As an example of the latter, consider radio host and writer Lou Dobbs, who dismissed concern for consumers in his book Exporting America, where he wrote, “I don’t think helping consumers save a few cents on trinkets and T-shirts is worth the loss of American jobs.” Similarly, then-Senator Barack Obama told a stadium filled with cheering union members in 2007 that “people don’t want a cheaper T-shirt if they’re losing a job in the process.” The idea here is that desire of consumers to save money should be trumped by the supposed need to “save jobs.”

Griswold points out that politicians generally favor “the noisy producer interests over the silent, suffering consumer” and reminds the reader that life itself depends on consumption. To that end, he quotes Adam Smith in The Wealth of Nations:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promotion of the consumer. The maxim is so perfectly self-evident that it would be absurd to prove it. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production and not consumption, as the ultimate end and object of all industry and commerce.

The problem, of course, is that there is usually political advantage in running a “mercantile system” that benefits some domestic producers at the expense of consumers—and other producers who need the “protected” goods to make their own products.

Griswold’s tour de force explores and documents the many ways in which import competition benefits American consumers, enabling them to improve their standard of living with a greater range of choice, lower real prices, and better quality. Those are not insignificant benefits. When the likes of Dobbs and Obama ridicule free trade as merely a matter of saving a small amount on T-shirts and trinkets, they’re giving a deliberately distorted picture of reality.

Big-box retailers, such as Walmart, Home Depot, and Best Buy, that purchase much of their inventory from overseas producers and ship it to stores in the United States, managed to hold their sales fairly steady or even increase them during the current recession. But what was good for those chains and their customers was sour news for organized labor. Unions often demand a “level playing field” and claim that foreign producers enjoy various “unfair advantages” such as a lower wage scale and export subsidies. When they call for tariffs, they say they don’t want special favors but only “fairness.”

Our author begs to differ. He explains to readers David Ricardo’s 1817 insight about comparative advantage—that each nation (or better still, each person or firm) will tend to discover where it has comparatively lower costs and then concentrate on producing those goods. Whether a producer’s cost advantage is “fair” or “unfair,” the best policy, Griswold argues, is for the government not to interfere with trade. Instead of further building up trade barriers, as various special interests advocate, he urges that we drop the barriers that separate us from the peaceful global marketplace.

But what about American manufacturing? Won’t free trade reduce us to a “service economy” consisting of mostly low-paying jobs? Politicians and pundits have been saying that for years, but Griswold replies that it isn’t true. The number of Americans working in manufacturing has indeed fallen, but that is due more to increases in productive efficiency than to “unfair competition.” While protectionists like North Dakota Senator Byron Dorgan wring their hands over the demise of some household name products like Huffy bicycles and Swingline staplers, they neglect to mention that American manufacturing has significantly increased in real terms since 1970.

Furthermore, Griswold explains that the U.S. government is responsible for a huge “swindle” of consumers—our Harmonized Tariff Schedule, filling nearly 3,000 pages. Our sugar tariff, for example, compels Americans to pay two to three times the world price for sugar. In turn, that has caused American food producers to shift production to Mexico or Canada to escape the cost. Protectionist politicians never mention the flip side of their “save jobs!” coin.

The book’s closing paragraph states: “Free trade unites us with other people in an ever-widening ‘community of work’ that provides a powerful alternative to conflict and war.” I strongly recommend Mad About Trade.

This is the state on which our authors focus. They aren’t much interested in either praising or condemning the conservative movement, but seek to explain its political success over the last several decades. They do that very well indeed. Micklethwait and Wooldridge thoroughly cover the whole spectrum of conservative politics, from the ground troops of the Republican Party to the brigades of analysts and policy wonks in the various rightist and free-market think tanks. (But sorry to say, FEE doesn’t get a mention.)

Micklethwait and Wooldridge take Western Europe as a counterpoint, a sort of leftish benchmark, and note that America is conservative in a relative way—and in a bipartisan way. Even “liberal” Democrats here are “conservative” in comparison with European leftists, something that the authors attribute to the “effectiveness” of the conservative movement.

Where I take major exception with the authors is precisely that—American conservatism is “effective.” Effective, how? Maybe in slowing down the progress of government expansion a tiny bit. We aren’t quite as bad off as, say, Sweden, but the main contours of America are not much different than they were when Nixon took office. And now we have a huge new federal entitlement in prescription drugs, courtesy of a “conservative” president.

Our authors note that America is the only developed nation without a full government-supported health-care system; that it is the only Western democracy that does not furnish child support to all families; that it is ready to be the only OECD nation (of 30—Australia seems about to give up being the only other holdout) to deny paid maternity leave. In this sense are we “the right nation,” one with “conservative power,” but I’m not inclined to see any remarkable conservative power in the fact that the United States hasn’t bitten on some of the worst ideas meddlesome politicians have come up with.

