[W]e need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. [Emphasis added.]

And:

When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference. . . . [Emphasis added.]

There are lots of claims there that cry out for examination. For example, what’s need got to do with it? Does Obama really favor a tax system that leaves you only what you need — as determined by someone else? And look at that term “tax breaks.” If a burglar decides not to break into your house and take your things, have you gotten a break? Or have you simply kept what is yours? Is Obama really suggesting that how much of your income you retain should depend on what “the country” can afford? What does that even mean?

Buffett Rule

All that aside, I want to home in on Obama’s notion of fairness. “If you make more than $1 million a year,” he says, “you should not pay less than 30 percent in taxes.” How does he know that constitutes fairness? Obviously 30 percent is an arbitrary figure. If he’s concerned that income and payroll taxes take a smaller percentage of Warren Buffett’s income than the percentage they take from his secretary’s income, why not reduce his secretary’s tax rate? It’s certainly not obvious that Buffett should pay more. (For an interesting discussion of the secretary’s tax rate, see this and this.) Obama (like most other politicians) regards government spending growth as inexorable and virtually untouchable, but why? (Proposed “cuts” are merely reductions in the rate of growth.)

On this matter of tax fairness, no one tops Murray Rothbard’s discussion in his classic Power and Market: Government and the Economy (online in PDF format here). Rothbard starts by noting that for many years people thought products had a “just price.”

It is clear, even to those (like the present writer) who believe in the possibility of a rational ethics, that no possible ethical philosophy or science can yield a quantitative measure or criterion of justice. . . . Economics, by tracing the ordered pattern of the voluntary exchange process, has made it clear that the only possible objective criterion for the just price is the market price. For the market price is, at every moment, determined by the voluntary, mutually agreed-upon actions of all the participants in the market.”

Rothbard of course is talking about a market unblemished by government monopoly privilege and other interventions.

He goes on next to ask: “If the search for the just price has virtually ended in the pages of economic works, why does the quest for a ‘just tax’ continue with unabated vigor? Why do economists, severely scientific in their volumes, suddenly become ad hoc ethicists when the question of taxation is raised?”

We might also ask why a president makes ethical pronouncements about levels of taxation without first laying out his moral philosophy plainly for all to judge.

Canons of Justice in Taxation

Thus the “canons of justice” in taxation must not be taken for granted. Calling something just does not make it so. Rothbard writes:

The prime objection to these “canons” is that the writers have first to establish the justice of taxation itself. If this cannot be proven, and so far it has not been, then it is clearly idle to look for the “just tax.” If taxation itself is unjust, then it is clear that no allocation of its burdens, however ingenious, can be declared just.

A few pages earlier Rothbard defined taxation, uncontroversially, I hope, as “a coerced levy that the government extracts from the populace.” Pulling no punches, he quotes his mentor Frank Chodorov, once an editor of The Freeman:

A historical study of taxation leads inevitably to loot, tribute, ransom — the economic purpose of conquest. The barons who put up toll-gates along the Rhine were tax-gatherers. So were the gangs who “protected,” for a forced fee, the caravans going to market. The Danes who regularly invited themselves into England, and remained as unwanted guests until paid off, called it Dannegeld; for a long time that remained the basis of English property taxes. The conquering Romans introduced the idea that what they collected from subject peoples was merely just payment for maintaining law and order. For a long time the Norman conquerors collected catch-as-catch-can tribute from the English, but when by natural processes an amalgam of the two peoples resulted in a nation, the collections were regularized in custom and law and were called taxes.

“Why do not economists abandon the search for the ‘just tax’ as they abandoned the quest for the ‘just price’?” Rothbard asks.

One reason is that doing so may have unwelcome implications for them. The “just price” was abandoned in favor of the market price. Can the “just tax” be abandoned in favor of the market tax? Clearly not, for on the market there is no taxation, and therefore no tax can be established that will duplicate market patterns.

So let’s hear no more about tax fairness, unless it’s to point out that fairness is approached as tax rates move toward zero.

Bastiat loved the market economy, and badly wanted it to blossom in full—in France and everywhere else. When he described the blessings of freedom, his benevolence shined forth. Free markets can raise living standards and enable everyone to have better lives; therefore stifling freedom is unjust and tragic. The reverse of Bastiat’s benevolence is his indignation at the deprivation that results from interference with the market process.

He begins his book Economic Harmonies by pointing out the economic benefits of living in society:

It is impossible not to be struck by the disproportion, truly incommensurable, that exists between the satisfactions [a] man derives from society and the satisfactions that he could provide for himself if he were reduced to his own resources. I make bold to say that in one day he consumes more things than he could produce himself in ten centuries.

What makes the phenomenon stranger still is that the same thing holds true for all other men. Every one of the members of society has consumed a million times more than he could have produced; yet no one has robbed anyone else.

Bastiat was not naive. He knew he was not in a fully free market. He was well aware of the existence of privilege: “Privilege implies someone to profit from it and someone to pay for it,” he wrote. Those who pay are worse off than they would be in the free market. “I trust that the reader will not conclude from the preceding remarks that we are insensible to the social suffering of our fellow men. Although the suffering is less in the present imperfect state of our society than in the state of isolation, it does not follow that we do not seek wholeheartedly for further progress to make it less and less.”

He wished to emphasize the importance of free exchange for human flourishing. In chapter four he wrote:

Exchange is political economy. It is society itself, for it is impossible to conceive of society without exchange, or exchange without society. . . . For man, isolation means death. . . .

By means of exchange, men attain the same satisfaction with less effort, because the mutual services they render one another yield them a larger proportion of gratuitous utility.

Therefore, the fewer obstacles an exchange encounters, the less effort it requires, the more readily men exchange.

How does trade deliver its benefits?

Exchange produces two phenomena: the joining of men’s forces and the diversification of their occupations, or the division of labor.

It is very clear that in many cases the combined force of several men is superior to the sum of their individual separate forces. . . .

Now, the joining of men’s forces implies exchange. To gain their co-operation, they must have good reason to anticipate sharing in the satisfaction to be obtained. Each one by his efforts benefits the others and in turn benefits by their efforts according to the terms of the bargain, which is exchange.

But isn’t something missing from this account?

Indeed, there is: the subjectivist Austrian insight that individuals gain from trade per se. For an exchange to take place, the two parties must assess the items traded differently, with each party valuing what he is to receive more than what he is to give up. If that condition did not hold, no exchange would occur. There must be what Murray Rothbard called a double inequality of value. It’s in the logic of human action—the discipline Ludwig von Mises christened praxeology. Bastiat, like his classical forebears Smith and Ricardo, erroneously believed (at least explicitly) that people trade equal values and that something is wrong when unequal values are exchanged.

