Dear Themon,

To be told I make more sense than the most influential philosopher of the 20th Century is indeed a marvelous compliment. I thank you for it. Keeping in mind that you have not yet read any of Rand’s books in full, however, I will try to prevent such praise from going to my head in the interest of getting through doorways. Then again, I am fond of French doors. Perhaps a few more wouldn’t hurt. . .

That said, I will argue most vehemently against any charge of nihilism. Political nihilism rejects any sort of intrinsic value or meaning in the individual or any state and cultural structure and thus advocates the complete abolition of such structures. As a firm believer in the Natural Law and Classical Liberalism, I represent the very antithesis of nihilism. If my letters in this thread focus more on errors than solutions, it is only because we were discussing Bernstein’s article and not my own proposals for a brave new world. I have a laundry list of those, however. The fact that I detest our current system does not mean I oppose the very idea of government nor does it mean I think our system is irreparable. It will, however, take a great deal of work and I have little confidence in the ability of our current politicians to accomplish it adequately. That, though, is plain old disgust and frustration—not nihilism.

I think it is unfair to level the charge of nihilism at the Tea Parties as well. To assert that government has gone too far, taken too much power, and trampled intolerably upon individual rights is hardly nihilism. The assertion of individual rights is quite opposed to nihilism. One need not be an academic capable of illustrating the finer details of these claims and how they came about to recognize their truth. Almost any idiot can recognize the injustice of government granted privilege in such acts as the bailouts even if they cannot explain the economic harms such things bring about. Moreover, the idea that we should limit the reach and power of government is hardly a call for its complete abolition as a meaningless wreck. People are beginning to see they let it get massively out of hand and are now seeking to correct that error. That is not nihilism. It is a return to liberalism.

Now then, if you prefer to say we are trying to create the limited constitutional government we never achieved rather than claiming to restore constitutional government I have no major objection. Certainly, a perfect system is unattainable given the flaws of the human beings trying to make it. Thus, it is a constant struggle to improve and refine. That said, however, I do maintain we have departed rather markedly from the system we did have in place and even returning to that would be an improvement.

You ask when that departure began. That is easy. The Liberalism of the Enlightenment was opposed by Progressivism in the late 1800’s, which basically sought to speed up the freedoms and improvements of Liberalism through government intervention and planning (i.e. socialism and collectivism). In Europe, Progressives and Liberals clashed openly and early. Progressives had already begun to steer European governments by the late 1800s. Progressivism did not take hold in the U.S. until a bit later and was much more subtle when it did so. Progressives even co-opted the Liberal name here and left Libertarians (and here I focus more on the philosophy rather than the modern political party) as the successors to true Classical Liberalism. The first Progressive of note we had was William Jennings Bryan. However, we did not get a truly Progressive president until Woodrow Wilson in 1913. Since then, Liberalism has been slowly obliterated and we have slid, despite a few obstacles, ever further toward socialism and ever expansive government. Whether you would choose to phrase it as restoring limited government or creating better government, I favor ending this trend and asserting the principles of Liberalism. As I mentioned, I have a laundry list of specific policies in which that can be accomplished but those can wait while we hash out basic philosophic principles.

*****
Big government vs. Good Government.

I think we may be using different definitions of big and small in reference to government. As I use the term big government, I do not necessarily refer to comparative budgets. Certainly, by that standard all the states are dwarfed by the Federal Government and appear quite small indeed. Even the British government, which has become one of the most invasive in the world, would be look small next to the U.S. if measured merely in dollars. However, that is not how I use the term. In referring to the size of government, I am looking at the area of our lives it occupies. By that measure, even state governments take up huge spaces. As you rightly point out, governments at any level can be full of corruption and vice. At any level, they can intrude terribly into our lives. At virtually every level, that intrusion has become too much, and thus I say government is too big in its scope. Consequently, its accomplishments are more oppressive and damaging than they are liberating and uplifting.

