Category: Free Society

By Richard Ebeling

Originally published on July 19, 2022 for The Future of Freedom Foundation

Leonard E. Read, the founding and long-serving first president of the Foundation for Economic Education (FEE), once told a story about when he first met the famous Austrian economist Ludwig von Mises. It was in 1940, shortly after Mises had arrived in the United States from war-torn Europe. Read had invited Mises to Los Angeles to deliver a talk to the local Chamber of Commerce.

Later that evening, Read hosted a dinner party at his home with several prominent free-market-oriented economists and California businessmen. Toward the end of the conversations about collectivist trends in America, one of the guests asked Mises, “Now, let us suppose you were the dictator of these United States. What would you do?”

Read said, “Quick as a flash came the reply, ‘I would abdicate!’” Read went on to say that in his mind, Mises’s response was an instance of the wisdom of how little any one of us knows to presume to plan — “dictate” — what others in society should do and how they should live.

Political paternalists want to run your life

Alas, we are surrounded with far too many people who presume to do just that. These political paternalists and social engineers arrogantly advocate the use of political power to tell us how to live, where to work (and at what prices or wages), with whom to interact (and in which ways), and to design our wider societal future. Virtually none of them seem to have any doubts or hesitation that they know what is better for all of us than we do.

They know the salaries we should earn. They know the work environment that is right for us. They know the language people should use in communicating with each other. They know the forms and types of human associations that are to be prohibited or insisted on. They know what we should buy and the prices we should pay. They know the medical care, the schooling, the retirement plans that each of us should have. They know whose incomes are “too high” and whose are “too low.” They know the cars we should drive, the houses we should live in, the kind of communities in which we should reside.

Reflect on practically anything in your private life or your social interactions, and the political paternalists know all about it better than you. This applies to both modern American liberals and conservatives. The types and content of the governmental rules, regulations, restrictions, and controls might vary, or the emphasis may differ, but almost all these modern liberals and conservatives have “a plan” that amounts to them playing dictator over your life and everyone else’s.

Many Americans want to change the constitutional order

Why do so many Americans accept this state of affairs and offer so little resistance? I would suggest that far too many of our fellow citizens have little or no idea about what a free society could or should look like or appreciate the value of such a free society now or in the future. That seems a stark statement, but let us look at the recent public opinion poll results from a survey of Democrats and Republicans by Hart Research Associates that was reported in The New Republic online (April 14, 2022).

While a majority of Democrats (52 percent) and Republicans (56 percent) said that the American constitutional order was basically sound and needed only minor changes to improve it, 48 percent of Democrats and 44 percent of Republicans called for a complete or major change in the U.S. constitutional system. When asked what “democracy” means to them, only 47 percent of Republicans said “individual rights and liberties are protected,” and that number dropped to 28 percent among Democrats. On the other hand, nearly 40 percent of Democrats said democracy means straight majority rule, implying little regard for threats to individual liberty from majority decision-making.

Part of the federalist system under the American Constitution is the Electoral College, which is meant to prevent domination by a few heavily populated areas over the rest of the country in presidential elections. The same applies to the U.S. Senate, with two senators for each state, while the membership in the House of Representatives reflects the population sizes of the various states. But in this opinion survey, 84 percent of Democrats think presidents should be elected by simple national majorities. Almost half of Republicans in the poll (48 percent) agreed with them. Also, 41 percent of Democrats thought it was a bad thing (anti-democratic) that each state has two senators regardless of population size. Nearly 30 percent of Republicans said the same.

Many Americans want more paternalism and less freedom

The survey also asked people if they thought the federal government should have the power to “get things done and solve problems.” Seventy-three percent of Democrats said yes, and 45 percent of Republicans agreed. Not surprisingly, therefore, only 27 percent of Democrats supported limiting the powers of the federal government; a small majority of Republicans (55 percent) wanted to limit the federal government. When asked whether government mandates for vaccinations and mask-wearing were threats to democracy in America, 80 percent of Democrats and 40 percent of Republicans said no.

Asked if people should have “the personal freedom to do as they please,” merely 21 percent of Democrats thought that would be a good idea, while only 38 percent of Republicans thought greater personal freedom would be desirable. In line with this, 53 percent of Republicans wanted political leaders in power reflecting and implicitly imposing their values on others. About 40 percent of Democrats agreed. Clearly not liking some recent Supreme Court decisions, 72 percent of Democrats said the number of justices on the court should be increased. Thirty percent of Republicans also wanted this. This used to be called “court packing.”

Summing up part of this, the survey asked Democrats how they view Republicans, as political opponents who they disagreed with (57 percent) or as political enemies who are a threat to their values and way of life (43 percent). Fifty-three percent of Republicans said they viewed Democrats as political opponents, and 47 percent of them considered Democrats as enemies of their values and way of life. Asked the hypothetical question of where they would want to live if the United States were to be divided into two separate nations, 85 percent of Democrats would want to live in a “blue” America, and 89 percent of Republicans would prefer to live in the “red” part of America.

Of course, it is always necessary to be leery of public-opinion polls, since the answers closely depend on the way the questions are framed and how the selection has been made as to whom will be polled. Plus, the survey was done for The New Republic, which has its own “progressive” political axes to grind. Nonetheless, it does give a certain snapshot of attitudes about politics and the role of government in America today.

Not only political and ideological elites want more paternalism

One thing that especially stands out, in my view, is that political paternalism and social engineering is not merely a governmental power grab by an ideological elite against the wishes and beliefs of the American people. Far too many of our fellow Americans want that paternalism and social engineering, as reflected in the answers to a good number of these survey questions.

The responses to the questions about whether the federal government should have the power to “get things done and solve problems” and whether individuals should have more “personal freedom to do as they please” are really two sides of the same coin. If the federal government is to have the authority to “get things done,” individuals cannot be allowed “to do as they please.” In the political arena, getting things done means government telling people what to do and how to do it. The government takes on the role of social planner, and the people must be the obedient responders to the plans, regulations, and restrictions imposed on them.

A lot of Americans, in other words, want that dictator over them to tell them how to live, work, earn, and act. Of course, ask any of those who responded in this way to the survey questions as to what they expect any political paternalist or social engineer to actually implement, and they would assume, no doubt, that the political agenda imposed would be the one they wanted.

Each wants more paternalism for what they want

This is seen in the answers to the question about whether you see those in the other major political party as merely an “opponent” or as an “enemy” threatening your values and way of life. Either my values and way of life are imposed on others, or theirs are imposed on me. It is my preferred paternalist dictators setting government policy, or it is theirs. Government is getting things done the way I want them to be done, or government is using its authority to get things done the way they want.

Either way, one of us is made to live in ways and with values with which we may partly or totally disagree. It is not too surprising, therefore, that within this political mindset and governmental system, Democrats would prefer to live in a “blue” America and Republicans would want to live in a “red” America. Otherwise, you are not only under the control of a political opponent but what amounts to your fundamental ideological enemy. If democratic government is presumed inescapably to be a form of paternalist dictatorship, then better mine than yours.

It is often said that a paternalist elite wants to undermine the traditional American constitutional order precisely because it limits their ability to control, plan, and direct the society. Federalism, with its various elements of checks and balances to restrain and inhibit undo concentration and abuse of political power, had long been considered essential as a means to prevent government from abridging or abolishing the liberty of individuals. Yet, this survey highlights that a noticeable number of our fellow Americans want to weaken or abolish those constitutional barriers precisely so government will have more centralized and arbitrary authority to “get things done.”

Democratic despotism in place of constitutional limits

What many of those Democrats and Republicans seem to want is a greater “democratic despotism.” Eliminating the Electoral College in presidential elections would make selection of who occupies the White House, with all the executive power that the office holds, a matter of a simple national majority. A handful of more “blue” paternalist states would be able to easily impose their will on all others in the country. This preference was held not only by a large majority of the Democrats in the survey but also by almost half of the Republicans. A lot of Americans think that sheer numbers at the voting booth should decide what freedoms people will be left with, under a government expected to “get things done.”

This is shown in the desire by over 70 percent of Democrats to pack the Supreme Court with additional members so as to ensure that the “biases” among Supreme Court justices can be more in line with a presumed majority of the electorate and its government representatives. Not a rule of law based on general principles of individual rights and limited government but rather the unrestrained democratic “will of the people” should determine what the court decides to be the law of the land.

De Tocqueville’s warning of tyranny with a democratic face

The French social philosopher Alexis de Tocqueville explained the nature of such a democratic despotism in a famous passage in his Democracy in America, vol. 2 (1840):

After having thus taken each individual one by one into its powerful hands, and having molded him as it pleases, the sovereign power extends its arms over the entire society; it covers the surface of society with a network of small, complicated, minute, and uniform rules, which the most original minds and the most vigorous souls cannot break through to go beyond the crowd; it does not break wills, but it softens them, bends them and directs them; it rarely forces action, but it constantly opposes your acting; it does not destroy, it prevents birth; it does not tyrannize, it hinders, it represses, it enervates, it extinguishes, it stupefies, and finally it reduces each nation to being nothing more than a flock of timid and industrious animals, of which the government is the shepherd.

I have always believed that this sort of servitude, regulated, mild and peaceful, of which I have just done the portrait, could be combined better than we imagine with some of the external forms of liberty, and that it would not be impossible for it to be established in the very shadow of the sovereignty of the people.

Elites have influenced people, but people now want paternalism

It might be said that while many in society may express a desire for or an acceptance of government as political paternalist and social engineer, this sentiment is still the product of a political elite that greatly influences the government educational system through which most in the society pass. It also includes an elite in the information media that espouses the same democratic despotism and which is supported by ideologically motivated and various special interest groups who want their ideas and policies imposed on everyone.

All this is most certainly true. Many, if not most, people in society accept the prevailing ideas in the country into which they have been born and which have enveloped the culture and politics of the communities in which they live. There is a reason that some people who appear to break out of this mold are call “free thinkers,” and very often not as a compliment. They swim against the stream of the ideas and ideals of the society in which they find themselves. That is why frequently they get labelled as “fringe” or “extremist” or “radical.”

When Ludwig von Mises responded to that questioner at Leonard Read’s dinner party who asked what he would do if he was “dictator” of the United States, that he, Mises, would “abdicate,” that was a fringe or extremist or radical answer. After all, if “I” or “you” were in absolute power, wouldn’t it be possible to, finally, set everything right? Cut government down to size; free people from the hinderances and restrictions of government regulations and controls; cut government spending, reduce taxes, and end the budget deficits; stop the central bank from controlling and printing money; and follow a general policy of non-interventionism at home and abroad.

Pushing a button ending paternalism would not end it

If only you or I were in charge, we could all be “free at last.” Or would we? Shortly after Leonard Read opened the doors of FEE in 1946, he delivered a talk at the Detroit Economic Club with the title, “I’d Push the Button.” He said that if there was a button on the podium from which he was speaking that, if pushed, would abolish all the government regulations and controls over all economic and social activities in America, he would push that button. With one push of the button, the United States would have a fully free-market, limited-government society.

But Read went on to say that if it was possible to push such a button, within little time, that new freedom would be reversed. Many, if not all, the regulations, restrictions, and redistributions would be back in place. Why? Because far too many Americans want government for all of those paternalistic things. The reason no such button pushing was necessary through a good part of nineteenth-century America was because most Americans during that earlier time believed in and wanted a society of widespread individual liberty, freedom of enterprise and trade, and a government limited to securing people’s individual rights rather than abridging them.

That dramatically began to change in the twentieth century. Yes, an elite of intellectuals, academics, and ideological proselytizers made the case for a bigger, a more intrusive, a more paternalistic political and economic system. These molders of ideas succeeded in changing people’s minds and therefore the climate of opinion and beliefs about the role of government in society and what people should expect from those in political office.

Is America worth defending, and if so, why?

But the fact remains that this view of government is now shared and believed in by a large number of Americans. This is exacerbated, I would say, by how little the average American knows about the founding ideas and history of his own country. Again, the intellectual, academic, and ideological elites have helped create this dilemma, and they continue to maintain it.

That is why, for instance, they are so intent on embedding the 1619 Project into the educational curriculum from grade school through the university. If America was founded in and is based on  racism since the first slaves arrived in colonial Virginia, then the notions of individual freedom, freedom of association, freedoms of speech and the press, etc., have all been shams, ruses to rationalize the oppression by one racial and gender group over all others. The spirit of 1776 is just a lie.

Who would want to defend or justify that? As one indication, in an opinion poll taken in March 2022, shortly after the Russian invasion of Ukraine, those surveyed were asked if they would stay and defend the United States if it were to be invaded by a foreign country like Putin’s Russia. In the 18 to 34 age group, only 45 percent said yes to that question. For those over 50, that number rose to 66 percent. Only 40 percent of Democrats said they would stay and defend America against an invader. After all, if America is an inescapably racist nation, who cares if someone like Putin were to conquer the country and impose his own authoritarian regime? Six of one, half a dozen of the other.

But for those who say they would stay and defend the United States against an aggressive invader, what would they be fighting for? If that Hart Research opinion survey is in any way accurate, too many Americans would be fighting to protect the American version of the paternalist and social engineering state.

There is nothing wrong for wanting to defend one’s family, community, or nation when threatened and attacked by either domestic or foreign aggressors. That is the meaning of self-defense in protection of one’s rights and liberty. But if a successful defense against some foreign tyrant were to leave America with its own version of a democratic despotism of the interventionist-welfare state, it would be a hollow victory.

Our fellow Americans need to be reasoned with to better understand that we should not only not want a dictatorship imposed from outside but we should also not want a domestic dictatorship, even when democratically elected, to paternalistically “get things done.” We each must give up the idea, “If only I was dictator, I know how to set things right.” Each of us has to see the correctness in Ludwig von Mises’s answer to that question and say, “I would abdicate.” That is the answer that any free person should know to and want to give.

By Richard Ebeling

Originally published on May 17, 2022 for The Future of Freedom Foundation

Seventy-five years ago, there occurred an important event in the post–World War II revival of free-market liberal ideas. Over the first ten days of April 1947, 39 people from Europe and the United States met in a hotel in Switzerland at a mountain place known as Mont Pelerin. They came together to discuss the future of economic, social, and political liberty in the face of the rise and growing influence of collectivist ideas, especially in the various forms of government central planning.

It was less than two years since the war had ended in Europe, leaving tens of millions of dead, wounded, and starving. Many parts of the continent were in ruins, including some of central Europe’s most important and architecturally beautiful cities. Germany and Austria were under the four-power occupation of the United States, Great Britain, France, and the Soviet Union. The Cold War was already dividing Europe, with communist governments being imposed in eastern Europe wherever Stalin’s Soviet armies had advanced in the conflict to defeat Nazi Germany.

In the Western European democracies, including Great Britain and France, the political presumptions and government policies all implied that the postwar world would be one of socialist planning, heavy regulation of whatever remained of private enterprise, and the redistributive welfare state. In the United States, by late 1946 practically all the wartime price and production controls over the American economy had been lifted. But the political arena was full of the increasingly triumphant Keynesian ideas of fiscal and monetary “activism.” At the University of Chicago, a prominent political science professor, Charles E. Marriam, insisted that, “Planning is coming. Of this there can be no doubt. The only question is whether it will be democratic planning of a free society or totalitarian in character … whether Fascist or Communist.”

Two world wars undermined classical liberalism

The classical-liberal idea and ideal of strictly limited government with impartial rule of law, accompanied by clearly recognized and respected individual rights to life, liberty, and honestly acquired private property in an arena of peaceful and voluntary association and exchange, had been drastically weakened with the beginning of the First World War in the summer of 1914. Centralized social control, forms of detailed economic planning, and reduced personal freedom in the name of the war effort among all the belligerent nations, including the United States after America’s entry into the war in April 1917, undermined the spirit and practice of individual liberty.