Perhaps I am too hard on Bastiat. After all, he was writing before 1850. Carl Menger did not publish Principles of Economics until 1871. Yet the Austrians were not the first to look at exchange strictly through subjectivist spectacles—that is, from the economic actors’ points of view. The French philosopher Étienne Bonnot de Condillac (1715–1780) did so a hundred years before Bastiat wrote: “The very fact that an exchange takes place is proof that there must necessarily be profit in it for both the contracting parties; otherwise it would not be made. Hence, every exchange represents two gains for humanity.”

Well, perhaps Bastiat was unaware of Condillac’s argument. That is not the case. He reprints the quote above in his book and responds:

The explanation we owe to Condillac seems to me entirely insufficient and empirical, or rather it fails to explain anything at all. . . .

The exchange represents two gains, you say. The question is: Why and how? It results from the very fact that it takes place. But why does it take place? What motives have induced the two men to make it take place? Does the exchange have in it a mysterious virtue, inherently beneficial and incapable of explanation?

We see how exchange . . . adds to our satisfactions. . . . [T]here is no trace of . . . the double and empirical profit alleged by Condillac.

This is perplexing. Clearly, the necessary double inequality of value is not empirical or contingent. Contra Bastiat, the double inequality explains quite a lot, and his questions all have easy answers.

Yet more perplexing still is Bastiat’s statement in the same chapter: “The profit of the one is the profit of the other.” This seems to imply what he just denied.

Bastiat’s failure to grasp this point had consequences for his debates with other economists. For example, he and his fellow “left-free-market” advocate Pierre-Joseph Proudhon engaged in a lengthy debate over whether interest on loans would exist in the free market or whether it was a privilege bestowed when government suppresses competition. Unfortunately, the debate suffers because neither Bastiat nor Proudhon fully and explicitly grasped the Condillac/Austrian point about the double inequality of value. As Roderick Long explains in his priceless commentary on the exchange:

[E]ach one trips up his defense of his own position through an inconsistent grasp of the Austrian principle of the “double inequality of value”; Proudhon embraces it, but fails to apply it consistently, while Bastiat implicitly relies on it, but explicitly rejects it. . . .

Proudhon’s case against interest seems to depend crucially on his claim that all exchange must be of equivalent values; so pointing out the incoherence of this notion would be a telling reply. But Bastiat cannot officially give this reply (though he comes tantalisingly close over and over throughout the debate) because elsewhere—in his Economic Harmonies—Bastiat explicitly rejects the doctrine of double inequality of value.

How frustrating! Bastiat has so much to teach. But here is one blind spot that kept him from being even better.

That’s a remarkable story. But just as remarkable is what that pamphlet led to. When it was issued, Stigler, then teaching at Columbia University (his University of Chicago days still lay ahead), told a young student about it, perhaps changing American intellectual history.

The student was Murray Rothbard.

“Rothbard,” writes Brian Doherty in Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement, “was delighted to learn of an organization promoting his political and economic values. . . . By 1948, Leonard Read had already noted young Rothbard’s deep knowledge of market economics and libertarian principles (and their history) and began to lean on him to vet articles for FEE.”

On visits to FEE Rothbard met Frank Chodorov, the prolific libertarian author who edited The Freeman the first year after Read acquired it. “Chodorov helped introduce Rothbard to the works of [Albert Jay] Nock, Herbert Spencer, Garet Garrett, and Isabel Paterson, among others,” Doherty reports. It wasn’t long before he encountered Ludwig von Mises, an adviser to Read.

Thus Rothbard, who went on to become one of the great natural-law libertarian figures in history and an indefatigable advocate/elaborator of Misesian (Austrian) economics in method and substance, can be said to have received vital intellectual nourishment at FEE’s Irvington-on-Hudson estate.

Rothbard, who died 15 years ago, was at once a beloved and controversial figure. He was one of the very few individuals who shaped the modern freedom movement at its start. Even advocates of the freedom philosophy who never read a word he wrote have been influenced by him. With a passion nonpareil, Rothbard set out to create a self-conscious libertarian movement, which he accomplished through his activism and charisma, as well as through his writings—from the scholarly to the popular—in economics, history, political philosophy, and social criticism. For one man to have turned out Man, Economy, and State/Power and Market; America’s Great Depression; The Ethics of Liberty; Conceived in Liberty (four volumes on American history through the Revolutionary War); For a New Liberty—and so much more—is something astounding. We probably won’t see his likes again. (See David Gordon’s Freeman article, “Murray Rothbard’s Philosophy of Freedom.”)

I feel lucky to have known Murray. He was always a delight to be around, whether talking about some obscure historical figure, traditional jazz (before the electric guitar intruded), classic movies, or the future of liberty. He was unfailingly optimistic and ever ready for a laugh. He was what he called H. L. Mencken (whom he treasured): “the joyous libertarian.”

To say that he was controversial even within the freedom movement is an obvious understatement. His application of libertarian and market principles to even the “traditional functions” of limited government—that is, his belief that the free market can and should provide all legitimate services competitively—stirs heated debate today. While his originality in the matter he called “anarcho-capitalism” is clear, he himself might say he was simply picking up the baton carried by the pioneering nineteenth-century free-market economist Gustave de Molinari, whose seminal essay, “The Production of Security,” Rothbard first brought to American libertarians.

Whatever one thinks of Rothbard’s answer to the question raised therein, there can be no doubting the value of the question itself; it forces one to examine the contours of liberty, the nature of the State, and therefore the very possibility of limiting its powers.

Those who cherish liberty cannot calculate their debt to Murray Rothbard.

* * *

We lead off with the winning essay in the second annual Eugene S. Thorpe writing competition: Richard Fulmer’s “Legends of the Fall: The Real and Imagined Sources of Our Bubble Economy.” Of the 182 entries addressing the causes of the current housing and financial debacle, Richard Fulmer’s was judged the best. Congratulations, Richard!

As the practice of medicine becomes more bureaucratized by government intervention, the profession will change subtly and gradually, but patients will eventually notice the degradation in service. Such is where “reform” will lead, says Theodore Levy.

All during the debate over the reinvention of medical insurance, it was taken for granted that individuals should be forced to buy coverage. James Payne, who refuses, is ready to accept his status as a criminal.

Nien Cheng suffered unimaginable oppression at the hand of the Chinese communist regime but went on to be a passionate spokeswoman for freedom. On the occasion of her death, James Dorn offers a tribute to this heroic woman.

When people think of Africa, sadly, they think of poverty and oppression. But that has not been true for Botswana. Scott Beaulier explains this little-known success story.

Nassim Nicholas Taleb is a provocative writer who scoffs at the idea that human affairs can be predicted scientifically. Robert Murphy introduces us to the man who popularized the term “black swan.”

Ethanol is still in our gasoline, and besides all the bad things you’ve heard about it, it also harms engines. Michael Heberling has the details.

Broadly speaking, there are only so many ways for society to be organized, and only one is in harmony with freedom and human nature. Paul Cleveland and Art Carden elaborate.

