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by Andrew I. Cohen

Andrew Cohen teaches philosophy at the University of Oklahoma, Norman.

Private property and limited government are unrivaled in promoting personal liberty and material abundance. These institutions of a free society also beat the competition in promoting another vital personal and social good, namely, friendship.

Beneath our differences, people understand that self-respect, some wealth, a sense of personal efficacy, and maybe even a dash of luck are among the essential ingredients of a successful life. These values would still seem shallow or pointless without friendship. As Aristotle observed, “No one would choose to live without friends even if he had all the other goods.” Our achievements would be emptier and our failures more unbearable without friends by our side. If friendship is then not the supreme good, it is certainly an essential one. Some of us are admittedly less social than others. The companionship that comes in meaningful friendships nevertheless seems to be a key part of the good life.

There are of course many sorts of friendships. Some persons are friends out of convenience. Perhaps our typical “acquaintances” fall into such a category. There are also friendships based merely on what two people find mutually pleasing. Both of these types of relationships help amplify our lives in various ways, but the best sorts of friendships are those where each friend cares deeply and sincerely about the other. In such complete friendships, each friend respects the other person, not as a means to his own ends, but as an end in himself.

A free society is uniquely qualified to promote the most complete friendships because it provides the institutional framework most favorable to them.

Freedom by Degrees

By a “free society,” we can speak of a social and political framework with three key features: (1) private property is protected as inviolable, (2) government’s role, at most, is to prevent and punish the violation of individual rights, and (3) all human relationships are voluntary. Free societies can exist in degrees. While the United States now is more free than, say, the Soviet Union under Stalin, the United States is not a completely free society. To the extent that a society counts as free, it will provide the best opportunities to nurture and sustain deep friendships.

Consider what is necessary for friendships. Two persons must share some form of good will. There needs to be a certain authenticity to any such mutual affection. This sincere good will helps to nurture a sense of trust and healthy interdependence. Trust is certainly key to building and maintaining any meaningful relationship, particularly in complete friendships where friends have a special respect for each other. But suppose you find yourself in an institutional environment where you have no choice but to interact with someone else. Such a stilted setting will tend to restrict the development of any friendship. While you may still come to be friends with the other person, it is much more difficult for you to do so under such circumstances. First you must overcome some understandable mutual suspicion, but then you must fight the worry that the other merely likes you as a means to some private end.

In all political economies, individuals will sometimes find themselves having to deal with persons somewhat involuntarily. Even in a nearly free society, we may find ourselves working for, going to school with, or just sitting beside persons with whom we would rather have no contact.

Consider just one example. Most municipalities have tightly regulated local telephone monopolies. To a great extent we have no choice but to deal with our telephone repairman. His incentive to engage in gestures of good will, and our reason to show him some sincere regard, are both constrained. The repairman’s “have a nice day” rings hollow when we know that we have no choice but to get our telephone service from that one company.

What a free society does is minimize the extent to which human relationships are involuntary. When we have no choice but to deal with someone, sincere good will is often hard to muster. But when individuals are free to come and go as they please and they nevertheless continue to interact with one another, they can be more certain of one another. They might then foster the trust and mutuality necessary for genuine friendships.

Take a lower-level friendship, such as one of mere convenience. We have such friendships with many persons, such as with the family doctor, the corner florist, or (if we are lucky) with car mechanics, plumbers, and carpenters. Our good will toward such persons is mostly based on what they can offer us. Genuine good will is an ingredient in any wholesome friendship. To the extent our displays of good will are sincere, it is because we recognize both the value such persons represent to us and their freedom to do as they wish.

These low-level friendships are often steppingstones toward the more complete friendships where each friend regards the other as an end in himself. People usually do not just fall into friendships. They develop their relationships, often starting out on the fragile and fleeting bases of mutual pleasure or mutual convenience. The trust that comes from freedom of choice can only help foster the good will that gets started in such rudimentary relationships. The enhanced freedom of choice characteristic of free societies also removes several impediments to the deepening of these relationships.

To say that the institutions of a free society best facilitate friendship does not mean that people didn’t have good friends in, say, Maoist China. (Perhaps genuine friends were especially valuable there.) But it is far more difficult to discover, nurture, and sustain good friendships when human relationships are not entirely voluntary. What a free society does is enhance our range of freedom of choice. We have more options to select or reject. When you find yourself interacting with persons in this wider range of choice, you have better reason to believe that another’s interest in you is genuine. You also have better reason to know that your own interest is genuine. The corner baker is more apt to take an interest in your life when he knows quite well that you could just as well go across the street to a competitor or bake your own muffins. You may also be more likely to feel a mutual good will toward the baker when you know that you are free not to patronize him.

Private Property

Another characteristic of a free society even more important and powerful for advancing friendships is private property.

What good is wealth, Aristotle asks rhetorically, unless we have people we care about with whom to share it? Ambiguously defined property rights and property that is not private notoriously promote waste and neglect. What matters here, however, is that when property is not private, or when it is otherwise not fully protected as private, individuals have diminished opportunities to cultivate the benevolence characteristic of genuine friendships.

There is a certain sort of kindness that helps to nurture and sustain friendships. This is the kindness manifested by freely sharing one’s belongings with others. Unless one owns property, however, it is difficult if not impossible to show benevolence toward another. With what would one be benevolent? It is not benevolence if you grant another access to some good to which you do not have an exclusive, protected claim.

Benevolence is still a vital ingredient in bringing a relationship to a higher level, one where you spontaneously and willingly contribute to a friend’s well-being. What property does is give individuals a protected sphere of control over some range of action and material goods. It sets up a divide between what is “mine” (and not yours) and what is not “mine” (but someone else’s). “Property” here is not just a material thing but also includes one’s freedom, one’s time, and one’s body. Even the materially poor man can be benevolent toward another; the poor man still owns himself and his time. The authentically benevolent man then freely waives his rights to exclude others from his goods. In doing so, he builds trust and helps to enhance his friend’s welfare. Such gestures lay the groundwork for later reciprocal gestures that, in a complete friendship, come freely and without any thought to some payoff.

A free society enhances the quantity of property individuals own and protects as inviolable whatever property rights individuals enjoy. A free society thereby promotes authentic friendships by giving people added opportunities to engage in meaningful sharing. If resources move from one person to another when they do nothave to, the recipient is better able to gauge the motives of the gesture. Indeed, the one who gave the property away is better able to be sure of his own motives. A free society does well in clearing the air in this fashion. Relationships are voluntary, and property is exchanged and redistributed only through free consent. Such gestures lay the groundwork for the most meaningful sorts of friendships.

Friendships are possible in a variety of circumstances, including in the most repressive of dictatorships. What a free society does is make the discovery, development, and sustenance of friendships of all types—particularly the most meaningful sort—easier. When free, individuals have a diminished need to second-guess the motives of others (and themselves) and they are better in a position to be generous. The freedom not to do what others may want us to do is a valuable liberty. Besides providing a sense of autonomy, that freedom is an important ingredient in expanding the opportunities for the friendships that characterize a successful human life.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 8.

By Russell Roberts

Russell Roberts is director of the Management Center at the John M. Olin School of Business at Washington University in St. Louis. He is the author of “The Choice: A Fable of Free Trade and Protectionism” (Prentice Hall).

The good effects of laws are often easily seen. The bad effects, unseen. So observed Frederic Bastiat 150 years ago. His basic insight remains true today. We live in busy times. Information bombards us. In such a world, even that which is seen is often overlooked. The unseen is that much more elusive.

If we are to make the case for economic freedom, we have to bring these unseen costs to light. Consider an increase in the minimum wage. What is seen: businesses give some of their low-wage workers a raise. The direct effects of the minimum wage—more money for low-wage workers, less money for businesses that pay them—frame the entire debate. Senator Christopher Bond of Missouri says the minimum wage is bad because it hurts small business—as he argued in his recent re-election campaign. So most people see the minimum wage as a tax on small business that helps the poor. No wonder many people think it’s a good idea.

If we want to dent the consciousness of the average American, we have to talk about how the minimum wage doesn’t just tax small business. We have to show how it bankrupts some firms that hire low-skill workers. That means fewer opportunities for low-skill workers. But even the firms that survive will try to reduce the hours of low-skill workers and their numbers. In short, while the minimum wage helps some low-skill workers by giving them a modest pay increase, it has a devastating effect on others, pushing them out of the work force and into the street. The minimum wage thwarts human possibility among those it tries to help. And as Bastiat understood, it is easy to see those who are helped by the minimum wage. Those who are harmed are much harder to identify.

We’ve done a decent job explaining the hidden costs of the minimum wage. We’ve done such a good job, in fact, that proponents of the minimum wage have actually tried to argue that increases in the minimum wage have no effect on low-skill employment. To paraphrase Orwell, you’d have to be an academic economist to find that argument compelling. But in other areas, we have a long way to go if we wish to cast light on the unseen costs of government intervention.

Free Trade and Protectionism

Here’s how trade often gets discussed in the media: should we destroy jobs in America in order to have cheap imports? That’s like being asked how long you’ve been beating your wife. Why does it get discussed this way?

Opponents of free trade want the American people to think that trade is about destroying jobs in order to get cheap foreign goods. It makes free trade look mean-spirited and mercenary. But another reason is that these are the most obvious effects of free trade. If Americans buy from foreign suppliers, people understand that fewer Americans will be hired in the competing domestic companies. Unseen are the jobs created to make the products we exchange with foreigners. Unseen is the impact of specialization and comparative advantage. Unseen is the power of foreign competition to induce our domestic industries to innovate.

Unless we can illuminate the unseen, making the case for free trade will be an uphill battle. Unfortunately, one of the best things about free trade is extremely difficult to see: free trade allows resources to flow to their highest use. But to make the argument compelling, we have to describe it in a way that allows it to be seen without a semester’s worth of economics.

Freeing Up Opportunity

Somewhere in South Carolina, there’s a high school girl whose mom works in a textile factory. This girl doesn’t know what she wants to do with her life, but like most high school kids in America, she probably doesn’t want to work in the same job or career as her parents. The security of the textile factory is appealing, but she might want to go to college and try something different. It all depends on her options.

That factory is threatened by Chinese competition. Should we let the factory go under or should we protect it from the cheaper Chinese imports? We could spend hours on the pros and cons and the economic impact of that decision. But let’s look at the impact on that girl in high school. If we keep the factory around, we make the choice of working in the factory more appealing. If we let the factory die, we change the available options. We push her out into the world.

Exploring the world is a good thing, but that’s not reason enough for letting the factory go under. What is harder to see is that the world to be explored is a more vibrant and alive place when the factory goes under. Allowing the factory to die frees up capital and management skill that can be used elsewhere. If we maintain all of the factories and all of the companies that cannot survive competition, then the American economy is a much more static place.

If we try to make everything for ourselves and be self-sufficient, we lose the opportunity to specialize in doing what we do best. Our capital gets tied up in industries that do not take the greatest advantage of our unique skills. Free trade allows a high school kid in South Carolina to inherit a world of maximum human potential, with the maximum chance for her to use her gifts, whatever they may be.

A skeptic would ask how the girl in South Carolina is going to achieve her potential if her mom is out of work. And that in turn might lead to a discussion of how past generations have managed to survive and thrive in a dynamic economy. In 1900, one-third of the American work force was in agriculture. Today the number is around 3 percent. Do you think the kids on the farms of 1900 are glad that we let agriculture become more capital intensive with fewer jobs? It wasn’t a trivial transition, but in 1900, we couldn’t see the industries that would arise to use the skills of the next generation. And we can’t know the opportunities that will arise to help that girl in South Carolina if we let the textile factory fail. But they will arise. What they will be depends on the gifts and aspirations of the next generation.

If we want to inspire people to support free trade, we must touch their imagination. Bastiat understood that 150 years ago. Our best chance is to make the unseen, seen. Economics can bring the unseen to light, but only if we leave the jargon behind and show how free trade and other economic freedoms help transform our lives.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 3.

by James Otteson

James Otteson teaches in the department of philosophy at the University of Alabama.

It is no secret that classical liberalism receives little attention in American academic philosophy, and then generally only as a historical artifact. What one hears is something like this: “No serious philosopher today believes that people can get on without substantial, organized help from the government. The only issues are in what way the government should help and to what extent; the issue of whether the government should help can no longer be seriously entertained.”

There are of course exceptions—Robert Nozick, David Schmidtz, and Eric Mack come to mind—but they are a decided minority and, in my experience at least, are often not considered to be within the philosophical mainstream. I have thus faced considerable difficulty convincing my colleagues that classical liberalism is worth thinking about at all, let alone worth careful examination. But a free society is worth the effort, and so I have explored many methods of opening the closed intellectual doors I have encountered, believing that if I can get others to think about classical liberalism for just a few minutes, I will find some place where it matches up with—or, if I am lucky, accounts for—a deep moral or political intuition they already have. When that happens, I have found that classical liberalism suddenly gains a footing as a position that has at least the possibility of plausibility. And that is a start.

Connecting to Intuition

In my experience arguments for classical liberalism rarely get off the ground unless they can first make this connection to intuition. Hence the method I have settled on for extending liberty’s cause in my discipline of philosophy is one that, first, seizes on a few of the adversary’s deeply held intuitions and then uses those intuitions as bases on which arguments can be built. I think three intuitions in particular combine to make an initial case for the free society that almost any person, regardless of his political position, will find formidable.

Here’s how I propose going about it.

Begin by asking whether there is anything wrong with rape. Now of course such a question may well shock its hearer, but a shock is sometimes necessary to get people to think hard about a different way of looking at the world. Ask your adversary to answer the question seriously. So: yes, there is something wrong with rape. Well, what is it exactly? It does not suffice to say that rape is self-evidently wrong because it might not be self-evidently wrong to everyone. The rapist, for example, might not think so.

To bring the matter into sharper focus, ask this next: Is rape always wrong—or might there be occasions when it is acceptable? What if raping a person would lead to some greater good? For example, should we consider whether the rapist might not receive such a degree of pleasure from the rape that it effectively cancels out the pain and suffering the victim experiences? On that ground, then, should we judge each rape on a case-by-case basis, asking in each instance whether the act in question led to a net increase or decrease in welfare? This question is typically met with horror: of course rape is always wrong and of course its wrongness is not subject to any utilitarian calculation. It is wrong absolutely and simply so. The following suggestion will now seem quite apt and will almost always meet with approval: rape is wrong always and everywhere because a person’s body is inviolable; a person has an absolute right to his (or her) body, and anyone who breaches that right is acting immorally regardless of his reasons. A person is, as it were, the owner of his own body, and as such he has absolute say over what gets done to it.

