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1 THE

FREEMAN
Features
8 Let's Not Be Energy Independent by David R. Henderson
12 Politicians Eye the Oil Market by Robert P. Murphy
19 Making Social Security More Harmful by J. R. Clark and Dwight R. Lee
21 Language, Loyalty, and Liberty by Becky Akers
28 Commerce, Markets, and Peace: Richard Cobden's Enduring Lessons
by Edward P. Stringharn

34 Beyond Municipal Wireless by Steven Titch

Columns
4 Ideas and Consequences ~ The Holiday That Isn't by Lawrence W. Reed
17 T h e Therapeutic State ~ Mendacity by Metaphor by Thomas Szasz
26 Our E c o n o m i c Past ~ The Great Escape from the Great Depression by Robert Higgs
37 Give Me a Break! ~ Legalize All Drugs by John Stossel
47 The Pursuit o f Happiness ~ Worker Freedom in Peril by Charles W. Baird

Departments
2 Perspective ~ Hubris in the First Degree by Sheldon Richman
6 T h e Subprime Crisis Shows That Government Intervenes Too Little in Financial Markets?
It Just Ain't So! by Lawrence H. White
39 Capital Letters

B o o k Reviews
42 Mises: The Last Knight o f Liberalism
by Jorg Guido Hiilsmann Reviewed by Bettina Bien Greaves

43 T h e Shock Doctrine: The Rise o f Disaster Capitalism


by N a o m i Klein Reviewed by Joseph R. Stromberg

44 Medicalization o f Everyday Life: Selected Essays


by Thomas Szasz Reviewed by Ross Levatter Page 42
45 T h e Antitrust Religion
by Edwin S. Rockefeller Reviewed by George C. Leef
-Perspective
1 THE

FREEMAN Hubris in the


Published by
T h e F o u n d a t i o n for E c o n o m i c E d u c a t i o n First Degree
I r v i n g t o n - o n - H u d s o n , N Y 10533
P h o n e : (914) 5 9 1 - 7 2 3 0 ; E - m a i l : f r e e m a n @ f e e . o r g

I
www.fee.org will c o m m i t t w o billion dollars each year on
clean-coal research and development. W e will
President L a w r e n c e W. R e e d
Editor Sheldon R i c h m a n
build the demonstration plants, refine the t e c h
Managing Editor Beth A. Hoffman niques and e q u i p m e n t , and make clean coal a reality."
Assistant Managing Editor AJ. Gardner That's w h a t J o h n M c C a i n , the R e p u b l i c a n presiden
Book Review Editor G e o r g e C . Leef
tial candidate, said back o n J u n e 18 in Springfield, M i s
Columnists souri. M y first reaction was this: "That's mighty
Charles Baird David R . Henderson generous of Senator M c C a i n . I didn't k n o w that he had
D o n a l d J. B o u d r e a u x R o b e r t Higgs
S t e p h e n Davies
that kind of money."
J o h n Stossel
B u r t o n W. F o l s o m , J r . T h o m a s Szasz T h e n I r e m e m b e r e d he doesn't. But if he wins the
Walter E. Williams election next m o n t h he'll have something better: the
Contributing Editors American taxpayers. In the end, that's w h y people run
N o r m a n Barry D w i g h t R . Lee for president of the U n i t e d States, isn't it? T h e y have big
P e t e r J. B o e t t k e Wendy McElroy
ideas, so patently sensible and desirableto their
James Bovard Tibor Machan
T h o m a s J. D i L o r e n z o A n d r e w P. M o r r i s s author, that isthat the rest of us must be compelled to
J o s e p h S. F u l d a J a m e s L. P a y n e go along w h e t h e r we want to or not.
B e t t i n a B i e n Greaves William H . Peterson
Isn't self-government divine?
John Hospers J a n e S. S h a w
R a y m o n d J. K e a t i n g Richard H.Timberlake M c C a i n sees clean-coal technology in o u r future.
Daniel B. Klein Lawrence H . W h i t e But h o w does he know that's the way to go? His experts
F o u n d a t i o n for E c o n o m i c E d u c a t i o n told him. H o w do they know? T h e y just do. They're
experts.
Board of Trustees, 2008-2009
Either those experts think a real free market (as
Wayne Olson, Chairman opposed to the reigning mixed corporatist economy)
Lloyd B u c h a n a n Frayda Levy
w o u l d develop clean-coal technologies if permitted or
Jeff Giesea Kris M a u r e n
Edward M. Kopko Roger Ream they fear it w o u l d not and want the government to step
Walter LeCroy Donald Smith in. If it's the second alternative, we ought to w o n d e r

T h e F o u n d a t i o n for E c o n o m i c E d u c a t i o n (FEE) is a
w h y their preferences should be p e r m i t t e d to override
non-political, non-profit educational champion of those of the t h r o n g whose choices w o u l d d e t e r m i n e the
individual liberty, p r i v a t e property, t h e free m a r k e t , a n d nature of energy development in a free market.
constitutionally limited government.
But if the experts instead believe that clean coal is
The Freeman is p u b l i s h e d m o n t h l y , e x c e p t for combined
J a n u a r y - F e b r u a r y a n d J u l y - A u g u s t issues. V i e w s expressed b y what the market w o u l d select, then they indict t h e m
the a u t h o r s d o n o t necessarily reflect t h o s e o f FEE's officers selves o n a charge of hubris in the first degree. H o w can
a n d trustees. To receive a sample copy, o r t o have The Freeman they know what a nonexistent unfettered market
come regularly t o y o u r d o o r , call 8 0 0 - 9 6 0 - 4 3 3 3 , o r e-mail
process w o u l d b r i n g about?
bhoffman@fee.org.
The Freeman is available o n microfilm from University Microfilm S o m e years ago N o b e l laureate James Buchanan
International, 3 0 0 N o r t h Z e e b R o a d , A n n Arbor, M I 4 8 1 0 6 . rightly criticized a strain of "free-market" thinking
Copyright 2 0 0 8 F o u n d a t i o n for E c o n o m i c E d u c a t i o n ,
w h i c h holds that, in principle, an omniscient being
e x c e p t for g r a p h i c s m a t e r i a l licensed u n d e r C r e a t i v e C o m m o n s
Agreement. Permission granted to r e p r i n t any article from
could anticipate the outcomes the market process
this issue, w i t h a p p r o p r i a t e credit, e x c e p t "Legalize All D r u g s . " w o u l d produce. W r o n g , Buchanan said, for that w o u l d
C o v e r : Peter K a m i n s k i , (flickr), Creative C o m m o n s A t t r i b u t i o n 2.0 imply that the market aims at outcomes external to itself,

THE FREEMAN: Ideas on Liberty 2


PERSPECTIVE: Hubris in t h e F i r s t Degree

m d such a view betrays a fundamental misunderstand


ing of w h a t markets do. Virtually everyone thinks A m e r i c a must become
For B u c h a n a n , " [ T ] h e 'order' of the market emerges energy i n d e p e n d e n t . It's s o m e t h i n g even opposing pres
only from the process of voluntary exchange a m o n g the idential candidates agree on. Be careful w h a t y o u ask
participating individuals. T h e 'order' is, itself, defined as for, says David H e n d e r s o n .
the o u t c o m e of the process that generates it. T h e 'it,' the A n d speaking of oil, are speculators to blame for the
allocation-distribution result, does not, and cannot, r u n - u p in gasoline prices? Are oil companies sitting o n
exist i n d e p e n d e n t l y of the trading process. . . ." lands that could be p r o d u c i n g m o r e barrels? R o b e r t
In o t h e r words, h u m a n beings do n o t robotically M u r p h y brings s o m e e c o n o m i c sense to the place
execute plans formulated in some Platonic realm sepa w h e r e demagogues dwell.
rate from their day-to-day world. O n the contrary, Social Security, b e i n g a g o v e r n m e n t program, stands
" T h e y confront genuine choices. . . . T h e potential par o n t w o frauds: that o u r " c o n t r i b u t i o n s " are invested and
ticipants do not know until they enter the process w h a t their that o u r bosses m a t c h those "contributions." As J. R .
o w n choices will be." Clark and D w i g h t Lee show, we've b e e n had.
H u m a n beings are n o t p r o g r a m - b o u n d c o m p u t e r s . Should people have to speak English before they can
T h e y are persons o n the Misesian m o d e l : creative e n t r e live in the U n i t e d States? Becky Akers says such a
preneurial beings facing an o p e n - e n d e d w o r l d in w h i c h requirement w o u l d violate the original A m e r i c a n spirit.
genuine surprise is possible. In the p a n t h e o n of liberty's champions, n o n e stands
" F r o m this it follows," concludes B u c h a n a n , "that taller than R i c h a r d C o b d e n , w h o explicitly c o n n e c t e d
it is logically impossible for an omniscient designer to free trade, anti-imperialism, and peace. E d w a r d String-
know, unless, of course, w e are to preclude individual h a m pens a well-deserved tribute.
freedom of will." "Progressive" cities promised free wireless Internet
This overlooked function of the market means that services to their residents. H o w ' d things w o r k out? N o t
c o m p e t i t i o n is m o r e than a "discovery procedure," to well, Steven T i t c h writes.
use F. A. Hayek's phrase. T h e market doesn't merely dis O u r regular contributors have b e e n toiling to p r o
cover what's there waiting to b e discovered, like s o m e d u c e these columns: Lawrence R e e d gets an early start
one's discovering an island. R a t h e r , the market process celebrating Bill of R i g h t s Day. R o b e r t Higgs explains
creates w h a t it "discovers" by virtue of b e i n g an envi h o w the Great Depression really ended. T h o m a s Szasz
r o n m e n t in w h i c h freely choosing individuals do things warns of the m e t a p h o r trap. J o h n Stossel inveighs
in particular situations that they m i g h t never have against the " d r u g war." Charles Baird strikes a blow for
anticipated d o i n g had they n o t faced those situations. workers' freedom. A n d Lawrence W h i t e , e n c o u n t e r i n g
A n d r e m e m b e r , those situations themselves are the the claim that only g o v e r n m e n t can stabilize b a n k i n g
product of people's m a k i n g unanticipated choices in and finance, ripostes, "It Just Ain't So!"
earlier situations, and so o n ad infinitum. O u r b o o k reviewers have i m m e r s e d themselves in
In light of this radical perspective o n the free m a r volumes about L u d w i g v o n Mises, "capitalism," p h o n y
ket, w e are entitled to ask: If an omniscient being medicine, and antitrust law.
couldn't k n o w if clean coal is the best choice, h o w W e w r a p up w i t h Capital Letters about the C o n s t i
can McCain and his experts know? Laissez faire, t u t i o n and voting.
laissez passer. Sheldon Richman
srichman @fee. org

3 OCTOBER 2008
Ideas and Consequences

The Holiday That Isn't


BY L A W R E N C E W. REED

I
k n o w it's only O c t o b e r , b u t that's late e n o u g h in property; rights to fair treatment for people accused of crimt
the year for most people to have already b e g u n protection from unreasonable search and seizure and set
t h i n k i n g of the holidays just around the corner. W e incrimination; and rights to a speedy and impartial jury tri
will each observe the traditional ones according to o u r and representation by counsel.
personal wishesa precious right w o n for us by past In this m o d e r n and supposedly enlightened age, n<
and present patriots. many people a m o n g the world's 6.6 billion can hor
Allow m e to advise you, however, n o t to let 2008 estly say they enjoy many of these rights to the
end w i t h o u t taking n o t e of " t h e holiday that isn't." fullestor at all. Even in America w e have to woi
It's not recognized officially, and few Americans hard to educate fellow citizens about the liberties tr
really k n o w of it. I had to be Bill of R i g h t s is meant to pre
r e m i n d e d of it by a friend from tect. T h e r e are plenty in ot
Arizona, R o y Miller, o n e of the midst w h o w o u l d sacrifice or
founders of the Goldwater or m o r e liberties for the tempc
Institute. rary and dubious security (
T h e day is D e c e m b e r 15. It a government program. Th
was o n that date in 1791 that past J u n e the Supreme Cou:
the fledgling U n i t e d States of affirmed the right to keep an
America formally adopted w h a t bear arms but only by a 5 -
w e k n o w as the Bill of R i g h t s , vote. No wonder Benjami
the first ten a m e n d m e n t s to the Franklin said the Constitutio
C o n s t i t u t i o n . Miller says, " F e w gave us "a republic, madam,
days in A m e r i c a n history were you can keep it."
more critical to securing or In the grand scheme c
proclaiming the principles American liberty, h o w impoi
b e h i n d the nation's founding." 2S tant is the Bill of Rights? It
A "Bill of R i g h t s D a y " is n o t fundamental and foundationa
U.S. Bill of Rights
o n the calendar, b u t a free p e o commons.wikimedia.org and about as bedrock as it get
ple d o n ' t have to wait for C o n In fewer than 500 words, man
gress to declare a holiday to celebrate one. On of o u r most cherished liberties are expressed as rigfn
D e c e m b e r 15, take a m o m e n t to reread the Bill of and unequivocally protected. It's a roster of instructior
R i g h t s and reflect o n its i m p o r t a n c e . Call it to the to g o v e r n m e n t to keep out of w h e r e it doesn't belong
attention of friends and family. W i t h o u t an agreement It bears the heavy imprint of a giant of republican gov
that a Bill of R i g h t s w o u l d be added or w i t h o u t a c o n e r n m e n t , James Madison.
sensus of w h a t they w o u l d do, the C o n s t i t u t i o n itself W h y did such critical protections end up as amend
would probably not have b e e n accepted. T h e ten ments instead of as core elements of the primary docu
a m e n d m e n t s ultimately adopted guarantee freedoms of ment? Here's the background:
religion, speech, the press, peaceful assembly and petition; the
rights of the people to keep and bear arms, and to hold private Lawrence Reed (lreed@fee.org) is the president of FEE.

THE FREEMAN: Ideas on Liberty 4


The Holiday That Isn't

T h e Second C o n t i n e n t a l Congress, originally c o n - Madison is regarded as the "Father of the C o n s t i t u


/ened in 1775 at the outbreak of hostilities w i t h the t i o n " because he was its p r i m a r y a u t h o r and, along w i t h
n o t h e r country, adopted the Articles of Confederation Alexander H a m i l t o n and J o h n Jay, part of the trio that
is the n e w nation's first formal, national g o v e r n m e n t . w r o t e the Federalist Papers in its defense. O n the m a t
5ome Americans came to believe by the late 1780s, ter of a m e n d i n g it w i t h a Bill of R i g h t s , h e was at first
aowever, that the Articles were weak and inadequate. opposed, b e i n g of the v i e w that e n u m e r a t i n g some
The Constitutional C o n v e n t i o n of 1787 p r o d u c e d a rights in the form of a m e n d m e n t s w o u l d o p e n the
draft C o n s t i t u t i o n to replace t h e m , subject to ratifica- d o o r to g o v e r n m e n t violations of any that were not
:ion by the states. listed. H e eventually m e t that very objection by devis
A great debate ensued and people lined up in o n e ing w h a t b e c a m e the N i n t h A m e n d m e n t : " T h e e n u
:amp or the o t h e r t h e Federalists or the Antifederal- m e r a t i o n in the Constitution, of certain rights, shall
sts. T h e former favored the C o n s t i t u t i o n and in most n o t b e construed to deny or disparage others retained
:ases, at least at first, w i t h o u t any a m e n d m e n t s . T h e lat- by the people." Madison b e c a m e o n e of the most
:er either opposed it altogether or c o n d i t i o n e d their e l o q u e n t defenders of the Bill of R i g h t s , and it is
ipproval o n adoption of stronger protections for i n d i unlikely the C o n s t i t u t i o n w o u l d have b e e n ratified
vidual liberties. w i t h o u t h i m or t h e m .
Keep in m i n d that virtually all the leading figures in In 1789 N e w Jersey was the first state to adopt the
[his great debate were libertarians by ten amendments that would
today's standards. T h e y believed in lib become the Bill of R i g h t s and
erty and limited government. Even the Even without the w h e n Virginia did so o n D e c e m b e r
[east libertarian a m o n g t h e m w o u l d be Bill of Rights, the 15, 1 7 9 1 , they b e c a m e part of the
horrified if he could see h o w later g e n supreme law of the land. (Actually,
erations have ballooned the size and Constitution 12 a m e n d m e n t s were sent to the
intrusiveness of the federal establish states, b u t t w o failed to w i n e n o u g h
ment. It never occurred to the most
represented a huge states to be ratified. T h e unratified
ardent Federalist that government advance for a m e n d m e n t s , originally n u m b e r s 1
should rob Peter to pay Paul for his and 2, set the ratio of H o u s e repre
health care, art w o r k , alternative energy,
civilization. sentative to p o p u l a t i o n and forbade
prescription drugs, h u r r i c a n e relief, or congressional pay raises to take
his notions of regime change in Somalia. effect "until an election of Representatives shall have
intervened." T h e latter was ratified as the 27th a m e n d
The Constitution and Centralization m e n t in 1992.)

S o even w i t h o u t the Bill of R i g h t s , the C o n s t i t u t i o n


represented a h u g e advance for civilization. B u t
during the ratification debate, e n o u g h citizens were
If you want to b o n e up o n the Bill of R i g h t s before
D e c e m b e r 15, check o u t the website of the Bill of
R i g h t s Institute (www.billofrightsinstitute.org), w h i c h
wary of any centralization of power that they w a n t e d to produces instructional materials and sponsors seminars
go further. I t h i n k they instinctively u n d e r s t o o d s o m e about America's foundational d o c u m e n t s . S o m e excel
thing that T h o m a s Jefferson o n c e so aptly expressed, lent books to consult o n the subject include We the Peo
" T h e natural progress of things is for liberty to yield ple by Forrest M c D o n a l d , Fighting for Liberty and Virtue
and g o v e r n m e n t to gain ground." W h e n the Massachu by M a r v i n Olasky, Simple Rules for a Complex World by
setts legislature m a d e it clear it w o u l d n o t ratify the R i c h a r d Epstein, Restoring the Lost Constitution: The Pre
C o n s t i t u t i o n unless language was added to strengthen sumption of Liberty by R a n d y Barnett, and Origins of the
individual rights, it triggered a m o v e m e n t a m o n g the Bill of Rights by Leonard Levy.
states to do just that. H a p p y Bill of R i g h t s Day!

5 OCTOBER 2008
The Subprime Crisis Shows That Government
Intervenes Too Little in Financial Markets?
It Just Ain't So!
BY L A W R E N C E H. WHITE

systems w i t h m o r e intervention. Perhaps the most strik

S
tart w i t h t w o assumptions. N o . 1: Banking and
financial markets are inherently unstable. N o . 2: ing example is that Canada, w h i c h allowed nationwid
Government intervention into banking and branch banking (unlike the U n i t e d States) and ha
financial markets can only stabilize (never destabilize). fewer restrictions o n b a n k n o t e issue, had n o bank fail
You'll find it easy to conclude that any p e r i o d of m a r ures d u r i n g the Great Depression (while the U n i t e
ket instability w e experience, like the recent s u b p r i m e - States had thousands). K r u g m a n invokes the Gre*
lending problem, is the market's fault and that it could Depression, claiming that in the recent troubles "w
have b e e n avoided w i t h m o r e intervention. were in a situation bearing a family resemblance to th
Following t h e same logic, any lessening of instability great banking crisis of 1 9 3 0 - 3 1 , " facing "a cascade c
that w e are n o w experiencing can't be financial failures that would crippl
due to the market's self-correcting, the economy." But h e fails to men
but must be due to timely interven
Over the broad tion that Canada's less-restricted sys
tion by g o v e r n m e n t . sweep of history, tern had n o "great banking crisis" i:
T h u s argues Paul K r u g m a n in his the Depression.
NewYork Times o p - e d c o l u m n "Success banking systems with Krugman notes that the Ne\
Deal imposed n e w banking regula
Breeds Failure" (May 5). According to few legal restrictions
Krugman, the subprime troubles tions and claims that the "ne\
o c c u r r e d only because "Wall Street have been more system worked well for half a cen
did an e n d r u n around regulation." tury." H e chose the 50-year perio<
T h e " o u t - o f - c o n t r o l financial system"
stable than systems advisedly. Fifty years after th
didn't collapse completely only with more N e w Deal banking reforms of 193,
because o u r g o v e r n m e n t central bank, lands us in 1985, just after the sav
like the fictional T V hero MacGyver,
intervention. ings-and-loan industry collapsed
"has cobbled together makeshift but before regulators had acknowl
arrangements to save the day." If w e listen to " m a r k e t - edged and addressed the collapse. T h e S&L fiaso
worshiping ideology" and fail to impose increased demonstrated the dangers of N e w Deal regulation
i n t e r v e n t i o n " f u n d a m e n t a l financial reform," h e calls specifically deposit insurance. Federal regulations c o m
i t K r u g m a n expects that " t h e next crisis will probably pelled S&Ls to hold portfolios consisting almos
be worse than this one." entirely of 30-year fixed-rate mortgages, w h i c h lei
Krugman's t w o initial assumptions, however, are t h e m highly exposed to losses in the event of a shar]
false. If even o n e is false, the case for increased inter rise in interest rates.
vention n o longer follows.
O v e r the broad sweep of history, banking systems Lawrence White (lwhite@umsl.edu) is the F.A. Hayek Professor of
w i t h few legal restrictions have b e e n m o r e stable than Economic History at University of Missouri - St. Louis.

THE F R E E M A N : Ideas on Liberty 6


Government I n t e r v e n e s T o o L i t t l e i n F i n a n c i a l M a r k e t s ? : IT J U S T A I N ' T S O !