Here’s what our columnists have whipped up: Lawrence Reed says he doesn’t care what you call yourself as long as you oppose aggressive force. Donald Boudreaux defines the rule of law. Robert Higgs discusses capital consumption during World War II. John Stossel dissects crony capitalism. Charles Baird anticipates how health care “reform” will help labor unions. And Ivan Pongracic, Jr., reading Paul Krugman’s claim that more government spending will fend off a 1937-style recession, responds, “It Just Ain’t So!”

Books on private schools for the poor, political capitalism, Herbert Hoover, and the Federal Reserve occupy our reviewers.

In Capital Letters, Thomas Szasz answers a reader’s concerns about religious identification and George Schwappach explains how carrying less health insurance saved him money.

Those who cherish liberty cannot calculate their debt to Murray Rothbard.

Read TGIF here.

That’s a remarkable story. But just as remarkable is that when the pamphlet was issued, Stigler, then teaching at Columbia University (his University of Chicago days were still ahead), told a young student about it, perhaps changing American intellectual history.

The student was Murray Rothbard.

“Rothbard,” writes Brian Doherty in Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement, “was delighted to learn of an organization promoting his political and economic values…. By 1948, Leonard Read had already noted young Rothbard’s deep knowledge of market economics and libertarian principles (and their history) and began to lean on him to vet articles for FEE.”

On visits to FEE Rothbard got to know Frank Chodorov,  the prolific libertarian author who edited The Freeman the first year after Read acquired it. He became a mentor to Rothbard. “Chodorov helped introduce Rothbard to the works of [Albert Jay] Nock, Herbert Spencer, Garet Garrett, and Isabel Paterson, among others,” Doherty reports. It wasn’t long before he discovered Ludwig von Mises, who spent a good deal of time at FEE as an adviser to Read, and Mises’s magnum opus, Human Action.

Thus Rothbard, who went on to become one of the great natural-law libertarian figures in history and an indefatigable advocate/elaborator of Misesian (Austrian) economics in method and substance, can be said to have received vital intellectual nourishment at FEE’s Irvington-on-Hudson estate.

Rothbard, who died 15 years ago this month, was at once a beloved and controversial figure. There is no gainsaying that he was one of the very few individuals who shaped the modern freedom movement at its start. Even advocates of the freedom philosophy who never read a word he wrote — and he wrote quite a lot — have been influenced by him in countless ways. With a passion nonpareil, Rothbard set out to create a self-conscious libertarian movement, and he accomplished that through his activism and charisma, as well as through his writings — from the scholarly to the popular — in economics, history, political philosophy, and social criticism. For one man to have turned out Man, Economy, and State/Power and Market, America’s Great Depression, The Ethics of Liberty, Conceived in Liberty (four volumes on American history through the Revolutionary War), For a New Liberty — and so much more — is something astounding. We probably won’t see his likes again. (I refer readers to David Gordon’s Freeman article “Murray Rothbard’s Philosophy of Freedom.”)

I feel lucky to have known Murray. More than once I was at the famous book-lined Rothbard apartment in New York (the one the entire libertarian movement once could have fit in) and was privileged to have him as a guest in my home. I always found him a delight to be around, whether he was talking about some obscure historical figure, traditional jazz (before the electric guitar intruded),  classic movies, or the future of liberty. He was unfailingly optimistic and ever ready for a laugh — his high-pitched laugh was unmistakable and infectious. Rothbard was a great listener, too. He was what he called H. L. Mencken – whom he treasured: “the joyous libertarian.”

I, like Steven Horwitz and so many other colleagues in the freedom movement, were deeply influenced by Rothbard on many levels – not least by his legendary gusto in the intellectual struggle for liberty. I first met him and saw him speak in 1969 and 1970 when he lectured at weekend conferences in New York and Philadelphia put on by the old Society for Individual Liberty. Those were heady days for an eager libertarian college student, and I will never forget them. No one could be more informative, inspiring, and entertaining at the same time than Rothbard. After college I became a newspaper reporter, but I knew that I would eventually move on to full-time libertarian writing. Murray was as responsible as anyone for that. I will always appreciate his encouragement. (I was honored to contribute a chapter, about Rothbard’s earliest writings, to a festschrift [pdf] in his honor.)

Rothbard the Controversial

To say that Rothbard was controversial even within the freedom movement is an obvious understatement. The controversies could be both intellectual and strategic, economic and political, and he brought his characteristic enthusiasm to these disputes every bit as much as he did to his battles with statists. His application of libertarian and market principles to even the “traditional functions” of limited government — that is, his belief that the free market can and should provide all legitimate services competitively — is still hotly debated today. While his originality in the matter he called “anarcho-capitalism” (or individualist anarchism) is clear for all to see, he himself might say he was simply picking up the baton carried by the pioneering nineteenth-century free-market economist Gustave de Molinari, whose seminal essay, “The Production of Security,” Rothbard first brought to American libertarians.

Whatever one thinks of Rothbard’s answer to the question raised therein, there can be no doubting the value of the question itself; for it forces one to examine the contours of liberty, the nature of the State, and therefore the very possibility of limiting its powers.

Those who cherish liberty cannot calculate their debt to Murray Rothbard.

This month marks the 15th anniversary of the death of Murray Rothbard, arguably the most important libertarian theorist of the twentieth century.  Although I only met him once in person, his work was influential in developing my “calling” in a number of ways, and the way he approached his scholarly and activist work for libertarianism over his life provides a number of lessons for advancing our own callings and the freedom movement more broadly.

Read Steven Horwitz’s column here.

In urging Congress to pass medical “reform,” the Times claims that this country can “afford” this multitrillion-dollar monstrosity because it ultimately will “cut costs,” lower the federal deficit, and make “affordable medical care available to all:

Over the next two decades, the pending bills would actually reduce deficits by a small amount and reforms in how medical care is delivered and paid for — begun now on a small scale — could significantly reduce future deficits.

My response is simple: How do we know this legislation will accomplish these things? From what I can tell, the Times says we know it because, well, the legislation declares it to be so. In other words, we are supposed to take Congress and the White House at their word because, after all, they allegedly have our best interests at heart, just as Congress and the White House claimed that the Iraq war would be done on the cheap (paid mostly through oil exports from Iraq, something that did not exactly work as planned).

However, the editorial claims that there are real-live portions of the bill that should result in the supposed federal budget savings:

Electronic medical records could eliminate redundant tests; standardized forms and automated claims processing could save hundreds of billions of dollars; “effectiveness” research would help doctors avoid costly treatments that don’t work; various pilot projects devised to foster better coordination of care and a shift away from fee-for-service toward fixed payments for a year’s worth of a patient’s care all show some promise.

In the next paragraph the editorialist admits:

These reforms are mostly untested. And the C.B.O. is properly cautious when it says that it does not see much if any savings for the government during the next decade, in part because of upfront costs and in part because no one knows what will work.

Let me get this straight. The Times is urging us in the name of “cost reduction” to accept a huge new government expense that will affect us all in ways we cannot imagine because the regime in power declares that it will cut costs. It must be so because, well, it must be so.