At this point the case for a free society has already begun to be built, though one’s adversary probably does not see it. It is time to call up the second intuition, again by asking a question whose answer will seem obvious. Is there anything wrong with slavery? Well, what exactly? Again we must not allow “self-evidence” to justify our belief that slavery is wrong because many people evidently have believed and continue to believe that slavery is at least in some circumstances acceptable. Might slavery be wrong because it violates the dignity of the enslaved by treating him as a means to someone else’s end? Might it be wrong because it dehumanizes the enslaved, treats him as if he were the moral equivalent of a pack animal?

Yes, that is it: slavery is wrong because it treats a man as if he were not a man; it fails to respect his inherent dignity, his inherent worth as a human being. But suppose that Congress—and congressmen, note, are popularly elected—passed legislation requiring the enslavement of some minority of the population. Suppose that to supply vital industries with much-needed cheap labor, the majority of us decided to enslave all, let us say, Irishmen. This would be democracy in action; the whole process would be strictly according to protocol in a democratic country. That would be acceptable, would it not?

Of course not! the reply will come. Slavery can never be justified, no matter how many people voted for it. And now one’s adversary will believe what has already been said with almost unshakable conviction: slavery disrespects the inherent dignity in a human being and is therefore always wrong. A person may not in any way be used against his will for the sake of another person, and his sovereignty over his own life is immune from democratic (or any other) lawmaking.

Is Theft Wrong?

Now the foundations of the free society are almost entirely laid. Only one more element is required. Is there anything wrong with stealing? This matter can be a bit tricky, because there will be those who think that stealing is justified in the case of a poor man stealing from a rich man. Put that possibility off for a moment and ask the hearer to answer whether theft as a general practice is acceptable. Is it all right for anyone who wants something simply to take it regardless of who owns the thing in question? To this question the answer will be “no.” But once again, why is it not all right?

Although the intuition that stealing is wrong is strong, people are often not quite sure what to say about why it is wrong. Proceed, then, with this question. Suppose Congress took a vote, and the majority, which carried the day, passed legislation licensing local police authorities to take anyone’s property whenever in their judgment, and in their judgment alone, they saw fit to do so. Would there be anything wrong with that? Would the fact that such a practice had been signed into law thereby make the practice morally acceptable? Odds are that the answer to this will be “no” as well.

Make, then, this suggestion. People have a right to what they own—that is, to what they have legitimately acquired (through labor, trade, or gift); stealing violates that right and for that reason is wrong. To return to the case of the poor man stealing from the rich man: how wealthy a person is does not seem relevant to our explanation of why theft is wrong. Theft violates a right, and hence it is wrong regardless of whose right is in question. If one’s adversary wavers on this point, remind him that there is always someone poorer than oneself, and thus everyone is a “rich man” relative to someone else—so if he is willing to allow an exception for a “poor man” to steal from a “rich man,” he is effectively licensing not only everyone else but also himself to be robbed. Is he still willing to make this exception?

Government Violates Rights

One can now move in for the coup de grâce: one’s adversary, whether he realizes it or not, is a classical liberal. Everything the state does beyond protecting these basic, negative rights of individuals is a violation of these same rights. Conscription, for example, is a use of your body to which you did not assent. The income tax and the staggering national debt are nothing but obligations on you to labor for the benefit of someone else. Wealth transfers to the poor, subsidies to farmers, support for the arts, and Social Security are all the forcible seizure of some people’s property in order to give it to others. And however noble the cause, however good the intentions, however many people voted in favor—rape, slavery, and theft are still wrong. And hence all the government programs that are merely particular instances of the principles underlying the immorality of rape, slavery, and theft are wrong as well.

One concrete example will show that the strong language of rape, slavery, and theft is justified in the case of government action. Estimated projections are that an average American born in 1999 will face an effective income tax rate of one hundred percent of his lifetime earnings simply to pay off the financial obligations that the American federal government will have incurred—and that is assuming that no more government programs are created. One hundred percent of lifetime earnings to make good on debts that these people played no part in creating and from which they will receive no benefit. How do you define slavery?

My genuine suspicion is that virtually all people are libertarians in their personal, everyday lives. In practice they regard anything that violates the sanctity of a person acting privately to be wrong. Certainly among my colleagues in philosophy I have met no one who would bodily assault another person (except perhaps in self-defense), who would enslave another person, or who would steal from another person. The challenge for the supporter of a free society, then, is threefold. First, he must get his adversaries to see that these three principles—the right to one’s body, the right to one’s labor, and the right to one’s belongings—are the fundamental organizing principles of classical liberalism. Second, he must show his adversaries that they already subscribe to these principles, a fact demonstrated by their reaction to the series of questions raised above. And, finally, he must bring his adversaries to understand that these principles are binding on everyone, including those who work for the government.

This last point is especially difficult since many people are inclined to believe that the government has an authority all its own. That is, they think that if the government says something, it must be right; and if the government tells one to do something, one’s sole duty is to obey. But one can summon a strong impulse to reconsider this thinking by pointing out that the government is nothing more than other people. If one would expect one’s neighbors to live by the three principles of respecting others’ lives, liberty, and property, then one should expect government employees to live by them as well. A person gains no special knowledge and earns no exemption from the requirements of morality merely by becoming an employee of the government.

Now I have not demonstrated that the free society is the only morally acceptable society (though I believe that it is). A philosophically sophisticated person will demand further argument for the principles underlying each of these intuitions, even if he shares them. It does not follow from the fact that one has a certain intuition about a moral matter, or even from the fact that many people have the same intuitions, that the matter is thereby settled. One’s intuitions might after all be wrong.

Moreover, I have not yet shown that the moral principles that I have suggested underlie these intuitions are in fact the principles that underlie them. It is possible to construct moral condemnations of rape, slavery, and theft—and thus justifications for the respect of life, liberty, and property—without appeal to natural rights. It might be possible, for example, to give a utilitarian or consequentialist rationale for these principles, although the sense that these principles deserve absolute recognition will be difficult to preserve within a utilitarian moral framework. It is also quite possible that one either has these intuitions or embraces these principles because one subscribes to Austrian economic thought. A follower of Ludwig von Mises or F.A. Hayek may well adhere to the sanctity of these moral principles without thereby thinking that they are made sacred because of their reliance on natural rights. Mises himself thought that the notion of natural rights was an intellectual fiction. Or one might subscribe to these principles because one is a Christian who believes that each of us, as a child of God, is sacred. A follower of Father Robert Sirico will believe that it is a violation of God’s will to treat another human being as anything other than inherently valuable and inviolable, and that one cannot fulfill one’s Christian duty to others unless one is radically free to choose to do so. Or, finally, one might think that man’s rational autonomy presupposes allegiance to certain universal rules, among which are the principles under consideration here. A Kantian will believe he is categorically commanded to treat others as ends in themselves and never merely as means, and he might for that reason believe that the free, classical liberal society is just the Kantian “kingdom of ends.”

I would not presume to resolve here which of these foundations for believing in the principles of the free society, if any, is correct. But that is not my intent. My belief is that substantially all of us share the intuitions that suggest these principles, regardless of the specific set of background beliefs we hold that lead us to accept them. My purpose rather is to galvanize adherents to a wide array of beliefs to fight for the free society by showing them that anything beyond the minimal, libertarian state violates moral principles they already hold—whatever the basis on which they hold them.

The Virtue of Consistency

All that would remain is to remind one’s adversaries of the importance of consistency in applying these principles generally. The classical liberal society is not alien or extreme or licentious or bizarre or naïve. It is simply our own moral principles writ large; it is the manifestation and reflection of the person of dignity each of us believes himself to be.

Many years ago Hayek called on classical liberals to “make the building of a free society once more an intellectual adventure, a deed of courage” and to develop a program that would at once inspire us and serve as a blueprint for us to realize freedom under law. I think that such a program must begin by appealing to our deeply held intuitions, our pre-theoretical sense of right and wrong.

It is frequently remarked in America today that voters have a deep distrust for politicians and for politics; they are cynical about the whole political system, a fact that is regularly evinced by their exceedingly low interest in finding anything out about the people running for office. One will probably not understand this distrust and cynicism until one sees the constitutional, if perhaps unconscious, libertarianism that runs through many Americans. I suspect they distrust politicians and dislike politics because they are aware on some level that almost everything that goes on in politics is a violation of moral propriety. When the government bestows largess on them, they are by and large happy to receive it; but I suspect that most of them nevertheless harbor the perhaps vague sense that there is something wrong with this state of affairs.

Even if they think that they cannot but take advantage of the government’s “free money” before someone else does, they would, if they were candid and forced themselves to reflect on the matter, admit that these are dishonorable actions. This, in part, is what stands behind Americans’ general belief that politics is a sordid affair (and that politicians are little better than moral reprobates). What is required, then, is to bring into the open exactly what makes these actions sordid and dishonorable, and to discover explicitly the close connection between people’s notions of impropriety and the libertarian principles that give rise to them.

One way to begin this process of discovery is to get people who spend their time thinking about moral and political issues on a philosophical level—like philosophy professors—to begin to focus their mental energy on the philosophical underpinnings of the free society. The hope is that more and more of them will come to see the classical liberal conception of society as a compelling manifestation of some of their own fundamental moral beliefs, and, further, that they will then teach it to their students. In this way one might get people who are already prone to intellectual investigations to become intrigued with the strong intellectual appeal of the free society and to replace their perhaps present desire for a socialist utopia with a desire for a classical liberal utopia.

The free society is worth fighting for, and even a person in a tiny corner of human life—a person in academic philosophy, for example—can take up the cause of liberty and make a difference. The strategy I have outlined here can be an effective way to make people within academic philosophy open to the power of classical liberalism, but it can also, I believe, bear fruit with people outside philosophy. It can thus be a first step toward answering Hayek’s call. I commend it to you.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 3.

By James Bovard

James Bovard is the author of “Freedom in Chains: The Rise of the State and the Demise of the Citizen” (St. Martin’s, 1999), from which this article is adapted.

“Freedom from want” is one of the most frequently invoked notions of freedom in our time. However, it is a bogus freedom that politicians and socialists offer to lull people into accepting policies that destroy true freedom. Freedom from want has been most loudly advocated in this century by those who favored removing almost all limits from government power.

For example, Sidney and Beatrice Webb, two of the founders of British socialism and authors of The Soviet Union: A New Civilization?, asserted in 1936: “Personal freedom means, in effect, the power of the individual to buy sufficient food, shelter and clothing.”^[1]

The Webbs did not specify how many millions of people government should be permitted to kill in the name of “freedom from want.” But during Stalin’s bloodiest decade, they asserted that for government economic planning to succeed, “public discussion must be suspended between the promulgation of the decision and the accomplishment of the task” and that any criticisms of the master plan should be treated as “an act of disloyalty, or even of treachery.”^[2] For government to be able to liberate people with food and clothing, it must have the power to execute anyone who criticizes the official economic plan. After visiting the Ukraine, the Webbs endorsed Stalin’s war on the kulaks (the least impoverished peasants), commenting that “it must be recognized that the liquidation of the individual capitalist in agriculture had necessarily to be faced if the required increase of output was to be obtained.”^[3] (Output plummeted.)

Equating liberty with satisfactory living standards became far more common as the twentieth century went on. “Real freedom means good wages, short hours, security in employment, good homes, opportunity for leisure and recreation with family and friends,” wrote Sir Oswald Mosley, the most prominent British supporter of Nazi Germany, in his 1936 book, Fascism.^[4] James Gregor noted in his book The Ideology of Fascism that fascism aimed at “restraints which foster the increased effective freedom of the individual.”^[5] President Franklin Delano Roosevelt noted in 1937 that “even some of our own people may wonder whether democracy can match dictatorship in giving this generation the things it wants from government.”^[6] University of Chicago professor Leslie Pape noted in 1941 that “democracies readily admit the claims of totalitarian states to great achievements in the cause of positive freedom.”^[7]

British historian E.H. Carr, writing in 1951, observed that, for the modern era, “freedom from the economic constraint of want was clearly just as important as freedom from the political constraint of kings and tyrants.”^[8]Carr justified the array of economic controls in postwar Britain: “The price of liberty is the restriction of liberty. The price of some liberty for all is the restriction of the greater liberty of some.”^[9] However, with this standard, there is no limit to the amount of freedom that government can destroy in the name of creating “greater liberty for some.” The British Labour government that Carr championed advanced freedom by conscripting labor for the coal mines and empowering the Ministry of Labour to direct workers to whatever employment was considered in the national interest—empowering over 10,000 government officials to carry out searches (including of private homes) without warrants—prohibiting restaurants from serving customer meals costing more than 5 shillings (less than $2 in 1947)—and fining farmers who refused to plant the specific crops government demanded.^[10] The government also “nationalized all potential land uses in the United Kingdom, permitting only continuation of existing ones and requiring ‘planning permission’ for any others,” as law professor Gideon Kanner noted.^[11]

The Labour government offered freedom via the solidarity of standing in the same rationing line—liberation via deprivation. (A 1998 New York Times article cited the Labour government’s postwar food rationing, which continued into the 1950s, as a contributing factor to the long-term decline of British cuisine.^[12])

The more politicians promise to give, the more they entitle themselves to take. Carr, serving in 1945 as chairman of the UNESCO Committee on the Principles of the Rights of Man, declared that “no society can guarantee the enjoyment of such rights [to government handouts] unless it in turn has the right to call upon and direct the productive capacities of the individuals enjoying them.”^[13] Thus, the price of government benefits is unlimited political control over people’s paychecks and work lives.

Once freedom is equated with a certain material standard of living, confiscation becomes the path to liberation. Thus, the more avidly a politician raises taxes, the greater his apparent love for liberty. In the name of providing “freedom from want,” the politician acquires a pretext to destroy the basis of private citizens’ independence. “Freedom from want” becomes a license for politicians, rather than a declaration of rights of citizens.

Anyone who does not have certain possessions is assumed not to be free—and in need of political rescue. President Johnson, justifying a vast expansion of government social programs, declared in 1965, “Negroes are trapped—as many whites are trapped—in inherited, gateless poverty. . . . Public and private poverty combine to cripple their capacities.”^[14] Vice President Hubert Humphrey defined a poor person as “the man who for reasons beyond his control cannot help himself.” This perspective on poverty and self-help mocks all of American history. It implies that any individual who earns less than $7,890 a year (the official poverty line for a single person) is incapable of any discipline or resolution.

