Invisible Hands by Kim Phillips-Fein, professor of American history at New York University’s Gallatin School, is a well-researched and thorough account of resistance to government economic domination. It’s also a veritable Who’s Who of twentieth-century “conservatives” who have been trying, ever since FDR’s New Deal, to “propagate a new mentality.” Phillips-Fein provides an evenhanded investigation of the counterreaction, launched mainly by people in the business world, to the authoritarianism of the New Deal. While she deftly illuminates that part of the “conservative” movement, Phillips-Fein fails to note that the “conservatives” consisted not only of free-market stalwarts like Mises but also many corporate-state advocates who just thought the New Deal went too far.

Franklin D. Roosevelt took office after criticizing his predecessor for expanding government and increasing public spending. Yet once in office FDR embarked on new programs that increased spending, centralized power, and imposed many regulations and taxes. Roosevelt won over public opinion, but many Americans were alarmed by his programs and philosophy.

The book describes the founding of the American Liberty League by a group of businessmen who wanted to preserve “private enterprise” (but were no fans of laissez faire). The National Association of Manufacturers joined in the struggle and even claimed by 1940 that it was winning the battle against the New Deal. Then came World War II, and it became “unpatriotic” to criticize federal controls and regulations. Only at war’s end were the varied “conservatives” able to resume the struggle to limit government power.

Phillips-Fein maintains that the decline of the “liberal” New Deal regime “lay not only in its inner tensions . . . but also in the slow preparation of an alternative agenda by its business opponents.” She acknowledges the crucial role of economists such as Ludwig von Mises and Friedrich Hayek in guiding that agenda. Also influential were the ideas of Leonard E. Read, founder of FEE, and the international Mont Pelerin Society of free-market advocates.

Invisible Hands also covers religious groups that were formed to promote the freedom philosophy and oppose communism.

Some of the success of these groups came through the publishing of books and magazines to promote the free market and attack socialism. Chambers of commerce supported entrepreneurship and argued against interventionist government. Business groups introduced free-market materials in the schools and a few universities created courses in entrepreneurship.

Collective bargaining, as required by the National Labor Relations Act, led to conflict and strikes. Companies often gave way to union demands, but some fought back, and the book details the personalities and events. The Kohler Company withstood a long strike in 1954, operating with non-union workers. General Electric’s Lemuel Boulware stood up to the unions, publicizing GE’s best offer and saying, “Take it or leave it.” Unfortunately, the courts declared his approach illegal.

The genial, articulate former movie actor Ronald Reagan proved an effective spokesman for GE and free enterprise. He had the common touch and spoke of providing jobs instead of encouraging capital formation. His attitude toward business? He was, the author writes, “the candidate of the entrepreneur, the farmer, the small businessman, the independent.”

Phillips-Fein looks on Reagan’s capture of the presidency in 1980 as a victory for “conservativism” and the anti-New Dealers she describes. “A great transformation of American politics began during the years that Ronald Reagan was in the White House,” she writes. Reagan fired and replaced 11,000 air traffic controllers after their illegal strike in 1981. Strikes and union membership declined. The labor movement dwindled, and the left’s statist agenda was held in check.

The author recognizes that Reagan failed to eliminate the welfare state or to shrink government bureaucracies. Still, she says, “the political cause for which they [market enthusiasts and business conservatives] labored has in large part been triumphant: the New Deal has been turned back.”

But that conclusion is unwarranted. The New Deal mentality is still alive and well. The government is growing rapidly in scope and power. Advocates of limited government and free enterprise now face a new and perhaps even more daunting challenge in Barack Obama’s “new New Deal.”

Invisible Hands is a carefully researched history of the struggle to “propagate a new mentality” to replace statist thinking. The history is sound even if the writer’s conclusions aren’t always solid.

Still, if that’s what you think, you’re wrong.

The latest entry in the genre, Thomas Woods and Kevin Gutzman’s Who Killed the Constitution?, is something different. It’s well worth your while.

Unlike some other writers, Woods and Gutzman don’t just place the blame for our present situation on a handful of bad Supreme Court decisions. Instead, they show how, in the twentieth century, all three branches of the federal government have spun out of control, completely abandoning any pretense that the Constitution constrains them at all.

Woods and Gutzman demonstrate how the executive branch claims virtually unlimited power. President George W. Bush damaged the constitutional fabric significantly, and the authors demolish the dubious constitutional scholarship of Bush’s court intellectual, law professor John Yoo. They point out, too, that presidents never have trouble finding “scholars” like Yoo to rationalize their power grabs.

But the authors also show that Bush did not do much of anything new. All presidents since at least Harry Truman have assumed they could make war without a declaration from Congress. In fact, most presidents since Theodore Roosevelt have assumed, as he did, that they can do anything they want in the absence of a specific constitutional restriction on their power. (Gene Healy’s recent book, The Cult of the Presidency, reviewed in the March Freeman, offers much additional detail on this subject.)

