the tyranny of regulations licensure and permits
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ESSAYS ON
The Tyranny of Regulations, Licensure and Permits
It’s Way Past Time to Restore the Liberty of the Individual!
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Perfectly Free and Unfettered by “The State”
“No cause . . . has perhaps more promoted in every respect the general prosperity of the United States than the absence of those systems of internal restrictions and monopoly which continue to disfigure the state of society in other countries. No law exists here directly or indirectly confining man to a particular occupation or place, or excluding any citizen from any branch he may at any time think proper to pursue. Industry is in every respect perfectly free and unfettered; every species of trade, commerce, art, profession, and manufacture being equally opened to all without requiring any previous regular apprenticeship, admission, [permit] or license.”
--Albert Gallatin Sec. of the Treasury under Thomas Jefferson, 1810
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Compiled by
Robert D. Gorgoglione Sr.
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Fascism’s Tyrannical Use of Licensure “To sustain its power and achieve its economic ends, fascism seeks to make its people economically and psychologically dependent on the government. [This] enhances the governments ... control over its' citizen's economic activities. Fascism also installs the mandatory government license as a central economic weapon, for compulsory government licensing of businesses allows the political hierarchy to control the nation's economy without the appearance of totalitarian coercion. Altruistically phrased, vague licensing standards such as the national or community interest, local needs, or the personal qualifications of the applicant preserve a facade of justice and due process to conceal unlimited governmental power. Exactly such elastic standards for government licenses prevailed in Nazi Germany.”
“ AMERICA’S FASCIST ECONOMY” Charlotte Twight
The Independent Institute
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Words of Wisdom from David O McKay Governments are the servants, not the masters of the people. All who love the Constitution of the United States can vow with Thomas Jefferson, who, when he was president, said,
I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.
He later said:
To preserve our independence, we must not let our rulers load us with perpetual debt. We must take our choice between economy and liberty, or profusion and servitude. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labors and in our amusements.
If we can prevent the government from wasting the labors of the people under pretense of caring for them, they will be happy. The same prudence which in private life would forbid our paying our money for unexplained projects, forbids it in the disposition of public money. We are endeavoring to reduce the government to the practice of rigid economy to avoid burdening the people and arming the magistrate with a patronage of money which might be used to corrupt the principles of our government. . . .
In conclusion, I repeat that no greater immediate responsibility rests upon members of the Church, upon all citizens of this Republic and of neighboring Republics than to protect the freedom vouchsafed by the Constitution of the United States.
Let us, by exercising our rights under the Constitution:
(1) Preserve our right to worship God according to the dictates of our conscience,
(2) Preserve the right to work when and where we choose. . . .
(3) Feel free to plan and to reap without the handicap of bureaucratic interference.
(4) Devote our time, means, and life if necessary, to hold inviolate those laws which will secure to each individual the free exercise of conscience, the right and control of property, and the protection of life.
“ Free Agency—A Divine Gift,” Improvement Era, May 1950
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DEDICATED TO
The Great Thomas Jefferson
For the following reasons:
Thomas Jefferson on Government
1. I have sworn upon the altar of God, eternal hostility to every form of tyranny over the mind of man!
2. The true foundation of Republican government is the equal right of every citizen, in his person and property, and in their management.
3. Still one thing more, fellow citizens – a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement: and shall not take from the mouth of labor the bread it has earned--this is the sum of good government.
4. Were we directed from Washington when to sow and when to reap, we should soon want bread.
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5. Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise. (Free enterprise competitive capitalism).
6. If we can prevent the government from wasting the labors of the people, under the pretense of caring for them, they will be happy.
7. Whensoever the General Government assumes un-delegated powers, its acts are un-authoritative, void, and of no force.
8. I consider the foundation of the [Federal] Constitution as laid on this ground: That "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [10th Amendment] To take a single step beyond the boundaries thus specifically drawn around the powers of Congress is to take possession of a boundless field of power, no longer susceptible of any definition.
On Religion:
1. Can the liberties of a nation be thought secure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are of the gift of God? That they are not to be violated, but with His wrath? 2. We hold these truths to be self evident, that all men are . . . endowed by their Creator, with certain unalienable Rights, that among these are Life, Liberty, [ property] and the pursuit of happiness. 3. Among the most inestimable of our blessings is that . . . of liberty to worship our Creator in the way we think most agreeable to his will; a liberty deemed in other countries incompatible with good government, and yet proved by our experience to be its best support. 4. In matters of religion, I have considered that its free exercise is placed by the Constitution independent of the powers of the government.
Now a final quote from the great Constitutionalist Thomas Jefferson:
An atheist . . . I can never be! _____________________________________________________________
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“ Upon the Alter of God”
THOMAS JEFFERSON
Champion and Defender of Individual Liberty And American Constitutional Government
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Acknowledgements
I would like to give recognition and thanks to the late Leonard Reed (1983), founder of the Foundation for Economic Education, the staff of The Freeman magazine, and of course the authors of these beautiful and inspired essays without which this book could never have been created or seen the light of day. I sincerely feel that it was with the guiding hand and inspiration of Divine Providence, that I was able to compile and organize these essays as they now appear in this book, “The Tyranny of Regulations, Licensure and Permits” It is my firm, but humble prayer, that these essays which may have been lost and forgotten in some old and dusty magazines, will inspire present and future generation with not only a burning love of Liberty in their hearts, but also a burning desire to defend the God inspired principles and precepts of Americanism and Constitutional government with “their lives, their fortunes and their sacred honor.” May we all seek out the guiding hand of Divine Providence in our righteous endeavors in the defense of American individual Liberty and Limited Constitutional Government. Robert D. Gorgoglione Sr. 3713 Deloy Dr., Apt 4, Idaho Falls Idaho, 83401 1-208-290-9022, [email protected] August 3, 2012 ________________________________________________
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INTRODUCTION The sanctity of private property is the most important bulwark of privacy. University of Chicago law professor Richard Epstein wrote that “private property gives the right to exclude others without the need for any justification. Indeed, it is the ability to act at will and without need for justification within some domain which is the essence of freedom, be it of speech or of property.”[
Without private property, there is no escape from [the power of the State]. Property rights are the border guards around an individual’s life that deter political invasions. Those who disparage [private] property often oppose any meaningful limits on government power. John Dewey, for instance, derided “the sanctity of private property” for providing “freedom from social [(government) control.”[3] Socialist regimes despise [private] property because it limits the power of the state to regiment the lives of the [individual and the] people. A 1975 study, The Soviet Image of Utopia, observed, “The closely knit communities of communism will be able to locate the anti-social individual without difficulty because he will not be able to ‘shut the door of his apartment’ [or home] and retreat to an area of his life that is ‘strictly private.’” [4] Hungarian economist Janos Kornai observed: “The further elimination of private ownership [of property] is taken, the more consistently can full subjection [of the individual] be imposed.”[
The property right that each citizen has in himself is the foundation of a free society. As James Madison observed, “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses.”[8] The property that each citizen has in his rights is the foundation of his ability to control his own life and strive to shape his own destiny.
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Contents
The Tyranny of Regulations, Licensure and Permits
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Prologue - It’s Time to End Occupational Licensure __21 Chapter 1 - “ The King is Dead”___________________25
Chapter 2 – Paving the Road to Serfdom__ ________31
The Beginnings of Motor Vehicle Licensing----------------------------33
The Fallacious Arguments for Driver’s Licenses-----------------------34
Licensing replaces the Common Law Right to Travel-----------------37
Chapter 3 - Does Occupational Licensure Protect Consumers?______________________ __41
How Licensing Limits Competition---------------------------------------42
The Effects of Licensing on Consumer Prices---------------------------43
The Effect of Licensing on the Quality of Services and Consumer Safety--------------------------------------------------------45
Licensing Boards Controlled by Professions They Regulate----------48
Regulations Serve the Interests of the Regulated by Reducing Potential Competition---------------------------------------48
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Chapter 4 – Scandals___________________ _____51
How Regulations Encourage Abuse and Corruption-------------------52
Chapter 5 - Government Licensing: The Enemy of Employment__________ _ _____57
“Are You Certified?”--------------------------------------------------------58
More Requirements Are Road Blocks to Certification-----------------59
Entrepreneurship, Not Bureaucracy is the Answer----------------------60
Chapter 6 - Unemployment Compensation____ ____63
Transfer Payments and “Legal Plunder”---------------------------------65
Unemployment Compensation Encourages Idleness-------------------67
Creating Employee Disincentives-----------------------------------------68
An Invitation to Deceit and Fraud-----------------------------------------70
Conclusion--------------------------------------------------------------------71
Chapter 7 - Let the People Own the Airwaves___ ___75
Freedom of the Press but No Freedom of Broadcasting----------------76
Four Reasons for Abolishing the FCC------------------------------------78
How the Licensing of the Press Came to an End------------------------78
Licensing of the Airways Leads to Censorship--------------------------80
FCC “Blue Book” and “Mayflower Decision” Leads to Censorship and Control of Programming ---------------------80
The “Communications Act” Forbade Censorship and Then Supplied the Means of Doing it-------------------------------81
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Increasing Regulation in the name of “The Public Good”----------------------------------------------------------82
Massive Propaganda Campaign for Regulating Television------------82
New Ideas and Innovations Thwarted In FCC Hearing Rooms-------83
Competition Improved BBC Programming------------------------------85
Government Control Equals Government Ownership------------------85
The Myth of the “Peoples Airwaves” and the “Sacred Public Trust”----------------------------------------------86
Competition Efficiently Allocates limited Resources ------------------87
Government Control of the Airways leads to Inefficiency and Monopoly ---------------------------------------------88
Chapter 8 - Psst! Wanna Buy a Bridge for Cash?_ _91
Act 389 is a Revenue Enhancement Scheme ----------------------------92
Act 389 A Demands Personal Proprietary Information ----------------92
Act 389 will force Some Businesses to Shut Down---------------------93
Chapter 9 - Engineering Regulation: The Return to Medievalism_____________ ____95
Licensing Demanded by the Occupations to by Regulated------------97
“The Greatest Harm is done By the Hack WITH a License”----------98
Coercive Licensing Restricts Entry into a Profession ------------------99
Licensing Encourages Favoritism, Fraud & Corruption--------------100
Regulatory Licensing Violates Human Rights (Liberty)-------------104
Alternatives to Licensing That Protect the Public---------------------105
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How Licensing Destroys a Professional’s Integrity-------------------106
Chapter 10 - The Economics of Smoking Bans_ ___111
Smoking Bans Can Hurt or Even Shut Down a Business------------113
Licensing: Method of Destroying Private Ownership----------------115
Chapter 11 - A Triumph for Bootstraps Capitalism_ 119
An Unlicensed Entrepreneur in Action---------------------------------120
Regulatory Prohibition Creates Unemployment and Poverty-------121
Court Decision Ends Barrier to Employment Opportunity----------122
The Ability of an Individual to Gain Control Over His Own Destiny----------------------------------------------------123
Chapter 12 - A Tale of Two Situations________ ___127
The Tyranny of the “Food Safety Inspection Service”----------------127
The Tyranny of 25 References, $10,000 and 6 Months---------------128
Chapter 13 - The Fraud of Seat-Belt Laws____ ____131
Death by Seat Belt and the Tyranny of “Prior Restraint”-------------133
“It’s for Your Safety” and the Road to Tyranny-----------------------134
Chapter 14 - "Affected with a Public Interest"__ __139
Tyranny in the Name of the “Public Interest”--------------------------140
Private Interests (Individual Liberty) Violated in the Name of the “Public Interests”------------------------------------141
Private and Public Interests Are Not Susceptible to Differentiation --------------------------------------------142
The True Meaning of “Public Interest”: Coercion Writ Large-------142
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Let Each Support His Own, Without Forcing Other ------------------143
Label a Business as “Public” and then Take Control------------------144
Tyranny in the Name of “Universality of Demand”-------------------146
A “Public Utility” is a Government Granted Monopoly--------------147
Chapter 15 - How Nineteenth-Century Americans Responded to Government Corruption_____ ___153
Creating Cartels Through Licensure and Regulation------------------155
Government Intervention Encourages Fraud, Corruption and Collusion-----------------------------------------157
Legislation to Forbid Merger of State and Corporate Power---------158
Chapter 16 – Property and Liberty__________ _____163
Private Property: The Bulwark of Privacy------------------------------164
Warrantless Searches and “no-knock raids” Violate the Privacy of Private Property---------------------------------166
Licensure Limits Choice of Occupation, Right of Contract and Competition--------------------------------------168
Private Property Ownership Gives the Individual the Ability to Resist Government Tyranny-----------------------------170
Chapter 17 - Liberty and Individual Responsibility __175
Competition Eliminates Scarcity; Creates Abundance----------------176
Social Order at the Sacrifice of Liberty---------------------------------177
The Rule of Private Property and Liberty for All----------------------178
Private Property Encourages Honesty and Accountability-----------179
The Need for Limited Government as a Referee ----------------------181
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The Need to Control Government---------------------------------------183
Constitutional Limits and the Limits of Constitutions----------------185
Individual Responsibility and Political Restraint----------------------186
Conclusion------------------------------------------------------------------188
Chapter 18 - Private Property and Government Under the Constitution_________________ ___193
The Economic Concept of Ownership----------------------------------195
The Common Law Boundaries of Private Property-------------------195
The English Whigs on Property and Government---------------------196
The Founders and Framers on Property and Government------------197
The Bill of Rights on Private Property----------------------------------201
Where Have All Our Property Rights Gone? -------------------------205
Chapter 19 - Individual Rights______________ ___211
The Nature of Government -----------------------------------------------212
Revolutionary Ideals of the Founders-----------------------------------213
Current Suppression of Rights -------------------------------------------216
Running up Against Everyday Controls --------------------------------217
Budgetary Tyranny of Government Spending -------------------------219
Democratic Despotism Violates the Rights of Individuals-----------221
All Other Rights Vanish in the Absence of Property Rights---------221
Property Rights Are Human Rights-------------------------------------223
For Sale: A Precious Birthright------------------------------------------224
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Chapter 20 - Individual Liberty and the Rule of Law 227
Definitions of Liberty and Law------------------------------------------228
Law and the Ambush of Liberty-----------------------------------------231
Liberty: Encouraged or Destroyed by Law-----------------------------238
The Value of Liberty and the Role of Law-----------------------------242
The Rule of Law-----------------------------------------------------------243
Epilogue - Obey the (Natural) Law________ _______247
APPENDIX 253 Industrial Revolution: Freeing the Market 254 The Proper Role of Government 268
Government Should Be Based Upon Sound Principles---------------268
The Correct Role of Government----------------------------------------269
The Most Important Function of Government------------------------- 270
The Real Meaning of the Separation of Church and State----------- 271
The Source of Governmental Power: “We the People”---------------271
Natural Rights are from God---------------------------------------------272
The Proper Function of Government -----------------------------------274
The Powers of a Proper and Just Government------------------------- 274
The Constitution and Self Government---------------------------------276
Local Government Essential to Liberty---------------------------------276
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Things the Government Should Not Do --------------------------------277
The Dividing Line Between Proper and Improper Government-----278
The Nature of “Legal Plunder”-------------------------------------------279
Government Cannot Create Wealth -------------------------------------279
The Basic Error of Marxian Socialism----------------------------------280
The Real Cause of American Prosperity--------------------------------281
A Formula for Prosperity: Limited Government and Free Enterprise------------------------------282
An Example of the Consequences of Disregarding These Principles----------------------------------------282
The Power of True Liberty from Improper Governmental Interference-----------------------------------283
But What About the Needy? ---------------------------------------------283
The Better Way ------------------------------------------------------------284
What Is Wrong With A “Little” Socialism? --------------------------284
Three Reasons Americans Need Not Fall For Socialist Deceptions --------------------------------------------284
How Can Present Socialistic Trends Be Reversed? ------------------284
Summary Thus Far--------------------------------------------------------285
Fifteen Principles Which Make For Good and Proper Government--------------------------------------286
All Right-Thinking Americans Should Now Take Their Stand-------------------------------------------290
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Government Enforced Monopolies
Another questionable but extremely common practice is to use the police power to give ourselves monopolistic protection against competitors. This would be called a criminal conspiracy and branded as extortion if forcibly engaged in without government protection and approval.
Today in the United States, monopoly protection is afforded by the police power in nearly every line of economic activity: in the professions and trades; in transportation and communication; in agriculture and labor; in finance, banking, and many other lines. How does this vast system of government enforced monopolies stand the conscience test and the application of the Golden Rule?
If we desire for ourselves the freedom to enter a trade or occupation when and where we choose, we should allow our fellow men this same right. If we believe we should be left free to purchase goods or services from any person who offers them for sale, how can we forcibly restrict the freedom of other members of the buying public and still live the Golden Rule?
-- H. VERLAN ANDERSON Many Are Called, But Few are Chosen
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PROLOGUE _____________________________________________________________
It’s Time to End Occupational Licensure
By Michael A. LaFerrara May 10, 2012
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A virulent epidemic is violating American’s rights and sapping the U.S. economy: occupational licensure.
The statistics are astounding. According to Forbes’ Suzanne Hoppough, from 1960 to 2007 the percentage of U.S. workers belonging to a licensed profession rose from 4.5 percent to 28 percent. In all, writes Hoppough, occupations requiring a government license in at least one state—including dentists, plumbers, hairdressers, secretaries, librarians, wallpaper hangers, and florists—rose from 80 in 1980 to 1100 by 2008.
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The economic cost is incalculable. Licensure restricts the supply of workers in the occupations affected, stifling innovation and entrepreneurship, suppressing competition, and driving up prices. And the violation of American’s rights to liberty and the pursuit of happiness are patent: We are forbidden to act or contract in accordance with our judgment, forbidden to pursue our happiness as we see fit, forbidden to earn a living in these areas unless we have permission, in the form of a license, from “The State”.
What drives the licensure epidemic? It is fueled, in large part, by the established members of the various occupations themselves, through myriad professional organizations such as the National Association of Mortgage Brokers, American Dental Association, and the Cleveland Bar Association. Writes Hoppough: “These modern-day guilds have replaced organized labor as the main vehicle for workers seeking to shield themselves from competition.” Institute for Justice President William Mellor observes that they are “monopolies created by the government.”
But by seeking government “protection,” the guilds have sold their souls to the devil. Statists are beginning to discover the extortive power that government licensure accords them, and they are using that power against those who have helped hand it to them.
Consider a few examples:
• A Florida legislator threatens a doctor with loss of his medical license for exercising his First Amendment rights.
• • A proposed Massachusetts law would force health care providers to
treat Medicare and Medicaid patients as a condition of their medical licenses.
• • Beginning next year, New York lawyers will be required to perform
fifty hours of free legal services as a condition of their law licenses.
Licensure is anti-freedom, anti-American, and pro-statism [Socialism]—it violates our rights, squelches our liberties, and throttles the economy in myriad ways—and it is high time for Americans to call for its abolition.
Without licensure laws, how would we know whether a person or company is of sufficient credibility, quality, or safety to do business
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with? By reference to the various companies and institutions that fill the vital demand for information about credibility, quality, and safety. Consumers want such information (hence the concern), so, in a free market, where people are free to act and to do business in accordance with their own judgment, profit-seeking businesses and nonprofit institutions arise to provide it. Indeed, such organizations already abound.
Consider, for instance, occupational accreditation that is voluntarily instituted in various professional and trade associations, such as the American Dental Association through its Commission on Dental Accreditation and the National Institute for Metalworking Skills. Consider also Zagat, which rates restaurants; Underwriters Laboratories (UL), which provides product safety testing for a wide range of industries; and the American National Standards Institute (ANSI), which provides a wide range of services including personnel certification and accreditation. [The same with those who graduate with doctorates and masters degrees etc. from colleges and universities.]
Subscribe to the “Journal for People of Reason”. If Americans want information about the credibility, quality, and safety of the people and organizations with whom they do business, they do not need to get such information from the government (nor can the government competently provide such information). Rather, they need freedom—and the goods and services that flow from self-interested people operating under the principle of supply and demand in the marketplace.
It is time for Americans to call for an end to occupational licensure and to demand, instead, that the government PROTECT and NOT VIOLATE our rights.
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“. . . You must have a permit.”
"Guilty," said the judge, and he fined Mr. and Mrs. Owner $20 plus $10 in court costs, but "That’s not all," said the judge—"You have illegally built your little tree house and therefore you are hereby ordered to tear it down. If you fail to do so you will be held in contempt of court, and yes, I will send you to jail. Don’t you know you can’t build anything without a government permit?" in the United States of America, the land of the free.
"No," said the judge, "you cannot keep the building inspector off your property." "Yes," said the judge, "it is your property—but you cannot keep the inspector away. Government has a right to inspect. You are wrong, you cannot build a house on your own property without a permit; and because you have continued to build your house in violation of the law, I sentence you to jail—to jail, Mr. Property Owner." And the king is dead.
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Chapter 1
"The King is Dead" By Leonard Franckowiak
October 1979
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Mr. Franckowiak was a businessman In Chicago. His business included a weekly radio program in behalf of freedom, entitled We Still Have 55 Per Cent (referring to the portion of personal earnings not taken by taxes). "The King Is Dead"is from the script of a recent broadcast.
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Jean and I and our two daughters, Cindy, age 9, and Gretchen, age 4, spent a delightful four days camping along the Illinois River.
It was a most peaceful and rewarding trip: no telephones, no television—just nature and family and our modern-day camper. And just as was predicted, after the hiking and the cook-outs and the marshmallows and a game or two of Old Maid or Mickey Mouse, Cindy and Gretchen were ready for bed, and Jean and I spent the late hours of the night in quiet enjoyment and reading. Well, without television, what can one do? Might as well read a book. Reading is a good habit to return to and, besides, who knows? We might even learn something! Anyway, Jean was reading a novel and I was reading Professor Ben Rogge’s new book, Can Capitalism Survive?—which brings me to the point of all this.
Cindy saw the book and said, "Daddy, what is ‘capitalism’ or whatever that word is?" And, well, I was called. (Don’t you see? Somebody—even though she’s nine years old—somebody wanted to know what capitalism is.) And I
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was thrilled to answer. Four hours later, with Cindy sound asleep, I was still talking about capitalism. Well, that’s not true either, but there I was, on the spot—my daughter wanted to know what capitalism is, and I had to come up with a simple answer which hopefully would make sense and satisfy her curiosity. What should I say? Finally: "Capitalism," I said, "is where you’re free to do anything you want as long as you don’t hurt anybody; you can do things without a license from government." Well, with a little discussion about drivers’ licenses and building permits, Cindy was satisfied, but by then I had been set to thinking.
I started thinking about all of the licenses and permits required by our government, and I came to a stark realization. "Why," I thought to myself, "the king is dead!" One by one I began to review those occupations which now require a government license: beauty operator, barber, doctor, lawyer. . . . The government is becoming the great Controller . . . plumber, real estate salesman, insurance broker, bus driver. . . . In the name of public good we all work or don’t work in our chosen professions at the convenience of “The State” . . . certified public accountants, engineers, architects, and taxicab drivers. . . . Why, “The State” has absolute control over our very means of livelihood . . . pharmacists, nurses, teachers. . . . We need permits to operate a bank, a liquor store, a restaurant or a grocery store. There isn’t a profession or business in America that isn’t under the control of government—not one place, in all of America, the land of the free. I even needed a permit to camp at Starved Rock. Capitalism, the king, is dead! I didn’t have the heart to tell my daughter Cindy.
My mind began to swirl. I called to mind the case of a man in Shelby, Michigan. He was going to build a new house for himself to replace his old broken-down shack. He was going to build a house, that is, until the county building inspector came along. You see, the owner hadn’t taken out a building permit to build his house.
"No," the inspector said, "there wasn’t anything wrong with the way the house was being built." The owner was doing good work and "yes, the new house would be a lot nicer for the neighborhood" and "yes, the owner was building the house on his own land," and "no, the neighbors were not complaining." As a matter of fact, the neighbors were helping.
Well, then, what was wrong, Mr. Inspector?
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"Well," said Mr. Inspector, "for one thing, you must have a set of stamped approved plans, and yes, by all means, you must have a permit. You can’t do any building without a permit."
And so the owner was hauled off to court.
"No," said the judge, "you cannot keep the building inspector off your property." "Yes," said the judge, "it is your property—but you cannot keep the inspector away. Government has a right to inspect. You are wrong, you cannot build a house on your own property without a permit; and because you have continued to build your house in violation of the law, I sentence you to jail—to jail, Mr. Property Owner." And the king is dead.
And so is the tree house in Hackensack, New Jersey. You see, some nice people there wanted to build a tree house in their backyard, and they know about permits. They know the law: You can’t do any building without a government permit—so they went to the building department for a permit.
But the inspector told them there was no tree house listed in the building code, so, no, they couldn’t get a permit. "If it ain’t listed in the code, you can’t build it."
But, my goodness, other people in town have tree houses; why can’t we? thought Mr. and Mrs. Owner. So they had carpenters build the little tree house. It cost $400.
"No," the inspector said, he didn’t think it was a safety hazard but "it’s not listed in the building code, and, well, the tree house was built without a permit."
"Guilty," said the judge, and he fined Mr. and Mrs. Owner $20 plus $10 in court costs, but "That’s not all," said the judge—"You have illegally built your little tree house and therefore you are hereby ordered to tear it down. If you fail to do so you will be held in contempt of court, and yes, I will send you to jail. Don’t you know you can’t build anything without a government permit?" in the United States of America, the land of the free.
And the roofers and the carpenters need licenses to operate and so do the truck drivers and the morticians. No, you can’t bury the dead without a license.
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What is capitalism, Cindy? Capitalism was a system, Cindy. It was a system practiced in a country called America—the sweet land of liberty; it was a system where every man, woman and child were free to follow their own special star; it was a system where people were free to do anything peaceful so long as they did no harm to their fellow man. Capitalism was a system which gave the people of our country the highest standard of living on earth and in the process allowed them to enjoy the blessings of liberty and the dignity of human existence, free from the intervention of “The State”.
Can you go work when you’re a teenager, Cindy? Well, I suppose so—if you get a work permit. Can we have a tree house in our backyard, Gretchen? Well, yes, we do have an OSHA-approved stepladder for you to use, and we could get a licensed contractor to build it for us, but you see, we need a government-issued building permit. What’s a permit, Daddy? Daddy, what is capitalism? The king is dead, and we still have 55 per cent.
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Privileges Replace Rights
Licensing replaces the common-law right of travel with a privilege that “The State” dispenses—and withdraws—at whim. It implies that we are silly children eager to drive without bothering to learn how; only the fatherly “State” saves us from automotive annihilation. That grants rulers enormous power over all our behavior, not just our driving.
Driving is merely another way to travel between Points A and B, as folks have for centuries. Philosophically, drivers should no more seek the state’s permission before hitting the road than did wagoners before shouting “Giddy-up!” Author Simson Garfinkel notes, “Our Founding Fathers never could have envisioned today’s driver’s license. It would have been inconceivable to [the] likes of Washington, Adams, and Jefferson that one day travel between a person’s home and work, or between nearby cities, in a carriage owned by that person, would be transformed from a right into a privilege to be granted and revoked at the pleasure of ‘The State’.”
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Chapter 2
Paving the Road to Serfdom By Becky Akers
November 2007
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Becky Akers is a freelance writer in New York City.
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It’s the stuff of nightmares and science fiction: a society so depersonalized and regimented that survival depends on producing the correct credentials. Sometimes it’s a fingerprint or other biometric; more often it’s a document. Without that totem there’s no trading, no traveling, no transaction of any kind. A demand for “Papers, please” pesters people at every turn, whether they’re buying a loaf of bread or enrolling a child in school. The citizen whose identification is lost, stolen, or—chillingly—revoked by the government becomes an instant pariah. He finds himself in a state of nature worse than any Hobbesian could imagine: not only is Everyman at war with him, but so is Everyman’s technology.
The United States took a giant leap toward this harsh horror with the REAL ID Act. Passed in 2005, due to take effect next year, REAL ID is “vital to preventing foreign terrorists from hiding in plain sight while conducting their operations and planning attacks.” Or so its sponsor, U.S. Rep. James Sensenbrenner (R-Wis.), wants us to believe. “By targeting terrorist travel, the Real ID will assist in our War on Terror efforts to disrupt terrorist operations and help secure our borders.” But REAL ID actually targets—and hits—American drivers. The bill standardizes licenses so that whether they’re issued in Alaska or Florida, they display the same data: name, date of birth, gender, a “digital photograph,” the holder’s signature, and home address (“permanent home address: no PO boxes; no exceptions,” as Bill Scannell of unrealid.com puts it—even for spouses fleeing abusive
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marriages and other vulnerable folks). It then forces each state to “provide electronic access to all other States to information contained in the motor vehicle database of the State.” Translation: REAL ID enables bureaucrats in California or Connecticut to learn anything and everything about someone in the Carolinas. It also puts that data at the feds’ fingertips, granting them and others unlimited access to information about us—and the unlimited power such knowledge brings.
Ominously, REAL ID also mandates that licenses include “a common machine-readable technology, with defined minimum data elements.” Who will “define” those “elements”? The Department of Homeland Security. Many experts think the department will require RFID (radio-frequency identification) chips as one “element.” Manufacturers and warehouses control inventory with RFID because it uniquely identifies each product and tracks its movement. Substitute “person” for “product,” and you’ll understand the state’s enthusiasm for this technology.
REAL ID puts your driver’s license on steroids, pumping it up to a national ID that must be flashed on authorities’ demand. Intriguingly, Americans who scarcely mutter when taxes chomp a third of their paycheck, who submit without fuss to pat-downs at airports, who trust government to school their children, are outraged at REAL ID. So are state legislatures, though a cynic might attribute that to fear that the feds will steal some of their power over us. As I write, two states have passed laws rejecting REAL ID and 28 are deliberating about doing so. As you read, more have probably joined the revolt.
Meanwhile, despite their fury over REAL ID, Americans continue to ignore the dragon’s teeth from which it sprouted: driver’s licenses. The state has so habituated us to these permits that virtually no one questions them. Even champions of limited government who protest at having to seek permission before selling a product or buying a gun seldom object to licensing drivers. Most people see it as not only a legitimate function of government but a desirable one. Shouldn’t the state protect us from the maniacs who would otherwise clog our roads?
But compelling citizens to ask permission before driving cars they’ve bought on roads they’ve paid for is lethal to liberty—and, often, to drivers. The state wants us to think its licensing protects us. Indeed, it would like us to commit the same error regarding its control of all things
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automotive, from road design and maintenance to enforcement of traffic laws to regulation of automobile design and manufacturing. But in all these areas, “The State” is a sponge, not a safety belt, sopping up all the money and power for miles. Protecting us is merely an excuse for controlling us. And, true to form, the authority that licensing handed “The State” spread like an oil slick. Having saturated our automotive lives, it’s now seeping into more and more crannies that have nothing to do with cars.
The Beginnings of Motor Vehicle Licensing
In the beginning states licensed anyone who paid a fee. They didn’t test competence, vision, or anything else. Many contented themselves for years with this pay-off; decades sometimes passed before they also forced drivers to satisfy a bureaucrat that they could see and decipher the government’s highway markings. Massachusetts and Missouri were both robbing drivers by 1903, but it wasn’t until 1920 that “Massachusetts. . . passed its first requirement for an examination of general operators” and “Missouri had no driver examination law until 1952,” according to Carl Watner at voluntaryist.com. Nor were Massachusetts and Missouri alone in picking drivers’ pockets. By 1909 “twelve states and the District of Columbia required all automobile drivers to obtain,” that is, buy, licenses. These permits generally listed only the operator’s “name, address, age, and the type of automobile he claimed to be competent to drive.” No demonstration of skills was required, and drivers usually ordered licenses through the mail.
And so taxpayers whose money had bought and paved the roads now paid the government yet again so that it would allow them to use those roads. Prior to licensing, this arrangement was known as “highway robbery.” Regardless, the driver’s competence—and the government’s as well—didn’t matter. In fact, the 12 states that extorted licensing fees from drivers in 1909 had issued “a combined total of 89,495 licenses . . . between January 1 and October 4[;] but only twelve applicants were rejected for incompetency or other reasons during this period—two in Rhode Island and ten in Vermont.” No wonder Watner emphasizes, “Our contemporary belief that drivers licenses were instituted to keep incompetent drivers off the road is a false one.”
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Given the loot lifted from drivers, you might expect the push for licensing to have originated with government. But the blame actually belongs to the American Automobile Association (AAA), those seemingly innocuous folks who rescue stranded motorists and rate motels. AAA’s website says the club was founded in 1902 by “1000 auto enthusiasts demanding a response to a lack of highways suitable for automobiles”—and we can all guess from whom they “demanded” this “response.” Wikipedia adds that these “enthusiasts” were “typically wealthy.” But their newfangled toy with its exhaust and loud engine irritated their neighbors, and they fought “widespread public disapproval of the automobile and its noise” at a time when there were roughly 17,000,000 horses versus 23,000 cars. How better to win this battle than to enlist the government’s power and prestige? A certificate testifying to the state’s approval should silence the spoilsports whose fastest stallions were eating the Model A’s dust.
Departments of motor vehicles (DMVs) have come a long way since then with their eye charts, driving exams, and surly clerks. DMVs fool Americans into equating licensed driving with safe driving. But there’s no proof behind that supposition because we don’t know how many motorists neglect to ask permission. This invalidates statistics on who causes accidents. The AAA warns in “Unlicensed to Kill”: “[The] methodology [of researchers who study licensing and safety] has limitations. . . . [I]t is hard to arrive at reliable findings for unlicensed drivers simply because so little is known about them.” Belief that licensing makes safer drivers is just that.
So who needs research? Intuition alone tells us that licensing contributes to safer roads, doesn’t it? Not necessarily. We won’t debate the relationship driver’s exams bear to the real world, nor whether an applicant is a better driver because he knows what behavior the law dictates when encountering a school bus on a divided highway or the exact moment at which headlights must legally shine. Even if the bureaucrats who devise these tests know what they’re doing, licensing has unintended—and dangerous—consequences like all government fiats.
The Fallacious Arguments for Driver’s Licenses
Unlicensed drivers who crash are likelier to run rather than stay to offer help or first-aid—or to receive it themselves: “Drivers with suspended, expired or revoked licenses may flee, rather than risk explaining to a police officer why
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they are driving,” says a report at deadlyroads.com. “This is especially true in California, where some estimate as many as 1 million unlicensed drivers occupy that states [sic] highways. Many drivers with no license are illegal immigrants, who risk deportment [sic] with any law enforcement contact.” Other places complain of the same hazard. Sylvia Lazon of the University of Missouri-Columbia School of Law claims that “The large number of immigrants driving without a license is creating a public health hazard. . . . In rural Missouri, there is no public transportatio n and driving is a necessity, with or without a license. . . . The unintended consequence is that these drivers create public health hazards.”
By law, unlicensed drivers cannot purchase insurance. Not only does that increase the pressure to flee an accident, but those who can’t or don’t flee are usually unable to pay for damages.
Government’s greatest talent lies in destroying life and property, judging by its thousands of years of warfare. Why then do we expect it to save lives and property on the highway? It’s no accident that driving has been considered inherently risky for as long as the state has monopolized the design of roadways and heavily regulated that of automobiles. Perhaps that’s because the incentives that prompt private entrepreneurs to produce safe products go missing from government: “Bureaucrats do not lose money when the death rate rises,” economist Walter Block notes in “Theories of Highway Safety.” “Nor is the road manager rewarded, as in private enterprise, if a decline in accidents occurs.” Those who design and maintain roads bear little responsibility for them; they duck behind sovereign-immunity laws when their lack of initiative and innovation kills us. We don’t know what free-market versions of roads and cars would look like, just as most Americans before the creation of UPS and Federal Express didn’t realize how slow the Post Office was at delivering mail. But it’s reasonable to suppose that if a completely free market prevailed in the automotive industry, we’d benefit from radical improvements.
For sure, no company could stay in business if its products were as lethal as the government’s roads. Annual “traffic deaths” in the United States have hovered at roughly 42,000 for the last decade—about 22 deaths out of every 100,000 users. (The number has very slightly declined since there are more licensed drivers now, from 23.21 deaths per 100,000 users in 1994 down to 21.54 per 100,000 in 2004, according to the “Fatality Analysis Reporting System Web-Based Encyclopedia” of the federal Department of
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Transportation.) That’s almost double the fatality rate of firearms. Many of these deaths occur when the victims are using cars and roads exactly as the government intends; they aren’t speeding nor have they bent an elbow except to turn the ignition key.
Yet despite years of tragically high fatalities, government constantly shifts the blame for its lethal roadways. Accidents are the driver’s fault, never the state’s for stupidly designing and poorly maintaining roads. Politicians reinforce this with incessant propaganda in favor of seat belts and against speeding, cell phones, and impaired driving. The advertising they buy with our taxes, the tickets and fines and prison sentences their enforcers dispense brainwash most victims into blaming themselves or their fellow drivers for mishaps. They sue each other, not “The State”, while those “at fault” pay fines to the very system that maimed them or killed the loved ones riding with them. Meanwhile, Americans continue forking over their funds and freedom to the DMV.
Those funds enormously enrich government, given the fees, taxes, and penalties it extracts in return for bestowing on us a privilege we already own as a right. Exactly how much is transferred from drivers to their masters can’t be determined. First, despite REAL ID’s zeal to consolidate information about us in a central database, government feels no compunction to return the courtesy: each state compiles its own records on what it charges drivers—and that varies in both amount and type from state to state. Secondly, reckoning the total by adding columns from the individual states is impossible because so many of the fees are obscured or never reported. Take just one category: traffic tickets. Municipalities often hide their income from this source lest their state demand a cut, so no one knows how much money tickets generate each year. The National Motorists Association estimates that state and local governments rake in between $3.75 and $7.5 billion annually—and that excludes parking tickets. Now add fees for car registration, driver’s licenses, license plates, and title certificates, as well as taxes on automotive sales, insurance, gasoline, and parking, to say nothing of parking meters and tolls. [What a racket!] (Newsday reports that New York City alone collected 126 million tolls solely for crossing to and from the island of Manhattan in 2006; these range from a couple of bucks for motorcycles to $36 or more for a truck with 5 axles.) Then there are the quirky taxes some localities impose, such as New York’s “vehicle use tax.” We owe much of this to licensing: decades ago, it became the wedge enabling the state to drive a huge financial stake through our cars.
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Licensing replaces the Common Law Right to Travel
But licensing’s biggest hit-and-run is philosophical. Licensing replaces the common-law right of travel with a privilege that “T he State” dispenses—and withdraws—at whim. It implies that we are silly children eager to drive without bothering to learn how; only the fatherly state saves us from automotive annihilation. That grants rulers enormous power over all our behavior, not just our driving.
Driving is merely another way to travel between Points A and B, as folks have for centuries. Philosophically, drivers should no more seek the state’s permission before hitting the road than did wagoners before shouting “Giddy-up!” Author Simson Garfinkel notes, “Our Founding Fathers never could have envisioned today’s driver’s license. It would have been inconceivable to [the] likes of Washington, Adams, and Jefferson that one day travel between a person’s home and work, or between nearby cities, in a carriage owned by that person, would be transformed from a right into a privilege to be granted and revoked at the pleasure of the state.”
Most states use the “privilege” of driving to control their residents, as parents do teens. Licenses can be revoked for a long list of infractions, many of which don’t pertain to driving . Minnesota will suspend a license for “providing false statements regarding insurance coverage” and “moving violations.” But it also takes it away for such disobedience as “truancy,” “underage consumption of alcohol” or even the “attempt to unlawfully purchase alcohol or tobacco,” “failure to pay child support,” and “out-of-state conviction.” Ohio is more draconian. It doles out “points” for all the usual “traffic offenses” and then some, but there are plenty of nondriving capers that will send you to your room—for keeps. Ohio repeals its permission to drive for “dropping out of high school, drug-related offenses, unsatisfied civil judgments, delinquent, unruly, or habitual drug user (juveniles), failure to appear in court on a bond, liquor law violations, medical condition that would impair your driving ability [and who decides that?], tagged as a ‘problem driver’ in the National Driver Registry, insurance noncompliance, unresolved out-of-state ticket, out-of-state alcohol- or drug-related offenses.” Cleveland, Columbus, and Coshocton may one day surpass New York as walkers’ cities.
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Ceding the state authority over our automotive lives has a final consequence, this one likely intended: the Associated Press reports that “Traffic stops are the most frequent way police interact with the public, accounting for 41 percent of all contacts. An estimated 17.8 million drivers were stopped in 2005.” The threat to freedom is so obvious that even a bureaucrat quoted by Carl Watner lamented it: “[T]he average adult American citizen [has] more direct dealings with government through licensing and regulation of the automobile than through any other single public activity. . . . [T]he incidence of arrest [for violation of motor vehicle laws] by armed police in the United States has undoubtedly reached the highest point for any civilization, democratic or totalitarian, in recorded history. While ours is assuredly a free society [this was written in 1968], it has nonetheless become commonplace for an American citizen to be arrested by an armed officer of the law. . . . One may well question whether the instincts of a free people will not one day be impaired by the habit of being arrested without protest.”
Liberty never grants the state a license to license. Why have we?
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Licensure Limits the Consumers “Freedom of Choice”
. . . the regulations enforced are more likely to serve the interests of those regulated—by increasing their income, by reducing their potential competition—and favor the interests of higher-income consumers over those to whom price and availability of a service may be more important than the formal education or skills of the service provider. The rationale for occupational licensing assumes that the interests of consumers can be generalized, when in fact different consumers value different things.
More importantly, this rationale assumes that government regulations function as they are intended. But research into the actual effects of licensing laws proves that by reducing the number of providers of a service and increasing the price of that service, they hurt most consumers more than they help them. Given this evidence, the best way to protect consumer health and safety would be to let them choose their own services in a free market.
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Chapter 3
Does Occupational Licensure Protect Consumers?
By John Hood
November 1992
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John Hood is research director of the John Locke Foundation in Raleigh, North Carolina, and a columnist for Spectator (N. C.) magazine
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It takes more to become an auctioneer in North Carolina than just experience, desire, and above-average verbal dexterity. It also requires a license from the North Carolina Auctioneer Licensing Board. Similarly, while a flashy television ad and a good reputation can give retailers of hearing aids a competitive edge in Missouri, they won’t sell a single device without first obtaining a license from the state’s board regulating hearing aid dealers.
While many Americans know that their doctors, lawyers, and other specialized professionals are closely regulated by state boards and commissions, most don’t know that barbers, plumbers, morticians, “cosmetic artists,” and a host of other occupations–1,000 at last count—are regulated, certified, or licensed by “The State”. What consumers don’t know is nevertheless supposed to help them. Advocates of government licensing and other occupational regulations contend that unless the state has a hand in guaranteeing quality, consumers will receive shoddy and overpriced
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services. And professional organizations frequently support government regulations on their members in order to “protect them from fraudulent and unscrupulous competitors” and to maintain the reputation of their profession.
In most cases, professions are licensed by state boards or commissions, established by legislatures, and staffed by gubernatorial or legislative appointment. These panels establish and monitor entrance requirements for new practitioners, handle consumer complaints, and undertake disciplinary actions against professionals who violate state regulations. The average number of occupational licensing and regulatory boards in a state is 17, but the number ranges from 29 in California to five or six in such states as Wyoming, where only professions like doctors, lawyers, and dentists are regulated.
But while the promise of occupational regulation is great, research shows that it is rarely fulfilled. In the United States, at least, these regulations typically raise the price of services without significantly raising service quality—and indeed, in many instances regulation appears to lower the quality of services consumers buy.
How Licensing Limits Competition
One of the most well-known effects of occupational licensing and regulation is reduced competition. The theory is that by excluding some providers of a service from the market, regulations reduce competition and form a kind of “cartel” in which service providers can afford to charge high prices without fear of losing customers. Potential competitors are excluded by state requirements regarding years of education, college degrees, apprenticeships, or licensing examinations. In some states, barbers or hair stylists must receive at least an associate (two year) college degree, despite the fact that even the trickiest tasks they perform—dealing with treatments or chemicals, for example—can be mastered through on-the-job training. Similarly, while everyone would like to visit the highest-skilled dentist (if it cost no more to do so), surveys of dental practice find that about 80 percent of the work performed by dentists are routine tasks that can be performed by a high-school graduate with only 20 months of post-secondary-school training.
Experience requirements seem particularly arbitrary, related less to minimum competency than to excluding people from the profession. Until
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recently, becoming a master plumber in Illinois took longer than becoming a Fellow of the American College of Surgeons. Similarly, an Oregon board regulating cosmetology raised the number of training hours required for entry from 1,500 to 2,500. According to Cato Institute author David Young, pressure for the change came not from disgruntled cosmetology consumers but from beauty schools that were able to charge more tuition and serve more consumers in school training salons. In addition, experience standards frequently govern not just how much experience a potential professional has but also where that experience is gained. In New York City, a “master plumber” must have 20 years of experience as a “journeyman” under a master plumber in New York City. Ten years of experience in Philadelphia or Akron do not count.
Some states require U.S. citizenship for licenses, which might make some sense for lawyers trained in French or Islamic law but not for other professions, including doctors, where knowledge of a particular culture is not needed or can be gained on the job. Other states impose residency requirements, with the same apparent irrelevancy to actual job performance.
Licensing examinations frequently reflect their true purpose of excluding competition more than their ostensible purpose of guaranteeing quality. A national exam for landscape architects, required in many states, was studied by consultants to the California Board of Landscape Architects in 1983. They found that fewer than half of exam questions had a direct relationship to public health or safety. On the portion involving history, 40 out of 45 questions were unrelated to the job. In another section, 32 of 98 questions were found to require more advanced knowledge than that normally considered “entry level”—in other words, they expected new landscape architects to mirror experienced architects in knowledge. These kinds of barriers to entry seem to be designed not so much to aid consumers as to aid those already in the professions regulated. After all, if new entrants to their professions are few, established professionals have less competition and thus can afford to charge higher prices without driving their customers into the arms of lower-priced competitors.
The Effects of Licensing on Consumer Prices
Researchers have found it difficult to estimate the precise impact of licensing and other regulations on price, because of the way these impacts
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are generated. Not surprisingly, it is difficult to guess at how many people would enter a given profession if regulations were lifted, and how prices would adjust to the enhanced competition. Moreover, licensing boards affect not only the specific occupations they regulate, but also new or innovative occupations that may compete with them by offering to solve a particular problem or provide a service in a whole new way. One example of this effect is the return of midwives as a low cost substitute for obstetricians and hospital-based birthing. According to a 1987 survey, 16 states prohibit the practice of midwifery. Seventeen states have licensing or registration laws governing midwives, and 17 have no law specifically prohibiting midwives from working (because professional regulations are constantly evolving and changing, these figures may understate or overstate the regulation of midwives). Because in-home births assisted by midwives cost significantly less than hospital stays, it is not surprising that medical boards have sought regulation of midwives.
The midwife case demonstrates how risk enters into the professional licensing picture. Though midwives may challenge this assumption, most people believe that in-home childbirth is more risky than birth at the hospital, chiefly because hospitals have equipment and specialists with which to intervene should complications or atypical medical problems develop. Thus, potential parents who choose midwifery over the traditional approach are apparently taking a risk in exchange for a price break. By disallowing this type of consumer risk, licensing boards may advance their notion of consumer safety—at the expense of lower-price choices for consumers.
Despite the difficulties in gauging price effects, researchers have been able to estimate how far prices might drop if licensing were lifted. In a 1978 study, Lawrence Shepard of the University of California at Davis examined the price differences between dentists in states where out-of-state licenses were honored to those in states where such licenses were not honored. In the latter group of states, dentists moving into the area had to meet new state or local licensing requirements, thus increasing the barriers to entry in those areas. Therefore, recognizing out-of-state licenses is to some extent a less restrictive form of regulation.
Shepard found that the price of dental services and the average income of dentists were 12 to 15 percent higher in the states where out-of-state licenses were not honored. In other words, regulation increases price,
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and the more restrictive the regulations, the higher the price will be. In the early 1980s, a set of studies by Canadian researchers found that licensing regulations imposed on some 20 professions increased potential earnings of professionals by nearly 27 percent.
The Effect of Licensing on the Quality of Services and Consumer Safety
Consumers might still think these inflated prices to be a bargain if they resulted in higher quality services. Unfortunately, this is not the case. Several studies have shown that regulations reduce the quality of services and consumer safety. Quality declines because the quantity of professionals falls. Even if the professionals remaining in a field after the advent of regulations are more qualified than their pre-regulation predecessors, consumers can still suffer from reduced quantity and availability of services. There are several ways reduced quantity leads to reduced quality.
1. Substitution. When consumers cannot find a professional to provide a service—or if they cannot afford the higher prices charged by professionals with scant competition—they frequently try lower-quality substitutes. Homeowners may try to do their own electrical work, for instance, because licensed electricians are few and charge high hourly rates.
2. Over-training. Ironically, if high licensing barriers permit only the most skilled professionals into the market, more routine tasks which could be performed by less-qualified entry-level professionals are performed by the highest-qualified ones. This, in effect, wastes their expertise and their time. The minutes or hours a dentist spends on routine maintenance, for instance, leave less time to perform delicate operations.
3. Visit tradeoff. Consumers maintain their health and safety not only because of the skills of the professionals they use but also because of the frequent visits to or by their professionals. Therefore, if regulation boosts the price per visit or reduces the number of professionals, thus reducing the available appointment times for each consumer, consumer health and safety will suffer. Obviously this is especially true in the case of medicine. It may take an incredible amount of skill and resources to treat a serious disease, which in its early stages can be prevented—if detected by regular vigilance. Similarly, regular visits to an accountant to keep financial records and tax
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plans in good order can be less expensive and more productive in the long run than once-a-year tax-a-thons for some consumers.
Researchers Sidney L. Carroll and Robert J. Gaston have studied the various effects of professional quantity on service quality for a number of professionals. In general, they found that licensing and other regulations can reduce quality by reducing quantity. Here are a few examples of professions they studied:
• Electricians: Carroll and Gaston found that licensing restrictions such as prior experience and oral licensing examinations reduced the number of electricians offering services in a given area. Then they compared the availability of electricians with rates of accidental deaths by electric shock. They found that “restrictions that reduce the density of electricians are significantly associated with a rise in the rate of death from accidental electrocution.” Possible explanations for their finding could be that homeowners were attempting their own electrical repairs or installations, or that homeowners ignored potential warning signs of electrical problems because the prospect of paying an electrician to look at them was too daunting.