While advocates of positive freedom insist that government must intervene so that each person “can be all that they can be,” government aid programs are notorious for rewarding people for making the least of themselves. President Roosevelt warned in 1935 that “continued dependence on relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber.”^[15] President Clinton declared in 1996: “For decades now, welfare has too often been a trap, consigning generation after generation to a cycle of dependency. The children of welfare are more likely to drop out of school, to run afoul of the law, to become teen parents, to raise their own children on welfare.”^[16] A rising tide no longer lifts all boats when the government rewards people for scuttling their own ships.

Faith in freedom from want depends on a political myopia that focuses devoutly on only one side of the ledger of government action. This is measuring freedom according to how much government does for people, and totally disregarding what government does to people. Government provides “freedom” for the welfare recipient by imposing tax servitude on the worker. Federal, state, and local governments collected an average of $26,434 in taxes for every household in the country, or an average of $9,881 for every U.S. resident in 1998, according to the Tax Foundation.^[17] In an age of unprecedented prosperity, government tax policies have turned the average citizen’s life into a financial struggle and insured that he will likely become a ward of the state in his last decades.

Some statists insist that taxation is irrelevant to freedom. According to sociologist Robert Goodin,

If what the rich man loses when his property is redistributed is described as a loss of freedom, then the gain to the poor must similarly be described as a gain of freedom. . . . No net loss of freedom for society as a whole, as distinct from individuals within it, is involved in redistributive taxation. Thus, there is no basis in terms of freedom . . . for objecting to it.^[18]

What does Goodin mean by “freedom for society as a whole”? By this standard, slavery would not reduce a society’s freedom, since the slave’s loss of freedom would be equaled by the slave owner’s gain. Nor is there any difference, vis-à-vis freedom, between permitting people to retain their earnings and spend them as they choose, and government confiscating their money to hire more regulators, inspectors, and informants to better repress the citizenry.

What are the practical results of the modern “freedom from want”? Economist Edgar Browning, writing in 1993, examined the marginal cost of redistribution—defined as “the ratio of the aggregate loss to the top four quintiles of households to the aggregate gain to the bottom quintile of households.”^[19] Browning estimated that the marginal cost to the most affluent 80 percent of households of increasing the income of the poorest 20 percent by $1 was $7.82.^[20] The marginal costs of redistribution are much larger than people might presume because of reduced incentives to work, both among the taxpayers and recipients. Also, as Browning noted, “marginal tax rates must be increased very sharply relative to the amount of income that is redistributed.” Combining Browning’s analysis and Goodin’s definition, confiscatory redistribution destroys almost eight times as much “freedom” as it creates.

Once the notion of “freedom from want” is accepted as the pre-eminent freedom, it becomes a wish list justifying endless political forays deeper and deeper into people’s lives. Princeton professor Amy Gutmann, in her 1980 book, Liberal Equality, declared: “Liberal egalitarians want to say that freedom of choice is not very meaningful without a right to those goods necessary to life itself.”^[21] Gutmann’s elaboration of “necessary goods” reveals how government would be obliged to control almost everything: “Supplying the poorest with more primary goods will be insufficient if their sense of self-worth or their very desire to pursue their conceptions of the good is undercut by self-doubt.”^[22] By this standard, freedom is violated when people suffer self-doubt, and the government is obliged to forcibly intervene to guarantee that all people think well of themselves.

Political scientist Alan Wolfe, a self-described “welfare liberal,” asserted in 1995 that “people need a modicum of security and income maintenance, underwritten by government, in order to fulfill the ideal of negative liberty, which is self-sufficiency.”^[23] Government dependency is the new, improved form of self-reliance: dependency on government doesn’t count because government is a better friend to you than you are yourself. But the more dependent people become on government, the more susceptible they are to political and bureaucratic abuse. Freedom from want is conceivable only so long as people are allowed to want only what the government thinks they should have.

Freedom from want supposedly results from government taking away what a person owns so that it can give him back what it thinks he deserves. The welfare state is either a way to force people to finance their own benefits via political-bureaucratic bagmen, or it is a way to force some people to labor for other people’s benefit. In the first case, government sacrifices the person’s freedom to the fraud that government must tax him to subsidize him; in the second, government sacrifices the person’s freedom in order to “liberate” someone else—often someone who chooses not to work. If someone pays the taxes that finance the government benefits he receives, he is less free than he would otherwise have been.

Some “freedom from want” advocates imply that government is a great benefactor when it promises citizens “three hots and a cot”—the old-time recruiting slogan of the Marine Corps. But trading freedom for a full belly is a worse bargain now than ever before. As economist F.A. Hayek observed, “As the result of the growth of free markets, the reward of manual labor has during the past hundred and fifty years experienced an increase unknown in any earlier period in history.”^[24] The average worker in industrialized countries can purchase the bare necessities of life with fewer hours of labor than ever before. Comparing current wages and prices with those of 1800, economist Julian Simon found that the average American worker today needs to labor less than one-tenth the time to earn enough to purchase a bushel of wheat than his predecessors did two centuries ago.^[25] While the real price of food has plummeted (in spite of government farm policies), the “real price” of political servitude has not diminished.

It is understandable that some well-intentioned people assume that “freedom from want” is the most important freedom. It is difficult for many people to conceive of enjoying anything (much less their freedom) if they lack food, clothing, or shelter. However, freedom is not a guarantee of prosperity for every citizen; the fact that some people have meager incomes does not prove that they are shackled. It is a cardinal error to confuse freedom with the things that free individuals can achieve or produce, and then to sacrifice the reality of freedom in a deluded shortcut to the bounty of freedom. Freedom is not measured by how much a person possesses, but by the restrictions and shackles under which he lives.

Throughout history, politicians have used other people’s property to buy themselves power. That is the primary achievement of the welfare state. The danger of government handouts to freedom was clear to some political writers hundreds of years ago. The French writer Etienne de la Boétie, in his 1577 Discourse of Voluntary Servitude, noted of ancient Rome: “Tyrants would distribute largess, a bushel of wheat, a gallon of wine . . . and then everybody would shamelessly cry, ‘Long live the King!’ The fools did not realize that they were merely recovering a portion of their own property, and that their ruler could not have given them what they were receiving without having first taken it from them.”^[26]

“Freedom from want” is not possible unless the government is allowed to control all things people want. Americans must beware of Trojan-horse definitions of freedom—definitions that, once accepted, allow bureaucrats to take over everyone’s life. Government handouts insinuate political power into the deepest recesses of a person’s life. And when the time is ripe, politicians take command where they previously lavished their gifts.

Notes

1. Quoted in Fritz Machlup, “Liberalism and the Choice of Freedoms,” in Roads to Freedom: Essays in Honour of Friedrich A. von Hayek, Erich Streissler, ed. (London: Routledge & K. Paul, 1969), p. 126.
2. Sidney and Beatrice Webb, Soviet Communism: A New Civilization?, vol. 2 (New York: Charles Scribner’s Sons, 1936), pp. 1038–39.
3. Ibid., vol. 1., p. 547.
4. Quoted in Dorothy Fosdick, What is Liberty? A Study in Political Theory (New York: Harper and Brothers, 1939), p. 28.
5. James Gregor, The Ideology of Fascism (New York: Free Press, 1969), p. 212.
6. The Public Papers and Addresses of Franklin D. Roosevelt, 1937 (New York: Macmillan, 1941), p. 361.
7. Leslie M. Pape, “Some Notes on Democratic Freedom,” Ethics, April 1941, p. 26.
8. Edward Hallett Carr, The New Society (London: Macmillan, 1951), p. 107.
9. Ibid., p. 108.
10. John Jewkes, The New Ordeal by Planning (New York: St. Martin’s, 1968; based on his 1948 book), p. 213.
11. Gideon Kanner, “Tennis Anyone?,” California Political Review, March-April 1998, p. 17.
12. William Grimes, “History Explains Disparity Between English and French Cuisine,” New York Times, May 9, 1998.
13. Quoted in F.A. Hayek, Law, Legislation and Liberty, vol. 2, The Mirage of Social Justice (Chicago: University of Chicago Press, 1976), p. 184.
14. Quoted in Marvin Gettleman and David Mermelstein, eds., The Great Society Reader (New York: Random House, 1967), p. 256.
15. Quoted in “The Welfare Bill: Excerpts from Debate in the Senate on the Welfare Measure,” New York Times, August 2, 1996.
16. “Radio Address of the President,” Office of the Press Secretary, White House, December 7, 1996.
17. “Total Tax Collections to Reach $2.667 Trillion in 1998, Tax Foundation Says,” Tax Notes Today, June 11, 1998.
18. Robert Goodin, Reasons for Welfare (Princeton: Princeton University Press, 1988), p. 313.
19. Edgar Browning, “The Marginal Cost of Redistribution,” Public Finance Quarterly, January 1993, p. 3.
20. Ibid., p. 3.
21. Amy Gutmann, Liberal Equality (Cambridge: Cambridge University Press, 1980), p. 8.
22. Ibid., p. 123.
23. Alan Wolfe, Review of Passions and Constraint: On the Theory of Liberal Democracy, by Stephen Holmes,New Republic, May 1, 1995.
24. Friedrich Hayek, Law, Legislation and Liberty, vol. 1, Rules and Order (Chicago: University of Chicago Press, 1973), p. 24.
25. Julian Simon, “What the Starvation Lobby Eschews,” Wall Street Journal, November 18, 1996.
26. Etienne de la Boétie, The Discourse of Voluntary Servitude, Murray Rothbard, ed. (New York: Free Life Editions, 1975), p. 70.

This article has been published with FEE‘s permission and has been originally published at The Freeman May 1999 • Volume: 49 • Issue: 5.

Tibor Machan teaches philosophy at Auburn University, Alabama. His recently edited volume “Commerce and Morality” was just published by Rowman and Littlefield, and he is now working on a book titled “Public Realms and Private Rights” for the Independent Institute of San Francisco.

There is much talk these days about government corruption. Scandals abound and usually involve special benefits obtained by organizations from local, state, or federal governments. Government officials are accused of playing favorites as they carry out their duties. They are charged with accepting gifts or campaign contributions in return for giving supporters special treatment.

But there is reason to believe that the more obvious improprieties are merely routine behavior carried out somewhat ineptly. In other words, it is very doubtful that politics in our society involves anything more noble than playing favorites, serving special interests—and neglecting what could be reasonably construed as the true public interest.

Although the distinction between the public and the private interest is quite meaningful, the democratic welfare state totally obscures it. Such a system favors majority role regarding any concern that some member of the public might have (if it can be brought to public attention). It treats everyone’s project as a candidate for public support. And, of course, most every person or group has different objectives. Thus, so long as these objectives can be advanced by political means, they can gain the honorific status of “the public interest.”

It is noteworthy that this may be the result of what Professor Benjamin Barber of Rutgers University has called a strong democracy—a political system that subjects all issues of public concern to a referendum. This approximation of strong democracy—where, for example, just wanting to add a porch to one’s home must be cleared with the representatives of the electorate—has produced our enormous “welfare” state. Yet it was just this prospect that the framers of the U.S. Constitution wanted to avoid. That in part accounted for their insistence on a Bill of Rights, namely, on denying to government-democratic, monarchical, or whatever—the kind of powers that strong democracy entails.

To see how confusing things have become in this kind of strong democracy/welfare state, consider a few current topics of “public concern.” Take, for example, wilderness preservation, an issue that appeals to many and cannot be considered a bad example—environmentalists who favor interventionist policies certainly believe that government preservation of wilderness areas is in the public interest.

Yet it is not unreasonable to suppose that many people do not have the wilderness as their top priority. Sure, they might like and even benefit from some of it. But in the main, they might prefer having at least part of the wilderness given up in favor of, say, housing development which might better suit their needs.

Or take all those Ralph Nader-type crusades for absolutely safe automobiles, risk-free medical research, and the banning of genetic experiments. Mr. Nader is the paragon of the so-called public-minded citizen, presumably without a self-interested bone in his body. Whatever his motives, however, his concerns quite legitimately are not shared by many citizens—.g., those who would prefer more powerful, maneuverable automobiles that can quickly get out of tight spots. These people might well lead better lives without all this worry about safety—they might be good drivers for whom Nader’s concern about safety is superfluous.

Jeremy Rifkin, a Nader type who would ban all genetic experimentation, is another of those who bill themselves as public interest advocates, presumably without a tinge of self- or vested interest to their names. But such persons in fact serve quite particular interests. These and similar-minded individuals clearly do not favor the general public. They favor, instead, some members of it. The rest can fend for themselves when Mr. Rifkin and others gain the political upper hand.

The point is that when government does so much—in behalf of virtually anyone who can gain political power or savvy—it is difficult to tell when it is serving the true public interest. Everyone is pushing an agenda on the government in support of this or that special interest group.

There is under such a system hardly any bona fide public service at all. In this case, laws often serve a private or special purpose—.g., smoking bans in restaurants, prohibition of gambling, mandatory school attendance, business regulations that serve the goals of some but not of others. Such a bloated conception of the “public” realm even undermines the integrity of our judicial system. Courts adjudicating infractions of such special interest laws become arms of a private crusade, not servants of the public.

An Erosion of Confidence

One consequence of this is that confidence in the integrity of government officials at every level, even those engaged in the essential functions of government, is becoming seriously eroded. The police, defense, and judicial functions all are suffering because government has become over-extended.

As government grows beyond its legitimate functions, scandals become the norm. They certainly should not be surprising. They merely represent the more obviously inept ways of trying to get the government to do your own private, special bidding.

It is all just a matter of getting your part of the pie out of Washington—whether it be day care for your children, a monument to your favorite subjects, help to unwed mothers, support of faltering corporations, or protection of the textile industry from foreign competition. Everyone wants to get the government on his side. Some people do this in ways that make it all appear on the up and up. They hire the necessary legal help to navigate the complicated catacombs of the welfare state. Others aren’t so adept.

In such a climate it is actually quite surprising that not more scandals erupt. Probably that is due to even more corruption—in this case cover-ups.

Were government doing something more nearly within its range of expertise—protecting individual rights from domestic and foreign threats—some measure of ethical behavior could be expected from it. But when, despite all the failures and mismanagement of government, people continue to go to it to ask for bailouts, why be surprised when some do it more directly, without finesse? And why wonder at their claim, when caught seeking favors openly and blatantly, that they are innocent?

In light of this, an old adage gains renewed support: the majority of people get just the kind of government they deserve. It is they who clamor for state favors by dishonestly calling their objectives the “public” interest. Notice how many look to political candidates for future favors, how many support this or that politician because they expect something in return once the political office has been gained. Unfortunately, many of us who choose not to play the political game have the results imposed on us in the form of higher taxes and more burdensome regulations.

