The term "Liberty" is so commonly used in our country that it has become a mere cliche. But do we know what it means? What it promises? How it factors into our daily lives? And most importantly, can we recognize tyranny when it is sold to us disguised as a form of liberty?
Dr. Paul writes that to believe in liberty is not to believe in any particular social and economic outcome. It is to trust in the spontaneous order that emerges when the state does not intervene in human volition and human cooperation. It permits people to work out their problems for themselves, build lives for themselves, take risks and accept responsibility for the results, and make their own decisions. It is the seed of America.
This is a comprehensive guide to Dr. Paul's position on fifty of the most important issues of our times, from Abortion to Zionism. Accessible, easy to digest, and fearless in its discussion of controversial topics, Liberty Defined sheds new light on a word that is losing its shape.
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About the Author
Dr. Ron Paul is a physician and twelve-term congressman from Texas who ran for president in 2008. He is the chairman of the domestic monetary policy subcommittee, and the author of eight books, including the New York Times bestsellers The Revolution: A Manifesto and End The Fed. An advocate of sound money, personal liberty, free markets, and international peace, he is chairman of the FREE Foundation, founder of the Campaign for Liberty, and distinguished counselor to the Ludwig von Mises Institute. He and Carol, his wife of fifty-three years, have five children, eighteen grandchildren, and three great-grandchildren.
Read an Excerpt
Liberty Defined50 Essential Issues That Affect Our Freedom
By Paul, Ron
Grand Central PublishingCopyright © 2011 Paul, Ron
All right reserved.
On one occasion in the 1960s when abortion was still illegal, I witnessed, while visiting a surgical suite as an OB/GYN resident, the abortion of a fetus that weighed approximately two pounds. It was placed in a bucket, crying and struggling to breathe, and the medical personnel pretended not to notice. Soon the crying stopped. This harrowing event forced me to think more seriously about this important issue.
That same day in the OB suite, an early delivery occurred and the infant born was only slightly larger than the one that was just aborted. But in this room everybody did everything conceivable to save this child’s life. My conclusion that day was that we were overstepping the bounds of morality by picking and choosing who should live and who should die. These were human lives. There was no consistent moral basis to the value of life under these circumstances.
Some people believe that being pro-choice is being on the side of freedom. I’ve never understood how an act of violence, killing a human being, albeit a small one in a special place, is portrayed as a precious right. To speak only of the mother’s cost in carrying a baby to term ignores all thought of any legal rights of the unborn. I believe that the moral consequence of cavalierly accepting abortion diminishes the value of all life.
It is now widely accepted that there’s a constitutional right to abort a human fetus. Of course, the Constitution says nothing about abortion, murder, manslaughter, or any other acts of violence. There are only four crimes listed in the Constitution: counterfeiting, piracy, treason, and slavery. Criminal and civil laws were deliberately left to the states. It’s a giant leap for the federal courts to declare abortion a constitutional right and overrule all state laws regulating the procedure. If anything, the federal government has a responsibility to protect life—not grant permission to destroy it. If a state were to legalize infanticide, it could be charged with not maintaining a republican form of government, which is required by the Constitution.
If we, for the sake of discussion, ignore the legal arguments for or against abortion and have no laws prohibiting it, serious social ramifications would remain. There are still profound moral issues, issues of consent, and fundamental questions about the origin of life and the rights of individuals. There are two arguments that clash. Some argue that any abortion after conception should be illegal. Others argue that the mother has a right to her body and no one should interfere with her decision. It’s amazing to me that many people I have spoken to in the pro-choice group rarely care about choice in other circumstances. Almost all regulations by the federal government to protect us from ourselves (laws against smoking, bans on narcotics, and mandatory seat belts, for example) are readily supported by the left/liberals who demand “choice.” Of course, to the pro-choice group, the precious choice we debate is limited to the mother and not to the unborn.
The fact is that the fetus has legal rights—inheritance, a right not to be injured or aborted by unwise medical treatment, violence, or accidents. Ignoring these rights is arbitrary and places relative rights on a small, living human being. The only issue that should be debated is the moral one: whether or not a fetus has any right to life. Scientifically, there’s no debate over whether the fetus is alive and human—if not killed, it matures into an adult human being. It is that simple. So the time line of when we consider a fetus “human” is arbitrary after conception, in my mind.
