I have devised a simple plan for improving Americans’ health by drastically reducing everyone’s weight, thereby significantly increasing longevity and reducing medical costs. All we need to do is revalue the pound. Instead of a pound being 16 ounces, it will now be 32, cutting everyone’s weight in half. We adjust our bathroom scales, our weights drop, and our health is improved.

Of course this “solution” rests on two fallacies. First, it conflates measurement with what is measured. Adjusting my bathroom scale does not change my weight, only my perception of my weight.

Second, the solution confuses cause and effect. My weight is not necessarily the cause of my health or lack thereof; in fact my weight may be caused by my ill health—an injury that keeps me from exercising or a thyroid condition, for example. More commonly, good health is the result of acting responsibly for many years: moderating calorie and alcohol intake, eating the right foods, engaging in regular exercise, getting quality dental and medical care. Such actions are likely to result in both moderate weight and good health. But I can no more make myself healthy by adjusting my bathroom scales than a doctor can cure a child’s cold by adjusting the thermometer he uses to measure her fever.

The two fallacies are so obvious that no one could possibly fall for them, right? Sadly, no. Many brilliant people have fervently believed in nearly identical fallacies for decades and are even now basing our country’s monetary policy on them.

Historian T. S. Ashton noted in his book The Industrial Revolution, 1760–1830:

If we seek—it would be wrong to do so—for a single reason why the pace of economic development quickened about the middle of the eighteenth century, it is to low interest rates we must look. The deep mines, solidly built factories, well-constructed canals, and the houses of the Industrial Revolution were the productions of relatively cheap capital.

John Maynard Keynes, making this same observation years before, concluded that simply by manipulating a country’s money supply and financial markets to artificially produce low interest rates, “deep mines, solidly built factories, well-constructed canals and houses” would spring into being. But Keynes confused “cheap capital” with easy money. Capital—inventories, pre-consumer goods, and the methods and means of production—cannot be conjured into being by manipulating interest rates. They can exist only through production and saving (deferred consumption).

Capital goods can be relatively cheap only if they are relatively plentiful. Increasing capital, all else equal, will lower interest rates. But interest rates are more than just a measure of capital availability; they also reflect lending risk. Risk in turn can be affected by such things as inflation and the reliability and efficiency of transportation, communication, and capital markets.

A lender would hardly agree to make a $100 loan unless he could reasonably expect to get at least $100 in purchasing power in return. If the government is debasing the currency, loans will be made only if interest rates are higher than the anticipated rate of inflation.

Costs and Lending Risks

Transporting goods by human or animal power is slow and costly. Sailing ships can carry far more goods far more quickly. Steam-powered ships are faster and more efficient still. Transportation costs, then, are inversely proportional to the level of technology. But costs also depend on the rule of law. When local chieftains can block mountain passes and extort steep tolls, or when highwaymen and pirates can exact their own tolls with impunity, transportation becomes risky and expensive. Conversely both transportation costs and lending risks are reduced if private property rights are respected and enforced.

Efficient capital markets foster trade by reducing transaction costs. Such markets depend on property rights and laws of exchange and on fast and reliable methods of communicating information such as prices, weather, and changing market conditions. Like transportation, communication depends on the level of technology.

Low capital costs are the result of a lot of people acting responsibly for many years: sound currency, institutions protecting private property and preserving the rule of law, inventors devising new and useful products, entrepreneurs bringing those products to market and finding ever-more-efficient ways to satisfy customers, and individuals producing more than they consume and saving for the future.

False Signals

Artificially low interest rates signal the existence of capital goods that were never actually created. While these low rates may spark investment bubbles, the bubbles must eventually burst when competition for scarcer-than-expected capital goods, services, and labor drives prices up.

Manipulating markets through monetary policy devalues a nation’s currency, destroys rather than secures property rights, and does nothing to sustain the rule of law constraining both the rulers and the ruled.

The costs of fooling ourselves can be high. By readjusting my bathroom scale I disable an indicator that might warn me when I need to change my eating and exercise habits. By overriding market money prices we similarly deny ourselves important data about the country’s fiscal health. Our weight and the real price of money are both valuable pieces of information providing vital feedback on our actions. Manipulating that feedback destroys the value of the information and, rather than giving us control, gives us only the illusion of control.

For those neophytes who have never heard of Spooner, let me simply quote Murray Rothbard’s description from the September 1974 Libertarian Forum: “[H]e was undoubtedly the only constitutional lawyer in history to evolve into an individualist anarchist,” and “of all the host of Lockean natural rights theorists, Lysander Spooner was the only one to push the theory to its logical—and infinitely radical—conclusion: individualist anarchism.”

The table of contents of Steve Shone’s book outlines the major areas of political philosophy and economics about which Spooner wrote: Natural Law, Private Mail, and Property; Poverty and Economics; Political Obligation; Jury Nullification; Slavery; and Religion, Morality, and the Legal Profession.

Spooner’s concern with natural law and justice manifested itself in his lifelong arguments against slavery; government monopolization of money, credit, and the post office; government licensure of lawyers and restrictions on juries; taxation; seizure and confiscation of private property; and government interference with the natural laws of intellectual property.

Just one example will suffice to demonstrate Spooner’s unique interpretation of the U.S. Constitution and the natural right of human beings to use their property peacefully as they see fit. Before Spooner’s own private postal delivery company was harassed and put out of business by federal authorities in 1844, he published “The Unconstitutionality of the Laws of Congress Prohibiting Private Mails.” In it he noted that the Constitution did not grant Congress a sole and exclusive right to establish post offices and post roads. In other words, the power given to Congress did not allow it “to forbid similar establishments by the States or the people.”

Furthermore, Spooner noted that no branch of the government had ever questioned the right of American citizens to mint their own gold coins so long as they did not attempt to imitate current coins of the United States. Spooner argued it was just as much a common-law right to deliver private mail entrusted to one’s care as it was a right “to weigh and assay pieces of gold and silver, mark upon them their weight and fineness, and sell them for whatever they bring, in competition with the coin of the United States.”

Although the author bills his work as “the first full-length work devoted to the ideas of Lysander Spooner,” Spooner’s writings are so extensive and comprehensive that some of his most important commentaries are not mentioned. One, reminiscent of Spooner’s famous No Treason series, is the appendix to his 1852 book, Trial By Jury. This short, seven-paragraph addendum epitomizes Spooner’s outlook on the nature of government, even before the citizens of the southern states were beaten into submission by federal armies and navies. Spooner wrote:

It was a principle of the Common Law . . . that no man can be taxed without his personal consent. The Common Law knew nothing of that system . . . of assuming a man’s own consent to be taxed, because some pretended representative, whom he never authorized to act for him, has taken it upon himself to consent that he may be taxed. . . .

. . . Taxation without consent is as plainly robbery, when enforced against one man, as when enforced against millions; . . . Taking a man’s money without his consent, is . . . as much robbery, when it is done by millions of men, acting in concert, and calling themselves a government, as when it is done by a single individual, acting on his own responsibility, and calling himself a highwayman. Neither the numbers engaged in the act, nor the different characters they assume as cover for the act, alter the nature of the act itself. . . .

. . . The government’s pretence of protecting him, as an equivalent for the taxation, affords no justification. It is for himself to decide whether he desires such protection as the government offers him. If he do not desire it, or do not bargain for it, the government has no more right than any other insurance company to impose it upon him, or make him pay for it.

For anyone interested in the antecedents of contemporary libertarianism and individualism, Lysander Spooner: American Anarchist is a good place to start. Be prepared to meet a man whose ideas are radical.

To the Editor:

Although I don’t see any flaws in your arguments about the theory of free trade in your column for the April 2004 issue of The Freeman, you should at least acknowledge the distortions in most any nation’s economy because of government intervention and direction. Because of that government involvement, I question whether we really can have free trade in the world today.

