They each own and operate popular vending stands outside Turner Field in Atlanta, serving baseball fans with tasty snacks, fully licensed Braves merchandise, parody shirts, and other goodies at steep discounts. They pay all the required and varied taxes on sales and business to city and state officials.

Little did they know that in July 2011 they would find themselves at the center of a major effort to vindicate the rights of street vendors nationwide.

Street vending has long allowed entrepreneurs to provide for themselves and their families while satisfying customer demands and creating jobs. Together Miller and Hambrick employ about a dozen people. They see vending not merely as work but as a way of life. As Miller puts it: “I’ve been able to develop a lifestyle around vending. I’ve been able to purchase me a home and raise children and grandchildren.”

Hambrick takes pride that his business provides jobs, supports his entire family, and pays for his children’s education: “I employ six people, and they are depending on me, and I’m depending on them now. I’ve been able to put my kids through college working here and being successful.”

But a new law on the books in Atlanta is about to destroy both of these businesses, along with untold others throughout the city.

Unprecedented Monopoly

Vending is thousands of years old and has thrived in America since the 1600s.

By 2007 street-vending businesses throughout the country generated revenues in excess of $40 billion. Vendors in Atlanta alone brought nearly $250 million to their local economy.

The recession in 2008 tightened consumer wallets and forced many out of work, which led to a street-vending boom. And, sure enough, new regulations followed.

In 2009 Atlanta officials decided to create a citywide vending monopoly. The city signed off on a deal that hands over all vending on public property to a single multibillion-dollar corporation.

Atlanta Mayor Shirley Franklin signed an exclusive 20-year contract with a Chicago-based shopping-mall management company, General Growth Properties (GGP). While governments have long meddled with street vendors, this was the first time in American history that a city gave one company the “exclusive right to occupy and use all public property vending sites . . . including without limitation those vending sites currently occupied by public property vendors.”

The GGP contract calls for the construction of vending kiosks around Atlanta. As the kiosks are built the existing vendors are forced to move out or else start paying up to $20,000 annually in rent and fees to work out of a cramped GGP kiosk. Vendors used to paying $250 a year for their vending site must now hand over $500 to $1,600 every month for the privilege of working for the monopoly. This makes it all but impossible for most Atlanta vendors to stay in business.

This is not the first time Atlanta legislation has had the effect of destroying vending businesses. When Atlanta hosted the Olympics in 1996 then-mayor Bill Campbell gave a personal associate the right to sublease out vending spots throughout the city. Thousands of vendors were pushed away, and many lost their businesses and life savings.

The GGP kiosks now popping up in Atlanta are designed for advertising rather than selling merchandise. They are covered with ads on three sides, limiting visibility and function while making it difficult to attract and interact with customers.

Further, the new Atlanta law absurdly requires GGP to prohibit their vendors from competing with nearby bricks-and-mortar businesses. The contract stipulates that GGP lessees may only sell products that “complement and not compete with existing ‘bricks-and-mortar’ retailers in the areas of the vending units.”

The transition to kiosks is occurring in several phases. As soon as the first phase went up numerous vendors were forced into unemployment. The second phase includes the area around Turner Field, with construction scheduled to begin toward the end of this baseball season. Once phase two is implemented, Miller’s and Hambrick’s businesses will almost assuredly be destroyed.

On July 15 Miller came to work to find a spray-painted outline of a kiosk on the ground next to his vending location. At a press conference two weeks later he pointed to the outline and lamented, “That might as well be my coffin.”

Trouble in Texas

Unfortunately, Atlanta vendors are not alone. Consider Yvonne Castenada.

Castenada is a proud Texan. Born and raised in El Paso, she created a successful vending business that provides for her daughter and injured husband. Castenada is a food vendor. By 5 o’clock in the morning she is already up and getting her food ready for the day. She cooks her popular burritos in a nearby commercial kitchen, loads them into warming trays in her food truck, and sets out into the El Paso streets to serve her customers.

Her business was thriving until city officials passed a law that turned El Paso into a no-vending zone—for the sole purpose of protecting bricks-and-mortar restaurants from competition.

The protectionist regulations made it illegal for mobile food vendors like Castenada to operate within a thousand feet of any restaurant, convenience store, or grocer. The city even prohibited vendors from parking to await customers, forcing vendors instead to constantly drive around the city until a customer flagged them down. Once the customer was served, the vendors had to leave immediately.

Vendors caught violating the new law faced thousands of dollars in fines.

City officials harassed and cited Castenada on multiple occasions. She said, “It has gotten to the point where I’m concerned about being able to pay my bills. I find myself constantly looking over my shoulder just because I might be too close to a restaurant.”

A spokesperson for the El Paso Restaurant Association admitted in an interview by the local ABC affiliate that the law is purely protectionist: “We wanted this ordinance in place to help established restaurants keep their business.”

Even the city’s health inspector admitted before the El Paso city council that the law was put in place “to address concerns of the fixed food establishment. . . . [T]here’s not a health reason or a Texas food rule that I can find that justifies that.”

A National Problem, A Nationwide Initiative

In November 2010 The Economist wrote that “thanks to Twitter and the tough economy, some of the best food Americans eat may come from a food truck.” Predicting that the recessionary street-vending boom would lead to “the biggest shift in America’s culinary landscape in 2011,” the magazine noted that new regulations were popping up in several cities, and in others there was pressure to ease restrictions so vending could flourish.

A new national report released by the Institute for Justice (IJ), Streets of Dreams, evaluated the vending regulations in the 50 biggest cities in the United States. The results were disturbing. For instance:

• 33 cities have established no-vending zones, which often include potentially lucrative areas such as downtown or areas near sporting venues.

• 20 cities ban vendors from setting up near bricks-and-mortar businesses that sell the same or similar goods.

• 19 cities prohibit mobile vendors from staying in one spot, forcing them to spend much of their day moving instead of selling.

• 5 cities prevent mobile vendors from stopping and parking unless flagged by a customer.

In January IJ launched its National Street Vending Initiative, creating a nationwide litigation and activism effort aimed at vindicating the right of street vendors to earn an honest living. The first targets were El Paso and Atlanta.

“I’m fighting for my American Dream.”

Thankfully, Castenada refused to let her competitors and their friends in government run her out of El Paso. Instead, in January she teamed up with other vendors and the Institute for Justice in a major federal lawsuit against the city. They argued that the vending regulations were anticompetitive and unconstitutional on the grounds that they violated the economic liberty of El Paso vendors.

And just weeks after the suit was filed, the city backed down and repealed its protectionist regulations.

Miller and Hambrick joined the vending initiative in July. Together with IJ they announced a lawsuit challenging Atlanta’s vending monopoly. The Wall Street Journal editorialized that “the Atlanta case is one more example of the way that governments tend to collude with private interests to benefit the powerful. We hope Atlanta’s new law is tossed out in court, so vendors like Messrs. Miller and Hambrick can get back to business.”

Hambrick clarified why he brought the lawsuit: “I’m fighting for my American Dream. And I’m fighting for the rights of other vendors and small businesses.”

Indeed, a victory by Miller and Hambrick could have national implications. A ruling in their favor would set a precedent for future challenges to restrictive vending laws in cities across the country.

Momentum is building. On August 17 vendors in Chicago joined forces with area law students and the IJ Clinic on Entrepreneurship in a grassroots street-vending campaign. The city has recently taken to ticketing and even arresting vendors simply for serving their customers. Regulations currently prohibit vendors from working within 200 feet of bricks-and-mortar restaurants. It’s also illegal for vendors to put toppings on a hot dog from their cart or serve any food before 10 a.m. The grassroots campaign seeks to overturn these needlessly restrictive regulations.

Judicial Engagement

Importantly, such vending laws exist throughout the country today because the courts fail to protect economic liberty. In the name of “judicial deference” judges have largely abdicated their responsibility to protect this right and enforce limits on government power. Without meaningful judicial supervision, laws favoring special interests have proliferated to an almost unimaginable extent.

For instance, IJ challenged a blatantly protectionist law in Louisiana that made it illegal to arrange and sell flowers without first obtaining permission from the government—the only law of its kind in the country. Aspiring florists were forced to pass a subjective licensing exam . . . that was graded by existing florists! Remarkably, a court upheld the law on the grounds that it was theoretically possible that without a flower cartel the public could be harmed by “infected dirt.”