It’s interesting to hear the strongest supporters of abortion squirm when asked if they support the mother’s right to an abortion in the ninth month of pregnancy. They inevitably don’t support such an act, but every argument that is made for abortion in the first month is applicable to late pregnancy as well. It’s still the mother’s body. It’s still her choice. Due to changed circumstances, she may well have strong compelling social reasons to prevent a live birth and assume its obligations, even in the third trimester. This is a dilemma for the proponents of choice and they should be challenged as to where the line should be drawn.
Another aspect of this debate needs to be resolved: If an abortion doctor performs a third-trimester abortion for whatever reason, a handsome fee is paid and it’s perfectly legal in some states. If a frightened teenager, possibly not even knowing she was pregnant, delivers a baby and she kills it, the police are out en masse to charge her with a homicide. What really is so different between the fetus one minute before birth and a newborn one minute after birth? Biologically and morally, nothing. We must also answer the grim question of what should be done with a newborn that inadvertently survives an abortion. It happens more than you might think. Doctors have been accused of murder since the baby died after delivery, but that hardly seems just. The real question is, how can a human infant have such relative value attached to it?
In the age of abortion, with nearly a million being performed each year in the United States, society sends a signal that we place a lower value on the small and the weak. Most young people choose abortions for economic reasons; they believe that they cannot afford to bear the child and would rather wait. Why is it that moral considerations do not trump such fears? Why do these women not consider other options, such as adoption, more seriously? They’ve been taught by society that an unwanted fetus-baby has no right to life and therefore has no real value. And why do so many young women put themselves at risk for having to make such choices in the first place? Availability of abortion, most likely, changes behavior and actually increases unwanted pregnancies.
The difference or lack thereof between a baby one minute after birth and one minute before needs to be quantified. The Congress or the courts are incapable of doing this. This is a profound issue to be determined by society itself based on the moral value it espouses.
Abortion is rarely a long-term answer. A woman who has had one abortion is more likely to have another. It’s an easier solution than a change in long-developed personal behavior. My argument is that the abortion problem is more of a social and moral issue than it is a legal one. In the 1960s, when I was in my OB/GYN residency training, abortions were being done in defiance of the law. Society had changed and the majority agreed the laws should be changed as well. The Supreme Court in 1973 in Roe v. Wade caught up with the changes in moral standards.
So if we are ever to have fewer abortions, society must change again. The law will not accomplish that. However, that does not mean that the states shouldn’t be allowed to write laws dealing with abortion. Very early pregnancies and victims of rape can be treated with the day after pill, which is nothing more than using birth control pills in a special manner. These very early pregnancies could never be policed, regardless. Such circumstances would be dealt with by each individual making his or her own moral choice.
As a bankrupt government takes over more of our health care, rationing of care by government mandates is unavoidable. Picking and choosing who should live and who should die may sound morally repugnant, but this is where we end up in a world with scarce means and politically driven decisions about how those means are going to be employed. The federal government will remain very much involved in the abortion business either directly or indirectly by financing it.
One thing I believe for certain is that the federal government should never tax pro-life citizens to pay for abortions. The constant effort by the pro-choice crowd to fund abortion must rank among the stupidest policies ever, even from their viewpoint. All they accomplish is to give valiant motivation for all pro-life forces as well as the antitax supporters of abortion to fight against them.
A society that readily condones abortion invites attacks on personal liberty. If all life is not precious, how can all liberty be held up as important? It seems that if some life can be thrown away, our right to personally choose what is best for us is more difficult to defend. I’ve become convinced that resolving the abortion issue is required for a healthy defense of a free society.
The availability and frequent use of abortion has caused many young people to change their behavior. Its legalization and general acceptance has not had a favorable influence on society. Instead, it has resulted in a diminished respect for both life and liberty.