A Litany of Abuses

One chapter in particular illustrates this by exposing one of the worst, but most overlooked, government crimes in U.S. history: Franklin Roosevelt’s confiscation of everyone’s gold. This discussion also gives the authors an opportunity to offer an important bit of economic education as they explain why gold was used as money in the first place.

You might expect the chapter titled “Roads to Nowhere” to offer a familiar list of pork-barrel projects funded by Congress. Instead, the authors show that the federal government shouldn’t be funding roads at all, no matter where those roads go. Early presidents assumed they would need a constitutional amendment to fund “infrastructure” projects. Unfortunately, today they just assume it’s within their power and that assumption goes unchallenged.

Other chapters explore topics such as the Commerce Clause, which the courts have used to justify almost anything Congress does; the military draft, which violates the Constitution’s prohibition of slavery; presidential “signing statements” (written pronouncements by a president on signing a bill, often with the intent to modify the statute and especially to nullify its application to the executive branch), and President Truman’s attempt to nationalize the steel industry.

Two of the boldest chapters deal with what the authors call the “third rail of American jurisprudence”—Brown v. Board of Education and its aftermath. The authors show how Brown had no basis in the Constitution—and that the Supreme Court justices behind the decision knew it. Yes, the book’s authors actually say it: the Fourteenth Amendment’s text does not actually prohibit school segregation.

Even if that’s so, why attack this sacred cow when most everyone today opposes segregation anyway? Because if the Supreme Court can so utterly disregard the Constitution and the very idea of law in this decision to reach its own policymaking goals, then there really is no Constitution to speak of anymore. And that’s the point. As they say in their introduction, “the Constitution is dead.”

Beyond Redemption

Refreshingly, they don’t argue that the Constitution might be revived by electing the right people or bringing the right lawsuits. Indeed, they even suggest that our sorry result might have been inevitable—not only with this particular Constitution, but with any written constitution. After all, what do you expect will happen when you let federal officials determine the limits of the federal government’s power? That’s true regardless of who’s in office, or what they might say before being elected. Woods and Gutzman write: “People in power exercise all the power they can get, even after they have howled in the wilderness against legislating judges, imperial presidents, and the death of states’ rights.”

The authors also quote Lysander Spooner, who put the problem best when he wrote in the nineteenth century that the Constitution “has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.”

Churchill, however, never waited idly for the world to construct his legend. From the 1890s onward, he strove to put himself in the places, especially the wars, where he would be best situated to advance his fame and realize his ambitions, and as he made his way through a series of adventures, he promptly wrote articles and books about each of them, thus shaping in large degree how others would view his actions. Moreover, he was an excellent writer; his articles and books sold very well, and in 1953 he was awarded the Nobel Prize in Literature. His sharp wit and dazzling rhetoric enhanced his reputation.

In Churchill, Hitler, and “The Unnecessary War,” Patrick J. Buchanan seeks to demolish the Churchill myth, along with several related ones, which he does with surprising success. I say “surprising,” not because the myth itself was ever unassailable—excellent historians, including Ralph Raico, long ago pounded Churchill’s feet of clay into dust—but because Buchanan is known primarily as an ideological polemicist. Yet in this book he presents respectably balanced and well-documented arguments for his theses. If he is not himself a professional historian, he has absorbed the works of scores of well-reputed historians, and he carefully assesses a number of counterarguments against his position. Although Buchanan presents no previously unreported facts, he offers abundant evidence expressed in clear, forceful prose. All in all, he makes a persuasive case.

Buchanan correctly views the two world wars as “two phases of a Thirty Years’ War.” He argues that both phases were unnecessary and that Great Britain “turned both European wars into world wars.”

For World War I, he maintains: “Had Britain not declared war on Germany in 1914, Canada, Australia, South Africa, New Zealand, and India would not have followed the Mother Country in. Nor would Britain’s ally Japan. Nor would Italy, which London lured in with secret bribes of territory from the Habsburg and Ottoman empires. Nor would America have gone to war had Britain stayed out. Germany would have been victorious, perhaps in months. There would have been no Lenin, no Stalin, no Versailles, no Hitler, no Holocaust.”

For World War II, he maintains: “Had Britain not given a war guarantee to Poland in March 1939, then declared war on September 3, bringing in South Africa, Canada, Australia, India, New Zealand, and the United States, a German-Polish war might never have become a six-year war in which fifty million would perish.”

He argues that the decisive event in the run-up to World War II was not the infamous 1938 appeasement at Munich—because the Germans had good reason to reabsorb the Sudetenland from Czechoslovakia—but the 1939 guarantee, which was foolish of the British to make and foolish of the Poles to rely on. It was foolish because Britain had no means of defending Poland. When Hitler attacked in 1939, after Polish leaders refused to return Danzig to Germany, the British could only watch helplessly.