This had only worsened in the years between the two world wars, with communism in Soviet Russia, fascism in Mussolini’s Italy, National Socialism (Nazism) in Hitler’s Germany, along with FDR’s New Deal experiments in America with fascist-like planning and deficit-spending-funded “make-work” projects. The Second World War had only reinforced the trends in the collectivist direction. Total government planning accompanied total war.

A. Hayek and the first Mont Pelerin Society meeting

However, there continued to be a handful of determined and articulate voices for freedom and the free-enterprise system in Europe and the United States. One of the most successful was Austrian economist Friedrich A. Hayek, who was a professor at the London School of Economics and had attained international recognition with The Road to Serfdom (1944). It was written as a warning that economic planning, regardless of the well-intentioned motives of its proponents, invariably carried with it the danger of the loss of personal and social freedom due to the fact that, especially, comprehensive central planning required all of human life to be made subservient to “the Plan” in the attempt to bring “the Plan” to a successful conclusion. Thus, even a “democratic” socialism could and would lead society down a road to serfdom that ends with some form of a totalitarian state.

Having developed a wide network of like-minded friends and acquaintances in Europe and America, both before and after the publication of The Road to Serfdom, Hayek went about arranging a conference with some of them. The culmination of his efforts was this first meeting of what became the Mont Pelerin Society in April 1947.

To mark the conference’s 75th anniversary, the Hoover Institution has published Mont Pelerin, 1947: Transcripts of the Founding Meeting of the Mont Pelerin Society. The volume is edited by Bruce Caldwell, a professor at Duke University and one of the preeminent Hayek scholars, who serves as the editor of the multi-volume Collected Works of F. A. Hayek.

Among the 39 participants at this first Mont Pelerin Society meeting were some of the leading figures at the time in the cause for personal and economic freedom. They included: F. A. Hayek, Ludwig von Mises, Wilhelm Röpke, William E. Rappard, Milton Friedman, George Stigler, Fritz Machlup, Frank H. Knight, Frank Graham, Lionel Robbins, Aaron Director, John Jewkes, John Davenport, Henry Hazlitt, Leonard E. Read, F. A. “Baldy” Harper, V. Orval Watts, Felix Morley, Michael Polanyi, Karl Popper, and Bertrand de Jouvenel.

All opposed socialism, but most were not for laissez-faire

Virtually all the attendees were deeply concerned about a postwar world in which government planning and political control would threaten to extinguish the autonomy and dignity of the individual. They also all shared an agreement about the vital importance of a decentralized and competitive price system for guiding the marketplace interactions of supply and demand. In their eyes, this made practically all of them intellectual heirs to the older classical liberalism of the nineteenth and early twentieth centuries. Most, however, were not proponents of that earlier, more laissez-faire classical liberalism. I am almost hesitant to express it in the following way, since it sounds so rhetorically exaggerated, but at one level the discussions, debates, and disagreements throughout many of the conference’s 19 sessions over those ten days might easily be read as: Ludwig von Mises versus all the rest.

What unified a sizeable majority of the participants, and which clearly emerged from the presentations and discussions at these sessions, was a general rejection of laissez-faire liberalism, the classical liberalism of, say, Frédéric Bastiat or Herbert Spencer or … Ludwig von Mises. In their joint memoirs, Two Lucky People (1998), Milton and Rose Friedman, recount that at one of the sessions, Mises “stood up, announced to the assembly, ‘You’re all a bunch of socialists,’ and stomped out of the room.” It is clearly told by the Friedmans to demonstrate Mises’s presumed dogmatic intransigence and extreme presumption of what free-market liberalism can or should mean.

Except for a few of the other American attendees, such as Leonard E. Read, Henry Hazlitt, or Baldy Harper, almost nary-a-one of the others, including Hayek, would have shared the view that liberalism meant, basically, laissez-faire — that is, a political and economic system under which government’s role would not extend much farther than protection of life, liberty, private property, and freedom of exchange.

Mises and the meaning of laissez-faire

It is true that in the detail of the law, the understanding and defining of such liberty are sometimes difficult matters of institutional implementation. Nonetheless, the paramount purpose of any organized social and political liberal order should be the recognition and protection of each individual’s right to freely live as he peacefully chooses, as long as he does not violate or infringe upon the equal rights of any other person. The social and psychological attitude of a free man in a free society was explained by Ludwig von Mises in his 1927 book on Liberalism:

A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police.

If one take Mises’s dictum seriously, it means that an individual may read, watch, consume, and act upon any desire he has or belief he holds, without molestation by either a fellow citizen or by the government, as long as his conduct is peaceful and honest. He may enter into any association and exchange, based upon mutually agreed-upon terms with any and all others, as long as they are not based on fraud or force. And he may keep all that he has peacefully and honestly earned and spend it any way he considers beneficial to himself, without being taxed or regulated to fund activities or redistributions to others for which he does not give his voluntary consent. It is the philosophy on the basis of which Leonard E. Read once entitled one of his books, Anything That’s Peaceful (1964).

The competitive order and government regulation

At the first and second sessions of the meeting, Hayek distinguished between “free enterprise” and a “competitive order.” While free enterprise is essential to a free society, he argued, it was only truly workable in an institutionally competitive system. While emphasizing that “monopoly” and other “imperfections” were often due to various types of government intervention, he argued government may also have to “intervene” to set rules concerning the size of corporate enterprises and the content of “freedom of contract.” Also, there was a “considerable number of services which are needed” in modern society that only government could provide.

This was followed by a presentation by Aaron Director, who was Milton Friedman’s brother-in-law. “We must repair the damage caused by 19th-century liberalism in failing to define the scope of voluntary associations.” This did not simply mean determining more precisely the meaning of, say, a coerced act. “The excessive size” of corporations had to be regulated by government, with limits set on “the scope of corporate activity.”

Also, “A private enterprise cannot provide the appropriate amount of investment in human beings,” Director said. Government, clearly, needed to “invest” in educating and training people for employment opportunities. If this required significant increases in taxation, even if it reduced growth in output due to “the impairment of incentives,” well, Director said, “We should be prepared to pay the price.”

This was followed by an insightful presentation by Walter Eucken, a German market-oriented economist who remained in Germany during the war. He had forthrightly refused to collaborate with the Nazi regime. Eucken was one of those whose “clandestine” preservation of a liberal-market outlook served as the theoretical and policy basis for the German “economic miracle” in the years after the war.

Eucken explained the disaster created by government central planning under the Nazi regime and how it was being continued by the Allied powers in their occupation policies. Nonetheless, he insisted that while state intervention and control are always a danger to liberty and a functioning economy, “In the competitive order, the state is very interested in the order of the market, but the economic process is free.” In other words, markets and prices function, but within the regulatory and fiscal parameters that a right-thinking “liberal” government would consider necessary.

Mises under attack for opposing business regulation

The next session, on the theme of monopoly, became extremely heated. Ludwig von Mises’s name must have come up in untranscribed comments by some of the participants, because Mises responded by insisting that if there are concerns about monopolies in society, its origin and persistence arises from government policies “fostering monopoly.” Frank Graham, a well-known economist who taught at Princeton University, replied that “Professor Mises is 100 percent wrong” on the monopoly and related questions. “I think if we carry out the [laissez-faire] suggestions of Professor Mises we shall be in the jungle. We are here to find the middle road between the jungle [of laissez-faire] and the jail [of a fully planned society].” The government had to have “the active role” of regulating the structure of markets, under the presumption that if companies are too big, they can “coerce” people in society.

This was followed by comments by Michael Polanyi, a prominent philosopher of science, who had strongly criticized Marxist and Soviet ideology in his various writings. He interjected, “Certain collective needs are satisfied by the state, and individuals have to pay. Are there any principles of the market by which principles of taxation are to be determined?”

Mises then said:

Should society be based on public ownership, or private? There is nothing between them which is possible for a permanent society. I am in favor of private enterprise. If consumers buy something, so that a firm increases in size, I don’t want someone to come along and prevent them from enjoying the results from this…. There is only one privilege possessed by the corporation — the right of the creditors is limited. Corporations are at the root of a great deal of progress, so why should we be against them?… Taxes: In a capitalist country where state expenditures are low, it doesn’t matter very much about the principles of taxation.

Aaron Director stated, “Professor Mises seems to think that past [laissez-faire] rules are good rules. I should like to know, ‘How far back?’”

Mises at another point in this session replies, “If it is true as has been suggested, that I am defending the [laissez-faire] orthodoxy of the 18th century, then it is true that I am defending it against the [Mercantilist-regulatory] orthodoxy of the 17th century.”

Disagreements over a European federation

Two sessions were devoted to the problems and possibilities of a European federation to remove economic tensions and minimize the likelihood of wars, especially in the face of Soviet expansionism in eastern Europe. There was little agreement, other than on the general idea of reducing trade barriers. Were member countries to retain their individual sovereignties? If national sovereignty was to be reduced, then, by how much? And what method would exist for federation-wide decision-making? French social philosopher Bertrand de Jouvenel expressed his “distrusted [of] political power.”

Hayek said that a “Federation may be a practical solution in a liberal society, but once the liberal society has disappeared, I don’t see how the thing is practicable at all unless as a movement towards liberalism again.” Reinforcing an aspect of Hayek’s remarks, Mises said that there was a, “Tendency in our age to overestimate [the] importance of offices and institutions, and to underestimate [the] importance of ideologies. If many people believe that wars can improve their position, an office in Geneva will not prevent wars.” In other words, a successful revival of liberal ideas was essential to removing barriers to trade and preventing wars.

Calls for government monetary and fiscal policies

Divisions existed on monetary and fiscal policy issues, as well. George Stigler began the discussion by saying that while the gold standard had been a tool to “combat major inflation” in their current postwar circumstances, “our problem is much more one of deflation, on which the gold standard has very little to say. Should we all agree that the first step should be to bring all money-making institutions under the control of the state?”

The debate became one of what rules should be followed by governments and their central banks in controlling, planning, and manipulating their monetary systems. Frank Graham even spoke of an “international monetary authority [that] would be able to issue [a] currency money. This system would seem to be an energizer of the economy, as well as a stabilizer.” Milton Friedman spoke in favor of what is now his famous advocacy of monetary “rules” for controlling the money supply and government spending, rather than Keynesian-style discretion.

Wage policy and redistributive taxation

Concerning wage policies, the participants were divided between those who were convinced that trade union power was here to stay, with its non-market-based determination of wages kept in check
by government intervention, and those interested in finding some way back to restore and maintain market-based wage flexibility to ensure full employment.

On taxation and income distribution, Milton Friedman said that “no democratic society is going to tolerate people starving to death, if there is food with which to feed them.” Progressive income taxation had been found as one way to raise the needed government revenues, which helped reduce too great an income inequality.

Friedman then proposed his now equally famous “negative” income tax, that is, the poorer a person or a household, the greater the redistributive share someone would receive from the government. When asked who would decide how much of a “tolerable” minimum, Friedman answered, “The elected representatives of the people would decide.” There would be “costs” born by all in society in the form of “some fall in production.” When further asked if he was offering this as a policy proposal out of political expediency, Friedman replied, “No, merely as a policy which is in accordance with the liberal society.”

Mises wondered that if this was to be taken as a premise of a “liberal” policy agenda, then why limit it to matters of wealth and poverty within richer, Western countries like the United States? Could not the citizens in far poorer countries around the world demand that global poverty also be alleviated through an international redistribution of income from the West to the rest? How open were the advocates of this policy to having it extended to the whole world? And on what premise could the richer countries refuse such an international welfare statism once the redistributive principle had been accepted?

Guaranteed incomes for special groups

When it came to farming and agricultural policy, several discussants strongly felt that government needed to offer and guarantee certain financial “floors” to the farming community due to the peculiarities of their corner of the market. Wilhelm Röpke added that government should also plan and determine the right size and mix of “town and country.” It would be desirable “to have [farming] units smaller than would otherwise be rational for normal business standards…. [The] liberal wants to do justice to the ‘social way of life’ of the farmer, without it becoming too ‘reactionary’ of a policy.” Indeed, Röpke said that government should make “the farmer largely independent of money income,” adding that, “I believe profoundly in peasant agriculture as an end,” clearly deserving of special government interventionist treatment.

Loren Miller, one of the American free-market think-tank participants responded to Röpke by asking, “How do you determine tolerable standards, and minimum standards?… And why shouldn’t everyone be insured against the vicissitudes of the market, if the farmers can be insured? What would be the sum of all the interventions which had been suggested during the conference? Wouldn’t that be a planned economy?”

Frank Graham’s response was to call Miller’s view “simplistic.” Did we really want to make liberalism our “unique aim?” “Would we want freedom above everything, if it meant freedom for us all to be miserable?” asked Graham. “Freedom isn’t the only value on which we lay importance. We are not ready to concede that all who are sub-marginal, on a free basis, should be allowed to die.”

Economist Karl Brandt insisted that it is “not the essence of a liberal economy to construct a 100 percent logical machine purely because the Nazis had a 100 percent logical machine.” In other words, a mixing of free-market and interventionist policies was desirable and necessary. In the midst of all this, Lionel Robbins tried to calm the contentious waters by saying, “There is no need for the liberal economists to turn sulky, just because they don’t agree on the aims of government.”

Given the recent events in Ukraine, it is perhaps interesting to note that at one of the last sessions of the meeting, philosopher of science Karl Popper said in reference to the emerging Cold War tensions in Europe, “I’m quite sure that Russia understands only the language of threats.” Lionel Robbins added, “You only get further with the Russians if you treat them as though they are not human beings.” Michael Polanyi concurred by saying, “Professor Robbins has said what I was going to say, but he’s said it very much better.”

Wanting liberalism, but not Mises’s laissez-faire

Reading over what I have written, I fear that I have not given a sufficient appreciation of how much really all the participants rejected socialist central planning and spoke insistently on the core essentiality of a functioning and competitive market and price system. Or how very much they expressed their deep concern that with socialism or any widely implemented collectivist system, the hard-won liberal principles and practices of personal freedom, civil liberties, impartial rule of law, dignity for the unique person, and the vitality of an unplanned social order would be threatened and then lost.

But it is nonetheless the case that for the large majority of the attendees at the first Mont Pelerin Society meeting, the task was to find a way to make a relatively free and competitive market economy compatible with degrees and forms of government regulation and redistribution. In a real sense, the whole meeting was about if it was possible to introduce a limited and restrained interventionist state within a market economy without seriously undermining the ability of the market to effectively operate.

There was no presumption that the entire trend toward political paternalism had been a mistake to be reversed and removed. As Karl Popper inserted in a discussion at one of the other sessions devoted to the relationship between liberalism and religion, the “Economic liberalism of Mises is I think perhaps not quite enough.”

If we were to think of the debates as an ideological playing field, the goalpost at one end would be the totalitarian planned society. But the goalpost at the other end was not the laissez-faire economy with a strictly limited minimalist state, as Mises advocated. No, instead, the goalpost was set at a market economy with a minimal or moderate interventionist welfare state interwoven into it.

In this sense, it did become Ludwig von Mises versus all the rest, not because any of the other attendees desired or endorsed the socialist centrally planned society. It was because most of them wanted the “liberal” goalpost closer to the center of the ideological playing field rather than the laissez-faire goalpost proposed by that intransigent “old liberal,” Ludwig von Mises, who had the audacity to point out that their desired good society was one that accepted many of the anti-liberal premises of the socialist critics of the market economy.