Unless judges are engaged—taking our rights and the facts before them seriously—such abuses are inevitable. For vendors and other Americans to fully enjoy their right to earn a living, the courts must decide that protectionism is not a constitutional exercise of government power. Currently the federal circuit courts are split on this issue.

For their part, Miller and Hambrick are ready to fight all the way to the Supreme Court if that’s what it takes to vindicate the right to earn a living for entrepreneurs nationwide.

My family’s number was TI3-8597. The letters were meant to honor a man I never knew of or appreciated until long after the switch to all digits—Samuel J. Tilden. He deserves to be much better remembered as something other than part of a defunct phone number. A strong case can be made that he was, as the subtitle of a recent book by screenwriter Nikki Oldaker suggests, “The Real 19th President.”

Tilden was born nearly two centuries ago on February 9, 1814, in New Lebanon, New York. After studies at Yale and New York University, he became a successful lawyer, a shrewd investor, a wealthy man, and a promising politician in the Democratic Party. A crusader against the corruption of the infamous Tammany Hall political machine in New York City, Tilden was catapulted from the New York state assembly to the governorship in 1874. From that perch he quickly earned a national following and gained the Democratic Party’s nomination for president in 1876.

No Democrat had occupied the White House since James Buchanan passed the office to Abraham Lincoln in 1861. Fifteen years later the country was ready for a change. Tilden comfortably beat Ohio Republican Rutherford B. Hayes in the popular vote, 51 to 47.9 percent, but a nasty political battle resulted in a dubious deal. Behind closed doors Hayes was awarded enough disputed votes in the Electoral College to edge Tilden there by one vote. In exchange the Republicans agreed to withdraw federal troops from the South and end Reconstruction. Tilden remains one of only four presidential candidates in U.S. history to win the popular vote but lose the Electoral tally—the others being Andrew Jackson (1824), Grover Cleveland (1888), and Al Gore (2000).

Tilden was known for assessing policy options according to right and wrong versus the typical political (and Machiavellian) rule of what can get you elected and reelected. “Successful wrong never appears so triumphant as on the very eve of its fall,” he once said. “We must believe in the right and in the future. A great and noble nation will not sever its political from its moral life.”

Hayes turned out to be a clean and decent one-term president, but Tilden just might have shined as one of our best. I’ve come to admire him because he was rigorously committed to all the right things: limited government, sound money, free trade, and low taxes—which is to say that he’d have a hard time getting to first base today, particularly within his own party. Most 21st-century libertarians would be very comfortable with the 1876 Democratic Party platform on which Tilden ran.

Money. The big money questions of the 1870s were 1) what to do with the hundreds of millions of paper dollars (“greenbacks”) issued during the Civil War; and 2) whether to subsidize and re-monetize silver as a means of inflating the currency. Tilden and the Democrats were the country’s leading advocates of fulfilling the original promise to redeem greenbacks in gold and in opposing subsidies for silver. As advocates of sound money they had no interest in monetary expansion to goose the economy and help debtors because they believed it was fundamentally dishonest.

“Reform is necessary,” asserted the Tilden platform, “to establish a sound currency, restore the public credit, and maintain the national honor. We denounce the failure for all these eleven years of peace to make good the promise of the legal tender notes (the greenbacks), which are a changing standard of value in the hands of the people, and the non-payment of which is a disregard of the plighted faith of the nation.” Taking direct aim at the Republicans, it went on to declare: “We denounce the financial imbecility and immorality of that party which . . . has made no advance towards resumption—no preparation for resumption—but instead has obstructed resumption by wasting our resources and exhausting all our surplus income.”

Tariffs: Taxes on imported goods were the primary source of federal revenue for most of the nineteenth century. Since Lincoln, the Republican Party stood for high tariffs not just for the revenue but also for the “protection” of domestic industries. The free-trade Democrats saw protectionism for what it really is: an attack on consumers for the benefit of producers with political connections. The Tilden platform’s critique of it is as relevant today as it was in 1876:

We denounce the present tariff, levied upon nearly four thousand articles, as a masterpiece of injustice, inequality, and false pretence. It yields a dwindling, not a yearly rising, revenue. It has impoverished many industries to subsidize a few. It prohibits imports that might purchase the products of American labor. It has degraded American commerce from the first to an inferior rank on the high seas. It has cut down the sales of American manufactures at home and abroad, and depleted the returns of American agriculture—an industry followed by half our people. It costs the people five times more than it produces to the treasury, obstructs the processes of production, and wastes the fruits of labor. It promotes fraud, fosters smuggling, enriches dishonest officials, and bankrupts honest merchants. We demand that all custom-house taxation shall be only for revenue.

Government spending: Virtual one-party (Republican) dominance since 1865 had produced huge increases in federal expenditures, largely for pork-barrel projects. Tilden denounced the spending explosion, and his people inserted strong language against it in the 1876 platform: “Since the peace, the people have paid to their tax-gatherers more than thrice the sum of the national debt, and more than twice that sum for the federal government alone. We demand a rigorous frugality in every department, and from every officer of the government.” The Tilden Democrats were squarely in the tradition of their Jefferson-Jackson forebears and light-years apart from their Democratic descendants of today. It was a tradition that would continue through the last great Democratic president, Grover Cleveland, only to be thoroughly forsaken by the next (and arguably the worst) Democratic president, Woodrow Wilson.

On many other vital issues of the day Tilden and the Democrats staked out the moral high ground. They opposed an imperialistic foreign policy and favored Civil Service reform to minimize political patronage and corruption. Because they respected the rights and sovereignty of free individuals, they fought against sumptuary laws to regulate personal behavior. They denounced the use of government power to advantage one group over another. And they pushed to treat the southern states once again as equal partners in the Union.

Today dozens of streets, townships, libraries, and schools from Wichita Falls, Texas, to Washington, D.C., bear the Tilden name. A statue of him and his home, both in New York City, still stand. But otherwise, sadly, the memory of this man who stood for liberty and should have been president is fading as surely as my old phone number.

Despite the widespread acceptance of this narrative, there are many reasons to question whether it accurately portrays the motivations and hopes of some Progressive-Era reformers. In a 2005 article in the Journal of Economic Perspectives, “Eugenics and Economics in the Progressive Era,” the economist Thomas C. Leonard offered a completely new historical account of the sources of Progressive-Era labor legislation and the intentions of its supporters. Leonard’s work, including an important 2009 article coauthored with legal scholar David E. Bernstein for Law and Contemporary Problems, “Excluding Unfit Workers: Social Control Versus Social Justice in the Age of Economic Reform,” indicates that lurking behind what many people see as humanitarian reforms was something much uglier.

Leonard and Bernstein argue that some of the most prominent of the Progressive reformers were “partisans of human inequality.” They supported interventions as ways to forward their eugenic goal of a purer (that is, whiter) human race by eliminating the opportunities for the “unfit” to get meaningful work. The “unfit” here included not just nonwhites (especially African-Americans) but also the “insane,” immigrants (especially from central and eastern Europe), and in a somewhat different way, women.

In other words, what we today think of as the unintended consequences of laws supported by today’s well-meaning but economically uninformed Progressives were actually the intended goals of some of their intellectual ancestors a century ago. Early Progressive economists understood the effects of these interventions, but they thought those effects were desirable.

The Progressive economists of the late nineteenth and early twentieth centuries saw social science not merely as a means of inquiry and understanding but as a guide to social management and control. The advent and broad acceptance of Darwinism in the late nineteenth century, combined with a more general belief in the power of science and scientific management to solve social problems, led to a fascination with eugenics and the possibility of using public policy to ensure the “survival of the fittest” and the purity and strength of the human race. In the hands of many thinkers at the turn of the twentieth century, Darwinian theory became a rationale for using the power of government to weed out the “undesirable” and “unfit” in much the way that the new understanding of evolution was changing agriculture and animal husbandry. Eugenics clubs and societies grew rapidly and many of the leading intellectuals of the early twentieth century, including a number of well-known economists (such as John Maynard Keynes and Irving Fisher, perhaps the most famous American economist of the time), were active in these groups and saw their work through the lens of eugenics.