The mind boggles at this logic. According to those who want government-run medical care (actually, most of medical care today already is run by the government one way or another), profit-seeking medical-insurance, drug, and private-care firms deliberately are driving up their costs in order to become more profitable. If that were true it would be the first time that profitability in a market system was positively related to firms’ artificially raising their own costs.

Indeed, as economists such as Ludwig von Mises and Murray Rothbard clearly demonstrated, firms earn profits by cutting costs, being resourceful, and creating goods and services that consumers want to purchase. The notion that companies become profitable through high production costs turns economic logic on its head.

For example, we have seen prices fall in the production and sale of computers and personal electronics in some of the freest markets on the planet. However, if these firms had adopted a production plan akin to what the Times demands for medical care, we would be paying a fortune for inferior electronic goods and there would be a “cost crisis” in that industry.

Sheldon Richman recently wrote about the “perverse incentives” that government has created in modern medical care, and he said that free markets in health care would better serve people than what we have now. Granted, he is using real economic logic, something that the political classes and their media allies have rejected as politically unsuitable. The rest of us will pay dearly for that arrogance.

This proposal was not really all that shocking: Such a program would have been consistent enough with the advertised purpose of certain phases of American land policy from 1776 on. American governments handed out land (however acquired) for over a century to veterans, settlers, land speculators, railroads, timber corporations, mining companies, and other parties. (I’ll give you three guesses which groups made out the best). Governments did so as a source of revenue, for geostrategic reasons, to win favor with voters, or to reward a small class of typically American operators who flat-out deserved to be rich.

In a new, revolutionary, and republican society, there was of course much talk about widespread property as the bulwark of republican freedom. But the talk was so general that Federalists and Republicans could share it, while leaving themselves plenty of room in which to create a small class of owners of a disproportionate amount of the public domain. Overall—from the founding land speculators down to 1893, when the frontier allegedly ran out—American land policy resembled in both theory and practice the kind of “privatization” we see under mercantilist Republican administrations. One landmark in the process was Johnson and Graham’s Lessee v. William M’Intosh (1823). Here, Chief Justice John Marshall undertook to write a long essay on the received theory of how property previously stolen by European kings or their agents is best conveyed. As was his wont, Marshall proved entirely too much, in as clear a case of Albert Jay Nock’s “copper riveting” of narrowly focused property rights as we could want. (See my “Albert Jay Nock and Alternative History,” The Freeman, November 2008.)

Southern agrarian Andrew Lytle noted that from the settler’s point of view the whole frontier process represented an attempt to get away from would-be aristocrats and other aspiring land monopolists. Consistent republican ideologists like Thomas Skidmore and George H. Evans agitated from the 1820s into the 1840s in favor of giving homesteaders first claim on the territories. Generally speaking, other claimants prevailed, while the politics of slavery and antislavery further complicated the matter. In the bigger picture, the Homestead Act of 1862 was the exception rather than the rule, as Paul W. Gates showed in a noteworthy 1936 paper (“The Homestead Law in an Incongruous Land System,” American Historical Review).

I cannot discuss here what an ideal policy based on “mixing one’s labor” with resources might have looked like. Suffice it to say that sales of thousands and tens of thousands of acres to individuals, land companies, and corporations were not especially consistent with any genuine republican ideal. The disappearance of most of the best land in California into the hands of a half-dozen individuals in a few decades comes to mind. But large-scale buyers had mixed their money with federal land officers, and that no doubt counts for something.

Meanwhile, the judiciary—state and federal—busily remodeled the common law and shifted the burdens of industrialization onto third parties, extensively modifying the older law of nuisance. Harry Scheiber finds that “law was often, if not to say usually, mobilized to provide effective subsidies and immunities to heavily-capitalized special interests [under] either ‘instrumentalist’ or ‘formalist’ doctrine.” Even existing doctrines of “public rights” and eminent domain came to serve business interests. Finally, federal judges’ discovery in the 1880s of corporate “personhood” in the Fourteenth Amendment perfected the Federalist Party’s original mercantilist program. All these changes importantly influenced just who would benefit from the American State-system of land tenure (to use Nock’s phrase) and its attendant modes of preemption and exploitation.

Land and Independence

Many writers have seen a special relationship between landownership and personal independence. And here we hit on what is perhaps the truest insight of republican theory—one taken up by many classical liberals. Briefly, this holds that a broad “middle class” of property owners is essential to the maintenance of free societies. The point is as old as Aristotle. On the negative side, in decrying the social effects of England’s fabled land monopoly, radical liberals like Percy Bysshe Shelley, Thomas Paine, Thomas Hodgskin, and John Bright implicitly affirmed the republican axiom.

A typical nineteenth-century American “self-help” book aimed at young men did not say, “Get a job working for wages within an increasingly intricate division of labor so as to enjoy a greater variety of consumer goods.” Instead, it said, “Get yourself a competency”—a vision fraught with republican implications suitably modernized. Working for wages, if one did it at all, was a temporary stage—to be endured while learning a skill or trade and abandoned later in favor of real or potential independence. This independence, derided in our time as “illusory,” left one free (within limits) not just from state interference but also from nineteenth-century employers. And if independence is illusory in our time, it is at least partly because the political activities of well-connected elites long since removed the preconditions of independence deliberately and systematically.

One key (but not the only one) to this much-sought-after independence was access to land, a theme taken up by Catholic writers Hilaire Belloc and G. K. Chesterton in early twentieth-century England. Sociologist Robert Nisbet commented that never, after reading Belloc, did he “imagine that there could be genuine individual liberty apart from individual ownership of property.” In any case, as historian Christopher Lasch put it, “Americans took it as axiomatic that freedom had to rest on the broad distribution of property ownership.” Perhaps Americans were wrong to believe such a thing. But let us examine the matter a bit more.

This American axiom receives support from those political economists who believed that the land/labor ratio importantly determines social structure. Edward Gibbon Wakefield somewhat gave the game away in the 1830s by opposing easy access to land in Australia, lest potential wage-earners try for self-sufficiency before spending “enough” years working for others. Marx chided Wakefield for letting this “bourgeois secret” out and was in turn chided by Franz Oppenheimer, Achille Loria, and Nock for not learning the right lesson from Wakefield’s recommendations on rigging the market.

H. J. Nieboer argued (1900) that where resources are “open,” few will work for big enterprises, and the latter will (if they can) institute some form of slavery. Evsey Domar writes (1970) that one never finds “free land, free peasants, and non-working owners” together. Why? Because where political leverage allows, aspiring lords and (literal) rent-seekers will eliminate the free land, the free peasants, or both.

Colonial Policies

With this theorem in view, let us survey some colonial evidence. Enterprisers in colonies have always wanted regular supplies of cheap labor for their projects. Although there is no evidence in favor of a “right” to such a thing, these prospective employers were never discouraged. Aided by colonial administrators with the same assumptions, they gradually overcame native economic independence. Land was the key, and neither the colonizers nor the natives doubted it. No matter how hard natives worked on their holdings, colonialists decried their “idleness”—and their uncivilized failure to work for wages.