The transcripts of the first meeting of the Mont Pelerin Society provide an extremely valuable and useful record for understanding the beginnings of the post–World War II movement to reestablish a meaningful market liberalism. But they also show why the laissez-faire variation on the liberal theme never really had a chance, because except for a small handful like Ludwig von Mises, it had few champions, even in the market-oriented liberal camp.

By Richard Ebeling

Originally published on December 1, 2021 for The Future of Freedom Foundation

We are living at a time when civil liberties are severely under attack from a number of directions. Two of the most obvious ones at the moment are the response by many governments to the coronavirus crisis and the rise of “critical race theory,” with its accompanying “cancel culture.”

We are seeing imposed or threatened suppression of freedom of speech, freedom of the press, freedom of religion, freedom of association, and freedom of movement. Historically, all of these were hard-won freedoms over the last 300 years. We need to recall that for most of human history, such freedoms did not exist.

Civil liberties born and abridged in the ancient world

Ancient Athens is often credited with being the Western cradle of democracy, including freedom of speech and conscience. But it was in ancient Athens that Socrates was made to drink Hemlock for “corrupting” the minds of the young in that city-state by asking them to question the established order and its traditions. He did not call for an overthrow of things. He merely asked his students to reflect upon the reasons and rationales for the institutional order, with its customs and traditions, to understand why they exist and whether they were all justified in terms of the betterment of the society.

Stirring up the young in this way was too much for the older free citizens of Athens, who held a trial and democratically voted to condemn Socrates to death if he would not stop teaching in this way. Socrates’s response was that he could not stop asking the “why” questions, since it was an inseparable part of his nature and mind. So rather than be untrue to himself, he drank the poison.

For most of human history, freedom of religion has been rarely or only narrowly allowed. The ancient Romans were fairly tolerant in respecting and recognizing “alien” gods worshiped among the many peoples they conquered in their vast empire. But when a radical sect emerged calling themselves “Christians,” who would not bow before a Caesar, the Romans attempted to repress these spiritual “revolutionaries,” including condemning them to death in the arena by facing gladiators or lions.

Out of religious intolerance grew freedom of conscience

When these Christians finally triumphed over Caesar, Christianity, in turn, also became, through the power of the state, intolerant of dissent and opposition. The religious wars between Catholics and Protestants tore parts of Europe apart, leading to multitudes of cruel deaths and massive destruction to villages, towns, and cities across the continent. The ordinary subject’s faith was often dictated and imposed by the ruling monarch.

But out of this, slowly but surely, came the reconciliating idea that if men were not to end up destroying mankind in the name of coercing others into eternal salvation, a freedom of conscience in choosing the path to that salvation needed to be left up to the individual. It took all of the 17th, 18th, and 19th centuries to more or less fully bring this to a reality in Western civilization, and from there, it spread to other parts of the world.

But if people are to be allowed a wide latitude to follow their conscience concerning the spiritual path to God, why could men not speak more freely and write about what was on their minds concerning their own lives and the societies in which they lived and worked? Why could they not express their voice about those who ruled over them and what the role of government should be in society? Why could they not freely associate and interact with others as they wished as they pursued ends and goals outside of the strength and ability of one man alone?

The triumph of civil liberty followed by totalitarian oppression

Only in the 19th century and then into the 20th century did the idea of such civil liberties as captured in the Bill of Rights and the Constitution of the United States come to be more widely recognized as the ideal around which a free society should be judged in successfully restraining those in political authority. The great difference said to distinguish the free, democratic society from the totalitarian society (whether in its fascist or communist variation) was a respect for such civil liberties as freedom of speech, the press, religion, assembly, association, and unmolested criticism of government policy, along with the ability to participate in the election of those holding public office.

For instance, the American journalist William Henry Chamberlin (1897–1969) reported for many years in the Soviet Union during the 1920s and 1930s, and he also traveled extensively in fascist Italy and Nazi Germany. In Collectivism: A False Utopia (1937), he explained the world before the First World War, when such civil liberties were taken for granted, and the world after that war:

Before the World War it would have seemed banal and superfluous to make out a case for human liberty, so far as North America and the greater part of Europe was concerned. Such things as regular elections, freedom of press and speech, security against arbitrary arrest, torture, and execution, were taken for granted in almost all leading countries.

People could travel freely in foreign lands without worrying overmuch about passports and were not liable to be arrested by the police of one insolvent country if they failed to declare a few bills of the currency of its equally insolvent neighbor. Concentration camps for political recalcitrants and the wholesale conscription of forced labor as a means of getting public works done were unknown. (p. 1)

In the 19th and early 20th centuries, attempting to control a person’s thoughts and words and the deeds connected with them was considered the essence of tyranny, dictatorship, and despotism. But how were such civil liberties to be institutionally secured and safeguarded? It was argued that that was the purpose of a written constitution that specified and delineated what areas of human life government, with its power of legitimized force, was not allowed to encroach upon.

Written constitutions worthless when government owns and controls

And, yet, in spite of written constitutions and public pronouncements by those inside and outside of government, people’s civil liberties have been violated or denied. In the 1930s, Comrade Stalin introduced a new constitution in the Soviet Union that promised and insisted that the same civil liberties hailed in the West were respected and present in the new socialist society being built on Marxist-Leninist foundations. And, indeed, a reading of that constitution easily gives the impression that all the civil freedoms taken for granted in the United States or Great Britain at that time were practiced in the communist paradise as well.

But anyone paying attention to how the Soviet system operated knew full well that such civil liberties did not exist, or were present in only sham forms that tried to hide the fact that the thoughts in people’s minds were subject to government indoctrination, that their spoken and written words were manipulated to conform to and strictly reflect what the Soviet regime wanted people to read, say, and, therefore, believe. All peaceful assemblies and all human associations were determined by and confined to what the Soviet “party line” wanted as public expressions of people’s actions and interactions.

In Collectivism: A False Utopia, William Henry Chamberlin also explained how the totalitarian regimes went about controlling people’s ideas, words, and actions:

The communist-fascist technique of remaining in power … is based first of all on a recognition of the tremendous possibilities of state-monopolized propaganda in an age when most people go to school, read newspapers, listen to radio broadcasts, and attend the movies. Censors and book burners can do a good deal; but … printing presses are not smashed; they are all utilized to spread far and wide the same brand of political, economic, and social doctrine.

People are not forbidden to possess radio sets or to go to the movies. But nothing goes on the air in the Soviet Union, [Nazi] Germany, or [fascist] Italy that could possibly offend, respectively, Stalin, Hitler, and Mussolini. The Russians can go to a film and see Communists heroically toiling for their country’s upbuilding and finally prevailing over the dark intrigues of fascist villains. The German may be simultaneously witnessing a film of precisely the same ideological content, but with the roles of hero and villain reversed. The school and the press are also exploited to the limit as means of teaching people, from the cradle to the grave, to think and behave in the way which the ruling system demands. (pp. 32–33)

No civil liberties when government dictates the use of property

What enabled these governments to succeed to an amazing extent in suppressing the array of civil liberties in their countries was the political authority’s direct ownership (in the Soviet Union) or strict control (in Nazi Germany and fascist Italy) over the means of production, through which thought, word, and deed are expressed. In the Soviet Union, there were no private newspapers or book publishers or radio stations, no independent movie-making companies or theaters for the performing arts, no markets on which people could offer to buy and sell separate from what the government dictated and centrally planned.

The same was the case in Nazi Germany and fascist Italy, in that any means of communication or the arts not also directly owned by these governments were under their strict control, with any nominal “private” owners, producers, and suppliers told by the Nazi and fascist authorities what they were to produce, when, how, at what price, and with what content. As German economist Guenter Reimann (1904–2005), summarized it in The Vampire Economy: Doing Business Under Fascism (1939):

The authoritarian State has made it a principle that private property is no longer sacred…. Nazi doctrine … is offered as a new justification for the State’s use of private capital and it is a means of placing drastic limitations upon private property rights in the “national interest”…. The capitalist under fascism has to be not merely a law-abiding citizen, he must be servile to the representatives of the State. He must not insist on ‘rights’ and must not behave as if his property rights were still sacred. He should be grateful to the Fuhrer that he still has private property. (pp. 12–13, 20)

Once private property rights were either abolished or strictly controlled and commanded by the government, as under these totalitarian regimes, people’s free actions and civil liberties were basically made null and void. This is what far too many people do not clearly and fully understand. What institutionally secures, in the long run, civil liberties in any society are private property rights and economic freedom.

Property rights and economic freedom essential for civil liberties

Economic freedom and the private property rights upon which it is based create an area of independence and autonomy from those in political power. That 1930s Soviet constitution stated that all citizens of the socialist paradise had a “guaranteed” freedom of religion. But how were people to express their religious faith in association with others when the government owned all the land, had monopoly possession of all building materials and construction equipment as well as all printing presses and paper? If the government refuses to allocate land for the site of a church, will not provide the resources and the building equipment to construct a house of worship, and declines a request for the publishing of Bibles and hymnals because the central planners decide that other “social” ends and purposes have higher priority, then those sharing a common faith, wishing to worship together, find themselves nominally “free” to worship as a civil right, but with no material means to manifest their shared belief.

Freedom of religion becomes a sham, as does all freedom of speech and the press. For instance, back in the 1980s, after the socialist Sandinistas had gained political power in Nicaragua, they assured everyone that there was an absolute right to freedom of the press and peaceful political dissent in the country. A leading opposition newspaper, La Prensa, found it impossible, however, to widely express their dissenting views to the Nicaraguan reading public due to the fact that the Sandinista government limited the amount of newspaper material and ink they allocated to the newspaper, so the paper’s circulation was limited to a mere fraction of what it had been before the Sandinistas took control.

Property and markets protect people from government abuse

During the anti-communism scare in the early 1950s, the U.S. government pressured a number of Hollywood studios to blacklist some well-known actors and screen writers who were accused of communist or pro-communist ties. It has remained a cause celebre in a variety of intellectual and entertainment circles as an example of innocent people being persecuted in America merely for their political views.

But as free-market economist Milton Friedman (1912–2006) argued more than once starting in the 1950s and 1960s, due to the fact that there was a vibrant and independent private sector in the U.S. economy, those hounded out of their Hollywood careers could and did find alternative employments and ways to earn a living with private enterprises not controlled or pressured in the same way by the government. Some of them, after things calmed down after a time, could still work at screen writing either under their own or assumed names.

In the Soviet Union, for which, in fact, some of these people did express active sympathy at an earlier time, dissidents and those accused of being “enemies of the people” suffered true unemployment and starvation, since under Soviet socialism there were no other employers outside of the state from whom the outcast might have found a job. Or such a critic — real or imagined — would have been given “employment” by the government in the slave labor camps of the Gulag, from which many millions never returned.

Property and markets provide anonymity from intolerance

Recognized and secure private property rights in a relatively open and competitive free market provide “islands” of economic and social autonomy and independence from the government and those in political power. This is reinforced by the fact that in the marketplace, people rarely pay attention to or care about the political, social, economic, or religious views of those with whom they do business.

When you do your food shopping at a supermarket, do you base your purchases of vegetables or canned goods or dairy products on the political views of those who have supplied the commodities you end up placing in the cart? How could you even know the political or religious views of the dozens, or hundreds, or even thousands of people who have directly or indirectly participated in the various supply chains that have assisted in bringing those desired goods to you, wherever you may be in the country or around the world?

Our beliefs are private and only open to voluntary market choices

We earn our livings in the free marketplace using our respective properties in the exchange processes of supply and demand, even when the only “property” we own and use to earn that living is our personal labor abilities as the means to buy what others have for sale that we desire. Our purchases partly reflect our political, social, and economic views through the books we buy, the music we listen to, and the organizations we involve ourselves with and to which we may donate. All of this is in the realm of the protected private world of property and exchange.

Sometimes people have refused to interact or associate with others due to disagreements over politics or religion, but these are voluntary and personal acts that do not and cannot, per se, force or compel others to boycott certain market suppliers who are considered ethically unacceptable. We may attempt to persuade others to follow our lead through a peaceful and voluntary withholding of business to get those viewed as personally or socially unethical or immoral to change their ways, but the power of the state cannot be brought down on them.

Government’s COVID abridgement of property and civil liberty 

We, however, do not live in a free market with secure and respected property rights and civil liberties in modern day America. This has been most clearly shown over the last two years with the government’s response to the coronavirus. There is no doubt that this virus has had lethal effects on multitudes of people, especially the sick or hospitalized. But it shows just how far we have moved away from guaranteed property rights and therefore secure civil liberties by the government’s heavy-handed abridgement of voluntary association and freedom of choice.

The federal and the state governments, especially the latter, told people to stop producing, do not go to work, stay at home, only shop for government-determined “essential” products and only in particular stores at certain times. Stay six feet or more away from others and wear a facial mask. And more recently, the Biden administration is using the power of government spending to compel private establishments that get some portion of their revenues from the government to force all their employees to be vaccinated or lose that government funding.

The only means by which the government has been able to do such things is to de facto declare that it may abridge people’s property rights and freedoms of association when and how it wants. You could not walk your dog beyond a certain parameter around your residence. You could not congregate in groups more than a certain size, including attending church in a house of worship.

Google and Facebook may be private companies, with their corporate owners certainly having their own ideological and political views and agendas. Behind much of their suppression of anti-vaccination viewpoints or challenges of the presumptions behind policy pronouncements by the Center for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA), however, are concerns and fears that if they do not do so, the Congress and the White House may have to seriously consider placing their businesses and their social media outlets under more direct and heavy-handed regulatory control and command.

Critical race theory and free speech in government schools

In the public schools, a fight is now on about whether or not critical race theory (CRT) should be taught. I consider CRT to be a serious distortion of American history, and I question the presumption that “systemic racism” dominates American culture and society. But what has made this an ideological “life and death” struggle between proponents and opponents of CRT has to do with the compulsory and near-monopoly status of schooling and education in the United States.

Either the “pros” or the “cons” get to determine what gets taught in government schools about the history and current status of race relations in America. The side that loses will, no doubt, insist that their group’s civil liberties are being violated by denying them freedom of speech and expression because the winning side gets to dictate the curriculum for all the students in that school district or state.

If schooling and what and how subjects are taught in the classrooms were fully shifted to the private sector, that is, the complete privatization of schooling and education, the entire issue would be greatly diffused. Each individual and group of individuals with their own views and values on race history and race relations in America would send their children to the school of their private and voluntary choice.

Privatizing schools solves the civil liberties problem

Nobody’s civil liberties concerning freedom of speech or the press or association would be threatened or abridged. By depoliticizing schooling and education, not only would no parent or child feel that their freedom of thought or word or belief had been abridged, it would immediately defuse the ideological and political anger and pressures that have been intensifying around the country.

Arguing over whose interpretation of American history and current American social relationships is correct would be moved to the arena of much calmer and polite and courteous discourse, precisely because it was understood that no one could use the power of the state to impose their views and values on others. If you think you are right, the available avenue to change people’s minds and actions becomes peaceful persuasion, not political power.

Civil liberties are essential for an open and free society, making us respectful and tolerant of others and the ideas they hold. It is the means by which we replace force and its threat with reason, argument, and mutual respect if we want to influence others in society.

But the bedrock upon which civil liberties are institutionally secure and guarded is private property and the free market of voluntary exchange. Without it, society always risks becoming an arena of intolerance, dogmatism, and coercion. When this latter path is followed, tyranny and oppression are the inevitable ends of the line.