W h e n inflation rose sharply in the 1970s (due to protecting the p a y m e n t system or stabilizing the m o n e y
sharply expansionary Federal R e s e r v e m o n e t a r y p o l supply. T h e Fed's n e w moves were rather m a d e in the
icy), it drove interest rates sharply u p w a r d as well. T h e h o p e of protecting investment banks and securities
interest rates S&Ls had to pay for n e w deposits rose dealers from the consequences of holding portfolios
well above the fixed rates they were earning o n old overweighted with mortgage-backed securities, or
mortgages. T h e S&Ls quickly bled to death. T h e y had exotic derivatives based o n such securities, while k e e p
b e e n able to h o l d such a risky portfolio w i t h o u t d e p o s ing levels of capital inadequate for such portfolios. T h e
itors noticing or objecting because depositors were reason that some financial institutions have b e e n having
insulated by federal deposit insurance. This was the trouble rolling over their debts is fundamentally the
"moral hazard" p r o b l e m : R e c i p i e n t s of subsidized market's uncertainty about their solvency. It is n o t a
deposit insurance, w i t h 100 percent coverage and n o liquidity problem.
deductibles, t o o k n o care to avoid risky institutions, and B y blunting the market penalty for financial i m p r u
so the institutions had m u c h less incentive to avoid tak dence, the Fed is breeding a n e w kind of moral hazard.
ing o n risk. W h e n regulators failed to close the " d e a d " If the next crisis is worse than this one, moral hazard
(insolvent) S&Ls promptly, they created a race of " z o m n o t failure to regulatewill be high o n the list of
b i e " institutions, the living dead, w h o s e suspects.
desperate-to-recover strategies m a d e the T h e Fed is currently lending
red ink multiply. This was moral hazard By blunting the hundreds of billions of Treasury
o n steroids. Ultimately taxpayers were securities from its portfolio and
market penalty for
left w i t h a bill of about $260 billion in taking j u n k assets as collateral. In
today's dollars. financial imprudence, a few years w e will be able to
tabulate the losses to the A m e r i c a n
Unprecedented Interventions
the Fed is breeding taxpayer.
a new kind of
T h e Federal Reserve's interventions
in the recent subprime-mortgage
crisis have i n c l u d e d a t its o w n initia
moral hazard.
Krugman

banks can
declares: " W e
k n o w that things that aren't called
nonetheless
now

generate
tive, w i t h o u t precedent, and without b a n k i n g crises, and that the Fed
congressional oversightthe extension of credit lines needs to carry o u t b a n k - t y p e rescues o n their behalf. It
to investment banks and the lending of Treasury bills to follows that h e d g e funds, special investment vehicles
" p r i m a r y " securities dealers. T h e traditional role of the and so o n n e e d b a n k - t y p e regulation. In particular, they
central b a n k as a "lender oflast resort" is to make loans n e e d to be required to have adequate capital."
only to commercial banks, because the traditional It just ain't so. Solvency problems for h e d g e funds
rationale is to protect the economy's p a y m e n t system. and investment banks do n o t constitute a b a n k i n g crisis
T h e h o p e of the traditional last-resort lender is to avoid as normally u n d e r s t o o d . W h a t w e n o w knowand
a collapse of the economy's m o n e y stock by injecting already knew-is that financial firms, especially if they
reserves into the commercial b a n k i n g system when believe they can c o u n t o n a g o v e r n m e n t bailout, can
there is an extraordinary "internal drain" of reserves get into trouble by h o l d i n g highly leveraged portfolios
(namely bank runs). of risky assets. T h e way to alleviate the p r o b l e m is to
In the recent crisis, by contrast, there has b e e n cure t h e m of that belief by letting t h e m and their c o u n
absolutely n o threat of a shrinking m o n e y stock. Invest terparties take their lumps. T h e potential for failure of a
m e n t banks do n o t issue checking deposits, are n o t s u b h e d g e fund, investment bank, or o t h e r financial institu
ject to b a n k runs, and are n o t part of the p a y m e n t tion is n o rationale for n e w legal restrictions o n t h e m .
system. N e i t h e r are securities dealers. T h e Fed's e x p a n T h e i r shareholders and those w h o lend to t h e m can
sions of its o w n role therefore had n o t h i n g to do w i t h and should determine h o w m u c h capital is adequate. (f|

7 OCTOBER 2008
Let's Not Be Energy Independent
B Y D A V I D R. HENDERSON

using 20. A substantial rise in price would result. As it

E
nergy i n d e p e n d e n c e " is a t e r m that sounds
g o o d but falls apart o n closer examination. rose, the a m o u n t d e m a n d e d would fall and the a m o u n t
A l t h o u g h the U n i t e d States could achieve supplied domestically w o u l d rise. T h e price would
energy i n d e p e n d e n c e , w e could do so only at an e n o r increase until the two were equal.
m o u s cost. E n e r g y " d e p e n d e n c e " is m u c h cheaper and H o w high would the price have to go? T h e honest
m u c h m o r e desirable. answer is that n o o n e k n o w s e v e n the most seasoned,
Before considering the costs and benefits of energy informed energy economist. T h e reason is that to c o m
i n d e p e n d e n c e , I should define my terms. W h a t is p u t e the n e w equilibrium price, o n e would have to
energy i n d e p e n d e n c e ? Various advocates and analysts k n o w the elasticities of supply and d e m a n d t h a t is, the
have proposed various definitions, but two c o m e up measures of sensitivity to price changes of the a m o u n t
again and again. T h e first is that a c o u n t r y is energy supplied and demanded. We have reasonable measures
i n d e p e n d e n t if it is self-sufficientthat of those elasticities for the range of
is, if it imports n o energy from any prices of oil that w e are used to. But
other country. T h e second is that a
A country is energy the current price of oil (about $125
country is energy independent if independent if it is per barrel at this writing) is, even
changes in world energy markets have adjusted for inflation, above that
n o effect o n that country's price of
self-sufficientthat usual range, and so w e k n o w little
about elasticities at that price or
energy. T h e first definition is m o r e is, if it imports no
c o m m o n l y used. above.
A l t h o u g h I could consider the issue energy from any Yet, even if the elasticities of sup
of energy i n d e p e n d e n c e abstractly, it is ply and d e m a n d were each as high as
other country. 1 (they are generally t h o u g h t to be
m o r e illuminating to examine it in the
context of the actual U.S. economy. m u c h less than that)so that a 1-
A n d I'll focus o n the major form of energy for w h i c h percent increase in price w o u l d lead to a 1-percent
m a n y Americans want i n d e p e n d e n c e : oil. increase in quantity supplied and a 1-percent decrease
Currently, the U n i t e d States uses about 20 million in quantity d e m a n d e d i t w o u l d still take a price
barrels per day (mbd) of oil and p e t r o l e u m products increase of at least 40 percent to equate the a m o u n t
and imports about 60 p e r c e n t o r 12 m b d o f that. David Henderson (davidrhendersonl950@gmail.com) is a research fellow
T h e most straightforward way to reduce imports to with the Hoover Institution and an economics professor at the Graduate
zero w o u l d be to ban imports or to impose a stiff tariff School of Business and Public Policy at the Naval Postgraduate School in
Monterey, California. He is the editor of The C o n c i s e E n c y c l o p e d i a of
o n oil designed to reduce imports to zero. W i t h 12 m b d
E c o n o m i c s (Liberty Fund, 2008). From 1983 to 1984, he was the
g o n e from the U.S. daily supply, there w o u l d be only senior economist for energy policy with President Reagan's Council of
eight m b d to serve consumers w h o were accustomed to Economic Advisers.

THE F R E E M A N : Ideas on Liberty 8


L e t ' s Not Be Energy Independent

supplied domestically to the a m o u n t d e m a n d e d . T h a t O r think of it a n o t h e r way. D o you ever take y o u r


w o u l d imply a price of over $180 per barrel. A n d few shirts to the local cleaner to be washed? If so, you are
economists believe that the elasticities of d e m a n d and " d e p e n d e n t " o n the cleaner. You could wash y o u r shirts
supply are as high as 1. T h e lower they are, the higher yourself, b u t you don't. T h e reason you don't is that
the price must go to equate the domestic a m o u n t s u p y o u r time is m o r e valuably used p r o d u c i n g other
plied to the a m o u n t demanded. It w o u l d probably go to things, s o m e of w h i c h you sell, and using some of the
over $200 per barrel. proceeds to pay the cleaner.
This means that to be self-sufficient in oil, A m e r i Moreover, think about the w o r d " d e p e n d e n c e . " T h e
cans w o u l d have to pay in excess of $ 180 a barrel w h e n , image the w o r d creates is of a poor, helpless waif. I p i c
instead, they could b e " d e p e n d e n t " o n o t h e r countries' ture Oliver Twist in the musical Oliver, w h o after eating
supplies and pay the world market price of $125.That's a meager a m o u n t of food, says, "Please, sir, I want some
n o t a g o o d deal for Americans. To p u t it in terms that more." B u t U.S. consumers of oil are n o t poor, helpless
everyone w h o drives a car understands, a $ 1 8 0 - p e r - waifs seeking the g o o d will of o i l - p r o d u c i n g nations
barrel price of oil w o u l d increase the price of gasoline that are giving us oil o u t of kindness. R a t h e r , they sell
by about $1.20 a gallon (the $50 increase in price us the oil. W e " n e e d " the oil and they " n e e d " the
divided by 42 gallons to the barrel). money. To the extent that d e p e n d e n c e exists, it is
mutual. International trade in oil
Comparative Advantage and is just that: trade. Since b o t h sides
Dependence gain from trade, each is therefore

E nergy "dependence"
m u c h cheaper. In fact, the
case for b e i n g " d e p e n d e n t " o n
is " d e p e n d e n t " o n the other. P r o
ducers of oil are d e p e n d e n t
the dollars, euros, and yen that
on

other countries for oil is the b u y the oil. This fact is c o m m o n l y


same as t h e case for being recognized w h e n the topic is U.S.
dependent on other countries exports; m a n y Americans worry
for bananas or coffee. At s o m e that we don't export enough
tariff-protected price, the because they want o u r exporters
U n i t e d States could b e self-suf to earn m o n e y from people in
ficient in bananas or coffee. If o t h e r countries. In o t h e r words,
the price were high enough, they see that o u r exporters n e e d
s o m e o n e w o u l d g r o w bananas the dollars, yen, and euros that
and coffee plants in green they earn o n their exports. But,
houses. B u t why would we somehow, they fail to see that this
want that? W h y w o u l d w e want is true of foreign exporters too.
to pay m o r e for coffee and bananas than w e n e e d to? Exporters in the M i d d l e East, Venezuela, and Canada
A n o t h e r way of saying that w e w o u l d pay m o r e is that n e e d the i n c o m e from e x p o r t i n g oil. " D e p e n d e n c e o n
w e w o u l d give u p m o r e of o u r resources (capital, labor, foreign oil," because it is so one-sidedly misleading, is a
and land) to have domestic bananas and coffee than w e t e r m that belongs in the dustbin of history.
n o w give up by p r o d u c i n g o t h e r things w i t h these B u t isn't it i m p o r t a n t to avoid d e p e n d i n g o n oil
resources and using the proceeds to b u y coffee and w h e n so m u c h of it is p r o d u c e d in the politically unsta
bananas m o r e cheaply abroad. W e w o u l d be poorer. T h e ble M i d d l e East? It w o u l d be nice if the M i d d l e East
reasoning doesn't change w h e n the g o o d is oil. By p r e were less unstable. B u t w h o e v e r is in charge of the oil
venting people from i m p o r t i n g oil, either w i t h a b a n o n wants to p r o d u c e it to make money. So, it matters little,
imports or a tariff o n oil, the g o v e r n m e n t w o u l d make from the v i e w p o i n t of oil supply, w h i c h particular
us poorer. tyrant runs w h i c h particular oil-producing country.

9 OCTOBER 2008
D a v i d R. H e n d e r s o n

Dependence and Government Ownership price of oil. B u t so was every other oil-importing
country. So it is true that a government of an oil-
I t is true, and troublesome, that the world oil industry
is largely a g o v e r n m e n t - r u n industry w i t h all the
problems that accompany government enterprise
p r o d u c i n g country can occasionally get nasty, cut the
world supply of oil, and raise the world price. It's also
high cost, slow reaction times, little innovation, and so true that if the U.S. g o v e r n m e n t insulated the c o u n t r y
o n . A n d it w o u l d b e nice if governments in Saudi from the world oil market by ending imports, it could
Arabia, Iran, the U n i t e d Arab Emirates, Venezuela, avoid these occasional price spikes. But the irony is that
Britain, Norway, and Canada denationalized their oil it w o u l d avoid the occasional spike by replacing it w i t h
supplies. B u t until that happens, it's still better to pay a p e r m a n e n t "spike." Imagine that haircutters unionized
the lower price that producers in the world market and had the occasional strike and that d u r i n g such
charge rather than the higher price that w o u l d result strikes the price of a haircut rose to $30 from its n o r m a l
from " i n d e p e n d e n c e . " $20.You could avoid the high price by resolving always
S o m e people w o r r y that a g o v e r n m e n t in a major to cut your o w n hair, even w h e n the price is $20.
o i l - p r o d u c i n g c o u n t r y S a u d i Arabia, for e x a m p l e W o u l d that be a g o o d idea?
m i g h t get upset at the U.S. g o v e r n
m e n t and take it o u t o n Americans by Subsidizing Alternative Fuels
refusing to sell us oil. B u t such a Of course, the Saudis any supporters of "energy
selective e m b a r g o is b o u n d to fail.
could hurt the M: independence," instead of argu
Imagine that Saudi Arabia cuts oil ing for a ban or prohibitive tariffs o n
exports to the United States, b u t United States by oil imports, advocate government
maintains total exports. T h e n it must subsidies for alternative fuels or for
sell these suddenly freed-up oil s u p
cutting exports in conservation. T h e y seem to think
plies s o m e w h e r e else. Let's say that it total. But then the that such policies can create energy
ships the additional oil to buyers in independence at a low cost. T h e y
C h i n a . T h e n those buyers will want Saudis would hurt are mistaken.
to b u y that m u c h less oil from their T h e cost of using these alterna
all oil-importing
old suppliers. Presto! T h e A m e r i c a n tives, if successful in driving oil
buyers' problems are solved because countries, not just imports to zero, w o u l d actually be
they can get this oil. quite high. W h a t makes these other
In short, w h e n the g o v e r n m e n t of
Americans. policies politically attractive is n o t that
o n e c o u n t r y tries to selectively target they cost little, b u t that they hide the
p e o p l e in a n o t h e r country, b u t still wishes to maintain cost. A tariff o n oil is a tax, and people can see the result
o u t p u t , it cannot succeed. T h e selective "oil w e a p o n " of the tax in the price of oil. A subsidy to alternative
is a dud. It's like a game of musical chairs w i t h the fuels or to conservation, however, comes from the gov
same n u m b e r of chairs as players. T h e game w o u l d ernment's treasury or from some other source and
be awfully b o r i n g , w h i c h is w h y it is n o t played that therefore is n o t visible to m o r e than a small percent of
way. B u t in the case of international trade, b o r i n g the population. Economist David Loughran and e n g i
is good. neer Jonathan Kulick studied the effect of state public
O f course, the Saudis could h u r t the U n i t e d States utility commissions' policies requiring electric utilities
by cutting exports in total. B u t t h e n the Saudis w o u l d to subsidize their customers' investments in conserva
h u r t all o i l - i m p o r t i n g countries, n o t just Americans. tion. T h e subsidies came n o t from tax revenue, but
This is in fact w h a t h a p p e n e d in 1973, w h e n the Saudis mainly from higher prices to other customers.
e m b a r g o e d the U n i t e d States and the Netherlands over L o u g h r a n and Kulick found that the cost of the conser
those t w o c o u n t r i e s ' g o v e r n m e n t s ' support of Israel. vation was b e t w e e n 14 and 22 cents per kilowatt-hour.
T h e countries were h u r t by the new, m u c h - h i g h e r This was a w h o p p i n g two to three times as expensive as

THE F R E E M A N : Ideas on Liberty 10


| ^ L e t ' s Not B e E n e r g y Independent

the energy conserved. (David L o u g h r a n and J o n a t h a n buying oil o r haircuts. T h e principle applies to groups
Kulick, ' D e m a n d Side M a n a g e m e n t and Energy Effi of individuals living in large geographical areas called
ciency in the U n i t e d States," Energy Journal 2 5 , n o . 1 countries. Moreover, the d e p e n d e n c e is mutual. In
[2004], cited in Jerry Taylor and Peter Van D o r e n , 1776, A d a m Smith w r o t e in The Wealth of Nations,
"Energy," in David R . H e n d e r s o n , ed., The Concise "It is n o t from t h e benevolence of t h e butcher, t h e
Encyclopedia of Economics.) brewer, o r the baker that w e expect o u r dinner b u t
" E n e r g y i n d e p e n d e n c e " is a bad idea. Every individ from their regard for their o w n self-interest." W e
ual understands that it is far better to d e p e n d o n others can comfortably d e p e n d o n foreigners for m u c h of
for most of w h a t w e w a n t rather than trying to d o our oil because t h e world's oil suppliers w a n t t o
everything for ourselves. This is true w h e t h e r we're make money. @

Writer JimPayne(TheCultureof Spending,Overcoming


Welfare, etc.) follows the waterways of America, living a
Inch
6
WatS-*
Tom Sawyer life, getting scared, soaked, and bailed out
of trouble by Samaritans he discovers along the way. His
escapades span the country, from the Hudson River to Rt
the Columbia, from the Mississippi to the Florida Keys. a
y on America's rivers
As Payne's adventures unfold, you never know what's
around the next bend. He's entrapped by security guards
at Mount Vernon, loses his rudder off the Florida Keys,
and sleeps in Franklin Roosevelt's bed. Across 1,600
miles, this middle-aged runaway often loses his sense
of direction, but never his sense of humor.

Available from booksellers or directly from the publisher


Send $14.95 (shipping is included) to:
L y t t o n Publishing C o m p a n y
Box 1212
Sandpoint, ID 83864

iAboveTheWater.com

OCTOBER 2008
11
Politicians Eye the Oil Market
B Y R O B E R T P. MURPHY

market, changes in foreign-exchange rates translat

W
ith oil prices setting records every w e e k
and gas prices t o p p i n g $4 per gallon, voters immediately into changes in the price of oil (quoted ii
are getting increasingly angry. This naturally dollars).
makes the politicians nervous, so they do w h a t they can If politicians want to " d o s o m e t h i n g " about recor<
to divert blame from themselves at all costs. Two easy oil prices, the answer is simple: Enact policies that boos
targets are "Big O i l " and speculators. In this article we'll supply a n d / o r reduce d e m a n d a n d this prescriptioi
see that the politicians' accusations against these scape indirectly includes policies that strengthen the dollar
goats are nonsensical, while the corresponding policy For example, o p e n i n g up the Arctic National Wildlif
r e c o m m e n d a t i o n s will only push oil prices higher. Refuge (ANWR) and the outer continental shel
Before exploring the errors of the (OCS) to drilling would boos
political charges, w e should first (expected future) supplies of oil, caus
understand exactly what's h a p p e n i n g
Global oil output ing producers w i t h excess capacity
in the oil market. T h e simple expla has been roughly today to ramp up current production
nation for high prices is: supply and T h e feds could also start unloading
d e m a n d . Global oil o u t p u t has b e e n
flat since 2005, the Strategic Petroleum Reserve
roughly flat since 2005, while while demand w h i c h currently has some 700 millioi
demand in developing economies barrels stockpiled. As the early Reagai
such as C h i n a and India has b e e n in developing experience showed, large margina
growing quickly. In a market the only tax-rate reductions would boost thi
economies such as dollar on the foreign exchanges. Ant
way to reconcile these facts is for the
price to rise; if C h i n a is c o n s u m i n g China and India has as far as reducing demand, foreigi
m o r e barrels per day while producers governments could stop subsidizing
aren't c h u r n i n g out m o r e product,
been growing quickly gasoline prices for their populations.
that means other countries have to All these policies made sense evei
cut back their daily c o n s u m p t i o n . R i s i n g prices do just five years ago w h e n oil was trading around $30 per bar
that, w i t h o u t anyone consciously orchestrating the rel. N o w that oil is flirting with $150 per barrel (as of thi
w o r l d w i d e coordination involved. writing), such policies are imperative. Unfortunately, a
To add n u a n c e to the explanation, w e should n o t e we'll n o w discuss, the suggested remedies coming fron
that the sinking U.S. dollar has played a role. F r o m J u n e Washington will have the exact opposite impact.
2007 to J u n e 2 0 0 8 , the price of oilmeasured in d o l Likely driven m o r e by politics than sound e c o n o m
larsmore than doubled. Yet 15 percent of this rise can ics, Republicans have increasingly endorsed expandec
b e attributed entirely to the sinking dollar, w h i c h fell
15.6 percent against the euro d u r i n g the same interval. Robert Murphy (bob.murphy.ancap@gmail.com) is the author of
Because oil is a fungible c o m m o d i t y traded o n a world T h e Politically I n c o r r e c t G u i d e to Capitalism.