We may therefore give the overworked English Enclosures time off (for now) and look at some other cases. Consider the Japanese colonial administrator in Okinawa who complained in 1899 that the typical Okinawan held land and therefore had low expenses and few wants. For these reasons, the native saw “no need to undertake any other business, nor to save money.” Since native lands were held informally, they could not be capitalized. Such people and properties did little for the great cause of development and, shortly, the Japanese government (!) denounced Okinawans’ customary arrangements as “feudal” and set out to modernize the island. American occupation later perfected this anti-agrarian revolution. Doubtless, however, much “employment” was created in the post-World War II Okinawan service economy dominated by the U.S. military.

Turning to English colonies in the Caribbean and Africa, we find comparable phenomena. England abolished slavery in the colonies in the 1830s. (Never mind that, as historian Eric Foner comments, “Through a regressive tax system, the British working classes paid the bill for abolition.”) By this time, English policymakers had embraced Adam Smith’s view that positive incentives motivated labor better than fear of starvation or draconian punishments did. But an ocean made all the difference, Foner observes, and new peasantries made up of former slaves were “seen in London, as in the Caribbean, as a threat not simply to the economic well-being of the islands, but to civilization itself.” John Stuart Mill’s famous defense of peasant proprietors “did not extend to the blacks of the Caribbean; their desire to escape plantation labor and acquire land was perceived as incorrigible idleness.”

And so Britain’s former slave colonies put vagrancy and other laws to work and crafted taxes aimed at restricting “the freedmen’s access to land.” As Foner puts it, “Taxation has always been the state’s weapon of last resort in the effort to promote market relations within peasant societies”—that is, to force people into markets in which they were not eager to participate. In Kenya the problem was one of “dispossessing a peasantry with a preexisting stake in the soil,” but colonial legislation proved up to the task. Foner concludes that in “the Caribbean and southern and eastern Africa . . . the free market [was] conspicuous by its absence”—its workings restricted “as far as possible” in the interest of the well-off and powerful.

Historian Colin Bundy has studied the economic rise and political-economic fall of a class of independent African farmers in the Eastern Cape Colony and other parts of South Africa. Various Cape Location Acts (1869, 1876, and 1884) sought to lessen “the numbers of ‘idle squatters’ (i.e., rent-paying tenants economically active on their own behalf) on white-owned lands.” Such peasant farming “conferred . . . a degree of economic ‘independence’: an ability to withhold, if he so preferred, his labour from white landowners or other employers.” Further: “Both the farmer and the mine-owner perceived . . . the need to apply extra-economic pressures . . . to break down the peasant’s ‘independence,’ increase his wants, and to induce him to part more abundantly with his labour, but at no increased price.” In their view, “Africans had no right to continue as self-sufficient and independent farmers if this conflicted with white interests.”

Bundy observes that “Social engineering on this scale took time and effort, but the incentives were powerful.” By way of a “one man one lot” rule under the Glenn Grey Act of 1894, legislators sought to keep African farming within “certain acceptable bounds.” (Here, finally, was a use for John Locke’s famous “proviso” about leaving enough resources for others!) Evictions increased after the Anglo-Boer War (1899-1903). Rents rose (Enclosure defenders, take note), and former tenants stayed on as laborers. Tax pressure on African farmers increased. This “employers’ offensive” from 1890 to 1913 ended successfully in the South African Natives Land Act of 1913, which effectively outlawed the practices under which a particular African peasantry had shown much success.

One supposes, in standard libertarian fashion, that agricultural employment increased thereafter along with land values. But that was the whole point: to proletarianize independent peasants by leaving them no option but to work for wages for Boers and Brits on farms, in mines, and elsewhere. Whether more “employment” was good in itself seems unclear. We can, at least, impute the outcome back to specific political intentions and levers. So much for the colonies, then—and all this without even mentioning the two greatest monuments to England’s defense of free markets: Ireland and India.

Telescopic Land Reform

Colonial bureaucrats and employers saw a definite connection between small-scale landownership and independence, and resolved to cut that independence short. By now we begin to see that “the subsidy of history”—to use Kevin Carson’s useful term—has been very large indeed. A number of libertarians have understood the problem at hand in pretty much these terms. They have tended, however, to dwell on instances far away from our own shores, writing about land reform in Latin America, South Africa, Asia, and other places. In the mid-1970s Murray Rothbard, Roy Childs, and others addressed the matter.

Rothbard wrote that “free-market economists . . . go to Asia and Latin America and urge the people to adopt the free market and private property rights” while ignoring “the suppression of the genuine private property of the peasants by the exactions of quasi-feudal landlords. . . .” In this vacuum, only the local communists appeared to support “the peasants’ struggle for their property. . . .” And so libertarians “allowed themselves to become supporters of feudal landlords and land monopolists in the name of ‘private property.’”

Decades earlier, that very conservative German liberal economist Wilhelm Röpke wrote that German history would have gone better had Prussia undergone “a radical agrarian reform breaking up the great estates and putting peasant farms in their place.” He adds: “Influential Social Democratic leaders opposed the transformation of the great estates in Prussia into peasant holdings . . . as a ‘retrograde step.’” Röpke called for freeing Germany from “agrarian and industrial feudalism” and the ills “of proletarization, of concentration and overorganization, of the agglomeration of industrial power and the destruction of the individuality of labor. . . .” In his view, the typical proletarianized worker or clerk wanted “a small house of his own with a garden and a goat shed, an undisturbed family life without training courses, mass meetings, processions, and political flag days; dignity and pleasure in his work, an independent if modest existence. . . .”

Why Go Abroad?

For Enclosure-like pressures on small-holders closer to home, we need look no farther than states like Kentucky, where courts vigorously enforced the full feudal rigor of the “broad form deed,” thereby ensuring the strip mining of many a mountaineer out of productive existence down to the early 1990s. With the system so long stacked in favor of big landholders and bankers, well subsidized by history, one begins to understand the popularity of those New Deal programs that promoted individual home ownership.

Economist Michael Perelman has confirmed a direct relationship between rural labor without independent means of support and the applied politics of English classical economists. The latter preached a great gospel of “work,” mainly for others, who ought to be doing this work. Except for a narrow class of Dissenting Protestant factory owners, those most vigorously espousing this gospel were not themselves noted for doing a lot of work. Together, however, owners and economists said in effect, “Work for us, join the armed forces, or emigrate, ye doughty Angles, Saxons, Jutes, and Scots.” And emigrate they did, leaving us with an American folk wisdom in which old times in England, Scotland, and Ireland were not that great. (This folk memory may have at least as much heuristic value as latter-day econometric claims that everyone became better off in the new division of labor.)