By Richard Ebeling

Originally published on January 28, 2022 for The Future of Freedom Foundation

America is in the grip of a serious counterrevolution against the ideas and ideals upon which the country was founded. Whether it concerns fears about the physical environment or frustrations with the domestic economy or charges of society-wide “systemic racism,” the presumption is that the problem stems from people having too much freedom or the wrong types of freedom.

The alternatives proposed to grapple with these problems all share a common premise: There is a need for greater government paternalism and planning over everyone’s lives. For example, it is argued that the only serious remedy to the presumed danger from global warming requires national and international governmental restrictions, commands, and controls over how we work, how we live, and the forms and contents of our standards of living.

The last two difficult years have been due to a government-created economic recession resulting from lockdowns and shutdowns on production, employment, shopping, and traveling as the political response to the coronavirus crisis. The sluggish recovery, especially in labor markets and supply-chains, have also been due to various government interventions. But proponents of government planning now insist that if more jobs are to be made available, if workers are to receive “living wages” and better work conditions, if goods and services are to be available in the face of these supply-chain disruptions, and if income inequalities are to be narrowed, there is only one answer: more government spending and more comprehensive government intrusions into how people work, on what terms, and making which products.

At the same time, America and, increasingly, various parts of Europe are facing the onslaught of a new brand of racism that rhetorically disguises what it is really about by insisting that it is an ideology of “anti-racism.” To overcome the pervasive presence of an asserted white “systemic racism” against all “people of color,” the call is made for government planning and regulation of virtually every form of human association inside and outside of the marketplace. Governments must determine the social and financial just due for every politically designated and categorized racial, ethnic, gender, and social group in the country.

Only future historians who, many decades from now, look back at the unfolding events of the first half of the 21st century will know whether these collectivist and political paternalist trends will succeed in triumphing over the social vestiges and cultural residues of the spirit of individual liberty and economic freedom in America and other parts of the Western world.

Liberal freedoms have partly survived but are fading away

But before becoming too pessimistic, it is worth remembering that the last 100 years have seen the ascendency and seemingly “inevitable” victory of earlier forms of philosophical collectivism and political paternalism as seen under Soviet communism, Italian fascism, and German National Socialism (Nazism). Friends of freedom despaired of a coming twilight of what remained of any (classical) liberal ideas and social arrangements. And while the state has grown in size and scope over the last century, for most of this time, the leading Western nations successfully avoided falling into the abyss of a fully totalitarian collectivism. They have, until now, preserved degrees of the institutional prerequisites for still relatively free societies.

But there is no doubt that with each passing year and decade, an understanding of the ideals derived from the classical liberal conception of a free society, based on a belief in the inviolable rights of the individual to his life, liberty, honestly acquired property, and free association with any and all others for peaceful mutual betterment, has faded further out of the societal memory of each new generation.

Perhaps this time the tribal collectivists will succeed in destroying the remaining philosophical, political, and cultural ramparts protecting the residues of liberty. Nothing will be left but archeological artifacts for those future historians to excavate and wonder how a civilization built on the idea of the dignity and freedom of each and every individual human could have been ruined by a philosophical and ideological barbarian horde. We may well wonder how this came about when the vanguard of that barbarian horde was comprised of many among the intellectual, social, and cultural elite of Western society.

But be that as it may, just as with the misplaced optimism of the political and economic collectivisms of the 20th century, the proponents of the Green New Deal and identity politics tribal collectivism of the 21st century possess a confident belief that a “climate-friendly” and “socially just” society of the future requires the pervasive and heavy hand of government central planning. Like the collectivisms of the last century, it is again insisted that the planning hand of paternalistic government will assure greater freedom, prosperity, and equality than anything possible or experienced under a more market-based economic system.

The old and new central planners on civil liberties

Many of the advocates of the socialist theme in the 20th century insisted that government central planning was compatible with existing conceptions of personal freedom and civil liberties. There was no reason why government control and direction of the economy was inconsistent with preservation of freedom of speech, the press, religion, assembly, and free association. Adding to these under socialism would bring newer and different freedoms, including a guaranteed job, a reasonable “living wage,” government provision of health care and retirement, a decent place to live, and equal access to the everyday amenities of life previously reserved for the privileged capitalist rich.

A significant difference with our modern collectivists who identify with identity politics, critical race theory, and cancel culture, however, is the wide absence of any references to or calls for personal freedom or civil liberties in the Western traditional sense. Indeed, there is frequently a conscious rejection of the premises behind them. For many aligned with this modern collectivism, there is an implicit and even explicit rejection of personal freedom and civil liberties. It is insisted that they have been and are a ruse to use language and justify actions inherently and inescapably “racist.”

The new planners blend Marxism with a neo-Nazism

These people are a peculiar and perverse blend of Marxism and Nazism. They see society as divided into conflicting groups of oppressors and oppressed, capitalist exploiters versus all others in society. But replacing the traditional Marxist “class analysis” based on ownership or non-ownership of the means of production, per se, is a Nazi-like idea that what identifies and unifies people are their positions in different categories of social awareness and social status based on race and gender.

The more radical versions of critical race theory insist that no one can escape from their racial identity; it is who and what you are. White people are definitionally racists and oppressors of all “people of color,” whether they are aware of it or not. Being white gives you “privilege” by the biological necessity of the color of your skin. Just as the same applies to all non-whites; being non-white means you have been and are an oppressed people, regardless of how an individual so classified thinks about himself and any actions he may attempt to undertake as a distinct and separate person.

This means that the version of a socialist planned society called for by identity politics and critical race theory is inconsistent with freedom in two senses. First, if government is to plan the social and economic affairs of the society, this necessarily abridges or abolishes those traditional notions of personal freedom and civil liberty. Both 19th- and 20th-century critics of all brands of socialism argued that by transferring control over the means of production from the private hands of individual owners, who compete in the marketplace for consumer business and the hiring of employees, to the single hand of government central planners, people’s freedom of choice as consumers and producers was done away with.

Government planning abrogates consumer and producer choice

The government central planners would now determine and dictate what was produced in terms of quantities manufactured, along with the qualities and characteristics of what they considered to be socially necessary, desirable, and important. Consumers would be supplied with what the political paternalists in charge of the ultimate planning decisions decided the people “really” needed, not what those consumers might actually want to buy as reflected in their demands for and purchases of competitively supplied goods and services in a free marketplace.

Also, as the monopoly controller and planner of all production activities, a socialist government becomes the single employer for all those looking for work in the society. Education, job opportunities and locations of employment, along with the salary to be paid and any fringe benefits accompanying it would be determined by the political authority. The loss of or exit from one job left the individual still confronting the same employer anywhere he tried to turn — the state.

But the twist with identity politics and critical race theory is that they deny even the illusion of desiring personal freedom. The 20th-century socialists said they accepted and believed in civil liberties, even as they often, de facto, abolished them, especially in the communist regimes like the Soviet Union through the government’s control over the means of production. But our new race-based, tribal, collectivist would-be planners reject any rationale for personal freedom and civil liberties. All forms of racist and sexist thought and action becomes unacceptable, as these tribal paternalist planners define them. There will be an officially approved system of language and action. Any verbal and physical expressions of forbidden speech and actions are to be expunged, with the accused banished from employment, without any ability to defend himself, or to participate in autonomous networks of human association. Hence, the accompanying role of “cancel culture.”

Individuals disappear in planned categories of race and gender

Placing control and planning over the means of production in the hands of those in political authority in the government means the end to individual liberty, freedom of choice, and voluntary association as these ideas have been understood for more than 300 years, first in the West and then in other parts of the world. Defined by the new political paternalists in power by collective and tribal categories of race, gender, and social status, individuals are no longer thinking, deciding, and choosing human beings. The individual’s fate and fortune — from cradle to grave — is determined and dictated by those possessing and wielding the coercive planning powers of government.

Our society has seen increasing instances of private organizations specifying, imposing, and policing rules of “politically correct” speech and action under the pressures of this new tribal collectivism, but it needs to be appreciated that it would be universalized to the extent that even greater degrees of governmental social and economic planning are introduced. The private-sector alternatives still free from this ideology of neo-Nazism in the name of “anti-racism” would be limited or closed off completely. Each person would find himself a slave to this race- and gender-based “anti-racist” totalitarianism.

The new planning scheme is economic fascism

Centralized government planning has long been identified with the name “socialism.” But many defenders of greater government control and command over social and economic affairs often insist that they are not advocating “socialism” because most of them do not call for outright government nationalization and ownership of the means of production. They, too, recognize and support the institution of private enterprise, they say, but in the current global environment, the laissez-faire of the past must be superseded by government oversight, rules, restrictions, commands, and controls guiding and directing how and for what purposes private enterprises go about their business.

There is, of course, another name for government command, control, and planning of social life and economic activity without direct government ownership of the means of production. It is called economic fascism. What is proposed in the name of fighting global warming, or for establishing race and gender “diversity” and “inclusiveness,” or greater racial and gender salary and status “equity,” is
not strictly the Italian corporativist model of government-mandated and directed cartels for all sectors of the market for pricing and production planning, but it comes closest to what is being proposed by many of the new proponents of economic planning

The Davos model for a fascist-type economy

For example, the World Economic Forum that meets every year at Davos, Switzerland, sponsored a detailed “white paper” in September of 2020 on how private businesses and corporations need to be reorganized and refocused in their structures and activities to meet the challenges of global warming and the need for greater race and gender “equity.” Corporations should set aside their archaic notion that their primary duty is to their shareholders and the making and maximizing of profits for these owners. They must view their essential duty to be to serve their “stakeholders” — those directly and indirectly impacted by anything and everything the private enterprise does, including the quality and sustainably of “the planet.”

Shareholders of the enterprise are to be viewed as merely one sub-group of claimants deserving of recognition and reward from the activities of the private enterprise. Profitability, cost-efficiency, and consumer satisfaction are all to be made secondary considerations to assuring pay and promotion and decision-making “equity” within the firm. “Socially aware” wages and racial and gender employment balance will replace market-based hiring and remuneration for those employed and their place and role within the company.

Corporations and other private enterprises that sign up to “voluntarily” follow the goals and targets of this new vision are to commit to introducing technologies and methods of production geared to reducing any and all carbon footprints. Quantitative goals are to be introduced to replace fossil fuel use with “renewable” energy sources by specified dates.

Corporate duties are to serve society, not shareholders

As the Davos white paper expressed it: “Corporate global citizenship requires a company to harness its core competencies, its entrepreneurship, skills and relevant resources in collaborative efforts with other companies and stakeholders to improve the state of the world…. ‘Stakeholder capitalism’ … positions private corporations as trustees of society.”

Every participating enterprise submits itself to follow a centralized plan of changing what and how they produce and sell to be consistent with the target goals of the Paris Agreement on Climate Change. Each participating member is to be obligated to issue an annual report summarizing what they have done to fulfill “the Plan” of zero-net fossil fuels emissions by 2050. This includes explaining how they have brought their company closer into “harmony with nature” to receive their “sustainability certification” from the association formed to represent, guide, and oversee the activities of all the participants.

Welfare fascism and Soviet-style planning targets

Besides the environment, all member enterprises are to directly take responsibility for the “mental, physical and social well-being of all people in their operations and value chains.” Thus, every private enterprise is to be a provider of comprehensive welfare-state services for all those within the firm as well as any others in some way related to or affected by the company. Wages and other employment benefits must place priority on paying a “living wage” and “a wage sufficient to meet the basic standards of life,” and to “lift households and communities out of poverty.”

Prices, costs, consumer satisfaction, and market-based balances between supplies and demands for inputs and outputs lose all meaning. Like under Soviet socialist central planning, the Davos model for economic fascism is simply to meet quantitative targets of input use and output amounts to reflect the climate change goals and social justice benchmarks set by the United Nations and the umbrella organizations monitoring and judging everything done by the private enterprise members.

But beyond the “voluntary” membership and participation by corporations and other private enterprises, the authors of the white paper see it as the basis of binding benchmarks, standards, targets, and goals that might result in legal penalties if not successfully met and fulfilled. Thus, it becomes a short step from the voluntary to the politically compulsory. Certainly, this is what President Joe Biden is insisting on when he commands that automotive companies meet production targets of so many new electric-powered motor vehicles to be sold and on the road by 2030. Or for regulatory plans to restrict other fossil fuel uses, with their replacement by mandated wind and solar sources of energy.

The relevance of the “Austrian” criticisms of central planning

Once these steps are more fully introduced and the economy is on a de facto economic fascist footing, all the “Austrian” criticisms of socialist central planning come into more applicable play. By preempting or prohibiting market-based pricing and autonomous entrepreneurial decision-making about what and how to produce, and, instead, imposing direct commands of output goals and production methods, the government central planners will undermine and then eliminate all remaining market rationality.

Is production directed to what actual income-earning consumers desire? Are the scarce resources of the society employed and utilized based on their market-determined opportunity costs? Do owners of the means of production have market-guided incentives to creatively devise new and better ways and means of producing more and improved goods at lower costs to the benefit of the consuming public? The answers to these and similar questions under such a system of fascist-like economic planning is basically — No!

Resource use, production decisions, and price and cost relationships will be increasingly, then finally, completely dictated by the central planning political paternalists based on ideology and special interest politicking in the corrupt give-and-take of “democratic” decision-making. It becomes a “political” economy in the most pejorative sense. It will gravitate toward what Ludwig von Mises called “planned chaos.”

Classical-liberal ideal of equality before the law

The classical-liberal and free-market ideal concerning “equality” has been the idea of every human being possessing the same individual equal rights before the law. Equal individual rights to life, liberty, and honestly acquired property in arenas of voluntary human association. However, an equality of rights carries with it an inevitable inequality of outcomes in terms of relative income shares and social status in society.

But this inequality is not based on political privilege or favoritism arising from government protections, subsidies, or other regulatory or redistributive benefits. Market-based inequalities result from the value judgments of others in society about what they, as consumers and employers, consider to be our monetary worth in assisting in producing and supplying goods and services that our fellow human beings desire and are willing to pay for.

The services of a brain surgeon usually carry a higher market value in the eyes of those needing a delicate neurosurgery than those same people or others see as the market worth of a gardener, or salesman in a shoe store, or an economics professor teaching at a college or university. As American economist Frank A. Fetter once expressed it, in the free marketplace, every penny spent by a consumer is a “vote” reflecting the buyers’ valuation of the product bought and, therefore, the worth of the services of those whose efforts have brought it to the market.

The dollar “votes” that each earns tells every income earner what others directly or indirectly think of the services they can render in satisfying the wants and improving the lives of others. Therefore, some of those income earners have more dollar votes of income than others, which enable them as consumers to purchase more of what their fellow economic neighbors bring to market. But every one of those dollars has been earned through a voluntary and mutually beneficial exchange.

Collectivist “equity” means politically determined group shares

While relative incomes in the marketplace are simply the outcome of a series of mutually-agreed-upon terms of trade in the free, competitive process, once this process is politicized through government-planned pricing and redistribution, it no longer possesses the rationality or the justice of a free society. With government determining what people earn and their access to various goods and services, the production and supply of which has increasingly been decided on by paternalist planners, there is reintroduced a society of privilege and favoritism.

Power and pull, ideological pressures, and voting-bloc influences will now determine and decide what any individual may or may not earn. It would not be the individual’s relative market worth that will be evaluated in the new world of identity politics and critical race theory. Instead, any person’s absolute and relative income share will be politically determined for him as a member of a racial, gender, or some other collectivist group to which he has been assigned based on the result of the rough and tumble of “democratic” real politick.

One consequence will be that individual initiative and effort is thwarted or redirected by government command or politicized incentives. This will have little or nothing to do with use of talent, creativity, or entrepreneurial expertise in ways that actually serve the properly understood “common good,” meeting consumer demand with constantly improving, least costly ways of supplying things.

