The Economic Foundation of Freedom
What Explains America's Achievements of the Last 150 Years?
SEPTEMBER 01, 2003 by HOWARD BUFFETT
Filed Under : Liberty, Private Property, Taxation, U.S. Constitution, Rule of Law
The late Howard Buffett was a U.S. representative from Nebraska (1943–1949 and 1951–1953). This article, condensed from a lecture at Midland College in Fremont, Nebraska, is reprinted from The Freeman: Ideas on Liberty, December 1956. For more information on Buffett see Joseph R. Stromberg, “Howard Homan Buffett: Old Rightist Extraordinaire” at www.antiwar.com/stromberg/s042401.html.
A clear understanding of the economic foundation of freedom and its ramifications is required by the person who strives to be an effective disciple of human liberty.
In a material sense, the economic achievements of American freedom in the last 150 years present the greatest phenomena of all history. In this relatively short period, our freedom has released and channeled human energy of such potential that an entirely new and hitherto undreamed-of world has been created.
What explains all this?
Some people have asserted that Americans are a superior race, smarter than any previous people. Not so. I have never seen or heard any evidence to indicate that Americans are an intellectual aristocracy. Perhaps it was our fortune to descend from superior pioneer stock. I don’t know. In any event such a superiority, if it existed, cannot begin to explain the fantastic material achievements of this nation in the last 150 years.
Some would have you believe that the natural resources of America were the decisive factor. Not so. Other lands are as rich or richer in natural resources. South America and Mexico are examples.
Nor has the human situation changed during this period. People are the same, and the earth is the same size and constitution as it was when Socrates was holding forth in Athens.
Here, for the first time in human history, human energy was freed from arbitrary authority. Here for the first time man was able to make and carry out business ventures individually, or in relationships with others, unrestrained by unjust man-created obstacles. In America, men like Edison, Ford, Alexander Bell, and others, were free to invent and produce new products without being blocked by political authority.
Here in America man was on his own, to make the most of whatever intellect, tools, and resources he could assemble by his own personal efforts.
Human energy works efficiently to supply human needs and satisfy human desires only when and where and precisely to the extent men know they are free.
For the first time in history, that freedom was affirmed and spelled out in the Constitution of the United States. Americans were henceforth to be unrestrained by political considerations.
But this elimination of political restraint was but a part of the change from the previous economic climate. Equally important was that, for the first time in history, men had a government organized on the principle that a basic purpose of government was to enable the individual to receive and enjoy the full fruits of his own labor.
Heretofore, from the Pharaohs on down to King George III, government in greater or lesser degree operated on the theory that people were subjects, that their person, their current production, and their property belonged to the rulers. The Constitution rejected that theory in toto.
This revolutionary concept can best be understood by an examination of the alternative ideas concerning production and its distribution.
The right of a person to the product of his own labor is the foundation of economic liberty, declares Dr. F. A. Harper, in his scholarly essay, Liberty: A Path to Its Recovery. He points out that “the question at issue is how to distinguish between what is mine and what is thine.”
There are three ways to handle this problem:
- Each person may have whatever he can grab.
- Some person other than he who produces the goods and services decides who shall have the right of possession or use.
- Each person may be allowed to keep whatever he produces.
These three methods cover all the possibilities; there are no others.
When the economic situation is reduced to these three clear-cut alternatives, the problem of achieving justice does not seem too difficult.
The first method of operation, under which each person can have whatever he can grab, is obviously unjust and impossible. It would return us to the jungle law that “might makes right.” Moreover, it would soon reduce individual economic effort to the absolute minimum required for existence. Certainly there is no reason in trying to produce wealth beyond immediate needs if one could expect to be deprived of it at any moment.
So the first method can be rejected outright.
The second method of handling economic production would provide that someone other than the person who produces goods and services shall decide who shall have their possession or use. This method of determining the rights of possession is practiced in every authoritarian society. It allows those who hold the coercive power of government to confiscate the fruits of any producer’s labor.
To accept this theory, you must hold two strange concepts: (1) that a nonproducer is better qualified to judge the correct use of what you have produced than you are; (2) that a nonproducer has a right to seize the fruits of your labor.
The late Justice Oliver Wendell Holmes once declared that someone must exercise command of the disposition of goods and services that have been produced, and that he knew of no better way of finding the fit man than the competition of the market place.
So it would seem that the second alternative, that someone other than the producer shall decide who shall enjoy the fruits of the producer’s labor, is similar to the first method. One is a private seizure outside any law; the second is a public and legalized seizure, but without justice.
Thus we come to the third method, whereby the producer has the right to the products of his own labor. It is the only economic pattern consistent with economic liberty.
Obviously if a person has exclusive rights to that which he has produced, that right is ownership. If all persons are to have the right to the product of their own labor, they are foreclosed from a claim to the product of another’s labor.