Strangely, given that my moral views are akin to theirs, various national pro-life groups have been hostile to my position on this issue. But I also believe in the Constitution, and therefore, I consider it a state-level responsibility to restrain violence against any human being. I disagree with the nationalization of the issue and reject the Roe v. Wade decision that legalized abortion in all fifty states. Legislation that I have proposed would limit federal court jurisdiction of abortion. Legislation of this sort would probably allow state prohibition of abortion on demand as well as in all trimesters. It will not stop all abortions. Only a truly moral society can do that.
The pro-life opponents to my approach are less respectful of the rule of law and the Constitution. Instead of admitting that my position allows the states to minimize or ban abortions, they claim that my position supports the legalization of abortion by the states. This is twisted logic. Demanding a national and only a national solution, as some do, gives credence to the very process that made abortions so prevalent. Ending nationally legalized abortions by federal court order is neither a practical answer to the problem nor a constitutionally sound argument.
Removing jurisdiction from the federal courts can be done with a majority vote in the Congress and the signature of the President. This is much simpler than waiting for the Supreme Court to repeal Roe v. Wade or for a constitutional amendment. My guess is that the scurrilous attacks by these groups are intended more to discredit my entire defense of liberty and the Constitution than they are to deal with the issue of abortion. These same groups have very little interest in being pro-life when it comes to fighting illegal, undeclared wars in the Middle East or preventive (aggressive) wars for religious reasons. An interesting paradox!
My position does not oppose looking for certain judges to be appointed to the Supreme Court, or even having a constitutional definition of life. Removing the jurisdiction from the federal courts would result in fewer abortions much sooner, but it wouldn’t prevent a national effort to change the Supreme Court or the Constitution by amendment. It makes one wonder why the resistance to a practical and constitutional approach to this problem is so strong.
Just about everyone knows that the Hippocratic oath includes the pledge not to do abortions. In the 1960s, most medical schools, rather than face the issue, just dropped the tradition of medical-school graduating seniors repeating the oath. My class of 1961 ignored the oath at graduation. Just think, the oath survived for so many years and then ended right before the drug and Vietnam War culture, when it was most desperately needed.
By 1988, when my son Dr. Rand Paul graduated, the oath was made voluntary in a special baccalaureate ceremony. But strangely, the oath was edited to exclude the provision pledging not to do an abortion. Today, sadly, medical school applicants in some schools are screened and can be rejected or at least intimidated on this issue.
As a pro-life libertarian physician, my strong advice, regardless of what is legal, is for medical personnel to just say no to participation in any procedure or process that is pro-death or diminishes respect for life in any way. Let the lawyers and the politicians and mercenary, unethical doctors deal with implementing laws regulating death.
Deregulating the adoption market would also make a margin of difference in reducing abortion. This would make it easier for nonprofit groups to arrange for adoptive parents and for them to compensate the mother enough to absorb the expenses and opportunity costs associated with carrying the child to term. Small changes could make a large difference here.
Finally, here is my program for pro-life MDs and medical personnel:
Do not perform abortions for convenience or social reasons.
Do not be the agent of active euthanasia.
Do not participate in any manner—directly or indirectly—in torture.
Do not participate in human experimentation. I’m not referring to testing new drugs with the patient’s consent. I’m speaking of our long history of military participation in human experimentation. The Tuskegee experiment, in which black soldiers who had syphilis were deliberately mistreated, is one example.
Do not be involved with the state in executing criminals or in any way approve the carrying out of the death penalty.
Do not participate in government-run programs where medical care is rationed for economic or social reasons that place relative value on life.
Do not give political or philosophical support for wars of aggression, referred to as preventive wars.
A foreign policy that endorses worldwide intervention and occupation requires that people live in perpetual fear of supposed enemies. In the post–9/11 period, proponents of such policies have been quite able to promote the fear needed for the American people to accept policies they otherwise would have rebelled against. Fear has enabled permanent runaway domestic surveillance and the sacrifice of privacy through legislation such as the Patriot Act. A citizen walking through the airport today is bombarded with 1984-style propaganda messages that are designed to make us fear some amorphous threat and also be suspicious of others. The government designs these messages to make us feel dependent and heavily lorded over in every aspect of our lives. These messages are becoming ever more pervasive, hitting us even in grocery stores when we are shopping.