If fully or even partially implemented, such a new political paternalist planning scheme would lead to the same social and economic consequences as the central planning experiences of the 20th century. The only question is whether it would be accompanied by the same reigns of terror and mass murders that were experienced under the Soviet, fascist, and Nazi versions of socialism. Let us hope that future historians do not have to record consequences similar those earlier ones.

(Based on a talk given for the Praxis Club at Hillsdale College in Hillsdale, Michigan, on October 28, 2021.)

By Richard Ebeling

Originally published on July 17, 2018 for the Foundation for Economic Education

Classical liberalism has been the most revolutionary set of ideas in world history in terms of the advancement of human freedom and prosperity. An appreciation of why and how, unfortunately, is sorely lacking. Understanding a little bit of the history of classical liberalism can help us better appreciate its continuing importance for freedom, prosperity, and peace.

The Ancient Dream of Unfulfilled Freedom

Since ancient times, there have been thinkers who dreamed of a world with greater freedom for all humanity. But for most of history this remained only in dreams. The ancient Greeks spoke of the importance of reason and the need for freedom of thought if our minds were to challenge each other’s logic and understanding as we groped toward a more complete awareness of the objective world around us.

Human society was a world of the unfree. Then this began to change.

The Romans argued about a higher, more universal law for humanity to live under: of a just and rationally discoverable “natural order” in society, given the nature of man. Jews and Christians appealed to a “higher law” concerning “right” and “justice” that was above the power of earthly kings and princes, and to which all people are subservient and responsible since it was given to them by the Creator of all things. (1)

But for all history, men lived under the earthly powers of conquerors and kings who claimed “divine rights” to rule over them. They were objects to be used and abused for the ends of those who held the whips and swords over their heads. Their lives were to serve and be sacrificed for something that was said to be greater than and above them.

Their lives were not their own. They belonged to another. They were slaves, regardless of the names and phrases used to describe and defend what was a master-servant relationship. Human society was a world of the unfree.

Then this began to change, first in men’s minds, then in their actions, and finally in the political and economic institutions under which people lived and worked.

Classical Liberalism and Natural Rights

While it is today often ridiculed by relativist and nihilist philosophers, the modern world of freedom had its origin in the conception of “natural rights”: rights that reside in men by their “nature” as human beings, and which logically precede governments and any man-made laws that may or may not respect and enforce these rights. (2)

While every man has a natural right to protect his life and property, men form political associations among themselves to better protect their respective rights.

Political philosophers such as John Locke articulated them in the 1600s. “Though the earth and all inferior creatures be common to all men, yet every man has a ‘property’ in his own ‘person,’” insisted Locke. “This nobody has any right to but himself. The ‘labor’ of his body and the ‘work’ of his hands, we may say, are properly his.”

While every man has a natural right to protect his life and property, men form political associations among themselves to better protect their respective rights. After all, a man may not be strong enough to protect himself from aggressors; and he cannot always be trusted when in the passion of the moment he uses defensive force against another that may not be reasonably proportional to the offense against him. (3)

Here in a nutshell is the origin of the ideas that germinated for nearly another century, and then inspired the Founding Fathers in the words of the Declaration of Independence in 1776, when they spoke of self-evident truths that all men are created equal with certain unalienable rights, among which are life, liberty and the pursuit of happiness, and for the preservation of which men form governments among themselves.

While every American schoolboy knows—or should I say, used to know—by heart those stirring words in the Declaration of Independence, what most Americans know less well is the remainder of the text of that document. Here the Founding Fathers enumerated their grievances against the British crown: taxation without representation; restrictions on the development of trade and industry within the British colonies and regulations on foreign commerce; a swarm of government bureaucrats intruding into the personal and daily affairs of the colonists; violations of basic civil liberties and freedoms.

Freedom is the common intellectual inheritance left to us by the great thinkers of the West.

What aroused their anger and resentment is that a large majority of these American colonists considered themselves to be British by birth or ancestry. And here was the British king and his Parliament denying or infringing upon what they considered to be their birthright—the customary and hard won “rights of an Englishman,” gained over several centuries of successful opposition against arbitrary monarchical power.

Freedom is the common intellectual inheritance left to us by the great thinkers of the West. But it is nonetheless the case that much that we consider and call individual rights and liberty had its impetus in Great Britain, in the writings of the political philosophers like John Locke and David Hume, legal scholars like William Blackstone and Edward Coke, and moral philosophers and political economists like Adam Smith.

What their combined writings and that of many others gave the West and the world over the last three or four centuries has been the philosophy of political and economic liberalism.

The Liberal Crusade Against Slavery

What was the vision and agenda of 18th and 19th-century liberalism? They may be understood under five headings: (4)

First, was the freedom of the individual as possessing a right to own himself. The great British liberal crusade in the second in the half of the 18th century and then into the early decades of the 19th century was for the abolition of slavery. The words of the British poet William Cowper in 1785 became the rallying cry of the anti-slavery movement:

We have no slaves at home—Then why aboard? Slaves cannot breathe in England; if their lungs receive our air, that moment they are free. They touch our country, and their shackles fall.

The British Slave Trade Act of 1807 banned the slave trade, and British warships patrolled the west coast of Africa to interdict slave ships heading for the Americas. This culminated in the Slavery Abolition Act of 1833, which formally abolished slavery throughout the British Empire 180 years ago, on August 1, 1834. (5)

Though not overnight, the British example heralded the legal end to slavery by the close of the 19th century through most of the world that was touched by the Western nations. The end to slavery here in the United States took the form of a tragic and costly Civil War that left its scar on the country. The unimaginable dream of a handful of people over thousands of years of human history finally became the reality for all under the inspiration and efforts of the 19th century liberal advocates of individual freedom.

The Liberal Crusade for Civil Liberties

Many of these civil liberties were incorporated into the Constitution in the first ten amendments.

The second great classical liberal crusade was for the recognition of and legal respect for civil liberties. Since Magna Carta in 1215, Englishmen had fought for monarchical recognition and respect for certain essential rights, including no unwarranted or arbitrary arrest and imprisonment. These came to include freedom of thought and religion, freedom of speech and the press, and freedom of association. Above it all was the wider idea of the Rule of Law, that justice was to be equal and impartial, and that all were answerable and accountable before the law, even those representing and enforcing the law in the name of the king. (6)

In the United States, many of these civil liberties were incorporated into the Constitution in the first ten amendments, which specified that there were some human freedoms so profoundly fundamental and essential to a free and good society that no government should presume to abridge or deny them.

The Liberal Crusade for Economic Freedom

The third great classical liberal crusade was for freedom of enterprise and free trade. Throughout the 17th and 18th centuries, governments in Europe controlled all the economic activities of their subjects as far as the arms of their political agents could reach.

Adam Smith and his economist colleagues argued that social order was possible without political design.

Adam Smith and his Scottish and English allies demolished the assumptions and logic of mercantilism, as the system of government planning was then called. They demonstrated that government planners and regulators have neither the wisdom, nor the knowledge, nor the ability to direct the complex interdependent activities of humanity.

Furthermore, Adam Smith and his economist colleagues argued that social order was possible without political design. Indeed, “as if guided by an invisible hand,” when men are left free to direct their own affairs within an institutional setting of individual liberty, private property, voluntary exchange, and unrestricted competition, there spontaneously forms a “system of natural liberty” that generates more wealth and coordinated activity than any governmental guiding hand could ever provide.

The benefits of the economic liberty that made Great Britain and then the United States the industrial powerhouses of the world by the end of the 19th century was rapidly doing the same, though at different rates, in other parts of Europe, and then, slowly, in other parts of the world, as well. Population sizes in the West grew far above anything known or imagined in the past, yet increased production and rising productivity were giving those tens of millions of more people an increasing standard and quality of living.

The Liberal Crusade for Political Freedom

The fourth classical liberal crusade was for greater political liberty. It was argued that if liberty meant that men were to be self-governing over their own lives, should that not also mean that they participate in the governing of the society in which they live, in the form of an enlarged voting franchise through which the governed selected those who held political office on their behalf?

John Stuart Mill proposed that all those who received any form of financial subsidy or support from the government should be denied the voting franchise.

Liberals condemned the corrupt and manipulated electoral process in Great Britain that gave office in Parliament to handpicked voices defending the narrow interests of the landed aristocracy at the expense of many others in society. So as the 19th and early 20th centuries progressed, the right to vote moved more and more in the direction of universal suffrage.

It was not that liberals were unconcerned about the potential abuses from democratic majorities. In fact, John Stuart Mill, in his Considerations on Representative Government (1861), proposed that all those who received any form of financial subsidy or support from the government should be denied the voting franchise for as long as they were dependent in such a manner upon the taxpayers. There was too much of a possible conflict of interest when those who received such redistributive benefits could vote to pick the pockets of their fellow citizens. Alas, his wise advice was never followed. (7)

The Liberal Crusade for International Peace

Finally, the fifth of the liberal crusades of the 19th century was for, if not the abolition of war, then at least the reduction in the frequency of international conflicts among nations and the severity of damage that came with military combat.

And, in fact, during the century that separated the defeat of Napoleon in 1815 and the commencement of the First World War in 1914, wars, at least among the European Powers, were infrequent, relatively short in duration, and limited in their physical destruction and taking of human life.

There were treaties detailing how prisoners of war were to be humanely treated, as well as the banishing of certain forms of warfare.

It was argued that war was counterproductive to the interests of all nations and peoples. It prevented and disrupted the natural benefits that can and did improve the conditions of all men through peaceful production and trade based on an international division of labor in which all gained from the specializations of others in industry, agriculture, and the arts. (8)

Due to the classical liberal spirit of the time, there were some successful attempts to arrange formal “rules of war” among governments under which the lives and property of innocent non-combatants would be respected even by conquering armies. There were treaties detailing how prisoners of war were to be humanely treated and cared for, as well as the banishing of certain forms of warfare deemed immoral and ungentlemanly. (9)

It would, of course, be an exaggeration and an absurdity to claim that 19th-century liberalism fully triumphed in terms of its ideals or its goals of political and economic reform and change.

However, if there is any meaning to the notion of a prevailing “spirit of the age” that sets the tone and direction of a period of history, then it cannot be denied that classical liberalism was the predominant ideal in the early and middle decades of the 19th century, and that it changed the world in a truly transformative way. Whatever political, economic, and personal liberty we still possess today is due to that earlier classical liberal epoch of human history.

America, the Beacon of Individual Liberty

In the new nation of the United States of America, there was a written constitution that, in principle and practice, recognized the rights of individuals to their lives, liberty, and honestly acquired property. Only in America could an individual say and do virtually anything that he wanted, as long as it was peaceful and not an infringement on other citizens’ similar individual rights. Only in America was trade across this new and growing country free from government regulations and controls or oppressive taxes, so people could live, work, and invest wherever they wanted, for any purpose that took their fancy or offered them profit.

Michel Chevalier was a Frenchman who, like Alexis de Tocqueville, visited America in the 1830s, then returned to France and wrote a book about his impressions of the Society, Manners and Politics of the United States (1839). Chevalier explained to his French readers:

The American is a model of industry… The manners and customs are altogether those of a working, busy society. At the age of fifteen years, a man is engaged in business; at twenty-one he is established, he has his farm, his workshop, his counting-room, or his office, in a word his employment, whatever it may be. He now also takes a wife, and at twenty-two is the father of a family, and consequently has a powerful stimulus to excite him to industry. A man who has no profession, and, which is the same thing, who is not married, enjoys little consideration; he, who is an active and useful member of society, who contributes his share to augment the national wealth and increase the numbers of the population, he only is looked upon with respect and favor. The American is educated with the idea that he will have some particular occupation, that he is to be a farmer, artisan, manufacturer, merchant, speculator, lawyer, physician, or minister, perhaps all in succession, and that, if he is active and intelligent, he will make his fortune. He has no conception of living without a profession, even when his family is rich, for he sees nobody about him not engaged in business. The man of leisure is a variety of the human species, of which the Yankee does not suspect the existence, and he knows that if rich today, his father may be ruined tomorrow. Besides, the father himself is engaged in business, according to custom, and does not think of dispossessing himself of his fortune; if the son wishes to have one at present, let him make it himself! (10)

Chevalier also emphasized the competitive spirit of the American:

An American’s business is always to be on edge lest his neighbor get there before him. If a hundred Americans were about to go before a firing squad, they would start fighting for the privilege of going first, so used are they to competition! (11)

It may seem to many as a cliché, but in those decades of the 19th and early 20th centuries, when few migration restrictions barred the door, America stood out as a beacon of hope and promise. Here a man could have his “second chance.” He could leave behind the political tyranny, religious oppression, and economic privileges of the “old country” to have a new start for himself and his family. Between 1840 and 1914, nearly 60 million people left the “old world” to make their new beginnings in other parts of the world, and almost 35 million of them came to America. Many of us are the lucky descendants of those earlier generations who came to “breathe free” in the United States. (12)

Modern Challenges to Classical Liberalism

The 20th century saw a turn away from the classical liberal idea and ideal that inspired those crusades for human freedom, prosperity, and a more humane civil society. In its place arose nationalism, socialism, and the interventionist-welfare state. They all represent a movement back to political and economic collectivism under which the individual is viewed as subservient to the interests of a wider community that the government is to define, impose and implement. The upshot is the reduction and loss of degrees of individual freedom in various corners and aspects of everyday life.

It is also asserted that the government must paternalistically regulate various forms of personal and social actions and activities.

The worst and the most brutal of the communist, nationalist, and racialist forms of 20th-century collectivism—Soviet socialism, Italian fascism, German National Socialism (Nazism)—have disappeared from the political face of the world. But in the form of the interventionist-welfare state, it is still presumed that it is necessary and essential for the government to micromanage much of what goes on in the market arena. It is also asserted that the government must paternalistically regulate various forms of personal and social actions and activities.

One of the most recent revived forms of this in the United States has been the rise of economic nationalism and the belief that government must restrict or induce where and for what private sector investment in undertaken within or outside of America. It is the stated policy of the current administration in Washington, D.C.

Classical Liberalism’s Defense of Economic Freedom

The underlying principle behind it was challenged by a prominent 19th century South Carolinian, Thomas Cooper (1759-1839). He was president of South Carolina College (later the University of South Carolina), and a professor of chemistry and political economy.  His 1830, Lectures on the Elements of Political Economy became one of the most widely used economics textbooks in the United States. He said:

The whole use of foreign trade is to import commodities that are wanted, at less cost, than they are produced at home. This is the very basis and essential character of it. Hence, the principle of restrictions and prohibitory imposts [tariffs], forbidding an article into being introduced from abroad because it can be had cheaper from abroad—goes to the utter annihilation of all foreign commerce…

The restrictive system tells us in fact, that we shall greatly profit by being confined as prisoners within our own houses, without intercourse out of doors; that is it our duty to let our domestic neighbor grow rich on our credulity, and persuade us to buy from him an inferior article, at a higher price…

For [this] principle being adopted, where is it to stop? To talk after this, of our being the most enlightened nation upon earth, is a satire upon ourselves more bitter than our own enemies have it in their power to utter. To be governed by such ignorance, is indeed a national disgrace…

Political Economy… has taught us, that human improvement, and national prosperity, are not promoted in any particular nation, by depressing every other, but by aiding, encouraging and promoting the welfare of every nation around us. That we are all in our turn customers to each other, and that no man or nation can become wealthy by impoverishing his customers. The richer other nations are, the more they are enabled to purchase, the cheaper they can afford to sell, the more improved they become in all the arts of living, in all intellectual acquirement, in everything desirable for other nations to imitate or improve upon. That if other nations become powerful by our assistance, we also of necessity become wealthy and powerful by our intercourse with them; and that peace and good neighborhood are the means of mutual happiness among nations as among individuals… 

The true principles of Political Economy… teach us also, that men should be permitted, without interference of government, to produce whatever they find it in their interest to produce; that they should not be prevented from producing some articles, or bribed to produce others. That they should be left unmolested to judge of and pursue their own interest; to exchange what they have produced when, where and with whom and in what manner they find most profitable and convenient; and not be compelled by theoretical statesmen to buy dear and sell cheap; or to give more, or get less, than they might if left to themselves, without government interference or control.