It may be surprising, after all this, that there are certain matters which are of genuine public interest the Founding Fathers had a clear idea of the public interest, as have most classical liberals. The public interest amounts to what is in everyone’s best interest as a member of the community—the defense of individual fights from domestic and foreign aggression. Here is where our individual human rights unite us into a cohesive public, with a common interest. We are justified in establishing a government, with its massive powers, only if this is our goal to protect and maintain the public interest so understood.

Once we expand the scope of the public in effect make the concept “public” quite meaningless the powers of the state get involved in tasks that serve only some of the people, and often at the expense of other people. And that simply breeds bad government—whether hidden, by phony legislation and regulation, or by means of out- and-out corruption and subsequent scandal.

It is therefore not surprising that the welfare state is so susceptible to misconduct. The lesson we ought to take away is that the scope of government should be reduced to proper proportions—the defense of individual rights.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1989 • Volume: 39 • Issue: 3.

by Pierre Lemieux

Mr. Lemieux is an economist and author living in Montreal.

The Canadian public health system is often put forward as an ideal for Americans to emulate. It provides all Canadians with free basic health care: free doctors visits, free hospital ward care, free surgery, free drugs and medicine while in the hospital—plus some free dental care for children as well as free prescription drugs and other services for the over-65 and welfare recipients. You just show your plastic medicare card and you never see a medical bill.

This extensive national health system was begun in the late 1950s with a system of publicly funded hospital insurance, and completed in the late 1960s and early 1970s when comprehensive health insurance was put into place. The federal government finances about 40 percent of the costs, provided the provinces set up a system satisfying federal norms. All provincial systems thus axe very similar, and the Quebec case which we will examine is fairly typical.

One immediate problem with public health care is with the funding. Those usually attracted to such a “free” system are the poor and the sick those least able to pay. A political solution is to force everybody to enroll in the system, which amounts to redistributing income towards participants with higher health risks or lower income. This is why the Canadian system is universal and compulsory.

Even if participation is compulsory in the sense that everyone has to pay a health insurance premium (through general or specific taxes), some individuals are willing to pay a second time to purchase private insurance and obtain private care. If you want to avoid this double system, you do as in Canada: you legislate a monopoly for the public health insurance system.

This means that although complementary insurance (providing private or semi-private hospital rooms, ambulance services, etc.) is available on the market, sale of private insurance covering the basic insured services is forbidden by law. Even if a Canadian wants to purchase basic private insurance besides the public coverage, he cannot find a private company legally allowed to satisfy his demand.

In this respect, the Canadian system is more socialized than in many other countries. In the United Kingdom, for instance, one can buy private health insurance even if government insurance is compulsory.

In Canada, then, health care is basically a socialized industry. In the Province of Quebec, 79 percent of health expenditures are public. Private health expenditures go mainly for medicines, private or semi-private hospital rooms, and dental services. The question is: how does such a system perform?

The Costs of Free Care

The first thing to realize is that free public medicine isn’t really free. What the consumer doesn’t pay, the taxpayer does, and with a vengeance. Public health expenditures in Quebec amount to 29 percent of the provincial government budget. One-fifth of the revenues comes from a wage tax of 3.22 percent charged to employers and the rest comes from general taxes at the provincial and federal levels. It costs $1,200 per year in taxes for each Quebec citizen to have access to the public health system. This means that the average two-child family pays close to $5,000 per year in public health insurance. This is much more expensive than the most comprehensive private health insurance plan.

Although participating doctors may not charge more than the rates reimbursed directly to them by the government, theoretically they may opt out of the system. But because private insurance for basic medical needs isn’t available, there are few customers, and less than one percent of Quebec doctors work outside the public health system. The drafting of virtually all doctors into the public system is the twit major consequence of legally forbidding private insurers from competing with public health insurance.

The second consequence is that a real private hospital industry cannot develop. Without insurance coverage, hospital care costs too much for most people. In Quebec, there is only one private for-profit hospital (an old survivor from the time when the government would issue a permit to that kind of institution), but it has to work within the public health insurance system and with government-allocated budgets.

The monopoly of basic health insurance has led to a single, homogeneous public system of health care delivery. In such a public monopoly, bureaucratic uniformity and lack of entrepreneurship add to the costs. The system is slow to adjust to changing demands and new technologies. For instance, day clinics and home care are underdeveloped as there exist basically only two types of general hospitals: the nonprofit local hospital and the university hospital.

When Prices Are Zero

Aside from the problems inherent in all monopolies, the fact that health services are free leads to familiar economic consequences. Basic economics tells us that if a commodity is offered at zero price, demand will increase, supply will drop, and a shortage will develop.

During the first four years of hospitalization insurance in Quebec, government expenditures on this program doubled. Since the introduction of comprehensive public health insurance in 1970, public expenditures for medical services per capita have grown at an annual rate of 9.4 percent. According to one study, 60 percent of this increase represented a real increase in consumption.^[1]

There has been much talk of people abusing the system, such as using hospitals as nursing homes. But then, on what basis can we talk of abusing something that carries no price?

As demand rises and expensive technology is introduced, health costs soar. But with taxes already at a breaking point, government has lit-fie recourse but to try to hold down costs. In Quebec, hospitals have been facing budget cuts both in operating expenses and in capital expenditures. Hospital equipment is often outdated, and the number of general hospital beds dropped by 21 percent from 1972 to 1980.

Since labor is the main component of health costs, incomes of health workers and professionals have been brought under tight government controls. In Quebec, professional fees and target incomes are negotiated between doctors’ associations and the Department of Health and Social Services. Although in theory most doc tors still are independent professionals, the government has put a ceiling on certain categories of income: for instance, any fees earned by a general practitioner in excess of $164,108 (Canadian) a year are reimbursed at a rate of only 25 percent.

Not surprisingly, income controls have had a negative impact on work incentives. From 1972 to 1978, for instance, general practitioners reduced by 11 percent the average time they spent with their patients. In 1977, the first year of the income ceiling, they reduced their average work year by two-and-a-half weeks.^[2]

Government controls also have caused mis-allocations of resources. While doctors are in short supply in remote regions, hospital beds are scarce mainly in urban centers. The government has reacted with more controls: young doctors are penalized if they start their practice in an urban center. And the president of the Professional Corporation of Physicians has proposed drafting young medical school graduates to work in remote regions for a period of time. Nationalization of the health industry also has led to increased centralization and politicization. Work stoppages by nurses and hospital workers have occurred half a dozen times’ over the last 20 years, and this does not include a few one-day strikes by doctors. Ambulance services and dispatching have been centralized under government control. As this article was being written, ambulance drivers and paramedics were working in jeans, they had covered their vehicles with protest stickers, and they were dangerously disrupting operations. The reason: they want the government to finish nationalizing what remains under private control in their industry.

When possible, doctors and nurses have voted with their feet. A personal anecdote will illustrate this. When my youngest son was born in California in 1978, the obstetrician was from Ontario and the nurse came from Saskatchewan. The only American-born in the delivery room was the baby.

When prices are zero, demand exceeds supply, and queues form. For many Canadians, hospital emergency rooms have become their primary doctor—s is the case with Medicaid patients in the United States. Patients lie in temporary beds in emergency rooms, sometimes for days. At Sainte-Justine Hospital, a major Montreal pediatric hospital, children often wait many hours before they can see a doctor. Surgery candidates face long waiting lists—it can take six months to have a cataract removed. Heart surgeons report patients dying while on their waiting lists. But then, it’s free.

Or is it? The busy executive, housewife, or laborer has more productive things to do be-sides waiting in a hospital queue. For these people, waiting time carries a much higher cost than it does to the unemployed single person. So, if public health insurance reduces the costs of health services for some of the poor, it increases the costs for many other people, it discriminates against the productive.

The most visible consequence of socialized medicine in Canada is in the poor quality of services. Health care has become more and more impersonal. Patients often feel they are on an assembly line. Doctors and hospitals already have more patients than they can handle and no financial incentive to provide good service. Their customers are not the ones who write the checks anyway.

No wonder, then, that medicine in Quebec consumes only 9 percent of gross domestic product (7 percent if we consider only public expenditures) compared to some 11 percent in the United States. This does not indicate that health services are delivered efficiently at low cost. It reflects the fact that prices and remunerations in this industry are arbitrarily fixed, that services are rationed, and that individuals are forbidden to spend their medical~care dollars as they wish.

Is It Just?

Supporters of public health insurance reply that for all its inefficiencies, their system at least is more just. But even this isn’t true.

Their conception of justice is based on the idea that certain goods like health (and education? and food? where do you stop?) should be made available to all through coercive redistribution by the state. If, on the contrary, we define justice in terms of liberty, then justice forbids coercing some (taxpayers, doctors, and nurses) into providing health services to others. Providing voluntarily for your neighbor in need may be morally good. Forcing your neighbor to help you is morally wrong.

Even if access to health services is a desirable objective, it is by no means clear that a socialized system is the answer. Without market rationing, queues form. There are ways to jump the queue, but they are not equally available to everyone.

In Quebec, you can be relatively sure not to wait six hours with your sick child in an emergency room if you know how to talk to the hospital director, or if one of your old classmates is a doctor, or if your children attend the same exclusive private school as your pediatrician’s children. You may get good services if you deal with a medical clinic in the business district. And, of course, you will get excellent services if you fly to the Mayo Clinic in Minnesota or to some private hospital in Europe. The point is that these ways to jump the queue are pretty expensive for the typical lower-middle-class housewife, not to talk of the poor.

An Enquiry Commission on Health and Social Services submitted a thick report in December 1987, after having met for 30 months and spent many millions of dollars. It complains that “important gaps persist in matters of health and welfare among different groups.”^[3] Now, isn’t this statement quite incredible after two decades of monopolistic socialized health care? Doesn’t it show that equalizing conditions is an impossible task, at least when there is some individual liberty left?

One clear effect of a socialized health system is to increase the cost of getting above-average care (while the average is dropping). Some Ix)or people, in fact, may obtain better care under socialized medicine. But many in the middle class will lose. It isn’t clear where justice is to be found in such a redistribution.

There are two ways to answer the question: “What is the proper amount of medical care in different cases?” We may let private initiative and voluntary relations provide solutions. Or we may let politics decide. Health care has to be rationed either by the market or by political and bureaucratic processes. The latter are no more just than the former. We often forget that people who have difficulty making money in the market are not necessarily better at jumping queues in a socialized system.

There is no way to supply all medical services to everybody, for the cost would be astronomical. What do you do for a six-year-old Montreal girl with a rare form of leukemia who can be cured only in a Wisconsin hospital at a cost of $350,000~a real case? Paradoxically for a socialized health system, the family had to appeal to public charity, a more and more common occurrence. In the first two months, the family received more than $100,000, including a single anonymous donation of $40,000.

This is only one instance of health services that could have been covered by private health insurance but are being denied by hard-pressed public insurance. And the trend is getting worse. Imagine what will happen as the population ages.

There are private solutions to health costs. Insurance is one. Even in 1964, when insurance mechanisms were much less developed than today, 43 percent of the Quebec population carried private health insurance, and half of them had complete coverage. Today, most Americans not covered by-Medicare or Medicaid carry some form of private health insurance. Private charity is another solution, so efficient that it has not been entirely replaced by the Canadian socialized system.

Can Trends Be Changed?

People in Quebec have grown so accustomed to socialized medicine that talks of privatization usually are limited to subcontracting hospital laundry or cafeteria services. The idea of sub-contracting hospital management as a whole is deemed radical (although it is done on a limited scale elsewhere in Canada). There have been suggestions of allowing health maintenance organizations (HMO’s) in Quebec, but the model would be that of Ontario, where HMO’s are totally financed and controlled by the public health insurance system. The government of Quebec has repeatedly come out against for-profit HMO’s.

Socialized medicine has had a telling effect on the public mind. In Quebec, 62 percent of the population now think that people should pay nothing to see a doctor; 82 percent want hospital care to remain free. People have come to believe that it is normal for the state to take care of their health.

Opponents of private health care do not necessarily quarrel with the efficiency of competition and private enterprise. They morally oppose the idea that some individuals may use money to purchase better health care. They prefer that everybody has less, provided it is equal. The Gazette, one of Montreal’s English-speaking newspapers, ran an editorial arguing that gearing the quality of health care to the ability to pay “is morally and socially unacceptable.”^[4]

The idea that health care should be equally distributed is part of a wider egalitarian culture. Health is seen as one of the goods of life that need to be socialized. The Quebec Enquiry Commission on Health and Social Services was quite clear on this:

The Commission believes that the reduction of these inequalities and more generally the achievement of fairness in the fields of health and welfare must be one of the first goals of the system and direct all its interventions. It is clear that the health and social services system is not the only one concerned. This concern applies as strongly to labor, the environment, education and income security.^[5]

A Few Lessons

Several lessons can be drawn from the Canadian experience with socialized medicine.

First of all, socialized medicine, although of poor quality, is very expensive. Public health expenditures consume close to 7 percent of the Canadian gross domestic product, and account for much of the difference between the levels of public expenditure in Canada (47 percent of gross domestic product) and in the U.S. (37 percent of gross domestic product). So if you do not want a large public sector, do not nationalize health.

A second lesson is the danger of political compromise. One social policy tends to lead to another. Take, for example, the introduction of publicly funded hospital insurance in Canada. It encouraged doctors to send their patients to hospitals because it was cheaper to be treated there. The political solution was to nationalize the rest of the industry. Distortions from one government intervention often lead to more intervention.

A third lesson deals with the impact of egalitarianism. Socialized medicine is both a consequence and a great contributor to the idea that economic conditions should be equalized by coercion. If proponents of public health insurance are not challenged on this ground, they will win this war and many others. Showing that human inequality is both unavoidable and, within the context of equal formal rights, desirable, is a long-run project. But then, as Saint-Exupéry wrote, “Il est vain, si l’on plante un chêne, d’espérer s’abriter bientôt sous son feuillage.”^[6]

Notes

1.   Report of the Enquiry Commission on Health and Social Services, Government of Quebec, 1988, pp. 148, 339.

2.   Gérard Bé1anger, “Les dépenses de santé par rapport à l’éonomie du Québee,” Le Médecin du Québec, December 1981, p. 37.

3.   Report of the Enquiry Commission on Health and Social Services, p. 446 (our translation).

4.   “No Second Class Patients,” editorial of The Gazette, May 21, 1988.