Just because jobs move to other countries where tasks can be done more cheaply than in this country does not necessarily mean that it’s because of the working of the free market. In fact, that is certainly not the case. Most, if not all, countries subsidize their industries so that they can compete with American companies or, in some cases, overtake and replace them. . . . For example, Japan set up national industrial policies to subsidize their electronics and steel industries specifically so they could overtake the U.S.’s. . . . [T]hat’s also why Japan’s economy has been stagnant for the past ten or so years. . . .

One may discuss the ability of governmentsubsidized goods to cross borders freely; but free trade? It can’t exist under the current state of political control of economies. Let’s remove the controls in our own country first, then talk about free trade.
—JOE OGRINC
Bratenahl, Ohio

Sheldon Richman replies:

My article did what is suggested in the letter: “[T]he mixed economy creates problems that appear attributable to international trade. . . . Finally, the doomsday scripts written by the free-trade skeptics confuse the effects of trade with those of pervasive government intervention in the economy. Yes, free trade requires people to make adjustments. Here’s how the government can help: cut spending, slash and repeal taxes, abolish regulations, and move to market-based money.”

Even if foreign competitors are subsidized to the extent that most people think, why is it assumed that shelter from competition would make those firms efficient? We should expect just the opposite. Japan’s record of helping industry has been unspectacular, despite impressions to the contrary. Foreign subsidies are indeed unjust to the taxpayers who have to provide them, but they do not violate free-trade principles per se, which merely call for borders open to goods and services.

Was Mises Right about Copyrights?

To the Editor:

In the June issue, Bettina Bien Greaves explored Ludwig von Mises’s opinions on copyrights and patents, and finds that Mises gave at least tacit approval of them. I thank her for bringing our attention to this issue. Her article shows that even the greatest minds can sometimes fall for popular fallacies. At least Mises recognized that copyrights and patents are monopolies created and enforced by a government.

One of the fastest growing areas of the economy today is in works, such as Linux, which are explicitly put in the public domain by the inventors so that they can continue to benefit from progress in technologies necessary for their work without impediment of copyrights and patents. Sharing technology improves efficiency and standardization, especially in favor of those who share that technology. This flies in the face of Mises’s conjecture that if factor fis needed for product g, and f does not attain any price at all, then production of f might need a government monopoly for g to be available. . . .

Mrs. Greaves says, “if the government is to protect property, it must define that property.” I think that such definition might be unsupportable and contrary to natural law. In natural law, a property right is authority to decide how some thing is used. This right is natural, because no two people can use the same thing at the same time. With a patent, one has the pledge of the government that it will assault someone who is imitating one’s patented methods. An unlimited number of people can imitate a method; and very likely no one will know about the vast majority of imitations. So, I find it difficult to call a patent something that can be owned in the same sense that physical property can be owned. To the extent that the government uses patents and copyrights to justify restricting the use of one’s mind, skills, and desired use of property, patents and copyrights involve government violation of property rights rather than protection of the same.

Mrs. Greaves notes that James Madison included copyrights and patents in the U.S. Constitution. However, the writers of the Constitution did so with hesitation, and Thomas Jefferson had serious concerns that merited several letters to James Madison. (See Copyrights and Copywrongs by Siva Vaidhyanathan, 2001.) It is also not at all clear to me that Madison’s inclusion within property rights of “opinions and the free communication of them” meant copyrights and patents. . . .
—JOSEPH D. RUDMIN
rudminjd@cisat.jmu.edu
Harrisonburg, Va.

To the Editor:

Bettina Greaves’s scholarly article on how Mises viewed copyright and patents fulfills the limited objective set by its title, but unfortunately leaves open the question of how those issues might be resolved in a properly free society; that is, one burdened by no irrational presumption that any solution must be furnished by a government.

Supposing that we can bring about such a society, the questions of how composers, writers, and inventors could protect their intellectual property becomes surprisingly simple: for the only “rule” applying would be that no obligations exist except those undertaken voluntarily by contract — that being an alternative expression of the nogovernment premise. Thus if Mrs. Greaves ad written a masterpiece on economics, she would consider whether or not it should be published, hopefully bringing her rich rewards as customers buy copies. If so, she would specify simple terms of contract governing each and every sale; they would include a clause that says the buyer may not under any circumstances copy the work.

Should a buyer subsequently break that contract and sell knockoffs of a work he does not own, he would be made to compensate the author. . . . A powerful deterrent, to be enforced of course by a freemarket justice system.

Similar terms would restrict those who broadcast music and who listen to it, and those who place CDs on the Internet, etc. There would be neither need for nor possibility of “laws”—which are, being no more than one-sided contracts, hopelessly inadequate.
—JIM DAVIES
jimdav@copper.net
Newbury, N.H.

Bettina Bien Greaves replies:

Mr. Rudmin’s criticism, as I see it, consists of three major points. He suggests that (1) by endorsing copyrights and patents, Mises fell for a “popular fallacy”; (2) to the extent that patent and copyright laws prevent individuals from copying a patented device or process, they restrict individuals from using their minds and skills; and (3) government violates “natural law” when it defines property more precisely than to say that “a property right is authority to decide how some thing is used.”

One may or may not agree with Mises on copyrights and patents. Perhaps he did fall prey to mainstream thinking. After all, the stand one takes is a value judgment, not a question of right or wrong or scientific law. Mises gave the subject serious thought and he agreed pretty much with the view, expressed in the Constitution, that copyrighting written works and patenting inventions would help “To promote the Progress of Science and useful Arts.” It is certainly correct to say that “a property right is authority to decide how something is used.” However, this is not a sufficient definition. All property originates from self-ownership, appropriation, and occupation of unused natural resources, production, exchanges, and gifts. However, it is not “natural law” that determines what is private property in today’s complex division of labor economy. Market participants etermine what is property by trading and by the terms in their contracts. They are continually exchanging goods and services in line with mutually agreeable terms, and ownership is continually shifting. If differences and misunderstandings arise concerning the terms of a contract, it is up to the courts to settle such disputes and assure that each market participant receives the property that is his due. And that is not always easy, even in the case of physical property. In some cases the courts — the government — must even define property and decide to whom it belongs.

I do not agree that government uses patents and copyrights to justify restricting the use of mind, skills, and property. What the patent gives the creator of an invention (a “practical application” of a principle, not the principle itself) is the exclusive right — for a certain period — to make reproductions to sell or to lease to others, or to authorize others to construct and operate the invention. The patent application is public, and its information may save would-be inventors the trouble of doing their own research and enable them to develop a new invention that they can then patent.

In response to Mr. Davies, what the copyright accomplishes is to define a new literary or musical creation as more than a physical object comprising sheets of paper with printing on them, which may be disposed of as the owner wishes. The copyright recognizes a property right of the creator not in the ideas presented, but “in the form or expression of ideas.” This gives the creator “the exclusive right to reproduce the work, prepare derivative works, or to perform or present the work publicly.” Thus once a work has been copyrighted, its “form or expression of ideas” attains special status as “property.”

These questions are fundamental to human life. In this essay we discuss some ways societies have organized themselves and consider the consequences of such efforts. This allows us to conclude that a society based on secure private property rights, trade, and the division of labor is not only economically efficient, it is morally superior to all other types of organization.

The Welfare State

Let us first consider the welfare state. In theory it aims to use government force to redistribute property in order to achieve a more equal consumption of economic goods. Advocates of this manner of social organization argue that it is based on the ideal of charity. However, this cannot be so since the logical implication of this form of organization is not the promotion of charity but the promotion of theft. Genuine charity involves the voluntary sacrifice of the giver. When the force of government is employed to redistribute property, there is no voluntarism in it. Rather, there is only forced sacrifice, which is the essence of theft.

Fundamentally, the welfare state is a type of social organization in which some people subsist off the fruits of other people’s labor by the use or threat of force. There are three ways to enjoy the fruits of others’ labor. The first is to receive legitimate charity. In this case, the producer has voluntarily parted with his product for the benefit of someone else. The second means is through voluntary exchange. In this case someone must make an attractive offer of something desired by the producer. The third method is to use violence or the threat thereof to appropriate the product. This form of getting what you want is especially pernicious when it is perpetrated by government, for then the victim has little recourse. (Fraud is a subtle form of theft—that is, of obtaining someone else’s product on terms other than those he would agree to.)