That no favored or privileged class should be fattened by monopolies or protections to which the rest of the community is forced to contribute. Such are the leading maxims by means of which Political Economy teaches how to obtain the greatest sum of useful commodities at the least expense of labor. These are indeed maxims directly opposed to the common practice of governments, who think they can never govern too much; and who are the willing dupes of artful and interested men, who seek to prey upon the vitals of the community. (13)

These free market, free trade, classical liberal principles expressed by Thomas Cooper are as valid today as when presented in the pages of his book almost 190 years ago. That is what the pages of a new journal, Political Economy of the Carolinas, will be devoted to and focused upon: the application and refinement of the social and economic principles of classical liberalism to the contemporary issues and problems confronting the people of North and South Carolina, today.

*See citations by clicking on the original article at the top of the page.

By Richard Ebeling

Originally published on August 10, 2021 for the American Institute for Economic Research

Rightly, much is being made about the size of federal government spending and the annual budget deficits, along with the projected resulting growth in the national debt over the next ten years. But a real and more serious deficit is to be found in the lack of sound and serious thinking and debate about the growing size and scope of government in America, because it is the latter that is the fundamental cause behind the fiscal and monetary madness that we are experiencing. 

In the current 2021 federal government fiscal year that closes at the end of September, Uncle Sam’s total outlays are projected to come to $6.85 trillion, with total tax revenues of $3.83 trillion, and a budget deficit of over $3 trillion. The Congressional Budget Office (CBO) anticipates that for seven of the next ten years federal spending will exceed federal revenues by $1 trillion. This will push the national debt from its current $28.5 trillion to nearly $40 trillion. 

In the 2021 fiscal year, federal spending will equal 30.6 percent of the U.S. Gross Domestic Product (GDP), and federal taxation will be 17.2 percent of GDP, making this year’s budget deficit equal to 13.4 percent of GDP. State and local government expenditures in 2021 are coming at over an additional $3 trillion. So, combined, all levels of government in the U.S. are absorbing almost $10 trillion, or nearly 45 percent of the nation’s GDP. 

If the CBO’s projections are more or less accurate (and they often underestimate what the government’s fiscal future holds in store), over the next decade federal government spending will average between 21 and 23 percent of GDP, and taxes will come to between 17 and 18 percent of GDP. For most of the next decade, again if the CBO is correct, the annual budget deficits will average between four and five percent of GDP. By 2031, the publicly-held national debt will be equal to 110 percent of GDP, and half of the money that government borrows that year will be to just pay the interest owed on all the accumulated debt. (See my article, “More Government Debt as Far as the Fiscal Eye Can See”.)

From Smaller Government to Big Spender

For a point of comparison, about 100 years ago, in 1920, federal expenditures were only 6.2 percent of GDP, while federal taxes were 6.7 percent; that is Uncle Sam ran a noticeable budget surplus for that year. State and local expenditures in 1920 totaled 5.2 percent of GDP, for a total of all government spending that year equaling 11.4 percent. While this may seem to be very small in comparison to now, those 1920 numbers were significantly larger than less than a decade earlier. In 1913, both federal expenditures and tax revenues only came to 2 percent of GDP; while state and local governments absorbed about 5.5 percent of GDP, for a total government take of only around 7.5 percent of Gross Domestic Product! 

Much of the tripling of Uncle Sam’s take of GDP between 1913 and 1920 was due to the huge increase in government spending, taxing and borrowing during America’s participation in the last year and a half of the First World War in Europe (1914-1918). This had been helped along with the 16th Amendment to the Constitution in 1913 that introduced a national income tax and the Congressional chartering the same year of the Federal Reserve System, which facilitated a good part of the war spending through monetary expansion made possible with America’s new central bank. 

America was not alone in having governments of far more modest size than today. In 1913, the year before the beginning of World War I, the British government spent 9.4 per cent of U.K. GDP, while in France that percentage was 17 percent, and in Imperial Germany it was 18.8 percent of their respective Gross Domestic Products. 

These percentage numbers of government spending relative to GDP may seem noticeably higher than that of the U.S in 1913. But recall, each of these European governments also had worldwide empires to run in a way that the United States did not, even after the Spanish-American War of 1898, which transferred the Philippine Islands and other smaller territories over to U.S. jurisdiction. However, compare those 1913 numbers to 2020, when for the U.K., France and Germany, government spending as percentages of their respective GDP came to 52.2 percent, 62.1 percent, and Germany, 51.5 percent! The modern domestic welfare state is clearly far more expensive and fiscally burdensome than were those worldwide empires of the past.

A Time When Individuals were Not Bothered by the State

It is difficult, I think, for most of us to even imagine how inconsequential government really was in people’s lives, at least at home, in these Western countries not much more than a century ago. Of course, even before the First World War, the modern welfare state was gaining footholds in these nations, but even with this, and especially in the United States and Great Britain, most people, to use the happy phrase of the British laissez-faire liberal, Herbert Spencer (1820-1902), could go through their daily lives and pretty much “ignore the state.”

An imagery of that world before 1914 was offered by British historian A. J. P. Taylor (1906-1990), no doubt with some exaggeration, in the opening pages of his English History, 1914-1945 (1965): 

“Until August 1914, a sensible, law-abiding Englishmen could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country forever without a passport or any sort of official permission. He could exchange his money for any other currency without restriction or limit. He could buy goods from any country in the world on the same terms as he bought goods at home. For that matter, a foreigner could spend his life in this country [Great Britain] without permit and without informing the police. Unlike the countries on the European continent, the state did not require its citizens to perform military service… Substantial householders were occasionally called for jury service. Otherwise, only those helped the state who wished to do so.”

Taylor did point out that already before the First World War the British government did impose a variety of regulations for purposes of food and health safety, legislated mandatory public education on the young, instituted a number of rules on hours and work conditions in the labor market, and was beginning to implement features of what later became the British welfare state of today. “Still, broadly speaking, the state acted only to help those who could not help themselves,” he stated. “It left the adult citizen alone.” 

This all changed with the coming of the First World War. Said Taylor:

“The mass of the people became, for the first time, active citizens. Their lives were shaped by orders from above; they were required to serve the state instead of pursuing exclusively their own affairs. Five million men entered the armed forces, many of them (though a minority) under compulsion. The Englishman’s food was limited, and its quality changed, by government order. His freedom of movement was restricted; his conditions of work prescribed. Some industries were reduced or closed, others artificially fostered. The publication of news was fettered. Street lights were dimmed. 

“The sacred freedom of drinking was tampered with; licensed hours were cut down, and the beer watered by order. The very time on the clocks were changed. From 1916 onwards, every Englishman got up an hour earlier in summer than he would otherwise have done, thanks to an act of parliament. The state established a hold over its citizens which, though relaxed in peacetime, was never to be removed and which the Second World War was again to increase. The history of the English state and the English people merged for the first time.”

The same pattern happened in the United States, with government power extending itself over American everyday life. Price, wage and production controls and central planning were imposed on every facet of the economy in the name of winning the war and making the world safe for democracy. Government war propaganda and press censorship compulsorily controlled the words and images seen by every citizen. 

Critics of the war effort, sometimes for the most minor verbal public expression of disagreement, were subject to arrest and imprisonment. Surveillance of the citizenry and informers watching their neighbors became part of daily existence. Nearly three million of the almost five million young Americans who served in the U.S. armed forces during the war had been forcibly conscripted – “nationalized” – by the government to fight in a war in which no foreign country had attacked the United States before America’s entry into the conflict. The Woodrow Wilson Administration basically collectivized the entire country as part of the war effort.

Many in America thought that things had returned to “normalcy” in the 1920s. But the coming of the Great Depression at the end of the 1920s and the early 1930s demonstrated that things were far from being so. But what made the turn toward political, economic and social collectivism in America a seemingly permanent trend for the remainder of these last one hundred years was the coming of Franklin D. Roosevelt’s New Deal.

The governmental policies of war planning and central control that were imposed in 1917 and 1918 became the backdrop to the mindset and the policies introduced by FDR starting in 1933 with the implementation of the New Deal. Sociologist and historian, Robert Nisbet (1913-1996), explained this well and clearly in his book, The Present Age (1988):

“[FDR] had served Wilson as assistant secretary of the navy in World War I, and had been thrilled by Wilson personally and by certain aspects of the War State. It is interesting to speculate on what form of American response to the depression of the 1930s would or might have taken had it not been for the legacy of government planning and regimentation left by the First World War…

“The response made by FDR and his chief aides… was simply a revival of structures and relationships which had characterized the Wilson War State. With altered names, many of the same production, labor, banking, and agricultural boards of World War I were simply dusted off, as it were, and with new polish set once again before the American people. This time the enemy was not Germany or any foreign power but the Depression; this did not, however, prevent Roosevelt from literally declaring war on it and likening himself and his associates to a ‘trained and loyal army willing to sacrifice for the good of a common discipline’.”

American industry was conscripted into government mandated cartels as part of the National Industrial Recovery Administration (NRIA) that set prices, wages, and production targets; American farmers were placed under the command of the government through the Agricultural Adjustment Administration (AAA), with its power to determine crop sizes, animal herds, and the prices of all that was supplied by the farming community. Grandiose public works projects of road building, dam construction, regional electrical programs (TVA), and huge budget deficits and central bank money creation were used to “stimulate” economy-wide demand and artificially push up prices and profits and employments. The welfare state was planted with government-mandated Social Security and health care programs, along with public housing projects, and unemployment insurance. Plus, the Roosevelt Administration used a host of propaganda campaigns to rally the people to loyally accept and go along with this new central planning role of government.   

Collectivism Came to America and People Passively Followed

Individuals, communities, and states were all submerged within and aggregated into nationalized tasks under government direction. This aspect to the nature and legacy of the New Deal was also emphasized by Robert Nisbet:

“The New Deal is a great watershed not only in twentieth-century American history but in our entire national history. In it the mesmerizing idea of a national community – an idea that had been in the air since the Progressive era… had come into full but brief existence in 1917 under the stimulus of war – was now at long last to be initiated in peacetime as a measure to combat the evils of capitalism and its ‘economic royalists’… 

“[FDR] once explained the New Deal’s ‘drastic changes in the methods and forms of the functions of government’ by noting that ‘we have been extending to our national life the old principle of the local community’… Without doubt the idea of national community burns brightly in the American consciousness at the present time. Initiated by President Roosevelt, the idea has been nourished, watered, and tended in one degree or other by each succeeding president… the national state, the centralized, collectivized, and bureaucratized national state…”

The significance of this political and economic transformation was understood by some at the time. For instance, the noted American journalist, Walter Lippmann (1889-1974), emphasized that what was happening in the United States were not policies for a temporary emergency, but, as he said in the pages of the June 1935 issue of Yale Review, the establishment of a “Permanent New Deal.” In fact, said Lippmann, it was initiated by Republican president, Herbert Hoover, with the coming of the Great Depression in the autumn of 1929 and was simply magnified and intensified with FDR’s New Deal planning, regulating and redistributing policies beginning in 1933. Explained Lippmann: 

“The policy initiated by President Hoover in the autumn of 1929 was something utterly unprecedented in American history… It was Mr. Hoover who abandoned the principles of laissez faire in relation to the business cycle, established the conviction that prosperity and depression could be publicly controlled by political action, and drove out of the public consciousness the old idea that depressions must be overcome by private adjustment… 

“Only those who have forgotten the inclusive and persistent experimentation before March 1933, can, I think, fail to see that most of [FDR’s] recovery program is an evolution from its predecessor’s program; and that there is a continuity of principle; and that both programs are derived from the unprecedented doctrine that the government is charged with responsibility for the successful operation of the economic order and the maintenance of a satisfactory standard of life for all classes of the nation…

“Did any previous American president suppose that it was his duty to tell farmers and businessmen and bankers, debtors and creditors, employers and employees, governors and mayors, what to do in order to restore prosperity, or that he had a right to draw upon all the powers of government and the resources of the nation?”

What most surprised Lippmann was that with such a large increase in the size and scope of government in the U.S., “Yet when the change occurred, there was almost no comment. Hardly anyone raised his voice in challenge on the ground of the individualistic tradition or the accepted limitations of the federal power.” 

There were voices, in fact, who raised questions and criticisms, especially following the even more concentration of federal control and planning after FDR took office in 1933, but nonetheless most Americans and almost all of the policy and press media pundits either acquiesced or strongly endorsed the president’s near dictatorial hand with the fascist-like economic planning institutions of the early New Deal. (See my article, “When the Supreme Court Stopped Economic Fascism in America”.)

Presidential Discretion in Going to War

The same pattern of acceptance of centralized power and decision-making grew out of the Second World War. So strong was the public sentiment for the United States to stay out of the wars in Europe and Asia before the Japanese attack on Pearl Harbor on December 7, 1941, that when Roosevelt ran for his unprecedented third term as president in 1940, he had to loudly and repeatedly assure the American voters that he would do all in his power to keep the U.S. neutral and out of war.

Of course, almost all historians now admit and detail the various ways FDR aggressively did all in his implicit authority to plan for and get the United States into the war against Nazi Germany and Imperial Japan. The fact that Roosevelt violated or at least skirted neutrality laws passed by Congress and sometimes earlier signed by him to restrict America from being dragged into foreign conflicts, and that he went far beyond his traditional Constitutional prerogatives in pushing for war is not even considered an important historical event anymore.  

It is now presumed that for all intents and purposes if a president considers some foreign conflict to be in some way “vital” to American interests or concerning “humanitarian” matters that “America cannot ignore,” then he has fairly wide discretion to enter such a conflict in some way, shape or form, and only later officially and fully inform Congress and arrange for needed appropriations to fund the foreign intervention. 

LBJ’s Great Society Hubris at Home and Abroad

What FDR began, Lyndon Johnson continued with the Great Society programs of the second half of the 1960s. Arrogance and hubris dominated the domestic and foreign political paternalism of those in the Johnson Administration. The “whiz-kids,” as some of his cabinet members and policy advisors were called, believed that they could micromanage a war in Vietnam, 10,000 miles away from the United States, through strategically planned “escalations” of bombings, battles, and population resettlements to win over the hearts and minds of the Vietnamese – with abject failure on all counts. 

At home LBJ initiated metaphorical “wars” meant to defeat poverty, illiteracy, racism, and inequality. As economists like Thomas Sowell have demonstrated, as in his book, Discrimination and Disparities (2019), from the history of America before and after the implementation of the Great Society agenda, the effects of many of these centrally planned programs for achieving a “social justice” utopia have been to make the circumstances of many worse than before in “minority” communities, or at least to slow down the improvements in income, social status, and family life that were being experienced by many Black Americans before the introduction of the political paternalisms of the Johnson presidency. (See my article, “Why the Social Engineers of the Sixties Failed to Make a ‘Great Society’”.)