If we are fearful enough, we are willing to tolerate what might otherwise be regarded as immoral means of dealing with the enemy. For example, the use of torture to combat evildoers has been accepted by a large number of otherwise reasonable Americans as a result of those who purposely, successfully used fear as a tactic to achieve their mischievous goals. And now we are moving toward the acceptance of assassinations of American citizens as necessary to provide national security, as I will show below. This, to me, signifies that we are no longer a nation of laws but rather a nation of people who act outside the law without restraint. The corruption in ideals has been so grave that many conservatives regard criticism of assassination as a sign of liberal wimpiness and sentimentality. In fact, we are dealing with a fundamental issue of human rights here.
We are told we are at war—against terrorism. Yet terrorism is a tactic and described in federal law as a crime. The war is “worldwide,” so lawlessness by our government can be perpetuated anywhere in the world, including within the borders of the United States. In wartime, the government assumes greater emergency powers to make secret arrests, build secret prisons, torture, and use secret rendition allowing other, more ruthless countries to do our dirty work.
The term “war on terror” should never be used as anything more than a cliché, like “war on” drugs, poverty, illiteracy, etc. But its use is deliberate, even in these symbolic usages, to con the people into thinking that all citizens must cooperate and sacrifice our liberties to “win” the war. Though these violations are fully endorsed by the Obama administration, they were introduced and generally used by the Bush administration.
We’ve moved much further along in the disintegration of American jurisprudence. Indefinite detention without charges or a right to counsel is now an established precedent for anyone in the world, including an American citizen, declared “an enemy combatant” by a single U.S. official. It has been acknowledged by the Obama administration that the current policy permits the assassination of any suspect anywhere in the world, including an American citizen. This, they argue, is crucial to keep all Americans safe. Somewhere along the way we forgot that the enemies of our Constitution are both foreign and domestic. It appears that many people in government want us to believe that the greater danger is coming from people like the underwear bomber rather than from our own government.
Our government has, for years, been involved in “regime change” around the world, which includes the use of assassination. But up until February 3, 2010, there was no admission to such a policy or recognition of its illegality. On this date, before the House Intelligence Committee, the Director of National Intelligence (DNI) Dennis C. Blair admitted that indeed such a policy existed. American citizens can be assassinated at the direction of the U.S. government with the authority probably coming from the DNI. As he put it: “Being a U.S. citizen will not spare an American from getting assassinated by military or intelligence operatives.”
No longer trying to keep assassination top secret and even admitting it can involve an American citizen is a bold and scary change in attitude. Many people now believe that it is proper under the law, necessary for our security, and condoned by both the people and their elected representatives in the Congress. Even more frightening is that the previously ridiculous notion that torture is legal is now more or less true—a rather sorry state of affairs.
Who would have ever believed that we could fall so far? The basic principle of the writ of habeas corpus has been around for 800 years, and so has the right not be in indefinite detention without charges. The justification for such abuse of the rule of law is all based on concocted fear by false claims associated with a lack of respect and understanding of what liberty is all about. It is constantly argued that danger in this post–9/11 period demands a different code of conduct to assure the people’s safety. Possibly so. But it is further argued that only a few Americans are on the target list for assassination.
Possibly so, but so what? Tyranny always begins with oppression of unpopular minorities. If we wait for tyranny to target the mainstream and the majority, it will be too late. These targeted individuals are “suspects,” not convicted criminals; nor, for the most part, are they even charged with a crime. Many innocent people have been held in secret prisons and tortured without legal counsel.
The perpetrators of the first Twin Towers bombing in 1993 were arrested, tried in New York City, and sentenced to life in prison. It is important that even the guilty have their day in court—not so much out of sympathy, for many are known to be evil, wicked men, but to keep us from ever slipping into a situation in which American citizens lose their right to have their day in court. Literally hundreds of terrorists have been tried in civilian courts in this country and convicted and did not have to be tried in secret military courts.
According to Dennis Blair, the justification for deciding who is to be assassinated is to declare an individual a “threat.” No charges of a crime or plan to commit a crime are needed. Being a “threat” is a purely subjective term and is totally ambiguous. Casual acquaintance or associations based on false information can easily lead to deadly mistakes.