5.   Report of the Enquiry Commission on Health and Social Services, p. 446 (our Ixanslation).

6.   “It is a vain hope, when planting an oak tree, to hope to soon take shelter under it.”

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1989 • Volume: 39 • Issue: 3.

By Hans Sennholz

Dr. Hans Sennholz heads the Department of Economics at Grove City College in Pennsylvania. He is a noted writer and lecturer on economic, political and monetary affairs.

During the 1984-85 school year American high school debaters have been weighing an important resolution:

Resolved: That the federal government should provide employment for all employable United States citizens living in poverty.

On the affirmative side students are expected to argue that the federal government shall strive to abolish poverty and, if necessary, act as employer of last resort; on the negative side they are likely to oppose the use of government for such ends.

High school students at last are catching up with the political debate that has animated their elders since the first New Deal. In 1935, President Franklin D. Roosevelt proposed to make the federal government the employer of last resort, proclaiming that “one third” of the American people were “underfed, under-clothed, and underhoused.” Thirty years later, President Lyndon B. Johnson declared his “war on poverty,” which was to liberate some twenty percent of the population. President Jimmy Carter, during his term of office, waged his special war on poverty. All three made the poverty of some 40 million Americans the central issue of their public pol icies. Indeed, all presidents have echoed a deep concern for the poor.

And yet, the poor are still with us. Their faces have changed, but their numbers hardly ever vary. Armed with poverty statistics, their spokesmen suggest that past government efforts were half-hearted and indecisive. The war, they argue, must be carried on with unrelenting vigor and dedication until victory is won. They would make government the employer of last resort.

Poverty in America

Other observers may draw entirely different conclusions. They may object that the poverty data itself may be erroneous and misleading. When compared with living conditions throughout the world there may be no poverty at all in the U.S. Most Americans have never seen the true face of poverty, which is visible in many other countries. It reveals hunger, disease and early death. In the U.S. even the least productive members of society live in relative abundance and comfort when compared with their counterparts abroad. Among his foreign peers the American pauper is an object of envy and the U.S. the target of pauper immigration.

American poverty statistics are built on levels of income. Families earning less than a stated dollar amount are defined as poor or poverty-stricken; families earning more are believed to be above the poverty line. A brief observation of the living conditions of the American poor, however, may suggest a different conclusion. It may reveal that forty percent of poor families own their own homes; eighty-six percent of these “very poor” homeowners have no mortgage debt. Some fifty percent have liquid savings of $500 or more. In Harlan County, Kentucky, the heartland of depressed areas, it was found that eighty-eight percent of the poor families have washing machines, sixty-seven percent have TV sets, forty-two percent have telephones, and fifty-nine percent own cars. (Newsweek,February 17, 1964, p. 20)

Most Americans now designated as poor and indigent would resent the label if they actually knew that the poverty warriors are talking about them. As a graduate student at New York University and a part-time accounting clerk, I never earned more than $1,500 a year, which sufficed to pay $35 tuition per credit and put me through school. Even as a young college instructor, the poverty definition included me. With all my heart I resent this supercilious and derogatory description of those important years of my life. It is obvious that the poverty politicians who are accustomed to spending billions of other people’s money have lost touch with economic reality and the meaning of life.

In every society some people are more prosperous than others, some are poorer than others. In the eyes of a critical observer, anyone who earns less than he does, may be poor. To a millionaire anyone with less than a million may be a pauper. To a poverty warrior anyone who belongs to the last 10 percent, 20 percent or 30 percent of income earners may be poverty-stricken. In fact, the concept of inequality of income and wealth always comprises the poor.

Government, Cause or Cure

Lengthy unemployment may impoverish a person and put him in a poverty bracket. More than seven million Americans are mostly unemployed, suffering declining incomes and living conditions. Alarmed at such statistics, the poverty warriors managed to pass the Humphrey- Hawkins Full Employment and Balanced Growth Plan Act of 1978. And yet, unemployment continued to rise. Defining “full” employment as no more than 3 percent adult (4 percent overall) unemployment, the warriors are now proposing to reach that level by using government as employer of last resort.

Most government programs seeking to alleviate poverty are treating the effects of unemployment; they never touch the causes. In fact, they completely reverse the cause and effect relationship by depicting the federal government as a source of employment rather than a primary cause of unemployment. They blame commerce and industry for the unemployment and call on government to correct the evil. They propose to grant more power to politicians, officials and bureaucrats and call for extensive government intervention. And yet, by confusing cause and effect they fail to accomplish their stated objectives and even make matters worse. During years of radical government intervention unemployment actually rises and levels of living usually fall.

The champions of government power and intervention are sadly unaware that government is the primary cause of unemployment. They do not understand that employment is a price and cost phenomenon, and that mass unemployment is the inevitable effect of any government measure that directly or indirectly raises labor costs. A law or regulation that boosts Social Security taxes, unemployment compensation taxes, workman’s compensation taxes, or in any way raises the cost of labor, reduces the demand for labor and creates unemployment. Boom and bust policies conducted by the Federal Reserve System may generate cyclical unemployment. Minimum wage legislation may deny employment to the least productive workers. Labor legislation that grants restrictive powers to labor unions may bring stagnation and unemployment to unionized industries.

Minimum wage legislation bars millions of young people from the labor market. Although they have limited training and experience, the federal government may issue an order that they be paid a minimum rate of $3.35 per hour. Moreover, it forces employers to pay a number of fringe benefits, from Social Security to national holidays, which may boost the worker’s employment costs to $5 or $6 per hour. If a person does not add this amount to production, if he fails to cover his employment costs, he is a candidate for unemployment.

Before the days of minimum wage legislation high school and college students were always welcomed by commerce and industry. From the first day of vacation to the last, young people used to work in offices and stores, workshops and factories, working their way through school or supplementing family income. Unfortunately, these ways of the past have given way to minimum wage legislation, which condemns young people either to remain in school, to join the armed forces, or be unemployed. At $5 or $6 an hour there may be no economic demand for their services.

Minimum wage legislation is the evil product of a political system that bestows favors and benefits on some classes of people at the expense of others. It favors the employment of skilled workers who are earning more than the minimum by denying employment to unskilled workers earning less. This is why labor unions representing skilled workers are fervent champions of minimum wage legislation.

Business Provides Employment

Poverty warriors like to depict business as the culprit behind poverty and unemployment. In reality, business is the only genuine source of production, employment, and income. It is bidding for labor in order to serve its customers. It eagerly employs labor as long as it is “productive,” that is, its net addition to output is positive. In other words, as long as it does not cost more than it is producing, labor is in great demand. When it costs more than it is adding to the production process, when it takes income from investors and entrepreneurs, when it becomes “destructive” to employers, it is discharged. In this case production is more productive without it.

Governments and unions are forever raising labor costs and thereby causing unemployment. Business is adjusting continually in order to prevent the unemployment. When the federal government raises its Social Security exactions and state governments boost unemployment compensation taxes, which may significantly raise the cost of labor and thus the rate of unemployment, business is straining to prevent the unemployment through cost adjustments. It may seek to offset the mandated costs with other cost reductions. In particular, it may reduce fringe benefits, delay inflation adjustments, elicit greater effort and draw out more efficient production. Whenever and wherever business is successful in offsetting the boost in labor cost it succeeds in preventing threatening unemployment. If laws, regulations and work rules prohibit the cost adjustment, business has no choice but to lay off loss-inflicting workers. Production is more productive with out them.

It is no coincidence that the strongholds of unions are also the centers of unemployment. In the steel and auto industries the union rates are more than double the market rates of industrial wages paid for similar labor throughout the American labor market. Union rules generally deny efficient use of labor and prevent cost adjustment. Ugly strikes by angry workers further increase labor cost. It cannot be surprising, therefore, that unionized industries are barely managing to stay afloat in an ocean of unemployment.

Job Programs Destroy Jobs

The unemployment generated by governments and unions is as severe and persistent as the force that is causing it. It is holding millions of Americans in its sinister grip and reducing them to poverty. To make government their employer of last resort is to put the culprit in charge and urge him to continue his transgressions. He will create more unemployment than he will provide jobs through a variety of make-work schemes. Facing mass unemployment, government may launch leaf-raking and snow-shoveling programs, build highways and public buildings, embark upon slum removal and urban renewal, or engage in any other economic activity. It may ostentatiously hire thousands of idle workers and become their employer of last resort. Unfortunately, the politicians who launch the programs and the poverty warriors who advocate them, are blissfully unaware of the consequences of their policies. They completely overlook two inevitable effects that tend to destroy more jobs than government can create:

1. When government appears on the labor market and engages idle labor it tends to support or even raise the labor costs that are causing the unemployment. It is removing the pressures for readjustment. By placing purchase orders for steel, automobiles, trucks and tanks it gives employment to idle steel and auto workers. But it also sustains their wage demands that exceed market rates, and thereby reinforces the cause of unemployment. Government tends to prolong and intensify the suffering of idle workers by encouraging them to cling to unproductive labor costs.

2. Government has no source of income and wealth of its own. Every penny spent is taken from someone. It may be exacted from taxpayers, borrowed from lenders, or snatched from inflation victims. If it takes $50,000 to give employment to one idle worker, taxpayers, lenders or inflation victims must be reduced by that amount. Their reduction consumes business capital, which in turn lowers labor productivity. Falling productivity, together with rigid labor cost, render more labor “unproductive” and cause it to be unemployed. And even if it were to consume no business capital, and labor productivity were to remain unchanged, the losses suffered by taxpayers and inflation victims would force them to curtail their consumption and the employment they would otherwise provide. While government may create one $50,000 job, which under bureaucratic conditions and circumstances would be a low-cost job, it probably destroys the jobs of two or three workers serving taxpayers and inflation victims.

Federal Assistance Reduces Levels of Living

Government reports are quick to point out that government assistance is sustaining those truly in need. According to one study, without any kind of assistance forty-one million people, or 18.8 percent of the population, would live below the poverty level. Cash assistance alone allegedly cut this number in hall If in-kind transfers are included, 13.5 million Americans are left in poverty. If medical care is included in the calculation, the poverty level includes only nine million people, or 4.1 percent of the population. (Press Release, Executive Office of the President, Office of Management and Budget, March 12, 1982)

In 1983 Federal cash programs supported 24.5 million elderly people living in retirement, 4.3 million disabled workers and their dependents, and 8.9 million survivors. They provided Medicaid and Medicare assistance to 47 million aged, disabled and needy Americans, ap proximately 20 percent of the total population and 99 percent of those over 65. They granted housing assistance to 3.4 million American households, and subsidized approximately 95 million meals per day, or 14 percent of all meals served in the country. They made available 6.9 million post-secondary awards and loans to students and their parents, and provided training for almost one million low-income disadvantaged people. They paid supplemental allowances to more than 7 million people, unemployment compensation to more than eight million, and granted food stamp assistance to 18.6 million individuals. Government sustained 3.5 million men and women on active military duty and their dependents, and some 27 million civilian employees and their dependents. Altogether, some 80 to 90 million Americans are dependent on tax dollars.

The Burden of Dependents

Whatever their numbers, the dependents weigh heavily on the economic well-being of their supporters, the taxpayers, lenders and inflation victims. Their inactivity and absence from economic production keeps society poorer than it otherwise would be. It visibly reduces the levels of living of the providers, discourages their productive efforts, and deprives them of the funds needed for productive investments. Surely, there cannot be any doubt that 80 to 90 million dependent Americans constitute a heavy burden on productive Americans.

Poverty warriors are encouraged by these transfer statistics. If 80 to 90 million Americans already are enjoying full support, another 7 to 10 million may not upset the transfer system. The warriors may be right. But they, too, must admit that there are limits to the burden the remaining producers can carry. All transfer systems have limits beyond which economic production is bound to decline and poverty is certain to multiply.

This article has been published with FEE‘s permission and has been originally published at The Freeman January 1985 • Volume: 35 • Issue: 1.

Professor Paul Cwik spoke to students attending Freedom University in Irvington, NY during the summer of 2009. This is the transcript of the lecture (without the Q&A at the end).

(These guys get turned off, right? Turn them off.

You know it’s going to ring. And then you will be embarrassed and I will make fun of you. And I will. That’s why we have name tags. We write down your names… OK.)

I have been asked to give the first lecture on Freedom Basics. A lot of stuff has been written on freedom. Freedom is a word that has been argued over, fought over for centuries, and I have been asked to cover the basics in less than an hour. So I think that I might have to skip a point or two. Maybe.

When somebody says freedom, they could mean it in a couple of different ways. “The freedom to” and “the freedom from.” So think about this. Freedom to worship God in your own way, or not at all. Freedom to write what you want in your newspaper column or blog. Freedom to pick your own friends, to gather with them as you please.

Now contrast this with the freedom from want. The freedom from hunger. The freedom from illness.

There is a fundamental difference between these concepts. But the word “freedom” is used by both sides. Both sides of the debate. And that tends to make the debate rather confusing because both sides say: “We want freedom!” As a result many on our side, the good guys, right, they sometimes use the word liberty instead. Of course you can say without losing the meaning “the liberty to worship, the liberty to write, the liberty to assemble,” but it is rather awkward to say “the liberty from want, the liberty from hunger, the liberty from illness,” it’s a clunky phrase. It really doesn’t fly. So, language is important. I don’t want to loose another word to the collectivists. We have already lost the word “liberal” to them. That’s enough. They don’t get any more words. We’re keeping liberty.

The concept of liberty or “freedom to” is rather new idea. It’s a radical departure from earlier thinking. In fact, it’s a very radical idea. Ludwig von Mises, whom you might hear a little bit about this week. He argues that the idea of liberty is distinctively western. And that it came up in the western culture.

The idea that there are rights that belong to individuals and that they come before the creation of government is the opposite of the medieval law. It’s the opposite, the reverse of the medieval law.

The concept of liberty and freedom says that each individual is unique. And therefore there is worth and value in each and every individual.

F. A. Harper in his book Liberty: A Path to its Recovery…

I have props. It looks like this. I stole it off the bookshelf and I will dutifully file it on the white table and not inserting it on the shelf.

Harper states it this way: “This concept of liberty rests on the supreme dignity of the individual.”  That’s fairly important distinction. It’s a radical thing. It says people matter. And if we look back the last 5 000 years of recorded human history, who are the serfs, the peasants, the peons – the nobodies?  They were the nobodies.  They were those that were sacrificed to the means, as means to some greater end at the whim of some king or emperor.

This line of thought has evolved – changed – and we can trace it through the works of John Locke, Montesquieu, Thomas Jefferson, Frederic Bastiat and Lord Acton.