Theft and fraud cannot be logical foundations for economic behavior because they suffer from the fallacy of composition. It is possible for a single individual to prosper as a looter, and indeed it may be possible for many people to prosper as a robber band. However, it is impossible for everyone to prosper as thieves since all thieves must have someone to steal from. The problem with thieves is that they do not produce anything, and if everyone is a thief then there is nothing to steal.

For this reason the welfare state rests on a very sandy foundation. It assumes there will always be something that can be looted from a productive class. Moreover, it assumes the productive class will continue to produce valuable goods and services even as they are being victimized. Pay-as-you-go entitlement programs like Social Security and Medicare are built on this shaky assumption. It relies on the notion that future generations will rise to meet the claims of older generations. In other words, to use Ayn Rand’s metaphor, the welfare state assumes that the harder it presses down on Atlas’s shoulders, the harder Atlas will work to hold the world aloft.

As an alternative, people can live as the beneficiaries of charity, but this too is unsustainable. There are certainly legitimate cases in which charity and gift-giving are appropriate, such as when someone suffers some unforeseeable calamity or when someone wishes to promote the interests of his friends and family members. When people get married or begin their families, for example, gifts are often very helpful and much appreciated. There are limits, however, to our charitable impulses, limits to our ability to discern need, and limits to our ability to feed others before we feed ourselves. In addition, it should be noted that the purpose of true charity is to promote the independence of the recipient. In this regard, charity is a noble, benevolent institution that is quite appropriate to a society of free, responsible, flourishing people.

But even charity can be carried too far. When someone expects to enjoy his bread by the sweat of another’s brow, he becomes what Rand called a moocher. Such a person claims the right to the fruits of others’ labor solely on the basis of his alleged need. He seeks to make himself dependent on someone else’s labor and is not interested in his own independence.

Mooching too is unsustainable because it presupposes that something has been produced. Therefore, we cannot all expect to live this way. Mooching as such provides no way for goods to be produced and in fact encourages the wasteful use of resources. If someone wishes to depend entirely on the kindness of strangers, he or she must invest in ways to elicit that kindness. In his 2007 book, Discover Your Inner Economist, Tyler Cowen points out tragic examples of places in India where people fight over begging turf or actually pay to have limbs amputated in order to increase their begging income. To borrow the terminology of William J. Baumol, these are exercises in destructive entrepreneurship. They create no new value; instead, they destroy value in an effort to appear more dependent and helpless so as to effectively attract the sympathies of others.

This has implications for how we understand what is known as paternalism. As we have already seen, proper charity treats people with dignity and directs them toward independence rather than dependence. Examples from fatherhood (or motherhood) are appropriate. The right goal for a father is not to give his children everything they want or to see that they are blissfully happy all the time. Rather his goal is to help his children flourish as independent, responsible people in an imperfect world. At every stage in their development, he is trying to help them achieve new levels of independence. When a young adult is capable of interacting socially through the process of voluntary exchange—thereby increasing his own range of opportunities by increasing opportunities for others—then the parenting has been a success. In other words, proper human life includes production and exchange. While there are cases when such autonomy cannot be achieved due to severe disability, nevertheless, the affirmation of human dignity and independence remains the goal as far as it can be achieved.

Production, Autarky, and Trade

Another way to acquire wealth is to produce it yourself and ask your neighbors for nothing; however, total individual autarky is impossible in its logical limit. There is no such thing as an autonomous, self-made person in a market economy, and people are social creatures not because of disposition only but out of necessity. It is not a psychological propensity to truck and barter that leads us to exchange, but a praxeological truth regarding the vast increase in productivity that arises from specialization, division of labor, and division of knowledge.

Leonard E. Read’s classic example showed that no single individual knows how to make something as simple as a pencil. This fundamental insight applies to a vast range of goods. Any kind of existence greater than that of the lowest animals requires exchange, and as exchanges increase, so too do the division of labor and division of knowledge.

Even before Adam Smith, economic thinkers had been well aware that trade creates wealth by making us more productive. We argue, however, that this is only part of the story. The criticism of homo economicus as an autistic and antisocial maximizer of pecuniary profit to the exclusion of all else is simplistic and naive. The economic person cannot take care of himself without taking care of others; indeed, the person who wishes to maximize his own profit can only do so by thinking constantly and deeply about the needs and wants of others. To be sure, homo economicus does not have to care about the people with whom he interacts in a deep moral sense. But this does not stop him from caring about them in a practical sense.

The Bible enjoins us to feed the hungry and clothe the naked, among other charitable endeavors. We do this most effectively through the market process. Indeed, the very act of buying low and selling high moves resources to areas where they are more valuable. While the entrepreneur does not have to know about the people he serves, he can only expand his own set of opportunities by creating opportunities for them.

In a lecture at the 2009 Austrian Scholars Conference at the Ludwig von Mises Institute, Rabbi Daniel Lapin made this point explicitly by considering the economic and social function of peddlers, people who would go through towns buying and selling. The good peddler was better off when he left town, but he only found himself in this happy circumstance by making the townsfolk better off as well. To borrow Lapin’s example, a peddler might show up at a house and ask if the residents had anything they were willing to sell. Suppose for a moment that they said yes and pointed to an old table with a wobbly leg that they were planning to throw away. The peddler might offer to buy it for $5, which they would gladly accept. They would now be better off by $5. At this point the peddler could repair the table and find another family that was planning to buy a similar table for $20. If the peddler offered to sell them the repaired table for $15, they would find themselves better off. And so it goes: With every transaction the peddler makes people better off and enables them to feed and clothe themselves. In a word, the peddler makes a direct contribution to their ability to flourish.

Of all the ways for societies to organize themselves, the free market is the only system that is simultaneously sustainable, prosperous, and conducive to human flourishing. We cannot live together as a community of thieves, nor could we sustain ourselves as a community of beggars, moochers, or wards of charity. Further, anything that can be properly defined as a human existence must necessarily rely on specialization, trade, and division of labor. This has the happy consequence of maximizing our ability to do well and do good by our neighbors. When we focus our attention on production and trade, we necessarily feed the hungry and clothe the naked because self-interest properly understood requires a degree of focus on the wants and needs of others that is conspicuously absent from other forms of social organization. To adapt a phrase from Harvard economist Claudia Goldin, life in the pre-market world was nasty, brutish, and short. In the world of free enterprise, life is long, healthy, and rich.

She loved traditional Chinese culture, but her world was shattered on August 30, 1966, when the Red Guards ransacked her home and, on September 27, arrested her. She spent the next six and a half years in Shanghai’s No. 1 Detention House, in solitary confinement.

Communist Party interrogators accused Cheng of being a spy, but her real “crime” was that she was viewed as a “capitalist roader.” She had attended the London School of Economics (LSE) in the 1930s, where she met her husband, Kang-chi Cheng, who later became general manager for Shell Oil in Shanghai.

When he died in 1957, Nien Cheng became a special adviser to the new general manager. She was the highest-ranked businesswoman in China at the time. Her skills in dealing with party officials were invaluable and helped Shell stay in China until the start of the Cultural Revolution in 1966.

During her imprisonment Cheng refused to admit  any wrongdoing. She was tortured and nearly died, but her determination to survive and her deep faith gave her the strength to persevere. She was released from prison on March 27, 1973, only to find that the Red Guards had murdered her only child, Meiping, for failing to “confess” and denounce her mother as a “class enemy.” Cheng’s one hope in life was gone; she left China forever in 1980 and settled in Washington, D.C., in 1983.

Anyone who knew Nien Cheng could immediately see that she was special—even the doctor at the No. 1 Detention House said he never met a more “truculent and argumentative” prisoner. When she learned of her imminent release, she refused to leave the prison unless the authorities declared, in writing, that she was “innocent of any crime or political mistake.” She insisted that they offer “an apology for wrongful arrest” and called the official statement “a sham and a fraud.”