Eugenics and Intended Consequences

We look back on the eugenics movement with proper horror. Yet the same ideas that led to forced sterilization also led to restrictions in the workplace, because labor markets were one place where eugenics-oriented economists could combine their two interests. They recognized early on that legislation which  excluded the “unfit” from labor markets would advance their eugenic goals. Most of these laws were enacted at the state level during this period, but the New Deal era saw many of the same arguments applied at the national level.

Consider minimum wage laws, for example. Today we tend to think people support them because they believe a minimum wage is a free lunch that will help the poor. Classical-liberal economists have long criticized such regulations, arguing they are a perfect example of the law of unintended consequences and of the disconnect between intentions and outcomes. In a competitive labor market any worker who can produce value is hirable at some wage up to that value. Even workers with limited skills are employable. What the minimum wage and other mandated benefit laws do is create a minimum productivity criterion for hiring, closing off the labor market to workers whose productivity is too low to justify that cost.

Leonard’s work shows that some advocates of the minimum wage, including many giants of the early days of the economics profession, such as John R. Commons and Richard T. Ely, understood exactly what minimum wage laws would do and liked it. In addition, various Progressives and socialists who were not economists, such as Eugene Debs and Beatrice and Sidney Webb, also supported minimum wage laws and other interventions into the labor market precisely because they would weed out those who were deemed too stupid or lazy to compete in a market economy—in particular, women, immigrants, and blacks.

Leonard writes, “the progressive economists . . . believed that the job loss induced by minimum wages was a social benefit, as it performed the eugenic service ridding the labor force of the ‘unemployable.’” He quotes the Webbs’ statement that “this unemployment is not a mark of social disease, but actually of social health.” Further, he quotes Henry Rogers Seager of Columbia University, who suggested that minimum wages were necessary to protect workers from the “wearing competition of the casual worker and the drifter.”

A. B. Wolfe, who would one day be a president of the American Economic Association, wrote in the American Economic Review in 1917 (quoted in part by Leonard and Bernstein): “If the inefficient entrepreneurs would be eliminated [by minimum wages,] so would the ineffective workers. I am not disposed to waste much sympathy upon either class. The elimination of the inefficient is in line with our traditional emphasis on free competition, and also with the spirit and trend of modern social economics. There is no panacea that can ‘save’ the incompetents except at the expense of the normal people. They are a burden on society and on the producers wherever they are.”

In the context of the early twentieth century this group largely included nonwhites, immigrants, and women, as well as white males with physical or mental disabilities—the very same groups the Progressive eugenicists thought were diluting the quality of the human gene pool. Unlike their modern successors, these supporters of minimum wage laws were under no illusion about the effects of their proposed policies; they understood and intended the negative consequences that economists now go to great lengths to argue will be the outcomes of the policies favored by contemporary Progressives. A great irony of the Progressive movement for a minimum wage is that while it aimed at eliminating the “unemployable,” it in fact created a group of “unemployables.”

Leonard’s research shows that even professional economists, including some for whom distinguished prizes and lectures are named today, engaged in a manner of thinking about issues like minimum wages that was profoundly—even obscenely, given their explicitly racist goals—anti-economic. According to some Progressives, wages were determined not by marginal productivity but by the living standards to which a particular worker was accustomed. Competition from women, children, and members of “low-wage races” threatened the dignity of white male heads of households, the robustness of the white genetic stock, and ultimately the social fabric. Leonard and Bernstein quote sociologist Edward A. Ross, who wrote that “the coolie, though he cannot outdo the American, can underlive him.” If society was to endure, white male breadwinners needed protection from outside competition.

Economists today sometimes argue that subsidies or expansion of negative income tax programs like the earned income tax credit are far more efficient ways to help the poor than policies like minimum wages. Leonard and Bernstein point out that according to Progressive economist Royal Meeker, wage subsidies were undesirable precisely because they would create more employment, particularly among “unfortunates.” The virtue of the minimum wage was that it increased the supposed dignity of white labor while separating “unfortunates” and “defectives” from jobs they would have otherwise had. Minimum wages were supported by explicit racists seeking explicitly racist ends.

Fast-forward a few decades and the results are still the same even if the intentions are more noble. In a recent paper, “Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases,” William Even and David Macpherson argued that in states fully exposed to the most recent minimum wage increases, the law cost young African Americans more jobs than the recession has. We should judge policies by results, not intentions. As the economist Thomas Sowell might say, whether a policy is deemed “compassionate” or not should depend on its effects rather than the stated goals of its advocates.

Other Labor Market Interventions

Eugenics provided an allegedly scientific pretext for protectionist legislation—specifically, restrictions on immigration. The eugenicists supported immigration restrictions because they believed that members of “low-wage races” would compromise not only whites’ living standards but also whites’ genetic stock through miscegenation. According to them, immigrants and other outsiders (read: African-Americans) would degrade the labor force and debauch the species. The Progressives proceeded on a model of society in which a (white male) breadwinner earned a “family wage” sufficient to support a (white) wife and (white) children. Women were to fulfill their roles as “mothers of the race,” and children were to be trained to do the same in the following generation.

In his 2005 article Leonard pointed out that restrictions on child labor were enacted specifically to prevent the lower classes from putting their children to work. Presumably this would then cause them to think twice about procreating as well as limit their incomes.

The Progressives used the same techniques to reduce the labor market opportunities of women. Women were seen both as fragile—in need of protection from the rigors of the workplace—and as having a special role in bearing children and managing the household as “mothers of the race.” This was in contrast to the perceived “overbreeding” of nonwhites and immigrants from places like eastern and southern Europe. Progressive reformers tried to keep women out of the labor force by enacting a variety of “protective” legislation at the state level, including maximum hours and minimum wage laws for women, both of which were set differently from those for men. Such laws made women less desirable and more expensive employees, which limited their labor force participation—precisely the goal of the reformers.

The perils of the 1930s provided an opening for additional burdens on the labor market designed to exclude “unfit” workers. Leonard and Bernstein report that the Davis-Bacon Act, for example, was “passed with the intent of preventing itinerant African American workers and others from competing with white labor unionists for jobs on federal construction projects.” The amplification of interest-group politics was evident in the relatively transparent attempts by New Deal Progressives to protect special interests from low-wage competition from the South—from African-Americans and other “low-wage races.”

In the 1930s U.S. Rep. John Cochran (D-Mo.) said he had “received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Rep. Clayton Allgood (D-Al.) joined in: “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

The disemployment effects, for example, of the National Industrial Recovery Act (NIRA) were stark. Leonard and Bernstein cite one estimate that the NIRA’s “wage provisions directly or indirectly led to the dismissal of 500,000 African American workers.” They also write that “the American Federation of Labor took credit for the failure of the FLSA [Fair Labor Standards Act] to provide for a lower minimum wage in the South,” preventing southward capital flows.

The Progressives, the Modern Left, and the Dismal Science

This history can be read as the American version of what happened earlier in England. David Levy has shown that economics became known as the “dismal science” because classical-liberal economists (such as J. S. Mill) favored racial equality in a free labor market. Reactionary, elitist British Romantics such as Thomas Carlyle and John Ruskin argued that the free market, with its underlying assumption of equality, would eliminate racial hierarchies and bring a “dismal” future of racial mixing. It was the classical-liberal economists who were providing the intellectual support for that future.

The moral of the story is that, despite the modern left’s continued claim that the pro-market philosophy is racist, sexist, and xenophobic, history demonstrates that classical liberals/libertarians were proponents of equality and opponents of racism, and that those who viewed the races as unequal were likely to seek backing from the State, particularly in labor markets. The historical record of the left on these counts is much more mixed than it is willing to acknowledge.

Despite their odious views on race and the use of the State to enforce their eugenically informed vision of the future, Progressive-Era reformers were ahead of their modern liberal counterparts in one important way. They understood that free markets, especially free labor markets, are the enemy of racism.

The crises laid at the feet of laissez faire are the crises of markets that are nothing if not fettered. When critics confront us with corporate malfeasance, structural poverty, or socioeconomic marginalization, we should be clear that market principles do not require defending big business at all costs, and that much of what our critics condemn results from government regulation and legal privileges. As a model for analyzing the political edge of corporate power and defending markets from the bottom up, we twenty-first-century libertarians might look to our nineteenth-century roots—to the insights of the American individualists, especially their most talented exponent, Benjamin Ricketson Tucker (1854–1939), editor of the free-market anarchist journal Liberty.

