Crisis and Liberty: The Expansion of Government Power in American History

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5. Crisis and Liberty

  • Crisis and Liberty Seminar
September 3, 2004Robert Higgs

Tags U.S. EconomyU.S. HistoryPolitical Theory

WWI was the culmination of progressivism. It was possible to impose prohibition. The creation of the Fed and the passage of an income tax allowed warfare socialism to rage and liberties to be lost.

Government reallocated resources by taking money from citizens and then purchasing war goods. Inflation was a stealth tax that fooled people. Most thought inflation was the fault of markets rather than governments. Patriotic hoopla was needed to persuade young men to be cannon fodder. Draft riots did not happen because many simply did not register for the draft and the Army had learned from earlier resistance to take themselves out of the visible draft activity. Recruiters made the system look like community defense efforts. The Brits invented war propaganda to induce Americans to come into the war.

Industry was mainly guided by a War Industries Board, using businessmen from various sectors as public servants. They tried to substitute their judgements for what should have been reliance upon the price system. The mess being made would have been obvious had the war continued much longer. Central planners can do something but they can’t know the opportunity lost costs. They can’t satisfy economic rationality. They can’t know how much they wasted.

Lecture 5 of 10 from Robert Higgs' Crisis and Liberty: The Expansion of Government Power in American History.

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