When the authors talk about “conservative power in America,” I say this could well be the very power that Milton Friedman put down as “the tyranny of the status quo.” Few conservative politicians have the nerve to challenge the deeply ingrained collectivist notions that many Americans hold, ranging from “public education” to eminent domain. The great conservative movement has done precious little to shake people out of those ideas, and it’s becoming increasingly clear that many conservative leaders today don’t even care to try. It reminds one that F. A. Hayek took pains to explain why he was not a conservative.

A particular blind spot for Micklethwait and Wooldridge is the phenomenon of rent-seeking. In their index, they give 12 citations to Milton Friedman and ten to Hayek, yet none to another Nobel economist, James Buchanan. Yet it was Buchanan who, with Gordon Tullock, came up with the idea of Public Choice, the explanation for why the modern democratic state inevitably gets caught up in the favor-granting business. Here special interests press our vote-and-campaign-money-hungry politicians for favors including subsidies and manifold tax-and-import protectionism.

Micklethwait and Wooldridge correctly charge the Bush White House with kowtowing to special interests, letting federal spending (defense and nondefense) skyrocket, federalizing airport security with tens of thousands of new government employees, slapping tariffs on imported steel, signing the biggest farm bill on record, and, by the way, casting not a single veto on a spending or any other bill. What they apparently fail to see is that the federal juggernaut is a systemic problem that conservatism has done nothing to solve.

Back in 1835, Tocqueville foresaw today’s democratic state, where all too often “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, til each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd.”

Dear Freeman reader, look out. Make way for more shepherded “progress.” Messrs. Micklethwaite and Wooldridge amuse and edify us on today’s Politicized America, but do so in an ephemeral way. They silently endorse government interventionism as a given and conservatism as a means of protecting the status quo. This a pity.

A Cato Institute report issued last October estimates corporate welfare at $87 billion in 2001. That’s 30 percent bigger than Cato’s previous 1997 corporate welfare estimate of $65 billion. Welfare for business? Business in bed with the state? What goes on? (See Stephen Slivinski, “The Corporate Welfare Budget: Bigger Than Ever,” Cato Policy Analysis No. 415, October 10, 2001.)

True, President Bush stoutly sought corporate welfare cuts of about $12 billion a year ago, notably in such programs as the Overseas Private Investment Corporation, Export-Import Bank, Small Business Administration, and Maritime Administration’s guaranteed loan program. Somehow these proposed cuts vanished with September 11 and the Hill politics of budgetary “stimulus” at a recessionary hour. Comments the Cato report on some of the “worst” corporate welfare programs: “They subsidize large, profitable corporations at the expense of taxpayers for projects that already receive, or could receive, adequate funding from the private sector.”

Amen.

The Cato report notes how hard it is for business and members of Congress to overcome their incestuous relationship. Such was the problem congressmen faced in shutting down military bases — and jobs — in their home districts, bases declared surplus by the Defense Department itself. Years passed till cooler heads in the House and Senate hit on the winning military-base-closure commission idea. Cato urges an analogous corporate-welfare-reform commission: it would propose a list of corporate welfare programs for repeal by Congress, which would hold an up-or-down vote on the entire package.

A personal confession: As a young innocent some 50 years ago setting out in graduate economics at New York University, I saw businessmen as born defenders of the faith, natural trustees of free markets — save for some renegade protectionists milking the system. Then I met visiting NYU Professor Ludwig von Mises, who set me straight by having me look up this passage in the English edition of his Socialism (1951, p. 503; original German edition 1922): “The entrepreneur, the man who seizes the opportunity of the moment, has little interest in the issue f a secular struggle of indefinite duration. . . . To fight on principle for the maintenance of an economy based on private property in the means of production is no part of the program of organized entrepreneurs.”

Corporate Philanthropy

This Mises point on corporate expediency, on getting along by going along, is seen in work by the Capital Research Center, based, like Cato, in Washington, D.C. Check its annual series, Patterns of Corporate Philanthropy, on the widespread business habit of handing over responsibility for corporate giving to a philanthropic managerial class hardly in sympathy with the workings of a free economy. The 2001 Patterns, using freemarket criteria, gives an “A” to no large firm for its corporate philanthropy; a “B” to but one big firm, Cigna; a “C” to eight large firms, including Weyerhaeuser and Bristol-Myers Squibb; a “D” to six large firms, including Merrill Lynch and Procter and Gamble; and an “F” to five large firms: PNC Bank, Sara Lee, May Department Stores, Target Stores, and Freddie Mac.

Nationally syndicated columnist Mona Charen, who wrote the preface in the 2001 Patterns, finds Big Business weak-kneed in standing up to intimidation and shakedowns. She refers, for example, to Jesse Jackson’s prevailing on major Wall Street firms to come across with nice contributions to him and his friends “on pain of lawsuits, boycotts, and other forms of protest.”