Conventional textbook treatments portray the American Gilded Age as one of relentless exploitation and economic laissez faire. But Tucker argued that the stereotypical features of capitalism in his day were products not of the market form, but of markets deformed by political privileges. Tucker did not use this terminology, but for the sake of analysis we might delineate four patterns of deformation that especially concerned him: captive markets, ratchet effects, concentration of ownership, and insulation of incumbents.

Types of Distortion

Captive Markets. Legal mandates and government monopolies produce captive markets in which customers are artificially locked in to particular services or sellers that they wouldn’t otherwise patronize because political requirements enforce the demand. For example, the car insurance market is shaped by laws requiring insurance and regulating the minimum service that must be purchased. Captive markets legally guarantee privileged companies access to a steady stock of customers, corralled by the threat of fines and arrest.

Ratchet Effects. Legal burdens, price distortions, and captive markets combine to ratchet up fixed costs of living far higher than would prevail in freed markets. To get by, people are constrained by the necessity of covering these persistent, inflexible costs—by selling labor, buying insurance, taking on debt—under artificially rigid circumstances. Ratchets keep many chasing the next paycheck, creating permanent states of financial crisis for the poor.

Concentration. Confiscation, regressive redistribution, and legal monopolies deprive workers of resources while concentrating wealth and economic control within a politically favored business class. Struggling to cover ratcheted fixed costs, workers are dispossessed of the means to make an independent living and enter markets where ownership of land, capital, and key resources are legally concentrated in the hands of a few. Workers therefore depend on relationships with bosses and corporations far more than in freed markets, deforming economic activity into hierarchical relationships and confining rental economies.

Insulation. Captive markets and bailouts protect big players, while legal monopolies, regulatory barriers, and anticompetitive subsidies inhibit substitutes and competition from below. Government support props up big businesses, stifling the market and social pressures that might otherwise be brought to bear. Insulated businesses can treat employees and consumers with far less consideration or restraint; meanwhile, intervention shuts out alternative solutions by blocking smaller, grassroots, or informal competitors.

Tucker’s Big Four

We can, then, turn to Tucker’s central idea: In “State Socialism and Anarchism” (1888), Tucker argued that “Four Monopolies” fundamentally shaped the Gilded Age economy—four central areas of economic activity where government ratchets, concentration, and insulation came together to deform markets into “class monopolies,” regressively reshaping all markets as the effects rippled outward.

The Land Monopoly. Land titles in nineteenth-century America had nothing to do with free markets. All unoccupied land was claimed by government, whose military seized land from Indians, Mexicans, and independent “squatters.” Government ownership and preferential grants monopolized access, excluding free homesteading. (The “Homestead Act,” which supposedly opened Western lands to homesteading, really imposed rigid legal limits on homesteaders that only certain medium-sized commercial farmers could effectively meet. Smaller farms and nonfarmers were excluded.) Tucker identified this concentration of land titles in elite hands as a “land monopoly,” creating a class of privileged landlords by depriving workers of market opportunities to gain freeholds and escape rent.

Since 1888 the land monopoly has dramatically expanded. Governments worldwide have nationalized oil, natural gas, and water resources; in the United States mining rights and fossil fuel exploration are largely accessed through government licenses, due to government’s ownership of 50 percent of the American West. The cost of land is ratcheted and ownership concentrated through zoning codes, eminent domain, municipal “development” rackets, and local policies to keep real estate prices permanently rising. Freed land markets would feature more individual and widely dispersed ownership; land would be less expensive and more often held free and clear; vacant land would be more readily open to homesteading; and titles would be based as easily on sweat equity as on leveraged cash exchanges. Many people would no longer need to rent; those who chose to rent would find that competition had dramatically improved the prices and conditions available on the market.

The Money Monopoly. For Tucker the most damaging of the Big Four was the Money Monopoly, “the privilege given by the government to certain individuals . . . holding certain kinds of property, of issuing the circulating medium,” politically manipulating the money supply, prohibiting alternative currencies, and cartelizing banking, money, and credit. Tucker saw that monetary control not only secured monopoly profits for insulated banks, but also concentrated economic ownership throughout the economy, favoring the large, established businesses that large, established banks preferred to deal with.

Tucker identified the Money Monopoly as an economic force in 1888—before the Fed and fiat currency, the FDIC, Fannie, Freddie, the IMF, or trillion-dollar bailouts to banks “too big to fail.” Today regulatory cartels and political mandates have also captured insurance, alongside credit, savings, and investment, as a Money Monopoly stronghold, forcing workers into rigged markets while shutting out noncorporate, grassroots forms of mutual aid.

Ideas and Extortion

The Patent Monopoly. Tucker condemned monopolies protected by patents and copyrights—“protecting inventors and authors against competition for a period long enough to enable them to extort . . . a reward enormously in excess of . . . their services.” Since copying an idea does not deprive the inventor of the idea, or any tangible property she had before, “intellectual property” meant only a legal monopoly against competitors who could imitate or duplicate the monopolists’ products at lower cost.

“Intellectual property” (IP) has grown vigorously since 1888, as media, technology, and scientific innovation made control over the information economy a linchpin of corporate power. Monopoly profits on IP are the effective business model of Fortune 500 companies like GE, Monsanto, Microsoft, and Disney, which demand virtually unlimited legal power to insulate themselves from competition. Copyright terms quadrupled in length, while massive, synchronized expansions of intellectual protectionism became standard features of neoliberal “free trade” “agreements” like NAFTA and KORUS FTA (United States-Korea Free Trade Agreement). In a freed market such business models would fall—and with them, the ratcheted costs consumers pay for access to culture, medicine, and technology.

The Protectionist Monopoly. Tucker identified the protectionist tariff as a monopoly in the sense that it insulated politically favored domestic producers from foreign competition, and thus ratcheted up daily costs for consumers.

With the rise of multinational corporations and neoliberal trade agreements, tariffs have declined over the years. But the specific legal mechanism was less important to Tucker than the purpose of controlling trade to insulate domestic incumbents. In 1888 that meant the tariff. In 2011, it means a vast network of political controls used to manage the “balance of trade”: export subsidies, manipulation of exchange rates, and multigovernment agencies like the World Bank and IMF.

Metastatic Monopolization

Tucker’s Big Four have only grown more pervasive since the 1880s. But the past century has also seen the metastatic proliferation of government regulatory bodies intended to restructure new transactions and capture new markets. Among today’s Many Monopolies, five are especially pervasive:

The Agribusiness Monopoly encompasses the New Deal system of U.S. Department of Agriculture cartels, surplus buy-ups, subsidized irrigation, export subsidies, and similar measures ratcheting up prices, distorting production toward subsidized crops, and concentrating agricultural activity in large-scale, capital-intensive monoculture. These, inevitably enacted in the name of “small farmers,” invariably benefit large factory farms and agribusiness conglomerates like ADM and Tyson.

The Infrastructure Monopoly includes physical and communications infrastructure. Governments build roads, railways, and airports through eminent domain and tax subsidies, and impose cartelizing regulations on most mass transit. Restricted entry secures monopoly profits for insulated carriers; confiscating money and property to subsidize long-distance transportation and shipping creates tax-supported business opportunities for agribusiness, big-box chain retailers, and other businesses dependent on long-haul trucking. Incumbent telecommunications and media companies like AT&T, Comcast, and Verizon accumulate empires by cartelizing bandwidth; control of broadcast frequencies is concentrated through the FCC’s political allocation; and ownership of telephone, cable, and fiber-optic bandwidth is concentrated through local monopoly concessions for each medium.

The Utility Monopoly grants control over electricity, water, and natural gas to massive, centralized producers through comprehensive planning, subsidies, and regional monopolies. Household generation, polycentric neighborhood systems, or off-the-grid alternatives are crowded out or regulated to death.

Regulatory Protectionism

Regulatory Protectionism may be the most widely dispersed of the Many Monopolies. Like Tucker’s Protectionist Monopoly, it concentrates and insulates incumbent providers by creating hurdles for would-be competitors. Established businesses stifle competition from below by lobbying for regulatory red tape, extortionist fees, and complex licensing for everything from taxi-driving to hairdressing. Industry standards, which would otherwise be set by social convention and market experimentation, are removed from competition and determined by political pull. High compliance costs insulate incumbents who can afford them from competitors who cannot, shutting the poor out of entrepreneurial opportunities and independent livelihoods.