• Dentists: Relying on surveys of dentists, Carroll and Gaston estimated that licensing restrictions lowered the number of dentists available in a given state (judging by the number of dentists complaining of being “too busy” or having long patient waiting lists). Relating these data to other information about the dental health of patients in 22 states, the researchers found that smaller numbers of dentists per capita were associated with, for example, more widespread tendencies among those who own false teeth to never wear them, indicating “that the dentures, for whatever reason, were not satisfactory.”
• Plumbers: Carroll and Gaston found that the number of plumbers per capita was associated with the retail sales of plumbing supplies, indicating that as plumbing services were made less available or more costly, consumers were more likely to attempt repairs themselves.
• Real Estate Brokers: In those states with licensing requirements for real estate brokers, Carroll and Gaston found that the number of brokers per capita was low and that quality of service was correspondingly low, at least measured by how long houses remained unsold on the market.
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• Veterinarians: Carroll and Gaston found that “the more strict the barriers to obtain a License, the fewer practitioners there are and that this results in an under-discovery of animal disease, thus possibly increasing the risk of infection to both healthy domestic animals and ultimately people.” For example, the researchers found that incidence of rabies was higher in those jurisdictions where there are strict limits on veterinary practice.
Other studies have found a similar relationship between licensing and quality—namely that where one is found, the other usually is not. For instance, the Federal Trade Commission studied incidence of fraud in the television repair industry in three jurisdictions: Louisiana, which licenses repairmen; California, which registers them; and Washington, D.C., where the profession is not regulated. Fraud was more frequent and prices were 20 percent higher in Louisiana than in the other jurisdictions.
Licensing Boards Controlled by Professions They Regulate
While research on licensing regulations has generally found limited or counterproductive effects for consumers, the issue is complicated by the fact that all consumers are not created equal. Some have more resources and expertise than others have. Licensing laws are supposed to help those consumers without the necessary knowledge or luxury of finding high quality services in the marketplace by substituting the good judgment of government regulators. Unfortunately, licensing regulation seems to have the opposite effect—it benefits the most advantaged consumers at the expense of the least advantaged.
First of all, lower-income consumers, by definition, will be most hurt by price increases due to licensing. They are the ones most likely to turn to more dangerous “do-it-yourself” substitutes, or to simply stop purchasing a service, deeming it less important than other goods and services they must buy with their limited resources. Furthermore, lower-income consumers frequently form the market tapped by innovators who seek to provide services at lower cost. To the extent that barriers to entry included in licensing laws reduce the potential profits of an entrepreneur or inventor, they are less likely to take the risk of entering the market. Licensing boards are frequently controlled by the professionals they regulate, whether formally (i.e., state bar associations governing the practice of law) or by
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political pressure. Thus potential innovators who offer quality services at lower prices become the target of professionals already in the market who don’t want their collective boats “rocked.”
It is certainly true that many consumers do not have expertise to judge the quality of services, but that doesn’t necessarily suggest that government would be better at it. In The Rule of Experts, David Young points out that even if only some consumers shop wisely for quality services, that creates competitive pressures on professionals to ensure their quality, thus helping everyone. When government sets the standards for quality, rather than quality-conscious consumers, the standards are more likely to be dictated by political pressures, by established professionals concerned with potential competition, than by consumer demand. Importantly, savvy or knowledgeable consumers may still be able to shop around for the best doctor or electrician or plumber under a regulatory atmosphere and, indeed, can afford the higher prices charged. Other consumers aren’t so lucky. And in extreme circumstances, wealthy consumers can travel to other, less regulated jurisdictions to obtain services not offered in regulated areas. Again, lower-income consumers cannot afford to do so. So, while occupational licensing is supposed to help those least able to help themselves—consumers who might be “taken advantage of” in a free marketplace—the reality is quite different.
Regulations Serve the Interests of the Regulated by Reducing Potential Competition
Recognizing the detrimental impact of licensing and other regulations on price and other consumer interests, some states have tried to reform the operation and makeup of state licensing boards. In many cases, reform has focused on the tendency of professionals being regulated to dominate the membership of regulatory boards. To introduce consumer interests into the process, some states have required so-called “public” board membership, in which non-professional people are nominated to licensing boards. But these reforms apparently do not significantly change either the operation of licensing boards or the barriers to entry they enforce in specific professional fields.
Saundra K. Schneider, a professor of political science, examined the operations of 16 licensing boards in Missouri, trying to relate decisions to such factors as board size, budget, and the existence of “public” members.
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She found that “the presence of voting public membership has no effect on any aspect of board decision making.” Similar studies in Michigan and California found that board decisions were no different after non- professional people were nominated, and that” public” members preferred to serve on advisory boards rather than on enforcement boards with detailed work to do or the responsibility for judging the conduct of specific professionals. One problem might be what economists call “regulatory capture”—the tendency for regulated industries to dominate their regulators because of the technical nature of relevant information or because those regulated are ultimately the source of information for those who are doing the regulating.
In other words, the negative impact of licensing boards is not related to the membership of the boards but to their very nature. These boards are supposed to represent the interests of consumers in various professional fields, but the regulations enforced are more likely to serve the interests of those regulated—by increasing their income, by reducing their potential competition—and favor the interests of higher-income consumers over those to whom price and availability of a service may be more important than the formal education or skills of the service provider. The rationale for occupational licensing assumes that the interests of consumers can be generalized, when in fact different consumers value different things.
More importantly, this rationale assumes that government regulations function as they are intended. But research into the actual effects of licensing laws proves that by reducing the number of providers of a service and increasing the price of that service, they hurt most consumers more than they help them. Given this evidence, the best way to protect consumer health and safety would be to let them choose their own services in a free market.
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Enormous Temptations and Corrupting Influences
In other words, the use of what Albert Jay Nock called “the political means” of acquiring wealth—taking it—rather than “t he economic means”—earning it—is seductive. By its expansion into all areas of everyday living, government is creating temptations on a massive scale. It is easy to fault individuals who succumb to temptation, but one should do so only with the realization that government-wrought temptations are today ubiquitous and overpowering. Thus, it is not that people on both sides of the government dispensary are morally weaker than those of earlier times: The problem is the incredible size and scope of the government dispensary, and the very notion that government may take from A to give to B or regulate the peaceful activities of A to benefit B. In pursuit of privileges, favors, and contracts, people often ignore the rule of law and thereby risk ending both their own careers and the careers of those in government who assist them in return for some form of payoff. Thus, as the daily news reports show us, the existence of the government dispensary with its enormous temptations and corrupting influence is not only theoretically indefensible, it is a very real human tragedy which brings people down at the peak of their powers who otherwise would have lived decent lives and had productive careers.
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Chapter 4
Scandals By Joseph S. Fulda
December 1987
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Joseph S. Fulda was Assistant Professor of Computer Science at Hofstra University.
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It is impossible to read a newspaper or listen to a newscast nowadays and fail to be impressed by the degree to which our society is beset by scandals, large and small. This was not always so. There was a time when scandals were infrequent, if not rare, deviations from the norm. In short, they were scandalous. Today, they are the norm—commonplace and expected, almost natural.
An exploration of the varied causes of this recent and unsettling phenomenon, which we shall undertake here, is necessary if one rejects the conventional wisdom that today’s scandals have arisen from the character defects of our current leaders, politicians, and businessmen—who, it is believed, are morally inferior to and more venal than those of yesteryear. In studying news reports over the last few months, several socio-political trends largely responsible for the huge increase in indictments precipitated by scandals clearly emerge.
First, there are more requirements and prohibitions set by the law, the courts that interpret them, and the administrative agencies that apply them than ever before. And even where the requirements or prohibitions are longstanding, the focus, energy, and skill brought to their enforcement is a recent development. Naturally the more laws and regulations there are
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to be broken, the more violations will occur. And the more effort applied to discovering such violations, the more will be discovered.
It is not that this generation has discovered more mala in se, the political theorist’s term for acts wrong by their very nature and apprehensible as such to any civilized man. Rather it is the extreme proliferation of the mala prohibita, the designation classically given to acts simply declared crimes by the state. Into this category fall many of the ancient victimless crimes, but also, and even here in capitalist America, many economic “crimes.”
For example, it is a felony to purchase five per cent of a company’s stock without notifying the government. This not only is an abridgment of the freedoms of speech and enterprise, it is hardly apprehensible as wrong by its very nature. Even worse, it is also a felony to aid someone’s nondisclosure of five per cent ownership, by holding the stock for him. What we have here, then, is a situation, where a mere bailment is treated as a serious crime, its triviality masked by such terms as “parking securities” and “stock fraud,” which to the general public sound so ominous.
Then there are also the numerous restrictions on mere possession, which have included illegal substances, controlled substances, contraband, fireworks, gold, firearms, burglars’ tools, and whatnot. Also burdensome are the many restrictions on the peaceful exchange of goods and services between consenting adults. For example, it is felonious for a stockbroker to lend a client more than a specified percentage of the means needed for a securities purchase. What once would have been seen as an act of brotherhood or at least a common business practice has become a “margin violation,” punishable by a prison term. Furthermore, when services are exchanged, even between friends, both parties are required to report the service received as barter income or face federal charges. One can’t even exchange small favors without the intrusion of the taxman.
How Regulations Encourage Abuse and Corruption
On and on the list goes—and we haven’t even begun to enumerate the restraints and mandates placed on business enterprises. But the idea is already clear: The index of proscribed and prescribed actions far outstrips the security needed by civilized men for social intercourse. And the longer this irrational and capricious list grows, the longer will be the list of
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offenders. It is well to recall Jefferson’s comment on this trend already evident in 1816. “Our legislators,” he wrote, “are not sufficiently apprised of the rightful limits of their power: that their true office is to declare and enforce only our natural rights and duties. . . . The trial of every law by one of these texts would lessen much the labors of our legislators and lighten equally our municipal codes.” [1]
Second, there has been an almost unimaginable expansion of government-sponsored programs, government-funded programs (grants and subsidies), and government regulation of privately sponsored and funded activities. As I discussed in an earlier article,[2] such programs provide almost limitless opportunities for abuse, both for the legislators, bureaucrats, and regulators dispensing the funds, permits, or contracts and for the corporations and individuals seeking to receive them. And both sides, givers and takers, have used these opportunities.
An excellent and timely description of this process comes from William Stem, formerly CEO of New York State’s Urban Development Corporation—a huge government agency “that does everything from building convention centers to financing economically depressed mushroom farms.” Mr. Stem candidly admits that “[t]he fact that government is involved in so much in New York . . . creates the motivation to influence government. And the process of influencing government is always sleazy. . . . It’s a side of liberalism that was not predicted, and I think not completely understood. . . . [T]he government becomes very much organized to push through the interests of whoever makes their influence felt.”[3]
In other words, the use of what Albert Jay Nock called “the political means” of acquiring wealth—taking it—rather than “t he economic means”—earning it—is seductive. By its expansion into all areas of everyday living, government is creating temptations on a massive scale. It is easy to fault individuals who succumb to temptation, but one should do so only with the realization that government-wrought temptations are today ubiquitous and overpowering. Thus, it is not that people on both sides of the government dispensary are morally weaker than those of earlier times: The problem is the incredible size and scope of the government dispensary, and the very notion that government may take from A to give to B or regulate the peaceful activities of A to benefit B. In pursuit of privileges, favors, and contracts, people often ignore the rule of law and thereby
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risk ending both their own careers and the careers of those in government who assist them in return for some form of payoff. Thus, as the daily news reports show us, the existence of the government dispensary with its enormous temptations and corrupting influence is not only theoretically indefensible, it is a very real human tragedy which brings people down at the peak of their powers who otherwise would have lived decent lives and had productive careers.
Third, with the advent of special prosecutors, full-disclosure requirements, and many other similar developments, the intense scrutiny placed on public officials and public figures is greater than that of any previous age. Facilitated by modern transportation, communication, and information processing systems, such scrutiny is urged on us by its advocates because of the pervasive corruption discovered in and following the Watergate era. And the more corruption discovered, the more intense is the push for yet more scrutiny.
On the surface, it appears that this trend is not directly caused by the growth of government. After all, scrutiny from the press, encouraged by the very weakened state in which the courts have left libel law in the United States, can be as unrelenting as that of a U.S. Attorney, a state prosecutor, or a legislative panel.
However, closer examination reveals that what really has occurred is the blurring of the all-important distinction between private and public. With almost everything heretofore considered private now considered public, such scrutiny is to be expected. And the continuing attenuation of the distinction between the public and the private is a direct consequence of the growth of government.
Nor is scrutiny itself goal-free. Most of it is directed to discovering whether the person has violated some insignificant malum prohibitum or whether he has been involved in the abuse of the government dispensary. Only rarely does the scrutiny placed on persons in public life result from suspicion that a malum in se, unrelated to the government dispensary, has been committed.
In sum, were government’s powers to grant subsidies, privileges, contracts, tax exceptions, licenses, and permits sharply curtailed and were government to refrain from declaring peaceful acts illegal, even today’s heightened scrutiny would yield little of substance. The public
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would soon lose interest in reading about probes, inquiries, hearings, and investigations—and scandals once again would be scandalous.
Notes
1. E. Dumbauld, ed., The Political Writings of Thomas Jefferson, p. 55.
2. J. Fulda, “The New Bondage,” The Freeman, April 1982, pp. 243-248.
3. P. Weber, “City of Scares: The Streets Were Paved with Gold Diggers,” National Review, June 5, 1987, p. 27. The article discusses the corruption scandals in both New York State and New York City, which magnify yet still typify the situation with government in general.
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Government Regulations and Requirements Destroy Employment Opportunities
Schools can administer tests and identify their own criteria for determining who is best, but there won’t be room for bureaucratic foolishness.
Thus not only will there be attainable teaching jobs, but the quality of education will go up across the board. So will salaries. Schools will have to offer teachers wages at market rates in order to attract the best, with salaries increasing in those areas of undersupply. Also, fewer administrators and less overhead will mean more money for teachers and their immediate needs. Instruction will proceed without the need to jump through bureaucratic hoops.
Most of this is probably obvious, and much is common knowledge. Let’s remember, though, that this is just one occupation. Today, most occupations are licensed, regulated, and ultimately controlled by the ever-present state. In some cases, the price tag for admission to the club is many times higher than it is for teaching. That gives us a ready explanation for why entrepreneurship is so difficult in today’s society, and why many people who want to work cannot find jobs.
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Chapter 5
Government Licensing: The Enemy of Employment
How Come Many People Who Want to Work Can't Find Jobs?
July 1996
By Steven Yates _____________________________________________________________
Dr. Yates is Bradley Visiting Fellow at the Center for Economic Personalism at the Acton Institute for the Study of Religion and Liberty. He is the author of Civil Wrongs: What Went Wrong with Affirmative Action , published by ICS Press in 1994.
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Not long ago I found myself without a job. The experience offered me some insight into the causes of unemployment in American society. I knew that occupational licensure was both a stumbling block to would-be entrepreneurs and a spur to joblessness because it prices entry into markets out of many people’s reach and creates disincentives to hire. I now have firsthand experience of how government bureaucracy systematically blocks individuals’ efforts to offer services to others in order to improve their own well-being.
When I found myself with no university teaching appointment last summer, I did what any responsible believer in individual liberty would do: I took
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stock of my strengths. I had seven years of full-time, university-level teaching experience, and additional years of part-time teaching. Though my doctorate is in philosophy, I had once been a science major with a year each of undergraduate mathematics, chemistry, geology, and physics. So I formulated my options and realized I had the background and skills to teach high school math and science. While there may be a glut of philosophy professors, there is a well-publicized shortage of math, science, and foreign-language teachers.
It is one thing to grasp a problem or situation intellectually. It is quite another to experience it in “real time.” What I learned from the experience of actually seeking a public-school teaching job made me recoil in horror.
“Are You Certified?”
The first thing I did was go to a local high school with my résumé, and transcript in hand and advertise my availability to teach math or science. I naively thought my experience as a teacher, combined with the course work clearly evident on my transcript, would make an impression. I’d hoped that all I would have to do is apply and, perhaps, take a test to demonstrate my grasp of the subject, and I’d be set. No sweat, right?
Wrong!
A receptionist immediately confronted me and asked, “Are you certified?” Knowing what I knew about government licensing, red flags went up at once. I replied that I wasn’t, and requested more information. I was directed to an office about a mile away. There, again, I was unable to get past the receptionist who asked the same question, as if by rote. Again I said no and requested an application for certification. She had none, but gave me the phone number of the teacher certification division of the South Carolina Department of Education.
I called and made an appointment. On the designated day I drove to the complex in downtown Columbia where a number of state offices are housed. The Department of Education takes up ten floors of the Rutledge Building; the teacher certification division is on the tenth floor. A women about my age gave me an informational package including brochures with titles like “Questions and Answers Related to Teacher Certification,” lists of
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instructions on “How to Apply for a South Carolina Teaching Credential,” request forms for official transcripts to be sent, a “Verification of Teaching Experience” form, a long application for an “Initial Teaching Credential,” another to take an Educational Testing Service standardized examination given four times a year, and so on. A final form required fingerprints of all ten fingers to be sent to the FBI; a memorandum identifying the specific legislation behind this requirement (something called Section 59-25-115) was included.
None of this is free. The fee for the initial application for certification is $25. The registration fee for the standardized test is $30; the fee for the test itself runs anywhere from $25 to $85, depending on the content. The fingerprint review costs an additional $24.
Because there are critical shortages of teachers in certain subjects, such as mathematics, the sciences, and foreign languages, the teacher certification division developed a Critical Need Certification Program. Since the purpose of that program is to get teachers into the classroom quicker, I initially opted to pursue it, thinking I could be teaching in less than a year. Wrong again. Despite the science and math on my transcript and my evident ability to research topics quickly, teaching in any of these areas required at least a bachelor’s degree, as well as a passing score on the equivalent National Teacher’s Examination. My degree was in philosophy; thus my seven-years-plus university-level teaching experience was meaningless. Even with a math degree, though, the most I could have gotten in one year was “conditional certification.”
More Requirements Are Road Blocks to Certification
A forest of additional requirements would have stood between conditional and actual certification, including (1) attendance at a pre-service institute at one of the local colleges “designed to prepare these prospective teachers for the opening of school and their initial involvement with students, peers and the instructional environment”; (2) attendance at eight once-a-month sessions during the school year “designed to provide a specific instruction component in addition to planning and interaction with other conditional teachers”; (3) attendance at an in-service institute the following summer “designed to address specific teaching techniques, classroom management, lab skills, etc.”; (4) attendance at four additional once-a-month sessions the following school year; and (5) completion of
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three education courses that address such matters as “student growth and development,” “exceptionalities [sic] of children,” “teaching of reading in the content area,” and so on. All that, of course, is in addition to the responsibilities teachers assume once they set foot in the classroom, including class preparations, grading, tutoring, informal counseling, and the like.
The government stipulates this forest of extra requirements to obtain an occupational license. Some of the language is sufficiently vague as to drive a one-time logic teacher like me up a wall. What, for example, is a “specific instruction component”? And what do they mean by “student growth and development”? Do they mean something besides learning the subject matter of a course? But that is the nature of bureaucratese. Remember, too, that the bureaucrats who originate those brainstorms draw higher salaries than do classroom teachers.
There are, of course, many would-be teachers willing to put up with this nonsense—they want to teach badly enough. That is fortunate, because without them there would be even greater shortages of qualified teachers. I decided I wasn’t one of them. My disdain for “educrats” is simply too great. While reviewing the licensing procedure I would have to go through to teach in a South Carolina high school, I thought of Francisco d’Anconia’s remark in Ayn Rand’s Atlas Shrugged about how “when you see that in order to produce, you must obtain permission from men who produce nothing . . . and your laws don’t protect you against them but protect them against you . . . you may know that your society is doomed.”
Entrepreneurship, Not Bureaucracy is the Answer
That may be overstating the case a little. But we know that public education is in trouble, and we know most of the reasons why. As we would expect from government bureaucracy, there are too many administrators and too few teachers, too much paperwork and too little teaching, too many discipline problems and too little freedom to do something about them, too much “self-esteem” psychobabble and too little encouragement of the values that lead to happy, successful lives. The source of the trouble: public education is not run by educators but heavy-handed bureaucrats obsessed with rules and procedures imposed from outside. For the bureaucrat, regulations matter, and for good reason: untying our hands would instantly send them scurrying to the want ads. As far as the actual
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business of educating goes, they have little to offer and they accomplish little except to get in the way— although they excel at interpreting every attempt to derail their gravy train as an attack on education itself.
The solution is obvious: get rid of the government licenses, get the bureaucrats out of the educational system, and sell the schools to private educational entrepreneurs to run as businesses. There is no danger that getting rid of government licensure in education will permit a flood of incompetent teachers into the classroom, for individual schools will have to compete for the best teachers and the best pupils. Reputations spread. Poor teachers will have to pursue other lines of work, and inefficient institutions will soon be out of business. Schools can administer tests and identify their own criteria for determining who is best, but there won’t be room for bureaucratic foolishness.
Thus not only will there be attainable teaching jobs, but the quality of education will go up across the board. So will salaries. Schools will have to offer teachers wages at market rates in order to attract the best, with salaries increasing in those areas of undersupply. Also, fewer administrators and less overhead will mean more money for teachers and their immediate needs. Instruction will proceed without the need to jump through bureaucratic hoops.
Most of this is probably obvious, and much is common knowledge. Let’s remember, though, that this is just one occupation. Today, most occupations are licensed, regulated, and ultimately controlled by the ever-present state. In some cases, the price tag for admission to the club is many times higher than it is for teaching. That gives us a ready explanation for why entrepreneurship is so difficult in today’s society, and why many people who want to work cannot find jobs. The question is: when are we going to do something about it?
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The Socialist Idea of Unemployment Compensation Is a Form of Forced Charity – Legal Plunder
The system is a form of public charity that springs from a new conception of social welfare. The public now accepts the concept that government must bear the ultimate responsibility for public relief, including unemployment assistance. This new attitude brought forth extensive social legislation and led the way to the “welfare” or “social service” state [Socialism]. The American system followed in the footsteps of earlier [Socialist] systems in Scandinavian countries, some Commonwealth countries and Great Britain, which in turn were influenced by the labor legislation of Bismarck Germany in the 1870s.[1]
The social service state has few genuine critics. Its countless supporters are guided by a great number of motives that continue to lend intellectual support to the system. Their first and foremost motive, we are led to believe, is charity toward their fellow men. They wax eloquent about their feelings of benevolence, good will and affection, indulgence and forbearance. In the name of charity they call upon government to cater to the needs of the people. [With the other fellow’s money rather than their own of course.] _____________________________________________________________
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Chapter 6
Unemployment Compensation
Hans F. Sennholz
May 1986 _____________________________________________________________
Hans Sennholz served as president of the Foundation for Economic Education from 1992 to 1997. At the time of his retirement, FEE’s Board of Trustees honored him with the title president emeritus. He was chairman of the department of economics at Grove City College for many years. _____________________________________________________________
To compensate workers for wages lost during periods of unemployment, most countries have systems of unemployment insurance. They are compulsory, in the sense that government enforces coverage and uses the taxing power to finance the expenditures. Previous contributions by or on behalf of the workers largely determine benefit eligibility and amounts according to formulas stipulated by law.
The primary purpose of the system is economic assistance and compensation of employees for wage loss during periods of economic decline and depression. The economic effects of such periods are compounded by sociological effects that are reflected in physical and mental ill health, rising crime rates, divorce rates, and even suicide rates. Unemployment compensation seeks to alleviate the ill effects.
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The American system is a federal-state system that was forced upon the states by the Social Security Act of 1935. The Act levied an unemployment tax on employers, but offered a 90 per cent offset (I) for employer payments of state payroll taxes for unemployment benefits or (2) for reductions in such state taxation under a program of experience ratings. The law left the states free to determine their own benefit levels and duration of benefits. Consequently, benefit provisions and tax rates differ widely among the states.
The system is a form of public charity that springs from a new conception of social welfare. The public now accepts the concept that government must bear the ultimate responsibility for public relief, including unemployment assistance. This new attitude brought forth extensive social legislation and led the way to the “welfare” or “social service” state. The American system followed in the footsteps of earlier systems in Scandinavian countries, some Commonwealth countries and Great Britain, which in turn were influenced by the labor legislation of Bismarck Germany in the 1870s [Socialism].[1]
The social service state has few genuine critics. Its countless supporters are guided by a great number of motives that continue to lend intellectual support to the system. Their first and foremost motive, we are led to believe, is charity toward their fellow men. They wax eloquent about their feelings of benevolence, good will and affection, indulgence and forbearance. In the name of charity they call upon government to cater to the needs of the people. Government is to assure a system of social assistance, to grant every citizen the right to extensive welfare benefits, unemployment compensation being just one of them, so that everyone may achieve maximum cultural and even spiritual well-being [with the other fellow’s money of course, and with never ending increases in your taxes].
A few critics are highly suspicious of this attitude that makes government the guardian of charity and welfare. Some are guided by Judeo-Christian principles that make charity a responsibility of each and every individual. To them, private initiative and charity are the keys to American progress and prosperity, having led to unprecedented improvements in working and living conditions. They look upon private charity as an important bulwark against complete state control and the political command system, which they abhor for many reasons.
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The welfare state as a transfer state [Legal Plunder] is an early form of the command system, appealing to envy and covetousness and, by creating classes of beneficiaries and victims, continuously breeds social conflict and strife. It is driven by government coercion and guided by majority vote [Democratic Despotism]. It is never fair, but always political. It is cumbersome and slow, unable to act promptly and efficiently.
Transfer Payments and “Legal Plunder”
The Judeo-Christian command of charity is no call for politics. Unemployment compensation is the product of politics. Its supporters may concede the point, but they hasten to defend the system on grounds that it is a desirable economic stabilizer that moderates the business cycle. They applaud it as an important countercyclical force that injects purchasing power when unemployment rises and absorbs it when unemployment fails again. It is said to stabilize the propensity to consume and thereby acts in a countercyclical, stabilizing way. [2]
In his popular textbook, Economics, Paul A. Samuelson applauds unemployment insurance and other welfare transfers as “a first line of defense” that goes into action automatically to counteract a recession. “Unemployment insurance pumps funds into or out of the economy in a countercyclical, stabilizing way. Similar features are seen in many income support programs. Food stamps, aid to families with dependent children, and early retirement on Social Security are examples of public transfer payments [Legal Plunder] that help to shave the highs and lows from the business cycle.”[3]
It is difficult to fathom the operation of the Samuelson pump that moves funds into and out of the economy. Unemployment tax revenues do not move in and out of the economy. They are levies imposed by politicians and collected by internal revenue agents, exacted from employers who in turn obtain them from the productive labors of their employees. Civil servants then disburse the funds to some unemployed workers. If there should be a temporary surplus, the U.S. Treasury spends it, issuing IOU’s in the form of U.S. Treasury bills and notes. If there should be a shortfall, the taxes are likely to be raised to the level of expenditures. One searches in vain for the pumping action that causes the funds to exit from the economy, remain hidden for a while and then to return to active duty.
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The only pump at work is a transfer pump that reduces the paychecks of working employees while it yields benefits to unemployed workers and salaries to civil servants who operate the pump. Contrary to popular belief, payroll taxes do not seize employer income. They do not reduce entrepreneurial profits or capital interest or managerial remuneration. Every penny exacted on behalf of employees is taken from employees through lower take-home pay. Lower take-home pay offsets the unemployment tax. The levy does not cause unemployment, but it continues to prevent saving and investing, which would raise labor productivity, bolster the demand for labor, and reduce unemployment.
No pump on earth can prevent the business cycle or moderate its effects. No food stamps, no aid to dependent children, no early retirement on Social Security can prevent the cycle once it has been set into motion through inflation or credit expansion. No matter what else government may contrive or attempt, easy-money policies bring about economic booms that cause business misjudgments and maladjustments. Once a boom has run its course it necessitates and brings forth a depression which is a period of readjustment. There are no miracle cures for business cycles, no recipes for full employment. Government cannot “fight” depressions through more easy money and more transfer payments. It can, however, prevent them by abstaining from the policy that causes them: inflation and credit expansion.
To embark upon pumping action at any stage of the cycle is to make matters worse. During the boom it may add to the maladjustment, during the recession it may delay the readjustment. Unemployment taxation, like any other taxation and government intervention, does not counteract the business cycle. It aggravates the disorder.
New unemployment levies are forced exactions to which the labor market has not yet adjusted. They boost labor costs and temporarily reduce employer income. Governments usually impose new levies either through higher rates or higher bases, or both, at the very moment of business difficulties, during the depth of depression. The exactions compound the situation by lowering the productivity of labor even further, thus reducing the demand for labor and boosting unemployment. They continue to have a painfully contracting effect until the take-home pay has fallen by the amount of the new tax exactions. Unfortunately, organized labor tends to resist the reduction, which aggravates the unemployment.
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Workers are led to lay the blame for rising unemployment on employer greed and the private property order rather than on the tax boosts and their own reluctance to adjust to the boosts.
Unemployment Compensation Encourages Idleness
Unemployment taxation and compensation may not encourage capital formation, but they are said to promote the preservation of skills and training. With their eyes glued on the output of the transfer pump, and completely ignoring the pump input, as well as the energy it takes to operate the pump, the popular champions of unemployment compensation view it as an auspicious outpouring that preserves given skills and training and thereby safeguards labor productivity. They favor generous compensation because it reduces the financial pressures on the unemployed to accept different or lower-level jobs. [4]
Surely, it is a grievous fallacy to contend that unemployment is more conducive to maintaining skills and training than work on any level; that it is more beneficial to finance idleness than to encourage the unemployed to accept lower-level jobs; that society is better served by mass unemployment than lower-level production. Work on any level usually broadens skill and ability and adds valuable experience that improves individual productivity. It is presumptuous to contend that there is no learning except on one’s own level of skill and expertise.
The skill-and-training argument completely ignores a fundamental characteristic of the private property order, which is continuous change and readjustment of production to the wishes of consumers and to the ever- changing state of technological knowledge. Capital and labor must adjust continuously; failure to adjust inflicts losses and causes unemployment. The chronic unemployment of some eight million Americans, which most observers are quick to place on the doorsteps of the business cycle, must be charged primarily to the very policies that prevent and discourage change and readjustment, from minimum wage legislation to the legal privileges of labor unions. Unemployment compensation that encourages preservation of old skills and discourages new learning and new skills aggravates and prolongs the chronic unemployment.
The reluctance to adjust to changes and acquire new skills may rest on individual apathy, sloth or just fatigue. But it may also spring from the
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notion that many unemployed workers have great skills and training that need to be preserved with the help of generous unemployment compensation. This is a popular error. The pains of unemployment are felt most frequently by the least productive members of society; they suffer a common fate because government or labor unions, endeavoring to raise their pay and benefits, manage to price them out of their jobs. Surely, the unemployment rate among minimum wage workers, steel workers and automotive workers, most of whom have minimal skills, training and education, is measurably higher than in any other vocation.
Creating Employee Disincentives
In the United States the existence of separate state systems makes for competition that reveals some startling contrasts. The high-benefit states are the high-unemployment states. The low-benefit states are the low- unemployment states. Low benefits, severe conditions and disqualifications, and the resulting low tax rates, seem to attract new industry and promote economic expansion, which provide new opportunities for employment. High benefits call for high taxation which, going higher and higher, may hamper business and breed unemployment.
The trends of unemployment are predictable, being subject to various influences and controls. Monetary, fiscal and foreign-trade policies affect the productivity of labor and consequently the demand for labor. The level of unemployment benefits has a significant impact on worker incentives and the supply of labor. Recent growth of the benefit provisions of the unemployment compensation system as well as public assistance benefits has significantly reduced the supply of labor. It subsidizes unemployment and thereby breeds more unemployment.
Acting man always faces a choice in allocating his resources among alternative uses. In this case he must allocate his time among alternative uses. He may use it in production (work) or in consumption (leisure). The mode of allocation generally depends on the relative prices of both: a rise in the price of one relative to the price of the other tends to lead to a decrease in its consumption; a falling price tends to increase consumption.
Unemployment benefits reduce the cost of leisure and encourage the withdrawal of some labor from the labor market. New benefits and extensions of old benefits reinforce the withdrawal, which is hidden in the
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thicket of rules and regulations that seek to deny workers the freedom to choose between work and leisure. Withdrawal from the labor market obviously assumes freedom of action and voluntary reaction to changes in the relative prices of labor and leisure. Unfortunately, institutional restriction and prohibition often deny individuals the freedom to choose. Many individuals are barred from participation in produc tion and exchange by such barriers as minimum wage legislation and license and permit requirements, which causes some workers to seek refuge in the underground economy. But most workers still have the choice between labor, which is regulated and taxed severely, and leisure, which is subsidized generously with unemployment compensation and other benefits of the transfer system. It cannot be surprising that many workers prefer the joys of leisure over the disutilities of labor.
Over the long run, aggregate unemployment rates have been rising in the United States. They have been increasing almost exclusively among unskilled or semiskilled laborers for whom the difference between the market wage of labor and the unemployment compensation and other benefits is minimal. A worker who earns $200 net per week for his labor exertion and $200 in the form of unemployment compensation and many other subsidies from food-stamps to Medicaid, lacks any pecuniary incentive to labor. He lacks the incentive to accept employment at a market rate of wage that may be lower than his compensation rate. He may prefer to remain unemployed until the benefits run out.
According to Department of Labor statistics, some seven to eight million Americans are unemployed. More than thirty million live in retirement and receive Social Security benefits. More than nine million depend on survivor benefits. Over six million live on public assistance or supplemental income. Altogether more than fifty million non-working Amer icans depend on transfer payments for their support. Surely, their number significantly reduces the supply of labor throughout the American labor market and renders the remaining labor more expensive. Not only does it deprive working people of the transfer income that is forcibly taken from them, but it also denies them the productive contribution many transfer beneficiaries could be making.
Society is substantially poorer because millions of able people no longer contribute to economic production, in recent decades American society has grown visibly poorer in the services which unskilled and semiskilled
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workers usually render. Many are idle, living on unemployment compensation and public assistance.
An Invitation to Deceit and Fraud
To limit the demand for its offerings, the system imposes benefit conditions that are designed to deny the leisure option. To be entitled to benefits, a person must be ready, willing and able to work. He must be unemployed through no fault of his own. Benefits are denied if he quits his job without a valid reason, is discharged for willful misconduct, refuses to apply for or accept any suitable work within a reasonable distance of his home, or attends a school or training course. The amount of benefits may be reduced if he is self-employed or has any type of earning.[5] Unfortunately, the conditions are rather ineffective, and breed deceit and fraud on a massive scale.
For example, it is difficult to estimate the number of beneficiaries who labor in the underground economy and who blithely forget to report their earnings. But failure to report is tantamount to fraud, which is deception practiced deliberately in order to secure unlawful gain. The unemployment compensation laws call for prosecution of anyone making false statements or knowingly withholding information to obtain benefits illegally. But few such cases appear in court and even fewer judges are prepared to impose the penalties.
Beneficiaries are expected to apply for and accept any suitable work within a reasonable distance of their homes. But many who prefer leisure over work use imagination and ingenuity, resorting to clever tricks and artful dodges that meet the requirements of application but avoid being offered a job.
Similarly, to quit a job without valid reason or to be dismissed for willful misconduct means forfeiture of benefits—at least, the law so stipulates. In reality, unemployed workers may cite a great many reasons that may be true, imagined, or even manufactured. The system officials passing judgment on the valid reason or willful misconduct usually concur with the workers and dispense the benefits. Employer efforts to protest and appeal the decision are so costly it is often easier to accept the decision, right or wrong.
Some states deny unemployment compensation to strikers on the assumption that strikers voluntarily leave their jobs and are unavailable for work.
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However, other states, especially in the Northeast where the labor union ideology is dominant, manage to pay strikers on grounds that they do not leave voluntarily, but are driven out or locked out. When the United Steelworkers struck Wheeling-Pittsburgh Steel Corporation, operating under Chapter 11 of the Federal Bankruptcy Code in an effort to reorganize $514 million in debt, Ohio’s Bureau of Employment Services ruled that Ohio strikers were locked out and, therefore, entitled to benefits. [6]
The effects of this policy are clear. Workers throughout the state suffer reductions in take-home pay so that the United Steelworkers of America, who earn nearly twice the rate of the average worker, can exact more income and wealth from company creditors and stockholders. The subsidy aggravates the strike and magnifies the company losses, which consume business capital, reduce the demand for labor and cause more unemployment.
Moreover, the benefits may necessitate boosts in unemployment taxation, which raise labor costs and reduce the demand for labor throughout the state. Unemployment is bound to go higher throughout the Buckeye State. The payment of benefits to strikers makes a farce of the provision that workers must be unemployed through no fault of their own. If strikers who are noisily manning picket lines and forcibly barring other workers from going to work, are said to be unemployed “through no fault of their own,” then worker fault has practically been eliminated and all fault been placed either on the doorsteps of employers or the economic system itself.
Conclusion
The high unemployment that is persisting in the United States has given rise to a vigorous debate as to its causes and potential cures. On the one hand are those observers who argue that the high level of unemployment reflects primarily a deficiency of aggregate demand. In the footsteps of John Maynard Keynes, they contend that higher and more rapidly rising levels of spending, including unemployment compensation and public assistance, supported by appropriate monetary and fiscal policies, can bring unemployment down to a satisfactory rate of four per cent or less.
Opposing this orthodox view is the economic argument that there is no lack of jobs in an unhampered labor market. Unemployment springs from extraneous force, in particular, by government and labor unions raising
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the cost of labor above its productivity. Numerous laws and regulations seek to bestow popular benefits, reduce effort and output, and erect obstacles to labor adjustments to changing costs and opportunities. Government and labor unions make the labor market a long obstacle course for unskilled and semiskilled workers. Unemployment compensation is one such obstacle. []
Notes
1. Ludwig von Mises, Omnipotent Government (Spring Mills, Pa.: Libertarian Press, 1985), p, 158 et seq.
2. Unemployment Compensation in Pennsylvania, Commonwealth of Pennsylvania, Department of Labor and Industry, UCP-19, REV 6-84.
3. Paul A. Samuelson and William D. Nordhaus, Economics, 12th edition (New York: McGraw. Hill Book Co., 1983), p. 175.
4. William Haber and Merrill G. Murray, Unemployment Insurance in the American Economy: An Historical Review and Analysis (Homewood, III.: Irwin, 1966).
5. Pennsylvania Unemployment Compensation Handbook, Commonwealth of Pennsylvania, Department of Labor and Industry, Office of Employment Security, UCP-1, REV 11-80, p, 2.
6. The Wall Street Journal, September 3, 1985, p. 14; 4.
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The Four Points That Deny the Right of Individuals To Own and Control the Airways and End Censorship
I have four points to make—four opinions to offer. They run contrary to most of what is said and heard about the plight of the broadcasting industry. But if the past is any gauge of the future, they simply must be true:
1. The revocable, renewable FCC-granted license has been an effective censorship device and will continue to be so regardless of who is serving on the commission.
2. Attempts to dictate to the broadcasting industry will tend to increase in the future unless the licensing regulations are relaxed or abolished.
3. A better broadcasting industry, truly serving the "public interest" and offering a wide fare for viewers, can only come about through less control—never through more.
4. The "people" do not really own the airwaves now, but would actually be able to exercise more direct control over the industry if the present licensing system were to be abandoned.
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Chapter 7
Let the People Own the Airwaves William Henry Chamberlin
June 1962
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Mr. Barger is Editor of The Flying A, company magazine of the Aeroquip Corporation at Jackson, Michigan.
"I urge you to put the people’s airwaves to the service of the people and the cause of freedom. You must help prepare a generation for great decisions. You must help a great nation fulfill its future. Do this and I pledge you our help."
Newton F. Minow, Chairman of the Federal Communications Commission, in closing his memorable "vast wasteland" speech before the annual convention of the National Association of Broadcasters in Washington, D. C., May 9, 1961.
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There comes a time in every man’s life when his curiosity gets the better of his laziness. Whether or not he really wants to, he feels compelled to find out certain things for himself. The answers are often both rewarding and surprising, and it’s good to do one’s own searching.
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For personal reasons, I heartily recommend this business of letting curiosity get out of hand. It eventually caused me to look into the "why" and "when" and "what" of federal control of the broadca sting industry. Starting with the idea that our chief concern should be to protect freedom of speech at all costs, I’ve become convinced that this freedom has been threatened or curtailed by the FCC in the past, and is under heavy fire today. I now suspect that the role of the FCC and the rights of speech and expression granted in the First Amendment are almost "mutually exclusive" things—you can have either one, but not both together. I have concluded that if either free speech or the FCC ought to be curtailed, thoughtful men should cast their vote in favor of curtailing the powers of the FCC.
I had been mildly curious for years about what seemed to be an odd contradiction. Why wasn’t the broadcasting industry—first radio, and then television—fully entitled to the same freedom traditionally secured by the Constitution for newspapers? Why had we talked so grandly about freedom of speech and expression, and yet imposed a government agency such as the Federal Communications Commission upon the broadcasting industry? Of course, I had no real proof that some kind of censorship went on. But over the years I developed a suspicion that a tight, restrictive federal control of the industry did exist.
Still, I was too lazy to look into the matter for myself and to learn how this had happened in a country that has always treasured free speech. I tried to find the answers the easy way in casual conversations with radio announcers and station owners whom I knew. It turned out that many of them had been just as lazy as I. The most frequent answer I got was that "complete freedom of expression is a great thing for newspapers and street-corner orators, but in broadcasting the government has to control the airwaves because of the limited number of frequencies." Intimidated by this hint of mysterious technical problems, I dropped the subject. I remained lazy—and ignorant.
Freedom of the Press but No Freedom of Broadcasting
Yet, things kept happening to keep me from forgetting the subject altogether. In a national magazine with wide distribution, my wife and I read an article by the TV critic, John Crosby, in which he recommended what seemed to be a virtual government take-over of the television industry (to cure its ills).1 I read the complete "vast wasteland" speech of Newton F. Minow—the one that has brought this whole issue into sharp focus as never before—and
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waited for somebody to rise up and make a ringing rebuttal on the grounds that Minow was openly threatening free speech. If a ringing rebuttal came, I missed it, but later on I did read newspaper editorials agreeing with Minow’s objectives and a four-part series in The Saturday Evening Post by John Bart-low Martin in which, like Crosby, he summarized by calling for more of the heavy hand of government.2
Clearly, the television industry was getting some rough treatment from people who should have been its allies. In times past, newspapers have risen up like one man to parry any attempts to censor even the most dubious phases of publishing, such as smut books, horror "comic" books, subversive literature, and other ghastly extremes. The principle has been that any attack on one part of publishing can set a precedent for eventual control of its other parts. This principle has even compelled editors to defend the rights of pub-lications they actually loathed. Hence, it was probably the peculiar and inconsistent attitude of many newspapers (and persons of influence) toward the Minow challenge which caused prominent communications attorney, W. Theodore Pierson, to write: "… it is impossible to understand why journalistic craftsmen in non-broadcast media either remain silent or applaud the cultural dictators when every constitutional justification for broadcast censorship can have similar counterparts with respect to nonbroadcast media."3
What Mr. Pierson was saying, in plain English, is that when a lion is in the streets, it’s the duty of every able-bodied man to do something about it—if only for reasons of pure self-interest. His words were a rebuke to Messrs. Crosby and Martin and the hundreds of others who have moralized about the misuse of the airwaves. Yet, voices of great influence have applauded Minow, and we hear much pious theorizing about how all of us can be ele-vated and uplifted by a "truly responsible broadcasting industry."
One thing was certain: the television industry had somehow acquired a bad press—and some of the press had advocated strong doses of government intervention as the remedy for what they thought to be wrong with tele-vision. Their reasoning was that the "people own the airwaves; hence, broadcasting isn’t free in the same sense that publishing is." There is also the argument that TV is a very powerful medium, and shouldn’t be left in "private hands for private gain." The first argument is the more critical one, for it is the one that is presented to the public. The second argument—that TV is a particularly powerful medium—works just as well for those of us
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who deplore government control of communications. It is, we can conclude, the fiction of the "people’s ownership" of the airwaves that gives government its strategic hold on the licensed broadcasting industry.
Four Reasons for Abolishing the FCC
Now I did become extremely curious, for it appeared that free speech had indeed been forced into a dilemma simply by the physical limitation in the airwaves. And it remains an insoluble dilemma so long as one does not challenge the basic wisdom in "governmental ownership." I feel that this whole matter of "government ownership" should be challenged.
I have four points to make—four opinions to offer. They run contrary to most of what is said and heard about the plight of the broadcasting industry. But if the past is any gauge of the future, they simply must be true:
1. The revocable, renewable FCC-granted license has been an effective censorship device and will continue to be so regardless of who is serving on the commission.
2. Attempts to dictate to the broadcasting industry will tend to increase in the future unless the licensing regulations are relaxed or abolished.
3. A better broadcasting industry, truly serving the "public interest" and offering a wide fare for viewers, can only come about through less control—never through more.
4. The "people" do not really own the airwaves now, but would actually be able to exercise more direct control over the industry if the present licensing system were to be abandoned.
How the Licensing of the Press Came to an End
[My first point is that] the licensing system has always been a means of control, and the feudal governments of old quickly imposed licensing restrictions on the printing industry in its earliest days. The practice of licensing the press was not abandoned in England until 1694. It had already become rooted in the colonies, and the press censorship of one kind or another was carried on without apology. Journalists like to point to the
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case of John Peter Zenger as one of the significant milestones in the battle for press freedom. In this famous case, back in those colonial days of 1734, Zenger was prosecuted for publishing harsh criticisms of the governor of New York and his administration. Freedom finally won the day when a jury acquitted Zenger, whose plea was that what he had printed was true, and thus not libelous! 4
From this early beginning, press freedom in America finally made its way to the First Amendment of the U.S. Constitution. It became a national tradition. With remarkable fidelity to principle, the Supreme Court has time after time destroyed laws which threatened press freedom. A Minnesota law which tried to suppress "malicious, scandalous and defamatory" publications was struck down in 1931.5 A Louisiana law which sought to impose a dis-criminatory licensing tax on newspapers was invalidated in 1936. And in 1938 the High Court ruled that it was censorship of the press to enforce a municipal ordinance requiring a permit from a city manager in order to distribute circulars and handbills. The permit was actually a form of li-censing, and in this decision the Court obviously made the tacit assumption that licensing and censorship go hand-in-hand.?
The Court has also had something to say about the attempts of federal agencies to censor the press. In the famous case of Hannegan v. Esquire (Magazine), the Court ruled that the Postmaster General’s authority over second-class mailing privileges could not be used to prohibit the mailing of a publication deemed to be salacious, and so forth.8
There is everything to applaud in these decisions, regardless of how one might have felt about the publications or persons involved. The decisions upheld the principle of a free press, which goes hand-in-hand with a free country. As Justice George Sutherland said in the Louisiana decision: "A free press stands as one of the great interpreters between government and the people. To allow it to be fettered is to fetter ourselves."
The result of our press freedom has been an unbelievable torrent of publishing covering every facet of life and thought. Much of it is bad, but much of it is also very good. The same laws that protect the publishing of frivolous comic books also guard the journals and books carrying the great ideas that test the foundations of society. To get the wheat, we endure the
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chaff, for nobody has shown us how to destroy the one and still preserve the other.
Licensing of the Airways Leads to Censorship
Yet this wonderful shield of the First Amendment, so jealously guarding printed matter and speech in open-air parks, becomes beclouded when the issue of the airwaves is discussed. The whole idea of licensing communications media tends to contradict American principles, despite the intended safeguard of Section 326 in the 1934 Communications Act:
Nothing in this Act shall be understood or construed to give the Com-mission the power of censorship over the radio communications or signals transmitted by any radio station and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication.¹º
Yet this well-intentioned (and perhaps impossible) restraint on FCC powers did not place the broadcasting industry in the same unfettered position as the publishing world. The FCC had the right to review the general performance of stations and to evaluate their performance in the "public interest." This remained as a potential means of indirect censorship.
FCC “Blue Book” and “Mayflower Decision” Leads to Censorship and Control of Programming
In 1940 the FCC struck at the very roots of free speech when it issued the famous Mayflower decision against radio station WAAB, which had openly editorialized in favor of a political point of view.
10 Walter B. Emery, Broadcasting and Government (Lansing: Michigan State University Press, 1961). The Mayflower Broadcasting Corporation, which owned the station, had to amend its policies in order to keep its license.¹¹ This decision obviously had a coercive effect on all other license-holders, and obviously forced stations to travel a neutralist political line as much as possible. The Mayflower decision was modified in 1949 to permit editorializing if both sides of an issue were presented. This is
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as if a magazine or a newspaper had to make all of its editorials of the "pro-and-con" variety.
An even more dubious venture was the development of the FCC Blue Book in 1946. It was an attempt to define the public service responsibility of licensees, and it triggered congressional charges that the FCC was censoring and controlling programs.12
The net effect of this FCC posture has been to place the industry in the position of always staying on the "safe side." Freedom of speech clearly implies a right to express views that are contrary to our own, or to the prevailing political climate. If we define free speech simply as permitting people to say what we want them to say, we would then have to conclude that the Nazis and the communists granted free speech: one was always free in Nazi Germany or Russia to praise the regime, and it was only contrary viewpoints that were punished. Thus, by granting station owners only the right to express neutralist or middle-of-the-road editorial viewpoints, the FCC has probably robbed the industry of the vigor and individualism which Minow complains it now lacks.
The “Communications Act” Forbade Censorship and Then Supplied the Means of Doing it.
Licensing is an unavoidable form of censorship; the FCC commissioners probably will continue to be censors whether or not they wish to be in that role. It is the old story: a federal agency given broad powers is actually forced to begin regulating and controlling in order to do its job properly. Far from being the officious meddler that many think him to be, Newton Minow may actually be one of the first FCC chairmen to have tried to do at least a thorough job. It is our fault—not his—if the job he’s trying to do collides with our principles. We should change this by altering the purpose of the job, not by attacking or criticizing the man who occupies it for the moment.