What these guys argue is that government is created by individuals for the protection of individual rights.  That’s why we have government. The common element and the key to their reasoning is what we call, “Methodological Individualism.”

Here’s your first big college word.  Because it’s university…it’s freedom university…so we need college-type words here.

Methodological Individualism.

I’m going to talk a bit more about this in the lecture after the dinner. But I want to just touch on it now—what it means. We are looking methodology here. Any time we see the word “-ology” or “-ological” – it means the science of.

So, the methd-ology or methodology is the science of… and our science – scientific method – is basing it on its most elemental parts. And that’s the individual. We cannot break it down any further than that.

Today we suffer from the use of collective nouns and we personify them. It’s just the way that we communicate with each other. So, someone might say today General Motors filed for bankruptcy.

Well, General Motors is not a real person. General Motors is not a real general.

General Motors does not have a brain or a heart or a soul or anything like that. What is it?

It’s a collection of people, group of individuals working together that produce cars – that produce these other things financing and such.

So, we use these sort of collective nouns. EPA regulates… the United States has invaded… General Motors filed… but there really isn’t such a thing. These are only collective nouns. We have to be careful about these.

But methodological individualism says that we have to focus on the basic unit and that’s the individual.  And we will use that much more in the next lecture on the “Praxeology: Supply and Demand”. But back to freedom…

The path from individualism to rights and a theory of a free and prosperous society has taken many forms and many shapes from many authors. So, I have identified four different approaches.

And, are these categories the best categories? No, these are just sort of categories that came to me.

The first one is the “The Natural Rights approach.” Some authors that typify it are people like Frédéric Bastiat and Murray Rothbard.

And, basically what they say is that life is given to us by God. At least Bastiat does in “The Law”. Other prop… I will use that prop again….

From this position that life is given to us by God – from this position combined with the fact that there is scarcity in the world in other words we can’t have all the stuff that we want. We don’t have enough time to do all the things that we want.

And with the fact that we do not live in isolation, we can deduce the natural rights of life, liberty and property.

Some of you might say that supposed to be “the pursuit of happiness.”

Well, where do we find that actually: “Life, liberty and the pursuit of happiness”? –Declaration of Independence. Who wrote that?

Well, it was a committee. It was a committee. Jefferson was the primary author and he originally had “life, liberty and property”.  Took it right out of John Locke’s “Second Treatise on Government”.

They said: “People are going to pick up guns and fight the biggest war machine ever known on this planet – at that point in time … For life, liberty and property… we have to flower this up—get people’s passions going. So, they put in “the pursuit of happiness.” That’s what happened.

More on the natural law rights theory in just a little bit.

“The Utilitarian Approach”.

The utilitarian approach is basically following the idea of utility (and we talk a bit more about that in the next lecture). But it’s a level of happiness. It’s weighting plusses versus minuses and the more utility you have the happier you are.

So, the utilitarian idea says that freedom is better because we are rich; we are more wealthy; we are more prosperous; we have a higher standard of living; our utility is higher. This approach can be typified by the writings of Jeremy Bentham.

There is a lot of danger with this approach – at least I think there is – because if anyone supposes that another way, say communism, can produce more wealth, then freedom and liberty can be just tossed overboard.

So, I’m not a big fan of that. But I do think that freedom leads to higher levels of prosperity. Look at North and South Korea. Look at Hong Kong vs. Mainland China before they opened themselves up to trade. East and West-Germany…Example after example after example we see that freedom works.

The next approach is “the Objectivist approach”.

And this is characterized by the writings of Ayn Rand.

Now, what she does – she begins with the individual, methodological individualism, because only individuals have minds, again no collective nouns.

Since each individual is solely united with his own mind, there is no separation or divorcing of one’s own mind with his person.  Each person thus has full ownership over themselves.

The implication is that all individuals are on the same plane as, or on the same level as, or on par with each other in their own self-ownership. So, you own yourself, I own me, we all own ourselves.

As such, no one person for any reason can make any claim over another for any reason.

The concept of rights flows from this idea of self-ownership and follows closely with the Natural Rights approach.  It does so without the reference to God.  She was an atheist.

And, the last approach that I just put up here is “The Societal approach”.

We see this in the writings of William Graham Sumner: “What Social Classes Owe To Each Other” and the “The Forgotten Man” as two principal works he wrote.

Sorry, no props for this.  I have no book.

What Sumner said in his book “What Social Classes Owe To Each Other” blends a bit of the utilitarian and empirical with the notion of prior rights to show that there are rules for society that work and other rules that just don’t.  He was a pioneer in the field of sociology.  He argues that a society based on contract is the strongest form of society.

Here’s an example what Sumner has to say.

Sumner says: “In our modern state, and in the United States more than anywhere else, the social structure is based upon contract, and status is of” – and status like who are your parents… are you royalty or anything like that is of  – “the least importance. Contract, however, is rational—even rationalistic.  It is also realistic, cold, and matter-of-fact.  A contract relation is based on a sufficient reason, not on custom or prescription…A society based on contract is a society of free and independent men, who form ties without favor or obligation, and cooperate without cringing or intrigue.”

I mean people will gladly become garbage men or work on a cleaning staff if you pay them enough.

Sumner continues: “A society based on contract, therefore, gives the utmost room and chance for individual development, and for all the self-reliance and dignity of a free man. That a society of free men, cooperating under contract, is by far the strongest society which has ever yet existed; that no such society has ever yet developed the full measure of strength of which it is capable; and that the only social improvements which are now conceivable lie in the direction of more complete realization of a society of free men united by contract, are points which cannot be controverted.”

So, Sumner is saying, “Look, you’re born in this position. You’re king, you’re Lord of the Manor – you’re born in that position. So, therefore you must serve.”

That’s a weak relationship, because people are not happy having to serve.
The rulers take it for granted. They don’t have the society of the realms best interest at heart.

But if you compare – contrast – that with a contractual relationship where you have to offer someone enough to make it worth their while to become the member of the cleaning staff or garbage man or mine coal under the ground, they will do this quite happily.

And you see the difference in those types of societies: some rules are just better than others for societies.

So, what’s the analysis so far?

Well, The analysis so far is this:

1. We are individuals and as such we have worth.
2. This value cannot be sacrificed by others (non-owners) for their ends.
3. The first right is Life…

..but when we say that we mean the right not to be hit, murdered, raped or anything like that. It is not a right to a standard of living or even the right to violate others’ rights to maintain your own life.  In other words, you cannot steal bread even if you are hungry and will die without that bread.

Ok. You can’t just steal someone else’s bread.

Now, the corollary to this is that with freedom comes responsibility.  If no one else is responsible for you, you have to take care of yourself.

And that’s a pretty scary thing. You have to be responsible for yourself – I know!

Coming from that right you can see where this leads then, since we are talking about responsibility, is that of liberty.

Each of us has faculties and talents that we can use to preserve, develop and perfect our lives.

It is the freedom to think as we think, to perceive the world as we perceive it, and to express ourselves as we wish. These are what constitute the right of Liberty.

A hermit does not care about the right of Liberty.  Why is that?  There is no one to impose any limitations on him.

It is because we live in society that we need to make distinctions between who can do what with which items.  This leads us to the development of the third right—Property.

Property rights are at the core of Freedom – of a free society.  They protect and allow for cooperation.  Their source stems from individual action.

And, Harper – this guy, actually here’s a picture of him. They call him baldy. There’s a bit of hair. I think it’s kind of unfair. – But in this book here he says this: “The only method consistent with liberty is the one that distinguishes between mine and thine according to the rule that the producer shall have the right to the product of his own labor. This foundation of economic liberty is important above all other considerations. By this concept, the right of ownership arises simultaneously with the production of anything; and ownership resides there until the producer-owner chooses to consume the product or transfer its ownership to another person through exchange, gift or inheritance.  The right to produce a thing thereby becomes the right to own it.”

So, if you have the right to make it then you have the right to own it. Those are inseparable.

“…and to deny one right is, in effect, to deny both.  This concept specifies that no part of production shall properly belong to a thief, or to a slave master or to a ruler by whatever title.”

If I make it, it’s mine. I don’t care what the majority of people voted for.  It’s mine; I made it.

Murray Rothbard in his book “The Ethics of Liberty” essentially says the same thing.

These rights are intertwined with each other and the loss of one – life, liberty, property – means that we lose all of them.

Back to Bastiat. OK. If I have the Greats I’m going to use the Greats. I like these guys.

So, Bastiat says: “Each of us has a natural right—from God—to defend his person, his liberty, and his property. These are the three basic requirements of life, and the preservation of any one of them is completely dependent upon the preservation of the other two. For what are our faculties but the extension of our individuality? And what is property but an extension of our faculties?”

What is it that makes us, us?

If we are to be able to constantly protect each of these rights constantly/continuously, then we can group together to constantly protect these rights.

Again Bastiat: “If every person has the right to defend—even by force—his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right—its reason for existing, its lawfulness—is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force—for the same reason—cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.”

If I can’t steal from someone, then the collective also does not have that right. Why is that? Because rights precede government and rights precede statutes.  They come before.

Our individual rights do not come from government, they are not granted us by a constitution or a Declaration of Rights.

Recall the Declaration of Independence, it says this (and you have the copy of this in your books): “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.”

Now pay special attention to the next part: “That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.”

So the rights come first. When government separates us or violates our rights – separates us from our property, violates our rights – then the government is behaving unlawfully.

But what if they pass a law then it is legal, right? Yes, it’s legal. But it is still plunder. (Get to that in a moment.)

Back to the Declaration of Independence. Later on it says, “But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”

The Declaration of Independence is absolutely radical. This perspective overturns thousands of years of human thinking. Many revolutions have since used this language to justify their fight for freedom.

So what then is freedom? [We’re so many minutes into our talk…] What’s freedom? We haven’t even defined it yet.

Mises point out that “Freedom always means: freedom from arbitrary action on the part of the police power.”  Liberty is NOT the freedom to do anything like rob and kill, riot and loot.  Start swinging in your arms so that you punch someone in the nose.  It can only exist when it is circumscribed by the rights described above.

Many wish to extend these rights and convert them into “the freedom froms” that I talked about at the beginning. Freedom from want, freedom from hunger, freedom from illness.

The concept of Legal Plunder is very useful for refuting these false freedoms.  Since no individual can violate rights and since the government derived from individuals’ rights then it cannot have any extra powers – doesn’t have any extra rights or superior rights.

So, I got these rights: life, liberty property. That means what? It means that I cannot take a gun, come up to Jay (How do I know he is Jay?  He’s got a name tag, that’s why we have to wear name tags) – and say: “Give all you money!” Why? That’s stealing.

Now, if I take all you money and I go out and buy a pad of paper, charcoal pencil and I give it to Jonathan over here – it’s still stealing!

Even if you call it the National Endowment for the Arts – it’s still stealing!

I can’t do that. So, the government which is the collection of us also does not have that power. Where would it get that power from if it derives all its power from us?

If I should not steal, then neither should the government.  When government passes a law making its actions “legal” – oh, we passed a law, it’s legal; We can do it – it is still violating rights, it is still plundering.  So Bastiat uses the phrase “Legal Plunder.”

He says this: “But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”
This is why I use the Greats, because it is so clear. Could you take it from her? Yeah. It’s stealing, but we voted on it. Still stealing.

Bastiat says: “Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it” – such as, I like this list – “ tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on.”

Bailouts.

“All these plans as a whole—with their common aim of legal plunder—constitute socialism.”

Now, let’s take a step back. I can take a step back. You can still sit.

The law is force.  Government is force.  It is coercion. At its root – that’s what it is. It is to threaten to violently reduce people’s options. You don’t want to do that? Well, you’re going to jail. We are violently reducing your options when you’re in jail.

If you don’t believe me try not paying your taxes.

Before government can do anything, it must first take.  And so the goal of the law should not be to promote justice or to cause justice to reign. “It ought to be stated that the purpose of the law is to prevent injustice from reigning.” (Bastiat) Notice the slight distinction. Instead of trying to reach an impossible ideal of perfect justice, what we should be trying to do is reduce the amount of injustice.

And, both the right and the left agree on this. They say yes, we want to reduce injustices.  However, we cannot violate rights to promote justice.  In order for government to stop the injustice of starving people – people are starving; that’s injustice; we want to prevent this – government would first have to take from others, which in itself is a violation of rights and an injustice.  We cannot move any closer to justice by creating injustices.

Do you see, what is going on here? Curing one injustice by creating another injustice.

So, all we can do then is remove injustices such as government’s wealth redistribution plans, etc.  It is by the negation of these injustices that we move closer to Justice. So if I am negating these takings – these stealings – then we move closer to Justice. But, we cannot actively pursue Justice. We have to sort of think of it as a negative concept.

Unfortunately, the way in which society perceives itself has changed – changed over the last hundred years. Specifically the argument has historically stemmed from the perspective that we are fallen beings.  We need limits because of our flawed nature – original sin.  But how does the idea of liberty change when we view ourselves as risen apes? We are not flawed but have conquered – we are better than every other species. We have the power to pull ourselves out of the primordial ooze, and so why shouldn’t we also have the power to plan a society? Such hubris is what Friedrich Hayek called the “Fatal Conceit.”

This idea that we have all the smarts, all this knowledge, that we can use to plan a society. (And we will be talking later on this week about what knowledge is actually out there that might be inarticulate knowledge or tacit knowledge that cannot be communicated or observed directly – cannot be collected directly by a central planning board.)

So, what we seen is that if people believe that we can shape society as an artist can shape clay. Whereas Adam Smith said we move pieces on a chess board. We think we can then shape and change society to the better because we studied this, we are sociologists and we know now.

But when we do this – now we start looking at the basic things – and we see that people ask… they don’t even ask the question anymore. Do we have a “right” to education?  Sheldon Richman later this week is going to talk about an education system that is not run by the government.

Do we have a “right” to water? (Or Mountain Dew…hmm…yummy and delicious. I will use this as a prop for the next lecture.) Because without water how can I have life? Without education, how can I have liberty or property?

What about right to healthcare?  Think about this. A right to healthcare. So, if I was standing on a street corner and there was a MD (medical doctor) standing next to me and we are chatting… la, la, la… Actually, that would be singing. Chatting blah, blah, blah. And I was so engrossed in that I wasn’t paying any attention, and I stepped into the street and bam, get hit by a car. There I am, laying on the street, bleeding, dying, not all happy… Do I have a right to healthcare?

Now, what does it mean to have a right to healthcare? That means that I can turn to my friend and go: “Give me healthcare!” …probably gurgling with blood and… but “Give me healthcare!”