Henry Ford II, on quitting the Ford Foundation as a trustee in 1976, told an associate it was a “madhouse,” explaining that the foundation is “a creature of capitalism, a statement that, I’m sure, would be shocking to many professional staff people in the field of philanthropy.” As the late William E. Simon, president of the John M. Olin Foundation and former secretary of the treasury, wrote in the
preface to the 1992 edition of Patterns: “Capitalism has no reason in this world to underwrite its enemies, but it does have a reason — in fact, a duty — to support individuals and institutions dedicated to preserving Western civilization and the economic and political institutions that have given America the highest standard of living, the greatest prosperity, and, most importantly, the greatest individual freedom ever known to man.”

Antitrust Faults

Antitrust is another area where corporate rectitude falls short. The broad theory of the Sherman Antitrust Act of 1890 is to safeguard consumers by safeguarding competition. Sure. But look how, for example, U.S. District Judge Thomas Penfield Jackson and the U.S. Justice Department pursued Microsoft on grounds of “monopoly.” The real litigants turn out to be not so much consumers represented by a noble U.S. government, but hard-driving, privilege-seeking Microsoft competitors like Sun Microsystems, Netscape, Oracle, and other corporate loathers of competition that bites them in the pocketbook. Surely businessmen and investors in general should return to first principles, rethink the role of government and business in a free society (avoiding pork like poison), re-examine their corporate philanthropy programs, and support more heavily pro-free-market organizations.

Business — and personal — integrity is the thing, a beacon that shines across the world whether you read the Bible or the Koran. As Polonius advises Laertes:

This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man.

At a time of international tension and a so-so economy, we are fortunate that the Federal Reserve Bank of Dallas has issued its essay (online or in hard copy) “The Fruits of Free Trade.”

It comes from the Dallas Fed’s 2002 annual report, and it carries a simple strategy for peace and prosperity in two words: free trade. The freer the trade the better. The essay should be required reading for those Bush White House officials who not long ago engineered higher tariffs on foreign steel and Canadian lumber—auto and house buyers be damned. The essay, complete with 14 statistical exhibits in color, has a front cover unlike any district Federal Reserve Bank report I’ve seen in my professional career: There in living color is a photo of an enticing global fruit basket, its contents available from your supermarket (as explained in the text): apples from New Zealand, apricots from China, bananas from Ecuador, blackberries from Canada, blueberries from Chile, coconuts from the Philippines, and so on. (For the online version, see http://www.dallasfed.org/fed/annual/2002/ ar02.pdf.)

Moreover, its two authors, W. Michael Cox, senior vice president and chief economist at the Dallas Fed, and Richard Alm of the Dallas Morning News, open up their secret to garnering wealth for both the individual and society. They do it as if they were ancient Greek visitors to the Oracle at Delphi, asking her how to get rich. Study hard? Work hard? “Probably not,” they respond to their own rhetorical questions, adding: “Diligence and intelligence are strategies for improving one’s lot in life, but plenty of smart, hard-working people remain poor.”

So Cox and Alm put the Oracle’s counsel for getting wealth into just two short sentences: Do what you do best. Trade for the rest. In other words, in life they suggest that you play a pro-growth win-win positive-sum game as you trade your productivity for the productivity of others—wherever they may be located, here or abroad. So their formula works for both the individual and society, including nations and the global society. It has no truck for the common if simplistic bumper sticker (usually shown with an image of the Stars and Stripes): “Buy American. The Job You Save May Be Your Own.” Such protectionism winds up as an anti-growth win-lose zero- or even negative-sum game.

Indeed, Exhibit 1 makes the point that over the last three decades, a period of U.S. economic growth, rising living standards, and creation of 50 million new jobs, trade in goods and services (exports plus imports) increased from 11 percent to roughly 30 percent of GDP, while U.S. capital flows more than tripled. So the authors reject the idea that exports are good because they support U.S. industry while imports are bad because they steal business from domestic producers. Actually, as Cox and Alm argue (as did Adam Smith in The Wealth of Nations), we don’t produce to produce—but to consume.

Look, say the authors: Yes, exports are resources we don’t consume at home, but they are how we pay for much of what we purchase overseas. In the end, cheaper and better imported goods and services are the pay-off to America and Americans. Consumers here and abroad are the win-win winners, as world competition presses producers everywhere to keep their prices competitive and their output at the highest quality feasible.

That competitive pressure, hold the authors, causes Ford to produce cars in 17 countries, with nearly three-fourths of its production occurring outside the United States. This pressure is reflected in the 2001 Honda Civic produced here in the United States with a get-it-where-you-can 75 percent domestic content, or in the 2001 Ford Escort produced here with a 60 percent domestic content. All that pressure is of course aimed at winning sales, at wooing the sovereign consumer with his make-or-break purchases.

Exhibit 7 shows how production in open-market societies far outpaces that in controlled or planned societies, pretty much proving that economic freedom and rising per capita consumption go together like the proverbial horse and carriage. The exhibit ranks two side-by-side, nation-by-nation rating graphs by the Heritage Foundation along with the Wall Street Journal and by the Fraser Institute of Vancouver, British Columbia, in terms of the degree of state intervention and the height of related output. The point of Exhibit 7: Country by country it follows that the less trade intervention, such as tariffs and import quotas, the higher the average individual consumption and standard of living.