THE FREEMAN: I d e a s on Liberty 12


Politicians Eye the Oil Market

drilling o n domestic land and in sea areas controlled by If w e are to believe t h e figures in t h e quotation
the federal g o v e r n m e n t . For various reasons t h e stan above, oil companies have t h e ability to p r o d u c e an
dard D e m o c r a t i c response has b e e n to dismiss these extra 1.75 billion barrels of oil p e r year (4.8 million x
proposals as gimmicks that w o n ' t solve America's l o n g - 365), w h i c h at $ 1 4 0 a barrel w o u l d yield around $245
t e r m " a d d i c t i o n " to fossil fuels. In this context t h e billion in extra annual revenues. It's true, they w o u l d
rhetorical lengths to w h i c h some politicians have g o n e have to pay a lot m o r e in wages and e q u i p m e n t costs,
are simply astounding. and t h e price of oil w o u l d certainly drop w i t h that
T h e best (or worst) example concerns statistics o n m u c h additional p r o d u c t i o n . Even so, it is ludicrous to
federal land-leasing that have served as talking points think t h e oil companies are staring at that m u c h m o n e y
d u r i n g t h e presidential campaign. T h e congressional o n t h e g r o u n d (or in t h e ground) and i g n o r i n g it.
C o m m i t t e e o n Natural R e s o u r c e s prepared a report In reality t h e situation is far less sinister. T h e oil and
(http://tinyurl.com/6m7ytb) intended to derail t h e gas companies pay t h e federal g o v e r n m e n t to lease
enthusiasm for m o r e drilling by "Big Oil." A c c o r d i n g to some of t h e land w h e r e it is currently legal to d o so,
the report: areas they believe are t h e best prospects for finding oil
and gas deposits. Obviously they don't k n o w before
Even if increased domestic hand exactly where t h e best
drilling activity could affect sites will be; they have to lease
the price of gasoline, there is the land a n d explore. After
yet n o justification to o p e n d o i n g so, they begin drilling in
additional federal lands. . . . the areas w i t h t h e most p r o m
C o m b i n e d , oil and gas c o m ise. With record-high oil
panies h o l d leases to nearly prices, t h e companies are n a t
68 million acres of federal urally going to cast a w i d e n e t
land and waters that they are (insofar as t h e feds give t h e m
not producing oil and gas legal permission to d o so), and
[from]. . . . O i l and gas c o m so t h e p r o p o r t i o n of leased
panies w o u l d n o t b u y leases land that actually ends up
to this land w i t h o u t believing b e i n g classified as " p r o d u c i n g "
oil and gas can b e p r o d u c e d Oil Refinery in Anacortes, W a s h i n g t o n will b e m u c h lower than 100
there, yet these same c o m p a Walter Siegmund, licensed under GNU Free Documentation and Creative percent.
Commons Attribution 2.5
nies are n o t p r o d u c i n g oil o r Ironically, t h e higher t h e
gas from these areas already u n d e r their control. fraction of leased land that is p r o d u c i n g oil, t h e more
If w e extrapolate from today's p r o d u c t i o n rates suspicious w e should b e that t h e oil companies are p u r
o n federal land and waters, w e can estimate that t h e posely h o l d i n g back. After all, assuming they found oil,
68 million acres of leased b u t currently inactive fed w h y w o u l d they pay t h e g o v e r n m e n t to lease lands o n
eral land and waters could p r o d u c e an additional 4.8 w h i c h they didn't plan to drill?
million barrels o f oil a n d 4 4 . 7 billion cubic feet o f
natural gas each day. Contradictions from Big Oil's Critics

N o w this is truly astounding. It's hard to k n o w


w h a t w o u l d b e worse: D o t h e authors of this r e p o r t
H ere w e r u n into yet a n o t h e r nonsensical aspect of
the official story from Big Oil's critics. Let's s u p
pose for t h e sake of a r g u m e n t that t h e accusations are
and t h e politicians w h o repeat t h e accusationsactu correct and that o p e n i n g u p A N W R and o t h e r federal
ally t h i n k this is h o w t h e oil industry works, or are lands w o u l d n ' t lead to m o r e drilling. T h e n w h a t in t h e
they consciously t h r o w i n g o u t ridiculous "facts" just world is stopping t h e politicians from accepting t h e oil
to w i n votes? companies' money? In these hard times, w h y not take

13 O C T O B E R 2008
R o b e r t P. M u r p h y

billions from E x x o n M o b i l and all the rest? If they don't rather than the wise husbandry that w o u l d develo]
end u p drillingas the harshest critics allegethen u n d e r truly private ownership.
people in Alaska, Florida, and California don't n e e d to Besides large oil companies, the other popular vil
w o r r y about their coastlines being soaked in crude lains are financial-market speculators. According to t h
spills, n o w do they? official story, oil prices are as m u c h as $70 higher pe
T h i n g s get worse. It's n o t merely that the conspir barrel than the "fundamentals" justify. H e d g e funds
acy-charging politicians deny companies access to fed pensions, and other institutional investors have floode<
eral lands that have the potential of major oil and gas the futures markets, looking for a piece of the action
1
discoveries. T h e y want to swing the p e n d u l u m in the These investors have gambled o n rising oil prices b
o t h e r direction w i t h so-called " U s e It or Lose It" legis increasing their holdings of oil futures contracts. Th<
lation, w h i c h w o u l d penalize energy companies that result (we are told) is a self-fulfilling prophecy, w h e n
lease federal land if they don't begin p r o d u c i n g w i t h i n institutional purchases push up futures prices, w h i c h ii
a specified time. t u r n drive up spot prices. T h e speculators get riche
P u t t i n g aside the arrogance of politicians telling oil- while the average motorist pays at the p u m p for thei
industry experts h o w to r u n their businesses, such leg fat profits.
islation w o u l d merely present an additional risk to T h e r e is so m u c h w r o n g with this story that it's hare
domestic exploration efforts. As it is, to k n o w w h e r e to begin. As always
an oil c o m p a n y runs the risk of paying w h e n people accuse market partici
to lease a certain area and finding
The "use it or lose pants of making profits througl
nothing. The proposed legislation it" mentality already "manipulation" we can ask: W h a t tool
w o u l d increase the hazards, causing t h e m so long? W h y was oil $30 b a d
companies to b e c o m e m o r e conserva
prevails when in 2003? Were investors back ther
tive in w h e r e they explore. politicians sell m o r e altruistic than they are today?
This sorry episode underscores the To unpeel the issues in oil specula
flaws w i t h g o v e r n m e n t ownership of access rights to the tion, w e need to first review tht
land. T h e r e are legitimate concerns "y3,St lcLTlcis they mechanics of the futures market

over environmental quality, just as Futures contracts allow producers anc

there are obvious concerns over high temporarily control consumers to hedge against the risi

gasoline prices. B u t the political of price movements. Oil producer;


process is a terrible way to settle disputes. If the federal can sell futures contractswhich are promises tc
g o v e r n m e n t auctioned off its massive landholdings to deliver physical barrels of oil at a future date, for a pre-
the private sector, oil companies and conservation specified a m o u n t of m o n e y w h i l e major consumers
groups alike could make bids and channel resources such as airlines, can buy futures contracts to lock in i
into appropriate ends, guided by the price system. guaranteed price for the massive quantities of oil the)
As it is, w e have the worst of b o t h worlds, w h e r e will need for operations in the c o m i n g years. Future;
valuable oil and natural-gas deposits are arbitrarily markets thus p r o m o t e efficiency, as producers and con
placed off-limits and w h e r e oil companies are given sumers can concentrate on their core businesses anc
rights to develop in certain areas w i t h o u t local owners make investments that w o u l d be far too risky if the)
exercising oversight to ensure that the mineral extrac were completely exposed to volatile spot prices.
tion occurs w i t h the appropriate level of attention to
l o n g - r u n resource and environmental v a l u e . T h e "use it The True Effects of Speculation
or lose it" mentality already prevails w h e n politicians
sell access rights to the vast lands they temporarily c o n
t r o l t h o u g h economists k n o w that this mentality is
C ontrary to popular belief, futures markets do theii
j o b m u c h better in the presence of savvy specula
tors. W h e n successful, speculators speed price adjust
conducive to economically inefficient exploitation, ments, and actually make prices less volatile than they

THE F R E E M A N : Ideas on Liberty 14


Politicians E y e the Oil Market

otherwise w o u l d be. After all, the speculator buys l o w the m a k i n g w o u l d show up in a sizable excess of
and sells high (or shorts high and buys back low). T h e s e crude hitting the market.
very actions are countercyclical, and keep prices w i t h i n This w o u l d make perfect e c o n o m i c sense, i n c i d e n
a narrower band than if the speculators had stayed o n tally. For example, if certain speculators b e c a m e c o n
the sidelines. vinced that an attack o n Iran w o u l d drive oil to $400
In this environment, large institutional investors p r o per barrel in the c o m i n g m o n t h s , they w o u l d rush to
vide liquidity to the physical hedgers. It is ironic that buy futures contracts. This w o u l d push up the futures
while the g o v e r n m e n t takes steps to p r o p u p Fannie price such that refiners and others w i t h the requisite
M a e and Freddie M a c w h o s e investors certainly don't k n o w - h o w w o u l d find it profitable to sell futures c o n
plan o n living in the houses they financepoliticians tracts (at the sky-high prices) and buy oil o n the spot
and c o m m e n t a t o r s wail about the evil investors w h o market. T h e y w o u l d literally warehouse the oil for a
b u y oil futures even t h o u g h they don't ever plan o n few m o n t h s , t h e n u n l o a d it w h e n the futures contracts
taking delivery of physical barrels. W i t h large investors matured.
willing to pick up the slack, as it were, the traditional
hedgers in the oil futures markets can use these c o n The Stockpiling Story
tracts m o r e liberally, because they can unload t h e m in a
m o r e liquid market. A l t h o u g h those stockpiling oil w o u l d b e d o i n g so
for personal gain, the Invisible H a n d w o u l d ensure
that everyone else benefited. T h e i r purchases of spot oil
Markets and Speculation w o u l d drive up spot prices, leading to

U p till n o w w e have seen the


benefits of speculation. It is true Official inventory
conservation in the present. A n d of
course, w h e n war w i t h Iran inter
that if speculators are wrong, they can
data don't show any rupted imports, the stockpiled oil
distort m a r k e t s t h e housing bubble w o u l d b e a blessing.
is a p r i m e example. (There were g o v stockpiling occurring However, this story doesn't seem to
ernment policies that encouraged be playing o u t w h e n w e look at the
speculation in real estate, but that is
in the last few years. d a t a . T h e "yield c u r v e " o n oil has b e e n
a n o t h e r story.) B u t the market has a in b a c k w a r d a t i o n w h e r e spot prices
handy way of enforcing discipline o n speculation. If exceed futures pricesfor large portions of oil's record
speculators guess prices will rise, b u t instead they fall, price r u n - u p , m a k i n g it difficult to see h o w investors in
t h e n the speculators lose m o n e y in exact p r o p o r t i o n to futures contracts are pulling up spot prices. Moreover,
h o w w r o n g their forecasts were. T h e r e is n o n e e d for official inventory data don't show any stockpiling
g o v e r n m e n t to tack o n additional penalties, so l o n g as o c c u r r i n g in the last few years.
contracts are enforced and the losers are m a d e to bear N o w there are ever m o r e convoluted stories that
the full b r u n t of their mistakes. T h e irony is that there is certain economists are spinning to explain away this
no hard evidence that speculators have been driving up oil lack of evidence. For example, it's possible that investors
prices. T h u s w e have b e e n defending speculators for a pushed up futures prices, w h i c h in t u r n led Saudi Ara
" c r i m e " that they d o n ' t seem to have even c o m m i t t e d . bia to scale back its o u t p u t . This drop in supply t h e n led
If it were really the case that the "sustainable" m a r to rises in spot prices, w h i c h explains the lack of mas
ket price of oil that balanced the fundamentals of s u p sive c o n t a n g o (where spot prices are b e l o w futures
ply and d e m a n d was $80, while speculators had driven prices) d u r i n g the last year. Further, w e see n o stockpil
the price u p to a bubbly $150, w e w o u l d see a large ing in inventory data, because the Saudis are stockpiling
surplus. E v e n t h o u g h supply and d e m a n d in the oil the oil u n d e r the sand by n o t p u m p i n g .
market are notoriously inelastic, surely the g r o w t h in Even here, the data do n o t really fit such a story,
quantity supplied, and the drop in quantity d e m a n d e d , though admittedly OPEC figures are n o t as trust
from a $70 price hikeespecially o n e that was years in w o r t h y as those issued by privately held companies. T h e

15 OCTOBER 2008
Robert P. Murphy

Energy Information Administration estimates that and assembly-line workers typically do n o t have the
O P E C o u t p u t did drop from 2005 t h r o u g h the first m o n e y or savvy for such strategies. Instead, the only
quarter of 2 0 0 7 . B u t since t h e n it has b e e n steadily way they can hedge themselves against skyrocketing
rising, reaching all-time highs in the first quarter of gasoline prices is for their pension- or mutual-fund
2 0 0 8 . If we're trying to explain the doubling of crude managers to gain exposure to oil prices. Yet this is p r e
prices over the last year, a complicated story involving cisely what some m e m b e r s of Congress want to crack
speculators and O P E C restrictions gets ever harder to d o w n on.
square w i t h the facts. Americans are understandably b e c o m i n g furious over
In any event, w h e t h e r or n o t speculators are respon record oil and gasoline prices. In response, the politicians
sible for rising oil prices, w e can confidently state have pointed fingers and proposed fixes that are based o n
that proposed regulations to restrict pension and o t h e r faulty economics. If these odious measures pass, the result
institutional investors from participating in the oil will be higher and more volatile oil prices and m o r e
futures market w o u l d d o n o t h i n g b u t h a r m the average exposed consumers. T h e truly sad thing is that even if
A m e r i c a n . If millionaires w a n t to bet o n rising oil this all comes to pass, most voters won't understand what
prices, they will still be able to do so, either t h r o u g h happened, and will believe the politicians w h e n they
h e d g e funds or in foreign markets. B u t schoolteachers blame $200 oil o n anybody but themselves. (^)

E c o n o m i c Sophisms
ECONOMIC By Frederic Bastiat
SOPHISMS Introduction by Henry Hazlitt

A l t h o u g h w r i t t e n 1 5 0 years a g o , Bastiat's d e v a s t a t i n g l y a c c u r a t e attacks o n


t h e illogical, s e l f - s e r v i n g a r g u m e n t s o f p r o t e c t i o n i s t s r e m a i n b o t h r e l e v a n t
a n d e n t e r t a i n i n g . A m o n g t h e g e m s i n Sophisms are " T h e N e g a t i v e R a i l
road," "Petition of the Candlemakers," and " T h e Physiology of Plunder."

P e r h a p s t h e b e s t r e c o m m e n d a t i o n for Sophisms c o m e s f r o m r e n o w n e d
j o u r n a l i s t a n d F E E f o u n d i n g t r u s t e e H e n r y H a z l i t t . I n his i n t r o d u c t i o n t o
t h e b o o k , Hazlitt declares:

We could use more Bastiats today. We have, in fact, desperate need of them. But we do, thank Heaven,
have Bastiat himself, . . . and the reader of these pages will not only still find them, as Cobden did,
"as amusing as a novel," but astonishingly modern, for the sophisms he answers are still making their
appearance, in the same form and almost in the same words, in nearly every issue of today's newspa
pers.

P u b l i s h e d b y t h e F o u n d a t i o n for E c o n o m i c E d u c a t i o n 3 2 8 pages, paperback


$11.00
To order, visit our online store at www.fee.org, or call 866-766-9440. Please add $3.00 per copy for standard postage and handling.

THE FREEMAN: Ideas on Liberty 16


The Therapeutic State

Mendacity by Metaphor
BY THOMAS SZASZ

E. H . Stackhouse of State S u p r e m e C o u r t in M a n

O
nce upon a time, law-abiding citizens
acknowledged that they w a n t e d lawbreakers hattan granted the hospital's request. . . . R o n a l d L.
punished. T h e y did n o t say the offenders Kuby, a defense lawyer, said medication was too
"needed" punishment. W h e n they used the term often used to create a false sense of sanity. " W h e n
" n e e d " metaphoricallyas w h e n an outlaw in a bar the j u r y sees y o u r client sitting there calmly, p e a c e
told his buddies that o n e of their adversaries " n e e d e d " fully, sort of blankly staring, that person t h e n looks
killingthey knew what they were talking about. sane," M r . Kuby said. " B u t that's a chemically
T h e y did n o t lie to themselves, n o r did they deceive i n d u c e d stability designed to make the judicial rail
others. This is n o longer true. In o u r society soaked in road function." . . . " Wlien somebody is in need of med
psychiatry, w e systematically use the term "need" ication" Mr. Konoski [Tarloff's principal attorney]
metaphorically, to lie to ourselves and to deceive said, 'forcing them not to have it,forcing them to deal with
others. H e r e is an example. their demons instead of being able to sup
In February 2008 David Tarloff press them through the medication, that's
a career "schizophrenic"is released In our society soaked almost like torture." [Emphasis added.]
from a type of prison w e call " h o s p i -
tal."Ten days later he kills a psycholo
in psychiatry, we Voila: T h e defendant w h o refuses
gist who shares offices with a systematically use the to ingest a chemical straitjacket has a
psychiatrist whom Tarloff holds medical n e e d for the drug. Acceding to
responsible for depriving h i m of lib term "need" the defendant's wish to n o t b e c h e m i
erty. In J u n e the New York Times cally restrained is t o r t u r i n g h i m . O n l y
metaphorically, to lie
reports: " A lawyer for a schizophrenic in the age of psychiatry could people
m a n accused of killing an U p p e r East to ourselves and to believe such brazen lies.
Side psychotherapist tried three times I was a trained physician and psy
o n Tuesday m o r n i n g to persuade his
deceive others. choanalyst before the advent of the
client to leave his holding cell for a class of chemicals w e call "psychiatric
hearing." T h e lawyer was unsuccessful. Tarloff was n o t drugs." I well r e m e m b e r w a t c h i n g 1 9 5 4 or 1955,
interested in being cooperative. H e was interested in his w h e n I was serving my required military t o u r of duty at
life situation as h e saw (constructed) it. O f course there the National Naval Medical C e n t e r in Bethesda, M a r y
is n o t h i n g n e w about defendantsespecially defendants l a n d w h a t must have b e e n o n e of the first films p r o
charged w i t h a capital c r i m e n o t cooperating w i t h the m o t i n g chlorpromazine, patented in the U n i t e d States
judicial system. W h a t is n e w about it is the way the as T h o r a z i n e . T h e film showed monkeys, rendered i r r i
medical-judicial system n o w deals w i t h such a person. table and aggressive by starvation and crowding, being
According to the Times, injected w i t h the d r u g and b e c o m i n g "tranquilized."

T h e hearing, held in a small c o u r t r o o m at Belle-


Thomas Szasz (tszasz@ao1.com) is professor of psychiatry emeritus at
vue, was held to decide w h e t h e r doctors could force SUNY Upstate Medical University in Syracuse. His latest books is
Mr. Tarloff to take his medication. . . . Justice J o h n Psychiatry: T h e S c i e n c e o f Lies (Syracuse University Press).

17 OCTOBER 2008
Thomas Szasz

T h e t e r m was n e w then. This, w e were told, was the don't k n o w h o w to j u d g e an editorial w h e n they see
n e w cure for schizophrenia. I did n o t like w h a t I saw one. T h e y don't k n o w h o w to j u d g e a political cam
and immediately w r o t e t h e following: " T h e widespread paign. T h e y don't k n o w w h e n they are being fooled
acceptance a n d use of the so-called tranquilizing drugs by a metaphor, an analogy, a parable. A n d m e t a p h o r
constitutes o n e of the most n o t e w o r t h y events in the is, of course, what w e are talking about. Education by
recent history of psychiatry. . . .These drugs, in essence, poetry is education by metaphor.
function as chemical straitjackets. . . . W h e n patients had
to b e restrained by t h e use of forcefor example, by a Paraphrasing that phrase, I suggest that education by
straitjacketit was difficult for those in charge of their psychiatry is education by and w i t h mendacity, a thesis
care to convince themselves that they were acting alto I have maintained for m o r e than half a century.
gether o n behalf of the patient. . . . Restraint by c h e m R e c e n t reports in the press exposed Dr. Joseph B i e -
ical means does n o t make [the psychiatrist] feel guilty; d e r m a n , professor of psychiatry at Harvard Medical
herein lies the danger to the patient." School, and his collaborators of failing to report "at
This, t h e n , was the g l o r i o u s b u t u n a c k n o w l e d g e d least $3.2 million dollars they had received from d r u g
and unacknowledgeablepsychopharmacological break companies b e t w e e n 2000 and 2007," violating federal
t h r o u g h : Restraint could b e p u t in t h e and university research rules designed to
patient instead of o n h i m and b e defined as police potential conflicts of interest.
" d r u g t r e a t m e n t " (of and for the patient). It B i e d e r m a n is said to be " o n e of the
was obvious from t h e start that neuroleptic most influential researchers in child psy
drugs benefit psychiatrists, n o t patients. Psy chiatry, w h o s e w o r k has helped to fuel a
chiatrists deal w i t h this predictable result by controversial 40-fold increase from 1994
attributing it to a newly invented m e n t a l - to 2003 in the diagnosis of pediatric b i p o
brain disease they call "anosognosia." lar disorder, characterized by severe m o o d
In 1931 R o b e r t Frost (1874-1963) swings, and a rapid rise in the use of
delivered a lecture at A m h e r s t College w i t h antipsychotic medicines in children."
the u n e x c i t i n g title " E d u c a t i o n by Poetry." H e is confident that the children whose
If y o u are ignorant of
It is a profound meditation o n , and w a r n i n g metaphor, w a r n e d [Robert] behavior displeases their mothers suffer
about, uses and abuses of metaphor. L o n g Frost, "You are not safe w i t h
from a brain disease that requires p h a r m a
science; y o u are not safe in
before I "discovered" t h e vast errors h i d d e n history . . . in the libraries and cological treatment. B u t is drugging chil
galleries."
from us by the m e t a p h o r of mental illness, dren allegedly suffering from "pediatric
common5.wikimedia.org
Frost w r o t e : bipolar disease" analogous to vaccinating
t h e m against smallpox, as B i e d e r m a n suggests? Never
Health is another g o o d word. A n d that is the m i n d that antipsychotic drugs are p r o m o t e d as thera
m e t a p h o r Freudianism trades on, mental health. A n d peutic agents, n o t as prophylactics. Never m i n d that
the first thing w e know, it has us all in u p to the top press reports routinely refer to antipsychotic drugs as
k n o t . . . . W h a t I a m pointing o u t is that unless you subduing involuntary subjects. A n d never m i n d that the
are at h o m e in the metaphor, unless y o u have had m o d e r n psychiatrists' favorite "patients" are persons
your proper poetical education in the metaphor, you w h o are powerless to resist being cast in that role: chil
are n o t safe anywhere. Because y o u are n o t at ease dren, prisoners, and old people in nursing h o m e s .
w i t h figurative values: you don't k n o w the m e t a p h o r If y o u are ignorant of metaphor, w a r n e d Frost, "You
in its strength and its weakness.You don't k n o w h o w are n o t safe w i t h science; y o u are n o t safe in history . . .
far y o u may expect to ride it and w h e n it may break in the libraries and galleries."You are certainly n o t safe
d o w n w i t h you. You are n o t safe w i t h science; you if you believe that psychiatrists care for and cure sick
are n o t safe in history... . T h e y don't k n o w what they people, w h e n in fact they coerce and control persons
may safely like in the libraries and galleries. T h e y helpless to resist their violence. (f|