Rhetoric of Less Government and Reality of Bigger Government

In retrospect, the 1980s and 1990s were a period of ideological delusion for many friends of liberty. The Reagan and Clinton years created the impression that personal freedom and limited government were possibly making a comeback. Reagan’s often eloquent rhetoric and captivating humor in which he preached about liberty and satirized communists, socialists and others on “the left,” was summed up in his often used phrase that, “Government is the problem, not the solution.” Plus, Bill Clinton’s declaration that the era of Big Government was over, due to his stalemate with a Republican-controlled Congress for most of his presidency that saw several years of modest federal budget surpluses, made it seem that, maybe, the tide might have turned away from increasing political paternalism and governmental control. (See my article, “The Lasting Legacy of the Reagan Revolution”.)

But that was shown to be really wrong in the 21^st century under the George W. Bush, Barack Obama, Donald Trump, and, now, Joe Biden Administrations. When Ronald Reagan left office in 1989, the national debt stood at $2.8 trillion (it had been less than a trillion dollars when he entered the presidency in 1981, for a 286 percent increase). It rose by 57 percent, to $4.4 trillion, when George H. W. Bush left the White House after one term in 1993. It went up more modestly by “only” 31 percent during Clinton’s two terms, to $5.8 trillion at the start of 2001.

But under George H. Bush’s eight years in office from 2001 to 2009, the national debt grew to $11.9 trillion (a 205 percent increase), and reached $20.2 trillion when Obama left after two terms in early 2017 (a 70 percent increase). During Trump’s four years as president, the debt increased to $27 trillion (a 34 percent increase). And with less than eight months in the White House, the national debt stands at over $28.5 trillion under Joe Biden – and growing. 

Government Regulation and Presidential Discretionary Power

A little over one hundred years ago, say in 1910, there were virtually none of the current government bureaus and agencies that today hamstring the private sector with a spider’s web of regulations and restrictions. But today, according to the Competitive Enterprise Institute (CEI), compliance with federal government regulations costs the private business sector at least $1.9 trillion. 

As the CEI points out in its 2021 edition of its annual Ten Thousand Commandments Report, this is almost equal to all the personal income and corporate taxes collected by the U.S. government. Or another way of looking at this burden of government regulation, if this $1.9 trillion represented the GDP of a separate country it would rank as the eighth largest economy in the world.  

It has not mattered who is residing in the White House or which major political party has control of the two houses of Congress. The end result has been the same: arrogated and arbitrary presidential power and legislative spending sprees. Barack Obama assured those in Congress, and the citizens of the country, that if he did not get his way with legislation that he wanted to see implemented, well, he had a phone and a pen, and he would simply sign off on executive orders to get what he wanted done. 

Donald Trump was no different in asserting his power and authority to bully businessmen to invest and employ workers where he thought it was good for America, and initiating trade wars that he said were “fun” and easy to win; and he even insisted that it was his job to “run” the country, including in 2020 during the beginning of the Coronavirus crisis, captured for weeks on end in his daily televised tirades on how he was in control of all aspects of the response to the pandemic. (See my articles, “Mr. President: Please Mind Your Own Business” and “Presidential Hubris: Let Me Run the Country” and “The U.S. Revives the Personal State”.)

Coronavirus Crisis and Dangerous Political Precedents

The Coronavirus crisis has set dangerous precedents for an even more discretionary and controlling government. The federal and state governments took over de facto control of practically all economic decision-making and social interactions. The American people were commanded and ordered to stop almost everything they were doing – don’t produce anything but what the political authorities declare to be “essential” items; do not go to work, except in those industries considered essential by politicians and their “experts”; stay at home, and only go outside for “essential” shopping for food or medical supplies; shut down your “nonessential” retail business of practically every type. Wear that mask and stay six feet away from others. 

Many “essential” and “nonessential” goods, not surprisingly, disappeared from retail stores, with panic buying setting in. Governments instituted or threatened price controls to prevent “price gouging” at a time of “national crisis,” which, of course, only exacerbated the short supplies and the desperate search for everyday items by consumers. 

Output fell, unemployment rose, people’s incomes dramatically went down or went to zero. The first truly American government-made and mandated economic collapse impacted the entire country. And like during the Great Depression years of the early 1930s, most Americans silently, passively, and obediently followed what the government told them to do. The increasing pockets of resistance or opposition to these near totalitarian policies are viewed by those in political power and in most of the media as “kooks” and ideological “extremists” not willing to “follow the science.”  

Every future declared health crisis can become a new reason and rationale to impose lockdowns and shutdowns, order everyone to wear a mask and stay “x” number of feet away from those around you, command people to stop working and stay at home, mandate vaccinations, and justify dictating where, what, and when private enterprises may produce and sell, and at what prices. (See my article, “War and ‘Following the Science’ are Sure Paths to Tyranny”.)

Biden Ignores the Constitution and Tells People What to Drive 

Biden is also adding layers to the arbitrary powers of the presidency. His latest decision to prolong the moratorium on rental evictions through the Centers for Disease Control and Prevention (CDC) is an example of this. Even though a few days before he publicly said that he did not have the Constitutional authority to extend such a moratorium, merely because of the political pressures from within his own party and “progressive” circle, Biden said he would, based on the uncertain advice of a constitutional lawyer who shares Biden’s political views. 

If the Supreme Court overturns his executive decision later on, as has been suggested might happen, well, that is likely to come long after the moratorium had served its political purposes. What was it that John Maynard Keynes once said? “In the long run we are all dead.” So what if the Constitutional order and the division of restrained powers between the three branches of government are weakened and made to seem as even more irrelevant than is already the case? Politics is about expediency, not principles, according to Joe Biden and most of his presidential predecessors for a very long time.

In addition, Joe Biden has decided what types of automobiles we should drive in the years ahead. He is instructing the appropriate regulatory agencies to see to it that by 2030, 50 percent of all new cars sold in America will be electric-powered vehicles. “There’s a vision of the future that is now beginning to happen, a future of the automobile industry that is electric — battery electric, plug-in hybrid electric, fuel cell electric,” Biden said at the White House. 

When he says, “there is a vision,” he means his vision and that of the opponents of fossil fuels, and not necessarily you and me. Is the future one of electric cars? It may very well be; but in a free society, this would be decided by the competitive and voluntary interactions of consumers and producers in the market for automobiles. It would be the result of entrepreneurial innovations that devised ways of making such electric cars cost-efficient, convenient, and attractive to automobile buyers, without government commands, controls, or subsidized “nudges” into the directions those in political power desire rather than “we, the people,” through our own market decisions.

In addition, it certainly could be a big nudge if any infrastructure or later Congressional bill contains federal government authority to tax each and every one of us based on the number of miles we drive our cars for any and all purposes, to feed the political establishment’s insatiable appetite for our income and wealth, and to further the ideological agenda of the climate central planners who want to get us out of our cars and into less convenient and more time consuming “public” mass transportation. (See my articles, “Biden’s Agenda of ‘Democratic’ Paternalism and Planning” and “The Paternalist Instincts of a Central Planner” and “Under Biden Free Enterprise Means Government Control”.)

We are running headlong in the direction of a far more comprehensive paternalistic state, and farther away from a world in which government would basically leave us alone in our peaceful and voluntary actions and activities with our fellow human beings. 

A. J. P. Taylor may have exaggerated when he said, as was quoted earlier, that there was a time not really that long ago when a person could go through his entire life and only come into contact with the state in the form of the postman delivering the mail, the policeman walking his neighborhood beat, and an occasional call from the courts for jury duty. But it reflects the imagery of a free society of free men going about their peaceful and freely associating business, both inside and outside of the free marketplace. 

However, if current trends continue in the present direction for too long, the potential and possibility for liberty may be irreparably lost. We need to remember and to forewarn others that liberty is far easier to lose than to be successfully and fully regained once it is lost.

By Dr. Eric Daniels

Originally published for The Objective Standard on February 20, 2013

In his 1996 State of the Union Address, President Bill Clinton confronted the problem of how the United States could continue making economic opportunities available to all Americans in the midst of a growing world economy with rapidly changing technology and robust competition from abroad. Many on the left had called for government to expand its role in the economy and to provide jobs and protection for Americans who felt that opportunities were bypassing them. In a masterstroke of political re-branding, Clinton instead announced that “big government does not have all the answers” and that “the era of big government is over.”¹

The now-famous speech sparked an interesting, if ultimately hollow, debate about the proper size of government. Politicians and pundits on the left alleged that Clinton took the position for purely political reasons, coming as it did in an election year when he would win a second term in office. Many on the right hailed the move at the time—only to lament the continuation of “big government” as changing world events, including 9/11 and the 2008 financial crisis, seemed to underscore the necessity of “big government” once again. Now, a decade and a half later, President Obama and Congress bicker over fiscal cliffs and debt ceilings, and federal and state politicians continue to bloat budgets, increase spending, and raise taxes. Arguments about “big government” and its ills have returned with a vengeance, but, at its root, the discussion is misguided.

The idea of “big government” has been vague and imprecise since its introduction to the English lexicon in the 1920s.² Those who use it leave the term undefined and throw it around as a rhetorical joust, counting on what everyone who is against the idea seems to “know”—that “big government” is bad—yet no one can specify how big is too big or even what “big” means in this context.

We who wish to defend liberty need to dispense with the shibboleth of “big government.” Size is not an essential aspect of government’s propriety or impropriety. The proper measure of government concerns its function. A government—or any aspect thereof—is good or bad depending on whether it is directed toward the proper end of government: the protection of individual rights by means of banning physical force from social relationships. Insofar as size matters at all, its significance lies in whether a given government or department or program is the optimal size for the ultimate purpose of protecting rights.

To begin making this clear, consider an analogy. A doctor observes that a patient’s weight has been increasing steadily for some months. The doctor announces that either a weight-loss diet or weight-reduction surgery will be necessary. The growth, he says, must not only be stopped; it must be reversed, and the patient returned to a previous size.

Is the doctor right? We cannot know unless we ask and answer crucial questions. What is the cause and nature of the growth? Is the patient a child going through a natural growth spurt? Is the patient pregnant? Is the patient suffering from a rapidly growing cancerous tumor? Has the patient regularly been eating pizza for breakfast, lunch, and dinner while abstaining entirely from exercise? Has the patient been eating a high-protein diet, lifting weights, and building muscle? Without investigating and diagnosing the cause and nature of the growth, a doctor who simply declared that all gains in size are bad and must be reversed would be guilty not only of gross negligence but of malpractice.

It would, of course, be a caricature to suggest that all arguments about the size and growth of government follow the pattern of the doctor in our example. But the analogy is useful in clarifying the importance of focusing not on the size of government but on its function. To evaluate any government or aspect thereof, we must ask what it aims to do: whether that aim is necessary to the proper function of government, the protection of rights; and whether the policy or program effectively serves that purpose. Likewise, to evaluate any instance or trend of growth in government, we must understand what specific aspect is growing, why it is growing, and what this means with respect to rights.

To further illustrate the problem with focusing on the size of government, consider some of the difficulties in trying to measure it.

Apart from the standard of protecting rights, how is government to be measured? Should it be compared to some earlier size? Should it be compared to governments in other developed nations? Should its budget be compared with its respective country’s economic growth or gross domestic product (GDP)? All such measures, although perhaps interesting for certain specialized purposes, draw us away from the question of what a government is actually doing and whether those actions are within the scope of its legitimate function.

Consider more closely the popular approach of measuring government by comparing its expenditures to GDP. Take countries A and B, which are extremely similar in almost every way—population, demographics, GDP, industrial development, geographic size—such that they could be doppelgängers, or the same country in an alternate universe. Despite their nearly identical conditions, the government in country A spends 15 percent of its GDP annually whereas the government in country B spends only 8 percent of its GDP. Which country is freer? Which has a government that is the appropriate size or at least closer to it?

The “clear” answer to anyone concerned primarily with the size of government is that country B is freer because its government consumes a smaller proportion of the total economy. But suppose the reason for the difference is that in country B some essential government function is missing or insufficient. Suppose, for example, the police departments are understaffed such that fewer criminals are arrested, or the judicial system is insufficiently funded such that fewer criminals are brought to justice and more innocent men are convicted. Or suppose that in country A, all government spending is allocated to rights-protecting functions; whereas in country B, 90 percent of the government spending is allocated to rights-protecting functions while 10 percent goes to interferences with its citizens’ religious liberty. Can we say, by reference to government spending relative to GDP, whether a given country has an appropriately sized government? The answer, clearly, is no.

It is no coincidence that the American Founders did not make a big deal about the size of government. The Founders knew that what matters in government is not its size but the extent to which it violates or protects rights, which is why they established the idea of individual rights as the bedrock of American government. The genius of the revolutionary generation consisted in large part in the discovery and application of the idea that government is only legitimate when its actions are restricted to upholding and protecting the rights to life, liberty, property, and the pursuit of happiness. Whatever deficiencies in their understanding of the ultimate source of rights, and whatever inconsistencies in their application of the principle of rights, the Founders knew that a proper government is one strictly limited to the protection of rights.

For a government to protect rights is not simple; it is a highly complex process involving a system of courts, to provide an objective arena in which individuals can resolve their disputes; an adequate police force, to protect citizens from rights violations perpetrated by other citizens and to enforce the laws of the society; and a sufficient military, to defend citizens and the country against foreign aggressors. But the complexity of the process does not alter the simplicity of its purpose, and getting the purpose of government right is essential to advocating freedom.

Remaining focused on the proper purpose of government enables us to achieve clarity on political matters—and to help others do so. Losing sight of this standard leads to confusion in our own minds and in the minds of others.

Countless confusions arise from undue concern with the size of government. Observe, for instance, the logical implication that, if smaller government is always better, then the ideal size of government is no government at all. To advocate ever-smaller government is to advocate anarchy. Observe further that if bigger government is always worse, then there is never any need or justification for expanding any aspect of government. This assumption can blind people from seeing the ways in which more robust government in certain areas can be more protective of individual rights and the ways in which smaller government in certain spheres can fail to adequately protect rights. Consider some historical examples.

Advocates of “small government” often find a model in the state and federal governments of late 19th-century America. With few national business regulations, an open employment market, and a relatively unhindered financial sector, America during this era experienced prodigious rates of growth, wondrous advancements in technology, and rising standards of living. Yet the period also witnessed significant limitations of individual freedoms, including state-sanctioned segregation against blacks, disfranchisement of blacks and poor whites, and a prohibition on Chinese immigration.

In 1890, for instance, the state of Louisiana passed the Separate Car Act, requiring railroads to provide at their own expense separate cars for blacks and whites. The notorious Plessy v. Ferguson case of 1896, in which the Supreme Court upheld the Separate Car Act, allowed for states and municipalities to force private businesses, many of which were otherwise unwilling, to uphold segregationist policies at private expense.³ Segregation laws also made it necessary for blacks to open and operate their own banks, separate from the national capital markets and other financial institutions. In violating the rights of blacks, these laws caused significant economic inefficiency, not only in the black-owned banks, but across the whole banking system.⁴ Another massive violation of rights during this era, the Chinese Exclusion Act of 1882, not only outlawed immigration from China; it also forbade existing Chinese immigrants from becoming U.S. citizens. The Scott Act of 1888 went further and prohibited reentry of existing Chinese immigrants if they left the country.

All of these state-sanctioned rights violations and many more happened during a time when the government was likely the smallest it has ever been. If we myopically focus on the size of government and fail to identify its proper purpose, we will see this era as entirely good, when, in fact, it was substantially mixed.

Consider also that the size of government appropriate for a 19th-century society, with relatively primitive forms of communication and technology and relatively simple forms of property, is necessarily different from the size of government appropriate to a modern, 21st-century society, with the Internet, highly advanced technology, and various complex forms of property. The development of new technologies requires a government to expand and provide the institutional framework for protecting rights, especially property rights, within this new context.