In that statement she was accused of conspiring with the British government because in a letter she signed in 1957, shortly after she joined Shell, “she divulged the grain supply situation in Shanghai.” That accusation was ludicrous. Her secretary was merely conveying common knowledge to the incoming general manager, who was still in London—namely, that “the Shanghai government allows everyone twenty catties of grain per month.”

After nearly seven years in prison she declared, “I shall remain here until a proper conclusion is reached about my case.” The authorities refused, and two female guards had to drag her out of prison. It was not until later that Cheng learned that her interrogators were trying to get her to confess to being a spy so that Jiang Qing (Mao Zedong’s wife) and other radicals could oust Premier Zhou Enlai, a moderate who favored allowing foreign firms like Shell to operate in China.

It was only after Mao’s death in 1976 and Deng Xiaoping’s decision to open China to the outside world that Cheng was officially declared innocent of any crimes against the State and “rehabilitated” in November 1978.

The Realities of Communist Rule

It is ironic that Cheng became enticed by socialism during her studies at LSE. In her essay “The Roots of China’s Crisis” (in Economic Reform in China, which I edited along with Wang Xi), she wrote, “When I read a book on the Soviet Union by Sidney and Beatrice Webb, I thought, ‘How wonderful and idealistic socialism sounds.’”

Later, after her husband had served in Australia as a diplomat for the Nationalist government, the Chengs made the fateful decision to return to China in late 1948. They and many of their Western-educated friends were seduced by Mao’s call for democracy and wanted to help build a new China.

In her essay Cheng notes that while she had learned about socialist ideals at LSE—including the apparent success of Soviet egalitarianism, central planning, and state ownership—her professors never mentioned “class struggle” or “the realities of communist rule.” What she painfully discovered was that in a society where individuals have no economic freedom and no genuine rule of law, no one is safe from the power of the State. Economic life is politicized, corruption is endemic, and inequality of power reigns, in stark contrast to promises of egalitarianism.

As Cheng wrote in her book, “The fact is that the Communist government controls goods, services, and opportunities and dispenses them to the people in unequal proportions.” During the Maoist regime one’s rank in the party determined one’s economic status. “Though the salary of a member of the Politburo was no more than eight or ten times that of an industrial worker, the perks available to him without charge were comparable to those enjoyed by kings.”

The Chinese Communist Party under Mao’s iron fist destroyed civil society and traditional culture. A new China was created after the Communist victory in 1949, but it was not the socialist ideal Cheng had envisioned. Rather, the party created “mindless robots, unburdened by the capacity for independent thinking or a human conscience.”

Success depended on power, and justice vanished. “The result was a fundamental change in the basic values of Chinese society,” she wrote.

Mao’s mantra was, “Strike hard against the slightest sign of private property.” Nien Cheng’s property, including her priceless porcelain collection, was confiscated. Her daughter was murdered and her freedom destroyed by the State.

Crony Capitalism

While in jail, in 1971, the inmates were assembled and an official announced, “Many of you are here precisely because you worshiped the capitalist world of the imperialists and belittled socialist China. You placed your hope in the capitalist world and believed that one day capitalism would again prevail in China.”

Today, mainland China is perhaps more capitalist than any other country, but it is “crony capitalism.”  The nation lacks full-fledged private property rights, especially in land; there is no independent judiciary to protect persons and property against the party’s monopoly on power; and freedom of religion and expression are sharply curtailed. The battle for justice that Cheng fought has not yet been won.

In her book Cheng recognized the significance of President Nixon’s visit to China in 1972 and the importance of engaging China. She witnessed the progress the mainland has made since Deng Xiaoping began to liberalize markets in 1978. She understood the critical role of trade and investment in linking China to the West. But she also understood that “Unless and until a political system rooted in law, rather than personal power, is firmly established in China, the road to the future will always be full of twists and turns.”

Seeking Truth and Justice

Nien Cheng’s journey from an idealistic Marxist liberal at LSE in the 1930s to a realistic market liberal—after living through Mao’s upheavals and seeing the end of private property and the uncertainty and injustice caused by arbitrary and unlimited State power—gave her a great appreciation of America.

Near the end of her life, in a personal letter, she wrote,

I can hardly believe I have lived so long. I think it is mainly because I am never angry nor am I ever worried. I believe in “constant change,” so I always think a bad situation will change into a good situation or not so bad after all. In any case, there is always a solution. As for being angry, after what had happened to me in China, I think I have used up all the anger inside me. There is simply nothing to be angry about in America.

All Americans should be proud Nien Cheng chose to make America her home. She believed that here she would be free to choose and that her person and property would be protected by the law of the land.

Today, as the U.S. government grows in size and power, it would be well to remember the wisdom of Nien Cheng—and the danger to personal freedom when the State erodes economic freedom.

A shorter version of this article first appeared in the South China Morning Post, November 15, 2009.

Save the earth! That’s been the mantra of environmentalists for decades. But now they want more. They not only want to tell us what we can do on the earth, but also what we can do off the earth, in outer space.

Yes, statist environmentalists are already concerned about the alleged threat to the outer-space environment posed by humanity. Humans have already defiled the earth, they say, so why should we be allowed to do it to the rest of the universe?

We find their proposed environmental programs for outer space wholly unjustified. In their place, we propose pure private property rights.

Almost no one would say he’s an enemy of the environment. Everyone wants clean air to breathe and clean water to drink, and no one wants anyone to invade his person or property with harmful substances. People (like us) who go this far—and only this far—with their environmentalism probably comprise the majority of humanity.

In the second half of the twentieth century another type of environmentalism arose: ecocentric (rather than anthropocentric) environmentalism, or “deep ecology.” According to ecocentrism, Mikael Stenmark writes, only “ecological wholes (such as species, ecosystems, the land or the biotic community) . . . have a value in themselves . . . and . . . the value of the ecological parts . . . is determined by how far they contribute to the survival and well-being of the ecological whole.”

The ecocentric view extends its concern to the entire earth, dirt and rocks included. Everything (except humans, apparently) is seen as possessing “intrinsic value” (value somehow derived from itself, not from man), which is destroyed or threatened by any human tampering. Holmes Rolston III writes, “Earth does not belong to us; rather we belong to it. . . . Earth is really the relevant survival unit.”

This philosophy’s real-world implications can be seen in the activities of the Earth First! organization, which is known for putting spikes in trees so lumberjacks or mill workers who cut them may be injured or killed. Earth First! leader Richard Foreman states the ends of ecocentric environmentalism: “We advocate bio-diversity for bio-diversity’s sake. That says man is no more important than any other species . . . . It may well take our extinction to set things straight.”

Considering the focus on the earth and “biodiversity,” one might expect that we would be spared the down-with-humans-up-with-dirt-and-rocks rhetoric with respect to man’s activity beyond the earth. Unfortunately, this has not been so. As Howard A. Baker writes in the law journal Annals of Air and Space, “With an environmental approach, protection of the outer space environment and its sub-systems is the priority, [not] ensuring that outer space can be used for [human] space activities.” In Law, Values, and the Environment, Robert N. Wells Jr. adds, “Outer space, a source of wonder and inspiration for centuries, deserves to be preserved in its original pristine state, for its own sake and for future generations to enjoy.” And April Greene Apking, writing in the Journal of International Environmental Law and Policy, writes, “[W]e must ensure that our presence [in space] does not defile what remains one of the few accessible pristine areas.”

These radical views even have found their way into the work of relatively moderate writers. Glenn H. Reynolds and Robert P. Merges, for example, generally favor private property rights, but make an exception for “environmental research and conservation preserves,” which would place “10 to 15 percent of the area capable of being developed” off limits.

To speak of a “pristine” outer-space environment is a rather strange thing to do, given how utterly unpleasant the rest of the universe appears to be. Mercury, for example, has no atmosphere, and portions of its surface become hot enough to melt tin, while others remain cold enough to keep ice from crashed comets perpetually frozen—with little remotely pleasant in between.