THE FREEMAN: Ideas on Liberty 18


Making Social Security More Harmful
B Y J . R. C L A R K AND D W I G H T R. L E E

Social Security are being saved and invested to finance

S
ocial Security is a fundamentally flawed system.
If a private firm offered such a retirement sys their retirement, instead of b e i n g spent immediately by
t e m and m a d e the same claims for it that the fed politicians, as is actually the case. B u t it is clear that
eral g o v e r n m e n t makes for Social Security, that firm m a n y do believe that they have a personal Social Secu
w o u l d quickly b e c o m e a poster child for corporate rity account containing the m o n e y to fund their retire
fraud, and its managers w o u l d soon be convicted of m e n t benefits. Alan Greenspan recounts in his recent
criminal charges. b o o k , The Age of Turbulence, a story told by former
T h e r e are t w o fraudulent claims the federal g o v e r n H o u s e leader T o m Foley. W h e n Foley tried to inform
m e n t makes about Social Security that deserve special his m o t h e r that there were n o lockboxes containing the
attention. By considering h o w these t w o claims inter m o n e y to pay for Social Security, she told h i m ,
act w i t h each other, it b e c o m e s clear that the "I h o p e you will n o t be offended at h o w
politicians and pundits w h o defend Social < surprised and shocked I am to find that the
Security are increasing the h a r m it is majority leader of the H o u s e of R e p r e
imposing o n A m e r i c a n workers. sentatives k n o w s n o t h i n g about Social
Security."
Two Fraudulent Claims T h e other fraudulent claim made

C onsider first that ever since Social


Security was enacted
Americans have b e e n told that their
in 1935
about Social Security (again, from the
very b e g i n n i n g of the program) is
that employees pay only half the cost,
" c o n t r i b u t i o n s " are being deposited into w i t h employers paying the other half.
their o w n account to pay for their retire This claim is widely seen as plausible
m e n t benefits. This claim has b e c o m e m o r e because the legislation authorizing Social
implicitly suggested than explicitly stated in Security clearly stipulates that the required pay
recent Social Security brochures, but n o t in the state ments are to be split evenly b e t w e e n employees and
ments of politicians w h e n opposing any attempt to par employers. If this were true, t h e n employees w o u l d n o w
tially privatize the program. Al Gore, in his 2000 be paying 6.2 percent of their before-tax i n c o m e u p to
presidential campaign, assured the public that if h e were $102,000 a year; employers w o u l d m a t c h that a m o u n t .
elected our Social Security " c o n t r i b u t i o n s " would As any g o o d student in an economic-principles
remain secure in a " l o c k b o x " until o u r retirements. It course should learn, however, the a m o u n t of a payroll
was never m a d e entirely clear w h e t h e r w e each had o u r
very o w n lockbox or all the m o n e y was in o n e big J.R. Clark (J-Clark@utc.edu) holds the Probasco Chair of Free
Enterprise at the University of Tennessee at Chattanooga. Dwight Lee
lockbox.
(leed@mail.cox.smu.edu) holds the William J. O'Neil Chair of Global
W e cannot find any serious study that estimates h o w Markets and Freedom in the Cox School of Business at Southern
many people really believe that the taxes they pay to Methodist University.

19 OCTOBER 2008
J. R. C l a r k a n d D w i g h t R. L e e

tax actually paid by employees and employers has to realize from Social Security (in present-value terms)
absolutely n o t h i n g to do w i t h w h a t politicians mandate the less the labor supply will decline. A n d indeed, i
in legislation. It is true that each worker has 6.2 percent they expect to receive m o r e in Social Security benefit
of his after-tax i n c o m e deducted from his paycheck and than the a m o u n t deducted from their checks, thei
sent to the Social Security Administration (SSA) and his labor supply will increase out from the original level.
employer sends in the same a m o u n t . But by altering the But this means that even if workers are receiving b e n
wages employers pay and workers receive, these pay efits greater than the a m o u n t being deducted from thei
ments change the supply and d e m a n d schedules for paychecks, they are not necessarily better off. Thi
laborat a given n o m i n a l wage, different amounts of decrease in labor demand and the increase in labor sup
labor will be supplied and d e m a n d e d than before. (In ply can result in a salary reduction greater than t h
the lingo of economics, the supply and d e m a n d curves a m o u n t Social Security benefits are expected to excee<
shift.) U n t i l w e k n o w h o w wages and salaries change in paycheck deductions. In fact, as w e show in our Economx
response to these shifts, w e cannot tell h o w m u c h of the Inquiry article, workers are made worse off by Socia
Social Security cost is paid by the employees and h o w Security unless the benefits they expect and actually receiv
m u c h is paid by employers. For example, if a worker's are at least equal to the total a m o u n t paid for Socia
salary is reduced by exactly the same a m o u n t that the Security by both the workers and their employers.
employer sends to the SSA for her,
t h e n the cost to the employer is n o t h Defrauding Workers
ing (what h e pays for the worker's It is ironic that those We are n o w able to nail d o w n ou
Social Security is offset by the lower main p o i n t t h a t advocates of Socia
salary) and the w o r k e r ends up paying pundits and politicians Security are defrauding Americai
the entire cost.
who oppose even the workers in two ways. First, claim
W e are n o t going to w o r k o u t the which leave the impression tha
details for d e t e r m i n i n g h o w the Social most timid moves to m o n e y paid into Social Security i
Security cost is divided b e t w e e n w o r k being saved for o u r retirements leac
ers and employers. B u t having w o r k e d
privatize Social
workers to believe their benefits ar<
this o u t w i t h graphical analysis in an Security . . . are widely m o r e secure than they are.
October 2006 article in Economic Second, persistent claims tha
Inquiry, w e can provide a simple verbal
seen as protectors of workers pay only half the Socia
explanation of h o w those w h o defend American workers. Security tax lead t h e m to believ<
Social Security are adding to the h a r m their benefits cost t h e m less thai
it inflicts o n A m e r i c a n workers. they really do.
T h e employer requirement to send a check to the These fraudulent claims clearly increase the polit
SSA for each worker equal to 6.2 percent of salary ical viability of Social Security by misleading worker
revises d o w n w a r d the firm's d e m a n d schedule for labor into expecting larger benefits than they will receive
according to the a m o u n t of this check. This reduction in But it is worse than this. By generating exaggeratec
demand, considered by itself, obviously reduces the expectations of Social Security benefits, the two claim
salary the firm is willing to pay each worker. Similarly, are actually reducing the net benefits workers receive b]
the Social Security deduction from each worker's increasing the a m o u n t they are paying for t h e m wit!
paycheck reduces the labor supply by revising upward lower wages.
the supply schedule by the a m o u n t of this deduction, It is ironic that those pundits and politicians who
assuming that there is no expected benefit from Social Security. oppose even the most timid moves to privatize Socia
B u t this overstates the reduction in labor supply if Security by downplaying, or denying outright, its Ponzi-
workers believe they are going to receive some benefit scheme nature are widely seen as protectors of Ameri-
from Social Security. T h e m o r e benefit workers expect can workers.

THE F R E E M A N : Ideas on Liberty 20


Language, Loyalty, and Liberty
BY B E C K Y AKERS

T
h e equanimity w i t h w h i c h Americans have B o t h groups bravely and v e h e m e n t l y object to the
w a t c h e d their freedoms flee puzzles many of infamous "Executive O r d e r 13166. Improving Access to
us, but perhaps I've solved the mystery: they're Services for Persons w i t h Limited English Proficiency."
too busy w o r r y i n g about the English language instead. President Bill C l i n t o n foisted this o n the nation in
T h e y fear its i m m i n e n t expiration, however exagger August 2000 w h e n h e fretted lest folks w h o weren't
ated reports of that death may be. S o m e blame rap fluent in English forgo their share of federal freebies.
music, text-messaging, or state-enforced T h e order requires b o t h Leviathan's
agencies and "recipients of Federal
" e d u c a t i o n " for English's demise; many
Some blame rap
fault immigrants. After all, these n e w financial assistance," such as hospi
comers often cling to their native music, text- tals, schools, and colleges, to "ensure
tongues and traditions instead of assim that the programs and activities they
ilating by learning English. This allows
messaging, or state- normally provide in English are
Americans to conclude that English is a enforced "education" accessible to L E P [limited English
fragile waif as endangered as Lady L i b proficiency] persons and thus do
erty. A n d they w a n t government to
for English's demise; not discriminate o n the basis of
defend her. In J u n e 2 0 0 5 , Z o g b y Inter many fault national origin in violation of title
national found that 79 percent of VI of the Civil R i g h t s Act of 1964."
Americans approve m a k i n g English the immigrants. After all, Thanks to its unconstitutional
presumptions, let alone its vague
official language of the U n i t e d States.
these newcomers
That's e n o u g h of a plurality to s u p and expansive wording, this spawn
p o r t several organizations. O n e is U.S. often cling to their of the Civil R i g h t s Act may have
English, founded in 1983 by the late wreaked as m u c h h a r m as its parent.
S. I. Hayakawa, a semanticist and o n e
native tongues and Complying with its open-ended
time U.S. senator from California. It traditions instead orders has cost taxpayers billions.
boasts 1.8 million m e m b e r s and lobbies For example, California's Depart
to enshrine English as America's "offi
of assimilating. m e n t of M o t o r Vehicles alone pays
cial" language, by w h i c h it means that $2.2 million annually in translating
"official g o v e r n m e n t business at all levels must b e c o n costs.Thirty states n o w limit such damage w i t h "official
ducted solely in English." A n o t h e r association, P r o - English" laws. A n d while e c o n o m i c self-defense seems
English, "workfs] t h r o u g h the courts and in the court to require these measures, a far better response is to
of public o p i n i o n to defend English's historic role as shrink and defang g o v e r n m e n t . We o u g h t to prohibit it
America's c o m m o n , unifying language, and to persuade
lawmakers to adopt English as the official language at Becky Akers (Ubertatem@aim.com) is a freelance writer and historian living
all levels of government." in New York City.

21 OCTOBER 2008
Becky Akers

from interfering in o u r lives rather than allowing it to cessful assimilation of ethnic communities into A m e r i
ensure that every serf understands its dictates and snits. can society." It also extols those long-ago immigrants
Most Americans w h o tout "official English" conflate for realizing that "language skills were the key to enter
the concept with "Americanization." T h e y not only ing the emerging 'middle class.' " If only modern
want immigrants to speak English; they also expect t h e m migrants were as astute.
to assimilate. Conservative activist and ex-bureaucrat Yet the politicians of that halcyon age saw i m m i
Linda Chavez recently advocated "giv[ing] priority to grants as anything but cooperative and compliant. Ir
immigrants" w h o want to live here w h e n they "already fact, they frequently castigated t h e m for spurning Eng
speak English, since this is a key factor in their successful lish "language skills" and the " e m e r g i n g 'middle class,'''
integration into American society." Furthermore, "suc that is, assimilation. Yesteryear's officials complained a<
cessful assimilation should be the goal of U S immigra much as today's Americans about n e w c o m e r s whc
tion policy." stubbornly preferred their o w n language and lifestyle
N o d o u b t M s . Chavez believes her former employer, so m u c h that c o n t e m p o r a r y Americanizers still quote
the federal g o v e r n m e n t , should decide w h i c h i m m i t h e m approvingly. O n e of their favorites is the n e o c o n -
grants will best assimilatea vague t e r m w i t h different servative icon T h e o d o r e Roosevelt.
definitions for different people. She O n January 3, 1919, the former pres
chillingly advises, " W e could also give ident wrote to the American Defense
priority admission to immigrants willing Society as its honorary head. This lettei
to serve in the U S military. . . . " of regret at missing one of the Society's
events became his last public statement:
Distrust of Immigrants he died three days later. T h e rich, retiree
ruler didn't blush at beating up o n peo
W hatever they m e a n by "assimila
tion," Americanizers
immigrants w h o persist in their native
distrust ple fleeing persecution, disease, war, anc
wretched poverty: " I n the first place, we
customs while living a m o n g their k i n should insist that if the immigrant w h c
dred and c o u n t r y m e n in a bewildering comes here does in g o o d faith become
n e w land. U.S. English warns that " t h e an American and assimilates himself tc
lack of an assimilation policy for i m m i us, he shall be treated o n an exact equal
grants to the U n i t e d States is rapidly Theodore Roosevelt ity with everyone else. . . . But this i<
Library of Congress
c h a n g i n g the successful integration ways predicated u p o n the man's b e c o m i n g ir
of the past. G o n e are the days of the A m e r i c a n D r e a m very fact an American, and n o t h i n g but an American."
and the upwardly mobile society for immigrants. In its T h a t w o u l d be news to the F o u n d i n g Fathers, w h c
place are l o w expectations and g o v e r n m e n t policies recognized o u r rights as "inalienable," endowed with
that encourage Americans to learn the language of the o u r h u m a n i t y and i n d e p e n d e n t of anything we say 01
immigrants, instead of the o t h e r way around." do. N o r does it matter w h e t h e r immigrants are01
Pro-English also bundles speaking English with aren'tgood for America. W h e t h e r they depress laboi
assimilation. It blames m a n d a t o r y "multilingualism" for markets, enlist in the a r m e d forces, or pay m o r e in taxe:
"causing a g r o w i n g underclass, w h i c h is segregated and than they send h o m e to impoverished families is al
walled off i n t o linguistic ghettos. A century ago such irrelevant. Immigrating and emigrating are natura
i m m i g r a n t ghettos were marked by extreme poverty, rights belonging to individuals; w h e t h e r immigrant;
80-hour workweeks and child labor." T h o u g h we benefit a nation is as immaterial as w h e t h e r free speech
m i g h t credit liberty for unleashing the innovations and does. G o v e r n m e n t s may not restrict a person's freedorc
technology that e n d e d those hardships, Pro-English to speak his m i n d i n whatever language he pleases
instead praises "mandatory public education and and they may n o t restrict his freedom of m o v e m e n t
reduced i m m i g r a t i o n " because they allowed the " s u c - T h o s e that do are tyrannies.

THE FREEMAN: Ideas on Liberty 22


Language, Loyalty, and Liberty

B u t R o o s e v e l t disdained natural rights and a g o v that he has got to learn it. Let the i m m i g r a n t w h o does
e r n m e n t t o o limited to threaten t h e m . His letter next n o t learn it go back. H e has got to consider the interest
attacked freedom of association. of the U n i t e d States or he should n o t stay here."
"If [an immigrant] tries to keep segregated w i t h Talk about setting a high bar! If we're going to
m e n of his o w n origin and separated from the rest of eject residents who consider their own interests
America, t h e n h e isn't d o i n g his part as an A m e r i c a n . instead of the country's, let's b e g i n w i t h politicians and
T h e r e can be n o divided allegiance here. Any m a n w h o bureaucrats.
says h e is an A m e r i c a n b u t s o m e t h i n g else also, isn't W h e n either g r o u p grouses that immigrants must
an A m e r i c a n at all. W e have r o o m for b u t o n e flag, learn English, they m e a n that Leviathan will teach it to
the A m e r i c a n flag . . . and w e have r o o m for b u t one, them. Requiring English in 21st-century America
soul loyalty, and that loyalty is to the A m e r i c a n people." implies that g o v e r n m e n t will operate centers to teach
(Many commentators excuse " s o u l " as a typo for it; U.S. English believes that "teaching n e w c o m e r s E n g
" s o l e " b u t we'll accept the sentence as he w r o t e it.) lish is o n e of the strongest acts of inclusion o u r g o v e r n
J o i n i n g the president in his p r e o c c u p a t i o n with m e n t can provide." A n d Pro-English cites a n o t h e r poll
immigrants' souls was Louis Brandeis, future S u p r e m e from Z o g b y in w h i c h " 7 8 % of Americans believe that
C o u r t justice. O n July 4, 1915, Brandeis decreed, the g o v e r n m e n t should do m o r e to help immigrants
"However great his o u t w a r d con- learn English." It's t o o bad 78 percent
formity, the i m m i g r a n t is n o t A m e r i of Americans don't realize that " h e l p
canized unless his interests and
It's too bad 78 ing i m m i g r a n t s " helps the state far
affections have b e c o m e deeply r o o t e d percent of Americans m o r e : it benefits from yet another
here. A n d w e properly demand of program, w i t h m o r e j o b s to dispense
the i m m i g r a n t even m o r e than t h i s
don't realize that and taxes to collect, as well as the
h e must be b r o u g h t into complete "helping immigrants" chance to indoctrinate victims.
h a r m o n y w i t h o u r ideals and aspira T h e r e are the demagogic advan
tions and cooperate w i t h us for their helps the state far tages, too, of pitting people against
attainment. O n l y w h e n this has b e e n
more: it benefits from one a n o t h e r : Politicians encourage
d o n e will h e possess the national c o n natives to fear n e w c o m e r s w i t h their
sciousness of an American." yet another program. incomprehensible languages and to
Naturally, g o o d Americans speak t u r n to g o v e r n m e n t for protection.
English. Even if an i m m i g r a n t "adoptfed] the clothes, Roosevelt exploited those fears o n July 4, 1917, w h e n
the manners and the customs generally prevailing here," h e implied that G o d alone k n e w w h a t treason G e r m a n
h e was only a "superficial" A m e r i c a n in Brandeis's immigrants were plotting: " D u r i n g the present war all
opinion. "Far m o r e i m p o r t a n t is . . . w h e n h e substitutes newspapers published in G e r m a n , or in the speech of
for his m o t h e r t o n g u e the English language as the c o m any of o u r foes, should b e required to publish, side by
mon medium of speech." R o o s e v e l t emphatically side w i t h the foreign text, columns in English c o n t a i n
agreed. T h e 48-state u n i o n of 2,917,652 square miles ing the exact translation of everything said in the
that he j u d g e d t o o tiny for multiple flags and loyalties foreign language. Ultimately this should be done
couldn't a c c o m m o d a t e multiple languages, either: " W e w i t h all newspapers published in foreign languages in
have r o o m for b u t o n e language here and that is the this country."
English language. . . ." Ninety years later the same attitude flourishes,
t h o u g h w i t h even less excuse. T h e justification this time
State Compulsion for English is n o t that a w a r r i n g nation must k n o w w h a t those

R oosevelt also advocated compulsory English e d u


cation. In 1916 h e declared, "Let us say to the
i m m i g r a n t n o t that w e h o p e he will learn English, b u t
sneaky foreigners are plotting, b u t that
Americans aren't comfortable confronting the unfamil
red-blooded

iar. N e w York City C o u n c i l m a n and mayoral candidate

23 OCTOBER 2008
Becky Akers

J o h n Avella represents a district of multiple ethnicities M e a n w h i l e , w i t h the rise of the welfare state, i m m i
in Q u e e n s . H e has repeatedly attacked his Korean c o n grants' alleged greed for "public services" has also
stituents for posting Korean signs advertising their earned Americanizers' wrath. T h e y forward emails
Korean shops to Korean customers. "I don't think ("WAKE-UP FOLKS. A R E A L EYE OPENER")
there's racism here," Avella averred in 2004, " b u t people w a r n i n g that "$12 Billion a year is spent o n primary
[as opposed to Koreans?] really feel discriminated and secondary school education for children here
against w h e n they suddenly see a store sign in the illegally and they cannot speak a w o r d of English."
n e i g h b o r h o o d they grew up in, and can't understand it. T h e eye-openers rightly resent Leviathan's theft of
T h e obvious response is to say, ' T h e y don't w a n t m e in o u r m o n e y to brainwash kids, but w h e r e those chil
their store; they don't want m e here.' " dren were b o r n and w h a t they speak are irrelevant
A n d the obvious response from a politician is to to that crime.
say, " T h e r e oughta be a law." So it's n o surprise R a t h e r than immigrants, Americanizers o u g h t to
Avella a n n o u n c e d " h e was preparing a bill requiring all attack g o v e r n m e n t for sponsoring the p r o g r a m s p u b -
signs in the city to b e 'at least half in lie schools, Social Security, food
English.'" This inversion of Executive stamps, M e d i c a i d t h e y claim n e w
O r d e r 13166 w e n t far e n o u g h that a
Rather than comers abuse. ( O u r friends are o n
c o u n c i l m a n w h o opposed it, J o h n Liu, immigrants, Ameri thin ice here: Every study proving
led a task force that surveyed 293 busi that immigrants disproportionately
nesses in the suspect n e i g h b o r h o o d . It canizers ought to abuse the taxpayers' largess has an
c o n c l u d e d that only 5 percent of the equal and opposite study crowning
attack government b o r n - a n d - b r e d Americans as wel
signs included no Englishthough
a n o t h e r 12 percent boasted some E n g for sponsoring the fare kings and queens.) W h e n the
lish words w i t h o u t actually describing state dangles free m o n e y in front
the shop. T h o s e inscrutable immigrants
programspublic of people, almost everyone will
are a wily b u n c h . schools, Social grab it, regardless of nationality or
citizenship.
Government and Xenophobia Security, food stamps, T h e reality also differs from the

