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Freedom in Crisis – David Boaz

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May 24, 2020

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Freedom in Crisis – David Boaz
Economics LC
May 24, 2020

“THE BEGINNING OF THE RENAISSANCE OF THE FREE-MARKET MOVEMENT”? Delivered to Cato University, Rancho Bernardo,California, July 30, 2009

Freedom is under assault in America, and has been for a while. we went through a lot in the Bush years-the excesses of the Patriot Act, the intrusionof the federal government into local schools and into state decisions on marijuana, end-of-life choices, and marriage law; the biggest expansion ofentitlements in 40 years; a law to sharply restrict core political speech; the steady accumulation of power in the executive branch and in the person ofthe president; the assertion and exercise of the president’s power to arrest and incarcerate American citizens without access to a lawyer or a judge;an increase in federal spending of more than a trillion dollars; and a near doubling of the national debt.

And all of that before President Bush’s last hundred days. People talk about a president’s “first hundred days,” but think about the last hundred daysof the prior administration. They were one assault on freedom after another.

Back in September and October, a lot of us were feeling shell-shocked by the blows to free-market capitalism-the federal bailout of Fannie Mae andFreddie Mac, the collapse of Lehman Brothers, the bailout of AIG, the all-power-to-Henry-Paulson plan, the collapse of Washington Mutual,congressional passage of the power-to-Paulson-plus-pork plan, the sharp drops in the Dow Jones average, the Federal Reserve Board’sunprecedented decision to lend directly to non-financial companies, the government’s partial nationalization of major banks, Paulson’s announcementthat he would use his bailout money for something other than what he asked Congress to authorize, the auto bailout in direct defiance of acongressional vote, and so on, and so on.

There was no time to fight these measures. Most of them were just announced as done deals-every Monday morning the Secretary of the Treasurywould tell us what he and the Fed chairman had done over the weekend.

With the incumbent president in charge, both presidential candidates going along, and most of Congress afraid to challenge the dire warnings ofcatastrophe, it was impossible to create any real political debate. Defenders of capitalism were reeling.

Adding insult to injury, then came the claim that the free market caused these problems, that American capitalism had failed. we faced a crisis causedby the Federal Reserve, the corporate tax system, Fannie Mae and Freddie Mac, and the Community Reinvestment Act-but the response of manypeople in Washington was to blame it on capitalism. A few even blamed it on libertarianism, as if libertarians had been in charge during the Clintonand Bush administrations.

Big government causes massive problems like this-and then demands more money and power to fix them. Again and again. If it can actually causebig enough problems to be a “crisis,” so much the better.

Robert Higgs, in Crisis and Leviathan, told us that the way government grows in the United States is not at a steady pace, a little every year. It growsduring crisis periods. Leviathan happens during wars, economic depressions, and natural disasters-that’s where you get government growth.

A couple of years ago, the left-wing author Naomi Klein wrote The Shock Doctrine. In an interview, she explained that “the Shock Doctrine is apolitical strategy that the Republican Right has been perfecting over the past 35 years to use for various different kinds of shocks. They could bewars, natural disasters, economic crises, anything that sends a society into a state of shock to push through what economists call ‘Economic ShockTherapy’-rapid-fire, pro-corporate policies that they couldn’t get through if people weren’t in a state of fear and panic.”

She has a point. Panics, crises, and states of shock do lead to political change. we saw that after 9/11, which was certainly a shock to the system.People were afraid. They wanted something to be done. And what happened? The Bush administration gave us the Patriot Act, which includedeverything law enforcement had wanted for a decade without necessarily being related to 9/11. we got the federalization of airport screeners, theHomeland Security Department, and arguably the war in Iraq. All of that demonstrates the idea of the shock doctrine.

But deregulation? Free markets? Hardly. The fact is, governments take advantage of crises to amass more money and power.

In the fall of 2008, we had a lot of economic shocks. Did the Republican administration summon up the spirit of Milton Friedman and cut governmentspending? Did it deregulate and privatize, as Naomi Klein would predict? No. It did what governments actually do in a crisis-it seized new powersover the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into thebanking system. It partially nationalized the biggest banks. It appropriated $700 billion to intervene in the economy. It made General Motors andChrysler wards of the state. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts orother government agencies.

The Obama administration is continuing this drive toward centralization and government domination of the economy. Its key players are explicitlyreferring to their own version of the shock doctrine. Rahm Emanuel, the white House chief of staff, said the economic crisis facing the country is “anopportunity for us.” After all, he said, “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things thatyou could not do before”-such as taking control of the financial, energy, information, and healthcare industries.