The Health Care Monopoly is a ripple effect of other monopolies but merits special notice because of the all-consuming growth of the medical sector and because health care and insurance so profoundly shape decisions about jobs, money, and financial planning. The central economic fact of health care is a crippling ratchet effect. Patent monopolies ratchet up drug costs and insulate profits for Pfizer and GlaxoSmithKline. The FDA and medical licensing provide a form of regulatory protectionism, constraining the supply of doctors, hospitals, and pharmaceuticals, concentrating profits and further ratcheting costs. A medical need can become a catastrophic cost, effectively requiring comprehensive insurance. Workers once got insurance through fraternal mutual-aid societies, but money monopolies have now thoroughly corporatized the insurance market through subsidies, mandates, and regulatory control. Workers now are tethered to their employers by the cost of insurance “benefits,” while facing the persistent danger of lost coverage, denied claims, and crippling debt.

Tucker’s analysis of the Four Monopolies controlling the Gilded Age economy, supplemented with the new Big Five that our own era has introduced, goes a long way toward showing why existing markets work the way they work and fail for the people they fail for. It may also inspire some objections from today’s libertarians.

The Many Monopolies deform markets toward stereotypically “capitalistic” business, but government intervenes in more than one direction. What about regulations or welfare programs to benefit poor people, or constraints on large, consolidated firms? These exist, but do not necessarily achieve their supposed aims. As shown in Gabriel Kolko’s Triumph of Conservatism, the Progressive regulatory structure and antitrust law, far from curbing big business, form the core of regulatory protectionism, cartelizing and insulating big business. There are also issues of priority and scale. While I object to SBA loans or TANF (Temporary Assistance to Needy Families) as much as any free-marketeer, in this age of trillion-dollar bank bailouts, even when government puts fingers on both sides of the scale, one finger is pushing harder than the other.

What about the explanations market economists offer for corporate firms’ greater efficiency, based on division of labor, economies of scale, or gains from trade? Wouldn’t large corporations outcompete smaller rivals, even without subsidies and monopolies?

But Tucker didn’t reject the division of labor, gains from trade, or large-scale production. Rather he suggested labor, trade, and scale organized along different lines. Independent contracting, co-ops, and worker-managed shops are forms of specialization and trade no less than centralized firms. Scale can be internalized through central management, or externalized through polycentric trade. A corporate economy is only one among many possibilities for dividing labor and exchanging values. The question is whether it predominates because of economic forces that would persist in markets free of structural privilege, or because of predicaments that would dissipate when competitors are free to offer alternatives with less centralization, less management, and more trade and entrepreneurial independence for ordinary workers.

If Tucker’s analysis proves anything, it proves there are many places in economic life where ordinary people are given a hard shove toward spending money they’d rather not spend with trading partners they wouldn’t otherwise keep. The most pervasive, far-reaching government interventions foster economic concentration, commercialization, hyperthyroidal scale, and the consolidated hierarchy needed to manage it—not because they grow naturally in market economies but because they grow out of control in the hothouse of socialized costs and inhibited competition.

The Belt and the Bones

For most of the twentieth century American libertarians were seen as defenders of “capitalism” (though see Clarence Carson’s doubts about that word in the 1985 Freeman article “Capitalism: Yes and No”). Most libertarians, and nearly all their opponents, seemed to agree that libertarianism meant defending business against the attacks of “big government,” and the purpose of laissez faire was to unleash existing forms of commerce from political restraints.

This was almost a complete reversal from the attitude of traditional libertarians like Tucker, which we might call “free-market anti-capitalism.” He was one of the best-known defenders of free markets in nineteenth-century America, happily summarizing his economic principles as “Absolute Free Trade . . . laissez-faire the universal rule.” For Tucker, then, libertarianism meant an attack on economic privilege by removing the political privileges that propped it up, dismantling monopolies by exposing them to competition from below.

The Many Monopolies are pervasive and fundamentally shape the everyday reality of the corporatist economy. So why then have not only the opponents but also the advocates of free markets so often missed Tucker’s analysis, with Progressives constantly laying the blame for inequality, exploitation, and corporate power on “unregulated markets,” while “pro-capitalist” libertarians respond by making excuses for the economic status quo? Paradoxically, it may be that Tucker’s approach is forgotten partly because of the very depth and pervasiveness of the problems it identifies.

The interventions twentieth-century libertarians were most likely to identify and oppose—progressive taxes, welfare, environmental regulations—are surface interventions, economically speaking. While aiming to reform or restrain the corporate state-capitalist economy, they take its basic features—concentration, insulation, ratcheted costs, and corporate power—for granted, attempting only to contain their most unsightly downstream effects. Countervailing “Progressive” regulations are like a belt put on capitalism. A man may need a belt or he may look better without, but his body remains the same with or without the restraint.

The political means that consolidate the Many Monopolies do more than interfere in the outcomes of preexisting market structures. State-capitalist privileges shape basic patterns of ownership, access, and cost for essential goods and factors of production. They fundamentally restructure markets, inventing the class structures of ownership, ratcheted costs, and inhibited competition that produce wage labor, rent, and the corporate economy we face. These primary interventions are no belt for state capitalism to wear or take off; they are its very bones. Without them, what’s left is not a different look for the same body—it’s a totally different organism.

Because you wear a belt on the surface, it’s easy to see and easy to imagine how you might look without it. Twentieth-century libertarians rightly condemned how the belt was hitched by government coercion—but rarely noticed that however much the anti-business belt constrains the state capitalist economy’s natural shape, without the belt it is still a political product shaped by intervention to its pro-business bones. The Monopolies that create capitalists, landlords, and financiers and uphold corporate power are so deeply embedded in the existing economy, so entrenched in consensus politics, it is easy to mistake them for business as usual in a market society.

We might say—with apologies to Shulamith Firestone—that the political economy of state capitalism is so deep as to be invisible. Or it may appear to be a superficial set of interventions, a problem that can be solved by a few legal reforms, perhaps the elimination of the occasional bailout or export subsidy, while preserving intact the basic recognizable patterns of the corporate economy. But there is something deeper, and more pervasive, at stake. A fully freed market means liberating essential command posts in the economy from State control, to be reclaimed for market and social entrepreneurship. The market that would emerge would look profoundly different from anything we have now. That so profound a change cannot easily fit into traditional categories of thought—for example “libertarian” or “left-wing,” “laissez-faire” or “socialist,” “entrepreneurial” or “anti-capitalist”—is not because these categories do not apply but because they are not big enough: Radically free markets burst through them. If there were another word more all-embracing than revolutionary, we would use it.

Licensing, for example, prices poor people out of business.

Take taxis: in New York City, you have to buy a license, or “medallion.” New York restricts the number of medallions so tightly that getting one costs hundreds of thousands of dollars.

“There are not many black-owned taxis in New York City,” George Mason University economist (and Freeman columnist) Walter Williams told me. “But in Washington, most are owned by blacks.” Why? Because in Washington, “it takes $200 to get a license to own and operate one taxi. That makes the difference.”

Regulation hurts the people the politicians claim to help.

People once just went into business. But now, in the name of “consumer protection,” bureaucrats insist on licensing rules. Today, hundreds of occupations require expensive licenses. Tough luck for a poor person getting started.

Ask Jestina Clayton. Ten years ago she moved from Africa to Utah. She assumed she could support her children with the hair-braiding skills she learned in Sierra Leone. For four years she braided hair in her home. She made decent money. But then the government shut her down because she doesn’t have an expensive cosmetology license that requires 2,000 hours of classroom time—50 weeks of useless instruction. The Institute for Justice (IJ), the public-interest law firm that fights such outrages, says “not one of those 2,000 hours teaches African hair-braiding.”

IJ lawyer Paul Avelar explained that “the state passed a really broad law and left it to the cosmetology board to interpret.”

Guess who sits on the cosmetology board. Right: cosmetologists.

And they don’t like competition.

One day, Jestina received an email.

“The email threatened to report me to the licensing division if I continued to braid,” she told me.

This came as a shock because she had been told that what she was doing was legal. Twice, in fact.

No customers complained, but a competitor did.

One cosmetologist claimed that if she didn’t go to school she might make someone bald.

But this is nonsense—hair-braiding is just . . . braiding. If the braid is too tight, you can undo it.