And so we return to Henry George’s problem: How did Americans manage as a society to seize so much land, incur whatever moral guilt goes with the seizures, and then not bloody have any of it? The chief mechanism was precisely the political means to wealth that Oppenheimer and Nock analyzed. The reason Brisco County Jr.’s “Robber Barons” struck the right note is that there were such individuals. California was a laboratory case, as George well knew, of the successful primitive accumulation of land by a microscopically small class of state-made men. As with ontogeny and phylogeny, Western accumulation recapitulated Eastern accumulation. From such causes arose the famous “end” of the frontier circa 1893. But open land did not so much disappear naturally as succumb to preemption. And then, with perfect timing, the conservation movement put enormous quantities of land beyond the reach of actual settlers.

As for those Americans who currently own property, they typically own it after 20 or more years of bank payments. Is land so genuinely scarce that a bank must always be in the middle? This remains our central question. Certainly, nineteenth-century allocations played a lasting role, and later political interventions added to concentrated property ownership.

And what of the promotion of “easy” home ownership in recent years? It is a product of 1) the widespread delusion, in the wake of Lyndon Johnson’s and Richard Nixon’s inflationary financing of the Vietnam War, that real estate constitutes the ultimate inflation hedge, and 2) the specific dynamics of the expansionist fractional-reserve banking under new rules (“deregulation”) increasing moral hazards for bankers.

There is also the unhappy fact of property taxes—our chief surviving feudal due. Fail to pay those, and the state enrolls a new owner on your former property. This reduces somewhat the fact of private property in land.

Independence, Republicanism, and Liberty

Some classical liberals and libertarians downgrade personal independence. Better to participate in the going order and enjoy a wider array of comforts, they say. But socialists and corporate liberals can play the same game—and have for over a century. It seems to me that those libertarians who join in this refrain rather willfully misconstrue a very simple point: They hail the joys of the division of labor, the higher degree of civilization (that is, more stuff) to be gained from dependence, interdependence, and sundry trickles of income and utility down and up. But already in 1936, Southern agrarian John Crowe Ransom noticed a flaw in this reasoning, writing, “[I]ncome is not enough, and the distribution of income is not enough. If those blessings sufficed, we might as well come to collectivism at once; for that is probably the quickest way to get them.” If greater choice among consumer goods makes up for lost independence, then the case for socialism (or X) would be clinched, provided socialism (or X) could deliver the economic goods (where “X” stands for any political ideology offering us the same stuff/independence tradeoff.)

I doubt we are necessarily “better off” merely because of employment. We need to know more, including why particular sets of choices exist in the first place. Back in the ’60s, Selective Service used to “channel” us into the “right” occupations by threatening to draft us. Given the parameters, our choices were “free.” If it’s that easy, then we are always free, no matter the historical and institutional constraints. Similarly, “To Hell or Connaught” was a choice, and never mind that Oliver Cromwell and his army arbitrarily created this particular prisoner’s dilemma. But perhaps I have leapt from choices among goods to choices between ways of life. Why? Let us look into this.

What if proletarianization is not the ideal form of human life? What if a complex division of labor is merely useful or convenient, but not a moral imperative? What if most of us are hirelings, well paid or otherwise, and then we learn what that status amounts to? The post-Marxist socialist André Gorz writes, “Capitalism owes its political stability to the fact that, in return for the dispossession and growing constraints experienced at work, individuals enjoy the possibility of building an apparently growing sphere of individual autonomy outside of work.” Our interest here is the “autonomy” mentioned, which sounds like a near cousin of “independence.” The sentiment seems sound enough, and the partial convergence of Röpke and Gorz is eye-opening.

Now in the view of Quentin Skinner (a modern republican theorist of note), unfreedom arises both from direct, forcible coercion and from institutional arrangements that make people dependent, since the latter always contain the possibility (realized or not) of arbitrary interference and coercion. Such discussions usually center on the form of state. Utilitarian liberals like Henry Sidgwick did not care about forms. If the Sublime Porte, Tsar, or King of England leaves us substantially alone, we are “free,” and that is that. In Skinner’s view, if those worthies can on their own motion change their policy of leaving us alone, we are not free, no matter what they are doing right now. Freedom requires that we not be menaced by latent unknown powers.

Freedom in this sense is liberty—a shared civic or public good. Like many real public goods it is not provided by the state, indeed the state may be its chief enemy. Law and settled custom may provide this public good, and consumer goods—the people’s pottage—do not compensate for abandoning such an order, where it exists. Today, people often work long hours to buy some independence. In another time, they began with some independence, and then chose how hard to work. Now we see, perhaps, the difference between choices among economic goods and past choices between systems structuring our choices.

Widespread landownership long supported a kind of liberal-republican independence. Perhaps we should reexamine the nexus and ask ourselves how, in Donald Davidson’s words, we “let the freehold pass,” and whether that was really for the best.

Remember, Herbert Hoover didn’t have a problem making unpleasant decisions: he had the courage and toughness to slash spending and raise taxes in the face of the Great Depression. Unfortunately, that just made things worse.

–“Stuck in the Middle”

Federal spending rose in 1930 and1931.From Murray Rothbard’s America’s Great Depression (1972, 233):

Federal expenditures rose from $4.2 billion in 1930 [up from $4.0 billion in 1929] to $5.5 billion in 1931–excluding government enterprises it rose from $3.1 billion to $4.4 billion, an enormous 42 per cent increase! …From a modest surplus in 1930, the Federal government thus ran up a huge $2.2 billion deficit in 1931. And so President Hoover, often considered to be a staunch exponent of laissez-faire, had amassed by far the largest peacetime deficit yet known in American history. In one year, the fiscal burden of the Federal government had increased from 5.1 per cent to 7.8 per cent, or from 5.7 per cent to 8.8 per cent of the net private product.

The following year, Hoover oversaw a huge tax increase, which led to lower revenues and a decline in federal spending. Yet “While the absolute amount of Federal depredations fell from $5.4 to $4.4 billion in 1932 … GNP, and gross private product, declined far more drastically. …Hence, the percentage of Federal depredation on the gross private product rose from 7.8 per cent in 1931 to 8.3 per cent in 1932…” (256).Franklin Roosevelt condemned Hoover as a spendthrift in the 1932 campaign and promised fiscal responsibility.

The first and probably the most important subsidy of history is land theft, by which peasant majorities were deprived of their just property rights and turned into tenants forced to pay rent based on the artificial “property” titles of state-privileged elites.

Of course, all such artificial titles not founded on appropriation by individual labor are completely illegitimate.

As Ludwig von Mises pointed out in Socialism, the normal functioning of the market never results in a state of affairs in which most of the land of a country is “owned” by a tiny class of absentee landlords and the peasant majority pay rent for the land they work. Wherever it is found, it is the result of past coercion and robbery.