As we have already seen, the Supreme Court ruled explicitly against licensing of the press. It was flatly held to be censorship. If this be true in the case of publishing, it must also be true in the case of broadcast media. The fallacy in the Communications Act was that it forbade censorship on the one hand, and yet on the other hand supplied the means of doing it.
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Increasing Regulation in the name of “The Public Good”
My second point is that the government’s pressure to dictate to the broadcasting industry—and perhaps to the press through indirect means—can be expected to become increasingly bolder in the future. We would do well to remember David Hume’s wise observation: "It is seldom that liberty of any kind is lost all at once." In the case of the FCC, it could not be that any one FCC chairman could in his administration gain absolutely dictatorial powers. What happens this year or next may not seem especially offensive. But we live in a time when the pressures for centralism in the U.S. seem to be gaining new force at an accelerating tempo. Federal control of broadcasting is fully in accord with centralist thinking, as is federal control of everything else.
Characteristically, the influential centralists at the public level are mostly men of good will who advocate their doctrines because they believe they are best. In their view, centralism is even the moral thing; "the public good versus private greed," "production for need rather than production for profit" are some of their choice sayings. Mr. Minow is also a man of good will and his words ring with high moral purpose. Yet it is the duty of the rest of us to see clearly what must be the inevitable outcome. Each decision or precedent that paves the way toward centralism paves the way for more of the same in the future, since one action is used to justify a similar but more drastic one at a later time. Thus, Mr. Minow’s attempt to strengthen the hand of the FCC is a dangerous thing, if indeed we regard federal control of communications to be dangerous.
Massive Propaganda Campaign for Regulating Television
We must also remember that many of the attacks on television have been the kind of attacks made right along at business organizations. They are simply one part of a massive campaign to thrust the government into every activity. Minow blasted the industry for the proliferation of commercials exhorting and cajoling people to buy things. The remarks carried the subtle implication that it is wrong to try to persuade people to buy things, when in fact successful salesmanship has again and again been shown to be a necessary phase of the distribution function.
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Minow also made pointed references to the industry’s profits, which have been enormous in recent years, but once again there was the implication that profits are wrong or have somehow been extorted from the public in an un-derhanded manner.
The attacks on programming are not unlike the fondness left-leaning writers have shown in recent years for attacking fickle things like "automobile tailfins" and "hula hoops." There seems to be a familiar sound in this idea of running "public service" programs rather than "popular" programs; isn’t it a little like the notion that funds should be diverted from the private sector to the public sector?
Once they have established their power, it is hard to break, for the cultural dictator is certain he’s right. The egotism of these powerful, entrenched centralists is a frightful thing to behold. In Britain the British Broadcasting Company held a tight monopoly of the radio industry, and, then it developed, television. One of the bureaucrats who headed the BBC and hence held immense power was J. C. W. Reith, whose replies to criticism are a good indication of how he felt about the citizen’s intelligence and judgment:
"It is occasionally indicated to us that we are apparently setting out to give the public what we think they need—and not what they want, but few know what they want and very few what they need."
And another:
"It is becoming obvious that, however desirable central control may be for the reasons indicated, it is essentially ethical, in order that one general policy may be maintained throughout the country and definite standards maintained." (Italics mine. )
Mr. Reith’s influence was always available in Britain to protect the monopoly of broadcasting, and incidentally, to maintain and enlarge Mr. Reith’s own sphere of influence as director.14
New Ideas and Innovations Thwarted In FCC Hearing Rooms
My third point is that the stated objectives of increased FCC jurisdiction—that is, improved programming in the "public interest"—probably will
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continue to elude us under the present system. The reason is simply that the market is forcibly restrained, and new ideas for increasing or varying broadcasting services are thwarted in the FCC hearing rooms. In fact, the entire broadcasting industry has some of the characteristics of a government-protected cartel, with broadcasters protesting FCC discipline and yet accepting the inevitable market protection the exclusive license provides. The very advantages this system is supposed to achieve—the offering of fine, high-level public service programs—has, in fact, been denied us. I don’t dare suggest that the programs now featured would disappear if restrictions were removed—my chief hope is only that the free market would have a tendency to serve all audiences.
Yet, it would be a sad day for the cause of liberty if the main remaining arguments favoring freedom became simply those showing it to be more efficient. The major issue involved here should be a free communications system versus a controlled one. Whether radio and television are good or bad should concern us little.
Yet it seems that many people have drifted into a state of mind that asks only: "Which system will give us the best television programs?" rather than "Which system will keep our communications free?" It would be better if they chose to defend the principle of free expression, but in any case it should be made clear that our best hope of improving broadcasting lies in liberating the entire system. "Improving" broadcasting ought to mean only the creating of conditions that will tend to create the stations and programs to serve the millions who are supposed to have been ignored when TV networks developed shows for the "lowest common denominator." A characteristic of the free market is that "demand" seeks to bring "supply" into existence, if the thing is at all possible. As we look about at all other industries, we can easily see that all businesses offer tremendous quantities of standardized low cost products for the mass market; yet this has not done away with unusual or special product lines for those who want them. Supermarkets have not destroyed the quality delicatessen stores, and mass-produced automobiles have not ruined the quality sportscar market. If there is a market for different kinds of television programming, the programming will find a way to appear.
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Competition Improved BBC Programming
The experience of television in Britain is interesting proof that increased competition (which would have to result in a free market) improved the programming. For almost all its existence, British broadcasting has been a government monopoly. This has been fought bitterly through the years, and it was proved that many British viewers tuned in on livelier broadcasts from the European continent—for the British Broadcasting Company was terribly dull. Finally, under mounting pressure, the government allowed one com-mercial network to begin broadcasting in 1955. The result: the coming of a rival forced the BBC to begin competing for audiences by using the same type of program fare. Viewers suddenly took to television as they never had before. It is estimated that the total TV audience (read market) in Britain has grown in seven years from 5¹/2 million to 40 million. 15
Yet this was only competition of a very limited kind. We have no way of determining what an uncontrolled television industry would be like. We can only point to the rest of our economy—particularly the freest portions of it—and say that something very fine would happen.
Government Control Equals Government Ownership
My fourth point is that the people do not effectively "own" the airwaves simply because they are public property. While this "people’s ownership" may be true in a strict legal sense, it is not true in practice. At present, the airwaves hardly belong to anybody. The government does not really own them fully, because their use has been allocated to private broadcasting by the Communications Act. Yet, the private broadcasters are not owners either—they simply have three-year licenses. Thus, everybody’s owner-ship rights have been diluted. It is a stalemate that ought to be broken—and it can be by removing the airwaves from their special "public property" classification.
In discussing the possibility of removing federal control of the airwaves, one quickly finds himself swept into a narrow "either-or" argument. Either we have federal licensing and control, the argument goes, or we face the broad-casting anarchy that existed before 1927.16 After all, governments have to provide policemen to direct traffic, don’t they? Freedom of the airwaves was fine back in those ancient times before 1927, but it would never work today.
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One loses this kind of an argument every time if he permits it to remain on the narrow "either-or" basis. The fallacy of the argument is in its assumption that we have a choice only between federal control and chaos. Even persons who are quite suspicious of any kind of federal control of broadcasting cannot see other alternatives. We must remember that this federal control has existed ever since broadcasting’s infancy, so the idea of liberating the airwaves has had little consideration. Ownership of the airwaves has been a government monopoly, to be shared sparingly with others. So long as this monopolistic ownership goes on unchallenged, there is little chance that the roots of broadcasting’s problems will be touched.
The Myth of the “Peoples Airwaves” and the “Sacred Public Trust”
The dispute will probably go on endlessly so long as the government continues to claim that it "owns" the airwaves. It is this claim of ownership that casts the broadcaster in a role only slightly above that of a free-loader or a despoiler of public property. To hear all of the moralizing about the "people’s airwaves" and the "sacred public trust," one would think that the airwaves were something built and paid for by public funds. Actually, the airwaves existed all along, and it was only the fantastic growth of the radio and television industries which gave them value at all. Most people didn’t even know of their existence until the miracle of radio proved it. If anybody should be in another’s debt in this situation, it is the government which should reimburse the industry for the tremendous capital appreciation of its airwaves.
Side-stepping the "either-or" argument, one begins to see a possibility of reasonable solution through private ownership and control of the airwaves. Let broadcasters own the airwaves themselves or lease them from other owners. Let the market pricing system allocate this scarce, valuable, economic resource to the highest bidder, with full powers to use his property as he judges best in the conduct of his own business. The market has functioned admirably whenever it has been given a chance with respect to countless other scarce and valuable resources; why not the air-waves? (At this point you will hear the "What-about-obscenity and-sedition?" argument, but this doesn’t apply either, for our courts are empowered to deal with obscenity and sedition, despite who happens to own the offending medium.) The private ownership or leasing arrangement
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has been advocated by Professor R. H. Coase of the University of Vir-ginia, and like all sensible solutions to perplexing problems, it is perhaps the only one which gives any promise of correcting broadcasting’s present confusion.17
Competition Efficiently Allocates limited Resources While Encouraging Technological Innovation
Since these channels are limited in number, wouldn’t this be to favor some individuals over others? Well, of course, that is what has already happened even under the FCC! Professor Coase answered that argument very well by pointing out that land, labor, capital, and almost everything else of commercial value is in limited supply. (Indeed, if the supply were unlimited, the commercial value might not be high!) Actually, ownership of the stations and the airwaves would most likely continue to rest with the persons and corporations who are in the business now, for they are the ones with the capital, and experience. One must remember that a "free enterprise" broadcasting industry would "favor" tho se who run their stations most effectively, and would eliminate those who don’t. Use of the airwaves would tend to revert swiftly to those who could make the best use of it. [Advances in new technology have added or discovered additional frequencies and brought about the competition of the internet and cable TV.]
Private ownership of the airwaves would introduce another factor that has been virtually absent from the industry: an intensified, well-financed campaign to bring more channels into existence or to narrow existing channels to permit broadcasting several programs simultaneously in the band now used for one. At present there is no incentive at all for private enterprise to sponsor this kind of an effort, and other efforts are constantly thwarted by restrictions.
Let us suppose, however, that private broadcasters were in a legal position to increase the worth of their own investments through a technological break-through of this kind, or through promoting pay-television and the ultra high frequency channels.¹8 Would they not do so, as quickly as possible? And would not the availability of more channels eliminate for all time the often-heard complaints that wonderful programs with only 10 million viewers were removed from the programming to make way for westerns
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watched by 30 million viewers? Would not broadcasters seek to serve minority audiences as they are now unable to do?
Government Control of the Airways leads to Inefficiency and Monopoly
Thus, I argue that the people and not the government ought to own the airwaves. I think we should label as utter hypocrisy this notion that "the people" can effectively "control" or "own" the airwaves through their government. Which of us, because of his vote or his contact with a con-gressman, has the slightest voice in the operations of the U.S. Government Printing Office or the Tennessee Valley Authority? Yet, in theory, we "own" these establishments. But over privately-owned businesses, we do have power—the immense and considerable power of exercising our right to buy or not to buy. We can influence the direction of privately-owned establishments whenever it suits us—but our government "ownership" of the airwaves will continue to get us more troubles like the ones we’ve had.
As a citizen, I would be glad to aid the cause of freedom by relinquishing my own microscopic interest in the public’s airwaves. If the other 184 million "co-owners" would do likewise, we could let the broadcasting industry become something it hasn’t as yet had a chance to be—the greatest and most effective medium the world has ever seen—offering something of everything and not too much of anything—serving the majority without slighting the minority—being truly a service that is of and for the people.
Notes
1. John Crosby, "What You Can Do To Make Poor TV Better," Ladies’ Home Journal, November, 1960, p. 74.
2. John Bartlow Martin, "Television USA: Wasteland or Wonderland," The Saturday Evening Post, 4-part series in weekly installments beginning October 21, 1961, p. 19.
3. W. Theodore Pierson, "Sees ‘Electronic Press’ Freedom Periled by Eggheads, Crackpots," The Detroit News, January 7, 1962.4 William
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4. Chenery, Freedom of the Press (New York: Harcourt, Brace and Company, 1955).
5. Near v. Minnesota, 283 U.S. 697, (1931).
6. Grosjean v. American Press Co., 297 U.S. 233, (1936).
7. Lovell v. Griffin, 303 U.S. 444, (1938).8 Hannegan v. Esquire, 327 U.S. 146, (1946).
9. Quoted in Encyclopedia Americana, Volume 22, 1961 (Freedom of the Press).
11. William L. Chenery, op. cit.
12. Walter B. Emery, op. cit.
13. Quoted on frontispiece of paperback edition, The Road to Serfdom (Chicago: The University of Chicago Press, 1960).
14. Wilfred Altman, et al., TV: from Monopoly to Competition, Institute of Economic Affairs, London, 1961.
15. Ibid.
16. The year the Federal Radio Commission was formed. FRC was superseded by FCC as a result of the 1934 Communications Act.
17. Ronald H. Coase, "Why Not Use the Pricing System in the Broadcasting Industry?" The Freeman, July, 1961, p. 52.
18. No attempt here to discuss toll-TV controversy or the difficulties of developing UHF channels. Author believes toll-TV dispute is a direct result of licensing system, which throws upon FCC rather than the open market the burden of deciding utilization of new broadcasting methods. UHF problems are quite involved, but it is safe to generalize that the free market also has the means of developing UHF when the need for additional channels occurs in specific areas.
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The Raw Tyranny of Act 389
Act 389 requires “all payments made by check, electronic transfers, or money order shall be reported separately in . . . daily reports.” Along with a record of financial data that can be readily provided to government authorities, the dealer must maintain and report:
• the date and place of each purchase he makes • the name and address of a seller, including information from a
government-issued ID • the license number of the vehicle delivering a purchase • a full description of the good purchased (including weight)
In short, the government demands proprietary information, which is a business asset, even though no crime is alleged.
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Chapter 8
Psst! Wanna Buy a Bridge for Cash?
A Louisiana law forbids cash for used goods.
Wendy McElroy October 25, 2011
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Freeman contributing editor Wendy McElroy is an author and the editor of ifeminists.com.
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A Louisiana law that took effect in August seeks to prevent the sale of stolen bridges by outlawing cash transactions in used goods. Secondhand dealers are also required to record the IDs of all buyers.
On its surface Act 389 addresses a real and growing problem. As the [depression] deepens and the prices of commodities soar, the theft of goods — like copper from construction sites — has increased dramatically and everywhere. For example, this month two brothers in Pennsylvania were charged with stealing a 50-by-20-foot bridge and selling “the 15 1/2 tons of scrap metal for more than $5,000.”
It is difficult, however, to view the Act as anything other than a tyrannical tax grab. It is deliberately so broad as to explicitly include “pictures, objects of art, clothing,” tools, automobile parts and electronics (such as radios). In short, thrift stores, flea markets, eBay,
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and yard sales are deliberately included; all they need to do is sell more than one item a month to be a covered business.
And if America’s most aggressive state crackdown on the “gray market” in used goods proves to be revenue-enhancing, other cash-starved states are likely to follow Louisiana’s lead.
Act 389 is a Revenue Enhancement Scheme
There are at least two ways in which Act 389 may rake in revenue:
1. Those who do not comply can be fined.
2. The Act specifies that instead of cash, a secondhand dealer must accept a “check, electronic transfers, or money order” issued in the dealer’s name. The required paper trails and reporting requirements set the stage for the future taxation of a relatively untapped activity. Secondhand businesses are notorious for tax evasion simply because their goods are often acquired and sold without paperwork. Act 398 closes that loophole with noose-like tightness.
Act 389 demands Personal Proprietary Information
Act 389 requires “all payments made by check, electronic transfers, or money order shall be reported separately in . . . daily reports.” Along with a record of financial data that can be readily provided to government authorities, the dealer must maintain and report:
• the date and place of each purchase he makes • the name and address of a seller, including information from a
government-issued ID • the license number of the vehicle delivering a purchase • a full description of the good purchased (including weight)
In short, the government demands proprietary information, which is a business asset, even though no crime is alleged.
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Act 389 Will force Some Businesses to Shut Down.
In 1862 Congress declared U.S. currency legal tender for all debts, and it is not clear that a state has the authority to ban its residents from using legal tender [Gold and Silver] to make a legal purchase. Nevertheless both the IRS and state taxing agencies are sure to applaud the substituting of a paper trail for cash in any economic transaction. As the self-interested president of MasterCard, Ajay Banga, has stated, “You can’t evade taxes if you accept credit cards.”
Privacy advocates will decry the creation of yet another government database to track every penny that goes into or out of a pocket. Some businesses will undoubtedly close their doors due to the sheer cost and aggravation of compliance. Struggling individuals are sure to resent the state regulation of innocuous ventures like yard sales or collecting cans off the roadside. They will howl at the prospect of paying taxes on selling used goods on which taxes were paid when new from income that was also taxed.
Louisiana will probably act to reduce the “howl factor.”
How a law is enforced is a different matter from what the law says. Enforcement is often selective and to date, thrift shops are reportedly still accepting cash. It is unlikely that the no-cash policy will ever be applied to a 25-cent child’s toy at a yard sale. Large and permanent business-like junk yards are far better targets in terms of public relations and the money to be gleaned in fines or “escaped” taxes.
Nevertheless, the law could be applied with no hesitation to anyone the authorities wish to target. Moreover the revenue net can be widened at will, and the information reported can be used to create new and innovative taxes.
Make no mistake, other states are watching.
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Many Businesses Support Regulation as a Way To Limit Competition in the Market Place
The foremost palliation given for dusting off this ancient despotism is not particularly original. John D. Constance, in the pages of THE BENT, for example, used the old saw of public protection: "Practically every design" he contends, "every operation, and every process developed by engineers has public implications… It should be evident that engineering, because of these implications, must be regulated by the state — and must come under the police powers of the various states — to provide this protection to the public."3 [The emphasis was his.] But as the public record of such regulation, from the Dark Ages to the present day, is increasingly exposed to objective scrutiny, the claim increasingly shows tarnish and wear. Friedman, again, shows: "The pressure on the legislature to license an occupation rarely comes from the members of the public who have been mulcted or in other ways abused by members of the occupation. On the contrary, the pressure invariably comes from members of the occupation itself. Of course, they are more aware than others how much they exploit the customer and so perhaps they can lay claim to expert knowledge."4
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Chapter 9
Engineering Regulation: The Return to Medievalism
By Larry W. Sarner
November 1975 _____________________________________________________________
Reprinted from the Spring 1975 BENT of Tau Beta Pi, National Engineering Honor Society. Larry W. Sarner received the B.A. degree in political science from Colorado State University in 1970 and is studying for the B.S. degree in applied math. In addition, he is a general partner in Hydra, a consulting firm specializing in data processing, survey and political analysis, and investment research.
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There are those who hail, in effect, the advent of state regulation of the several professions as "the bright, shining day" of public protection and professional responsibility, and they have held sway over the public consciousness for many years. Nevertheless, there are storm clouds building nearby, within the professions and without, and they threaten to eclipse, at least temporarily, regulation’s source of power. There are those, again within and without, who are urging the clouds on. I am one.
While professional regulation by government is an accomplished fact in many fields, including engineering, it need not remain so. Unlike physical laws, government statutes do not necessarily mold reality; and also unlike physical laws, they can be repealed. Regulation is very much like the engine
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with positive feedback throttle–a built-in tendency to get out of control that is not so much an error in design which can be engineered away as it is a blunder in conception which must be discarded. And it will not be so much a turning back of the clock merely to abandon the scheme as it appears on its face; for regulation itself is a throwback to bleaker, more desperate times. Consider:
(1) An organization is formed to protect the working conditions of the profession, though its primary justification is the protection of the public.
(2) All services are to be performed for a just price, with competition on price alone condemned as unprofessional.
(3) Regulations governing the standard of quality are set up for each profession by its practitioners, since only these experts can determine what is the correct quality in the profession involved.
(4) Advertising of all kinds is prohibited.
(5) An "apprenticeship" is allowed for, permitting the training of young professionals.
(6) After a journeyman’s experience, an individual may become a licensed professional, provided he passes an examination before other professionals, demonstrating his proficiency, his good character, and his financial standing.
(7) Unfair competition, especially price-cutting, is frowned upon. In fact, cooperation is the ideal, enforced if necessary by strict regulation on the part of the authorities.
(8) The enforcement of penalties against offenders is made possible through exclusion from the license, which means that the professional loses his right to do business.¹
I believe the advocate of regulation will find the foregoing to be a fair representation of the basic elements necessary to control a profession, though motivations for them are conspicuously absent. The particular rationales were omitted because the elements are not a blueprint for regulation, at least as explicitly as that form is known today, though I contend the model fits very well. Instead, it is a faithful account of the
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essential characteristics of the medieval practice of guilds, which most historians will say passed from the Western scene nearly 500 years ago.
Guilds were a fascinating economic organization, viewed from afar. They provided stability, quality, and social cohesiveness for whole classes of people. But they were also tyrannical, corrupt, and economically unviable in a society where change, technological progress, freedom, and capital investment were the norms. Thus the institution faded in influence and power, and its final vestiges were abolished by freedom-minded reformers centuries ago.
Their passing was not lamented; the cause of human progress was immeasurably advanced by their disappearance. As economist Milton Friedman has stated,
"The overthrow of the medieval guild system was an indispensable early step in the rise of freedom in the Western world. It was a sign of the triumph of liberal ideas, and widely recognized as such, that by the mid-nineteenth century, in Britain, the United States, and to a lesser extent on the continent of Europe, men could pursue whatever trade or occupation they wished without the by-your-leave authority of any governmental or quasi-governmenmental authority."²
But there are those in the twentieth century who are effectively urging a return to feudal practice. They are insisting that the state resume its interference with the right of the individual to engage in a commercial or professional activity of his or her own choosing. Despite the historical evidence of 1,000 years of what was appropriately labeled the "Dark Ages," and the insurmountable arguments pointing toward present-day economic untenability akin to the waning days of the guilds, the tendency toward state regulation has successfully grasped the engineering profession.
Licensing Demanded by the Occupations to be Regulated
The foremost palliation given for dusting off this ancient despotism is not particularly original. John D. Constance, in the pages of THE BENT, for example, used the old saw of public protection:
" Practically every design" he contends, "every operation, and every process developed by engineers has public implications… It should be
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evident that engineering, because of these implications, must be regulated by the state — and must come under the police powers of the various states — to provide this protection to the public."3 [The emphasis was his.]
But as the public record of such regulation, from the Dark Ages to the present day, is increasingly exposed to objective scrutiny, the claim increasingly shows tarnish and wear. Friedman, again, shows:
" The pressure on the legislature to license an occupation rarely comes from the members of the public who have been mulcted or in other ways abused by members of the occupation. On the contrary, the pressure invariably comes from members of the occupation itself. Of course, they are more aware than others how much they exploit the customer and so perhaps they can lay claim to expert knowledge."4
Citizens’ groups and public interest lobbies are now pressuring legislatures to review the occupational licensure provisions in their states. And what some of these investigations are uncovering is a record of public abuse rather than protection. If the " public protection" argument is to hold water, it must show three things:
first, that there is an abuse that needs to be corrected; second, that professional review is an effective means of correcting such abuses; and third , that the police powers will not be turned against the public itself. Yet, as to the first, rarely if ever has any trustworthy evidence been produced to show that abuses exist outside the purview of criminal statutes which can be more effectively treated with regulatory procedures; those that ostensibly exist are usually straw men the regulators can conveniently pick apart or carefully screened single instances gleaned from decades of searching. Thus, on the first count, the cause celebre of public protection wanes.
“The Greatest Harm is done By the Hack WITH a License”
The cause fails on the second count as well, however. The record, at least in Colorado, Florida, Iowa, and probably in the remainder of the states, shows an entirely contrary performance to the public interest. For instance, in Colorado, the head of the Department of Regulatory Agencies revealed
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recently that, "In 1971, not one doctor — not one dentist — had ever had a license suspended or revoked" in Colorado.’ This is a remarkable testimony to the competence of Colorado‘s medical practitioners — if anyone genuinely believes that not a single reproachable medical practice was undertaken in a state of two million people during 365 or more days. It contrasts sharply with the apparently rampant incompetence in Florida’s construction industry, where 2,149 candidates took the general contractor’s examination in 1973 and every one of them flunked.’ Concomitantly, the state’s official sanction to an incompetent, when it is given, causes even greater damage than if nothing is given at all. Says Earl Johnson, the Colorado regulator: " The greatest harm is done by the hack with a license. The state says he’s qualified and he’s not. That hurts the public whether the incompetent is a dentist, a pharmacist or a plumber." 7
A negative performance in the third area makes the failure complete. In addition to the blatant restrictions of membership as evidenced in the Florida case, there is mounting concern on the part of many groups over the guild-type regulations which limit the public’s choices and hinder efficiency. Furors have been raised in Colorado over a regulatory prohibition of charitable hair-dressing of elderly women by "untrained" (i.e., unlicensed) beauticians, over the ban of competitive advertisement of pharmaceutical prices (successfully challenged by a large supermarket chain), and the enforcement of drug-abuse laws by the Board of Barber Examiners in Florida similar storms have been howling over the regulations governing the professions of optometry, real estate, and medicine. And talk is circulating in Washington of applying federal antitrust statutes to the more "unreasonable" practices of regulatory commissions.
Of course, it can be argued by the pro-regulators, in an attempt to salvage something of what they’ve built, that these failures are more simply "abuses" needing only a little corrective salve. But it is my contention that there is much more to it than that. As before, the engine is a run-away not because of faulty design, but because of fundamental misconceptions. I hope to show herein that systemically regulation (1) fosters monopolistic growth of power, stagnating the profession; (2) fails to achieve its purported goals; and (3) is an unsupportable violation of human rights and freedom. Of course, it should be said up front that my basic predilection is that the opposite of each of these effects is desirable and that the affects themselves are to be avoided if alternatives can be found.
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Coercive Licensing Restricts Entry into a Profession
First, as to the monopolistic growth of power, my concern rests thus: the introduction of government into any area of legitimate endeavor is never an improvement over any state of affairs. The growing mountain of evidence, from the recent localized studies of Bernard Siegan (Land Use Without Zoning) to the current series of articles of The Wall Street Journal concerning the effects and operations of federal regulatory agencies, is giving a strong presumption against government regulation of all types and at all levels. Slowly, citizens are becoming aware that regulation in their name has not been consistently in their interest, and more often than not against it. Pretty much, regulation is instead a concession by men of mediocre abilities in the professions involved (or men with greater competence, but less psychological security) that they are unable to cope with the world and want others to do it for them. Licensure is an introduction of politics into an arena where politics is not only irrelevant, but destructive. The possession of competence in a given field is an objective fact, not the product of a political decision. Yet, where you have government intervention, you have political decisions, not objective ones.
The prime power in the licensure process is the ability to restrict entry to the profession. Every regulated profession, at one time or another (or continuously) has used the licensing structure to restrict its numbers. They can, and do, adopt guild-like requirements for admission. Colorado, for example, insists that its engineering applicants provide five character references, at least three of whom must be professional (licensed) engineers. The board which passes on applicants is composed exclusively of engineers who have been licensed for at least ten years.8 An immediate concern for Colorado’s engineers is how long it will be before the inherent inbreeding of such a process creates a form of professional hemophilia.
Licensing Encourages Favoritism, Fraud & Corruption
Already the symptoms are beginning to show. It is possible, for example, for a group of professional arbiters, with immense credentials in the advocacy of regulation, to spell out terms to the profession and to the public. Engineers can see this particular tendency in the drive of certain regulators to achieve a forced unnatural union of the engineering profession. Mr. Constance, a leading spokesman, would have the regulators oppose the
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fragmentation of the profession (a process which would have the — laudable — effect of making regulation more difficult, and power that much more difficult to exercise). "To counteract this tendency [toward specialization]," he says, "Those who have been concerned with licensing have superimposed an effort to get unity."9 This is a fortuitous example, for it demonstrates vividly the contention that regulation will, in the normal course of events, expand beyond its nominal scope of public protection and engage in superfluous matters.
On the public side, as I have mentioned before, many consumer groups of late have shown an increasing alarm at the inbred nature of the professions and their regulators. The medical profession, for example, is now under heavy attack for the oppressive nature of its regulatory procedures. The ability of the medical societies to utilize the state’s power to circumcise health care to suit the cliquish desires of their leaders has proven too much for the general public to bear. The severe limitations on the much-needed paramedics, the jurisdictional dispute between nurses and operating-room personnel, and of course the omnipresent thorns of chiropractic and acupuncture, have made the public acutely aware that regulation is not serving them any too well in one of the world’s oldest, and probably most heavily regulated, professions. As an absolute minimum solution, the public pressure has been for the placement of consumer representatives on regulatory boards. The professions will naturally resist, mostly on the claim that professional competence is prime, but politics is politics and eventually the "public" will have its way and some just deserts will be forthcoming.
For the engineer, an additional problem will be posed by a public thirsting for new ideas and processes in an age of energy "crises" and famine. If the profession begins to make excuses instead of "delivering the goods," it will find itself facing a skeptical, increasingly hostile electorate. It will matter little that the profession’s inadequacies are justifiable rationally; once having accepted a political method of approaching competence, there is an inexorable tendency to accept political methods in approaching all professional matters. This will subject the profession to the pressures of an American belief nearly as old as the nation, that a problem can be solved primarily by an exercise of will. As de Tocqueville noted about the national character over 140 years ago: "No natural boundary seems to beset the effort of man [in the American view]; and what is not yet done is only what he has not yet attempted to do."¹º
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Yet standing against the tide are the regulators, or the would-be regulators, the ones who contend that professional engagement is a grab-bag of governmental favors and that if the engineers don’t get in there and fight someone else will come along and pick off first what is justly theirs. Lawyers, they claim, will steal away their ability to write contracts; accountants will run off with their right to keep books; and architects will usurp their ability to look over blueprints. As an alternative to the undignified rush to the law books, a more promising solution might be for engineers to give a loud "No!" to the usurpations of the others. Engineers’ rights will not be assured by guild legislation; they will only be preserved by a consistent, vigorous defense made by honest engineers. The choice should not be made to "legalize" engineering at the expense of "criminalizing" honest craftsmanship.
As to the second point, the failure of regulation to achieve its purported aims: there are picayune methods of attacking the problem of "protecting" the public, and there are substantive ones. The picayune, for example, is the bloated concern over the use of titles. For a country little concerned with titles, noble and otherwise, since its founding, it is remarkable the concern which many regulators will attach to a designation such as "engineer," "doctor," "architect," or any one of a multitude of others. Somehow, it is thought, the unscrupulous will be thwarted if they cannot use the proper titles. But human ingenuity is boundless, and the small matter of a word presents but a tiny obstacle to either con man or journeyman. To the predictable consternation of every regulator, there is at least one best-selling author who baldly asserts that "licenses and regulations can be avoided by using a little imagination. There are plenty of psychologists who are unlicensed because they don’t call themselves psychologists. And there are plenty of people who do the same things that teachers, doctors, architects, lawyers, beauticians, engineers, bankers, investment counselors, and psychiatrists do, but avoid the legal requirements by not using the legal titles." ¹¹ Right or wrong, such views reflect how the "other side" views the subject of sacred titles. Fortunately for the regulators, the laws themselves are more substantive (in theory, at least) than the mere banning of a word. The law requires definitions to be operative, and Colorado law, for instance, defines the practice of engineering thusly:
The performance for others of any professional service or creative work requiring engineering education, training, and experience and
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the application of special knowledge of the mathematical, physical, and engineering sciences to such professional services or creative work, including consultation, investigation, evaluation, planning, design, surveying and mapping, and supervision of construction for the purpose of assuring compliance with specification and design, in connection with the utilizing of the forces, energies, and materials of nature in the development, production and functioning of engineering processes, apparatus, machines, equipment, facilities, structures, buildings, works, or utilities, or any combination or aggregations thereof, employed in or devoted to public or private enterprise or uses.¹²
Clearly such a definition could conceivably be construed to include just about anything anyone did that employed the "forces, energies, and materials of nature" for someone else, from the inventor to the neighborhood mechanic to the office-building janitor (or "sanitation engineer"). What is fortunate, of course, for the continued smooth functioning of our society, is that no one, not even the dedicated regulator, seriously proposes that the letter of such laws be strictly enforced. But then what does this say of the legalistic process, if the only reasonable application of the laws is not an objective, but a subjective application of their provisions? The fault surely lies not with the definition; can anyone think of a better definition that will not encounter the same difficulties?
Additionally there is a total lack of evidence to show that any fewer incidents of fraud, deceit, or misrepresentation have followed the adoption of regulatory procedures. Indeed a case can be made that the lot of the incompetent or the bunko artist has been made much easier by the passage of such laws. In Colorado, the worst that a violator of the regulations can expect is to be restrained from further activity by an injunction and a fine of from $100 to $500; if he were guilty of (and taken to court for) fraud, however, he could receive one to five years in the penitentiary and upwards of $15,000 in fines. Insofar as the predisposition of the government is in favor of its regulatory over its criminal procedures, the difference in penalties represents a net gain for the dishonest; at the very least, it represents the opportunity to plea-bargain. Alternatively, however, the honest practitioner who would not normally be subject to fraud penalties because he has committed no crime could be held to an injunction depriving him of his chosen livelihood. The upshot of all this is that the honest live in fear of the government and the dishonest are
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granted reprieves from it. The disparity of such results does not instill confidence in the process.
Further if a person is truly unethical and wants the title, how does the regulatory procedure designed to test his "ethics" conceivably prevent him from exercising his lack of them by lying to the authorities and consequently deceptively receiving his license? And if a person is incompetent, how does the procedure prevent him from knowing just barely enough to pass the examinations (or even cheating somehow), and forgetting most of it afterwards? For that matter, how is this last result prevented on the part of the once-competent, after their hands are on the license?
Regulatory Licensing Violates Human Rights (Liberty)
Of them all, however, the most impressive argument to me against state intervention is on the third point, that regulation violates human rights and freedom. Mr. Constance makes the point that a minimum legal standard "assures that the practicing engineer is qualified in the eyes of the law, giving him legal status and providing him with the right to make available his services to the public."¹³ I could not differ more strongly. No such law can ever give any man such a right. It is his from the day he is born. [It is God given.] Man’s fundamental nature requires a full application of liberty in every pursuit ; the only legitimate restraint is that he not initiate force against another human being, or threaten to initiate force. His liberty includes the right to engage in mental and physical labor for his own benefit and the benefit of those around him, if he freely chooses. Inherent in this right is the ability to offer this labor to anyone who may voluntarily choose to purchase it. It is my contention, as a point of personal and professional need, that no statute, no regulation, no legal provision can ever give (or take) this right. For the ability to give is also the ability to deny, and for the government to have this power would be the severest abrogation of human freedom. It must be resisted at every turn. As philosopher John Hospers recently wrote in relation to this subject, "What gives the government any special right or any special ability, to separate the wheat from the chaff in such matters?”¹ 4 I certainly see none, and to give the slightest sanction to the state in this regard is a betrayal of principle. Consequently I, for one, will never, under any circumstances, submit to licensure or examination of my professional qualifications by the state.
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Alternatives to Licensing That Protect the Public
The alternatives to regulation can be attractive, provided people do not lock themselves into thinking only in terms of government solution. The most promising of them is the deliberate use of professional reputation and an attitude of professionalism. Along with a vigorous enforcement of criminal statutes against abuses such as fraud, malicious injury, and malpractice, the best assurance that any member of the public has against professional abuse is reputation. If an engineer’s reputation is a bad one, he should be avoided; if it is good, he should be patronized. This principle can extend beyond this point even if he is personally unknown to the prospective client; the client can consider his schooling: does his school have a reputation for turning out good, bad, or mediocre engineers; or is he an honorable or distinguished graduate of the celebrated school of hard knocks? Has he worked previously with men or women who have good reputations or bad? If his reputation is still uncertain, the questions could then revolve around his performance with other clients, the breadth of his experience, vitality, and imagination. A system based on character and professionalism must work, or no system can.
Parenthetically it should be recognized that it is possible, indeed even probable, for private bonding agencies to certify technical competence and for customers to expect bonding. Unlike government agencies, bondsmen would have a financial stake in making correct decisions on competence (deny it, they lose a premium; grant it, they could lose the bond), and further, unlike government agencies, they do not have life or death powers over the profession. It would not be criminal to be unbonded; at present, it is criminal to be unlicensed.
And there are also the other alternatives: professionally developed and voluntarily subscribed codes of ethics, membership in professional and honor societies, and publications of the Consumer Reports variety, all of which can be used by the concerned public.
If the consumer chooses correctly and gets what he wanted or paid for, perhaps more does it matter if the professional was "unlicensed"? And ultimately if the consumer selects unwisely and is criminally injured. Of course, if he takes a chance on an unknown, and it works out wrong, he has recourse to the law for recovery and punishment, then the fault lies
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entirely with him. It is not the type of system that permits the consumer to be lax in his judgment and allow the faceless mass of the body politic to assure him that his decision will always be correct; it is instead the type of system that demands the most from both professional and client. And that is what makes for progress.
The aims set forth in Tau Beta Pi are to establish an appreciation of standards of character and to free technical people from the fetters of their narrow technology, to make them aware of man’s history and potential in all areas.¹5 Regulation undermines this, as I have attempted to show, by relying on the power and mechanical processes of the state’s attempts to assure that a judgment on character and breadth of understanding is unnecessary.
How Licensing Destroys a Professional’s Integrity
Our purpose, as set forth in the Eligibility Code, is the promotion of true integrity, sine qua non.15 But regulation destroys the importance of integrity by presuming an inherent tendency to defraud and destroy. It attacks those with integrity by requiring them to submit their standards of professionalism to review by committee. How can " high standards of truth and justice" be determined by a majority vote?
And regulation is attacking the root of the profession, the engineer himself. As Milton Friedman asserted in his essay,
"There are many routes to knowledge and learning and the effect of restricting the practice [of a profession]… and defining it as we tend to do to a particular group, who in the main have to conform to the prevailing orthodoxy, is certain to reduce the amount of experimentation that goes on and hence to reduce the rate of growth of knowledge in the area."¹7
It is a natural extension of all that I have said here that it is not enough to merely oppose such laws, or to speak out against their advocacy. If this matter is as important as I believe it to be, it is imperative that efforts be made to repeal this legislation and return from the Dark Ages. Should I personally ever be in a position to do so, I will gladly introduce the legislation. To leave such laws on the books is to pose a very real danger to the profession, to the public, and to the world. Guild laws are a false sun in the firmament of a free people; and the "bright, shining day" they create
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is an illusion. In the words of John Stuart Mill in his classic essay On Liberty:
The worth of a State, in the long run, is the worth of the individuals composing it; and a State which postpones the interest of their mental expansion and elevation, to a little more of administrative skill, or of that semblance of it which practice gives, in the details of business; a State which dwarfs its men in order that they may be more docile instruments in its hands even for beneficial purposes — will find that with small men no great thing can really be accomplished; and that the perfection of machinery to which it has sacrificed everything, will in the end avail it nothing, for want of the vital power which, in order that the machine might work more smoothly, it has preferred to banish.18
Notes
1. Stewart C. Easton, The Western Heritage (New York: Holt, Rinehart and Winston, 1961), pp. 214-15.
2. Milton Friedman, Capitalism and Freedom (Chicago: Univ. of Chicago Press, 1963), p. 137.
3. John D. Constance, "The Meaning of Engineers’ Registration," THE BENT of Tau Beta Pi, Fall 1974 (65:4), pp. 23-25.
4. Friedman, p. 140.
5. Bob Ewegen, "Regulatory Panels ‘Less Than Good,’" The Denver Post, 10 Jan. 1975 (83:162), pp. 1, 16.
6. Jim Montgomery, "Far-Reaching Reform of Licensing Boards Urged in Many States," The Wall Street Journal, 8 Jan. 1975 (92:5), pp. 1, 14.
7. Ewegen, pp. 1, 16.
8. Colorado Revised Statutes 1973, Sections 12-25-107 and 12-25-109.
9. Constance, p. 23.
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10. Alexis de Tocqueville, Democracy in America, Book I (New York: Schocken Books, 1961), I, p. 510.
11. Harry Browne, How I Found Freedom in an Unfree World (New York: Macmillan, 1973), p. 181 [paperback ed.].
12. C.R.S. 1973, Section 12-25-102 (13).
13. Constance, p. 24.
14. John Hospers, Libertarianism (Los Angeles: Nash Publishing, 1971), p. 363.
15. Pamphlet, Tau Beta Pi, dated April 1972.
16. The Eligibility Code of The Tau Beta Pi Association, adopted by the 1926 convention.
17. Friedman, p. 157.
18. John Stuart Mill, On Liberty (New York: Appleton-Century Crofts, 1947), pp. 117-18.
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When Government Dictates the Uses of Ones Property, It in Reality Owns It “ The Essence of Ownership is Control”
It has become common for government bodies to dictate the uses of private property. As Mises observed decades ago, “[N]owadays there are tendencies to abolish the institution of private property by a change in the laws determining the scope of the actions which the proprietor is entitled to undertake with regard to the things which are his property. While retaining the term private property, these reforms aim at the substitution of public ownership for private ownership.”11
This tendency is clearly alive and well today. But the more that government bodies usurp the ability of entrepreneurs to plan, the more they erode the role of entrepreneurship and deaden wealth creation. Simultaneously, in such a system entrepreneurs begin spending time and resources not looking for new ways to satisfy consumers, but attempting to influence government, spending thousands or millions lobbying. In this way, wealth is actually squandered.
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Chapter 10
The Economics of Smoking Bans
Restaurant and Bar Owners Should Have the Freedom to Determine Smoking Policies
Arthur E. Foulkes July 2003
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Arthur Foulkes is a journalist and freelance writer in Indiana.
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The war on smoking is proceeding with rapid progress. Anti-smoking activists are successfully fighting for smoking bans in restaurants, bars, bowling alleys, and other places open to the public. California and Delaware have banned smoking in virtually all restaurants and bars. Smoking is prohibited in restaurants in Maine, and voters in Florida recently approved a constitutional amendment that will do likewise.
Several local governments have joined in. Smoking is banned in all restaurants and bars in Tempe and Guadalupe, Arizona; Cambridge and the Cape Cod area of Massachusetts; Corvallis and Eugene, Oregon; and Helena, Montana. Other local authorities have confined themselves to banning smoking in restaurants only. Some of these include Tucson and Mesa, Arizona; Fort Wayne, Indiana; Erie County, New York; Cabell County, West Virginia; and several towns and cities in Texas. And this is just a quick sampling.
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Why all the bans? Advocates say they are protecting either children or workers (or both) from secondhand smoke, also known as environmental tobacco smoke (ETS). The Environmental Protection Agency (EPA) considers ETS to be a Category A carcinogen—meaning it is a substance known to cause cancer in humans. A federal judge later overturned the EPA’s finding, noting the agency “adjusted established procedures and scientific norms” to reach its conclusion.1 The EPA appealed the judge’s ruling and maintains that ETS “is responsible for approximately 3,000 lung cancer deaths each year in nonsmoking adults” and harms the “respiratory health of hundreds of thousands of children.”2 The prestigious Mayo Clinic concurs: “Research has linked secondhand smoke to lung cancer, cardiovascular disease, low birth weight, sudden infant death syndrome, asthma, bronchitis” and more.
Even if the EPA is right and ETS is harmful, does this justify government’s telling property owners they can’t allow smoking on their premises? According to smoke-free advocates, the answer is an unadulterated yes. New York Mayor Michael Bloomberg, who favors banning smoking in New York City bars, restaurants, and even outdoor cafes, puts the case this way: “Common sense and common decency demand . . . the need to breathe clean air is more important than the license to pollute it.” (Does this mean we should also ban all other “non-essential” activities that pollute, such as pleasure boating, family vacations, and motorcycle rides?)
Bloomberg is an example of a full-bodied smoke-free advocate. This type wants government to protect workers by banning smoking in all workplaces, including bars. A more “mild” variety of smoke-free advocate only wants to protect children by banning smoking in restaurants, bowling alleys, and other places accessible to kids. Of course, some “milds” hope to extend restaurant bans to bars next.3 The chief executive of the American Cancer Society summed up the “full-bodied” view: “A bar is a workplace. You should not be allowed to smoke in a workplace.”4
The argument that children should not be exposed to secondhand smoke strikes a chord. After all, even libertarians believe government should protect citizens from harm inflicted by other citizens. If children are being abused when parents drag them into Denny’s or some other restaurant where smoking is allowed isn’t it within the proper scope of government action to prevent such harm?
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But if this is so, why stop at restaurants? Under this reasoning, smoking should be banned anywhere children are present, including private vehicles and homes. The smoke that kids of smokers breathe in a restaurant is negligible compared with what they get at home or on a drive. If ETS amounts to abuse, what possible difference does it make where the abuse takes place?
But parents permit or partake of lots of activities that might be detrimental to their children’s health. Some allow their kids to eat lots of fast food or to watch too much television. Statisticians could quickly find correlations between these behaviors and bad health as well.
What about protecting workers? Many workplaces are unsafe or potentially unsafe. That creates a disincentive for many people to accept such jobs and allows perhaps less well-qualified and less particular workers to take the jobs. The element of danger or discomfort also forces employers to offer higher wages than otherwise. For those then willing to take the jobs, it means higher pay. By making workplaces smoke-free, some better-qualified workers will now be attracted to those jobs, driving the lesser-qualified workers into even less-desirable work—possibly at jobs with more immediate dangers—or out of work altogether.
Smoking Bans Can Hurt or Even Shut Down a Business
The war over smoking bans reached low ebb when the opposing sides started funding academic studies to argue that the bans are having either a positive or negative effect on the restaurant industry in smoke-free communities. Some restaurant trade groups sponsored studies showing a decrease in restaurant business after the smoking bans went into effect. But these studies have been largely dismissed as based on “anecdotal information”5 or “funded by the Tobacco industry.”6
Meanwhile, on the antismoking side, several studies (largely undertaken by smoke-free advocates, but never mind) have shown smoking bans have not harmed the restaurant industry. Some have even shown an increase in overall restaurant business. These econometric studies have examined several communities, including Fort Wayne, Indiana; Boulder, Colorado; Dane County, Wisconsin; New York City; Chapel Hill, North Carolina; Flagstaff, Arizona; West Lake Hills, Texas; and several locations in
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California and Massachusetts. Their findings are based on restaurant sales-tax receipts or other aggregate data.
Does this mean economics supports the smoking bans? Not at all. As noted, all the studies supporting smoking bans are based on aggregated restaurant sales data; they look at the “restaurant industry” in the smoke-free communities. They largely ignore what might be happening under the surface to individual businesses and completely ignore the extent to which the bans further erode the essential concept of private property rights—the very linchpin of wealth creation in a market economy.
That said, there is no reason to doubt, as the econometric studies show, that overall restaurant business has increased in some areas with bans. As one restaurant owner who favors the smoke-free ordinances noted, “If 75 percent of people don’t smoke and 25 percent do, that means 75 percent are going to eat out more and 25 percent are going to eat out less.”7
But does this mean smoking bans are really a “win-win situation for restaurant owners, restaurant workers and restaurant patrons,” as the commissioner of the Massachusetts Department of Public Health proclaimed?8 Again, not at all. For some restaurants or types of restaurants, the benefits of a smoke-free ordinance will outweigh the costs. For other restaurants and bars this will likely not be so. Blue-collar bars and restaurants, for example, may be especially hard hit, since, according to the National Opinion Research Center, smoking is more common among blue-collar workers and people with lower incomes.9 Bars that cater to these customers may suffer a loss of business.
Moreover, where ordinances fall short of an outright ban, but require costly remodeling and nonsmoking sections, larger chain restaurants may be better able to cope than smaller competitors. For example, some ordinances require floor-to-ceiling dividers keeping bar areas separate from eating areas, or independent ventilation for smoking rooms. While overall restaurant business may increase, certain kinds of restaurants may suffer or go out of business. As usual, then, we see that government regulation of private business simply creates new winners and losers. It creates no new wealth, and, as we will see, actually squanders it.
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Licensing: Method of Destroying Private Ownership
Yet another economic reason to resist smoking bans has to do with the importance of private property to a prosperous society. In a free society standards of living rise when goods and services are available more abundantly and in accordance with consumer preferences. Entrepreneurs play a vital role in this story because they direct productive resources toward ends they believe will satisfy consumers. If they guess correctly they profit; if they are wrong they suffer losses and abandon their enterprises.
When an entrepreneur invests in a restaurant, he does not invest in the aggregated “restaurant industry,” but rather in a specific kind of restaurant, one he believes will satisfy consumers. In short, he has a specific plan in mind.
Any plan can be carried out only if the planner has control—as much as possible—over the necessary implements. A football coach can draw plans all day, but he is wasting his time if the players are following another person’s orders. If he lacks control over his team, he will soon stop planning altogether. Such control is also vital to entrepreneurs. As the great Austrian economist Ludwig von Mises wrote, “Private ownership means the proprietors determine the employment of the factors of production. . . Where it is absent, there is no question of a market economy.”10
It has become common for government bodies to dictate the uses of private property. As Mises observed decades ago, “[N]owadays there are tendencies to abolish the institution of private property by a change in the laws determining the scope of the actions which the proprietor is entitled to undertake with regard to the things which are his property. While retaining the term private property, these reforms aim at the substitution of public ownership for private ownership.”11
This tendency is clearly alive and well today. But the more that government bodies usurp the ability of entrepreneurs to plan, the more they erode the role of entrepreneurship and deaden wealth creation. Simultaneously, in such a system entrepreneurs begin spending time and resources not looking for new ways to satisfy consumers, but attempting to influence government, spending thousands or millions lobbying. In this way, wealth is actually squandered.
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Most of us don’t like breathing other people’s smoke, but it is more an annoyance than an immediate threat to our lives. (Even directly smoking a cigarette does not instantly kill us like some exotic poison.) One smoke-free study found the number-one reason people avoid smoky restaurants is they don’t like the lingering smell of cigarette smoke on their clothes and in their hair.12 My wife and I sometimes avoid places we know will be especially smoky. Other times we don’t particularly care. It depends on our values at the moment. (She actually favors smoking bans, so I’m doing a little risk/benefit analysis just by writing this.) Even the most strident smoke-free advocate may accept a table in a restaurant’s smoking section if, for example, he is in a big hurry and wants the next available table. Just going to work or school each day involves risk/benefit analysis. It is simply a part of life.