I right to healthcare means that he must use his property, his talents, his time to help me out. Think about his relationship that we have. Who’s commanding who? Are we equals?

No. If I have a right to his time, his skills, his property, his labor. That makes me master, superior. It puts me on a higher plane. It makes him subordinate. You say, but you are dying. You need help. Otherwise you will die. That’s true! Absolutely true!

But should he help? That’s a different question. Should he help? Does he have a moral obligation? That’s a different question of whether or not I have a right. Because when I claim a right to his labor. I’m enslaving him to my purposes – to that degree.

If he has a moral obligation where does that come from? What is it? That’s compassion. Where does compassion come from? Comes from the human heart.

But remember, if I am forcing him, if I have a right, that means the government will force him to help me. That’s all government is, coercion. Here’s a gun. Help him! Well, help me.

If someone is pointing a gun in your heard are you being terrible? Is the doctor being compassionate?  Is he being charitable if someone points a gun into him and says: “Fix this person up!”?

No. Does he even have the opportunity to be compassionate and charitable? His ability to decide to be charitable has been taken away from him, because the decision has been forced upon him. Now he is no longer acting morally.

If I see someone who wants food or clothing or something, and I give him some money. It comes from my heart. I’m being compassionate – being charitable. But you are not being compassionate or charitable when you are paying taxes. When you go up to the Pearly Gates and you see Saint Peter and he says: “Have you served your fellow man, have you been compassionate and acted charitably to your fellow man. And you say: “Look at my 1040-form!”

He is not going to take that, is he? He’s like – no, you did not get signature on that. No!

So, the law cannot force compassion. And the Law is not being charitable. Government is not being charitable. But, we have to bail out General Motors. Why? Because all these people will lose their jobs. That’s sad. That’s sad. But don’t chalk it up as charity that we are trying to keep this people in jobs. Absolutely not – it’s anything but.

I and the rest of you have been forceably made co-owners, what ever that means.

So back to Bastiat, one last time, “It is not true that the function of law is to regulate our consciences, our ideas, our wills, our education, our opinions, our work, our trade, our talents, or our pleasures. The function of law is to protect the free exercise of these rights – life, liberty and property, and to prevent any person from interfering with the free exercise of these same rights by any other person.

“Since law necessarily requires the support of force, its lawful domain is only in the areas where the use of force is necessary. This is justice.

“Every individual has the right to use force for lawful self-defense. It is for this reason that the collective force—which is only the organized combination of the individual forces—may lawfully be used for the same purpose;” – right, it is only for self-defense –  “and it cannot be used legitimately for any other purpose.”

You can use it for other things, clearly. Look at the society we are living. When you define inside as standing under a little awning or something…

So is all that government does some type of plunder?  Should we even have a government?

When we go down that road and I have several friends who are down that road they call themselves anarcho-capitalists. Anarchy, but not like the bad anarchy, this is capitalist anarchy.

Harper – one last time, this guy; good book; I’m very pleased with this book  –addresses the anarcho-capitalism question in this way, he says: “Based on all that has been said, one might easily conclude that government is an entirely negative force so far as liberty is concerned. He might conclude that anarchy…would be the ideal society, and that liberty would be complete under anarchy.  That would be true if all persons were perfect.  But they are not.”

And this comes back to the question how do we perceive ourselves. Are fallen beings or are we risen apes?

“With human frailties as they are, anarchy affords the opportunity for certain powerful and tyrannical individuals to enslave their fellow men, to the extent of their power to gain and keep control over others. So some degree of governmental function…is necessary if liberty is to be at a maximum; violators of liberty must be restrained so that the rights of liberty will be protected for those who respect them and play the game of society according to the rules of liberalism.”

The good liberalism – the classical liberalism.

“Thus at one extreme the absence of government allows anarchy to rob the people of their liberty, whereas at the other extreme the government itself becomes the robber of liberty. The task in a liberal society, therefore, is to find that point where all the people will enjoy the greatest possible degree of liberty.”

Personally, I am really close to anarcho-capitalism. I buy a lot of their arguments. I see a whole bunch of them.  I think that we should all strive to reduce plunder and expand liberty as much as we can.  And when we get to that little Minarchist state – that last little tiny state– maybe then I can decide whether we should abolish the last little bit of government or so.

But that’s not really the debate that we need. Because we are so far from that

point right now. It’s sort of like how many angles are dancing on the top of the Mountain Dew bottle?  It’s kind of pointless. What we need to do is pull in one direction and pull hard, not fight with each other.

My thoughts on what the right size of government is right now is… Imagine your own personal worst enemy. You know who that is.  And they can be placed in charge of the government and you would be okay with it.

Because right now if my own worst personal enemy was placed in position of power and they control the courts, IRS and other taxing, regulatory authorities then my life would be miserable.

But if we can reduce the government to the size where you can take your own personal worst enemy and put them in charge of all the things that the government does and you are okay with it. That’s a pretty good size government.

I have asked many questions. I have raised many questions that each of us is attempting to answer.

There are some answers: communism – bad. But the task set before us is to find that “greatest possible degree of liberty” for society.  This week is “Freedom University.”  What we should do is explore what exactly that means through good discussion and deep thinking.

So, I’m really excited about this week.

by Stefan Molyneux

Stefan Molyneux is the host of ‘Freedomain Radio‘, the largest and most popular philosophy show on the Web.

If the Twentieth Century proved anything, it is that the single greatest danger to human life are the thugs of the centralized political State, who extinguished more than 170 million souls during the bloodiest rampage in recorded history. By any rational standard, modern States are the last and greatest remaining predators – and that the danger has not abated with the demise of communism and fascism. All Western democracies currently face vast and accelerating escalations of State power and centralized control over economic and civic life. In almost all Western democracies, the State chooses:

• where children go to school, and how they will be educated
• the interest rate citizens can borrow at
• the value of currency
• how employees can be hired and fired
• how more than 50% of their citizens’ time and money are disposed of
• who a citizen’s doctor is
• what kinds of medical procedures can be received – and when
• when to go to war
• who can live in the country
• …just to touch on a few.

Most of these amazing intrusions into personal liberty have occurred over the past 90 years, since the introduction of the income tax. They have been accepted by a population helpless to challenge the endless expansions of State power – and yet, even though most citizens have received endless pro-State propaganda in government schools, a growing rebellion is brewing. State predations are now so intrusive that they have effectively arrested the forward momentum of society, which now hangs before a fall. Children are poorly educated, young people are unable to get ahead, couples with children fall ever-further into debt, and the elderly are finding State medical systems collapsing under the weight of their growing needs – and State debts continue to grow.

Thus, these early years of the twenty-first century are the end of an era, a collapse of mythology comparable to the fall of fascism, communism, monarchy, or political Christianity. The idea that the State is capable of solving social problems is now viewed with great skepticism – which foretells a coming change. As soon as skepticism is applied to the State, the State falls, since it fails at everything except increasing its power, and so can only survive on propaganda, which relies on unquestioning faith.

Yet while most people are comfortable with the idea of reducing the size and power of the State, they become distinctly uncomfortable with the idea of getting rid of it completely. To use a medical metaphor, if the State is a cancer, they prefer medicating it into an unstable remission, rather than eliminating it completely.

This can never work. A central lesson of history is that States are parasites which always expand until they destroy their host population. Because the State uses violence to achieve its ends – and there is no rational end to the expansion of violence – States grow until they destroy civilized interaction through the corruption of money, contracts, honesty, family, and self-reliance. As such, the cancerous metaphor is not misplaced. People who believe that the State can somehow be contained have not accepted the fact that no State in history has ever been contained.

Even the rare reductions are merely temporary. The United States was founded on the principle of limited government; it took little more than a century for the State to break the bonds of the Constitution, implement the income tax, take control of the money supply and the educational system, and begin its catastrophic expansion. There is no example in history of a State being permanently reduced in size. All that happens during a tax or civil revolt is that the State retrenches, figures out what it did wrong, and plans its expansion again. Or provokes a war, which silences all but fringe dissenters.

Given these well-known historical facts, why do still people believe that such a deadly predator can be tamed? Surely it can only be because they consider a slow strangulation in the grip of an expanding State somehow better than the quick death of a society bereft of a State.

Why, then, do most people believe that a society will crumble without a coercive and monopolistic social agency at its core? There are a number of answers to this question, but generally they tend to revolve around three central points:

• dispute resolution;
• collective services; and,
• pollution.

Dispute Resolution

The fact that people still cling to the belief that the State is requires to resolve disputes is amazing, since modern courts are out of the reach of all but the most wealthy and patient, and are primarily used to shield the powerful from competition or criticism. In this writer’s experience, to take a dispute with a stockbroker to the court system would have cost more than a quarter of a million dollars and taken from five to ten years – however, a private mediator settled the matter within a few months for very little money. In the realm of marital dissolution, private mediators are commonplace. Unions use grievance processes, and a plethora of other specialists in dispute resolution have sprung up to fill in the void left by a ridiculously lengthy, expensive and incompetent State court system.

Thus the belief that the State is required for dispute resolution is obviously false, since the court apparatus is unavailable to the vast majority of the population, who resolve their disputes either privately or through agreed-upon mediators.

How can the free market deal with the problem of dispute resolution? Outside the realm of organized crime, very few people are comfortable with armed confrontations, and so generally prefer to delegate that task to others. Let’s assume that people’s need for such representatives produces Dispute Resolution Organizations (DROs), which promise to resolve disputes on their behalf.

Thus, if Stan is hired by Bob, they both sign a document specifying which DRO they both accept as an authority in dispute resolution. If they disagree about something, and are unable to resolve it between themselves, they submit their case to the DRO, and agree to abide by that DRO’s decision.

So far so good. However, what if Stan decides he doesn’t want to abide by the DRO’s decision? Well, several options arise.

First of all, when Stan signed the DRO agreement, it is likely that he would have agreed to property confiscation if he did not abide by the DRO’s decision.[1] Thus the DRO would be entirely within its right to go and remove property from Stan – by force if necessary – to pay for his side of the dispute.

It is at this point that people generally throw up their arms and dismiss the idea of DROs by claiming that society would descend into civil war within a few days.

Everyone, of course, realizes that civil war is a rather bad situation, and so it seems likely that the DROs would consider alternatives to armed combat.

What other options could be pursued? To take a current example, small debts which are not worth pursuing legally are still regularly paid off – and why? Because a group of companies produce credit ratings on individuals, and the inconvenience of a lowered credit rating is usually greater than the inconvenience of paying off a small debt. Thus, in the absence of any recourse to force, small debts are usually settled. This is one example of how desired behaviour can be elicited without pulling out a gun or kicking in a door.

Picture for a moment the infinite complexity of modern economic life. Most individuals bind themselves to dozens of contracts, from car loans and mortgages to cell phone contracts, gym membership, condo agreements and so on. To flourish in a free market, a man must honour his contracts. A reputation for honest dealing is the foundation of a successful economic life. Now, few DROs will want to represent a man who regularly breaks contracts, or associates with difficult and litigious people.[2] (For instance, this writer once refrained from entering into a business partnership because the potential partner revealed that he had sued two previous partners.)

Thus if Stan refuses to abide by his DRO’s ruling, the DRO has to barely lift a finger to punish him. All the DRO has to do is report Stan’s non-compliance to the local contract rating company, who will enter his name into a database of contract violators. Stan’s DRO will also probably drop him, or raise his rates considerably.

And so, from an economic standpoint, Stan has just shot himself in the foot. He is now universally known as a man who rejects legitimate DRO rulings that he agreed to accept in advance. What happens when he goes for his next job? What if he decides to eschew employment and start his own company, what happens when he applies for his first lease? Or tries to hire his first employee? Or rent a car, or buy an airline ticket? Or enter into a contract with his first customer? No, in almost every situation, Stan would be far better off to abide by the decision of the DRO. Whatever he has to pay, it is far cheaper than facing the barriers of existing without access to a DRO, or with a record of rejecting a legitimate ruling.

But let’s push the theory to the max, to see if it holds. To examine a worst-case scenario, imagine that Stan’s employer is an evil man who bribes the DRO to rule in his favour, and the DRO imposes an unconscionable fine – say, one million dollars – on Stan.

First of all, this is such an obvious problem that DROs, to get any business at all, would have to deal with this danger up front. An appeal process to a different DRO would have to be part of the contract. DROs would also rigorously vet their own employees for any unexplained income. And, of course, any DRO mediator who corrupted the process would receive perhaps the lowest contract rating on the planet, lose his job, and be liable for damages. He would lose everything, and be an economic pariah.

However, to go to the extreme, perhaps the worst has occurred and Stan has been unjustly fined a million dollars due to DRO corruption. Well, he has three alternatives. He can choose not to pay the fine, drop off the DRO map, and work for cash without contracts. Become part of the grey market, in other words. A perfectly respectable choice, if he has been treated unjustly.

However, if Stan is an intelligent and even vaguely entrepreneurial man, he will see the corruption of the DRO as a prime opportunity to start his own, competing DRO, and will write into its base contract clauses to ensure that what happened to him will never happen to anyone who signs on with his new DRO.[3]

Stan’s third option is to appeal to the contract rating agency. Contract rating agencies need to be as accurate as possible, since they are attempting to assess real risk. If they believe that the DRO ruled unjustly against Stan, they will lower that DRO’s contract rating and restore Stan’s.

Thus it is inconceivable that violence would be required to enforce all but the most extreme contract violations, since all parties gain the most long-term value by acting honestly. This resolves the problem of instant descent into civil war.

Two other problems exist, however, which must be resolved before the DRO theory starts to becomes truly tenable.

The first is the challenge of reciprocity, or geography. If Bob has a contract with Jeff, and Jeff moves to a new location not covered by their mutual DRO, what happens? Again, this is such an obvious problem that it would be solved by any competent DRO. People who travel prefer cell phones with the greatest geographical coverage, and so cell phone companies have developed reciprocal agreements for charging competitors. Just as a person’s credit rating is available anywhere in the world, so their contract rating will also be available, and so there will be no place to hide from a broken contract save by going ‘off the grid’ completely, which would be economically crippling.

The second problem is the fear that a particular DRO will grow in size and stature to the point where it takes on all the features and properties of a new State.

This is a superstitious fear, because there is no historical example of a private company replacing a political State. While it is true that companies regularly use State coercion to enforce trading restrictions, high tariffs, cartels and other mercantilist tricks, surely this reinforces the danger of the State, not the inevitability of companies growing into States. All States destroy societies. No company has ever destroyed a society without the aid of the State. Thus the fear that a private company can somehow grow into a State is utterly unfounded in fact, experience, logic and history.