Murray Rothbard, in The Ethics of Liberty, explained the injustice of feudal landlordism:

But suppose that centuries ago, Smith was tilling the soil and therefore legitimately owning the land; and then that Jones came along and settled down near Smith, claiming by use of coercion the title to Smith’s land, and extracting payment or “rent” from Smith for the privilege of continuing to till the soil. Suppose that now, centuries later, Smith’s descendants (or, for that matter, other unrelated families) are now tilling the soil, while Jones’s descendants, or those who purchased their claims, still continue to exact tribute from the modern tillers.Where is the true property right in such a case? It should be clear that here . . . we have a case of continuing aggression against the true owners—the true possessors—of the land, the tillers, or peasants, by the illegitimate owner, the man whose original and continuing claim to the land and its fruits has come from coercion and violence. Just as the original Jones was a continuing aggressor against the original Smith, so the modern peasants are being aggressed against by the modern holder of the Jones-derived land title. In this case of what we might call “feudalism” or “land monopoly,” the feudal or monopolist landlords have no legitimate claim to the property. The current “tenants,” or peasants, should be the absolute owners of their property, and, as in the case of slavery, the land titles should be transferred to the peasants, without compensation to the monopoly landlords.

So rather than defending all existing land titles in the name of the “sanctity of property” and protesting when some left-wing government institutes a land reform that transfers feudal land titles to the peasantry, Rothbard favored 1) dividing up Southern plantations and giving freed American slaves “forty acres and a mule,” and 2) transferring the latifundia from Latin American landed oligarchies to the peasants.

In the Old World, especially Britain (where the Industrial Revolution began), the expropriation of the peasant majority by a politically dominant landed oligarchy took place over several centuries in the late medieval and early modern period. It began with the enclosure of the open fields in the late Middle Ages. Under the Tudors, Church fiefdoms (especially monastic lands) were expropriated by the state and distributed among the landed aristocracy. The new “owners” evicted or rack-rented the peasants.

Expropriating from the Peasantry

The Restoration Parliament of the seventeenth century carried out a series of land “reforms” that abolished feudal land tenure altogether—but only upward. There were two ways Parliament could have abolished feudalism and reformed property. It might have treated the customary possessive rights of the peasantry as genuine title to property in the modern sense, and then abolished their rents. But what it actually did, instead, was to treat the artificial “property rights” of the landed aristocracy, in feudal legal theory, as real property rights in the modern sense; the landed classes were given full legal title, and the peasants were transformed into tenants at will with no customary restriction on the rents that could be charged. The most important component of this “reform” was the Statute of Frauds of 1677, which nullified rights of copyhold by making them unenforceable in royal courts.

Finally, the Parliamentary Enclosures of the eighteenth and early nineteenth century robbed the peasantry of their rights of common. The propertied classes of England saw the economic independence provided by the commons as a threat, first to an adequate supply of agricultural wage labor on the landed oligarchy’s own land, and later to an adequate supply of factory labor willing to work the long hours and low pay demanded by the owners. The literature of the propertied classes of the time was quite explicit on their motivation: the laboring classes would not work hard enough or cheaply enough so long as they had independent access to the means of subsistence. They had to be made as poor and hungry as possible so that they would be willing to accept work on whatever terms it was offered.

A version of the same phenomenon took place in the Third World. In European colonies where a large native peasantry already lived, states sometimes granted quasi-feudal titles to landed elites to collect rent from those already living on and cultivating the land; a good example is latifundismo, which prevails in Latin America to the present day. Another example is British East Africa. The most fertile 20 percent of Kenya was stolen by the colonial authorities, and the native peasantry evicted, so the land could be used for cash-crop farming by white settlers (using the labor of the evicted peasantry, of course, to work their own former land). As for those who remained on their own land, they were “encouraged” to enter the wage-labor market by a stiff poll tax that had to be paid in cash. Multiply these examples by a hundred and you get a bare hint of the sheer scale of robbery over the past 500 years.

Contrary to Mises’s rosy version of the Industrial Revolution in Human Action, factory owners were not innocent in all of this. Mises claimed that the capital investments on which the factory system was built came largely from hard-working and thrifty workmen who saved their own earnings as investment capital. In fact, however, they were junior partners of the landed elites, with much of their investment capital coming either from the Whig landed oligarchy or from the overseas fruits of mercantilism, slavery, and colonialism.

In addition, factory employers depended on harsh authoritarian measures by the government to keep labor under control and reduce its bargaining power. In England the Laws of Settlement acted as a sort of internal passport system, preventing workers from traveling outside the parish of their birth without government permission. Thus workers were prevented from “voting with their feet” in search of better-paying jobs. You might think this would have worked to the disadvantage of employers in underpopulated areas, like Manchester and other areas of the industrial north. But never fear: the state came to the employers’ rescue. Because workers were forbidden to migrate on their own in search of better pay, employers were freed from the necessity of offering high enough wages to attract free agents; instead, they were able to “hire” workers auctioned off by the parish Poor Law authorities on terms set by collusion between the authorities and employers.

Legalized Discrimination Against Laborers

The Combination Laws, which prevented workers from freely associating to bargain with employers, were enforced entirely by administrative law without any protections of common-law due process. And they were only enforced against combination by workers, not against combination by employers (such as blacklisting “troublemakers” and collusive setting of wages). The Riot Act (1714) and other police-state legislation during the Napoleonic Wars were used to stem the threat of domestic revolution, essentially turning the English working class into an occupied enemy population. Such legislation criminalized most forms of association.

Even fraternal associations for mutual aid, burial and sick benefits, and the like operated in the face of hostility from the state, according to historians of the friendly-society movement such as Bob James and Peter Gray. Under the terms of the Combination Act, friendly societies were subjected to close judicial supervision lest direct craft production be organized for barter among the unemployed, or the societies’ benefits cross the line and function as de facto unemployment insurance for striking workers. The Corresponding Societies Act, passed around the same time, prohibited all societies that administered secret oaths or were federated on a national scale.

So the Industrial Revolution was, in fact, built on a system of legal peonage in which employers were directly implicated. The form taken by the factory system surely reflects this history. In a Britain composed of peasant smallholders, with no restraints on free association, workers would have been free to mobilize their own properties as capital through mutual credit institutions. Absentee ownership and hierarchy would likely have been far, far less prevalent, and the factory system where it existed far less oppressive and authoritarian.

A similar process occurred in the colonization of settler societies like America and Australia, by which the colonial powers and their landed elites attempted to replicate feudal patterns of property ownership. In such colonies, the state preempted ownership of vacant land and restricted working people’s access to it. Sometimes they gave title to vacant land to privileged land speculators, who were able to charge rent to those who homesteaded it (the legitimate owners).

E. G. Wakefield, an early nineteenth-century British theorist of colonialism, advocated just such preemption on the same grounds that the propertied and employing classes of Britain had supported Enclosure: it was easier to hire labor on favorable terms to the employer. In England and America, he wrote:

In colonies, labourers for hire are scarce. The scarcity of labourers for hire is the universal complaint of colonies. It is the one cause, both of the high wages which put the colonial labourer at his ease, and of the exorbitant wages which sometimes harass the capitalist. . . .