In Common Sense, Thomas Paine explains that, “Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.” That is the idea upon which the founders created this nation. Good government was not their objective. They did not believe it was possible. With the Constitution, the founders set out to create a government capable of carrying out its basic functions, but so limited in power and scope that it could not become oppressive so long as the Constitution was followed.

The experiment worked marvelously at first. America was a wonder of the world. The French aristocrat, Alexis de Tocqueville, beautifully described our burgeoning nation in Democracy in America in 1835. However, he did have a few ominous predictions about our limited government. He warned that it would attempt to grow and subject us to a “new kind of servitude” when:

after having thus successfully taken each member of the community in its powerful grasp, and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate to rise above the crowd. The will of man is not shattered but softened, bent and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to be nothing better than a flock of timid industrial animals, of which government is the shepherd. — I have always thought that servitude of the regular, quiet, and gentle kind which I have just described might be combined more easily than is commonly believed with some of the outward forms of freedom and that it might even establish itself under the wing of the sovereignty of the people.

I would say his prediction has come true. Not only has government massively overstepped its original role, it has managed to convince a good portion of our society that such intrusions are not only desirable, they are actually necessary for the survival of the nation and society itself. Your own recent arguments display this attitude rather aptly, despite your skepticism of government’s competency. Your statements about the fundamental purpose of government, for instance, go well beyond the fundamentals. By including equitable redistribution of wealth in your list, you depart entirely from fundamental purpose of government and leap into Progressive policy aims to make society better through government—a proposition that continues to fail yet never seems to go away; it just gets dressed in new fashions and goes out preaching again.

The Purpose of Government

Obviously, I reject the idea that government either is or can be made to be good. At best, it can be limited to its proper role. I hold that the proper role of government is to provide stability in a society where the actions of individuals are insufficient to accomplish that task on their own. All governments in history are formed for this reason (social contract theory); how far beyond this purpose they go is another matter.

Nonetheless, for the sake of stability and survival, providing a military for the common defense, which not even the wealthiest of people could provide individually, would be a proper role. Where individual action can provide adequately (markets, transactions, provisions of goods and services) it should be as free as possible to do so. Where individual action, competition, and free negotiation are insufficient or unable to provide stability, though, they should be supplemented with government (codes of law for contracts, anti-fraud, property rights, et cetera). That is it. That is the most basic purpose of government.

This is why I have a simple test for any policy:

1. Does the policy address a continuing issue of true instability in society?

2. Is the policy narrowly tailored to address the issue while preserving individual liberty to the maximum extent possible?

3. Is the policy uniformly enforceable so as not to be arbitrary or capricious?

4. Finally, after all is tailored thusly, does it fit with the Constitutions of the State and U.S.? If not, it must be redrafted or proposed as an amendment.

This form of government is based upon a particular notion of freedom. Here, the purpose of government is to ensure that the individual is able to go about as he pleases without interference and without interfering with others. This is the idea of true liberty and being free from limiting authorities to the greatest extent possible.

There is an opposing idea of freedom, though. That is the freedom to do something or have something. This type of freedom was conceived of by Progressives who were impatient with all the gains made by Liberalism. They sought to go further and faster. Of course, this type of positive freedom is the exact opposite of true liberty. It requires a rather powerful state which makes certain positive guarantees to people and ensures that they have the freedom, for instance, of universal health insurance. As Hayek points out in, The Road to Serfdom:

How sharp a break not only with the recent past but with the whole evolution of Western civilization the modern trend toward socialism mean becomes clear if we consider it not merely against the background of the nineteenth century but in a longer historical perspective. We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton, but one of the salient characteristics of Western civilization as it has grown from the foundations laid by Christianity and the Greeks and Romans. Not merely nineteenth — and eighteenth — century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides, is progressively relinquished.

For the purposes of this discussion, I would add that the progressive notions of ‘freedom to’ rather than the classical liberal idea of ‘freedom from’ also abandons the whole history of Druidic and Celtic tradition and law based entirely upon the individual.