North versus South Korea

Cox and Alm tell a tale of two nations. One is North Korea, with about the lowest economic freedom in the world. Its per capita income averages just $950 annually, with many North Koreans trying to escape across the border into China. South Koreans, on the other hand, enjoy the bounty of a rather free-enterprise economy, with its per capita income of $11,428—or 12 times that of North Korea.

My only “but” about this remarkable and most welcome essay is its inadvertent lack of the peace-inducing implications of free trade and investment. For the nice fact is that no seller goes around shooting, bombing, or terrorizing his customers. IBM caught this implication in its old motto, “World Peace Through World Trade.” Or as the Old Testament caught it: “They shall beat their swords into plowshares, and their spears into pruninghooks.”

Robert D. McTeer, Jr., president and CEO of the Dallas Fed, in a comment on the essay, relates the observation “attributed to economist Henry George that protectionists want to do to their own country during peacetime what the country’s enemies would wish to do to it during wartime—that is, close its borders to imports.”

Hear, hear.

Well, look to recent experience, from the Mexican peso crisis to the collapse of the Asian financial markets to the Russian devaluation of the ruble (which President Boris Yeltsin promised on bended knee he would never permit) to the faltering Euro to the decade-old sick Japanese yen or the roller-coaster currencies of Argentina, Brazil, and Venezuela.

Look then to the storms and meltdowns that mark the last dozen years or so in the international capital market, a market in which some $1.5 trillion of funds daily race across the world seeking the opposite goals of yield and safety.

So, ask a number of “experts,” why not let us simply re-regulate the system and rid ourselves of financial turbulence? Were it only that simple. Yet pontificates one dyed-in-the-wool regulator, billionaire currency trader George Soros: “There is an urgent need to recognize that financial markets, far from tending towards equilibrium, are inherently unstable. . . . Thus, in finding a remedy, ‘market discipline’ may not be enough. There is also the need to maintain stability in the financial markets.”

Amazingly, the tool Soros would use for stability is none other than the disaster-prone International Monetary Fund (IMF) itself.

Hence this book’s rightfully worrying subtitle, “the case against a new international financial architecture.” The author, himself a professional currency trader, an adjunct professor of finance at the Yale School of Management, and a thrice-weekly columnist for Bloomberg News, wins dust-jacket blurbs for his well-mounted case from the respected likes of Milton Friedman and Johns Hopkins’s Steve Hanke. DeRosa argues firmly against those like Soros who want to “restructure” international financial markets.

DeRosa acknowledges that recent currency markets have indeed been rocky and costly in terms of damaged global growth and loss of taxpayer funds via bankrupt investments in the IMF. But he holds that a cure of a strengthened IMF with authority over a new bureaucracy, an “International Credit Insurance Corporation,” would be worse than the disease.

Undoubtedly, centralized control of money and credit is no better than centralized control of any other aspect of the economy. But isn’t this disease at base the nationalization of virtually every currency in the world? And can’t this disease be greatly eased if not cured by currency privatization or the restoration of the gold standard? Sadly, DeRosa does not pursue that question to its logical conclusion, but contents himself with the immediate question of aggrandizing the IMF’s powers.

DeRosa asks: Can IMF bureaucrats, even armed with a giant insurance stabilization fund, be any more successful in stabilizing the international currency regime than they were in stabilizing the Russian ruble or the Malaysian ringgit or the Indonesian rupiah or the Argentine peso, or scores of other debacles in which IMF officials have prescribed precisely the wrong medicine for mending battered welfare-state-based currencies? Merely to ask that question is sufficient: No. The IMF has a miserable track record and is able to continue wasting money precisely because it itself suffers no harm or loss from its blunders.

DeRosa sees as the common denominator in almost every currency crisis an experiment with a newly fixed exchange rate, followed by the propping up of a wobbly currency with IMF loans and “conditionalities” that ignore the underlying flaws of an interventionist state. Fixed exchange rates are the problem; and the IMF doesn’t solve that, but only engages in costly and wasteful diversions.

Should we have the IMF at all? Joseph Stiglitz, Nobel laureate economist at Stanford and chief economist at the World Bank from 1997 to 2000 declared: “Every recession eventually ends. All the IMF did was make East Asia’s recession deeper, longer, and harder.” And George Shultz, secretary of state under President Reagan, treasury secretary under President Nixon, and distinguished fellow at the Hoover Institution, goes farther and asks that the IMF be abolished. Period.

Unfortunately, DeRosa seems unready to call for a death-blow to the benighted IMF, to declare openly: “End it, don’t mend it.” A clarion call for the termination of U.S. support for this meddlesome institution would have made the book truly useful, but the call never sounds.

That said, his book still makes a good read on the basic illogic and politicized vaccilation in national or IMF currency interventionism.