For a long time, as I said, many of us were shell-shocked at the daily barrage of assaults on economic freedom. But there were two other factors thathave been hampering the freedom movement. First, too many small-government advocates felt some ambivalence about taking on the Bushadministration. They thought Republicans really do believe in smaller government and free markets, no matter how many trillions in new spendingthey run up or how many Americans they incarcerate without access to a lawyer. That misperception limited libertarians’ ability to organize a broaderfreedom movement to oppose the Bush administration.

Second, during the height of the financial crisis, some business people, and even some free-market economists, felt uncertain about opposing theemergency measures being taken by Paulson and Fed chairman Ben Bernanke. One economist told me, “If Bernanke has seen all the data andreally feels this is necessary, I’m inclined to believe him.”

But that’s all over now. Smaller-government folks feel no hesitation about vigorously taking on the Obama-Reid-Pelosi government. Instead of afinancial “rescue package”-which one conservative called an attempt to “save the capital markets on which the process of creative destructiondepends”-we moved on to debating an old-fashioned, Keynesian, throw-money-at-the-problem, kitchen-sink spending bill described as “economicstimulus.” Most free-market economists feel no ambivalence about opposing that bill. John Cochrane of Chicago dismissed it, saying, “The premiseof a fiscal stimulus is that Americans do not borrow enough and do not spend enough. Enough said.” Robert Barro of Harvard called it “probably theworst bill that has been put forward since the 1930s.”

The reaction to the so-called stimulus bill may have been the beginning of the renaissance of the free-market movement. Freed from the burden offeeling some connection to a big-government Republican president, Republicans voted overwhelmingly against the bill in both houses of Congress.Libertarians played leading roles in galvanizing the opposition.

The good news is, the freedom movement is back in gear. The bad news is, it’s because the welfare state is on the march.

But we’ve faced dark days before. Think about the first great fight for American freedom, the Revolution, challenging the power of the mightiestempire on earth. 1776 was a great year. Americans issued the Declaration of Independence and took up arms. Across the pond, Adam Smithpublished The Wealth of Nations. But by the end of the year, Thomas Paine was writing his famous words, “These are the times that try men’s souls.The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the loveand thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the moreglorious the triumph. what we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put aproper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated.”

A year later, just before Christmas of 1777, Washington’s army took up winter quarters at Valley Forge. They faced a cruel race with time to get hutserected before the soldiers-barefoot and half naked, wrapped in blankets-froze to death. Hundreds of horses starved, and for the army starvation wasa mortal danger. Americans persisted and came through the crisis-and established a free country on this continent.

Later, we faced the challenge of slavery-an institution that had existed from time immemorial, in virtually all parts of the world, until the rise oflibertarian ideas in England and America created a movement for abolitionism. we’ve all read of the horrors of the Middle Passage and the regime oflegalized violence that sustained slavery on the plantation. Reports and novels about the reality of slavery helped to change minds. But thefundamental principle that motivated the abolitionists was the pure idea of liberty.

Frederick Douglass, William Lloyd Garrison, Sarah and Angelina Grimké all used libertarian arguments. They talked about liberty and the Declarationof Independence. They talked about self-ownership. They called slavery “man stealing” because it was stealing the man from himself. AngelinaGrimké wrote, The great fundamental principle of abolitionists is that man cannot rightfully hold his fellow man as property. Therefore, we affirm thatevery slaveholder is a man-stealer; a man is a man, and as a man he has inalienable rights, among which is the right to personal liberty. The causeof freedom won that fight, too.

Compared to the hardships of Valley Forge and plantation slavery, the New Deal may seem a minor problem. But it presented a fundamentalchallenge to economic freedom and constitutional government. There were a lot of similarities then to our own time. People were told the market hadfailed. There was a crisis atmosphere and a state of shock in the American polity-and pseudo-solutions being passed in panic.

The forerunners and founders of the libertarian movement reacted in horror. Frank Knight told Hayek that the New Deal represented a “generalmovement of west European civilization away from liberalism to authoritarianism.” Henry Simons, another of the early Chicago economists, fearedthat “the basic values of civilization would be lost” in the coming of the New Deal. Isabel Paterson wrote that it was not right to say that the New Dealwas like fascism. Rather, she said, the New Deal “is fascism.”

As if nine years of the abuse of the market and constitutional government and the growth of presidential power wasn’t enough, then came world warII, the greatest, most destructive war in the history of the world. Imagine being one of the tiny band of remaining libertarians in 1943. You had the NewDeal. You had the horrors of war. And Europe was in the hands of dictators. The Soviet Union had eastern Europe and the alliance of NationalSocialism and fascism had most of the rest, from Stalingrad to North Africa to the English Channel. It was a bleak time.