Certainly, speech that does not echo the party line or information that truthfully explains the nature and cause of anti-American activity can easily be construed as a threat to American policy overseas and a challenge to the current government. Blair claims that no one will be targeted for “free speech.” I guess that is supposed to make us all rest more peacefully.
Anwar-al-Awlaki, the American citizen targeted by a CIA drone in Yemen, was never charged with a crime. The attack against Awlaki failed to kill him, but several others who were killed are now listed as statistics of collateral damage. More hatred of Americans will surely be generated by these constant events.
Government, once given power thought to be very limited in scope, is never restrained in expanding the use of its new-gotten power. Some people have perpetual desires for expanding government power and they frankly admit that, to achieve their goals, they never want any crisis to go to waste.
Enough Americans need to wake up and change this dangerous trend. But first they have to come to understand why no person should be exempt from the Bill of Rights when charged with violating U.S. law. The Constitution protects “persons,” not just “citizens.”
The war on terror slogan says “we are at war,” and therefore protection of civil liberties is to be forfeited. But here is a fact: No war has been declared. The executive branch cannot ordain a war. The Congress and the courts are derelict in their duty if they do nothing to stop the madness of targeting American citizens for assassination before this evil precedent is perpetuated and more frequently used.
The phrase “Austrian School” or “Austrian economics” is not something I ever expected would enter into the vocabulary of politics or media culture. But since 2008, it has. Reporters use it with some degree of understanding, and with an expectation that readers and viewers will understand it too. This is just thrilling to me, for I am a long-time student of the Austrian tradition of thought.
The phrase is often used as a synonym for free market economics. I don’t object to this characterization, but it isn’t exactly precise. It is possible to appreciate the role of markets without actually embracing the Austrian tradition, and it is possible to learn from the Austrian tradition without holding a particular political position. Nonetheless, the tradition has much to teach us and it goes far beyond the mere appreciation and defense of free enterprise.
The school of thought is named for the country of its modern founder, Carl Menger (1840–1921), an economist at the University of Vienna who made great contributions to the theory of value. He wrote that economic value extends from the human mind alone and is not something that exists as an inherent part of goods and services; valuation changes according to social needs and circumstances. We need markets to reveal to us the valuations of consumers and producers in the form of the price system that works within a market setting. In saying these things, he was really recapturing lost wisdom that had earlier been understood by Frédéric Bastiat (1801–1850), J. B. Say (1767–1832), A. R. J. Turgot (1727–1781), and many more throughout history. But history needs people like Menger to rediscover forgotten wisdom.
Menger built up a new school of thought in Austria with thinkers such as Eugen von B hm-Bawerk (1851–1914), F. A. Hayek (1899–1992), Ludwig von Mises (1881–1973), Henry Hazlitt (1894–1993), Murray Rothbard (1926–1995), and Hans Sennholz (1922–2007) and gave rise to a huge number of philosophers, writers, financial analysts, and many others today who have learned from the tradition. The Austrian School champions private property, free markets, sound money, and the liberal society generally. It provides a way of looking at economics that takes into account the unpredictability of human action (absolutely no one can quantitatively know the future) and the huge role of human choice in the way economies work (in markets, consumers drive decisions over production), and explains how it is that order can emerge out of the seeming chaos of individual action. In short, the Austrian School provides the most robust defense of the economic system of the free society that has ever been made. This is why I often refer people to the Austrian School rather than speak about Adam Smith and the classical school, much less other schools of thought such as the Keynesian or Marxist schools.
People often forget that economists are not mere technicians who follow numbers. They are philosophers of sorts, thinkers who carry around certain assumptions about the way the economy works and society is built. The Austrian School had achieved mainstream status before the so-called Keynesian Revolution of the 1930s swept away the older wisdom. John Maynard Keynes turned truth on its head, arguing that saving is not a precursor to investment but rather a drag on the economy. He conceived of the various sectors of the economy (saving, investment, consumption, production, borrowing, lending) not as integrated through the price system but as homogeneous aggregates that are constantly colliding with one another. He imagined that wise central planners could know more than irrational market participants and correct for macroeconomic imbalances through manipulating market signals. More often than not, he proposed credit expansion as the solution to all that ails us. This entire agenda presumes the existence of a wise activist state that is involved in every level of economic life. Liberty was not an issue that concerned him.
