Mises Daily Articles
Four Policies: The Original Intent
These days, government regulations are the popular fad. Is there a conflict in the market? Regulate it! Is there a conflict with the regulation? Regulate it! It never ends.
Now our country's economy is drowning underneath all of the regulations, and the funny thing about them is that their origins don't involve the cleanest people. Their initial promoters had vastly different plans than the regulations' current supporters do.
The Federal Reserve
The current excuse for the central bank is that it has the power to create money with the characteristic of extreme elasticity, a tool required to cultivate healthy economies in times when consumer spending decreases. The artificial expansion of credit allows for economic growth, and then people can use most of their incomes to purchase expensive houses and luxury automobiles and live happily ever after. Unfortunately, this sentiment completely ignores the inevitable bursting of these bubbles. The Austrians have answered this fallacy in theory and in practice, most recently by predicting the housing crisis.
Out of this list, the Federal Reserve is perhaps the organization most widely suspected by the general public to be guilty of collusion, even if a percentage of the consensus is based on conspiracy theories and an empty distrust of bankers. I credit Ron Paul's campaigns — and End the Fed — for popularizing an increasingly academic opposition to the institution's fraudulent inflationary policies. Yet, to my dismay, many people continue to criticize corporations and CEOs instead of the hand that feeds them.
It should come as no surprise that the creation of the Federal Reserve had nothing to do with humanitarian economists working toward a prosperous marketplace. Its implementation had everything to do with unhappy bankers who didn't want to compete in the real world and who, instead, focused on gaining control of the nation's money supply. The wealthy powerhouses of Morgan and Rockefeller funded a decade-long "bank reform movement" in order to convince influential businessmen and intellectuals of the supposed need for a central bank. When they were comfortable that their plan would pass through the governmental chambers with ease, J.P. Morgan scheduled an extremely secretive and exclusive retreat to Jekyll Island. The invitees were told to tell no one about the meeting and to proceed on a first-name-only basis. It was here that, for an entire week, the bankers and government officials hammered out their draft of the Federal Reserve Act, creating the central bank as we now know it. As Sheldon Richman quotes historian Gabriel Kolko, "The real purpose of the conference was to discuss winning the banking community over to government control directed by the bankers for their own ends."
The organization acts as a complex, legislation-fueled monopoly that prohibits the same service — in this case, the manufacture of currency — from being provided by other individuals, leaving a limited sequence of elite bankers to control the money supply of the United States. This authority allows the banking cartel to give handouts to well-connected corporations that can spend the money before it has technically entered the real money supply; this means that the corporations won't have to deal with the onset of higher prices due to inflation, whereas the last recipients of the money — usually the working class — will feel the effects, chiefly through the cost of food, housing, and energy.
Many economists, even after learning the Austrian business-cycle theory and admitting to the existence of the adverse effects of interest-rate manipulation, still believe that it's better to have a boom and bust than to have no boom at all. Whether you hold this pro-interventionist opinion or have faith in the classical laissez-faire environment is up to you, but it's no mystery that the Federal Reserve was only created to benefit wealthy bankers. The same organization in its essence remains unanswerable to the population today.
Thomas Jefferson once wrote, "Above all things I hope the education of the common people will be attended to; convinced that on their good sense we may rely with the most security for the preservation of a due degree of liberty." Do we have the right to an education, and is the government the essential provider of this right? And, perhaps most importantly, is public education a required service in preserving freedom in our country?
It's assumed that the repeal of public education in the United States would drive the poor further into poverty and segregate minorities into terrible schools, especially since private institutions like Yale University and George Washington University cost around $40,000 and $44,000, respectively.
Looking into history, however, we're presented an interesting tale of xenophobic individuals setting up public education in order to suppress foreign cultures.
The original public-education movement was led by a group of New Englanders. Their purpose, in the words of Murray Rothbard, "was precisely to use it to cripple the cultural and linguistic life of the waves of immigrants into America, and to mould them, as educational reformer Samuel Lewis stated, into 'one people.'"
The first targets of the largely Calvinist-backed movement were parochial Catholic schools, and the public-schooling system established a uniform code of teaching in order to combat that religious upbringing of children.
Many of the New Englanders — namely Horace Mann, Henry Barnard, and Calvin Stowe — admired the education system set up in Prussia, which indoctrinated children for the purpose of obedience to the state. In 1837, Horace Mann became secretary of the Massachusetts Board of Education, and only 15 years later the state passed compulsory-attendance legislation.
The 20th century's influx of educational prejudice moved away from the failed battle against Catholics. Instead it fought against Puerto Rican immigrants and black Americans through a noted series of events in Harlem. Similar attempts at cultural suppression were used to ensure that the minorities couldn't learn about their own ethnicities and racial histories, and, at first, many Puerto Ricans were forced to learn science, mathematics, and other subjects in English, which many didn't speak. Luckily, this tale consists of only a few conflicts that were strongly — and successfully — contested by real market solutions.
William Wooldridge writes, "When big-city blacks became dissatisfied with the public schools, seeking to establish a private alternative was a most American thing to do." The Urban League of Greater New York voluntarily sponsored a series of programs called "street academies" that took dropouts from the public-education system and provided to them a true grade-school education. Once the graduates felt prepared enough to leave, their mentors helped them to find jobs at local businesses, and a great number of graduates even stayed back to act as recruiters for and mentors to new dropouts. The best part is that the payment for these programs were voluntary donations given by organizations like the Ford Foundation, IBM, and the First National City Bank.
We can see that education reformer Newton Bateman has been proven completely incorrect when he stated that education "cannot be left to the caprices and contingencies of individuals." Testing scores have remained stagnant in the United States despite the fact that federal spending per pupil has greatly increased since the creation of the Department of Education in 1979. The government's one-size-fits-all education system is unnatural and confining, and it will never work.