Venus is even worse. Its atmosphere is almost pure carbon dioxide, complemented by thick clouds of something like battery acid. Its atmospheric pressure is 92 times greater than earth’s, so any visiting astronaut in a normal spacesuit would be crushed instantly. The mean surface temperature is 480 degrees Celsius.

Earth’s moon is relatively less hateful, but it has no atmosphere, of course, and has never supported liquid water, let alone life.

Mars is dead, too. There is no conclusive evidence for life there, either now or in the past. Its atmosphere consists mostly of deadly carbon dioxide, and its mean surface temperature is negative 23 degrees Celsius.

Jupiter, Saturn, Uranus, and Neptune are covered in extremely large, cold, and stormy mixes of toxic liquids and gasses. Some of these distant planets’ moons might be of some use, but are nonetheless wholly inhospitable. For example, one of Jupiter’s moons, Europa, is covered in water ice and may have liquid water and possibly some sort of microscopic life beneath its frozen surface. And Saturn’s moon Titan has, like earth, a mostly nitrogen atmosphere—at negative 180 degrees.

Where there is no atmosphere, as on the moon, the environment is far from healthy. Spaceships and spacesuits must be well shielded to protect against the sun’s radiation.

Bad to Worse

All of that may sound bad, but in fact the space environment is only going to become much worse. That’s because our sun will eventually change to a “subgiant” star, then a Red Giant, then a nebula, then a White Dwarf, then a Black Dwarf. In the end, all the planets, including earth, will lose their atmospheres and exist at a temperature just a few degrees above absolute zero.

In sum, the space environment is so bad right now that, from anything other than a human-hating perspective, it could not get much worse—except that billions of years from now, it will get worse, and there is nothing anyone can do about that.

Considering the solar system’s present and future environmental state, the idea of space pollution becomes absurd.

Air pollution? As we’ve seen, there is no air on the moon—and to the extent that our neighboring planets have an atmosphere at all, it’s almost entirely carbon dioxide, which is toxic and the bane of environmentalists when produced by humans here on earth. Thus nothing we could do to other celestial bodies could make the “air” more toxic than it already is.

Water pollution? There is no surface liquid water anywhere but on earth.

Radiological pollution? There’s already dangerous radiation in space against which humans must shield themselves. The Mars atmosphere may limit the amount of radiation on its surface—but given its poison-gas environment, not to mention its already highly toxic soil, how much worse would some radiation here and there make the planet?

To speak of pollution or contamination of space in the abstract—apart from human beings’ property rights—makes no sense.

Law professor Lawrence D. Roberts suggests that “[u]biquitous commons [sic] resources on Earth such as air and water will likely pose the same kinds of environmental challenges for space developers as they do for Earth developers,” adding, “The need to recycle such valuable commodities will require stringent regulation of the discharge of hazardous byproducts into the waste stream.” We find this implausible. If there’s any air or surface water on the moon or elsewhere in space, how did it get there? It could only be from humans who brought or created it there. Where would it be found? Inside the space vehicles or other structures people brought or built there. And here we get to the key space environmental policy: to protect humans’ environment in space, we need only protect their private property rights.

On earth such a policy has presented some technical difficulties. For example, it may be difficult to determine which factories contributed to victims’ air or water pollution and in what amounts, as contaminants may travel imperceptibly over long distances. Pollution victims may also suffer very small harms individually such that a lawsuit would cost them more than it was worth. Those problems are not insurmountable in the earthbound context—technological advances and the availability of class-action lawsuits should make them decreasingly problematic—but they do exist.

In space, though, apart perhaps from radiological poisoning, some sort of clear physical invasion would be necessary for anyone to pollute anyone else’s air or water. Thus enforcement of a property-rights regime for pollution should be simple and effective.

Lunar-Dust Pollution

Some have said we need environmental regulation on the moon to prevent pollution from lunar dust. But why should this be a problem? There’s no atmosphere, and it seems likely that those using the moon for mining and those using it for recreational purposes or for a good view of the earth would rationally spread themselves apart. With relatively few parties and a strong incentive to spread out, we can imagine that people might bargain either in advance to avoid conflicts or later do so to eliminate them.

Of course, to the extent that polluters (whether by dust, chemicals, radiation, or anything else) arrive at the moon first, they may establish property rights there, including the right to “pollute.” Where no one has already homesteaded lunar or planetary land, a mine or factory owner may homestead an easement to “pollute” the surrounding area that his operation affects. Then new arrivals will know that they should not locate in the area the established industrial operation affects unless they are willing to subject themselves to the industry’s byproducts.

On the other hand, where owners of hotels, golf courses, “wilderness” preserves, and the like arrive first, they will homestead their land, including the right not to be disturbed by pollution. Should someone trespass on their property with any form of pollution, they will be entitled to both damages and injunctive relief, just as pollution victims were in Great Britain and the United States through the 1830s.

One of the most promising uses for space is, of course, as a waste dump. This should be cause for environmentalist celebration, not alarm.

For example, nuclear electric power is far better for the environment than fossil fuels, which pollute the air and cause countless health problems. But what to do with the small amount of toxic waste it creates? Once space flight becomes sufficiently affordable, the answer becomes simple: send it on a long, long trip. Who but the most fanatical “cosmo-centrist” could be disturbed by sending our waste to Venus, an already hellish place where no living creature will likely ever go? The only colorable objection to this is that the waste might pose a risk to people on earth as it leaves the atmosphere (say, if the ship carrying it explodes or crashes, as NASA vehicles are wont to do). But presumably that risk would shrink as the private sector moves further into space transportation and space technology advances. For example, a space elevator would not entail the high risks or costs of ordinary space flight. And, of course, carriers of hazardous waste would be liable for harm they cause—which, along with their financial investment, would encourage them to take extreme care.

Another potential benefit would be to move polluting industrial operations off-planet. Again, environmentalists who really care about the well-being of humans or life generally (as opposed to rocks and dirt per se) should delight in this prospect.

As we’ve mentioned, some have called for part or all of outer space to be declared an untouchable “wilderness.”

We find this to be a rather strange preoccupation. Right now space is a de facto 100 percent wilderness preserve and will remain so even if humans go there in large numbers.

If environmentalists wanted to preserve specific areas, they could buy or simply homestead land, which some of them have done on earth. Governments, though, have little incentive or ability to determine which parts of any celestial body are best used as wilderness preserves and which are best put to other purposes. Such determinations would surely be corrupted by the influence of special interests, just as special interests have influenced terrestrial environmental laws to the benefit of polluters. Indeed, the U.S. government’s management of its national parks has been dismal, as have governments’ overall environmental records. So if optimal preservation of that which is valuable to scientists and other admirers of pristine lunar wilderness is the goal, the answer again is strictly enforced private property rights.

It is entirely unjust for “wilderness” advocates to use government to prevent others from developing their property in space. They may speak in terms of intrinsic value, but they really seek to use the law to forcibly place their personal aesthetic preferences above those of others, and above the welfare of the human race.

Terraforming

What about “terraforming”? This would involve transforming an alien environment to give it a climate more like earth’s. Fantastic though it sounds, this may be technologically feasible on Mars. Essentially, it would involve initiating “global warming” through the release of CF4 into the now very sparse Martian atmosphere, raising its temperature by ten degrees Celsius within several decades, which would cause an increase of water vapor in the atmosphere, further warming the planet. Next, humans could release “methanogenic and ammonia-creating bacteria into the now-livable environment,” quoting Robert Zubrin, creating even more greenhouse gases. “The net result of such a program could be the creation of a Mars with acceptable atmospheric pressure and temperature, and liquid water on its surface within fifty years of the start of the program.” (Zubrin is quoted in Glenn H. Reynolds, “Space Law in the 21st Century: Some Thoughts in Response to the Bush Administration’s Space Initiative,” Journal of Air Law and Commerce.) Mars would not then have a breathable atmosphere, writes Glenn Reynolds, “but would support crops and allow people to move around without spacesuits.”