He wrote at a time when the world fell in love with the idea of a planned economy and a planned society and lost its attachment to liberty as an ideal. From that point on through today, the Keynesian system has been in charge. But in our own times, the Austrian School has made a massive comeback in many different sectors, including academia, and this is in large part due to the work of private institutions such as the Ludwig von Mises Institute to show that the Austrian paradigm makes more sense of the way the world works than the bundle of fallacies that characterize the Keynesian system.
Ideas are very important to the shaping of society. In fact, they are far more powerful than bombs or armies or guns. And this is because ideas are capable of spreading without limit. They are behind all the choices we make. They can transform the world in a way that governments and armies cannot. Fighting for liberty with ideas makes much more sense to me than fighting with guns or politics or political power. With ideas, we can make real change that lasts.
The Austrian School believes this too, because it places such a high value on the subjective element of economics and on the individual as the primary economic unit. We are not cogs in a macroeconomic machine; people will always resist being treated as such. Economics should be as humanitarian as ethics or aesthetics or any other field of study.
People often say that what this country needs is for people in Washington to stop fighting and just get the job done. To achieve that, we need more “bipartisanship.” I don’t agree. If two parties with two sets of bad ideas cooperate, the result is not good policy but policy that is extremely bad. What we really need are correct economic and political ideas, regardless of the party that pushes them.
For more than 100 years, the dominant views that have influenced our politicians have undermined the principles of personal liberty and private property. The tragedy is these bad policies have had strong bipartisan support. There has been no real opposition to the steady increase in the size and scope of government. Democrats are largely and openly for government expansion, and if we were to judge the Republicans by their actions and not their rhetoric, we would come to pretty much the same conclusion about them. When the ideas of both parties are bad, there is really only one hope: that they will continue fighting and not pass any new legislation. Gridlock can be the friend of liberty.
Some argue that what I say can’t be true because Republicans are fighting with Democrats all the time, and legislation still gets passed. True, but all the fighting, despite the rhetoric, is only over which faction will control the power to pass out the benefits. The scramble to serve various special interests is real. Yet when it comes to any significant differences on foreign policy, economic intervention, the Federal Reserve, a strong executive branch, or welfarism mixed with corporatism, both parties are very much alike.
The major arguments and “hotly contested” presidential races are mostly for public consumption, to convince the people they actually have a choice. Republicans have been great at expanding the welfare state and running up the deficit despite their campaign promises. Democrats remain champions of foreign adventurism despite their effort to portray themselves as the peace party.
We have had way too much bipartisanship that promotes an agenda that has ignored constitutional restraints and free market principles. Many Republicans will argue that they stood strong against Obama’s expansion of government-run medical care. It is true that they did, and that helped perpetuate the belief that the two parties are radically different. But we must remember that when Republicans were in charge just a few years ago, the government still expanded its role in medical care, and in very similar ways. The biggest difference is that the Republicans didn’t advertise it.
So-called moderate politicians who compromise and seek bipartisanship are the most dangerous among the entire crew in Washington. Compromise is too often synonymous with “selling out,” but it sounds a lot better. Honest politicians who state that their goal is total socialized medicine (or education, etc.) are met with a greater resistance; while people who favor the same thing but sell it as moderate bipartisanism slip by unnoticed. They are the ones who destroy our liberties incrementally, in the name of compromise and civility.
Incrementalism can only be justified if we regain some of our liberties and if the size and scope of government shrinks. The medical care debate of 2010 concluded with the radicals being held in check by the moderates who got them to back off from a single-payer system—i.e., socialized medicine. Yet the result was that we again moved significantly closer to that position. President Obama and the Congress agreed on a tax bill in late 2010 that retained some existing tax laws plus expanded unemployment insurance so that people could continue to stay off the labor rolls—and this was sold as a bipartisan “tax cut”!