Contributing editor William Peterson is an adjunct scholar at the Heritage Foundation.

Singer mentions such things as alcohol, sunshine, iodine, sodium, iron, copper, cholesterol, and nuclear radiation (as involved in low-dose X-rays). Excessive food can kill: obesity can lead to a heart attack. The same could be said of excessive exercise. Singer similarly sees bacteria as a possibly constructive agent since a totally sterile environment could cause an unchallenged healthy immune system to deteriorate.

Well, this raises quite a question: Is not government itself hormetic?

Wasn’t Thomas Paine onto something in his Common Sense (1776) in seeing government as “a necessary evil”? Cannot excessive government be fatal to human life? Indeed. Recall the fatal regimes of Germany under Hitler, the Soviet Union under Stalin, and China under Mao in the twentieth century.

Thus America, apart from the entire West, faces a rather silent if potentially deadly challenge: Can it reverse direction from its march to a broadening “public” (read coercive) sector ever away from a shrinking private (read voluntary) sector and thereby stop courting a hormetic ending?

Look, Peterson, say my critics: Stop playing Cassandra. Go outside and enjoy the summer. Didn’t we all enjoy the 2002 Winter Olympics out of Salt Lake City? I respond with some lines from Alexander Pope:

Vice is a monster of so frightful mien,

As to be hated needs but to be seen;

But seen too oft, familiar with her face,

We first endure, then pity, then embrace.

Look. Did not the Founding Fathers, themselves close students of history, wrestle with hormetics so as to better guide us today? Hence did they not set down such things as checks and balances in government so as to limit its powers (as specified and enumerated in Article 1, Section 8, in the U.S. Constitution); provide a written constitution; a bicameral legislature; a tripartite central government of legislative, executive, and judicial branches; shared power with the states; and the Bill of Rights’ Ninth and Tenth Amendments, leaving no doubt of their limited-government aims, per:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

So the strangely silent challenge for America in 2002 and beyond is, I submit, to reverse course and get back to the limited-government philosophy of the Declaration of Independence of 1776, the Constitution of 1787, and the Bill of Rights of 1791. Recall the ringing libertarian language of Thomas Jefferson in the Declaration: “We hold these truths to be self-evident; that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. . . .”

The rub with consent today is its relative absence. Did you consent to be enrolled in Social Security as Congress decreed in 1935? And what of the cited Ninth and Tenth Amendments? Hasn’t their impact been critically cut over time—unable to hold back a progressively “liberal” U.S. Supreme Court and its loose constitutional interpretations, especially after Franklin Roosevelt threatened to pack the Court in 1937? The threat worked. It led to reversals of stands by ex-diehard constitutionalist justices on such matters as the meaning of the “general welfare” clause in Article 1, Section 8. And so did the Court come to embrace the New Deal and the welfare state.

Today the irony is that the Constitution is said to be “living,” which may well mean that it is in fact dying.

Drop Leviathan

Peterson, you would reverse national direction? And how!

So, Americans all, drop Leviathan, embrace and practice liberty (a word bandied about but ill understood). Recall how Robert Higgs proved in his ace study, Crisis and Leviathan (1987), that the size and power of central government invariably grew, net, with each passing national crisis, in particular with the Civil War, World Wars I and II, the Great Depression, the Cold War, and the Great Society-Vietnam War, which set forth such programs as, says Higgs, “Medicare, Medicaid, environmental and occupational safety regulations, consumer-protection and anti-discrimination laws,
and the political forces to sustain all these programs.”

Now, presumably and sadly, comes the War on Terrorism with perhaps similar import and dosage.

Think how the prospects for reversing national direction are weakened by the War on Terrorism. Ponder if it is a winnable war or something of an open-ended impossibility. You cannot declare a war on terrorism. It’s like declaring a war on murder, says Roy Licklider, a political scientist at Rutgers University, as reported by Fox News Online (December 31, 2001). The war sounds Kafkaesque: Perpetual War for Perpetual Peace, or is it perchance Perpetual War for Perpetual Re-election? Or as Jacob Hornberger, head of the Future of Freedom Foundation, noted in his Freedom Daily in December 2001: It’s a general, undefined, perpetual war on terrorism that now constitutes the biggest obstacle to the achievement of a free society.

And that was before President Bush’s 2002 State of the Union Address in which he nailed North Korea, Iran, and Iraq as the “axis of evil,” a phrase his critics in America, Asia, and western Europe tag with such epithets as “simplistic,” “unilateralist,” and “provocative.”

Prophetic Orwell

Consider the juxtaposition of direction reversal and perpetual war—an idea that smacks of George Orwell’s 1984 and the motto of the Ministry of Truth, “War Is Peace.” The motto sounds less far-fetched in 2002.