Members of Congress, those people most eager to tell the rest of us how to live, allow individual members to decide the smoking policy in their own offices on Capitol Hill.13 Restaurant and bar owners should have the same freedom, even if large majorities favor a ban on smoking. Workers too should be free to work where they would like and make their own risk/benefit tradeoffs. And parents, not the government, should be responsible for their children’s well-being. By usurping the parental role, governments not only seize authority over children, but also make children out of adults. This approach, in addition to being morally destructive, is bad economics as well—regardless of what the econometric analyses say.
Notes
1. Antismoking activists note that U.S. District Judge William L. Osteen’s court was in North Carolina, a key tobacco-growing state. However a year earlier antismoking forces applauded the same judge for ruling the U.S. Food and Drug Administration had the authority to regulate cigarettes. A higher court overturned that ruling. See Joseph Perkins, “Has EPA been promoting one big secondhand smoke screen?” Ventura County Star, July 29, 1998, www.junkscience.com/news3/perkins.htm.
2. Environmental Protection Agency, “Fact Sheet: Respiratory Health Effects of Passive Smoking,” www.epa.gov/iaq/pubs/etsfs.html. The
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strongly anti-tobacco World Health Organization conducted “one of the biggest single pieces of research” into the question of ETS and lung cancer. It found no statistically significant correlation and was later widely accused of “burying” its own findings. See “The World Health Organization is showing signs of allowing politics to get in the way of the truth,” The Economist, March 14–20, 1998.
3. Douglas Martin “Smoking Ban Has Not Hurt Restaurants, Analysts Say,” New York Times, January 12, 1999.
4. Ibid. 5. Centers for Disease Control, “Assessment of the Impact of a 100%
Smoke-Free Ordinance on Restaurant Sales—West Lake Hills, Texas, 1992–1994,” MMWR Weekly, May 19, 1995, pp. 370–72, www.cdc.gov/mmwr/preview/mmwrhtml/00037061.htm.
6. Martin. 7. Ibid. 8. “Massachusetts Department of Public Health Releases New Report on
the Economic Effects of Restaurants Going ‘Smoke-Free,’” Massachusetts Department of Public Health Press Release, March 27, 2001.
9. Survey data show blue-collar workers 10–15 percent more likely to smoke than white-collar. Also, the same survey researchers showed a strong inverse correlation between smoking and income. James Allan Davis and Tom W. Smith, General Social Survey(s), 1990, 1989, 1988, 1987, produced by the National Opinion Research Center, Chicago.
10. Ludwig von Mises, Human Action, 4th rev. ed. [paperback] (San Francisco: Fox & Wilkes, 1996), pp. 682–83.
11. Ibid., p. 683. 12. “Studies Find Massachusetts’ Smoke-Free Ordinances Having No
Significant Effect on Restaurant Revenue,” U.S. Newswire, January 11, 1999, posted at www.gasp.org/nyrest. html.
13. See C_SPAN www.c-span.org/questions/weekly61.asp.
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“No permit shall issue for bootblack stands on public space.”
Thereafter, Ego Brown enlisted workers from the ranks of the homeless. He provided his homeless recruits a shower, clean clothes, a shoeshine kit and training—and most important, a renewed sense of dignity. Brown estimates he employed as many as 20 homeless men, both black and white, at shoeshine stands in downtown Washington. His efforts were so successful, in fact, that a District of Columbia social worker regularly referred enterprising homeless people for the “second chance at life” Ego Brown offered.
But during the summer of 1985, these efforts came to an abrupt end as District of Columbia police shut down Mr. Brown’s business. They cited a 1905 law providing that “No permit shall issue for bootblack stands on public space.” Regulated vendors peddling goods and services ranging from hot dogs to photo opportunities with cardboard celebrities were allowed to operate, but shoeshine stands were prohibited.
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Chapter 11
A Triumph for Bootstraps Capitalism
Clint Bolick
October 1989 _____________________________________________________________
Clint Bolick is Director of the Landmark Legal Foundation Center for Civil Rights in Washington, D.C., and author of Changing Coupe: Civil Rights at the Crossroads (New Brunswick, N.J.: Transaction Books, 1988).
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Ego Brown never fancied himself a crusader His ambition is more that of a classic entrepreneur. His dream, as Mr. Brown describes it, is to “spread the shine” with shoeshine stands on street corners throughout Washington, D.C., and eventually in other cities as well.
The story of Ego Brown in many ways exemplifies the great American tradition of bootstraps capitalism: the methodical climb up the economic ladder by means of creativity, talent, and hard work. Indeed, Ego Brown’s little enterprise took on added luster by providing employment opportunities to the homeless—a classic case of an entrepreneur doing good by doing well.
But along the way, Mr. Brown encountered an unexpected obstacle—a District of Columbia law that forbade him from pursuing his chosen business. This law and thousands of others like it form an oppressive
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barrier that prevents entrepreneurs like Ego Brown from earning their share of the American Dream.
The resulting battle for the right to earn a living free from excessive governmental interference cast Brown in the unlikely role of champion in the cause of economic liberty. His path breaking triumph is a beacon to others outside the economic mainstream that opportunity still exists in America.
An Unlicensed Entrepreneur in Action
Ego Brown launched his career after he quit his job as a voucher examiner for the Navy seven years ago. “I used to look outside and think about how good it would be to work for myself,” he recalls. He cast about for the right opportunity to do just that.
Mr. Brown quickly discovered a lucrative potential market in the thousands of scuffed shoes pounding the sidewalks of downtown Washington. “It’s an image city,” he says. “People care about their appearance and they wear nice clothes, but they forget about their feet.”
He set out to remedy this anomaly by providing the “finishing touch”—a quality shoeshine. Drawing upon the talent he developed as a youngster shining shoes for pocket money, Mr. Brown went to work. He started out in a barber shop near Howard University, but soon hungered for his own business. In 1985, he obtained a vending license from the District of Columbia, invested in a portable two-seat shoeshine stand, and set up shop at the corner of 19th and M Streets, N.W. Attired in his trademark tuxedo, Brown quickly attracted a large clientele for his distinctive “Ego Shine.”
Mr. Brown dismisses the notion that shoe shining is degrading to blacks. “I’m out to change that stereotype,” he says. “I’m a shoeshine artist. I provide a valuable service, and I do it with a touch of class.”
The success of his first stand encouraged Brown to expand his business. That’s when the idea of employing homeless people occurred to him. He recalls that “when I used to see these people on the streets, I’d dig into my pockets and give them money. Then one day I realized I wasn’t helping them. They didn’t need a handout. What they needed was an opportunity, a chance to lift themselves by their own bootstraps.”
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Thereafter, Ego Brown enlisted workers from the ranks of the homeless. He provided his homeless recruits a shower, clean clothes, a shoeshine kit and training—and most important, a renewed sense of dignity. Brown estimates he employed as many as 20 homeless men, both black and white, at shoeshine stands in downtown Washington. His efforts were so successful, in fact, that a District of Columbia social worker regularly referred enterprising homeless people for the “second chance at life” Ego Brown offered.
But during the summer of 1985, these efforts came to an abrupt end as District of Columbia police shut down Mr. Brown’s business. They cited a 1905 law providing that “No permit shall issue for bootblack stands on public space.” Regulated vendors peddling goods and services ranging from hot dogs to photo opportunities with cardboard celebrities were allowed to operate, but shoeshine stands were prohibited.
Mr. Brown appealed to his elected representatives for help, to no avail. Although Mayor Marion Barry was calling for massive private sector assistance to cure the homeless problem, he ignored Brown’s plight, apparently preferring to have homeless people sleeping on the streets rather than earning their livelihood on those streets.
Thwarted by this anachronistic law, Brown struggled to stay in business by shining shoes in private establishments. But by late 1988, he was a step away from the welfare rolls, his dream dimmed to a faint glimmer.
Regulatory Prohibition Creates Unemployment and Poverty
The District’s shoeshine stand prohibition was a relic of the Jim Crow era. Governments during that time frequently placed severe constraints on economic activities pursued by blacks. Though ostensibly race-neutral, these laws were designed to prevent blacks from gaining economic serf-sufficiency.
The shoeshine ban was such a law, adopted in a political environment permeated by racial bigotry. A 1906 District of Columbia Health Service report reflected the government’s prevailing attitude when it spoke of blacks as “a race just entering what is termed civilized life.”
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The same District Board of Commissioners that adopted the bootblack ban took a number of other steps designed to subjugate blacks. W. Calvin Chase, editor of The Bee, Washington’s black daily newspaper during this period, assailed the District government for erecting a public whipping post and enacting stringent licensing requirements for the building trades. Chase called the whipping post “a pet scheme to deter the white wife-beaters by whipping the Negroes. The moment a white man is thrashed, the law will go out of business.” Of the builder licensing requirements, Chase asked “[W]hat becomes of the minor builders, who are fully competent to construct a house, but not able to pass an examination?” (The Bee, January 7, 1905)
The shoeshine ban fit nearly into this pattern. According to the 1900 census, the public streets of Washington provided a means of living to 1.5 percent of the city’s employed black male population as “bootblacks,” “hucksters,” and “peddlers.” By prohibiting bootblacks on the streets—hence confining them to hotels and barber shops as employees rather than independent entrepreneurs—the government eliminated an important outlet for economic serf-sufficiency.
Today, oppressive economic regulations such as occupational licensing laws and government-conferred business monopolies proliferate at the state and local levels. These laws often far exceed legitimate public health and safety concerns. Like theft Jim Crow antecedents, these laws are race-neutral but impose their harshest burdens on people outside the economic mainstream—primarily minorities and the poor.
Court Decision Ends Barrier to Employment Opportunity
For more than 50 years, the courts have consistently declined to protect entrepreneurs from arbitrary or excessive economic regulation. Moreover, establishment civil rights groups have ignored such barriers to opportunity, preferring to focus on social engineering schemes like quotas, business set-asides, and welfare.
As a result, in May 1988 the pro-free enterprise Landmark Legal Foundation launched its Washington-based Center for Civil Rights, which initiated a long-range economic liberty litigation program. The Center hopes to restore the basic civil right of individuals to pursue a trade or profession—a civil
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right that provided substantial impetus for many of the major civil rights laws, including the Fourteenth Amendment and the Civil Rights Act of 1964. The Center promptly filed its first economic liberty lawsuit against Mayor Barry and the District of Columbia on behalf of Ego Brown and two homeless men who worked for him.
In light of a half century of adverse legal precedent, the Center faced an uphill battle. The District cited scores of decisions in which the courts refused to strike down economic regulations, no matter how onerous. But the Center argued that the shoeshine ban went too far, violating the Fourteenth Amendment’s equal protection, due process, and privileges or immunities clauses. Allowing the District to extinguish opportunities in this quintessentially entry-level business, the Center charged, would destroy economic liberty.
Ego Brown’s lawyers suffered a setback in October 1988, when Federal District Court Judge George H. Revercomb denied an injunction on procedural grounds. But Judge Revercomb expressed strong sympathy for the merits of the case, declaring that individuals have a Constitutional right “to follow a chosen profession free from unreasonable governmental interference,” adding that “the federal courts’ role in protecting American citizens from unreasonable economic regulation has been one of the hallmarks of American liberty, prosperity, and progress.”
Heartened by Judge Revercomb’s language, the Center pressed forward. Finally, on March 22, 1989, Judge John H. Pratt declared the shoeshine ban unconstitutional and permanently enjoined its enforcement. “We would have to ‘strain our imagination,’” Judge Pratt declared, “to justify prohibiting bootblacks from the use of public space while permitting access to virtually every other type of vendor.” The District is free to adopt reasonable regulations, he ruled, but may not altogether prohibit shoeshine stands.
The Ability of an Individual to Gain Control Over His Own Destiny
Ego Brown’s victory in the courts may signal a crucial turning point in the battle to protect economic liberty. The Center plans to use the Brown v. Barry decision as a building block for other assaults on excessive economic
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regulation, and already has filed a challenge to the Houston Anti-Jitney Act of 1924 on behalf of entrepreneur Alfredo Santos.
For Mr. Brown, the ruling means vindication and a chance to pursue his dream. His enthusiasm waned during the four years following the forced demise of his business. Brown remarked a week before the court decision, “I lose sleep became I can’t understand why.”
But following his triumph, Ego Brown displayed the resilience that is the hallmark of a successful entrepreneur. “I plan to get back on the streets and prove— to myself more than anybody else— that my idea, my dream can become a reality.” Asked if he feared competition from other shoeshine entrepreneurs, Brown replied to the contrary. “It would stroke my ego to see someone else out there with me,” he said. “I would think I had something to do with that, that I inspired someone to go into business. I beckon competition.”
And compete he will. Even before spring reached full bloom in the nation’s capital, Ego Brown was back on the streets of Washington, pursuing his dream. His stand was booming, and homeless people were learning the trade, Well wishers were streaming by yelling, “Way to go, Ego!”
For countless others like him, however, arbitrary barriers remain. For a nation whose moral claim is staked in its doctrinal commitment to opportunity, such barriers are a matter of shame. Challenging such barriers—securing for all individuals the ability to control their own destinies—is part of the unfinished business in the quest for civil rights.
But Ego Brown’s successful struggle provides hope to would-be entrepreneurs that one day our nation will honor that basic opportunity that is every American’s birthright —every American’s civil right.
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25 References, $10,000 and Six Months
I have an old shed I’d like to turn into an office. It’s a small, uncomplicated project. I do not intend to host conventions there or otherwise expose innocents to my construction acumen.
I could use a hand, so I called a man advertising his handyman services on a placard outside the feed store. We talked it over; he needed capital and I needed labor; we had a deal. I had expected to be hammering on joists this morning instead of this keyboard but for the fact that he didn’t show up today. Why? The county, vigorously addressing this “situation,” had torn down all his signs (including one in front of his home) citing him for neglecting to indicate his contractor’s license. Fair enough, you say; he knows the rules and got burned. So why the stink?
Well, here is a gentleman in his mid-50s with more than 25 years of construction experience who was a licensed contractor in Florida before moving to Arizona. For more than six months he has been fighting to gain the requisite licensing. He is obliged, among other onerous duties, to provide twenty-five references spanning his entire career and from across a continent before his application can enter the waiting list. He estimates his application will cost $10,000 and take another six months. He is afraid to work with me, even as a “tutor,” because he has been told that counties often set people up to entrap them.
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Chapter 12
A Tale of Two Situations On doing business in America
By
May, 2011 _____________________________________________________________
Paul Schwennesen is a southern Arizona rancher and is a regular contributor to PERC, the Property and Environment Research Center. He can be reached at The Agrarian. ... Paul Schwennesen
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Once upon a time selling a chicken was fraught with few if any legal implications. Remodeling a shed was equally simple from a regulatory standpoint. Today, however, we live in more enlightened times. Protected from our wayward desires by an empowered bureaucracy, we can rest easier knowing that decisions like what we eat and where we build is being carefully managed by authorities.
The Tyranny of the “Food Safety Inspection Service”
Josh is a Mennonite friend who happens, by the grace of native talent and a powerful work ethic, to produce magnificent chickens. Raised on green growing pasture, they are never medicated, never fed artificial supplements or genetically selected to grow abnormally fast. They develop rich golden fat and a deep flavor, characteristics that have been more or less lost in modern, streamlined, highly efficient poultry production. Not surprisingly, Josh’s chickens are in high demand among food cognoscenti and fine restaurants. A couple of years ago I began bringing Josh’s chickens to my farmers’ market stand to sell alongside our equally popular grass fed beef.
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Josh and I, in a classic entrepreneurial endeavor, have made these wholesome chickens available to happy, discerning customers who would otherwise be unable to justify a three-hour commute to buy a bird for dinner.
Josh processes his chickens on his farm under a legal exemption allowing him to avoid industrial (and expensive) processing plants. Each chicken he produces is clearly labeled as to origin, method of production, added ingredients (none); the label also cites the statute that allows him to operate unmolested.
Recently he was informed by the Food Safety Inspection Service, the regulatory arm of the USDA, that he faced a “situation.” They had discovered a chink in the otherwise protective “non-molestation” statute. Because he is marketing chickens to an intermediary (me), his product is therefore rendered illegal and he must desist. In a disturbing addendum the inspector also let slip that the USDA would be “willing and free of charge” to take over inspection of his facilities and that they would be “more than happy to help him get going,” presumably in the chicken business.
The same authority willing to allow a company to distribute (and I’m not making this up) a neon-green sugar drink with the word “sweetener” (in quotes) on the ingredient list believes that customers cannot be trusted to buy a natural chicken from a reputable farmer.
The Tyranny of 25 References, $10,000 and 6 Months
I have an old shed I’d like to turn into an office. It’s a small, uncomplicated project. I do not intend to host conventions there or otherwise expose innocents to my construction acumen.
I could use a hand, so I called a man advertising his handyman services on a placard outside the feed store. We talked it over; he needed capital and I needed labor; we had a deal. I had expected to be hammering on joists this morning instead of this keyboard but for the fact that he didn’t show up today. Why? The county, vigorously addressing this “situation,” had torn down all his signs (including one in front of his home) citing him for neglecting to indicate his contractor’s license. Fair enough, you say; he knows the rules and got burned. So why the stink?
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Well, here is a gentleman in his mid-50s with more than 25 years of construction experience who was a licensed contractor in Florida before moving to Arizona. For more than six months he has been fighting to gain the requisite licensing. He is obliged, among other onerous duties, to provide twenty-five references spanning his entire career and from across a continent before his application can enter the waiting list. He estimates his application will cost $10,000 and take another six months. He is afraid to work with me, even as a “tutor,” because he has been told that counties often set people up to entrap them.
Once again presumptuous authority has stepped between educated, intelligent adults to prevent free, fully cognizant transactions. Am I a pathological obediphobe to find such meddling unsavory?
Even if these cases turn out to be simple errors in communication or an innocent overstepping of authority, the damage has already been done. The perception alone is enough to chill behavior. In relaying these injustices I have now wasted hours that could have otherwise been spent creating outstanding beef; Josh is reducing his next order of chicks; and an out-of-work man with a lifetime of skills sits idle wishing for work.
Perhaps these are just the fickle vagaries, the marginalia of an otherwise appropriate regulatory regime. But I’m afraid they represent a deeper, metastasized, problem. The late Mr. Jefferson, that “intellectual voluptuary” according to his Big Government nemeses, explained that government’s only purpose is to secure natural rights. Governments, he believed, exist to protect life, liberty, property, and little else. It’s probably archaic of me to wish for a return to such a limited view, but I can’t help it. The kind of absurd oversight now considered standard practice feel fundamentally unjust.
It would be wonderful to live in a world where selling a chicken and remodeling a shed weren’t rife with official allegations or burdened with State prohibitions.
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The Loss of Liberty and Death by Seatbelt
While the hundreds of millions of dollars spent in support of seat-belt laws has been a horrendous financial burden to society, the greatest cost is really not money. It’s the loss of freedom. Seat-belt laws infringe a person’s rights as guaranteed in the Fourth, Fifth, and the Ninth Amendments, and the civil rights section of the Fourteenth Amendment. Such laws are an unwarranted intrusion by government into the personal lives of citizens; they deny through prior restraint the right to determine one’s own individual personal health-care standard.
While seat-belt use might save some people in certain kinds of traffic accidents, there is ample evidence that in other kinds, people have been more seriously injured and even killed only because they used seat belts. Some people have been saved from death in certain kinds of accidents only because a seat belt was not used. In those cases, the malicious nature of seat-belt laws is further revealed: such persons are subject to fines for not dying in the accident while using a so-called safety device arbitrarily chosen by politicians.
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Chapter 13
The Fraud of Seat-Belt Laws
Seat-Belt Laws Infringe a Person's Constitutional Rights
William J. Holdorf
September 2002 _____________________________________________________________
William J. Holdorf is a writer from Chicago.
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On the promise of reducing highway fatalities and auto insurance rates, seat-belt laws began to pass in state legislatures throughout the United States beginning in 1985.
While such laws had been proposed before 1985, they were rejected by most state legislators since they knew the vast majority of the people opposed them. “The Gallup Opinion Index,” report no. 146, October 1977, stated: “In the latest survey, a huge majority, 78 percent, opposes a law that would fine a person $25 for failure to use a seat belt. This represents an increase of resistance since 1973 to such a law. At that time 71 percent opposed a seat belt use law.” “The Gallup Report” (formerly “The Gallup Opinion Index”), no. 205, October 1982, report showed that a still-high 75 percent queried in June of that year opposed such a law.
Given the massive, obvious opposition to seat-belt laws, why did state legislators suddenly change their minds and begin to pass them in 1985? Simple–money and federal blackmail. According to the Associated Press, Brian O’Neill, president of the Insurance Institute for Highway Safety, said, “People have been talking about seatbelt laws and there have been attempts
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to pass them for well over 10 years. It’s been a snowball effect, once the money poured in.”1
That sudden flow of money began in 1984, when then-Secretary of Transportation Elizabeth Dole promised to rescind the rule that required automakers to install passive restraints by 1990 if states representing two-thirds of the U.S. population passed seat-belt laws by April 1, 1989.2 Passive restraints included air bags, which automakers bitterly opposed because, they claimed, the high expense to develop and install them would raise the price of autos way beyond what the average auto buyer would pay. Dole’s promise amounted to an invitation to the automakers to use their financial resources to lobby states for seat-belt laws, something the Department of Transportation (DOT) was forbidden to do by law, in exchange for the government’s not forcing them to install air bags. In effect, the DOT surreptitiously used the financial resources of the private sector to further the political agenda of the federal government through blackmail.
In response to Dole’s promise, the automakers created the lobby Traffic Safety Now (TSN) and began spending millions of dollars to pass seat-belt laws. That caught the attention of state legislators, and suddenly the “will of the people,” void of financial backing, gave way to the “will of the seat-belt law lobbyists,” who had millions of dollars to spend.
Besides the millions of dollars spent by TSN, the federal government added millions more by, for example, giving grants to states for achieving a certain percentage of seat-belt use and to pay the police to enforce the seat-belt law.3 And with increased seat-belt law enforcement, ticket income increased, another source of easy revenue for the state.
While TSN championed passage of seat-belt laws under the banner of reducing highway fatalities and auto insurance rates, no mention was made that the real purpose was to avoid installation of air bags.
As of 1992, TSN had spent $93 million to buy passage of seat-belt laws in almost all states.4 Popular opposition to the laws sometimes made passage difficult. In most states the only way the law could be passed was to make enforcement secondary; that is, the police could not stop a motorist for not using a seat belt unless the officer witnessed another traffic violation. Some laws applied only to front-seat occupants. Exemptions were also added to
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help reduce opposition. In three states, Mississippi, Rhode Island, and Wyoming, the laws were passed without any penalty.
Once seat-belt laws were passed in any form, supporters returned each legislative session to lobby for amendments, such as including all occupants, increasing fines, eliminating exemptions, and changing to primary enforcement, so that the police could stop a motorist merely under suspicion of not using a seat belt.
Such action by seat-belt law supporters shows the insidious nature of such laws, and supporters continue to lobby for stricter enforcement and heavier penalties. Even the U.S. Supreme Court in 2001 added its own flavor of tyranny by ruling it was legal for a Texas police officer to arrest, handcuff, and jail a woman, and impound her car, for not buckling up herself and her children.5 Our nation, founded on freedom, certainly has come a long way from Patrick Henry’s cry, “Give me liberty or give me death,” to “Click it or ticket.”
After the automakers did the DOT’s bidding, the government went back on its word and mandated installation of air bags anyway. Also, the very law the automakers worked for, supposedly to save people’s lives, turned on them. While using seat belts saves some lives, doing so can injure and kill others . That got the attention of lawyers. Moreover, some seat-belt systems were defective.6 As a result, since 1985 the automakers have faced hundreds of millions of dollars in damages in hundreds of lawsuits.
Death by Seat Belt and the Tyranny of “Prior Restraint”
While the hundreds of millions of dollars spent in support of seat-belt laws has been a horrendous financial burden to society, the greatest cost is really not money. It’s the loss of freedom. Seat-belt laws infringe a person’s rights as guaranteed in the Fourth, Fifth, and the Ninth Amendments, and the civil rights section of the Fourteenth Amendment. Such laws are an unwarranted intrusion by government into the personal lives of citizens; they deny through prior restraint the right to determine one’s own individual personal health-care standard.
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While seat-belt use might save some people in certain kinds of traffic accidents, there is ample evidence that in other kinds, people have been more seriously injured and even killed only because they used seat belts. Some people have been saved from death in certain kinds of accidents only because a seat belt was not used. In those cases, the malicious nature of seat-belt laws is further revealed: such persons are subject to fines for not dying in the accident while using a so-called safety device arbitrarily chosen by politicians.
The state has no authority to subject people to death and injury in certain kinds of traffic accidents just because it hopes others will be saved in other kinds of accidents merely by chance. The state has no authority to take chances with a person’s body, the ultimate private property.
As for the promise that seat-belt laws would reduce auto insurance rates, there is no record of any insurance company ever reducing its rates because a seat-belt law was passed. A study released in August 1988 by the Highway Loss Data Institute compared auto-accident injury claims before and after the enactment of seat-belt laws in eight states and could find no clear-cut evidence that belt-use laws reduced the number of injuries. “These results are disappointing,” the report added.7
Seat-belt laws have also failed to reduce highway fatalities in the numbers promised by supporters to get such laws passed.8 According to the National Highway Traffic Safety Administration, there were 51,093 highway fatalities in 1979.9 Five years later, 1984, the year before seat-belt laws began to pass, there were 44,257 fatalities. That is a net decrease of 6,836 deaths in five years, which represents a 13.4 percent decline with no seat-belt laws and only voluntary seat-belt use. In 1999, there were 41,611 fatalities. That is a net decrease of 2,646 deaths, a 6 percent decrease over 15 years of rigid seat-belt law enforcement, with some states claiming 80 percent seat-belt use. If the passage of seat-belt laws did anything, it slowed the downward trend in highway fatalities started years before the passage of such laws.
“It’s for Your Safety” and the Road to Tyranny
Besides such facts, a person has the right to refuse any health-care recommendation. No non psychiatric doctor would dare attempt to force a person to use a medical device or take a drug or have surgery or other
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medical treatment without full consent. Yet politicians force motorists to use a health-care device, a seat belt, against their will under threat of punishment that could include jail.
The hundreds of millions of dollars spent in support of seat-belt laws have been wasted. Not one penny of that money has ever prevented even a single traffic accident, the real cause of highway fatalities. We don’t need millions of dollars for stricter seat-belt law enforcement. Instead, we need more responsibly educated drivers, safer vehicles, and better roads to prevent traffic accidents.
Individual freedom is the very foundation of our country. The American people should not accept legislators who pass laws that take liberty away while claiming to do good. History has shown this to be the easy road to power for tyrants.
There is certainly nothing wrong with voluntary seat-belt use; however, there is a great deal wrong with all seat-belt laws. As Benjamin Franklin said, “They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”
Notes
1. “Carmakers Push Belt to Avoid Bag,” Greensboro (N.C.) News and Record, May 27, 1986.
2. Final Regulatory Impact Analysis, Amendment to FMVSS No. 208, National Highway Traffic Safety Administration, July 11, 1984.
3. This goes on to this day: “U.S. Transportation Secretary Mineta Announces Grants of $44.4 Million to Increase Seatbelt Use,” in NHTSA news release no. 4-02, January 18, 2002. Summary of IRS tax-exempt form 990 for Traffic Safety Now, Inc., prepared by Seatbelt Freedom of Choice, a Wisconsin grassroots citizens group opposed to the Wisconsin seat-belt law.
4. Gail Atwater v. City of Lago Vista, April 24, 2001. 5. “Auto Seat Systems-Dangerous Safety Restraints?” Trial Magazine
(Trial Lawyers of America), April 1990. 6. “Highway Loss Data Institute Insurance Special Report: Insurance
Injury Loss Experience in Eight States with Seat Belt Laws, 1983, 86
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Models, HLDI A-28.” The Institute is an Arlington, Virginia, nonprofit public-service organization closely associated with and funded by the Insurance Institute for Highway Safety, which is wholly supported by auto insurers.
7. For example, see “Traffic Deaths Up 5%,” Chicago Sun Times, January 3, 1987, and “Traffic Deaths Roll on Despite Seatbelt Law,” Chicago Sun Times, July 6, 1996.
8. National Highway Traffic Safety Administration, “Traffic Safety Facts 1999,” Dec
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Individual Rights (Interest) Voided and Sacrificed for Group Rights (Public Interests)
On the other hand, no such thing as a public interest exists, despite continual use of the phrase.5 When one utters that pair of words, he means to convey a thought most aptly derived from Munn v. Illinois: he means that some private, personal, individual interest or value of one or more persons is, in the speaker’s subjective opinion, of such overwhelming importance that all members of society should embrace it as eternal verity and that if any other private, personal, individual interest or value conflicts with the advancement of the first interest, the conflicting interest must be shunted aside, depriving the holder or holders of that second interest of their liberty or right to enjoy and advance the second interest. In plain language, the "public interest" represents a power tool to coerce those who disagree with the idea or subjective value advanced by the statist.
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Chapter 14
"Affected with a Public Interest"
Ridgway K. Foley Jr.
September 1978
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Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon.
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Jurists often weave erratic seams in the legal fabric we call jurisprudence. Once rooted in the law, error seems to possess all the tenacity of crabgrass; aided by the concept of stare decisis (stand by previous decisions) and the juridical tendency never to undo what has once been accomplished, error takes sustenance and proliferates, until a whole body of normative rules wells up and covers the territory.
This article deals with just such a concept: the doctrine that governments can regulate and control business enterprises "affected with a public interest." In varying guises, this postulate with its myriad tentacles has strangled freedom for almost a century, although its antecedents can be discerned in earlier Anglo-American reports.
The American birth of the rule took place in 1876 in a decision by the Supreme Court of the United States entitled Munn v. Illinois,’ the most important of the so-called "Granger" cases presented to the Court at the same time. The Supreme Court of the United States upheld a Minnesota
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law which required grain warehouses to secure a license and to comply with price restrictions in order to operate as a business. The rationale of the court: grain warehouses were "affected with a public interest."
In 1933, during the throes of depression occasioned by government interventions into the economy, the doctrine received impetus to strangle all manner of economic concerns in the case of Nebbia v. New Yorke which prohibited price reductions in enterprises "affected with a public interest."
The lack of judicial understanding of economic and moral values appears in the following statement:
The court has repeatedly sustained curtailment of enjoyment of private property, in the public interest. The owner’s rights may be subordinated to the needs of other private owners whose pursuits are vital to the paramount interests of the community.³
A wiser decision, and one justified by sound reason of political economy and morality, permits anyone to engage in any business at any time unless he initiates aggression or practices fraud upon another.
The overweening coercion emanating from, and justified by, Munn v. Illinois and Nebbia v. New York impels us, even at this late stage, to examine the foundations of the doctrine. What does "affected with a public interest" really mean?
Tyranny in the Name of the “Public Interest”
What businesses are cloaked with a public interest? A better inquiry: what enterprises are not affected with a public interest? Upon examination, one finds that he can make an equally good case for the public interest in all endeavors, and not just grain warehouses, wharves and taverns. The only business not affected with a public interest is one which fails to serve the public. The sole business I can conceive of which does not serve the public is one which sinks into bankruptcy.
Once again, we discern a judicial decision which fails to accord with sound principles of economics and human action. The majority in Munn v. Illinois could not perceive that the only reason for the existence of any business enterprise is to create and transfer goods or services to willing recipients.
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A successful business is one which satisfies enough consumers or customers at a high enough price so that the enterprise returns a profit to those individuals who have contributed to the entrepreneurial activity. An unsuccessful business is one which does not attract and satisfy sufficient customers at a sufficient price to generate a profit and encourage maintenance of the necessary capital investment.
To the extent that customers express satisfaction in a product or a service, in continued purchases, the producer serves the "public interest." To the extent that no customers seek the creations of a business, there exists no "public interest." Thus, we can say with some certainty that Edsel Motor Division of Ford Motor Company was not a business "clothed with a public interest." On the other hand, any individual or corporate business which does attract and hold customers is, at least to that extent, "affected with a public interest."
Private Interests (Individual Liberty) Violated in the Name of the “Public Interests”
How should we define "public interest"? What is the public? In a very real sense, all inhabitants of a given community or territory constitute that particular public, for a public refers to a community or populace at large in their common, non-private characters and capacities.
As with other terms, however, the phrase "public interest" has undergone a certain corruption at the hands of the illiberal element. Currently the words seem to convey a belief that the public interest overrides any personal or individual interests. Yet, all interests derive from persons. In that sense, all interests are private interests, at least at their genesis.
You like ballet; you band with others to form a civic ballet association to promote the art. Seminally, the community interest in ballet existed as a wholly private interest: yours. As you gain adherents, does the interest take on an altered character, or does it remain a distinctly individual undertaking? If the private interest changes into a public interest, do we measure such dynamism by the number of supplicants or the character of the interest, or in some other manner? In other words, what is it which transmutes a purely personal individual value or desire into one of such overpowering essence and force that it can be termed a "public interest" and justify the limitation upon the freedom of individuals?
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Private and Public Interests Are Not Susceptible to Differentiation
The difficulty in responding to these rhetorical questions lies not in the answers but in the inquiries themselves. It is a difficult task to state a question neutrally, and these particular questions rest on a presumption that we can define and differentiate private and public interests. In truth, we cannot do so. As commonly used, a private interest may be defined as a value held by an individual. Since each man is a unique and discrete being, each man possesses a separate set of values or interests. I may be interested in baseball, you may prefer ice hockey. I may enjoy picking a guitar and singing; you may consider my renderings anything but musical. Each person, by his ideas, his words, and his conduct, holds and expresses these values which make up his private interests. He seeks to advance these interests, to enjoy them, to introduce others to them. Nonetheless, these interests never lose their individual private character.
The True Meaning of “Public Interest”: Coercion Writ Large
On the other hand, no such thing as a public interest exists, despite continual use of the phrase.5 When one utters that pair of words, he means to convey a thought most aptly derived from Munn v. Illinois: he means that some private, personal, individual interest or value of one or more persons is, in the speaker’s subjective opinion, of such overwhelming importance that all members of society should embrace it as eternal verity and that if any other private, personal, individual interest or value conflicts with the advancement of the first interest, the conflicting interest must be shunted aside, depriving the holder or holders of that second interest of their liberty or right to enjoy and advance the second interest. In plain language, the "public interest" represents a power tool to coerce those who disagree with the idea or subjective value advanced by the statist.
Consider this definition in analysis of some of our earlier examples. My pleasure in baseball may exist side by side with your interest in ice hockey; each private interest receives and satisfies its own followers. Should too few persons share my interest in baseball, and refuse to patronize supporting advertisers and to buy grandstand seats, my favorite home team may move away to Spokane, for the owner has a private interest in making a return on
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his capital investment. If he does not make a return in Milwaukee, he will move to Atlanta; if he makes an insufficient return in the latter city, he may travel elsewhere or he may reinvest his remaining capital in an entirely different venture, one which attracts and pleases more people.
Now notice what will happen if I am able to convince the government that baseball is an enterprise "affected with a public interest." I may attend the games because they accord with my personal, private, individual interest. You, however, prefer to spend your earnings on the hockey games. If you and others who do not share my interest in baseball preponderate, the owner and operator of the team will lose money. Yet, if his business is "affected with a public interest," he cannot move the team to the most favorable location, or raise his prices, or take any other ameliorative steps. Instead, he must remain captive and lose money (destruction of his capital), sell to someone else who will remain and lose money, or secure a subsidy or other favors from the government. Most "public enterprises" follow the latter course.
Subsidy and monopoly inevitably lead to regulation and disallocation of economic goods. One common result: increased taxes for all members of the community to support the team in the "public interest." I might well be willing to pay extra taxes to advance my private interest turned public, but chances are, I would rather mulct my neighbors, thinking that this endeavor represents the greatest good. In any event, you will be deprived of your capital (which you would ordinarily use to support the hockey team) against your will, and you will be compelled to watch your privately and justly earned funds spent on an endeavor you dislike, an endeavor which cannot carry its own weight in the free market.
Let Each Support His Own, Without Forcing Others
The only fair method of allocating scarce resources between numerous activities commands each man to support that which he values with that which he has created, and to compel no other man to act contrary to his desires. Justifiable societal action consists of the coercive prevention of force and fraud and the preservation of a system of settling disputes, and no more. Myriad activities can take place concurrently, with no forced adherence to any particular one. If any endeavor lacks supporters, it must pass from the scene until new support appears. When this concept replaces
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the doctrine of "public interest," when the "public interest" shibboleth reveals its true nature, freedom regains its exalted place.
As demonstrated earlier, any business not in bankruptcy is "affected with a public interest" in the sense that some customers (the "public" of that enterprise) find satisfaction in the products supplied. Mr. Justice Field recognized this a century ago when he declared:
The public is interested in the manufacture of cotton, woolen, and silken fabrics, in the construction of machinery, in the printing and publication of books and periodicals, and in the making of utensils of every variety, useful and ornamental; indeed, there is hardly an enterprise or business engaging the attention and labor of any considerable portion of the community, in which the public has not an interest in the sense in which that term is used by the court in its opinion. . . .6
Thus, the phrase not only connotes a coercively imposed choice by some adherent of a cause, but also descends into meaninglessness. It becomes a catch-phrase employed by courts to justify the unseemly result of depriving someone of his liberties, a juridical make-weight. Of course, the community possesses the naked power to pilfer and destroy. That is not to say that looting and coercion is justified, nor can one honestly credit a grain warehouse or a milk seller with cloaking their enterprise with a public interest. Such a statement reminds one of a robbery victim pilloried by the community for owning property of interest to the miscreants.
No entrepreneur cloaks his business with a public interest. Each person evaluates his talents, creates capital, and plunges into an enterprise which he believes will satisfy the public and produce a subjectively acceptable rate of return. Employing the jabberwocky of the Supreme Court, one cloaks his business with a public interest when he serves the public well.
Label a Business as “Public” and then Take Control
Venturing forth from the holding of Munn v. Illinois, the courts in the past one hundred years have justified all manner of regulation of, and intrusion into, the private affairs of those businesses denominated "public utilities." A public utility has been defined as a business regularly
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supplying the public with a particular commodity or service of "public consequence or need."7 In simple terms, a public utility supplies a product which some of the public believes that all must have.
The mere statement of the definition expresses the ambiguous and tautological nature of the phrase, similar to that encountered in defining "public interest." Anything and everything can fit the definition, depending on the values of the speaker.
Early inroads occurred in medieval England in the realm of food, drink and lodging.8 Inadvertent poisonings occurred with some frequency and the traveler often found himself at the mercy of the innkeeper. Because sustenance and lodging formed the "necessities" of life, those who supplied these goods and services soon came to be labeled as "affected with a public interest" or some such nebulous phrasing signaling a limitation upon the suppliers’ freedom. Of course, laws preventing coercion and misrepresentation amply protect the consumer.
In subsequent centuries, all manner of businesses fell in and out of the category of a "public utility," depending on the current whims and fads of those in power. Companies supplying water, fuel, power, energy, and transportation quickly come to mind. In almost every instance, the so-called public utility supplied goods or services which were greatly in demand; this factor seems to make one of the two distinctions between "public utilities" and other endeavors. The other apparent criterion for speaking of a particular business as a public utility appears to rest on the fact that, while many individuals seek the goods or services provided, only a relatively few producers choose to offer such wares.
These two reasons require analysis in order to determine if any veracity resides in the rule singling out some businesses as "public" and limiting their freedom of action. We have already discerned that the mere attribution of the term "public" to a business presents an exercise in banality, since all businesses which sell goods or offer services demanded by someone else serve that portion of the "public." Nevertheless, is there any reason why we should treat some activities differently because (1) many persons desire the product or (2) few persons supply the product?
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Tyranny in the Name of “Universality of Demand”
First, consider the universality of desire. Economics considers the distribution of scarce goods, not free (abundant) goods. This science posits, as a first principle, the proposition that human wants are insatiable and competing, and economic goods (the subjects of those wants) are scarce. Values, being subjective, vary from person to person. Some desires crop up more frequently than others: the need for food, clothing, shelter, transportation. Yet the mere universality of these wants affords no rational basis for treating the supplier with disdain or coercion.
Let us accept the postulate that man requires food to survive. It does not logically follow that the producer of grain, a farmer, must be restricted in his liberty merely because others gain sustenance from the grain. Suppose the farmer desires not to sell; he created the value (grain)—he should be able to eat it, hoard it, destroy it, and do with it as he pleases. Such a right accords with justice and with the axiom that each man owns the absolute right to live his own life and to choose his own destiny without interference from any other human being, so long as the actor does not coerce or defraud another individual.
The farmer does not coerce or defraud the would-be consumer by holding onto his grain. The consumer retains the choice to eat beef, or olives, or jello, or to purchase grain from another farmer. Or, if he really wants the first farmer’s grain, he will pay the price which represents the concatenation of values between farmer and producer. After all, grain is a perishable commodity and the first farmer will not want to store his crop forever lest he lose his entire capital investment. And, the first farmer cannot exist on grain alone; he requires a balanced diet, shoes for his children, blankets for his bed, tobacco for his pipe, books for his pleasure, and countless other items which grade from necessity to luxury, depending upon the particular set of values held by the actor.
One may urge that individuals cannot survive without food and drink and, therefore, these products demand special dispensations. True, persons cannot survive for long periods without food and water; that fact does not justify restriction upon the liberties of others, so long as the others do not employ force or fraud.
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We might conjure up a hypothetical example where a cruel creature hoarded food while others starved. Yet those who desire the food possess no moral right to take from the producer that which he has created. One need not evidence much perception to discern that few persons, if any, will fit the hypothetical mold of evil, and that other citizens abound who possess sufficient food and beverage to alleviate any impending starvation and who display a willingness to do so. Sympathy etches the character of the free man. The supposition that one miscreant would and could corner the supply of food and drink (or any other product) and sit idly by while others go without sustenance remains the wildest sort of whimsy, wholly out of union with reality.
A “Public Utility” is a Government Granted Monopoly
Second, consider the possible monopoly of production. Those who employ the concept of "public utility" fear the concentration of power over the supply of a given product in one or a few men.’° If a concentration appears, history proves it likely to be ephemeral.¹¹ If one man produces goods or services so much in demand that he makes a profit, other entrepreneurs will follow him into the field and reduce the cost to the consumer. If only a few supply the many, it is simply because those few are the only ones who freely desire to invest their capital in the enterprise, probably because the potential return lacks sufficient attraction to other enterprising ventures.
Proponents of the public utility concept often tender a collateral argument: public utility monopolies justify on the basis not only of the need of the public (demonstrated heretofore to be sham), but also on the preservation of capital. This contention assumes that competing public utilities would duplicate service and thereby act uneconomically because of the extensive capital investment commanded. Such a suggestion raises the immediate inquiry of whether, assuming the truth of the argument, such facts really justify the destruction of freedom.
More saliently, however, every producer competes with myriad others, both for the entire consumer dollar and for that part of the consumer dollar normally expended on such products. To this extent, each producer duplicates investment with others, yet no one decries the competition between Montgomery Ward and Sears, Roebuck, or between Albertson’s, Fred Meyer, Safeway, and A & P. Indeed, those most
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vociferous in favor of "competition" as a goal often inconsistently acclaim virtue for monopoly in the "public utility" arena.
If two power companies serve the same area, and duplicate transmission lines, so what? Each will remain ensconced in business only so long as it provides a satisfactory service to its customers. Indeed, increased competition inevitably leads to better service at a lower cost, with ultimate benefit to the purchaser. If one of the power companies cannot compete effectively, it will leave the industry and convert its capital to other, more favorable uses.
NOTES:
Competition no more destroys capital here than in any other business milieu; if capital is wasted or destroyed, that amounts to one of the costs we must be willing to pay for freedom. If one of the competing power companies leaves the field, the public utility proponents apprehend the increased cost to the "public" of this "necessary" service. Of course, the "public" possesses the ultimate weapon: it can refuse to purchase the service and thus drive the producer out of business (even if the service constitutes a "necessity," substitutes generally exist). Or, more likely, a competitive producer,
COMPETITION ASSURES EFFICIENCY
It is apparent that a change in transportation costs, production technology, management, or any other cost factor can upset a monopolistic position. Also, a concentration beyond the optimum point is an invitation to failure, for the unit costs of production tend to increase again. The monopolist who disregards this fact invites potential competitors to invade his field and reduce him to his optimum size. There is no need for government to break up a giant enterprise; if it were too large, the competitors would reduce it. . . Of course, it is most unnatural and unlikely for a businessman to rise to eminence through product improvements and lower prices, and then suddenly to turn toward output curtailment and price increases. But if he should act in such a manner, which is conceivable, he practices self-destruction.
HANS F. SENNHOLZ, " The Phantom Called Monopoly"
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attracted by profit, will enter the field and offer the same service for a lower price.
Thus, we perceive that reason entitles no enterprise to the appellation "public utility" or the special advantages and regulations which attend such a designation. No business can be truly said to be "affected with a public interest" in the sense that such an endeavor should be subjected to special rules. Equal treatment should be the bench mark of state/business relations.
Persistent repetition of the "public" concept of business enterprises permeates the past century of American history, rendering the hypothesis of almost universal acceptance. One can only pray that succeeding generations will visit the issue with precision and clarity of analysis and not be betrayed by the hoariness of age. Old myths die hard, but pass away they must if freedom is to become enthroned. One can pierce the fiction of a "public" business by recognizing that no business possesses "public" functions; the only business of business is business, the supplying of the best possible goods and services at the highest possible return to the greatest number of customers. If any business performs this function, it will amply serve the public interest.
NOTES 194 U.S. 113, 24 L. Ed. 77 (1876).
²Nebbia v. People of State of New York, 291 US 502, 54 S. Ct. 505, 78 L.Ed. 940 (1934). ³lbid., 291 U.S. at 525.
‘The concept of value provides a separate topic of discussion beyond this essay.
*One may wonder if man can conceive of that which does not exist. Unicorns on the moon and the vagaries of science fiction should dispel this question. Man seems destined to conceive, and act upon, political and economic fantasies.
*Note 1, op. cit., 94 U.S. at 141.
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‘See Gulf States Utilities Co. v. State, 46 SW 2d 1018, 1021 (Tex Civ App 1932); Black’s Law Dictionary (4th Ed., West Publishing Company, St. Paul, Minn., 1957) 1395.
One should not lose sight of the fact that English law, while possessing similar roots, differs markedly from the American experience, the latter stressing human liberty and the free market to a greater degree.
See Note 1, op. cit., 94 U.S. at 130-132, where Mr. Chief Justice Waite stresses the "monopoly" aspects of grain warehouses.
¹ºHow singular that most of these theorists express no concern over the concentration of monopoly power of coercion (government) in the hands of the few and the incompetent, yet quake with the thought of free market concentrations.
¹¹Better minds than mine have exposed the illusions which pockmark the chimera of monopoly. See, e.g., Sennholz, Hans F., "The Phantom Called Monopoly," VII Essays on Liberty 295-317 (Foundation for Economic Education, Inc., Irvington-on-Hudson, New York 1960); Armentano, Dominick T., The Myths of Antitrust (Economic Theory and Legal Cases) (Arlington House, New Rochelle, New York, 1972); Rogge, Benjamin A., "Will Capitalism Survive?" III Imprimis No. 5 (May 1974), discussing Joseph Schumpeter’s Capitalism, Socialism and Democracy (1942).
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Government: An Instrument of “Legal Plunder”
Political officials will not grant and enforce such a legal cartel arrangement for nothing, however. Private interests seeking monopoly or cartel gains at the expense of their competitors and the public will have to pay the politicians for granting them. The payments assume diverse forms, such as campaign contributions, wining and dining by lobbyists, literal bribes, speaking fees, and the promise of jobs after their political careers end. In essence, the politicians operate an auction market where various interests bid for redistributive legislation. Obviously, this may take many forms beyond the literal regulatory cartelization legislation. Examples include efforts by firms and other private interests to obtain such things as targeted income transfers, farm price supports, tariffs on imports competing with domestic products, and so on.
The basic insight here seems obvious: Politicians who have the power to grant special benefits, and can generate payments from private interests seeking to be the beneficiaries, will also have the power to impose legislative harms and can generate payments from private parties by threatening to do so.8 [This process is called] “rent extraction,” or legislative extortion.
This can take many forms, including threats to impose excise taxes or costly regulation (including price controls), or even threats to deregulate industries previously cartelized through regulation. Officials in federal, state, and local regulatory agencies can also engage in rent-extraction by such practices as threatening to withhold licenses required to do business or to initiate antitrust prosecutions.
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Chapter 15
How Nineteenth-Century Americans Responded to Government Corruption
Constitutional and Legal Reform Dealt Mercantilist Interventionism an Enormous Blow
By James Rolph Edwards
April 2004 _____________________________________________________________
James Rolph Edwards is an associate professor of economics at Montana State University-Northern.
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From its origin as a distinct secular scientific discipline with the French Physiocratic school in the middle of the eighteenth century, and the British classical school that followed, economics had a pro-market, limited-government orientation. Indeed, intellectual historians and political philosophers often refer to it as “economic liberalism,” in contrast with the classical liberal political philosophy of natural rights, human equality, and constitutionally limited government, which emerged somewhat earlier. Complementing that political philosophy, the teachings of the economists are known to have helped institutionalize liberal regimes and policies based on private property and voluntary exchange.
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The effects of such regimes and policies were startling, first in Britain and then in America. Centuries of medieval stagnation gave way, and for the first time in recorded history, continuing economic growth with rising real incomes for ordinary persons became the norm. In the eighteenth century, real income had stagnated in the American colonies under British mercantile policy. Over the nineteenth century, however, closely following ratification of the Constitution in 1788, real incomes in America grew at an average annual rate 50 times above that experienced in the Old World during the sixteenth and seventeenth centuries. Average life spans rose rapidly, and life-changing inventions and innovations of all kinds emerged at a dazzling pace.
Fairly early in the twentieth century, however, most economists in America succumbed to the interventionist perspective of political progressivism and welfare liberalism. In this “public interest” perspective, the regime of private property and voluntary exchange was and is believed to be subject to massive and frequent market failures—externalities, monopolies, corporate exploitation of workers, and so on—which are assumed to require interventions by public-spirited government officials in the form of taxation, subsidies, or administrative regulation.1 For decades economic analysis focused strongly on the nature of market failures and on regulatory prescriptions. Government intervention expanded apace, progressively restricting economic freedom.