If I have a right to the corn grown on my own land, certainly I have no claim on the cotton produced on another person’s land. Otherwise his rights will be violated and no property is safe.
So far the right of a person to the product of his own labor would seem to be obvious. How then, have we arrived at our present situation?
Today’s situation is the result of an alarming and devious governmental intervention in the economic affairs of the nation for objectives not contemplated by the men who wrote the Constitution.
Historically, in America the producer was protected by government in the enjoyment of the fruits of his labors. That protection of his property explains the glorious material progress already recounted.
Taxation Without Representation
The last 40 years have seen a gigantic expansion of political power over economic affairs by the federal government. This change is linked by many scholars to the passage of the income tax law in 1913. This law revolutionized the taxing system in two ways:
- It gave the government new powers over the economic status of the individual. This change has curtailed the ability of the individual to achieve economic independence.
- The part of his production taken from the producer cumulatively increases the power of the federal government proportionately with the increase in its income. This power is not created; it is simply taken away from the people by those in government.
In the 1930s a further sharp step-up in the centralization of power took place. Its scope can best be understood by quoting from the annual message to Congress by the President on January 3, 1936:
“In thirty-four months we have built up new instruments of public power. In the hands of a people’s government this power is wholesome and proper. But in the hands of political puppets of an economic autocracy such power would provide shackles for the liberties of the people. . . .”
That presidential statement touched a critical issue. As he pointed out, public power “in the hands of political puppets of an economic autocracy” could “provide shackles for the liberties of the people. . . .”
But the reverse is also true. Economic power in the hands of those holding political power can also provide shackles for the liberty of the people.
The Power to Control
It would be salutary if the American people could objectively and effectively ascertain how far this increase of economic power by the government has gone. Then we would know exactly where we are in the trend away from the freedom of our ancestors. But for us at this moment it is essential to learn why the separation of economic power from political power is so important.
Students of liberty offer this explanation. Power is the instrumentality of control by men and groups of men over other men.
George Sokolsky, noted columnist, says it this way: “When human beings become dependent upon the political power of the state for their livelihood, the independence of person must disappear. It is the identification of economic power with police power that destroys the right of the individual to liberty.”
The transfer of economic power into political hands takes many forms. In 1932 about 2.5 million people received a check from the government every month. Today about 20 million receive a government check every month. What is the effect on the freedom of this great segment of our people being more or less dependent on the political authorities for their daily bread? The question is not easy to answer.
Something of its import may be gained from the old rhyme that goes about like this:
So runs the law and so the law will run
’til the race of men be still,
That he who eats another’s bread
Must do the other’s will.
Desire for Security
Any discussion of the status of the economic foundation of freedom is incomplete without some attention to a historic human urge—the desire for security. This intense human desire is reflected in the so-called social legislation politicians have placed on our statute books.
Will this legislation fulfill its promises? If you think so, consider this rarely mentioned fine print clause. If the government is to guarantee you what the consequences of your actions will be in this case, security, then the government must take control of your activities. For with responsibility—even self-arrogated responsibility—must go authority.
This means that if politicians are to supply your security, they must control your work, your spending, and your saving. Witness crop controls. In that event you have traded the reality of liberty for the promise of security.
History elsewhere indicates that government-provided security is a mighty poor mess of pottage in exchange for man’s birthright of freedom. There is, I suggest, no valid reason to conclude that modern man or modern conditions have changed any of the eternal verities concerning power and liberty.
In his book, The Promises Men Live By, Harry Scherman, organizer and long-time president of the Book-of-the-Month Club, has set out a course of action that deserves the attention of Americans concerned about the future of their country. Here is his suggestion:
If, as an individual, you really have some concern about the best way to change our present world to a better one, not a bad principle is to identify the enemy.
It should not be true, but unfortunately it is, that your immediate enemies remain, as they always have been, your rulers—your government. At all times, it is a wise thing to suspect both their intellectual honesty and their intelligence in economic matters.
Nothing can be lost, everything can be gained, by doing so. Make them prove themselves in these respects, and be utterly ruthless in your judgment.
When they seem most plausible, in your particular interests, it is not a bad course to suspect their economic intelligence the most. They are, in these days, the managers of a highly complex world.
You have placed them in this management, and you acquiesce in it. But, unfortunately, they give not the slightest indication of being any more capable in handling the affairs of masses of men than rulers have been all through history. . . .
Scherman’s challenge closes with a plea that citizens make a vigorous and untiring effort to understand the economics of the world we live in. Without that understanding the citizen has no competence to judge the actions of his rulers, which also means he is unable to vote competently.
Without intellectual competence the citizen is controlled by his emotions. People controlled by their emotions in political matters have always been, and are today, easy prey for tyrants.