Buchanan begins his narrative at the end of the nineteenth century and ends it at the conclusion of World War II. Churchill occupies center stage in this extended drama because he “was the most bellicose champion of British entry into the European war of 1914 and the German-Polish war of 1939.” Along the way, Buchanan adduces evidence that Kaiser Wilhelm II, a grandson of Queen Victoria and nephew of King Edward VII, did not seek war with Great Britain (in 1910, he “marched in Edward’s funeral—in the uniform of a British field marshal”). Likewise, 30 years later, Hitler wished to avoid war with Great Britain, whose people and empire he admired: “His dream was of an alliance with the British Empire, not its ruin.”

The Lebensraum he sought lay to the east of Germany, not to the west. The Germans did not seek to “conquer the world,” despite frequent claims to that effect, and in any event, they lacked the means to achieve such a conquest.

No short review can depict the breadth, the depth, and the many fascinating details of Buchanan’s book. Read it and see for yourself. It may well challenge your most cherished beliefs about Winston Churchill and the world-shattering Thirty Years’ War of 1914–45.

But wait. Only 3.5 million jobs? Why so few? It’s not like creating jobs is difficult.

Egypt built more than 100 pyramids beginning sometime in the third millennium B.C. to house the corpses of the pharaohs and their significant others. Think of all the jobs that project created. I’ll bet the unemployment rate was something any pharaoh could have proudly campaigned for reelection on—if he faced election, that is. Pyramid-building is one heck of a public-works project.

Pyramids, Earthquakes, Wars

Its economic significance was not lost on that great advocate of full employment through public works, John Maynard Keynes. The British economist, so in vogue today, famously wrote in The General Theory on Employment, Interest, and Money (1936), “Pyramid-building, earthquakes, even wars may serve to increase wealth.”

In fact, pyramids are even better than the usual government project. Keynes said: “Two pyramids . . . are twice as good as one; but not so two railways from London to York.”

Ancient Egypt’s success has many applications today. We could have full employment overnight if the government simply outlawed machines. Today’s 8 percent unemployment rate would vanish.

Again, we find an endorsement in Keynes’s General Theory: “‘To dig holes in the ground,’ paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services.”

Exhibit B is Franklin Delano Roosevelt. I don’t mean his public-works projects, like the Civilian Conservation Corps. I’m talking about his most serious job-creating operation: the draft.

If You Can’t Employ ‘Em, Draft ‘Em

In September 1940 Roosevelt signed the Selective Service Act, which ordered all males 21–35 to register for military service. “Of the 16 million persons who served in the armed forces at some time during the war, 10 million were conscripted, and many of those who volunteered did so only to avoid the draft. . . .” writes Robert Higgs in Depression, War and Cold War.

The draft marked the beginning of the end to the double-digit unemployment that had plagued America for a decade. Two years earlier, Roosevelt’s treasury secretary, Henry Morgenthau, lamented, “[A]fter eight years of this administration we have just as much unemployment as when we started.” The draft was the answer they had sought all that time.

So creating jobs is not difficult for government. What is difficult for government is creating jobs that produce wealth. Pyramids, holes in the ground and war do not produce wealth. They destroy wealth. They take valuable resources and convert them into something less valuable.

Instead of iPods, great art, cures for diseases and machines that replace back-breaking work, we get the equivalent of digging holes and filling them up.

Under President Obama’s “stimulus” plan, jobs will be created to weatherize buildings, construct schools and wind turbines, and repair roads and bridges. But outside the market process, there is no way to know whether those are better uses of scarce capital than whatever would have been produced had it been left in the private economy.

Since government services are paid for through the compulsion of taxes, they have no market price. But without market prices, we have no way of knowing the importance that free people would place on those services versus other things they want.

So although we’ll see the government putting people to work and even some new schools and bridges, we won’t be able to calculate how much wealth we’ve lost because scarce resources were misallocated by the politicians.

Nevertheless, we can be sure we will have lost. If the government’s projects were truly worthwhile, they would be undertaken by private efforts, and in their quest for profits, entrepreneurs would handle them more efficiently.

Remember this when President Obama begins to boast about how successful his stimulus plan is.

Some observers seem to think employers are less willing than employees to seek federal help, so the actual case is revealing. The National Industrial Recovery Act (soon shortened to NRA) became law under President Franklin Roosevelt in 1933 and dramatically altered America’s traditional free-market system. Under the NRA, a majority of firms in any industry had government approval backed by force to determine how much a factory could expand, what wages had to be paid, the number of hours to be worked, and the prices of products. Whether or not a businessman helped write the code for his industry, he was bound by the terms and subject to a fine or jail term if he violated them.