X e n o p h o b i a seems to be part of the


human condition.
have always struggled w i t h the suspi
Newcomers
Medicaidthey
claim newcomers
stereotype regarding English. Most
immigrants want to learn English
and struggle valiantly to do so.
cion and dislike most people harbor for Common sense tells them that
those w h o look, act, or speak differ
abuse. c o m m u n i c a t i n g w i t h employers and
ently. T h e federal g o v e r n m e n t endorsed clients is requisite for prospering in
these dark e m o t i o n s in the 1870s, w h e n the Supreme their n e w h o m e . A P e w Hispanic C e n t e r / K a i s e r Family
C o u r t discovered a constitutional "interest" in i m m i Foundation poll in 2002 reported that 90 percent of
gration. Curiously, the feds had s o m e h o w overlooked Latinos believe Latino immigrants must learn English
that "interest" for the nation's first century. It's even to succeed here. Yet Americanizers slander immigrants
m o r e curious that despite pressure from Westerners as too stubborn and unpatriotic to bother. Jingoists
w h o resented the cheap Chinese workers flooding their w h o have never tried to master a foreign language
states, the C o u r t couldn't c o m e u p w i t h the constitu themselves apparently forget that children pick up n e w
tional clause c o n c e r n i n g this "interest," either. T h e lingo far m o r e easily than adults do. O l d e r immigrants
justices c o m p e n s a t e d by citing "national sovereignty" w h o aren't verbally facile strain to understand English,
and o t h e r euphemisms for " w i n k - w i n k - t h e - C o n s t i t u - let alone speak it; they may want to learn it every bit as
tion-actually-prohibits-federal-interference-here-but- m u c h as the Americanizers want t h e m to. There's added
who-cares?" incentive if they need to converse w i t h other i m m i -

THE FREEMAN: Ideas on Liberty 24


Language, Loyalty, and Liberty

grants w h o don't c o m e from their c o u n t r y or s o m e must first obtain a bureaucrat's permission.) If n e w


times even their particular region: people newly arrived comers are t o o stupid to understand their o w n best
from C h i n a have to learn English if they expect to do interests, Americanizers stand ready to assist t h e m b y
business w i t h their M e x i c a n neighbors. force, if necessary.
English also enjoys cachet as an international lan B u t w h y measure patriotism w i t h language? H o w
guage, the patois of C o c a - C o l a , M c D o n a l d ' s , rock does vernacular d e t e r m i n e devotion to the A m e r i c a n
music, and Hollywood's glitter. Plus it's easier than ideals of liberty, private property, and equality u n d e r
other languages, w i t h straightforward, uninflected law? T h e Americanizers, w i t h their faith in c o m p u l
grammar. Philip Sidney rejoiced in 1598 that English is sion, betray freedom far m o r e than the n o n - E n g l i s h -
"void of those c u m b e r s o m e differences of cases, m o o d s , speaking i m m i g r a n t .
genders and tenses, w h i c h I t h i n k was a piece of the Language is a deeply personal trait that shapes the
tower of Babylon's curse that a m a n should b e p u t to very way w e think. N o w o n d e r the state tries to insin
school to learn his m o t h e r tongue." Kids immediately uate itself h e r e w h i c h makes it all the m o r e i m p e r a -
grasp this. W h e n I asked a little girl tive that w e grant g o v e r n m e n t n o say
b o r n in N e w York City to Spanish- in s o m e t h i n g so subjective, essential,
speaking parents w h i c h language she
Language is a deeply and vital. E n c o u r a g i n g immigrants to
uses w i t h her Hispanic friends, she personal trait that speak their native tongues at h o m e , as
gave m e a look that showed how the Los Angeles Unified School D i s
d u m b m y question was. "English, a
shapes the very way trict did in the 1990s, is every bit as
course," she said. "It's faster." Life's an we think. N o wonder offensive as forcing t h e m to speak
exciting whirl w h e n you're six years English. (We w o n ' t even start on
old; w h o has time to spout; ten Spanish the state tries to bilingual education in Leviathan's
words w h e n only three or four E n g insinuate itself here. schools: W h y inveigh against that
lish ones convey the same idea? detail w h e n the w h o l e structure is
rotten?) If w e must have a g o v e r n
The Paternalism of Americanizers m e n t , its sole p u r p o s e is to protect o u r rights to life, lib

B ut n o n e of these advantages deflect the A m e r i c a n


izers from enforcing English. T h e y often
their insistence w i t h the excuse that they want to help
cloak
erty, and property; it has n o place p r o m o t i n g
language over another. Lovers of liberty should object
strenuously each time the state intrudes in this area,
one

new citizens take advantage of all A m e r i c a offers. w h e t h e r o n behalf of English or any o t h e r t o n g u e .


("Illegal" immigrants are a n o t h e r matter. T h e only help J o h n M i l t o n w r o t e in Areopagitica that English is " t h e
Americanizers w o u l d spare t h e m is a ticket home. language of m e n ever famous and foremost in the
People w h o h o p e to live in the land of the free achievements of liberty." Let's keep it that way. (H

25 OCTOBER 2008
Our Economic Past

The Great Escape from the Great Depression


BY ROBERT HIGGS

cessful transition from the wartime c o m m a n d - a n d - c o n -

Q
uestions about the Great Depression may be
usefully framed as pertaining to three distinct trol e c o n o m y to a peacetime market-oriented economy.
issues: the Great C o n t r a c t i o n , the extraordi Perhaps the main reason w h y economists have mis
narily severe e c o n o m i c decline from 1929 to understood the remarkably smooth transition is that
1933; the Great D u r a t i o n , the persistence of subpar they have first misunderstood the war e c o n o m y itself.
e c o n o m i c performance for m o r e than a decade; and the T h e y have viewed the war " b o o m " in simple Keynesian
Great Escape, the ultimate recovery from this uniquely terms: G o v e r n m e n t spending, financed by huge budget
deep and l o n g depression. A l t h o u g h economists c o n deficits and a c c o m m o d a t e d by rapid increases in the
tinue to debate the causes of the Great C o n t r a c t i o n m o n e y stock, propelled the e c o n o m y from the lingering
and the Great D u r a t i o n , a r o u g h consensus has e m e r g e d depression to unprecedented heightsindeed, during
that major policy blunders of various sorts deserve the peak years of war production the e c o n o m y appeared
most of the blame for these calamities. W i t h regard to be operating far beyond its "capacity to produce,"
to the Great Escape, economists have also reached even t h o u g h by 1945 more than 16 million prime-age
substantial agreement, but u n f o r t u - m e n had been pulled from the labor
nately they have c o m e to agree o n force at some point and replaced by
an interpretation that is almost c o m
Economists gener teenagers, w o m e n with little or no
pletely w r o n g . ally recognize, of experience in the paid labor force, and
It is w r o n g factually because it elderly m e n .
places the Great Escape in the early
course, that normal, In t r u t h , however, this apparent
1940s, a r o u n d the time the U n i t e d civilian-oriented Keynesian "miracle of production,"
States b e c a m e a declared belligerent d u r i n g w h i c h the u n e m p l o y m e n t rate
in World War II, whereas the e c o n prosperity resumed had b e e n pushed to an all-time low of
o m y did n o t r e t u r n to w h a t w e may less than 2 percent, rested not on
after the war.
properly describe as prosperity until shrewd fiscal and m o n e t a r y policy, but
after the war. Economists have m i s on massive military conscription,
construed the specious " w a r t i m e prosperity" as the real w h i c h had directly pulled m o r e than 10 million m e n
thing, b u t diverting nearly 40 percent of the total labor o u t of the labor force and indirectly induced millions of
force into military-related e m p l o y m e n t and p r o d u c i n g others to enlist in hopes of avoiding service in the
m o u n t a i n s of guns and a m m u n i t i o n d o n o t create g e n dreaded infantry.
uine, sustainable prosperity, as people w o u l d discover if After the war most of the wartime e c o n o m i c c o n
they tried to operate an e c o n o m y o n this basis for m o r e trols were discontinued, m o r e than 10 million m e n
than a brief p e r i o d . T h e true Great Escape did n o t were mustered out of the a r m e d forces, and the released
occur until 1946. warriors and civilian war workers quickly found private
Economists generally recognize, of course, that n o r e m p l o y m e n t or left the labor force for h o m e or school.
mal, civilian-oriented prosperity resumed after the war,
Robert Higgs (rhiggs@independent.org) is senior fellow at the Independent
b u t their explanations of this resumption generally rest
Institute (www.independent.org), editor of T h e I n d e p e n d e n t R e v i e w ,
o n factual and theoretical mistakes, and they fail to take and author oj N e i t h e r Liberty n o r Safety: Fear, Ideology, and t h e
into account certain factors that were critical to a suc- G r o w t h of G o v e r n m e n t (Independent Institute).

THE FREEMAN: Ideas on Liberty 26


The Great Escape from the Great Depression

T h e u n e m p l o y m e n t rate in 1947, w h e n the transition invest or lack of financial resourcesto the great aston
was nearly complete, was less than 4 percent. ishment of the elite Keynesian economists, w h o had
T h e standard interpretation of the transition after forecast that a severe postwar depression w o u l d occur
1945 emphasizes that during the war people had accu w h e n the g o v e r n m e n t reduced its purchases of war-
mulated e n o r m o u s amounts of bonds and bank deposits, related goods and services.
and afterward these financial holdings were "released" to T h e Keynesians had failed completely to understand
finance consumer spending, especially for durable goods that the prewar depression had persisted in large part
whose production had been prohibited or greatly d i m i n because d u r i n g the Second N e w Deal (193538) the
ished during the war. This interpretation, however, makes Roosevelt administration had created extreme appre
n o sense: the bonds o n e m a n sold another bought, leav hension in the minds of investors and businessmen
ing the economy's overall holdings unchanged. Similarly, about the security of private property rights, and h e n c e
the m o n e y o n e m a n spent by drawing d o w n his bank had discouraged these parties from m a k i n g the large
account reappeared in the sellers' bank accounts, leaving v o l u m e of l o n g - t e r m investments necessary for the
the economy's overall bank deposits unchanged. In fact, economy's full recovery and for its sustained l o n g - r u n
holdings of liquid assets did n o t decline at all after the g r o w t h . D u r i n g the war, investor-friendly businessmen
war. People financed their spending for consumer goods in t e m p o r a r y g o v e r n m e n t service had administered the
by reducing their saving rate. command economy for the most
N o r did people attempt to reduce part, b u t concentration o n w i n n i n g
their holdings of liquid assets by Holdings of liquid the war had kept the civilian e c o n
decreasing their d e m a n d for cash bal assets did not o m y starved for resources.
ancesequivalently, by increasing the By the war's end, however,
average dollar's "velocity of e x p e n d i - decline at all Franklin D. R o o s e v e l t was dead, the
ture."Velocity actually fell slightly d u r Second New Deal's most zealous
ing the immediate postwar years
after the war.
advisers and administrators had left
(because, s o m e economists have c o n the g o v e r n m e n t or had b e e n pushed
j e c t u r e d , people still expected postwar deflation). into less influential positions, and therefore the future
N o r did consumers reduce their holdings of g o v e r n security of private property rights looked considerably
m e n t b o n d s . A l t h o u g h the a m o u n t of outstanding g o v m o r e auspicious than it had l o o k e d before the w a r a
e r n m e n t debt declined b e t w e e n 1945 and 1948, this change in o u t l o o k sufficient to i n d u c e a great deal of
o c c u r r e d almost entirely because of reductions in the l o n g - t e r m private investment for the first time since
holdings of commercial banks and corporations o t h e r 1929. Because " r e g i m e uncertainty," w h i c h had d o m i
than banks and insurance companies. nated the later 1930s, n o longer cast such a dark
shadow over business and investment, the economy
Postwar Business Expansion finally recovered from the Great Depression and the
e c o n o m i c hardships of the war years, even as it simulta
W hile consumers were financing their
spending binge simply by reducing their saving
rate, w h i c h had risen to extraordinary heights d u r i n g
postwar
neously reallocated about 40 percent of the labor force
from war-related uses to civilian uses.
the war, businesses financed their postwar investment T h e year 1946, w h e n civilian o u t p u t increased by
surge by selling g o v e r n m e n t securities acquired d u r i n g about 30 percent, was the most glorious single year in
the war; by retaining m o r e of their current earnings, in the entire history of the U.S. economy. By 1948, real
part because business taxes were reduced substantially o u t p u t was back o n its l o n g - r u n g r o w t h trend, and d u r
after 1945; and by e n t e r i n g the capital markets, w h e r e ing the decades that followed, the e c o n o m y was spared
stocks and bonds could b e sold o n very attractive terms. the sort of deep and l o n g debacle that a congeries of
Even greater business expansion was prevented mainly w r o n g h e a d e d g o v e r n m e n t policies had caused d u r i n g
by lack of materials, rather than by lack of desire to the 1930s. ()

27 OCTOBER 2008
Commerce, Markets, and Peace:
Richard Cobden's Enduring Lessons
B Y E D W A R D P. S T R I N G H A M

The progress of freedom depends more upon the maintenance of C o b d e n began his 1835 pamphlet England, Ireland,
peace and the spread of commerce and the diffusion of education than and America w i t h a q u o t e from George Washington's
upon the labour of Cabinets or Foreign Offices.
farewell address to the American people: " T h e great
R I C H A R D C O B D E N (1804-1865)
rule of c o n d u c t for us in regard to foreign nations is, in
extending our commercial relations, to have w i t h t h e m
as little political connection as possible." Whereas Wash

I
n a 1944 review of F. A. Hayek's Road to Serfdom,
G e o r g e O r w e l l declared, "Capitalism leads to dole ington made the political case for trade with all and
queues, the scramble for m a r entanglements with none, Cobden
kets, and war." Indeed, if w e look outlined an economic case; he was
at the past century, w e see signifi not a pacifist o n principle.
cant advances in markets, but we Cobden emphasized first the
also see an era plagued by war. opportunity costs of military spend
D o capitalism and conflicts go hand ing. Unlike later economists influ
in hand? Are the military and m a r enced by J o h n Maynard Keynes, he
kets complements? Indeed, many did not fall victim to the "broken
conservative advocates of markets w i n d o w " fallacy. H e recognized that
also passionately support the mili each million the government spent
tary, and many people w h o oppose was necessarily a million (or more)
war also oppose markets. not spent by private parties. W h e n
Nineteenth-century writer Richard the government devotes resources to
C o b d e n , however, maintained that armies and navies, those resources
the military and markets were s u b have an opportunity cost.
stitutes: M o r e military entails less C o b d e n did not view all govern
market. A l t h o u g h the ideas in The Richard Cobden (1804-1865) m e n t expenditures as p r o m o t i n g the
Political Writings of Richard Cobden public good. As the government c o n
(1903) are a c e n t u r y and a half old, C o b d e n considered sumes m o r e resources, fewer resources can be devoted
many arguments for military interventionism still made to private wealth-generating activities. Government
today. H e discussed w h e t h e r military spending was agents may gain from increased public spending, but the
beneficial to the economy, to c o m m e r c e , and to peace, Edward Stringham (edward.stringham@gmail.com) is a visiting associate
and in all three cases h e answered no. B o t h conserva professor of economics at Trinity College in Hartford, Connecticut. A longer
tives and left-liberals can learn m u c h from Cobden's version oj this article won second prize (faculty division) in the 2003
Olive W. Garvey Fellowship Program for the Independent Institute and
discussion of c o m m e r c e , markets, and peace. As he
is reprinted in O p p o s i n g t h e C r u s a d e r State: Alternatives t o Global
demonstrated, the advocate of markets must be an I n t e r v e n t i o n i s m , edited by Robert Higgs and Carl P. Close (Independent
advocate of peace. Institute).

THE F R E E M A N : Ideas on Liberty 28


Commerce, Markets, and Peace: Richard Cobden's Enduring Lessons

public loses. C o b d e n d r e w a distinction b e t w e e n the At the time C o b d e n w r o t e , Britain had m o r e than


interests of the productive class and the interests of gov ten times m o r e g r o u n d soldiers than the U n i t e d States
e r n m e n t . " O u r history d u r i n g the last c e n t u r y may be maintained and a significantly larger navy as well. H e
called the tragedy of'British intervention in the politics hypothesized that A m e r i c a n enterprise had b e c o m e so
of E u r o p e ' ; in w h i c h princes, diplomatists, peers, and i m p o r t a n t in such a short time because it was relatively
generals, have b e e n the authors and the actorsthe u n b u r d e n e d by heavy taxes. "It has b e e n t h r o u g h the
people the victims; and the moral will be exhibited to peaceful victories of mercantile traffic, and n o t by the
the latest posterity in 800 millions of debt." W h e n the force of arms, that m o d e r n States have yielded to the
state directs resources, its beneficiaries certainly gain, supremacy of m o r e successful nations." H e upheld the
but unfortunately the public foots the bill. A m e r i c a n s ' lesser military spending as a m o d e l to be
followed: " T h e first, and, indeed, only step towards a
Cobden on Military Adventurism d i m i n u t i o n of o u r g o v e r n m e n t expenditure, must be
the adoption of that line of foreign policy w h i c h the
C o b d e n viewed Britain's military expenditures as
wasted resources. R a t h e r than e n c o u r a g i n g c o m
merce, the army and navy were a drain
Americans have clung to, w i t h such wisdom
pertinacity, ever since they b e c a m e a
and

o n the economy. H e maintained that people." C u t t i n g back government


the productive citizens did n o t profit Cobden recognized spending is the easiest way to
from the British government's activities improve e c o n o m i c performance.
around the globe. H e w a n t e d to e d u
that taxes constitute a C o b d e n ' s hypothesis seems to be
cate m e m b e r s of the business class that weight on the corroborated by empirical w o r k by
they had to pay for all of the g o v e r n M a l c o l m Knight, N o r m a n Loayza,
ment's projects. W h e n the g o v e r n m e n t
economy and that and D e l a n o Villanueva ( " T h e Peace
creates programs around the world, h e decreasing military Dividend: Military Spending Cuts
argued, the bureaucracy can only grow. and E c o n o m i c Growth," International
A l t h o u g h this activity may look g o o d spending abroad Monetary Fund Staff Papers, 1996,
for g o v e r n m e n t , the average person
would result in 137), w h i c h indicates that the
receives little benefit when govern greater the military spending in an
m e n t exerts its influence abroad. significant savings. economy, the worse the economic
A l t h o u g h the public's benefits are performance. T h e s e analysts h y p o t h
murky, its costs are crystal clear. C o b d e n recognized esize that "military spending adversely affects growth;
that taxes constitute a weight o n the e c o n o m y and that namely, t h r o u g h crowding o u t h u m a n capital invest
decreasing military spending abroad w o u l d result in sig m e n t and fostering the a d o p t i o n of various types of
nificant savings: " [ W ] e k n o w of n o t h i n g that w o u l d b e trade restrictions."
so likely to c o n d u c e to a d i m i n u t i o n of o u r burdens, by
reducing the charges of the army, navy, and ordnance Markets and the Military
(amounting to fourteen millions annually), as a proper
understanding of o u r relative position w i t h respect to
o u r colonial possessions." A l t h o u g h England's i n t e r n a
A lthough all able economists recognize
spending as costly, these costs may be necessary for
the existence of markets. If so, opposing military spend
military

tional affairs were c o n d u c t e d u n d e r the pretext of ing w o u l d a m o u n t to opposing markets, as m a n y c o n


enhancing the public good, C o b d e n believed that servatives c o n t e n d . C o m m e r c e certainly has beneficent
m u c h of public policy benefited only special interests: characteristics and war does not, b u t perhaps society
"The h o n o u r s , the fame, the emoluments of war has to take the bad w i t h the good. T h e only choice
b e l o n g n o t to [the middle and industrious classes]; the m i g h t be to accept b o t h markets and militarism or to
battle-plain is the harvest-field of the aristocracy, oppose b o t h . To C o b d e n , however, this u n i o n was a
watered w i t h the b l o o d of the people." false marriage: Markets and military do n o t go hand

29 OCTOBER 2008
E d w a r d P. S t r i n g h a m

in hand; the success of an e c o n o m y depends o n the journals; whilst, all along the entire Atlantic coast of
achievements of free enterprise, w h i c h do n o t d e p e n d the U n i t e d Statesextending, as it does, m o r e than
o n military spending. 3,000 miles, to w h i c h we send a quarter of o u r
W e can see this reality by l o o k i n g at w h e r e the g o v whole yearly exportsthere are stationed two
e r n m e n t devotes military resources. Discussing how British ships of war only, and these two have also
m u c h trade o c c u r r e d b e t w e e n England and the U n i t e d their station at the West Indies. N o ! this c o m m e r c e ,
States, C o b d e n asked, " N o w , w h a t precaution is taken unparalleled in magnitude, b e t w e e n two remote
by the G o v e r n m e n t of this c o u n t r y to guard and regu nations, demands n o a r m a m e n t or safeguard.
late this precious flood of traffic?" A l t h o u g h the c o m
merce certainly had great importance, the merchants The trade b e t w e e n the nations was immense, but
w h o c o n d u c t e d it were for the most part o n their o w n . British merchants simply could n o t d e p e n d o n their
W i t h great passion, C o b d e n argued that c o m m e r c e did navy to defend their every journey. T h e British military,
n o t d e p e n d o n the navy: although significant, was n o t devoting its resources to
protecting merchants.
H o w m a n y of those costly vessels of war, w h i c h are
maintained at an expense to the nation of m a n y m i l The Legacy of Mercantilism
lions of p o u n d s annually, do o u r
readers suppose, are stationed at the
m o u t h s of the Mersey and Clyde,
Cobden favored
W hy t h e n are so many
ments for the military made in
the n a m e of commerce? O n e reason
argu

to w e l c o m e and convoy into Liver abandoning military is the legacy of mercantilism, u n d e r


p o o l and Glasgow, the merchant which the government played an
ships from N e w York, Charleston, conquest for the active role attempting to manage the
or N e w Orleans, all bearing the benefit of economy. This intervention included
inestimable freight of c o t t o n w o o l , the establishment of foreign trading
u p o n w h i c h o u r commercial exis "commerce'' and monopolies by law. Because the gov
e r n m e n t maintained these c o m m e r
tence depends? N o t one!
adopting instead a
cial monopolies w i t h a r m e d forces,
Similarly, h e asked about the army: system of free trade. the discussion of c o m m e r c e and the
" W h a t p o r t i o n of o u r standing army, military went hand in hand. To C o b
costing seven millions a year, is occupied in defending den, however, mercantilist policies conflict w i t h free
this m o r e than Pactolusthis golden stream of trade, trade. T h e military should n o t be used to enforce
o n w h i c h floats n o t only the wealth, but the hopes and monopolies.
existence of a great c o m m u n i t y ? Four invalids at the C o b d e n favored abandoning military conquest for
Perch R o c k Battery hold the sinecure office of defend the benefit of " c o m m e r c e " and adopting instead a sys
ing the p o r t of L i v e r p o o l ! " T h e world is t o o big for any t e m of free trade. T h e entire military involvement w i t h
nation to police every mile of it, so merchants were left c o m m e r c e was unnecessary, so superfluous spending
to themselves. could be cut w i t h o u t h a r m i n g the market.
If the spread of trade increases the risk of incurring
B u t o u r exports to the U n i t e d States will reach . . . greater costsdue, for example, to thievery or extortion
m o r e than ten millions sterling, and nearly o n e half by governments or by piratesthe simple solution is to
of this a m o u n t goes to N e w Y o r k : w h a t p o r t i o n of implement policies friendly to business. T r i u m p h in the
the R o y a l navy is stationed off that port, to protect world market hinges o n successful private enterprise,
o u r m e r c h a n t s ' ships and cargoes? T h e appearance of w h i c h depends n o t on military superiority but on lower
a King's ship at N e w York is an o c c u r r e n c e of such costs. By cutting the military drastically, the savings can
rarity as to attract the especial notice of the public be passed o n to productive enterprise. "By this course of