Item: The New York Times lead story of February 19, 2002, charged that the Pentagon planned to broaden the scope of its recently created Office of Strategic Influence to “send [spin?] news or maybe false news [read disinformation] to even friendly lands,” a charge denied by Defense Secretary Donald Rumsfeld, yet a charge that confronts much history in which the first casualty of war is the truth. (Rumsfeld was forced to scrap the Office in the heat of the bad publicity.)

Certainly, reversal of national direction is harder when fazed House Republicans, sans guidance or leadership from a seemingly war-preoccupied White House, joined their Democrat counterparts to pass last February the flawed Shays-Meehan bill. The bill further violates the First Amendment while further securing member incumbency. Similar confusion or miscalculation was seen in GOP and Democrat versions of Keynesian-oriented “stimulus” bills designed to spur a lagging economy.

For America to reverse direction, then, is most challenging. The revolution was. The center cannot hold. So what, say many Americans who embrace—and vote for—the welfare state? Thus is America cursed by what Milton Friedman calls “the tyranny of the status quo.” So the center has shifted—and continues to shift—toward statism.

The national silence, including academe and the media, on this ongoing shift is deafening. Consider. The State is hormetic, and its current dosage, already high with the federal budget alone at more than $2 trillion, grows still and accelerates more with an open-ended War on Terrorism—growth hardly benign but, frankly, dangerous. Stay tuned.

Even so, the challenge to America is to work to win back the future as the Founders saw it, to roll back the size and power of government, to reinvigorate individual rights, private property rights, and the rule of law, all while preserving security, all while reclaiming the American Dream. A tall order, I agree, but please tell me if there is any other workable answer.

Contributing editor William Peterson is an adjunct scholar at the Heritage Foundation.

That price is almost five times the $100 charged for its best seats, itself a Broadway record–yet one still too low, I further submit, as evidenced by the long lines at the box office. So this move is simply smart entrepreneurship, a service to the theater public, who may be relieved of coping with the box office or dealing with scalpers, a kind of reduction in transaction costs, in the jargon of Nobel economist Ronald Coase.

Good then that Rocco Landesman, a producer of the show, is up front, saying the scalpers’ money will now go to “the people who created the show.” Good too that the move wins a nod from New York State Attorney General Eliot L. Spitzer, who favors repeal of New York’s anti-scalping laws to “let the market function.” Yet, pray, apart from possible scalper payoffs, or “ice,” to some theater operators, box-office employees, and theater agents to breach, sub rosa, their contracts, what’s wrong with scalping?

Nothing really. It’s simply an aspect of our market, or voluntary-exchange system. A hit’s a hit, and The Producers is a super hit. Supply and demand are at work, with here a daily fixed supply of tickets at set prices. It’s that fixed supply and those set prices that change things. Prices ration goods and services, as almost everybody knows. When demand is off, producers can cut prices, as attested by that same-day discount ticket pavilion in the middle of Times Square. But when demand is red-hot, as with The Producers, in come, at least until recently, the scalpers to collect what the market-that is, the buyers-will bear. They perform a service by saving time for those anxious to see the show without standing in long lines to do so. For isn’t the scalper but a middleman performing a valued service, despite his putdown name and often illegal but not necessarily evil status? Scalpers convert time cost into money cost for those who buy tickets from them. Outlawing scalping favors those with time to spare over those with money to spare. Why should the government take sides?

Peaceful Action

Don’t scalpers deserve their day in the court of public opinion? Aren’t they, like the rest of us, simply responding to supply and demand in one way or another. Don’t their activities come under FEE founder Leonard Read’s rubric, “anything that’s peaceful”? For isn’t this, broadly, how the New York Stock Exchange itself works-without set stock prices? Or the Chicago commodity futures market without set commodity prices? Or art and antique auctions mostly without set or “minimum” prices but with their free-bid prices? Or even your local gas station, albeit with “set” pump prices but ones subject to frequent ups or downs? Or soft realty markets, where asking prices drift down as demand eases?

Meanwhile, how nice to see ticket sales to New York theater and sporting events move onto the Internet or into Connecticut or New Jersey where scalping is legal. Let competition work its wonders. To be sure, critics cry “shame” on those who baldly cater to the well-to-do or who don’t make the theater more available to those of lesser means. Well, for the latter there are other alternatives, such as movie houses and even “free” TV.

Besides, what’s wrong with being or striving to be well-to-do? Isn’t that an economic incentive, a part of human nature, a way of the free market too?

More recently, noneconomists like biologist Paul Ehrlich of Stanford University, Lester Brown of the World Watch Institute, and presidential candidates Ralph Nader of the Green Party and Pat Buchanan of the Reform Party have jumped on the World-Is-Going-To-Hell bandwagon.

Here’s how Newsweek reported on “Global 2000,” a 1980 multimillion-dollar U.S. government study authorized by President Jimmy Carter: “The year: 2000. The place: Earth, a desolate planet slowly dying of its own accumulating follies. Half the forests are gone; sand dunes spread where fertile lands once lay. Nearly 2 million species of plants, birds, insects, and animals have vanished. Yet man is propagating so fast that. . . .” Well, you get the flavor of “Global 2000”; it was caught in a bumper sticker of that day: “Stop the Planet! I Want to Get Off!”