However, a reversion of opinion by many economists back toward the classical-liberal roots of the profession began in the 1960s and accelerated in the 1970s due to three developments. The first was the increased professional influence of Milton Friedman and the Chicago school of economics, which had a strong free-market orientation. The second factor was that economists had, by that time (the 1960s), several decades of regulatory practice to observe and analyze. The picture emerging from careful studies was not one of social problems being cured by beneficent regulators. The third factor was the resurgence of the Austrian school, which had always defended free markets and opposed statist interventionism, but which had almost disappeared in the 1940s.
Oddly (or perhaps not so oddly), this resurgence of skepticism among economists about the political motivations for and beneficial character of government intervention overlapped a new burst of regulatory activity in the late 1960s and early 1970s. In that period the Johnson and Nixon
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administrations established the EPA, OSHA, NHTSA, CPSC, and many additional regulatory agencies with enormous budgets and vast powers. Since then, evidence has continued to accumulate that regulation normally does more harm than good. If regulatory activities were in fact solving social problems and overcoming market failures by acting to end racial discrimination, business monopoly, labor exploitation, externalities, unsafe working conditions, and the like, they should have increased productivity and economic growth.2 Instead, after 1972, productivity growth fell below its historic 2 percent long-run annual average, and stayed below it for over 20 years, in an episode economists termed the Great Productivity Slowdown. Richard K. Vedder has shown empirically that increasing regulation was a primary cause of the slowdown and that we suffered staggering losses in real income as a result.3
Creating Cartels Through Licensure and Regulation
Suspicion among economists over the motives for regulatory intervention emerged not only because the forms and effects of regulation diverged from economists’ models and predictions, but also because firms were often observed seeking regulation, rather than opposing it. Major firms in the trucking industry, for example, had lobbied for passage of the National Motor Carrier Act of 1935, bringing the industry under regulatory control of the Interstate Commerce Commission, which had been created in 1877 to regulate the railroads. And in 1938 the airlines lobbied Congress to pass the Civil Aeronautics Act, establishing a government-enforced cartel over the air-passenger industry.4
George Stigler was among the first economists to wonder whether, given that economic agents often demand regulation, something like market exchange was occurring between those parties and legislators. He was a pioneer in attempting to model supply and demand in such a market.5 A student of industrial organization and cartels, Stigler was aware that private cartels are unstable: The fixing of a price above the competitive level motivates members of the cartel to undercut the fixed price for personal gain. Also, the high price attracts outside competitors into the market, adding to supply and making it impossible to maintain the cartel price. He also knew that entry can be prevented, and cartel arrangements enforced, if the cartel can persuade the government to use its coercive legislative and police powers in those efforts.
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Political officials will not grant and enforce such a legal cartel arrangement for nothing, however. Private interests seeking monopoly or cartel gains at the expense of their competitors and the public will have to pay the politicians for granting them. The payments assume diverse forms, such as campaign contributions, wining and dining by lobbyists, literal bribes, speaking fees, and the promise of jobs after their political careers end. In essence, the politicians operate an auction market where various interests bid for redistributive legislation. Obviously, this may take many forms beyond the literal regulatory cartelization legislation stressed by Stigler. Examples include efforts by firms and other private interests to obtain such things as targeted income transfers, farm price supports, tariffs on imports competing with domestic products, and so on.
The key social problem associated with private efforts to obtain redistributive legislation (termed “political rent-seeking”) was made clear by Gordon Tullock, in another breakthrough paper.6 Scarce resources (money and lawyers’ and lobbyists’ time, among other things) that are used in such efforts are diverted from more productive uses, and the real output they would have otherwise generated is lost. Indeed, Tullock demonstrated that when rent-seeking is competitive, the entire discounted present value of the prospective future gains being sought through redistributive legislation will be expended as rent-seeking costs. Redistributive politics is thus a negative-sum game. There are winners and there are losers, but the sum of the losses exceeds the sum of the gains, and the members of society as a whole are made poorer than they otherwise would be.7
Recently there has been another breakthrough in describing the interaction between political authorities and private interests. Economist Fred S. McChesney of Northwestern University noticed that many payments by private parties to legislators could not be explained as efforts to obtain economic rents at public expense through legislation. Instead, the parties making the payments were simply attempting to protect wealth and income they already possessed from being reduced or eliminated by costly legislation targeted at them. The basic insight here seems obvious: Politicians who have the power to grant special benefits, and can generate payments from private interests seeking to be the beneficiaries, will also have the power to impose legislative harms and can generate payments from private parties by threatening to do so.8 McChesney calls this process “rent extraction,” or legislative extortion.
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This can take many forms, including threats to impose excise taxes or costly regulation (including price controls), or even threats to deregulate industries previously cartelized through regulation. Officials in federal, state, and local regulatory agencies can also engage in rent-extraction by such practices as threatening to withhold licenses required to do business or to initiate antitrust prosecutions. It is notable, for example, that Bill Gates gave little in political contributions before the Microsoft prosecution and has given very much since it began.
McChesney stresses that, just as with political rent-seeking, there are real costs associated with rent extraction. First, the risk that government officials will use their legislative or administrative power to reduce private returns on invested capital diminishes the incentive private entrepreneurs have to invest in the first place. In addition, there are transactions costs (including bargaining and information gathering) incurred in the process. Also, risks of rent-extraction motivate some economic agents to hide their resources to avoid political extortion, and there are deadweight costs associated with doing so.
Public Choice economists have long argued that minimizing rent-seeking behavior and its associated costs requires constitutional reforms restricting the power of legislators to grant special favors. Few people will waste time or money trying to influence a legislator who has no power to grant them a subsidy or protected position in the market. McChesney likewise recognizes that limiting government authority to its minimum legitimate functions would minimize rent-extraction. Who would make extortion payments to politicians lacking power to carry out their threats?
Government Intervention Encourages Fraud, Corruption and Collusion
The immediate question becomes whether such constitutional reforms are feasible. History provides a fairly unambiguous answer, because such reforms have been applied, and have worked, in the past. The fact that the U.S. Constitution placed so many prescriptive (Article I, section eight) and proscriptive (including Article I, section 9, and the Bill of Rights) limits on the legislative power of Congress is a primary reason so little interventionist activity was engaged in at the federal level before the Civil War. State officials, in contrast, were under much less constraint and engaged in a great deal of rent-seeking and rent-extracting economic
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intervention. When the effects of such activities became clear to the public, however, constitutional reforms were applied at that level of government also. Oddly, this history is little known.
One of the first political parties in the United States, the Federalists, was a mercantilist party advocating central banking, internal excise taxes, and federal funding of the building of canals and turnpikes.9 Its Jeffersonian opponents in Congress, citing a lack of constitutional authority, predicting that fraud and collusion would result, and stressing the regional redistributions likely to be generated by any particular transportation subsidy, largely frustrated the Federalist program of “internal improvements .” At the state level, however, constitutional provisions were less restrictive and the case for canal and turnpike subsidies seemed initially more compelling.10
State officials wanted to subsidize grandiose canal and turnpike projects precisely in such instances where market entrepreneurs were unwilling to venture because of likely unprofitability. The officials easily assumed—usually falsely—that subsidies would make those projects profitable. In some cases, such as the Erie Canal, built by New York State with borrowed money and revenue from an excise tax on salt between 1817 and 1825, that appeared to be true. The Erie made money, though its profitability was mostly due to the state’s suppressing of competition from other canals and railroads built along segments of its route.
The apparent success of the Erie, however, motivated New York and other states to subsidize many other projects. These subsidies, often in the form of state stock or bond purchases to capitalize franchised private builders, were associated with massive and repeated rent-seeking corruption, generating political scandals that outraged the public in state after state. Worse, most of the projects lost money, and the financial conditions of the states heavily involved in such projects consequently deteriorated, putting many of them in serious trouble.
Legislation to Forbid Merger of State and Corporate Power
The development of the steam railroad engine and rapid expansion of the railroad industry after 1830, though an enormous stimulus to economic growth through reduced transport cost between locales not capable of being
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connected by waterways, in some ways exacerbated the problems of the state governments. For one thing, the railroads, like the turnpike and canal corporations before them, had to obtain incorporation charters or permits from the governments. In return, state authorities frequently extracted rents. Canal and turnpike companies lobbied state legislators to prevent competing railroads from being built. This motivated counter-lobbying from the railroads, further enriching the legislators, but wasting scarce resources.11 In many cases, the legislators offered subsidies to the railroad bidding highest for the legislative franchise to build a particular route. Consequently, many railroads were built to obtain the subsidies not to profit from operations. Such roads were often not completed, or otherwise lost money, leaving the states further in debt.
By the early 1840s the citizens in many states had had enough of scandals and financial crises generated by “internal improvement” subsidies. Around 1842, under pressure from angry citizens led by Jacksonian reformers, Indiana, Illinois, and Michigan all amended their constitutions to forbid or restrict their legislatures from providing subsidies to private corporations. They were followed in 1845 by Louisiana, in 1846 by New York, in 1850 by Kentucky, in 1851 by Maryland and Ohio, and in 1857 by Missouri and Pennsylvania. On top of this, under the same public pressures, many states had begun passing general incorporation laws, allowing virtually any group of aspiring business associates to incorporate. This removed state power to extract rents from private parties to obtain or retain incorporation, and also made corporations truly private, rather than quasi-public, business entities.12
These events significantly contracted the boundaries of the public sector relative to the private sector, providing crucial conditions for rapid economic growth to occur in the remainder of the nineteenth century.
This massive public revulsion and wave of constitutional and legal reform had important national implications. Mercantilist interventionism had been dealt an enormous blow, and, with it, so had a major political party. Since 1834, the mercantilist party in the United States had been the Whigs, who favored public infrastructure subsidies, paper money, and high tariffs. Their opponents were the Jacksonian Democrats, who had a classical-liberal ideology favoring low tariffs, hard money, and opposition to government economic interventions. The rejection of mercantilism by the public was to no small extent a rejection of the Whigs. This and other factors
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caused the Whig party to break up and be replaced by the Republican Party after 1854.13
What followed then, we all know: a civil war over tariffs and slavery that badly injured the South and, with the Southern Democrats out of Congress, a new wave of statist and mercantilist policy under the Republicans, including the corrupt and unnecessary federal subsidization of the first transcontinental railroads.14These traumatic events seem to have overshadowed and reversed an enormous victory for those who favored limited government and opposed corrupt rent-seeking and rent-extraction, which occurred over the two decades prior to the war.
Notes
1. See, for example, Leverett S. Lyon and Victor Abramson, Government and Economic Life: Development and Current Issues of American Public Policy (New York: Brookings Institution, 1940).
2. For the logic of this claim, see James Rolph Edwards, Regulation, the Constitution, and the Economy: The Regulatory Road to Serfdom (Lanham, Md.: University Press of America, 1998), pp. 166 and 169–70.
3. Richard K. Vedder, “Federal Regulation’s Impact on the Productivity Slowdown: A Trillion Dollar Drag,” CSAB Policy Study Number 131, July 1996.
4. See William A. Jordan, Airline Regulation in America: Effects and Imperfections (Westport, Conn.: Greenwood Press, 1979 [1970]).
5. George Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science, Spring 1971, pp. 3–21.
6. Gordon Tullock, “The Welfare Costs of Tariffs, Monopoly, and Theft,” Western Economic Journal, June 1967, pp. 224–32. For a description of rent-seeking see Sanford Ikeda, “Rent-Seeking: A Primer,” Ideas on Liberty, November 2003.
7. This is so not just because of the rent-seeking cost, however, but also because of the overhead costs of administering the transfers or regulating the cartel, the deadweight costs of taxation to finance such activities, and so on.
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8. Fred S. McChesney, Money for Nothing: Politicians, Rent Extraction, and Legislative Extortion (Cambridge Mass.: Harvard University Press, 1997).
9. It is important to know that the late medieval European monarchies were mercantilist, rent-seeking societies, replete with franchised monopolies, cartels, and trade restrictions. Mercantile practices had to be largely eliminated for free societies with efficient market systems to emerge. The motives for mercantile policies never quite disappear, however.
10. The standard source here is Carter Goodrich, Government Promotion of Canals and Railroads (New York: Columbia University Press, 1960). Goodrich’s bias, however, is easily shown. Repeatedly implying that state and federal subsidies were beneficial on net, he never once even mentions James J. Hill, who built the Great Northern Transcontinental railroad in the 1890s without a cent of either federal or state subsidy, an achievement that dwarfs the building of the Erie Canal.
11. Stewart H. Holbrook, The Story of American Railroads (New York: Crown Publishers, 1947), p. 231, describes these conditions well.
12. Robert Hessen, In Defense of the Corporation (Stanford Cal.: Hoover Institution, 1979), pp. 29–30.
13. The failure to recognize the nature and importance of these events leads historians to vague and convoluted explanations for the demise of the Whig party. See, for example, Michael F. Holt, The Rise and Fall of the American Whig Party (New York: Oxford University Press, 1999), chapter 26.
14. See Burton W. Folsom, The Myth of the Robber Barons (Herndon, Va.: Young America’s Foundation, 1991), chapter 2.
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Private property Ownership: A Mighty Bulwark Against the Tyranny of “The State”
Without private property, there is no escape from [the power of the State]. Property rights are the border guards around an individual’s life that deter political invasions. Those who disparage [private] property often oppose any meaningful limits on government power. John Dewey, for instance, derided “the sanctity of private property” for providing “freedom from social control.”[3] Socialist regimes despise [private] property because it limits the power of the state to regiment the lives of the [individual and the] people. A 1975 study, The Soviet Image of Utopia, observed, “The closely knit communities of communism will be able to locate the anti-social individual without difficulty because he will not be able to ‘shut the door of his apartment’ [or home] and retreat to an area of his life that is ‘strictly private.’” [4] Hungarian economist Janos Kornai observed: “The further elimination of private ownership [of property] is taken, the more consistently can full subjection [of the individual] be imposed.”[5]
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Few government policies better symbolize the contempt for property rights than the rising number of no-knock raids. “A man’s home is his castle” has been an accepted rule of English common law since the early 1600s and required law-enforcement officials to knock on the door and announce themselves before entering a private home. But this standard has increasingly been rejected in favor of another ancient rule—“ the king’s keys unlock all doors.” [20]
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Chapter 16
Property and Liberty Property Rights Are Essential to Liberty
By James Bovard
September 2000 _____________________________________________________________
Contributing Editor James Bovard is the author of Attention Deficit Democracy, Terrorism and Tyranny, Lost Rights, and other books. ...
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Property is “the guardian of all other rights,” as Arthur Lee of Virginia wrote in 1775. [1] The Supreme Court declared in 1897: “In a free government almost all other rights would become worthless if the government possessed power over the private fortune of every citizen.” [2] Unfortunately, legislators, judges, and political philosophers in the twentieth century have perennially disparaged property’s value to freedom.
Without private property, there is no escape from state power. Property rights are the border guards around an individual’s life that deter political invasions. Those who disparage property often oppose any meaningful limits on government power. John Dewey, for instance, derided “the sanctity of private property” for providing “freedom from socia l control .” [3] Socialist regimes despise property because it limits the power of the state to regiment the lives of the people. A 1975 study, The Soviet Image of Utopia, observed, “The closely knit communities of communism will be able to locate the anti-social individual without difficulty because he will not be able to ‘shut the door of his apartment [or home’] and retreat to an area of his life that is ‘strictly private.’” [4] Hungarian economist Janos Kornai
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observed: “The further elimination of private ownership is taken, the more consistently can full subjection [of the individual] be imposed.”[5]
Yet Oxford professor John Gray asserted in 1990 that “very extensive State intervention in the economy has nowhere resulted in the extinction of basic personal and political liberties.”[6] One wonders which freedoms Bulgarian and Romanian citizens enjoyed under communism that Gray neglects to mention. Perpetual shortages of almost all goods characterized East Bloc economies; politicians and bureaucrats maximized their power and maximized people’s subjugation through discretionary doling out of goods. Shortages created new pretexts to demand further submission: the worse the economic system functioned, the more power government acquired—until the people rose up and destroyed the governments.[7]
Private Property: A Foundation for Individual Liber ty
Government cannot control the economy without controlling the lives of everyone who must rely on that economy to earn his sustenance. There is more to life than wealth. But the more wealth government seizes from people, the more likely that government will be able to control all the other good things in life. Once government domineers the economy, it becomes far more difficult to resist the extension of government power further and further into the recesses of each person’s life.
Property rights are not concerned merely with the sanctity of the estates of the rich. The property right that each citizen has in himself is the foundation of a free society. As James Madison observed, “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses.”[8] The property that each citizen has in his rights is the foundation of his ability to control his own life and strive to shape his own destiny.
Some contemporary liberals argue that government ownership is the ultimate safeguard of freedom. According to Alan Wolfe, “No one would be able to enjoy the negative liberty of walking alone in the wilderness if it were not for the regulatory capacity of government to protect the wilderness against development.”[9] Wolfe implies that if the government did not own much of the nation’s land, private citizens would ravage the landscape from coast to coast. However, private landowners have a better record of safeguarding the environmental quality of their land than does the
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federal government.[10] The Army Corps of Engineers has destroyed far more of the natural river beauty in this country than has any private malefactor, and the Federal Emergency Management Agency’s lavish subsidies for “flood insurance” have made possible vast numbers of buildings on ecologically fragile coastlines.[11] Wolfe also implies that no private forest owner would permit anyone else to walk on his land. However, the proliferation of contracts for hunting on private land show that, with a sound incentive system, access to private land can easily be negotiated. Citizens have different values, and many citizens prefer to keep their land in semi-pristine condition. Besides, even if all citizens wanted to sell their land to developers, only a small percentage of such land would be developed—simply because there is no economic rationale for developing much of rural America.
Private Property: The Bulwark of Privacy
The sanctity of private property is the most important bulwark of privacy. University of Chicago law professor Richard Epstein wrote that “private property gives the right to exclude others without the need for any justification. Indeed, it is the ability to act at will and without need for justification within some domain which is the essence of freedom, be it of speech or of property.”[12] Unfortunately, federal law enforcement agents and prosecutors are making private property much less private. In 1984 the Supreme Court ruled in Oliver v. United States—a case involving Kentucky law-enforcement agents who ignored several “No Trespassing” signs, climbed over a fence, tramped a mile and a half onto a person’s land and found marijuana plants—that “open fields do not provide the setting for those intimate activities that the [Fourth] Amendment is intended to shelter from government interference or surveillance.”[13] (The Founding Fathers apparently forgot to include a parenthesis in the original Fourth Amendment specifying that it applied only to “intimate activities.”) And the Court made it clear that it was not referring only to open fields: “A thickly wooded area nonetheless may be an open field as that term is used in construing the Fourth Amendment.”[14] Justice Thurgood Marshall dissented: “Many landowners like to take solitary walks on their property, confident that they will not be confronted in their rambles by strangers or policemen.”[15] Even prior to this ruling, it was easy for law-enforcement agents to secure warrants to search private land merely by concocting an imaginary confidential informant who told police about some malfeasance. [16]
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The core of the “open fields” decision is that the government cannot wrongfully invade a person’s land, because government agents have a right to go wherever they damn well please. After this decision, any “field” not surrounded by a 20-foot-high concrete fence is considered “open” for inspection by government agents. (And for those areas that are sufficiently fenced in, the Supreme Court has blessed low-level helicopter flights to search for any illicit plants on the ground.[17])
The Supreme Court decision, which has been cited in over 600 subsequent federal and state court decisions, nullified hundreds of years of common-law precedents limiting the power of government agents. The ruling was a green light for warrantless raids by federal immigration agents; in late 1997 the New York Times reported cases of upstate New York farmers’ complaining that “immigration agents plowed into fields and barged into packing sheds like gang busters, handcuffing all workers who might be Hispanic and asking questions later . . . . [D]oors were knocked down, and workers were wrestled to the ground.”[18] In a raid outside of Elba, New York, at least one INS agent opened fire on fleeing farm workers. [19] Many harvests subsequently rotted in the fields because of the shortage of farm workers.
Warrantless Searches and “no-knock raids” Violate the Privacy of Private Property
The “open fields” doctrine provides an acid test of conflicting views on freedom. Are people more or less free when government agents can roam their land? Are they more or less free when they can be accosted by government agents any time they step past the shadow of their front door? Is freedom the result of government intrusions—or of restrictions on intruders? The scant controversy the 1984 decision evoked is itself a sign of how statist contemporary American thinking has become.
Few government policies better symbolize the contempt for property rights than the rising number of no-knock raids. “A man’s home is his castle” has been an accepted rule of English common law since the early 1600s and required law-enforcement officials to knock on the door and announce themselves before entering a private home. But this standard has increasingly been rejected in favor of another ancient rule—“ the king’s keys unlock all doors.” [20]
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A New York Times piece observed in 1998 that “interviews with police officials, prosecutors, judges and lawyers paint a picture of a system in which police officers feel pressured to conduct more raids, tips from confidential informers are increasingly difficult to verify and judges spend less time examining the increasing number of applications for search warrants before signing them.”[21] The Times noted that “the word of a single criminal, who is often paid for his information, can be enough to send armed police officers to break down doors and invade the homes of innocent people.”[22]
No-knock raids have become so common that thieves in some places routinely kick down doors and claim to be policemen.[23] The Clinton administration, in a 1997 brief to the Supreme Court urging blind trust in the discretion of police, declared that “it is ordinarily reasonable for police officers to dispense with a pre-entry knock and announcement.”[24] Law-enforcement agencies’ fear of losing small amounts of drug evidence has fueled attacks on the sanctity of homes. The Clinton administration, for instance, appears far more concerned about the flushing of drugs than about the flushing of privacy. In a 1995 brief to the Supreme Court, the Clinton administration stressed that “various indoor plumbing facilities . . . did not exist” at the time the common law “knock-and-announce” rule was adopted.[25] Making a grand concession to civil liberties, the administration admitted that “if the officers knew that . . . the premises contain no plumbing facilities . . . then invocation of a destruction-of-evidence justification for an unannounced entry would be unreasonable.”[26] The Supreme Court has failed to impose effective restraints on police’s prerogative to carry out no-knock raids. Professor Craig Hemmens observed that the Court’s “recent decisions involving the knock and announce rule, essentially gutted the rule, reducing it to little more than a ‘form of words.’”[27]
Police also possess the right to destroy property they search. Santa Clara, California, police served search and arrest warrants by firing smoke grenades, tear-gas canisters, and flash grenades into a rental home; not surprisingly, the house caught fire and burned down. When the homeowner sued for damages, a federal court rejected his plea, declaring that the police “only . . . carelessly conducted its routine and regular duty of pursuing criminals and obtaining evidence of criminal activity. The damage resulted from a single, isolated incident of alleged negligence.”[28]
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It is as much a violation of property rights and liberty when government agents storm into the shabbiest of rental apartments as when they invade the richest mansion. The sanctity acquired by renters to a private domain illustrates how the exchange of private property can give someone vested rights—rights within which they can build and live their own lives. Local and state governments routinely treat renters as second-class citizens; many localities have mandatory inspection policies for all rental units that permit government officials to search private dwellings without a warrant or any pretext. Park Forest, Illinois, in 1994 enacted an ordinance that authorizes warrantless searches of every single-family rental home by a city inspector and police officer, who are authorized to invade rental units “at all reasonable times.” No limit was placed on the power of the inspectors to search through people’s homes, and tenants were prohibited from denying entry to government agents. Federal Judge Joan Gottschall struck down the searches as unconstitutional in February 1998, but her decision will have little or no effect on the numerous other localities that authorize similar invasions of privacy. [29]
Licensure Limits Choice of Occupation, Right of Contract and Competition
Some socialists have argued that private property is a bane of freedom because inequality of wealth is equivalent to political tyranny . According to historian R. H. Tawney, “Oppression . . . is not less oppressive when its strength is derived from superior wealth, than when it relies on a preponderance of physical force.”[30] But regardless of how much wealth a person owns, he has no legal right to coerce other citizens. Offering someone the best wage he can find is unlike holding a gun to his head; offering someone the best price for a product he is selling is not like expropriation. A legitimate government must restrict the coercion of all citizens, including those with the largest bank accounts. But the fact that politicians are sometimes corrupted by bribes and deny equal protection of the law to the poor is not a good reason to give more power to politicians.
To understand the difference between economic wealth and political power, consider the difference between the power of a boss and that of a government agent. Any power that a boss or company has over a person is based on a contract, express or implied; that power is limited to the work and time contracted for. (Contracts for lifetime labor are illegal in
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the United States.) A boss’s power is conditional, dependent on an employee’s choosing to continue to receive a paycheck.
In contrast, the government agent’s power is often close to absolute: for example, a citizen who refuses to pull over for a traffic cop flashing his lights can face jail time, regardless of whether the cop had a legitimate reason to stop him. Markets allow people a choice of whom to deal with, while government dictates that citizens must submit to its orders. As Nobel laureate James Buchanan observed, “As individuals become increasingly dependent on ‘the market,’ they become correspondingly less dependent on any identifiable person or group. In political action, by contrast, increasing dependence necessarily becomes increasing subjection to the authority of others.”[31] Markets limit the power of people to dictate to other people because the parties can seek other bidders or sellers. Markets provide venues for people to voluntarily agree with other people. Markets are symbolic of voluntary activities in the same way that jails are symbolic of coercion.
Some friends of government legitimize vesting sweeping power in politicians by defining practically any private business decision as coercive. Economist Robert Kuttner declared on a 1997 PBS program that “when a company relocates overseas . . . that is a form of violence.”[32] To define practically any economic change as “violence” is to authorize an unlimited number of political first strikes against property owners. If moving a factory overseas is a form of violence, then moving a factory across state lines is also a form of violence—since the “violence” is presumably done by a factory leaving one location, regardless of where it relocates. When a person is given a “right” to a job, all other people are prohibited from competing for that job.
A viable concept of freedom must consist of more than psychological wish fulfillment—more than a fantasy world in which every citizen can buy low and sell high, in which every citizen gets the wages he demands and pays the prices he pleases. It is crucial to distinguish between frustrated economic aspirations and government coercion. Feeling a compulsive need to impress neighbors by buying a swimming pool is not the same as facing arrest for planting grass seed in your yard and allegedly disturbing a federally designated wetland. The compulsion to buy a suit of the latest fashion is not the same compulsion as experienced during an IRS audit, especially if the agent decides to employ a notorious “lifestyle audit,” which
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forces citizens to detail and justify how much cash they had on hand at any one time a year or two before, whether they have a safe deposit box and what it contains, how much they spend on groceries, where they eat out, what toys they buy for their children, and what books or jewelry they purchase.[33] The compulsion to buy a new car differs from the compulsion you feel when police pull you over, announce that your appearance matches that of a “drug courier profile,” and proceed to rummage through your trunk, glove compartment, tire hubs, and pockets, and to ask a bevy of incriminating questions about your personal life.[34] The fact that a person spends himself deeply into debt and thus feels obliged to keep working at a job he despises is not coercive because no one compelled the person to become a mindless consumer.
An inability to find a satisfactory job or satisfactory career path is not a violation of liberty—unless government or private action forcibly blocks or restrains people. A person is not “oppressed” by his own lack of marketable job skills: every art history major who did not find a good job after college is not a victim of some sinister force.
One of the clearest violations of freedom of contract is government licensing laws, which prohibit millions of Americans from practicing the occupation of their choice. Over 800 professions, from barbers to masseuses to interior designers to phrenologists to tattooists to talent agents, now require a government license to practice. Licensing laws are usually engineered by professional associations that want to “protect” the public from competitors who might charge lower prices. [35] Licensing laws kept many blacks out of the skilled professions until the civil rights era. The Federal Trade Commission perennially reports on the anticompetitive aspects of state government licensing boards. [36 For many professions, private accreditation systems—many of which have already been developed—would provide a much more reliable consumer guide than politically controlled certification systems.
Private Property Ownership Gives the Individual the Ability to Resist Government Tyranny
Property is the basis of freedom of contract, which is simply liberty in action. Without freedom to exchange, government places all exchanges at the discretion of the political-bureaucratic ruling class. As new forms of property and wealth have developed in the last 200 years, it is now much
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clearer how vital property is to all citizens’ freedom, not merely that of landowners. By holding title to certain resources (including themselves and their own labor), people can make exchanges with others that allow them to raise themselves, to better provide for their families, to pursue their own values. Freedom is more than the right to own property or the right to buy and sell. But once the citizen loses the right to own—even if he previously owned nothing—he loses the ability to control his own life. If the citizen is denied the right to own or control his own computer disks or the clothes on his back, he has little chance of being able to shape his own future.
Property rights and market economies are vital steppingstones to political freedom. Private property gives people a place to stand if they must resist the government. Market economies and private property allow citizens to build up sufficient wealth to resist government pressure.
It is important to have freedom to buy and sell, to invest, to innovate, to choose one’s risks and reap one’s profits—but it is not enough. It is also vital that police not be able to break people’s heads, or entrap them on bogus charges, or intercept their e-mail at a whim, or target them because of their race, ethnicity, or political ideas. Unfortunately, some advocates of economic freedom seem nonchalant about practically any use of government power that does not directly interfere with profit-making.
Notes
1. Quoted in James W. Ely, Jr., The Guardian of Every Other Right (New York: Oxford University, 1992), p. 26.
2. Chicago, Burlington & Quincy R.R. v. Chicago, 166 U.S. 226 (1897). 3. John Dewey, Liberalism and Social Action (New York: G. P.
Putnam’s Sons, 1935), p. 34. 4. Jerome Gilison, The Soviet Image of Utopia (Baltimore: Johns
Hopkins University Press, 1975), p. 149. 5. Quoted in Robert Skidelsky, The Road from Serfdom (New York:
Penguin, 1997), p. 99. 6. Ibid., p. 119.
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7. James Bovard, “Eastern Europe, The New Third World,” New York Times, December 20, 1987, and James Bovard, “The Hungarian Miracle,” Journal of Economic Growth, January 1987.
8. The Writings of James Madison, vol. 6, ed. Gaillard Hunt (New York: G.P. Putnam’s Sons, 1906), p. 103. The quote is from an article Madison wrote for the National Gazette, March 29, 1792.
9. Alan Wolfe, review of Stephen Holmes’s Passions & Constraint: On the Theory of Liberal Democracy, New Republic, May 1, 1995.
10. Tom Bethell, The Noblest Triumph: Property and Prosperity Through the Ages (New York: St. Martin’s Press, 1998), pp. 272-89.
11. James Bovard, “Assistance to Flood Victims Invites Further Disaster,” Los Angeles Times, June 18, 1997.
12. Richard Epstein, Takings (Cambridge, Mass.: Harvard University Press, 1985), p. 66.
13. Oliver v. United States, 466 U.S. 170, 179 (1984). 14. Ibid., p. 180, fn. 11. 15. Ibid., p. 192. 16. The National Law Journal reported in 1995 that between 1980 and
1993 the number of federal search warrants relying exclusively on confidential informants nearly tripled, from 24 percent to 71 percent, and that “from Atlanta to Boston, from Houston to Miami to Los Angeles, dozens of criminal cases have been dismissed after judges determined that the informants cited in affidavits were fictional.” Mark Curriden, “Secret Threat to Justice,” National Law Journal, February 20, 1995.
17. Florida v. Riley, 488 U.S. 445 (1989). 18. Evelyn Nieves, “I.N.S. Raid Reaps Many, But Sows Pain,” New York
Times, November 20, 1997. 19. Associated Press, “Agent Fired During Raid on Migrants, Report
Finds,” New York Times, December 12, 1997. 20. Craig Hemmens, “I Hear You Knocking: The Supreme Court Revisits
the Knock and Announce Rule,” University of Missouri at Kansas City Law Review, Spring 1998, p. 562.
21. Michael Cooper, “As Number of Police Raids Increase, So Do Questions,” New York Times, May 26, 1998.
22. Ibid. 23. Barney Rock, “Kicking in Doors New Trend among Thieves,”
Arkansas Democratic Gazette, January 21, 1995. 24. Hemmens, p. 584.
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25. Brief for the United States as Amicus Curiae Supporting Respondent, Wilson v. Arkansas, no. 94-5707, February 23, 1995, p. 26.
26. Ibid., p. 28. 27. Hemmens, p. 601. 28. Patel v. U.S., 823 F. Supp. 696, 698 (1993). For discussion of this
case, see Gideon Kanner, “What Is a Taking of Property?” Just Compensation, December 1993.
29. Kenneth Black et. al v. Village of Park Forest, 1998 U.S. Dist. LEXIS 2427, February 23, 1998.
30. Quoted in Robert E. Goodin, Reasons for Welfare (Princeton, N.J.: Princeton University Press, 1988), p. 307.
31. James Buchanan, “Divided We Stand,” review of Democracy’s Discontent: America in Search of a Public Philosophy” by Michael J. Sandel, Reason, February 1997, p. 59.
32. “Debate on Free Trade,” Public Broadcasting Service, August 15, 1997.
33. Arthur Fredheim, “IRS Audits Digging Deeper Beneath the Surface,” Practical Accountant, March 1996, p. 20.
34. See, for instance, Tracey Maclin, “The Decline of the Right of Locomotion: The Fourth Amendment on the Streets,” Cornell Law Review, September 1990, p. 1258, and Mark Kurdish, “The Drug Courier Profile: In Planes, Trains, and Automobiles; and Now in the Jury Box,” American University Law Review, February 1997, p. 747.
35. See, for instance, Sue Blevins, “Medical Monopoly: Protecting Consumers or Limiting Competition?” USA Today (magazine), January 1998, p. 58.
36. Interview with Federal Trade Commission spokesman Howard Shapiro, July 28, 1998.
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Private Property Encourages Honesty and a Sense or Responsibility
Surely more important than the wealth generated under a system of private property and market exchange is the individual liberty that this system permits. The rule of private property makes it possible to allow people a large measure of liberty because this rule makes people accountable for the consequences of their decisions. Every time an individual puts a resource to use, a cost is imposed; that cost being measured in terms of the value of the resource in the highest valued alternative use. When an individual owns a resource he is fully accountable for this cost, since his use of the resource requires the sacrifice of the highest amount someone else is willing to pay for it. Given this accountability there is no harm, and indeed much benefit, in giving individuals wide latitude to use resources as they choose.
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Eliminate the accountability provided by the rule of private property and you eliminate the very basis upon which people can be tolerant of the freedom of others. A reduction in the scope of individual liberty, with detailed directives and regulations replacing general rules of social conduct, is the certain consequence of either the inability or the unwillingness to rely on private property and voluntary exchange to order economic activity.
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Chapter 17
Liberty and Individual Responsibility
By Dwight R. Lee
April 1987 _____________________________________________________________
This essay was one of two winning entries for the North American Region in the N. Goto Essay Contest held in conjunction with the 1986 general meeting of The Mont Pelerin Society in Italy. The author would like to thank the Philip M. McKenna Foundation for financial support which helped in the preparation of this paper.
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Liberty is both a highly valued outcome of a beneficent political economy, and an essential ingredient into it. In some respects a consideration of the role of liberty as both output and input is straightforward. Limited government, serving to maintain the legal environment necessary for an economic order based on private property and voluntary exchange, provides fertile ground for individual liberty. And the lifeblood of a political economy characterized by limited government, private property, and voluntary exchange, is the flow of information that can be provided only when individuals possess a full measure of political and economic liberty.
However, a careful examination of how a political economy based on classical liberal principles both nourishes, and is nourished by, individual liberty reveals a complicated interaction between the social institutions
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necessary for liberty and the exercise of liberty. The exercise of liberty, unless tempered by a responsibility that can never be imposed entirely by a force external to the ethical convictions of the individual, will with time undermine the social institutions upon which liberty depends. A careful study of the political economy of liberty contains within it a warning of just how fragile is the foundation upon which liberty stands.
Competition Eliminates Scarcity; Creates Abundance
In order to examine the connections between economics, politics, and liberty, it is useful to consider first the most fundamental of economic problems. That problem is scarcity. In a world without scarcity each of us could be entirely independent of others. Each individual could exercise complete freedom in a broad range of activities and have no impact whatsoever on anyone else. Because we live in a world of scarcity, individuals must interact with one another and this interaction is shaped by rules of social conduct. Such rules impose restrictions on the activities of individuals and establish the important distinction between liberty and license. Without the restrictions imposed by such rules, scarcity itself would impose on us an even more confining set of restrictions.
Consider the fact that although scarcity makes cooperation desirable, it makes competition inevitable. Each of us wants more than he has and the only way to get more is by competing against others for control over limited resources. Competition is commonly seen as the source of a host of social ills, with the replacement of competition by cooperation suggested as necessary for social improvement. What this view fails to recognize is that competition is not the cause, but rather the consequence, of the ultimate social ill, namely scarcity. With no way to eliminate scarcity, the important question is not how to prevent competition, but how to provide rules for social conduct that motivate the type of competitive behavior which leads to productive and cooperative outcomes. Competition can be either productive or destructive depending on the rules that define permissible limits in our dealings with one another.
Consider the possibility of no rules, or more accurately the rule of force. Everyone would be free to do whatever he wanted as long as he possessed the power to force his will on others. In this setting, people would be forced to compete through the exercise of unrestrained brute strength and there
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would be no freedom in the meaningful sense of “independence of the arbitrary will of another.”[1]
If one person had enough physical power he could force others to work for him without compensation, to be his slave. But the master today has no assurance that he will not be someone else’s slave tomorrow.
Neither is the rule of force likely to motivate productive and cooperative outcomes. There would be little motivation to devote one’s effort to the production of wealth since there would exist no protections against its forcible expropriation by others. Competing successfully would depend more on developing the skills needed for plundering and defending against plunder than on developing the skills needed to produce wealth. Even if one were able to survive in such a social environment, one’s standard of living would be low. With resources being devoted overwhelmingly to predation and protection from the predatory activity of others, little would be produced and poverty would be the norm. Life in such a Hobbesian jungle would indeed be “solitary, poor, nasty, brutish, and short.”
Freedom from rules is simply not a viable social possibility. In a society without rules there would be little prosperity and no genuine freedom.
Social Order at the Sacrifice of Liberty
Emergence from the Hobbesian jungle, which finds a “war of each against all,” is necessary if we are to realize the benefits of a civil social order. Underlying any beneficent social order are rules that will impose limits on individual behavior. All rules serve to limit freedom of action. However, when rules are applied generally they can, by limiting the actions of each in predictable ways, expand the liberty of all. [2]
On the other hand, when they become too numerous and detailed, rules can destroy liberty just as surely and effectively as no rules. And the tendency is in the direction of too many rules. Traditionally the obsession within societies has been the horrors of disorder. With plunder, riot, rape, mayhem, and murder the common experience, the loss of liberty has been seen as the unavoidable cost of escaping disorder. The prevalent human condition throughout history has been subjugation to rigid and brutally enforced rules that specify the type and location of one’s work, travel, religious practices, and even social status. The overriding problem of society
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has been that of maintaining order, and only the most limited amount of liberty has been considered compatible with this objective.
While a rigid social order based on detailed rules concerning every aspect of behavior may be preferred to the chaos that would prevail in the absence of all rules, the shortcomings of such a social order are apparent. The first problem is to find leaders who can be trusted with the power that has to be exercised in a totally controlled society. Such power is subject to enormous abuse. Those who have such power are in a position to advance their interests at the expense of their subjects, and will seldom be able to resist the temptation to do so. The only possible advantage an all powerful government has over anarchy is that the exercise of government power is visible. Moving from the anarchy of no rules to the detailed control of leviathan government is to substitute one thief in the light for many thieves in the night.
The cost in terms of sacrificed liberty is much the same regardless of whether it is sacrificed to anarchy or to unlimited government. One who finds himself forced to toil for the benefit of others is not likely to care who his masters are—the physically dominant brutes in the “jungle” or the politically dominant brutes in the government.
So, traditionally, the social choice appeared to have been between some combination of two undesirable states: the regimentation of detailed rules or the lack of social order. Society could have less of one only at the cost of having more of the other. There appeared to be no realistic hope that individuals living together in a world of scarcity could simultaneously have both more liberty and more social order. It was in the 17th and 18th centuries that philosophers began to give serious consideration to a structure of rules that offered the possibility of overcoming this social dilemma. [3]
The Rule of Private Property and Liberty for All
It was the writings of John Locke, Adam Smith, Bernard Mandeville, and other 17th-and 18th- century philosophers that gave modern birth to the ideal of compatibility between individual liberty and social order. Crucial to this ideal was a fundamental conceptual shift regarding the role of rules. Social rules were traditionally seen as necessary to force particular outcomes which were required if a productive social order was to be
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maintained. Fields had to he tilled, cloth had to be woven, cattle had to be tended, and particular services had to be rendered. Concentrating authority in the hands of a ruler who could require these things to be done was seen as the only guarantee that they would he done. The fundamental insight of the aforementioned philosophers was that establishing general rules of social conduct, which ignored particular outcomes, could create an environment in which desirable outcomes emerged from the exercise of individual liberty.
Crucial to this liberating view of social order are rules which clearly define individual rights by providing assurances that individuals can plan and carry out their activities without the return to their activities being arbitrarily confiscated by others. Lacking such assurances, little motivation exists for people to be productive and no basis exists for them to interact with each other in a civil manner.
The rule of private property can now be seen as crucial to the goal of a productive social order that is compatible with, indeed dependent upon, individual liberty. The rule of private property requires that individual rights to property be well defined and subject to transfer from one individual to another by mutual consent of both parties. When liberties are constrained only by the broad limits imposed by the role of private property, then a system of social communication and cooperation is established within which the liberty of each individual is compatible with the liberty of all . Indeed, under the rule of private property the liberty exercised by one expands the options over which liberty can be exercised by all. [4]
The social cooperation facilitated by the rule of private property, though well known to all serious students of economics, is sufficiently relevant to a consideration of liberty to deserve discussion. When property is privately owned and voluntarily exchanged, market prices emerge. These prices are the means by which each market participant communicates to all other market participants the value he places on the marginal units of goods.
Private Property Encourages Honesty and Accountability
In addition to creating a truly impressive network of communication, private property motivates an equally impressive degree of honesty. Honesty can be expected to prevail since it is in no one’s interest to be dishonest about the price he is willing to pay. The self-interest of market participants insures that
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they will assess carefully the value they expect to realize from an incremental unit of each good, and then communicate their desire for more only if the incremental unit is worth more to them than the prevailing market price.[5] Furthermore, each participant in this communication process is motivated to act as if he gives the concerns of others the same consideration he gives his own. When an individual reduces his consumption of a product in response to an increase in its price, he is in effect saying, “Others are saying to me that this product is worth more to them at the margin than it is to me, so I will consume less so they can consume more.”
This system of communication and cooperation obviously does not work with perfection. However, even when full recognition is given to what has become known as “market failure,” any impartial evaluation must acknowledge that the benefits derived from the rule of private property, and the derivative market process, cannot even remotely be duplicated by any known alternative social role, or set of rules. Because the information and incentives generated by market competition allow each of us to interact cooperatively and honestly with literally millions of people around the globe, we are able to specialize our efforts, direct resources into their most productive uses, and thus generate enormous wealth.
Surely more important than the wealth generated under a system of private property and market exchange is the individual liberty that this system permits. The rule of private property makes it possible to allow people a large measure of liberty because this rule makes people accountable for the consequences of their decisions. Every time an individual puts a resource to use, a cost is imposed; that cost being measured in terms of the value of the resource in the highest valued alternative use. When an individual owns a resource he is fully accountable for this cost, since his use of the resource requires the sacrifice of the highest amount someone else is willing to pay for it. Given this accountability there is no harm, and indeed much benefit, in giving individuals wide latitude to use resources as they choose.
In the absence of private property rights there is a constant clamoring, often with justification, for detailed restrictions on individual behavior. Consider, for example, the fact that it is difficult in the extreme to divide up and parcel out the atmosphere as private property. As a consequence, the atmosphere is a common property resource and individuals are not held accountable for the
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costs being generated when they use the atmosphere as a receptacle for their auto exhaust, or industrial smoke. The result is broad public acceptance of huge Federal and state bureaucracies imposing a host of detailed restrictions on our behavior in the name of forcing us to act in environmentally responsible ways.
Eliminate the accountability provided by the rule of private property and you eliminate the very basis upon which people can be tolerant of the freedom of others. A reduction in the scope of individual liberty, with detailed directives and regulations replacing general rules of social conduct, is the certain consequence of either the inability or the unwillingness to rely on private property and voluntary exchange to order economic activity.
The Need for Limited Government as a Referee
The advantages we realize from observing the rule of private property are general advantages. The rule of private property is not designed to generate particular outcomes or to allow particular individuals to benefit at the expense of others. Rather it allows the liberty necessary to accomplish objectives that on balance benefit us all, but which no one could have predicted or programmed ahead of time. However, unless each of us refrains from attempting to infringe upon the property rights of others, the general advantages realized from an economic process which fosters both the production of wealth and a social tolerance for liberty will be diminished for everyone.
Unfortunately, even though we become collectively worse off when property fights are violated, it is possible for each individual to improve his situation by infringing on the property of others. The only parasite on a healthy organism is in an enviable position. It is true that if there is a multitude of parasites attempting to free ride on the same organism no one benefits; the organism perishes, as do the parasites. But this elementary fact provides little motivation for any one individual to cease being a parasite and turn to productive activity. Each individual recognizes that denying himself the immediate gains from plunder will do nothing to preserve the benefits derived from private property and voluntary exchange if there is a general failure to respect property rights. Indeed, in a world where everyone is engaged in plunder it would be the height of folly for an individual to confine his efforts to productive activity.
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In other words, the free and productive social order based on private property and voluntary exchange is a public good; a good which when available to one is available to all. As with any public good it has to be paid for by the contributions of individuals, contributions which in this case take the form of sacrificing opportunities to infringe on the property fights of others. As is the case with all public goods, each individual faces the tempting possibility of free riding on the contributions of others. Since individuals know that they can benefit from the free and productive social order that is being paid for by the restraint of others, whether they restrain themselves or not, when left entirely to individual choice we can expect too little respect for private property rights.
Faced with the problem of maintaining social order, each individual is generally willing to exercise restraint if, by agreeing to do so, everyone else is made to do the same. Such collective respect for private property rights has the potential for making everyone better off and, with good prospects for enforcement, will be agreed to almost universally. Enforcement of the social rules of the game is essential here, and it is the need for such enforcement that provides the rationale for the monopoly in coercion which is granted to government.
It is the legitimate role of government to exercise its power in order to serve as an impartial referee who knows the rules of the game, observes the play of the participants, and imposes penalties on those who violate the rules. Good government, as a good referee, does not strive for particular results, but is concerned solely with facilitating the interaction of individuals each of whom is free to pursue his own purposes as long as he operates within the limits established by the agreed upon set of rules.
By enforcing the rule of private property, government is both performing as a referee and requiring that those who benefit from a free and productive social order contribute their part in maintaining it. Those who persist in violating the property rights of others will, if government is doing its job, be denied their liberty through imprisonment. This has the effect of converting the public good provided by respect for private property into a price-excludable public good. That is, those who do not pay the price are excluded from the benefits.
Up to this point the discussion has been concerned primarily with the protective or rule enforcement role of government. The government has to
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enforce general rules if liberty and social order are to be maintained. In this capacity the government makes no choices in the sense of weighing the benefits and costs of alternatives. It has only to determine if the rules are being obeyed and to take predetermined measures if they are not. The discussion has, however, touched on a further function of government. Public goods other than social order exist, and the government is also the institution through which members of the community decide which of these goods to finance publicly, and how extensively they should be funded, in this capacity, government is called upon to make genuine economic choices, and to engage in directly productive activities. [6]
The Need to Control Government
The government is then more than the referee in the game; it is a participating player as well. In its capacity as a player government is also subject to rules. This situation presents some rather difficult problems. The fact is that the government is necessarily exempt from certain rules that apply to all other players in the game. The government, in one sense, has the authority to violate property rights by forcing citizens to pay for certain public goods. One can argue that this is not really a violation of property rights since everyone is part of the collective process in which the decision to provide public goods is made and goods are provided in return for payments rendered. This argument notwithstanding, it remains true that government’s legal power to compel people to make payments places it outside the rules that apply to private individuals and organizations.
Not only does government enter into the game under less restrictive rules than are imposed on nongovernment players, but since it is government that enforces the rules on all, it is government that enforces the rules on itself. Letting a player in any game be the judge of his own infractions creates an opportunity for abuse that few can be expected to resist. Of course, the government is not a single player but rather a collection of the members of the community. Even so, in their roles as political decision makers individuals will coalesce around certain objectives and will be tempted to take whatever action is necessary to realize their objectives. Whether acting individually or in groups, people find fewer things easier to do than justify in their minds those actions that advance their interests. As a player in the game the government has to be called to task for violations of the rules just as other players; but how can we be sure that the government will
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be sufficiently diligent in calling infractions and imposing penalties against itself?.
The problem here was clearly seen by James Madison when, in arguing for ratification of the United States Constitution, he wrote:
If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: You must first enable the government to control the governed; and in the next place, oblige it to control itself. [7]
Obliging government to control itself is no easy task. Government power, unless tightly circumscribed, creates opportunities for some to benefit at the expense of others through involuntary transfers [Legal Plunder – See “The Law” by Frederic Bastiat]. This abuse of government power tends to feed upon itself. First, government transfers reduce the private return from producing new wealth and increase the private return from acquiring or protecting existing wealth through political influence. This shift in relative returns draws more people out of productive activity and into political activity, which shifts relative returns yet further in favor of the latter. Second, government transfer activity is destructive of the accountability that characterizes an economic order operating in accordance with the rule of private property. As this accountability is reduced the very basis for individual liberty is also reduced and there will be increased pressure for yet broader government control on individual behavior. The power needed by government to maintain a free social order can easily become the force that undermines that order.
Our liberty and prosperity depend on general rules of social conduct. It is government’s legitimate function to enforce those rules, as well as to provide a limited number of public goods. In order for government to perform its role properly, the conduct of government also has to be disciplined by general rules. It is important that these rules on government are obeyed. No society will long remain free unless they are. But how do we impose the discipline on government to get it to enforce these rules on itself and ensure that government power is not used to destroy the very liberty it is supposed to protect?