THE F R E E M A N : Ideas on Liberty 30


Commerce, Markets, and Peace: Richard Cobden's Enduring Lessons

policy, and by this alone, w e shall b e enabled to reduce est of neither t h e intervening nation n o r t h e distant
o u r army and navy m o r e nearly to a level w i t h the c o r country.
responding burdens of o u r American rivals."
Foreign Policy of Non-intervention
Markets Foster Peace

N ot only does free trade require little


backing, but, moreover, markets should substitute
military C o b d e n m a d e a case first by appealing to t h e self-
interest of his fellow citizens. H e argued that a
c o u n t r y embroiled itself in other people's affairs only at
for the military. R e p l a c i n g military relations w i t h c o m its peril: " O u r sole object is to persuade t h e public that
mercial relations w o u l d lead to significant tax savings, as the wisest policy for England, is to take n o part in these
well as to m o r e peace. "[Bjesides dictating t h e disuse of r e m o t e quarrels. . . . W e shall claim the right of p u t t i n g
warlike establishments, free trade (for of that beneficent the question u p o n a footing of self-interest."
doctrine w e are speaking) arms its votaries by its o w n Although many problems exist in the world,
pacific nature, in that eternal t r u t h becoming involved in each one
the more any nation traffics abroad upon w o u l d b e futile. " U p o n w h a t princi
free and honest principles, the less it Why should a ple, c o m m e r c i a l , social, or political
will be in danger of wars''' (emphasis in in short, upon what ground,
original). T h u s rather than creating
country be surprised consistent with common sense
antagonistic relationships, trade encour when it is attacked does t h e foreign secretary involve
ages peaceful relations b e t w e e n nations. Great Britain in t h e barbarian p o l i
Nothing encourages cooperation so after its government tics of t h e O t t o m a n G o v e r n m e n t , to
much as a m u t u a l l y advantageous has involved itself in t h e manifest risk of future wars, and
enterprise. Manufacturing, n o t naval the present pecuniary sacrifice
strength, is the key to prosperity. far-off concerns? attending standing armaments?"
C o b d e n believed that trade w o u l d (emphasis in original). Moreover,
Cobden believed n o t only are such endeavors costly,
flourish as long as manufacturers l o w
ered their costs. W h e n trading partners countries that do b u t they also risk full-fledged war.
specialize according to their c o m p a r a W h y should a c o u n t r y b e surprised
tive advantage, they p r o d u c e increased
not maintain an w h e n it is attacked after its g o v e r n
output and consumption for all international military m e n t has involved itself in far-off
traders. concerns? C o b d e n believed coun
T h e dilemma c o n c e r n i n g i n t e r n a
presence would be tries that d o n o t m a i n t a i n an i n t e r
tional trade is that it requires more less at risk. national military presence w o u l d b e
than o n e party. If o n e c o u n t r y adopts less at risk.
policies inimical to markets, it reduces Even t h o u g h o t h e r governments
others' opportunities for trade. C a n liberating such a may well b e in the w r o n g , w h y chance the further
c o u n t r y benefit b o t h its citizens and its liberators? C i t m u d d y i n g of already roiled waters? V i e w i n g British
izens w o u l d have their g o v e r n m e n t overthrown, and involvement w i t h foreign nations as a problem, C o b d e n
the liberators w o u l d have n e w f o u n d trading partners, so argued that t h e British had n o business interfering in
m i g h t t h e o u t c o m e b e a w i n - w i n situation? C o b d e n overseas politics. "If w e g o back t h r o u g h the Parliamen
considered such justifications for military involvement tary debates of the last few reigns," h e observed, " w e
abroad, recognizing that appeals for military involve shall find this singular feature in o u r national charac
m e n t were m a d e in t h e n a m e of p r o m o t i n g g o o d . H e t e r t h e passion for m e d d l i n g in the affairs of foreign
favored t h e preservation of peace, b u t h e disputed that ers." W i t h sufficient problems at h o m e , w h y w o r r y
military involvement was an effective means to that about the entire world's problems? "Public opinion
end. In his v i e w military intervention served the inter- must u n d e r g o a change; o u r ministers must n o longer

31 OCTOBER 2008
E d w a r d P. S t r i n g h a m

be held responsible for the every-day political quarrels gradual process of intellectual advancement." C o b d e n
all over E u r o p e . " Intervention struck C o b d e n as c o u n viewed the transition to liberty as a learning process
terproductive: "Again w e say (and let us be excused the that cannot be imposed by b r u t e force. If w e want m a r
repetition of this advice, for w e w r i t e w i t h n o other kets, the public has to be convinced, n o t forced, to sup
object but to enforce it), England cannot survive port them.
its financial embarrassment, except by renouncing Because war does not advance liberty, foreign
that policy of intervention w i t h the affairs of other nations must b e left to sort o u t their o w n affairs, n o
States w h i c h has b e e n the fruitful source of nearly all m a t t e r h o w difficult their problems. A desire to step in
o u r wars." and control the situation is a natural feeling, b u t C o b
A second type of a r g u m e n t for military involvement den o p p o s e d such i n t e r v e n t i o n . R a t h e r than trying to
abroad is humanitarian.Yes, military intervention entails fix every p r o b l e m using might, E n g l a n d should stay
costs, b u t w h e n a c o u n t r y is blessed w i t h m o r e liberty, out. W i t h so m u c h strife b e t w e e n E u r o p e a n nations,
compassion requires helping others to attain such lib C o b d e n w r o t e , "it b e c o m e s m o r e than ever o u r duty
erty. A l t h o u g h Cobden favored liberty throughout to take natural shelter from a storm, from entering
E u r o p e , he did n o t believe that British military action i n t o w h i c h w e could h o p e for n o benefits, b u t m i g h t
could establish it. justly dread r e n e w e d sacrifices." Precisely at a time of
so m u c h discord, the best policy is n o n i n t e r v e n t i o n .
Exporting Liberty by Force Rather than venturing into the

H e questioned w h e t h e r war can


advance markets. Simply d e p o s
Public opinion must storm, a nation, instead, should focus
o n free trade. R a t h e r than acting as
ing and replacing a country's leaders undergo a change the world's policeman, England
will n o t lead to m o r e liberty. C o b d e n should devote its energy to com
w r o t e : "[L]et it never be forgotten, toward respecting merce.
that it is n o t by means of war that private property
states are rendered fit for the enjoy The Humanitarianism of Liberty
rights; otherwise, a
m e n t of constitutional freedom;
the contrary, whilst terror and b l o o d
shed reign in the land,
on

involving
market economy W ould eschewing foreign politi
cal squabbles be t a n t a m o u n t to
abandoning everyone else and refus
men's minds in the extremities of cannot function. ing to help those in need? To C o b d e n ,
hopes and fears, there can be no the answer was no. H e r e c o m m e n d e d
process of t h o u g h t , n o education going on, by w h i c h laissez faire as the most humanitarian course of action.
alone can a people be prepared for the enjoyment of A policy of n o n i n t e r v e n t i o n w o u l d actually help other
rational liberty." Liberty requires enlightenment, w h i c h nations m o r e than activist policies. Serving as a model
can c o m e about only by means of education and p e r for foreign nations w o u l d help t h e m far m o r e than
suasion, n o t military force. b e c o m i n g embroiled in their conflicts.
Public opinion must undergo a change toward Consider the trade b e t w e e n the U n i t e d States and
respecting private property rights; otherwise, a market England in the n i n e t e e n t h century. Despite the lack of
e c o n o m y cannot function. C o b d e n described h o w the political reunification, peaceful relations existed because
French were having so many difficulties precisely the private sectors of the two economies were so
because of war: "[A]fter a struggle of twenty years, closely connected. "England and America are b o u n d up
b e g u n in behalf of freedom, n o sooner had the wars of together in peaceful fetters by the strongest of all liga
the French revolution terminated, than all the nations tures that can b i n d two nations to each other, viz.,
of the c o n t i n e n t fell back into their previous state of commercial interests; and w h i c h , every succeeding year,
political servitude, and from w h i c h they have, ever since renders more impossible, if the t e r m may be used, a r u p -
the peace, b e e n qualifying to rescue themselves, by the ture b e t w e e n the t w o " (emphasis in original). M u c h of

THE FREEMAN: Ideas on Liberty 32


Commerce, Markets, a n d Peace: Richard Cobden's Enduring Lessons

England's manufacturing d e p e n d e d o n r a w materials England . . . has . . . u n i t e d for ever t w o r e m o t e


i m p o r t e d from t h e U n i t e d States. W h e n groups are hemispheres in t h e bonds o f peace, by placing
interdependent, aggression is less likely. W h e r e n o trade E u r o p e a n d A m e r i c a i n absolute a n d inextricable
exists, i n contrast, b o t h countries have less t o lose by d e p e n d e n c e o n each other; England's industrious
resort t o warfare. classes, t h r o u g h t h e energy of their commercial
Conflict often occurs w h e r e trade barriers are pres enterprise, are at this m o m e n t influencing t h e civi
ent. Have embargoes ever b r o u g h t about m o r e c o o p e r lization o f t h e w h o l e world, by stimulating t h e
ation o r p r o d u c e d m o r e liberty? Empirical evidence labour, exciting t h e curiosity, a n d p r o m o t i n g t h e
demonstrating t h e effectiveness o f these policies is taste for refinement of barbarous c o m m u n i t i e s , and,
scant. G o v e r n m e n t interference w i t h trade jeopardizes above all, by acquiring a n d teaching t o s u r r o u n d i n g
peace. W i t h each n e w trading relationship u n d e r free nations t h e beneficent attachment t o peace.
trade, a b o n d comes into existence b e t w e e n otherwise
separate parties. B y expanding trade a r o u n d t h e globe, C o b d e n was right: Trade is " t h e great panacea." To
nations develop m o r e such peaceful relations. I n this p r o m o t e a w o r l d of peace, w e must p r o m o t e a world of
realm, g o v e r n m e n t relations are superfluous. free markets. W

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33 OCTOBER 2008
Beyond Municipal Wireless
BY S T E V E N TITCH

T
h e harsh daylight of fiscal reality has rudely closed that it was considering a bankruptcy filing. This
awakened city administrators across the c o u n followed the company's 2007 decision to limit partner
try to the unfeasibility of funding or partnering ships to cities that agreed to purchase a significant level
in citywide c o n s u m e r wireless-broadband services. of wireless services themselves, thus providing the o p e r
O v e r the past year, city after city has retreated from ation w i t h immediate cash flow. Azulstar, w h i c h had
large-scale municipal wireless projects. Most, including w o n the contract to construct a multicity municipal
H o u s t o n , Chicago, Los Angeles, and Anchorage, Alaska, wireless system covering m u c h of Silicon Valley, was
backed away before c o m m i t t i n g any forced to exit the deal after failing to
substantial funds or city assets. raise the necessary capital. T h a t fol
The final nail in t h e municipal
The case for lowed R i o R a n c h o , N e w Mexico's
wireless coffin may have b e e n E a r t h - municipal wireless decision to pull the plug o n an Azul
Link, Inc.'s M a y 13 a n n o u n c e m e n t that star system there after the company
it will be shutting d o w n its system in
was founded on the failed to pay $33,000 in electric bills
Philadelphia. T h e City of Brotherly premise that owed to the city.
Love was the first major U.S. city to In policy circles municipal w i r e
wade into the municipal wireless broadband service less, a subset of the larger municipal-
waters, a n n o u n c i n g its deal w i t h E a r t h - broadband concept, intensified the
was equivalent to
Link in 2005. T h e agreement was debate over w h a t role, if any, local
launched w i t h high hopes. Philadel basic consumer governments should have in the
phia's chief information officer, Diana funding, construction, and ownership
Neff, w h o engineered the deal, was
utilities, such as of infrastructure designed to provide
n a m e d the city's public official of the electricity, water, retail p h o n e , cable-TV, and high
year. M e a n w h i l e , EarthLink had h o p e d speed Internet services, often in c o m
that municipal wireless w o u l d be the
or sewerage. petition w i t h commercial providers.
springboard to rebuild its flagging T h e case for municipal wireless
telecommunications business, w h i c h had never recov was founded o n the premise that broadband service was
ered from the d o t - c o m bust. T h r e e years and $17 mil equivalent to basic consumer utilities, such as electric
lion later, EarthLink can't even give the n e t w o r k away. ity, water, or sewerage. Conventional w i s d o m consid
T h e c o m p a n y was set to begin dismantling the n e t w o r k ered broadband, like water and power, a universal need.
J u n e 12, after Philadelphia t u r n e d d o w n its offer to take San Francisco Mayor Gavin N e w s o m w e n t so far as to
over ownership at n o charge. call broadband a h u m a n right. Conventional w i s d o m
EarthLink's competitors fared n o better. In late May,
M e t r o F i closed d o w n its remaining municipal systems Steven Titch (titch@experteditorial.net) is the telecom-policy analyst at the
in Portland, O r e g o n , and Naperville, Illinois, and dis- Reason Foundation.

THE FREEMAN: Ideas on Liberty 34


Beyond Municipal Wireless

also held that the market was failing to reach lower- Roosevelt, where per capita incomes range from
income households because commercial providers $16,950 to $32,532.
believed they were unprofitable to serve. To some At the same time, wireless I n t e r n e t services from the
extent, these critics were correct. T h e first half of the legacy cellular c o m p a n i e s A T & T , Verizon Wireless, T-
decade, w h e n most municipal plans were hatched, Mobile, and Sprint N e x t e l g r e a t l y improved. Verizon
broadband buildouts were limited to wealthier areas as Wireless introduced V Cast, w h i c h delivers full-motion
service providers calculated that it w o u l d take average video to cell p h o n e s . A T & T and Apple teamed o n the
m o n t h l y revenue of $50$100 per household to justify snazzy i P h o n e , w h i c h combines the functionality of a
a cable or digital-subscriber-line ( D S L ) t h e t w o most p h o n e , w e b browser, and digital-video and music player
c o m m o n hardwired broadband platformsinvestment into o n e pocket device that can use b o t h cellular and
in a given n e i g h b o r h o o d . W i F i networks. Google unveiled plans for Android, a
Municipal advocates believed that wireless systems n e w type of software for wireless p h o n e s that w o u l d
could be cheaper to build and could provide e n o u g h allow users m o r e freedom and control over wireless
bandwidth to support no-frills high-speed Internet (no web surfing. Each of these developments required
cable or phone) to the point w h e r e ubiquitous service municipal officials and their wireless business partners
could be offered for as little as $10$20 a m o n t h , if n o t to revise costs and budgets upward. Broadband was n o t
free. But cities, while hatching their like water and power, w h e r e annual
plans two and three years ago, failed to revenues and costs were predictable
take the speed of market and technol Even before and infrastructure could b e amortized
ogy evolution into account. By the over 20 to 30 years. T h e t e l e c o m m u
municipal wireless nications industry seemed to change
time they began to rev up for launch,
commercial service providers, n o t to became all the rage, every six m o n t h s , and cities just
m e n t i o n hotel chains, coffee shops, and couldn't keep up.
shopping-mall food courts, had the
government-owned Finally, t h e announcement that
same WiFi technology in operation broadband had a Sprint and Clearwire were planning a
that the cities had h o p e d to p i o n e e r n a t i o n w i d e rollout of local wireless
in the very places that cities had h o p e d poor record. services using W i M a x , a broadband
would generate early revenues. platform that can cover areas m e a s
ured in square miles, versus W i F i , w h i c h is measured in
Falling Rates in the Private Sector feet, forced most governments to realize that any n e t

M
which
eanwhile, rates for wired residential broadband
services were dropping. L o w - e n d D S L service,
was still faster than wireless, r e a c h e d the
works they build today, to remain remotely c o m p e t i
tive, w o u l d have to be substantially upgraded, if n o t
replaced, in less than five years.
$ 2 0 - $ 2 5 per m o n t h level in 2006. Verizon in 2007 Smaller cities and towns that j u m p e d o n the m u n i c
began an extensive rollout of m o r e robust fiber-optic ipal b a n d w a g o n early suffered the greatest financial
networks across all d e m o g r a p h i c markets. For example, penalties, b u t in d o i n g so they gave pause to larger cities
in 2 0 0 6 Nassau and Suffolk counties in N e w York, that, in deciding to back off, may have saved their
w h i c h make up suburban L o n g Island, proposed an already beleaguered taxpayers millions.
extensive g o v e r n m e n t wireless n e t w o r k in the belief What's b e e n learned so far? First, municipal b r o a d
that the private sector was leaving m a n y L o n g Island band still is a bad idea. Even before municipal wireless
c o m m u n i t i e s b e h i n d . Municipal talks faded after Veri b e c a m e all the rage, g o v e r n m e n t - o w n e d broadband had
zon began rolling o u t f i b e r - t o - t h e - h o m e service n o t a p o o r record. Since the 1990s n u m e r o u s cities have
just in towns like Laurel Hollow, w h e r e , according to attempted to finance, o w n , and operate competitive
the U.S. Census Bureau, per-capita i n c o m e is $83,366, c a b l e - T V and high-speed Internet networks. In the past
but also in Massapequa, Mineola, Valley Stream, and several years the focus has b e e n o n extending fiber

35 OCTOBER 2008
Steven Titch

optics to the h o m e , often at a cost of m o r e than $100 telecom networks m o r e efficiently and inexpensively
million. In a 2007 report the Pacific R e s e a r c h Institute than national businesses with m o r e than 20 years of
estimated that 52 municipal broadband systems had experience working with low-power, short-range
c o n s u m e d a total of $840 million over the past 20 radio technology.
years, falling deeper into debt while failing to gain p o s A l t h o u g h proponents of municipal broadband and
itive cash flow. wireless often deny or rationalize the string of d o c u
Municipalities that followed the g o v e r n m e n t - o w n m e n t e d failures, the experiences of Chaska, St. C l o u d ,
ership m o d e l for wireless fared n o better. Even m u n i c and L o m p o c led many of the larger cities to pursue
ipal wireless advocates were shaken w h e n city officials partnerships w i t h companies like EarthLink, M e t r o F i ,
in Chaska, Minnesota, w h o had long t o u t e d their sys and Azulstar. U n d e r this model, w h i c h was adopted in
t e m as o n e of the first municipal success stories, dis Philadelphia, the private-sector partner w o u l d finance,
closed in J u n e 2006 that it had g o n e over b u d g e t by build, and operate the network, sharing a p o r t i o n of
$ 3 0 0 , 0 0 0 s o m e 50 percent. At the same time the city the revenues w i t h the city, or in the case of Philadel
also reversed a long-standing claim that it had b e e n phia, a nonprofit corporation, Wireless Philadelphia,
providing city w i d e service since early 2005. TechDirt, that w o u l d fund digital-inclusion programs in the city.
an online technology publication, reported that most In r e t u r n for pledging citywide buildout, the partner
residents were unable to access the system until May w o u l d get exclusive, discounted access to city rights of
2006, a few weeks before the news of the cost overruns way w h e r e it w o u l d place antennas and wireless access
broke. T h e city has since privatized the system, selling it points.
to Siemens C o m m u n i c a t i o n s . The approach initially looked promising, chiefly
In addition to r u n n i n g over budget, cities struggled because it t o o k local governments o u t of the c o m p e t i
w i t h the sheer physics of radio-system e n g i n e e r i n g and tive telecom business. Still, in the end, the private sector
design. In April 2006 St. C l o u d , Florida, reportedly underestimated the costs of covering an entire city. In a
b e c a m e the first city to launch free (read tax-subsi number of cities, including Philadelphia, EarthLink
dized) W i F i service. Coverage was so bad that few resi concluded it w o u l d need as many as twice the wireless
dents could c o n n e c t to it. W o u l d - b e users were soon access points than originally t h o u g h t to cover the entire
told that to get "free" service, they had to purchase a cityadditional costs that n o t even discounted rights
special wireless bridge device for $170. M o s t opted to of way could overcome.
go w i t h wireline broadband service from local tele If municipal wireless is unfeasible either as a govern
p h o n e or cable companies. m e n t - o w n e d operation or in partnership with the p r i
vate sector, what then is sound policy w h e n it comes to
Governmental Incompetence encouraging broadband adoption?