Pessimist Ehrlich has been especially wrongheaded. In 1969, on the very eve of the Green Revolution of zooming farm productivity, he foresaw that hundreds of millions of people “will starve to death,” including tens of millions in the United States. Somehow he won a MacArthur Foundation “genius” award.

Enter optimist—and realist—Julian Simon (1932–1998). Economist Simon had the annoying habit of confronting the doomers and gloomers with hard facts. He concluded that population literature was wrong, that there is no “population bomb,” that we are not running out of resources, that human beings are not only consumers but producers, and that they are indeed our “ultimate resource.”

In 1980 Simon made a famous bet with Ehrlich that the prices of any five natural resources would fall ten years hence. Ehrlich leaped at the chance—and in 1990 had to pay up.

Enter too, Stephen Moore, long a research associate of Julian Simon, and today a brilliant young economist and thinker in his own right. He prevailed on the Cato Institute to complete and publish Simon’s unfinished manuscript. The two authors set the central premise that there was likely more improvement in the human condition in the twentieth century than in all previous centuries combined.

Through more than 100 color data charts, each supported by about a page of text, they maintain that compared to previous generations, we Americans are in the great majority healthier; live longer; are richer; can afford to buy far more things; have better jobs; earn higher pay; have more time for recreation, travel, sports, and the arts; have bigger and better homes; are at much less risk from catastrophic accidents; and breathe cleaner air and drink safer water. They also show that black Americans have shared in the prosperity and that the income gap between blacks and whites is closing, as is the income gap between men and women. The authors note that at the start of the twentieth century almost no women went to college; today women are more likely to attend college than are men.

And so on and on go the upbeat trends, a welcome breath of fresh air in the dark ruminations on the dismal science. For opinion polls show that many Americans still fret about the human prospect. They regard technological change as a net negative development, worry that the income gap between the rich and the poor is wider than 100 years ago (not so), and fear that the environment is worse mainly because of the automobile (forgetting that the horse pulling a buggy or wagon was a far greater polluter than the auto). Ben Wattenberg titled his 1984 book The Good News Is The Bad News Is Wrong, and Moore and Simon succeed in proving that that really is the case.

Yes, there are also some unfavorable trends, found where government policy holds sway. Social indicators such as divorce and out-of-wedlock births are grim. Taxes are higher and government much bigger. Educational quantity is way up, but its quality is way down. Rita Simon, Julian’s widow, a faculty member at American University and author of the foreword to the book, notes that the twentieth century saw the rise of Nazism, Stalinism, and Maoism but also their fall; that in side-by-side comparisons, South Korea has been far more prosperous than North Korea, West Germany than East Germany, and Taiwan than mainland China. Government control, so often prescribed by the gloom-and-doom set, has been a dismal failure.

Maybe market economics should be renamed “the enriching science.”

William Peterson, an adjunct scholar at the Heritage Foundation, is a contributing editor to Ideas on Liberty.

Reviewed by William H. Peterson

There is hope yet for America. Larry Elder is a host of a successful talk show on KABC Radio in Los Angeles and a nationally syndicated columnist who wins the imprimatur of a major book publisher to carry a big message. As a black libertarian, he is also a breath of fresh air in his courage and plain speaking.

Elder is even something of a firebrand. Here he daringly takes on the Fortress America of Political Correctness on and off the campus, in and out of the mainline media, from and to the church pulpit. And so he assails ten supposedly unassailable yet monumentally politically correct paradigms.

Here are his topics:

1. Blacks Are More Racist than Whites;
2. White Condescension Is as Bad as Black Racism;
3. The Media Bias: It’s Real, It’s Widespread, It’s Destructive;
4. The Glass Ceiling—Full of Holes;
5. America’s Greatest Problem: Not Crime, Racism, or Bad Schools—It’s Illegitimacy;
6. There Is No Health-Care “Crisis”;
7. America’s Welfare State: The Tyranny of the Statist Quo;
8. Republicans Versus Democrats: Maybe a Dime’s Worth of Difference;
9. The War Against Drugs Is Vietnam II: We’re Losing This One, Too;
10. Gun Control Advocates: Good Guys with Blood on Their Hands.

Those are indeed things that can’t be said in most circles, but Elder argues his points with great assurance. He says out loud what Americans only whisper at the kitchen table, on the shop floor, or at the water cooler. Something has gone wrong.

We have become, he maintains, a nation of whimpering people who won’t take responsibility for our own actions, but furiously rage that the problem is always someone or something else.

Here’s a choice cut of Elder’s rhetoric: “We’ve become a nation of ‘victicrats’. . . . The glass ceiling? Nonsense. Hate crimes? All crimes are hateful. O.J. Simpson? He did it, and his defense team shamelessly used the black victicrat mentality to escape conviction.”