Those who want a “pristine” outer-space environment hate this idea, but we see no problem with it. If no one owned property on Mars before terraforming apart from the terraformers, property rights wouldn’t be an issue—the terraformers would have a right to do as they please. They would not own the whole planet, though, but only the parts with which they actually “mixed their labor.”

If other property owners were present, they would likely welcome terraforming because it would make their own property more useful to them. Some, though—especially scientists researching the planet’s history—might not welcome the radical changes to the planet. But the right to be protected against weather one finds undesirable has never been recognized, to our knowledge.

No Legal Standing

Of course, non-property-owning environmental activists on earth—those most likely to challenge terraforming—would have no standing to challenge this process of development. Again, their aesthetic tastes should not be given priority over the preferences of those with an actual stake in the matter (property owners) and over the good of the human race generally.

Some have suggested that space settlers should be restricted because extraterrestrial life is possible. We disagree. There is no evidence that life exists or has ever existed anywhere except earth. And even if it does exist, there is no reason to think government is necessary to protect it.

Human beings are fascinated by the idea of extraterrestrial life. Anyone who goes to space for any purpose is likely to be interested in checking for signs of past or present life on his property before acting in a way that might destroy those signs. For the intellectually uncurious, there would still be financial incentives. For example, scientific or environmental organizations could offer prize money for discovery of evidence of extraterrestrial life; a property owner who discovers such evidence could sell scientists, journalists, and others rights to access, study, and publicize it. Only governmental intervention (say, stripping individuals of property rights when something of scientific interest is found on their property) is likely to cause incentives to run in any other direction.

Space environmentalism lacks any justification, and its only philosophical foundation is a most extreme form of environmentalism to which very few people seriously subscribe. For the good of the human race, and because it is just, private parties should be free to use space for whatever human purposes they see fit within the limits of private property rights.

China’s transition from plan to market since 1978 has not only increased prosperity but also has led to a new way of thinking. In a 2005 poll covering 20 countries, GlobeScan found that China had the highest proportion of respondents (74 percent) who agree that the “free market economy is the best system on which to base the future of the world.” That outcome is remarkable given that only a short time ago Beijing embraced a state-led development model.

The same poll found that U.S. citizens have strong support for the free market (71 percent) while Russia, which has a long anti-capitalist history, still has rather weak support (43 percent favored the market), and France, with its long attachment to socialism, has even less support with only 36 percent saying they favor a free market.

The significant change in the Chinese people’s attitude toward economic liberalism is further illustrated in the Chicago Council on Global Affairs’ 2006 multination survey of public opinion. Eighty-seven percent of those surveyed in China thought that “globalization, especially the increasing connections of their country’s economy with others around the world, is mostly good for their country.” That result compares with 60 percent in the United States and 54 percent in India.

It is not surprising that the Chinese people would embrace globalization as it has opened China to the outside world, brought about rapid economic and social change, and helped lift millions out of absolute poverty. In 1978, only 12 large state-owned enterprises (SOEs) had the right to engage in foreign trade. Today virtually any firm is free to enter the import-export business. China has become the world’s third largest trading nation and is the leading destination for foreign direct investment. Those regions that have experienced the greatest amount of economic freedom have also grown the most and have the highest living standards. Guangdong, Zhejiang, and Fujian are all heavily “marketized” (SOEs account for only a small fraction of output) and have growth rates far above the national average.

In widening the range of opportunities open to people, globalization has increased personal freedom and put pressure on the Chinese Communist Party (CCP) and National People’s Congress to pass a Property Law last March. It recognizes the importance of the private sector and better protects property rights—all with a positive impact on civil society.

People are free to own their own homes, operate their own businesses, and seek work in the private sector. Those and other economic freedoms would have been impossible under central planning and autarky. One can now read a leading business magazine like Caijing and see a glossy photo of the Statue of Liberty on the same page as an advertisement for private condominiums in Beijing. F. A. Hayek’s Road to Serfdom and the Cato Institute’s Toward Liberty can be found in Beijing bookstores. High-school students in Shanghai can now open their new history textbooks and find much discussion of globalization and economic reform but only a single reference to Mao.

Most surprising, one can travel to the Southwestern University of Finance and Economics in Chengdu and see a life-size statue of Adam Smith, who in 1776 wrote in The Wealth of Nations: When “all systems either of preference or of restraint” are abolished, “the obvious and simple system of natural liberty establishes itself of its own accord.”

Spontaneous order, or economic harmony, arises out of voluntary exchange based on what Smith called the “laws of justice.” The role of market prices and profits is to coordinate the myriad individual plans in the pursuit of happiness.

Smith’s principle of spontaneous order—or freedom under the law—is similar to Lao Tzu’s principle of nonintervention (wu wei). Long before the Wealth of Nations was written, Lao Tzu argued that when the ruler takes “no action . . . the people themselves become prosperous.” Today China’s President Hu Jintao is promoting the idea of a “harmonious society” and “peaceful development.” In doing so, he should embrace the ideas of Lao Tzu and Adam Smith, and realize that limited government and the rule of law are essential for peace and harmony.

The problem is that the CCP has no desire to let go of its monopoly on power. Creating “free private markets,” as the late Milton Friedman recommended to General Secretary Zhao Ziyang when they met in 1989, would require widespread private property rights and further undermine the CCP’s influence. That is why China’s leaders continue to favor market socialism rather than market liberalism.

Nevertheless, the momentum for market liberalization is strong, especially since China joined the World Trade Organization in December 2001. Trade liberalization has been good for China and good for the global economy. Even though millions of Chinese workers have been dislocated, the Chicago Council survey found that 65 percent of those polled in China believe that “international trade is good for the job security of workers.” In contrast, only 30 percent of Americans surveyed thought free international trade benefited workers.

Of course, the goal of trade is not to protect jobs but to create wealth—and global wealth is much greater today than it was two or three decades ago. Trade liberalization, the information revolution, and financial integration have combined with pro-market institutional change to make China’s future bright. Trade is not a zero-sum game: the richer China becomes, the more prosperous the global economy. Protectionism would destroy the market forces that have helped lift millions out of poverty, embolden hardliners, and politicize economic life. Both economic and personal freedom would suffer.

One lesson from China’s transition from central planning to a market-oriented system is that poverty is best addressed by institutional change rather than foreign aid and government intervention. Several decades ago most of the world’s poor were concentrated in Asia, not Africa. The reverse is true today. Foreign aid has not improved the plight of the poor.

Likewise, increasing the minimum wage is not a panacea. Politicians promise a higher wage but do nothing to address the underlying causes of poverty. Rather, if the legal minimum wage is above the prevailing market wage for unskilled workers, employers will cut back on hours, reduce benefits, and switch to labor-saving methods of production.

Hong Kong has no minimum wage yet is prosperous. China has no national minimum wage and lets the market guide local minimum wages so that they do not interfere with economic growth and employment. In Shenzhen, one of the most marketized cities in China, the minimum wage was increased last year to 810 yuan per month (about $105). Many companies already pay more than the minimum, so the higher minimum wage is unlikely to interfere with job opportunities. Indeed, there is a labor shortage, so market wages will be forced up by competition. As one local labor official said, “We are adapting to the market through the pay raise, rather than interfering with the market.”

Entrepreneurship Everywhere

The spirit of entrepreneurship is evident everywhere in China. One of the most popular TV game shows is “Win in China,” a contest in which the person with the best business plan is awarded venture capital financing of $1.2 million and gets to retain 20 percent of the equity. The first show in 2006 attracted 120,000 entrants. The host of the show, Anna Wang Lifen, launched the program because she sees entrepreneurs as “the heroes of our peaceful times.”

Although China has made substantial progress on its march toward the market, much remains to be done. Free markets require widespread private property rights, a transparent and just legal system, and the free flow of information. Moreover, if China is to develop world-class capital markets, Beijing must make the yuan fully convertible and allow capital freedom.