S imilarly, the L o m p o c , California, city administrators


found themselves red-faced w h e n , after deploying a
citywide W i F i n e t w o r k , they realized that most of the
A n a h e i m , California, t o o k a different approach. It
offered a low-cost right of way to any wireless c o m
pany seeking to build a network. N o o n e company was
houses were built w i t h s t u c c o s o m e t h i n g a r a d i o - favored w i t h exclusivity. F r o m A n a h e i m Mayor C u r t
e n g i n e e r i n g team in the private sector w o u l d have Pringle's perspective, granting wide-scale access to the
m a d e a p o i n t of checking at the outset. Stucco is rein city's right of way w o u l d do far m o r e to encourage
forced w i t h metal wire, w h i c h blocks radio waves at b u i l d - o u t than limiting it to o n e player. H e was right.
certain frequencies, including those used by W i F i . The moves sparked investment from a number of
L o m p o c , d u e to i n e x p e r i e n c e w i t h basic radio p r o p e r small wireless-service providers w h o n o w c o m p e t e for
ties, spent $1.5 million on a wireless service few local consumers.
could use. It's n o t funny. It's w h a t happens when As this shows, the taxpayers need n o t be the first, n o r
cities buy into the idea that they can build wireless even the last, resource for broadband funding. ^)

THE FREEMAN: Ideas on Liberty 36


Give M e a Break!

Legalize All Drugs


BY JOHN STOSSEL

In the 1980s, the press reported that "crack babies"

R
eading the New York Post's popular Page Six
gossip page recently, I was surprised to find a were " p e r m a n e n t l y damaged." Rolling Stone, citing o n e
picture of m e , followed by the lines: " A B C ' S study of just 23 babies, claimed that crack babies "were
J o h n Stossel wants the g o v e r n m e n t to stop interfering oblivious to affection, automatons."
w i t h y o u r right to get high. T h e crowd w e n t silent at It simply wasn't true. T h e r e is n o proof that crack
his call to legalize hard drugs." babies do worse than anyone else in later life.
I had attended a Marijuana Policy Project event cel Myth No. 2: If y o u do crack once, you are h o o k e d .
ebrating the N e w York State Assembly's passage of a Truth: L o o k at the n u m b e r s 1 5 percent of y o u n g
medical-marijuana bill. I told the audience I t h o u g h t it adults have tried crack, but only 2 percent used it in the
pathetic that the m e r e half passage of a bill to allow sick last m o n t h . If crack is so addictive, w h y do most people
people to try a possible r e m e d y w o u l d w h o ' v e tried it n o longer use it?
merit such a celebration. Of course m e d People once said heroin was
ical marijuana should be legal. For
Of course medical nearly impossible to quit, b u t d u r i n g
adults, everything should be legal. I ' m marijuana should be the V i e t n a m War, thousands of sol
amazed that the health police are so diers b e c a m e addicted, and when
smug in their opposition. legal. For adults, they r e t u r n e d h o m e , 85 percent quit
After years of r e p o r t i n g o n the d r u g w i t h i n o n e year.
everything should be
war, I ' m convinced that this " w a r " does People have free will. M o s t w h o
m o r e h a r m than any drug. legal. I'm amazed that use drugs eventually wise up and
Independent of that harm, adults stop.
o u g h t to o w n o u r o w n bodies, so it's
the health police are A n d most people w h o use drugs
n o t intellectually honest to argue that so smug in their habitually live perfectly responsible
"only marijuana" should be legaland lives, as Jacob Sullum p o i n t e d o u t in
only for certain sick people approved
opposition. Saying Yes.
by the state. Every d r u g should b e legal. Myth No. 3: D r u g s cause crime.
" H o w could you say such a ridiculous thing?" asked Truth: T h e d r u g war causes the crime.
my assistant. " H e r o i n and cocaine have a p e r m a n e n t Few d r u g users h u r t or rob people because they are
effect. If you do crack just once, you are automatically high. M o s t of the crime occurs because the drugs are
h o o k e d . Legal hard drugs w o u l d create m a n y more illegal and available only t h r o u g h a black market.
addicts. A n d that leads to m o r e violence, homelessness, D r u g sellers a r m themselves and form gangs because
o u t - o f - w e d l o c k births, etc.!" they cannot ask the police to protect their persons
H e r diatribe is a g o o d s u m m a r y of the d r u g w a r and property.
riors' arguments. M o s t Americans probably agree w i t h In t u r n , some buyers steal to pay the high black-
w h a t she said. market prices. T h e g o v e r n m e n t says heroin, cocaine,
B u t w h a t most Americans believe is w r o n g . (For
John Stossel is co-anchor of ABC News' "20/20" and the author of
details, see the links here: h t t p : / / t i n y u r l . c o m / 3 p h w 3 s . )
M y t h s , Lies, a n d D o w n r i g h t Stupidity: G e t O u t t h e ShovelWhy
Myth No. 1: Heroin and cocaine have a permanent effect. E v e r y t h i n g You K n o w is W r o n g , now in paperback. Copyright 2008
Truth: T h e r e is n o evidence of that. by JFS Productions, Inc. Distributed by Creators Syndicate, Inc.

37 OCTOBER 2008
John Stossel

and nicotine are similarly addictive, and about half the I ' m n o t so sure.
people w h o b o t h smoke cigarettes and use cocaine say B a n n i n g drugs certainly hasn't kept y o u n g people
s m o k i n g is at least as strong an urge. B u t n o o n e robs from getting t h e m . W e can't even keep these drugs o u t
convenience stores for Marlboros. of prisons. H o w do we expect to keep t h e m o u t of
A l c o h o l prohibition created Al C a p o n e and the America?
Mafia. D r u g prohibition is worse. It's c o r r u p t i n g w h o l e But let's assume my daughter is right, that legaliza
countries and financing terrorism. tion w o u l d lead to m o r e experimentation and m o r e
T h e Post w r o t e , "Stossel admitted his o w n 22-year- addiction. I still say: Legal is better.
old daughter doesn't think [legalization] is a g o o d idea." W h i l e drugs h a r m many, the d r u g war's black m a r
B u t that's n o t w h a t she said. M y daughter argued ket harms more.
that legal cocaine w o u l d probably lead to m o r e cocaine A n d most importantly, in a free country, adults
use. A n d therefore probably abuse. should have the right to h a r m themselves. ||)

Coming in the November 2008


1 THE

issue of FREEMAN
Freedom Works: The Case of Hong Kong
by Andrew P. Morriss

U.S. Agricultural Programs: Who Pays?


by E. C. Pasour, Jr.

Gas Prices: The Latest Excuse To Reengineer Society


by Steven Greenhut

Albert Jay Nock and Alternative History


by Joseph R. Stromberg

mm

THE F R E E M A N : Ideas on Liberty 38


Capital Letters
n o t fraudulent. H e n c e , if H a m i l t o n admitted in the
Mistreating the Constitution?
Federalist that the federal g o v e r n m e n t could n o t do
If recent items in The Freeman are any indication, its
such-and-such, and the N e w Y o r k ratification c o n v e n
writers take a rather d i m view of the C o n s t i t u t i o n and
tion ratified it u n d e r that understanding, t h e n that is the
the Framers thereof. W h i l e I couldn't agree more
meaning, regardless of the language of the C o n s t i t u t i o n
regarding the people w h o w r o t e o u r federal c o m p a c t
or Hamilton's particular desires.
(with a few exceptions), I must take issue w i t h h o w the
It is true, as H u e b e r t says, that ambiguity inheres in
magazine treats the C o n s t i t u t i o n itself.
any constitution, especially short ones. However, rely
Sheldon Richman started w h a t seems to have
ing o n only the "people's eternal vigilance" obviously
b e c o m e a trend in Constitution-bashing w i t h his article
works n o better, since even w i t h b o t h a w r i t t e n consti
regarding the Tenth A m e n d m e n t and its non-similarity
tution and a population bred to liberty, w e have
to Article II of the Articles of Confederation, w h i c h
reached a deplorably unfree state. T h e key is to have
w i t h h e l d powers n o t "expressly delegated" from the
b o t h , because a vigilant people can be vigilant of n o t h
Confederation Congress ( " T h e C o n s t i t u t i o n or L i b
ing w i t h o u t a universal reference, unless the writers of
erty," JanuaryFebruary). A couple of m o n t h s later,
The Freeman suggest a pure democracy. T h a t universal
Joseph Stromberg n o t e d the n o t - s o - h o n e s t nature of
reference is a w r i t t e n constitution. Likewise, a w r i t t e n
the delegates to the 1787 C o n v e n t i o n that p r o d u c e d
constitution is also, by itself, worthless. It is m e r e paper,
the C o n s t i t u t i o n ("Slick C o n s t r u c t i o n U n d e r the A r t i
after all. However, w e can control, to some degree,
cles of Confederation," April). A n d now, most recently,
w h e t h e r there is a constitution and w h a t it says. W e
a b o o k review of Kevin Gutzman's Politically Incorrect
cannot, o n the other hand, control w h e t h e r the p o p u
Guide to the Constitution by J. H . H u e b e r t o n c e again
lation u n d e r that constitution is "vigilant." So let's n o t
raises the a r g u m e n t that the C o n s t i t u t i o n w r i t t e n in
leave out the o n e element w e have control over, lest w e
1787 was at worst a hoax, and at best useless (May).
a b a n d o n all h o p e to limit g o v e r n m e n t .
T h e key p r o b l e m w i t h all t h e above authors, in m y
m i n d , is n o t their evaluation of t h e intentions of
nationalists like M a d i s o n and H a m i l t o n . T h e s e m e n JOSHUA SCOTT

were i n d e e d snakes of t h e worst sort, w i t h H a m i l t o n SCOTTJ82@lsus.edu


b e i n g t h e least dangerous precisely because h e never
p r e t e n d e d to favor republican g o v e r n m e n t . R a t h e r ,
t h e authors m i s u n d e r s t a n d t h e n o t i o n of originalist S h e l d o n R i c h m a n replies:
j u r i s p r u d e n c e . A t r u e originalist j u r i s p r u d e n c e looks Mr. Scott raises several provocative issues in his
n o t to w h a t individual delegates to t h e C o n v e n t i o n thoughtful letteralas, t o o many to respond to here. So
w a n t e d , b u t to w h a t they said w h e n they w e r e asked I will address t h e m and related matters in a future arti
to explain t h e fruit of their labor, especially to the cle. For now, let t w o quotations suffice:
state conventions that ratified t h e C o n s t i t u t i o n . O n l y "[A]ny interpretation still hangs in the air along
w h e n such explanations fail us should w e t u r n to w i t h w h a t it interprets, and cannot give it any support.
w h a t was said in Philadelphia, and even that is b e t t e r Interpretations by themselves do n o t d e t e r m i n e m e a n
than w h a t a single delegate such as H a m i l t o n w o u l d ing." L u d w i g Wittgenstein, Philosophical Investigations
have desired. (198)
W h y must originalism b e u n d e r s t o o d in this way? In "[I]f the Constitution demands just compensation
short, because any c o m p a c t (which is w h a t the C o n s t i for victims of e m i n e n t domain, then such victims must
tution was claimed to be) is only valid insofar as it is receive whatever is actually just, not w h a t the framers

39 OCTOBER 2008
Capital Letters

t h o u g h t was just, since the Constitution says to give just b u t I can't help b u t feel that such problems w o u l d
compensation' rather than saying to give 'whatever w e be greatly reduced if fewer people adopted Mr.
consider just compensation.' " R o d e r i c k T. Long, " T h e Boudreaux's attitude.
N a t u r e of Law," Part III ( h t t p : / / t i n y u r l . c o m / 5 n x d w y ) . . . Indeed, if w e w o u l d take a greater interest in our
local government, it w o u l d be greatly strengthened and
there w o u l d be a greater demand for the state and fed
Voting Locally eral governments to "play by the rules." O n e quote that
D o n a l d Boudreaux's article "I W o n ' t Vote" (April) Mr. B o u d r e a u x chose to highlight, "I implicitly a g r e e
. . . illustrates o n e of my main concerns w i t h libertarian by votingthat the process of selecting people to exer
t h o u g h t , e.g. the complete failure to recognize the dif cise power over m e is legitimate," indicates that he does
ference b e t w e e n w h a t local, state, and federal levels of n o t feel he should be subjected to government rules at
g o v e r n m e n t can and should do. W h i l e Mr. Boudreaux's any level. This indicates a belief that his behavior and
ideas make some sense for the election of a president or t h o u g h t is, or should be, the standard of right. As I
a senator, they make n o sense whatsoever for the elec understand his position, Leonard R e a d felt that this very
tion of a city c o u n c i l m a n or a school board m e m b e r . In attitude was the greatest enemy of the free market. . . .
m y c o m m u n i t y , at least, these are frequently decided by
a m e r e handful of votes. In a city-council election, a M E R R I L L GEE
tally of 100 to 105 votes is n o t at all u n c o m m o n . In Salt Lake City, U t a h
such an election, if I were to switch my vote and I
could convince t w o otherssay, my wife and an older
c h i l d t o do likewise, I could completely change the D o n a l d B o u d r e a u x replies:
o u t c o m e of the election. Mr. B o u d r e a u x pats himself I appreciate Mr. Gee's response to my article. I c o n
o n the back for his attitude toward voting. In local elec cede that voting in local elections presents less of a
tions, 90 percent, and frequently m o r e , of the voters moral problem than does voting in national elections.
share his attitude exactly. Local governments aren't as able to be as oppressive as
O n e reason, of course, is that for b o t h liberals and national governments, if for n o reason other than that
libertarians, these elections m e a n , or should m e a n in each of us can m o r e easily move out of any particular
their view, next to n o t h i n g . T h a t this should be the case local jurisdiction than out of any country.
for so-called liberals, w h o feel that every responsibility B u t I disagree that any practical reasons counsel an
should rest ultimately w i t h the federal g o v e r n m e n t , is individual to vote in a local election. Even in local elec
n o t surprising. W h a t I find annoying is that although tions an individual's vote is extremely unlikely ever to
libertarians, in theory, at least, are opposed to that sort decide an o u t c o m e . T h e analytics of determining the
of thing, o n a practical level they lend it de facto s u p probability of decisiveness of a single vote are quite
port. Local leaders, elected for the most part by a h a n d complexsee chapter four of Geoffrey B r e n n a n and
ful of friends and neighbors, struggle to do w h a t they Loren Lomasky's Democracy and Decision for a c o m p r e
can to m a k e life as pleasant as possible for those same hensive treatment of this issuebut, practically speak
people, find themselves characterized by libertarians, ing, the probability of o n e vote deciding the o u t c o m e
w h e n they d o n ' t agree w i t h absolutely everything the of an election in a small t o w n with, say, 1,000 voters is
local leaders do, as "lifestyle N a z i s " or something n o t meaningfully m u c h higher than is the probability of
similar. I a m perfectly aware that there is a great deal of o n e vote d e t e r m i n i n g the o u t c o m e of a national elec
c o r r u p t i o n and d o w n r i g h t stupidity in local politics, tion w i t h millions of voters. m)

THE F R E E M A N : Ideas on Liberty 40


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Book Reviews

people began to accept a readily tradable c o m m o d i t y as


Book Reviews a m e d i u m of exchangemoney.
Mises also described how inflation (monetary
expansion) fostered by the banks leads to widespread
Mises: T h e Last K n i g h t of Liberalism price increases, e c o n o m i c malinvestment, and then
by Jorg Guido Hulsmann inevitably, w h e n the banks stopped inflating, the
Ludwig von Mises Institute 2007 1143 pages $50.00 collapse of businesses, e c o n o m i c stagnation, and a
readjustment of prices. T h u s Misesin 1912laid the
Reviewed by Bettina Bien Greaves
g r o u n d w o r k for understanding the e c o n o m i c crises
iographer Guido Hulsmann and b o o m / b u s t cycles that have plagued capitalistic
B; 'has written a magnificent economies.
b o o k , describing in detail n o t only Mises's third significant contribution was his analysis
the life of L u d w i g von Mises, b u t of socialism, considered " t h e wave of the future" in the
also his writings, his intellectual early 1920s. In a socialist society all property w o u l d be
development, and his importance. o w n e d and controlled by the state. T h u s there w o u l d be
H u l s m a n n studied all Mises's works n o market and n o market prices reflecting buyers' and

\ i i s i :s in G e r m a n , English, and
and the biographer's fluency served
French, sellers' bids and offers for property. W i t h o u t
prices for either consumer's or producer's goods, gov
market

h i m well. H e traveled widely to locate Mises's papers, e r n m e n t "planners" w o u l d have n o guidance as to what
files, personal correspondence, and d o c u m e n t s and did people w a n t e d and did n o t want, and n o way to k n o w
vast research into his life and b a c k g r o u n d . w h e n , w h e r e , and h o w best to produce anything. In
First and foremost, the b o o k covers Mises's great short, there could be n o e c o n o m i c planning.
contributions to e c o n o m i c understanding. H e was n o t H u l s m a n n describes the life and times of Mises in
the most popular, r e n o w n e d , or influential economist of his native Austriahis family, cultural, and historical
the t w e n t i e t h century, b u t was u n d o u b t e d l y the most background. Mises grew up in a world in w h i c h almost
i m p o r t a n t . Perhaps his greatest c o n t r i b u t i o n was the everybody was an interventionist or socialist. H e c o n
d e v e l o p m e n t of subjective-value economics as a science fessed later that w h e n he entered the university he was
of reason, logic, and immutable laws. H e explained all "a complete statist." T h e n in 1903 he read Carl
e c o n o m i c p h e n o m e n a as o u t c o m e s of people's actions, Menger's Principles of Economics, w h i c h introduced h i m
choices, and decisions o n the basis of their respective to the subjective value theory and t u r n e d Mises's
subjective values. T h o s e actions generate prices, p r o thoughts in an entirely n e w direction; he said it " m a d e
duction, money, trade channels, markets, wages, interest an e c o n o m i s t " of him.
rates, capital goods, savings, investments, c o m p e t i t i o n , Hulsmann tells about Mises's search after World
profits, losses, and m o r e . War I for a position in w h i c h he could n o t only earn
Mises's second i m p o r t a n t c o n t r i b u t i o n was in the his living but also pursue his interest in economics. In
field of m o n e y and the m o n e t a r y t h e o r y of the trade 1918 h e j o i n e d the Austrian government's advisory
cycle. In his first theoretical b o o k h e explained that C h a m b e r of C o m m e r c e . W h i l e w i t h the C h a m b e r he
m o n e y was a market p h e n o m e n o n . It developed o u t of was able to continue his study of economics. H e also
barter as individuals, seeking to improve their personal taught at the University ofVienna as an unsalaried lec
situations, traded w i t h o n e another. Each trader was turer w i t h the title of Professor Extraordinary, c o n
a t t e m p t i n g to exchange s o m e t h i n g h e possessed for ducted a private e c o n o m i c seminar, and established the
s o m e t h i n g h e preferred m o r e . Eventually, some individ Austrian Institute for Business Cycle Research. In
ual ventured to offer w h a t h e had for s o m e t h i n g h e 1922, as e c o n o m i c adviser to the Austrian government,
could use, n o t immediately but in a later trade. O t h e r he was influential in halting the Austrian inflation
w o u l d - b e traders a t t e m p t e d similar exchanges. In time, before it reached such a disastrous level as in Germany.

THE FREEMAN: Ideas on Liberty 42


Book Reviews

Mises was always w r i t i n g n e w s p a p e r articles, e c o Klein forces the evidence into a pattern. T h e y say her
n o m i c papers, and b o o k s o n nationalism, socialism, lib treatment of the views of certain psychologists, e c o n o
eralism, epistemology, money, and e c o n o m i c crises. His mists, and military planners and her comparative
entire life was dedicated to trying to improve his o w n account of h o w those views are (were) i m p l e m e n t e d ,
understanding of e c o n o m i c s and to explain to others are "unfair," especially to the economists. B u t Klein
h o w the market operates. By q u o t i n g from Mises's rightly pursues the ideas in question across these fields
books, papers, and correspondence, Hiilsmann does a of k n o w l e d g e (and action) by analogya perfectly g o o d
masterful j o b of showing h o w Mises gradually refined Aristotelian and T h o m i s t i c procedure. " H o o d i n g " a
his ideas and improved his explanations. captive and "blacking o u t " an entire city by b o m b i n g
Hulsmann's biography portrays a m a n of principle are analogous, because they are d o n e for the same
w h o was dedicated to pursuing the truth. By dint of his reasonto disorient and confuse, and so on, t h r o u g h
studies, h e transformed himself into a powerful a d v o further stages of comparison.
cate of peaceful social c o o p e r a t i o n and the free market. The said psychologists, economists, and military
T h e b o o k is fascinating reading for anyone interested in planners dwell endlessly o n certain themes because they
Mises, the person, the economist, the libertarian. (f| see the world as a manipulable object and proceed from
shared mechanistic, H o b b e s i a n , positivist premises,
Bettina Bien Greaves (bbgreaves@aol.com) served FEE for more than four
decades as a senior staff member and resident scholar.
w h e r e b y actual people are mere atoms, objects, or
e m p t y ciphers o n indifference curves. W e cannot be
surprised that these experts' activities c o m p l e m e n t o n e
T h e Shock Doctrine: T h e Rise of Disaster Capitalism another in real life and reveal an indifference to
by Naomi Klein "unforeseen consequences," while a kind of m a t h e m a t
Metropolitan Books/Picador 2007/2008 576 pages ical Platonism underlies the supposedly "empirical"
$28.00 hardcover; $16.00 paperback performances. Shared themes include "shock," "shock
therapy," crises as e x p e r i m e n t a l opportunities, and
Reviewed by Joseph R. Stromberg
"clean slates" (Hobbes's "clean paper") o n w h i c h to
plot o u t n e w worlds. They talk this way; Klein makes

II
_ ' I me core thesis of Naomi
^^9|^H^H JL Klein's Shock Doctrine is that n o t h i n g up.
^^^^^^^H American foreign and domestic Klein follows these c o m m o n threads from the "free-
^BMH^Hl policies of the last 30 years have market" Chilean tyranny, t h r o u g h M r s . Thatcher's
^^^^^^H shaped a n e w corporatism. C o r p o - rather mixed reforms, p h o n y "privatizations" in Poland
^B^^^^Bm rat ism, Klein writes, "originally and Russia, the half-mad U.S. invasion of Iraq, w i t h
fl^^|HjHl referred to Mussolini's m o d e l of a m o r e p h o n y "privatizations," dispossession of small
HHnHffii police state r u n as an alliance o f . . . holders in Sri Lanka, and "state failure" in New
HHHHHH g o v e r n m e n t , businesses and trade Orleans, w h e r e school vouchers were imposed while
unions . . . in the n a m e of nationalism." Latter-day c o r the city rotted.
poratism involves "a h u g e transfer of wealth from p u b The Sri L a n k a n case must suffice here. There,
lic to private hands, followed by a h u g e transfer of long-established fishermen, having survived the
private debts into public hands." Neo-liberal corpo t s u n a m i , w e r e b a r r e d from their b e a c h holdings, so
ratism "erases the boundaries b e t w e e n Big G o v e r n m e n t that resort hotels favored by t h e W o r l d B a n k , U.S.
and Big Business," while organized l a b o r i n d e e d all operatives, and investors m i g h t e x p a n d . T h i s is p r e
laboris locked o u t of the n e w arrangements. cisely w h a t a C h i c a g o Law and E c o n o m i c s (Coasean)
Klein's case is tightly organized, well presented, j u d g e w o u l d do. T h e f i s h e r m e n are "socially ineffi
and o v e r w h e l m i n g in cumulative impact. She makes cient." T h e y got n o " g r o w t h . " Away w i t h their land!
a c o m p l e x a r g u m e n t dealing w i t h w h a t are, indeed, T h e y may c o m e b a c k in t h e r e f o r m e d "free m a r k e t "
complicated matters. S o m e reviewers complain that as waiters and busboys.