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Constitutional Limits and the Limits of Constitutio ns
The only genuine hope for controlling government is through constitutional limits on government activity and constitutionally grounded procedures for operating within those limits. It is only by elevating these limits and procedures to the constitutional level that there can be any real prospect of immunizing them against the special interest pressures of ordinary politics.
But while the constitutional approach is the only one that holds promise for limiting government power and for making this power a positive rather than a negative force for freedom, constitutions by no means provide an easy or assured route to responsible government. An effective constitution cannot be created simply by writing words on parchment. The U.S. Constitution, surely the most effective and durable written constitution in history, has served as the model constitution (sometimes being copied nearly verbatim) for numerous political regimes around the world. Few of these cloned constitutions have been particularly durable or effective. A successful constitution has to be derived from customs, beliefs, and ethical understandings that are rooted in a pre-existing social order. A constitution can serve effectively to guard against only those abuses of government power that are widely recognized as abuses. If battered by the force of public approval of particular government practices, constitutional barriers against those practices will soon be breached.
As observed by Henry Simons:
“Constitutional provisions are no stronger than the moral consensus that they articulate. At best, they can only check abuses of power until moral pressure is mobilized; and their check must become ineffective if often overtly used.” [8]
There can be no doubt, for example, that the success of the U.S. Constitution derived from the fact that it was the product of intense and widespread public concern for individual liberty. The 55 delegates to the constitutional convention who met in Philadelphia during the summer of 1787 were not operating from a clean slate. For at least two decades interest in securing liberty had been elevated to an obsession among the American people. According to a colonist writing in 1768, “Never was there a People whom it more immediately concerned to search into the Nature and
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Extent of their Rights and Privileges than it does the People of America at this Day.” [9]
Edmund Burke noted before the House of Commons in 1775 that the colonists’ intensive study of law and politics had made them acutely inquisitive and sensitive about their liberties.[10] An outpouring of writing, taking the form of everything from political tracts by the unlettered to celebrated contributions to political philosophy by the intellectual luminaries of the day, were manifestations of the public concerns that found expression in the U.S. Constitution. The protection of liberty was the pre-eminent concern, a concern that saw government power as a necessary evil and discretionary government power as an unmitigated evil.
There is no way of shifting to a constitution the responsibility for protecting individual liberty against the abuse of government power. Liberty will not long survive the absence of effective constitutional limits on government, but constitutional limits on government will not long remain effective in the absence of public approval of those limits.
Individual Responsibility and Political Restraint
Public approval of constitutional limits that make liberty possible depends ultimately on individuals accepting responsibility for the consequences of exercising that liberty. Responsibility has no meaning in the absence of individual liberty, but liberty has no future in the absence of individual responsibility. In the words of Hayek, “A free society will not function or maintain itself unless its members regard it as right that each individual occupy the position that results from his action and accept it as due to his own action.” [11]
This sense of individual responsibility is not easily maintained. As Hayek also points out, liberty “can offer to the individual only chances and . . . the outcome of his efforts will depend on innumerable accidents. . . .”[12] When an individual suffers a setback it is always possible for him to find plausible reasons for absolving himself of responsibility. The temptation is strong to petition government for relief through exemptions from the rules of the game that apply to everyone else. The individual may recognize that if such exemptions were generalized everyone would be worse off, but still feel sincerely that in his particular case special treatment is fully justified.
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When politicians begin exceeding their constitutional authority in order to provide special assistance to the few, they soon find it impossible to avoid providing special assistance to the many. The sense of individual responsibility that is the only effective bulwark against the abuse of government power will quickly break down in the face of that abuse. Few people retain a strong sense of responsibility for their actions when those around them are seeking to avoid this responsibility through political influence. The destructive dynamic here is clear. An expanding government weakens the sense of individual responsibility, and results in more demands on government and yet further government expansion. And, by increasing the opportunities for people to benefit at the expense of others, an expanding government weakens the rule of private property and thus undermines the accountability upon which individual liberty depends.
There is every reason for concern that the size of government in the [West] has reached the point of posing a threat to the long tradition of liberty that has made these [countries] beacons of hope throughout the world. Underlying this development is a fundamental shift in the way the public views government. Rather than seeing government power as a threat that is socially beneficent only when tightly circumscribed, discretionary government power in pursuit of particular ends is now widely seen as the primary force for social progress.
The surface consequences of this shift in responsibility from the individual to the state are clear enough. Expanding budgets and chronic deficits have become ubiquitous features of the modern [socialistic] welfare state, and have raised concern that this fiscal irresponsibility creates the potential for economic adversity. The most troubling thing about chronic budget deficits, however, is not their adverse economic consequences, but the fact that they reflect our inability to exercise political restraint. There is much discussion of the financial burdens our lack of fiscal responsibility is imposing on future generations. But our lack of fiscal responsibility derives from a general lack of political restraint that portends a far greater burden on the yet unborn than the obligation to pay our debts. That burden is the loss of the liberty that we enjoy today because of the political restraint exercised by our ancestors, but which cannot long survive our political intemperance.
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Conclusion
Liberty is possible only when adherence to general rules of conduct makes the regimentation of detailed directives and restrictions unnecessary for the maintenance of social order. Liberty can never be license since the unrestrained use of liberty quickly and surely renders inoperative the general rules upon which it is based. The ideal setting for liberty is one in which individuals have internalized an ethic of responsibility and restraint that motivates voluntary compliance with society’s general rules. It is because this ideal can never be fully realized, however, that government is granted the power to force compliance on those who would, in the absence of external restraint, threaten the general liberty by abusing their own liberty. Government power is necessary if liberty is to be prevented from cannibalizing itself.
Government power may be necessary to maintain liberty, but it is not sufficient. The ability of government to enforce impartially general rules can be sabotaged by the same lack of individual responsibility and restraint that makes government necessary in the first place. The ability of government to enforce impartially general rules will be sabotaged if the lack of responsibility and restraint reaches the point where government becomes the dominant source of discipline in society. The more necessary government is to the maintenance of the general rules upon which liberty depends, the more insufficient to this task it is sure to be.
There is no avoiding the fact that liberty will perish if the exercise of liberty is not tempered by an ethic of individual responsibility. The affirmation of this fact is the ethical responsibility of those of us who cherish liberty and understand the fragile foundation upon which it stands.
Notes
1. The usefulness of this definition of freedom is explained by F. A. Hayek in his The Constitution of Liberty (The University of Chicago Press. 19603. See especially chapters I and 2.
2. In the words of John Locke, “The end of law is not to abolish or restrain but to preserve and enlarge freedom; for in all the states of
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created beings capable of laws, where there is no law, there is no freedom. For liberty is to be free from the restraint and violence of others, which cannot be when there is no law; but freedom is not, as we are told, a liberty for every man to do what he lists. For who can be free, when every other man’s humor might domineer over him?” See John Locke. The Second Treatise of Government. Ed. by Thomas P. Perdon (New York: The Liberal Arts Press, Inc., 19543, pp. 32-33.
3. The first recorded awareness that individual liberty could be expanded under a set of universally applied rules (the rule of law) comes from the ancient Greeks; particularly the Athenians during the fifth and fourth centuries B.C. The Greek ideals of liberty were kept alive by Roman writers, such as Cicero, whose work was important to the modern development of classical liberal principles.
4. As Hayek points out, “The benefits I derive from freedom are thus largely the result of the uses of freedom by others, and mostly of those uses of freedom that I could never avail myself of.” F, A. Hayek, op. cit.: p. 32.
5. Under certain conditions it is obviously possible for sellers to benefit by misrepresenting their products. But just as obvious is the fact that this problem is mitigated by market forces. Also, specific market arrangements tend to develop that reduce the seller’s potential to gain from fraud, because both buyer and seller can benefit from such arrangements. For a useful discussion of such arrangements, and the theory behind them, see Benjamin Klein and Keith Leffler. “The Role of Market Forces in Assuring Contractual Performance,” Journal of Political Economy (August 1981), pp. 615-41.
6. Buchanan makes a clear distinction between the rule enforcement role of government and the role of government as economic decision maker in his discussion of “the protective state” and – the productive state.” See James M. Buchanan, The Limits of Liberty: Between Anarchy and Leviathan (Chicago: The University of Chicago Press, 19753, Chapter 4.
7. Federalist 51, The Federalist Papers.
8. Henry C. Simons, Economic Policy for a Free Society (Chicago: University of Chicago Press, 19513, p. 20.
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9. Quoted in Clinton Rossiter, Seedtime of the Republic: The Origin of the American Tradition of Political Liberty (New York: Harcourt. Brace, and World, Inc., 19533, p. 362.
10. See Gordon S. Wood, The Creation of the American Republic. 1776-1787 (Chapel Hill: The University of North Carolina Press. 19693. pp. 4-5,
11. Hayek, op. cit., p. 71.
12. Hayek, op, cit., p. 71. While acknowledging here the obvious fact that no one can be in complete control of the outcomes that affect him, Hayek continues with the observation that when an individual has to accept responsibility for those outcomes, “it forcefully directs his attention to those circumstances that he can control as if they were the only ones that mattered,”
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Private Property Rights Protected by the Common Law
The common law provided a clear picture of [private property] ownership to the Founding Fathers.
The common law has three pillars: private property, tort liability, and the law of contract. Property and tort liability are inexorably intertwined. No one has a right to infringe upon the legitimate rights of others.
If one uses his possessions to create a health hazard or nuisance to others, he is fully liable for damages. In some instances, an injunction may even prevent an unlawful action before it causes damages to others. The very boundaries of private property are defined by common law liabilities. For example, if Mr. A erects a six-foot fence at the border of his land and this fence blocks the sunlight to Ms. B’s garden, does Ms. B have a common law right to access the sunlight? If so, she would have a claim under tort law. If not, Mr. A may construct the fence and Ms. B either relocates her garden or persuades or compensates Mr. A to move his fence away from the established boundary. The point is that a reasonable and efficient result should occur under either rule. What is important is for the liability limits to property be well-established and clearly defined. After many case precedents the common law courts begin to sharply define the boundaries of private property. Owners may then negotiate, mutually reaching an arrangement, without going to battle in court over a legal ambiguity or seeking a new statute.
[The above shows clearly that there is NO need for Licenses and Permits which in affect turn God given rights into privileges, thus giving unlimited power to “The State”.]
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Chapter 18
Private Property and Government Under the
Constitution Modern Intellectuals Do Not
Take Private Property Seriously
Gary M. Pecquet
January 1995 _____________________________________________________________
The economic concept of private property refers to the rights owners have to the exclusive use and disposal of a physical object. Property is not a table, a chair, or an acre of land. It is the bundle of rights which the owner is entitled to employ those objects. The alternative (collectivist) view is that private property consists merely of a legal deed to an object with the use and disposal of the object subject to the whims and mercies of the state. Under this latter view, the state retains ownership and may at any time regulate or even repossess the property it temporarily cedes to individuals.
The Founding Fathers upheld the economic view of property. They believed that private property ownership, as defined under common law, pre-existed government. The state and federal governments were the mere contractual agents of the people, not sovereign lords over them. All rights, not specifically delegated to the government, remained with the people–including the common-law provisions of private property. Consequently, the constitutional rights regarding free speech, freedom of religion, the right of assembly, and private property rights are all claims that
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individuals may hold and exercise against the government itself. In brief, private property refers to the rights of owners to use their possessions which are enforceable against all nonowners–even the government.
The Economic Concept of Ownership
“We may speak of a person owning land and using it as a factor of production,” writes Nobel laureate Ronald Coase in his essay on “ The Problem of Social Cost,” “but what the owner in fact possesses is the right to perform certain (physical) actions.” These “rights to perform physical actions,” called private property, constitute the real factors of production and the real articles of trade. Legal title itself means nothing. At best, a title or deed amounts to proof of ownership, not the rights inherent in ownership.1
Many people confuse the economic concept of ownership with the mere holding of legal title. Often, title and ownership coincide, but not necessarily. Sometimes businesses lease equipment from manufacturers under circumstances which transfer all of the meaningful rights of ownership to the lessee while title remains with the manufacturer. Here are two examples: if a lease approximates the useful life of the equipment or if the lease itself contains an option to buy the equipment outright for a nominal sum. In both cases the lease transfers ownership in the true economic meaning of rights to employ the equipment without actually changing title. Proper accounting principles, in such cases, require the lessee to record the equipment on its books as an asset and the lease itself becomes a method of financing the purchase. The manufacturer although still retaining title to the equipment no longer “owns” the property and, accordingly, should not include it as an asset.
In other cases, the “bundle of rights” to use an object may be separated and sold apart from the title. Once again, here are two examples: landowners may lease property for a specified period of time while retaining the residual rights to the land upon termination of the contract or the same landowner may sell only the mineral rights, while retaining title along with most of the “sticks” in the property rights bundle. The validity of these contracts implies that ownership refers to the many legitimate uses and disposal of things, rather than title to the object itself.
The economic view of property consisting of primarily actions, rather than things, is also compatible with intellectual property, such as copyrights and
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patents. The right to publish a book or construct a machine may be reserved to the author/inventor. These species of private property do not refer to any specific objects at all, but are legitimate articles of property nonetheless.
The Common Law Boundaries of Private Property
The British common law has established the legal limits to property rights through case precedents, reflecting the practical needs of trade long before the North American colonies even existed. The common law provided a clear picture of ownership to the Founding Fathers.
The common law has three pillars: private property, tort liability, and the law of contract. Property and tort liability are inexorably intertwined. No one has a right to infringe upon the legitimate rights of others.
If one uses his possessions to create a health hazard or nuisance to others, he is fully liable for damages. In some instances, an injunction may even prevent an unlawful action before it causes damages to others. The very boundaries of private property are defined by common law liabilities. For example, if Mr. A erects a six-foot fence at the border of his land and this fence blocks the sunlight to Ms. B’s garden, does Ms. B have a common law right to access the sunlight? If so, she would have a claim under tort law. If not, Mr. A may construct the fence and Ms. B either relocates her garden or persuades or compensates Mr. A to move his fence away from the established boundary. The point is that a reasonable and efficient result should occur under either rule. What is important is for the liability limits to property be well-established and clearly defined. After many case precedents the common law courts begin to sharply define the boundaries of private property. Owners may then negotiate, mutually reaching an arrangement, without going to battle in court over a legal ambiguity or seeking a new statute.
The “bundle of rights” we call private property comprise the subject matter for all contracts. Every time goods exchange hands, land is purchased, and an employment contract is signed, “bundles of rights” to resources are exchanged. All commerce, and the prosperity which it generates, depend upon the security and certainty of property rights. If an urban area has a notorious high crime rate, local businesses will tend either to relocate or increase prices. If the courts do not establish consistent liability rules, then litigation costs increase and the basis for agreements is
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undercut. If the legislature threatens to regulate business, then potential competitors may be frightened away. If the potential uses to which property may be employed are subject to regulation by a governmental body, then the value of property declines. Men like James Madison and Alexander Hamilton understood that prosperity depends upon the security and certainty of property rights and designed the Constitution accordingly.
The common law does evolve slowly to reflect changes in both technology and social mores, but it provides a stable set of rules of conduct. Moreover the common people on juries decide common law cases, not kings, not legislatures. This establishes an important rule-making authority outside of any centralized government.
The English Whigs on Property and Government
Our American forefathers did not develop their political theories in an intellectual vacuum. More than a century before the American Revolution, a Civil War raged in Britain. It pitted the Monarchy against Parliament. Among the opponents of the Monarchy were the seventeenth-century English Whigs. Over the course of a few decades, English Whig intellectuals expounded their theories about property and government. These thinkers, including John Locke, Algernon Sidney, and Thomas Gordon, taught America’s founders much about property and government
Prior to the rise of the English Whigs, the “divine right of kings” had held that all rights, liberties, and properties actually belonged to the king. The king merely permitted his subjects to use their possessions. The king, however, might regulate the use or even seize these possessions outright at his whim. The people had no claims or rights which could be exercised against the sovereign. Their possessions were at the mercy of the government.
By contrast, the English Whigs believed that the fountainhead for all rights was the sanctity of the individual, not the divinity of the state. John Locke contended that human rights were “natural rights” which pre-existed government. The original owners of the land were the real sovereigns, not the king. Remember the old English saying, “A man’s house is his castle and every man is king.” Owners, however, might consent to give up a small part of their liberty and property to government in order to institute criminal law and national defense and to perform certain other specifically
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delegated tasks. Legitimate government is formed by contract and may never acquire more rights than delegated by the property owners who institute it. The authorities must never exceed their narrow constitutionally delegated authority–lest they become despotic.
According to the Whig view, legitimate government is an agent, a servant, a mere convenience charged with certain specific tasks. Moreover, even elected governments tend to become despotic as the British Parliamentary experience illustrated. Most of the descriptions of political power during colonial times were negative. Thomas Gordon discussed the issues of the day in Cato’s Letters. Power was often shown as a “clutching grasping hand” or described as a “cancer that eats away at the body public.”
It is also relevant that the Whigs expressed all rights in terms of property. Each man owned his own person and labor. Slaveholders were condemned as man-stealers, the lowest sort of thief who stole the whole person, not merely part of his labor. Whenever the Whigs argued for freedom of religion, the teachers of our forefathers referred to “property in one’s conscience.” When they opposed Sabbatarian laws, prohibiting certain activities on Sunday, they referred to “property in one’s time.” The Whig view equated property and liberty, once again reflecting the economic concept that property refers primarily to freedoms to act.
The Founders and Framers On Property and Government
The best way to examine the importance of private property to our forefathers and its place under the law is to study the words of the founders and framers themselves: men like Thomas Jefferson, James Madison, and Alexander Hamilton. In the passage below Jefferson argues that the colonial landholdings had always been held free and clear of the British crown. Throughout American colonial experience, the British crown exacted a small fee called a quit-rent upon all landholders. The quit-rent often went uncollected and never raised much revenue, but it remained on the books as a legal assertion that all land titles were held subject to the crown. In 1774, Jefferson disputed this kingly claim. Jefferson’s reasoning gave historical teeth to the Whig view that sovereignty belongs to individuals and that property pre-exists government. Therefore the United States government formed two years later would be established by free men, not serfs. Neither could the new government claim to be the recipient of any
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superior monarchial rights or claims to private landholdings. According to Jefferson:
That we shall at this time also take notice of an error in the nature of our landholdings, which crept in at a very early period of our settlement. The introduction of the feudal tenures into the kingdom of England, though ancient, is well enough understood to set this matter in its proper light. In the earlier ages of the Saxon settlement feudal holdings were certainly altogether unknown, and very few, if any, had been introduced at the time of the Norman Conquest. Our Saxon ancestors held their lands, as they did their personal property, in absolute dominion, disencumbered with any superior. . . . William the Conqueror first introduced that system [feudalism] generally. The lands which had belonged to those who fell at the battle of Hastings, and in the subsequent insurrections of his reign, formed a considerable proportion of the lands of the whole kingdom. These he granted out, subject to feudal duties, as did he also those of a great number of his new subjects, who by persuasions or threats were induced to surrender then for that purpose. But still much of the land was left in the hands of his Saxon subjects, held of no superior, and not subject to feudal conditions. . . . A general principle indeed was introduced that “all lands in England were held either mediately or immediately of the crown”: but thus was borrowed from those holdings which were truly feudal, and applied to others for the purposes of illustration. Feudal holdings were therefore but exceptions out of the Saxon laws of possession, under which all lands were held in absolute right. These therefore still form the basis of the common law, to prevail whenever the exceptions have not taken place. America was not conquered by William the Norman, nor its lands surrendered to him or any of his successors. Possessions are undoubtedly of the [absolute disencumbered] nature. Our ancestors however, were laborers, not lawyers. The fictitious principle that all lands belong originally to the king, that they were early persuaded to believe real, and accordingly took grants of their own lands from the crown. And while the crown continued to grant for small sums and on reasonable rents, there was no inducement to arrest the error.2
In The Federalist Papers, James Madison and others argued that the proposed U.S. Constitution would protect the liberty and property of the citizens from usurpations of power from the federal government.
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Power in the new government was to be divided into three branches: legislative, executive, and judicial. This would create a system of checks and balances necessary to hinder the unwarranted expansion of political power. The division of power would also make it more difficult for a majority to oppress a political minority and political stability would more likely result. In the following passage James Madison discusses the problems of “mutable policy” (governmental activism). Madison believed that the new Constitution would establish a consistent, stable set of laws necessary to promote prosperity. Otherwise, he warned:
The internal effects of a mutable policy are still more calamitous. It poisons the blessings of liberty itself. It will be of little avail to the people that the laws are made by men of their choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?
Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the monied few over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow citizens. This is a state of things in which it may be said with some truth that the laws are made for the few, not the many.
In another point of view, great injury results from an unstable government. The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend upon a continuance of existing arrangements. What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans will be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory
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labors and advances will not render him a victim of inconsistent government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady stream of national policy.3
Alexander Hamilton contended that the new federal Constitution would protect private property and liberty from abuses arising at the state level. Between the end of the Revolutionary War in 1781 and the ratification of the Constitution in 1788 state governments faced debtor uprisings, such as Shays’ Rebellion.
State legislatures sometimes granted debt relief or “stays” on the payments of debts. Hamilton believed the proposed Constitution had “precautions against the repetition of those practices on the part of the State governments which have undermined the foundations of property and credit.”4 He referred to Article I section 10 of the Constitution which explicitly protects creditors by forbidding states to pass laws “impairing the obligation of contract” or even devaluing debt obligations by making “any thing but gold and silver a tender in payment of debts.”
The “impairment of contract” clause remains effective today. New state laws affecting long-standing agreements may only alter future contracts, not existing ones. This protects interstate commerce, such as insurance and banking, from potential abuses by state and local politicians who may be tempted to rewrite contracts to redistribute income from outsiders to local constituents.
In the body of the Constitution, Article I sections 9 and 10, also expressly forbids both federal and state governments to grant titles of nobility. This prohibits the establishment of a formal, hereditary class in the United States. In England, the titles “Prince,” “Duke,” and “Earl” consisted of much more than a prefix to a name. Nobility also laid feudal claim to the land held by the common people. Feudal titles, such as Prince of Wales and Duke of York, pretend ownership to the entire realm, subordinating the rights of the landholdings of commoners. America’s framers hated the European class system and the feudal pretense to the land that it represented. The United States are forbidden to ever establish feudal land tenures to lands because sovereign landholdings are essential to a free “Republican form of government.”
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The U.S. Constitution contained a few flaws, most notably, the official sanctioning of slavery. Nor did the Constitutional framers advocate laissez-faire capitalism. Some of the framers, including Alexander Hamilton, believed that the government should actively encourage economic growth through protective tariffs. Nonetheless, the framers all held private property in high esteem. Indeed, commercial prosperity seems to be the chief end of good government to them. The economic system under the Constitution is capitalism with a very few specific exceptions explicitly delegating limited powers to Congress, i.e., coin money, establish a Post Office, lay customs duties, etc. James Madison summarized, “The powers delegated to the federal government are few and defined.” 5
The Bill of Rights on Private Property
Many people were fearful that the Constitution still concentrated too much power in the hands of the federal government. The electorate in key states insisted upon a “Bill of Rights” lest they would reject the proposed Constitution.
These amendments soon became incorporated into the new Constitution. Six of these ten amendments pertain either directly or indirectly to private property rights.
The Third Amendment states, “No soldier shall in times of peace be quartered in any house, without consent of the owner, nor in times of war, but in a manner prescribed by law.” This amendment grew out of abuses by the British, who had forced people to allow troops into their homes. The amendment clearly protects the rights of homeowners, but is too specific for wider applications.
The Fourth Amendment includes the clause, “The rights of people to be secure in their persons, houses, and effects against unreasonable searches and seizures shall not be violated and no warrants shall issue, but upon probable cause . . .” The “search and seizure” clause has been interpreted to pertain primarily to criminal cases, but the stated intent of this statement is to make people secure in their persons and possessions. In civil cases law enforcement officials presently are able to seize property without a warrant and place the burden of proof upon the owner to show that he did not commit a crime. In fact, some local governments now use civil seizures to supplement their budgets.
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The Seventh Amendment requires that for civil cases in federal courts, “no fact tried by a jury, shall be otherwise re-examined in any court of the United States than according to common law.” The common law, as we have seen, rests upon three pillars, including private property rights. This indirect recognition of private property only protects individual owners against other private parties. These common law property claims become enforceable against the federal government under the Ninth and Tenth Amendments.
Amendment Nine states, “The enumeration of certain rights shall not be construed to deny or disparage others retained by the people.” Amendment Ten further stipulates, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states are reserved to the states and the people.” The original intent of the “enumeration” and the “reservation” clauses clearly reaffirm the contract theory of government held by John Locke and James Madison alike. All “powers not delegated to the federal government” includes any and all private property rights described under the common law. Historically, however, U.S. courts have never used the “reservation” clause to decide important cases.
The most explicit recognition of private property comes in the Fifth Amendment which states “Nor shall [anyone] be deprived of life, liberty, or property without due process of law; Nor shall private property be taken for public use without just compensation.” The first clause is called the “due process” clause while the second part is referred to as the “takings” clause.
Until the middle of the twentieth century, the “due process” clause was often used to strike down regulations imposed on private property especially if they amounted to confiscation by regulation or if they exceeded the federal government’s constitutionally delegated authority. For example, when President Franklin Roosevelt’s National Recovery Act required all trades and businesses to form trade associations, restrict entry, and establish minimum wages and prices, the Supreme Court overturned this wholesale reorganization of U.S. industry as a violation of the “due process” clause. This prompted President Roosevelt to threaten to “pack” the Supreme Court. Although Roosevelt failed to gain congressional approval to expand the Supreme Court from nine to fifteen members, the Court no longer overturned New Deal policies. Subsequently, Courts have
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created an artificial distinction between “property liberties” and “personal liberties.” Rarely, do Courts use the “due process” clause to uphold “property liberties” anymore. Current judicial theorists argue that the Constitution does not prescribe a particular economic system (capitalism). Therefore, private property liberties are not protected while “personal liberties” such as First Amendment guarantees of free speech are still upheld under the “due process” clause.
The “takings” clause requires all levels of government to justly compensate owners for property taken for public use. Whenever land is condemned or taken for highway construction, military bases, and so forth, courts must estimate the fair value of the property to be paid to the owners. The “takings” clause also requires governments to compensate owners when confiscatory taxes are imposed or regulatory acts render property worthless.
The “takings” clause was intended to prevent the government from forcing a few property owners to bear the burdens of legislative measures intended to benefit the general public. It reduces the uncertainties of property ownership arising out of the political system, helping to mitigate the problems of “mutable” policy alluded to by Madison. Requiring government to compensate owners for the resources that it takes for public use also enhances proper cost-benefit planning on the part of policymakers; but the primary purpose of this clause is to protect property owners from arbitrary governmental power, not to assist bureaucratic planners–or else the framers would have added a “givings” clause entitling the State to be compensated for the public benefits it claims to generate.
Until the twentieth century, U.S. courts never applied the “takings” clause to regulations falling short of transferring legal title to the government. Courts, however, did respect private property. Owners could find relief under the “due process” clause which could overturn state and federal legislation altogether. Indeed, the failure to apply the “due process” clause in property cases places the “takings” clause as the final barrier to full governmental supremacy over private property rights.
At present, courts are evolving their opinions regarding the “takings” clause. They are willing to allow the regulation of property to some extent, but if the regulation goes too far it may become a taking. The current legal uncertainty
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results from the clashing views on the nature of private property. Does property constitute the rights of individual owners to actions which enjoy constitutional protections against arbitrary government actions or is the government supreme? In our forefathers’ day, the latter view was known as “the divine right of kings.” During the middle of the twentieth century, the economic system which allows ownership on paper while the government made all of the important decisions regarding the uses of property was called fascism. Today, in the United States government supremacy over individual property owners means that the government may temporarily permit us to hold title to certain of its possessions and use them in limited ways at its pleasure. So far, the opponents of constitutional property rights have refused to give their system a new name, but it amounts to the same old system called tyranny.
The essence of private property is the bundle of actions which owners may rightfully perform. Logically, any legislation restricting these ownership acts amounts to a regulatory “taking” and the owner ought to be entitled to be compensated for the decline in value of his assets. The Constitution did not establish unlimited majority rule. Even the legislature must be subject to the rule of law.
Nevertheless, many regulations would not involve compensation under the Fifth Amendment because they either do not involve a regulatory “taking” or measurably reduce the fair market value of property. For example, if landowners have a right to be free of pollution under the common law of nuisance and the owners are too disorganized to protect their rights against polluters, a governmental statute may empower the executive to bring the polluters to court under the common law and even impose special statutory penalties upon them. Since the right to pollute did not exist, no “taking” is involved and the government is merely performing its legitimate role in defense of private property. Other regulations, such as Civil Rights public accommodations cases, the regulatory requirement to serve all patrons would not adversely affect the value of the property. Zoning laws often increase land values. No compensation would be required unless the value of the “takings” is measurably reduced.
Under any interpretation, the “takings” clause is a comparatively weak protection of private property. The government may still impose taxes and acquire resources for public use. Courts must still determine “fair” value by making very imprecise approximations. Finally, some government
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regulations inhibit trade while actually augmenting the value of certain properties. For example, a zoning ordinance which severely restricts the land available for commercial use might increase the value of the property already employed in trade. Although such laws stifle growth and commercial liberty, the “takings” clause offers no relief to prospective businessmen who are unable to enter the market. The broad interpretation of the “takings” clause is no substitute for the judicial protection of “property liberties” under the “due process” clause.
Following the Civil War, the Thirteenth Amendment ended slavery and the Fourteenth Amendment extended the application of the “Bill of Rights.”
Section 1 of the Fourteenth Amendment reads, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor deny any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
The application of the “due process” clause to the states gives to individuals and businesses the same Fifth Amendment grounds to challenge state regulations as they already possessed against federal law. The “equal protection” clause extends the basic rights of citizenship to all Americans, regardless of race and sex.
Both clauses were specifically intended to protect the property and liberty of blacks from outrageous actions on the part of southern states. It obviously outlaws the old southern “separate but equal” segregation laws. Thanks to the Fourteenth Amendment, all citizens are joint heirs to the old Saxon and English Whig concepts of liberty and property.
Where Have All Our Property Rights Gone?
The constitutional history discussed above clearly shows that the founders did take private property seriously and designed the Constitution accordingly. In order to limit the potential for tyranny the framers:
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(1) Divided the powers into three separate branches (legislative, executive and judicial).
(2) Further separated the functions of government between federal and state levels, giving the federal level only a few enumerated powers.
(3) Incorporated a “Bill of Rights” which specifically listed some of the most important applications of individual rights for all people to read and the courts to uphold.
The constitutional protections of our liberties have withered over the years. The division of powers within the federal government may have checked the expansion of one part of the federal government into the domain of another, but there is no protection for the people and states against collusions and the conspiracies among the different branches to exceed the delegated powers of federal authority. For example, the Constitution does not grant the federal government jurisdiction over education, housing, agriculture, or energy, but these functions have been elevated to cabinet level status in Washington by Congress, administered by the executive branch and approved by the courts.
Federal regulations have become so extensive that Congress often delegates its rule-making powers to numerous, non-elected agencies, such as the FTC, FDA, OSHA, SEC, and EPA. These agencies combine executive and judicial functions with their rule-making authority–subverting the division of power concept becoming laws unto themselves with feudal-like dominions in command over the private property held by commoners. James Madison condemned “the accumulation of all powers legislative, executive, and judicial in the same hands, whether of one, few or many and whether hereditary, self-appointed or elective, may justly be pronounced the very definition of tyranny. Were the Constitution chargeable with this accumulation of power or with a mixture of powers, having a dangerous tendency to such an accumulation, no further arguments would be necessary to inspire a universal reprobation of the system.”6
Most recently, the federal government’s appetite for power exceeds its capacity to raise revenues. Instead of taxation and spending, Congress prefers to subvert the rights of private property owners by imposing unfunded mandates upon them, such as “family leave” and employer mandates or forced “contributions” to proposed health-care legislation.
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The words of Madison decrying the problems of “mutable” policy have been drowned out amidst a flood of ever wider calls for new government powers.
The usurpation of powers and rights belonging to the states and people by the federal government is partly due to defects in the Constitution itself. The framers, unfortunately, never established an effective check or balance that state governments could invoke against the encroachment of federal power into their proper domains. Ever since the Civil War, the threats by states to secede or nullify laws are not taken seriously, no matter how intrusive federal regulations become. Abuses of federal power may only be addressed in federal courts, hardly an independent or adequate restraint on federal authority.
The unfortunate legacy of slavery also made it more difficult to defend both private property and federalism. The framers granted the same constitutional protections to slave-holding as it accorded to legitimate private property. This has led to the mistaken notions among scholars, including noted Civil War historian James McPherson who called the abolishment of slavery in the Thirteenth Amendment as representing one of “the greatest seizures of property in world history.” In fact, no one can ever legitimately own another human being. The English Whigs understood that the first right was self-ownership. The emancipation of slaves recognized the legitimate claims by southern blacks to self-ownership. The United Stated did not “seize” the slaves as third world governments take over factories. The Thirteenth Amendment set the captives free.
Following the Civil War, the southern states frequently violated the property rights and liberties of black people. The Fourteenth Amendment gave the federal Congress the power to protect their civil rights. This amendment was necessary, but it also established a precedent, “a hook” which the federal government has used to exceed its legitimate powers. Today, federal usurpation of the domain belonging to the states and people goes unchecked. “Liberal” scholars consider private property rights to be government grants of privilege–to be tolerated when convenient to the government, but no longer as a significant human right in itself. The concept of “states’ rights” holds even less respect because it reminds one of past injustices committed by states, rather than as safeguards against the centralization of power.
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The “Bill of Rights” provides very explicit words guaranteeing the rights of the common people. Unfortunately, words are not self-enforcing. The constitutional contract between the people and the government must provide incentives, counterforces, etc. to ensure that politicians remain the servants of the people, rather than the other way around. Even the most ingenious constitutional safeguards will wither and die if the public no longer appreciates the importance of liberty and property and if they can be made to believe that the crises of the day invariably requires extra-constitutional remedies.
Modern intellectuals do not take private property seriously, nor do they wish to constrain the makers of public policy. Ever since the “New Deal” of the 1930s, “liberal” scholars have rejected the belief that any economic system is proper for all periods of history. To them, political economy does not reveal any enduring set of legal principles. Political economy instead molds itself to the crises of the moment. The Great Depression, The War on Poverty, Projected Environmental Disasters, and the Health-Care Crisis, all supposedly require radical reorganization of the economy. Property rights and the rule of law must give way to the reformers.
In truth, no crisis is ever bigger than the Constitution. A solid education in economics would teach that private property and markets normally align the interests of property owners with the public. Most of the attempts by government to eliminate poverty, regulate prices, control macro-economic fluctuations, or otherwise manage the economy have proven very costly and usually counterproductive. It is also probable that many of the recent ecological scares are scientifically unfounded. Real world problems can usually be addressed within the context of private property and market economics.
Infrequently, a government regulation may provide a convenient route in mitigating a particular problem of the day, but the benefits of infringing property rights are small compared to the sheer costs of government and the uncertainties found in the law today. Moreover the Constitution contains an amendment process to handle situations where the need to act is great and normal remedies appear to be inadequate. This amendment process, however, is a slow, deliberate one which enables the people and the experts alike to investigate, study, and analyze the problem and the costs of alternative remedies. Prudent, reasoned solutions require time.
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Neither the Constitution, nor the rule of law can long endure the blight of a misinformed public. As friends of liberty, our eternally vigilant task must be an educational one. The people must ever remember the words of the founders, the wisdom of economists, and the lessons of history. Let us endeavor to turn back the regulatory lords in Washington, the twentieth-century pretenders to our property.
Notes
1. Bernard Bailyn, The Ideological Origins of the American Revolution (Cambridge: Harvard University Press, 1967). 2. Thomas Jefferson, “A View on the Rights of British America” (1774) in The Portable Jefferson, Merrill D. Peterson (editor), pp. 17-18. 3. James Madison, The Federalist Papers, no. 62, pp. 381-82 (New York: 1961). 4. Alexander Hamilton, The Federalist Papers, no. 85, p.521. 5. James Madison, The Federalist Papers, no. 45, p. 292. 6. James Madison, The Federalist Papers, no. 47, p. 301.
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Gradual Destruction of Individual American Liberty
How the United States evolved from a nation that held individual rights in high esteem (at least as ideals, if never consistently in practice) into a collectivist regime in which individual rights are subjugated in countless distinct ways every hour of every day is a long and complicated story—in many respects, it is the whole story of American society during the past 200 years. . . . In most respects the trend, sometimes quicker, sometimes slower, was relentlessly toward a less and less free society. The pace of the movement accelerated during the past 75 years; it shows no sign of slowing now. Each day Americans become a little less free. [Now a lot less free.]
The tragedy is that most neither know nor care. Like George Orwell’s character in 1984, who inhabited a world in which the official language held that war was peace and slavery was freedom, most Americans have actually learned to love Big Brother. Indeed, they spend much of their time actively seeking, or supporting the efforts of those who seek, to extend the grip of government over the whole of human affairs. Nothing is too intimate or too personal or too important to be left for free individuals to decide: not the education of young people, not the care of children or the sick, not even vital decisions involving life and death—nothing escapes the tentacles of government.
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Chapter 19
Individual Rights: The Crumbling Foundation of American Government
Robert Higgs
October 1991 ________________________________________________
Robert Higgs is the Thomas F. Gleed Professor in the AIbers School of Business and Economics and Director, Center for the Study of SociaI Dynamics, Seattle University.
Almost everyone recognizes that government can perpetrate great evils. One has only to think of the regimes of Stalin, Hitler, and Pol Pot, three of the most hideous examples. But government is also widely regarded as a potential source of great good. Even Ludwig von Mises, an archenemy of statism, declared that government is “the most necessary and beneficial institution, as without it no lasting social cooperation and no civilization could be developed and preserved.” 1 How can people enjoy the benefits of government while avoiding the dangers? Upon what principles must a tolerable government be built?
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The Nature of Government
When we say the word “government,” we may mean various things. Sometimes we refer to certain institutions, the established rules and proceedings by which the body politic is ordered and incorporated into the making and maintaining of collective arrangements for social life. At other times we refer to the particular persons who wield established authority over the citizenry. The two meanings are connected. Government as rulers operates according to government as institutions, which people often call “the system.” This connection holds whether the type of government be dictatorship, oligarchy, monarchy, or representative democracy.
Governments have existed for thousands of years. Philosophers have argued that they are either natural—it would be inconceivable that humankind not have them—or that people without a government would be, in Thomas Hobbes’s words, so “few, fierce, short-lived, poor, nasty, and deprived of all that pleasure and beauty of life, which peace and society are wont to bring with them,” that no one would want to be without a government.2 In Hobbes’ estimation, it would be a good bargain for individuals to surrender all their freedom of action to a ruler in exchange for a modicum of peace and social order.
A government, by definition, claims a monopoly of legitimate coercion within its jurisdiction. Every government, ultimately if not immediately, relies on physical violence to enforce its rule. If it cannot do so effectively, it probably will be replaced by another government that can. Hence it is entirely natural that governments maintain police, prisons, and armed forces, whereas General Motors, Exxon, and IBM do not. People sometimes talk about “economic power” as if it were comparable with governmental power. It isn’t.
Every government recognizes that people will obey orders more readily if they believe the orders are proper and, in some sense, in the best interests of the ruled as well as the rulers. Historically, a close linkage of the warrior class and the priesthood has characterized most societies. The blessing of religion has given many governments a more effective claim to obedience. Whether by appeal to religion or by appeal to secular principles of right or virtue, governments always try to legitimate their actions. This striving after legitimation is the principal differ ence between governments and mere criminal gangs.
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Whether government really is necessary (and a few of us still consider the question open to debate), once a society has a government, the potential exists for rulers to abuse their power by pursuing their own ends rather than those cherished by the people they rule. Unchecked government can give rise to tyranny. Accordingly, many lovers of liberty have called government a necessary evil: necessary because they see no alternative institution to maintain peace and domestic order, and evil because the rulers, by virtue of their exclusive control of legitimate coercion, may over-extend their powers at the expense of the well-being and liberties of the ruled.
Revolutionary Ideals of the Founders
The men who founded the United States were, in the eyes of the established British government, outlaws—traitors, thieves, and murderers. Americans nowadays so venerate the memory of Jefferson, Madison, Washington, Hamilton, Adams, Franklin, and the other Founding Fathers that we easily forget the raw reality of what they undertook to do between 1775 and 1783. They armed themselves, laid claim to authority denied them by established law, and set out to overthrow the established government by killing the men who defended it.
They were not murderers by profession. Indeed, they probably were the most thoughtful, best educated, and most articulate band of outlaws in history. When they decided to take up arms to overthrow the government, they debated their cause at length, and they wrote down in various places their reasons for resorting to killing other human beings, their justification for actions they ordinarily would have strongly condemned. How did they justify their actions?
They claimed that they, in common with all men, had rights, and that in the existing circumstances they could effectively defend their rights only by violence. In 1774 the First Continental Congress made a declaration of what its members called “their indubitable rights and liberties; which cannot be legally taken from them, altered or abridged by any power whatever, without their own consent . . . .” They claimed that they were “entitled to life, liberty, and property . . . .”
Where did the asserted rights come from? They said that they held the rights “by the immutable laws of nature, the principles of the English constitution, and the several charters or compacts” establishing the British
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colonies in North America.3 Again and again the rebels justified their cause by claiming a right to liberty. They insisted that the legitimacy of government required the consent of the governed.
The Continental Congress’s “Declaration of the Causes and Necessity of Taking Up Arms,” issued July 6, 1775, declared that
“a reverence for our great Creator, principles of humanity, and the dictates of common sense, must convince all those who reflect upon the subject, that government was instituted to promote the welfare of mankind, and ought to be administered for the attainment of that end . . . . Honour, justice, and humanity, forbid us tamely to surrender that freedom which we received from our gallant ancestors . . . . The arms we have been compelled by our enemies to assume, we will . . . employ for the preservation of our liberties; being with one mind resolved to die freemen rather than to live slaves. [And finally] in defence of the freedom that is our birth-right, and . . . for the protection of our property, . . . we have taken up arms.”4
Then, in 1776, the Continental Congress issued a Declaration of Independence. Here is the justification the rebels gave for their actions:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.
The Declaration continued by explaining that the rebels had not rashly taken up arms against the established government:
Governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations,
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pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
The Declaration went on to present a lengthy list of grievances against the King, including the complaint that he had “ erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance.”
During the Revolutionary era, individual states enacted bills of rights. The Virginia Bill (1776) , almost entirely drafted by George Mason, began, “all men are by nature equally free and independent, and have certain inherent fights . . . .” 5
The Massachusetts Bill (1778), written almost entirely by John Adams, began, “all men are born free and equal, and have certain natural, essential, and unalienable rights; among which may be reckoned the right of enjoying and defending their lives and liberties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.” Article seven of the Massachusetts Bill of Rights declared:
“Government is instituted for the common good . . . and not for the profit, honor or private interest of any one man, family, or class of men . . . .”
And Article 10 read:
“Each individual of the society has a right to be protected by it in the enjoyment of his life, liberty, and property . . . . No part of the property of any individual can, with justice, be taken from him, or applied to public uses, without his own consent, or that of the representative body of the people . . . . And whenever the public exigencies require that the property of any individual should be appropriated to public uses, he shall receive a reasonable compensation therefor.”6
Later, in the national Bill of Rights, the 10 amendments to the United States Constitution ratified in 1791, many of the rights proclaimed by the individual states in the 1770s became part of the entire country’s
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supreme law. Later still, in the 14th Amendment, added to the Constitution in 1868, each state was forbidden to “deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”
Clearly, government in the United States was founded on an explicit recognition of rights—natural, inalienable rights of each individual—and governments were understood to be legitimate only insofar as they acted to protect those lights. Individuals and their rights were regarded as morally prior to government and its mandates; governments were to serve the people, not the people the government. Government was justifiable only as an instrument of the governed. When governments proved abusive of their powers, when they destroyed rather than protected the natural rights of individuals, the people had a right to defend their rights and to overturn the government that threatened them.
Current Suppression of Rights
Comparing the ideology of the Founders with the currently dominant ideology, we encounter a stark contrast: on the one hand, the deep regard that the Revolutionary ideals expressed for individual rights; on the other hand, the rampant disregard for individual rights with which the present governments of the United States—federal, state, and local—conduct themselves and justify their actions. To make matters worse, not only do most Americans not recognize that their governments massively invade rather than protect their rights; most Americans actually talk as if they live in a free society.
Many people remain unaware of the extent to which government controls a vast range of human conduct in our society because they are not themselves on the receiving end of many of the particular forms of control. If you are not an automobile designer, you may not be aware that the government prescribes many requirements that all automobiles must meet. If you are not a real estate developer, you may not be aware of the multitude of government permits that must be acquired before you may commence building, and of the plethora of regulations that constrain how you may build. If you are not a pharmaceutical manufacturer, you may not be aware of the long process of testing and certification that must be endured before the government will permit you to sell your product. If you are not an importer or exporter, you may not be aware of the many controls and
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paperwork requirements that impede your business. If you are not a personnel or payroll officer, you may not be aware of the huge number of requirements you must meet with respect to collecting taxes and providing benefits to employees, and with respect to the makeup of your work force as regards race, sex, and other criteria. If you are not a dealer in stocks and bonds, you may not be aware that acting on the basis of certain information, which the government considers “inside information,” may land you in jail. If you do not have complicated business or financial dealings, you may not be aware of how extensively you must give an account of your affairs to the tax authorities. If you are not a business person, you may not be aware that any number of seemingly proper and mutually beneficial business arrangements may cause you to be charged with violating the antitrust laws. And so on and so on, endlessly.
Running up Against Everyday Controls
But even an ordinary person unavoidably runs up against government controls every day. Perhaps you wake up when your clock radio comes on, bringing you signals transmitted by a radio station permitted to operate only after being granted a license by the Federal Communications Commission. You get dressed, putting on clothing and shoes that cost you more than they would have if the United States government had not restricted the importation of clothing, textiles, and footwear. You drive to work in a car constructed in accordance with a variety of government regulations; or you ride the bus, paying a fare established by a government regulatory commission. You work or go to school with people who have been selected in part on the basis of governmentally prescribed rules and quotas regarding race, sex, ethnicity, handicap, or veteran status. You eat lunch at a care that is allowed to operate only after acquiring various permits. You make telephone calls and pay for them at a rate set by a public utility commission. You go home to sit down to an entree of meat sold only after mandatory inspection by the Department of Agriculture. What you paid for the food reflects the price supports on farm products and the restrictions on the importation of farm products into the United States. In the evening you turn on the television, watching a program broadcast by a station licensed by the Federal Communications Commission. Just before turning in for the night, you may take some medicine that you could legally purchase only by prescription and which can be sold to you only because it has been approved by the Food and Drug Administration. Yours has been an uneventful day,
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yet you have moved at every moment within a web woven by government.
How the United States evolved from a nation that held individual rights in high esteem (at least as ideals, if never consistently in practice) into a collectivist regime in which individual rights are subjugated in countless distinct ways every hour of every day is a long and complicated story—in many respects, it is the whole story of American society during the past 200 years. Not that liberty diminished at every place and time. The emancipation of the slaves, for example, was a triumph of liberty against which anything else in our history pales. But that was an anomaly, just as the existence of slavery had been an anomaly in the early days of the Republic. In most respects the trend, sometimes quicker, sometimes slower, was relentlessly toward a less and less free society. The pace of the movement accelerated during the past 75 years; it shows no sign of slowing now. Each day Americans become a little less free.
The tragedy is that most neither know nor care. Like George Orwell’s character in 1984, who inhabited a world in which the official language held that war was peace and slavery was freedom, most Americans have actually learned to love Big Brother. Indeed, they spend much of their time actively seeking, or supporting the efforts of those who seek, to extend the grip of government over the whole of human affairs. Nothing is too intimate or too personal or too important to be left for free individuals to decide: not the education of young people, not the care of children or the sick, not even vital decisions involving life and death—nothing escapes the tentacles of government.
Lovers of liberty watch in horror as their fellow citizens stitch new and unnatural organs Onto the Frankenstein monster. One marvels that they can take these actions in the name of “doing good,” “being fair,” “promoti ng prosperity . . . maintaining national security,” and a variety of other noble-sounding purposes. Perhaps in some cases they know what they are doing and have simply decided that the loss of liberty entailed by the new government power they support is an acceptable price to pay for the prospective benefit they anticipate—especially when they expect only other people’s liberty to be diminished. In many cases, though, they surely act with no awareness that the new government program entails a further throttling of human liberty, an overriding of individual rights .
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In 1991, according to official sources, Federal bureaus alone—not to mention the 50 states, more than 3,000 counties, and scores of thousands of cities, townships, and other government units, all imposing restraints on individual action—will propose or make final the issuance of 4,675 new rules.7 Those are new rules. When added to all the existing rules, laws, ordinances, regulations, decrees, injunctions, orders, requirements, prohibitions, and other official directives, they make up a heap of coercive measures so enormous that not even an army of lawyers can hope to grasp them all, and tax accountants throw up their hands in exasperation.
Budgetary Tyranny of Government Spending
To carry out their thousands of projects, the governments of the United States take at gunpoint—remember, payment of taxes is not a voluntary contribution—a sum of money beyond human comprehension, currently about $2 trillion. Question: How far would total government revenues, put into the form of a string of two trillion dollar bills, reach? Answer: It would stretch from the earth to the sun and back, leaving enough of the string to wrap around the earth about 167 times. And this illustrates just this year’s government revenues. Watch out for next year!
Remember the American colonists’ complaints about taxation without representation? Well, they paid at most a few percent, probably no more than 3 percent, of their annual incomes in taxes. Americans now pay about 36 percent of their vastly larger incomes to their governments. Much of this huge revenue amounts to taking from Peter to pay Paul, then taking from Paul to pay Peter—in order to be fair. Along the way, government officials and bureaucrats take a hefty broker’s commission on each transaction. Fully one worker in seven is on the government payroll. Vast numbers of others, supposedly in the “private sector,” also work for the government, because they do what they do only because of government spending, taxing, and regulating.