Yet there were a few people who stood up. In that dark year, three remarkable women wrote books that launched the libertarian movement-orrelaunched the American movement for freedom. Isabel Paterson wrote The God of the Machine. Rose wilder Lane, the daughter of Laura Ingallswilder-than whom you could not get more quintessentially American-wrote The Discovery of Freedom. And Ayn Rand wrote The Fountainhead, whichbecame a massive bestseller and a major motion picture. These books gathered a readership, the kind of people Albert Jay Nock called “theremnant.” In 1944, Friedrich Hayek published The Road to Serfdom, a book that was certainly more important in academic circles. It was Hayek’smost popular book and brought him great attention. In 1946, with the war over, Leonard Read was ready to start the organized libertarian movement.He founded the Foundation for Economic Education, the first free-market think tank. He launched a movement with these books and these ideas anda very few people.

Now freedom is under assault again. Statism marches forward, helped along once again by an atmosphere of crisis and panic. It’s easy to getdiscouraged. It’s easy to let the immensity of the challenge stop us. But it didn’t stop Thomas Paine. It didn’t stop Frederick Douglass. It didn’t stopIsabel Paterson, Ayn Rand, and Friedrich Hayek.

And it won’t stop us. The Cato Institute raised serious questions about President Obama’s “stimulus” plan in our full-page newspaper ads and inhundreds of newspaper articles and broadcast appearances. we’re publishing longer studies and even books critically analyzing the roots of thefinancial crisis and the elements of the Obama program.

Speaking of summer soldiers and sunshine patriots, a few weeks ago I was joking with some free-market economists who declined to sign our ad,and I told one of them, “Some day you’ll be sorry you weren’t on this roll of honor.” And I quoted the St. Crispin’s Day speech from Shakespeare’sHenry V:

We few, we happy few, we band of brothers; For he today that sheds his blood with me Shall be my brother; And gentlemen in England now abedShall think themselves accursed they were not here, And hold their manhoods cheap while any speaks That fought with us upon Saint Crispin’s day.

The challenges we face today are not going to stop us.

And I know they won’t stop you.

More than 200 years ago, Thomas Jefferson and the other signers of the Declaration of Independence committed themselves to the cause ofAmerican liberty with these words: “And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutuallypledge to each other our Lives, our Fortunes and our sacred Honor.”

And they weren’t kidding. Twelve signers had their homes ransacked and burned by the British. Nine more died from wounds or hardships of theRevolutionary war. None, however, lost their sacred honor.

And you know, we talk about the statesmen, and the military leaders, and the philosophers who made us free. But their work was made possible bythe farmers, and the merchants, and the printers who provided the kinds of support without which those great deeds could not have been done.

The struggle for freedom has never relied entirely on geniuses and heroes. Think about the Quaker merchant Benjamin Furley, who provided moneyand lodging for John Locke and William Penn, or Elizabeth Cady Stanton, a housewife and mother who spent 50 years campaigning for women’srights. The great libertarian campaigns for free trade and the abolition of slavery depended not just on their leaders and orators but on thousands ofpamphleteers, contributors, precinct walkers, and envelope stuffers. Today you can stuff envelopes in the privacy of your email account.

We will not risk our lives or our fortunes if we speak out for freedom. All we have to do is write letters to our public officials-and letters to the editor-and speak out at public meetings-or speak up against subsidies and regulations in trade associations and chambers of commerce-or join a groupworking for fiscal sanity or an end to the war. And I would be remiss if I didn’t ask you to devote some portion of your fortune to the cause. Theorganizations committed to liberty and limited government can survive and grow only with your support.

We don’t have to risk our lives. But we do have to do those things-because we know that freedom isn’t free.

And so I end today by recalling a statue that stands in downtown Chicago, in the heart of a great enterprising city-HOG Butcher for the world,

Tool Maker, Stacker of wheat, or today we might say allocator of capital for the world-that shows George Washington flanked by two men who alsomade the American Revolution-Robert Morris and Haym Solomon, who provided the funding that kept Washington’s troops in the field and kept menlike James Madison in the Continental Congress.

Let this statue be a symbol of our partnership, and our commitment, to the cause of freedom. And let us not fail to live up to their example.

~~~~~~~~

Address by David Boaz, Executive Vice President, Cato Institute, and author, Libertarianism: A Primer and the Politics of FreedomD

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