Evil Price-Cutting

Why were Roosevelt and certain New Dealers so eager for higher wages and prices without an increase in productivity and with less competition? They believed that if people earned more, they could buy more, and that would stimulate recovery from the Great Depression. In this high-wage theory the efficient, innovative, and price-cutting businessman was evil because he was believed to contribute to lower wages and therefore diminishing purchasing power. He was a violator of “fair competition.” His gain was not just the loss of his competitors but of the whole country. By encouraging codes of “fair competition,” the NRA was giving all existing businesses a chance to make profits, to pay high wages, and to survive the price-cutter.

Many businessmen liked the idea of raising their prices and sending to jail any competitor who wanted to charge lower prices. But such a move discouraged inventors and entrepreneurs from experimenting with ways to make products cheaper and better. The NRA in effect carved up markets among existing producers, fixed prices and wages, and assumed all industry was stagnant and unchanging. In automobiles, however, Henry Ford had experimented with assembly-line production and had cut the price of American cars from about $3,000 to $300. Under the NRA he was not allowed to innovate further. So Ford refused to sign the code and jack up his car prices, as his competitors at General Motors and Chrysler were doing. “I do not think that this country is ready to be treated like Russia for awhile,” Ford wrote in his notebook. “There is a lot of that pioneer spirit here yet.”

Ford was told his company would receive no government contracts until he signed—and with the large increase in government agencies during the 1930s, that meant a huge loss of business. For example, the government rejected a Ford agency bid on 500 trucks for the Civilian Conservation Corps that was $169,000 below the next best offer. “We have got to eliminate the purchase of Ford cars [by the government because the company has not] gone along with the general [NRA] agreement,” Roosevelt said at a press conference.

Ford’s assertion of freedom and independence gave hope to those who wanted to return to competition.

When Hugh Johnson, the head of the NRA, was asked what would happen to those “who won’t go along with the new code,” he threatened, “They’ll get a sock in the nose.” Although Johnson refrained from applying his fist to Ford’s nose, he did use the arm of the law to jail many men who refused to jeopardize their businesses by complying with NRA codes. In York, Pennsylvania, for example, Fred Perkins, who produced storage batteries to help light farms, went to jail for paying his employees less than what had been written into the NRA code by the storage-battery businessmen. Perkins’s employees were outraged that their boss was in jail, and they met with him to receive instructions on how to continue the business in his absence. As J.B. Jones, one of Perkins’s employees, said, “We asked him for work and he gave it to us at a time when we were in distress. The wages he was paying were fair.”

A more dramatic jailing was that of 49-year-old Jacob Maged of Jersey City, New Jersey. Maged had been pressing pants for 22 years, and his low prices and quality work had kept him competitive with larger tailor shops in the better parts of town. The NRA Cleaners and Dyers Code demanded that he charge 40 cents to press a suit. Maged, despite repeated warnings, insisted on charging his customers only 35 cents. “You can’t tell me how to run my business,” he insisted.

Not only was Maged thrown in jail, he was also slapped with a $100 fine. “We think that this is the only way to enforce the NRA,” said Abraham Traube, a director of the NRA code authority for the Cleaners and Dyers Board of Trade. “If we did the same thing in New York City we would soon get the whole industry in line.” Many editorialists, however, sided with Maged. “It didn’t matter,” the Washington Post said, “if Maged had to charge less than the bright and shiny tailor shop up the street if he wanted to continue to exist. The law said he couldn’t.” “For a parallel,” the New York Herald Tribune said, “it is necessary to go to the Fascist or Communist states of Europe.”

Embarrassing Questions

No merchants wanted to pay fines or go to jail, but the more than 500 NRA codes often imposed such quirky regulations that it was hard for many to comply. Finally, in 1935, the Schechter brothers, who sold kosher chickens in Brooklyn, took their case to the Supreme Court to challenge the constitutionality of the NRA. Justice George Sutherland asked so many embarrassing questions about the NRA chicken code that the audience actually broke into laughter at some of the exchanges. By a 9-0 vote the NRA was found unconstitutional.

The defeat of the NRA was a cause for celebration. “The Constitution has been re-established,” rejoiced Senator William Borah of Idaho. “Impulsively adopted . . . ,” journalist Frank Kent said, “it [the NRA] was fastened on the people by the most blatant ballyhoo ever promoted by a Government, and it ends in a horrible mess.” President Roosevelt disagreed and said the Supreme Court was taking the country backward with a “horse and buggy” interpretation of the clause in the Constitution that gives Congress the power to regulate commerce. Roosevelt’s desire to continue his experiments in central planning and government intervention would keep the Great Depression going for many years more. When we freed up the American economy after World War II, however, we encouraged competition, innovation, and the creation of new jobs. The Great Depression was over at last.