The cosmetology board told Jestina that if she wanted to braid hair without paying $18,000 to get permission from the board, she should lobby the legislature. Good luck with that. Jestina actually tried, but no luck. How can poor people become entrepreneurs if they must get laws changed first?! Jestina stopped working because she can’t afford the fines.

“The first offense is $1,000,” she said. “The second offense and any subsequent offense is $2,000 each day.”

“It is not unique to Utah,” Avelar added. “There are about 10 states that explicitly require people to go get this expensive, useless license to braid hair.”

Fortunately, IJ’s efforts against such laws have succeeded in seven states. Now it’s in court fighting for Jestina, which, appropriately, means “justice” in her native language.

Once upon a time, one in 20 workers needed government permission to work in their occupation. Today, it’s one in three. We lose some freedom every day.

“Occupational licensing laws fall hardest on minorities, on poor, on elderly workers who want to start a new career or change careers,” Avelar said. “[Licensing laws] just help entrenched businesses keep out competition.”

This is not what America was supposed to be.

Playing Chicken

Josh is a Mennonite friend who happens, by the grace of native talent and a powerful work ethic, to produce magnificent chickens. Raised on green growing pasture, they are never medicated, never fed artificial supplements or genetically selected to grow abnormally fast. They develop rich golden fat and a deep flavor, characteristics that have been more or less lost in modern, streamlined, highly efficient poultry production. Not surprisingly, Josh’s chickens are in high demand among food cognoscenti and fine restaurants. A couple of years ago I began bringing Josh’s chickens to my farmers’ market stand to sell alongside our equally popular grassfed beef. Josh and I, in a classic entrepreneurial endeavor, have made these wholesome chickens available to happy, discerning customers who would otherwise be unable to justify a three-hour commute to buy a bird for dinner.

Josh processes his chickens on his farm under a legal exemption allowing him to avoid industrial (and expensive) processing plants. Each chicken he produces is clearly labeled as to origin, method of production, and added ingredients (none); the label also cites the statute that allows him to operate unmolested.

Recently he was informed by the Food Safety Inspection Service, the regulatory arm of the USDA, that he faced a “situation.” They had discovered a chink in the otherwise protective “non-molestation” statute. Because he is marketing chickens to an intermediary (me), his product is therefore rendered illegal and he must desist. In a disturbing addendum the inspector also let slip that the USDA would be willing (“free of charge”) to take over inspection of his facilities and that they would be “more than happy to help him get going,” presumably in the chicken business.

The same authority willing to allow a company to distribute (and I’m not making this up) a neon-green sugar drink with the word “sweetener” (in quotes) on the ingredient list believes that customers cannot be trusted to buy a natural chicken from a reputable farmer.

Raising the Roof

I have an old shed I’d like to turn into an office. It’s a small, uncomplicated project. I do not intend to host conventions there or otherwise expose innocents to my construction acumen.

I could use a hand, so I called a man advertising his handyman services on a placard outside the feed store. We talked it over; he needed capital and I needed labor; we had a deal. I had expected to be hammering on joists this morning instead of this keyboard but for the fact that he didn’t show up today. Why? The county, vigorously addressing this “situation,” had torn down all his signs (including one in front of his home), citing him for neglecting to indicate his contractor’s license. Fair enough, you say; he knows the rules and got burned. So why the stink?

Well, here is a gentleman in his mid-50s with more than 25 years of construction experience who was a licensed contractor in Florida before moving to Arizona. For more than six months he has been fighting to gain the requisite licensing. He is obliged, among other onerous duties, to provide 25 references spanning his entire career and from across a continent before his application can enter the waiting list. He estimates his application will cost $10,000 and take another six months. He is afraid to work with me, even as a “tutor,” because he has been told that counties often set people up to entrap them.

Once again presumptuous authority has stepped between educated, intelligent adults to prevent free, fully cognizant transactions. Am I a pathological obediphobe to find such meddling unsavory?

Even if these cases turn out to be simple errors in communication or an innocent overstepping of authority, the damage has already been done. The perception alone is enough to chill behavior. In relaying these injustices I have now wasted hours that could have otherwise been spent creating outstanding beef; Josh is reducing his next order of chicks; and an out-of-work man with a lifetime of skills sits idle wishing for work.

Perhaps these are just the fickle vagaries, the marginalia of an otherwise appropriate regulatory regime. But I’m afraid they represent a deeper, metastasized, problem. The late Mr. Jefferson, that “intellectual voluptuary” according to his Big Government nemeses, explained that government’s only purpose is to secure natural rights. Governments, he believed, exist to protect life, liberty, property, and little else. It’s probably archaic of me to wish for a return to such a limited view, but I can’t help it. The kind of absurd oversight now considered standard practice feels fundamentally unjust.

It would be wonderful to live in a world where selling a chicken and remodeling a shed weren’t rife with official allegations or burdened with State prohibitions.

The Yugo: The Rise and Fall of the Worst Car in History, by Jason Vuic, an assistant professor of history at Bridgewater College in Virginia, deftly describes yet another episode in the history of the fiascos that occur when governments enable political entrepreneurs.

What can one say about the Yugo? It started out as one of the hottest items in U.S. automotive history, only to become the butt of jokes such as:

Q: How do you double the value of a Yugo?

A: Fill it up with gas.

Interestingly, the very reason the Yugo even became an item was a U.S. government move to keep small Japanese cars out of the United States. The Japanese automakers responded to this protectionism by making mid-sized luxury cars, which created a void for a small, inexpensive vehicle. The Yugo would (at least temporarily) fill that void thanks to the foresight of entrepreneur Malcolm Bricklin.

Austrian economists such as Israel Kirzner point out that entrepreneurs first see an opportunity and then they act. Bricklin, who is described as a “habitual entrepreneur,” decided that American consumers wanted small cars, and he knew just the company to build them—Zastava, a State-owned firm in Yugoslavia.

Bricklin is always looking for business opportunities, but he likes shortcuts. These invariably land him in trouble and ultimately bankruptcy. Despite having already pushed several failed ventures, Bricklin kept going, proving the wisdom of P. T. Barnum’s declaration that “There’s a sucker born every minute.”

So how is it that the guy who had conned investors in a scheme to fund Handyman America stores (which went bankrupt in 1965) and managed nearly to kill the one good company he founded (Subaru America—and, yes, I drive a Subaru) could find people willing to fund the Yugo venture? Enter the politics of the Cold War.

As Vuic notes, Yugoslavia, a communist/socialist country with “non-aligned” status, was a “buffer” between East and West. The U.S. government aggressively cultivated its relationship with that country, which in normal political times might have gone almost unnoticed. With the Cold War still in full bloom in the mid-1980s, and with Americans wanting cheap transportation, a marriage between the U.S. market and a company making inferior cars (Zastava used an old Fiat plant it had purchased) was consummated. All it took were the efforts of the failed entrepreneur Bricklin and Washington fixers like Lawrence Eagleburger, a former official in Ronald Reagan’s State Department, then working for Kissinger Associates.

U.S. operations opened in 1985, and the car was a huge success. Yugo mania was in full swing, as people crowded the lucky dealerships and waited for months for delivery of their spanking new Yugos.

But trouble soon began. The Yugo, for all of Bricklin’s hype, still was true to its socialist, Eastern European roots. While it wasn’t as terrible as a Wartburg or a Trabant, no one was trying to market those glorified East German lawnmowers in the United States as a “smart” choice. Once people began to drive Yugos they came to realize that communist quality control meant that the workers had proper political attitudes, not that they could build a decent car. Demand plunged as drivers learned about the car’s pathetic quality. In less than a decade Yugo America was bankrupt, as was Bricklin once again. Eventually the Yugo enjoyed a second career—as pop art.

Even though Vuic is not an economist, his well-written and entertaining book sheds a great deal of light on the larger issues of State planning, economic calculation, and every other argument that Austrians have been making against socialism and crony capitalism for the past 90 years. The next time you hear someone talking about the wonderful future for some proposed government-business partnership, remember the Yugo.

Let’s concede for argument’s sake there is something unattractive about viewing patients as consumers. Krugman writes, “Medical care, after all, is an area in which crucial decisions—life and death decisions—must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge.”

All true, but not necessarily decisive in answering Krugman’s question—because if we reject the patient-as-consumer model, we must then ask: What’s the alternative?

