hopes that the
dead horse—becomes tedious. reader will be so impressed with the author’s
Cowen offers his own “new perspective,” erudition as not to notice that all this material
his “risk-based” theory, as a modification of fails to make a coherent argument about the
the one he rejects. Whereas the Austrian theo- points at issue. Cowen employs a variant of
ry requires “volatile inflation” rather than this style: he spews forth, almost as if at ran-
steady inflation, volatile inflation under his dom, numerous theoretical terms and con-
theory “produces an immediate contraction cepts and numerous summaries of other
and downturn, rather than an expansion of authors’ articles. Occasionally economists try
malinvestment.” (By “inflation,” Cowen usu- to make a splash in their own field by import-
ally seems to mean money-supply expansion ing concepts and techniques from philosophy
rather than price inflation.) His theory “is not or engineering or whatever. Cowen, with one
committed to pinpointing the nature of expec- foot still in the Austrian school that nurtured
tational errors from inflation, as does [sic] the him, writes as if—I say no more than “as
traditional Austrian theory.” It does not if” —attempting a similar splash by importing
require that a bust always follow an inflation- sophisticated terminology (more so than sub-
ary boom. “Either increases or decreases in stance) from advanced economics and econo-
long-term investment may set off downturns.” metrics. He does not adequately test his theo-
It does not rely on specific types of misper- ry against its rivals; the many potted sum-
ception, forecast error, or malinvestment; it maries of econometric studies in his
can accommodate a variety of them. concluding chapter do not serve that purpose.
It is pointless to go on trying to summarize He himself concludes by claiming no more
Cowen’s theory. Although it does invoke a than that his risk-based approach is compati-
tradeoff between risk and expected yield on ble with microeconomic theory and with
investments, it is not really a theory. It is a far- some observed facts and can provide a basis
rago of disorganized lists of how risk, invest- for future research.
ments of various kinds, sectoral shifts, various Who might appreciate this book? Not the
misperceptions and errors, and monetary general reader who might be sympathetic to
volatility might somehow affect business con- libertarian political philosophy and have an
ditions. Cowen repeatedly speaks of what amateur interest in economics, for too many
“may” happen and occasionally of what “may inadequately explained technicalities will
or may not” happen. repel him. Not the mainstream economist
All this is vague and iffy. To add complexi- who likes to think of himself as working at
ty—to multiply the factors taken into the “frontier” of research, for he will find no
account—is no virtue in its own right. On the contribution to the technical topics so blithe-
contrary, a good theory penetrates beyond ly mentioned, and Cowen’s lack of rigor will
fringe complications to emphasize decisive irritate him. (I reject knee-jerk demands for
circumstances and relations. It reveals signifi- “rigor” and “explicit models”; but Cowen’s
cant uniformities amidst apparent diversities. loose style will arouse sympathy for such
The old Austrian account, though wrong as a demands.) Nor will Cowen find much reso-
general theory of cycles, arguably at least nance among economists of the Austrian
helps focus thinking and research on its sub- school, for his tacit parade of superiority
ject matter. Cowen’s new theory does not rise  rankles. []
even to that level; to borrow a phrase from the Leland B. Yeager is Ludwig von Mises Distin-

physicist Wolfgang Pauli, it is “not even guished Professor Emeritus of Economics at Auburn
wrong.” University.



===== PAGE 65 =====

BOOKS 573

“international corporate income tax.” Other

Global Taxes for World Government proposals include a tax on fossil fuels and air

by Cliff Kincaid travel, or simply a percentage of each coun-

Huntington House Publishers ® 1997 ® 200 pages try’s military budget.

® $14.95 The promoters of a global tax are a diverse
, lot. Kincaid identifies various notable individu-

Reviewed by Laurence M. Vance als, including international financier George

Soros, Boutros-Ghali, former Soviet dictator
any Americans have at least some Mikhail Gorbachev, the late French president
knowledge about the Stamp Act of Frangois Mitterrand, economist and 1981