The ideas you propose as the fundamental purposes of government grow from both of these notions of freedom. The problem is that these two notions of freedom are irreconcilable. Either you can have liberty or you can have the government grant you privileges until if falls apart under its own weight or is torn asunder by those it oppresses to provide those privileges. However, you may not have both liberty and privilege. Taking your four categories of regulation of individuals, of trade, of providing hedges, and redistribution, I will endeavor to show where we may be in agreement for the structure of a limited government and where your proposals are simply not possible in a free society.

Regulation of Individuals

I agree with you that the social conservatives are fools. They have forgotten why the founders did not want to establish any one religion in this nation. And yes, the attacks on the Bill of Rights have been alarming. However, I think you overlook Democrat attacks on our liberties. Why is it everyone simply accepted the idea that Secretary Salazar could close all offshore drilling? Where does the Executive Branch get such power? The answer, as a federal judge recently reminded them, is that it has no such power. The government may not simply take over businesses in such a manner. This is but one example though. The regulatory schemes which are consistently imposed by executive agencies, enforced and changed with alarming arbitrariness to suit the needs or views of government are manifold, though, and all represent attacks on our liberties in the name of government provided betterment. Did you know you have to have a permit just to have a picnic in any Denver park? No real reason for it that individuals can’t handle on their own. But it does allow police to ticket some they dislike or move groups they don’t agree with. Arbitrary and capricious and certainly a violation of liberty if we have to ask to have a family picnic.

Such behavior does not solve instability in society; it creates it by undermining the rule of law. The rule of law, as Kant put it, says that “Man is free if he needs obey no person but solely the laws.” This creates a stability under which people can live comfortable and make plans, knowing the likely outcomes. They even have set process by which they can change those laws. Under such a system, even an annoying or bad law, properly made and universally enforced, is preferable to an arbitrary one in which no one knows how to act, when or how it will be changed, and who it will ensnare. As members of both major parties seek to use government to regulate everything as fits their particular agendas far beyond what is needed for stability or supplementing competition, they embark into areas where executive agencies cannot help but act with arbitrariness from the vague and expansive laws congress delivers to them. I think you overlook this—especially among Democrats.

Regulation should only be used to address instabilities not adequately provided for by individual actions. It should follow my formula when it is enacted. It should certainly not be arbitrary and capricious. Yet, the recent bailouts and financial regulatory schemes violate all of that. The existence of agencies like Fannie and Freddie violate that. These are areas where both parties are guilty of violating individual liberties with regulations and overly expansive government.

Regulating trade and commerce.

You are absolutely correct in your assessments of both parties here. They are stupid and fascist—both of them. You are also correct that regulation should be simple, clear and relevant, and that enforcement should be consistent, and that penalties should outweigh gains to be made from violations if they are to have any effect at all. I agree wholeheartedly. So why do you oppose removing government interference?

Republicans say they are pro-business rather than pro competition, a seemingly innocuous but important distinction. As a result, they are willing to try to forward all sorts of exemptions, tax breaks, and subsidies to favored businesses. This succeeds mostly in creating large market distortions from the privileges they grant to some, not all. It also encourages businesses to work with the government to try to win those important privileges. A more sensible republican would favor eliminating exemptions and tax breaks altogether in favor of a consistent, uniform and sensible regulatory and tax code. This is rarely heard, though, and our current tax code is a monument to fascist planned economies and arbitrary political acts. Clearly the involvement of government has been a poison, so why continue it?

Democrats do indeed focus on what they deem ‘nice’ or ‘for the public good’ and manage only to massively drive up the costs. Their meddling also encourages businesses to lobby voraciously to avoid being put under their regulatory schemes. Like Republicans, those who do it well get favored positions and exemptions or anticompetitive measures to hurt their smaller competitors or foreign competitors all in the name of public good or safety. Again, government involvement looks like the problem.