The right to freely buy and sell currencies and assets is an important element of personal freedom. In his “Memorandum to General Secretary Zhao Ziyang,” Friedman listed what he considered the fundamental lessons from studying the process of development. The first lesson, which he thought applied to China as well as India, is that the government should “end exchange control, establish a free market in foreign exchange, and permit the exchange rate to be determined by the market.” Without such reforms, he thought, corruption would continue. Although Hong Kong does not have a freely floating exchange rate (it has a currency board that fixes the Hong Kong dollar to the U.S. dollar), there are no capital or exchange controls. The high degree of capital freedom has enabled Hong Kongto become a leading financial center.

China is moving gradually toward a more flexible exchange-rate regime and slowly relaxing capital controls. That process will take time, but it appears China’s leaders support the long-term goal of a fully convertible currency. Ending capital and exchange controls would give the Chinese people greater investment options and increase efficiency. But, again, such reforms would threaten the CCP’s power.

Opening the CCP to capitalists is not sufficient. The Party’s monopoly on power has to be contested at some point. Nor is it sufficient to amend the PRC Constitution to better protect private property when there is no independent judiciary to enforce contracts. If China’s future is to rest with the free market, there must be political as well as economic liberalization. Ultimately a free market cannot exist without a free people. The real challenge for Beijing will be to institute a rule of law that protects persons and property against the state. The people’s preferences will then rule rather than the Party’s. China’s leaders would do well to follow the path of Lao Tzu and Adam Smith by adhering to Hong Kong’s model of “Big Market, Small Government.”

At times, Machiavellian has served as a synonym for diabolical; in our own time it denotes the cynical and unprincipled conduct of organizational leadership, especially leadership of the state. The Machiavellian leader seeks the augmentation and perpetuation of his own power and will do anything, no matter how underhanded, conniving, or even murderous, to gain his objectives.¹

Machiavelli the man probably deserves a better remembrance. He was, in today’s idiom, not such a bad guy. He seems to have been a loyal friend; he favored republican government; he even had a sense of humor.

Machiavelli was also a political scientist of historic stature, the first to study politics not by focusing on the realization of normative ideals, but by paying close attention to actual political conduct. Francis Bacon wrote in 1623, “We are much beholden to Machiavelli and other writers of that class who openly and unfeignedly declare or describe what men do, and not what they ought to do.”²

If he had a glaring fault, it was an inclination to ingratiate himself with the powers that be. Indeed, he wrote his most famous work, The Prince (1513), in an attempt to curry favor with the Florentine leader of the day. The dedication reads,“To the Magnificent Lorenzo di Piero de’ Medici.”

This same Lorenzo the Magnificent represented a family of merchant princes whose charming motto was the forthright declaration: “money to get the power, power to keep the money.” Rarely has anyone expressed the essence of politics so pithily.

In The Prince Machiavelli is concerned for the most part to arrive at rules of expedient conduct for someone who seeks to acquire or to retain governmental power. In this quest he briefly surveys a number of historical episodes in which rulers and would-be rulers acted either aptly or inaptly, and he draws lessons from this historical evidence to support his arguments. Much of the work pertains to war, which Machiavelli considers a recurrent event in political life as rivals vie for supremacy, but he also devotes some attention to economic policy.

Like David Hume three centuries later, Machiavelli recognizes that “a Prince can never secure himself against disaffected people, their number being too great,” and therefore “[h]e who becomes a Prince through the favour of the people should always keep on good terms with them; which it is easy for him to do, since all they ask is not to be oppressed.”³ Fortunately for the ruler, the masses do not make great or complicated demands:

A Prince . . . sooner becomes hated by being rapacious and by interfering with the property and with the women of his subjects, than in any other way. From these, therefore, he should abstain. For so long as neither their property nor their honour is touched, the mass of mankind live contentedly, and the Prince has only to cope with the ambition of a few, which can in many ways and easily be kept within bounds.(47)

Machiavelli also recognizes that the ruler will thrive better in a prosperous realm than in an impoverished and discontented one:

He ought accordingly to encourage his subjects by enabling them to pursue their callings, whether mercantile, agricultural, or any other, in security, so that this man shall not be deterred from beautifying his possessions from the apprehension that they may be taken from him, or that other refrain from opening a trade through fear of taxes; and he should provide rewards for those who desire so to employ themselves, and for all who are disposed in any way to add to the greatness of his City or State. (61)

Had this advice been taken universally, it probably would have sufficed to create economic growth and thus to eliminate poverty everywhere on earth.

Restated by Adam Smith

In the late eighteenth century Adam Smith could scarcely improve on Machiavelli’s sound counsel. In The Wealth of Nations, he restates it as follows:

Commerce and manufactures can seldom flourish long in any state which does not enjoy a regular administration of justice, in which the people do not feel themselves secure in the possession of their property, in which the faith of contracts is not supported by law, and in which the authority of the state is not supposed to be regularly employed in enforcing the payment of debts from all those who are able to pay. Commerce and manufactures, in short, can seldom flourish in any state in which there is not a certain degree of confidence in the justice of government.⁴

Even today, economic development experts cannot give rulers any more important advice about how to create a flourishing economy anywhere in the world.

Why then have so many countries failed to achieve substantial, sustained economic development, and even the most prosperous ones fallen far short of their potential for such development? The brief answer is that their rulers have been too Machiavellian, in the worst sense, for their countries’ good—and in many cases ultimately too much so for the rulers’ personal good as well.

Rulers know—or they ought to know—from the wisdom of Machiavelli, Smith, and other sages that the key to economic prosperity and growth is to use their powers to enforce secure private property rights. Yet time and again they have violated these rights in order to seize resources for their own consumption, often to fight a war. In brief, rulers have repeatedly resorted to plundering their own people. Instead of keeping their promise to protect the people’s lives and property and to administer justice impartially, they have overridden the people’s rights and caused the devastation of their own realms.

Searching for a means of preventing this destructive opportunism, philosophers, economists, and others have sought devices—written constitutions, governmental structures, conditional pledges—to confine the rulers to their legitimate tasks and to punish them for overstepping their proper authority. Lately, the magic bullet has taken the form of what economists call “credible commitment,” a means whereby a ruler’s own incentives are brought into conformity with his staying in line. Unfortunately, so far no long-lasting means of securing credible commitment has been discovered. Therefore, so long as we are stuck with government as we know it, we shall have to endure Machiavellian rulers in the worst sense.

Notes

1. Here and elsewhere in this essay, I rely on Felix Gilbert, “Machiavellism,” in Dictionary of the History of Ideas, vol. 3, pp. 116–26, available at http://etext.lib.virginia.edu/cgi-local/DHI/dhi.cgi?id=dv3-15. See also John W. Danford, The Roots of Freedom: A Primer on Modern Liberty (Wilmington, Del.: ISI Books, 2000), pp. 51–59.
2. Quoted in Gilbert, p. 121.
3. The Prince (New York: Dover, 1992), p. 25. For subsequent quotations from this source, page numbers appear in my text in parentheses.
4. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Modern Library, 1937 [1776]), p. 862.

During the Korean War the government imposed controls on raw materials, production, shipping, credit, wages, and prices. When the wage-price controls created a collective-bargaining impasse in the steel industry, threatening a nationwide strike, President Harry S. Truman ordered the secretary of commerce on April 8, 1952, to seize and operate most of the country’s steel mills for the ostensible purpose of maintaining production of critical munitions.

Owners of the seized properties obtained a court injunction against the seizure, and an appeal of that injunction to the U.S. Supreme Court gave rise to one of the “great cases” in constitutional law, Youngstown Sheet & Tube Co. et al. v. Sawyer.¹ Although the Court found the President’s actions to be unconstitutional, its decision did not signify a triumph of private rights or a significant check on the government’s exercise of de facto emergency powers.

By 1952 Truman had become an unpopular president, even among Democrats, and his attempted seizure evinced a power struggle with a hostile Congress. He had alternative ways to proceed. Although no current statute authorized him to nationalize the steel industry, he had authority under the Taft-Hartley Act to order an 80-day “cooling- off period,” during which the union- management dispute might have been settled without a strike. The pro-union President chose not to issue such an order, however, because he opposed the Taft-Hartley Act, which Congress had passed over his veto in 1947. He did not ask Congress to authorize his seizure of the steel industry.