1765, so instrumental in setting the stage for Nobel laureate James Tobin, and an assortment
the American Revolution. But who among us of current and former American bureaucrats.
has ever heard of former United Nations Several prominent environmental groups and
Secretary-General Boutros Boutros-Ghali’s left-wing U.S. foundations are also singled out.
proposal for a “stamp tax on international Kincaid explains that the purposes of glob-
travel and travel documents”? al taxes are often hidden under nice-sounding
Global Taxes for World Government, by phrases like “protecting the environment,”
journalist Cliff Kincaid, is a fully document- “peacekeeping,” and “family planning.” But as
ed, penetrating look at the U.N.’s quest to fur- he shows throughout the book, “protecting the
ther drain the wealth of the United States to environment” means the end of free-market
finance a nameless, faceless international capitalism, “peacekeeping” means war, and
bureaucracy. A sequel to his earlier book, “family planning” means forced abortions.
Global Bondage, this one focuses exclusively The most frightening aspect of the growing
on the plans of the U.N. and its sympathizers power of the U.N. is in the judicial realm. Kin-
to raise even more money to feed its already caid reveals the drive to establish an interna-
bloated bureaucracy (Boutros-Ghali himself tional justice system to prosecute “hate
took in over $300,000 in 1996) and further its crimes” and “crimes against humanity,” and
agenda of international socialism. argues that the ongoing debacle in Yugoslavia
Taxes are the food that every leviathan state is a test case.
consumes to stay in existence. Thus, just as in Besides exposing the U.N. for the radical
days of old, when “there went out a decree organization that it is, those who on principle
from Caesar Augustus, that all the world oppose the twin evils of foreign aid and for-
should be taxed,” it is only natural that a body eign interventionism will be pleased to find
like the U.N. would now seek a global tax. But that Kincaid likewise skewers the World
what chance is there of that tax actually being Bank, the World Trade Organization, the
implemented? How could the U.S. Congress International Monetary Fund, the World
ever consent to such a thing? The same ques- Council of Churches, and central banks,
tions were once asked about a federal income including the Federal Reserve.
tax until it was enacted in 1913. The deficiency of Global Taxes for World
Kincaid not only documents the various Government is the author’s lack of under-
plans for a global tax, but also the promoters standing of the case for free trade. Kincaid
and the purpose of the tax. While doing so, he seems to equate free trade with the current
exposes both the dearth of coverage of these U.S. policy of managed trade. He laments
issues by the mainstream media and the trade deficits, dumping, unfair competition,
increasing glorification of the UN. in the pub- corporate downsizing, and “foreign regimes
lic schools. that exploited our market.” But Kincaid’s eco-
Rather than send a bill to every citizen of nomic ignorance does not detract from an oth-
each country, various schemes have been erwise informative and important book on a
devised to implement a global tax. Kincaid subject likely to be ignored by many. Cl
mentions a tax on “speculative international once Vance is an instructor at Pensacola Bible
movements of foreign exchange goods” and Institute and a freelance writer living in Pensacola,
“international currency transactions,” or an Florida.



===== PAGE 66 =====

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===== PAGE 67 =====

The Pursuit of Happiness by Sigfredo A. Cabrera

¥ Government

Plenty of Room at the Inn

rench immigrants Claude and Micheline After 12 years of working long hours and
Lambert are asking some tough questions moonlighting as a French teacher, he was able
these days, and they need to be answered— to buy the 58-room Cornell, located at 715
real soon. To paraphrase: Bush Street. Over the next few years, Mr. and
What can be said of individual and eco- Mrs. Lambert reinvested over $1 million to
nomic liberty in a country where government renovate and transform the deteriorated, six-
has the power to impose extreme burdens ona story Victorian building into a charmingly
single group of people in the name of the decorated inn. The local Club Lafayette
“public good”? How free is American “free described the Comell as “epitomizing the
enterprise” when government officials deter- finest of those little gems a traveler discovers
mine the “customers” to whom businesses in France.” Business and political writer Eliz-
shall offer goods and services? How does free abeth Larson wrote that “Their efforts have
enterprise flourish in the “land of the free” won accolades from fellow immigrants and
when success is held hostage by government French visitors alike. . . . French businessmen
edicts that punish people for their hard work? and exchange students have flocked to the
On what authority does government stand Cornell as their home away from home during
when it turns our “American dream” into a long business trips to the Bay Area or semes-
nightmare? ters at Berkeley attending the University of
The Lamberts’ questions are not without California.” The Cornell’s accommodations
context. The city of San Francisco is holding include a quaint French restaurant in the base-
31 of the rooms of their hotel “hostage” in the ment, called Jeanne D’Arc. The Lamberts and
name of the homeless until the small-business their daughter Sabine, who helps run the
owners pay it over a half-million dollars in hotel, are proud of their accomplishments. For

ransom to free up the units for tourist use. helping to improve the neighborhood, “we
should have a medal,” said Mr. Lambert.
An “American Dream” Story The Lamberts’ bureaucratic nightmare

began on September 23, 1979. Under San
Gone Sour Francisco’s Hotel Conversion Ordinance, any
The Lamberts came to the United States 30 hotel room which, on that day, had been occu-
years ago and are now owners of a small pied by the same guests for at least 32 days
tourist hotel in San Francisco. Mr. Lambert was designated “residential,” while all others
began working at the Cornell Hotel in 1966 as were designated “tourist units.” Since 31 of
a janitor in exchange for room and board. the Cornell’s 58 rooms were being rented
to long-term business clients and exchange