I believe the answer is this: If the patient is not a consumer he or she will be a ward of the State or a government-empowered insurance company. If the choice is between consumer and ward of the State, consumer doesn’t look so bad after all.

To see what ward status means, ponder Krugman’s thoughts on the Independent Payment Advisory Board, Obamacare’s Medicare cost-cutting apparatus:

“About that advisory board: We have to do something about health care costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can’t maintain a system in which Medicare essentially pays for anything a doctor recommends. . . .

“And the point is that choices must be made; one way or another, government spending on health care must be limited” (emphasis added).

Much of what Krugman says here is correct. Resources are finite. Choices must be made. No matter how medical care is paid for, spending will be limited—regardless of what demagogues imply. But under Krugman’s patient-not-as-consumer model (which is largely in effect today), government experts make all the important decisions. Bureaucrats will have a global budget for medical spending, and it will be their job to stick to that budget. They will not be the patients’ agents. Advocates of this scheme insist the quality of medical care will not be cut along with costs. They assure us they will prohibit only “unnecessary” and “wasteful” procedures. But how objective are those categories? And why should we trust unaccountable bureaucrats and “experts” to make the right decisions, as though there were one-size-fits-all answers in medicine?

The upshot is that anyone who has his or her medical bills paid by the taxpayers will ultimately be at the government’s mercy. If you’re not a consumer you’re a ward of the State.

But won’t private medical coverage also have restrictions? The difference is that if medical coverage were offered in a freed market—no privileges, no licenses, no protectionism—the environment would be competitive. When government is in charge competition disappears or is vastly constrained to the point where it hardly matters. In a competitive environment entrepreneurs seek to discover what services best satisfy their customers’ requirements. Note well: This environment includes nonprofit solutions, such as mutual-aid societies, which through “lodge practice” managed to provide decent medical coverage to people of modest means in earlier times (tinyurl.com/cjca68).

Competition is a discovery process (Hayek). Government is the habitat of bureaucrats who pretend they know it all already.

Krugman cautions, “[B]ear in mind that we’re not talking about limits on what health care you’re allowed to buy with your own (or your insurance company’s) money. We’re talking only about what will be paid for with taxpayers’ money.” This is disingenuous.

After being taxed all their lives, how many elderly people are in a position to forgo Medicare in favor of private insurance? Government creates dependence, then exploits that dependence to justify its power.

* * *

Even if the flawed Consumer Price Index isn’t quite showing it yet, there is talk of inflation in the air. What exactly is going on? One of our sharp economy watchers, Warren Gibson, doesn’t like what he sees.

Advocates of government expansion have not found the Constitution a terribly formidable barrier. Could a better-written preamble have helped? James Payne thinks perhaps it would have.

Schools run by state and local governments are bad enough, but how about a single national school system run from Washington, D.C.? The best-kept secret these days is the Obama administration’s moves toward a national curriculum. Neal McCluskey has the unpleasant details.

H. L. Mencken famously suggested that fear among the people is the government’s best friend. James Bovard finds ample empirical evidence for Mencken’s thesis.

Why are markets, despite their palpable benefits, morally tainted in so many people’s eyes? F. A. Hayek thought it’s because markets don’t embody the nurturing morality of the family that we first learn as children. Dwight Lee endorses Hayek’s explanation and points out that we wouldn’t like the results if great societies were run like families.

After a natural disaster the high-profile first response leaves the impression that no alternative to a centrally planned recovery is available. Peter Boettke says that’s a failure to look more closely.

Labor unions continue to be at the center of controversy. Despite appearances, Wendy McElroy writes, government-backed unions limit workers’ ability to organize in their own interest.

Just because two things are called by the same name is no reason to assume they are actually the same. Take the case of private-sector and government investment. Adam Summers does just that.

Our columnists’ inquiring minds have produced a smorgasbord of provocative fare: Thomas Szasz ponders the legal status of suicide. Stephen Davies looks at Japanese commercial virtues. John Stossel thinks police making arrests have no right to privacy. David Henderson says no particular person can say how much manufacturing Americans should engage in. And Gary Chartier, encountering a newspaper columnist’s claim that opposing military intervention indicates indifference to suffering, responds, “It Just Ain’t So!”

Books on the mistreatment of taxpayers, economics, and an infamous automobile catch the fancy of our reviewers.

As a student of Austrian economics I know I cannot foresee what the domestic energy market would look like or what the relative prices would be if all U.S. regulations, taxes, and privileges were abolished. But I submit that those who think the United States would be energy self-sufficient have the same knowledge limitations. It seems highly unlikely that Americans would import no oil from the Middle East or elsewhere. (More on this below.)

Unwise and Unnecessary

But even if things should work out that way, it is not something to be sought. Making self-sufficiency a goal would only promote protectionism—to the benefit of privileged interests—and encourage interventionists. Let’s not give them a helping hand.

What if freeing the domestic market did not produce energy independence? Should the government give it a nudge? Do banning imports, subsidizing alternative forms of energy, and mandating conservation sound like good ideas? Have we forgotten all that we know about bureaucratic ignorance, perverse incentives, and naked corruption? When one considers how pervasive energy is economically, one realizes that a serious comprehensive energy policy would require squaring or cubing the current corporate state. No thank you.

Concerns about Middle East oil—which persist although only 24 percent of U.S. crude-oil imports come from that region—center largely on fears that an unfriendly ruler might cut off shipments. But these concerns are baseless. Any oil-producing country will want to sell to someone. What else is there to do with crude oil? The opportunity cost of leaving it all in the ground would be enormous (unless prices were expected to rise dramatically). And even if a ruler tried to embargo the United States, the additional oil he sold to other countries (at necessarily lower prices) would find its way here. Economic interest and the market process—despite all the impediments—guarantee it.

I’ve previously discussed the misconceptions about the 1970s OPEC oil embargo. I pointed out that the hardship of that period was strictly the result of the U.S. government’s price controls and other interventions in the oil and gasoline industries, which discouraged producers from bringing supply to market. Even so, “[d]espite the embargo,” economist Donald Losman wrote, “U.S. oil stockpiles fell only slightly, and, by March 1974, they were growing again.” (“Trading for Security,” December 2010)

In other words, the embargo failed. As the Saudi oil minister put it later, “[T]he embargo was more symbolic than anything else. . . . [T]he world is really just one market.” Bingo.

Another fear is that Middle Eastern turmoil could disrupt oil shipments, and this is surely possible. The answer to that is diversification, which a freed entrepreneurial market would encourage and permit. We need not refuse oil from the region because someday it might not be available. That’s Karl Pilkington logic.

That should dispel the fears of energy dependence. Indeed, as Freeman columnist David Henderson points out (“Let’s Not Be Energy Independent,” October 2008), the case for the market is all about dependence. We gain from exchange through lower costs thanks to the division of labor and comparative advantage, which deliver the benefits of specialization. Self-sufficiency would be expensive and thus reduce our standard of living, harming the least well-off among us. How in the world can we account for apparently pro-market people looking to the government to “reduce our dependence on foreign oil”?

Let It Take Its Course

I don’t wish to underestimate the distortions government intervention has wrought in the energy market or how it encourages consumption of Middle Eastern oil. Imagine that the oil companies could not count on the U.S. departments of defense and state or the CIA to protect their access to and transport of that oil—at hidden taxpayer expense. Imagine that they had to foot that cost themselves and charge prices for their products that reflected those costs in competition with alternatives that did not have to recoup those expenses. Consumers would then make choices with their eyes wide open. Maybe oil from halfway around the world wouldn’t look so attractive. As I said at the outset, I don’t know what a freed energy market would look like. But nothing in this uncertainty supports a policy of energy self-sufficiency. Free the market of all impediments and privileges—and let it take its course.

Whether there are many years remaining of low-cost oil underground or not, the case for freeing the market is the same. As that Saudi oil minister also said, the Stone Age ended, but not because mankind ran out of stones. Likewise, the Oil Age will end, but not because mankind has run out of oil. I would only add: if the market is really freed.

Events in Egypt and neighboring countries are only the beginning of a spreading resistance to dictatorship throughout the region. As inhabitants of a land born in rebellion against tyranny, we should view this with hope. Freedom will enable us to weather any turmoil as best as can be expected. There is no reason to wish for the unnatural state of self-sufficiency.