Instead, Truman rested his seizure order on legally vague national-emergency grounds, citing his inherent powers as president and as commander in chief of the armed forces.² Afterward, he and his official spokesman sought clumsily “to transform the steel crisis from a particular labor dispute into a broader battle against ‘big business,’” a rendering that had little resonance.³

Why did Truman proceed on such flimsy legal grounds? Although historians have advanced various explanations related to the administration’s political calculations,⁴ few writers seem to have noted another possibility: The President had seized many industrial properties in labor disputes during past “national emergencies,” and therefore he probably did not worry about getting away with another seizure. Between April 17, 1945, and August 27, 1946, Truman had seized 28 other industrial properties—sometimes entire industries, such as the railroads and the meat packers—in labor disputes.⁵ High-handedness might have become second nature for Truman. Historian Maeva Marcus notes, “In view of the Supreme Court’s construction of presidential power during wartime, Truman and the White House staff were confident that the courts would uphold the seizure.”⁶

The composition of the Supreme Court might have encouraged such confidence. In a recent recollection of Youngstown, Chief Justice William H. Rehnquist observes that “all of the nine Justices who heard the case had been appointed by Democratic presidents—five by Roosevelt and four by Truman—and yet by a vote of six to three they ruled against Truman’s authority to seize the mills.”⁷ Roosevelt and Truman, however, had distinctly different followings. Four of the six majority votes came from Roosevelt appointees; two of the three dissents came from Truman appointees.

Justice Hugo Black’s majority opinion, which was really a ruling on constitutional separation of powers rather than on emergency or inherent presidential powers, found intolerable the president’s failure to cite specific legislative authority for his action. On emergency powers, however, the justices’ seven opinions—one for each for the six justices in the majority plus one for the three dissenters—spoke more in favor than in opposition. The three dissenters argued that “a [presidential] power of seizure has been accepted throughout our history” (p. 700). Justice Tom Clark, who supported the majority result but not the reasoning of Justice Black’s opinion, agreed (p. 662). Justice Robert Jackson, in a concurring opinion, emphasized “the ease, expedition and safety with which Congress can grant and has granted large emergency powers” (p. 653). Only two justices (Black and Douglas) explicitly rejected the claim of inherent presidential power to seize the industry in the absence of congressional authorization.⁸

The outcome: The steel seizure itself was forbidden, but in view of the justices’ reasoning and the fragmentation of their opinions, the vulnerability of private property rights to emergency suspension remained as great as before—which is to say, very vulnerable indeed, as subsequent events have demonstrated repeatedly.⁹ In Youngstown, as in many other cases, the Court read the Constitution not as a bulwark against government oppression of private citizens, but rather as the institutional ground rules according to which high officials in the three branches of government conduct their internecine struggles for supremacy over civil society.

Notes

1. 343 U.S. 579 (1952). The defendant Charles Sawyer was the secretary of commerce.
2. Executive Order 10340 is reproduced in the case decision, where Truman’s grounds for issuing the order appear on p. 591.
3. Maeva Marcus, Truman and the Steel Seizure Case: The Limits of Presidential Power (New York: Columbia University Press, 1977), p. 99.
4. On the political maneuvering, see Marcus, pp. 58–82.
5. My count from the compilation in Youngstown, pp. 624–27.
6. Marcus, p. 102. See also pp. 178–94, and Paul L. Murphy, The Constitution in Crisis Times, 1918–1969 (New York: Harper & Row, 1972), p. 289.
7. Remarks of the Chief Justice, Dedication of the Robert H. Jackson Center, Jamestown, New York, May 16, 2003, at www.supremecourtus.gov/publicinfo/sp_05-16-03.html.
8. Marcus, p. 216; and Alan I. Bigel, The Supreme Court on Emergency Powers, Foreign Affairs, and Protection of Civil Liberties, 1935–1975 (Lanham, Md.: University Press of America, 1986), pp. 135–50.
9. For examples, see Robert Higgs and Charlotte Twight, “Economic Warfare and Private Property Rights: Recent Episodes and Their Constitutionality,” Journal of Private Enterprise, Fall 1987, pp. 9–14.

Professor Richard Pipes has written extensively about the connection between property rights and prosperity in the history of Russia. Others, including Peter Bauer and Amartya Sen, have noted the connection in various places around the globe. Without the legal infrastructure that recognizes and protects the right to private property, as well as some other, derivative institutions, such as freedom of contract, prosperity is difficult to foster.

Yet why is there this close connection between the right to private property and prosperity? Why is it so evident in Russia’s history and current economic situation? Why does it have such a noticeable impact on Africa’s economy? And why, also, is it a feature of Europe’s and even America’s economic woes, with interventionist laws and regulations—bearing on the employment and the environment—eating away at private property rights and thus producing unemployment and economic malaise?

What is it about the world and human beings that renders so vital respect and protection for the right to private property?

The main reason for our having the right to private property was clearly indicated by William of Ockham when he characterized natural rights as “the power of right reason.” This means that only when a person has a defined sphere of authority will he have the capacity to make meaningful, concrete moral judgments. We live in a natural world in which our actions have moral significance: are we doing what we ought to do or are we neglecting or even subverting this? To know, there must be a sphere of authority for each of us, including a material sphere in which we may carry out our plans. That is the first reason why private property rights are necessary for human community life: that sphere can be threatened, attacked, and undermined, and so it must be secure.

Of course, just how actual ownership of one thing or another, simple or complex, is to be obtained is itself complicated. John Locke pinned it on our mixing our labor with natural stuff; others have tied it to good judgment or prudence.*

In light of not only the clear moral significance of the right to private property, but also the issue of prosperity, it is worth considering why this right is under widespread attack in the academy. Why do so many prominent people and publishing houses offer theories denying that individuals have the right to private property? Why, for example, would Thomas Nagel and Liam Murphy manage to get a slim, shopworn attack on private property rights, The Myth of Ownership, so well published (Oxford University Press), and why would it get such a good reception?

A promising hypothesis is that the right to private property makes possible the individual’s prosperity, and many find that lamentable. Material progress is often deemed materialistic, selfish, commercial, anti- spiritual, and thus contrary to our higher moral purposes. Indeed, the right to private property is a source of individual liberty, something many consider dangerous because in their view it fosters self-indulgence, hedonism, and degradation. Free men and women need not conform to edicts issued by moralists and other self-appointed leaders.

It doesn’t seem to occur to these critics of liberty that without the right to private property it is not possible to choose to pursue those allegedly higher goals. A slave or serf or hostage isn’t at liberty to elect to do whatever is deemed to be his duty.

What’s an Individual?

Furthermore, there is the idea, advanced by so many who weigh in on this topic, that human beings aren’t rights-bearers at all since they aren’t really individuals but species beings. Marx told us, in his famous essay “On the Jewish Question,” that “The human essence is the true collectivity of man.” Auguste Comte said something similar in Catéchisme positiviste. Contemporary communitarians aren’t all that far from this view when they carry on so negatively about individualism.

Organicism or collectivism renders human beings akin to bees in a hive or ants in a colony without personal identity and, thus, without the sovereignty that is required for moral responsibility.

Unless these views are shown to be erroneous, the attacks on the right to private property will continue and even prevail. It simply does not suffice to show that those attacks lead to misery and oppression, for those issuing the attacks argue that misery and oppression—asceticism and obedience—are our proper lot.

The radicalism of private property is yet to be widely grasped—perhaps understandably since in the history of the human race the idea is very new. That’s one reason not to despair. The bad habit of relying on the collective, on chiefs of tribes and heads of states, is difficult to shed. But such bad habits can be overcome, provided there is vigilance, the eternal exercise of which is, of course, the price of liberty.

*My essay “The Right to Private Property,” at www-hoover. stanford.edu/publications/epp/109/109b.html, deals with the topic in detail.