Where land is cheap and all men are free, where every one who so pleases can obtain a piece of land for himself, not only is labour very dear, as respects the labourers’ share of the product, but the difficulty is to obtain combined labour at any price.

Consequently, “[f]ew, even of those whose lives are unusually long, can accumulate great masses of wealth.”

Wakefield’s disciple, Thomas Merivale, wrote of the “urgent desire for cheaper and more subservient labourers—for a class to whom the capitalist might dictate terms, instead of being dictated to by them.”

Land preemption was a major element of colonial policy in early American history. Gary Nash, in Class and Society in Early America, described land grants in colonial America comparable to those of William I in England after the Conquest. In New York, for example, the largest estates granted by the British colonial administration (after the New Netherlands was acquired in the Dutch Wars) ranged from the hundreds of thousands to over a million acres. Governors continued to grant tracts of land in the hundreds of thousands of acres to their favorites, well into the eighteenth century. Under Governor Fletcher, some three-quarters of available land was granted to 30 persons.

Albert Jay Nock, in Our Enemy, the State, argued that “from the time of the first colonial settlement to the present day, America has been regarded as a practically limitless field for speculation in rental values.” Many leading figures in the late colonial and early republican period were prominent investors in the great land companies, including George Washington in the Ohio, Mississippi, and Potomac Companies; Patrick Henry in the Yazoo Company; Benjamin Franklin in the Vandalia Company, and so forth.

In The Ethics of Liberty, Rothbard condemned such preemption (“land-engrossing, where arbitrary claims to virgin land are used to keep first-transformers out of that land”) on the same grounds that he criticized feudal landlordism. He called for voiding all current titles to vacant and unimproved land, and opening it up to free homesteading. In addition, in cases where current mortgage holders and landlords trace their title to state grants of land, the proper claim lies with those who first homesteaded the land, or their heirs and assigns.

The Homestead Act of 1862, an apparent exception to this general trend, was really just another illustration of it. The majority of land, rather than being claimed under the terms of the Homestead Act, was auctioned to the highest bidder. Even for land covered by the Act, according to Howard Zinn, the $200 fee was beyond the reach of many. As a result, much of the land was not homesteaded on Lockean principles at all, but initially went to speculators before being partitioned and resold to homesteaders. And compared to the 50 million acres covered by homestead legislation, 100 million acres were given away as railroad land grants during the Civil War—free of charge! In other words, the privileged classes got the gravy, and ordinary homesteaders got the bone.

Keeping the System Going

What I have described here are only the initial acts of coercion and robbery on which our existing form of industrial capitalism was founded. Of course it didn’t stop there. Once the system was up and running, it depended on the state’s ongoing efforts to maintain a legal structure of privilege, based on artificial property rights and artificial scarcity: enforcement of absentee titles to vacant and unimproved land; entry barriers for the banking industry to make credit artificially expensive and scarce; the artificial property rights of patent and copyright; and more. And starting in the late nineteenth century the modern form of corporate capitalism depended on even more massive state intervention: subsidies to long-distance shipping to make market areas and firm size artificially large; the cartelizing effects of patents and tariffs; regulatory cartelization; and entire industries and sectors of the economy either brought into existence or guaranteed a taxpayer-funded market by the post-1941 perpetual war economy.

Contrary to popular mythology, the New Deal was not a departure from some preexisting idyllic state of “laissez faire.” There never was anything remotely approaching laissez faire. Capitalism—that is, the existing historical system as it actually developed—has had very little to do with free markets and a great deal to do with robbery and coercion.

This is not to say that all avenues to economic advancement through independent entrepreneurship have been closed off. But it’s much more of an uphill struggle than it would be in a free market, and the field is unfairly tilted in favor of the big players.

In seeking to institute a genuine free market, libertarians shouldn’t lose sight of these facts. What lessons are libertarians to learn from the previous historical account?

First, there is nothing “libertarian” about the instinctive tendency to rally to the defense of existing property titles without regard to justice. As Karl Hess said in The Libertarian Forum, back in 1969,

[L]ibertarianism wants to advance principles of property but . . . it in no way wishes to defend. . . all property which now is called private. Much of that property is stolen. Much is of dubious title. All of it is deeply intertwined with an immoral, coercive state system which has condoned, built on, and profited from slavery; has expanded through and exploited a brutal and aggressive imperial and colonial foreign policy, and continues to hold the people in a roughly serf-master relationship to political-economic power concentrations.

Second, in advocating free-market reform, we must consider the role of this historical legacy of injustice (the subsidy of history) in determining the winners under the present system. A “free-market reform” that simply locks in the beneficiaries of past robbery and privilege, and ratifies the past theft from which they benefit, will merely reward injustice and secure its ill-gotten gains.

From a libertarian ethical standpoint, the standard model of “privatization” (selling off state property to a large, politically connected private corporation, on terms most advantageous to the corporation) is therefore highly dubious. That’s especially true considering that much of the property was created in the first place—at taxpayer expense—for the primary purpose of subsidizing the operating costs of big business. Much of the state-owned utility and transportation infrastructure in the Third World was created, at the behest of transnational financial elites, as a precondition for profitable Western capital investment. And the odious debt thus incurred, often by corrupt dictatorships acting in collusion with global finance, is then used by the World Bank to blackmail those countries into selling off their infrastructure to the very same transnational corporations it was created to benefit—usually at pennies on the dollar.

An Appropriate Model for Privatization

Rothbard’s model of privatization is far superior: to void state titles to property and treat it as unowned, subject to immediate homesteading by those actually mixing their labor with it. That would mean that state universities would be transformed into the property of their students or faculty, as consumer or producer cooperatives. Government-owned utilities would become consumer cooperatives owned by ratepayers, and state-owned factories would be handed over to the work force and reorganized as worker cooperatives.

We must also be wary of pseudo-Coasean arguments that it “doesn’t matter” who the property was originally stolen from, because it will end up in the hands of the “most efficient” owner. That’s essentially the same argument used for eminent domain. Regardless of whose hands the property winds up in, the rightful owners and their descendants—who never received compensation—are out the value of what was stolen from them. And even the most inefficient ways of organizing production are pretty “efficient,” comparatively speaking, when you have the competitive advantage of working with stolen property.

Besides, there is no such thing as generic “efficiency”; efficiency depends on the owner’s purpose. The most efficient technique for subsistence farming on a small plot—economizing on land by building soil and adding intensive labor inputs—is entirely different from that for a feudal oligarch producing cash crops with access to more stolen land than he could possibly use, and often holding a majority of his stolen land out of use altogether. In any case, the rightful owner would no doubt find it far more “efficient” to be feeding himself on his own land, than starving in a shantytown because he can’t afford to buy even the cheapest food from those “efficient” plantations occupying his stolen land.

The actual system of political economy that so many corporate apologists refer to as “our free market system” has in fact been characterized from the beginning by robbery. We must beware of “free market reforms” carried out by the robbers. They amount in practice to allowing the robbers—hands still full of loot—to say: “All right, no more stealing, starting . . . now!”