Wednesday, March 09, 2005

Practical Libertarianism for Americans: Part V


This is an excerpt of Part V of a nine-part work in progress. I welcome constructive criticisms and suggestions. Please send an e-mail to: libertycorner-at-sbcglobal-dot-net .

Absent the welfare-regulatory state, most of the poor would be rich, by today's standards. And those who remain relatively poor or otherwise incapable of meeting their own needs -- because of age, infirmity, and so on -- would reap voluntary charity from their affluent compatriots....

[A]t the onset of the Great Depression -- Americans and American politicians lost their bearings and joined Germany, Italy, and Russia on the road to serfdom. Most Americans still believe that government intervention brought us out of the Depression. That bit of shopworn conventional wisdom has been debunked thoroughly by Jim Powell, in FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, and Murray N. Rothbard, in America's Great Depression. The bottom line of FDR's Folly is stark:
The Great Depression was a government failure, brought on principally by Federal Reserve policies that abruptly cut the money supply; unit banking laws that made thousands of banks more vulnerable to failure; Hoover's tariff's, which throttled trade; Hoover's taxes, which took unprecedented amounts of money out of people's pockets at the worst possible time; and Hoover's other policies, which made it more difficult for the economy to recover. High unemployment lasted as long as it did because of all the New Deal policies that took more money out of people's pockets, disrupted the money supply, restricted production, harassed employers, destroyed jobs, discouraged investment, and subverted economic liberty needed for sustained business recovery [p. 167].
All we got out of the New Deal was an addiction to government intervention, as people were taught to fear the free market and to believe, perversely, that government intervention led to economic salvation. The inculcation of those attitudes set the stage for the vast regulatory-welfare state that has arisen in the United States since World War II....

You know the rest of the story: Spend, tax, redistribute, regulate, elect, spend, tax, redistribute, regulate, elect, ad infinitum. We became locked into the welfare state in the 1970s..., and the regulatory burden on Americans is huge and growing. The payoff:
  • Real GDP (in year 2000 dollars) was about $10.7 trillion in 2004.
  • If government had grown no more meddlesome after 1906, real GDP might have been $18.7 trillion (see first chart above).
  • That is, real GDP per American would have been about $63,000 (in year 2000 dollars) instead of $36,000.
  • That's a deadweight loss to the average American of more than 40 percent of the income he or she might have enjoyed, absent the regulatory-welfare state.
  • That loss is in addition to the 40-50 percent of current output which government drains from the productive sectors of the economy.
And that is the price of...ceding liberty piecemeal in the mistaken belief that helping this interest group or imposing that regulation will do little harm to the general welfare, and might even increase it....

The next several years will see a showdown between the forces of darkness and the forces of progress in America. The forces of darkness -- having already greatly diminished the general welfare in the name of improving it -- will seek to tighten the shackles of the regulatory-welfare state in the name of environmentalism. The forces of progress will seek to tame the regulatory-welfare state -- if not repeal it. But they will be labeled evil, greedy, know-nothings for trying to protect us generally from the predations of the welfare-regulatory state and particularly from the ravages of environmental hysteria. As Ludwig von Mises put it:
[I]f a revolution in public opinion could once more give capitalism free rein, the world will be able gradually to raise itself from the condition into which the policies of the combined anticapitalist factions have plunged it.14 [Quoted by Bryan Caplan.]
I am doubtful of a revolution in public opinion, especially because it would require a revolution in elite opinion and in the media -- both of which are in thrall to the god of the regulatory-welfare state.

As I will argue in Part VI, we have come to our present state because public opinion, elite opinion, and the media have combined to undo the great work of the Framers, whose Constitution prevented tyranny by the majority. Unchecked democracy has become the enemy of liberty and, therefore, of material progress. As Michael Munger says, "The real key to freedom is to secure people from tyranny by the majority, or freedom from democracy."

The last best hope for liberty and prosperity lies in the neutralization of public opinion through a renewal of constitutional principles. I'll have more to say about that in Parts VII and VIII.

Click here for the full text of Part V.