If society becomes frightened of a particular DRO, then it can simply stop doing business with it, which will cause it to collapse. If that DRO, as it collapses, somehow transforms itself from a group of secretaries, statisticians, accountants and contract lawyers into a ruthless domestic militia and successfully takes over society – and how unlikely is that! – then such a State will then be imposed on the general population. However, there are two problems even with this most unlikely scare scenario. First of all, if any DRO can take over society and impose itself as a new State, why only a DRO? Why not the Rotary Club? Why not a union? Why not the Mafia? The YMCA? The SPCA? Is society to then ban all groups with more than a hundred members? Clearly that is not a feasible solution, and so society must live with the risk of a brutal coup by ninja accountants as much as from any other group.

And, in the final analysis, if society is so terrified of a single group seizing a monopoly of political power, what does that say about the existing States? They have a monopoly of political power. If a DRO should never achieve this kind of control, why should existing States continue to wield theirs?

Collective Services

Roads, sewage, water and electricity and so on are also cited as reasons why a State must exist. How roads could be privately paid for remains such an impenetrable mystery that most people are willing to support the State – and so ensure the eventual and utter destruction of civil society – rather than cede that this problem just might be solvable. There are many ways to pay for roads, such as electronic or cash tolls, GPS charges, roads maintained by the businesses they lead to, communal organizations and so on. And if none of those work? Why, then personal flying machines will hit the market!

The problem that a water company might build plumbing to a community, and then charge exorbitant fees for supplying it, is equally easy to counter. A truck could deliver bottled water, or the community could invest in a water tower, a competing company could built alternate pipes and so on. None of these problems touch the central rationale for a State. They are ex post facto justifications made to avoid the need for critical examination or, heaven forbid, political action. The argument that voluntary free-market monopolies are bad – and that the only way to combat them is to impose compulsory monopolies – is obviously foolish. If voluntary monopolies are bad, then how can coercive monopolies be better?

Due to countless examples of free market solutions to the problem of ‘carrier costs’, this argument no longer holds the kind of water it used to, so it must be elsewhere that people must turn to justify the continued existence of the State.

Pollution

This is perhaps the greatest problem faced by free-market theorists. It’s worth spending a little time on outlining the worst possible scenario, and see how a voluntary system could solve it. However, it’s important to first dispel the notion that the State currently deals effectively with pollution. Firstly, the most polluted resources on the planet are State-owned, because State personnel do not personally profit from retaining the value of State property (witness the destruction of the Canadian cod industry through blatant vote-buying). Secondly, the distribution of mineral, lumber and drilling rights is directly skewed towards bribery and corruption, because States rarely sell the land, but rather just the resource rights. A lumber company cannot buy woodlands from the State, just the right to harvest trees. Thus the State gets a renewable source of income, and can further coerce lumber companies by enforcing re-seeding. This, of course, tends to promote bribery, corruption and the creation of ‘fly-by-night’ lumber companies which strip the land bare, but vanish when it comes time to re-seed. Auctioning State land to a private market easily solves this problem, because a company which re-seeded would reap the greatest long-term profits from woodland, and so would be able to bid the most for the land.

Also, it should be remembered that, in the realm of air pollution, governments created the problem in the first place. In 19th century England, when industrial smokestacks began belching fumes into the orchards of apple farmers, the farmers took the factory-owners to court, citing the common-law tradition of restitution for property damage. Naturally, the capitalists had gotten to the State courts first, and had more money to bribe with, employed more voting workers, and contributed more tax revenue than the farmers – and so the farmers’ cases were thrown out of court. The judge argued that the ‘common good’ of the factories took precedence over the ‘private need’ of the farmers. The free market did not fail to solve the problem of air pollution – it was forcibly prevented from doing so through State corruption.

The State, then, is no friend of the environment – but how would the free market handle it? One egregious example often cited is a group of houses downwind from a new factory which works day and night to coat them in soot.

When a man buys a new house, isn’t it important to him to ensure that it won’t be subjected with someone else’s pollution? People’s desire for a clean and safe environment is so strong that it’s a clear invitation for enterprising capitalists to sweat bullets figuring out how to provide it.

Fortunately, since we have already talked about DROs and their role in a free market, the problem of air pollution can be solved quite easily.

If the aforementioned group of homeowners is afraid of pollution, the first thing they will do is buy pollution insurance, which is a natural response to a situation where costs cannot be predicted but consequences are dire. Let’s say that a homeowner named Achmed buys pollution insurance which pays him two million dollars if the air around or in his house becomes polluted in some predefined manner.[4] In other words, as long as Achmed’s air remains clean, the insurance company makes money.

One day, a plot of land upwind of Achmed’s house comes up for sale. Naturally, his insurance company would be very interested in this, and would monitor the sale. If the purchaser is some private school, all is well (assuming Achmed has not bought an excess of noise pollution insurance!). If, however, the insurance company discovers that Sally’s House of Polluting Paint Production is interested in purchasing the plot of land, then it will likely spring into action, taking one of the following actions:

• buying the land itself, then selling it to a non-polluting buyer;
• getting assurances from Sally that her company will not pollute;
• paying Sally to enter into a non-polluting contract.

If, however, someone at the insurance company is asleep at the wheel, and Sally buys the land and puts up her polluting factory, what happens then?

Well, then the insurance company is on the hook for $2M to Achmed (assuming for the moment that only Achmed bought pollution insurance). Thus, it can afford to pay Sally up to $2M to reduce her pollution and still be cash-positive. This payment could take many forms, from the installation of pollution-control equipment to a buy-out to a subsidy for under-production and so on.

If the $2M is not enough to solve the problem, then the insurance company pays Achmed the $2M and he goes and buys a new house in an unpolluted neighbourhood. However, this scenario is highly unlikely, since the insurance company would be unlikely to insure only one single person in a neighbourhood against air pollution – and a single person probably could not afford it!

So, that is the view from Achmed’s air-pollution insurance company. What about the view from Sally’s House of Polluting Paint Production? She, also, must be covered by a DRO in order to buy land, borrow money and hire employees. How does that DRO view her tendency to pollute?

Pollution brings damage claims against Sally, because pollution is by definition damage to persons or property. Thus Sally’s DRO would take a dim view of her polluting activities, since it would be on the hook for any property damage her factory causes. In fact, it would be most unlikely that Sally’s DRO would insure her against damages unless she were able to prove that she would be able to operate her factory without harming the property of those around her. And without access to a DRO, of course, she would be hard-pressed to start her factory, borrow money, hire employees etc.

It’s important to remember that DROs, much like cell phone companies and Internet providers, only prosper if they cooperate. Sally’s DRO only makes money if Sally does not pollute. Achmed’s insurer also only makes money if Sally does not pollute. Thus the two companies share a common goal, which fosters cooperation.

Finally, even if Achmed is not insured against air pollution, he can use his and/or Sally’s DRO to gain restitution for the damage her pollution is causing to his property. Both Sally and Achmed’s DROs would have reciprocity agreements, since Achmed wants to be protected against Sally’s actions, and Sally wants to be protected against Achmed’s actions. Because of this desire for mutual protection, they would choose DROs which had the widest reciprocity agreements.

Thus, in a truly free market, there are many levels and agencies actively working against pollution. Achmed’s insurer will be actively scanning the surroundings looking for polluters it can forestall. Sally will be unable to build her paint factory without proving that she will not pollute. Mutual or independent DROs will resolve any disputes regarding property damage caused by Sally’s pollution.

There are other benefits as well, which are almost unsolvable in the current system. Imagine that Sally’s smokestacks are so high that her air pollution sails over Achmed’s house and lands on Reginald’s house, a hundred miles away. Reginald then complains to his DRO that his property is being damaged. His DRO will examine the air contents and wind currents, then trace the pollution back to its source and resolve the dispute with Sally’s DRO. If the air pollution is particularly complicated, then Reginald’s DRO will place non-volatile compounds into Sally’s smokestacks and follow them to where they land. This can be used in a situation where a number of different factories may be contributing pollutants.

The problem of inter-country air pollution may seem to be a sticky one, but it’s easily solvable. Obviously, a Canadian living along the Canada/US border, for instance, will not choose a DRO which refuses to cover air pollution emanating from the US[5]. Thus the DRO will have to have reciprocity agreements with the DROs across the border. If the US DROs refuse to have reciprocity agreements with the Canadian DROs – inconceivable, since the pollution can go both ways – then the Canadian DRO will simply start a US branch and compete.

The difference is that international DROs actually profit from cooperation, in a way that governments do not. For instance, a State government on the Canada/US border has little motivation to impose pollution costs on local factories, as long as the pollution generally goes north. For DROs, quite the opposite would be true.

Finally, one other advantage to DRO’s can be termed the ‘Scrabble-Challenge Benefit’. In Scrabble, an accuser loses his turn if he challenges another player’s word and the challenge fails. Given the costs of resolving disputes, DROs would be very careful to ensure that those bringing false accusations would be punished through their own premiums, their contract ratings and by also assuming the entire cost of the dispute. This would greatly reduce the number of frivolous lawsuits, to the great benefit of all.

The idea that society can only survive in the absence of a centralized State is the greatest lesson that the grisly years of the Twentieth Century can teach us. Our choice is not between the free market and the State, but between life and death. Whatever the risks involved in dissolving the central State, they are far less than the certain destruction which will result from its inevitable escalation. Like a cancer patient facing certain demise, we must open our minds and reach for whatever medicine shows the most promise, and not wait until it is too late.

Notes
[1] For the sake of simplicity, the assumption is that there is no appeal process, which is admittedly highly unlikely.
[2] More accurately, DRO’s will be happy to deal with such people – just as car insurance companies will insure even terrible drivers – but the cost of representation will be very high.
[3] This is also why existing DRO’s will be so vigilant in rooting out corruption. Faster than any other single factor, corruption will breed competition.
[4] Naturally, the insurance company would have to deal with the problem that it is cheaper for Achmed’s neighbour to let Achmed buy the insurance, which could be dealt with by descending group rates and so on.
[5] Of course, the idea of ‘countries’ may be somewhat anachronistic by this time…

This article has been published with the author’s permission.

by John Semmens

John Semmens is an economist with the Laissez Faire Institute in Chandler, Arizona.

The idea that the government should spend money as a means of stimulating the economy and boosting employment has been a formal part of U.S. policy since the Employment Act of 1946. This law was clearly rooted in Keynesian economics. The idea was that government spending would make a splash in the economic pond that would send out ripples that would impact the rest of the economy in a positive way.

The plausibility of this idea is enhanced by the very visible employment of those working on the specific projects funded by the government. For example, government subsidies to public transit are often urged as a means for achieving the dual objectives of improved urban transportation and stimulation of employment.

The buses and trains used to provide this transportation are there for everyone to see. These vehicles have drivers. The systems also employ mechanics, ticket sellers, administrators, accountants, etc. The American Public Transit Association proudly observes that over 300,000 people are employed due to public transit spending programs.

In 1992 around $20 billion was “invested” on public transit in the United States. Because this spending does “ripple” through the economy and eventually become someone else’s income, it could be said that, in all, public transit may account for the employment of 800,000 people.

This sounds very impressive and is, no doubt, part of the reasoning behind plans to boost the U.S. economy by increased spending on public transit. The flaw in this thinking, though, is its failure to account for what economists call the “opportunity cost” of using resources on transit subsidies. That is, what opportunities may have been sacrificed while funds were being spent on public transit? What gains might have resulted if the funds committed to transit “investments” had been invested in something else?

Since 1965, when the federal government began subsidizing transit, U.S. taxpayers have paid over $60 billion into this program. State and local taxpayers have paid a similar amount. In total, over $125 billion in tax dollars have been “invested” in public transit. If the transit subsidy program had not existed and this money had instead been invested in other businesses, would we now be better off in terms of employment and economic activity?

If we assume that our investment alternative produced only average results, our economy and employment options would be far more robust than they are now. Business assets would be nearly $100 billion higher than they now are. Gross domestic production would be $400 billion higher. There would be over 8 million people employed in these alternative business enterprises.

These private sector benefits would have been augmented by substantial public sector gains, as well. Current federal tax receipts could have been $80 billion per year higher than they now are. State and local government tax receipts could have been $60 billion per year higher. These gains from economic growth could have meant fewer tax increases or less government borrowing, either of which would have stimulated economic growth even more than the above estimates.

The reason for the great disparity in results is that it makes a difference whether investments make profits or losses. Since the federal government subsidies began in 1965, public transit has failed to make a profit in any year. In fact, losses have grown larger in every single year since 1965. For 1992, public transit’s financial losses amounted to around $13 billion.

Losses mean that the economy is not being stimulated by transit subsidies. Rather, it is being drained. Every year, other, more profitable business activities have been taxed to provide the funds to prop up public transit. The long-term consequences of this parasitic relationship have been very costly.

The economy is weaker. Virtually every sector, save those directly benefitting from the subsidies, has been harmed. There has been a net loss of over 7 million job opportunities. Wages are lower. Business sales are lower. Interest rates are higher. The federal government’s budget deficit crisis is worse.

These unpleasant consequences are the result of ignoring the essential role of profit in creating resources and stimulating the economy. Profit results when the value of the outputs of an economic enterprise is worth more than the cost of the inputs. Profits mean that the economic enterprise has added to the economy’s wealth. Each increment of profit on each subsequent transaction adds more to the economy’s wealth. The compounding of these increments over time is what enables us to enjoy a higher standard of living than earlier generations.

Profits accrue to those businesses that have satisfied their customers. Profits act as both a message and a means for these businesses to continue and expand. Losses send a different message. Losses indicate that the business’s output is worth less than the cost of its inputs. A business must heed this message by improving its efficiency or changing its product. Failure to heed the message will result in a loss of resources and endanger its ability to remain in business.

The lack of profit in government enterprises should not be surprising. Government’s ability to tax means its businesses are insulated from the need to earn a profit in order to stay alive. Consequently, they don’t earn profits. The absence of profits means that government businesses consume rather than create resources.

Despite consuming a huge quantity of resources over the last 25 years, public transit is still a sickly industry. Its share of the passenger travel market has declined. Most buses and trains run mostly empty most of the time. Passenger fares pay less than 35 percent of the cost of each ride. Today the total number of public transit passengers is barely above where it was before all this government “investment” started.

This pathetic record of non-achievement is all too typical for government “investments.” If we truly want to stimulate our economy we need to stop “investing” in government’s money-losing ventures.

This article has been published with FEE‘s permission and has been originally published at The Freeman April 1994 • Volume: 44 • Issue: 4.