Moderates are somehow convinced that they are the saviors of the country, rescuing us all from the effects of philosophical differences. In fact, philosophical differences are healthy because they lead to the clarification of principles. Genuine progress is going to require more confrontation, partisanship, and serious and honest discussion of the truth about government, the economy, and every sector of American life. It also needs politicians who can hold strong to their beliefs and do not compromise their core values. How sad a state we are in when it seems like such a stretch to expect that from a politician! We need to bring back some understanding of the idea of liberty and what it means. Bipartisanship will not help that process along, mainly because there are so few things on which the two parties agree that would be good for the country.
In the midst of the “great recession” that began in earnest in 2008, there was no end to the talk about stimulus, yet hardly any talk about what causes recessions in the first place. The answer involves looking not at the downturn itself but at the structure of the preceding boom. Here is where the economic balance is tipped and production gets distorted. Rather than look at the recession as the disaster, we are better off looking at it as a period of healing following a false sense of prosperity generated by the boom times.
So what causes these economic booms—periods in which productivity expands in some sectors far beyond what the economic fundamentals seem to justify? Here we can draw on the Austrian theory of the business cycle, which was first sketched by Ludwig von Mises in the early days of central banking. He wrote that the central bank posed a serious danger due to its ability to manipulate the interest rate. Because artificially low rates cause an expansion of the money supply, these invented rates are central to understanding what causes booms. Mises wrote in 1923: “The first condition of any monetary reform is to halt the printing presses.”
The interest rate is a signal that tells bankers and businesses about the best times to expand production. When interest rates fall below their market rate, a false signal is sent out that there are more saved funds available for lending, so naturally, everyone starts to do more business and expand production. They feel they are getting a good deal. The mere process of simple lending acts to create new forms of money in the economy and thus create an economic boom. This boom is usually worsened by government promising bailouts to banks, loan guarantors, and enterprises, thereby encouraging bad investment and business by removing the fear of failure.
The combination of these factors is precisely what led to the wild housing boom from the 1990s and forward that came crashing down in 2008. There was nothing particularly new in this except that this time it happened to affect housing. In previous times, it had affected the stock market, the dot-com market, the oil market, and other sectors, all the way back to when the Federal Reserve Bank was created in 1913. Of course there were business cycles before that time, but they were not as severe and not as widespread, precisely because banking was not as centrally controlled as it has since become. But even back then, people understood the dangers of credit creation by banks and the false signals that they send to producers.
The problems of the business cycle are then exacerbated by the attempt to prevent the bust from leveling out as the market would dictate. In other words, when a bust is looming, a frantic scrambling and even more artificial attempts to inflate the economy occur, which only worsens the inevitable correction. This tendency to use macroeconomic measures began under Herbert Hoover in 1930, a pattern that was continued by FDR. Hoover and FDR actually pushed the same agenda of high spending, attempted monetary expansion, controls on business, and efforts to keep wages high. FDR managed to take us farther down the road to serfdom only because he had longer in office.
One might suppose that the incredible failures of those efforts to work as planned would have discredited countercyclical policy forever. One might suppose that the same failures of Japanese policies that led to a twenty-year recession in Japan would also discredit these efforts. But not so: Both the Bush and Obama administrations (just like Hoover and FDR) have attempted to stimulate the economy through artifice and ended up causing enormous damage to the economy and to economic liberty.
We are currently at a crossroads, deciding which political and economic path to take. It all boils down to two choices: either more government or less. The true believers, still in charge, remain fully committed to central economic planning; others argue that enough is enough, the evidence is clear, and it’s freedom we need, not more government interference.
The misguided remain adamant that to solve the problems of huge malinvestment and debt that have been caused by Federal Reserve–orchestrated low interest rates, the government’s obligation is to come up with more creative regulations. They aim for even lower interest rates by creating trillions of dollars of new money, all while increasing spending and debt. Grade-school math can show you why this won’t work. I am dumbfounded to hear serious, highly educated political leaders enthusiastically endorse such a program with straight faces.
Over the decades, Keynesianism has generated a false confidence—a moral hazard of immense proportion, as former Fed chairman Paul Volcker has admitted. The Federal Reserve, the regulatory agencies, and Congress have systematically taught the American people to trust the government to be there when trouble strikes and that caution in investing, spending, and debt is harmful to the economy.