43 OCTOBER 2008
Book Reviews

O n e key to the n e w order, I w o u l d add, is this: By The Medicalization of E v e r y d a y Life: Selected Essays
excluding w a r - m a k i n g capacity ("defense") from the by Thomas Szasz
concept of "state" by implicit definition, Republican "anti-
Syracuse University Press 2007 168 pages $19.95
statists" create a desert mirage. W e can wrangle over
smaller g o v e r n m e n t any time; n o o n e can reasonably
Reviewed by Ross Levatter
hold that w e are getting such a thing now from those in nomas Szasz's most recent
power, sundry "privatizations" notwithstanding.
Klein s o m e w h a t overplays the verbal opposition of
Thomas Szasz T! b o o k is, in a sense, n o t recent
at all. The Medicalization of Everyday
" p u b l i c " and "private."The current rulers set up e x p e n Vu Medicalizati6n Life is a compilation of 16 essays
sive contractors to coordinate already expensive Everyday life Szasz published over the last third
defense-industry suppliers. This done, the c o n t r a c t o r s of a century. R e c e n t or not, these
clothed in state p o w e r a r e n o longer exactly " p r i essays are still quite valuable.
vate"; neither are they " p u b l i c " like the post office. O u r T h e r e was a time w h e n people
"free m a r k e t " reformers may answer for any conceptual led rich lives, filled w i t h mistakes
confusion. A n d here, Klein may n o t see that the c o n and successes, bad habits and g o o d ones, cowardice and
tractor fad is partly about e m p o w e r i n g the U n i t a r y heroism. N o w lives are simply filled w i t h a variety of
Executiveshielding its operations from congressional ailments, most of t h e m psychiatric, that cause us to act
oversight. B u t she is quite right to see n u m e r o u s threats in cowardly, evil, or mistaken ways. Were it n o t for nar
to democracy. cissistic personality disorder and neuroses, schizophre
I w o u l d add that imposing "spontaneous orders" by nia and separation anxiety disorder, paranoia and panic
debt-leveraging, "privatization," or invasion amounts to disorder, life w o u l d be grand. It's only mental disease
r i g h t - w i n g social e n g i n e e r i n g n o t an especially " c o n that separates us from nirvana, and w e place our faith in
servative" v o c a t i o n . N e i t h e r are "privatizations" psychiatry and psychopharmacology to b r i n g us to the
a m o u n t i n g to confiscations on the scale of H e n r y V I I I promised land.
conservative. O u r current regime calls to m i n d institu W h i l e w e wait, w e follow the n e w rules. We're used
tionalized W h i g c o r r u p t i o n after 1689, w h e n (in E. P. to doctors telling us w h a t to do. That's h o w they help
T h o m p s o n ' s phrase) England was a "banana republic," us get better. As m o r e and m o r e aspects of everyday life
everything was for sale, and i n c o m e migrated upwards are viewed as types of illness, doctors try to b e c o m e
via the state. m o r e and m o r e helpful by promulgating m o r e rules.
T h e r e are some problems of language t h r o u g h o u t T h e y m o r p h into powerful bureaucrats, often backed
the b o o k . R e a d i n g it, o n e might think the author by the force of law.
deplores any conceivable free markets whatsoever. Klein Szasz describes this process as it has occurred over
uses "capitalism" and "free market" to refer to assertions the last half of his professional lifetime. T h e change in
m a d e by policymaking ideologues merchandising corpo the past few decades has been striking. Szasz makes this
ratist and imperial policies. I wish she had s o m e h o w sep point by telling us about a psychiatric symposium he
arated official rhetoric from other possible, face-value attended in 1973. H e listened to discussions by psychi
meanings of these words, by putting t h e m in quotes or atrists " p r o v i n g " that alcoholism was genetically deter
occasionally writing "state-capitalist." m i n e d and noticed that (as was then fashionable) the
This is, in any case, an important, insightful book. vast majority of psychiatrists in attendance were s m o k
Klein's specific critique of new-wave corporatism out ing cigars or cigarettes.
weighs any disagreements some might have with her "third Szasz says: " W h e n my t u r n came to speak, I asked
way" politics. Accordingly, I hope people read the book why, if alcoholism is a mental disease, is nicotinism not
before falling into predictable, knee-jerk reactions. (| also a mental disease?" This, he argued, is because most
psychiatrists like to smoke but do n o t drink to excess.
Joseph R. Stromberg (jrstromberg@charter.net) is an independent historian
and writer living in Alabama. A n d since they control w h a t counts as disease, they do

THE FREEMAN: Ideas on Liberty 44


Book Reviews

n o t place their favorite pastimes in the disease category. religious parents are n o t always that religious t h e m
L o o k i n g back 34 years later, w e find the profession selves, yet frequently hide this fact. T h u s it is n o t i n c o n
responds to outside pressures; the desire to smoke has ceivable that Michael Schiavo spoke truthfully in saying
b e c o m e yet a n o t h e r mental illness since psychiatrists that, contrary to her religion, Terry didn't want to live
themselves have largely given u p the habit. that way. W h y didn't he speak u p earlier? Perhaps he
This compilation contains several rare pieces most had h o p e d that she'd revive. I see the issue as m o r e
Szasz admirers have n o t previously seen. T h e s e include morally ambiguous than Szasz does, b u t his discussion is
his thoughts o n routine neonatal circumcision, his eval nonetheless stimulating and based, as always, o n liber
uation of the Terri Schiavo case, and his hostile view of tarian principles.
philosopher Peter Singer's ethics of medicalization. The Medicalization of Everyday Life is a great i n t r o
(Singer is the philosopher w h o argues that lower life duction, or re-introduction, to the deep insights and
forms have rights, n o t just humans.) delightful prose of T h o m a s Szasz. You w o n ' t regret the
T h e b o o k also includes an excellent essay o n the time you invest in this b o o k . (f|)
history of psychiatry, originally published in the j o u r n a l
Dr. Levatter (rlevatter@mac.com) was the recipient of the Thomas S. Szasz
History of Psychiatry, which Szasz subsequently Award for Outstanding Contributions to the Cause of Civil Liberties,
expanded into a major b o o k , Coercion as Cure. Professional Category, in 2007.

A l t h o u g h m a n y of the essays deal w i t h specific


issues, there are also some excellent general essays that
introduce n e w readers to Szasz's approach to m e d i c i n e T h e A n t i t r u s t Religion
and psychiatry. T h e s e include such classics as " M e n t a l by Edwin S. Rockefeller

Illness: A M e t a p h o r i c a l Disease," "Diagnoses Are N o t Cato Institute 2007 124 pages 16.95

Diseases," and "Hysteria as Language."


Reviewed by George C. Leef
Szasz is perhaps best k n o w n for his views that
psychiatry has b e c o m e an excuse factory for c r i m i any years ago w h e n I was in
nality and a justification for authoritarian treatment M; .law school, I listened to a
of people w h o have c o m m i t t e d n o crime. T h e b o o k talk by a fellow student o n antitrust
contains t w o famous articles o n those topics, "Psy law. R i g h t at the b e g i n n i n g of his
chiatry's War o n C r i m i n a l Responsibility," and " P h a r - presentation, he earnestly stated
macracy: T h e N e w Despotism." that the antitrust laws were a " c h a r
For libertarians the most controversial essay is apt to ter of freedom." I was probably the
be Szasz's analysis of the Terry Schiavo case. He only person in the room who
describes her as "half-alive" (dead brain, living b o d y ) . I w i n c e d . T h a t "charter of freedom"
w o u l d restrict terms like "half-alive" to patients w i t h , line is an item of faith a m o n g most people (and nearly
say, cord lesions r e n d e r i n g t h e m w i t h a living u p p e r half all lawyers) w h o have b e e n told that antitrust laws p r o
and " d e a d " lower half. M y personal take is that dead tect c o m p a n i e s a n d thereby consumersfrom the
brain means o n e is dead, even w h e n , as in the case of a monopolistic designs of greedy business tycoons.
persistent vegetative state, the b o d y still has a heart that T h e reason I w i n c e d was that I k n e w that line is
beats and lungs that breathe. nonsense. As an undergraduate I had read D o m i n i c k
Szasz argues that the family's desire to maintain their A r m e n t a n o ' s iconoclastic b o o k , The Myths of Antitrust,
daughter o n life support should have prevailed, at least and u n d e r s t o o d that antitrust, far from protecting free
if they were willing to cover the costs, and that her h u s d o m , is an assault o n it. A r m e n t a n o subjected to w i t h
band had clear motives for desiring her death. B u t after ering analysis the naive belief that antitrust law is
decades of psychiatric practice, Szasz should b e aware necessary to the preservation of free markets. H a d my
that parents don't always have their children's best inter classmate read that b o o k , he'd have k n o w n h o w foolish
ests at heart. H e also should k n o w that children of very his remarks were.

45 OCTOBER 2008
Book Reviews

Since A r m e n t a n o ' s seminal w o r k , there have b e e n T h e antitrust religion thrives o n false history and
o t h e r scholarly critiques of antitrust. T h e most recent is encourages confused thinking. True believers call for
E d w i n Rockefeller's The Antitrust Religion. Rockefeller antitrust enforcement to prevent the kinds of c o m p e t i
has impeccable credentials to w r i t e such a b o o k . H e is tive "injury" that is inevitable u n d e r capitalism. "Belief
a lawyer w h o has served o n the staff of the Federal in antitrust," Rockefeller writes, "is based o n a kind of
Trade C o m m i s s i o n , chaired the A m e r i c a n Bar Associa competition in w h i c h some w i n but n o n e lose."
tion's antitrust section, and taught at G e o r g e t o w n Law B u t w h y does our author c o n t e n d that antitrust is
School. Instead of w r i t i n g the kind of b o o k you m i g h t n o t really " l a w " at all? Because true law must be know-
expect from s o m e o n e w i t h that b a c k g r o u n d a dense able so people can adjust their behavior in order to
treatise w i t h i n - d e p t h analysis of dozens of cases avoid legal difficulties. Antitrust, however, is so vague
Rockefeller has given us a concise b o o k that anyone that people can never be certain that they w o n ' t be
can easily read. H e doesn't try to cover all the many prosecuted for " a t t e m p t e d m o n o p o l i z a t i o n " w h e n e v e r
e r r o n e o u s doctrines of antitrust, b u t only to prove his they c o m p e t e vigorously. T h e rule of antitrust a u t h o r i
thesis that "antitrust is n o t consistent w i t h o u r aspira ties is like that of a capricious dictator.
tions for a rule of law." A n d w h y is that? Rockefeller Rockefeller is absolutely correct that antitrust is n o t
explains, "[A]ntitrust enforcement is arbitrary political compatible w i t h the rule of law. It was America's first
regulation of commercial activity, n o t enforcement of a instance of law so vaguely w r i t t e n that people didn't
c o h e r e n t set of rules." k n o w w h a t it meant. Unfortunately, since t h e n it has
T h a t is to say, antitrust is the rule of men, n o t of laws. b e e n j o i n e d by others, as politicians enact legislation
C o m i n g back to the book's title, Rockefeller argues that in effect says to bureaucrats and judges, " H e r e are a
that antitrust has all the trappings of a religion. It's few broad objectivesnow you figure out what to do
accepted as a matter of faith and is built around a n u m to achieve them."
ber of myths. Despite his solid case that antitrust is wasteful and
T h e central m y t h is o n e blindly accepted by almost counterproductive, Rockefeller holds out n o h o p e that
all educated Americans. T h e y have heard that the evil w e will escape from its clutches. T h e religion is just too
Standard O i l C o m p a n y had a virtual m o n o p o l y in the deeply ingrained, and opinion leaders see it as a c o m
oil business, causing g o v e r n m e n t authorities to break p o n e n t of "social justice." A n d even if w e s o m e h o w
u p the gigantic, dangerous firm. If you believe that, the repealed the antitrust statutes starting w i t h the Sherman
rest of the antitrust catechism falls neatly into place: Act, that might make things worse because of the
W e n e e d g o v e r n m e n t officials to constantly m o n i t o r existence of the Federal Trade Commission, w h i c h
business activity and to stop the ever-present threat has b e e n invested w i t h broad, o p e n - e n d e d powers to
of m o n o p o l y . regulate business "for the public interest." That's just
Rockefeller shows that the accepted Standard Oil tale as vague as a statute that makes it illegal to "attempt
is as baseless as a Halloween scare story. D u r i n g the time to monopolize."
of Standard's supposed market dominance, the price of T h e only way to root out the antitrust religion is to
refined petroleum products continually fell and c o m p e t i teach people the truth about capitalism. (|
torsyes, there were quite a fewsteadily chipped away
at Standard's market share. There was no problem. George Leef (gcorgeleef@aol.com) is book review editor of T h e F r e e m a n .

THE FREEMAN: Ideas on Liberty 46


The Pursuit of Happiness

Worker Freedom in Peril


BY C H A R L E S W. BAIRD

T
he Alliance for Worker Freedom (AWF) free w o r k e r is o n e w h o decides for himself w h e t h e r to
recently published its 2001 Index of Worker engage in political advocacy.
Freedom (IWF).The index ranks each of Prevailing wage (PW) laws. States w i t h o u t t h e m get a
the 50 states on the basis of t e n variables that 1; the others get a 0. T h e y stipulate that u n i o n wage
affect the freedom of workers. " F r e e d o m " is defined rates must be paideven by union-free firmson
properly as the absence of interferences with ind construction projects funded w i t h tax money. A free
ividual w o r k e r choices. T h e full report is found at construction w o r k e r is o n e w h o may w o r k for a u n i o n -
www.workerfreedom.org. free firm o n terms to w h i c h h e and his employer agree.
After explaining the ten variables used and identify Defined contribution (DC) pension plans. States that
ing the five states w i t h most, and the six states w i t h offer t h e m to their g o v e r n m e n t employees get a 1;
least, w o r k e r freedom, I will explain w h y I t h i n k C o n those that don't get a 0.Workers have control over their
gress may eliminate interstate differences in s o m e of D C plans, and they are free to move from j o b to j o b
these variables in the next few years. This " h a r m o n i z a w i t h o u t losing benefits.
t i o n " will significantly reduce b o t h w o r k e r freedom Government-employee collective bargaining (CB) laws.
and the usefulness of the IWF. T h e 13 states w i t h o u t t h e m receive a 1; the others, a 0.
T h e ten variables, and the reasons for their inclu While the National Labor Relations Act (NLRA)
sion, are: exposes private-sector workers to coercive unionism,
Right to work (R.TW) laws. T w e n t y - t w o states have the states, at least for now, are free to decide w h e t h e r to
RTW laws. T h e y receive a 1; the others receive a do the same to their g o v e r n m e n t employees.
0. R T W laws protect workers from b e i n g forced to pay Government-sector union membership (UM). States w i t h
u n i o n dues. UM lower than the national average (36 percent)
Minimum wage (MW) laws. States w i t h M W s lower receive a 1; the others, a 0. U M indicates the extent to
than the federal m i n i m u m , and the five states w i t h n o w h i c h g o v e r n m e n t - s e c t o r unions can override d e c i
such laws, receive a 1; the others receive a 0. A free sions by individuals as to w h e t h e r they will be repre
w o r k e r is o n e w h o decides the m i n i m u m he will accept sented by a u n i o n .
for himself. Entrepreneurial activity (EA). This is measured as the
Union density (UD). This is the percentage of the n u m b e r of entrepreneurs w h o start n e w firms in a year
workforce, b o t h private and government, w h o are as a percentage of total adult population. T h e national
u n i o n m e m b e r s . States w i t h U D s b e l o w the national average is 0.3 percent. States w i t h EA above the
average (12 percent) receive a 1; the others receive a 0. national average receive a 1, while the others receive a
In states w i t h high U D s the usual u n i o n apparatus of 0. E A activity creates additional union-free employ
coercion, intimidation, and wholly o w n e d politicians m e n t alternatives for workers, and states w i t h more
will be m o r e prevalent and well established than in w o r k e r freedom are m o r e hospitable to EA.
states w i t h lower U D s . Workers compensation (WC) premiums. States w i t h p r e
Paycheck protection (PP) laws. States w i t h t h e m receive m i u m s b e l o w the national average ($2.49 per $100 of
a 1; the others receive a 0. P P prevents u n i o n bosses
from using dues forced from g o v e r n m e n t employees for Charles Baird (charles.baird@csueastbay.edu) is a professor of economics
political purposes w i t h o u t their express permission. A emeritus at California State University at East Bay.

47 OCTOBER 2008
Charles W. Baird

payroll) receive a 1; those above the national average, a expose their employees to unionization or not.
0. W C p r e m i u m s are most often paid to g o v e r n m e n t R e m e m b e r the camel's-nose-under-the-tent strategy of
m o n o p o l y agencies rather than private insurance c o m the N e w Deal: Get part of w h a t you want first and later
panies, w h i c h w o u l d c o m p e t e w i t h each other. H i g h use that base to grab it all. Today it is police and fire
m o n o p o l y p r e m i u m s reduce the a m o u n t of m o n e y for fighters. Later, the u n i o n bosses pray, all state and local
capital and o t h e r business expenses, thus reducing g o v e r n m e n t employees will be herded into unions.This
w o r k e r e m p l o y m e n t alternatives. w o u l d eliminate any interstate differences in AWF's
collective-bargaining and u n i o n - m e m b e r s h i p variables.
Ranking Worker Freedom Individual state C B laws will be m o o t , and each state's

A state's ranking is d e t e r m i n e d by s u m m i n g up the


scores for the ten variables. U t a h , the state w i t h the
best score, received a 9 (out of 10); it does n o t offer D C
U M will be 100 percent.
By any reasonable reading of the Tenth A m e n d m e n t ,
the federal government has n o power over state- and
plans. C o l o r a d o , Idaho, Mississippi, and South Carolina local-government labor relations. But in 1935 Chief Jus
each had 8. T h e six worst statesConnecticut, Hawaii, tice Charles Evans Hughes wrote in the Gold Clause
Minnesota, New York, Pennsylvania, and Rhode Cases, "We are under a Constitution, but the C o n s t i
Islandreceived 0. tution is what the judges say it is."
T h e I W F is a helpful resource for Any five justices of the Supreme
employers and employees alike w h o There are ominous C o u r t can reinvent the Constitution
are trying to locate in states w i t h a anytime they wish. In Garcia v. San
more favorable labor environment
noises in Congress Antonio Metropolitan Transit District
than others. Just as the Heritage and that suggest interstate (1985), five justices decided that state
the FraserCato indices of e c o n o m i c and local governments are mere play
freedom have resulted in healthy competition in ers, on an equal footing with unions,
competition among nations to worker freedom will in the game of influencing Congress
increase e c o n o m i c freedom, the I W F o n questions of labor relations. Alas,
m i g h t be expected to result in healthy be thwarted by naked the federal government may pass
c o m p e t i t i o n a m o n g states to increase any state and local labor-relations
government force. statutes it likes.
worker freedom. For this, union
bosses have called A W F an antiunion Further, u n i o n bosses have long
group. B u t A W F is c o n c e r n e d w i t h w o r k e r freedom. sought to eliminate the r i g h t - t o - w o r k clause of the
It is a n t i u n i o n only insofar as unions decrease w o r k e r N L R A . If they have their way w i t h the n e w Congress
freedom. and president, state R T W laws will be abolished. A n d
T h e r e are o m i n o u s noises in Congress that suggest the recent attempts by Congress to apply the federal
interstate competition in worker freedom will be DavisBacon Act's prevailing-wage provisions through
t h w a r t e d by naked g o v e r n m e n t force. For example, the legislation concerning farms, c a p - a n d - t r a d e global
Public Safety E m p l o y e r - E m p l o y e e Cooperation Act w a r m i n g , clean water, school construction, and housing
was passed in the H o u s e in 2007, and the Senate voted bailouts suggest that individual state P W differences
6929 to limit debate on the measure (cloture) in May. may n o t survive for long.
At this w r i t i n g the Act has n o t received a final vote in Just as the bureaucrats in Brussels seek to " h a r m o
the Senate, b u t the margins in b o t h bodies are v e t o - nize" e c o n o m i c policy a m o n g m e m b e r s of the E U , the
proof. T h e Act w o u l d force state and local governments n e w Congress and the n e w president are likely to try to
to submit to the unionization of their police and fire restrict interstate competition in worker freedom. This
fighters. Before this, states could decide w h e t h e r to is "change w e can believe in." (||)

THE FREEMAN: Ideas on Liberty 48

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