Let us take the security regulations. After Enron, Congress came up with the Sarbanes-Oxley Act. It was the first time they touched the securities laws since the 1933 and 1934 Acts. While they trumpeted the supposed reforms, they have not amounted to much. The perpetual auditing system they designed created a various new niche industries of regulation compliance services from accountants to managerial consultants to legal services. Many companies I have looked at spend several hundred million dollars on compliance costs alone. In addition to massively increasing costs, this has created huge barriers to entry as a publicly traded company and damaged competition. However, it has not shown any reasonable benefits of prevented further financial crisis. If anything, it has created an even cozier relationship between SEC regulators and the industry who hires them after a few years in the agency. Despite this, Congress and the President and many on both the left and right are calling for even more regulations and an even closer relationship between governments and corporations. We may as well declare ourselves corporatist fascists and be done with it.

Alternatively, we can deregulate. The ’33 and ‘34 Acts are hopelessly outdated. In an age of instant communication, rather than passing byzantine new laws with huge costs of compliance and enforcement, not to mention the inappropriate relationships such things encourage, we could easily scale back to anti-fraud provisions. Anti-fraud. With just that much, you could take out false transaction and false valuation statements. You could easily use it to fight the problem of naked short selling. And yet, there is no extensive regulatory scheme to sort though, no massive cost of compliance, and no arbitrary enforcement. Do we really need the quiet period and other outdated regs that serve only to provide their niche industries and provide jobs for the regulators in private industry to help navigate such arcane systems? No. Furthermore, with such simple rules, constantly enforced, we reduce the motive to lobby so actively as well, as the system stays the fair and consistent for everyone.

As to the regulators, we can abolish the SEC. We can hand enforcement to the FBI and regulation to Treasury. That eliminates much of the cozy relationship between business and its regulators, as well as the wrist slaps often administered today.

These are just a few examples, but all this accomplishes much of what you desire: simple rules, clearly stated and consistently enforced without arbitrariness. But it is accomplished through deregulation and scaling back governmental interventions—not increasing the role or scope of government. Indeed, it would require actively limiting the role of government to get such desirable results.

Hedges

Yes, hedges of all sorts are inherently socialistic and some are even necessary. We seem to agree completely that virtually all of our social programs and military have grown out of control. Describing the whole affair as bread and circus may be quite apt.

That said, I have to differentiate here between a hedge, and social welfare program, and a true public good. A hedge for government would indeed be like a grain stockpile in case of disaster or drought, or perhaps a healthy surplus of public funds to better weather times of recession. A social welfare program is a bit different in that it affects individuals rather than strictly government behavior. To some degree, such programs may have some limited worth if they are crafted correctly. An unemployment fund of strictly limited size and duration may be useful for stemming popular unrest for instance. Grown and bloated into a long term welfare program, though, produces problems we know all too well. This should be treated with extreme care and caution, but I do not disagree that it should occasionally be done. Finally, a true public good would be a service that individuals on the free market cannot feasibly provide. The military would be an excellent example. Roads would be another. Things like education, however, do not fall into this category. Those are good people have chosen to have the government provide, but they can easily be provided on the market and are not true public goods. They fall back into social welfare programs instead.

I will grant that even limited governments should provide for true public goods such as military and roads. Providing hedges such as a rainy day fund for its own functions may also be wise. I am quite skeptical of the extent to which a government can or should provide social welfare programs, however.

Take, for instance, social security. You characterize it as a hedge. By my definition it would be a social welfare program as it has nothing to do with temporary disasters. However, it was not intended as either. It was intended as a revenue generator. The reason there is no money in the Social Security Trust is that FDR never intended people to receive that money. At most, the government expected people to receive benefits for a year or two. That is it. While the people would see this as a benevolent attempt to care for them in their old age, the great bulk of the wealth could then be used to fund other operations of the government. Unfortunately, people did not obligingly die as they should have. Instead, we had the gall to prolong out lifespan. Social Security now, for the first time, pays out more than it takes in, and is no longer generating revenue. Now it is a burden on the government, a risk for the people depending upon it, and a danger to the people as they ceded power to the government to make them dependant on such a vile lie (I still don’t understand where the government even derives the power for SS, Medicare and Medicaid, and it hasn’t yet been litigated—though the new Obamacare litigation may provide an answer).