Safety in Health
The government's presence in the regulation of health and wellness is rarely contested in modern politics. Advancements in the medical and food industries, it seems to be assumed, wouldn't even exist without the Food and Drug Administration's monopolized oversight. A skewed mental vision in the agency's absence depicts our pain medication as a mixture of morphine with a touch of ether, our toothache capsules filled to the brim with cocaine, and our meat covered with fast-running bugs and undiscovered bacteria. This examination disregards the idea that human progress would continue without the oversight of unelected bureaucrats, and it pays little attention to the exact details surrounding the passage of the legislation such as the lobbying by various individuals and the false allegations put forth by Upton Sinclair in The Jungle.
People praise Sinclair's book as the single work that catalyzed the Federal Meat Inspection Act's quick movement through Congress. But to praise Sinclair's text is to praise the author's sensationalized fantasies of a capitalistic system in Chicago that he had never even seen. It's reasonable to suggest that the intestine-covered floors and puddles of animal blood dreamed up by Sinclair were, in fact, unreal and not simply missed by hundreds of meat inspectors sanctioned by the US government throughout the decade preceding 1906. Either way, Sinclair's attempt to enlighten Americans to the cleanly ways of socialism paved the way for loophole regulation in favor of big business.
Large meatpacking companies endorsed the new legislation as a way to cripple the impeding competition of smaller firms and to make sure that taxpayers were forced to pick up the tab for its costly enforcement. In an ironic twist of events, Sinclair openly rejected the legislation for its true, fascistic nature. Meanwhile European meat packers were strengthening their own regulations in order to protect domestic gains against American imports; the proponents gave no thought to consumers' health.
Sadly the food industry isn't the only sector with corrupt foundations — the medical industry is also laden by licensing legislation. Legislation favoring the American Medical Association's preferred licensure process had nothing to do with protecting patients against uneducated physicians and dirty tools. Instead, the main goal was to increase the salaries of allopathic physicians whose patients were transferring over to the treatment of homeopathic physicians, who used more natural treatments to cure disease. Physicians emigrating from countries like Puerto Rico (later, Austria and Cuba) were also excited to make a new living in the United States, and these dreams posed a risk to the livelihood of "regular physicians." As the AMA's power continued to increase, the first half of the 20th century was met with a 58 percent drop in medical schools and a 25 percent drop in physicians. More recently, as Dale Steinreich notes, "Since AMA's creation of the Council a century ago, the U.S. population (75 million in 1900, 288 million in 2002) has increased in size by 284%, yet the number of medical schools has declined by 26% to 123."
It is clear that legislation like the two pieces previously mentioned were created in order to limit the supply of alternative competitors in various markets. Loophole regulations serve only the industries from which we are meant to be protected. The regulations do not work, and, when the agencies do act, they prohibit individuals from voluntary consenting to be treated by natural herbs and other solutions that enrich our well-being.
Restriction of Firearms
Gun owners are typically portrayed to be cowboys out of the wild, wild West — people whose tempers are short and whose trigger fingers are quick. If we were to repeal all gun-control legislation, detractors say, Americans would be running around like animals. We'd end up living in a chaotic, Somalia-style country with warlords at every corner. The appeal to emotion disregards all statistics on the negative effects of gun control, but many violent crimes involving firearms are still seen as the outcome of a "fundamental" reading of the Second Amendment as it relates to new technology in the self-defense sector. Critics of the Second Amendment do have one good point: the original purpose of gun control was to protect people from criminals' acquiring firearms. However, the "criminals" in this historical context were slaves who wished to be free of their shackles.
Centuries preceding the Revolutionary War era are filled with legislation geared toward prohibiting blacks from owning firearms, numerous statutes admitting outright to the purpose of "preventing Negroes insurrections." The Civil War resulted in an extreme excess of weapons at the expense of Lincoln's greenbacks, so the increase in supply led to very affordable prices for interested blacks.
The post-Constitution rebellion led by Nat Turner in 1831 proved to the government that its worst fears had come true. Many slave owners then forgot about the potential of their own slaves and began fearing freed blacks, whose taste of liberty would convince them to free other blacks and kill whites.
A notable and more recent Supreme Court case is Cooper and Worsham v. Savannah, 4 Ga. 68 (1848), the decision of which stated,
Free persons of color have never been recognized here as citizens; they are not entitled to bear arms, vote for members of the legislature, or to hold any civil office. They have always been considered as in a state of pupilage.
The statement was an effect of fear mongers who warned that, if freed blacks were allowed to possess firearms in one state, the state's acknowledgement of their humanity would lead to an unstable Union. There was still local corruption that opposed ownership of weapons by blacks after the Civil Rights Act of 1866, but the illegality of the action made it much more difficult for governments to fully enforce the confiscations.
This pattern follows us through the sands of time, in places as wretchedly cruel as the 1930s Soviet Union to the US government's occupation of Iraq in the 2000s. The 112th session of Congress has written heaps of gun legislation, and now we find out that the Bureau of Alcohol, Tobacco, Firearms, and Explosives has been selling these high-powered firearms to Mexican drug cartels for two years. Gun-control legislation never really works in favor of law-abiding citizens but rather presses directly against them in favor of criminals and tyrants, just as it always has.
Joseph Sobran writes,
In the Politics, Aristotle explains the character of law well. He recommends that there be as few laws as possible, and that they be altered as seldom as possible. The reason for this is that law should be an extension of our normal sense of right and wrong, so that people can observe it, for the most part, simply by living what they regard as morally upright lives.… The less frequently it changes and the more permanence it has, the more citizens will feel reverence for it.
We need to get back to a belief in natural law. Freedom is inherent, and the survival and progression of the human civilization depends on our ability to make this realization.