A final point: One way to help eliminate the need for uprisings such as we saw in Egypt would be for the U.S. government to stop supporting dictators.

“Nowhere was the American rejection of authority more complete than in the political sphere,” writes historian David Donald. “The decline in the powers of the Federal government from the constructive centralism of George Washington’s administration to the feeble vacillation of James Buchanan’s is so familiar as to require no repetition here. . . . The national government, moreover, was not being weakened in order to bolster state governments, for they too were decreasing in power. . . . By the 1850s the authority of all government in America was at a low point.”

The United States, already one of the most prosperous and influential countries on the face of the earth, had practically the smallest, weakest State apparatus.

The great irony of the Civil War is that all that changed at the very moment that abolition triumphed. As the last, great coercive blight on the American landscape, black chattel slavery, was finally extirpated—a triumph that cannot be overrated—the American polity did an about-face.

Insofar as the war was fought to preserve the Union, it was an explicit rejection of the American Revolution. Both the radical abolitionists and the South’s fire-eaters boldly championed different applications of the revolution’s purest principles. Whereas the abolitionists were carrying on the assault against human bondage, the fire-eating secessionists embodied the tradition of self-determination and decentralized government. As a legal recourse, the legitimacy of secession was admittedly debatable. Consistent with the Antifederalist interpretation of the Constitution that had come to dominate antebellum politics, secession undoubtedly contravened the framers’ original intent. But as a revolutionary right, the legitimacy of secession is universal and unconditional. That at least is how the Declaration of Independence reads. “Put simply,” agrees William Appleman Williams, “the cause of the Civil War was the refusal of Lincoln and other northerners to honor the revolutionary right of self-determination—the touchstone of the American Revolution.”

American nationalists, then and now, automatically assume that the Union’s breakup would have been catastrophic. The historian, in particular, “is a camp follower of the successful army,” Donald wrote, and often treats the nation’s current boundaries as etched in stone. But doing so reveals a lack of historical imagination. Consider Canada. The United States twice mounted military expeditions to conquer its neighbor, first during the American Revolution and again during the War of 1812. At other times, including after the Civil War, annexation was under consideration, sometimes to the point of private support for insurgencies similar to those that had helped swallow up Florida and Texas. If any of these ventures had succeeded, historians’ accounts would read as if the unification of Canada and the United States had been fated, and any other outcome inconceivable. In our world, of course, Canada and the United States have endured as separate sovereignties with hardly any untoward consequences. “Suppose Lincoln did save the American Union, did his success in keeping one strong nation where there might have been two weaker ones really entitle him to a claim to greatness?” asks David M. Potter. “Did it really contribute any constructive values for the modern world?”

The common refrain, voiced by Abraham Lincoln himself, that peaceful secession would have constituted a failure for the great American experiment in liberty, was just plain nonsense. “If Northerners . . . had peaceably allowed the seceders to depart,” the conservative London Times correctly replied, “the result might fairly have been quoted as illustrating the advantages of Democracy; but when Republicans put empire above liberty, and resorted to political oppression and war rather than suffer any abatement of national power, it was clear that nature at Washington was precisely the same as nature at St. Petersburg. . . . Democracy broke down, not when the Union ceased to be agreeable to all its constituent States, but when it was upheld, like any other Empire, by force of arms.”

“War is the health of the State,” proclaimed Randolph Bourne, the young Progressive, disillusioned by the Wilson administration’s grotesque excesses during World War I. Bourne’s maxim is true in two respects. During war itself the government swells in size and power, as it taxes, conscripts, regulates, generates inflation, and suppresses civil liberties. Second, after the war there is what economists and historians have identified as a ratchet effect. Postwar retrenchment never returns government to its prewar levels. The State has assumed new functions, taken on new responsibilities, and exercised new prerogatives that continue long after the fighting is over. Both of these phenomena are starkly evident during the Civil War.

Before Fort Sumter national spending was only about $2.50 per person per year, or $50 per person in today’s prices. The central government relied on only two sources of revenue: a very low tariff and the sale of public lands. The war brought not only protectionist import duties but also a vast array of internal excises, the country’s first national income tax, and an extensive internal revenue bureaucracy with 185 districts reaching into every hamlet and town. Federal outlays soared from 1.5 percent of the economy’s output to almost 20 percent, approximately what the central government spends today. The national debt climbed from a modest $65 million, less than annual expenditures, to $2.8 billion. This provided the justification for replacing the antebellum monetary system of free banking and financial deregulation (which some economic historians believe was the best the country has ever had) with inflationary fiat money and nationally regulated banking.

Protectionism would continue to dominate U.S. trade policy mercilessly until the Great Depression and was just one manifestation of the Lincoln administration’s effort to enlist special interests through government subsidies and privileges. The Yankee Leviathan also was responsible for the first federal aid to transcontinental railroads, land grants for higher education, a Department of Agriculture for farmers, and troops to break strikes for employers. The prewar regime of Jacksonian laissez faire was effectively supplanted by Republican neomercantilism, an alliance between business and government that became so scandalous during the Grant era that it has gone down in history as, to use Vernon Louis Parrington’s label for the postwar feeding frenzy, the “Great Barbecue.”

Lincoln’s war delivered a blow to civil liberties as well. The Union’s resort to nationally administered conscription touched off so much resistance that the President suspended habeas corpus throughout the North. Traditional estimates are that the administration imprisoned without trial or charges 14,000 civilians during the conflict, but some historians believe the figure to be much too low. To be sure, the greater number were citizens of either the border states or the Confederacy itself, and many of those arrested secured quick release within a month or two, usually after swearing a loyalty oath. Yet the federal government at the same time monitored and censored both the mails and telegraphs and shut down over 300 newspapers for varying periods.

Many of these measures were of course abandoned at the fighting’s end. Federal spending fell from its wartime peak to only 3 to 4 percent of GDP. Although not a trivial decline, it still left spending at twice prewar levels, and the largest postwar expenditures were war-related. Interest on the war debt initially accounted for 40 percent of federal outlays, and by 1884 veterans’ benefits were consuming 30 percent. These benefits were so lavish that they constitute the national government’s first old-age and disability insurance and stand as a precursor to Social Security. The impact of the Civil War was even felt in the seemingly unrelated area of obscenity. Congress passed the first act regulating mail content in response to complaints that troops were ordering pornographic material, and this became the basis for the Comstock witch hunts of the 1870s.

The Real Turning Point

This ratchet effect is a phenomenon historians frequently observe. Yet the Civil War did something more. Despite wars and their ratchets, governments must sometimes recede in reach, else all would have been groaning under totalitarian regimes long ago. Both conservatives and so-called liberals date the major political turning point in American history at the Great Depression of 1929. Previously Americans are supposed to have self-reliantly resisted the temptations of government largess and confined federal power within strict constitutional limits. Although Franklin D. Roosevelt’s New Deal is responsible for Social Security, which along with health care, now ranks as the national government’s primary expense, this legend ignores several inconvenient facts. To begin with, the New Deal simply emulated the Wilson administration’s previous war collectivism. Moreover the growth of government under the New Deal was trivial compared to its growth during the United States’ next major conflict: World War II.

More astute analysts push the watershed in U.S. history back to the Progressive Era. Progressivism emerged at the beginning of the twentieth century as a diverse inclination, varying in different parts of the country and including members of all political parties. But it became the country’s first dominant mindset to advocate government intervention in the free market and in personal liberty at every level and in every sphere. My contention, however, is that America’s decisive transition must be dated even earlier.

The Yankee Leviathan co-opted and transformed abolitionism. It shattered the prewar congruence among anti-slavery, anti-government, and anti-war radicalism. It permanently reversed the implicit constitutional settlement that had made the central and state governments revenue-independent. It acquired for central authority such new functions as subsidizing privileged businesses, managing the currency, providing welfare to veterans, and protecting the nation’s “morals”—at the very moment that local and state governments were also expanding. And it set dangerous precedents with respect to taxes, fiat money, conscription, and the suppression of dissent.

These and the countless other changes mark the Civil War as America’s real turning point. In the years ahead, coercive authority would wax and wane with year-to-year circumstances, but the long-term trend would be unmistakable. Henceforth there would be few major victories of Liberty over Power. In contrast to the whittling away of government that had preceded Fort Sumter, the United States had commenced its halting but inexorable march toward the welfare-warfare State of today.