In terms of social welfare programs, I rather like the example Colorado Springs is providing (see the Denver Post Story). Private individuals and community groups are maintaining parks, fountains, and street lights. Private clubs are managing pools and recreation centers. Churches and community organizations are filling gaps left by government programs and discovering the meaning of the word community again in the process. Though the author worries about poorer neighborhoods, I disagree. Poor people do not suffer deficits of time any more than other people. They suffer deficits of money and it does not take money to help clean up a park. Our modern welfare state has turned many poor neighborhoods into government dependant slums where the people expect the state to take care of all maintenance, and thus the author may be correct initially. However, U.S. and some European history of poor neighborhoods in pre-welfare days shows that poor people often had close and involved communities, even maintaining schools and keeping areas relatively clean.

You add another interesting category to your ‘hedge’ concept, however. You add a category of guiding industry or national direction. In many ways, this overlaps with regulation of industry and trade, but it is interesting to talk about it in terms of public goods.

I like the example of the prostitutes you cite. I believe Sweeden still maintains a corps of army prostitutes. Anyway, providing for a military is a clear public good, but it does little good if the whole army is decimated by Syphilis or some other STD. The licensing of prostitutes is easy to see as a necessary measure to protect the troops, but it is also a good anti-fraud provision in the marketplace. In the case of an STD, while a client could sue a diseased prostitute for damages, the harm is done: the military is weakened and the client is stuck with an STD. The market has no way to prevent this. A licensing regime can accommodate it easily to the benefit of all.

As I said earlier, where competition and individuals cannot remedy an issue of instability, the government has a legitimate cause to step in and supplement competition. A license for prostitutes, or a government certification that a medication is not filled with poison, fulfills this function. Contrast that, though, with law licenses. Getting legal advice from a non lawyer will not kill you. In fact, a Ph.D. in privacy law might be able to help you protect your online information better than a licensed attorney. Yet, we make it a crime for that Ph.D. to give legal advice. We even make it a crime for attorneys to give advice in other states despite the fact that the bar exam is the same in every state, the only difference being the number of essays used. Here, the regulation is not designed to prevent fraud or ensure fair practices, but to limit competition. A guild certified attorney might indeed be the most valuable representative you could choose, but there is no real reason why the people should be prevented from choosing representation by people outside the guild if they find such representation more effective or more affordable.

Vaccinations are a bit easier in terms of a public good. An outbreak of plague is certainly as big a threat to a state as an invasion. In the case of the Byzantine Empire, it is one of the prime factors which made a Turkish invasion possible. Thus, a state provided vaccination meets the definition of a public good as no individual can adequately cover such a thing and it requires total distribution to be effective.

Jump starting industries gets into much shadier areas, though. NASA began with military goals in mind. You are correct that without NASA the space program would have been much slower to develop. That said, NASA today has no useful purpose. It already subcontracts out virtually all of its functions. Its own role seems to be meddling just enough to screw things up (like not converting between metric and English systems and watching helplessly as their probes smash themselves onto the surface of Mars). My friends at Lockheed have no end of frustrating stories about NASA’s interference. More disturbingly, though, if a business tries to operate outside NASA, NASA immediately underbids them—even in private enterprise. It can do this as it operates on tax dollars. Thus, it has successfully presented all meaningful competition in the U.S. and all private space efforts are conducted outside our borders. Whatever good NASA did in the past is now gone. What it does today is both unnecessary and wasteful. In this case, there is no longer any need to supplement competition and government is actively hampering it. If government has military space interests, it has many options now to help it carry them out. NASA is superfluous. It would have been better had government chartered such research out to begin with rather than making it a separate military effort which morphed and bloated into an immortal agency.