So utterly devoid of principle is the current activity of U.S. governments that no project whatsoever is too silly to exclude from the trough. Recall the scandal involving the hundreds of thousands of dollars recently appropriated to fix up the boyhood home of Lawrence Welk somewhere in the lost reaches of the Dakotas. (The appropriation was repealed when the news media publicized it heavily, but rarely does anyone take much notice of the
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equally outrageous appropriations that lard the budget.) You probably haven’t heard of the $566 million appropriated to fly cows to Europe, supposedly to promote exports. Or the $107,000 to study the mating habits of the Japanese quail. Remember, every dollar is taken from you or someone else at gunpoint. Would you put a gun to someone’s head to get money for studying the Japanese quail?
There’s much more, including the $2.8 million for a fish farm in Stuttgart, Arkansas; the $1.3 million for repairs to a privately owned dam in South Carolina; the $500,000 for the 1992 American Flora Exposition; and the $49 million for a rock-and-roll museum. Consider next the $500,000 to revitalize downtown Ada, Oklahoma—not a place many Americans are likely to visit—and the $772,000 to construct a skeet shooting club at Tinker Air Force Base. After all, one never knows when the Russians will attack with clay pigeons. There is also $375,000 to renovate the House of Representatives beauty parlor; plus $98 million for Congressional mall no one wants to receive, hyping the virtues of your local member of Congress; and $1.5 million to spruce up a military golf course. (Is this what the framers of the Constitution had in mind by the phrase “provide for the common defense”?) There’s $7 million to study air pollution-in Mexico City—and $1 million for the bicycle transportation demonstration project in Macomb County, Michigan. And the list goes on and on and on.8
One could continue indefinitely just listing one-line descriptions of ludicrous government projects, which in many cases have no real value to anyone except those paid to carry them out. Rarely does the budget contain the only kind of projects contemplated by the founders of the nation, namely, those of common benefit (that is, of benefit to everyone) that are also within the powers enumerated in the Constitution as allowable government actions.
Needless to say, constitutional limits on government action fell by the wayside years ago. Where economic interventions are concerned, the federal government received the blessing of the Supreme Court, in a series of cases between 1937 and 1942, to do virtually anything authorized by Congress.9 Given that green light, members of Congress proved time and again that no scheme to buy votes was too outrageous to refuse. Anyone who thinks that taxes must be raised to cut the federal government’s deficit, because spending already has been cut to the bone, should spend some time reading the budget documents.
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Democratic Despotism Violates the Rights of Individuals
Of course, we’ve been told since childhood that all of this is just the workings of “democracy,” as if taking a vote could decide the wisdom or morality of an action. The central purpose of the Constitution in the first place was to put limits on the actions of political representatives. A majority vote can do nothing to justify an action. The majority vote of the people or the Congress can no more justify a political action than the majority vote of a gang can justify an assault.
Majority voting is simply a decision rule for selecting the actions that will be taken from the set of all permissible actions. Through the years the mantra of “democracy” has been chanted over the most morally offensive actions of American governments, as if majority voting can make everything okay. It cannot. When governments override the rights of individuals, they violate their only raison d’être. Under the banner of democracy, the United States has built an engine of oppression so vast that it is doubtful whether it can ever be substantially reduced, much less dismantled.
All Other Rights Vanish in the Absence of Property Rights
Is it possible that I am taking too seriously some 200-year-old rhetoric about human rights, and that I have compounded the blunder by supposing that property rights are among the most fundamental of all human rights? After all, didn’t Jeremy Bentham tell us that the notion of rights is not only nonsense; it is “nonsense on stilts”?
I admit that I am no philosopher and that, if called upon to supply a proof of the existence of human rights, I cannot provide one. Nor am I persuaded by the attempts I’ve seen of philosophers far better prepared than I to give the proof. But as an economist, I am trained to ask certain questions: First, what’s the alternative? Second, after a choice is made, what happens next, and after that, and after that, as repercussions of the initial choice continue to have indirect effects?
Suppose you tell me, there is no such thing as rights; and I reply, okay, let’s agree that there are none. Later, when a mugger accosts you and demands
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that you surrender your wallet on pain of having your throat slashed, am I supposed to feel that you have been wronged? Of course, you won’t like this event, but the mugger will; it’s just your personal loss against the mugger’s personal gain.
Or suppose you wake up tomorrow morning and discover that a majority vote has been taken, and the majority or its chosen representatives have decided that all people like you—in some respect, it doesn’t matter which—are to report for transportation to concentration camps. Well, that’s democracy in action. Remember what happened to the Japanese-Americans in 1942.
If there are no rights, then we’ll just have to get along without them. But chances are, with no conception of rights, social life will be pretty much as Hobbes thought: brutish and short, et cetera, or else everyone will end up obeying the person who wields the most power at the moment. A society that doesn’t take human rights seriously and protect them will turn out sooner rather than later to be hellish. Apart from whatever one may think about the philosophical status of rights, a world without rights would not meet the aspirations of even the most thoroughgoing utilitarian. So, if one doesn’t care whether people believe in rights, fine; but one must be prepared to suffer the consequences.
We know from history what happens to societies without genuine individual rights. From sweeping powers of government, unconstrained by silly notions that all individuals have rights to life, liberty, and property, come the Soviet Union and its empire, Nazi Germany, Fascist Italy, and Pol Pot’s Cambodia as well as today’s China, Vietnam, Cuba, and a lot of other loathsome societies that merit the full measure of our contempt and sorrow.
In due course we shall arrive at something similar in the United States, for this country is fast proceeding in the direction of subjugating all human rights, especially human rights to property, without which the others eventually will prove more or less worthless. When the government controls everybody’s access to newsprint and broadcasting channels, freedom of the press won’t have any real substance—just consider how shamelessly the news media performed during the recent war, when the government controlled reporters’ access to the theater of war. When the government controls the conditions on which people can obtain or give employment, freedom of speech won’t matter much—who will jeopardize
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his job by speaking out against the government? When the government controls the manner in which all goods and services must be produced and the terms on which they may be sold, freedom of association won’t be worth much—what good will it do to have a meeting under those conditions? A nation without firm private property rights will eventually prove unable to defend any human rights whatever. Only citizens who have secure private property rights possess a protected, autonomous position from which they can challenge their rulers. Our forefathers understood this well, but most Americans have forgotten.
Property Rights Are Human Rights
Property fights have been slandered throughout most of the 20th century, especially by people who contrast property rights and human rights, and pose a choice between them. Now, faced with such a choice, who wouldn’t opt for human rights—far better to worry about human beings than about sticks and stones. But this way of posing the question is misleading and utterly unacceptable.
All rights are human rights. It is in the very nature of rights, which are morally justifiable claims on the conduct of other persons, that only human beings can possess them. Property rights don’t belong to the factory in which a corporation manufactures its products; they belong to the corporation’s shareholders, the individual human beings who have surrendered other property in voluntary transactions to acquire ownership claims on the factory. A related and equally foolish idea is that government can tax “business” rather than individuals. But bricks and mortar can’t pay taxes; only persons can. “Taxing business” is just another term for taxing certain people differently from others.
Property rights are the human rights to decide how property will be used, to appropriate the income or other benefits of the property, and to transfer the rights of ownership to others in voluntary transactions. Everyone realizes that some degree of property ownership is essential for sustaining human life in society. But many people suppose that once we go beyond personal property such as clothing, furniture, automobiles, perhaps houses, and arrive at “bigger” property such as land, factories, mines, and railroads, private ownership no longer is essential. The supposition is wrong. Suppression of private property rights at any level tends to have socially destructive consequences.
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Property rights must be lodged somewhere. Even societies that pretend to have no private rights in “bigger” property simply lodge the rights in the hands of politicians or bureaucrats. Someone, some human being, still decides how the property will be used and who will receive its benefits.
But without private property rights, the link is severed between rational employment of the property and the rewards or punishments of the decision-maker. Irresponsible behavior no longer carries with it an automatic punishment. Politicians or bureaucrats are free to use resources destructively as they have in socialist economies for decades and as they have in the socialized sectors of the United States such as public education or management of public forests or rangelands or national defense production—and still the decision-makers may thrive.
Private property rights create an incentive to employ resources in their most highly valued uses as determined by consumers. Socialized property arrangements insulate the decision-makers from the preferences of consumers, who invariably suffer, as they have throughout the socialist world since 1917, and as the unfortunate people of those places, some of whom now are free to speak, readily attest.
For Sale: A Precious Birthright
As ever more rules and regulations curtail the decisions individuals may make for themselves, as ever greater proportions of people’s income are siphoned off to be used as our leaders decide, as every species of special interest pays tribute to predatory politicos who suck the marrow from the bones of civil society, individuals are reduced to ever more meaningless atoms in the social cosmos. All of life becomes politicized, which means corrupted by power. And as individual liberty and individual rights die, all that is decent in human society dies with them.
Our Revolutionary forebears complained that King George had “erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance.” But Jefferson and Madison could not have dreamed, even in their most horrifying nightmares, of the swarms of bureaucrats upon us now, harassing us and eating our substance. The nation’s founders could not have understood how cheaply a wealthy society of their descendants would sell its precious birthright of liberty and justice and respect for individual rights.
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No individual, of course, can do much about the state of the nation. But each of us has a mind, and with some effort one can use it to think. The next time you hear of a proposal to employ the government for still another noble purpose, think! Ask yourself: At what cost to individual liberty wi ll this project operate? And how can we preserve our remaining liberties if we give our assent piecemeal to the thousands of new proposals for enlarging and strengthening government that pour forth each year? What will be the end result of these piranha attacks on human rights? And do you want to live in that kind of world?
Notes
1. Ludwig von Mises, The Ultimate Foundation of Economic Science: An Essay on Method (Kansas City, Kan.: Sheed Andrews and McMeel, 1978), p. 98.
2. Thomas Hobbes, Philosophical Rudiments Concerning Government, as reprinted in Hobbes: Selections, edited by Frederick J. E. Woodbridge (New York: Charles Scribner’s Sons, 1930), p. 267.
3. “Declaration and Resolves of the First Continental Congress,” in Documents of American History, edited by Henry Steele Commager (New York: Appleton-Century-Crofts, 1948), pp. 83-4.
4. “Declaration of the Causes and Necessity of Taking Up Arms,” in Documents, pp. 92-5.
5. “The Virginia Bill of Rights, in Documents, p. 103. 6. “Massachusetts Bill of Rights,” in Documents, pp. 107-08. 7. Unified agenda of Federal regulations, as cited in Robert Pear, “In
Bush Presidency, the Regulators Ride Again, The New York Times, April 28, 1991.
8. The preceding examples, and many more, appear in a series of stories on Congress in New Dimensions, March 1991, pp. 22-57.
9. Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (New York: Oxford University Press, 1987), pp. 180-94.
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There is No Liberty in the Absence of The Rule of Law
The end of the law is, not to abolish or restrain, but to preserve and enlarge freedom. For in all the states of created beings capable of laws, where there is no law there is no freedom. For liberty is to be free from restraint and violence from others; which cannot be where there is no law; and is not, as we are told, a liberty for every man to do what he lists (For who could be free when every other man’s humor might domineer over him?) But a liberty to dispose, and order as he lists, his person, actions, possessions, and his whole property, within the allowance of those laws under which he is, and therein not to be the subject of the arbitrary will of another, but freely follow I his own.
--JOHN LOCKE, Second Treatise
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Chapter 20
Individual Liberty And the Rule of Law
Ridgway K. Foley Jr.
June 1971
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Ridgway K. Foley, Jr., is an attorney associated with the firm of Souther, Spaulding, Kinsey, Williamson & Schwabe and practices law in Portland, Oregon. This article is scheduled for publication in the November 1971 issue of The Willamette Law Journal and is printed here with the express permission of Willamette University, Salem, Oregon.
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Contemporary Western society places high value upon two ideals: individual liberty’ and the rule of law.
Cursory examination of these concepts seemingly reveals the clear instance of inevitably warring propositions. The current milieu of high rebellion versus "law and order," of do-your-own-thing versus the sanctity of the traditional, ² bringing into conflict personal action and public authority, does little to disabuse the notion. If law is defined as restraint on human action and liberty as the absence of restraint, the concepts are inimical and conciliation impossible. This article proposes briefly to scrutinize individual freedom and the rule of law, to determine if
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the working definitions are accurate, and to decide if overgeneralization has obscured the whole truth of partially valid tenets.
On the first blush, it may appear singular for a law review to consider the general quantity and quality of the law. Such considerations should have been long ago made and laid to rest. It is much more exciting to consider what the law can do to and for man, with or without his consent. Eradica-tion of poverty, improvement of the environment, and assurance of economic equality for all men ring a more responsive chord in the breast of the sympathetic lawyer than cold, jurisprudential analysis.
The existence of past analysis does not mean that the present reiteration and refinement of essential ideas is unrewarding; we may need a gentle reminder of the past, and demonstration of its applicability to the dynamic present. It is the use of law for laudable goals at the possible expense of human freedom which commands re-examination. After all, most men agree that clean air, good housing, and a commodious job are desirable goals. The inquiry is not of goals, but of the means to secure the goals; the end pre-exists in the means.3 If the rule of law can destroy human action, such a fact should be trumpeted to all concerned; before man surrenders his freedom for an end, he may want to know (1) if the suggested action will achieve the end sought and, if so, (2) if the end is worth the price.
Definitions of Liberty and Law
The first step toward understanding and analysis is the development of working definitions of the concepts to be studied.
(1) Elements of liberty
A meaningful concept of liberty presupposes a living, purposive, choosing human being.4 An inanimate object may be described as being in a "free state" and yet it would be singular to characterize it as possessing liberty in the sense that a man is free. A man, however, imprisoned in Salem, cannot be in Paris or Rome or, indeed, in any place but his cell, so he is properly described as unfree or restrained.
The prisoner example indicates a second prerequisite for liberty: the human actor must have a meaningful range of alternatives. The choice between remaining in prison or being shot while attempting to escape presents little real choice at all, but it remains a choice. It becomes viable if conditions in
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prison deteriorate to the progressively intolerable. However, freedom does not presuppose an infinite variety of choices.5 One may live in London, or Paris, or Rome, but he cannot be present in all three places at the same in-stant, nor can he be on Saturn or Uranus (at this stage of space travel). Despite these limitations, an individual can be described as free. Man may be free despite his finity; one is not denuded of liberty merely because he cannot think like Albert Einstein, leap over buildings like Superman, or play basketball like Bill Russell.6
A third essential element of individual freedom is a relationship to at least one other human being. A person is meaningfully free only where his choice of alternatives is unrestricted by deliberate human interference, notwithstanding his subservience to physical or biological limitations. Robinson Crusoe, alone on his island, is neither free nor restrained. Only when he encounters natives on his rustic shore will the question of freedom arise, because only then is there possibility of deliberate human interference with individual actions.
Fourth, some element of internal and external restraint adheres in the very definition of liberty;7 it is ineffective to equate liberty solely with the absence of restraint because such a definition could also apply to a state of lack of freedom. Robinson Crusoe could be subject to no deliberate human intervention when he subdued the inhabitants of his world and became ab-solute monarch, but he could not be styled free if he were subject to uncontrollable fits of passion or impulsive action which he could not restrain. Thus, the internal aspect of restraint, be it denoted self-control, morality, or conscience, is implied in the very definition of liberty .8
Some thinkers have also recognized that unlimited power of human action without external restraint could result in license, anarchy, and civil chaos. In such a society, the "inferior" persons would have only the freedom of action permitted by their more powerful neighbors; the "superior" beings might virtually enslave their less fortunate fellows, but they, too, would be unfree to the extent that they were forced to devote their time to coercive, as opposed to creative, endeavors. To the extent that the predator must dissipate his creative powers in use of force upon others, he, too, is restrained, although his re-restraint is self-imposed and by his own choice.
Berlin’s analysis separates liberty into "positive" and "negative" aspects; negative liberty is concerned with the inquiry, "In what area is man left
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free to do what he wishes without interference by other men, singly or in the collective?"9 Implicit in this question concerning liberty is the premise that some restraint on human action exists compatibly with freedom. To the extent that this area of noninterference is contracted, the individual is coerced and unfree, but the very concept of an area of noninterference presupposes some limitation.
The external restraint implicit in liberty is a recognition of freedom of action as an equal right of all purposive beings in society. ¹º The necessary implication is that liberty is not the total absence of restraint. The quest is for the permissible limits of restraint. In the words of Bastiat, liberty is "the freedom of every person to make full use of his faculties, so long as he does not harm other persons while doing so… [and] the restricting of the law only to its rational sphere of organizing the right of the individual to lawful self-defense….” ¹¹ Thus, the workable ideal of liberty is a range of individual choice unhampered by deliberate human interference except insofar as intervention is necessary to assure equal liberty to all individuals.
Liberty has meaning because man possesses the power to choose, that is, the ability to observe, measure, test, evaluate, and select from alternatives.12 But this does not mean that choice is meaningless unless liberty is also measured in terms of power to accomplish ends." The freedom to do something does not imply success; it includes freedom to try and fail [and try again]. Freedom to undertake a venture may well be of profound importance to the individual sans success in the ultimate endeavor. Hayek has wisely observed" that the concept of liberty cannot be restricted to areas where we know the result will be "good" because that is not necessarily freedom; freedom is required to attend to the unpredictable and unknown, and is desirable because the favorable results will far outstrip the unfavorable. The libertarian¹5 is not utopian; he only asserts that liberty is the best condition for the realization of the multiple goals sought by purposive individuals. He would not impose his choice upon others; he merely asks that others not interfere with his voluntary choice.
Individual freedom is the lack of formal or informal external restraints imposed by one man or group of men upon another, save for the collective coercion aimed at preventing individuals from acting forcibly or fraudulently against their neighbors. It is the absence of human impediment to the vol-untary action of fellow human beings. The permissible limitation on free choice is the recognition of an equal ambit of choice to all other men.
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(2) The elements of law
I do not propose here to isolate and analyze the phenomena denoted "law." For the purposes of this article, it is sufficient to identify several classes of law, well accepted as such in the contemporary United States, and to limit our analysis accordingly. This in no way pretends that the proffered classification is exclusive.
In general, law is a method of control of human behavior, ordinarily accomplished by policies, rules, orders, decisions, and regulations, operative within a given territorial unit; its ultimate authority resides in the monopoly of coercion possessed by the state.16 Coercion as an essential element of the legal system cannot be understated, even where compliance with law may be secured either by mere threat of force or by subtle forms of coercion.
The law is coercive insofar as it delimits the range of alternatives otherwise open to the individual actor, whether the results of non-compliance are penal sanctions in the traditional sense, or the foreclosing of legal processes for redress to the noncomplying individual. As indicated in the discussion of external restraints inherent in the definition of liberty, freedom not only presupposes a system of law but also could not survive in the absence of law.¹7 However, an equally valid proposition is that liberty may be destroyed by the misuse of law.10 Throughout the remainder of this article, by example and analysis, the interrelationship of law and liberty and the application of these two propositions will be explored.
Law and the Ambush of Liberty
Analysis of the relationship between law and liberty is complicated by the fact that laws which operate in society under the guise of liberty may, in fact, be inimical to the freedom ideal. All law actually premised upon such masquerading concepts may obstruct individual liberty, but the possibility of erosion of the concept is so likely that it is necessary to unmask some of the most common interlopers.
(1) Strange bedfellows: Liberty, Equality, and Fraternity
When liberty is properly defined as the absence of human interference with the actions of a purposive individual except to the extent required
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to assure like liberty to all other individuals in society, liberty and equality become singularly discordant companions. Liberty has long survived the graveyard of dogma because the libertarian accepts man as he finds him, an extraordinarily complex, volitional being, capable of creation or destruction, searching for multiple goals; 19 equality is curiously in-compatible with both liberty and the nature of man, because the egalitarian refuses to accept man as he finds him. The egalitarian all too often bottoms his view on the premise that mankind is essentially brutish and incompetent, incapable of betterment and undeserving of salvation, although the same thinker may posit that man acting in the collective somehow achieves great creative powers.²º
Liberty is both a desirable and achievable goal; equality is neither, unless equality means "equality before the law," equal treatment of saint and sinner found in the same posture or circumstance.
This confusion of concepts is partially caused by the association of the word "equality" with the American and French revolu tions of the eighteenth century, traditionally associated with the search for freedom. A literal application of the egalitarian concept may be utilized to level society by fitting men of varying potentialities to a Procrustean bed measured to the least fit. Those possessed of the least measurable potential might be made happier by this process, but the result would not be freedom. Equality is consonant with liberty only in a limited sense; the equality comprehended by the Declaration of Independence and the libertarian tradition was equality of birth, without vested privileges provided by the state, and equality before the law, an equal liberty to utilize one’s faculties and potential to his own ends, to succeed or fail, to determine his own destiny without special favor of discrimination.²¹
Fraternity possesses a subtler but very real possibility of shrouding liberty. Berlin has clearly indicated that the cries of oppressed classes and nationalities for "liberty" often obscures their real desire, that of recognition by other men of one’s own human worth.22 This search for status may lead to the worst kind of demagoguery and oppression, since the individual sacrifices his liberty for the realization of group status, and in return receives recognition by the group. It is not the motive to be recognized by one’s fellow man which is wrong, for this is a very real human desire. Rather, it is the sacrifice of voluntary action in the name of liberty which results in illiberal acts committed in the name of liberty which is wrong; the
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submission of the individual to the group renders him less human by his escape from moral responsibility for his acts, placing responsibility and choice in the hands of the will of the group, which normally means the will of the loudest or the most violent. The fallacy lies in the fact that fraternity consonant with true liberty cannot be enforced — it must be voluntary.23
(2) Democracy and the “General Will” are Subversive of Liberty
Another concept masquerading as liberty is the natural desire to be self-governing, or "democracy." Berlin has analyzed the problem of liberty as confusing the question of "to what extent shall I be free in my actions from the deliberate intervention of others?" with the inquiry, "To the extent that I am to be coerced by others, who should coerce me?"24 Cohen has taken issue with this analysis, terming it "academic, inflated and obscure."25 He argues that Berlin confuses the positive-negative liberty distinction with a distinction between individual liberty and public authority, and that the tra-ditional libertarian thought was identified not only with a search for "negative" liberty, but also with the development of self-government.26
Despite these criticisms, there is a distinction between the form of the state and the area of noninterference.27 Democracy can be as subvertive of liberty as autocracy; 51 per cent of the electorate could vote to plunder and pillage the remaining 49 per cent; a progressive income tax obviously limits the freedom of those in the higher brackets for the alleged benefit of the majority who reside in the lower brackets. On the other hand, it is possible to hypothesize an absolute monarch who governs solely within a strictly limited sphere of state action, preventing fraud and violence, and providing for the settlement of private disputes.
Once this basic distinction is recognized, Cohen’s criticism is rendered less vital. To acknowledge the distinction between liberty and self-government, and to admit the possibility of perversion of democracy into mob rule of might-makes-right, is entirely distinct from contending that self-government is undesirable or less favorable than another governmental system. Certainly libertarian tradition has consistently concluded that self-government not only fulfills the basic human desire to be master of oneself, but also provides the most likely form by which to secure the condition of liberty.
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But, Berlin asserts a salient proposition that the desire to be master of one’s own self can degenerate into the worst kind of totalitarianism.28 The demented idealist glorification of the state influenced two vicious forms of state barbarianism in this century, national socialism and commu-nism. Yet this very idealism commenced with the premise of a natural desire to master one’s own destiny; it was perverted when it became hopelessly confused with the belief that the ends of each man, rationally measured, would always coincide with those of every other man. Therefore, the gen-eral will represented the "rational choice" of each member of society, although a given individual member might be blind to his "real self" and therefore his choice would have to be made for him by a master more rational than he. 29
This is, of course, the same tired argument of all tyrants, that the state must do for man what he cannot do for himself. Since the state is a coercive, not a creative, force, there is nothing it can do, except use force, that man, singly or in voluntary association, cannot do for himself. It may, however, do things a volitional individual would not do;³º reveals an on a somewhat lesser, but no less pernicious, plane, the Fabianism sweeping the West31 today proceeds upon the same illogic, idolizing the expert and the planner who know better than the citizenry what the latter "wants" done in a given situation. The libertarian recognizes the vital truth that not only are the ends of man in potential conflict3²º but also that individual voluntary action is the only method by which one’s destiny can be completely and morally determined, even if the determination so chosen might appear "irrational" to an observer .33 To be free is to be allowed to make one’s own mistakes deprive individuals of their property (taxes) and enter into an uneconomic project — it is likely that this is the rational analysis of federal space exploration. See how private action can solve, and has solved, many problems which are posited as "necessary state action" in Wooldridge, op. cit., 20.
(3) Liberty and security
Security, occasionally mislabeled "liberty," is a common end sought by man. Security might be said to be the barter of freedom in order to satisfy a desire to avoid choice, agreeing to acquiesce in the choice of another. Although liberty inherently posits individual choice for oneself, it does not prevent the choice for "security" in all instances. Security is inimicable to liberty where one not only chooses not to choose, but his
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choice, ordinarily in the collective with other similarly situated, operates by some sanction to force that choice upon another unwilling individual.³4 Man commonly desires to plan for his retirement or old age; it is not a perversion of liberty to choose to enter a voluntary arrangement whereby a private in-surer plans a retirement program for consideration. However, where 51 per cent of the voters choose a state-enforced program binding all present and future citizens, it is clear that the quest for security has resulted in a deprivation to the liberty of the unwilling who wish no program at all, or, more likely, wish to plan for the future in accordance with their unique situation.
An amazing example of confusion of terms in high places is the illogical shift in the infamous "four freedoms" speech.35 Coupled with the two accepted adjunct freedoms, expression and religion, are two interlopers, freedom from want and freedom from fear. More amazing still is the fact that these false freedoms have wormed their way into accepted political pro-grams without criticism, accepted as respectable as though they could be achieved in fact. "Freedom from want and fear" may represent basic human desires but to call them freedom is foolish.36
(4) Liberty or Consensus
Again, liberty may be confused with a system of enforced orthodoxy, sometimes signified the "consensus" fallacy, which provides for such a limited range of choice that the individual is not really free at all. Sunday laws are a common example of this concept, where religious freedom means freedom to be religious in the manner recognized by the community. Compulsory franchise laws, existent in both Eastern and Western nations, provide another example where a citizen must vote, although he may have a real, not a perfunctory, choice between candidates who may represent diverse positions. Freedom must include freedom to abstain or it cannot be freedom; to claim that the Soviet hegemony has free elections is a mockery. The most obvious example appears in the enforced othodoxy of conscription, now under some semblance of attack in the halls of Congress.37 The concept of a conscript fighting for freedom could be humorous if the milieu were not so deadly serious. The cause of freedom has suffered much in making the world safe for democracy.
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(5) The question is: Freedom for whom?
Liberty achieves its true station when it is equally applicable to each individual in society; 38 this is implicit in the definition of liberty as the absence of human interference with individual actions except as is necessary to insure equal freedom for all. Yet, an "unequal liberty" may parade under the mask of liberty; this interloper may partake of some attri-butes of liberty, but only for a limited group of persons. For example, a slave society might be found where the ideal of liberty existed for the ruling class alone; to the extent of slavery enforced by coercion, that society is re-strained, not free. In fact, the ruling class is itself less free, albeit by deliberate choice, in two senses:
(a) It must allocate part of its resources to the continuation of slavery, instead of releasing these forces for creative endeavor, and
(b) to the extent that the enslaved class does not operate to its creative potential because of the oppression, the rulers suffer the loss of that potential out flowing of productivity.
When examining a restrictive norm allegedly enacted or adduced to advance freedom, a relevant inquiry is "freedom for whom?" If the law extends privileges to one group at the expense of others, and is not founded upon the legitimate state function of preventing fraud and violence and providing for the adjudication of private disputes, then it does not achieve liberty. 39
In our legitimate concern over the mistreatment of colored persons for two centuries, we now fail to see that the liberty of the employer is restricted when he is forced to hire a Negro applicant against his will, and the liberty of a storekeeper is limited when he is forced to serve those he does not wish to serve at his lunch counter. An entirely different inquiry is presented when white persons, singly or collectively, with or without authority of law, coerce colored persons and prevent them from voting, breach the doors of their church and harass their peaceful meeting, or fail to provide an equal administration of justice for persons of all races by excluding qualified Negroes from the venire.
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(6) Human Rights Takes Precedence over Property Rights?
Statist philosophy often obscures the essential fact that liberty is indivisible. Failure to educe this element tends to lead the less sophisticated apologist for unwarranted state intervention to justify governmental extension on the grounds that "human rights take precedence over property rights." So stated, the proposition is clearly unsound and a negation, because of the identity of subject and object. "Property" possesses no rights, any more than air, or dogs, or cinnamon possess rights; rights inhere only in individual, volitional beings. Property rights are human rights.4º Thus, the contention really means that the liberty of some persons must be curtailed and in some mystical way the liberty of other persons will be expanded.
What those propounding this argument truly mean is that certain aspects of liberty should be restricted while others remain unmolested (for the time being), but emotive words are utilized to secrete the true justification. Thus, while the United States currently witnesses a growing recognition and sanction of the constitutionally specified freedoms of speech, press, association, and religion, an over-all diminution of liberty occurs. 41
The clearest present deprivation of liberty is to be found in the market place where state intervention has whittled down the individual’s choice of alternatives. Because of the artificial human rights-property-rights distinction, there has been acceptance of the tenet that freedoms of association, speech, press, and religion can somehow survive without economic freedom. This is preposterous: as the market becomes more con-trolled, these adjunct freedoms lose strength. Freedom of the press means little where the state controls the supply of newsprint; freedom of speech and association are fine unless the state owns all the available meeting places; freedom of religion can be destroyed if land and building materials for the construction of structures of worship belong to the state, since the state affixes conditions of use to that which it owns or controls. The rights of freedom of speech, press, association, and religion are all dependent upon economic freedom because, to be effective, they must utilize the product of the market, and where the state controls production and distribution, it controls ultimate use. Market control is not price control or rent control — it is people contro1.42
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Liberty: Encouraged or Destroyed by Law
To ascertain the relationship between liberty and the various functions which law performs as a device for securing social order, it is desirable to separate several obvious types of laws and examine their peculiar relationship to liberty, noting how each class of law can either encourage or destroy individual freedom. 43
(1) Criminal duty-imposing rules
Criminal law provides for the redress of harm done to individuals when the harm is such that its existence threatens the very structure of society and all persons situate therein. Criminal laws are absolutely necessary to the existence of liberty because their function is to protect the individual, by deterrence and penalty, from infringements on individual liberty by those who would trespass upon the equal freedoms of others. If nothing else is achieved by the state, it should at least isolate those who would forcibly and fraudulently deprive their neighbors of life, liberty, or property. It is difficult to imagine a system where liberty could flourish without institutions to prevent individual or collective force and fraud against one’s neighbors. Criminal laws restrict liberty to the extent that they inhibit the individual from his free choice. Thus, this limitation of liberty is necessary and desirable for liberty to survive.
It may seem curious to assert that criminal law, customarily so devoted to the equal protection of individual life, liberty, and property from the transgressions of others, could be perverted into a destroyer of freedom. However, a legal system which fostered plunder of property by making individual resistance thereto unlawful certainly would restrict liberty. Freedom is unduly inhibited where the criminal laws utilize and sanction that which is proper human action, not interfering with the equal liberty of all, such as Sunday laws, usury laws, consensual crimes between adults not in the public view, and minimum wage laws."
(2) Civil duty-imposing laws
The law performs another essential function by providing institutions for civil recovery of individual restraints on human action, commonly denoted the "administration of justice." Conduct restricted may or may not also be criminal. For example, P’s freedom is obstructed when D negli-gently strikes him with an automobile, to the extent that P’s life may be
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shortened, his freedom of movement hampered by a broken leg, or his property taken for the payment of medical bills. Therefore, D’s freedom of action is justly restricted to the limit of taking some of his property at P’s instance to compensate P for his loss; D’s freedom of action is restricted but only by the consequences of his volitional act. There is no proper penalty for negligence; a restriction of liberty is valid only where D is at fault and that fault causes the deprivation of another’s freedom." If, however, D intentionally struck P, he might be both civilly and criminally liable; not only would D restrict P’s freedom of choice and action but also he would constitute a danger to society as a whole.
Civil-duty laws destroy liberty where liability is imposed upon D without any fault, or without any causal connection between his actions and P’s injuries. Thus, laws providing for status or absolute liability," justified only on the basis of the "deep-pocket" doctrine, or the theory of "enterprise liability," represent legally sanctioned deprivations of liberty, as does the trend toward state-enforced insurance and compensation schemes. Where an individual is mulcted for results not of his making, where he is not "at fault," his liberty is unfairly restrict ed and the society falls short of the ideal of freedom. Where the individual is made to pay for the consequences of acts volitionally done (his fault), the lessening of liberty is justified.
(3) Laws channeling or conferring powers
Rules providing procedures by which the individual can achieve the results of his voluntary and consensual associations with other persons may augment the ideal of liberty. Law in the early United States, by the development of many of these rules, fostered the nineteenth century outburst of creative energy.47 Even a frontier society required a law providing for the recordation of land titles," and norms for enforcing individual agreements voluntarily reached, as well as rules for the adjudication of private disputes.
Power-conferring rules restrict liberty when they deny enforcement procedures for individual action not following prescribed procedures; they do not prevent voluntary individual resolution of problems by other means if enforcement is not required. There is no prohibition of a sale of Blackacre by oral agreement between B and S, if both parties carry out their bargain — it is only when one party reneges that the statute of frauds prevents enforcement. Again, the law-conferring powers will not penalize B for failure to record title to Blackacre, and if no other claimants appear,
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B’s title is secure. The power-conferring rules destroy liberty only when they are used to restrict human endeavor, to allocate market resources, or to promote favoritism.
Curiously, many writers have considered the nineteenth century United States as a laissez-faire economy where freedom was given free rein, and the government performed only the functions of a night watchman. Proceeding from this naive premise, they draw the equally absurd conclusion that law must positively restrict individual freedom in order to prevent real or imagined evils flowing from the "libertarian experiment."
First, nineteenth century America clearly enjoyed less restriction on human action than any earlier society in history; however, the claim that the limitations were only those of a policeman preventing malum in se crimes ignores historical fact. Writing at mid-century, Bastiat indicated two particular areas of restraint, slavery and protective tariffs.5º To these can be added, by way of nonexhaustive example, the internal improvement schemes of Henry Clay; the fostering of public education; the grant of monopoly power to private groups in the "public interest"; national control of finance; licensing and regulation of navigation and improvement of harbors; and direct or indirect encouragement of transportation; not to mention state tinkering with money, coinage, and banking in relation to the finance powers.51 Moreover, the argument falsely focuses only upon the Federal government, which, admittedly, was more concerned with the problems of federalism prior to the Civil War. One cannot overlook state and local restrictive activities, including commercial regulation, licensing, subsidies, and monopoly grants under an ex-pending concept of the police power. 52
Second, the "Golden Age"53 argument assumes that individual liberty was responsible for "abuses" of the nineteenth century, proceeding from the un-tenable tacit assumption that liberty was meant to be a panacea leading to utopia. The libertarian contention is only that voluntarism is the best system for a fallible but improvable mankind.
Likewise, the conclusion that liberty caused abuse is untenable; empirically, most "abuses" were conditioned by law, not liberty, and flow from failure to properly provide sanctions against trespass on liberties or unwarranted interdiction of human freedom, directly or by delegation to private groups.
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Third, the argument overlooks the positive function performed by the law in the nineteenth century; for example, the Federal judiciary under the Interstate Commerce Clause prevented the erection of internal barriers to free trade by mercantilist states at the behest of favored local businesses, and the states followed a liberal policy of granting charters to associations and providing a remedy for failure of subscribers to a capital pooling venture to carry on their voluntarily entered bargains."
(4) Adjudicative laws
The development of individual freedom requires a body of law relating to the administration and settlement of private disputes. Without adjudicative rules, there would be great difficulty in effecting the rules imposing civil or criminal duties, or conferring powers, since there would be no organized institution of enforcement. Common examples of adjudicative rules are regulations relating to the qualifications, selection, and tenure of a judge, conciliation commission or arbitrator, rules of evidence and procedure for guiding the presentation of the dispute and enforcing the official determination. 55
Adjudicative rules restrict individual liberty by narrowing the choice of alternatives in the choice of court, judge, procedure, and evidence, and excluding the choice of self-help, but they are justified on the ground of making choice meaningful. Absent the central administration of justice, civil chaos would reign. However, the ideal of liberty is perverted when adjudicative rules are used to discriminate against some persons seeking legal redress or where the law is used to unduly restrict liberty. For example, where colored people are customarily excluded from the venire, liberty is imperiled. Likewise, where the legal system no longer requires proof of fault or causation for civil recovery, but only that the defendant possess a deeper pocket, and upon such proof authorizes and enforces recovery, the law is misused and reduces the defendant’s freedom.
(5) Laws for making laws
Closely related to adjudicative rules are the law-making laws; adjudicative rules make law in the sense of the law of the case and in the sense of precedent; lawmaking laws provide procedures and qualifications for the passage of general laws, limitations on law-making powers, and grants of law-making powers. Common examples of law-making laws are those setting forth qualifications and tenure of public officials; local
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initiative, referendum and recall; home rule; rules of procedure within legislative, executive, or administrative bodies; rules of court; and the procedural apparatus for publicizing laws.
Law-making laws also include rules against potential laws and the abuse of law-making power by providing a line beyond which there is no law-making power extant. For example, constitutional prohibitions against taking property for public use without just compensation, impairing the obligation of contracts, and the whole gamut of provisions in the Bill of Rights contain absolute restrictions to protect the individual from collective interference.
Additional norms within the category of law-making laws are rules prescribing the proper functions of the state; here the greatest destruction of individual freedom has occurred. Where restrictions against state interference with individual liberty are perverted by legislative fiat or judicial interpretation, so as to permit the state to become a producer in the market, as occurred in the development of the Tennessee Valley Authority or Social Security Programs, individual liberty suffers as a consequence.56
The Value of Liberty and the Role of Law
To this point I have proceeded upon the major premise that a maximum ideal of individual liberty is desirable and the proper role of the law is to foster and protect that ideal. Some reasons for this premise follow:
(1) Only under conditions of individual liberty can man be a truly responsible moral agent.57 Choice presupposes responsibility and fosters it; if a man is unable to choose because of restraint he is, to that extent, dehumanized. The choice not to choose at all but to pass that choice to a nonresponsible collective is a choice per se and the burden for the consequences of the allocation by the collective must rest, in last analysis, upon the ultimate choice-maker, the individual who refused or refrained from choosing.
(2) Only with the conditions of maximum liberty can man’s creative nature have full sway in the solution of his problems; liberty is a singular concept, having no fixed ends in itself, and presupposing that ends are open and only, the individual can best choose for himself.58
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(3) With maximum liberty and the concurrent release of individual creative power, man will produce the greatest abun-dance of material, as well as spiritual, wealth possible.59
In summary, then, what is individual freedom and what is the proper function of law? Liberty is the absence of human intervention with the endeavors of an individual to utilize his life, liberty, and property (and all adjunct rights flowing there from) as he sees fit and for the ends he desires, limited only by the equal liberty of all other individuals in society. To accomplish this ideal of liberty, law must be restricted to its proper role ; prevention of use of force and fraud against any individual or group by any individual or group60 or by the state, except where necessary to prevent the actor from invading the equal freedom of another; provision of processes and institutions for adjudication and enforced settlement of private disputes ; and, provision of reasonable channeling procedures through which private individuals may utilize their voluntarily chosen ends.
The Rule of Law
“The end of the law is, not to abolish or restrain, but to preserve and enlarge freedom. For in all the states of created beings capable of laws, where there is no law there is no freedom. For liberty is to be free from restraint and violence from others; which cannot be where there is no law; and is not, as we are told, a liberty for every man to do what he lists (For who could be free when every other man’s humor might domineer over him?) But a liberty to dispose, and order as he lists, his person, actions, possessions, and his whole property, within the allowance of those laws under which he is, and therein not to be the subject of the arbitrary will of another, but freely follow his own.”
JOHN LOCKE, Second Treatise
FOOT NOTES
1.I use the terms "liberty" and "freedom" interchangeably in this article. Berlin suggests that there have been over 200 recorded definitions of liberty, Isaiah Berlin, Two Concepts of Liberty (Oxford University Press, 1958) 6; I do not intend to catalog or examine all these definitions. Rather, this article is concerned with the search for a
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precise, valid definition of liberty, one which reveals and corrects the current deterioration of the concept. Berlin, id 16, does not believe such a deterioration is taking place, but see, contra, Lon L. Fuller, "Freedom — A Suggested Analysis" 68 Harv. L. Rev. 1305 (1955).
See for a different analysis, Glanville Williams, "The Concept of Legal Liberty," Essays in Legal Philosophy (University of California Press, 1968, Summers ed.), 121-145.
2. What the existent generation presently sanctifies as traditional and sacred may not normally represent the great value judgments and normative concepts of the past. Today’s nominal conservative may well mimic the radical of 30 years ago. Witness the acceptance, by all but the strict libertarian or voluntarist, of social security, union monopolies, and the Federal Reserve System.
3. Leonard Read amplifies and refines this truth orginally enunciated by Ralph Waldo Emerson. See, e.g., Leonard E. Read, Let Freedom Reign (The Foundation for Economic Education, Inc., Irvington-on-Hudson, New York, 1969), 78 et seq.
4. See Fuller, op. cit., at 1306-1307
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What is the status of “laws” that contravene the “natural law”?
Legislation consistent with justice, however, is the exception not the rule, as we know. The real laws commanding us to do natural justice and abstain from injustice are older than the hills, fully in force before the first Congress or legislature convened. So we must ask, what is the status of “laws” that contravene the natural law? Spooner answers:
“ If they command or license any man to do injustice, they are criminal on their face. If they command any man to do anything which justice does not require him to do, they are simple, naked usurpations and tyrannies. If they forbid any man to do anything, which justice could permit him to do, they are criminal invasions of his natural and rightful liberty. In whatever light, therefore, they are viewed, they are utterly destitute of everything like authority or obligation. They are all necessarily either the impudent, fraudulent, and criminal usurpations of tyrants, robbers, and murderers, or the senseless work of ignorant or thoughtless men, who do not know, or certainly do not realize, what they are doing. . . .”
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Epilogue
Obey the (Natural) Law Live honestly, hurt no one, and give to every one his due.
By Sheldon Richman April 09, 2010
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Sheldon Richman is the editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families.
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Tax Day approaches, and I’ve been thinking of all the ways government bullies us, demanding we do – and not do – things — or else.
You can get into big trouble for not sending in a bunch of forms to the IRS by April 15 disclosing how much money you made last year. You can get into bigger trouble for not giving the government the cut to which it believes it’s entitled.
You can also get into trouble – admittedly lesser – if you don’t fill out and return that census form sent you without your consent.
You can get into trouble for hiring someone who doesn’t have the government’s permission to be within the politically defined borders of the United States. Even some people who claim to be for limited government like this idea — they favor tough employer sanctions and raids by armed
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government agents to break up such commercial relations between consenting adults.
You can get into trouble if you ingest a disapproved intoxicant or narcotic. Heck, you can get in trouble for ingesting some approved ones without permission.
You can get into trouble if you refuse to sell your land to the government at any price when politicians decide they want it for a public or private use.
You can get into trouble for putting a shop in an area zoned exclusively residential or vice versa.
You can get into trouble for doing some jobs without a government license, even if your customers are perfectly happy.
And, oh yes, soon you’ll get into trouble for not buying a health-insurance policy.
You can get into trouble for doing a long list of other things that harm no one whatsoever. The things I’m thinking of are not objectively wrong. They’re just mandates and prohibitions decreed by a legislature and signed by an executive.
“It’s the law.”
Is it?
There’s a legal tradition dating back to antiquity which says that “law” means the natural law and that any legislative product that conflicts with the natural law is no law at all.
As Auburn University philosopher Roderick Long points out, the principle lex injusta non est lex — an unjust law is not a law — “was once and indeed for over two millennia, the dominant position in western philosophy of law…. This doctrine was upheld by Socrates, Plato, and Xenophon, by the Stoics and by Cicero, by Augustine and Aquinas, and by Blackstone as well. The traditional idea was that law must be distinguished from mere force by its authority, and that nothing unjust could have genuine authority” As Long points out, the great American political
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philosopher Lysander Spooner (1808-1887) applied this principle in his characteristically consistent and rigorous manner.
It’s worth seeing what Spooner had to say. In 1882 Spooner defined natural law as “the science of justice”:
the science of all human rights; of all a man’s rights of person and property; of all his rights to life, liberty, and the pursuit of happiness.
It is the science which alone can tell any man what he can, and cannot, do; what he can, and cannot, have; what he can, and cannot, say, without infringing the rights of any other person.
It is the science of peace; and the only science of peace; since it is the science which alone can tell us on what conditions mankind can live in peace, or ought to live in peace, with each other.
In his 1886 “ A Letter to Grover Cleveland,” Spooner elaborated on what natural law is:
Let me then remind you that justice is an immutable, natural principle; and not anything that can be made, unmade, or altered by any human power.
It is also a subject of science, and is to be learned, like mathematics, or any other science. It does not derive its authority from the commands, will, pleasure, or discretion of any possible combination of men, whether calling themselves a government, or by any other name.
It is also, at all times, and in all places, the supreme law. And being everywhere and always the supreme law, it is necessarily everywhere and always the only law.
This is hard-hitting stuff, absolutely bracing. But where does it leave the Congress, state legislature, and city council?
Lawmakers, as they call themselves, can add nothing to it, nor take anything from it. Therefore all their laws, as they call them, — that is, all the laws of their own making, — have no color of authority or obligation. It is a falsehood to call them laws; for there is nothing in them
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that either creates men’s duties or rights, or enlightens them as to their duties or rights. There is consequently nothing binding or obligatory about them. And nobody is bound to take the least notice of them, unless it be to trample them under foot, as usurpations.
But if perchance Congress should pass a law that coincides with the natural law?
If they command men to do justice, they add nothing to men’s obligation to do it, or to any man’s right to enforce it. They are therefore mere idle wind, such as would be commands to consider the day as day, and the night as night.
Legislation consistent with justice, however, is the exception not the rule, as we know. The real laws commanding us to do natural justice and abstain from injustice are older than the hills, fully in force before the first Congress or legislature convened. So we must ask, what is the status of “laws” that contravene the natural law? Spooner answers:
If they command or license any man to do injustice, they are criminal on their face. If they command any man to do anything which justice does not require him to do, they are simple, naked usurpations and tyrannies. If they forbid any man to do anything, which justice could permit him to do, they are criminal invasions of his natural and rightful liberty. In whatever light, therefore, they are viewed, they are utterly destitute of everything like authority or obligation. They are all necessarily either the impudent, fraudulent, and criminal usurpations of tyrants, robbers, and murderers, or the senseless work of ignorant or thoughtless men, who do not know, or certainly do not realize, what they are doing….
It is intrinsically just as false, absurd, ludicrous, and ridiculous to say that lawmakers, so-called, can invent and make any laws, of their own, authoritatively fixing, or declaring, the rights of individuals, or that shall be in any manner authoritative or obligatory upon individuals, or that individuals may rightfully be compelled to obey, as it would be to say that they can invent and make such mathematics, chemistry, physiology, or other sciences, as they see fit, and rightfully compel individuals to conform all their actions to them, instead of
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conforming them to the mathematics, chemistry, physiology, or other sciences of nature.
Of course, prudence may counsel compliance with the arbitrary decrees of legislators. Within limits, so be it. But, please, in the name of exactness and truth, do not think of it as obeying the law.
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APPENDIX A _____________________________________________________________
Industrial Revolution: Freeing the Market 254 The Proper Role of Government 268
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The following is overwhelming historical evidence of the destructive consequences of government regulation and licensure on individual liberty and a prosperous and free market economy. It also very strongly fortifies the message of this book.
– Robert D. Gorgoglione Sr. _____________________________________________________________
Industrial Revolution: Freeing the Market
From Chapter 2 of
“ Architects of Conspiracy” By William P. Hoar
Western Islands Publishers, 1984 (Publishing arm of The John Birch Society)
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Mercantilism was the economic system that dominated Western Europe from around 1500 to the time of the Industrial Revolution. It was a system of state control and national economic rivalry, which sought to accumulate precious bullion for the state through a politically planned economy involving taxation of imports, promotion of favored exports, and exploitation of colonies. Regulation was the byword of the day. Like Marxism [socialism], mercantilism held
“ that there is an irreconcilable conflict of interests among men and groups of men. The gain of one is invariably the damage of others; no man profits but by the loss of others . . . It was the essence of the teaching of Mercantilism . . .” (Theory and History, Ludwig von Mises, New Rochelle, Arlington House, 1969.)
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Colonies such as those Great Britain had in America were viewed as economic markets whose purpose was to serve Mother England. Such colonies, observed Edward P. Cheyney,
“were controlled by the English government largely for their commercial and other forms of economic value. The production of goods need in England but not produced there, such as sugar, tobacco, tar, and lumber, was encouraged. But the manufacture of such goods as could be exported from England was prohibited. The purchase of slaves in Africa and their exportation to the West Indies was encouraged, partly because they were paid for in Africa by English manufactured goods, partly because their use in the colonies made the supply of sugar and some other products plentiful and cheap.” (An Introduction To The Industrial And Social History O England, New York, Macmillan, 1929)
Under the Navigation Acts, for example, certain English merchants were assured of a monopoly of trade with the colonies in America, the East Indies, and Africa. Movement of cargoes to and from the colonies could only be legally done on English ships built in the motherland and crewed by British seaman. Indeed, our own War for Independence was in large part a reaction to the government controls imposed by British mercantilism. London’s economic prohibitions and regulations, said America’s friend Edmund Burke in the House of Commons, resulted in
“ the system of monopoly. No trade was let loose from the constraint, but merely to enable the colonists to dispose of what in the course of your trade you could not take; or to enable them to dispose of such articles as we forced upon them, and for which, without some degree of liberty, they could not pay.”