Likewise, the rise of foreign enemies and their increasing access to weapons of mass destruction and advanced means of transportation give rise to the need of greater military capacity to defend against such threats. The United States benefited for decades, if not a century, from the natural borders and protection offered by the Atlantic and Pacific Oceans. In these years, especially as relations with land neighbors Canada and Mexico became nonmilitarized, the U.S. government was able to manage with miniscule defense budgets. In the 20th century, let alone the 21st, the ability of hostile powers to extend destructive force to American soil from across the globe, the rapidity with which they can do this, and the widespread destruction possible from such an attack, require that the United States expend considerably more resources on its military. Leaving aside whether the U.S. military is overextended or underfunded at present, there is no doubt that defense spending in the modern era of nuclear warheads and rockets is necessarily greater than in the era of wooden ships and muskets.

Advocates of liberty often marvel at the economic vibrancy and development in the 19th century and note the very small size of government relative to later periods, but if the proper purpose of government is to protect rights, then government during this period was in some respects too small. Some of the most vital functions of the new government were, in many cases, conducted without adequate funding or staffing. For instance, because courts were substantially understaffed, judges had to “ride circuit,” or travel from town to town adjudicating many cases on relatively little rest—not an ideal situation for prosecutors or the prosecuted.

Similarly, when Thomas Jefferson was secretary of state, there was no dedicated patent office, so the job of patent inspector was included as a subsidiary responsibility of the secretary of state. As brilliant as Jefferson was, and as deeply interested in science and technology as he was, executing his responsibilities as patent inspector while simultaneously handling the international tensions between the United States and Britain and France undoubtedly diminished his overall effectiveness.

A contemporary example of how focusing on the size of government rather than its proper function causes problems can be seen in today’s criminal justice system. It is likely that this aspect of government—at least as it pertains to dispute resolution and violent crimes—should be bigger than it currently is. The court system experiences clogs in its dockets; criminals often slip through the hands of justice; individuals seeking impartial resolution to their disputes may not have their day in court or may be insufficiently heard because the system is underfunded. It is neither inexpensive nor easy to operate a proper judicial system, with extensive and impartial reviews of evidence, an incarceration system that properly punishes but does not abuse inmates, and proper laws and procedures that provide for the objective resolution of contractual disputes.

And then there are the opportunities afforded to seedy politicians when the focus is on the size of government rather than its proper purpose. By highlighting numerical measures of government while ignoring its proper purpose, politicians often claim to be serving the interests of the American people when they are, in fact, only minutely tinkering with the degree to which government violates or fails to protect our rights. Consider, for instance, some of the typical measures of big government: the number of government employees, the amount of government spending, the number of laws and regulations, the number of Americans who “depend” on the government. Although politicians notoriously distort, manipulate, and obfuscate these numbers, the fundamental problem is worse: Focusing on these numbers distracts us from focusing on the proper purpose of government and thus enables politicians to get away with all that they do—from McCain-Feingold to Sarbanes-Oxley to ObamaCare.

One commonly used measure of the size of government is the number of people who work for the government. As historical tables indicate, the number of people who work for the United States government, in both civilian and military capacity, has grown not only in absolute terms as the country has grown, but also as a function of the total employment base of the nation. The employment share of the government has risen considerably during periods of major military conflict and subsequently declined, as one would expect. The government’s share of total employment also trended upward over the course of the 20th century. These trends hold true for state and local government as well. Surely these measurements tell us something, but they miss as much as they account for. Consider just two substantial factors that such measurements miss entirely. One is the marked growth of “shadow government employment”—employment ostensibly in the private sector but ultimately for government purposes. Another is the fact that the data in such measurements are, for the most part, aggregated—not differentiated by what these employees actually do. Take these in turn.

Shadow government employees include everyone from university biochemistry professors whose budgets and graduate student employees are funded by grants from the National Institutes of Health, to employees of concrete factories whose product is purchased predominantly for government road building. Countless contractors, grant recipients, suppliers, service technicians, and dozens of other kinds of recipients earn their basic living from government outlays. The best current estimate is that inclusion of the “shadow government” would render total federal employment ten times larger than the officially listed numbers produced in Washington, D.C.⁵

Because of political pressures and partisan jockeying, politicians from both parties and across the branches of government have a strong incentive to make the government appear smaller in employment terms than it actually is. In the past thirty years, more government activity has been outsourced to workers who do not hold official federal jobs, but who nevertheless effectively work full-time for the government.

Even within the narrower realm of “official” government employees, however, a sheer head count means little, unless it is accompanied by a standard specifying the legitimate functions of government. Government comprises hundreds of agencies, thousands of offices, and millions of employees. Which ones should stay, and which should go? It depends on what government is supposed to do.

Political wrangling and posturing have long plagued the debate about the magnitude of government taxing and spending. For as long as government has used taxes to raise revenue, politicians and pundits have attempted to distort or hide the true extent of spending. The government now maintains both on-budget and off-budget items; separates transfer payments and government “insurance” programs, grants-in-aid, and other categories; engages in “quantitative easing,” the latest euphemism for printing money; and takes countless other measures to obscure the extent and details of its spending. Data provided by the government about government spending radically understate the true extent of it.

Further, much of the cost of government manifests in private expenditures necessitated by government mandates. To take one example, the time, money, and effort required to comply with the tax laws are left uncounted by official records of federal outlays, but these amount to billions, if not trillions, of dollars annually—all paid for by private business and private citizens. And that’s just tax compliance. Implementation of and compliance with the tens of thousands of regulations amounts to a massive “shadow cost structure” that goes unmeasured in conventional accounts of government taxing and spending.⁶ The Securities and Exchange Commission, for instance, estimates the annual cost of compliance with Sarbanes-Oxley for the average applicable firm in excess of $2 million. Given the thousands of businesses in the United States that must comply with the law, the annual cost of this law alone is easily in the billions.⁷

Another common approach to measuring the size of government recognizes the problems involved in merely counting employees or measuring expenditures, and attempts to account for the scope of government by identifying how much of the life of the citizen is “controlled” by government policy, whether directly by a rule-enforcing bureaucrat or indirectly through choice-thwarting laws or regulations. The rough proxy typically used for assessing how broadly the government has affected our everyday lives is the number and variety of laws and regulations it passes and enforces and the number of different agencies it creates. Comparing an organizational chart of government agencies and offices over time provides an arresting visual. All the departments, agencies, and offices of the original U.S. government could be listed on a single page. Now, enumerating the tens of thousands of agencies, offices, and commissions that form the government requires dozens of pages. Likewise, the code of federal laws and regulations has grown dramatically. Study after study has shown the virtual sea of paper and ink that flows from Washington and the state capitols each year. New laws can encompass hundreds of pages of print, then tens of thousands more to spell out the rules and regulations required to administer and enforce them.

Yet even this kind of measurement does not reveal the whole truth. Consider antitrust laws, which originated in 1890 with the Sherman Antitrust Act. In its original conception, the Sherman Act was a brief and simply stated law with a potentially unlimited scope. Compare that with a new law involving mandates about the storage, transport, and use of a hazardous chemical compound—a law that, on paper, might extend over a thousand pages, detailing a multitude of technical areas and implications. Which law is more an artifact of “big government”? The fact is that twenty laws of the latter variety would not amount to the rights-violating, market-throttling nature of the Sherman Act.

Finally, some people argue that the best means of measuring the size or growth of government is to identify the extent of individual and business “dependence” on government. We see increasing rates of dependence on government in the form of increasing welfare rolls, increasing employment by government, increasing government contracting, increasing corporate bailouts, and the like. Certainly there is something to this. Even so, although studies about “dependency” can be useful, they suffer from the same problems discussed above with respect to measuring government employment and spending: They leave unanswered important questions about why the government acts as it does in different areas, and, most fundamentally, whether its actions protect or violate rights.

Each of the above approaches to measuring government reveals important information about government. But none of these approaches, and no combination thereof, has much meaning if divorced from an understanding of the proper purpose of government. The notion that the size of government can serve as the determining factor in assessing the propriety of government or any aspect thereof is beyond salvation.

Yet data about the size and growth of government should not be dismissed out of hand. Instead, recognizing that these data will only take us so far, advocates of liberty should embrace a more fundamental approach that will help make sense of such data and shed a full spectrum of light on the problem. We need to focus, as the Founding generation did, on the proper role and legitimate functions of government.

For those who spend the time and effort to grasp the significance of how large the government is today and how fast it is growing, the natural and entirely understandable tendency is to try to shrink it. This is also what our politicians perpetually promise to do: cut back government and keep it lean. But they never do because the American people don’t hold them to an objective standard of what proper government is. This is what we must now do. We must stop advocating small government and start advocating properly limited government—government limited to the protection of individual rights.

The author would like to thank Dr. C. Bradley Thompson and Eric Allison for extensive conversations and suggestions about this article and its arguments.

Endnotes

1. Bill Clinton, State of the Union Address, January 23, 1996, The American Presidency Project, http://www.presidency.ucsb.edu/ws/index.php?pid=53091.

2. “Big Government,” The Oxford English Dictionary, 2nd ed. (Oxford: Oxford University Press, 1989).

3. Brook Thomas, ed., Plessy v. Ferguson: A Brief History with Documents (Boston: Bedford St. Martin’s Press, 1997).

4. “Banks, African-American Owned,” in Paul Finkleman, ed., Encyclopedia of African American History, vol. 1 (New York: Oxford University Press, 2009), pp. 131–32.

5. Paul C. Light, True Size of Government (Washington, DC: Brookings Institution Press, 1999).

6. Sam Pelzman, “The Growth of Government,” The Journal of Law and Economics, vol. 23, no. 2, October 1980, pp. 209–87.

7. “Study of the Sarbanes-Oxley Act of 2002 Section 404 Internal Control over Financial Reporting Requirements,” Office of Economic Analysis, United States Securities and Exchange Commission, September 2009, http://www.sec.gov/news/studies/2009/sox-404_study.pdf.

By Richard Ebeling

Originally published on December 29, 2021 for the American Institute for Economic Research

Suppose that there was a button in front of you that if you pushed, it would, in one instant, abolish all the governmental controls and regulations on the US economy. Would you push that button, and in so doing transform the United States into a society of free people? People who would associate with each other based on voluntary exchange, with government limited to protection of life, liberty and honestly acquired property?

There are many people today who speak about the intensifying heavy-handedness of government, and its increasing stranglehold on people’s freedom and the country’s potential renewed prosperity. They often cogently demonstrate the failure and corruption of political manipulation in society. And they say the “private sector” is the key to real and lasting solutions to our social problems. But we almost never hear voices declaring a desire to “push the button.” Indeed, what passes for “deregulation” or market-based reform has limited connection with any call for a truly laissez-faire capitalist United States.

Whether the issue is the coming crisis in Social Security, the failure of public education, the supposed environmental apocalypse, the claimed threat from mass immigration into America, or the fear of jobs and business lost to foreign competition, the proposed “fixes” all entail a continuing intrusion of political power into the peaceful affairs of the citizenry.

Let’s look at two examples.

Let’s Abolish Rather Than Tweak Social Security

For over 85 years, the federal government has asserted its right and duty to plan the retirement of the American people through a compulsory pension system perversely called Social Security. Now, finally, the game is almost up, with not enough people in the working-age population to subsidize all the retirees who have been promised a certain level of income in their later years. In fact, the Social Security Trust Fund will run out of money no later than the early or mid-2030s. Money collected from the working age population and from cashing in Treasury securities accumulated from prior decades when the Social Security system ran surpluses that it “lent” to the rest of the federal government will not be enough to fully pay eligible retirees. Monthly payments to recipients may have to be cut by as much as 25 percent.

But rather than admit that it’s all been a fraud and simply end this forced intergenerational redistribution of wealth, even pro-market advocates merely propose various forms of “tweaking” the system: raising the retirement age, lowering the promised benefits, and allowing Americans to “invest” a portion of their plundered money into government-approved mutual-fund accounts.

This is not freedom; it is merely a continuation of the same old compulsory system under different rules and regulations. What might a real market reform look like? Well, one possibility would be to just abolish Social Security. The government directly owns more than one quarter of all the land in the United States. This land, with all of its mineral resources, forests, and grazing areas, could be sold off at public auctions over a period of time, with the proceeds being disbursed as payback to Social Security recipients in descending order beginning with the oldest recipients. Some estimates suggest that the payments might almost equal what the government has robbed from people over the decades.

Social Security taxes, likewise, should be ended. Those who have been victimized by the system and who still could not make ends meet would and could rely on the benevolence and generosity of good people – just as it was before Social Security was imposed in the 1930s as part of FDR’s New Deal.

Real School Choice Means Ending Government Schools

Many Americans are also frustrated and disappointed with the educational failure of mandated government schooling, along with imposed “political correctness” in the government monopoly school system, with its most recent manifestation being in the form of Critical Race Theory. The shift into private schools and the growth of homeschooling demonstrate how much people desire to take greater control of and responsibility for their children’s education, especially after the closing of most government schools for more than a year during the Coronavirus crisis. More and more parents seem willing to make the financial and related sacrifices to educate their children, despite the tax load leveled on the average American family.

But where are the free-market voices that propose simply abolishing the government’s schools? Instead, schemes are devised for vouchers, educational tax credits, and charter schools. These, of course, offer useful and pragmatic alternatives for many parents wanting to opt out of failed government schools. But the more fundamental question left out of these debates and proposals is why government in the school business to begin with.

Government schools began in the United States as a tool for political indoctrination to make all young Americans uniform and obedient “good citizens,” as defined by the political authorities. This has continued to the present time. The only thing that is different today from, say, 30 or 40 years ago is what the state curriculum designers consider to be the politically correct set of ideas to try to implant into the minds of those in their compulsory care.

Private Schooling Would End Wars over Public School Curriculum

All the often-angry school battles during the last, say, 50 years, over prayer and sex education in the classroom, or evolution versus intelligent design in the biology curriculum, or saying the Pledge of Allegiance at the start of the school day, or, now, Critical Race Theory in every facet of the learning process, would disappear if the state school system were fully privatized.

Parents would send their children to the schools that taught the values and offered the curriculum they considered best for preparing them for the trials and opportunities of adult life. Furthermore, privatization would introduce real competitive excellence as schools strove to attract students at market-determined prices. Under a free-market educational system, rarely would any child be “left behind,” because competition would lower the cost of a good education and private charities would extend opportunities for the less financially fortunate through scholarships and grants.

How could this be brought about? Real market reform would entail privatizing the existing network of government schools. They might be turned over to the existing administrators and teaching staffs, who would become the “stockholders” of the companies. Or they could be auctioned off to private firms desiring to operate a single school or acquire a chain of schools on the market. At the same time, all legal and regulatory restrictions on operating private schools and all government rules on curriculum and staffing would be abolished.

Freedom Needs People Willing to “Push the Button”

The problem is that many in the free-market camp view such proposals as too “radical.” Americans are not ready for such root-and-branch change. They need to be weaned from government dependency through gradual changes that would make them amenable to more comprehensive free-market reforms down the road.

There are two responses to this argument. First, many of these more “moderate” and “modest” reform proposals threaten to entrench state power even more. “Private” investment accounts with Social Security dollars run the risk of politicizing the financial markets even more than is already occurring at the present time. And the voucher plan could extend even further the government’s rules and regulations to all private schools that accept these political dollars.

Second, unless there are voices unafraid to present clearly and persuasively the principled and uncompromising case for a truly free society, the goal of liberty may never be established. Freedom requires people who call for “pushing the button,” and who demonstrate why it would be good if we could.