Sigfredo Cabrera is the director of communications for students on that fateful day, the Cornell was
Pacific Legal Foundation in Sacramento, California. ~~ officially classified by the city as a “mixed

575


===== PAGE 68 =====

576 THE FREEMAN e SEPTEMBER 1998

use” hotel subject to the hotel ordinance. conversion ordinance is being used as a ruse |
Unlike many small San Francisco hotels, for generating income. “One of the most para-
the Cornell was never in the business of pro- mount public policies in this city is preserva-
viding low-income housing for the city’s indi- tion of the housing stock,” insists Deputy City
gent residents. But that didn’t matter to the Attorney Andrew Schwartz, who also says it
local housing bureaucrats. For the Lamberts, is “inconceivable” the city would deny the
the law dictated that only 27 of their rooms Lamberts a permit because they wouldn’t pay
were available for tourist use. Even worse, the the ransom.
residential units had to be rented out at regu- But assume, for the sake of argument only,
lated, below-market rents. In response, the that the city was genuinely sincere and truly
Lamberts closed up many of those rooms, wanted to use the private property of others as
since it was cheaper to keep them vacant than a convenient depository for the city’s home-
to clean and maintain them without being able less—does that make it right? Is it fair that a
to charge the market price. law should place the financial burden of hous-
The Lamberts applied for a conditional-use ing the indigent on the backs of an industrious
permit to convert the 31 residential units to family, and others similarly situated, whose
tourist use, giving them the freedom to rent to property can be easily seized and converted to
whomever they wish. However, that would public use? Such a law is a clear violation of
entail the “destruction” of low-income hous- the U.S. Constitutions Fifth Amendment,
ing under the city ordinance. “The city’s hous- which says government shall not take private
ing stock must be preserved,” cried the city property for public use without paying “just
Planning Commission, which rejected the compensation” to the property owner. The
Lamberts’ application to reclassify all the underlying purpose of this takings clause is to
Cornell’s rooms for tourist use. To free up deter government from enacting laws that
their rooms, the Lamberts would have to pay especially burden private-property owners.
a ransom of about $600,000, the city’s esti- Commenting on the Pacific Legal Founda-
mate for building replacement housing. To get  tion’s defense of the Lamberts, Schwartz told
the bureaucrats off their backs and get on with a legal reporter that PLF “believes that prop-
their lives, the Lamberts offered the city erty rights should be elevated to a fundamen-
$100,000, but that was rejected. tal right, and there is no basis for that in our
Jurisprudence” (emphasis added). That state-
ment is directly contrary to the U.S. Supreme
Court’s determination, in Dolan v. City of
What makes this case most outrageous is Tigard, that property rights are as important a
that the hotel-conversion ordinance is nothing part of the Bill of Rights as freedom of speech
more than a subterfuge for generating rev- and religion or the protection against unrea-
enue. Despite the city’s mantra about the need sonable searches and seizures: “We see no
to save the housing stock, local officials have reason why the Takings Clause of the Fifth
done nothing to fill over 5,000 rooms that Amendment, as much a part of the Bill of
remain vacant in the many small hotels sub- Rights as the First Amendment or Fourth
ject to this confiscatory ordinance. “In Amendment, should be relegated to the status
essence, the city is telling these property own- of a poor relation,” Chief Justice William
ers ‘keep your rooms empty, or pay us Rehnquist wrote.
money,” said Pacific Legal Foundation attor- By saying “our jurisprudence,” Deputy
ney R.S. Radford, who is representing the City Attorney Schwartz has made it clear
Lamberts. So far, a trial court and a court of there is no vacancy for private-property rights
appeal have rejected their challenge, but the in San Francisco and that other business and
California Supreme Court has offered a glim- property owners in the city are fair game for
mer of hope by deciding to hear their appeal. this type of abuse. Let's hope the Lamberts
Of course, the city denies that the hotel- prove him wrong. []

Victims of Subterfuge