Let’s focus on just two of his “ten things.” First, take his argument that the War On Drugs amounts to Vietnam II—that we’re mired in a bloody and foolish conflict that can’t be won. Why, he asks, is it all right for his next-door neighbor to come home and have a martini—but a serious criminal offense to come home and smoke a joint?

Drugs, he admits, can kill, but so can alcohol. And so does tobacco, in far larger numbers. Ditto for overeating. The moral question is who is accountable to whom? Who should take responsibility—the individual or the Nanny State? Elder, of course, can’t abide the latter.

Second, what about those “holier than thou” gun controllers? For all their talk about child safety locks and “sensible” gun registration and licensing requirements, Elder asks if their ultimate aim isn’t the confiscation of privately owned weapons.

Bare fists or mace won’t do when an attacker has a gun. Elder believes you have the right to decide what sort of personal defense to own and use while the controllers think they are entitled to make that choice for you. He notes that New York has issued concealed weapons permits to Donald Trump, Laurence Rockefeller, and Howard Stern. Well, what about the baker in Queens? Or for that matter, women anywhere who are worried about violence?

Books by talk-show hosts tend to be unscholarly, but not this one. Elder has done his homework. Ten Things You Can’t Say in America is heavily documented, with many graphs and tables.

Larry Elder’s book is a triumph of common sense, with enough nerve to shake up the dreary statist quo. It is a passionate plea for limited government and personal responsibility. Let us hope to hear more from him.

Contributing editor William Peterson is an adjunct scholar at the Heritage Foundation.

An Entrepreneurial Revolution. This is the watchword-guidepost here of Mr. Keating, chief economist of the Washington D.C.-based Small Business Survival Committee, and Mr. Edmonds, a political media consultant and coauthor with Mr. Keating of their successful 1995 book, D.C. by the Numbers: A State of Failure.

To be sure, the Entrepreneurial Revolution sought by the authors has not been exactly dormant in America over the years, with the United States enjoying the world’s highest gross domestic product per capita. But entrepreneurship is certainly in a beleaguered state today as the country continues to grapple with the inner contradictions of the welfare state. It is those contradictions—a power struggle between the public and private sectors—that are confronted and tracked numerically by the Keating-Edmonds team both for the nation (in 71 pages) and for each of the 50 states and the District of Columbia (in 865 pages).

Nationally, the authors note a trend of government-spending increases that far outpace population growth. In other words, they see the public sector—the coercive government sector—swelling, while the voluntary sector of society shrinks, at least relatively. To wit:

From 1960 to 1997, total real government revenues—federal, state, and local—increased by 289 percent, so that government in the United States eats up today more than 31 percent of the GDP.

From 1960 to 1999, real federal payroll tax revenues increased by an estimated 614 percent.

From 1960 to 1999, real federal revenues increased by an estimated 236 percent, accounting for about two-thirds of the total government take, including some $250 billion in annual federal grants to state and localities.

Those grants are usually on a 50-50 cost-sharing basis for projects favored by Washington, a trend that does not bode well for federalism or whatever is left of states’ rights.

For example, the authors observe that in America’s welfare state (and because of welfare-state support of unwed mothers?) the portion of live births to unmarried mothers climbed from 3.5 percent in 1940 to 5.3 percent in 1960 to 18.4 percent in 1980 and to 32.4 percent in 1997. Rising illegitimacy of course adversely affects crime, health, housing, work, education, and other social and economic trends in America.

To get from here to there, to a reinvigorated Entrepreneurial Revolution, our authors suggest that federal policy abandon Keynesian-Phillips Curve inflation-employment tradeoff thinking, as well as talk of macroeconomic “aggregate demand.” “Coming from a Randian/Austrian economics background,” they write, “[Fed Chairman Alan] Greenspan should know better.”

On fiscal and regulatory policy, they call for sharply lower government spending and taxation. Keating and Edmonds argue that the best capital gains tax policy is not to tax capital gains at all. They also advocate the repeal of death taxes and do not take kindly to the minimum wage, holding that it deflects hiring and on-the-job training from those who need it most.

The authors’ data on the states (including D.C.) demonstrate the acuity of their pro-market vision.

California, for example, imposes a capital gains tax rate of 9.3 percent, the highest in the country; its personal income tax rate, also 9.3 percent, is the third highest; and its corporate income tax rate of 8.84 percent is the 12th highest, an “antigrowth tax system,” charge the authors. Still, California boasts of Silicon Valley employing a million people, a healthy inflow of immigrants, and good trade access to the Pacific Rim. All in all, California is rated as having a so-so investment environment—and that’s before its current electricity imbroglio.

The book is a gold mine of data, charts, and trends that lay out a comparative competitive analysis of the United States in a global economy and of each state struggling for investment dollars and economic growth. It should prove to be an invaluable reference work for bankers, entrepreneurs, newspaper and TV-radio editors, academic and business economists, land developers, and legislators.

Contributing editor William Peterson is an adjunct scholar at the Heritage Foundation.