All the mistakes of the past decades are now clearly revealing themselves. And yet, since Washington has not changed its ways in the slightest, the needed corrections will be long in coming. If blame is to be placed for the mess we’re in, don’t just pick on George Bush and Barack Obama. Blame Lord Keynes and all his followers who rejected the Austrian theory of the business cycle. It is bad theory that is the root of the problem, the belief that the central banks can turn stones into bread.
Simply put: If we want to cure the bust, don’t create the boom. Economic growth must be based on real factors, not phony stimulus provided by the central bank.
CAMPAIGN FINANCE REFORM
Our ongoing political agenda is filled with phony reforms that purport to curb the influence of “bad people” in Washington, and campaign finance reform is always one of these issues. The incentive is so great to buy influence, even before it becomes necessary to lobby for favors, that the “investment” in government begins with elections. All the reforms in the world will not eliminate the corruption in this system. Certainly, regulating elections will not do so, and the attempt alone threatens our liberties to work within the system in order to change the system.
The McCain-Feingold Act, or the Bipartisan Campaign Reform Act, of 2002 was the most recent attack on the First Amendment’s protection of political speech. Twice in lower courts the restrictions on corporations and unions were upheld. The Supreme Court dropped a bombshell in January 2010 when it ruled by a five-to-four margin (Citizens United v. Federal Election Commission) that McCain-Feingold was unconstitutionally restricting free speech. That brought loud dissent from those who don’t mind using government power to restrict political activity; these same people do not even entertain the thought that excessive spending on campaigning is a symptom of corrupt big government.
If there were less to buy through influencing campaigns, there would be a lot less incentive to invest so much in the process. The size of government violates the Constitution and, in particular, its rather narrow enumerated powers (read the Constitution for yourself and see how few there really are); and the problem is further compounded by regulating free speech, which also undermines the Constitution. Those who attack the court’s decision say that corporations and unions have no rights of free speech, following the flawed belief that government can regulate commercial speech in advertising. This is especially harmful when it comes to producers of vitamins and nutritional products, companies that aren’t even permitted to explain what they believe are the health benefits that come from the use of their products, thereby denying consumers useful information. The notion that political speech and commercial speech are two different entities must be rejected. Speech should not be subject to prior restraint.
Corporations don’t have rights per se, but the individual who happens to own a corporation or belong to a union does have rights, and these rights are not lost by merely acting through another organization.
If the right of free speech is lost because individuals belong to corporations, then radio and TV stations, newspapers and magazines, and various groups on the Internet would be subject to prior restraint by the government. Those who argue against permitting corporations to spend money on elections would never argue that corporate media entities like CNN should be legally barred from influencing opinion. The rights of the media are not inconsequential considering how the media can make or destroy a candidate with biased reporting, especially close to elections.
This whole complex issue is nothing more than a predictable consequence of government overreach and a flawed attempt to rectify what appears to be an injustice. Sadly, any effort to remove the incentive to buy government simply by sharply reducing the size and scope of government (thereby making less available to buy in the first place) would be met with great resistance from both liberals and conservatives.
The $2,400 campaign donation limit per person in federal elections makes no sense. How could it be that the right to support a candidate is arbitrarily limited to a dollar amount? And why that dollar amount? Yes, it is correct that the amount of money being spent on elections is obscene, but it’s understandable to me, since much is to be gained by financially participating in the process. Government is a growth industry, and tragically so. The real obscenity is the size of government and its intrusion into every aspect of our economic and personal lives, which generates the financial interest and involvement in the elections.
Campaign laws simply won’t solve the problem. Even if stricter laws were passed, the stakes are so great that the financing would just go underground (or under the table), as is not infrequently done under current conditions. The corruption is not eliminated; it merely takes other forms.
As bad as the process is, there is an even worse solution offered: taxpayer-financed elections. Talk about abusing rights! Can one imagine the eruption of the Tea Party’s anger if those who are disgusted and angry have to pay out of pocket for the campaign of two individuals they find grossly offensive?
Excerpted from Liberty Defined by Paul, Ron Copyright © 2011 by Paul, Ron. Excerpted by permission.
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