Energy is an even more problematic way to think of the supposed benefits of government on industry. Low oil prices do not stifle alternative energy research and development. We have poured billions into such research privately and the government has maintained that monument to uselessness, the Department of Energy, since the Carter days.

I agree with you, though, that Obama seems to think if he just shuts down oil production here in the U.S. and demands alternatives, our tech gurus will magically produces them. I am reminded of King Knute sitting in his throne on the shore as he ordered the tide not to ebb. He demonstrated to everyone the true power of a monarch when his feet still got wet.

Obama’s problem is that simply demanding something does not make it so. We do have alternatives. However, while about 10-18 barrels of oil are produced for every one barrel used in the production (and declining as oil becomes scarcer), the ratio of all alternatives are much worse. Methanol gives only 3:1 while biodiesel gives 2:1 and corn is actually negative. Hydrogen cells cannot be produced without a net loss in energy. We cannot produce anything as cheaply or as effectively as oil. Also, our infrastructure is not designed for anything else. We face a major lifestyle change. While we need to be doing everything possible to prepare for that change, government attacks on the oil industry as we reach that point are massively counterproductive. I guarantee that we will need every drop of our oil to sustain us before we get to the point where we are living effectively on alternatives. Obama’s efforts and interference here will just make things worse and more painful.

The long and the short of this is that while government might effectively use its power to direct and protect public goods, in general, and even in such instances, it should stilltry to follow the legislative philosophy I laid out so as to accommodate competition where possible and supplement it where it is not. It should not, however, try to supplant it entirely or direct its entire course. That invariably leads to trouble.

From prior conversations, I think you will agree with most of what I have pointed out here. Thus, I must ask again, where does your faith in government come from? The functions I propose here all require a limited government with a focus on free competition.

Redistribution of Wealth

Up to this point, I think you and I share an appreciation of the problems government causes in society. The fundamental difference seems to be that I do not believe government is capable of solving most of these problems unless it is scaled back and limited whereas you seem to maintain a stubborn belief that government may be able to address some of these problems if we just put in the right policies and regulations. I think, however, you would agree with me that so far we have been quite inept at using broad scope government to deal with the problems of broad scope government.

We do massively disagree, however, as to whether redistribution of wealth is a fundamental purpose of government. I adamantly maintain that it is not. Certainly, as I have already explained, such an idea is a rather recent development in history, and was not any part of the original justifications of the state. Thus, it is not a fundamental purpose of government. I will not even grant that such an idea would be a fundamental improvement to government. I find it entirely appalling. There can be no other word to describe the immoral assertion that one person has the right to take away the earnings or property of one person and give it to another merely because the other person doesn’t have it. In addition to the moral travesty that idea represents, though, it causes economic calamity. Removing economic motivations are just the most obvious economic consequences. However, the concentrations of wealth you speak of supposedly requiring redistribution are not even the root cause of our problems.

You mention that Republicans and conservative blame many of our problems on big government while you could say “low wages” and point them at the corporations. I think not. Low wages by themselves are self correcting. People stop working or shift employment. Also, products cannot be sold and profits cannot be made if people are too poor to buy them. People cannot do much about monetary policy though. Inflationary causes do have impacts. Loose credit cycles have major impacts, as we are seeing. The French Revolution didn’t happen because people were poor. They were always poor and often much poorer than at the time of the Revolution. The French Asignot, however, had been destroyed by money printing and loose credit cycles. Inflation was out of control and no one could make use of the money. Poor became starving and it had nothing to do with business interests but rather the collusion between the crown and the banks. The ideology of Rousseau put a nice gloss on the cause though. Now no one much recalls the underlying economics .