Doubtless the most famous critic of the mercantilist system was Adam Smith, Professor of moral Philosophy at Glasgow University and author of The Theory of Moral Sentiments (1759) and An Inquiry Into The Nature And Causes Of The Wealth of Nations (1776). Smith urged a Free Market approach to political economy, observing in 1755, for instance:
“Little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and tolerable administration of justice; all the rest being brought about by
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the natural course of things. All governments which thwart the natural course are unnatural, and to support themselves, are obliged to be oppressive and tyrannical.” (The Roots Of Capitalism, John Chamberlain, Indianapolis, Liberty Press, 1976)
The regulations of mercantilism, said Professor Smith, were “impertinent badges of slavery” imposed “by the groundless jealousy of the merchants and manufacturers of the mother country.” You see, it was not that Smith loved businessmen but that he knew the destructive consequences of legally assured monopoly. As he remarked in an oft-quoted passage:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
But Smith’s point was and is, reflects Benjamin Rogge, that “in the absence of government backing, such conspiracies do not survive.” (Can Capitalism Survive, Indianapolis, Liberty Press, 1979) The argument made by Adam Smith applies today even as it did two hundred years ago: In the absence of government interference the freedom of all to follow self-interest will enrich the individual as it rewards the public. In the words of the great Scots economist:
“The uniform constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite of the extravagance of government, and of the greatest errors of administration.” (The Wealth Of Nations, edited by Edwin Cannan, New York, Modern Library, 1937)
It will doubtless surprise many to learn that the meddlesome bureaucrats of today are mirror images of those under which Adam Smith suffered. Regulation under mercantilism was overwhelming. And the penalties, as Smith described them, were enough to set a bureaucrat at the Federal Trade Commission longing for the good old days. For instance, wrote Smith,
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“ the exporter of sheep, lambs or rams, was for the firs offense to forfeit all his goods forever, to suffer a year’s imprisonment, and then have his left hand cut off in a market town upon a market day, to be there nailed up; and for the second offense to be adjudged a felon, and to suffer death accordingly. To prevent the breed of sheep from being propagated in foreign countries seems to have been the object of this law.”
Poor Ralph Nader; like Miniver Cheevy, born too late. How he would have loved mercantilism! Consider the typical regulation of the trading of English wool, as described in The Wealth Of Nations:
“ In order to prevent exportation, the whole inland commerce of wool is laid under very burdensome and oppressive restriction. It cannot be packed in any box, barrel, cask, case, chest, or other package, but only in packs of leather or pack-cloth, on which must be marked on the outside the words wool or yarn, in large letters not less than three inches long, on pain of forfeiting the same and the package, and three shilling for every pound weight, to be paid by the owner or packer. It cannot be loaden on any horse or cart, or carried by land within five miles of the cost, but between sun-rising and sunsetting, on pain of forfeiting the same, the horses and carriages. The hundred next adjoining to the sea coast, out of or through which the wool is carried or exported, forfeits twenty pound, if the wool is under the value of ten pound; and if of greater value, then treble that value, together with treble costs, to be sued for within the year. . . . These regulations take place through the whole kingdom. “But in the particular counties of Kent and Sussex the restrictions are still more troublesome. Every owner of wool within ten miles of the seacoast must give an account in writing, three days after shearing, to the next officer of the customs, of the number of his fleeces, and of the places where they are lodged. And before he removes any part of them he must give the like notice of the number and weight of the fleeces, and of the person to whom they are sold, and of the place to which is intended they should be carried.”
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All of this, so similar to what our modern bureaucrats demand, was of course fearfully inefficient. In its place Smith proposed what became known as the laissez-faire theory. The idea was to restrict government to protecting the nation from foreign invasion: administering justice in connection with personal injury, contact disputes, and violence; and, “certain public works and certain public institution.” Many of Smith’s more temperate successors, notes Edward Cheyney, “would have cut off the last duty altogether.” (An Introduction To The Industrial And Social History Of England) But it was Adam Smith’s popular volume, a contemporary correctly predicted, that “would persuade the present generation and govern the next.” (Rousseau And Revolution, Will and Ariel Durant, New York, Simon and Schuster, 1967) As even so “Liberal” an economist as Robert L. Heilbroner admits,
“Smith was the first to understand the full philosophy of action which such conception demanded, the first to formulate the entire scheme in a wide and systematic fashion. He was the man who made England, and then the whole Western World, understand jus how the market kept society together and the first to build an edifice of social order on the understanding he achieved.” (The Worldly Philosophers, New York, Simon and Schuster, 1053)
Not that Adam Smith lived to see England transformed from economic dictatorship into a practitioner of economic liberty. When he died in 1790, the consequences of his ideas were only beginning to flower. What is important to note here is that the basis for restraining the state in favor of the Free Market had first to be laid in a great educational campaign fostered by Adam Smith’s important book. As Smith had noted in The Wealth Of Nations, mercantilism considered production to be the key to industry and commerce, virtually ignoring the role of the free play of the market in determining what ought to be produced and how. The producers had therefore contrived to control the system with the power of government. It would take widespread public understanding of the inefficiencies of this before politicians would appear on the scene – such as the precocious William Pitt II, Chancellor of the Exchequer at age twenty-three and Prime Minister the next year – who would attempt to implement the theory of limited government. As John Chamberlain explains, Pitt the Younger took Smith’s philosophy
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“as his guiding light of policy. If the shadows of the French Revolution and the long Napoleonic struggles had not intervened, the full Smith doctrine might have become English government policy long before 1835 or 1848.”
The times were surely suited for change as Great Britain suffered horribly under the heel of economic regulation. Ludwig von Mises described the situation in his monumental Human Action (Third Edition, Chicago, Regnery, 1963):
“The truth is that economic conditions were highly unsatisfactory on the eve of the Industrial Revolution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Business was imbued with the inherited spirit of privilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign. The number of people for whom there was no room left in the rigid system of paternalism and government tutelage of business grew rapidly. They were virtually outcasts. The apathetic majority of these wretched people lived from the crumbs that fell from the tables of the established castes. In the harvest season they earned a trifle by occasional help on farm; for the rest they depended on private charity and communal poor relief. Thousands of the most vigorous youths of these strata were pressed into the service of the Royal Army and Navy; many of them were killed or maimed in action; many more perished ingloriously from the hardships of the barbarous discipline, from tropical diseases, or from syphilis. Other thousands, the boldest and most ruthless of their class, infested the country as vagabonds, beggars, tramps, robbers, and prostitutes. The authorities did not know of any means to cope with these individuals other than the poorhouse and the workhouse. The support the government gave to the popular resentment against the introduction of new inventions and labor-saving devices made things seem quite hopeless.”
Yet with the first efforts to deregulate came fear and violence. Among the opponents of labor-saving devices were the so-called Luddites, who demanded the continued “protection” of the government from industrial
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advances that they viewed as threatening their jobs. Parliament had ended the regulation of the wool industry and thus made possible the first ventures that would lead to the Industrial Revolution. Throughout 1811 to February 1812 mobs rioted in Lancashire, Yorkshire, and Nottingham, breaking up machinery such as wool frames. “They issued letters signed by ‘Kin Lud’ or ‘Ned Lud,’ and so gave the movement of machine-breaking its name. In nearly a year, from March 1811 to February 1812, they broke over a thousand frames . . . . Sympathy with them was general.” (Modern Britain, Paulline Gregg, New York, Pegasus, 1965) Eventually, remembering the French Revolution, the government broke the Luddite movement and continued to deregulate. In 1813, report J.L. and Barbara Hammond in The Rise of Modern Industry (New York, Harcourt, Brace, 1926), Parliament repealed
“ the Acts authorizing magistrates to fix wages; in 1814 the apprenticeship sections of the Statute of Artificers; in 1815 the Acts establishing the size of Bread in London. The repeal, in each case, registered a decision taken and applied much earlier . . . .industry, like agriculture, escaped sooner in England than on the Continent from the restraints that the institutions and the temper of the Middle Ages had placed upon it.”
The factories developed in an atmosphere of dramatic political change accompanied by prejudice, vestigial regulations, and fear over the loss of vested interests. Mises recounts in Human Action:
“That the factories could thrive in spite of all these hindrances was due to two reasons. First there were the teachings of the new social philosophy expounded by the economists. They demolished the prestige of Mercantilism, paternalism, and restrictionism. They exploded the superstitious belief that labor-saving devices and processes cause unemployment and reduce all people to poverty and decay. The laissez-faire economists were the pioneers of the unprecedented technological achievements of the last two hundred years. “Then there was another factor that weakened the opposition to innovations. The factories freed the authorities and the ruling landed aristocracy from an embarrassing problem that had grown too large
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for them. They provided sustenance for the masses of paupers. They emptied the poorhouses, workhouse, and the prisons. They converted starving beggars into self-supporting breadwinners. The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them Low as these wage rates were, they were nonetheless much more than these paupers could earn in any other field open to them.”
The resultant growth and prosperity were extraordinary. The consumption of raw cotton, for example, increased from eight thousand tons in 1760 to one hundred thousand tons in 1830; coal production over roughly the same period nearly quadrupled; and, the iron output was four times as great in 1835 as in 1800. The key to all of this growth was the political philosophy of Prime Minister William Pitt II, a disciple of Adam Smith . (See The Younger Pitt, John Ehrman, New York, Dutton, 1969) As Winston S. Churchill put it, Pitt
“was the first English statesman to believe in Free Trade, and for a while his Tory followers accepted it. The antiquated and involved system of customs barriers was now for the first time systematically revised. There were sixty-eight different kinds of customs duties, and some articles were subject to many separate and cumulative imposts. A pound of nutmegs paid, or ought to have paid, nine different duties. In the first visible effects of his wide-ranging revision of tariffs was a considerable drop in smuggling.” (History of the English-Speaking People, New York, Dodd, Mead, 1957)
But Pitt was soon faced with a general war, and to finance it he imposed a variety of new taxes. “He first put a tax on racehorses, carriage-horses, hackney carriages, personal servants, shopkeepers, windows, hair powder, dogs, watches and clocks, and various other articles,” records S. E. Ayling.
“Later, under the demands of war, he both trebled his original taxes on many of these items, and also underlined the elements in them of taxing luxuries; a man with ten servants would pay more than ten times the tax of a man having one only, and so forth. Some of these
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taxes were failures, others open to criticism; the window tax has been blamed for encouraging the bricking-up of windows and exclusion of light . . . . the national lottery begun in 1784 (It lasted forty years) was attacked by some on moral grounds. But, in any case, the great expenses of war with France eventually forced altogether more radical thoughts on taxation; and Pitt in 1799 . . . imposed a tax on income itself, again using the principle of a higher rate of tax on the rich . . . .” (The Georgian Century, London, Harrap, 1966)
All of this had not only slowed the move toward an unregulated economy, it had in consequence frustrated the Industrial Revolution. But after twenty-two years of war the income tax, supposedly a war measure only, was scheduled for abolition. The trouble is, as we know, that government has a tendency to expand, not contract, and it is always reluctant to surrender its revenues. That is, unless the public demands otherwise. This time, because of the growing influence of advocates of the Free Market, it did so. And the great tax rebel of the time was a champion of the middle class named Henry Brougham, a lawyer and journalist with the Edinburgh Review, who helped to found London University. According to former Wall Street Journal editor Jude Wanniski:
“What made the Industrial Revolution and the Pax Britannica possible was the audacity of the British Parliament in 1815. Spurred by middle-class agitators such as Henry Brougham, the legislature rejected the stern warnings of the fiscal experts and in one swoop eliminated Pitt’s income tax, which had been producing14.6 million pounds or a fifth of all revenues and tariffs and domestic taxes that had been producing 4 million pounds more. Had the British left their tax rates high in an attempt to quickly pay down their debs, the sixty-year bull market that followed would not have been possible . . . . As the economy surged in the following decades, expanding revenues were used both to pay down the debt and reduce other tax rates.” (The Way The World Works, New York, Simon and Schuster, 1978)
England went to work with determination. Furthermore, in 1816, she returned to the gold standard; three years later, bullion and coins were allowed to pass in and out of the country with impunity. Mercantilism was on its way to the graveyard. As Will and Ariel Durant observe:
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“ Inspired by Adam Smith . . . English industry was geared to private enterprise, spurred by the profit motive, and largely free from government regulation. It obtained capital from its own unspent earnings, from prosperous merchants, from landlords gathering agricultural revenues and urban rents, and from bankers who knew how to make money by hugging it, and who lent money at lower rates of interest than their French compeers. So individuals and associations provided funds for entrepreneurs who proposed to unite the products of farm and field with the service of machines and the labor of men, women, and children on a larger scale and to greater gains than England had ever known. The providers of capital dept watch on its use, and gave its name to the economic system that was about to transform the Western world.” (The Age of Napoleon, New York, Simon and Schuster, 1975)
Capitalism in a free market responded by providing products not mainly to the rich, as under mercantilism, but for the great masses. Workers became more affluent consumers and, because of business expansions and economies of scale, could afford the results of their mechanically enhanced production. Ludwig von Mises elaborates:
“ The Laissez-faire ideology and its offshoot the ‘Industrial Revolution,’ blasted the ideological and institutional barriers to progress and welfare. They demolished the social order in which a constantly increasing number of people were doomed to abject need and destitution. The processing trades of earlier ages had almost exclusively catered to the wants of the well-to-do. Their expansion was limited by the amount of wants of the luxuries the wealthier strata of the population could afford. Those not engaged in the production of primary commodities could earn a living only as far as the upper classes were disposed to utilize their skill and services. But now a different principle came into operation. The factory system inaugurated a new mode of marketing as well as of production. Its characteristic feature was that the manufactures were not designed for the consumption of a few well-to-do only, but for the consumption of those who had hitherto played but a negligible role as consumers. Cheap things for the many, was the objective of the factory system.” (Human Action)
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Not that government regulations of the economy which had been the norm for centuries was easily set aside. In 1820, for example, the Edinburgh Review was still complaining of:
“Taxes upon every article which enters into the mouth, or covers the back, or is placed under the foot . . . . taxes upon warmth, light, and locomotion . . . . taxes on the raw material – taxes on every fresh value that is added to it by the industry of man . . . . The schoolboy whips his taxed to – the beardless youth manages his taxed horse, with a taxed bridle on a taxed road: and the dying Englishman pouring his medicine, which has paid seven percent into a spoon that has paid fifteen percent – flings himself back upon his chintz bed which has paid twenty-two percent – makes his will on an eight pound stamp, and expires in the arms of an apothecary who has paid a license of 100 pounds for the privilege of putting him to death. His whole property is then immediately taxed from two to ten percent. Besides the probate, large fees are demanded for burying him in the chancel; his virtues are handed down to posterity on taxed marble; and he is then gathered to his fathers, -- to be taxed no more.”
But one by one such taxes were repealed or reduced as the middle class began to exert its growing power. For example, the
“wine excise was abolished in 1825, the tea excise in 1833, the beer tax in 1830, the tobacco excise in 1840. The transit duties on coal were reduced, the law prohibiting the emigration of artisans was repealed in 1824; the export of machinery was permitted under license.” (Modern Britain)
A Potato blight in 1845 and 1846 led to the abolition of the Corn Laws (grain in general), which had heavily taxed foodstuffs imported from a foreign country. Because of the failure of the potato crop, reports Jude Wanniski,
“ the starving Irish could not be fed from the inadequate British granaries. The Corn Laws simply had to be ended to permit entry of grains from the United States. Even so, a half million Irish died of starvation in 1846-47.”
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“Prime Minister Robert Peel, a Tory, not only dealt with the Corn Laws but also “abolished the excise duties on livestock, meat, and potatoes; he reduced those on sugar, cheese, and butter. Gladstone’s budgets of 1853 and 1860 completed the work and Britain was virtually a Free Trade country.” (Modern Britain)
Gone, too, were the relics of the guild, legal monopolies, emigration bans, and the whole slate of mercantilist regulations. And what were the consequences of this introduction of laissez faire, of leaving each individual free to act in the market? It made Britain the economic colossus of the world, gave her supremacy on the seas for some one hundred and fifty years, and provided a rich Empire upon which the sun never set As Professor George Woodcock has written:
“ . . . from imperial defeat in 1783, Britain rose to become the most dominant naval power the world has known, and to assemble an Empire that in size and population dwarfed any of its predecessors or contemporaries. With its fleet and its Empire, Britain – whose army was negligible by the standards of continental Europe – became a major power and, for most of the nineteenth century, the world’s exemplar and leader, whose achievements other nations emulated and whose aura of strength and self-confidence was so intimidating that its real power was rarely even tested.” (Who Killed The British Empire?, New York, Quadrangle, 1974)
Great Britain thrived under economic freedom not only in Empire and prestige, but in other spheres as well. As K.B. Smellie observes in Great Britain Since 1688 (Ann Arbor, University of Michigan Press, 1962:
“ Between 1816 and 1875 Britain was to become the world’s workshop, the world’s banker, and the world’s trader . . . . By 1860 she was supplying half the world’s output of coal and manufactured goods. In 1830 world production of coal was about 30 million tons, of which Britain produced four-fifths; in 1870 it was about 220 million tons, of which Britain produced half . . . . In 1870 the external trade of the United Kingdom was greater than that of France, Germany, and Italy combined and three times that of the United States. The output of pig iron had risen from 700,000 tons a year in 1830 to about 3,800,000 in 1869-71, and to over 6,500,000 in 1871- 1873. While
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many industries were dependent on the coal fields, the main growth had been in cotton. Cotton was the one industry into which mechanization had cut deep by 1820. Textile operatives were more than 10 percent of the working population in 1841 . . . . “ Between 1815 and 1851 occurred the most rapid development of domestic resources in the whole of British economic history.”
There seemed no stopping Great Britain, which was soon the leading creditor in the world. Historian K.B. Smellie recounts:
“ It was this vigorous, competitive, hideous and yet dazzling community which was the great exporter of the capital which made it possible to open up the vast but hitherto untapped resources lying in the hinterlands of new continents. All the underdeveloped parts of the world were calling the investments. Nearly a quarter of the 2.4 billion pounds which was added to the capital of the United Kingdom between 1865 and 1875 was placed abroad, while a sixth went into houses and a tenth into railways at home . . . . It has been argued that the effort and the expense which went into the development of the colonial empire were at the cost of improvements which might have been made at home. This is to ignore the indirect gains which came from bringing new areas with new products into a worldwide system of multilateral trade. The small volume of direct trade with many new colonies often contained an element which played a vital part in some more complex interchange.”
All of this was great and splendid. But it did not suet the purposes of collectivist [socialist] conspirators who saw government as the ultimate monopoly. They made their counterattack at about the time of the release of the Communist Manifesto, in the mid-nineteenth Century, by arranging for Great Britain to readopt the income tax. As the country entered the Twentieth Century, that tax was gradually made more progressive, even as conspirator Karl Marx had urged. And, as the influence of the Fabian Socialist waxed before and after World War I, economic freedoms waned. There developed a movement for a return to “protectionist” tariffs and a “planned” economy. And as these found political favor in the aftermath of war, Britain mo ved away from laissez faire and . . . ceased to be Great.
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There is of course a lesson in all of this for the United States. It is that we can free the market and return to greatness as Britain once led under the influence of Adam Smith and his successors, or we can continue with the neo-mercantilism of regulation, paternalism, taxation, and decay. Only fools fail to learn from [the] lessons of history. _____________________________________________________________
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The Proper Role of Government
By the Honorable Ezra Taft Benson
Former Secretary of Agriculture. The Eisenhower Administration – ed. Published in 1968)
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Men in the public spotlight constantly are asked to express an opinion on a myriad of government proposals and projects. “What do you think of TVA?” “What is your opinion of Medicare?” How do you feel about Urban Renewal?” The list is endless. All too often, answers to these questions seem to be based, not upon any solid principle, but upon the popularity of the specific government program in question. Seldom are men willing to oppose a popular program if they, themselves, wish to be popular – especially if they seek public office.
Government Should Be Based Upon Sound Principles
Such an approach to vital political questions of the day can only lead to public confusion and legislative chaos. Decisions of this nature should be based upon and measured against certain basic principles regarding the proper role of government.
If principles are correct, then they can be applied to any specific proposal with confidence.
“Are there not, in reality, underlying, universal principles with reference to which all issues must be resolved whether the society be simple or complex in its mechanical organization? It seems to me we could relieve ourselves of most of the bewilderment which so unsettles and distracts us by subjecting each situation to the simple test of right and wrong. Right and wrong as moral principles do not change. They are applicable and reliable determinants whether the situations with which we deal are simple or complicated. There is
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always a right and wrong to every question which requires our solution.” (Albert E. Bowen, Prophets, Principles and National Survival, P. 21-22)
Unlike the political opportunist, the true statesman values principle above popularity, and works to create popularity for those political principles which are wise and just.
The Correct Role of Government
I should like to outline in clear, concise, and straight-forward terms the political principles to which I subscribe. These are the guidelines which determine, now and in the future, my attitudes and actions toward all domestic proposals and projects of government.
These are the principles which, in my opinion, proclaim the proper role of government in the domestic affairs of the nation.
“(I) believe that governments were instituted of God for the benefit of man; and that he holds men accountable for their acts in relation to them, both in making laws and administering them, for the good and safety of society.”
“(I) believe that no government can exist in peace, except such laws are framed and held inviolate as will secure to each individual the free exercise of conscience, the right and control of property, and the protection of life…”
“(I) believe that all men are bound to sustain and uphold the respective governments in which they reside, while protected in their inherent and inalienable rights by the laws of such governments; and that sedition and rebellion are unbecoming every citizen thus protected, and should be punished accordingly; and that all governments have a right to enact such laws as in their own judgments are best calculated to secure the public interest; at the same time, however, holding sacred the freedom of conscience.”
The Most Important Function of Government
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It is generally agreed that the most important single function of government is to secure the rights and freedoms of individual citizens. But, what are those right? And what is their source? Until these questions are answered there is little likelihood that we can correctly determine how government can best secure them.
Thomas Paine, back in the days of the American Revolution, explained that:
“Rights are not gifts from one man to another, nor from one class of men to another… It is impossible to discover any origin of rights otherwise than in the origin of man; it consequently follows that rights appertain to man in right of his existence, and must therefore be equal to every man.” (P.P.N.S., p. 134)
The great Thomas Jefferson asked:
“Can the liberties of a nation be thought secure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are of the gift of God? That they are not to be violated but with his wrath?” (Works 8:404; P.P.N.S., p.141)
Starting at the foundation of the pyramid, let us first consider the origin of those freedoms we have come to know are human rights. There are only two possible sources. Rights are either God-given as part of the Divine Plan, or they are granted by government as part of the political plan. Reason, necessity, tradition and religious convictions all lead me to accept the divine origin of these rights. If we accept the premise that human rights are granted by government, then we must be willing to accept the corollary that they can be denied by government. I, for one, shall never accept that premise.
As the French political economist, Frederick Bastiat, phrased it so succinctly,
“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” (The Law, p.6)
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The Real Meaning of the Separation of Church and State
I support the doctrine of separation of church and state as traditionally interpreted to prohibit the establishment of an official national religion. But I am opposed to the doctrine of separation of church and state as currently interpreted to divorce government from any formal recognition of God. The current trend strikes a potentially fatal blow at the concept of the divine origin of our rights, and unlocks the door for an easy entry of future tyranny. If Americans should ever come to believe that their rights and freedoms are instituted among men by politicians and bureaucrats, then they will no longer carry the proud inheritance of their forefathers, but will grovel before their masters seeking favors and dispensations – a throwback to the Feudal System of the Dark Ages.
We must ever keep in mind the inspired words of Thomas Jefferson, as found in the Declaration of Independence:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.” (P.P.N. S., p.519)
Since God created man with certain unalienable rights, and man, in turn, created government to help secure and safeguard those rights, it follows that man is superior to the creature which he created. Man is superior to government and should remain master over it, not the other way around. Even the non-believer can appreciate the logic of this relationship.
The Source of Governmental Power: “We the People”
Leaving aside, for a moment, the question of the divine origin of rights, it is obvious that a government is nothing more or less than a relatively small group of citizens who have been hired, in a sense, by the rest of us to perform certain functions and discharge certain responsibilities which have been authorized. It stands to reason that the government itself has no innate power or privilege to do anything. Its only source of authority and power is from the people who have created it.
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This is made clear in the Preamble to the Constitution of the United States, which reads:
“WE THE PEOPLE… do ordain and establish this Constitution for the United States of America.”
The important thing to keep in mind is that the people in mind is that the people who have created their government can give to that government only such powers as they, themselves, have in the first place. Obviously, they cannot give that which they do not possess. So, the question boils down to this. What powers properly belong to each and every person in the absence of and prior to the establishment of any organized governmental form? A hypothetical question? Yes, indeed! But, it is a question which is vital to an understanding of the principles which underlie the proper function of government.
Of course, as James Madison, sometimes called the Father of the Constitution, said,
“ If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” (The Federalist, No. 51)
Natural Rights are from God
In a primitive state, there is no doubt that each man would be justified in using force, if necessary, to defend himself against physical harm, against theft of the fruits of his labor, and against enslavement of another.
This principle was clearly explained by Bastiat:
“Each of us has a natural right – from God – to defend his person, his liberty, and his property. These are the three basic requirements of life, and the preservation of any one of them is completely dependent upon the preservation of the other two. For what are our faculties but the extension of our individuality? And what is property but and extension of our faculties?” (The Law, p.6)
Indeed, the early pioneers found that a great deal of their time and energy was being spent doing all three – defending themselves, their property and
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their liberty – in what properly was called the “Lawless West.” In order for man to prosper, he cannot afford to spend his time constantly guarding his family, his fields, and his property against attach and theft, so he joins together with his neighbors and hires a sheriff. At this precise moment, government is born. The individual citizens delegate to the sheriff their unquestionable right to protect themselves. The sheriff now does for them only what they had a right to do for themselves – nothing more.
Quoting again from Bastiat:
“ If every person has the right to defend – even by force – his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force [government] to protect these rights constantly. Thus the principle of collective right -its reason for existing, its lawfulness – is based on individual right.” (The Law, p. 6)
So far so good. But now we come to the moment of truth. Suppose pioneer “A” wants another horse for his wagon, He doesn’t have the money to buy one, but since pioneer “B” has an extra horse, he decides that he is entitled to share in his neighbor’s good fortune, Is he entitled to take his neighbor’s horse? Obviously not! If his neighbor wishes to give it or lend it, that is another question. But so long as pioneer “B” wishes to keep his property, pioneer “A” has no just claim to it.
If “A” has no proper power to take “B’s” property, can he delegate any such power to the sheriff? No. Even if everyone in the community desires that “B” give his extra horse to “A”, they have no right individually or collectively to force him to do it. They cannot delegate a power they themselves do not have.
This important principle was clearly understood and explained by John Locke nearly 300 years ago:
“For nobody can transfer to another more power than he has in himself, and nobody has an absolute arbitrary power over himself, or over any other, to destroy his own life, or take away the life of property of another.” (Two Treatises of Civil Government, II, 135; P.P.N.S. p. 93)
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The Proper Function of Government
This means, then, that the proper function of government is limited only to those spheres of activity within which the individual citizen has the right to act. By deriving its just powers from the governed, government becomes primarily a mechanism for defense against bodily harm, theft and involuntary servitude. It cannot claim the power to redistribute the wealth or force reluctant citizens to perform acts of charity against their will. Government is created by man. No man possesses such power to delegate. The creature cannot exceed the creator.
In general terms, therefore, the proper role of government includes such defensive activities, as maintaining national military and local police forces for protection against loss of life, loss of property, and loss of liberty at the hands of either foreign despots or domestic criminals.
The Powers of a Proper and Just Government
It also includes those powers necessarily incidental to the protective functions such as:
(1) The maintenance of courts where those charged with crimes may be tried and where disputes between citizens may be impartially settled.
(2) The establishment of a monetary system and a standard of weights and measures so that courts may render money judgments, taxing authorities may levy taxes, and citizens may have a uniform standard to use in their business dealings.
My attitude toward government is succinctly expressed by the following provision taken from the Alabama Constitution:
“That the sole object and only legitimate end of government is to protect the citizen in the enjoyment of life, liberty, and property, and when the government assumes other functions it is usurpation and oppression.” (Art. 1, Sec. 35)
An important test I use in passing judgment upon an act of government is this: If it were up to me as an individual to punish my neighbor for
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violating a given law, would it offend my conscience to do so? Since my conscience will never permit me to physically punish my fellow man unless he has done something evil, or unless he has failed to do something which I have a moral right to require of him to do, I will never knowingly authorize my agent, the government to do this on my behalf. I realize that when I give my consent to the adoption of a law, I specifically instruct the police – the government – to take either the life, liberty, or property of anyone who disobeys that law. Furthermore, I tell them that if anyone resists the enforcement of the law, they are to use any means necessary – yes, even putting the lawbreaker to death or putting him in jail – to overcome such resistance. These are extreme measures but unless laws are enforced, anarchy results.
As John Locke explained many years ago:
“The end [purpose] of law is not to abolish or restrain, but to preserve and enlarge freedom. For in all the states of created beings, capable of laws, where there is no law there is no freedom. For liberty is to be free from restraint and violence from others, which cannot be where there is no law; and is not, as we are told, ‘a liberty for every man to do what he lists.’ For who could be free, when every other man’s humour might domineer over him? But a liberty to dispose and order freely as he lists his person, actions, possessions, and his whole property within the allowance of those laws under which he is, and therein not to be subject to the arbitrary will of another, but freely follow his own.” (Two Treatises of Civil Government, II, 57: P>P>N>S., p.101)
I believe we Americans should use extreme care before lending our support to any proposed government program. We should fully recognize that government is no plaything.
As George Washington warned,
“Government is not reason, it is not eloquence – it is force! Like fire, it is a dangerous servant and a fearful master!” (The Red Carpet, p.142)
It is an instrument of force and unless our conscience is clear that we would not hesitate to put a man to death, put him in jail or forcibly
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deprive him of his property for failing to obey a given law, we should oppose it.
The Constitution of the United States
Another standard I use in deterring what law is good and what is bad is the Constitution of the United States. I regard this inspired document as a solemn agreement between the citizens of this nation which every officer of government is under a sacred duty to obey.
As Washington stated so clearly in his immortal Farewell Address:
“The basis of our political systems is the right of the people to make and to alter their constitutions of government. – But the constitution which at any time exists, until changed by an explicit and authentic act of the whole people is sacredly obligatory upon all. The very idea of the power and the right of the people to establish government presupposes the duty of every individual to obey the established government.” (P.P.N.S., p. 542)
I am especially mindful that the Constitution provides that the great bulk of the legitimate activities of government are to be carried out at the state or local level. This is the only way in which the principle of “self-government” can be made effective.
As James Madison said before the adoption of the Constitution,
“(We) rest all our political experiments on the capacity of mankind for self-government.” (Federalist, No.39; P.P.N.S., p. 128)
Thomas Jefferson made this interesting observation:
“Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the forms of kings to govern him? Let history answer this question.” (Works 8:3; P.P.N.S., p. 128)
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Local Government Essential to Individual Liberty
It is a firm principle that the smallest or lowest level that can possibly undertake the task is the one that should do so. First, the community or city. If the city cannot handle it, then the county. Next, the state; and only if no smaller unit can possible do the job should the federal government be considered. This is merely the application to the field of politics of that wise and time-tested principle of never asking a larger group to do that which can be done by a smaller group. And so far as government is concerned the smaller the unit and the closer it is to the people, the easier it is to guide it, to keep it solvent and to keep our freedom.
Thomas Jefferson understood this principle very well and explained it this way:
“The way to have good and safe government, is not to trust it all to one, but to divide it among the many, distributing to every one exactly the functions he is competent to. Let the national government be entrusted with the defense of the nation, and its foreign and federal relations; the State governments with the civil rights, law, police, and administration of what concerns the State generally; the counties with the local concerns of the counties, and each ward direct the interests within itself. It is by dividing and subdividing these republics from the great national one down through all its subordinations, until it ends in the administration of every man’s farm by himself; by placing under every one what his own eye may superintend, that all will be done for the best. What has destroyed liberty and the rights of man in every government which has ever existed under the sun? The generalizing and concentrating all cares and powers into one body.” (Works 6:543; P.P.N.S., p. 125)
It is well to remember that the states of this republic created the Federal Government. The Federal Government did not create the states.
Things the Government Should Not Do
A category of government activity which, today, not only requires the closest scrutiny, but which also poses a grave danger to our continued freedom, is the activity NOT within the proper sphere of government. No one has the authority to grant such powers, as welfare programs,
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schemes for re-distributing the wealth, and activities which coerce people into acting in accordance with a prescribed code of social planning. There is one simple test. Do I as an individual have a right to use force upon my neighbor to accomplish this goal? If I do have such a right, then I may delegate that power to my government to exercise on my behalf. If I do not have that right as an individual, then I cannot delegate it to government, and I cannot ask my government to perform the act for me.
To be sure, there are times when this principle of the proper role of government is most annoying and inconvenient. If I could only FORCE the ignorant to provided for themselves, or the selfish to be generous with their wealth! But if we permit government to manufacture its own authority out of thin air, and to create self-proclaimed powers not delegated to it by the people, then the creature exceeds the creator and becomes master. Beyond that point, where shall the line be drawn? Who is to say “this far, but no farther?” What clear PRINCIPLE will stay the hand of government from reaching farther and yet farther into our daily lives?
We shouldn’t forget the wise words of President Grover Cleveland that
“… though the people support the Government the Government should not support the people.” (P.P.N.S., p.345) We should also remember, as Frederic Bastiat reminded us, that “Nothing can enter the public treasury for the benefit of one citizen or one class unless other citizens and other classes have been forced to send it in.” (THE LAW, p. 30; P.P.N.S., p. 350)
The Dividing Line Between Proper and Improper Government
As Bastiat pointed out over a hundred years ago, once government steps over this clear line between the protective or negative role into the aggressive role of redistributing the wealth and providing so-called “benefits” for some of its citizens, it then becomes a means for what he accurately described as legalized plunder. It becomes a lever of unlimited power which is the sought-after prize of unscrupulous individuals and pressure groups, each seeking to control the machine to fatten his own pockets or to benefit its favorite charities – all with the other fellow’s money, of course. (THE LAW, 1850, reprinted by the Foundation for Economic Education, Irvington-On-Hudson, N.Y.)
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The Nature of “Legal Plunder”
Listen to Bastiat’s explanation of this “legal plunder.”
“When a portion of wealth is transferred from the person who owns it – without his consent and without compensation, and whether by force or by fraud – to anyone who does not own it, then I say that property is violated; that an act of plunder is committed!
“How is the legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime…” (THE LAW, p. 21, 26; P.P.N.S., p. 377)
As Bastiat observed, and as history has proven, each class or special interest group competes with the others to throw the lever of governmental power in their favor, or at least to immunize itself against the effects of a previous thrust. Labor gets a minimum wage, so agriculture seeks a price support. Consumers demand price controls, and industry gets protective tariffs. In the end, no one is much further ahead, and everyone suffers the burdens of a gigantic bureaucracy and a loss of personal freedom. With each group out to get its share of the spoils, such governments historically have mushroomed into total welfare states. Once the process begins, once the principle of the protective function of government gives way to the aggressive or redistribute function, then forces are set in motion that drive the nation toward totalitarianism.
“ It is impossible,” Bastiat correctly observed, “to introduce into society… a greater evil than this: the conversion of the law into an instrument of plunder.” (THE LAW, p. 12)
Government Cannot Create Wealth
Students of history know that no government in the history of mankind has ever created any wealth. People who work create wealth. James R. Evans, in his inspiring book, “The Glorious Quest” gives this simple illustration of legalized plunder:
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“Assume, for example, that we were farmers, and that we received a letter from the government telling us that we were going to get a thousand dollars this year for plowed up acreage. But rather than the normal method of collection, we were to take this letter and collect $69.71 from Bill Brown, at such and such an address, and $82.47 from Henry Jones, $59.80 from a Bill Smith, and so on down the line; that these men would make up our farm subsidy. “Neither you nor I, nor would 99 percent of the farmers, walk up and ring a man’s doorbell, hold out a hand and say, ‘Give me what you’ve earned even though I have not.’ We simply wouldn’t do it because we would be facing directly the violation of a moral law, ‘Thou shalt not steal.’ In short, we would be held accountable for our actions.”
The free creative energy of this choice nation “created more than 50% of all the world’s products and possessions in the short span of 160 years. The only imperfection in the system is the imperfection in man himself.” The last paragraph in this remarkable Evans book – which I commend to all – reads:
“No historian of the future will ever be able to prove that the ideas of individual liberty practiced in the United States of America were a failure. He may be able to prove that we were not yet worthy of them. The choice is ours.” (Charles Hallberg and Co., 116 West Grand Avenue, Chicago, Illinois, 60610)
The Basic Error of Marxian Socialism
According to Marxist doctrine, a human being is primarily an economic creature. In other words, his material well-being is all important; his privacy and his freedom are strictly secondary. The Soviet constitution reflects this philosophy in its emphasis on security: food, clothing, housing, medical care – the same things that might be considered in a jail. The basic concept is that the government has full responsibility for the welfare of the people and, in order to discharge that responsibility, must assume control of all their activities. It is significant that in actuality the Russian people have few of the rights supposedly “guaranteed” to them in their constitution, while the American people have them in abundance even though they are not guaranteed. The reason, of course, is that material gain and economic security simply cannot be guaranteed by any government. They are the result and reward of hard work and
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industrious production. Unless the people bake one loaf of bread for each citizen, the government cannot guarantee that each will have one loaf to eat. Constitutions can be written, laws can be passed and imperial decrees can be issued, but unless the bread is produced, it can never be distributed .
The Real Cause of American Prosperity
Why, then, do Americans bake more bread, manufacture more shoes and assemble more TV sets than Russians do [in 1968]? They do so precisely because our government does NOT guarantee these things. If it did, there would be so many accompanying taxes, controls, regulations and political manipulations that the productive genius that is America’s would soon be reduced to the floundering level of waste and inefficiency now found behind the Iron Curtain.
As Henry David Thoreau explained:
“This government never of itself furthered any enterprise, but by the alacrity with which it got out of its way. IT does not educate. THE CHARACTER INHERENT IN THE AMERICAN PEOPLE HAS DONE ALL THAT HAS BEEN ACCOMPLISHED; AND IT WOULD HAVE DONE MORE, IF THE GOVERNMENT HAD NOT SOMETIMES GO IN ITS WAY. For government is an expedient by which men would fain succeed in letting one another alone; and, as has been said, when it is most expedient, the governed are most let alone by it.” (Quoted by Clarence B. Carson, THE AMERICAN TRADITION, p. 100; P.P.S.N., p.171)
In 1801 Thomas Jefferson, in his First Inaugural Address, said:
“With all these blessings, what more is necessary to make us a happy and prosperous people? Still one thing more, fellow citizens – a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it had earned.” (Works 8:3)
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A Formula for Prosperity: Limited Government and Free Enterprise
The principle behind this American philosophy can be reduced to a rather simple formula:
Economic security for all is impossible without widespread abundance. Abundance is impossible without industrious and efficient production. Such production is impossible without energetic, willing and eager labor. This is not possible without incentive.
Of all forms of incentive – the freedom to attain a reward for one’s labors is the most sustaining for most people. Sometimes called THE PROFIT MOTIVE, it is simply the right to plan and to earn and to enjoy the fruits of your labor.
This profit motive DIMINISHES as government controls, regulations and taxes INCREASE to deny the fruits of success to those who produce. Therefore, any attempt THROUGH GOVERNMENTAL INTERVENTION to redistribute the material rewards of labor can only result in the eventual destruction of the productive base of society, without which real abundance and security for more than the ruling elite is quite impossible.
An Example of the Consequences of Disregarding These Principles
We have before us currently a sad example of what happens to a nation which ignores these principles. Former FBI agent, Dan Smoot, succinctly pointed this out on his broadcast number 649, dated January 29, 1968, as follows:
“England was killed by an idea: the idea that the weak, indolent and profligate must be supported by the strong, industrious, and frugal – to the degree that tax-consumers will have a living standard comparable to that of taxpayers; the idea that government exists for the purpose of plundering those who work to give the product of their labor to those who do not work. The economic and social cannibalism produced by this communist-socialist idea will destroy
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any society which adopts it and clings to it as a basic principle – ANY society.”
The Power of True Liberty from Improper Governmental Interference
Nearly two hundred years ago, Adam Smith, the Englishman, who understood these principles very well, published his great book, THE WEALTH OF NATIONS, which contains this statement:
“The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.” (Vol. 2, Book 4, Chapt. 5, p. 126)
But What About the Needy?
On the surface this may sound heartless and insensitive to the needs of those less fortunate individuals who are found in any society, no matter how affluent. “What about the lame, the sick and the destitute? Is an often-voice question. Most other countries in the world have attempted to use the power of government to meet this need. Yet, in every case, the improvement has been marginal at best and has resulted in the long run creating more misery, more poverty, and certainly less freedom than when government first stepped in.
As Henry Grady Weaver wrote, in his excellent book, THE MAINSPRING OF HUMAN PROGRESS:
“Most of the major ills of the world have been caused by well-meaning people who ignored the principle of individual freedom, except as applied to themselves, and who were obsessed with fanatical zeal to improve the lot of mankind-in-the-mass through some pet formula of their own….THE HARM DONE BE ORDINARY
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CRIMINALS, MURDERERS, GANGSTERS, AND THIEVES IS NEGLIGIBLE IN COMPARISON WITH THE AGONY INFLICTED UPON HUMAN BEINGS BY THE PROFESSIONAL ‘DO-GOODERS’, who attempt to set themselves up as gods on earth and who would ruthlessly force their views on all others – with the abiding assurance that the end justifies the means.” (p. 40-1; P.P.N.S., p. 313)
The Better Way
By comparison, America traditionally has followed Jefferson’s advice of relying on individual action and charity. The result is that the United States has fewer cases of genuine hardship per capita than any other country in the entire world or throughout all history. Even during the depression of the 1930′s, Americans ate and lived better than most people in other countries do today.
What Is Wrong With A “Little” Socialism?
In reply to the argument that a little bit of socialism is good so long as it doesn’t go too far, it is tempting to say that, in like fashion, just a little bit of theft or a little bit of cancer is all right, too! History proves that the growth of the welfare state is difficult to check before it comes to its full flower of dictatorship. But let us hope that this time around, the trend can be reversed. If not then we will see the inevitability of complete socialism, probably within our lifetime.
Three Reasons Americans Need Not Fall For Socialist Deceptions
Three factors may make a difference. First, there is sufficient historical knowledge of the failures of socialism and of the past mistakes of previous civilizations. Secondly, there are modern means of rapid communications to transmit these lessons of history to a large literate population. And thirdly, there is a growing number of dedicated men and women who, at great personal sacrifice, are actively working to promote a wider appreciation of these concepts. The timely joining together of these three factors may make it entirely possible for us to reverse the trend.
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How Can Present Socialistic Trends Be Reversed?
This brings up the next question: How is it possible to cut out the various welfare-state features of our government which have already fastened themselves like cancer cells onto the body politic? Isn’t drastic surgery already necessary, and can it be performed without endangering the patient? In answer, it is obvious that drastic measures ARE called for. No half-way or compromise actions will suffice. Like all surgery, it will not be without discomfort and perhaps even some scar tissue for a long time to come. But it must be done if the patient is to be saved, and it can be done without undue risk.
Obviously, not all welfare-state programs currently in force can be dropped simultaneously without causing tremendous economic and social upheaval. To try to do so would be like finding oneself at the controls of a hijacked airplane and attempting to return it by simply cutting off the engines in flight. It must be flown back, lowered in altitude, gradually reduced in speed and brought in for a smooth landing. Translated into practical terms, this means that the first step toward restoring the limited concept of government should be to freeze all welfare-state programs at their present level, making sure that no new ones are added. The next step would be to allow all present programs to run out their term with absolutely no renewal. The third step would involve the gradual phasing-out of those programs which are indefinite in their term. In my opinion, the bulk of the transition could be accomplished within a ten-year period and virtually completed within twenty years. Congress would serve as the initiator of this phase-out program, and the President would act as the executive in accordance with traditional constitutional procedures.
Summary Thus Far
As I summarize what I have attempted to cover, try to visualize the structural relationship between the six vital concepts that have made America the envy of the world. I have reference to the foundation of the Divine Origin of Rights; Limited Government; the pillars of economic Freedom and Personal Freedom, which result in Abundance; followed by Security and the Pursuit of Happiness.
America was built upon a firm foundation and created over many years from the bottom up. Other nations, impatient to acquire equal abundance, security
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and pursuit of happiness, rush headlong into that final phase of construction without building adequate foundations or supporting pillars. Their efforts are futile. And, even in our country, there are those who think that, because we now have the good things in life, we can afford to dispense with the foundations which have made them possible. They want to remove any recognition of God from governmental institutions, They want to expand the scope and reach of government which will undermine and erode our economic and personal freedoms. The abundance which is ours, the carefree existence which we have come to accept as a matter of course, CAN BE TOPPLED BY THESE FOOLISH EXPERIMENTERS AND POWER SEEKERS. By the grace of God, and with His help, we shall fence them off from the foundations of our liberty, and then begin our task of repair and construction.
Fifteen Principles Which Make For Good and Proper Government
As a conclusion to this discussion, I present a declaration of principles which have recently been prepared by a few American patriots, and to which I wholeheartedly subscribe.
As an Independent American for constitutional government I declare that:
(1) I believe that no people can maintain freedom unless their political institutions are founded upon faith in God and belief in the existence of moral law.
(2) I believe that God has endowed men with certain unalienable rights as set forth in the Declaration of Independence and that no legislature and no majority, however great, may morally limit or destroy these; that the sole function of government is to protect life, liberty, and property and anything more than this is usurpation and oppression.
(3) I believe that the Constitution of the United States was prepared and adopted by men acting under inspiration from Almighty God; that it is a solemn compact between the peoples of the States of this nation which all officers of government are under duty
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to obey; that the eternal moral laws expressed therein must be adhered to or individual liberty will perish.
(4) I believe it a violation of the Constitution for government to deprive the individual of either life, liberty, or property except for these purposes:
(a) Punish crime and provide for the administration of justice;
(b) Protect the right and control of private property;
(c) Wage defensive war and provide for the nation's defense;
(d) Compel each one who enjoys the protection of government to bear his fair share of the burden of performing the above functions.
(5) I hold that the Constitution denies government the power to take from the individual either his life, liberty, or property except in accordance with moral law; that the same moral law which governs the actions of men when acting alone is also applicable when they act in concert with others; that no citizen or group of citizens has any right to direct their agent, the government to perform any act which would be evil or offensive to the conscience if that citizen were performing the act himself outside the framework of government.
(6) I am hereby resolved that under no circumstances shall the freedoms guaranteed by the Bill of Rights be infringed. In particular I am opposed to any attempt on the part of the Federal Government to deny the people their right to bear arms, to worship and pray when and where they choose, or to own and control private property.
(7) I consider ourselves at war with international Communism which is committed to the destruction of our government, our right of property, and our freedom; that it is treason as defined by the Constitution to give aid and comfort to this implacable enemy.
(8) I am unalterable opposed to Socialism, either in whole or in part, and regard it as an unconstitutional usurpation of power and a denial of the right of private property for government to own or
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operate the means of producing and distributing goods and services in competition with private enterprise, or to regiment owners in the legitimate use of private property.
(9) I maintain that every person who enjoys the protection of his life, liberty, and property should bear his fair share of the cost of government in providing that protection; that the principles of justice set forth in the Constitution demand that all taxes imposed be uniform and that each person's property or income be taxed at the same rate.
(10) I believe in honest money, the gold and silver coinage of the Constitution, and a circulation medium convertible into such money without loss. I regard it as a flagrant violation of the explicit provisions of the Constitution for the Federal Government to make it a criminal offense to use gold or silver coin as legal tender or to use irredeemable paper money.
(11) I believe that each State is sovereign in performing those functions reserved to it by the Constitution and it is destructive of our federal system and the right of self-government guaranteed under the Constitution for the Federal Government to regulate or control the States in performing their functions or to engage in performing such functions itself.
(12) I consider it a violation of the Constitution for the Federal Government to levy taxes for the support of state or local government; that no State or local government can accept funds from the Federal and remain independent in performing its functions, nor can the citizens exercise their rights of self-government under such conditions.
(13) I deem it a violation of the right of private property guaranteed under the Constitution for the Federal Government to forcibly deprive the citizens of this nation of their property through taxation or otherwise, and make a gift thereof to foreign governments or their citizens.
(14) I believe that no treaty or agreement with other countries should deprive our citizens of rights guaranteed them by the Constitution.
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(15) I consider it a direct violation of the obligation imposed upon it by the Constitution for the Federal Government to dismantle or weaken our military establishment below that point required for the protection of the States against invasion, or to surrender or commit our men, arms, or money to the control of foreign or world organizations of governments. These things I believe to be the proper role of government.
We have strayed far afield. We must return to basic concepts and principles – to eternal verities. There is no other way. The storm signals are up. They are clear and ominous.
As Americans – citizens of the greatest nation under Heaven – we face difficult days. Never since the days of the Civil War – 100 years ago – has this choice nation faced such a crisis.
In closing I wish to refer you to the words of the patriot Thomas Paine, whose writings helped so much to stir into a flaming spirit the smoldering embers of patriotism during the days of the American Revolution:
“These are the times that try men’s souls. The summer soldier and the sunshine patriot will in this crisis, shrink from the service of his country; but he that stands it NOW, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly; ‘tis dearness only that gives everything its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed, if so celestial an article as FREEDOM should not be highly rated.” (THE POLITICAL WORKS OF THOMAS PAINE, p.55.)
I intend to keep fighting. My personal attitude is one of resolution – not resignation.
I have faith in the American people. I pray that we will never do anything that will jeopardize in any manner our priceless heritage. If we live and work so as to enjoy the approbation of a Divine Providence, we cannot fail. Without that help we cannot long endure.
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All Right-Thinking Americans Should Now Take Their Stand
So I urge all Americans to put their courage to the test. Be firm in our conviction that our cause is just. Reaffirm our faith in all things for which true Americans have always stood.
I urge all Americans to arouse themselves and stay aroused. We must not make any further concessions to communism at home or abroad. We do not need to. We should oppose communism from our position of strength for we are not weak. [1968]
There is much work to be done. The time is short. Let us begin – in earnest – now and may God bless our efforts, I humbly pray.
(Source: by The Honorable Ezra Taft Benson, Former Secretary of Agriculture. The Eisenhower Administration – ed. Published in 1968)
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