You talk about the concentration of wealth and speak as if it is the inevitable result of market capitalism. How does wealth get to be so concentrated without the help of government regulation and monetary policy though? It does not. As far back as 1941, the Congress’ Temporary National Economic Committee (certainly no conservative bastion) took up a study of the “Concentration of Economic Power.” They concluded:

“The superior efficiency of large establishments has not been demonstrated; the advantages that are supposed to destroy competition have failed to manifest themselves in many fields. Nor do the economies of size, where they exist, invariably necessitate monopoly. . . . The size or the sizes of the optimum efficiency may be reached long before the major part of a supply is subjected to such control. The conclusions that the advantage of large scale production must lead inevitably to the abolition of competition cannot be accepted. It should be noted, moreover, that monopoly is frequently the product of factors other than the lower costs of greater size. It is attained through collusive agreement and promoted by public policies. When these agreements are invalidated and when these policies are reversed, competitive conditions can be restored.” Final Report and Recommendations of the Temporary National Economic Committee (77th Cong., 1st sess.; Senate Document No. 35 [1941]), p. 89.

All of Austrian Economics has argued the same. Today it is especially clear. I have no disagreement with you that our present stock market is concentrating wealth among a top few while screwing the majority population. But why? Could it be because Goldman Sachs gets the Fed bonds and printed money before anyone else, then spends them before they trickle down and register as inflation? Could it be because Fannie and Freddie and other pseudo private companies likewise get first money and are backed by the government? Could it be because certain companies are deemed too big to fail and are provided numerous backstops and bailouts to ensure their survival in the midst of clear and unmitigated failure while other companies and individuals go broke? I could go on and on but the story is not much different from the Asignot of France or the Weimar Republic. Government, not capitalism, is responsible for the unhealthy concentrations of wealth and corruption of the money supply.

Wealth without labor — even on highly concentrated amounts– is not the issue. Investment wealth, properly managed, makes labor and production possible. Improperly managed it can and does dissipate quickly. Without investment wealth, businesses would find it difficult to innovate or automate. And while that reduces labor while increasing profits, that labor is then free to go elsewhere in the economy, making certain things possible that were not before due to either a scarcity of labor or of a lack of people properly trained in certain fields. So yes, investment and reinvestment is a basic requirement for economic growth and development. Left to its own devices, often that investment will fail, limiting wealth and how much people are willing to risk. Only when colluding with government does it becomes poisonous to the whole system and lack the natural limiting process.

Despite all this, you dismiss basic wealth freeing policies of low taxes as self serving bullshit and promote using the very system that gave us all our problems—government tax and regulatory schemes—as the proper means of fixing the problems they created in the first place. I have to admit to being somewhat astonished by this. You see all the problems very well. You also seem to acknowledge the government’s role in perpetuating and exacerbating those problems. Yet, despite this, you seem to have an almost religious devotion to the idea of government as the solution to those very problems—contrary to all evidence. Whatever is wrong with the idea of simply removing government from its role as master manipulator of the markets and industry?

You want another way of equitable wealth distribution? I suggest free market capitalism coupled with limited governmental scope and a sound monetary system. You say that waiting for the return of Jesus is more likely. However, the alternative of using more government regulations and controls to compensate for the harm and corruption other government regulations and controls are already producing is frankly insane. Evil cannot be used to fight evil. One of the two will win and take over resulting in evil or they will insidiously combine resulting in more evil. To prevent the evils of government you must chain it up and free the people, depriving the evil of a mechanism with which to assert its tyranny over them. Our failure to do so already has the potential for financial Armageddon and we may all be hoping to meet Jesus before the end. .

Government is like a chained and monstrous giant. We want it just free enough to toss the occasional rock at something for us. Preferably with just two fingers. If it gets its whole arm loose, though, and starts smashing houses, the solution is not to release the other arm in hopes it will control the first; the solution is to chain it up again.

Even if it were desirable to free government to solve these problems, it is incapable of doing so. Better men than myself have demonstrated clearly that the state simply has no way to compensate for all the decisions needed in a market. Only individuals, acting in their own interests, can effectively make a market run. Any government action that goes beyond supplementing competition into controlling it or supplanting it entirely will result in disaster.

Then there are the issues of liberty and equality. Under the solution I propose, we are equal under the law. We are at liberty to do as we please so long as we infringe no one else’s rights. Though the results will be somewhat unequal, there will be no privilege. Alternatively, we can have a society where we are all measured differently under the law based on wealth and ability. We are free to do no more than we are permitted by the state. The results will be equal in terms of what we are permitted to do or have, but there will be privilege in terms of who sets the rules and decides who is affected and how. There is no compromise between these two systems. They are incompatible, and half measures do a poor job of either. We found that out after trying half measures, and have been sliding steadily toward the later idea of freedom and equality.

After reading your letter, I went back and reread Hayek’s The Road to Serfdom. It really is a marvelous little book and I relied heavily upon it in making some of these arguments. Written in 1944, it is perhaps more relevant today than ever. He lays out, with startling clarity, the consequences of trying managed economies or equitable redistributions of wealth outside the processes of the market; as the book’s title suggests, it is always serfdom. He also illustrates, however, the profound justice to be found in the free market and limited scope of government. Indeed, it is only there where the rule of law can triumph over the arbitrary rule of interests or individuals. It is also the only system where wealth can be made rather than taken or looted and individuals in society remain free to achieve what they can.

Last Remarks

In your conclusion you mention the declining production here in the U.S. Much of what we do is make-work, if not quite so bad as Mr. Jetson. The U.S. economy has transformed from an agricultural economy, to a production economy, to a service economy, to what it is today – a financial economy. We produce next to nothing save agricultural products. We trade paper. Again, though, our loose credit system has caused this. In many ways, it has mandated it as our artificially low interest rates propelled people into riskier and ever more bizarre financial schemes in order to get a decent return when saving rates were unprofitable or (as today) even negative. Couple that with extensive regulation and tax systems which has made overseas production more profitable and you have our current situation.

Can this be undone? Yes. However, look at the causes. Again, it originates with government policies. Can production and service be brought back to the U.S.? Can the financial industry control itself? All yes, but not without a massive shrinkage in governmental scope and cost and the enactment of a sound monetary system. This is not new. It happens over and over again through history. The U.S. was just foolish enough to believe it could not happen here, even if we made all the same mistakes others did. We have not learned the lesson even yet, but we will. How quickly we learn that lesson will determine how long the unemployment rate stays above 20%.

If, however, we are unwilling to abandon our faith that more government is the solution to government caused problems, then we will be in for a long haul, likely worse than the Great Depression as it this one is worldwide.

Julian Dunraven.

P.S. My statement that modern U.S. government is so far reaching and all encompassing that no king or emperor or sultan has ever achieved so much power or control over his subjects as the U.S. government now exercises over its citizens is utterly true. We don’t often think of it this way. No king could ever hope to invade the email and phone records of all his subjects. No emperor could boast of having a regulatory process for virtually every product on the market.

Try an experiment. From the time you get up, keep a list of all the government regulations you live under. It will start with the mattress tags you are not allowed to remove. Then there will be the product safety standards for your sheets. The shower will have its standard plumbing and the water will be fluoridated. Your clothes and grooming products will all meet the necessary label requirements. Your cereal will also have label and nutritional labels. Your daily meds will come with any number of FDA regulations. As you look out the windows of the house you will think of the building permit you had to get even if you put them in yourself. You will no doubt be using your standard and regulated electrical systems. You will drive to work in standard vehicle safety constraints along a heavily regulated road and under any number of surveillance cameras. Probably before you ever pass your office door and have to think of all the regulations upon your labor and the money you make from it, you will find that nothing you do is unregulated and, unlike any ancient code of taboos, never has the government had an easier time of enforcing such an all encompassing code of regulations. And no, I have never found any scholar who disagrees with that. In fact, it was a religious historian who pointed it out to me.